IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE
December 13, 2010
MIKE ROSEN, PLAINTIFF AND APPELLANT; STEPHANIE ROSEN, PLAINTIFF AND RESPONDENT
CHRIS COOK ET AL., DEFENDANTS AND APPELLANTS.
MIKE ROSEN, PLAINTIFF AND APPELLANT,
CHRIS COOK ET AL., DEFENDANTS AND APPELLANTS.
MORELAND LLC ET AL., PLAINTIFFS AND APPELLANTS,
MIKE ROSEN, DEFENDANT AND APPELLANT.
MORELAND LLC ET AL., PLAINTIFFS AND APPELLANTS,
STEPHANIE ROSEN, DEFENDANT AND APPELLANT.
(San Mateo County Super. Ct. No. CIV440930) (San Mateo County Super. Ct. No. CIV451036) (San Mateo County Super. Ct. No. CIV461115) (San Mateo County Super. Ct. No. CIV461115)
The opinion of the court was delivered by: Banke, J.
Rosen v. Rosen CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
These appeals and cross-appeal arise from (a) orders granting Mike Rosen a new trial in three cases (San Mateo case Nos. 440930, 451036, and 461115 (appeal No. A123458)) and (b) a final judgment in favor of Stephanie Rosen in one of these cases (San Mateo case No. 461115 (appeal No. A123558)). The records in these appeals provide only a sketchy understanding of the events that led to this morass of litigation. Suffice it to say, the parties entered into real estate transactions that did not proceed as expected. The records make it abundantly clear, however, that the litigation became extremely contentious, and even the parties' lawyers became infected with the rancor and ceased to act reasonably or with professional civility. The parties are now before this court in appeal No. A123458 in the wake of a failed attempt to reach a global settlement. They are before the court in appeal No. A123558 following entry of judgment after a court trial.
The briefing on appeal sheds little light on the procedural history of this litigation, and we have been required to comb the records, including the extensive superior court dockets in these cases (their unusual size reflecting the contentiousness of the litigation) to understand the chronology of events. After reviewing the records and the applicable law, we hold as follows:
In appeal No. A123458: As to case No. 440930--in which judgment was entered on March 24, 2006, in favor of Mike and Stephanie Rosen, and which judgment was on appeal at the time of the attempted settlement--the trial court had no jurisdiction to enter an "Amended Judgment" as to Mike Rosen on August 1, 2008 or, likewise, to grant a new trial as to that "Amended Judgment" on September 25, 2008. Moreover, the voluntary dismissal of the appeal on August 7, 2008, had the effect of affirming the judgment. The judgment in favor of the Rosens therefore remains in full force and effect and is binding on all parties thereto. As to case Nos. 461115 and 451036--in which judgments were entered as to Mike Rosen on August 1, 2008--the new trial orders are affirmed, including on the ground the settlement agreement failed of its essential terms and therefore is not enforceable. Accordingly, as to Mike Rosen and the other parties who signed the settlement agreement, these cases return to the procedural position they were in before the attempted settlement.
In appeal No. A123558, we affirm the judgment in favor of Stephanie Rosen and against Christopher Cook and Moreland LLC. We reverse the ruling that Stephanie Rosen was not a "prevailing party" on the first cause of action for judicial foreclosure and remand for a determination of reasonable contract attorney fees incurred in the trial court and on appeal.
Given our disposition of these appeals and cross-appeal, we strongly encourage all parties to make a good faith effort to reach a global resolution of this litigation, which has now spanned more than six years and unduly consumed their own resources and the resources of the courts.
II. Factual and Procedural Background
In February 2002, Mike Rosen borrowed $15,000 from Christopher Cook (Cook).*fn1 Mike signed a promissory note, secured by a deed of trust on property located on Moreland Drive (the Moreland property) in the City of San Bruno. Mike's wife, Stephanie, did not sign either document.*fn2 In March 2003, Mike and Cook entered into an agreement whereby Mike would complete the subdivision process for the Moreland property and Cook, through his company, LegacyQuest, would purchase four of five newly created lots. Stephanie did not sign this document either. The agreement contemplated Cook would build homes on the four lots he acquired. The Rosens would build a home on the lot they retained, and they paid Cook $150,000 to build it. Cook also conveyed other property to the Rosens (the Palmetto property). The following month, and apparently to effectuate these agreements, Mike executed a grant deed to add Stephanie to the title of the Moreland property and the Rosens, as the owners, signed off on the subdivision map for the property. Cook also signed the map as a "beneficiary" and did so as "a married man, as his sole and separate property."
A year later, in July 2004, the Rosens filed suit for breach of contract against Cook and LegacyQuest (San Mateo case No. 440930). Moreland LLC, another entity owned by Cook and to which the four Moreland lots had been conveyed, was later added as a defendant. After numerous demurrers and amended complaints, followed by exhaustive discovery disputes, the case finally went to trial on February 21, 2006. On March 8, the jury returned a verdict in favor of the Rosens and against Cook and LegacyQuest, for $434,743.36, and against Moreland LLC on its cross-complaint. The court ruled against the Rosens, however, on their equitable claim against Moreland LLC for fraudulent conveyance. Judgment was entered accordingly. After unsuccessful posttrial motions, Cook, LegacyQuest, and Moreland LLC appealed from the judgment (appeal No. A114176).
In the meantime, in 2005, the Rosens filed a second lawsuit, this one for fraud, against a number of individuals and entities, including Cook, Natalie Cook, Ruo Hui Chen, and several construction companies (San Mateo case No. 451036). Again, there was extensive law and motion, followed by exhaustive discovery disputes.
In February 2007, Cook and Moreland LLC sued the Rosens (San Mateo case No. 461115), and in May 2007, filed an amended complaint. In the first cause of action, Cook sought judicial foreclosure on the 2002 note and deed of trust executed by Mike. In the second cause of action, Moreland LLC sought damages for malicious prosecution based on the Rosens' lack of success on their claim for fraudulent conveyance and their having filed lis pendens notices in connection therewith. In the third cause of action, Cook and Moreland LLC sought damages for conversion based on the Rosens' efforts to execute on the judgment in their favor before Cook and Moreland LLC filed a personal surety bond, staying the judgment on appeal. Another round of law and motion ensued, eventually causing the trial court to chastise the parties for their contentiousness: "No OSC's will issue. The entire discussion of same is uncalled for."
On August 8, 2007, Mike and Cook and their respective lawyers attended a mediation session before a third party neutral. Stephanie and Natalie Cook did not attend. In mid-September, the Rosens' attorney sent by e-mail a draft settlement agreement and release to the Cooks' attorney. In summary, the agreement provided all three cases (the case on appeal and the two pending cases) would be resolved by (a) Cook, Natalie Cook, LegacyQuest, Moreland LLC, Ruo Hui Chen, 101 Construction, 101 Construction, Inc., Ruo Wu Chen, Cabrillo Construction Company, Inc., and CRW Construction (the Cook parties) paying a total of $830,000 to the Rosens and (b) the Rosens transferring their Moreland lot to Cook. The escrow to accomplish this exchange was to close not later than January 5, 2008.
The Cook parties filed a notice that a conditional settlement had been reached in case No. 461115, which triggered an OSC and dismissal hearing on December 18, 2007. Counsel for Cook and Moreland LLC claimed he had never received a draft written settlement agreement, and both counsel then accused the other of dragging his feet and not following through with the settlement.
In January 2008, the Cook parties filed a motion to enforce the settlement even though Natalie Cook had not signed the written agreement. She did so just prior to the hearing on the motion and only after the Rosens opposed the motion, in part on the ground Natalie Cook had not signed the agreement. The Rosens also claimed there was a dispute over their right to "structure" the payment to be made by the Cook parties and the latter had rejected the Rosens' proposed "structure." In addition, Stephanie also had not signed the settlement agreement, and the Rosens asserted her failure to do so rendered the agreement ineffectual since it required the conveyance of community property, which could not be accomplished without her agreement and signature.
At the hearing on the motion to enforce the settlement, the trial court (Judge Marie S. Weiner) rejected the Rosens' argument there was some uncertainty about "structuring" the payment by the Cook parties. Calling the settlement agreement "pretty simple," the court pointed out the Rosens could have returned to the mediator to resolve any supposed questions about their right to "structure" the payment. As for the problem engendered by Stephanie's failure to sign the agreement--which precluded conveyance of the community property--the court stated whether the settlement was "workable" or "enforceable" was the Cook parties' "problem" and immaterial to whether the settlement could be judicially enforced. The only thing that mattered, said the court, was whether the parties had "stipulated" to the terms, and since Mike had signed the agreement, it could and would be enforced as against him. The court then said, however, Mike was not entitled to any cash payment from the Cook parties until Stephanie signed the conveyance documentation, "so obviously [he] ha[d] to wait" until the litigation against Stephanie was concluded. The court did not explain how concluding the litigation as to Stephanie could or would compel her to execute the documentation necessary to transfer the community property to Cook.
Mike promptly opened an escrow to effectuate the settlement, and Stephanie signed the written settlement agreement. However, despite having just moved to enforce the settlement, the Cook parties now refused to accept her signature. The Cook parties' lawyer later told an understandably incredulous trial court they refused her signature because they were mad--she signed only after the Rosens "lost" a purported "gamble" to "change" the settlement, "no legal basis" compelled the Cook parties to accept her signature, and the parties were "in warfare at the time." Instead, the Cook parties offered a new global settlement proposal wherein they would pay $550,000, rather than the originally agreed to $830,000, supposedly reflecting changed market conditions. The Rosens rejected this proposal.
On April 18, 2008, the trial court (Judge Weiner) finally signed written orders enforcing the settlement as to Mike in all three cases. Stephanie was ordered to file an answer in case No. 461115, the stay on discovery was lifted, and trial was set for August 8, 2008. As for case No. 451036, in which Stephanie was a plaintiff, the court ordered it to be set for a new case management conference.
On June 23, 2008, the Rosens moved to continue the trial date in case No. 461115. At this point, there was an issue as to whether Moreland LLC had signed the settlement agreement, thus resolving all claims involving Mike. The Cook parties' lawyer asserted all claims involving Mike had been settled, accused the Rosens of trying to subvert the settlement and get more money, and claimed Stephanie was "estopped" from "forcing her way into the settlement" because she had opposed the motion to enforce it. The trial court (Judge Robert D. Foiles) heard and denied the motion to continue on July 11, 2008.
On August 1, 2008, the trial court (Judge Weiner) entered "judgments" in all three cases pursuant to its April 18, 2008, written orders granting the Cook parties' motion to enforce the settlement as to Mike. However, rather than entering judgments in accordance with the terms of the settlement agreement (and leaving it to the Cook parties to figure out how to enforce the deal), the trial court attempted to work around the fact the property to be conveyed was community property. The court thus entered judgments for essentially "half" the settlement--requiring Mike to convey his community property interest in the property to Cook ("half" the property) and requiring the Cook parties, in turn, to pay Rosen $415,000 (half of the $830,000 settlement amount). The trial court also attempted to deal with the procedural posture of case No. 440930, in which judgment had been entered in favor of the Rosens in March 2006, and which was on appeal, by entering an "Amended Judgment" as to Mike for ostensibly "half" the settlement.
In the meantime, Cook, LegacyQuest, and Moreland LLC had apparently made numerous requests for extensions of time to file their opening brief on appeal in case No. 440930 (appeal No. A114176) on the ground the parties were in the process of settling the case. Finally, this court issued an order to show cause requiring the parties to appear and explain why the appeal should not be dismissed. The parties appeared before the court on August 7, 2008, and Cook, LegacyQuest, and Moreland LLC requested a dismissal of their appeal, which the court granted.
On August 15, 2008, Mike filed a notice of intent to move for a new trial as to the August 1, 2008, judgments in case Nos. 461115 and 451036 and amended judgment in case No. 440930. He asserted, among other things, that the trial court had committed an error of law by imposing on the parties terms and conditions different from those set forth in the written settlement agreement and that the orders requiring him to convey his community property interest in the Moreland property violated Family Code section 1102.
On August 19, 2008, a two-day court trial commenced in Cook and Moreland LLC's case against Stephanie (case No. 461115).*fn3 The court (Judge Steven L. Dylina) found against Cook and Moreland LLC, and in favor of Stephanie, on all three causes of action. The court also ruled there was no "prevailing party" on the first cause of action for judicial foreclosure and therefore denied Stephanie's request for contractual attorney fees.
On August 21, 2008, the trial court (Judge Weiner) issued an order vacating the hearing date for Mike's new trial motions and deemed the motions "submitted." Nevertheless, a hearing was held on September 15, 2008, at which only Mike appeared due to the procedural confusion caused by the court's order. Mike repeated the entire history of the efforts to settle the cases, from his perspective. He also repeated his claim that because the settlement required the conveyance of community property, it simply was not effective without Stephanie's agreement and signature. He also advised the court the property was now in foreclosure.
The court (Judge Weiner) held a further hearing on the new trial motions on September 24, 2008, at which Mike and counsel for the Cook parties appeared. Both sides continued to accuse the other of sabotaging the settlement. The Cook parties also argued the judgments against Mike for ostensibly "half" of the settlement were justified because the property, by this point, was probably worth only half of the original settlement amount.
On September 25, 2008, the trial court (Judge Weiner) granted the new trial motions on the ground it had committed an error of law by entering judgments requiring Mike to transfer his community property interest in the property. The court's new trial order further stated, however, that as to its "orders" enforcing the settlement against Mike, "no error of law" had been shown.
On October 29, 2008, the Rosens attempted to conduct a debtor's examination of the Cooks in connection with their efforts to collect on the judgment in their favor in case No. 440930 (in which the appeal had been dismissed). The Cooks objected that the judgment "ha[d] been ordered settled by Judge Weiner" and there "no longer" was a judgment in favor of Mike. They further asserted that when Mike settled, the judgment was "liquidated." The trial court (Judge Foiles), annoyed with all parties, set aside the subpoena on the ground the judgment in case No. 440930 appeared "uncertain."
On November 21, 2008, the Cook parties appealed from the new trial orders.
In light of the questions raised by the statement in the new trial orders that "no error of law" had been shown as to the court's "orders" enforcing the settlement against Mike, Mike returned to the trial court on December 5, 2008, seeking an order vacating the April 18, 2008, orders granting the Cook parties' motion to enforce the settlement. The trial court (Judge Weiner) concluded it had no jurisdiction to take any action with respect to the orders enforcing the settlement in light of the Cook parties' appeal from the new trial orders. The court also believed Mike could advance his argument that the orders enforcing the settlement were invalid as an additional ground for affirming the new trial orders.
On December 10, 2008, Stephanie filed a notice of "cross-appeal" from the ruling in case No. 461115 that there was no "prevailing party" on the first cause of action for judicial foreclosure and denying her request for attorney fees. On December 18, 2008, Cook and Moreland LLC filed a notice of appeal from the judgment in case No. 461115 in favor of Stephanie.*fn4
Appeal No. A123548
The trial court (Judge Weiner) aptly observed at the final hearing concerning the settlement, "[t]his thing is in a terrible procedural mess." This "mess" is due in part to the parties' rancorous relationship. It is also due in part to the parties' and trial court's failure to appreciate (a) the jurisdictional limitations on the trial court's ability to alter a judgment and (b) that settling a case on appeal is a fundamentally different proposition than settling a case pending in the trial court before entry of judgment. We therefore separately discuss case No. 440930, in which judgment had been entered and which was on appeal when the parties made efforts to settle the litigation, and case Nos. 461115 and 451036, which were still pending in the trial court during the parties' settlement efforts.
A. Case No. 440930
As set forth above, judgment was entered in case No. 440930 in favor of the Rosens on March 24, 2006, for $434,743.36. Following unsuccessful posttrial motions, Cook, LegacyQuest, and Moreland LLC appealed from the judgment (appeal No. A114176). The case was still on appeal when Cook and Mike attended the mediation session before the third party neutral on August 8, 2007. It was still on appeal when the Cook parties moved to enforce the settlement, and when the trial court entered its written order on April 18, 2006, enforcing the settlement as to Mike. And it was still on appeal when, pursuant to its written order, the trial court entered an "Amended Judgment" on August 1, 2008, as to Mike and the Cook parties for ostensibly "half" of the settlement. The trial court's entry of the "Amended Judgment" as to Mike and the Cook parties ran afoul of two fundamental limitations on the court's jurisdiction to act.
First, in a civil action, there are only a limited number of procedural vehicles by which a trial court can alter a judgment. (See Day v. Collingwood (2006) 144 Cal.App.4th 1116, 1124 [" 'Jurisdiction over a cause or parties after a final judgment, order or decree is exceptional and limited to special situations' "].) These procedures are largely confined to the usual posttrial motions, i.e., motion for judgment notwithstanding the verdict (Code Civ. Proc., § 629), motion for a new trial (Id., § 657) and motion to vacate the judgment (Id., § 663a). (See Ramon v. Aerospace Corp. (1996) 50 Cal.App.4th 1233, 1236 [" 'Once judgment has been entered . . . [the court] may correct judicial error only through certain limited procedures such as motions for new trial and motions to vacate the judgment.' "].)
The Cook parties duly challenged the March 24, 2006, judgment in favor of the Rosens by way of motions for judgment notwithstanding the verdict and for a new trial, which the trial court denied. At that point, the trial court's jurisdiction to alter the judgment was effectively exhausted. No procedural vehicle empowered the trial court, more than two years later, to effectively vacate the judgment as to Mike and the Cook parties and to enter an "Amended Judgment." For this reason, alone, the "Amended Judgment" was an act in excess of the trial court's jurisdiction and a void and ineffectual act.
Second, when an appeal is filed, jurisdiction over the matter moves to the Court of Appeal, and if a stay is in place, the trial court can take no further action on the judgment or any matter embraced therein or affected thereby. (See Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 189, 198-199 [acts by the trial court in contravention of a stay on appeal are in excess of the court's jurisdiction in its "fundamental sense" and thus are "void"].) The Cook parties posted an undertaking by personal sureties, and accordingly the judgment in case No. 440930 was stayed on appeal.
The purpose of the stay provisions provided by the Code of Civil Procedure "is to protect the appellate court's jurisdiction by preserving the status quo until the appeal is decided. The [stay] prevents the trial court from rendering an appeal futile by altering the appealed judgment or order by conducting other proceedings that may affect it." (Elsea v. Saberi (1992) 4 Cal.App.4th 625, 629.) This means, for example, the trial court cannot directly or indirectly seek to "enforce, vacate or modify [the] appealed judgment or order." (Ibid. ["trial court's power to enforce, vacate or modify an appealed judgment or order is suspended while the appeal is pending"]; Betz v. Pankow (1993) 16 Cal.App.4th 931, 937-938 [appeal precludes the trial court from vacating the appealed judgment or order]; see also Dallman v. Dallman (1958) 164 Cal.App.2d 815, 817-818 [appeal precludes the trial court from modifying the appealed order].) Accordingly, for this reason, as well, the trial court had no jurisdiction to partially vacate the judgment on appeal and enter an "Amended Judgment" as to Mike and the Cook parties.
Further, the dismissal of the appeal by Cook, LegacyQuest, and Moreland LLC on August 7, 2008, did not affect the judgment in favor of the Rosens. When parties settle on appeal, they have two procedural options for dealing with the underlying trial court judgment. One option is to file an application for a stipulated reversal of the judgment. (Code Civ. Proc., § 128, subd. (a)(8); Ct. App. First Dist., Local Rules, rule 4; see generally Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2010) ¶ 6:120 et seq., pp. 6-18 to 6-29.) If the Court of Appeal grants such an application (stipulated reversals are disfavored), there is no longer any judgment. The parties can then return to the trial court and file a dismissal with prejudice, effectively making the lawsuit "go away." The second, and more commonly used, option is to procure a dismissal of the appeal. This can be accomplished by filing an abandonment of the appeal if the record on appeal has not yet been filed with the Court of Appeal (Cal. Rules of Court, rule 8.244(b)) or by asking the Court of Appeal to dismiss the appeal if the record has already been filed with the court. (Id., rule 8.244(c).) The effect of an abandonment or dismissal of the appeal is to affirm the judgment.*fn5 (See Cal. Practice Guide: Civil Appeals and Writs, supra, ¶ 5:57, p. 5-22; ¶ 6:120.1, p. 6-18, ¶ 6:125.5 et seq., p. 6-37; cf. County of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1005.) The parties then typically return to the trial court and file a full satisfaction of judgment after the settlement agreement is fully consummated.
Here, Cook, LegacyQuest, and Moreland LLC asked this court to dismiss their appeal, which it did. This had the effect of affirming the judgment in favor of the Rosens.
In summary, since the trial court had no jurisdiction to enter the "Amended Judgment" or, in turn, to grant a new trial thereto, both the "Amended Judgment" and new trial order were void and ineffectual acts. The "order" granting the motion to enforce the settlement also has no further force and effect. It was not a final disposition, but only the predicate for the entry of a judgment pursuant to Code of Civil Procedure section 664.5--a judgment which, for the reasons we have explained, the trial court had no jurisdiction to enter. In addition, as we explain in the next section, the settlement agreement was not enforceable, in any event. The judgment in case No. 440930 in favor of the Rosens and against Cook, LegacyQuest, and Moreland LLC therefore stands as a final, enforceable judgment.
B. Case Nos. 451036 and 461115
Neither the Rosens' second lawsuit against the Cook parties filed in 2005 (case No. 451036), nor Cook and Moreland LLC's lawsuit against the Rosens filed in February 2007 (case No. 461115), had been tried or otherwise disposed of when the trial court entered judgments therein on August 1, 2008, as to Mike and the Cook parties ostensibly for "half" the settlement. Accordingly, the trial court had jurisdiction to enter the judgments and, likewise, had jurisdiction to hear and rule on Mike's new trial motions.
Code of Civil Procedure section 657, itself, sets forth the framework of our review of the new trial orders: "On appeal from an order granting a new trial the order shall be affirmed if it should have been granted upon any ground stated in the motion, whether or not specified in the order or specification of reasons, except that (a) the order shall not be affirmed upon the ground of the insufficiency of the evidence to justify the verdict or other decision, or upon the ground of excessive or inadequate damages, unless such ground is stated in the order granting the motion and (b) on appeal from an order granting a new trial upon the ground of the insufficiency of the evidence to justify the verdict or other decision, or upon the ground of excessive or inadequate damages, it shall be conclusively presumed that said order as to such ground was made only for the reasons specified in said order or said specification of reasons, and such order shall be reversed as to such ground only if there is no substantial basis in the record for any of such reasons." (Code Civ. Proc., § 657.)
Orders granting a new trial generally are reviewed under the deferential abuse of discretion standard. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 859.) "When the trial court provides a statement of reasons as required by [Code of Civil Procedure] section 657, the appropriate standard of judicial review is one that defers to the trial court's resolution of conflicts in the evidence and inquires only whether the court's decision was an abuse of discretion." (Oakland Raiders v. National Football League (2007) 41 Cal.4th 624, 636; accord, Whitlock v. Foster Wheeler, LLC (2008) 160 Cal.App.4th 149, 158-159.) However, "any determination underlying any order is scrutinized under the test appropriate to such determination." (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 859.) Thus, when a trial court grants a motion for new trial based on an error of law occurring in the trial, the determination is reviewed de novo. (Id. at p. 860; Westamerica Bank v. MBG Industries, Inc. (2007) 158 Cal.App.4th 109, 130.)
The trial court granted new trials on the ground it had made an "error of law" in entering judgments requiring Mike to convey his interest in the Rosens' community property. The court also stated, however, "no error of law" had "been demonstrated" as to its orders enforcing the settlement as to Mike. Rather, the "problem," said the court was "with the subsequent entry of Judgment, whereby" it "ordered transfer of Mike's one-half interest in the real property in exchange for one-half of the settlement money." The court explained: "[S]uch a transaction is illegal under Family Code Section 1102, and thus the Judgment ordering such is not enforceable as a matter of law."
We conclude the trial court correctly granted new trials in case Nos. 451036 and 461115, and we do so for two reasons, each of which constituted an "error of law."
The Judgments Exceeded the Trial Court's Authority under CCP Section 664.6
First, the judgments entered in case Nos. 451036 and 461115 exceeded the bounds of the trial court's authority to enforce a settlement under Code of Civil Procedure section 664.6. Section 664.6 provides: "If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement." (Code Civ. Proc., § 664.6, italics added.)
"Prior to the enactment of section 664.6, a party seeking to enforce a settlement agreement had to file a new action alleging breach of contract and seeking either contract damages or specific performance of the settlement terms, or alternatively had to supplement the pleadings in a pending case. (See, e.g., Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, ¶ 12:951, p. 12(II)-70; Viejo Bancorp, Inc. v. Wood (1989) 217 Cal.App.3d 200, 208 . . . ['Prior to the enactment of section 664.6, a party who sought to enforce a settlement agreement could file a separate action for specific performance, or could seek leave to file a supplemental pleading in the first action.'].) . . . Expeditious enforcement of a settlement agreement was therefore not always possible." (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809 (Weddington).) "Section 664.6 was enacted to provide a summary procedure for specifically enforcing a settlement contract without the need for a new lawsuit." (Ibid.)
"Although a judge hearing a section 664.6 motion may receive evidence, determine disputed facts, and enter the terms of a settlement agreement as a judgment (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, ¶ 12:975 et seq., pp. 12(II)-76 to 12(II)-82-7; Fiore v. Alvord (1985) 182 Cal.App.3d 561 . . . [court may interpret terms of settlement agreement]), nothing in section 664.6 authorizes a judge to create the material terms of a settlement, as opposed to deciding what terms the parties themselves have previously agreed upon." (Weddington, supra, 60 Cal.App.4th at p. 809.)
Here, the trial court did not enter judgment on the terms agreed to by the parties. The parties agreed, in essence, to the following: The Cook parties would pay the Rosens $830,000. The Rosens, in turn, would convey a specific parcel of real property to Cook. That property, however, was community property, and the trial court apparently recognized the contemplated conveyance could not occur without Stephanie's signature on the conveying document. The court thus stated at the hearing on the motion to enforce the settlement that even if the settlement was enforced as to Mike (since he had signed the agreement), he would not be entitled to any cash payment from the Cook parties until Stephanie signed the conveyance documentation. "So," said the court, "obviously [Mike] ha[d] to wait" until the litigation against Stephanie was concluded. As we noted above, the trial court did not explain how the conclusion of the litigation as against Stephanie could or would compel her to sign the conveying documentation. (As we also noted, she subsequently prevailed in case No. 461115.) In any event, before case No. 461115 was tried against Stephanie, the trial court attempted to work around the community property problem by entering judgments for ostensibly "half" of the settlement--requiring the Cook parties to pay Mike $415,000 (half of the $830,000 the parties had agreed to) and requiring Mike to transfer his community property interest in the property to Cook (ostensibly "half" of the real property).
While the trial court's effort to conclude as much of this litigation as possible is both understandable and laudable, what the court did was substitute its own settlement agreement in place of that to which the parties had agreed. It is one thing, for example, for the Rosens to convey a parcel of real property and thereby have no further ownership interest in it, as the settlement agreement contemplated. It is an entirely different thing for Mike to transfer his community interest in the property, leaving Stephanie a tenant in common with Cook, which would have been the result under the trial court's judgments. The judgments entered by the trial court thus fundamentally altered the terms of the settlement to which the parties had agreed, and thus exceeded the trial court's authority under Code of Civil Procedure section 664.6.
The Settlement Agreement Was Unenforceable
Not only did the trial court exceed its statutory authority under Code of Civil Procedure section 664.6, but even more fundamentally, the settlement agreement was incapable of being performed and, consequently, was unenforceable. As we discussed above, the trial court granted new trials in case Nos. 451036 and 461115 on the ground the judgments requiring Mike to convey his share of the community property to Cook were "illegal" under Family Code section 1102, but stated no error of law had been shown as to its orders enforcing the settlement. We conclude the problem engendered by the fact the subject property was the Rosens' community property and Stephanie had not signed the settlement agreement, was more endemic than just rendering the "judgments" unlawful. Rather, it wholly foreclosed enforcement of the settlement agreement.
"A settlement agreement is a contract, and the legal principles which apply to contracts generally apply to settlement contracts. (See, e.g., Gorman v. Holte (1985) 164 Cal.App.3d 984, 988 . . . ['Compromise settlements are governed by the legal principles applicable to contracts generally'].)" (Weddington, supra, 60 Cal.App.4th at pp. 810-811.) One such principal is that "[w]here the parties assume that a certain object or effect will be attained, and this becomes impossible, performance by the injured party is excused . . . . The defense has sometimes been explained on the theory of implied conditions and failure of consideration." (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 843, p. 929.) In such a case, " '[p]erformance remains entirely possible, but the whole value of the performance to one of the parties at least, and the basic reason recognized as such by both parties, for entering into the contract has been destroyed by a supervening and unforeseen event.' " (Id. at pp. 929-930.) Another fundamental principle is that " '[w]here the defendant's performance depends on the consent or approval of one not a party to the contract who is free to withhold his consent, specific performance of the contract will not be decreed where it does not appear that such consent or approval has been or can be obtained, or where it appears that such consent or approval is withheld or refused or has become impossible' (81 C.J.S. Specific Performance, § 16b); see also Williston on Contracts (rev. ed.) Sec. 1422." (Casady v. Modern Metal etc. Mfg. Co. (1961) 188 Cal.App.2d 728, 731-732; see also Forde v. Bank of Finance (1982) 136 Cal.App.3d 38, 45-46.)
Because the settlement agreement here required the conveyance of community property, provisions of the Family Code were squarely implicated, as the trial court recognized. Specifically, Family Code section 1102, subdivision (a), provides that: "Except as provided in Sections 761 and 1103, either spouse has the management and control of the community real property, whether acquired prior to or on or after January 1, 1975, but both spouses, either personally or by a duly authorized agent, must join in executing any instrument by which that community real property or any interest therein is leased for a longer period than one year, or is sold, conveyed, or encumbered." (Fam. Code, § 1102, subd. (a).) "The language of this section is derived from that found in the older, now repealed, section 172a dating back to 1917. The history of this provision reveals the evolution of women's more equal status under California Community Property Law. The section as it now reads gives either spouse management and control of the community real property but requires both to join in executing any instrument by which the community real property is sold." (Andrade Development Co. v. Martin (1982) 138 Cal.App.3d 330, 333-334.)
The courts have construed this statutory requirement to fully protect the property interests of a spouse. As the Andrade court explained, "[w]e believe the non-consenting spouse should be fully protected in such efforts to dispose of community real property and hold the contract [by the husband to convey the property] is subject to a timely action during the marriage to avoid it, a corollary of which is no specific performance or damages are recoverable as to any part of the effort to dispose of the community real property. Any effort to dispose of this property will adversely affect the spouses' interests. Disposal of community property or partition of the spouses' interests should be allowed only where the spouse consents or where a court sitting in equity can provide an equitable result as in dissolution or probate proceedings." (Andrade Development Co. v. Martin, supra, 138 Cal.App.3d at p. 334, italics added.)
Accordingly, the Supreme Court has held the statute requires both spouses to execute a conveyance of any part of the property, even if it is of only one spouse's share of the community property. (Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26, 46-47 (Droeger).) Furthermore, if one spouse attempts to unilaterally convey his or her interest, the other spouse can invalidate the transaction. Likewise, if one spouse attempts to unilaterally convey the entirety of the property, the other spouse can invalidate the transaction in its entirety. (Id. at pp. 30, 46-47.) As the court explained, the "statute requires that both spouses join in executing 'any instrument' conveying 'any interest' in the community's real property. (Italics added.) The term 'any' (particularly in a statute) means 'all' or 'every.' (California State Auto. Assn. Inter-Ins. Bureau v. Warwick (1976) 17 Cal.3d 190, 195 . . . ['From the earliest days of statehood we have interpreted "any" to be broad, general and all embracing.']; Estate of Wyman (1962) 208 Cal.App.2d 489, 492 . . . ; Emmolo v. Southern Pacific Co. (1949) 91 Cal.App.2d 87, 92 . . . .) The language, 'any interest,' would include the consenting spouse's one-half undivided interest. Therefore, under the plain language of section 5127 [the predecessor to section 1102], both spouses 'must join in executing any instrument' encumbering such interest." (Id. at p. 38.)
These cases make clear that because Stephanie did not agree to the settlement agreement and did not sign any documentation conveying any interest in the community property, the pivotal property transfer called for by the settlement agreement could not occur. These cases also make clear the Cook parties were not entitled to an order compelling any kind of "specific performance" with respect to conveyance of the property. Yet, that was exactly the effect of the order enforcing the settlement agreement as to Mike, since what he was required to do under the agreement was to convey the community property to Cook. Mike could not, however, be compelled to make any kind of unilateral transfer of the property, in part or in whole, because of requirements of Family Code section 1102. And Stephanie could not be compelled to make any kind of transfer because she was not a signatory to the settlement agreement. Accordingly, no conveyance of any part of the property could be compelled. Since conveyance of the property was one of the two critical exchanges required by the settlement agreement, we conclude the agreement necessarily failed of its essential terms and therefore could not be enforced. (See Habitat Trust for Wildlife v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1340 [where parties assumed third party would qualify to hold property for mitigation, but party failed to qualify, contract was unenforceable; the third party's qualification was "a condition to the very existence of an enforceable contract"].)
We understand that our conclusion means Stephanie effectively had "veto" power over the settlement. That, however, is the result mandated by Family Code section 1102. Moreover, we are hard pressed to find any inequity with respect to the Cook parties, since only days after they insisted the settlement agreement should be enforced, they refused to accept Stephanie's signature, which would have removed the impediment to enforceability otherwise created by Family Code section 1102.
The Cook parties' assertion that a spouse can incur debts for which the community estate is chargeable, while correct (Fam. Code, § 910; Code Civ. Proc., § 695.020), misses the mark. The settlement agreement called for the conveyance of the Rosens' community real property, and that specific action is subject to the specific requirements and limitations of Family Code section 1102.
Nor does any aspect of Lezine v. Security Pacific Fin. Services, Inc. (1996) 14 Cal.4th 56 (Lezine), assist the Cook parties. On the contrary, in that case, deeds of trust for community property unilaterally executed by the husband were deemed invalid and unenforceable pursuant to former Family Code section 5127 (the predecessor to section 1102) and Droeger, supra, 54 Cal.4th 26. The issue before the Supreme Court was whether the fact the security interests were invalid precluded a judgment lien for the underlying debt, which had been enforced and reduced to judgment in a collection action against the husband. (Lezine, supra, 14 Cal.4th at pp. 59-60.) The court held it did not and that the community estate, including the community real property, was liable for the debt incurred by the husband that had been reduced to a judgment. (Id. at pp. 63-75.) In other words, the loss of the security interest because it had been procured in violation of former Family Code section 5127, did not "extinguish the underlying debt," which, if reduced to judgment, could give rise to a judgment lien. (Lezine, at pp. 70-73.) This simply underscores the point we have made--the fact the community estate may be liable for a debt incurred by a spouse does not trump the specific requirements of section 1102, requiring that both spouses execute any conveyance by them of the community real property. (Lezine, at p. 73 [even though community property was subject to a subsequent judgment lien, the purpose of former Family Code section 5127 was still served--"the unauthorized direct transfer [by the husband was] cancelled"].)
The Cook parties' assertion that Mike was acting as Stephanie's agent and declared he had full authority to settle the case, does not change the fact the settlement agreement required, and indeed, had a line for, her signature. Moreover, there is no evidence she delegated Mike her "duly authorized agent" under Family Code section 1102 for purposes of executing either the settlement agreement or the conveyance of the property. And to the extent there was any factual dispute about this, the trial court necessarily found against the Cook parties, a finding supported by the record and which we must accept on appeal.
Finally, the Cook parties urge Mike should have been "estopped" from raising the enforceability of the settlement agreement in his new trial motions. On this record, there is no basis whatsoever for such an estoppel, whether called equitable estoppel, judicial estoppel, or waiver. The Cook parties, as much as anyone, contributed to the delay in generating a written settlement agreement; indeed, Natalie Cook also had not signed the agreement when the Cook parties moved to enforce it. From that point on, the Rosens consistently took the position the settlement agreement was unenforceable for a number of reasons, including because Stephanie had not signed the agreement, let alone any document conveying the property. And while the Cook parties clamor for estoppel, we again observe that, despite having sought enforcement of the settlement agreement, they turned around and refused to accept Stephanie's signature--simply out of pique--when she promptly offered it after the hearing. They are in no position to ask for equitable dispensation from us.
In summary, with respect to case Nos. 451036 and 461115, the new trial orders are affirmed. Accordingly, at this juncture, there is no judgment in these cases as between Mike and any of the Cook parties. In addition, because we have held that the settlement agreement is unenforceable, the trial court's April 18, 2008, orders enforcing the settlement have no force and effect.
Appeal No. A123558
As we recounted above, Cook and Moreland LLC sued the Rosens, asserting three causes of action--for judicial foreclosure, malicious prosecution, and conversion (case No. 461115). The case went to trial only against Stephanie, after the trial court granted the Cook parties' motion to enforce the settlement agreement as to Mike and the Cook parties refused to accept Stephanie's proffered signature on the settlement agreement. The trial court, sitting as the trier of fact, found in favor of Stephanie on all three causes of action. Cook and Moreland LLC appeal from the judgment, challenging the trial court's ruling on each cause of action. Stephanie cross-appeals from the ruling that there was no "prevailing party" on the cause of action for judicial foreclosure and denial of her request for contractual attorney fees. We affirm the judgment, except as to the ruling denying attorney fees to Stephanie. As to the latter, we remand the matter to the trial court for an award of reasonable, contractual attorney fees incurred in both the trial court and on appeal.
A. The Judgment in Favor of Stephanie Is Not Affected By the New Trial Order That Vacated the Judgment Entered As to Mike
Cook and Moreland contend the trial court's judgment in favor of Stephanie was "influenced" by the fact the case was ostensibly settled as to Mike. They claim the subsequent order granting Mike's motion for a new trial "changed" what had been the "underlying basis" for the court's judgment, thus rendering the judgment "erroneous because it was based on a factor which was no longer accurate." Cook and Moreland vastly overstate the trial court's reference to the settlement as to Mike, and their assertion that the new trial order as to Mike vitiates the judgment in favor of Stephanie has no merit.
As to the first cause of action for judicial foreclosure, asserted by Cook only, the trial court ruled the claim should have been brought as a compulsory cross-complaint in the first action filed by the Rosens and in which judgment had been entered in their favor in March 2006 (case No. 440930). As to the second cause of action for malicious prosecution, asserted by Moreland LLC only and based on the Rosens' filing of lis pendens notices and lack of success on their equitable claim for fraudulent conveyance in their first case (No. 440930), the trial court found there was "simply no evidence" Stephanie pursued the claim and filed lis pendens notices without any basis for doing so or for malicious reasons. Further, she relied on counsel in pursuing the claim and filing the lis pendens. As to both of these causes of action, the court made no mention at all of the settlement as to Mike.
The court did discuss the settlement in connection with its ruling in favor of Stephanie on the third cause of action for conversion. This cause of action, asserted by both Cook and Moreland LLC, was based on the Rosens' execution on the judgment in their favor in case No. 440930 before Cook and Moreland LLC filed a surety bond staying execution of the judgment on appeal. Cook and Moreland LLC alleged that once they filed the surety bond and a stay went into effect, the Rosens should have returned the amounts they had already obtained by levy. During closing arguments, Stephanie's attorney argued the cause of action was essentially moot, since the appeal in case No. 440930 had been dismissed and therefore she now had a right to execute on that judgment. Cook and Moreland LLC's attorney disagreed, arguing the amended judgment entered as to Mike had a number of "conditions" which had not yet been met.
The trial court thus commented there were now "two parallel judgments" in case No. 440930--the judgment in favor of Stephanie which was intact after the dismissal of the appeal and the amended judgment that had been entered as to Mike pursuant to the settlement. Concluding it was not going "to make this situation more confusing" and "the parties had materially changed the very basis for this [cause of] action," the court granted judgment in favor of Stephanie. As we discuss later in this opinion, the procedural posture of case No. 440930 at the time case No. 461115 was tried is, in fact, irrelevant to the merits of the judgment in favor of Stephanie on the third cause of action.
B. Judgment Was Correctly Entered for Stephanie on the First Cause of Action for Judicial Foreclosure
The trial court ruled the first cause of action for judicial foreclosure, asserted by Cook only, should have been brought as a compulsory cross-complaint in the first action filed by the Rosens and tried to judgment in March 2006 (case No. 440930). Cook contends the trial court erred, arguing case No. 440930 involved the agreement he and Mike entered into in March 2003, and not the promissory note and deed of trust Mike executed in February 2002 and on which Cook sought judicial foreclosure.
During trial, the court asked the parties to address the fact Stephanie had not signed the February 2002 promissory note and deed of trust on which Cook sought to foreclose. Cook again asserted that under Family Code section 910 and the Lezine case he could look to the Rosens' community property to satisfy a debt owed by Mike and therefore a judgment could properly be entered against Stephanie, since she now had a community property interest in the property. Stephanie contended a cause of action for foreclosure could not be asserted against her, since she was not a party to the note or deed of trust and only an action in the nature of an in rem action could be brought against the community property and, then, only to enforce a debt proven up as to Mike.
In supplemental briefing, submitted at our request, the parties further explained their positions as to the significance, if any, of the fact Stephanie had not signed the February 2002 promissory note and deed of trust on which Cook sought to foreclose. Cook contends a foreclosure action can properly be brought not only against the original mortgagor or trustor, but also any person or entity who subsequently obtains any interest in the property. Cooks cites Diamond Benefits Life Ins. Co. (1998) 66 Cal.App.4th 1 and 4 Witkin, Summary of Cal. Law (10th ed. 2005), Security Transactions in Real Property, section 139, page 939. He therefore asserts he could properly proceed against Stephanie because one year after Mike executed the February 2002 note and deed of trust, he conveyed to Stephanie a community property interest in the property.
Stephanie continues to contend that as a nonsignatory spouse, no judgment could be entered against her, citing Wilshire Associates, supra, 64 Cal.App.4th at pages 454-455. In Wilshire Associates, the plaintiff lessor sued the wife of the guarantor of a lease, based solely on her husband's obligations as a guarantor. The plaintiff contended the wife was liable for the husband's personal guarantee under Family Code section 910 because that statute provided the wife was responsible for her husband's obligations to the extent of their community property. (Wilshire Associates, at p. 455.) The appellate court affirmed summary judgment in favor of the wife on the ground there was no cause of action in California based on community property liability under section 910. (Wilshire Associates, at p. 457.) The court noted the plaintiff had sued the wife not because she was personally liable on the guarantee, "but to facilitate its postjudgment recovery of money damages should it succeed on its claim" against the husband. (Id. at p. 455.) The appellate court relied on Reynolds & Reynolds Co. v. Universal Forms, Labels & Systems, Inc. (C.D.Cal.1997) 965 F.Supp. 1392, in which the court held: "Where both spouses are named in litigation, and where one spouse is included solely in the capacity as a community representative, that spouse has no personal liability, that spouse's separate property cannot be reached for the type of debt alleged, and such spouse does not desire to participate in the litigation, there appears to be no legitimate advantage to plaintiff in forcing the unwilling spouse to participate in the litigation." (Id. at p. 1397; Wilshire Associates, at p. 457.)
We note that Wilshire Associates did not involve a security interest granted by a spouse on what, at the time, was his or her separate real property. We do not resolve the reach of Wilshire Associates, however, because we conclude the trial court properly determined Cook's cause of action for foreclosure should have been asserted as a counter-claim under Code of Civil Procedure section 426.30 in the first lawsuit comprising this spate of litigation, the Rosens' 2004 lawsuit for breach of contract (case No. 440930).
"The compulsory cross-complaint statute is designed to prevent 'piecemeal litigation.' (Carroll v. Import Motors, Inc. (1995) 33 Cal.App.4th 1429, 1436 . . . .) In discussing the legislative purpose of former section 439, the predecessor of section 426.30, the Supreme Court explained that because '[t]he law abhors a multiplicity of actions . . . the obvious intent of the Legislature . . . was to provide for the settlement, in a single action, of all conflicting claims between the parties arising out of the same transaction. [Citation.] Thus, a party cannot by negligence or design withhold issues and litigate them in successive actions; he may not split his demands or defenses; he may not submit his case in piecemeal fashion. [Citation.]' (Flickinger v. Swedlow Engineering Co. (1955) 45 Cal.2d 388, 393 . . . ; see also Clark v. Lesher (1956) 46 Cal.2d 874, 882 . . . .) In furtherance of this intent of avoiding a multiplicity of actions, numerous cases have held that the compulsory cross-complaint statute--both section 426.30 and its predecessor statute (former section 439)--must be liberally construed to effectuate its purpose." (Align Technology, Inc. v. Bao Tran (2009) 179 Cal.App.4th 949, 959, fn. omitted (Align).)
"Section 426.30, subdivision (a), provides that 'if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.' As used in the compulsory cross-complaint statute, the term 'complaint' includes both a complaint and cross-complaint (§ 426.10, subd. (a)), and the term 'plaintiff' includes both a plaintiff and cross-complainant (§ 426.10, subd. (b)). And the phrase 'related cause of action' in section 426.30 is defined as 'a cause of action which arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.' (§ 426.10, subd. (c).) Because of the liberal construction given to the statute to accomplish its purpose of avoiding a multiplicity of actions, 'transaction' is construed broadly; it is 'not confined to a single, isolated act or occurrence . . . but may embrace a series of acts or occurrences logically interrelated [citations].' (Saunders[ v. New Capital Small Business, Inc.] 231 Cal.App.2d [324,] 336 . . . ; see also Currie Medical [Specialties, Inc. v. Bowen (1982)] 136 Cal.App.3d [774,] 777 . . . .)" (Align, supra, 179 Cal.App.4th at pp. 959-960.) "[T]he relatedness standard 'requires "not an absolute identity of factual backgrounds for the two claims, but only a logical relationship between them." [Citation.] This logical relationship approach is the majority rule among the federal courts [citation]. At the heart of the approach is the question of duplication of time and effort; i.e., are any factual or legal issues relevant to both claims? [Citation.]' (Currie Medical, supra, at p. 777.)" (Id. at p. 960.)
The trial court took judicial notice of the rulings and verdicts in the first lawsuit (case No. 440930), and both Cook and Stephanie argued their respective positions as to whether Cook's foreclosure claim came within the ambit of the statute. As the trial court explained, the first lawsuit (case No. 440930) involved the same parties and their rights and liabilities as to the same property (the Moreland property). The fact the Rosens' complaint in the first lawsuit involved different substantive claims than the foreclosure cause of action Cook subsequently asserted against the Rosens does not negate a finding of logical relatedness. (See Align, supra, 179 Cal.App.4th at pp. 962-968 [emphasizing this point and canvassing case law].)
The evidence showed that numerous sums of money had been exchanged between Cook and the Rosens, all in the context of working toward the subdivision and development of the Moreland property which was the genesis and focus of the first lawsuit. In addition, Cook testified the reason the legal description on the 2002 deed of trust no longer comported with any current legal lot descriptions was because of the subdivision process. He also testified that during that process, the title company was asked to reform the 2002 deed of trust so the property description conformed to the one lot retained by the Rosens, but the company failed to do so. And during the trial in the first case, Cook testified about the 2002 note--that Mike had executed it when he first bought the property and that Cook had repeatedly asked Mike to repay the loan. The trial court's finding that Cook's cause of action for foreclosure on the February 2002 note and deed of trust "is directly related" to the previously filed litigation is thus amply supported by the record.*fn6
Cook asserts it is manifestly unfair that he be deemed to have "forfeited" his right to recover on the 2002 note and enforce the deed of trust. However, as we have observed above, he is in no position to cry "foul." He was willing to settle and thus forego any claim on the note and action to foreclose on the deed of trust. But simply out of pique, he refused to accept Stephanie's belatedly proffered signature on the settlement agreement, which would have sealed the deal and delivered the property to him. His obdurate refusal to do so paved the way for all the tortured proceedings that followed.*fn7
C. Substantial Evidence Supports the Judgment for Stephanie on the Second Cause of Action for Malicious Prosecution
The second cause of action for malicious prosecution, asserted by Moreland LLC only, was based on the Rosens' filing of lis pendens notices in conjunction with, but lack of success on, their equitable claim for fraudulent conveyance in their first case (No. 440930). As we noted above, the trial court found there was "simply no evidence" Stephanie filed lis pendens notices and pursued the claim without any basis for doing or for malicious reasons. The court also found she had relied on counsel in pursuing the claim and filing the lis pendens.
Without even acknowledging the applicable standard of review on appeal, let alone heeding it, Moreland LLC mounts what is in effect a substantial evidence challenge to the trial court's ruling in favor of Stephanie. "On appeal, we review the whole record in the light most favorable to the judgment below to determine whether it discloses substantial evidence--that is, evidence that is reasonable, credible and of solid value--from which a reasonable trier of fact could find the defendant guilty beyond a reasonable doubt. [Citations.] ' "[I]f the verdict is supported by substantial evidence, we must accord due deference to the trier of fact and not substitute our evaluation of a witness's credibility for that of the fact finder." ' [Citation.]" (People v. Snow (2003) 30 Cal.4th 43, 66, quoting People v. Ochoa (1993) 6 Cal.4th 1199, 1206.) The testimony of a single witness may be sufficient. (People v. Avila (2009) 46 Cal.4th 680, 703, citing People v. Richardson (2008) 43 Cal.4th 959, 1030-1031.) We affirm if a "reasonable trier of fact could find that the judgment and each essential element thereof was established by the appropriate burden of proof." (Rivard v. Board of Pension Commissioners (1985) 164 Cal.App.3d 405, 414.)
The trial court found an utter lacuna of proof as to the second cause of action. "I don't find that there's anything that Ms. Rosen did or said or had knowledge of that can support a cause of action." "[T]here is simply no evidence, factual evidence . . . to support it." The record amply supports this assessment. Stephanie was aware of the litigation, but had little involvement in the details. For example, when asked whether she understood the effect of filing a lis pendens, she answered: "I'm not certain actually."
Moreland LLC complains the trial court overruled an objection to a leading question asked of Stephanie by her own counsel--"Was the lis pendens recorded based on advice of counsel"--and then failed to allow Moreland LLC to cross-examine Stephanie on the details of her discussion with her attorney.*fn8 To begin with, the trial court only conditionally denied Moreland LLC's request for follow-up cross examination, stating if Moreland LLC could provide any authority in support of its request, the court would reconsider. Moreland LLC provided no authority, and thus did not pursue the issue. It accordingly, has waived the issue on appeal. (See K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc. (2009) 171 Cal.App.4th 939, 948-950.)
Even if the issue was preserved, and even if there was any abuse of discretion in limiting the extent of Cook's questioning, it was not prejudicial. One of the essential elements of a malicious prosecution claim is that the defendant acted "primarily for a purpose other than succeeding on the merits of the claim" on which he or she did not prevail. (CACI No. 1501; Bertero v. National General Corp. (1974) 13 Cal.3d 43, 50 [malicious prosecution plaintiff must prove inter alia defendant brought prior action "with malice"].) It is clear from the record the trial court found Stephanie was not motivated by malice. For this reason, alone, the judgment as to the second cause of action must be affirmed, regardless of whether she also carried her burden of proving the affirmative defense of reliance on counsel. We therefore do not reach the issues Moreland LLC has raised in connection with that affirmative defense.
D. Judgment Was Correctly Entered for Stephanie on the Third Cause of Action for Conversion
The third cause of action for conversion was asserted by both Cook and Moreland LLC and based on the Rosens' execution on the judgment in their favor in case No. 440930 before Cook and Moreland LLC filed a personal surety bond staying execution of the judgment on appeal. Cook and Moreland LLC claimed that once they filed the surety bond and a stay went into effect, the Rosens should have returned the amounts they had already obtained by levy.
As we discussed above, the parties took differing positions on the effect the procedural posture of case No. 440930 had on the conversion cause of action. The trial court essentially concluded Cook and Moreland LLC's abandoned trip to the Court of Appeal and ostensible settlement with Mike in case No. 440930, "changed the very basis" of their third cause action in case No. 461115. To avoid making the situation any more confusing, the court entered judgment in favor of Stephanie. The trial court's sense that the litigation had become a Gordian knot is understandable. It is also a tangle in which we do not need to become enmeshed.
Stephanie argued in the trial court that Cook and Moreland LLC's tort claim based on the postjudgment execution and levy on their assets was barred by the absolute litigation privilege set forth in Civil Code section 47, subdivision (b). The trial court heard argument on the issue, but then said it had not had time to research the point. We agree with Stephanie and affirm the judgment in her favor as to the third cause of action on the ground it was barred by the litigation privilege.
We begin by observing Cook and Moreland LLC are correct in asserting that once they posted an appropriate undertaking in case No. 440930 staying the judgment on appeal, the Rosens could not retain the property on which they had properly levied prior to the posting of the undertaking. (California Commerce Bank v. Superior Court (1992) 8 Cal.App.4th 582, 584-588 (California Commerce Bank).) However, the fact the Rosens should have returned any property on which they had levied, does not also mean they can be sued in tort for damages.
In Brown v. Kennard (2001) 94 Cal.App.4th 40 (Brown), the defendant enforced a purported money judgment by levying on the plaintiff's deposit account pursuant to a writ of execution. However, the plaintiff was not a party to the underlying action, and he sued for abuse of process. The trial court sustained the defendant's demurrer without leave to amend. The Court of Appeal affirmed, ruling the abuse of process claim was barred by the absolute litigation privilege set forth in Civil Code section 47, subdivision (b).
The court explained the California courts "recognized long ago that a wrongful levy may constitute an abuse of process." (Brown, supra, 94 Cal.App.4th at p. 46.) It also discussed several more recent cases holding such efforts are " 'logically and legally related to the realization of a litigation objective--that is, collection of a judgment,' " and, as such, are privileged under Civil Code section 47, subdivision (b). (Brown, at p. 48, quoting O'Keefe v. Kompa (2000) 84 Cal.App.4th 130, 134-135.) The appellate court agreed with the reasoning of these cases. "Undeniably . . . enforcement proceedings are an extension of the judicial process and are related to the realization of a litigation objective." (Brown, at p. 49.)
The court went on to observe the "recent decisions that invoke the litigation privilege and curtail the derivative tort remedy of abuse of process arising from allegedly wrongful levies recognize, importantly, that the plaintiff (the one being levied on) is not left remediless." (Brown, supra, 94 Cal.App.4th at p. 50.) For example, a party threatened with or aggrieved by allegedly wrongful execution efforts can promptly post an undertaking or seek a writ of supersedeas precluding any enforcement efforts, file a motion to quash a wrongful writ of execution, or file a motion for a turnover order to recover property that has been seized. (Ibid.; see also California Commerce Bank, supra, 8 Cal.App.4th at p. 588.)
That Cook and Stephanie titled their third cause of action as one for "conversion," rather than for "abuse of process," is simply a matter of labeling and has no substantive significance with respect to the litigation privilege. What is significant is the factual basis of their claim--that in attempting to execute on the judgment in their favor in case No. 440930, the Rosens wrongfully seized and retained property after the judgment was stayed on appeal. As Brown and the cases it discusses hold, the Rosens' efforts "undeniably" were "an extension of the judicial process . . . related to the realization of a litigation objective"--collecting on the judgment in their favor. (Brown, supra, 94 Cal.App.4th at p. 49; see also O'Keefe v. Kompa, supra, 84 Cal.App.4th at pp. 134-135 [abuse of process claim based on defendant's attempt to enforce judgment on appeal barred by litigation privilege].) The litigation privilege therefore applies and bars Cook's and Moreland LLC's derivative tort claim for conversion against Stephanie. Accordingly, judgment was properly entered in her favor on the third cause of action.
E. Cross-Appeal No. A123558
In connection with the first cause of action for judicial foreclosure, Cook alleged he was entitled to recover attorney fees on the basis of an attorney fee provision in the deed of trust. The fee provision was actually in the note secured by the deed of trust and specified: "If action be instituted on this note, the undersigned promise(s) to pay such sum as the Court may adjudge as attorney's fees." The "undersigned" was Mike. Accordingly, the fee provision, itself, was "one-sided," and fee reciprocity is provided by Civil Code section 1717. (Hsu v. Abbara (1995) 9 Cal.4th 863, 870 (Hsu) [" '[s]section 1717 was enacted to establish mutuality of remedy where [a] contractual provision makes recovery of attorney's fees available for only one party [citations], and to prevent oppressive use of one-sided attorney's fees provisions' "].)
At the close of arguments, the trial court asked whether attorney fees could be awarded if it concluded the foreclosure claim should have been raised as a compulsory cross-complaint in the Rosens' first lawsuit and, thus, did not decide the claim on the merits. Stephanie's attorney stated it would be a matter left to the trial court's discretion. Cook's attorney stated there would be no prevailing party. In its judgment filed on October 20, 2008, the trial court ruled the first cause of action should have been brought as a compulsory cross-complaint and further ruled "there is no prevailing party." It therefore "decline[d] to award attorney's fees" to Stephanie.
Nevertheless, Stephanie filed a motion for an award of attorney fees, which was heard on January 23, 2009. At the hearing, the trial court stated it had been "incorrect" in "believing" there was no prevailing party on the contract cause of action and under Supreme Court authority, Stephanie was the prevailing party. However, upon being advised that Cook and Moreland LLC had appealed from the judgment and Stephanie has cross-appealed, the court concluded it had no jurisdiction to correct the judgment. We now correct the trial court's acknowledged error.*fn9
Had Cook prevailed on the first cause of action for judicial foreclosure, he would have been entitled to recover contractual attorney fees. Under the reciprocity provided by Civil Code section 1717, and having wholly defeated Cook's claim, Stephanie was, in turn, entitled to fees. (Hsu, supra, 9 Cal. 4th at p. 870.) "It is now settled that a party is entitled to attorney fees under section 1717 'even when the party prevails on grounds the contract is inapplicable, invalid, unenforceable or nonexistent, if the other party would have been entitled to attorney's fees had it prevailed.' " (Ibid., quoting Bovard v. American Horse Enterprises, Inc. (1988) 201 Cal.App.3d 832, 842.)
That the trial court ruled in Stephanie's favor on a "procedural" ground--that Cook's cause of action for judicial foreclosure should have been brought as a compulsory cross-complaint in the Rosens' first action--is immaterial. Civil Code section 1717 defines "prevailing party" as the "party who recovered a greater relief in the action on the contract." (Civ. Code, § 1717, subd. (b)(1).) Thus, as Hsu holds, "when a defendant defeats recovery by the plaintiff on the only contract claim in the action, the defendant is the party prevailing on the contract under section 1717 as a matter of law." (Hsu, supra, 9 Cal.4th at p. 876.)
Stephanie obtained "a simple, unqualified victory by defeating the only contract claim in the action." (Hsu, supra, 9 Cal.4th at p. 877.) She was therefore the "prevailing party" and entitled to recover reasonable, contractual attorney fees. (Ibid.) As the prevailing party on this claim on appeal, Stephanie is also entitled to an award of reasonable, contractual attorney fees on appeal. " ' "[I]t is established that fees, if recoverable at all--pursuant either to statute or [the] parties' agreement--are available for services at trial and on appeal." (Italics added.)' (Morcos v. Board of Retirement (1990) 51 Cal.3d 924, 927 . . . ; Serrano v. Unruh (1982) 32 Cal.3d 621, 637 . . . .)" (Center for Biological Diversity v.County of San Bernardino (2010) 185 Cal.App.4th 866, 901.) " 'Although this court has the power to fix attorney fees on appeal, the better practice is to have the trial court determine such fees . . . .' (Security Pacific National Bank v. Adamo (1983) 142 Cal.App.3d 492, 498 . . . .)" (Ibid.)
In case No. 440930, the "Amended Judgment" entered on August 1, 2008, and the new trial order filed on September 25, 2008, are both reversed because the trial court had no jurisdiction to enter such judgment or order. The prior judgment in this case in favor of the Rosens and against Cook, LegacyQuest and Moreland LLC remains in full force and effect.
In case Nos. 451036 and 461115, the new trial orders are affirmed, and there is now no judgment in these cases as between any of the Cook parties and Mike Rosen. In addition, the April 18, 2008, orders in these cases enforcing the settlement agreement have no further force and effect.
In case No. 461115, the judgment in favor of Stephanie Rosen and against Cook and Moreland LLC is affirmed, except as to the denial of attorney fees to Stephanie Rosen. The ruling denying fees is reversed, and the matter is remanded to the trial court to determine, upon proper notice and motion, reasonable contractual attorney fees incurred in the trial court and on appeal.
The parties shall bear their own costs on appeal.
We concur: Margulies, Acting P. J. Dondero, J.