Lucas v. Mitchell Group

Filed 8/5/09 Lucas v. Mitchell Group CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

This is the second appeal in litigation arising from two real estate transactions. We take judicial notice of the court records and our prior opinion (H028561). (Evid. Code,  452, 459.) We briefly recite the salient facts and background.

Plaintiff Jeffrey A. Lucas brought a lawsuit against real estate agent Mark Capito, broker Halley Mitchell, referred to during the litigation as Halley Mitchell Dow (hereinafter "Dow"), and the Mitchell Group, Inc. a California corporation and against the Estate of Emogene Owen, through her representatives Allison Owen and Robyn Elizabeth Mostyn (hereinafter "Owen Estate") in regard to two real estate transactions. The first transaction involved the sale of plaintiff's real property on Oak Way in Carmel, California. The second involved plaintiff's purchase of real property on Coast Ridge Drive in Carmel, California, from seller Emogene Owen, now deceased.

Capito, who worked for the Mitchell Group, represented plaintiff in both these transactions. The Mitchell Group was the listing broker for the sale of the Oak Way property. The Mitchell Group, which also listed the Coast Ridge property, acted as agent for both buyer Lucas and seller Owen in the sale of the property to Lucas for $892,400 in March 2001. In September 2001, after he had discovered water problems, plaintiff Lucas sold the Coast Ridge property to Paul Porch, who had been a competing potential buyer in the sale by Owen, for $856,000. The Mitchell Group was not involved in that third transaction.

Plaintiff's complaint contained four causes of action: (1) breach of fiduciary duty against defendants Capito, Dow, and the Mitchell Group as to both transactions, (2) negligence against defendants Capito, Dow, and the Mitchell Group as to both transactions, (3) negligent misrepresentation against all defendants as to the Coast Ridge transaction, and (4) fraud against defendant Owen Estate as to the Coast Ridge transaction. The complaint alleged, among other things, that the Coast Ridge property had standing water under the house and water intrusion problems.

In the first appeal, this court determined the trial court had committed a number of errors in determining damages and the attorney fees award. Following remand, the trial court issued a new judgment.

The post-appeal judgment, filed April 8, 2008, again found for defendants with regard to the Oak Way transaction. As to the Coast Ridge transaction, the trial court again found that the Mitchell Group, Capito and Dow were negligent, they breached their fiduciary duties, and they negligently misrepresented material facts about the Coast Ridge property. The trial court again found that seller Owen negligently misrepresented material facts and intentionally concealed material facts. The trial court awarded out-of-pocket damages of $36,400, the difference between the purchase price of $892,400 and the Coast Ridge property's actual value of $856,000 as determined by the court, against all defendants, jointly and severally. The judgment awarded consequential damages of $1,736.19, which consisted of $1,524.18 in excess interest and $212.01 in excess real property taxes paid by plaintiff Lucas based upon the excess purchase price of $36,400. The judgment awarded $58,000 in attorney fees to plaintiff against only defendant Owen Estate. It awarded $1,695.50 in statutory costs to plaintiff against all defendants, jointly and severally. The judgment also awarded prejudgment interest of $25,813.89, consisting of $24,681.45 in interest on the general damages award of $36,400 and $1,132.44 in interest on the award of consequential damages through December 19, 2007.

In this appeal, defendants challenge the out-of-pocket and consequential damages. Additionally, as to the attorney fees award, it is argued that the Owen Estate should not be liable for $58,000 in attorney fees and "principles of fairness and justice require allocation" of the attorney fees "between the two litigated transactions." It is also urged that an allocation should be made between defendants.

Some of the issues raised in this appeal were considered and decided in the prior appeal. We reverse and remand for the limited purpose of allowing the trial court to exercise its discretion in evaluating the reasonableness of the attorney fees award against defendant Owen Estate.

A. Out-of-Pocket Damages

In the prior appeal, defendants argued that there were no out-of-pocket damages since plaintiff Lucas failed to present evidence that the market value of the Coast Ridge property at the time he bought it was less than the purchase price and they claimed that plaintiff's testimony was insufficient evidence. In this appeal, defendants contend that the trial court should not have awarded out-of-pocket damages because there was no "competent evidence" to establish that the market value of the Coast Ridge property at the time plaintiff Lucas bought the property was less than its purchase price. These arguments are substantially the same. In our prior decision, we discussed plaintiff's testimony indicating that the market value of the property at the time he purchased it was about the price at which he subsequently sold it after his discovery of water problems. We discussed the applicable law and rejected the argument that plaintiff had not met his burden of proof.

"The doctrine of law of the case . . . governs later proceedings in the same case (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 701 . . . ) with regard to the rights of the same parties who were before the court in the prior appeal. (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 301 . . . , 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, 895, p. 928.)" (In re Rosenkrantz (2002) 29 Cal.4th 616, 668, fn. omitted, italics added.) "The rule of 'law of the case' generally precludes multiple appellate review of the same issue in a single case." (Searle v. Allstate Life Ins. Co. (1985) 38 Cal.3d 425, 434.)

" 'The doctrine of "law of the case" deals with the effect of the first appellate decision on the subsequent retrial or appeal: The decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case.' [Citation.]" (Morohoshi v. Pacific Home (2004) 34 Cal.4th 482, 491.) "[T]he law of the case doctrine [applies] where the point of law involved was necessary to the prior decision and was ' "actually presented and determined by the court." ' (People v. Shuey, supra, 13 Cal.3d at p. 842 . . . .)" (People v. Gray (2005) 37 Cal.4th 168, 197.)

"The doctrine of law of the case of course is not inflexible. (England v. Hospital of Good Samaritan (1939) 14 Cal.2d 791, 795. . . .) The principal ground for ignoring the doctrine, however, is an intervening or contemporaneous change in the law [citations] . . . ." (Davies v. Krasna (1975) 14 Cal.3d 502, 507, fn. 5.) "[T]he doctrine will not be adhered to where its application will result in an unjust decision, e.g., where there has been a 'manifest misapplication of existing principles resulting in substantial injustice' (Shuey, supra, 13 Cal.3d at p. 846), or the controlling rules of law have been altered or clarified by a decision intervening between the first and second appellate determinations (People v. Ramos (1984) 37 Cal.3d 136, 146 . . . ). The unjust decision exception does not apply when there is a mere disagreement with the prior appellate determination. (Shuey, supra, 13 Cal.3d at p. 846.)" (People v. Stanley (1995) 10 Cal.4th 764, 787.) The law of case doctrine applies to the issue of proof of out-of-pocket damages.

B. Consequential Damages

In its post-appeal judgment, the trial court awarded consequential damages for excess interest paid on the loan and excess real property taxes. In this second appeal, defendants argue that the court erred in awarding these consequential damages because (1) there was no substantial evidence establishing that the market value of the Coast Ridge property at the time of plaintiff's purchase was $856,000 and (2) the recovery of both prejudgment interest on the award of out-of-pocket damages and these items of consequential damages amounts to "an unwarranted double recovery." There is no other assignment of error.

We have dispensed with the first contention under the law of the case, as discussed above. We are not persuaded by the second contention

Defendants do not contend that the full loan interest and full taxes paid by plaintiff during the brief period he owned the Coast Ridge property would have been incurred regardless of the negligent misrepresentation or intentional concealment of material facts regarding the Coast Ridge property, which the trial court found resulted in an inflated purchase price over market value. (Cf. Gagne v. Bertran (1954) 43 Cal.2d 481, 491 [cost of installing the foundation was not recoverable since the installation cost would have been incurred regardless and resulted from the land's physical condition and not from defendant's incorrect determination of the extent of fill].) A plaintiff fraudulently induced to purchase real property is entitled to recover consequential damages. (See Civ. Code,  3343, subd. (a)(1) [one defrauded in the purchase of property is entitled to recover "any additional damage arising from the particular transaction" including "[a]mounts actually and reasonably expended in reliance upon the fraud"]; Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1249 [consequential damages for fraud available under Civil Code section 3343 or 3333, depending upon whether defendant stands in a fiduciary relationship]; Gagne v. Bertran, supra, 43 Cal.2d at p. 490, fn. 6 [plaintiff entitled to consequential damages resulting from soil tester's misrepresentations regarding depth of fill]; see also Rest.2d Torts,  549, subd (1)(b) [consequential damages for fraudulent misrepresentation] and com. d., pp. 109, 112-113; see 552B, subd. (1)(b) [consequential damages for negligent misrepresentation], p. 140.)

In distinction to amounts expended as a consequence of tortious conduct, "[p]rejudgment interest is awarded to compensate a party for the loss of the use of his or her property. [Citation.]" (Bullis v. Security Pac. Nat. Bank (1978) 21 Cal.3d 801, 815.) The policy underlying "an award of prejudgment interest is to compensate the injured party-to make that party whole for the accrual of wealth which could have been produced during the period of loss. [Citations.]" (Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1790.) We discern no impermissible double recovery as argued by defendants.

C. Attorney Fees

After the trial court's original judgment, plaintiff brought a motion for an award of $73,001 in attorney fees to the prevailing party. In their points and authorities in opposition to plaintiff's motion, defendants asserted that plaintiff's "claim of $73,001 in attorney's fees [was] grossly excessive and unreasonable" for a court trial that took place "over parts of six days." In an order filed on May 28, 2004, following a hearing on plaintiff's motion, the trial court determined plaintiff Lucas was "entitled to attorney's fees in the amount of $58,000 as against Owen and the Mitchell Group, jointly and severally." In its "Amended Judgment After Court Trial," also filed May 28, 2004, the trial court awarded attorney fees of $58,000 to plaintiff Lucas against defendants Mitchell Group and Owen Estate, jointly and severally.

The trial court's "second amended judgment," filed on January 5, 2005 after its partial grant of defendants' motion to vacate the judgment and enter a different judgment and before the first appeal, also awarded $58,000 in attorney fees and additionally awarded $5,664.26 in attorney fees that, apparently, had been paid "as part of the settlement charges" from the proceeds of plaintiff's sale of the Coast Ridge property to plaintiff. In declining to apportion fees between the Oak Way transaction and the Coast Ridge transaction, the trial court stated: "It is extremely difficult if not impossible for the court to apportion the trial time between the transactions as they were so inter-related and, the court considered this in not awarding all of the fees incurred and requested by plaintiff." It imposed joint and several liability and concluded that apportionment was "really an issue of contribution among the various defendants."

In the first appeal, this court determined that the trial court had no statutory authority under Civil Code section 663 to add new attorney's fees not requested in plaintiff's noticed motion for an attorney fee award. We further concluded the defendants had not established that the trial court had abused its discretion by not apportioning attorney fees between the two real estate transactions. We observed that the complaint did not contain separate "Oak Way causes of action," the court had not awarded the full amount requested by plaintiff, and, in demanding that defendant Owen Estate not be held liable for the Oak Way litigation, defendants had made no reference to the attorney fee billings contained in the record. We also recognized that apportionment between causes of action may not be required where there are common issues. But we did determine that the trial court erred because the applicable attorney fee provision permitted recovery of attorney fees from only seller Owen.

Following remand to the trial court after the first appeal, attorneys for the parties filed their objections to the proposed post-appeal judgment. In their opposition to the proposed post-appeal judgment, defendants requested that the trial court eliminate the "portion of the Plaintiff's attorney's fees incurred prosecuting the Oak Way transaction" from its award of attorney fees against the Owen Estate. Defendants objected to the trial court "simply transfer[ing] [liability for] the previous award of attorney's fees" to defendant Owen Estate. Defendants asserted that plaintiff should be required to file a new motion for attorney fees, impliedly for the purpose of adjudicating attorney fees afresh.

In its post-appeal judgment, the trial court stated: "As to attorney's fees and costs, again Lucas is considered the prevailing party in this litigation on claims against each party based upon his overall monetary success. Consistent with the Court of Appeal's decision, attorney's fees cannot be awarded against The Mitchell Group, as it found that there is no underlying contractual right to those fees. As the appellate court also found, however, this Court did not abuse its discretion 'in not attempting to segregate the attorney fee billings between the two transactions', even though Owen had no involvement with Oak Way. Accordingly, attorney's fees are awarded to Plaintiff as against solely Owen in the amount of $58,000 through January 25, 2004, the date through which Plaintiff last requested fees . . . ."

On appeal, it is asserted that the trial court "erred in entering this new judgment without any attempt to allocate or apportion [attorney] fees in any way at all." It is now contended that an allocation should be made between defendants since the attorney fee agreement applied only to seller Owen. It is also argued that "the trial court should have made a fair and just allocation between the two litigated transactions." This latter argument is in essence the same argument raised in the first appeal, which was rejected. Consequently, law of the case doctrine applies to this argument and we do not revisit it.

It does appear, however, that the trial court did not recognize its discretion in determining the reasonableness of its attorney fee award in light of our conclusion that attorney fees were recoverable on a contractual basis against only seller Owen. "[A] case will be remanded for a redetermination of the [attorney] fee award if it is evident that the court's ruling was not an exercise of discretion [in determining reasonable attorney fees], but the consequence of an erroneous view of the court's own power. (Sternwest Corp. v. Ash (1986) 183 Cal.App.3d 74, 76, 227 Cal.Rptr. 804.)" (Contractors Labor Pool, Inc. v. Westway Contractors, Inc. (1997) 53 Cal.App.4th 152, 168 [award of reasonable attorney fees to prevailing party under Civil Code section 3250].)

As our prior opinion indicated, the attorney fee provision in the Coast Ridge purchase agreement between Lucas and Owen entitled the prevailing buyer or seller to recover "reasonable attorney fees" from the nonprevailing buyer or seller in an action between buyer and seller arising out of the purchase agreement. (Cf. Civ. Code,  1717, subd. (a) ["Reasonable attorney's fees shall be fixed by the court"].) Any contractual entitlement to reasonable attorney fees is circumscribed by the contract language as construed under the rules of contract interpretation, subject to Civil Code section 1717. (See Santisas v. Goodin (1998) 17 Cal.4th 599, 608-611.)

"[T]he fee setting inquiry in California ordinarily begins with the 'lodestar,' i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. . . . The lodestar figure may then be adjusted, based on consideration of factors specific to the case . . . ." (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095.) In evaluating the reasonableness of attorney fees recoverable against defendant Owen Estate, the trial court should consider the extent to which attorney time was devoted to common issues and to issues and claims outside the scope of the attorney fee provision. (See Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129-130 ["Attorney's fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed"]; cf. Cruz v. Ayromloo (2007) 155 Cal.App.4th 1270, 1274, 1277-1278 [trial court acted reasonably in not apportioning attorney fees incurred in representing tenants with and without an attorney fee clause in their leases since landlord's liability to tenants was so factually interrelated that it would have been impossible to separate into compensable and noncompensable time units but trial court had reduced contractual attorney fee award to prevailing tenants by 20 percent "to account for legal fees incurred for work done specifically for the tenants who did not have a contractual right to attorneys' fees"].) In this case, the trial court had discretion to reduce the attorney fee award to reflect the claims against the other defendants outside the applicable attorney fee provision even though no formal allocation of billable hours may have been possible given the representation of all defendants by the same counsel and the existence of interrelated facts and common issues.

"It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court . . . . [Citations.] The value of legal services performed in a case is a matter in which the trial court has its own expertise. [Citation.] The trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony. [Citations.] The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case." (Melnyk v. Robledo (1976) 64 Cal.App.3d 618, 623-624.) " 'The experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong' - meaning that it abused its discretion. (Serrano v. Priest (1977) 20 Cal.3d 25, 49 . . . ; Fed-Mart Corp. v. Pell Enterprises, Inc. (1980) 111 Cal.App.3d 215, 228 . . . [an appellate court will interfere with a determination of reasonable attorney fees 'only where there has been a manifest abuse of discretion'].)" (PLCM Group v. Drexler, supra, 22 Cal.4th at p. 1095.)

The judgment is reversed. We remand for the limited purpose of permitting the trial court to exercise its sound discretion in determining reasonable attorney fees

recoverable on a contractual basis from defendant Estate of Owen. The parties shall bear their own costs on appeal (see Cal. Rules of Court, rule 8.278(a) and (d)).

___________________________

ELIA, J.

WE CONCUR:

___________________________

RUSHING, P. J.

___________________________

PREMO, J.

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