(Super. Ct. No. SC20080098)
The opinion of the court was delivered by: Robie , J.
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
For nearly 20 years, plaintiffs Richard and Nancy Gardner leased certain property in South Lake Tahoe from Willette Strong, who held the property as the trustee of a testamentary trust set up by her late husband, Lester, for her support and maintenance.*fn1 Under the terms of Lester's will, the trust was to terminate on Willette's death and the trust property was to pass to his two daughters, defendants Joye McCoy and Carmen McCandlish (jointly, defendants). Along with the lease, however, Willette granted the Gardners the option to purchase the property on her death. When she died in 2007, they attempted to exercise the option, but defendants refused to cooperate. This breach of contract action followed.
Both sides moved for summary adjudication. Determining that the option was valid, the trial court granted the Gardners' motion and denied defendants' motion. Thereafter, the court awarded damages to the Gardners, entered judgment in their favor, and awarded them attorney fees and costs.
On appeal from the judgment and the award of attorney fees, defendants contend (among other things) that the trial court erred in ruling on the motions for summary adjudication because Willette was a life tenant who had no right to grant an option to purchase trust property that was effective only when she died. On their cross-appeal from the judgment and their appeal from a postjudgment order taxing their costs, the Gardners contend the trial court erred in awarding them a lesser amount of damages than they were entitled to and in taxing a substantial part of the costs they claimed.
We conclude the trial court did not err in granting the Gardners' motion for summary adjudication or err in denying defendants' motion for summary adjudication because Willette was not a life tenant; she held the property as a trustee under a trust that would have allowed her to sell the property outright during her lifetime and thus permitted her to take the lesser step of granting an option to purchase the property. We also conclude, however, that the trial court erred in its award of damages to the Gardners, and therefore we will reverse that award and remand the case to the trial court to recalculate it, though we otherwise affirm the judgment. As for the postjudgment orders granting the Gardners' motion for attorney fees and taxing some of the Gardners' costs, we will affirm those orders.
FACTUAL AND PROCEDURAL BACKGROUND*fn2
Lester died in 1977. Pursuant to his will, he left all of his property to his wife, Willette, in trust, for her lifetime. Upon her death, the trust was to cease and, after the payment of certain specific bequests, the remainder of the property was to pass to Lester's daughters, defendants. (Willette was not defendants' mother.)
Among the trust property was certain real property on U.S. 50 in South Lake Tahoe known as the Red Hut property.
In June 1978, Willette leased the Red Hut property to Malcolm and Lorraine Grant pursuant to a written lease. The term of the lease was five years, with an option to renew for an additional five years.
In November 1981, Willette and the Grants entered into an addendum to the lease under which, in exchange for $100, Willette gave the Grants an option to purchase the Red Hut property. By its terms, the purchase option could be exercised only in the event of Willette's death during the term of the lease or during the term of the five-year renewal of the lease. The purchase price was to be the appraised value of the property at the time of the exercise of the option. If the parties could not agree on the appraised value, then either party could petition the El Dorado Superior Court to select an appraiser, whose decision on the value would be conclusive. The terms of purchase were 25 percent cash down, with the balance payable over 10 years, with interest at the prime rate, secured by a deed of trust on the property. The addendum further provided that if legal action was necessary to enforce the terms of the option agreement, the prevailing party could recover reasonable attorney fees and costs of suit.
In December 1982, the Grants exercised their option to renew the lease through May 1988.
In December 1984, with Willette's consent, the Grants assigned their interest in the lease and the lease addendum to The Hut Partnership -- a general partnership consisting of Jerry Slack and Richard Gardner. Willette also agreed to extend the terms of the lease and the lease addendum through May 1993.
In August 1988, with Willette's consent, Slack assigned his interest in the lease, the lease addendum, and the lease extension to the Gardners.
In December 1997, Willette and the Gardners entered into a second addendum to the lease, under which the terms of the lease, the original lease addendum, and the lease extension were extended through May 2003. The second addendum also gave the Gardners the option to further extend the lease through May 2008. The Gardners subsequently exercised that option.
In October 2006, James Riordan was appointed to serve as trustee of the trust. By the spring of 2007, the trust had insufficient cash to pay its obligations. As a result, Riordan sought court approval to sell the Red Hut property to the Gardners. An appraiser determined that as of the end of May 2007 the property was worth $460,000.
In July 2007, before court approval of the sale to the Gardners, Willette died. In September 2007, the Red Hut property passed to defendants in equal shares. Thereafter, the Gardners attempted to exercise their option to purchase the property based on the previously appraised value of $460,000 by depositing $115,000 in cash and a promissory note for $345,000 into escrow with a title company. Defendants, however, refused to recognize the Gardners' exercise of the purchase option. Accordingly, in April 2008, the Gardners commenced this action by filing a verified complaint for breach of contract and breach of the covenant of good faith and fair dealing against defendants, seeking damages and specific performance.
In October 2008, defendants moved for summary judgment or summary adjudication on the ground (among others) that Willette did not have the power to grant the purchase option because "under the terms of the Trust, Willette . . . possessed only a life estate in the Red Hut property." Defendants also argued that the appraisal on which the Gardners were relying for the purchase price understated the size of the property. In support of their motion, defendants set forth as undisputed facts most of the chronology set forth above, relying largely on the documents attached to the Gardners' complaint.
In opposition to the motion, the Gardners argued that even though she was only a beneficiary of the trust for her lifetime, Willette nonetheless had the power to dispose of the Red Hut property by granting a purchase option that was effective only on her death. The Gardners also challenged defendants' attack on the appraisal.
In December 2008, before the trial court ruled on defendants' motion, the Gardners filed their own motion in which they sought "an order granting summary adjudication on their First Cause of Action for Breach of Contract, granting them the right to purchase the Red Hut Property and awarding them their attorney's fees and costs." To establish the undisputed facts in support of their motion, the Gardners relied primarily on the exhibits to their own complaint and on the evidence defendants had submitted in support of their motion; however, the Gardners did not actually submit any of these exhibits or evidence to the court along with their motion. Instead, they simply cited the exhibits and evidence in their separate statement.
In opposing the Gardners' motion for summary adjudication, defendants did not object to the evidentiary basis for the motion or argue that the summary adjudication the Gardners had requested was procedurally inappropriate. Instead, they disputed some of the facts the Gardners asserted and argued on the merits that the Gardners did not have a valid option to purchase the Red Hut property because Willette "had no authority to sell, or grant an option to sell, the . . . [p]roperty."*fn3
The cross-motions came before the court for hearing in March 2009. After oral argument from both sides, the court requested additional briefing.
Then, in June 2009, the court issued its ruling on the cross-motions without holding a further hearing. The court concluded that the case "turn[ed] on the legal effect of the various documents." Construing those documents, the court determined that Lester's will gave the Red Hut property to Willette, in trust, "with the specific power 'to receive, hold, sell, exchange, mortgage, manage, invest and reinvest the principal and proceeds therefrom.' " In essence, the court concluded the Gardners' option to purchase the property was valid and they had properly exercised the option. Accordingly, the court granted the Gardners' motion and denied defendants' motion. In granting the Gardners' motion, the court further determined that they were entitled to an award of attorney fees and costs.
Two weeks later, the Gardners filed a memorandum of costs, along with supporting documentation, claiming over $38,000 in attorney fees. Defendants moved to strike the costs memorandum, arguing that a noticed motion for attorney fees was necessary and that, in any event, any fee award was premature because the Gardners' second cause of action, for breach of the covenant of good faith and fair dealing, remained unresolved. The Gardners responded by filing a motion for attorney fees and costs. The trial court denied the motion to strike the costs memorandum but also denied the motion for attorney fees on the ground that fees could not be fixed until judgment was rendered.
In a settlement conference statement filed in November 2009, the Gardners contended that the issues remaining to be resolved were their "breach of contract damages and [their] cause of action for breach of the covenant of good faith and fair dealing."
In December 2009, the Gardners procured another appraisal of the Red Hut property, which valued the property at $470,000 as of July 26, 2007 (hereafter, the JPA appraisal).
Ultimately, the matter was set for trial in August 2010. In their pretrial brief, the Gardners claimed as damages the rent they had been paying on the property since October 2007, when they attempted to exercise the purchase option. For their part, in their brief defendants argued (among other things) that enforcement of the option would violate the Subdivision Map Act (Gov. Code, § 66410 et seq.) because the purchase option covered only part of the legal parcel. Along with their brief, defendants filed the JPA appraisal, which they contended, unlike the appraisal from 2007, "covered the entire legal parcel." More broadly, defendants asserted in their brief that there were "no triable issues remaining to proceed to trial, and therefore the Court should resolve [the] various questions of law presented in the instant briefing and enter judgment at the conclusion of this pretrial briefing."
At a status conference in early August, the trial court vacated the "one day court trial date" set for later that month and set a hearing on motions in limine for September, with a case management ...