Judge Theresa M. Traber, Case Number: BC717200, Date: 2023-10-12 Tentative Ruling

Judge: Theresa M. Traber, Case: BC717200, Date: 2023-10-12 Tentative Ruling

Case Number: BC717200 Hearing Date: December 1, 2023 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: December 1, 2023 JUDGMENT: June 27, 2023

CASE: Yoav Botach et al. v. Newmark of Southern California, Inc., et al.

CASE NO.: BC717200

MOTION FOR ATTORNEY’S FEES

MOVING PARTY: Defendants Newmark of Southern California, Inc.; Newmark & Company Real Estate, Inc; Gibran Begum

RESPONDING PARTY(S): Plaintiffs YB Real Estate Properties I, LLC and the estate of Yoav Botach

CASE HISTORY:

08/09/18: Complaint filed.
01/10/22: First Amended Complaint filed.
03/10/23: Jury verdict.
06/27/23: Judgment entered.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiffs alleged that Defendants conspired to induce Plaintiff Yoav Botach to sell the Garfield Building at 403 W. 8th Street, Los Angeles, CA (hereafter “the subject property”) to sell the subject property to Kyriakos Kerry Bonnis for well below its listed price. Plaintiffs alleged causes of action for breach of fiduciary duty, fraud, declaratory relief, financial elder abuse, and negligence.

Defendants Newmark of Southern California, Inc., Newmark & Company Real Estate, Inc., Newmark Knight Frank Valuation & Advisory, LLC, and Gibran Begum move for attorneys’ fees incurred in the defense of this action.

TENTATIVE RULING:

Defendants’ Motion for Attorney’s Fees is DENIED.

DISCUSSION:

Defendants Newmark of Southern California, Inc., Newmark & Company Real Estate, Inc., Newmark Knight Frank Valuation & Advisory, LLC, and Gibran Begum move for attorney’s fees incurred in the defense of this action.

Request for Judicial Notice

Defendants request that the Court take judicial notice of (1) Plaintiffs’ currently pending Motion for Attorney’s Fees and (2) Plaintiffs’ Motion to Tax Costs. As these documents are not material to the Court’s ruling, Defendant’s request is DENIED. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 (“[J]udicial notice . . . is always confined to those matters which are relevant to the issue at hand.”].)

Entitlement to Fees on Contract

Defendants contend that they are entitled to attorney’s fees as the prevailing parties on the Estate’s claims against them.

1. Entitlement to Fees Under Civil Code Section 1717

Defendants argue that this case is an action “on a contract” governed by Civil Code section 1717. This section provides, in relevant 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(a), bold emphasis added.) “[I]t is established that fees, if recoverable at all – pursuant either to statute or parties’ agreement – are available for services at trial and on appeal.” (Morcos v. Board of Retirement (1990) 51 Cal.3d 924, 927 [emphasis in original].) The purpose of section 1717 is to reciprocate the allowance of attorney’s fees on a contract “only when such fees are incurred to enforce the provisions of the contract.” (McKenzie v. Kaiser-Aetna (1976) 55 Cal.App.3d 84, 89-90 [emphasis added].)

According to Defendants, section 1717 governs this action because Plaintiffs’ claims were based “on the contract.” In evaluating whether an action is “on a contract,” relevant factors include the “pleaded theories of recovery, the theories asserted and the evidence produced at trial, if any, and also any additional evidence submitted on the motion in order to identify the legal basis of the prevailing party’s recovery.” (Boyd v. Oscar Fisher Co. (1989) 210 Cal.App.3d 368, 377.) Defendants offer no basis for their position beyond a conclusory assertion that attorney’s fees are available here because Plaintiffs’ claims were predicated on a Purchase and Sale Agreement for the Garfield Building. Defendants do not attempt to demonstrate that any portion of this action sought to enforce the provisions of the contract. To the contrary, the gravamen of Plaintiffs’ pleadings and legal theories was that Defendants fraudulently induced Yoav Botach to enter into the Purchase and Sale Agreement. (See generally FAC.) Well-established precedent holds that fraudulent inducement is not an action “on a contract” within the meaning of section 1717. (Stout v. Turney (1978) 22 Cal.3d 781, 730; Schlocker v. Schlocker (1976) 62 Cal.App.3d 921, 923; Reyes v. Beneficial State Bank (2022) 76 Cal.App.5th 596, 620, cf. City and County of San Francisco v. Union Pacific R.R. Co. (1996) 50 Cal.App.4th 987, 999-1000 [declaratory relief claim for rights under a contract is an action “on a contract” for purposes of section 1717].)

Although Defendants offer numerous authorities which they claim support their position that Plaintiffs’ claims were an action on a contract as defined by section 1717, closer examination reveals that none of those authorities are on point. One, Kangarlou v. Progressive Title Co., is factually distinguishable from this case because it concerned whether an escrow holder’s fiduciary duties sounded in the escrow agreement, not whether a broker’s fiduciary duties sounded in the purchase and sale agreement. (See Kangarlou v. Progressive Title Co., Inc., (2004) 128 Cal.App.4th 1174, 1179.) Another concerned a breach of contract action with associated claims for fraudulent conveyance and conspiracy, which the Court of Appeal held constituted an action “on a contract” even though the breach of contract claim was dismissed by the Plaintiff. (347 Grp. v. Philip Hawkins Architect, Inc. (2020) 58 Cal.App.5th 209 211-12.) Others concerned breach of contract claims for which the issue of whether the claims were “on a contract” was not in dispute. (Reynolds Metal Co. v. Alperson (1979) 25 Cal.3d 124, 128; Jones v. Drain (1983) 149 Cal.App.3d 484, 486-90; Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111.) The remaining citations concern whether a party is entitled to recover attorney’s fees on tort claims pursuant to a contract on the express reasoning that such claims fall outside section 1717. (Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 821-24; GoTek Energy, Inc. v. SoCal IP Law Group, LLP (2016) 3 Cal.App.5th 1240, 1250; Thompson v. Miller (2003) 112 Cal.App.4th 327, 336.) Although these authorities may have some relevance to Defendants’ right to recover attorney’s fees under the terms of the Agreement, as addressed infra, they do not establish a right to recover under section 1717.

Thus, Defendants are not entitled to attorney’s fees by operation of this statutory provision. However, the Court’s inquiry does not end there, as Defendants have asserted an alternative basis for recovery of attorney’s fees.

2. Entitlement to Fees Under Terms of Contract

Defendants argue that they are also entitled to attorney’s fees under the terms of the attorney fee provision of the underlying purchase and sale agreement. Although section 1717 does not authorize recovery of attorney’s fees on tort claims, it is well-settled that “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.” (Santisas v. Goodin (1998) 17 Cal.4th 599, 608.) To determine the right of recovery under the terms of a contract, the Court applies the ordinary rules of contract interpretation:

“Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1649.) The ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ (id., § 1644), controls judicial interpretation. (Id., § 1638.) Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning. [citation].”

(Santisas v. Goodin, supra, 17 Cal.5th at 608, quoting AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-22.)

Here, the Purchase and Sale Agreement contains a fee award provision which provides:

If any Party or Broker brings an action or proceeding (including arbitration) involving the Property 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 this 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.

(Declaration of Thomas J. Kearney ISO Mot. Exh. A. § 16.) The Agreement identifies the “Parties” as the Buyer, Bonnis Properties, Cal LP or its affiliate or assignee, and the Seller, YB Real Estate Properties I, LLC, whose manager is named as Yoav Botach. (Id., Exh. A. § 1.1., p.8.) The Agreement identifies the Brokers for the respective Parties as Avison Young – Southern California, Ltd. for the Buyer and, for the Seller, Newmark of Southern California, Inc., d/b/a Newmark Grubb Knight Frank, with attention directed to Gibran Begum as Newmark’s Managing Director. (Id. at p. 8.)

As Defendants correctly state, the plain language of the Purchase and Sale Agreement encompasses any disputes concerning the Garfield Building, whether they sound in tort or not. Plaintiffs’ tort claims, which concern Defendants’ conduct in inducing Yoav Botach to sell the property, necessarily fall within that definition. (FAC ¶¶ 10-29.) Defendants thus contend they are entitled to recover their reasonable attorney’s fees from the Estate because they prevailed on all causes of action as to the Estate, even though Yoav Botach is not a party to the Agreement. However, although Defendants argue that the Estate should be bound by the fee provision in the Agreement notwithstanding Botach’s non-signatory status, all of Defendants’ supporting authority is predicated on the application of section 1717 and the express assertion of breach of contract claims. These authorities are therefore both legally and factually distinguishable. (See, e.g., Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111; MSY Trading, Inc. v. Saleen Automotive, Inc. (2020) 51 Cal.App.5th 395, 398-99.) Defendants cite no authority, either in their moving papers or their reply brief, establishing that an agreement allocating attorney’s fees may be enforced against a non-signatory party absent the application of Civil Code section 1717. Defendants have therefore failed to demonstrate that they are entitled to recover attorney’s fees against the Estate for prevailing on the claims asserted by Yoav Botach against them.

Reasonableness of Fees Sought

As Defendants have not demonstrated that they are entitled to recover attorney’s fees against the Estate on either a statutory or contractual basis, the Court does not consider the reasonableness of Defendants’ fee request.

CONCLUSION:

Accordingly, Defendants’ Motion for Attorney’s Fees is DENIED.

Moving Parties to give notice.

IT IS SO ORDERED.

Dated: December 1, 2023 ___________________________________

Theresa M. Traber

Judge of the Superior Court