Judge Bruce G. Iwasaki, Case Number: 22STCV33144, Date: 2023-11-28 Tentative Ruling

Moving Party: Defendants Packo Investments, Inc., Allen H. Park, James Lee, Saenz Rodolfo and Chae & Saenz Rodolfo Trust

Plaintiff filed a First Amended Complaint (FAC) on March 29, 2023. The FAC contains causes of action for violation of quiet use and enjoyment, negligence, breach of oral contract, and intentional infliction of emotional distress.

On May 1, 2023, Defendants demurred the entire FAC arguing Plaintiff failed to state a claim. The demurrer was unopposed. On June 12, 2023, the Court sustained the demurrer in its entirety and declined to grant leave to amend because Plaintiff had not opposed the demurrer.

On August 2, 2023, the Court entered Judgment in favor of Defendants and confirmed that Defendants were the prevailing parties in this matter.

Defendants now seek attorney fees and costs in the amount of $42,611.15. Plaintiff opposes the motion.

The motion for attorney fees and costs is granted in the reduced amount of $1,000 for attorney fees and $61.65 for costs.

California Code of Civil Procedure section 1021 provides, in pertinent part: “Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties.” Pursuant to Section 1021, “parties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract.” (Palmer v. Shawback (1993) 17 Cal. App. 4th 296, 299.)

In moving for attorney fees and costs, Defendants argue that they are entitled to fees and costs pursuant to Code of Civil Procedure sections 1032 and 1033.5, in addition to Civil Code section 1717 and California Rules of Court Rule 3.1702. Defendants rely on the attorney fee provision in the parties’ Lease agreement with Plaintiff.

In opposition, Plaintiff argues that Defendants are not entitled to attorney fees on the contract pursuant to Civil Code section 1717 because she did not allege a breach of the Lease agreement.

Section 1717 provides in pertinent part: “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.” (Civil Code, § 1717, subd. (a).)

“ ‘California courts liberally construe the term “ ‘ “on a contract” ’ ” as used within section 1717. [Citation.] As long as the action “involve[s]” a contract it is “ ‘on [the] contract’ ” within the meaning of section 1717.” (Hjelm v. Prometheus Real Estate Group, Inc. (2016) 3 Cal.App.5th 1155, 1168.) “In determining whether an action is ‘on the contract’ under section 1717, the proper focus is not on the nature of the remedy, but on the basis of the cause of action.” (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 347; see generally Luckey v. Superior Court (1930) 209 Cal. 360, 366 [“[t]he subject matter of an action and the issues involved are determinable from the facts pleaded, rather than from the title or prayer for relief”].) Hence, it has been held, “[a]n action (or cause of action) is ‘on a contract’ for purposes of section 1717 if (1) the action (or cause of action) ‘involves’ an agreement, in the sense that the action (or cause of action) arises out of, is based upon, or relates to an agreement by seeking to define or interpret its terms or to determine or enforce a party's rights or duties under the agreement, and (2) the agreement contains an attorney fees clause.” (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 241-242.)

Civil Code section 1717 does not bar recovery of attorney's fees for noncontract claims as long as the attorney's fees clause is broad enough to encompass such noncontract claims. “ ‘[T]he parties to a contract are free to agree that one or more of them shall recover their attorney fees if they prevail on a tort or other noncontract claim,’ ” and in such a case “ ‘the right to recover those fees depends solely on the contractual language.’ ” (Monster, LLC v. Superior Court (2017) 12 Cal.App.5th 1214, 1226 [quoting Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 820].)

Here, Plaintiff entered into a Lease agreement with Defendant Chae & Saenz Rodolfo Trust (Lease), containing an attorney’s fees provision. (Wigley Decl., Ex. A, ¶43.) The attorney’s fees provision provides:

“43. ATTORNEY FEES: IN any action or proceeding arising out of this Agreement, the prevailing party between Landlord and Tenant shall be entitled to reasonable attorney fees and costs, collectively not to exceed $1,000 [], except as provided in paragraph 42A.” (Wigley Decl., Ex. A [Lease].)

As a preliminary matter, the attorney’s fees provision in this Lease is broad enough to include noncontract claims. (See e.g., Drybread v. Chipain Chiropractic Corp. (2007) 151 Cal.App.4th 1063, 1071 [clause allowing for noncontract attorney's fees that stated: “[i]f any action or other proceeding arising out of this Sublease is commenced . . ..”].)

Further, Plaintiff’s claims are considered “on the contract.” Plaintiff brought her lawsuit against Defendants Packo Investments, Inc. (Packo), Allen H. Park (Park), James Lee (Lee), Saenz Rodolfo (Rodolfo). She alleged that the property manager (Packo Investments), Packo Investments’ employee (Lee), and its “responsible broker” (Park) engaged in improper conduct, arising from their landlord-tenant relationship. Specifically, Plaintiff Lee alleges Defendants sent her harassing e-mails at 2:00 a.m. regarding terminating her lease, allowed other tenants to view her unit, knocked on her door, and provided her notice of lease violations. (FAC ¶¶ 27-34.) The FAC also alleges Defendants had a duty to “provide habitable premises” and the premises had many defects, including a leaking ceiling, plumbing and defective refrigerator, dishwasher. (FAC ¶¶ 5, 38.) Finally, Plaintiff alleges that Defendant agreed to renew the Plaintiff’s lease at the same amount of $2,5000, which was the same rental amount of the prior lease, starting with the October 2022 rent. (FAC ¶ 57.) The term of this new lease began on October 1, 2022 and ended on March 31, 2024. (FAC ¶ 58.) The FAC alleges this oral contract was breached when Defendants demanded $2,950 in rent a month. (FAC ¶ 60.)

While it is true Plaintiff did not allege a breach of the written lease agreement, Plaintiff’s claims all arose out of the landlord-tenant relationship, which in turn arose out of the Lease Agreement. Based on the nature of the allegations in the Complaint and the FAC, Plaintiff’s claims were an action “on the contract.”

Finally, having prevailed against Plaintiff’s action on demurrer, Defendants are undoubtedly the prevailing party. Contrary to the opposition, it is of no consequence that Plaintiff’s claims were not frivolous. (Opp., 6:5-20.)

Based on the foregoing, Defendants are entitled to attorney fees pursuant to the Lease and Civil Code section 1717.

Defendants seek attorney fees and costs in the amount of $42,611.15, which includes $9,920 in attorneys’ fees in connection with this Motion.

“43. ATTORNEY FEES: IN any action or proceeding arising out of this Agreement, the prevailing party between Landlord and Tenant shall be entitled to reasonable attorney fees and costs, collectively not to exceed $1,000 [], except as provided in paragraph 42A.” (Wigley Decl., Ex. A [emphasis added].)

Paragraph 42A contains a requirement that the parties attempt to mediate the matter “before resorting to court action.” (Wigley Decl., Ex. A, ¶ 42.) The provision continues: “If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action.” (Wigley Decl., Ex. A, ¶ 42 [emphasis added].) There is no evidence that Plaintiff complied with this provision prior to bringing her lawsuit in court; thus, had she prevailed in this action, she would not have been entitled to attorney fees. That said, Paragraph 42A has no impact on the entitlement to fees of Defendants – where there is no evidence Defendants refused to mediate.

However, Paraph 43 contains a $1,000 limitation on the amount recoverable as reasonable attorney fees. This limitation applies to Defendants’ request for attorney fees.

Defendants challenge this limitation by arguing that the provision is internally contradictory because it allows for “reasonable attorney fees” but limits fees to $1,000, which Defendants argue is an unreasonable amount. Based on this contradiction, Defendants contend that there is an ambiguity in the Lease that is “open to multiple, reasonable interpretations.” (Mot., 10:2-3.)

Contrary to Defendants argument, the attorney fee provision in the Lease is not ambiguous. Rather, the language of the attorney fee provision is clear and unambiguous. The provision defines the upper limit of reasonable attorney fees under the Lease; that is, attorney fees are limited to $1,000 – or any reasonable amount under this limit.[1]

Moreover, even assuming there was an ambiguity, in this case, the ambiguity would seem to be construed in favor of Plaintiff – not Defendants. Here, by its own terms, a professional organization of real estate brokers prepared the standard form lease. As such, under the circumstances, it appears that the Lease was “entered into between two parties of unequal bargaining strength, expressed in the language of a standardized contract, written by the more powerful bargainer to meet its own needs, and offered to the weaker party on a ‘take it or leave it’ basis....” (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269.) As such, an ambiguity in the terms of the Lease would be construed against the Defendants, composed of the landlord, landlord agents and real estate broker. (Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 269–272; Gamer v. duPont Glore Forgan, Inc. (1976) 65 Cal.App.3d 280, 286.)

Defendants also argue that third-party beneficiary should not be bound by this $1,000 limitation because these third-parties “ability to recover their fees should be governed by the statutory right to fees not the limitations imposed upon the Landlord and Tenant in the Lease.” (Mot., 10:19-20.) Assuming that non-signatory Defendants here are even entitled to recover attorney fees under the circumstances, there is no legal basis to allow them greater rights under the attorney fee provision than the actual signatories. That is, Defendants here blow hot and cold on this issue. They seek the benefit of the attorney fee provision when it serves their purpose of obtaining fees but reject it when it limits their recovery.

Defendants are granted attorneys’ fees against Plaintiff in the reduced amount of $1,000.

Finally, on August 23, 2023, Defendants filed a memorandum of costs seeking costs in the amount of $1,643.16. No motion to tax these costs was filed. These costs are not at issue on this motion. On this motion, Defendants seek filing fees of $61.65. (Wigley ¶ 17.) Defendants are entitled to this cost. (Code Civ. Proc., § 1033.5, subd. (a)(1).)

Lastly, Plaintiff claims she was never served with the demurrer such that no opposition was filed. However, Plaintiff has not filed any motion seeking affirmative relief on this ground. This issue is not before the Court on this motion.

The motion for attorney fees and costs is granted in the reduced amount of $1,000 for attorney fees and $61.65 for costs on this motion. Plaintiff Lee is ordered to pay to Defendants’ counsel the sum of $1,061.65 on or before January 5, 2024.

[1] Although not argued by Defendants, it is worth noting that Defendants cannot rely on the statutory language of Section 1717 to expand their right to attorney fees because the statute is limited and governed by the contract. That is, Section 1717 is a statute meant to ensure mutuality of access to attorney fees: where a provision for awarding attorney fees is unilateral, section 1717 by operation of law makes such a clause bilateral. (California-American Water Co. v. Marina Coast Water Dist. (2017) 18 Cal.App.5th 571, 576-577.) What the statute does not do is authorize an award of attorney fees where it is mutually unavailable based upon contractual language. For example, in Leamon v. Krajkiewcz (2003) 107 Cal.App.4th 424, 427, 431-433, the Court of Appeal affirmed a trial court's denial of attorney fees based upon findings that a condition precedent (mediation) listed in the underlying contract mutually applied to both parties, had not been satisfied, and therefore validly did not authorize an award of attorney fees by its own language. (Id. at 431-433; see also ”]; Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342 [“Because of its more limited scope ... section 1717 cannot be said to supersede or limit the broad right of parties pursuant to Code of Civil Procedure section 1021 to make attorney fees agreements.”].)