Judge: Michelle C. Kim, Case: 22STCV37412, Date: 2024-09-17 Tentative Ruling

Case Number: 22STCV37412    Hearing Date: September 17, 2024    Dept: 78

Motion for Attorneys’ Fees filed by Cross-Complainant Commercial Loan Servicing, LLC on June 12, 2024 is CONTINUED to allow Cross-Complainant to submit an amended declaration in support of the motion that details only the work performed in connection with Cross-Complainant’s prosecution of the action against Cross-Defendants.

procedural history

On November 29, 2022, Plaintiffs Windsor Terrace Healthcare, LLC and Windsor Healthcare Sepulveda, LLC (collectively “Plaintiffs”) filed their Complaint against Defendants Lawrence Feigen (“Feigen”), SA Hospital Real Estate Holdings-Jefferson (“SA Hospital”), and Commercial Loan Servicing, LLC (“CLS”), asserting ten causes of action for (1) fraudulent concealment; (2) constructive fraud; (3) aiding and abetting fraud; (4) breach of fiduciary duty; (5) breach of operating agreement; (6) slander of title; (7) cancellation of instrument; (8) recission, Cal. Civ. Code §1689; (9) quiet title; and (10) declaratory judgment.

On January 9, 2023, CLS filed its Cross-Complaint against Feigen, Jeffrey Ahlholm (“Ahlholm”), and SA Hospital (collectively “Cross-Defendants”), asserting nine causes of action for (1) breaches of contract; (2) breaches of guaranty; (3) money due; (4) money lent; (5) intentional misrepresentation; (6) negligent misrepresentation; (7) false promise; (8) promissory estoppel; and (9) equitable indemnity.

The Cross-Complaint alleges that in 2022, Cross-Defendants convinced CLS, an entity operated by Ray and Srinivas Yalamanchili (the “Yalamanchilis”), to loan a total of $7,500,000 to SA Hospital by offering and providing (1) a deed of trust for real property in Missouri; (2) a second deed of trust for real property located in California, which is the subject of the Complaint filed by Plaintiffs; (3) a personal guaranty from Feigen; and (4) a personal guaranty from Ahlholm. (Cross-Compl., ¶1.) Cross-Defendants first borrowed $6 million from CLS in January 2022. (Id., ¶16.) SA Hospital failed to make payments as required under the first loan agreement. (Id., ¶17.) On January 7, 2022, Feigen and Ahlholm each executed a written continuing guaranty to personally guarantee the first loan. (Id., ¶18.) In April 2022, SA Hospital borrowed an additional $1.5 million from CLS.  (Id., ¶19.) SA Hospital agreed to increase the collateral option payment from $1.2 million to $1.5 million. (Id., ¶20.) SA Hospital failed to make payments on the second loan. (Id.) Feigen and Ahlholm executed a second written guaranty in April 2022. (Id., ¶21.) Cross-Defendants failed to make payments on both loans, which matured on July 6, 2022 and May 19, 2022. (Id., ¶22.) 

On July 12, 2023, Plaintiffs’ lawsuit against CLS only was dismissed with prejudice.[1] (Request for Dismissal 07/12/23.)

On April 16, 2024, the Court granted CLS’ motion for summary adjudication against Cross-Defendants as to the first through fourth causes of action in the Cross-Complaint.[2] (Minute Order 04/16/24.)

On June 7, 2024, based on the written contracts signed by Cross-Defendants, the Court entered judgment, jointly and severally, against Cross-Defendants in the amount of $8,141,750.00. (Judgment 06/07/24.)

Thereafter, CLS filed this motion for attorney fees, jointly and severally, in the amount of $407,942.50 against Cross-Defendants under the attorney fee provisions in the written contracts pursuant to California Civil Code § 1717.

As of September 12, 2024, Cross-Defendants have not filed an opposition.

Discussion

I.               MOTION FOR ATTORNEY’S FEES

Legal Standard

The prevailing party on a contract, which specifically provides for attorney fees and costs incurred to enforce the agreement, is entitled to reasonable attorney fees in addition to other costs.¿ (Civ. Code § 1717(a); CCP §§ 1032, 1033.5(a)(10)(A).)¿ The court, upon notice and motion by a party, shall determine the prevailing party and shall fix, as an element of the costs of suit, the reasonable attorney fees.¿ (Civ. Code § 1717(a), (b).)¿ However, “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” (Civ. Code § 1717(b)(2).) Any notice of motion to claim attorney fees as an element of costs under shall be served and filed before or at the same time the memorandum of costs is served and filed; if only attorney fees are claimed as costs, the notice of motion shall be served and filed within the time specified in CRC 3.1700 for filing a memorandum of costs.¿ (CRC 3.1702; Gunlock Corp. v. Walk on Water, Inc. (1993) 15 Cal.App.4th 1301, 1303, fn. 1.)¿¿ 

¿¿ 

PLCM Group v. Drexler (2000) 22 Cal.4th 1084 contains the Supreme Court’s explanation of how fees are to be determined. It states that Civ. Code section 1717, “reflects the legislative purpose ‘to establish uniform treatment of fee recoveries in actions on contracts containing attorney fee provisions.’ (Citation.) Consistent with that purpose, the trial court has broad authority to determine the amount of a reasonable fee.” (Id. at 1095.) PLCM provides that fees are to be determined by calculating the “‘lodestar,’ i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate.” (Ibid.) The “reasonable hourly rate” applicable under the lodestar method is the rate “prevailing in the community for similar work.” (Ibid.) “The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case.” (Id. at pg. 1096.)

¿¿ 

The verified time entries of the attorneys are entitled to a presumption of credibility, which extends to an attorney’s professional judgment as to whether time spent was reasonably necessary to the litigation. (Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 396 [“We think the verified time statements of the attorney as officers of the court are entitled to credence in the absence of a clear indication the records are erroneous.”].) “California courts do not require detailed time records, and trial courts have discretion to award fees based on declarations of counsel describing the work they have done and the court’s own view of the number of hours reasonably spent.” (Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 698-699.)

Analysis

Here, CLS moves pursuant to Civil Code section 1717 to recover attorney fees, jointly and severally, in the amount of $407,942.50 based on 580.9 hours at hourly rates ranging from $325 to $825 against Cross-Defendants under the attorney fee provisions in the written contracts on which the Court granted summary adjudication to CLS. The amount sought is also based on the work required by CLS to defend against Plaintiffs’ Complaint. A summary of CLS’s request is as follows:

First, CLS is considered the prevailing party on its Cross-Complaint as the Court entered judgment in its favor after granting CLS’s motion for summary adjudication as to the four causes of action for breach of contract and breach of guaranty against Cross-Defendants. (Minute Order 04/16/24; Judgment 06/07/24.) Further, the various written agreements—first and second loan agreements and their respective promissory notes and personal guarantees—contain clauses permitting an award of attorneys’ fees. (Hyslop Decl., ¶ 16.) Therefore, attorneys’ fees are appropriate in this case for CLS’s prosecution of the action against Cross-Defendants. However, CLS also moves for attorneys’ fees for the work required to defend against Plaintiff’s Complaint. Because Plaintiff’s Complaint against CLS was ultimately settled in or about June 2023 and because Plaintiff’s lawsuit against CLS was dismissed with prejudice, CLS is not considered the prevailing party entitled to attorney fees pursuant to Civil Code section 1717, subdivision (b)(2). (Hyslop Decl., ¶ 6; Request for Dismissal 07/12/23.) Therefore, attorneys’ fee are not appropriate in this case for CLS’s defense against Plaintiff’s Complaint.

Second, the Court finds that the rates requested by CLS (ranging from $325 to $825) are reasonable and commensurate with rates charged by attorneys with comparable skills and expertise. The Court’s review of the Hyslop Declaration, its description of the attorneys’ years of experience, work history, and justification of their respectively hourly rates leads to the conclusion that such rates are reasonable. (Hyslop Decl., ¶¶ 18-20.) In addition, Cross-Defendants do not challenge these rates because there is no opposition to the motion.

Third, the Court finds that CLS has provided sufficient evidence to support the work that was performed as CLS has provided 18 redacted copies of invoices to CLS from December 1, 2022 to June 3, 2024. (Hyslop Decl., ¶28.)  The declaration of Hyslop is sufficient to support the motion. (Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 698-699.) And again, Cross-Defendants do not challenge the work that was performed because there is no opposition to the motion. However, as provided above, the Court does not intend to award hours for work that was performed in connection with CLS’s defense against Plaintiff’s complaint; but the Court will award hours for work that was performed in connection with CLS’s prosecution of the action against Cross-Defendants. Therefore, CLS should submit an amended declaration in support of the motion that details only the work performed in connection with CLS’s prosecution of the action against Cross-Defendants. Lastly, CLS does not request a fee-multiplier and the Court declines to award such.

Accordingly, the Motion for Attorneys’ Fees filed by Cross-Complainant Commercial Loan Servicing, LLC on June 12, 2024 is CONTINUED to allow Cross-Complainant to submit an amended declaration in support of the motion that details only the work performed in connection with Cross-Complainant’s prosecution of the action against Cross-Defendants. No other filings, from any party, will be permitted.

Moving Party to give notice.

DATED:  September 17, 2024    

           ________________________________

Hon. Michelle Kim

Judge of the Superior Court