Judge: Christian R. Gullon, Case: 22PSCV01402, Date: 2023-08-28 Tentative Ruling

Case Number: 22PSCV01402    Hearing Date: August 28, 2023    Dept: O

Tentative Ruling

PLAINTIFF/CROSS-DEFENDANT WEN WEN JIANG’S NOTICE OF MOTION AND MOTION TO STRIKE PORTIONS OF ANSWER TO OF PLAINTIFF’S COMPLAINT is DENIED.

Background

Plaintiff WEN WEN JIANG alleges the following against Defendant TOMAS DELGADO: Plaintiff is the owner of two vehicles, a Tesla and Prius. Plaintiff’s husband, Antonio Wong (Wong), “gave Delgado an envelope full of titles which were intended to be the titles of the business vehicles” (Complaint ¶11) wherein Wong pledged various vehicles as collateral for but Wong inadvertently gave vehicle titles to Plaintiff’s two vehicles. Plaintiff asserts that based thereon, Delgado has unlawful possession of the two vehicles.[1]

On February 28, 2023, Plaintiff filed suit for: (1) Fraudulent Concealment (2) Conversion (3) Negligent Misrepresentation (4) Unjust Enrichment (5) Intentional Misrepresentation (6) Intentional Infliction Of Emotional Distress.

On January 3, 2023, Defendant filed his answer.

On January 4, 2023, Defendant filed a cross-complaint for Express Indemnity; Equitable Indemnity; Breach Of Contract; Fraud; Conspiracy To Commit Fraud; Declaratory Relief.

On February 28, 2023, Plaintiff filed the instant motion to strike.

On February 28, 2023, Defendant filed a first amended cross complaint.

On August 15, 2023, Defendant filed his opposition to the motion to strike.

On August 21, 2023, Plaintiff filed her reply.

Legal Standard

A motion to strike may be used to cut out—whether the entire pleading or any part thereof—that is “irrelevant, false, or improper matter inserted in any pleading.” (Cal. Civ. Proc. Code § 436(a)’ see also Baral v. Schnitt (2016) 1 Cal.5th 376, 393-394.) The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. (Cal. Civ. Proc. Code § 437(a).) Answers are subject to a motion to strike. (Ibid.)

Discussion

Plaintiff moves to strike line 2 on Page 6 of Defendant’s Answer to Plaintiff’s Complaint, which seeks attorney’s fees and costs. Specifically, Plaintiff argues that according to Civil Code section 1021, each party is to bear his own attorney fees unless a statute or the agreement of the parties permits otherwise. (Motion p. 4:8-10.) Accordingly, here, Defendant’s prayer for attorney fees is improper because the action between Plaintiff and Defendant is not based upon a contract (rather tort) and that even if it is a contractual action, Plaintiff is not a party to the contract.

For the reasons to be discussed below, the court finds Defendant’s prayer for attorney fees is proper.

Ordinarily, litigants must bear the expense of their own attorney fees. (Motion p. 4, citing Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 504.) The Legislature codified this American Rule when it enacted Civil Code section 1021, which states in pertinent part that “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.” One such statute is Civil Code section 1717 which provides for attorney fees if the party prevails in “an action on a contract.” In determining what constitutes an “action on a contract,” the courts liberally construe the phrase. (Orozco v. WPV San Jose, LLC (2019) 36 Cal.App.5th 375, 408) (emphasis added). But an action is not “on a contract” for purposes of an attorney fee award “even though the underlying transaction in which the fraud occurred involved a contract containing an attorney fee clause.” (Ibid; see also Reply p. 2, citing to Stout v. Turney (1978) 22 Cal.3d 718, 730 [“A tort action for fraud arising out of a contract is not, however, an action “on a contract” within the meaning of this section.”].) “However, whether a complaint pleads contract causes of action is not dispositive to the application of Civil Code section 1717. Instead, courts look to the gravamen of the overall action.” (Orozco, supra, 36 Cal.App.5th at p. 409) (emphasis added). “An action is more likely to be found ‘on a contract’ for purposes of [section 1717] if the agreement is broad in scope or if the main thrust of the litigation is based on the contract.” (Ibid, quoting Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar, 3d ed. 2018) § 4.50) (emphasis added). Put another way, to determine whether an action is based on contract or tort, a court should examine the “nature of the right sued upon, not the form of the pleading or relief demanded.” (Id. at p. 410) (emphasis added). Even if a breach of contract action is not specifically pled, an action may “be on a contract” where the contract claim can be asserted at trial. (Walsh v. New West Federal Savings & Loan Assn. (1991) 234 Cal.App.3d 1539, 1547 [“[E]ven if a breach of contract is not specifically pleaded, an action may be ‘on a contract’ where, as here, the contract claim is asserted during trial ‘and the [contract] theory ... [is] well known to court and counsel.”].)

Here, the complaint explicitly references the promissory note/contract (eleven times) and the tort claims are in connection with the promissory note. (Complaint ¶11.) Effectively, as Plaintiff is challenging the validity of the Promissory Note and the security pledged as collateral for the note by her husband, the thrust of this litigation is based on the promissory note between Plaintiff’s husband and Defendant. Plus, Plaintiff could, theoretically, assert a cause of action reformation of the contract to correct the scope of the collateral because she is presumably the party “aggrieved” by the mistake of her husband. And the right to reformation of an instrument is not restricted to the original parties to the transaction; an aggrieved party “clearly includes one who has suffered prejudice or a pecuniary loss.” (Watson v. Collins (1962) 204 Cal.App.2d 27, 32.)[2]

Therefore, even if the pleading frames the action as one in tort, it is more likely to be one found on contract. And assuming there is a contract, the promissory note that Plaintiff’s action arises from does contain an attorney fees provision:

The Borrower shall be liable for all costs, expenses and expenditure incurred associated with making or administering the note, including, without limitation, the complete legal costs of the Lender incurred by enforcing the Note . . . .

(Motion, Ex. A; see also Opp. Ex. A [Promissory Note], ¶4) (emphasis added).  

Here, enforcing the Note is part of Defendant’s defense because the Note provides for various collateral (Note, ¶5) but Plaintiff claims ownership to two vehicles that are part of the collateral.[3]

To the extent that Plaintiff avers that the provision does not expressly call for attorney fees (Reply p. 2:25-28), cost is an ambiguous term subject to varying definitions, and Plaintiff has not provided authority that provides a well-settled distinction between costs and allowances for attorney fees. Next, to the extent that Plaintiff avers that she is not a party to the promissory note such that Defendant cannot invoke the promissory note, the vehicles are likely community property. (Opp. p. 6.) Generally, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt. (Cal. Family Code § 910(a).) Plaintiff’s opposition is silent as to this point. Lastly, to the extent that Plaintiff avers that the attorney fee provision cannot be asserted against Plaintiff because she is not a party to the contract (Reply pp. 3-4), not only is the court uncertain as to Plaintiff’s analysis, but of note, Plaintiff, as a purported nonparty, is seeking attorney fees despite conceding no contract between the parties.

Even assuming arguendo that the action is not based upon a contract, there is an additional exception to the general rule that each party bear their own attorney fees: exceptional circumstances such as third-party litigation. (De La Hoya v. Slim’s Gun Shop (1978) 80 Cal.App.3d Supp. 6, 8.)[4] “A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney's fees, and other expenditures thereby suffered or incurred.” (Ibid; see also Walters v. Marler (1978) 83 Cal.App.3d 1, 29 [“[C]ourts have allowed such fees and expenses when exceptional circumstances have been found to exist. Such exceptional circumstances have been the result of weighing by courts of policy considerations when the factors in favor of allowance, rather than any hard fast rule, have dictated the justice of the allowance of such damages on a case-by-case basis.”].)

Applying the principal here, the person (Defendant), through tort of another (Plaintiff’s husband), has been required to act in the protection of his interests by defending an action against a third person (here, Plaintiff).

Therefore, regardless of a statute or agreement, it follows that Defendant should be entitled to recover compensation for the reasonably necessary attorney’s fees incurred.

Conclusion

All in all, though Plaintiff may label her action as one in tort, the thrust of the pleading is based upon a contract, and that contract allow for recovery of legal costs (i.e., attorney fees). In the alternative, if the action is not based upon contract, the court finds an exception applies to allow Defendant to seek recovery of attorney fees. Based on the foregoing, the motion to strike attorney fees is DENIED.