Zacadia Financial
Limited v. Fiduciary Trust Internat. of Cal.
Filed 1/8/14
Zacadia Financial Limited v. Fiduciary Trust Internat. of Cal. CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.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
FOURTH
APPELLATE DISTRICT
DIVISION
THREE
ZACADIA FINANCIAL LIMITED PARTNERSHIP,
Plaintiff and Respondent,
v.
FIDUCIARY TRUST INTERNATIONAL OF CALIFORNIA, as
Trustee, etc.,
Defendant and Appellant.
G047921
(Super. Ct. Nos. BC 396443 consol.
with BC
396473)
O P I N I O N
Appeal
from an order of the Superior Court of Los
Angeles County, Victor E. Chavez, Judge.
Affirmed.
Farmer
& Ridley and Richard D. Cleary; Winston & Strawn, Rolf S. Woolner,
Justin E. Rawlins, Jenna W. Logoluso and Linda T. Coberly, pro hac vice, for Defendant and Appellant.
No
appearance for Plaintiff and Respondent.
>
INTRODUCTION
This
case is a companion to another we decide today, the $2.5-million tail on a $353-million
dog.
title="">[1] Appellant Fiduciary Trust
International of California (Fiduciary
Trust) is the the successor trustee of the Mark Hughes Family Trust, whose
trustees prevailed over respondent Zacadia Financial Limited Partnership (Zacadia)
in a three-week jury trial concerning the breach of a secured loan
agreement. The agreement included a
one-way attorney fee clause, entitling Zacadia to its “actual attorneys’ feesâ€
if it prevailed in any collection proceeding involving the secured loan. Invoking Civil Code section 1717, the
attorneys’ fees,†which they pegged at somewhat north of $3.1 million.
The
trial court awarded the trustees “reasonable fees†of $2.5 million instead. The successor trustee, Fiduciary Trust, has
appealed from this order, asserting that it is entitled to the full amount, as
Zacadia would have been if it had prevailed at trial.
We
affirm the order, which adhered to the unambiguous language of the
statute. Fiduciary Trust is entitled
only to reasonable fees, and it has not argued that the trial court abused its
discretion in awarding the amount it did.
FACTS
description of the elaborate, tax-driven financial dealings between Fiduciary
Trust’s predecessors and Zacadia may be found in our companion opinion. For purposes of this appeal, it suffices to
say that Zacadia became the ostensible lender to the Mark Hughes Family Trust,
in a scheme to reduce taxes on the massive estate of the late Herbalife
entrepreneur, Mark Hughes. Zacadia
alleged that the trustees breached the loan agreement and sought $353 million
in damages; a three-week jury trial resulted in a defense verdict.
The
loan agreement included the following attorney fee provision:
“If
this Note is not paid when due, whether at maturity or by acceleration, the
undersigned [i.e., the trustees of the Mark Hughes Family Trust] promises to
pay all costs of collection, including without limitation, actual
connection with the protection or realization of the collateral securing this Note
or the enforcement of any guaranty hereof incurred by the holder hereof on
account of such collection, whether or not suit is filed hereon or thereon;
such costs and expenses shall include, without limitation, all costs, expenses
and attorneys’ fees actually incurred by the holder hereof in connection with
any insolvency, bankruptcy, arrangement or other similar proceedings involving
the undersigned, or involving any endorser or guarantor hereof, which in any
way affects the exercise by the holder hereof of its rights and remedies under
this Note or under any mortgage, deed of trust, security agreement, guaranty or
other agreement securing or pertaining to this Note. As used herein, ‘actual attorneys’ fees’ or ‘attorneys’
fees actually incurred’ means the full and actual cost of any legal services
actually performed in connection with the matter for which such fees are sought
calculated on the basis of the usual fees charged by the attorneys performing
such services, and shall not be limited to ‘reasonable attorneys’ fees’ as that
term may be defined in statutory or decisional authority.â€
Having
prevailed at trial, the trustees put in for their attorney fees under Civil
Code 1717.
title="">[3] They presented evidence of $3,131,429
in fees. The trial court awarded them
$2.5 million, and Fiduciary Trust has appealed, claiming the court should have
awarded the entire amount.
DISCUSSION
This appeal turns on the
interpretation of Civil Code section 1717, a pure question of law subject to de
novo review. (Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th
443, 448.) “[T]he objective of statutory
interpretation is to ascertain and effectuate legislative intent.†(Burden
v. Snowden (1992) 2 Cal.4th 556, 562.) To discover that intent we first look to the
words of the statute, giving them their usual and ordinary meaning. (Granberry
v. Islay Investments (1995) 9 Cal.4th 738, 744; DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593, 601.) “Where the words of the statute are clear, we
may not add to or alter them to accomplish a purpose that does not appear on
the face of the statute or from its legislative history.†(Burden
v. Snowden, supra, 2 Cal.4th at p. 562.)
Civil
Code section 1717 was enacted to ensure mutuality in contractual attorney fee
provisions. “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 . . . .†(North
Associates v. Bell (1986) 184 Cal.App.3d 860, 865.)
In this
case, Fiduciary Trust argues for the intent of the statute over the plain and
unambiguous statutory language. The
statute clearly states that any fees awarded pursuant to its terms must be “reasonableâ€
fees. (Civ. Code, § 1717, subd.
(a).) The trustee maintains, however,
that the Legislature intended to create a reciprocal right to attorney fees
when a contract provided that only one party was entitled to fees. (See Reveles
v. Toyota by the Bay (1997) 57 Cal.App.4th 1139, 1152 (overruled on other
grounds, Gavaldon v. DaimlerChrysler
Corp. (2004) 32 Cal.4th 1246.) Since
Zacadia would have been entitled to its “actual†fees if it had prevailed at
trial, the trustee argues, Fiduciary Trust should get its actual fees, not
reasonable fees, in order to be reciprocal.
The
premise of Fiduciary Trust’s argument is incorrect. Had Zacadia prevailed, it would not have obtained
its attorney fees under Civil Code section 1717. It would have been entitled to its fees as
costs under Code of Civil Procedure section 1033.5, subdivision
(a)(10)(A). These costs, however, “shall
be reasonable in amount.†(Code Civ.
Proc., § 1033.5, subd. (c)(3).) Zacadia’s
fees would therefore be subject to the trial court’s evaluation for
reasonableness.
Civil
Code section 1717, the only basis for the trustee’s entitlement to fees,
restricts that recovery to “reasonable†fees.
“If a statute’s language is clear, then the Legislature is presumed to
have meant what it said, and the plain meaning of the language governs.†(Kizer
v. Hanna (1989) 48 Cal.3d 1, 8.) Under
this code section, “[i]t is elementary that attorney fees must be reasonable,
and that the party claiming them must establish (1) not only entitlement to
such fees but (2) the reasonableness of the fees claimed.†(Civic
Western Corp. v. Zila Industries, Inc. (1977) 66 Cal.App.3d 1, 16.)
In
599, the California Supreme Court enforced the statutory provisions in the face
of contrary contract language. The
plaintiffs had voluntarily dismissed their real estate lawsuit, and the
defendants moved for their attorney fees pursuant to the real estate purchase
agreement. (Id. at pp. 603-604.) The
court agreed that, as prevailing parties, the defendants had a contractual
basis for recovering their attorney fees.
When a plaintiff dismisses the action, however, “[Civil Code] section
1717 bars the defendant from recovering attorney fees incurred in defending
those causes of action, even though the
contract on its own terms authorizes recovery of those fees.†(Id.
at p. 617.) In other words, the
provisions of the statute override the contract terms. (See also
Silver v. Boatwright Home Inspection, Inc., supra, 97 Cal.App.4th at p.
450; Wong v. Thrifty Corp. (2002) 97
Cal.App.4th 261, 264 [statute overrides contract definition of prevailing
party]; Exxess Electronixx v. Heger
Realty Corp. (1998) 64 Cal.App.4th 698, 707 [same]; cf.
172 Cal.App.4th 101, 113-114 [court’s award of reasonable fees pursuant to “actual
fees†provision upheld].)
The
loan agreement is expressly governed by the law of the State of California. California law
restricts reciprocal recovery of attorney fees in one-way fee agreements to “reasonableâ€
ones. (Civ. Code, § 1717, subd. (a).)
that the trial court’s award was unreasonable, other than that it was not
everything asked for. The trial court
properly applied the code section to this motion for attorney fees.
DISPOSITION
affirmed. Respondent is to recover its
costs on appeal.
BEDSWORTH,
ACTING P. J.
WE CONCUR:
MOORE, J.
ARONSON, J.
name="_ftn1" title=""> [1] Zacadia Financial Limited Partnership v. Fiduciary Trust International
of California etc. (Jan. 8, 2014, G047613) [nonpub.
opn.].
name="_ftn2" title=""> [2] The related security agreement also
contained a one-way attorney fees provision for “the amount of any and all
expenses, including the fees and expenses of [Zacadia’s] counsel . . . .â€
