Judge: Cynthia A Freeland, Case: 37-2021-00015048-CU-BC-NC, Date: 2023-11-03 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

DEPT.:

EVENT DATE:

EVENT TIME:

SOUTH BUILDING TENTATIVE RULINGS - November 02, 2023

11/03/2023  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

CASE NO.:

CASE CATEGORY:

EVENT TYPE:

CASE TITLE: CASE TYPE:

Civil - Unlimited  Breach of Contract/Warranty Motion Hearing (Civil) 37-2021-00015048-CU-BC-NC QSX, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY VS. ALB LAND, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Attorney Fees, 09/01/2023

Defendant John Cabral ('Defendant')'s motion for attorneys' fees and costs is granted.

California follows the 'American rule,' under which 'each party to a lawsuit must ordinarily pay his own attorney fees.' Trope v. Katz (1995) 11 Cal. 4th 274, 278 (citing Gray v. Don Miller & Associates, Inc.

(1984) 35 Cal. 3d 498, 504; United Services Auto. Assn. v. Dalrymple (1991) 232 Cal. App. 3d 182, 187).

The Legislature codified the American rule when it enacted California Code of Civil Procedure ('CCP') § 1021, which provides that '[e]xcept 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; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.' See Cal. Code Civ. P. § 1021; Cargill, Inc. v. Souza (2011) 201 Cal. App. 4th 962, 966. CCP § 1033.5(a)(10) likewise allows attorneys' fees as costs under CCP § 1032 when contractually, statutorily, or legally authorized. See Cal. Code Civ. P. § 1033.5(a)(10). CCP § 1032(a)(4) defines the 'prevailing party' as 'the party with a net monetary recovery, a defendant whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant.' Cal. Code Civ. P. § 1032(a)(4).

Additionally, California Civil Code ('CC') § 1717(a) provides: 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.

Cal. Civ. Code § 1717(a). 'California courts liberally construe the term 'on a contract' as used within section 1717. [Citation.] As long as the action 'involves' a contract it is 'on [the] contract' within the meaning of [s]ection 1717. [Citations.]' Blickman Turkus, LP v. MF Downtown Snnyvale, LLC (2008) 162 Cal. App. 4th 858, 894 (quoting Dell Merk, Inc. v. Franzia (2005) 132 Cal. App. 4th 443, 455). CC § 1717(b)(1) defines the 'prevailing party' on a contract as 'the party who recovered a greater relief in the action on the contract.' Cal. Civ. Code § 1717(b)(1).

CC § 1717(b)(2) provides that there is no prevailing party for CC § 1717's purposes '[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case.' Cal. Civ. Code § 1717(b)(2). Put differently, 'an award of attorneys' fees is not permitted where an action 'on the contract' has been dismissed as part of a settlement.' Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal. Calendar No.: Event ID:  TENTATIVE RULINGS

3015952 CASE NUMBER: CASE TITLE:  QSX, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY VS. ALB LAND,  37-2021-00015048-CU-BC-NC App. 4th 698, 707. CC § 1717 applies only to contract claims – it does not apply to tort claims. See Santisas v. Goodin (1998) 17 Cal. 4th 599, 615. Indeed, '[i]f an action asserts both contract and tort or other noncontract claims, section 1717 applies only to attorney fees incurred to litigate the contract claims.' Ibid. (citing Reynolds Metals Co. v. Alperson (1979) 25 Cal. 3d 124, 129-130). 'To determine whether an action is on the contract, we look to the complaint and focus on the basis of the cause of action. [Citations.] Any action that is based on a contract is an action on that contract regardless of the relief sought.' Yoon v. Cam IX Trust (2021) 60 Cal. App. 5th 388, 392-393 (quoting Brown Bark III, L.P.

v. Haver (2013) 219 Cal. App. 4th 809, 827-828).

On April 6, 2021, Plaintiff Rick Cardenas ('Plaintiff') commenced this action by filing a Complaint against Defendant and Defendants ALB Land, LLC ('ALB') and Pacifica Real Estate Services, Inc. ('Pacifica').

See ROA No. 1. The operative Second Amended Complaint (the 'SAC') alleged causes of action for: (1) declaratory relief; (2) breach of contract; (3) negligence; (4) intentional interference with economic advantage; (5) breach of fiduciary duty; (6) misrepresentation/fraud; and (7) concealment/failure to disclose. See ROA No. 61. Defendant was a party to all causes of action except for the second (breach of contract) and sixth (misrepresentation/fraud). On April 13, 2022, Defendant filed: (1) a demurrer to each cause of action to which he was a party (see ROA No. 66), and (2) a motion to strike portions of the SAC seeking punitive damages against him (see ROA No. 67). On August 19, 2022, the court granted Defendant's motion to strike with leave to amend. See ROA No. 84. On September 12, 2022, the court issued a minute order: (1) overruling the demurrer to the extent Defendant argued that Plaintiff lacked standing to pursue his claims; (2) overruling the demurrer to the first (declaratory relief) and third (negligence) causes of action; and (3) sustaining the demurrer to the fourth (intentional interference with economic advantage), fifth (breach of fiduciary duty), and seven (concealment/failure to disclose) causes of action with leave to amend, with instructions that Plaintiff file and serve a third amended complaint within ten days. See ROA No. 86. Plaintiff did not file a third amended complaint within the time allowed by the court and, as a result, the fourth, fifth, and seventh causes of action were dismissed as to Defendant. See Cal. Code Civ. P. § 581(f)(2). At that time, only the first and third causes of action remained against Defendant. On July 26, 2023, Plaintiff dismissed the entire action with prejudice. See ROA No. 148.

Defendant now seeks to recover the attorneys' fees and costs he incurred in defending this action, which he claims he is entitled to as the prevailing party under the Standard Industrial/Commercial Single-Tenant Lease – Net (the 'Lease'). See Israel Decl., Ex. 3. More specifically, ¶ 31 of the Lease, entitled 'Attorneys' Fees,' provides as follows: If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term 'Prevailing Party' shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).

See Lease, ¶ 31. Under the Lease, ALB, as Lessor, agreed to lease to QXS LLC ('QXS'), as Lessee, the commercial property located at 2937 Norman Strasse Road, San Marcos, CA 92069 (the 'Property'). Ibid., ¶¶ 1.1, 1.2. The Lease identifies Defendant as: (1) QXS's agent/broker, and (2) a guarantor. Ibid., ¶¶ 1.9(a), 1.10.

As the parties agree, the issue becomes whether Plaintiff's dismissed claims, i.e., the first, third, fourth, Calendar No.: Event ID:  TENTATIVE RULINGS

3015952 CASE NUMBER: CASE TITLE:  QSX, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY VS. ALB LAND,  37-2021-00015048-CU-BC-NC fifth, and seventh causes of action, sound in tort or contract. To the extent the claims are contractual in nature, Defendant is barred from seeking his attorneys' fees and costs by operation of CC § 1717(b)(2).

As set forth above, the court must analyze the SAC and focus on the basis for each cause of action regardless of the relief sought. Notably, under California law, claims arising from breaches of promises set forth in an agreement are contract claims whereas breaches of duties arising out of the contractual relationship are not contract claims. See, e.g., Eads v. Marks (1952) 39 Cal. 2d 807, 811.

The SAC alleged that Plaintiff is a member of QXS and is engaged in the manufacturing, selling, and distribution of alcohol products. See SAC, ¶ 4. In January 2020, as a result of the COVID-19 pandemic, Defendant PE Management Group, Inc., formerly known as ALB and alter ego to Pacifica ('PEMG') began losing money from lack of rent at the Property. Ibid., ¶ 15. Around this time, Defendant and Shahin Edalatdju convinced Plaintiff to move his base of business operations to the Property. Ibid., ¶ 16.

Defendant and Mr. Edalatdju told Plaintiff that by moving he would be able to produce 20,000 gallons of sanitizer per day. Ibid., ¶ 17. On June 1, 2020, QXS and PEMG entered into the Lease. Ibid., ¶ 21.

Defendant, a licensed real estate agent, negotiated the Lease as the agent for QXS and ultimately received a $20,000.00 commission for his services. Ibid., ¶ 22. Plaintiff, Defendant, and Mohammed Bari guaranteed the Lease. Ibid., ¶ 24. The Property was not in compliance with local fire codes at the time the parties entered into the Lease. Ibid., ¶ 31. All defendants knew or had reason to know of this condition. Ibid. Defendant, for his part, knew of missing control wiring and other structural issues at the Property because he was charged with properly inspecting the Property before the parties entered into the Lease. Ibid., ¶¶ 61, 66. He also covered up the reasons why the fire system at the Property was malfunctioning. Ibid., ¶ 47. Moreover, Defendant allegedly misrepresented and hid from Plaintiff the maximum occupancy of the Property. Ibid., ¶¶ 67-70. Defendant further failed to disclose to Plaintiff that a safety 'push bar' was required at the Property. Ibid., ¶ 74. Importantly, ¶ 80 of the SAC alleged: Defendant CABRAL had a duty to diligently exercise reasonable care, diligence and skill in representing QXS, LLC and RICK CARDENAS in the performance of the responsibilities of the agency relationship that had been created by agreement of Mr. CABRAL and Plaintiff. By reason of his licensure, a real estate agent is deemed to have specialized and professional expertise, knowledge and skill in real estate related matters superior to that of the average person. The nature of the fiduciary relationship is such as to cause Mr. CARDENAS to justifiably rely on Mr. CABRAL's representations.

Ibid., ¶ 80.

As to the first cause of action, Plaintiff sought a declaration of the parties' 'respective rights and duties to one another, with particularity to the lease agreement and the rights and obligations connected with the Property.' Ibid., ¶ 104. As to the third cause of action, the SAC alleges that Defendant owed Plaintiff: (1) a duty to disclose, inform, and investigate, and (2) a fiduciary duty by virtue of his position as QXS's agent. Ibid., ¶¶ 120-121. As to the fourth cause of action, the SAC alleged that the defendants (without specific reference to Defendant) knew about preexisting business relationships between Plaintiff and third parties, and their failure to disclosure defects in the Property led to the cessation of those relationships. Ibid., ¶¶ 128-129. As to the fifth cause of action, the SAC alleged that Defendant, as QXS's agent, breached his fiduciary duties by failing to disclose all material issues with the Property and by not acting with the utmost good faith and in his clients' best interests. Ibid., ¶¶ 135-143. As to the seventh cause of action, in essence, contended that Defendant knew or had reason to know of the Property's defects yet intentionally concealed those facts from Plaintiff. Ibid., ¶¶ 153-163.

Having carefully considered the foregoing, the court finds that Plaintiff's claims against Defendant sound in tort, not contract, and thus Defendant's request for attorneys' fees and costs is not precluded under CC § 1717(b)(2). It is undisputed that Defendant, while serving as a broker and guarantor, was not a party to the Lease. Moreover, in reviewing the SAC's material allegations, it is plain that Plaintiff did not sue Defendant for breaching the Lease; rather, each of Plaintiff's claims involve Defendant's failure to properly conduct himself as a fiduciary/agent by not disclosing the Property's defects or sufficiently inspecting the Property before the parties entered into the Lease. Put differently, Plaintiff's claims against Defendant did not arise from the Lease itself since Defendant did not, in fact, owe Plaintiff any Calendar No.: Event ID:  TENTATIVE RULINGS

3015952 CASE NUMBER: CASE TITLE:  QSX, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY VS. ALB LAND,  37-2021-00015048-CU-BC-NC obligations thereunder. Rather, the alleged misconduct arose from the circumstances relating to the Property or, at most, a duty growing out of the contractual relationship between QXS and PEMG, as a result of Defendant's role as a broker/real estate agent. This is true even as to Plaintiff's declaratory relief cause of action (which also is included under the broad attorneys' fees provision set forth in the Lease).

That being said, the court still must determine the reasonableness of Defendant's fee request. Courts employ the lodestar method for calculating reasonable attorneys' fees. See Ketchum v. Moses (2011) 24 Cal. 4th 1122, 1136. '[T]he fee setting inquiry in California ordinarily begins with the 'lodestar,' i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate . . . . The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided.' Ibid.

In determining a reasonable hourly rate, the court must consider the prevailing market rates in the relevant community, which typically means comparable attorneys' rates in the forum district. See Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal. App. 4th 972, 1009. The court should consider the requesting attorney's experience, skill, and reputation, and may also rely upon its own knowledge and familiarity with the legal market. Ibid. In addition, the court can review attorney affidavits regarding prevailing fees in the community and rate determinations in other cases. Ibid. The difficulty or complexity of the litigation is also a relevant factor. See Syers Properties III, Inc. v. Rankin (2014) 226 Cal. App. 4th 691, 700.

Plaintiff does not take issue with Defendant's counsel's hourly rate. In addition, the court finds that Mr.

Israel's experience, skill, and reputation warrants the requested hourly rate. The requested hourly rate is also consistent with the court's understanding of the prevailing market rate for similarly situated attorneys in the San Diego legal community. Moreover, while the issues set forth in this action were not overly complex and did not involve novel legal issues, the case nevertheless involved significant motion practice and resulted in a dismissal of all claims against Defendant (three by way of Defendant's demurrer and two as a result of Plaintiff's voluntary dismissal). Accordingly, the court approves Mr.

Israel's hourly rate as requested.

As to the number of hours expended, Plaintiff, as the objecting party, bears the burden of referencing the specific items challenged, with a sufficient argument and citations to the evidence. See Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal. App. 4th 550, 564.

'General arguments that fees claims are excessive, duplicative, or unrelated do not suffice.' Ibid. The court must also independently assess the reasonableness of the time spent. Toward that end, verified time statements are entitled to credence absent a clear indication that the records are erroneous. See City of Colton v. Singletary (2012) 206 Cal. App. 4th 751, 785. However, the billing statements merely form the basis for the hours reasonably expended and the court may reduce the number of hours if it concludes that Defendant's counsel's efforts were unnecessary, duplicative, or excessive in light of the issues fairly presented. See 569 East County Boulevard LLC v. Backcountry Against the Dump, Inc.

(2016) 6 Cal. App. 5th 426, 440.

To start, Plaintiff did not meet his initial burden of challenging Defendant's counsel's hours. Arguing in conclusory fashion that the requested fees are excessive, unreasonable, and/or inflated, without more is insufficient. Moreover, to the extent Plaintiff argues that the fee request as to the fourth, fifth, and seventh causes of action is untimely, such contention is not well taken. While it is true that the fourth, fifth, and seventh causes of action were dismissed as a matter of law in September 2022 after Plaintiff failed to further amend the operative pleading, no judgment to that effect was ever entered. Indeed, Defendant did not technically become the 'prevailing party' for CC § 1717's purposes until Plaintiff dismissed the action on July 26, 2023. See Chen v. Valstock Ventures, LLC (2022) 81 Cal. App. 5th 957.

In sum, the court must respectfully disagree that Defendant should have sought, in essence, an interim fee award while the parties continued to litigate the first and third causes of action.

The court has carefully reviewed the Invoices attached as Exhibit 2 to Mr. Israel's declaration and finds Calendar No.: Event ID:  TENTATIVE RULINGS

3015952 CASE NUMBER: CASE TITLE:  QSX, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY VS. ALB LAND,  37-2021-00015048-CU-BC-NC that the Invoices reflect time reasonably expended in defending against Plaintiff's claims and bringing the present motion. Put differently, the court finds that the billing entries reflect time that was reasonably and necessarily expended in light of the facts and issues fairly presented. Accordingly, the court awards Defendant $46,827.07 in reasonable attorneys' fees and costs. Plaintiff, for his part, urges the court to consider his current personal and financial circumstances and awards fees and costs in a lesser amount. The court declines to do so. Plaintiff chose to sue Defendant and others and litigate this action for over two years before ultimately dismissing it. Moreover, Exhibit 3 to Mr. Israel's Reply declaration calls into question the veracity of Plaintiff's assertions.

In light of the foregoing, the court grants the motion and awards Defendant $45,148.00 in attorneys' fees and $1,679.07 in costs, for a total award of $46,827.07.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, November 3, 2023. If no party appears at the hearing, this tentative ruling will become the order of the court as of November 3, 2023. If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

Calendar No.: Event ID:  TENTATIVE RULINGS

3015952