Reversed Denial of Fees; However, Denial Of Costs Award Was Proper In “Mixed” Case Involving Nondiscretionary And Discretionary Cost Categorical Results.
Chima v. Chima, Case No. C075602 (3d Dist. Oct. 31, 2016) (unpublished) is a situation where children beneficiaries under a trust, as plaintiffs/cross-defendants, prevailed in a suit where their father’s step-wife, on behalf of defendants/cross-complainants, transferred 66 acres of land out of a trust benefiting the children to herself and then to her parents. Children basically quieted title to the 66 acres and had to win a declaration of what limited partnership agreement governed as far as determining their rights to the 66 acres. Children then moved to recover $52,973.76 in routine costs and $861,688.60 in attorney’s fees based on a broadly-worded attorney’s fees clause in the limited partnership agreement which was found to be operative when children prevailed in the litigation. The lower court denied both requests.
On appeal, a “split verdict”—the costs denial was affirmed, but the fee denial was reversed and remanded to have the lower court award reasonable fees to victorious children.
The costs denial, although seemingly erroneous because children beat back the cross-complaint (making them costs winners on a mandatory basis), had a twist because they prevailed under their own complaint by recovering “other than monetary” relief making them costs winners only in the discretion of the trial judge. The Third District observed: “The parties have not cited and we have not found a case dealing with the type of mixed situation presented here.” (Slip Opn., p. 7.) In the absence of such authority, the appellate court believed that this case did give the trial judge discretion to find that children were not entitled to costs as a matter of right, especially where the other side’s cross-complaint was fundamentally defensive in nature.
However, a different result did occur on the fee denial. Under Civil Code section 1717, “on the contract” is construed liberally, with both the primary and cross-actions centrally involving the parties’ rights under the LLC operating agreement, which issues were actually adjudicated by the lower court. Children won, such that they were entitled to an award of fees in a reasonable amount. The opposing side argued that the 66 acres had “dubious value” so as to divest children of fee entitlement, but the appellate court rejected this argument by saying this only was relevant in fixing the amount of fees (not upon divesting fee entitlement altogether).
BLOG UNDERVIEW—Interesting enough, although children will likely still get a hefty fee award, the trial judge at the fee hearing—before ultimately denying fees altogether—did give some indication that the lodestar would be reduced 50% plus lowered another 20% through an across-the-board rate reduction. This might indicate what happens on remand. However, given that the lower court on the first go-around denied fees altogether, the “moot” lodestar analysis was not a ripe subject for review at all.