Seaport Village v. Terramar Retail Centers CA4/1 (2015) · DecisionDepot
Seaport Village v. Terramar Retail Centers CA4/1
California Court of Appeal Dec 28, 2015 No. D066026Unpublished
Filed 12/28/15 Seaport Village v. Terramar Retail Centers CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
SEAPORT VILLAGE LTD., D066026
Plaintiff and Respondent,
v. (Super. Ct. No. 37-2012-00094928- CU-BC-CTL) TERRAMAR RETAIL CENTERS et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of San Diego County, Katherine A.
Bacal, Judge. Affirmed.
Procopio, Cory, Hargreaves & Savitch, Richard A. Heller and Kendra J. Hall for
Defendants and Appellants.
Higgs, Fletcher & Mack, John Morris and Victoria E. Fuller for Plaintiff and
Respondent.
Plaintiff and respondent Seaport Village Ltd. (Limited) sued defendant and
appellant Washington State Investment Board (WSIB), on breach of fiduciary duty and
other theories. Limited claimed WSIB was a partner or affiliate of another defendant and
appellant, Terramar Retail Centers (Terramar), and that those defendants wrongfully
engaged in transactions and loans concerning a limited liability corporation (LLC)
formed by Limited and Terramar to pursue a development project. Later, Limited
voluntarily dismissed its complaint, to pursue dissolution of the LLC in another forum.
WSIB sought an award of prevailing party attorney fees under an attorney fees
clause found in an operating agreement for the LLC's project (the Agreement), which
Limited had entered into with Terramar and with another party (not WSIB). Before us is
WSIB's appeal of the trial court's order determining that it was not entitled to an award of
fees on either a statutory or contractual basis. (Civ. Code,1 § 1717; Code Civ. Proc.,
§ 1032.)
On appeal, WSIB contends it was a prevailing party within the meaning of the
attorney fees clause in the Agreement (the fees clause), based on the authority of Santisas
v. Goodin (1998) 17 Cal.4th 599 (Santisas). The tort claims against it arose out of
Limited's disputes with codefendant Terramar over the Agreement, and therefore WSIB,
an "affiliate," claims that the language of the fees clause was broad enough to allow
1 All further statutory references are to the Civil Code unless otherwise indicated. Section 1717, subdivision (a) 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 . . . shall be entitled to reasonable attorney's fees in addition to other costs. . . ." (Italics added.) The "prevailing party" is usually defined as "the party who recovered a greater relief in the action on the contract." (§ 1717, subd. (b)(1); italics added.) Under section 1717, subdivision (b)(2), there shall be no prevailing party where the action was voluntarily dismissed. 2
WSIB the contractual status of a "party" to the Agreement who can assert rights under it.
(Code Civ. Proc., § 1021 [attorney compensation is left to the agreement of the parties].)
Alternatively, WSIB argues that since it was sued as a principal, partner or joint
venturer with a named party to the contract (Terramar), WSIB developed a contractual
entitlement to attorney fees as costs. (Code Civ. Proc., §§ 1032, 1033.5, subd. (a)(10)
[fees may qualify as costs where there is a contractual or statutory provision granting
them].) WSIB relies on the mutuality of remedy principles developed under section 1717
to claim that if Limited could have prevailed and shown a contractual entitlement to
attorney fees, WSIB should likewise be able to do so on a reciprocal basis. (Reynolds
2 "Only in an action on a contract does section 1717 provide mutuality of remedy when the contract includes a provision for the recovery of attorney fees as costs. It is applied where an otherwise unilateral right to recover attorney fees is not reciprocal, ensuring mutuality of remedy so that attorney fees may be awarded to whichever contracting party prevails. It is also applied where a party is sued on a contract providing for an award of attorney fees to which he is not a party." (Topanga, supra, 103 Cal.App.4th at p. 780.) 4
FACTUAL AND PROCEDURAL BACKGROUND
A. Project, Operating Agreement and Complaint
Limited, a partnership, held a ground lease at the Seaport Village property.
Together with Terramar's predecessor, it planned to redevelop and manage the property,
and toward that end, formed the LLC in Delaware. Neither the LLC nor another party, a
trust that signed the Agreement, is involved in this appeal. WSIB is not a party to the
Limited-Terramar Agreement. WSIB made $20 million-plus loans to Terramar, which
Limited claims were improperly used to discharge Terramar's debts and effectively
allowed WSIB and Terramar to take over all the income from the project.
Limited's complaint against the LLC and Terramar sought to dissolve the LLC and
obtain an accounting. As amended, Limited's action claimed Terramar and WSIB had
breached fiduciary duties toward it, a member of the LLC. WSIB was alleged to be the
partner or principal of Terramar, causing damages to Limited. In a separate cause of
action, WSIB was charged with intentionally interfering with the contract (the
Agreement) between Limited and Terramar. Compensatory damages of $27.5 million
were sought, and a like amount of punitive damages.
As a defendant, the LLC obtained a grant of summary judgment on the ground that
the dissolution issue should be litigated before the Delaware Court of Chancery.
Accordingly, Limited voluntarily dismissed its complaint and filed another action in
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Delaware against the LLC and Terramar, and eventually named WSIB as a defendant
there.3
B. WSIB's Attorney Fees Motion; Ruling
WSIB brought a motion to recover its own attorney fees, on the basis it prevailed
when Limited voluntarily dismissed its action. WSIB relied on the Agreement's attorney
fees provision (the clause), stating as follows: "If any action is brought by any party
against another party, relating to or arising out of this Agreement, or the enforcement
hereof, the prevailing party shall be entitled to recover from the other party reasonable
attorneys' fees, costs and expenses incurred in connection with the prosecution or defense
of such action." WSIB argued that this clause should be interpreted to authorize it, as a
"party" prevailing in a lawsuit arising under the Agreement, to recover a total of
$928,791.25 fees and costs. Approximately $89,400 was directly charged to WSIB for
its defense, and it also sought all or half of another $839,389 jointly charged to WSIB and
Terramar.
In its motion, WSIB relied on Reynolds, supra, 25 Cal.3d at pages 128 to 129, to
argue that Limited had pursued it as a partner, coventurer or affiliate with Terramar, or as
the principal to Terramar's agent. WSIB pointed out that Limited's complaint had sought
attorney fees, and if Limited had prevailed in contract against it, WSIB could have been
held liable to it for attorney fees. WSIB's motion cited to Santisas, supra, 17 Cal.4th 599
3 This court previously denied two motions filed by WSIB and co-appellant Terramar, considered with the appeal, that requested this court to take judicial notice of records in the related action Limited filed against them in Delaware's Court of Chancery. 6
for the proposition that a contract provision for prevailing party attorney fees may be
broad enough to authorize a fee award in tort as well as contract actions. (Id. at pp. 608,
622.) The motion did not expressly cite to Code of Civil Procedure section 1032
(entitling prevailing parties to recover costs), or section 1033.5, subdivision (a)(10)(A)
(providing that attorney fees authorized by contract are recoverable costs).
In opposition, Limited argued there was no statutory basis for an award of fees,
and the contractual fee clause did not apply to WSIB, which did not sign the Agreement.
Even if it was a very broadly worded clause, the voluntary dismissal precluded such a
recovery of fees based on any contractual entitlement. (§ 1717, subd. (b)(2).) Limited
argued that as to any tort claims, Topanga, supra, 103 Cal.App.4th 775, 786, clarified
that a prevailing party must be a signatory to the contract under which attorney fees were
sought. WSIB, not a signatory, should not be entitled to recover its defense fees.
Also in opposition, Limited claimed the motion was dilatory and the amounts
sought were unreasonable, because WSIB had not participated extensively in the
litigation. The action was still pending against Terramar in Delaware, and Terramar was
not yet a prevailing party. Also, Limited believed there might be contractual indemnity
rights between WSIB and Terramar, based on their loan arrangements, so WSIB might
not have incurred liability for any fees anyway.
In reply and at the argument before the trial court, WSIB contended that it was not
relying on section 1717 at all, because only tort claims had been made against it. Instead,
it invoked the fees clause based on Limited's allegations it was a partner, co-venturer, or
principal of a signatory (Terramar), for purposes of the breach of fiduciary and tort
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causes of action against WSIB. The fees clause was broadly worded, arguably covering
WSIB as an affiliate. WSIB argued it was not yet established whether it had any separate
indemnity rights against Terramar, and even if so, those rights did not affect its
entitlement to fees from Limited under the Agreement and Code of Civil Procedure
section 1021.
The trial court denied WSIB's motion, concluding that section 1717, subdivision
(b)(2), precluded any determination that it was a prevailing party, due to Limited's
voluntary dismissal of its complaint. As a nonsignatory, WSIB had no basis for claiming
fees except under section 1717 and Reynolds, supra, 25 Cal.3d 124, 128 ("mutuality of
remedy"), and no fees were due after the dismissal. (Topanga, supra, 103 Cal.App.4th at
pp. 783-786.) WSIB appeals.
DISCUSSION
I
APPLICABLE STANDARDS AND ISSUES PRESENTED
The facts are undisputed, and a de novo reading of the documents and statutory
provisions is required to determine whether a legal basis for a contractual fee award has
been shown. (Conservatorship of Whitley, supra, 50 Cal.4th 1206, 1213; Sessions
recovery for costs, in the form of attorney fees under a fees clause, to parties prevailing in
tort, who had signed the underlying agreement being sued upon. In that case, there was
no need for reciprocity principles to reach that conclusion, since the court was
considering the rights of signatories to the contract. (Topanga, supra, 103 Cal.App.4th at
pp. 783-784 ["The significant point of the decision in Santisas is that the claims for
attorney fees were based on the terms of a written contract entered into by the
parties . . . section 1717 applies only to breach of contract actions and does not apply to
tort causes of action."].) In Santisas, the voluntary dismissal rule of section 1717,
subdivision (b)(2) did not preclude such an award to the signatory who had defended the
noncontract causes.
However, if a nonsignatory defendant seeks fees under a contract, it does not
qualify under that contract as the prevailing party on any alternative tort theories,
pursuant to Code of Civil Procedure sections 1032, subdivision (a)(4) or 1033.5,
subdivision (a)(10)(A), because it was not a contracting party. (Topanga, supra, 103
Cal.App.4th at pp. 783-786 [the prevailing defendants in Santisas, supra, 17 Cal.4th 599
were awarded fees as signatories to the underlying contract].)
Here, WSIB cannot assert contractual rights under the fees clause, without
bringing in the reciprocity principles of section 1717. (Reynolds, supra, 25 Cal.3d at
pp. 128-129.) It is a nonsignatory, not a third party beneficiary, and was not sued as an
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alter ego. The Agreement does not fall within the scope of section 1717 to authorize a
fee award to WSIB, as it admits. More importantly, the Agreement is not one of the
"contracts within operation of the award of costs as provided in Code of Civil Procedure
section 1033.5," because WSIB did not sign it. (Topanga, supra, 103 Cal.App.4th at
pp. 783-784; Santisas, supra, 17 Cal.4th at pp. 622-623.) WSIB cannot invoke the
Reynolds interpretation of section 1717, as to mutuality of remedy under a contractual
attorney fees clause, to make it eligible to seek an award of fees as costs, even in a tort
context.
As far as the record shows, if Limited had prevailed against WSIB, it would have
been in tort, not on the Agreement's terms. WSIB cannot show it had a "contractual right,
not affected by section 1717, to recover attorney fees incurred in litigating [tort] causes of
action." (Santisas, supra, 17 Cal.4th at p. 617.) It is irrelevant, for purposes of fee
entitlements, that WSIB prevailed in tort, since it was not a party to the underlying
Agreement. (Topanga, supra, 103 Cal.App.4th at pp. 786-787.) WSIB has not set forth
any contractual or statutory foundation to expand the applicability of the fees clause
beyond the parties to the Agreement. As a matter of law, the court correctly denied the
motion for attorney fees as costs.
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DISPOSITION
The order is affirmed. Costs on appeal are awarded to respondent.
HUFFMAN, J.
WE CONCUR:
McCONNELL, P. J.
McDONALD, J.
20
AI Brief
AI-generated · verify before citing
Holding. The court held that a non-signatory defendant (WSIB) is not entitled to recover attorney fees under a contract's fee provision following a voluntary dismissal of tort claims, as the defendant failed to establish a contractual or statutory basis for such an award. The court determined that the reciprocity principles of Civil Code section 1717 do not apply to non-signatories in this context, and the fee clause did not extend to the defendant as a third-party beneficiary.
Issues
Whether a non-signatory defendant is entitled to attorney fees as costs under a contract's fee provision after a voluntary dismissal of tort claims.
Whether the reciprocity principles of Civil Code section 1717 allow a non-signatory to recover attorney fees when sued on tort theories.
Whether the attorney fees clause in the Agreement is broad enough to include WSIB as a third-party beneficiary or affiliate entitled to fee recovery.
Disposition. affirmed
Quotations verified verbatim against the opinion
“There can be no award without statutory or contractual authorization.”
“The Reynolds authority does not extend to a motion that is not based on section 1717.”