Second District, Division Four Determines Landlord Prevailed and Dismisses Other Technical Challenges to Major Portion of Fee Award.
Tenant got caught up in an imbroglio with her Landlords when she moved her business into a residential apartment after the roof of her off-premises store collapsed. After being served with an eviction notice, Tenant brought a civil action against Landlords arising from their efforts to evict her from the apartment (Vinci I). Landlords filed an unlawful detainer action, which Tenant lost such that possession of the apartment was restored to Landlords. This prompted Tenant to file an amended complaint in Vinci I, adding claims for trespass (based on Landlords’ entry into the apartment to photograph its contents) and bad faith denial of contract. The lower court sustained demurrers to all claims but the trespass count, which was transferred to a limited jurisdiction department. Tenant filed a new action, Vinci II, asserting the same causes of action she tried to add to her complaint in Vinci I (with the trespass claim consolidated into this new action). Vinci II proceeded to trial, with the court entering judgment in favor of Landlords based on the litigation privilege defense. Tenant appealed, with the Court of Appeal finding that all the rulings in Vinci I and Vinci II were correct, excepting reversal on the trespass claim which was remanded for trial. The jury found one of the Landlords had trespassed, but caused Tenant no harm and no damages. The trial court awarded Landlords $157,940 in attorney’s fees under a fees clause in the lease with Tenant. Tenant appealed.
In Vinci v. Pollyea, Case No. B199494 (2d Dist., Div. 4 Oct. 2, 2008) (unpublished), Presiding Justice Epstein—writing for a 3-0 panel of the Second District, Division 4—affirmed with a modification of the fee award.
Initially, the appellate panel determined that Tenant’s loss on the trespass count was covered by a broadly worded fees clause in the lease, which was not limited to actions on the contract but included "any legal action or proceeding" brought by either party to the agreement. This was broad enough to cover the trespass cause of action. (Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1341 (1992).)
Landlords were definitely the prevailing parties, the Court of Appeal reasoned. Most of Tenant’s claims were dismissed before trial, and she did not obtain any damages on a trespass claim for which she sought more than $1 million. Beyond that, Tenant did not beat two prior CCP section 998 offers, one for $1,001 and a subsequent one for waiver of costs or fees.
Tenant next suggested that Landlords’ fees motion was untimely because it was filed more than 40 days after issuance of the remittitur in the prior appeal in which the Court of Appeal had ordered both sides to bear their own costs, contravening the 40-day deadline of California Rules of Court, rule 8.278. Not so, said Justice Epstein. Because the prior appeal resulted in a reversal and remand, the prevailing party could not be determined until the case was at an end after remand. Even a successful appellant who loses on the merits after trial will not be the prevailing party for purposes of Civil Code section 1717 fees for the appeal if that party ultimately loses on the merits. (See Butler-Rupp v. Lourdeaux, 154 Cal.App.4th 918, 928 (2007).) Justice Epstein put it this way: "Our order requiring each side to bear its own costs on appeal had no bearing on the entitlement to attorney fees under section 1717; based on the ultimate result in the action, respondents were the prevailing parties and were entitled to recover attorney fees, including the attorney fees in this court." (Slip Opn., at p. 9.) As far as timing of the motion, the appellate panel determined that rule 3.1702, not rule 8.278, governed, which meant Landlords had 180 days from entry of the ultimate judgment to timely file their fee motion. Landlords filed their fee motion 10 days after judgment entry, so there was no time bar.
Tenant also challenged Landlords requesting the normal hourly rates charged by their attorneys rather than the rate Landlords’ insurance carrier actually paid attorneys for defending the cases. Justice Epstein rejected this challenge. Fees can be based on the prevailing market value of comparable legal services, with the trial court not required to base its fee award on the actual contract between the insurer and counsel. (Slip Opn., at p. 11, citing PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1096, 1098 (2000).) The trial court did not commit error in utilizing the lodestar approach.
However, the appellate panel did reduce the fee award by $46.046, down to $111,894. This reduction was grounded on the fact that the trial court had awarded fees previously for a period up to judgment in Vinci II, and Landlords did not move for reconsideration or challenge that award which was $46,046 less than the amount of fees claimed in the fee motion under review. Even though the Court of Appeal agreed that the question of prevailing party could not be finally determined at the time the appellate court previously remanded the cause for trial, it was improper for the trial court to revisit the earlier portion of the fee award on remand. Except for this reduction, Landlords won the final battle and were awarded costs on appeal (which will likely include supplemental fees based on the lease clause).