Alford v. Constanza

Filed 2/16/10 Alford v. Constanza CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION FOUR

APPEAL from a judgment of the Superior Court of Los Angeles County, James A. Kaddo, Judge. Affirmed in part, reversed in part, and remanded.

Law Offices of Marshall C. Sanders and Marshall C. Sanders for Plaintiff and Appellant and Defendant and Appellant.

Law Offices of Raymond Hovsepian, Raymond Hovsepian and David Dantes for Defendants and Respondents and Plaintiff and Respondent.

_________________________

This appeal is from two consolidated lawsuits concerning a house owned by Solomon and Anna Constanza and rented by Phillip and Carol Alford. After Solomon Constanza sued for unlawful detainer, the Alfords sought specific performance of an option agreement to purchase the house. The trial court denied specific performance, concluded the Alfords owed Solomon Constanza over $50,000 in unpaid rent, and found that Carol Alford owed over $70,000 in attorney fees. We affirm the judgment but reverse the attorney fee award and remand the matter for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

From May 1998 until March 2006, Carol and Phillip Alford lived in a 4500 square foot single family residence located at 13524 and 13526 Crewe Street, Valley Glen, California (property). Until 2002, the house was owned solely by respondent Anna Constanza. Beginning in 2002, both Anna and her husband Solomon Constanza owned the property. Since judgment was entered, Carol Alford has passed away and Phillip Alford (appellant) was substituted in her place.

1. Unlawful Detainer/ Breach of Contract Lawsuit

On June 23, 2004, Solomon Constanza filed a complaint asserting a single cause of action for unlawful detainer. Solomon alleged that in 1998, the Alfords agreed to pay monthly rent of $2,500, and that in 2003, rent increased to $2,750. During trial, the complaint was amended to state a single cause of action for breach of contract by failing to pay rent.

The contract at issue was a Residential Lease With Purchase Option executed April 15, 1998 (1998 Agreement). The 1998 Agreement identified the tenant as A.U. International, c/o Carol Alford and identified the landlord as Solomon Constanza. However, both Solomon and Anna signed the agreement in a space next to the term landlord. Both A.U. International (care of Phillip Alford) and Carol Alford signed the agreement in a space next to the term tenant. Above the line for the tenants signatures, a handwritten notation stated, we agree to all terms as written in this contract. Phillip, Carol, and their children were identified as occupants of the property.

The terms of the 1998 Agreement included a one-year renewable lease with rent set at $2,500 a month.[1] A provision entitled, Attorneys Fees provided that in a proceeding arising out of this Agreement, the prevailing party shall be entitled to reasonable attorneys fees and costs.

2. Specific Performance Lawsuit

Days after Solomon Constanza initiated the unlawful detainer action, the Alfords sued the Constanzas for specific performance of an option to purchase the property.[2] In their second amended complaint for specific performance, the Alfords alleged that in June 2000, they entered a written agreement entitled, Lease With Option to Purchase (2000 Agreement) with Anna Constanza. They alleged that they had timely provided notice of their intention to exercise the option, and that Anna had improperly refused to convey the property.

The 2000 Agreement attached to the second amended complaint was signed by the Alfords, but not by either Anna or Solomon Constanza. The 2000 Agreement included an option for the purchase of the property at any time before June 30, 2004 for $390,000. The 2000 Agreement did not contain an attorney fee provision.

3. Trial

Both cases were tried to the court. The specific performance lawsuit was tried first.

a. First Trial (Specific Performance)

At trial, Phillip acknowledged that Anna never signed the 2000 Agreement. Phillip relied on a memorandum dated August 20, 2000 purporting to contain Annas signature and purporting to confirm the agreement. Phillip also relied on a memorandum dated June 25, 2002, which he believed confirmed the 2000 Agreement. That memorandum, which was signed by both Anna and Solomon, stated in pertinent part: An Agreement in June of 2000 . . . would have been legally enforceable had you given a cheque for ten thousand dollars to buy the option to purchase. You admitted that you never did give the Option Money and, as a consequence, the tentative agreement was never signed by Anna Constanza. Phillip testified that in 2002 or 2003, he obtained a loan to purchase the property at $390,000 or at $400,000.

The court found that the 2000 Agreement was unenforceable because it was not signed by Anna. Additionally, the court concluded that Anna did not sign the August 20, 2000 memorandum, and that the June 25, 2002 memorandum did not confirm the terms of the 2000 Agreement. Accordingly, the court rejected the Alfords claim for specific performance.[3]

b. Second Trial (Breach of Contract)

During the second trial, over two years later, the parties agreed that Solomons unlawful detainer lawsuit would instead be tried as a breach of contract based on the 1998 Agreement. Solomon testified that on February 1, 2003, he advised the Alfords by letter of a rent increase to $2,750 per month. Phillip testified that he did not receive the letter and that Solomon never asked him for increased rent. Phillip also testified that at the time this lease was executed his credit was bad, and for that reason A.U. International was identified as a tenant under the lease. Carol Alford did not testify, and no evidence was presented regarding her intent in signing the lease. Appellants attorney argued that A.U. International was the sole tenant. Solomon argued that in addition to A.U. International, Carol Alford was a tenant.

The court found that both Phillip and Carol were occupants of the premises and that Carol was a tenant. The court awarded Solomon $59,979.28 against Carol and $57,929.12 against Phillip, with any payments received from one to apply to both. In a postjudgment order, the court awarded Solomon attorney fees in the amount $71,071.36, and found that only Carol was liable for those fees. The Alfords appealed from the final judgment and the postjudgment attorney fee order.

DISCUSSION

Appellant argues that the 2000 Agreement was enforceable and that the trial court should have awarded them specific performance. He also contends that Carol was not a tenant under the 1998 Agreement, and that the court therefore erred in awarding damages and attorney fees based on that contract. Finally, appellant claims that the attorney fee award failed to properly segregate those fees based on the 1998 Agreement (containing an attorney fee provision) from those based on the 2000 Agreement (lacking an attorney fee provision). As we explain, we conclude that only the last argument has merit.

1. Specific Performance

It was undisputed that Anna never signed the 2000 Agreement. Because Anna did not execute the agreement, it was not enforceable. (Elias Real Estate, LLC v. Tseng (2007) 156 Cal.App.4th 425, 430 [sale agreement for property owned by four brothers that was signed by only one brother was invalid].) Appellant does not dispute this principle; he concedes that the statute of frauds required the agreement for the purchase of real property to be in writing and subscribed by the party to be charged or the partys agent. (See Civ. Code, 1624, subd. (a)(3).)

Appellant argues, however, that the statute of frauds was satisfied by the June 25, 2002 memorandum, which Anna signed.[4] The statute of frauds may be satisfied by a note or memorandum . . . subscribed by the party to be charged. . . . (Sterling v. Taylor (2007) 40 Cal.4th 757, 765.) A memorandum satisfies the statute of frauds if it identifies the subject of the parties agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty. (Ibid.) The problem with this argument is that the June 25 memorandum expressly states that Anna refused to sign the 2000 Agreement because the Alfords failed to satisfy a condition. Thus, the June 25 memorandum does not show the parties entered into a contract, but instead shows the opposite. Stated otherwise, appellant presented no evidence that Anna agreed to be bound by the terms of the unsigned 2000 Agreement. (See Rest.2d Contracts, 131 [to satisfy the statute of frauds, memorandum must among other things indicate that contract has been made].)[5]

2. Breach of Contract

Appellant does not challenge the amount of rent awarded Solomon, but argues that no damages for unpaid rent should have been awarded because A.U. International was the sole tenant and was not a party to the lawsuit. Appellant predicates his argument on the statement that [w]hile Carol Alford also signed the Agreement . . . her signature [was] superfluous. Because no extrinsic evidence was admitted, we consider the interpretation of the contract de novo, (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865), and interpret the contract in a manner to give effect to the mutual intention of the parties at the time the contract was made. (Civ. Code, 1636.)

Carol signed the 1998 Agreement next to the notation TENANT. Her signature indicated that she was assenting to the terms of the lease, and this intention was emphasized by the handwritten notation, stating we agree to all terms as written in this contract. Moreover, the use of the term we in the handwritten notation indicated the parties intended that more than one tenant was entering the agreement. Accordingly, we reject appellants contention that A.U. International was the sole tenant.[6]

3. Attorney Fees

Appellant argues that Solomon was entitled to attorney fees only for the breach of contract lawsuit, not the specific performance lawsuit. Respondents counter that the two lawsuits were intertwined and that they were required to defend against the specific performance lawsuit in order to prevail on their breach of contract claim. Respondents rely on the contractual attorney fee provision in the 1998 Agreement which provides: In any judicial, arbitration, or other proceeding arising out of this Agreement, the prevailing party shall be entitled to reasonable attorneys fees and costs. Respondents also rely on cases interpreting Civil Code section 1717 and Code of Civil Procedure section 1021, both of which govern the award of attorney fees in cases involving contractual attorney fee provisions.

a. Civil Code Section 1717

Civil Code section 1717 (section 1717) provides that [i]n any action on a contract, where the contract specifically provides that attorneys fees and costs, which are incurred to enforce that contract, shall be awarded . . . then the party who is determined to be the party prevailing on the contract . . . shall be entitled to reasonable attorneys fees in addition to other costs. The phrase on a contract contained within section 1717 requires consideration of the basis of the cause of action, not the remedy sought. (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 347 [finding declaratory relief and injunctive relief causes of action to be on the contract].) Where a cause of action based on the contract providing for attorneys fees is joined with other causes of action beyond the contract, the prevailing party may recover attorneys fees under section 1717 only as they relate to the contract action. [Citations.] (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129(Reynolds).)

Several courts have applied the foregoing principle under circumstances where parties had entered multiple agreements. In Reynolds, our Supreme Court concluded that attorney fees are recoverable only when based on the contract containing a fee provision. (Reynolds, supra, 25 Cal.3d at p. 129 [attorney fees recoverable where litigation based on contracts containing attorney fee provisions, but not where based on contract lacking attorney fee provision].) Courts of appeal, including, this one, have reached the same conclusion. (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 534 [affirming denial of attorney fees where parties entered three agreements, two of which contained attorney fee provision, but lawsuit sought to enforce third agreement that lacked attorney fee provision]; Paul v. Schoellkopf (2005) 128 Cal.App.4th 147, 153 [no attorney fees recoverable where one of many contracts contained attorney fee provision but dispute did not concern that contract]; cf. Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464, 491 [where multiple contracts contain attorney fee provisions, court must consider prevailing party as to each contract separately].)[7]

Because only the 1998 Agreement contained an attorney fee provision, the court erred in awarding fees incurred in defending the specific performance lawsuit. Simply put, the specific performance lawsuit was not one based on the 1998 Agreement; instead, as the trial court found earlier in the proceedings, it ar[ose] out of the 2000 Agreement. The fees incurred to defend the specific performance lawsuit thus do not relate to the 1998 Agreement.

The principle that [a]pportionment of a fee award between fees incurred on a contract cause of action and those incurred on other causes of action is within the trial courts discretion is inapplicable here. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111; see also Erickson v. R.E.M. Concepts, Inc. (2005) 126 Cal.App.4th 1073, 1085.) That principle applies after the threshold requirement that the attorney fees relate to the contract has been satisfied. (Reynolds, supra, 25 Cal.3d at p. 129; Abdallah v. United Savings Bank, supra, 43 Cal.App.4th at p. 1111.) It applies only where the issues involved in a cause of action for which fees are authorized are inextricably intertwined with the issues in a cause of action where fees are not authorized. (Abdallah v. United Savings Bank, supra, 43 Cal.App.4th at p. 1111; see Reynolds, supra, 25 Cal.3d at p. 129.)

Here, the fees incurred by the Constanzas in defending against the specific performance lawsuit did not relate to -- much less arise out of -- the 1998 Agreement. In the specific performance lawsuit, the Alfords sought to compel the Constanzas to transfer the property pursuant to the terms of the alleged 2000 Agreement. In the breach of contract action, Solomon Constanza sued the Alfords for failing to pay rent under the 1998 Agreement. The sole claim in the breach of contract action -- that the Alfords had breached their obligation to pay rent under the 1998 Agreement -- was not contested by the Alfords in their suit to compel specific performance of the 2000 Agreement. The testimony and evidence in the two lawsuits was presented at separate times, concerned different agreements, and was not overlapping. This is not an instance in which common issues arose in both suits or in which the claims for relief were so intertwined as to make it impractical to separate attorneys time into compensable and noncompensable units. Nor is this a case in which Solomon, in order to vindicate his rights under the 1998 Agreement, was compelled first to defend against an attack on that contract. In short, the two suits arose from two distinct contracts, only one of which authorized the recovery of attorney fees. Accordingly, Solomon was entitled to recover only such fees as he incurred in pursuing the breach of contract action.

b. Code of Civil Procedure Section 1021

In arguing that he was entitled to attorney fees incurred in defending against specific performance, Solomon Constanza cites several cases awarding attorney fees under Code of Civil Procedure section 1021. That statute applies where the parties have agreed to a broad contractual attorney fee provision.[8] [P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract. (Santisas v. Goodin (1998) 17 Cal.4th 599, 608, quoting Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341.) For example, a party who prevails in an action for breach of contract and successfully defends a cross-complaint for fraud may recover fees incurred in prosecuting the complaint and defending the cross-complaint. (Siligo v. Castellucci (1994) 21 Cal.App.4th 873, 879(Siligo).)[9] The focus is whether the attorney fee provision encompasses the claims at issue. (Moallem v. Coldwell Banker Com. Group, Inc. (1994) 25 Cal.App.4th 1827, 1831[where contract contains broad attorney fee provision, attorney fees may be awarded for tort causes of action that fall within ambit of contractual provision]; see Siligo, supra, 21 Cal.App.4th at p. 878, fn. 5.)

For the reasons discussed above, the specific performance lawsuit did not fall within the ambit of the contractual attorney fee provision in the 1998 Agreement. The 1998 Agreement contained an attorney fee provision encompassing claims arising out of that agreement. But the specific performance lawsuit did not arise out of the 1998 Agreement. Accordingly, the trial court should have awarded Solomon only those fees incurred in prosecuting the breach of contract litigation.

DISPOSITION

The attorney fee award is reversed. In all other respects, the judgment is affirmed. The case is remanded to the trial court to determine the appropriate

attorney fee award. The parties shall bear their own costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

MANELLA, J.

We concur:

EPSTEIN, P. J.

WILLHITE, J.

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[1] The1998 Agreement also contained an option to purchase the property. The Alfords did not assert any claim based on the option in the 1998 Agreement.

[2] Additional causes of action alleged in the complaint were dismissed at trial.

[3] We previously dismissed a purported appeal from the trial courts ruling denying specific performance because it was not a final judgment.

[4] Appellant does not challenge the trial courts finding that the August 20, 2000 memorandum was not signed by Anna.

[5] Because we conclude the trial court correctly found the 2000 Agreement unenforceable as it was neither signed nor ratified by Anna, we need not consider appellants remaining claims that (1) the court improperly relied on settlement attempts and (2) the Alfords properly exercised the option.

[6] Our conclusion that Carol was a tenant is dispositive of appellants remaining contentions that (1) only A.U. International was in privity of estate and privity of contract with Solomon and (2) that Carol could not be liable for attorney fees.

[7] Attorney fees may be recoverable where multiple contracts are involved if the contracts concern the same subject and are made as part of the same transaction. (Boyd v. Oscar Fisher Co. (1989) 210 Cal.App.3d 368, 378, citing Civ. Code, 1642.) Neither party suggests that the 1998 and 2000 Agreements were part of the same transaction.

[8] Code of Civil Procedure section 1021 provides: Except as attorneys fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.

[9] Solomon cites Siligo for the proposition that California law is settled that an obligation to pay attorney fees incurred in the enforcement of a contract includes attorneys fees incurred in defending against a challenge to the underlying validity of the obligation. (Siligo, supra, 21 Cal.App.4th at p. 878.) Here, the Alfords did not challenge the underlying validity of the 1998 Agreement. Because Solomon was not forced to defend against a challenge to the underlying validity of the 1998 Agreement, the principle discussed in Siligo is inapplicable.