COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA
December 17, 2010
DC PAINTING, INC., PLAINTIFF AND RESPONDENT,
MICHAEL SUMMERS, DEFENDANT AND APPELLANT.
Super. Ct. No. 37-2007-00074199-CL-BC-CTL APPEAL from an order of the Superior Court of San Diego County, William R. Nevitt, Jr., Judge. Affirmed.
The opinion of the court was delivered by: Nares, J.
DC Painting v. Summers 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
This action involves a dispute over a contract for DC Painting, Inc. (DC Painting) to paint a commercial property owned by Michael Summers. The contract called for payment to DC Painting in the amount of $4,200 and contained an attorney fee clause. A dispute arose between the parties and Summers refused to pay DC Painting.
DC Painting sued Summers, and, following a court trial, judgment was entered in favor of DC Painting in the amount of $3,800.
Thereafter, DC Painting brought a motion for attorney fees, seeking $69,735 in fees. The court found that (1) DC Painting was the prevailing party on the contract; (2) DC Painting provided the requisite prelitigation notice to Summers that he might be liable for fees and costs, required under Code of Civil Procedure*fn1 section 1033, subdivision (b)(2), where a party obtains a judgment within the jurisdictional amount of the small claims court; (3) Summers's section 998 offer did not preclude an award of attorney fees to DC Painting; and (4) $37,100 constituted a reasonable amount of attorney fees.
Summers appeals the order awarding attorney fees, asserting (1) he was not given proper notice under section 1033 that the action could result in an award of fees and costs to DC Painting; (2) an award of fees was not proper because Summers's section 998 offer to compromise was greater than DC Painting's recovery; (3) DC Painting was not the prevailing party on the contract; (4) the above facts, taken together, required a denial of fees; and (4) the amount of the fee award was unreasonable. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. DC Painting's Painting Work for Summers
In March 2007 Summers, through his agent Mark Ewing, entered into a written contract with DC Painting for painting work on Summers's commercial building. The contract was in the amount of $4,200. The contract contained a provision for recovery of attorney fees in any action brought to enforce the contract.
In April 2007 DC Painting substantially completed the painting work.
B. The Dispute
Summers refused to pay DC Painting, and, according to DC Painting, refused it access to the property to address punch list items and touch-up painting. According to DC Painting, Summers was unsatisfied with the color of the paint, although Summers chose the paint color.
Thereafter, Ewing sent DC Painting a check in the amount of $3,050 for partial payment, but Summers stopped payment on the check. Summers then asserted that he did not enter into the contract, he did not know about the contract, and Ewing did not have authority to enter into the contract. Summers denied receiving a preliminary notice of the work being performed and threatened that the costs of collecting would make it impossible for DC Painting to be made whole.
DC Painting's counsel sent Summers two letters notifying Summers that if the amounts owed were not paid in full, DC Painting would be forced to institute legal action, which could include an award of attorney fees and costs. Specifically, in a letter sent July 2, 2007, counsel for DC Painting stated, "As you are aware, the contract with DC Painting provides for the payment of all costs associated with the collection of overdue payments, including attorneys' fees." The letter then totaled the amount of principal and interest due, as well as the amount of attorney fees incurred to that date, and stated, "If payment to DC Painting in the amount of $6,306.19 is not delivered to our offices by the close of business on July 5, 2007, we will file suit in the Superior Court of San Diego for breach of contract and to foreclose on the mechanic's lien already recorded against the Thornmint property."
Thereafter, DC Painting received a check for $3,900 from a third party, Ameri Care Medical Services, Inc., a company owned by Summers, with the notation, "Partial payment being paid under protest due to incomplete/improper/non-contracted work." DC Painting rejected the check.
C. The Instant Action
DC Painting filed a complaint in the Superior Court of San Diego County, alleging causes of action for breach of contract, reasonable value of labor, equipment and materials, foreclosure of mechanic's lien, unjust enrichment, and breach of implied warranty of authority.
On August 25, 2008, shortly before trial, Summers served a section 998 offer of compromise in the amount of $4,701, which included principal and interest, plus costs incurred to date, "but exclusive of attorney's fees, as precluded by [ s]section 1033[, subdivision] (b)." DC Painting rejected the [section] 998 offer, and countered with an offer of $10,000 to settle the action.
On September 9, 2008, the matter came on for a court trial before the Honorable William R. Nevitt, Jr., on DC Painting's breach of contract and foreclosure of mechanic's lien claims. . After hearing a half day of testimony, the matter was continued at Summers's request and thereafter trial was held over a period of three days. After hearing testimony and receiving exhibits, the court found in favor of DC Painting on both those claims. The court awarded DC Painting $3,800, which consisted of the contract price, minus $400 that DC Painting's expert estimated it would cost to correct deficiencies in DC Painting's work and do touch-up work not performed by DC Painting.
D. Motion for Attorney Fees
Following trial, DC Painting brought a motion for attorney fees seeking $69,735 in fees it incurred in prosecuting the action. In that motion, counsel detailed the work performed prelitigation, pretrial, and at trial. Counsel explained that they were required to incur more fees than is ordinarily required in the early stages of litigation because of Summers's "evasive tactics" such as denying there was a contract, denying Ewing had authority to enter into the contract, denying he ever received the preliminary lien notice, and sending partial payment checks, one of which he stopped payment on. In this early stage of the litigation, DC Painting incurred $6,559 in attorney fees.
DC Painting asserted that it made a concerted effort to minimize fees incurred prior to trial. It used written discovery to address Summers's defenses, and took Summers's deposition. Until 30 days before trial, counsel incurred $11,452 in attorney fees for pretrial preparation.
Counsel also explained that the start of trial for half a day, and the two-month continuance at Summers's request, led to unavoidable duplication of trial preparation fees. DC Painting incurred $14,669 preparing for the initial trial date. Thereafter, DC Painting incurred an additional $20,994.50 in fees preparing for the continued trial date. DC Painting incurred $16,619.50 attending trial and related hearings.
DC Painting incurred $6,000 in preparing the motion for attorney fees. The hourly rates for the attorneys that worked on the case ranged from $125 to $350 per hour.
DC Painting also submitted a declaration from an attorney specializing in construction litigation who opined that the rates charged and hours worked by counsel for DC Painting were reasonable.
Summers opposed the motion, arguing (1) section 1033 required that DC Painting be denied its fees, (2) DC Painting was not the prevailing party, (3) section 998 established that DC Painting was not the prevailing party, and (4) the fees were unreasonable.
The court granted DC Painting's motion, finding first that DC Painting was the prevailing party. It also found that section 1033, subdivision (b)(2) applied because although DC Painting's award was within the jurisdiction of the small claims court, DC Painting's cause of action for foreclosure of mechanic's lien could not be brought in small claims court. Therefore, in order to be awarded fees, DC Painting was required, prior to commencement of the action, "to 'inform the defendant in writing of the intended legal action against the defendant and that legal action could result in a judgment against the defendant that would include the costs and necessary disbursements allowed by this paragraph.' " The court found that counsel for DC Painting's July 2, 2007 letter complied with that section. The court found that section 998 did not preclude an award of fees to DC Painting and that the award to DC Painting, including costs and attorney fees incurred prior to the section 998 offer, exceeded that offer. The court found that $37,100 was a reasonable amount of fees.
A. Section 1033 Notice
Section 1033, subdivisions (b)(1) and (2) provides:
"When a prevailing plaintiff in a limited civil case recovers less than the amount prescribed by law as the maximum limitation upon the jurisdiction of the small claims court, the following shall apply: [¶] (1) When the party could have brought the action in the small claims division but did not do so, the court may, in its discretion, allow or deny costs to the prevailing party, or may allow costs in part in any amount as it deems proper. [¶] (2) When the party could not have brought the action in the small claims court, costs and necessary disbursements shall be limited to the actual cost of the filing fee, the actual cost of service of process, and, when otherwise specifically allowed by law, reasonable attorneys' fees. However, those costs shall only be awarded to the plaintiff if the court is satisfied that prior to the commencement of the action, the plaintiff informed the defendant in writing of the intended legal action against the defendant and that legal action could result in a judgment against the defendant that would include the costs and necessary disbursements allowed by this paragraph." (Italics added.)
As stated, ante, the court found that section 1033, subdivision (b)(2) applied because DC Painting's mechanic's lien could not be brought in small claims court. Summers disputes that finding, asserting subdivision (b)(1) applies, and the court should have denied fees under that section. However, Summers provides no authority for his position that section subdivision (b)(1) applies.
The court was correct that subdivision (b)(2) applies because a cause of action for foreclosure of a mechanic's lien can only be brought in the superior court. Section 392, subdivision (a)(2) provides that "the superior court in the county where the real property that is the subject of the action, or some part thereof, is situated, is the proper court for the trial of the following actions: [¶] . . . [¶] (2) For the foreclosure of all liens and mortgages on real property." (Italics added.)
Summers asserts that if subdivision (b)(2) applies, the court erred in finding DC Painting gave adequate notice under that subdivision because "there was no warning that fees would be attached, there was only a demand and assumption that fees must be paid." However, the July 2, 2007 letter informed Summers that he was liable under the contract for attorney fees, and that if the contract amount were not paid, along with fees incurred to date, suit would be filed. That letter provided adequate notice to Summers that if suit were filed, any judgment against him would include attorney fees. The court did not err in concluding that DC Painting complied with section 1033, subdivision (b)(2).
B. Section 998
Summers asserts that because he made a section 998 offer that exceeded DC Painting's recovery, fees should be denied. This contention is unavailing.
Section 998, subdivision (c)(1) provides: "If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant's costs from the time of the offer."
However, in determining whether the plaintiff obtained a judgment more favorable than the section 998 offer, the plaintiff's preoffer costs and attorney fees must be included. (Heritage Engineering Const., Inc. v. City of Industry (1998) 65 Cal.App.4th 1435, 1441.) As of the date of the offer, DC Painting had already incurred more than $20,000 in attorney fees. Thus, it is clear that DC Painting's recovery, when its preoffer costs and attorney fees are included, exceeded Summers's offer of $4,701, and thus section 998 does not preclude an award of attorney fees to DC Painting.
C. DC Painting as the Prevailing Party
Summers asserts DC Painting was not the prevailing party because DC Painting failed to accept the check for $3,900 it offered prior to litigation, and DC Painting only obtained an award of $3,800. We reject this contention.
In an action on a contract, Civil Code section 1717 permits an award of attorney's fees to the prevailing party. "[T]he party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section." (Civ. Code, § 1717, subd. (b), italics added.)
When a party obtains a " 'simple, unqualified win' " by completely prevailing on, or defeating, the contract claims in the action, and the contract contains a provision for attorney fees, the successful party is entitled to attorney fees as a matter of right, eliminating the trial court's discretion to deny fees under Civil Code section 1717. (Hsu v. Abbara (1995) 9 Cal.4th 863, 875-877 (Hsu).) "If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees." (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.) "Because the statute allows such discretion, it must be presumed the trial court has also been empowered to identify the party obtaining 'a greater relief' by examining the results of the action in relative terms: the general term 'greater' includes '[l]arger in size than others of the same kind' as well as 'principal' and '[s]uperior in quality.' " (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1151.)
When determining the prevailing party under Civil Code section 1717, the trial court "is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources." (Hsu, supra, 9 Cal.4th at p. 876.)
Additionally, "in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by 'equitable considerations.' For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective." (Hsu, supra, 9 Cal.4th at p. 877, italics omitted.) A trial court has wide discretion in determining which party is the prevailing party under Civil Code section 1717, and we will not disturb the trial court's determination absent "a manifest abuse of discretion, a prejudicial error of law, or necessary findings not supported by substantial evidence." (Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 577.)
DC Painting sought $4,200, the contract price, and obtained an award of $3,800. At trial, Summers sought to deny DC Painting any recovery, arguing DC Painting did not complete the project, it was not done in a workmanlike manner, and the damages Summers incurred to complete the work offset any damages claimed by DC Painting. Thus, because DC Painting obtained a $3,800 award, and the court rejected Summers's defenses, DC Painting "recovered a greater relief in the action on the contract." (Civ. Code, § 1717, subd. (b)(1).) It matters not that the damages sought by DC Painting were reduced by the court. (See Distefano v. Hall (1968) 263 Cal.App.2d 380, 385, 385-387 [plaintiff prevailing party even though it sought $128,458.05 in damages, but obtained a net judgment of only $12,559.96].)
Moreover, Summers offers no authority for the proposition that a prelitigation offer of less than the contract amount, rejected by the plaintiff, precludes that plaintiff from being considered the prevailing party if the plaintiff fails to obtain a recovery greater than that offer. Civil Code section 1486 provides: "An offer of partial performance is of no effect." As discussed, ante, the offer of partial performance did not include the attorney fees DC Painting had incurred and was for less than the contract amount. Moreover, at trial, Summers sought to evade any liability on the contract, not merely reduce DC Painting's damages to the amount of the prelitigation offer. The court rejected Summers's defenses and awarded DC Painting relief on the contract. The court did not abuse its discretion in finding DC Painting was the prevailing party on the contract.*fn2
D. Reasonableness of Fees Awarded
Summers asserts that the amount of fees was unreasonable, arguing "the amount awarded, in comparison to the amount in controversy, can only be described as madness." In support of this contention, Summers cites Bakkebo v. Municipal Court (1981) 124 Cal.App.3d 229 for the proposition that fees should bear some rational relationship to the amount of the substantive recovery. However, Bakkebo does not support Summers's position. Rather, in Bakkebo, a case filed in the municipal court, the Court of Appeal held that fees that exceeded the jurisdiction of the municipal court were excessive. (Id. at p. 236.) Here, the attorney fee award did not exceed a jurisdictional amount.
In fact, courts have often awarded fees that are substantially larger than the damages awarded. For example, in Stokus v. Marsh (1990) 217 Cal.App.3d 647, 651, 656-657, the Court of Appeal upheld as reasonable an attorney fee award in the amount of $75,000, where the plaintiff only recovered $6,166 in damages.
The ratio of fees to the principal amount awarded is not determinative. Rather, courts must weigh the facts and circumstances of the individual case to determine what is reasonable. (Boyd v. Oscar Fischer Co. (1989) 210 Cal.App.3d 368, 381.)
DC Painting requested an award of $69,735 in attorney fees and submitted detailed billing records in support of the request. DC Painting also submitted a declaration by a partner at an unaffiliated law firm to support the reasonableness of the fees requested. After the matter was briefed, the court reduced DC Painting's request to $37,100, finding that this amount was reasonable.
Although Summers asserts the amount of the award is excessive, he does not point to any specific fees that were unnecessary or excessive. Nor does he claim the rates billed were unreasonable. Accordingly, Summers cannot show the court abused its discretion in awarding DC Painting fees in the amount of $37,100.
The order awarding DC Painting $37,100 in attorney fees is affirmed. DC Painting shall recover its costs on appeal.
BENKE, Acting P. J.