Katakis
Filed 1/23/13 Sinclair v. Katakis CA5
NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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
RICHARD C. SINCLAIR et al.,
Plaintiffs and
Appellants,
v.
ANDREW KATAKIS et al.,
Defendants and
Respondents.
F060497
(Super.
Ct. No. 332233)
APPEAL
from a judgment of the Superior Court
of
County. Roger M.
Beauchesne, Judge.
Richard C.
Sinclair, in pro. per., and for Plaintiffs and Appellants.
McCormick, Barstow,
Sheppard, Wayte & Carruth, Todd W. Baxter and John M. Dunn for
Defendants and Respondents.
-ooOoo-
In this
appeal, appellants challenge posttrial orders awarding respondents $750,000 in
attorney fees and denying their motion
for reconsideration. Appellants are
Richard C. Sinclair, who serves as counsel for these appellants;
Sinclair’s company, Lairtrust, LLC; Sinclair’s son, Brandon Sinclair (Brandon);
Brandon’s company, Capstone, LLC;
and Gregory Mauchley.
name="_ftnref1" title="">[1] Respondents are Andrew Katakis, his company
California Equity Management Group (CEMG), and the Fox Hollow of Turlock Owners
Association (FHOA).
Appellants
raise three issues and make a number of claims in relation to the issues. They contend:
(1) the trial court abused its discretion in failing to continue a
hearing on posttrial motions in light of Sinclair’s disability; (2) the trial
court should have reconsidered the rulings because respondents’ counsel had a
disqualifying conflict of interest; and (3) the trial court abused its
discretion in awarding respondents attorney fees. We will affirm.
FACTUAL SUMMARY
Relevant
facts are set forth in the discussion as each argument is based on discrete
specifics.
DISCUSSION
I. Appellants Request for a
Continuance
Posttrial Procedural Summary
The trial
court filed the statement of decision and judgment on August 18, 2009, reserving the issues of
costs and attorney fees. On
September 8, respondents submitted a memorandum of costs requesting
$38,031.89. They also sought to amend
the judgment to add Mauchley as a judgment debtor, which was set to be heard on
October 8. Sinclair, on behalf of
appellants, opposed that motion.
Appellants,
also through Sinclair, moved to strike respondents’ memorandum of costs or to
tax costs. That motion was set to be
heard on December 1.
On
October 23, respondents filed a motion to be declared the prevailing
parties and sought attorney fees of $1,202,604.50.
On November 9, 2009, Sinclair filed
an ex parte application to continue
the hearings on the motions until February 6,
2010, due to his disability.
Sinclair stated that trial counsel, the law firm of Neumiller &
Beardslee, was no longer representing appellants; he was. He attached a doctor’s note that said he
should be excused from activities for 90 days due to a medical condition. Respondents opposed the motion, noting that
trial counsel continued to be listed on appellants’ filings and they had not
moved to withdraw from representation.
The trial court continued the hearings on all motions to
December 18.
In late
November, Sinclair submitted a declaration that disclosed he was scheduled to
have surgery on November 30,
2009, and would be unable to work until February 6, 2010. On January 13,
2010, Sinclair requested another continuance to March 23, 2010. He declared that he had two cervical discs
replaced during the surgery and was still heavily medicated, which impeded his
ability to concentrate. His physician
had extended his work restriction to March 1,
2010. Although the ruling is
not in the record, Sinclair said in subsequent filings that the trial court
denied the additional continuance.
On
February 3, appellants, through Sinclair, filed opposition to respondents’
motion for attorney fees. Sinclair asked
the court to reconsider his request for a continuance because he was “currently
disabled and unable to protect myself or my clients [sic] interests.†On
February 9, Sinclair, for appellants, filed a reply to the opposition to
the costs motion.
About
February 16, Sinclair filed an ex parte application to delete Stanley
Flake, as an individual, from the statement of decision and judgment. Respondents opposed the application. Sinclair did not appear at the hearing on the
application and it was dropped. The
court on its own motion continued all hearings until February 26, 2010.
The trial
court posted tentative rulings on the pending motions, and Flake’s new counsel
requested a hearing. Flake’s new
counsel, however, was involved in a traffic collision the morning of
February 26th and did not appear.
The trial court continued the motions as to Flake.
Respondents’
counsel asked if the trial court would consider granting the motions as to
appellants because they had not requested a hearing in response to the
tentative ruling. The trial court asked,
“Can anybody tell me the status of Mr. Sinclair?†Respondents’ counsel replied that Sinclair
had filed responsive pleadings to each motion as well as an ex parte
application. Sinclair had requested a
further extension of time to designate the record in the Court of Appeal, which
was denied on February 24. Further,
Sinclair was appearing by telephone in the related federal court matter on
Monday, March 1.
name="_ftnref2" title="">[2]
The trial
court concluded, under the circumstances, it would confirm its tentative
rulings and grant the motions for attorney fees and costs against all parties
except Flake. The trial court also
granted the petition to amend the judgment to add Mauchley as a judgment
debtor.
On March 19, 2010, Sinclair filed a
notice of continued disability until April 18,
2010, with a note from a different doctor, which stated, “unable to
return work until 4‑18‑10.â€
(Capitalization omitted.) On
April 19, appellants filed a motion for reconsideration of the trial
court’s rulings and a motion to set aside the judgment and orders. As grounds for the motions, appellants
reargued the trial facts and rulings, alleged that respondents’ counsel had a
disqualifying conflict of interest, and Sinclair asserted that he remained
or his clients’ interests. Respondents
opposed appellants’ motion and filed a motion to hold Sinclair in contempt
under Code of Civil Procedure section 1008, subdivision (d) and to impose
sanctions against Sinclair and appellants for filing meritless motions. Appellants opposed those motions and filed a
reply brief in support of their motion for reconsideration.
Appellants’
motions for reconsideration and to set aside the judgment and respondents’
motions for sanctions and to hold Sinclair in contempt were heard on June 4, 2010. At the onset, the trial court addressed
statements in appellants’ filings that the court “deliberately erred and
decided matters when the Court … knew that [Sinclair] was supposedly
unavailable because of illness or medical condition.†The trial court stated, “I can assure you,
unhesitatingly, that at no time during my legal career or my judicial career
have I ever done any such thing.†The
trial court reviewed the procedural history of the posttrial motions on the
record and stated that Sinclair’s statement that the trial court had
deliberately heard these matters while aware that Sinclair had a disability was
inaccurate. The trial court then invited
Sinclair to address his motions.
Sinclair
stated he had faxed his request for a continuance to the trial court and the
trial court wrote him saying, “I didn’t get everything.†The trial court responded that it “[did not]
write notes to counsel on one side. That
would be ex parte communication.â€
Sinclair then asserted he had received a note from “someone†and thought
it was from the judge. Because he had
informed the trial court of his continued disability, he assumed the trial
court knew of it.
The trial
court asked Sinclair why he had not requested a hearing in response to the
posted tentative ruling. Sinclair
responded he was unable to do so. The
trial court clarified, “You were unable to request a hearing?†Sinclair responded, “Well, I was unable to
attend, so I couldn’t request a hearing.â€
The trial court asked Sinclair why he had not contacted the court by
e-mail or telephone or contacted opposing counsel’s office to voice his
objection to the tentative ruling and see about getting the matter
continued. Sinclair responded only that
he had submitted his notice of continued disability.
At the
conclusion of the hearing, the trial court said to Sinclair:
“I
don’t understand why, after the Court issued its tentative ruling on the 25th
of February, why you couldn’t have had somebody pick up a telephone … and say,
wait a minute, the judge is not being fair here in giving me an extension.
“I give
people extensions all the time if they say they have a health
issue …. But it seems to me you
kind of just sat there hoping that things would go away, or that maybe this is
something you could use down the road to argue that the Court’s decisions were
erroneous.
“But
you can’t convince me at this point this morning that there was nothing you
could have done about that to … contact the Court and say, listen, I want to
have a hearing on this, Judge. I’m
simply not ready physically and mentally, and I’m asking you to put this
over.… [¶] Do you honestly think I
would have said, no, tough luck?â€
Sinclair
responded, “I thought that we had submitted an extension to March 2nd that the
Court had also on file. And then
another, ‘I’m disabled. I can’t
appear.’â€
The trial
court then confirmed its tentative rulings to deny appellants’ motions to
reconsider and to set aside the judgments and orders. The trial court also denied respondents’
request for sanctions and to hold Sinclair in contempt but stated, “it’s a
close call.â€
The trial
court filed an amended judgment on June 21,
2010, that awarded costs and attorney fees in favor of respondents
and against appellants, jointly and severally, in the amount of $783,141.67,
which included $750,000 in attorney fees and $33,141.67 in costs.
Analysis
A trial
court has the discretion to deny a request for a continuance when there is no
good cause for granting one or when there is a lack of diligence or other
abusive circumstances. On the other
hand, a request for a continuance supported by a showing of good cause usually
ought to be granted. And, when the
denial of a continuance has the practical effect of denying a party a fair
hearing, it is reversible error. (
1389, 1395-1396.)
In
reviewing a trial court’s exercise of discretion, the court will not disturb
the exercise of discretion unless there has been a miscarriage of justice. (Denham
v. Superior Court (1970) 2 Cal.3d 557, 566.)
Appellants
raise two claims relative to whether the court abused its discretion in failing
to continue the hearing on February 26 when Sinclair failed to
appear. They contend respondents’ trial
counsel violated the Business and Professions Code, the Penal Code, and Rules
of Professional Conduct because counsel (1) disobeyed federal district court
judge Oliver Wanger’s “order†of February 5, 2010; and (2) “lied to†the
trial court at the hearing and suppressed evidence they were obligated to
disclose to the court. Respondents
submit that appellants have waived these claims by failing to cite to the
record, ignoring the standard of review, and failing to develop legal arguments
in relation to their claims. We agree
appellants have waived or abandoned certain claims and conclude the trial court
did not abuse its discretion or violate due process in not continuing the
matter further. We consider each claim
in turn.
A. Federal Court “Orderâ€
Appellants
contend respondents’ trial counsel violated a federal court order “by Judge
Wanger … that Mr. Sinclair was seriously disabled through March 1,
2010.†Further, that respondents
violated the order by alluding to Sinclair’s “alleged disability†in pleadings
they filed on February 9 and in failing to disclose the order to the trial
judge at the February 26 hearing.
Not so.
First,
appellants never mentioned the federal order in their motion for
reconsideration in the trial court, and they raise the issue for the first time
on appeal. For this reason alone, the
court may refuse to consider the issue.
(People ex rel. Dept. of
Transportation v. Superior Court (2003) 105 Cal.App.4th 39, 46 [issue not
cognizable on appeal when never raised in trial court].) Second, appellants failed to include a copy
of the order in the appellate record.
Documents not presented to the trial court are disregarded as beyond the
scope of review. (Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184,
fn. 1.) Third, appellants’ claim is
based on a misrepresentation of the substance and effect of the federal court
documents.
In
pertinent part, Judge Wanger’s memorandum decision of February 8 addressed
trial counsel Neumiller & Beardslee’s motion to withdraw and Sinclair’s
motions to substitute himself as counsel of record and to continue all matters
until March 21 because of his disability.
The federal court granted Neumiller & Beardslee’s motion to withdraw
and noted:
“Neumiller cannot be forced to remain as counsel of
record for Mr. Sinclair and the other [appellants] solely because the
substitution will result in delay.
Moreover, unless [respondent] has evidence that Mr. Sinclair and
his doctors are lying, he has a serious medical condition that necessitates the
continuance. While [respondent] is
concerned that Mr. Sinclair will keep returning to seek additional
continuances, that will be dealt with if and when it occurs.â€
The court granted Sinclair’s motion for a continuance, but
only to March 1 rather than the March 21 date that he had requested,
and ordered Sinclair to appear either personally or telephonically on
March 1.
Simply put,
the memorandum decision did not order respondents to do or refrain from doing
anything in relation to the state court action.
Nor did it order counsel to recognize Sinclair’s medical disability
through March 1, 2010. Rather, the
federal court told respondents that it accepted Sinclair’s representation that
he was presently disabled absent evidence to the contrary. Accordingly, we reject appellants’ claim that
respondents’ counsel violated the federal court order.
B. Counsel’s Representations to
the Trial Court
In a
related argument, appellants contend respondents’ trial counsel were obligated
to disclose their knowledge of Sinclair’s medical condition, including the
contents of Judge Wanger’s memorandum decision, to the trial court at the
February 26 hearing. Instead,
counsel misled the trial court “into believing that Mr. Sinclair was only
‘allegedly disabled’ when they knew†Sinclair had advised them and the courts
of his “serious disability,†and “Judge Wanger had ordered them to ceaseâ€
because Sinclair was disabled until March 1, 2010.
Appellants
contend counsel’s actions violated Business and Professions Code section 6103
(willful disobedience of a court order connected with attorney duties) and
Penal Code section 166 (willful disobedience of a court order). These claims fail for the reason set forth
above—respondents’ statements at the February 26 hearing did not violate a
court order.
Moreover,
in responding to the trial court’s inquiry regarding Sinclair’s status on
February 26, respondents’ counsel stated that Sinclair had fully briefed
the matters at issue, he was appearing telephonically in a related federal
court matter the following Monday, and he had not requested a hearing in
response to the court’s tentative rulings.
Those statements were true and appellants do not claim otherwise. Further, as the trial court noted at the
motion for reconsideration, if the court did not have current information about
Sinclair’s status on February 26, the blame lay with Sinclair, who failed
to notify the trial court of his inability to appear in response to the posted
tentative rulings.
Finally,
respondents have requested judicial notice of a number of pleadings filed in
San Francisco Superior Court, as well as invoices from Sinclair’s law office
billing for legal work, that indicate Sinclair was practicing law in February
and March 2010, including making court appearances, at the time he told the
trial court he was disabled and unable to do legal work.
C. Motion for Reconsideration
Appellants’ caption to this
argument states in part, “[t]he court erred in not granting the motion for
reconsideration as it said it would.â€
(Capitalization and emphasis omitted.) Appellants then quote and paraphrase from the
June 4th hearing and state the trial court was unaware of Sinclair’s
disability even though “it had all of the documents, except Judge Wanger’s
Order.†And, respondents’ counsel “chose
not to tell the truth†about Sinclair’s disability “but instead to mislead the
Court to their financial gain.â€
Appellants conclude, the “Court Erred and acknowledges that if it had
known, it would have changed its decision.â€
There are
no citations to the record in the opening brief. Appellants added citations in their reply
brief, but the added citations do not necessarily support the accompanying
statements. For example, appellants
state “[the trial judge] … in a motion to reconsider stated that if he had
known of Sinclair’s disability, he would have continued the matter and not
ordered Sinclair or any plaintiff[] to pay.â€
They cite to the portion of the transcript where the trial court
responded to statements Sinclair made in appellants’ pleadings that accuse the
trial court of deciding the matter when it knew of Sinclair’s supposed
unavailability because of his medical condition. The trial court said it had never done any
such thing. The trial court did not say
it would not have ordered plaintiffs to pay.
(See Liberty National Enterprises,
L.P. v. Chicago Title Ins. Co. (2011)
194 Cal.App.4th 839, 846 [court looks askance at practice of stating what
purport to be facts without support in record, a violation of rule
8.204(a)(1)(C) of Cal. Rules of Court; such assertions will, at a minimum, be
disregarded].)
Further,
appellants make no legal argument in relation to this contention. The appellate court is not required to
consider alleged error where the appellant merely complains of it without
pertinent legal argument. The appellate
court deems such claims to be without foundation and abandoned. (Rossiter
v. Benoit (1979) 88 Cal.App.3d 706, 710.)
As such, we deem abandoned appellants’ claims that the trial court
abused its discretion in not continuing the February 26 hearing and in
denying the motion for reconsideration, and that the rulings deprived them of
due process.
Also, we
see no abuse of discretion or denial of due process. Sinclair’s failure to contact the trial court
in response to the posted tentative rulings demonstrated lack of
diligence. Further, despite appellants’
claim that they responded to the motions with “skeletal briefs,†they had the
opportunity to expand on their opposition in the motion for reconsideration,
but presented little, if any, new facts or law to support their
opposition. Thus, appellants have failed
to demonstrate that they were denied a fair hearing or that the court abused
its discretion in not continuing the hearing.
II. Allegation that
Respondents’ Counsel Had a Disqualifying Conflict of Interest
Appellants
contend that respondents’ trial counsel violated the California Rules of
Professional Conduct, rules 3-600 (Organization as Client)
Adverse Interests), and breached a fiduciary duty owed to them as members of
the FHOA by representing adverse interests without appellants’ written
consent. They submit this conflict of
interest and breach of fiduciary duty require reversal of the court’s orders. Respondents submit the claim is meritless because
(1) appellants never filed a motion to disqualify respondents’ trial counsel;
(2) any potential conflict was waived by failing to raise the issue until the
motion for reconsideration of posttrial orders; and (3) there was no conflict
of interest—the homeowners association, not its individual members, was
respondents’ counsel’s client. (
(2000) 79 Cal.App.4th 639, 644.) We
conclude that appellants waived this issue by failing to timely move to
disqualify respondents’ counsel.
name="_ftnref6" title="">[6]
Respondents’
counsel substituted into the case in February 2008, 10 months before trial
commenced. Appellants first challenged
counsel’s ability to represent the homeowners association in April 2010 in
their motion for reconsideration of the court’s order awarding respondents
attorney fees and costs. In the
three-page discussion, they contended the trial court should reconsider its
orders awarding respondents costs and attorney fees because respondents’
counsel, by representing “some of the plaintiffs†while representing interests
adverse to the plaintiffs (the homeowners association), had a conflict of
interest during the “entire trial through this date.†(Capitalization and emphasis omitted.) Appellants did not address their delay in
raising the issue.
Respondents
countered that there was no conflict because counsels’ representation of the
homeowners association did not make the members of the association their
clients. Further, appellants’ delay in
raising the issue waived any alleged conflict.
Since substituting into the case, counsel had spent over 4,400 hours on
the litigation and respondents had incurred attorney fees in excess of
$950,000. Thus, appellants’ argument
represented “the epitome of gamesmanship in litigating an action, holding in
reserve an argument, and then seeking to use it only after one is disappointed
with the result.†The trial court did
not mention the argument at the hearing or in its order denying reconsideration.
A party may
waive opposing counsel’s disqualification by failing to bring the motion in a
timely manner. (Liberty National Enterprises, L.P.
v. Chicago Title Ins. Co., supra,
194 Cal.App.4th at p. 844.) For example,
in River West, Inc. v. Nickel (1987) 188 Cal.App.3d 1297, a case out of this
court, a defendant moved to disqualify the plaintiffs’ attorney because the
attorney had represented the defendant in a related matter many years
before. The defendant filed the motion
more than three years after he was aware of the conflict, after the attorney
had worked more than 3,000 hours on the case, at a cost of some $387,000. The defendant attempted to excuse the delay
by claiming there had been no court available to hear the motion due to pending
motions for change of venue and judicial disqualification. The excuse was insufficient. The inability of a court to determine the
motion did not excuse the defendant from filing the motion to give notice to
the plaintiffs and their attorney of the claimed conflict. (Id. at
pp. 1311-1312.) By comparison,
appellants’ delay in this case—until after they had lost at trial and been
ordered to pay respondents’ costs and attorney fees—was far more egregious.
Appellants’
delay in raising the disqualification issue is also an indication that they did
not view the alleged conflict of interest as serious or substantial. And the trial court properly can consider the
possibility that the disqualification motion is a tactical device to delay the
litigation. (Liberty National Enterprises, L.P.
v. Chicago Title Ins. Co., supra,
194 Cal.App.4th at p. 847.) Both are
reasonable inferences in this case.
Accordingly,
appellants’ extreme delay in raising the conflict of interest issue after
judgment was entered constitutes a waiver of the issue.
III. The
Award of Attorney Fees
Procedural Summary
Respondents
moved to be declared prevailing parties and requested attorney fees of
$1,202,604.50. They contended that Civil
Code section 1354, subdivision (c) authorized them to recover attorney fees
from all appellants on their claims to enforce the FHOA governing
documents. And Civil Code section 1717
authorized them to recover attorney fees from all appellants based on the
promissory notes, deeds of trust, and CC&R’s (covenants, conditions and
restrictions). The motion was supported
by hundreds of pages of billing documents and counsels’ declarations. Appellants argued that respondents’ request
must be reduced to exclude the nonfee claims, which included the unclean hands
defense, and any fees awarded must be attributed to a particular cause of
action and made against only the responsible appellants.
The trial
court awarded respondents $750,000 in attorney fees against appellants jointly
and severally. The trial court found
respondents were the prevailing parties in an action to enforce the governing
documents of the FHOA and were entitled to attorney fees under Civil Code
section 1354, subdivision (c). They were
also the prevailing parties in an action on contract (the CC&R’s, promissory
notes and deeds of trust, each of which had an attorney fees clause) and were
entitled to attorney fees under Civil Code section 1717. And the issues related to the defense of
those actions were “inextricably intertwined.â€
Concerning
the amount of attorney fees, the trial court excluded time spent on nonfee
claims, the cross-complaint, and any duplicative work required by respondents’
change of counsel in 2008. The trial
court reviewed the bills and declarations supporting the fees and found sufficient
evidentiary support for an award of $750,000 as reasonable attorney fees.
The trial
court exercised its discretion not to apportion fees among the various causes
of action for which fees were awardable, but awarded them against each
appellant, jointly and severally. The
trial court also ordered Mauchley to be added to the judgment to the same
extent as Mauctrst, LLC.
The Basis of the Award
Contractual Provisions
The
declaration of the CC&R’s of the FHOA provides, “[i]n the event legal
action is instituted by the Board pursuant to this section, any judgment
rendered in any such action shall include costs of collection, court costs and
reasonable attorneys’ fees.†The
CC&R’s also authorized the FHOA to collect attorney fees from lot owners in
actions to collect assessments.
The Granite
Bay Funding notes and deeds of trust connected to lots 3, 7, 9, and 14 included
attorney fee provisions. The notes
provided that the borrower will pay the costs and expenses of enforcing the
note to the lender, or anyone who took the “Note by transfer and who is
entitled to receive payments under†the note.
The deeds of trust provided that in a legal proceeding involving the
breach of the security instrument, the lender was entitled to recoup its
expenses from the borrower, including reasonable attorney fees and costs.
Parties Liable for and Entitled to Attorney Fees
Mauchley,
as borrower, and Granite Bay Funding, as lender, were the parties to the notes
and deeds of trust. CEMG was the
successor of Granite Bay Funding and, as such, was subject to the terms of the
notes and deeds of trust. Mauchley
assigned his rights and obligations under the notes and deeds of trust to
Mauctrst, LLC. The trial court found
Mauchley and Sinclair were the alter egos of Mauctrst, LLC.
holder/lender’s rights under those contracts.
Thus, respondents were entitled to attorney fees under those contracts.
Pleadings Creating Liability For and Entitlement to Attorney Fees
Appellants’
fifth amended complaint included 44 paragraphs of allegations common to all
causes of action. Most of the
allegations were not specific, but refer generally to “plaintiffs†and
“defendants.†For example:
“Defendants
acquired title to a number of lots in the Fox Hollow Subdivision from the note
holders and subsequent owners with knowledge of Plaintiffs’ prior rights and
contracts and interfered with Plaintiffs’ acquisition, ownership and
contractual rights.â€
“[In
relation to lots 9 and 14,] Plaintiffs contend that the foreclosure and
application of payments were inappropriate and that the foreclosure process was
in violation of California Civil Code Section 2900 et seq.â€
“[In
relation to lots 3 and 7,] Plaintiffs contend that the non-judicial foreclosure
and the application of payments were inappropriate and that the foreclosure
process was in violation of Civil Code Section 2900 et seq.â€
“These
sales are or were unfairly conducted, improperly organized, and held at the
various behest of … Defendants. Each
party acted with knowledge of the impropriety and of the Preliminary Injunction
and with knowledge that Plaintiffs claim a prior right and interest in and to
the property. The action taken by
Defendants were without authority and are null and void.â€
“…
Defendants have wrongfully asserted claims superior to those of Plaintiffs in
and to the Fox Hollow properties.â€
“…
Defendants conspired to deprive Plaintiffs of their properties and their
livelihood. Defendants also negligently,
intentionally and knowingly demanded more money than was due and owing by
Plaintiff. Defendants further improperly
conducted the non-judicial foreclosure process ….â€
“Defendant
Katakis conspired with third parties to … take over the Homeowner’s Association
for his own personal gain and to obtain control so that he could acquire all
the property in the subdivision and interfere with Plaintiffs’ ownership,
acquisition and business advantage.…â€
Appellants
incorporated the general allegations into each of their 12 causes of action:
(1)
Declaratory relief: as to disputes regarding
the Fox Hollow ownership interests of “Plaintiffs†and “Defendants.â€
(2)
Injunctive relief: against “Defendantsâ€
who improperly interfered with “Plaintiffs’†ownership, acquisition and
operation of Fox Hollow and who improperly operated the homeowners association.
(3)
Accounting: for money owing from
“Plaintiffs†to secured deed holders and the homeowners association.
(4) Slander
of title: for “Defendants’†wrongful
publication of false statements about “Plaintiffs’†ownership of the property.
(5)
Conversion: “Defendants†converted
“Plaintiffs’†property, rents, and profits to the loss and detriment of
“Plaintiffs.â€
(6)
Misrepresentation: “Defendants’â€
misrepresentations were made without a good faith basis for believing them to
be true and were relied upon to “Plaintiffs’†financial detriment.
(7)
Interference with contractual relationship:
“Defendants†intentionally interfered with “Plaintiffs’†contracts with
the holders of the notes and deeds of trust and with the homeowners
association, to “Plaintiffs’†detriment.
(8) and (9)
Tort claims for intentional and negligent interference with prospective
economic advantage. (These claims are
immaterial because the court excluded fees incurred to defend the tort
actions.)
(10)
Negligent interference with contract:
“Defendants†negligently interfered with “Plaintiffs’†contracts with
its lenders and others causing damages.
(11) To set
aside foreclosure: “Defendants’â€
nonjudicial foreclosures of “Plaintiffs’†property resulted in invalid trust
deeds.
(12)
Violation of privacy and credit statutes:
“Defendants†obtained and disclosed “Plaintiffs’†financial applications
in violation of their privacy rights for the purpose of harming “Plaintiffs.â€
By way of
relief, appellants requested “judgment against Defendants, and each of them,â€
on each cause of action and attorney fees on all causes of action.
Prevailing Parties
Respondents
prevailed on all of appellants’ contract claims regarding the notes and deeds
of trust for lots 3, 7, 9, and 14. The
trial court found against appellants on the merits of each of their claims, and
also found the doctrine of unclean hands precluded recovery on those
claims. Respondents also prevailed on
appellants’ claims to enforce the governing documents (primarily in relation to
lots 1 and 19). In ruling against
appellants on these claims, the trial court found, “Plaintiffs are
indistinguishable from one another for the purposes of the [unclean hands]
doctrine as Mr. Sinclair was acting for them and Mauctrst was a sham and
alter ego for Mr. Sinclair and Mr. Mauchley.â€
Similarly,
in ruling on the attorney fees request, the trial court found that the issues
related to the defense of the actions on contract and on the governing
documents were “inextricably intertwined.â€
For that reason, the trial court exercised its discretion not to
apportion fees among the various causes of action on which fees were
awardable. The trial court, however, awarded
only $750,000 of the requested $1.2 million, about 62.5 percent of the fees
requested.
Standard of Review
The
experienced trial judge is in the best position to value an attorney’s services
rendered in the judge’s court. Thus,
while the judgment is subject to review on appeal, it will not be disturbed
unless appellant establishes that it is clearly wrong or constitutes an abuse
of discretion. (PLCM Group, Inc. v. Drexler
(2000) 22 Cal.4th 1084, 1095.)
Analysis
Appellants claim the trial court
erred in awarding attorney fees to respondents by: (a) awarding fees for nonfee claims, (b)
awarding fees for work related to the unclean hands affirmative defense, (c)
failing to apportion fee liability among only the applicable appellants, (d)
awarding attorney fees under Civil Code section 1717 to nonsignatories and
against nonsignatories of the contracts, (e) failing to properly apply lodestar
and segregate the fees requested among the causes of action, (f) awarding an
unreasonable amount, and (g) awarding fees notwithstanding respondents’ unclean
hands.
(a) For duplicative, nonfee and
cross-complaint legal work
We can quickly dispose of
appellants’ claim that the award erroneously included amounts for duplicative,
nonfee, and cross-complaint work.
Respondents’ motion for fees specifically identified bills for that work
and eliminated those fees from their request.
And, the trial court’s order expressly states the fee award did not
include fees for time spent on duplicative, nonfee and cross-complaint
work. This claim fails because it is not
supported by the record.
(b) For work related to unclean
hands defense
Appellants
contend the trial court improperly awarded fees for the hours spent preparing
and litigating respondents’ unclean hands affirmative defense. Not so.
The trial
court found, in part, that respondents were the prevailing parties on
appellants’ claims to enforce the governing documents of the homeowners
association and the notes and deeds of trust for lots 3, 7, 9, and 14 because
of appellants’ unclean hands. The
unclean hands evidence served as a defense to appellants’ actions on a contract
and to enforce the governing documents of the FHOA. Because the prevailing homeowners association
and the prevailing defendant on a contract claim may be awarded fees,
respondents’ counsel were entitled to attorney fees for their work on the
affirmative defense that defeated appellants’ claims. (Hunt
v. Smyth (1972) 25 Cal.App.3d 807, 832 [award to defendant creditor in
plaintiff debtor’s unsuccessful action to enjoin sale under trust deed].)
(c) Failing to apportion fee
liability among appellants
Appellants
next argue the award is erroneous because all appellants did not make claims to
enforce the governing documents or claims on a contract. Thus, respondents were not entitled to fees
under Civil Code sections 1354 and 1717 from all appellants. Appellants contend their claims were distinct
and not intertwined. They attempt to
attribute the claims to enforce the governing documents of the FHOA to Lairtrust,
LLC, and Capstone, LLC, only, and all the claims on contract to Mauctrst, LLC,
only. They contend the individual
appellants are not liable for attorney fees.
We disagree.
(1) All appellants made claims on the governing documents
Civil Code
section 1354, subdivision (c) provides, “In an action to enforce the governing
documents, the prevailing party shall be awarded reasonable attorney’s fees and
costs.†Appellants submit that the trial
court erred in making the attorney fee award against all appellants; the award
should have been made against Lairtrust, LLC, and Capstone, LLC, only. We conclude there was no abuse of discretion.
To
determine who the parties to an action are, courts consider the allegations of
the complaint. (Plumlee v. Poag (1984) 150 Cal.App.3d 541, 547.) As set forth above, all appellants alleged
every cause of action against every respondent.
After trial, respondents provided the court with a detailed chart
setting forth the parties to the litigation, the allegations to enforce the
governing documents and those to enforce the contractual obligations, and the
claims appellants asserted in their posttrial briefs. The allegations and evidence supported the
conclusion that all appellants made claims to enforce the governing documents
of the homeowners association.
The
complaint alleged that all appellants objected to the actions of the homeowners
association and made claims to enforce the governing documents. It further alleged that respondents conspired
with others to terminate and interfere with “Plaintiffs’†ownership by
improperly taking over the homeowners association, improperly using the FHOA
for respondents’ personal gain, and failing to use the FHOA funds as required
by the governing documents.
In
addition, the evidence showed that Sinclair, on behalf of all
appellants—Mauctrst, LLC; himself; Brandon; Capstone, LLC; Lairtrust, LLC;
Capstone Trust; Flake; and Mauchley—repeatedly challenged Katakis’s assumption
of leadership of the FHOA and objected to the actions of the homeowners
association as being in violation of the governing documents. Further, Brandon, Sinclair and Mauchley
claimed they were the directors and existing officers of the association and
that the October 2002 board meeting was invalid because the existing board was
not given notice and an opportunity to call the meeting. And because the meeting was invalid, all
subsequent board actions, including the decisions to levy special assessments
and to foreclose on lots 1 and 19, were invalid.
Thus, the
record does not support appellants’ assertion that only Lairtrust, LLC, and
Capstone, LLC, made claims to enforce the governing documents of the FHOA. To the contrary, the record demonstrates that
every appellant made claims to enforce the governing documents of the FHOA.
(2) All appellants made contract claims
Civil Code
section 1717, subdivision (a) 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.â€
Appellants submit the trial court erred in making the
attorney fee award against all appellants because only Mauctrst, LLC, made
claims to enforce the notes and deeds of trust.
Again, we conclude there was no abuse of discretion.
Respondents
were entitled to attorney fees under the documents. Although only Mauchley and Granite Bay
Funding signed the promissory notes and deeds of trust, the trial court found
that CEMG was the successor-in-interest/assignee of Granite Bay Funding. CEMG incurred attorney fees to enforce its
rights under those contracts and to protect its rights in the property. Thus, CEMG, as the prevailing party, was
entitled to fees under the contracts and Civil Code section 1717. (Reynolds
Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129.)
Appellants
also alleged that FHOA was the agent and alter ego of Katakis and CEMG. A defendant, sued on an alter ego theory, can recover attorney fees under Civil Code
section 1717. (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at p. 128.)
Appellants
also were liable for fees under the notes and deeds of trust. The allegations and evidence supported the
conclusion that all appellants made claims on the promissory notes and deeds of
trust on lots 3, 7, 9, and 14. Mauchley,
the original borrower, assigned his rights and obligations under the notes and
deeds of trust to Mauctrst, LLC. As an
assignee, Mauctrst, LLC, became liable for the debts under those
contracts. The trial court then found
that Mauchley and Sinclair were the alter egos of Mauctrst, LLC. So Mauchley and Sinclair were liable for
attorney fees to the same extent as Mauctrst, LLC.
Finally,
the trial court found appellants did not distinguish among themselves or their
causes of action in their pleadings or at trial. Rather, every cause of action included
allegations relating to every appellant.
And at trial, the voluminous evidence disclosed the tangled web of
actions and transactions that appellants had woven around the Fox Hollow
property for years.
Appellants
cite authority for the proposition that the trial court may, in its discretion,
apportion liability for attorney fees among the nonprevailing parties. But none of the cases cited compel the trial
court to do so. For example, in
Cal.App.3d 268, 272, the court noted that while the county defendants were
responsible for fewer of the abuses remedied by the litigation, the county
actively opposed the litigation and thus generated the expenses compensated by
the award of attorney fees. Therefore,
the trial court did not abuse its equitable powers by imposing attorney fees
jointly and severally on all appellants.
For all of
these reasons, the trial court wisely exercised its discretion not to apportion
fees among the causes of action for which fees were awardable or among appellants. While some appellants played a much larger
role than others in the transactions on which the claims were based, appellants
failed to segregate their claims and thereby provide the court with a basis to
apportion liability for fees.
(d) Awarding fees on contract to
nonsignatories and against nonsignatories
Appellants
contend respondents are not entitled to attorney fees because none of them was
a signatory to the notes and deeds of trust.
Further, Mauchley, who signed as borrower, was not a plaintiff and “all
plaintiffs†did not sign the operative documents so cannot be liable for fees
under Civil Code section 1717.
Appellants are mistaken.
A
nonsignatory defendant’s right to recover attorney fees as a prevailing party
turns on whether it would have been liable for fees had the other side
won. Thus, a nonsignatory sued as if it
were a party to the contract can recover attorney fees as the prevailing party
as if it would have been liable for fees had it lost. (Reynolds
Metals Co. v. Alperson, supra, 25
Cal.3d at p. 128.)
The same
rationale applies when the plaintiff is the nonsigning party. Where a nonsignatory plaintiff sues a
signatory defendant in an action on a contract and the defendant prevails, the
signatory defendant is entitled to attorney fees if the nonsignatory plaintiff
would have been entitled to its fees if the plaintiff had prevailed. (California
Wholesale Material Supply, Inc. v. Norm Wilson & Sons, Inc. (2002) 96
Cal.App.4th 598, 608.)
All
appellants alleged every cause of action and all alleged they were entitled to
attorney fees from respondents on each cause of action. Had appellants prevailed on their claims
under the contracts, they would have been entitled to attorney fees under the
language within the governing documents, promissory notes, and deeds of
trust. Thus, under Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at page 128 and California Wholesale Material Supply, Inc. v. Norm Wilson & Sons,
Inc., supra, 96 Cal.App.4th at
page 608, the nonsignatory respondents were entitled to attorney fees and the
nonsignatory appellants were liable for attorney fees.
(e) Failing to apply lodestar
properly and segregate fees among the causes of action
Appellants
summarily contend that respondents were not entitled to attorney fees because
they did not comply with the requirements of lodestar to segregate their
attorney fee claims as to parties and causes of action. Appellants cite no authority for the
proposition that respondents bore the burden of apportioning attorney fees, and
case law is to the contrary.
By way of
analogy, in Acosta v. SI Corp. (2005)
129 Cal.App.4th 1370, 1376, the court stated that it found no authority to
support the proposition that a defendant who prevailed against all of the
plaintiffs bore the burden of apportioning costs where the plaintiffs were
represented by the same law firm and pursued a single cause of action in a
joint trial. While this case is
different because appellants did not allege just one cause of action, it is
analogous because the interwoven nature of appellants’ causes of action made
their various claims indistinguishable.
In
addition, in Friends of the Trails v.
Blasius (2000) 78 Cal.App.4th 810, 837-838, the court stated the
nonprevailing parties are not entitled to an apportionment of their liability
as to the successful party. The court
noted, if the attorney fee award is not joint, the prevailing party faces
greater difficulty in collecting the attorney fees, and some of the attorney fees
will not be recoverable if any opposing party is insolvent. (Id. at
p. 838.) The same reasoning applies
here.
Given the
interwoven allegations and evidence in this case, respondents bore no burden to
segregate their attorney fee request among the parties and the fee causes of
action. And the trial court did not
abuse its discretion in not apportioning the fee award among the appellants or
the causes of action.
(f) Awarding an unreasonable
amount of fees
Appellants
next contend the amount of fees awarded—$750,000 of the $1.2 million requested—was
unreasonable under the lodestar analysis.
Specifically, they assert the amount should be reduced due to (1)
inefficient use of multiple counsel, (2) duplicative work, (3) overly lengthy
trial preparation and trial, (4) inclusion of work associated with the
cross-complaint, and (5) it being “unreasonably inflated.†This contention fails.
Factual and Procedural Summary
Respondents
provided the trial court with detailed declarations and billing documents to
support their fee request. They summarized
the attorney fees requested as follows:
Prior counsel
$18,592.99
$0
Prior counsel’s firm
$284,532.39
$37,535.07
McCormick Barstow
$695,936.00
$173,984.00
(less 3% for tort
issues)
title="">[9]
<$29,971.84>
<$6,354.57>
Subtotals:
$969,089.54
+
$205,173.50
=
$1,174,263.04
Fees for attorney fee
motion
$22,673.20
+
$5,668.30
=
$28,341.50
TOTAL FEES:
$1,202,604.54
Trial
counsel’s declarations set forth precisely how much time was spent by each
attorney and paralegal in litigating the matter and their hourly billing rates,
which ranged from $105 to $295.
Appellants opposed the fee request on grounds similar to those they
raise on appeal. The trial court
exercised its discretion and awarded respondents $750,000, which constitutes
about 62.5 percent of the fees requested.
The Law
In
calculating the amount of attorney fees to award, the trial court begins with
the “lodestar,†the number of hours reasonably expended multiplied by the
reasonable hourly rate in the community.
(PLCM Group,
In making the determination, the court considers 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,
and the success or failure. (
their own expertise regarding the reasonable value of attorney services. (Ibid.) The attorney fee award should ordinarily
compensate for all the hours reasonably spent in litigating the action to a
successful conclusion. (
State University (2005) 132 Cal.App.4th 359, 394.)
Analysis
We consider
each contention in turn.
(1) Inefficient use of multiple counsel and duplicative efforts
Appellants’
contention regarding the inappropriate use of multiple counsel is vague. They challenge the costs of “training,
research and education†of previous counsel, who prepared the case for trial in
2007, but substituted out in 2008, necessitating McCormick Barstow to prepare
for trial anew in 2008. Appellants
argue, in effect, that ordering them to pay for two firms’ separate preparation
for trial was unreasonable. (
Cal.App.4th 819, 840-841 [fee award should be reduced because parties filed
essentially duplicative actions].)
Appellants’ argument ignores that the trial court did not award
respondents all the fees requested; it awarded less than two-thirds of the
amount asked for. As such, appellants
provide no basis for us to conclude that the trial court abused its discretion
by awarding fees for duplicative work.
(2) Overly lengthy trial preparation and trial
Appellants
next challenge the amount of fees based on respondents’ use of eight attorneys
and five paralegals to prepare and litigate the case. We again conclude there was no abuse of
discretion. The number of hours devoted
to the case by respondents’ trial counsel plus one associate and one paralegal
accounted for more than 90 percent of the total number of hours billed. Further, the time involved in litigating the
case was due to appellants’ shotgun approach
numerous claims. Respondents’ counsel
were forced to expend extensive time and effort to prepare and try the case in
an orderly and efficient manner.
(3) The amount was “unreasonably inflatedâ€
Appellants
also contend “the fee award should be denied because [it was] unreasonably
inflated.†They cite case law for the
proposition that a prevailing party’s fee request that appears unreasonably
inflated is a special circumstance that permits the trial court to reduce the
award or deny it altogether.
In
635, the court noted that if a court were simply required to award a reasonable
fee when the prevailing party requested an outrageously unreasonable one,
claimants would be encouraged to make unreasonable demands, knowing that the
only consequence of such misconduct would be reduction of their fee to what
they should have asked for in the first place.
To discourage such greed, courts were permitted to deny an unreasonably
inflated award altogether. (Accord,
(2006) 141 Cal.App.4th 643, 674 [Counsels’ legal work consisted of filing three
petitions, opposing motions to dismiss and one demurrer, filing motions to
amend, to stay, and to consolidate, preparing status conference statements and
paperwork in connection with the fee motion.
For this, the petitioners sought $16 million from the city’s public
coffers. That amount was not reasonable
or equitable. Rather, it was a special
circumstance permitting the court to deny an award altogether.];
California (1998) 67 Cal.App.4th 437, 455 [fee request was unreasonably
inflated where plaintiff’s attorneys attempted to justify more than $500,000 in
fees for case that achieved modest financial award and stipulated injunctive
relief, which required defendants to do little more than obey the law. The court did not abuse its discretion in
denying attorney fees incurred in attempting to justify this unreasonable
request].)
Appellants’
contention is not supported by citations to the record or reasoned legal
argument. Their bare assertion that a
$750,000 attorney fee award following an aggressively litigated action
involving 12 causes of action and a 36-day trial is “unreasonably inflatedâ€
does not make it so. Appellants have
failed to demonstrate the trial court abused its discretion in awarding the
amount of attorney fees it did.
(g) Special circumstances
Finally,
appellants contend that special circumstances required the court to deny fees
altogether. They argue that respondents’
unclean hands, their lack of an “unqualified win,†and their behavior during
settlement and discovery militate against the award of fees.
The case
law they cite, Hsu v. Abbara (1995) 9
Cal.4th 863, holds to the contrary.
There, the court held that when a party obtains a “simple, unqualified
win†on the contract claim in an action, the trial court may not invoke
equitable considerations unrelated to litigation success, such as the parties’
behavior during settlement negotiations or discovery proceedings, except as
expressly authorized by statute. (
Further,
appellants’ contention regarding respondents’ unclean hands is futile. As set forth in Sinclair v. Katakis, F058822, whether respondents engaged in
unclean hands was neither raised nor litigated at trial. Respondents’ behavior was not at issue, except to the extent it was relevant to
establish appellants’ causes of action.
For all of
the reasons set forth above, we reject appellants’ claims that the trial court
abused its discretion in awarding the amount of attorney fees it did.
DISPOSITION
The
posttrial orders are affirmed. The
motion to dismiss Mauctrst, LLC is granted.
The respondents’ requests that we take judicial notice are granted. The respondents are awarded their costs on
appeal. The trial court is directed to
determine the amount of attorney fees to be awarded to respondents for legal
services on appeal. (
43 Cal.App.4th 1101, 1112.)
________________________________
CORNELL, J.
WE CONCUR:
________________________________
WISEMAN, Acting P.J.
________________________________
LEVY, J.
name="_ftn1" title="">[1]Mauctrst,
LLC, a company owned by Mauchley and comanaged by Sinclair, filed a certificate
of cancellation in 2011. This court
granted respondents’ motion to dismiss Mauctrst, LLC as an appellant in
appeal. The motion is granted.
name="_ftn2" title="">[2]February 26,
2010, the date of the hearing, was the Friday before Monday, March 1.
