Darton v. Park Vasona Gas

















Filed 2/14/13 Darton v. Park Vasona Gas CA6

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California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.





IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



SIXTH
APPELLATE DISTRICT




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LYNN DARTON, Plaintiff, Cross-Defendant and Respondent, v. PARK VASONA GAS, INC., et al., Defendants, Cross-Complainants and Appellants.

H037499 (Santa Clara County Super. Ct. No. CV120344)

Defendants Park Vasona Gas, Inc.,
Francy Amidi, and Anthony J. Ellenikiotis appeal from that part of a judgment
awarding attorney fees to plaintiff Lynn Darton after plaintiff prevailed at
trial in a dispute over his sale of a gas station to defendants. They contend that plaintiff was not entitled
to attorney fees because he failed to propose mediation of the dispute before
suing, as required by the sales contract.
We agree with other courts that the contract means what it says: plaintiff’s failure to seek mediation
precludes an award of attorney fees. But
we agree only insofar as the prosecution of plaintiff’s complaint is
concerned. Plaintiff also prevailed on a
cross-complaint for breach of the sales
contract brought by Park Vasona and is entitled to recover defensive
attorney fees from Park Vasona. We
therefore reverse the judgment and remand the matter for consideration of an
award for plaintiff’s defensive attorney fees.

background

Plaintiff sold his Chevron gas
station to “MIKE & FRANCY N. AMIDI AND/OR ASSIGNEE.” The purchase agreement was on a California
Association of Realtors standard form designated as “BUSINESS PURCHASE
AGREEMENT AND RECEIPT FOR DEPOSIT.” It
included an attorney’s fee provision
(Paragraph 35) that provided as follows:
“In any action, proceeding, or arbitration between
Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller
shall be entitled to reasonable attorney’s fees and costs, except as provided
in paragraph 31A.” Paragraph 31A stated
the following: “Buyer and Seller agree
to mediate any dispute or name="SR;419">claim arising between them out of this Agreement, or any resulting transaction, before
resorting to arbitration or court action . . . . If any party name="SR;452">commences an action based on a name="SR;442">dispute or claim to which this name="SR;448">paragraph applies, without name="SR;456">first attempting to resolve the name="SR;461">matter through mediation, then that
party shall not be entitled
to recover attorney’s fees,
even if they would otherwise be available to that party in
any such action.”

Part of the purchase price
consisted of a promissory note payable
to “Darton, Inc.” by “Park Vasona Gas, Inc.” for $275,000 signed by “Francy
Amidi” and “Anthony J. Ellenikiotis” on behalf of Park Vasona. The note included an attorney fee clause
providing that “Obligor promises to pay the reasonable attorney’s fees incurred
by Lender from any collection action on this Note.”

The promissory note was secured by
the property and fixtures of the business evidenced by a security agreement
signed by Amidi and Ellenikiotis on behalf of Park Vasona. The security agreement included an attorney
fee clause providing that “The prevailing party shall be entitled to reasonable
attorneys fees in any legal action on this Agreement.”

The promissory note was guaranteed
by Amidi and Ellenikiotis and evidenced by a guaranty agreement. The guaranty agreement recited that Amidi and
Ellenikiotis guaranteed the note “in consideration of [Darton, Inc.] entering
into the [promissory note] with [Park Vasona].”
It included an attorney fee clause providing that “In any action brought
under this Guaranty, the prevailing party shall be entitled to reasonable
attorney’s fees.”

No one made payments on the
promissory note and plaintiff sued defendants without first attempting to
resolve the matter through mediation.
The third amended complaint is on Judicial Council Form PLD-C-001. The first cause of action is for breach of contract. It references the purchase agreement, states
that the agreement was between plaintiff and Amidi and Ellenikiotis (and
Michael Amidi), recites that a copy of the agreement was attached to the
complaint as an exhibit, and alleges that the breach was for failure “TO PAY
PURCHASE PRICE.” It prays for damages
and attorney fees “according to proof.
VIA CONTRACT.” The second cause
of action is for common counts against Amidi and Ellenikiotis for failing to
pay $275,000. It prays for damages and
attorney fees “according to proof. VIA CONTRACT.” The third cause of action is for breach of
contract against Park Vasona for failing to pay the promissory note. The fourth cause of action is for common
counts against Park Vasona for failing to pay $275,000. And the fifth cause of action is against
Amidi and Ellenikiotis for failing to pay on the guaranty.href="#_ftn1" name="_ftnref1" title="">[1]

Park Vasona filed a cross-complaint
against plaintiff and Darton, Inc. The
first cause of action alleged breach of a separate covenant not to compete
executed by Darton, Inc., in favor of Park Vasona as part of the gas station
sale. And the second cause of action
alleged breach of an oral agreement to sublease the automobile repair shop bays
in the gas station from Park Vasona.

The trial court found that the
contract between the parties consisted of, among other writings, the purchase
agreement, promissory note, security agreement, guaranty, and covenant not to
compete. It then found for plaintiff on
the complaint and cross-complaint. And
it held that plaintiff was entitled to attorney fees under the provisions of
the promissory note and guaranty. After
plaintiff’s posttrial motion, it awarded plaintiff $128,924 over defendants’
objection that plaintiff had not attempted mediation and in accord with
plaintiff’s theory that he was invoking (1) the note and guaranty attorney fee
clauses rather than the purchase-agreement attorney fee clause for his
prosecutorial attorney fees, and (2) the note, guaranty, and purchase agreement
attorney fees clauses for his defensive attorney fees.

discussion

name="citeas((Cite_as:_2003_WL_22664648,_*1_(C">Defendants reiterate their
legal argument and contend that the trial court erred by awarding name="SR;315">plaintiff his attorney fees because it
failed to take into account plaintiff’s failure to attempt prelitigation name="SR;337">mediation as required by the purchase contract.

“On appeal, we review the
determination of the legal basis for an award of attorney fees de novo as a
question of law.” (Blackburn v.
Charnley (2004) 117 Cal.App.4th 758, 767.)

“The language of a contract is to
govern its interpretation, if the language is clear and explicit, and does not
involve an absurdity.” (Civ. Code, §
1638.) “We may not ‘create for the
parties a contract which they did not make, and . . .
cannot insert in the contract language which one of the parties
now wishes were there.’ ” (Ben-Zvi v.
Edmar Co. (1995) 40 Cal.App.4th 468, 473.)

In plain language, on its face, the
purchase agreement authorizes an award of attorney fees to the prevailing party
in a dispute between the buyer and seller, but bars an award to a party who
commences an action without first attempting to resolve the dispute through
mediation.

In Frei v. Davey (2004) 124
Cal.App.4th 1506, the court construed a similar attorney fee provision and
concluded that it “means what it says and will be enforced.” (Id. at p. 1508.) “To recover attorney fees under the [a]greement,
a party cannot commence litigation before attempting to resolve the matter
through mediation.” (Id. at p.
1516; accord Lange v. Schilling
(2008) 163 Cal.App.4th 1412, 1417 [plaintiff’s “failure to meet the [mediation]
condition . . . precludes any award of fees”]; Johnson
v. Siegel (2000) 84 Cal.App.4th 1087, 1101 [“[s]eeking
mediation is a
condition precedent to name="SR;1975">the recovery of name="SR;1978">attorney fees.”].)

Plaintiff insists that he was
seeking fees under the note and guaranty and that the mediation provision
cannot be exported from the purchase agreement and inserted into the note and
guaranty. We disagree with this
analysis.

The controlling statute is Civil
Code section 1642, which provides: “Several contracts relating to the same
matters, between the same parties, and made as parts of substantially one
transaction, are to be taken together.”
Pursuant to this section, “it is the general rule that several papers
relating to the same subject matter and executed as parts of substantially one
transaction, are to be construed together as one contract.” (Nevin v. Salk (1975) 45 Cal.App.3d
331, 338.) “Thus, a note, mortgage and agreement
of sale constitute one contract where they are a part of the same transaction
[citation].” (Huckell v. Matranga
(1979) 99 Cal.App.3d 471, 481.)

Cases have indicated that “it is a
question of fact whether multiple contracts are intended to be elements of a
single transaction under [Civil Code] section 1642.” (Pilcher v. Wheeler (1992) 2
Cal.App.4th 352, 355; accord, BMP Property Development v. Melvin (1988)
198 Cal.App.3d 526, 531; Nevin v. Salk, supra, 45 Cal.App.3d at p. 338.) “However, ‘[i]nterpretation of a contract
presents a question of law unless it depends on conflicting evidence, and an
appellate court is not bound by a trial court’s interpretation which does not
depend on the credibility of extrinsic evidence.’ ” (Boyd v. Oscar Fisher Co. (1989) 210
Cal.App.3d 368, 378.)

In any event, here, the trial court
specifically found that the note and guaranty were “the ‘effectuation’ of the
contract.’ ” Indeed, there is no purpose
for the note and guaranty but for the contract.
A breach of the contract for nonpayment will of necessity effectuate a breach
of the note and guaranty; a breach of the note and guaranty for nonpayment will
of necessity effectuate a breach of the contract. Thus, plaintiff’s action was necessarily an
action “arising out of [the purchase agreement].” It is indisputable that the three writings
constituted an indivisible transaction.
It is artificial to treat the note and guaranty as stand-alone
agreements apart from the contract.
Civil Code section 1642 requires that the three writings be taken
together as one contract.

Plaintiff argues that Ellenikiotis
was not a party to the purchase agreement and therefore cannot invoke the
mediation provision. Plaintiff’s
analysis is erroneous.

Again, the writings must be taken
together as one contract. In any event,
plaintiff sued Ellenikiotis on the contract.
The first cause of action alleges that Ellenikiotis was a party to the
contract and breached the contract by failing to pay the purchase price. It attaches a copy of the contract and prays
for an award of contractual attorney fees.

name="citeas((Cite_as:_2012_WL_5492309,_*4_(Ca">Civil Code section 1717,
subdivision (a) states, in relevant part:
“In any action on a contract, where the contract specifically provides
that attorney’s fees and costs, which are incurred to enforce that contract,
shall be awarded either to one of the parties or to the prevailing party, then
the party who is determined to be the party prevailing on the contract, whether
he or she is the party specified in the contract or not, shall be entitled to
reasonable attorney’s fees in addition to other costs.”

“The primary purpose of [Civil
Code] section 1717 is to ensure mutuality of remedy for attorney fee claims
under contractual attorney fee provisions.
[Citation.] Courts have
recognized that [Civil Code] section 1717 has this effect in at least two distinct
situations. [¶] The first situation in which [Civil Code] section 1717 makes an
otherwise unilateral right reciprocal, thereby ensuring mutuality of remedy, is
‘when the contract provides the
right to one party but not to the other.’ [Citation.]
In this situation, the effect of [Civil Code] section 1717 is to allow
recovery of attorney fees by
whichever contracting party
prevails, ‘whether he or she is the party specified in
the contract or not.’ ”
(Santisas v. Goodin (1998) 17 Cal.4th 599, 610-611 (Santisas).)

“The second situation in which
[Civil Code] section 1717 makes an otherwise unilateral right reciprocal,
thereby ensuring mutuality of remedy, is when a person sued
on a contract containing a provision for attorney
fees to the prevailing party
defends the litigation ‘by successfully arguing the inapplicability, invalidity,
unenforceability, or nonexistence of the same contract.’
” (Santisas, supra, 17 Cal.4th at p.
611.) This includes cases in which “a name="SR;2244">party is sued on a contract
providing for an award of attorney fees
to which he is not a party.” (Topanga and Victory Partners v. Toghia
(2002) 103 Cal.App.4th 775, 780.)

The California Supreme Court has
explained that Civil Code section 1717 “would fall short of th[e] goal of full
mutuality of remedy if its benefits were denied to parties
who defeat contract claims by proving that they were not name="SR;2312">parties to the alleged contract or
that it was never formed.” (Hsu v.
Abbara (1995) 9 Cal.4th 863, 870.)
“Because these arguments are inconsistent with a contractual claim for name="SR;2344">attorney fees under the same
agreement, a party prevailing on any of these bases
usually cannot claim attorney fees
as a contractual right.
If [Civil Code] section 1717 did not apply in this situation, the right
to attorney fees would be
effectively unilateral--regardless of the reciprocal wording of the name="SR;2393">attorney fee provision allowing name="SR;2397">attorney fees to the prevailing
attorney--because only the party seeking to affirm and
enforce the agreement could invoke its attorney name="SR;2418">fee provision. To
ensure mutuality of remedy in this situation, it has been consistently held
that when a party litigant prevails in an action on a name="SR;2445">contract . . . [Civil Code] section 1717 permits that name="SR;2450">party’s recovery of attorney name="SR;2454">fees whenever the opposing parties
would have been entitled to attorney fees
under the contract had they prevailed.” (Santisas, supra, 17 Cal.4th at p. 611.)

Here,
neither the trial court’s statement of decision nor its judgment makes clear
whether plaintiff prevailed against Ellenikiotis on the first cause of action
(necessarily affirming that Ellenikiotis was a party to the contract) or
Ellenikiotis prevailed against plaintiff on the first cause of action (because
Ellenikiotis was not a party to the contract).
The statement and judgment speak to Ellenikiotis’s liability as a
guarantor but do not parse out an exoneration under the first cause of
action. But the point is of no moment
given that plaintiff sued Ellenikiotis as if he were a party to the
contract. If plaintiff prevailed against
Ellenikiotis on the first cause of action, the attorney fee clause would apply
against Ellenikiotis; and if Ellenikiotis prevailed against plaintiff on the
first cause of action, the attorney fee clause would apply in favor of
Ellenikiotis. Under either scenario, the
clause is operable vis-à-vis
Ellenikiotis. Since the clause includes
the mediation provision, the mediation provision is operable vis-à-vis Ellenikiotis.

Plaintiff, however, prevailed
against Park Vasona on the cross-complaint.

The filing of a cross-complaint
“institute[s] a ‘. . . separate, simultaneous action’ ”
distinct from the initial complaint and makes the cross-defendant a
defendant. (Bertero v. National
General Corp. (1974) 13 Cal.3d 43, 51.)
The result is “ ‘ “two simultaneous actions pending
between the same parties wherein each is at the same time
both a plaintiff and a defendant.” ’ ” (Id.
at p. 52.) That the Legislature
changed the definition of a complaint to mean either a complaint or
cross-complaint “reinforces [the] treatment of all cross-actions
as independent suits.” (Id. at p.
52, fn. 2.)

As a “defendant” in Park Vasona’s
action, plaintiff could be entitled to recover
attorney fees incurred for its defense.
(See Johnson v. Siegel,
supra, 84 Cal.App.4th 1087, 1101 [affirming fee award to the
defendant under mediation clause similar to this case
where the plaintiff filed complaint without first seeking
to mediate].)

Although the covenant not to
compete does not contain an attorney fee clause, the covenant specifically
makes itself effective upon the consummation of the gas station sale and the
trial court found that the covenant was one of the writings that effectuated
the purchase agreement. The covenant
must therefore be taken together with the purchase agreement. (Civ. Code, § 1642.) The cause of action for breach of the
covenant was therefore an action “arising out of [the purchase agreement],”
giving plaintiff the right to attorney fees for successfully defending that
cause of action.

Similar reasoning applies to the
cause of action for breach of an oral agreement to sublease the automobile
repair shop bays. The trial court found
that a written lease of the bays, which was incorporated into the purchase
agreement and made effective on consummation of the purchase agreement, was one
of the writings that effectuated the purchase agreement. The lease contained an attorney fee clause in
favor of the prevailing party should “either party be compelled to commence or
sustain an action at law or in equity to enforce their rights pursuant to this
agreement.” The trial court articulated
that Park Vasona’s claim was that plaintiff made oral promises to lease the
bays for an extended time after expiration of the lease’s term. It found against Park Vasona because, among
other reasons, the written lease provided that any extension would be on a
month-to-month basis. Thus, although the
alleged oral promise to lease is without an attorney fee clause, plaintiff
defended the cause of action by enforcing his rights under the written lease. And the cause of action is also an action
“arising out of [the purchase agreement]” given that the written lease is a
part of the purchase agreement by statute and incorporating language. Plaintiff therefore has the right to attorney
fees for successfully defending the cause of action.

Where, as here, plaintiff’s prosecutorial
claims are not covered by the attorney fee provision but his defensive claims
are covered by the attorney fee provision, attorney name="SR;3459">fees may be awarded and the trial
court may apportion the fees to award
those incurred in connection with the defensive claims. (Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th
1158, 1179-1180; see also Santisas,
supra, 17 Cal.4th at p. 615.)

“The recognized barrier to
segregation for purposes of calculating fee awards is inextricably intertwined
issues. Thus, although timekeeping and
billing procedures may make a requested segregation difficult, they do not,
without more, make it impossible.” (Diamond
v. John Martin Co. (9th Cir. 1985) 753 F.2d 1465, 1467; see Reynolds
Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129 [“[w]here a cause of
action based on the contract providing for attorney’s fees is joined with other
causes of action beyond the contract, the prevailing party may recover
attorney’s fees under [Civil Code] section 1717 only as they relate to the
contract action.”]; Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1604 [“[w]here fees
are authorized for some causes of action in a complaint but not for others,
allocation is a matter within the trial court’s discretion.”].)

On remand, the trial court shall
allow the parties to submit further papers on the issue of reasonable name="SR;3202">allocation of plaintiff’s attorney name="SR;3207">fees to the defense of the cross-complaint. (See Smith v. Circle P Ranch Co. (1978) 87 Cal.App.3d 267, 279-280
[remand appropriate where insufficient showing made as to allocation].)

Defendants claim that plaintiff’s
attorney fee motion was an “action” or “proceeding” that arose out of the
purchase agreement and that, if they are “prevailing” parties on this appeal,
they have the contractual right to attorney fees for defending plaintiff’s
motion and prosecuting this appeal. We
disagree.

“[T]he trial and appeal are treated
as parts of a single proceeding. The
party prevailing on appeal is not necessarily the prevailing party for the
purposes of awarding contractual attorney fees.” (Wood
v. Santa Monica Escrow Co. (2009) 176 Cal.App.4th 802, 806 (>Wood).)
A prevailing party in a contract action is the “party who recovered a
greater relief in the action on the contract.”
(Civ. Code, § 1717, subd. (b)(1).)

Here, plaintiff is indisputably the
prevailing party in this action. Not
only did he win the lawsuit (Wood,> supra,176 Cal.App.4th at p. 807), but
the trial court also declared plaintiff to be the prevailing party by awarding
him contractual, prevailing-party attorney fees.

disposition

The judgment is reversed. Upon plaintiff’s motion, the trial court is
directed to consider the allocation of plaintiff’s attorney fee award to the
defensive aspects of this litigation.
Costs on appeal are awarded to defendants.











Premo,
Acting P.J.











WE CONCUR:













Mihara,
J.



















Márquez,
J.