Court of Appeal Also Affirmed Denial of Routine Costs Because
Litigant Did Not Overall “Prevail.”
A recent decision from the Fourth District, Division 1
is a fresh reminder of the discretion trial courts possess and legal principles
they must follow in determining whether a litigant is a “prevailing party” under
Civil Code section 1717 (fees clause mutuality provision) or Code of Civil
Procedure section 1032 (routine costs provision). Even though the opinion we
synopsize is 45 pages long, we will try to capture its essence and elucidate its
reasoning on “prevailing party” principles.
In Lair v. Vinci
(Lair II), Case No. D048964 (4th Dist., Div. 1 Oct. 7, 2008)
(unpublished), Vinci loaned Lair some money secured by an airplane hanger and
helicopter (May 2001 loan) and a Lancair airplane (Lancair loan), which was to
be used by a limited liability company toward the purchase of a commercial
building. After Lair transferred all interest in the building to Vinci, Vinci
granted the LLC an option to purchase the commercial building under terms by
which specified monthly payments were due to Vinci. Lair defaulted in making
payments under the option and the two notes, prompting cross-suits culminating
in special jury verdicts awarding damages to both parties. The jury found Lair
owed Vinci $97,317 under the option agreement, found Lair was entitled to unjust
enrichment damages of $650,000 for taking care of the commercial building,
awarded Vinci $214,000 under the May 2001 note, awarded Vinci $111,436.70 under
the Lancair loan, and awarded Vinci $19,000 for Lair’s breach of fiduciary
duties in managing the property. The trial court granted a new trial motion, but
the Court of Appeal reversed in Lair I and reinstated the jury verdict
in full.
Before remand proceedings could take place, Vinci successfully moved for
a writ of possession for one of the involved aircrafts. Both parties filed
cross-motions for attorney’s fees and costs, with the trial court denying them
all on the basis that no party prevailed for purposes of fees and costs. What
happened next? You readers are all too prescient—both sides
appealed!
Initially, Justice
O’Rourke—the author for a 3-0 panel of the Fourth District, Division 1—did
not believe that Vinci’s taking possession of the aircraft prevented an appeal
of the judgment. Vinci’s appellate challenges, including the order denying
attorney’s fees, did not impact the judgment relating to aircraft possession.
Thus, no waiver of appellate rights.
Attention next turned to whether the trial court correctly determined
that no party prevailed on the notes. The lower court reasoned that Vinci did
prevail on the Lancair loan, but that Vinci did not prevail on the May 2001 note
because Lair did not dispute the money was owed and Vinci recovered much less
than he sought to recover. However, the synergistic effect was that no one
prevailed, the lower court believed.
In ruling on the “prevailing party” fee determinations, Justice O’Rourke
importantly observed that each separate loan note must be examined, namely, the
May 2001 loan and the Lancair note. (See Arntz Contracting Co. v. St. Paul
Fire and Marine Ins. Co., 47 Cal.App.4th 464, 491 (1996).)Under the 2001 note, Vinci argued he was entitled to recover over $400,000,
Lair conceded he owed $265,000, and the jury found Vinci was only entitled to
$214,000 (well below what even Lair agreed was due). Relying on Scott Co. v.
Blount, Inc., 20 Cal.4th 1103, 1109 (1999), the appellate panel
agreed that the trial court retained discretion to determine there was no
prevailing party where a litigant like Vinci only recovered $214,000 after
demanding over $400,000 in damages.
However, Vinci was the prevailing party under the Lancair note,
recovering the full amount he requested at trial. He was a “simple, unqualified
victor” under Hsu v. Abbara, 9 Cal.4th 863, 871 (1995) [one
of our Leading Cases]. Nevertheless, given that there were other issues than the
loan note claims, the appellate panel remanded so the trial court could
apportion out work not relating to the Lancair loan. (Vinci was also entitled to
apportioned appellate fees for winning this issue on appeal. See Track
Mortg. Group, Inc. v. Crusader Ins. Co., 98 Cal.App.4th 857, 871
(2002).)
The Court of Appeal then drilled down to the routine costs issue. The
determinative provisions were Code of Civil Procedure sections 1032(b) and
1032(a)(4), which allow a costs award to the “prevailing party with a net
recovery.” After noting that a section 1032 prevailing party is not necessarily
the Civil Code section 1717 prevailing party because the definitions are
different (see Sears v. Baccaglio, 60 Cal.App.4th 1136, 1142
(1998)), the appellate panel observed “[t]he trial court was not required to
grant prevailing party status under Code of Civil Procedure section 1032 to each
party that succeeds on a separate contract.” (Slip Opn., at p. 31.) Because Lair
received the ultimate net monetary recovery when the $650,000 unjust enrichment
award was considered, the lower court did not abuse its discretion in concluding
that no costs should be awarded to Vinci. (Lincoln v. Schurgin, 39
Cal.App.4th 100, 105-106 (1995).)
The end result was that most of the prior determinations were affirmed,
except that Vinci could on remand seek recovery of trial and appellate
attorney’s fees relating to his win on the Lancair loan note. Otherwise, both
sides went their own separate ways, something we blogs have noticed happens
frequently in contentious fights like this one.