Equitable Claims Can Be “On The Contract,” Parties Losing On Their Complaint And Cross-Complaint Meant That Neither Side Prevailed; One Litigant Beat 998 Offer Based On Non-Monetary Value And The Fact That The Composite Joint Nature Of Offer Had To Be Considered, But Matter Had To Be Remanded For Prevailing Party Determination Based On An Earlier Reversal As To Plaintiff’s Fee Motion.
Justice Fybel and two other colleagues on our local Santa Ana appellate court considered a host of attorney’s fees issues in Copenbarger v. Morris Cerullo Word Evangelism, Case Nos. G055129/G055131 (4th Dist., Div. 3 June 10, 2019) (unpublished).
The backdrop is that plaintiff’s complaint sought damages for breach of a settlement agreement in a hard-fought ground lease/sublease dispute, initially winning $118,000 in damages. However, that judgment was reversed as a matter of law the other way in a prior appellate opinion. One defendant cross-claimed, attempting to reform the settlement agreement but was unsuccessful in obtaining specific performance of the reformed agreement. There were dueling motions for attorney’s fees. Before the prior appeal was decided, the lower court denied the defense motion for attorney’s fees based on the cross-complaint, because those claims were denied. However, it granted plaintiff’s motion for fees to the tune of $176,190 (out of a requested $328,500).
In this second appeal, the 4/3 DCA panel affirmed the fee denial as to the defense, but it remanded the fee determination on plaintiff’s motion for a revisit of the prevailing party determination. Many issues were addressed in this opinion.
First, the defense argued that its cross-complaint should not have been considered under Civil Code section 1717 because the pleading only asserted equitable claims for reformation and specific performance, not “on the contract” under section 1717. Wrong, said the appellate court. Equitable claims can be on the contract (Kachlon v. Markowitz, 168 Cal.App.4th 316, 347 (2008); In re Tobacco Cases I, 193 Cal.App.4th 1591, 1601 (2011)), even when a plaintiff was not seeking to enforce the contract (Wong v. Davidian, 206 Cal.App.3d 264, 270 (1988)). Here, the cross-complainant sought specific performance of a “reformed” settlement, which certainly is on the contract. Given that neither side obtained relief on their pleadings, the trial court easily could determine that no side prevailed.
Second, cross-complainant argued that its cross-complaint was only “defensive,” but that was rebuffed because it sought reformation and specific performance rather than sticking to its original strategy of seeking only to rescind the settlement agreement. Beyond that, however, the trial court has discretion to find a cross-complainant a prevailing party in a “defensive” situation; it is not obligated to do so. (Cussler v. Crusader Entertainment, LLC, 212 Cal.App.4th 356, 368 (2012).)
Third, the cross-complainant contended that plaintiff was liable for fees because it did not beat an unaccepted CCP § 998 offer for $100,000 and non-monetary consideration. Based on the prior appellate reversal, plaintiff did not beat the monetary compensation. But that brought the appellate court to the nonmonetary component, which it was able to value based on email clarification from the 998 offeror’s counsel (a practice encouraged in Prince v. Invensure Ins. Brokers, Inc., 23 Cal.App.5th 614, 623 (2018)). The nonmonetary valuation was at least $359,000, and after deduction of the $100,000 monetary payment, the total value of the 998 offer was $259,000—something which plaintiff/cross-defendant obtained in defeating the cross-complaint, beating the 998 offer. However, despite the nonmonetary value of the 998 offer, the one defendant had to show that plaintiff did not beat the 998 offer, which was joint as to two defendants—something which the defense could not do based on the total 998 offer valuation. (Agreeing with the comparison approach of Kahn v. The Dewey Group, 240 Cal.App.4th 227, 242-244 (2005) and disagreeing with the contrary solitary approach of Winston Square Homeowner’s Assn. v. Centex West, Inc., 213 Cal.App.3d 282, 294 (1989).)
Last, based on its earlier reversal of the monetary judgment in plaintiff’s favor, the appellate court determined that the proper course was to reverse the order granting fees to plaintiff and remand to redetermine prevailing party status. The lower court would have to do so based on the fact neither side ultimately received what they wanted based on the complaint and cross-complaint.