Rohde
v. Clark

 

 

Filed 1/30/14  Rohde v. Clark CA5

 

name=PublicationStatus> 

 

NOT TO BE PUBLISHED IN THE OFFICIAL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  This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.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

FIFTH
APPELLATE DISTRICT

 

 
>

KATHY ROHDE,   Plaintiff and Appellant,                           v. RICHARD CLARK,   Defendant and Respondent.

F064642   (Super. Ct. No. VCU235217)   OPINION

 

            APPEAL from an order of the href="http://www.mcmillanlaw.us/">Superior Court of Tulare County.  Valeriano Saucedo, Judge.

            Donna M. Standard for Plaintiff and
Appellant.

            Horswill, Medero & Soares, Joseph
F. Soares and Brandon M. Ormonde for Defendant and Respondent.

-ooOoo-

            Plaintiff appeals from a
postjudgment order awarding defendanthref="#_ftn1" name="_ftnref1" title="">>[1] his attorney
fees based on provisions found in the contract between the parties.  Plaintiff contends the award was inequitable
because defendant breached the contract. 
Defendant prevailed in the trial court by establishing plaintiff’s claim
on the promissory note and second deed
of trust was barred by the antideficiency statutes.  We conclude the trial court properly awarded
attorney fees to the prevailing defendant, even though he prevailed by
establishing the contract was unenforceable. 
Accordingly, we affirm.

>FACTUAL AND PROCEDURAL BACKGROUND

            Plaintiff and defendant jointly
purchased a residence.  When their href="http://www.sandiegohealthdirectory.com/">relationship ended,
defendant agreed to pay plaintiff $165,000 for her interest in the
property.  He paid her $135,000 by check
and gave her a promissory note secured by a second deed of trust for the
remaining $30,000.  Defendant refinanced
the first trust deed on the property,
which enabled him to pay plaintiff the $135,000.  After four years, defendant defaulted on both
the first deed of trust and plaintiff’s second deed of trust.  The holder of the first deed of trust gave
notice, then held a trustee’s sale at which it purchased the property for an
amount insufficient to satisfy plaintiff’s note.  Plaintiff demanded payment from defendant,
then filed suit for breach of contract
when defendant failed to cure the default. 
Defendant moved for summary judgment in plaintiff’s action against him,
asserting plaintiff’s second deed of trust was a purchase money mortgage and
her action was barred by the antideficiency statute (Code of Civil Procedure,
section 580bhref="#_ftn2" name="_ftnref2"
title="">>[2]).  The trial court denied the motion, then
permitted plaintiff to amend her complaint to allege fraud and other tort
causes of action against defendant and the loan broker who assisted with the
loan transaction.  The matter proceeded
to court trial, after which the court ruled in favor of defendants and against
plaintiff, on the ground fraud and other href="http://www.sandiegohealthdirectory.com/">torts had not been proven
and the antideficiency statute barred the claim on the contract.  Judgment was entered and defendant moved for
an award of attorney’s fees based on provisions for such fees in the promissory
note and deed of trust.  The trial court
granted the motion and awarded defendant $21,435 in attorney’s fees.   Plaintiff appeals.  Her notice of appeal was untimely as to the
judgment itself, so the only issue before this court is whether the trial court
erred in making the award of attorney’s fees.  


DISCUSSION

>I.          Standard of
Review

“[T]o determine whether an award of
attorney fees is warranted under a contractual attorney fees provision, the
reviewing court will examine the applicable statutes and provisions of the
contract.  Where extrinsic evidence has
not been offered to interpret the [contract], and the facts are not in dispute,
such review is conducted de novo. 
[Citation.]  Thus, it is a
discretionary trial court decision on the propriety or amount of statutory
attorney fees to be awarded, but a determination of the legal basis for an
attorney fee award is a question of law to be reviewed de novo.  [Citation.]” 
(Carver v. Chevron >U.S.A.>, Inc. (2002) 97
Cal.App.4th 132, 142.)  Plaintiff does
not challenge the amount of attorney fees awarded; rather, she contests
defendant’s entitlement to any award of attorney fees.  Consequently, our review is de novo.

II.        Attorney Fees

“California follows what is commonly referred
to as the American rule, which provides that each party to a lawsuit must
ordinarily pay his own attorney fees.”  (>Trope v. Katz (1995) 11 Cal.4th 274, 278
(Trope); § 1021.)  There are exceptions to this general rule,
including “when there is an ‘agreement, express or implied, of the parties’
that allocates attorney fees.”  (>Id. at p. 279, citing § 1021.)  Attorney fees are recoverable as costs when
authorized by statute, contract, or law. 
(§ 1033.5, subd. (a)(10).)  When
so authorized, they may be recovered as a matter of right by the prevailing
party in the action.  (§ 1032, subd.
(b).) 

“Although
Code of Civil Procedure section 1021 gives individuals a rather broad right to
‘contract out’ of the American rule by executing … an agreement [that allocates
attorney fees], these arrangements are subject to the restrictions and
conditions of [Civil Code] section 1717 in cases to which that provision
applies.”  (Trope, supra, 11 Cal.4th at p. 279.)  Civil Code section 1717 provides:

“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.”  (Civ. Code, §
1717, subd. (a).)

There
is no dispute that there was an attorney fee provision in the contract in
issue; both the promissory note and the second deed of trust contained language
governing attorney fees.  The most direct
provision is found in paragraph 14 of the deed of trust, which provides:  “Lender may charge Borrower fees for services
performed in connection with Borrower’s default, for the purpose of protecting
Lender’s interest in the Property and rights under this Security Instrument,
including, but not limited to, attorneys’ fees, property inspection and
valuation fees.”  Although the provision
expressly authorizes only the lender to recover attorney fees, Civil Code
section 1717 makes that provision reciprocal. 
(Santisas v. Goodin (1998) 17 Cal.4th 599, 610-611 (Santisas).)  Thus, the prevailing party is entitled to
attorney fees, whether the lender or the borrower prevails. 

The
term “prevailing party” is defined to include “a defendant where neither
plaintiff nor defendant obtains any relief, and a defendant as against those
plaintiffs who do not recover any relief against that defendant.”  (§ 1032, subd. (a)(4).)  Neither party obtained any relief, and
plaintiff did not recover any relief against defendant.  Consequently, defendant was the prevailing
party on the contract, and was entitled to his attorney fees. 

A
prevailing defendant may be entitled to an award of attorney fees even when
that defendant successfully defends a contract action by establishing the
contract containing the attorney fees provision was invalid or
unenforceable. 

“[Civil Code]section 1717 makes an
otherwise unilateral right reciprocal, thereby ensuring mutuality of remedy, …
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.’  [Citation.]  Because these arguments are inconsistent with
a contractual claim for attorney fees under the same agreement, a party
prevailing on any of these bases usually cannot claim attorney fees as a
contractual right.  If section 1717 did
not apply in this situation, the right to attorney fees would be effectively
unilateral—regardless of the reciprocal wording of the attorney fee provision
allowing attorney fees to the prevailing attorney—because only the party
seeking to affirm and enforce the agreement could invoke its attorney 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 contract by establishing that the contract is
invalid, inapplicable, unenforceable, or nonexistent, section 1717 permits that
party’s recovery of attorney fees whenever the opposing parties would have been
entitled to attorney fees under the contract had they prevailed.  [Citations.]” 
Santisas, supra, 17 Cal.4th at
p. 611.) 

Plaintiff
sought an award of attorney fees in her complaint and first amended
complaint.  She does not dispute that she
would have been entitled to an award of attorney fees if she had prevailed on
her complaint.  Defendant prevailed on
plaintiff’s contract claim by establishing the contract was unenforceable
because enforcement was barred by the antideficiency statute.href="#_ftn3" name="_ftnref3" title="">>[3] 
Thus, defendant was entitled to an award of attorney fees as the
prevailing party even though he prevailed by establishing the contract was not
enforceable.

Plaintiff
states that an award of contractual attorney fees under Civil Code section 1717
is to be governed by equitable principles, and asserts that defendant should
not be awarded attorney fees, because it is inequitable to award fees to a
defendant who breached the contract by failing to make payments as
required.  Her argument is answered by one of the cases she cites in support of her
argument for application of equitable principles to awards of contractual
attorney fees.  In North Associates v. Bell (1986) 184 Cal.App.3d 860 (>Bell), the defendant argued that
appellate decisions had applied Civil Code section 1717’s mutuality provisions
to award attorney fees to prevailing parties when the contract containing the
attorney fees provision was unenforceable, but only when the party with
superior bargaining power had inserted a one-sided attorney fees provision into
the contract.  The court responded: 

“Bell’s argument misconstrues the actual
rationale of the cited cases.  They are
based not on the question of whether the language of a given attorney fees
provision is or is not reciprocal, but on the fundamental purpose of section
1717 to insure mutuality of a prevailing party’s access to an award of attorney
fees.  As long as an
action ‘involves’ a contract, and one of the parties would be entitled to
recover attorney fees under the contract if that party prevails in its lawsuit,
the other party should also be entitled to attorney fees if it prevails, even
if it does so by successfully arguing the inapplicability, invalidity,
unenforceability, or nonexistence of the same contract.  [Citations.] 
As stated in Jones v. Drain [(1983)
149 Cal.App.3d 484, 489-490]:  name=clsccl5>‘The courts have consistently held that the award of Civil
Code section 1717 contractual attorney’s fees is to be governed by equitable
principles.  [Citations.]  We
believe that it is extraordinarily inequitable to deny a party who successfully
defends an action on a contract, which claims attorney’s fees, the right to
recover its attorney’s fees and costs simply because the party initiating the
case has filed a frivolous lawsuit.  As a consequence, we find
that a prevailing defendant sued for breach of contract containing an
attorney’s fees provisions and having had to defend the contract cause of
action is entitled to recover its own attorney’s fees and costs therefor, even
though the trial court finds no contract existed.’”  (Bell,
supra, 184 Cal.App.3d at p. 865, italics added.)

Plaintiff
argues that the party trying to enforce a contract should be required to comply
with it before being allowed to enforce it. 
It was plaintiff, however, not defendant, who sought to enforce the
contract.  Defendant defeated plaintiff’s
action by establishing that enforcement of the contract was barred.  As discussed in Bell, it would be inequitable not to permit defendant to recover
attorney fees after he prevailed at trial, simply because he prevailed by
showing the contract was unenforceable and plaintiff’s action was therefore
without merit. 

            The award of attorney fees
compensates the prevailing defendant for the expense of defending against a
meritless action.  Regardless whether
defendant failed to make payments on the promissory note as required by that
note, plaintiff was not entitled to a judgment for the unpaid balance after the
trustee’s sale by the first trust deed holder. 
Her claim was barred by the antideficiency statute.  Plaintiff’s action was without merit and,
under the contract and Civil Code section 1717, defendant was entitled to
recover the amount he expended or incurred for attorney fees to defend himself
in this action.  The trial court did not
err in awarding defendant attorney fees.

>DISPOSITION

            The postjudgment order awarding
defendant attorney fees is affirmed. 
Defendant is entitled to his costs on appeal.

 

 

                                                                                                            _____________________

HILL, P. J.

WE CONCUR:

 

 

_____________________

CORNELL, J.

 

 

_____________________

GOMES, J.