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Tenzera, Inc., et al v. Michael Osterman et al

April 19, 2012

TENZERA, INC., ET AL., PLAINTIFFS, CROSS-DEFENDANTS AND APPELLANTS,
v.
MICHAEL OSTERMAN ET AL., DEFENDANTS, CROSS-COMPLAINANTS AND APPELLANTS.



(Los Angeles County Super. Ct. No. SC086741) APPEAL from orders of the Superior Court of Los Angeles County, John H. Reid, Judge. Affirmed in part and reversed in part with directions.

The opinion of the court was delivered by: Aldrich, J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

In a prior opinion (Tenzera, Inc v. Osterman (Jan. 21, 2010, B211656) [nonpub. opn.] (Tenzera I)), we reversed the trial court's order vacating an arbitration award in favor of Michael and Lonnie Osterman (the Ostermans) against Tenzera, Inc. (the company). But, we affirmed the trial court's order vacating the award against Bruno and Ivan Tenzera (the Tenzeras) because the arbitrator exceeded his authority in joining them as parties to the binding arbitration. In Tenzera I, we stated the "parties are to pay their own costs on appeal." We did not decide whether the Ostermans were entitled to prejudgment interest. In the unpublished portion of this opinion, we hold that our disposition in Tenzera I did not preclude the Ostermans from seeking contractual attorney fees on appeal.

In what appears to be an issue of first impression in California, we must determine whether the Ostermans are entitled to prejudgment interest between the time the trial court vacated the arbitration award in their favor and our reinstatement of the award in the previous appeal in this case. Stated another way, we must determine whether the trial court erred in suspending the accrual of prejudgment interest (Civ. Code, § 3287, subd. (a)) (hereafter section 3287).*fn2 We conclude that prejudgment interest accrued during the pendency of the appeal in Tenzera I, and no statutory exception applies. Thus, the trial court erred in suspending the accrual of interest during the previous appeal in this case. Accordingly, we reverse in part, affirm in part, and remand the matter to enable the trial court to consider the Ostermans' attorney fees request and to amend the judgment to recalculate prejudgment interest.

BACKGROUND

The underlying dispute between the Ostermans and the company involves a contract to install tile, stone, and marble in the Ostermans' home. The service contract, entered into between the company and the Ostermans, has an attorney fees provision that states: "Should TENZERA, Inc. retain the services of any attorney in connection with performance by the acceptor of his obligations under this contract, whether or not suit is brought by TENZERA, Inc. to enforce the term of this contract, the acceptor shall pay reasonable attorney fees to TENZERA, Inc."

After filing suit, the company and the Ostermans stipulated to submit to " 'binding arbitration before a retired judge of the Superior Court in accordance with the provisions of California Code of Civil Procedure Sections 1280-1294.2.' " (Tenzera I, supra, B211656, at [p. 3].) During the arbitration proceedings, the arbitrator permitted the Ostermans to add the Tenzeras as cross-defendants. (Id. at [pp. 3-4].)

The arbitrator awarded the Ostermans $426,047.72, and found the company and the Tenzeras jointly and severally liable. (Tenzera I, supra, B211656, at [p. 4].) The arbitrator also concluded the Ostermans were the prevailing parties on the contract and awarded them $181,000 in attorney fees and costs recoverable from the company, but not from the Tenzeras because they were not parties to the contract. (Ibid.)

The Ostermans filed a petition to confirm the arbitration and attorney fees award (hereafter, arbitration award) pursuant to Code of Civil Procedure section 1285. The Ostermans also requested prejudgment interest from the date of the final arbitration award. (Tenzera I, supra, B211656, at [p. 4].) The Tenzeras sought to vacate the arbitration award because they did not voluntarily consent to arbitration. The company, along with the Tenzeras, also challenged the arbitrator's award of expert witness fees. (Id. at [pp. 4-5].) The trial court vacated the arbitration award as to all parties even though the company did not seek to vacate the award. (Id. at [pp. 10-11].) The Ostermans appealed.

In Tenzera I, we held the trial court erred in vacating the entire arbitration award, and should have modified the award to reflect that only the company was liable. (Tenzera I, supra, B211656, at [pp. 7-11].) This modification would have been consistent with the company's position because it did not seek to vacate the award and there did "not appear to be any reason not to confirm the award as to Tenzera, Inc., which was a party to the construction contract and the stipulation to arbitrate." (Id. at [p. 11].) We did not address the company's challenge to the arbitrator's decision to award expert fees, or the Ostermans' request for prejudgment interest. (Id. at [p. 12].) In Tenzera I, we did not award costs on appeal to either party. (Ibid.)

CURRENT APPEAL

On remand in Tenzera I, the trial court considered motions for attorney fees incurred on appeal, and the Ostermans' motion for prejudgment interest.

The trial court denied the Ostermans' request for attorney fees, reasoning that attorney fees are an element of costs under Code of Civil Procedure section 1033.5, subdivision (a)(10), and our opinion in Tenzera I denied costs on appeal. Moreover, the trial court concluded the Ostermans were not the prevailing party on appeal pursuant to Code of Civil Procedure section 1032, subdivision (a)(4).

The trial court also denied the Tenzeras' request for attorney fees, reasoning the arbitrator's award stated they were not parties to the contract. Thus, the Tenzeras were not entitled to contractual attorney fees, and there was no other statutory basis to support an attorney fees award.

The trial court awarded the Ostermans prejudgment interest, but did not award the interest that would have accrued during the pendency of the appeal in Tenzera I.*fn3 The trial court invoked the statutory exception in section 3287 and reasoned that during the pendency of the ...


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