Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. 1-06-CV-074030
Bamattre-Manoukian, ACTING P.J.
Appellants Louis Ferrari Doyle and Vicki Saxton Doyle appeal from an “Order and Judgment” filed October 20, 2008 (appeal No. H033773), and from a subsequent order filed on February 23, 2009, awarding respondents David Bayto and Marlene A. Mattoon, Co-Trustees of the Jack P. Boyto Trust, $278,323 in attorney’s fees (appeal No. H034076). We have denied appellants’ motion to consolidate, but we will consider the two appeals together.
In appeal No. H033773, appellants argue, 1) that the court’s imposition of a vendor’s lien on the subject property was improper, 2) that a jury award of $99,339 in damages on a cause of action for breach of fiduciary duty was unsupported by the evidence, 3) that the narrow attorney’s fee provision in the parties’ contract did not support the court’s prevailing party determination for purposes of an award of attorney’s fees under Civil Code section 1717, and 4) that the judgment contains language that does not accurately reflect the findings of the jury in its special verdict.
As to the first contention, we find this issue has been mooted by the subsequent foreclosure and sale of the subject property. We reject appellants’ second contention, that the damages award was not supported by the evidence. As to their third contention, we agree with appellants that the court improperly considered the result in a tort cause of action in making its determination of the party prevailing on the contract. (See Hsu v. Abbara (1995) 9 Cal.4th 863, 873-874.) We find that the matter must be remanded so that the court can exercise its discretion, in accordance with Civil Code section 1717 and the principles expressed herein, to determine which party, if any, was the party prevailing on the contract. We also find that appellants’ fourth contention has merit. On remand, appellants may request the trial court to delete any inaccurate language contained in the judgment.
We reverse the judgment in appeal No. H033773. This disposition renders appeal No. H034076 moot, and we will therefore dismiss that appeal.
BACKGROUND
The Parties
Appellant Louis Doyle is an attorney licensed in California and is also a licensed California real estate broker. He earns his living primarily as an attorney. He is not active in real estate sales, although he was sole proprietor of a business called Ferrari Land Company at the time of these events. He is married to appellant Vicki Saxton Doyle. In 1995, the Doyles built a home in rural Gilroy and moved to Gilroy from the Palo Alto area. In 1999, Doyle moved his law practice from Palo Alto to San Martin.
Jack Boyto, now deceased, owned a block of commercial property in San Martin. Doyle and Boyto first met when Doyle rented office space from Boyto for his law practice. Boyto was retired and lived in Santa Clara, although he farmed property he owned in Gilroy containing a prune orchard. At the time of the sale of the Gilroy property to Doyle in 2000, Boyto was 82 years old. The record reflects that Doyle and Boyto had a cordial relationship.
Respondents David Bayto and Marlene Mattoon are the nephew and niece of Jack Boyto. After his death in 2006, they took over his affairs as successor co-trustees of his trust.
Bayto explained that the family surname is Bojto. Some family members spell the name Boyto and others spell it Bayto.
Sale of 23-Acre Property (the Roop Road Property)
In 1999, shortly after Doyle moved into the office in San Martin, Boyto asked Doyle to take a look at his prune orchard property located off of Roop Road in rural Gilroy. It consisted of three parcels, totaling 23 acres. A vacant older house was situated on one of the parcels. According to Doyle, Boyto asked him to put a for sale sign on the property. Boyto said he wanted to ask $1.2 million for the property, but that he would accept $1 million. Doyle testified that he offered to put the property on the multiple listing service but that Boyto did not want to sign a written listing agreement. Doyle placed a Ferrari Land Company sign on the property, which remained there during the last six months of 1999. He also placed ads in the local newspaper. There were some inquiries on the property but no offers. Doyle removed the sign in late December of 1999 and stopped advertising. He had decided to make an offer on the property himself.
In early January of 2000, Doyle presented a written offer to Boyto to purchase the property for $940,000. The offer included financing carried by the seller. Doyle testified that he and Boyto had discussions about the offer, and in particular about the four-acre parcel that was part of the 23 acres. They discussed Doyle’s intent to sell off this parcel in order to be able to pay down the seller financing. Both Boyto and Doyle believed that the four-acre parcel was a separate buildable parcel.
Several weeks later, Boyto came to Doyle’s office and made an oral counter offer to sell the property to Doyle for the full $1 million. Doyle agreed, and he prepared and signed a purchase contract. The two-page purchase contract, dated January 19, 2000, described the real property, a total of approximately 23 acres consisting of three parcels, which were identified by their Assessor’s Parcel Numbers (APNs). The terms were $40,000 cash and the balance of $960,000 to be carried by the seller at 6 percent interest, payable in annual payments of interest only, in the amount of $57,600, for ten years, when all principal and interest would be due and payable. The debt was to be secured by a deed of trust on the property.
The purchase agreement contained a release clause, whereby the seller agreed to release any or all of the three parcels free of the purchase money security, upon payment of a portion of the outstanding principal. The payment was to correspond to the percentage of acreage released, plus $100,000. The agreement described in detail how this would work with the four-acre parcel, identified as APN 835-24-026: “[S]hould buyer request release of the security against the four acre parcel bounded on the south by Dryden Ave, buyer would be required to pay seller four twenty-thirds of $960,000.00 or $166,957.00 of the principal plus interest accrued plus $100,000.00 for a total of $266,957.00 plus interest accrued on said fractional amount.” The promissory note for $960,000, signed by the Doyles, contained the same language. The purchase agreement further provided that this formula could be applied to release the other parcels from the security, and that the acreage of such parcels could change if there were lot line adjustments.
Other provisions of the purchase agreement were: it was effective as of January 1, 2000, and Doyle was to be responsible for all taxes, insurance and assessments from that date; Doyle was to pay all title and escrow costs; Boyto was to retain the right to farm the property through the year 2000; and Boyto agreed to subordinate his security interest to a construction loan. Both parties to the agreement acknowledged in writing that Doyle was a licensed attorney and real estate broker. No close of escrow date was stated in the contract. Doyle signed the agreement on January 19, 2000, and Boyto signed it on February 10, 2000. Doyle paid Boyto the $40,000 down payment. During the year Boyto farmed the prune orchard and Doyle kept some horses on the portion of the four-acre parcel where there were no prune trees.
Escrow closed a year later, on January 12, 2001, concurrent with the first annual interest payment of $57,600.
Problems With the Property and Subsequent Refinancings
The three parcels comprising the 23 acres were configured as follows. The smallest one, APN 835-24-013, approximately one and one- half acres, was a long and narrow parcel extending out to the driveway entrance on Roop Road. The middle parcel, APN 835-24-014, was approximately 17 acres, and contained most of the prune trees, the house and some storage buildings. According to Doyle, Boyto had told him that this parcel was actually two separate parcels of approximately eight and nine acres, with the house located on the nine acres. The third parcel, APN 835-24-026, consisted of four acres and extended out to Dryden Avenue. Boyto had purchased this four-acre parcel in 1977. The rest of the property had been in the family since the 1950s.
Doyle made the second interest payment of $57,600 in January of 2002. During 2001, he had worked with an engineering firm to obtain lot line adjustments in order to divide the 17-acre parcel. As of January 1, 2002, the County of Santa Clara (County) changed its zoning laws so that these lot line adjustments were prohibited. Doyle was also improving the property by installing fences for his horses, resurfacing the driveway, and remodeling the older existing house. In the fall of 2002, he asked Boyto to subordinate to a loan of $300,000 to finance these and other improvements. Boyto agreed to subordinate his $960,000 loan to the new loan in October of 2002. Doyle also put the entire property on the multiple listing service, for $2.5 million, and in addition was trying to sell the four-acre parcel separately.
Doyle made the interest payment to Boyto in 2003. Later that year, Doyle received an offer to purchase the four-acre parcel for $375,000. However, in May of 2003, the County informed him that the four-acre parcel was not a legal parcel, because it had been created subsequent to the 1969 Map Act. Since the parcel was not a buildable parcel, Doyle’s prospective buyers backed out of the sale. Doyle showed the letters from the County to Boyto and they discussed the situation. Both men had thought that the four-acre parcel was a buildable parcel. According to Doyle, Boyto was very understanding of the change of circumstances, and was willing to cooperate to try to work out a solution. There was no written memorandum of this discussion. Doyle again listed the entire property on the multiple listing service, this time for $1.875 million. In August of 2003, the Doyles also put their home up for sale.
On December 3, 2003, Doyle wrote to Boyto explaining that because he had been unable to complete the sale of the four-acre parcel, and the Doyles’ home had not yet sold, they were unable to make the January 2004 interest payment on time. Doyle said he was hopeful their house would sell early in 2004, at which time he would make the 2004 interest payment. He asked for Boyto’s forbearance and Boyto agreed.
More problems developed with the property when the County began a review of agricultural land under the Williamson Act. All of the property in the 23 acres purchased by Doyle was subject to Williamson Act contracts. The County finally reached a decision that prohibited all building on Williamson Act land.
The California Land Conservation Act of 1965 (Gov. Code, § 51200 et seq.), also known as the Williamson Act, authorizes local governments to establish “agricultural preserves” consisting of lands devoted to agricultural and other compatible uses. (Gov. Code, § 51230.) Once a preserve is established, the local government may enter into a renewable contract with the landowner to restrict the use of the land in exchange for favorable property tax assessments. (Gov. Code, §§ 51240, 51242, 51244; see County of Colusa v. California Wildlife Conservation Bd. (2006) 145 Cal.App.4th 637, 642.)
The Doyles’ home sold in April of 2004, and they moved into the remodeled house on the 17 acres. Again they needed to refinance and applied for a new loan for $763,000 for improvements to the property. Doyle wrote to Boyto in September of 2004, explaining that he would be making two interest payments, one for 2004 and one for 2005, from the proceeds of the loan, and he asked if Boyto would release his security on the 17 acres so that the new loan could be placed on this part of the property. After the new loan was recorded, Boyto’s deed of trust could be recorded in second position. Doyle confirmed in this letter that he still owed the full amount of $960,000, plus unpaid interest, and that he intended to pay off the entire loan. Doyle informed Boyto that part of the 17 acres, which the County had approved as a separate eight-acre parcel, was up for sale. Boyto agreed to release his security on the acres and signed a partial reconveyance on September 28, 2004.
With the proceeds of the new loan, the Doyles paid off the existing $300,000 loan, and paid Boyto $115,200, representing the interest payments for 2004 and 2005. The Doyles executed and notarized a deed of trust on November 1, 2004, and Doyle presented it to Boyto. According to Doyle, Boyto told him he did not need to record it. Boyto said he would continue to carry the note unsecured so that Doyle would be able to sell off the eight-acre parcel, or another part of the property, in order to pay down the loan.
In April of 2005, the Doyles obtained an equity line on the 17-acre parcel for $150,000. According to Doyle, he told Boyto about this, and Boyto approved it.
The San Jose Commercial Property Transaction
In July of 2005, Boyto contacted Doyle seeking advice about an offer he had received on a commercial property he owned in San Jose, referred to as the Chynoweth property or the Shenado property. Doyle met with him, looked over the offer, which was an option agreement, and agreed to represent Boyto in the transaction. The offer was for $1.2 million. Boyto received an initial deposit of $10,000, and then later agreed to an extension for the payment of further option monies and also agreed to reduce the price to $1.12 million. However, the buyers eventually backed out. Doyle was paid a total of $4,000 by the buyers for his representation in this transaction.
Doyle offered to list the property for sale, and also told Boyto a builder he knew might be interested in it. Boyto did not want to sign a formal listing agreement and asked Doyle to try to solicit an offer from the builder. The builder, Gregory Mussallem, was interested and in December of 2005 made an option offer for $1.1 million. Boyto accepted the Mussallem offer, and ultimately received a non-refundable deposit of $60,000. The option contract included a 6 percent commission to Doyle.
Doyle and Boyto agreed that in lieu of the 6 percent commission earned by Doyle for the sale of the Shenado property, which would have been $66,000, Boyto would credit him for the January 2006 interest payment on their loan, in the amount of $57,600, with the balance to be credited to the following year’s payment. Mussallem eventually exercised the option and completed the purchase of the property, but not until after Boyto had passed away.
Fiduciary Relationship
Doyle acknowledged that he acted as Boyto’s real estate broker when he placed his sign on the Roop Road property, but in his opinion the purchase transaction with Boyto was an arm’s length transaction. At trial Bayto and Mattoon took the position that Doyle was in a fiduciary relationship to Boyto, both as an attorney and a real estate broker, during the entire purchase and subsequent refinancings of the Roop Road property. Doyle acknowledged that he accepted a 6 percent commission as Boyto’s real estate agent in the Shenado transaction and that he acted as Boyto’s attorney in that transaction.
In addition to the property transactions, there was evidence that Doyle had paid a traffic citation for Boyto, either in 1999 or 2000. In 2004, on another matter, Doyle went with Boyto to a rebuttal hearing at the Department of Motor Vehicles, and wrote a letter on Boyto’s behalf in order to help him get his license back. At Boyto’s request, Doyle also attended Boyto’s deposition in connection with an automobile accident, although Boyto was represented by an attorney from his insurance company at the time. Doyle did not bill Boyto on any of these matters.
Boyto’s Health Fails in 2006
In the spring of 2006, Boyto developed health problems and had to be hospitalized. He had created a living trust and remained the trustee as long as he was able. His nephew David Bayto began to look after Boyto’s financial affairs after his illness. Boyto died on July 26, 2006. Bayto and his cousin Marleen Mattoon became successor co-trustees of Boyto’s trust.
Events Leading to the Lawsuit
After Bayto started looking at Boyto’s financial records, he had several conversations with Doyle about the Roop Road property and the Shenado transaction. In addition, Doyle wrote to Bayto, explaining in detail the history of these transactions. Bayto attempted to rescind the sale of the Shenado property. However, it eventually closed escrow and the Boyto Trust received the proceeds. Bayto was also concerned about several aspects of the Roop Road property sale transaction, in particular the lack of any recorded deed of trust on the 17 acres, which was the most valuable part of the property, to secure payment of the $960,000 promissory note.
In September of 2006, Bayto sent a letter to the Doyles demanding payment of 17/23 of the $960,000 promissory note, plus $100,000, in accordance with the provisions of the note. When the Doyles did not meet the demand, Bayto considered that this was a breach, and that the note was in default. He demanded, on behalf of the trust, full payment of the principal balance of $960,000.
Doyle made a payment of the interest due in January of 2007, in the amount of $49,200. Doyle testified that he explained to Bayto that this was short of the usual amount of $57,600 because of the remaining credit for the commission on the sale of the Shenado property. However, Bayto contended that this had never been explained to him in any type of letter or memo, and that there was no writing in his uncle’s records reflecting any agreement about this commission.
Meanwhile, Doyle continued with his efforts to try to sell the eight-acre parcel (part of the original 17 acres), or the four-acre parcel, in order to pay off, or pay down, the note to Boyto. Doyle also wrote to counsel for Bayto and Mattoon on September 26, 2006, reaffirming the Doyles’ commitment to satisfy their obligations to the trust on the promissory note, and offering to record the deed of trust on the 17-acre parcel. When County requirements again changed, making it possible to build on the eight-acre and four-acre parcels, Doyle contended that he had purchasers interested in both parcels. But by that time, the lawsuit had commenced and a lis pendens had been filed on the property.
TRIAL PROCEEDINGS
The Complaint and Cross-Complaint
Bayto and Mattoon filed a complaint as co-trustees of the Jack Boyto Trust on October 31, 2006, against Louis and Vicki Doyle. The complaint contained nine causes of action: 1) breach of contract (the promissory note); 2) imposition of a vendor’s lien; 3) declaratory relief (with respect to the loan obligation and security agreement); 4) judicial foreclosure; 5) for money lent; 6) fraudulent misrepresentation; 7) negligent misrepresentation; 8) professional negligence (as against Louis Doyle only, in his capacity as Boyto’s attorney and real estate broker); and 9) breach of fiduciary duty (as against Louis Doyle only). Plaintiffs sought damages in excess of $960,000, plus outstanding interest, on the breach of contract cause of action, for general and special damages incurred as a result of misrepresentations, negligent acts, and breaches of fiduciary duty, and punitive damages. They also asked for imposition of a vendor’s lien, a declaration of rights under the promissory note and deed of trust, and an order providing that the vendor’s lien could be foreclosed and the proceeds of sale applied to amounts owed to plaintiffs. Finally, they asked for costs and attorney’s fees.
On December 18, 2006, the Doyles filed a cross-complaint containing two causes of action: breach of contract and partial rescission. They alleged that the lawsuit and lis pendens constituted a breach of the agreement, as modified, between them and Boyto, and prevented them from performing on the agreement. They further alleged that when they entered into the purchase contract with Boyto, they and he both believed that the four-acre parcel was a buildable parcel, and that this was a mutual mistake, sufficient to support partial rescission of the purchase contract.
Just before trial commenced, plaintiffs brought a motion for judgment on the pleadings as to the Doyles’ cross-complaint. The court granted the motion as to the cause of action for partial rescission and denied it as to the breach of contract cause of action. The Doyles chose not to pursue their cause of action for breach of contract in the cross-complaint.
Jury Trial
A jury trial was held from March 12 through March 19, 2008 on the causes of action for breach of contract, fraud, negligent misrepresentation, professional negligence and breach of fiduciary duty. In addition to testimony from Bayto and Doyle, both sides presented the testimony of real estate attorneys who were qualified as experts on the standard of care in attorney/client and broker/client relationships. Each side also presented testimony of appraisers as to the value of the property.
The jury returned its special verdict on March 21, 2008. As to the breach of contract cause of action, the jury found that Doyle and Boyto had entered into a written purchase agreement regarding the 23 acres, and that they had agreed to modify the contract. They found that Doyle had not breached the contract as modified.
As to the tort causes of action, the jury found that Doyle had not intentionally misrepresented an important fact to Boyto, and had not intentionally failed to disclose an important fact. They found that he had not acted with malice, oppression or fraud. They found he had negligently made “a false representation of an important fact to Boyto, ” but that he had “reasonable grounds for believing the representation was true when made.” And they found that Doyle had breached duties of care of an arranger of credit with respect to the purchase of the 23 acres, but that this breach was not a substantial factor in causing damage to Boyto.
Finally, the jury found that Doyle had breached duties of care as an attorney and a real estate broker with respect to the purchase of the 23 acres or later refinancings, and that Doyle’s breach of these duties was a substantial factor in causing damage to Boyto. The jury found Boyto’s damages to be $99,339.
Post-Trial Proceedings
After proceedings with the jury concluded, the parties and the court agreed that the equitable causes of actions, which included the causes of action for a vendor’s lien, for declaratory relief and for judicial foreclosure, would be submitted to the court on the oral and documentary evidence that had been submitted during the jury phase of the trial. The court set a briefing schedule for these causes of action and for any post-trial motions.
On May 9, 2008, plaintiffs filed several post-trial briefs. They sought judgment in their favor on their equitable claims for a vendor’s lien, for declaratory relief, and for judicial foreclosure. And they asked for a determination that they were the prevailing parties in the action, entitled to an award of court costs and attorney’s fees.
Plaintiffs also filed a motion for judgment notwithstanding the verdict, seeking judgment in their favor on the breach of contract cause of action. They argued that the oral modifications of the contract asserted by Doyle were unenforceable as a matter of law. They also filed a motion asking the court to set aside the jury’s verdict and to grant them a new trial on the breach of contract and fraud causes of action and to determine damages, including punitive damages.
Defendants briefed the equitable issues and also filed a motion for attorney’s fees on May 9, 2008. They argued that they were the parties prevailing on the only contract cause of action and were thus entitled to attorney’s fees under Civil Code section 1717.
The court heard the post-trial motions and argument on the equitable issues on June 10, 2008, and issued a written tentative decision on June 13, 2008. The court found in defendants’ favor on the cause of action for judicial foreclosure, based on the jury verdict finding there was no default under the contract as modified. The court also found in defendants’ favor on the declaratory relief cause of action, again based on the jury’s verdict that there was no breach of contract.
As to the cause of action for a vendor’s lien, the court found that, even though the jury had found no default on the contract, “principles of equity, fairness and good conscience compel the court, under the facts of this case, to provide plaintiffs with adequate security in the form of a vendor’s lien as prayed for.”
The court found that plaintiffs were the prevailing parties because they received an award of $99,339 against Doyle on their cause of action for breach of professional duties, because they were entitled to judgment on their cause of action for a vendor’s lien, and because they prevailed on the cross-complaint.
By separate orders on June 13, 2008, the court denied plaintiffs’ motion for a partial judgment notwithstanding the verdict, and motion for a new trial.
Defendants filed objections to the court’s statement of decision, asking the court to clarify the basis for its finding that plaintiffs were prevailing parties on the cross-complaint, and asking for clarification whether plaintiffs’ claims for breach of professional duties and for a vendor’s lien were encompassed by the attorney’s fees clause in the promissory note.
The court filed its statement of decision on June 27, 2008. As to the cross-complaint, the court found that appellants “chose not to pursue and abandoned their cause of action for breach of contract... and the court granted [respondents’] motion for judgment on the pleadings as to the cause of action for partial rescission of contract....” The court expanded, without substantively changing, the discussion of the basis for its prevailing party finding.
Defendants again filed the same objections to the statement of decision.
The court filed an amended statement of decision on October 20, 2008. As to its prevailing party finding, the court reiterated the basis for its determination, as follows: “Although defendants received a verdict in their favor on all but one cause of action, plaintiffs received an award of $99,339 from the jury on its finding that defendant Louis Doyle breached his professional duties as an attorney and a real estate broker in connection with the contractual transactions; plaintiffs are entitled to judgment on their equitable cause of action for a vendor’s lien in connection with the contractual transactions; and plaintiff/cross-defendants are also entitled to judgment on the cross-complaint for breach of contract and partial rescission of the contract.” We shall discuss the court’s stated reasoning in more detail below.
The amended statement of decision and the “Order and Judgment” were filed on October 20, 2008 and notice of entry of judgment was served on November 20, 2008. The judgment included an order imposing a vendor’s lien on the 17 acres in the amount of $960,000, effective as of October 31, 2006, the date the complaint was filed.
In December of 2008, based on the court’s prevailing party determination, plaintiffs filed their motion for attorney’s fees. They sought $278,323 in attorney’s fees, representing all fees incurred for all aspects of the case. Louis Doyle, in propria persona, filed opposition to the motion for attorney’s fees, arguing that the fees were excessive and unreasonable in light of plaintiffs’ limited litigation success and the jury’s verdict that there was no breach of contract. The motion was heard on February 5, 2009, and on February 23, 2009, the court filed its order granting the motion and awarding plaintiffs attorney’s fees in the amount of $278,323.
The record on appeal was augmented to include this motion. However, it was not file-stamped.
Defendants filed two appeals. First they appeal from the “Order and Judgment” filed on October 20, 2008, including the court’s determination of the prevailing party for an award of attorney’s fees (appeal No. H033773). The second appeal is from the award of attorney’s fees on February 23, 2009 (appeal No. H034076).
DISCUSSION
I. The Vendor’s Lien
Appellants argue that it was improper for the court to impose a vendor’s lien on the property in this case since the jury had found that the contract between Boyto and Doyle, as modified, had not been breached. Thus there was necessarily an implied finding that Boyto had agreed to remove his security from the 17-acre parcel.
On February 19, 2010, we granted respondents’ motion to take judicial notice of the following. On April 21, 2009, appellants filed for bankruptcy protection under chapter 11 of the United States Bankruptcy Code; on June 25, 2009, the bankruptcy court granted appellants’ application to have special counsel appointed to litigate the two appeals before us; on September 22, 2009, after obtaining relief from the bankruptcy automatic stay, respondents foreclosed on the entire Roop Road property and took title to the property at a trustee’s sale. On December 9, 2009, the bankruptcy court ordered appellants’ bankruptcy case to be converted from chapter 11 to chapter 7.
The trustee’s deed attached to the request for judicial notice reflects that appellants are no longer owners of the property. Thus the propriety of the vendor’s lien has become moot. Where it has become impossible for an appellate court to grant appellants effective relief on their claim, it will be deemed moot. (Ebensteiner Co. v. Chadmar Group (2006) 143 Cal.App.4th 1174, 1178.)
II. Damages
Appellants argue that no substantial evidence in the record supports the jury’s award of $99,339 in damages for Doyle’s breach of fiduciary duty. They contend that this cause of action must fail because respondents presented no evidence of damages, which is a necessary element in the cause of action. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 182.) They further contend that damages may not be based on sheer speculation and that “the mere possibility or even probability that damage will result from wrongful conduct does not render it actionable. [Citations.]” (Ventura County Humane Society v. Holloway (1974) 40 Cal.App.3d 897, 907.) “ ‘The mere breach of a professional duty, causing only nominal damages, speculative harm or the threat of future harm-not yet realized-does not suffice to create a cause of action for negligence.’ ” (Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052, 1058.)
In its special verdict the jury found that Doyle had breached duties of care, both as an attorney and as a real estate broker, “with respect to either the purchase of the 23 acres or the re-financings.” They found, by a vote of nine to three, that the breach was “a substantial factor in causing damage to Boyto.” And they assessed damages at $99,339.
It is not clear from the record how the jury arrived at this number. On the other hand, “[i]n examining the sufficiency of the evidence to support an award of damages, it is not required that we be able to precisely recreate the jury’s reasoning.” (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 532.) The amount of damages is a question of fact, committed to the discretion of the fact finder, in this case the jury. (Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 506-507.) And the measure of damages for breach of fiduciary duties is not limited to harm to the principal; it can also include disgorgement of profit by the fiduciary. (County of San Bernardino v. Walsh (2007) 158 Cal.App.4th 533, 543.) We will uphold a jury’s determination of damages if it is within the range of possibilities supported by the testimony. (Pellegrini v. Weiss, supra, 165 Cal.App.4th at p. 532.)
The jury listened to two weeks of testimony regarding the various real estate transactions involved here, including evidence of the value of the property at the time of sale, the prices it was offered for sale in succeeding years, and the various amounts of the refinancing loans that Doyle placed on the property, thus reducing Boyto’s equity. At the time of the sale in 2000, Boyto was asking $1.2 million for the property, but told Doyle he would accept $1 million. He rejected Doyle’s offer of $940,000, but agreed to finance the sale to Doyle for $1 million, at terms favorable to Doyle. In 2002, a year after the escrow closed, Boyto subordinated his loan to a new $300,000 loan on the property, and Doyle offered the property for sale for $2.5 million. In 2003 Doyle put the property on the market for $1.875 million. In 2004, a new loan of $763,000 was placed on the property, and an additional equity line of $150,000. Boyto agreed to remove his security on the property to accommodate these loans to Doyle. At the time of trial there was testimony that the property was worth $2.2 million. The appraisers also testified as to the relative value of junior and senior liens. And there was testimony by experts on both sides as to what constituted the duties of care of a real estate broker and an attorney. Having determined that Doyle breached these duties, the jury was entitled to calculate, based on the figures presented during trial, how that breach was a substantial factor in causing damage to Boyto, and what those resulting damages were. We will not presume to second guess the jury in its damages award. (Pellegrini v. Weiss, supra, 165 Cal.App.4th at p. 532; Seffert v. Los Angeles Transit Lines, supra 56 Cal.2d at pp. 506-507.)
III. Incorrect Language in the Judgment
Appellants argue that the judgment, which was prepared by respondents’ counsel and signed by the trial judge, contained inaccuracies and improper language, in two respects. First, the judgment provided for damages against Doyle “as and for non disclosure of material information and breaches of statutory and fiduciary duty as an attorney and as a real estate broker during the purchase and later refinancing transactions....” The judgment further provided, in describing the imposition of the vendor’s lien, that the reconveyance of the original deed of trust, dated January 12, 2001 “was not authorized.”
Appellants argue that the italicized language is improper. In the first case, the jury specifically found that Doyle did not fail to disclose any material information. Secondly, the jury found that Boyto and Doyle had agreed to modify the contract; thus Boyto’s removal of the deed of trust was authorized.
These points may be well taken. However, the time and place to assert these complaints was in the trial court when the judgment was filed. If appellants had brought a motion under Code of Civil Procedure section 473 to correct the judgment, the trial court would have had the opportunity to do so while it had jurisdiction. In light of the sale of the property to respondents at the trustee’s sale, the vendor’s lien is no longer in effect and any issue regarding incorrect wording in its provisions is moot. As to the other language, appellants may make a request to the trial court to correct the judgment on remand of this matter.
IV. The Prevailing Party Determination
Standard of Review
“[A] determination of the legal basis for an attorney fee award is a question of law to be reviewed de novo.” (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142; Salawy v. Ocean Towers Housing Corp. (2004) 121 Cal.App.4th 664, 669.) In order “to determine whether an award of attorney fees is warranted under a contractual attorney fees provision, the reviewing court will examine the applicable statutes and provisions of the contract. Where extrinsic evidence has not been offered to interpret the [contract], and the facts are not in dispute, such review is conducted de novo.” (Carver v. Chevron U.S.A., Inc., supra, 97 Cal.App.4th at p. 142; Snyder v. Marcus & Millichap (1996) 46 Cal.App.4th 1099, 1102; Akins v. Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1132-1133 [“The determination of the statutory basis for an attorney fees award presents a legal issue for us to determine anew on appeal....”].)
If the proper legal standards are accurately assessed by the court, the trial court’s determination as to which party was the prevailing party involves an exercise of discretion. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 894; Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 449.) “[I]t 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.) Where the trial court has properly exercised its discretion, we review the court’s prevailing party determination under the abuse of discretion standard. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, supra, 162 Cal.App.4th at p. 894.) The party challenging such a determination must demonstrate “a clear abuse of discretion.” (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158.) 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.)
As noted, however, although the court has broad discretion in its prevailing party determination, “its discretion is not unlimited” and must be grounded on a sound legal basis in the statutes and the underlying contract. (Silver Creek, LLC v. BlackRock Realty Advisors, Inc. (2009) 173Cal.App.4th 1533, 1541; Carver v. Chevron, supra, 97 Cal.App.4th at p. 142; Estate of Drummond (2007)149 Cal.App.4th 46, 50.) In sum, when reviewing the court’s discretionary determination of prevailing party, we consider the entire record, including the trial court’s stated reasons for the ruling, to see if the court applied the proper legal criteria. (Silver v. Boatwright Home Inspection, Inc., supra, 97 Cal.App.4th at pp. 448-449; see also, City of Santa Monica v. Stewart (2005) 126 Cal.App.4th 43, 83; Crawford v. Board of Education (1988) 200 Cal.App.3d 1397, 1406.)
The Statutory Framework for an Award of Attorney’s Fees
Code of Civil Procedure Section 1021
As a general rule, the parties to a lawsuit must bear their own attorney’s fees. (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 806.) Exceptions to the general rule are where attorney’s fees are specifically provided by statute or where the parties have expressly agreed to an award of attorney’s fees. Code of Civil Procedure section 1021 provides that “ ‘[e]xcept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties....’ ” “Code of Civil Procedure section 1021 does not independently authorize the recovery of attorney’s fees.” (Santisas v. Goodin (1998)17 Cal.4th 599, 607, fn 4.) Rather, it recognizes and codifies the general rule that attorney’s fees may be recovered only when they are authorized by a statute or provided for by the parties’ agreement. (Ibid.)
Code of Civil Procedure Sections 1032 and 1033.5(a)(10)
Code of Civil Procedure section 1032 provides for the recovery of the costs of suit to a prevailing party. Subdivision (a)(4) of section 1032 describes four categories of prevailing parties who are entitled to recover costs: “the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant.” (Code Civ. Proc., § 1032, subd. (a)(4).) A party in any of these categories is entitled to costs as a matter of right, and a court has no discretion to deny prevailing party status. (Michell v. Olick (1996) 49 Cal.App.4th 1194, 1197; Building Maintenance Service Co. v. AIL Systems, Inc. (1997) 55 Cal.App.4th 1014, 1025.)
Where none of these four categories applies to determine prevailing party status as a matter of right, the statute permits the trial court, in its discretion, to determine the prevailing party, and then to allow costs, or to apportion costs. (Texas Commerce Bank v. Garamendi (1994) 28 Cal.App.4th 1234, 1248-1249.) It provides: “When any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides....” (Code Civ. Proc., § 1032, subd. (a)(4).)
Code of Civil Procedure section 1032 addresses only costs, not attorney’s fees. (See Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1142.) However, Code of Civil Procedure section 1033.5 describes the items allowable as costs and provides that attorney’s fees are allowable as costs under section 1032, “when authorized by any of the following: (A) Contract. ¶ (B) Statute. ¶ (C) Law.” (Code Civ. Proc., § 1033.5, subd. (a)(10).) In other words, “recoverable litigation costs do include attorney fees, but only when the party entitled to costs has a legal basis, independent of the cost statutes and grounded in an agreement, statute, or other law, upon which to claim recovery of attorney fees.” (Santisas v. Goodin, supra, 17 Cal.4th at p. 606.)
Civil Code Section 1717
Civil Code section 1717 controls the recovery of attorney fees where the action is “on a contract” containing an attorney’s fees provision. (Civ. Code, § 1717, subd. (a).) It provides: “(a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Ibid.)
“Section 1717 is the applicable statute when determining whether and how attorney’s fees should be awarded under a contract.” (Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1157.) Civil Code section 1717 “covers only contract actions, where the theory of the case is breach of contract, and where the contract sued upon itself specifically provides for an award of attorney fees incurred to enforce that contract.” (Xuereb v. Marcus & Millichap, Ins. (1992) 3 Cal.App.4th 1338, 1342, disapproved on other grounds by Santisas v. Goodin, supra, 17 Cal.4th at p. 614, fn. 8, as recognized by Damian v. Tamondong (1998) 65 Cal.App.4th 1115, 1127, fn. 13.)
Under subdivision (b)(1), section 1717 sets forth a general standard for determining which party, if any, prevailed on the contract: “The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. Except as provided in paragraph (2), the 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)(1).) In paragraph (2), the statute provides that “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” (Civ. Code, § 1717, subd. (b)(2).)
Civil Code section 1717, subdivision (b)(1), was amended to its present form in 1987. The term “prevailing party” was changed throughout to “party prevailing on the contract.” And the phrase “the party who recovered a greater relief in the action on the contract” replaced the former definition of prevailing party as “the party who is entitled to recover costs of suit.” The language that the court “may also determine that there is no party prevailing on the contract for purposes of this section” was also added at this time. (Stats. 1987, ch. 1080, § 1.)
Prior to the 1987 amendment, Civil Code section 1717, subdivision (b)(1) read: “The court, upon notice and motion by a party, shall determine who is the prevailing party, whether or not the suit proceeds to final judgment. Except as provided in paragraph (2), the prevailing party shall be the party who is entitled to recover costs of suit.”
The effect of these changes is to clarify that the party prevailing on the contract, for purposes of Civil Code section 1717, is not necessarily the same as the prevailing party entitled to recover costs under Code of Civil Procedure section 1032. (Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1142.) “The definition of prevailing party under section 1717 thus differs significantly from section 1032. Rather than focusing on who receives the net monetary award, section 1717 defines the prevailing party as the one who recovers ‘a greater relief in the action on the contract.’ ” (Id. at p. 1143.)
Civil Code section 1717 has been interpreted as allowing for no discretion by the trial court in a case where one party obtains a “simple, unqualified victory” on the only contract claim in the action. (Hsu v. Abbara, supra, 9 Cal.4th at p. 877 (Hsu).) Such a party is entitled to attorney’s fees as a matter of law and the trial court may not deny fees by finding that there was no party prevailing on the contract. (Id. at p. 876.) However, where the results of the litigation are mixed, the court may exercise its discretion in determining whether one party “recovered a greater relief in the action on the contract, ” or whether “there is no party prevailing on the contract for purposes of this section.” (Civ. Code § 1717, subd. (b)(1).)
The Supreme Court in Hsu set forth guidelines for the trial court’s exercise of discretion in making a determination whether there is a party prevailing on the contract under Civil Code section 1717: “[T]he 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 statement, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by ‘a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.’ [Citation.]” (Hsu, supra, 9 Cal.4th at p. 876.)
Analysis of the Trial Court’s Prevailing Party Determination
Applicable Legal Standards
Any entitlement to attorney’s fees must be “grounded in an agreement, statute, or other law....” (Santisas v. Goodin, supra, 17 Cal.4th at p. 606; Code Civ. Proc., § 1021.) In the case before us, the only legal basis for recovery of attorney’s fees is the parties’ agreement regarding attorney’s fees. We therefore turn first to the attorney’s fees provision in the contract, namely the promissory note between the Doyles and Boyto. It provides: “Should suit be commenced to collect this note or any portion thereof, such sum as the Court may deem reasonable shall be added hereto as attorney fees.” No extrinsic evidence was presented to the trial court to explain the intent of the parties as to the meaning of this language. We thus determine de novo the scope of the attorney’s fees provision. (Carver v. Chevron U.S.A., supra, 97 Cal.App.4th at p. 142; Thompson v. Miller (2003) 112 Cal.App.4th 327, 334-335.)
The promissory note provides that it is secured by a deed of trust. The form deed of trust incorporates all of the provisions of a “Fictitious Deed of Trust” recorded in the county records, including a provision for payment of reasonable attorney’s fees incurred in efforts to collect on the indebtedness secured by the deed of trust.
The plain language of the attorney’s fees agreement authorizes an award of attorney’s fees in an action to collect on the promissory note. Civil Code section 1717, subdivision (a), makes this provision apply to both parties to the contract. Thus in a simple action to collect on the note, the party obtaining an unqualified win would have been entitled to attorney’s fees as a matter of law as the party prevailing on the contract. (Hsu, supra, 9 Cal.4th at p. 876.) Where there is a mixed result, the court may exercise its discretion to determine the party prevailing on the contract. However, if the action also includes noncontract claims, the court must first determine whether the parties’ agreement regarding attorney’s fees encompasses such claims, i.e. “whether the type of claim is within the scope of the provision.” (Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 708; Santisas v. Goodin, supra, 17 Cal.4th. at p. 608.)
The parties may fashion a fee agreement that will include tort claims as well as contract claims. (Santisas v. Goodin, supra, 17 Cal.4th at p. 608; Xuereb v. Marcus & Millichap, Inc, supra, 3 Cal.App.4th at p. 1341.) For example, contractual language providing for fees in any action arising from, or relating to, the contract has been held to be broad enough to encompass recovery of attorney fees in tort actions. (See Santisas v. Goodin, supra, 17 Cal.4th at p. 603 [“ ‘In the event legal action is instituted by... any party to this agreement, or arising out of the execution of this agreement or the sale, or to collect commissions... the prevailing party shall be entitled to... a reasonable attorney fee....’ ”]; Xuereb v. Marcus & Millichap, Inc., supra, 3 Cal.App.4th at p. 1342 [“If this agreement gives rise to a lawsuit or other legal proceeding between any of the parties hereto....”]; Moallem v. Coldwell Banker Com. Group, Inc. (1994) 25 Cal.App.4th 1827, 1831 [provision authorizing fees in “any ‘legal action... relating to’ the contract”]; Biren v. Equality Emergency Medical Group (2002) 102 Cal.App.4th 125, 135 [agreement provided for attorney’s fees in an action “to enforce or declare any rights or remedies arising under this Agreement....”].)
On the other hand, the parties may chose to restrict their contractual attorney’s fees provision to fees incurred to enforce the particular contract. (See Loube v. Loube (1998) 64 Cal.App.4th 421, 429 [“[I]f legal action or arbitration is necessary to enforce the terms of this Agreement, the prevailing party shall recover reasonable attorneys fees.”]; Gil v. Mansano (2004) 121 Cal.App.4th 739, 742 [“ ‘In the event action is brought to enforce the terms of this [agreement], the prevailing party shall be paid his reasonable attorney fees and costs....’ ”]; Exxess Electronixx v. Heger Realty Corp., supra, 64 Cal.App.4th at p. 702 [provision for attorney’s fees in an “action or proceeding to enforce the terms hereof or declare rights hereunder”]; Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1140 [a guaranty required payment of attorney’s fees “to the prevailing party in any legal action concerning the guaranty”]; Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 356 [promissory note provided for costs and attorney’s fees “ ‘in enforcing this Note’ ”].)
Comparing these examples with the attorney’s fees provision in the case before us, which provides that reasonable attorney’s fees shall be included “should suit be commenced to collect this note or any portion thereof, ” we conclude the provision in our case is quite narrow in scope because it refers only to a suit “to collect this note” and not to an action to resolve disputes arising out of or relating to the agreement. Several propositions follow from this conclusion. First, a narrow attorney’s fees provision, limited to the enforcement of the contract, cannot support an award of attorney’s fees to a party prevailing on tort claims, since tort claims do not “enforce” a contract. (Exxess Electronixx v. Heger Realty, supra, 64 Cal.App.4th at p.709; Santisas v. Goodin, supra, 17 Cal.4th at p. 622, fn 9.) Second, Civil Code section 1717 is the fundamental statute governing the award of attorney’s fees on a contract and fees must be awarded in accordance with the standards expressed in that statute. (Santisas, supra, at p. 615; Exxess Electronixx v. Heger Realty, supra, 64 Cal.App.4th at p.706; Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1157.) The court must therefore “begin its inquiry in any contract action with the provisions of section 1717 and be guided in the proper exercise of its discretion by the equitable principles fundamental to that section.” (Id. at p. 1158.) Finally, and most important in the context of the case before us, the court may not consider the success of a party on tort claims in its determination as to which party recovered “a greater relief in the action on the contract” under Civil Code section 1717, subdivision (b)(1). The court’s determination of “the party prevailing on the contract” for purposes of contractual attorney fees must be made “without reference to the success or failure of noncontract claims. [Citation.]” (Hsu, supra, 9 Cal.4th at pp. 873-874.)
Federal Deposit Ins. Corp. v. Dintino, supra, 167 Cal.App.4th 333 (FDIC) illustrates these principles. In FDIC, plaintiff bank filed a lawsuit against defendant borrower containing causes of action in contract and tort. The bank alleged that the borrower had breached a contract by failing to pay on a promissory note and also that the borrower had been unjustly enriched. The promissory note contained a provision for costs and expenses, including attorney’s fees incurred “in enforcing this Note.” (Id. at p. 356.) Judgment was entered for the borrower following summary judgment on the contract claim, and after a bench trial damages were awarded to the bank on its unjust enrichment claim. The borrower sought attorney’s fees incurred in defending the contract claim on the basis that he was the prevailing party under Civil Code section 1717. The trial court denied the motion, finding that there were mixed results in the case and although the borrower had succeeded in defending the breach of contract claim, he was not the prevailing party because the bank had been awarded damages and had “achieved its main litigation objectives.” (FDIC, supra, at p. 356.)
The Court of Appeal reversed. The court relied on the Supreme Court’s decision in Hsu, supra, 9 Cal.4th 863: “Hsu noted that in 1987 the Legislature amended Civil Code section 1717 to replace ‘the term “prevailing party” with the term “party prevailing on the contract, ” evidently to emphasize that the determination of prevailing party for purposes of contractual attorney fees was to be made without reference to the success or failure of noncontract claims. [Citation.]’ (Hsu, at pp. 873-874, italics added.).... ‘[W]hen 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 [Civil Code] section 1717 as a matter of law. [Citations.]’ (Hsu, at p. 876, italics added.)” (FDIC, supra, 167 Cal.App.4th at p. 357.)
Applying the reasoning in Hsu, the court in FDIC found that the only contract claim alleged by the bank was its breach of contract cause of action, on which the borrower had prevailed. “The trial court could not properly consider Bank’s success on its noncontract causes of action (e.g., unjust enrichment cause of action) in making its determination of which party, if any, prevailed on the contract cause of action. [Citation.] In so doing, the trial court erred.” (FDIC, supra, 167 Cal.App.4that p. 358.)
The Statement of Decision Does Not Show That the Trial Court Correctly
Applied the Applicable Legal Criteria Under Civil Code Section 1717
In the case before us, respondents sued appellants to collect on the promissory note, and also on a variety of other causes of action: for imposition of a vendor’s lien, for declaratory relief, for judicial foreclosure, for fraudulent misrepresentation, for negligent misrepresentation, and as against Louis Doyle only for professional negligence and breach of fiduciary duty. In addition, appellants filed a cross-complaint for breach of contract and partial rescission. As we have summarized above, the jury found that appellant Doyle had breached professional duties of care as a real estate broker and an attorney and awarded damages of $99,339. On all other causes of action that were decided by the jury, including the breach of contract cause of action, the jury found in favor of appellants. In addition, the court found in favor of appellants on the equitable actions of declaratory relief and judicial foreclosure, on the basis that the jury found no breach of contract. But the court awarded respondents relief requested by ordering imposition of a vendor’s lien. Finally, appellants took nothing by way of their cross-complaint for breach of contract and partial rescission.
On these results, the court found that respondents were the prevailing parties, for purposes of an award of attorney’s fees, stating three bases for its decision: “plaintiffs received an award of $99,339 from the jury on its finding that defendant Louis Doyle breached his professional duties as an attorney and a real estate broker in connection with the contractual transactions; plaintiffs are entitled to judgment on their equitable cause of action for a vendor’s lien in connection with the contractual transactions; and plaintiff/cross-defendants are also entitled to judgment on the cross-complaint for breach of contract and partial rescission of the contract.”
Breach of fiduciary duty is a tort claim and not a contract cause of action. (Loube v. Loube, supra, 64 Cal.App.4th at p. 430 [action for professional negligence is not an action “ ‘on the contract’ ” and provides no basis for attorney’s fees under Civil Code § 1717]; Exxess Electronixx v. Heger Realty, supra, 64 Cal.App.4th at p. 708 [claim for breach of fiduciary duty does not “enforce” a contract within the meaning of Civil Code § 1717].) The monetary damages award for breach of fiduciary duty provides the basis for an award of costs under Code of Civil Procedure section 1032, subdivision (a)(4), as a matter of right, because plaintiffs obtained a “net monetary recovery.” However, “the prevailing party for the award of costs under section 1032 is not necessarily the prevailing party for the award of attorney’s fees in contract actions under section 1717.” (Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1142.) Attorney’s fees cannot be included as an item of costs awarded under Code of Civil Procedure section 1032, unless provided by statute or by the parties’ agreement. (Code Civ. Proc., § 1033.5, subd. (a)(10).) Here the parties’ agreement regarding attorney fees is narrowly drawn and cannot reasonably be read to include tort claims. Civil Code section 1717 is therefore the applicable statute regarding attorney’s fees; it cannot be circumvented by relying on the general costs provisions of Code of Civil Procedure section 1032. (Exxess Electronixx v. Heger Realty, supra, 64 Cal.App.4that p. 707; Santisas v. Goodin, supra, 17 Cal.4th at pp. 606-607.) As the court stated in Hsu, “the determination of prevailing party for purposes of contractual attorney fees [is] to be made without reference to the success or failure of noncontract claims.” (Hsu, supra, 9 Cal.4th at pp. 873-874.) Consequently, we conclude that the trial court erred in considering the $99,339 damages award on the breach of fiduciary claim in its determination that respondents were prevailing parties for the purpose of awarding attorney’s fees.
Respondents contend that the court could have awarded costs under Code of Civil Procedure section 1032, subdivision (a)(4), on the basis that the $99,339 in damages provided them a “net monetary recovery, ” and in addition could have exercised its discretion to find that they were the prevailing parties under Civil Code section 1717 because they “recovered a greater relief in the action on the contract.” (Civ. Code, § 1717, subd. (b)(1).) We agree with this assertion, in theory. However, on the record before us, it does not appear that the court considered the “net monetary recovery” only for the costs award under Code of Civil Procedure section 1032, and then based its attorney’s fees award only on the contract causes of action under the standards expressed in Civil Code section 1717. Rather the statement of decision reflects that the court improperly combined the two statutes in its prevailing party analysis and applied both to the overall results in this case.
First, the court identified the three factors it considered in its prevailing party determination, including, first and foremost, respondents’ recovery of damages on their tort claim. Then the court continued: “The contract in issue, the promissory note dated December 12, 2000 (Exhibit 6), contains an attorney’s fees provision which provides the basis for the court’s application of the ‘net monetary recovery’ rule.” This is not a correct statement of the law, as applied to the circumstances of this case. The only “monetary recovery” here was for a tort cause of action, which was not encompassed by the narrowly drawn attorney’s fees clause in the parties’ contract. The contract therefore does not provide a legal basis for the application of the “net monetary recovery” rule. (Code Civ. Proc., § 1032, subd. (a)(4).)
Although the “net monetary recovery” rule is contained in Code of Civil Procedure section 1032, subdivision (a)(4), the court did not cite that section for this rule, but instead referenced Civil Code section 1717, subdivision (b)(1). The court then correctly quoted the standard in that statute: “ ‘the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.’ ” And the court then stated it had “found that plaintiff/cross-defendants have recovered ‘a greater relief’ in the action and the cross-action on the contract, and therefore are ‘the prevailing party.’ ” However, the court’s improper conflation of the two statutes is further reflected in its extensive reliance for this finding on two cited cases: Pirkig v. Dennis (1989) 215 Cal.App.3d 1560 (Pirkig), and Birenv. Equality Emergency Medical Group, Inc., supra, 102 Cal.App.4th 125 (Biren). Neither one of these cases involved a contract, such as ours, with a narrow attorney’s fees clause that does not support an award of fees for tort causes of action.
The Pirkig case is particularly problematical as support for an award of fees in the circumstances before us. In that case, the court affirmed an award of fees to a successful litigant on a tort claim of negligent misrepresentation arising from a real estate purchase. At issue in Pirkig was whether the “net monetary recovery” rule in Code of Civil Procedure section 1032 applied even though there was a zero judgment due to previous settlements. The court in Pirkig found that it did apply. The discussion in Pirkig focused principally on Code of Civil Procedure section 1032, referring to Civil Code section 1717 briefly as an “alternative argument.” (Pirkig,supra, 215 Cal.App.3d at p. 1568.) In the circumstances of our case, Civil Code section 1717 is the only applicable statute for determining the party prevailing on the contract for purposes of a fee award, and the net monetary recovery rule is not applicable. (See, e.g., Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1157.)
The Pirkig case was recently disapproved on this point by the Supreme Court in Goodman v. Lozano (2010) 47 Cal.4th 1327, 1337.
Furthermore, Pirkig was decided before the Supreme Court in Hsu held that “the determination of prevailing party for purposes of contractual attorney fees [is] to be made without reference to the success or failure of noncontract claims.” (Hsu, supra, 9 Cal.4th at pp. 873-874.) After Hsu, courts engaging in a prevailing party analysis under Civil Code section 1717 have recognized that “a trial court cannot consider a party’s success on noncontract causes of action, or in achieving its litigation objectives in general... in determining which party is the prevailing party on the contract for purposes of Civil Code section 1717.” (FDIC, supra, 167 Cal.App.4th at p. 358, fn 12.)
In reliance on Pirkig, the trial court’s statement of decision concludes as follows: “Accordingly the court determines that plaintiffs/cross-defendants, who recovered ‘a greater relief’ in the action and the cross-action and who received ‘the net monetary recovery, ’ are ‘the prevailing party’ within the meaning of Code of Civil Procedure section 1032(a)(4) and for purposes of awarding attorney’s fees and costs of suit to ‘the prevailing party’ pursuant to Code of Civil Procedure section 1033.5(a)(10) and Civil Code section 1717(a).” Again, this reflects an improper blend of the separate standards set forth in Code of Civil Procedure section 1032 and Civil Code section 1717. In an action on a contract providing that fees are to be awarded to the party prevailing on the contract, the party prevailing on the contract must be determined in accordance with Civil Code section 1717. (Exxess Electronixx v. Heger Realty Corp., supra, 64 Cal.App.4th at p. 706; Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1157.) The relevant standard for an award of attorney’s fees in the circumstances of this case is which party “recovered a greater relief in the action on the contract.” (Civil Code, § 1717, subd. (b)(1).) Neither Pirkig nor the trial court’s statement of decision in our case stated this standard correctly, both omitting the qualifying phrase on the contract.
The trial court’s quote from Biren, immediately following its conclusion, underscores that the incorrect standards were applied here. The court in Biren stated the general rule that “[w]here each side seeks monetary relief, the side that receives the ‘net monetary recovery’ is the prevailing party. [Citation.]” (Biren, supra, 102 Cal.App.4that p. 139.) As we have explained, the “net monetary recovery” rule in Code of Civil Procedure section 1032 is not applicable in the circumstances of our case, where the only monetary recovery was on a tort cause of action, a claim that is not encompassed by the parties’ attorney’s fee provision. Unlike our case, Biren involved a broad attorney’s fee clause authorizing fees in an action to enforce “any rights or remedies arising under this Agreement.” (Id. at p. 135.) Such language has been held to authorize fees in tort actions. (Santisas v. Goodin, supra, 17 Cal.4th at p. 603.) Furthermore, in Biren both sides had obtained monetary recoveries on their claims. In our case, Civil Code section 1717 is the applicable statute. (Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1157.) Neither Biren nor the case it cited and relied on (Michell v. Olick, supra, 49 Cal.App.4th 1194) contained any discussion of the standards set forth in Civil Code section 1717.
The main issue in Biren was whether defendant was entitled under Code of Civil Procedure section 998 to attorney’s fees post-offer, even though the court had found defendant not to be a prevailing party for purposes of costs and fees prior to the offer.
In sum, we are unable to conclude from the statement of decision that the trial court in this case considered the proper factors and applied the correct legal criteria in exercising its discretion to determine the party prevailing on the contract under Civil Code section 1717 for purposes of an award of attorney fees. And we cannot say with any certainty that the court would have reached the same result in its prevailing party determination if it had properly excluded the $99,339 in damages on respondents’ tort claim in its assessment, and confined its determination to the contract causes of action. We must therefore remand the matter so that the court may exercise its discretion under the standards expressed in Civil Code section 1717, based solely on the contract causes of action, to determine which party, if any, “recovered a greater relief in the action on the contract.” (Civil Code, § 1717, subd. (b)(1).) This brings us to the question what were the contract causes of action that the court could consider in its determination. Appellants argue that the court erred in considering both the vendor’s lien and the cross-complaint as actions “on the contract, ” within the meaning of Civil Code section 1717.
The Vendor’s Lien Was an Action on the Contract
A vendor’s lien is described in Civil Code section 3046: “One who sells real property has a vendor’s lien thereon, independent of possession, for so much of the price as remains unpaid and unsecured otherwise than by the personal obligation of the buyer.” A cause of action to impose a vendor’s lien is an action in equity. Imposition of the lien gives the seller a lien on the property in the amount of the unpaid purchase price.
The question whether the court erred in imposing a vendor’s lien in this case has been mooted by the foreclosure and trustee’s sale of the property, as addressed in section I of this opinion. Here we decide only whether the cause of action to impose a vendor’s lien was an action “on the contract” for purposes of the prevailing party determination under Civil Code section 1717.
Appellants argue that the enforcement of rights based on principles of equity does not constitute an action on a contract. We believe that this is too broad a statement. A more focused analysis is required, based on the circumstances of each case, in order to identify the legal basis of a party’s claim. For example, in Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, the court found that equitable causes of action for an injunction, to quiet title, and to obtain declaratory relief could be considered “on the contract” for purposes of Civil Code section 1717. The court explained: “In determining whether an action is ‘on the contract’ under section 1717, the proper focus is not on the nature of the remedy, but on the basis of the cause of action. [Citation.] Here, although the remedy sought in the relevant causes of action was equitable, the claims were still actions ‘on the contract, ’ i.e. the note and deed of trust.” (Kachlon, supra, at p. 347.) In Exxess Electronixx v. Heger Realty, supra, 64 Cal.App.4th 698, a case relied on by appellants, the court found that rights to contribution or indemnity were separate legal rights implied in law and not based on the contract. However, it further found that “a declaratory relief action that seeks to establish the parties’ rights under a contract is an action sounding in contract.” (Id. at pp. 710-711.) Similarly in Milman v. Shukhat (1994) 22 Cal.App.4th 538, 545, the court found that although declaratory relief was an equitable remedy, a declaratory relief action on promissory notes was an action on the contract within the meaning of Civil Code section 1717.
Here the parties’ promissory note provided for attorney’s fees in a suit to collect on the note and also provided for security in the form of a deed of trust. The purpose of the action for imposition of a vendor’s lien was to collect amounts due on the note by having a security instrument in place that could be foreclosed. We believe under these circumstances, this cause of action constituted an action “on the contract” for purposes of the prevailing party determination under Civil Code section 1717. Consequently, the court was entitled to consider respondents’ success on this cause of action in assessing which party recovered “a greater relief in the action on the contract.” (Civil Code, § 1717, subd. (b)(1).)
The Action for Partial Rescission Was an Action on the Contract
Appellants’ cross-complaint contained two causes of action, for breach of the promissory note, as modified, and for partial rescission of the purchase contract. Prior to trial the court granted judgment on the pleadings on appellants’ partial rescission cause of action. They did not submit their breach of contract claim to the jury. Appellants contend that the court erred in considering their lack of success on their cross-complaint, as to both of these causes of action, in its prevailing party assessment.
As to the partial rescission cause of action, this was based on an asserted mutual mistake of fact as to the buildable status of the four-acre parcel that was part of the subject property. In ruling for respondents on their motion for judgment on the pleadings, the court found that there could be no mistake in fact because the legal status of the four-acre parcel was ultimately ascertainable from the public records. Appellants argue that the court erred in considering this cause of action in a prevailing party determination because it was not an action to collect on the promissory note, but rather was based on the purchase contract, which did not contain an attorney’s fees provision.
Respondents argue that the promissory note was part of the purchase agreement “by extension.” They rely on Civil Code section 1642: “Several contracts relating to the same matters, between the same parties and made as parts of substantially one transaction, are to be taken together.” Thus a sales contract, promissory note and deed of trust are all part of the same transaction and are to be construed together as one contract. (Nevin v. Salk (1975) 45 Cal.App.3d 331, 338.)
We agree with respondents. In similar circumstances in Nevin v. Salk, supra, 45 Cal.App.3d 331, the court affirmed an award of attorney’s fees to a seller of a business and real property after the seller successfully defended a suit by the buyer for fraud and rescission of the agreement of sale. The buyer argued that the attorney’s fees were not proper because the contract in question, the agreement of sale, did not contain an attorney fee provision. The court rejected this argument. Two promissory notes and a deed of trust, which were incorporated in the agreement of sale, did contain an attorney’s fee provision. The court found that it is a question of fact whether several writings comprise one transaction, and the trial court properly concluded that all the instruments formed a single contract.
Neptune Society Corp. v. Longanecker (1987) 194 Cal.App.3d 1233 (Neptune Society) is also instructive. In that case, plaintiff franchisor sued to enforce promissory notes the franchisee had signed pursuant to a franchise agreement, and the franchisee cross-complained for rescission of the agreement. The trial court ordered the agreement rescinded and awarded the franchisee attorney’s fees. On appeal the franchisor argued that the award of attorney’s fees on the rescission action was improper because the only attorney’s fees provision was contained in the promissory notes and was limited to an action to collect on the notes. The court rejected this argument, finding that “[s]ince the promissory notes were inherent parts of the agreement, which is the subject matter of the litigation, the attorney’s fees provisions are properly construed as applying to the entire contract.” (Id. at p. 1250.)
Appellants would distinguish Neptune Society because it was decided before the 1987 amendment to Civil Code section 1717, and also on its facts because the party prevailing on the rescission action in the cross complaint also prevailed on the complaint. However, neither of these distinctions bears on the court’s finding in that case that several documents that are part of the same transaction can be construed as one contract for purposes of an attorney’s fees provision in one of the documents.
Appellants further argue that respondents’ success on the cross-action for partial rescission is of far less significance than their own success on respondents’ breach of contract claim in the main action, both because the rescission action was disposed of prior to trial, and also because the thrust of respondents’ lawsuit was to recover the entire amount on the promissory note. However, these arguments are misplaced here. The weighing of the parties’ relative successes given their litigation objectives is properly addressed to the trial court, in its exercise of discretion to determine which party, if any, “recovered a greater relief in the action on the contract.” (Civil Code, § 1717, subd. (b)(1).)
Although the purchase contract in this case did not contain an attorney’s fees provision, it referred to the promissory note, which did provide for attorney’s fees. The promissory note in turn referred to the deed of trust, the provisions of which contained an attorney’s fees clause. And appellants’ cause of action for partial rescission, if successful, would have directly affected respondents’ position with respect to their promissory note and security interest. We conclude that the record supports a finding that the promissory note was an inherent part of the purchase contract in this case. Thus the cross-action for partial rescission of the purchase contract constituted an “action on the contract” for purposes of Civil Code section 1717.
The Breach of Contract Cause of Action in the Cross-Complaint was Voluntarily Dismissed, Within the Meaning of Civil Code Section 1717, and Did Not Provide a Basis for Attorney’s Fees
As to the breach of contract cause of action in the cross-complaint, appellants contend that this cause of action cannot be considered in the prevailing party determination because Civil Code section 1717, subdivision (b)(2), provides that “where an action has been voluntarily dismissed... there shall be no prevailing party for purposes of this section.” The question is therefore whether this cause of action was “voluntarily dismissed” within the meaning of Civil Code section 1717, subdivision (b)(2).
Code of Civil Procedure section 581 provides for various means by which a party or the court can dismiss a case or cause of action. As pertains here, subdivisions (d) and (e) provide that, after the trial has commenced, a court “shall dismiss” a cause of action “when upon the trial and before the final submission of the case, the plaintiff abandons it” (Code Civ. Proc., § 581, subd. (d)), or “if the plaintiff requests a dismissal....” (Code Civ. Proc., § 581, subd. (e).)
A dismissal entered by the court after the plaintiff indicates its intent to abandon a cause of action is considered a voluntary dismissal for purposes of Civil Code section 1717, subdivision (b)(2), even if it is initiated during trial and is with prejudice. (D & J, Inc. v. Ferro Corp. (1986) 176 Cal.App.3d 1191, 1195.) Civil Code section 1717, subdivision (b)(2) makes no distinction between various types of voluntary dismissals, nor does it distinguish between dismissals sought before or after trial has commenced or before or after the plaintiff has put on its evidence. It states simply that where an action has been voluntarily dismissed, “there shall be no prevailing party for purposes of this section.” This provision has been “broadly applied.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, ¶ 11:39.2, p. 11-25 [noting the “[s]tage of proceedings not determinative”].) “Any dismissal entered on plaintiff’s motion or request or on stipulation of the parties, before or during trial, is ‘voluntary’ within the meaning of [Civil Code section 1717]... and prevents a fee award.” (Id., ¶ 11.39.4, p. 11-25.)
The record in this case does not contain a judgment of dismissal or any formal ruling on a request for dismissal. However, the court specifically found in its statement of decision that appellants “chose not to pursue and abandoned their cause of action for breach of contract.” Appellants argue that this finding that they “abandoned their cause of action” is supported by the record, which shows that they did not argue this claim at trial and it was not submitted to the jury. Under Code of Civil Procedure section 581, subdivision (d), the court “shall dismiss” a cause of action if plaintiff abandons it. Therefore this cause of action must be deemed dismissed. Respondents contend that a dismissal must be supported by some express request or other clear and unequivocal intent on appellants’ part to abandon their cause of action.
Appellants have filed a motion, accompanied by a declaration of counsel, asking us to make a factual finding that counsel made an oral motion to dismiss this cause of action, which was granted by the trial court but inadvertently left out of the reporter’s transcript. Respondents deny that this occurred. Although this court is authorized to take evidence and make findings of fact, this authority is reserved for very rare occasions. (Code Civ. Proc., § 909; Cal. Rules of Court, rule 8.252; In re Zeth S. (2003) 31 Cal.4th 396.) This is not such an occasion. We will deny appellants’ motion.
Both sides rely on Kaufman & Broad Bldg. Co. v. City & Suburban Mortg. Co. (1970) 10 Cal.App.3d 206 (Kaufman). In that case the trial court entered a directed verdict for the defendant, based in part on the court’s understanding that plaintiff had abandoned one cause of action. The Court of Appeal found that the directed verdict could not be supported since the record showed that the plaintiff had not unequivocally indicated an intent to abandon the cause of action, and in fact contended that he had not abandoned it. The court explained that while subdivision (4) of Code of Civil Procedure section 581 (the precursor to subdivision (d)) grants the court the power to dismiss during trial, the dismissal must be based on “some affirmative action by plaintiff in abandoning his cause of action.” (Kaufman, supra, at p. 212.) “In other words, section 581, subdivision 4 has traditionally been a mechanism by which a plaintiff (and not the court) voluntarily dismissed an action which has been expressly and intentionally abandoned.” (Id. at p. 213.) The court concluded as follows: “We hold that the provisions of section 581, subdivision 4 provide for a voluntary dismissal which must be predicated upon a clear, unequivocal and express intent to abandon an action. Such intent must be demonstrated to the court by way of a motion to dismiss, stipulation of the parties or some other form of express intent on the record.” (Ibid.)
Kaufman is distinguishable from our case. In Kaufman, the record did not show that the plaintiff unequivocally abandoned the cause of action. After an in chambers discussion, during which the court formed the impression that plaintiff had abandoned the cause of action, plaintiff continued to present evidence at trial regarding that cause of action, in the apparent belief that it was still viable. And following the judgment on the directed verdict, based in part on the court’s impression that the cause of action had been abandoned, plaintiff moved for a new trial. Here, on the other hand, the record is consistent with an intent by appellants to abandon their cause of action. They did not present any evidence of damages regarding their cross-claim for breach of contract, and they did not prepare or submit jury instructions or present any argument regarding this claim. Neither side objected to the court’s finding in its amended statement of decision that appellants had chosen not to pursue the cause of action for breach of contract in their cross-complaint and thus had abandoned it.
Although the record contains no motion or other stipulation, we believe it nonetheless shows a clear intent by appellants to abandon the cause of action for breach of contract in their cross-complaint. And it appears that all parties and the court understood that appellants had voluntarily abandoned this cause of action. The court so found, and the record supports that finding. When a plaintiff abandons a cause of action, Code of Civil Procedure section 581, subdivision (d) provides that the court shall dismiss it. In addition, the court has inherent power to dismiss an action, or cause of action, for failure to prosecute it. (Code Civ. Proc., § 581, subd. (m); Lyons v. Wickhorst (1986) 42 Cal.3d 911, 915.) We conclude that the record demonstrates a voluntary dismissal of this cause of action, within the meaning of Civil Code section 1717, subdivision (b)(2). It was therefore error for the court to consider this cause of action in its determination of the party prevailing on the contract under Civil Code section 1717.
Directions on Remand
The narrow attorney’s fees provision in the parties’ promissory note authorizes fees only in an action “to collect this note.” Such a provision cannot support an award of attorney’s fees to a party prevailing on a tort cause of action, and the court’s prevailing party determination must be made without reference to a party’s success on tort claims. (Hsu, supra, 9 Cal.4th at pp. 873-874.) On remand, the court’s exercise of discretion in determining the party prevailing on the contract in this case, for purposes of an award of attorney’s fees, must be made in accordance with Civil Code section 1717, based only on the contract causes of action. These included the breach of contract, declaratory relief, judicial foreclosure and vendor’s lien causes of action in the complaint, and the partial rescission cause of action in the cross-complaint. The court is to determine, in its discretion, which party “recovered a greater relief in the action on the contract.” (Civil Code section 1717, subdivision (b)(1).) In addition, “[t]he court may also determine that there is no party prevailing on the contract for purposes of this section.” (Ibid.)
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, supra, 60 Cal.App.4th at p. 1151.) Thus the determination of prevailing party for purposes of Civil Code section 1717 goes beyond simply counting the numbers of claims won by each side. (Silver Creek, LLC v. BlackRock Realty Advisors, Inc., supra, 173 Cal.App.4th at p. 1540.) Rather the court must evaluate the parties’ “comparative litigation success.” (Ibid.) This involves “a pragmatic assessment of the parties’ ultimate positions vis-à-vis their litigation objectives as reflected in pleadings, prayers, and arguments.” (Estate of Drummond, supra, 149 Cal.App.4th at p. 51.) “[I]n 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. [Citations.]” (Hsu, supra, at p. 877.) However, the court may not invoke equitable considerations unrelated to litigation success. In other words an award of attorney’s fees cannot have a punitive purpose: It is “improper for a trial court to consider the fault of the parties or their litigation motives in making a prevailing party determination under section 1717.” (Silver Creek LLC v. BlackRock Realty Advisors, Inc., supra, 173 Cal.App.4th at p. 1541; Hsu, supra, 9 Cal.4th at p. 877; Marina Glencoe, L.P. v. Neue Sentimental Film AG (2008) 168 Cal.App.4th 874, 879.)
The Supreme Court has stated the guidelines for the court’s exercise of discretion under Civil Code section 1717 as follows: “[I]n deciding whether there is a ‘party prevailing on the contract, ’ 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. The prevailing party determination is to be made only upon final resolution of the contract claims and only by ‘a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.’ [Citation.]” (Hsu, supra, 9 Cal.4th at p. 876.)
APPEAL NO. H034076
In their second appeal, appellants challenge the award of $278,323 in attorney’s fees on grounds that the fees were excessive and that the court failed to properly limit the fees awarded to those incurred on the contract causes of action. Since we will remand this matter so that the trial court may exercise its discretion to determine the party prevailing on the contract, applying the correct legal standards, the second appeal is moot and we will dismiss it. On remand, after the court has determined which party, if any, was the party prevailing on the contract, the court may also consider the amount of an attorney’s fees award.
DISPOSITION
In appeal No. H033773, the court’s “Order and Judgment” dated October 20, 2008, is reversed and the matter is remanded so that the trial court may exercise its discretion, in accordance with the opinions expressed herein, to determine which party, if any, was the party prevailing on the contract, within the meaning of Civil Code section 1717. On remand, appellants may request that the court correct improper language contained in the judgment. Based on our reversal in appeal No. H033773, appeal No. H034076 is dismissed. The parties are to bear their own costs on appeal.
WE CONCUR: MIHARA, J., Duffy, J.