Opinion
G059310
11-30-2021
LLOYD COPENBARGER, as Trustee, etc., Plaintiff and Appellant, v. MORRIS CERULLO WORLD EVANGELISM, Defendant and Respondent.
Hall Griffin, George L. Hampton IV and Laura J. Petrie for Plaintiff and Appellant. G10 Galuppo Law and Daniel T. Watts for Defendant and Respondent.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 30-2012-00605730, Thomas A. Delaney, Judge. Affirmed. Motion for sanctions. Denied.
Hall Griffin, George L. Hampton IV and Laura J. Petrie for Plaintiff and Appellant.
G10 Galuppo Law and Daniel T. Watts for Defendant and Respondent.
OPINION
FYBEL, J.
INTRODUCTION
In this appeal, Lloyd Copenbarger, as Trustee of the Hazel I. Maag Trust (the Maag Trust), challenges an order denying his motion for contract-based attorney fees sought pursuant to Civil Code section 1717 (section 1717). The trial court considered the mixed litigation results, found that no party had prevailed, and denied the Maag Trust's motion. The court acted well within its discretion by making those determinations. We therefore affirm the order denying the Maag Trust's motion for attorney fees.
The trial court also denied a motion for attorney fees brought by Morris Cerullo World Evangelism (MCWE). MCWE has abandoned its appeal from the order denying its motion.
Although we are deciding the appeal in favor of MCWE, we are disturbed by the many instances in its respondent's brief in which MCWE has misrepresented the record, made false or misleading statements, and mischaracterized this court's opinions. Its own misconduct notwithstanding, MCWE has brought a motion for sanctions for frivolous appeal against the Maag Trust and, in that motion, repeats the misrepresentations, falsehoods, and mischaracterizations made in MCWE's briefs. The Maag Trust's appeal is unsuccessful but not frivolous. MCWE's motion for sanctions is denied.
FACTS
We take the facts from our nonpublished opinion, Copenbarger v. Morris Cerullo World Evangelism (June 10, 2019, G055129) (Copenbarger II):
"'MCWE is the lessee of a 50-year ground lease (the Ground Lease) of real property (the Property) in Newport Beach. The Property was improved with an office building and marina (the Improvements). The Ground Lease terminates on December 1, 2018.
"'In 2004, MCWE subleased the Property and sold all of the Improvements to NHOM (the Sublease). The Sublease terminates on November 18, 2018. Paul Copenbarger and Kent McNaughton were the members and managers of NHOM.
"'To acquire the Sublease and fund the purchase of the Improvements, NHOM obtained a $1.15 million loan from Plaza del Sol . . . and a $3 million loan from the Maag Trust. Lloyd Copenbarger, who is Paul Copenbarger's brother, is the trustee of the Maag Trust. The $3 million loan from the Maag Trust was evidenced by a promissory note (the Maag Note) and secured by a first priority deed of trust on the Sublease and the Improvements (the Maag Deed of Trust). The $1.15 million loan from Plaza del Sol was evidenced by a promissory note (the Plaza del Sol Note) and secured by a second priority deed of trust on the Sublease and the Improvements (the Plaza del Sol Deed of Trust).
Plaza del Sol Real Estate Trust. Roger Artz is the trustee of Plaza del Sol. (Copenbarger II, supra, G055129.)
"'Starting in 2009, NHOM experienced cash flow problems due to "a shortage of rents." . . . Necessary maintenance and repairs were not made . . . . In late August 2009, the Maag Trust notified NHOM of defaults of NHOM's obligations under the Maag Note, including failure to maintain the Property and to make timely loan payments.
"'. . . In April 2010, Cerullo, Plaza del Sol, and the Maag Trust entered into an "Agreement re: Assignment and Transfer of Promissory Note and Deed of Trust and Ground Lease Enforcement" (the Agreement Re: Assignment). Under the terms of the Agreement Re: Assignment, the Maag Trust agreed to make certain payments on the Plaza del Sol Note, reimburse Plaza del Sol for real property taxes it paid on the Improvements and the Property, and make future payments to Plaza del Sol in an amount equal to payments due on the Plaza del Sol Note as such payments became due. MCWE and Plaza del Sol agreed not to declare a default under the Sublease on account of then-existing defaults so long as the Maag Trust made the agreed-upon payments.
"'In June 2011, MCWE commenced an unlawful detainer action against NHOM . . . (the UD Action), based on allegations NHOM failed to maintain and undertake required repairs to the Improvements. Six months later, the Maag Trust intervened in the UD Action as a party defendant under the theory that if NHOM were evicted and the Sublease terminated, then the Maag Trust's security interest created by the Maag Deed of Trust would be destroyed.
"'In August 2012, MCWE, Plaza del Sol, and the Maag Trust entered into a settlement agreement (the Settlement Agreement). The Settlement Agreement "rescind[ed] and cancel[ed] the Agreement Re: Assignment," required the Maag Trust to pay $400,000 (split into two payments) to MCWE, and obligated Plaza del Sol to assign the Plaza del Sol Note and the Plaza del Sol Deed of Trust to the Maag Trust. The Settlement Agreement states . . . "[i]n any dispute involving the enforcement of this [Settlement] Agreement, the prevailing party shall be entitled to recover . . . its reasonable attorneys' fees and all other reasonable costs and expenses incurred therein."
"'The Settlement Agreement states MCWE "[w]ill, and hereby does, dismiss the UD [Action] with prejudice." . . . Although the Settlement Agreement was signed in August 2012, and required a dismissal with prejudice, MCWE did not dismiss the UD Action until October 2015, and then did so without prejudice.'" (Copenbarger II, supra, G055129, quoting Copenbarger v. Morris Cerullo World Evangelism, Inc. (2018) 29 Cal.App.5th 1, 4-6 (Copenbarger I), some capitalization omitted.)
PROCEDURAL HISTORY
I. Trial and Judgment on the Maag Trust's Complaint and MCWE's Cross-complaint
We start the procedural history by quoting from Copenbarger II:
"'[T]he Maag Trust filed a complaint against MCWE and Plaza del Sol for declaratory relief and breach of contract. The complaint alleged MCWE and Plaza del Sol breached the Settlement Agreement by failing to dismiss the UD Action and by not delivering the Plaza del Sol Note and Plaza del Sol Deed of Trust to the Maag Trust.' [Citation.] An amended complaint added two causes of action that were dismissed before trial.
"MCWE and Plaza del Sol filed a cross-complaint for rescission of the Settlement Agreement. However, in 2015, MCWE and Plaza del Sol amended their cross-complaint to add causes of action for reformation and specific performance of the Settlement Agreement. MCWE then dismissed the UD Action, without prejudice. [Citation.]
"A bench trial was conducted in May 2016. The Maag Trust's theory of damages was it had incurred $118,000 in attorney fees defending the UD Action between August 2012, when the Settlement Agreement was executed, and November 2015, when MCWE dismissed the UD Action.
"The trial court ruled in favor of the Maag Trust and against MCWE on the declaratory relief and the breach of contract causes of action and awarded the Maag Trust $118,000 in damages. The judgment awarded the Maag Trust $118,000 in damages against MCWE only, awarded judgment in favor of Plaza del Sol on the Maag Trust's first amended complaint, and awarded judgment in favor of the Maag Trust and against MCWE and Plaza del Sol on the cross-complaint.
"In the statement of decision, the trial court found: (1) the Settlement Agreement was 'valid, binding, and of full force and effect' and rejected MCWE's claim for its reformation; (2) MCWE materially breached the Settlement Agreement by 'not promptly dismissing with prejudice the UD [Action]'; (3) this breach excused further performance by the Maag Trust; and (4) the Maag Trust could recover attorney fees incurred in the UD Action as damages for breach of the Settlement Agreement. The court awarded the Maag Trust $118,000 in damages based on Lloyd Copenbarger's testimony that the Maag Trust had incurred that amount in defending the UD Action.
"As to the cross-complaint, the trial court found, 'MCWE fails to show that it is entitled to reformation of the Settlement Agreement.' The court found: 'The reformation that MCWE seeks . . . is not what the parties had agreed upon. Rather, MCWE seeks to create an entirely new settlement agreement, one to which Lloyd Copenbarger testified at trial that he would have never agreed [upon].' Because MCWE was not entitled to reformation of the Settlement Agreement, it was not entitled to specific performance of a reformed agreement." (Copenbarger II, supra, G055129, quoting Copenbarger I, supra, 29 Cal.App.5th at pp. 6-7.)
II. The Maag Trust's First Motion for Attorney Fees
Continuing from Copenbarger II: "The Settlement Agreement has an attorney fees provision (section 8) stating: 'In any dispute involving the enforcement of the Agreement, the prevailing party shall be entitled to recover, in addition to all other remedies it may have, its reasonable attorneys' fees and all other reasonable costs and expenses incurred therein.' After entry of judgment, the Maag Trust and Plaza del Sol each brought a motion for attorney fees based on section 8 of the Settlement Agreement. The Maag Trust sought $328,500 in attorney fees while Plaza del Sol sought $759,402 in attorney fees. . . .
"The trial court denied Plaza del Sol's motion for attorney fees. The court found that, although Plaza del Sol was the prevailing party under Code of Civil Procedure section 1032, it was not the prevailing party for purposes of awarding attorney fees because Plaza del Sol did not prevail on its cross-claims for reformation and specific performance. The trial court granted the Maag Trust's motion for attorney fees because the Maag Trust was 'the prevailing party on the Settlement Agreement with respect to MCWE.'" (Copenbarger II, supra, G055129, some capitalization omitted.)
III. Reversal of the Judgment and the Order Awarding the Maag Trust Attorney Fees
In Copenbarger I, supra, 29 Cal.App.5th at page 4, a panel of this court reversed the judgment awarding Copenbarger $118,000 in damages. The disposition was to reverse the judgment and remand with directions to enter judgment in favor of MCWE. (Id. . at pp. 17-18.)
In Copenbarger II, supra, G055129, a panel of this court reversed the portion of the attorney fees order awarding the Maag Trust attorney fees and remanded the matter for the trial court to make a new determination of prevailing party status and, depending on that determination, award attorney fees. We noted that "[o]ur decision in Copenbarger I removed a major premise for the trial court's determination that the Maag Trust was the prevailing party under section 1717." (Copenbarger II, supra, G055129.)
We concluded: "[T]he correct course of action in light of Copenbarger I is to reverse the order granting the Maag Trust attorney fees and remand to the trial court to redetermine prevailing party status. We disagree with MCWE that reversal of the money judgment in favor of the Maag Trust makes MCWE the prevailing party within the meaning of section 1717(b). [Citation.] We explained in . . . the Discussion section, the Maag Trust prevailed on MCWE and Plaza del Sol's cross-complaint, which asserted reformation and specific performance causes of action having significant monetary value. The cross-complaint was not purely defensive but, even if it were, that would not be dispositive of prevailing party status." (Copenbarger II, supra, G055129, footnote omitted.)
The disposition stated: "[T]he attorney fees order is affirmed with respect to Plaza del Sol, and in all other respects is reversed and remanded to the trial court with directions to redetermine prevailing party status, and, depending on that determination, award attorney fees." (Copenbarger II, supra, G055129.)
IV. Cross-motions for Attorney Fees: The Trial Court Finds That No Party Prevailed
Following issuance of the remittitur in Copenbarger II, a second amended judgment was entered. The second amended judgment recites that the Maag Trust shall take nothing by way of the first and second causes of action of the first amended complaint, and that MCWE and Artz shall take nothing by way of their cross-claims. The judgment recites that the court shall make the determination whether the Maag Trust or MCWE "is the prevailing party or entitled to recover attorney fees."
The Maag Trust brought a motion for an order finding it to be the prevailing party and to recover attorney fees in the sum of $363,868.25 from MCWE. MCWE also brought a motion for an order finding it to be the prevailing party and to recover attorney fees from the Maag Trust.
The trial court denied both motions. The court found: "[The Maag Trust] achieved a litigation objective by obtaining a dismissal of the UD action and defeated the cross-complaint. The cross-complaint sought affirmative relief for reformation and specific performance. The appellate court held that the cross-complaint was not merely defensive. [¶] On the other hand [MCWE] prevailed on [the Maag Trust] 's breach of settlement claims. [MCWE] offered to settle for $100,000 in its statutory offer. [The Maag Trust] failed to recover any monetary sum. [¶] Based on the mixed results, the Court finds that there was no prevailing party. Neither side is entitled to recover any attorney fees."
The Maag Trust appealed from the order denying its motion for attorney fees. MCWE filed a notice of appeal but later abandoned the appeal.
DISCUSSION
I. Governing Law and Standard of Review
Section 1717 governs fee awards for enforcing contractual fee-shifting clauses. Section 1717, subdivision (a) provides for the recovery of attorney fees in "any action on a contract" to "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." The prevailing party is defined as "the party who recovered a greater relief in the action on the contract." (§ 1717(b)(1).)
"The court may also determine that there is no party prevailing on the contract for purposes of this section." (§ 1717, subd. (b)(1).) "If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees." (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109; Hsu v. Abbara (1995) 9 Cal.4th 863, 876 (Hsu).) "The trial court ruling on a motion for fees under section 1717 is vested with discretion in determining which party has prevailed on the contract, or that no party has [prevailed]." (DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5th 968, 973.)
The trial court's finding of no prevailing party for purposes of section 1717 is reviewed under the abuse of discretion standard. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 894.) The abuse of discretion standard measures whether, in light of the evidence, the lower court's decision falls within the permissible range of options set by the legal criteria. (Bank of America, N.A. v. Superior Court (2013) 212 Cal.App.4th 1076, 1089.) The scope of the court's discretion is limited by law governing the subject of the action taken. (Ibid.) An action that transgresses the bounds of the applicable legal principles is deemed an abuse of discretion. (Ibid.) A trial court's decision is an abuse of discretion if it is based on an error of law (In re Tobacco II Cases (2009) 46 Cal.4th 298, 311; Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622, 629) or if the court's factual findings are not supported by substantial evidence (Millview County Water Dist. v. State Water Resources Control Bd. (2016) 4 Cal.App. 5th 759, 769).
When determining which party prevailed within the meaning of section 1717, the trial court "is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources." (Hsu, supra, 9 Cal.4th at p. 876.) In determining litigation success, courts should respect substance rather than form, and may be guided by equitable considerations connected to litigation success. A party who is denied direct relief on a claim may nonetheless be a prevailing party if it is clear the party has otherwise achieved its main litigation objective. (Id. at p. 877.) However, a party's failure to achieve its main litigation objective does not make the other party "ipso facto the prevailing party." (Marina Pacifica Homeowners Assn. v. Southern California Finance Corp. (2018) 20 Cal.App.5th 191, 205.)
II. The Trial Court Did Not Err by Finding Neither Party Prevailed
Neither the Maag Trust nor MCWE achieved a complete litigation victory. A close analysis of the parties' respective litigation goals and relief obtained leads us to conclude the trial court acted within its discretion by making a finding of no prevailing party for purposes of attorney fees.
The Maag Trust's litigation objectives:
The complaint sought a declaration that the Settlement Agreement was "valid, binding and of full [] force and effect" and that the Maag Trust was "entitled to have a dismissal with prejudice of the UD action filed immediately." (Some capitalization omitted.) The complaint also sought damages from MCWE for breach of the Settlement Agreement. In addition, the Maag Trust sought to defeat MCWE's cross-complaint.
MCWE's litigation objectives:
MCWE sought to defeat the Maag Trust's complaint and deny the Maag Trust the relief sought by the complaint. MCWE's cross-complaint sought reformation of the Settlement Agreement and specific performance of the reformed agreement.
Relief obtained by the Maag Trust:
1. Dismissal of the UD Action. In response to the Maag Trust's complaint, MCWE dismissed the UD Action. This was a significant win.
MCWE argues the dismissal of the UD Action cannot be considered because the judgment did not order it. This argument has no merit: Dismissal of the UD Action was an appropriate factor to consider in determining prevailing party status.
In Santisas v. Goodin (1998) 17 Cal.4th 599 (Santisas), the California Supreme Court, in defining the term "prevailing party," stated "a court may base its attorney fees decision on a pragmatic definition of the extent to which each party has realized its litigation objectives, whether by judgment, settlement, or otherwise." (Id. at p. 622, italics added.) In support of that proposition, the Supreme Court cited Hsu, supra, 9 Cal.4th at page 877, in which the court had stated: "We agree that in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by 'equitable considerations.' For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective."
Thus, in Santisas and Hsu, the California Supreme Court recognized that in determining the prevailing party under section 1717, a court may consider whether a party achieved its litigation objectives by means other than judicial resolution or settlement.
In confirming and clarifying the catalyst theory, the court considered the meaning of the terms "prevailing party" and "successful party" as used in section 1021.5. (Graham, supra, 34 Cal.4th at p. 570.) The court concluded those terms should have the practical meaning of the party to litigation that achieves its objectives, even if that party did not obtain judicial relief. (Id. at p. 571.) The court, citing Santisas, supra, 17 Cal.4th 599, endorsed this practical definition of prevailing party or successful party as "consistent with our construction of the meaning of 'prevailing party' within the context of Civil Code section 1717." (Graham, supra, at p. 571.) The court explained: "If, as is clearly the case, a defendant can be a prevailing or successful party after a plaintiff has voluntarily dismissed the case against it, it is difficult to fathom why a plaintiff cannot be considered a prevailing or successful party when it achieves its litigation objectives by means of defendant's 'voluntary' change in conduct in response to the litigation. When a creditor sues a debtor to collect a debt, and the debtor pays the debt before a judgment is entered against it, the creditor has been a 'successful party' by any conventional understanding of that term." (Id. at p. 572.) Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553 (Graham) lends support to this conclusion. In Graham, the California Supreme Court addressed whether to abolish the catalyst theory, which holds that a plaintiff may recover attorney fees under Code of Civil Procedure section 1021.5 if the litigation produces no judicial resolution but causes the defendant to change behavior, resulting in a substantial benefit. (Graham, supra, 34 Cal.4th at p. 565.)
The trial court therefore correctly found the Maag Trust achieved a litigation objective by obtaining dismissal of the UD Action. (See Pont v. Pont (2018) 31 Cal.App.5th 428, 443 [husband achieved a litigation objective of enforcing stipulated judgment in marital dissolution action by obtaining dismissal of ex-wife's civil lawsuit].)
2. The trial court made a finding that the Settlement Agreement was "'valid, binding, and of full force and effect.'" (Copenbarger I, supra, 29 Cal.App.5th at p. 7.) This was an objective sought by the Maag Trust's complaint. MCWE did not challenge that finding on appeal.
3. Defeat of MCWE's cross-complaint. In Copenbarger II, we stated: "The Maag Trust prevailed against MCWE and Plaza del Sol on the cross-complaint" and "in the wake of Copenbarger I, supra, 29 Cal.App.5th 1, the Maag Trust recovered nothing from MCWE or Plaza del Sol on the complaint but prevailed on the cross-complaint." MCWE contends its cross-complaint was defensive and the monetary value of its cross-complaint was "zero." Those contentions are misleading, if not false. In Copenbarger II, we concluded that MCWE's cross-complaint was not purely defensive but sought affirmative relief and the value to MCWE of the relief sought was at least $359,000. (Copenbarger II, supra, G055129.) In assessing the value of the cross-claims for reformation and specific performance, we concluded, "[b]y defeating the cross-claims for reformation and specific performance, the Maag Trust obtained a recovery worth $359,000 and a judgment more favorable than the $259,000 value of the section 998 offer." (Copenbarger II, supra, G055129.) Yet, in the respondent's brief, MCWE persists in calling its cross-complaint defensive, a matter that has been decided against MCWE.
Relief obtained by MCWE:
MCWE defeated the Maag Trust's claims for specific performance and damages sought in the complaint. The complaint sought specific performance by MCWE of its alleged duty to deliver possession of the Plaza del Sol Note, which had a face value of $300,000, and the Plaza del Sol Deed of Trust. The complaint also sought monetary damages according to proof at trial. The trial court granted MCWE's motion in limine to exclude evidence and argument that MCWE breached the Settlement Agreement by failing to deliver the Plaza del Sol Note and the Plaza del Sol Deed of Trust. This ruling, by eliminating the Maag Trust's claim for specific performance, was a win for MCWE. (Copenbarger I, supra, 29 Cal.App.5th at p. 7.) The Maag Trust proved MCWE breached the Settlement Agreement, and recovered $118,000 in damages, but we reversed the judgment because the Maag Trust had failed to prove its damages. (Id. at pp. 11, 17.)
This analysis demonstrates that the Maag Trust and MCWE each achieved some of their litigation goals. The trial court therefore could exercise its discretion to make the determination that "on balance, neither party prevailed sufficiently to justify an award of attorney fees." (Scott Co. v. Blount, Inc., supra, 20 Cal.4th at p. 1109.)
The Maag Trust argues "[t]he Appellate Court's decision in Copenbarger II mandates a finding that Maag Trust is the prevailing party." If that were true, then, in Copenbarger II, we would have directed the trial court on remand to make that finding and award the Maag Trust its attorney fees. We did not do that. Instead, we stated, "[i]t is therefore up to the trial court on remand to compare the results achieved by each party, exercise its discretion to make the determination of prevailing party status and, depending on that determination, award attorney fees." (Copenbarger II, supra, G055129.) We stated that "[w]e express no opinion whether the Maag Trust, MCWE, or no party prevailed." (Ibid.) As we directed, the trial court considered and compared the litigation results achieved by the Maag Trust and MCWE, and, based on the mixed results, exercised its discretion to make a determination of prevailing party status.
The Maag Trust argues the trial court erred by basing its decision on the Maag Trust's failure to recover money damages and by not considering the Maag Trust's defeat of MCWE's cross-complaint, which had a value of $359,000. The trial court did consider the Maag Trust's achievement in defeating MCWE's cross-complaint and found that to have been "a litigation objective." However, the Maag Trust recovered no monetary damages, and that was a major litigation victory for MCWE. The Maag Trust asserts it was the prevailing party because the nonmonetary value of MCWE's cross-complaint ($359,000) was greater than the amount of damages sought by the Maag Trust ($118,000). That assertion misapprehends the test for determining prevailing party status and the scope of the trial court's discretion.
Because neither the Maag Trust nor MCWE achieved a complete win, the trial court had discretion to determine prevailing party status by comparing litigation objectives and achievements. Such comparison is not simply a matter of comparing the monetary value of one side's litigation achievements against the value of the other side's achievements. Defeating the Maag Trust's claims for damages and specific performance was a major litigation objective for MCWE, and the trial court acted within its discretion by finding, in light of this achievement, that no party prevailed. Because we have concluded the trial court did not abuse its discretion by finding no party prevailed, we do not address MCWE's argument that the Maag Trust cannot recover attorney fees because it is not the prevailing party under Code of Civil Procedure section 1032 (section 1032). MCWE's argument under section 1032 is, however, highly relevant to MCWE's motion for sanctions on appeal against the Maag Trust.
MOTION FOR SANCTIONS
I. Law Regarding Sanctions for Frivolous Appeal
MCWE has filed a motion for sanctions against the Maag Trust for pursuing a frivolous appeal. Code of Civil Procedure section 907 authorizes the Court of Appeal to impose sanctions when an appeal is "frivolous or taken solely for delay." California Rules of Court, rule 8.276 authorizes the Court of Appeal, on motion of a party or its own motion, to impose sanctions against a party or an attorney for "[t]aking a frivolous appeal or appealing solely to cause delay" or for "[c]ommitting any other unreasonable violation of these rules." (Cal. Rules of Court, rule 8.276(a)(1) & (4).)
An appeal is considered frivolous when "it is prosecuted for an improper motive-to harass the respondent or delay the effect of an adverse judgment-or when it indisputably has no merit-when any reasonable attorney would agree that the appeal is totally and completely without merit." (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.) The total lack of merit of an appeal can be seen as evidence the appeal was taken solely for delay. (Id. at p. 649.)
II. MCWE's Arguments in Favor of Sanctions Have No Merit
MCWE argues the Maag Trust's appeal is frivolous for four reasons: (1) the Maag Trust lost every claim for breach of contract; (2) to recover attorney fees under section 1717, it is necessary to be deemed the prevailing party under section 1032; (3) the Maag Trust violated the rule of candor by failing to disclose authority "directly adverse to [its] position"; and (4) the Maag Trust made false statements to the tribunal. We address each argument in turn. None has merit and two are themselves frivolous.
A. The Maag Trust Did Not Lose on Every Claim for Breach of Contract
MCWE argues the Maag Trust's appeal is frivolous because, MCWE contends, the Maag Trust lost on every claim and "a plaintiff who does not prevail on a single claim is not a prevailing party." This argument is without merit.
We have explained that the Maag Trust did not lose every claim arising under the Settlement Agreement and in fact achieved several significant litigation objectives. The Maag Trust defeated MCWE's cross-complaint, a significant litigation achievement which MCWE ignores. The Maag Trust obtained a dismissal of the UD Action, also a significant litigation achievement. The Maag Trust obtained a declaration that the Settlement Agreement was valid and binding, another litigation achievement. The Maag Trust lost its claim for specific performance and monetary damages, but that did not in itself render the Maag Trust ineligible to recover attorney fees or make MCWE the prevailing party.
B. The Maag Trust's Appeal Is Not Frivolous Under Established Law
MCWE contends the Maag Trust's appeal is frivolous because it is "[b]lack letter, crystal clear law" that to recover attorney fees under section 1717, it is necessary, but not sufficient, for a party to be the prevailing party under section 1032, the general cost recovery statute for civil lawsuits. MCWE relies on Zintel Holdings, LLC v. McLean (2012) 209 Cal.App.4th 431, 438 (Zintel Holdings), in which the court stated that prevailing party status under section 1032 was "a necessary prerequisite for an award of attorney fees as costs." One appellate opinion does not create black letter law. We are not bound by Zintel Holdings (Sarti v. Salt Creek Ltd. (2008) 167 Cal.App.4th 1187, 1193 ["there is no horizontal stare decisis in the California Court of Appeal"]) and a reasonably strong argument can be made that we should not follow Zintel Holdings.
Section 1032, subdivision (b) states: "Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding." Costs include attorney fees when authorized by contract. (Code Civ. Proc., § 1033.5, subd. (a)(10)(A).)
This hypothetical illustrates our concern. Plaintiff sues defendant for breach of a contract with an attorney fees clause and for various noncontract causes of action. Defendant prevails on the contract cause of action, while plaintiff obtains a monetary recovery on the noncontract causes of action. Plaintiff is the prevailing party under section 1032. But defendant prevailed in the action on the contract under section 1717. Zintel Holdings, supra, 209 Cal.App.4th 431, suggests that in the situation described the defendant, who prevailed on the contract causes of action, should be denied contractual attorney fees.
Appellate decisions uniformly hold that "the prevailing party for the award of costs under section 1032 is not necessarily the prevailing party . . . in contract actions under section 1717." (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1142 (Sears); see McLarand Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1456 (McLarand); PNEC Corp. v. Meyer (2010) 190 Cal.App.4th 66, 70, fn. 2 ["We recognize the 'prevailing party' inquiries under Civil Code section 1717 and Code of Civil Procedure section 1032 are distinct"].) This principle does not foreclose the possibility that one litigant might be the prevailing party under section 1032, while another might be entitled to attorney fees as the prevailing party under section 1717. In Sears, the court concluded, "[a] party can fail to recover a net monetary judgment and yet prevail for purposes of collecting fees in an action founded in contract." (Sears, supra, at p. 1139.)
In DeSaulles v. Community Hospital of Monterey Peninsula (2016) 62 Cal.4th 1140, 1147, the California Supreme Court rejected the proposition that section 1032 controls the determination of prevailing party status for recovery of attorney fees under section 1717: "Section 1032's definition of 'prevailing party' does not control, however, when another statute provides for different means of allocating costs. [Citation.] The definition of 'prevailing party' in section 1032 is particular to that statute and does not necessarily apply to attorney fee statutes or other statutes that use the prevailing party concept." MCWE did not cite DeSaulles.
MCWE's argument that it, and not the Maag Trust, is the prevailing party under section 1032 is based on the false premise, made both in the respondent's brief and in the sanctions motion, that in Copenbarger v. Morris Cerullo World Evangelism (May 17, 2021, G059072) [nonpub. opn.] we found MCWE to be the prevailing party under section 1032. This is a gross mischaracterization of our opinion in that matter. Copenbarger v. Morris Cerullo World Evangelism, supra, G059072 was an appeal from an order denying the Maag Trust's motion to tax costs: The only issues presented were whether the trial court erred by permitting MCWE to recover various items of costs on appeal. In describing the procedural history, we stated, "MCWE argued its memorandum of costs was timely as to costs incurred in Copenbarger I because it was not until October 29, 2019 that the trial court entered a judgment declaring MCWE to be the prevailing party in the trial court litigation." By making that statement, we were not affirming the judgment but merely reciting an argument made by MCWE to justify its untimely motion.
Both in the respondent's brief and in the sanctions motion, MCWE argues that in Copenbarger II, supra, G055129 and Copenbarger I, supra, 29 Cal.App.5th 1, we found MCWE to be the prevailing party under section 1032. In those two opinions, MCWE was awarded costs as the prevailing party on appeal. An award of costs to the prevailing party on appeal is made pursuant to California Rules of Court, rule 8.278 and is unrelated to a determination of prevailing party status in the trial court under section 1032. When the trial court in the present matter ruled on the motions for attorney fees, no determination of prevailing party status under section 1032, as between the Maag Trust and MCWE, had ever been made.
MCWE asserts that the Maag Trust conceded that MCWE was the prevailing party under section 1032 by submitting a proposed judgment stating that MCWE is entitled to recover costs. MCWE does not support this assertion with a citation to the record-a violation of California Rules of Court, rule 8.204(a)(1)(C). MCWE seems to be referring to the judgment entered October 29, 2019-the second amended judgment-but it expressly and specifically states, "Whether Lloyd Copenbarger, as Trustee of the Hazel I. Maag Trust or Morris Cerullo World Evangelism, Inc. is the prevailing party or entitled to recover attorney fees shall be determined by the Court." (Bold added.)
Further, MCWE is not necessarily the prevailing party under section 1032. It has been held that "'a defendant who defeats the plaintiff's claim on a complaint, but who recovers nothing on his [or her] cross-complaint against the plaintiff, is nevertheless a prevailing party entitled to . . . costs.'" (Zintel Holdings, supra, 209 Cal.App.4th at p. 438, accord McLarand, supra, 231 Cal.App.3d at pp. 1454-1455.) MCWE argues that is the situation in the present case. But section 1032, subdivision (a)(4) states: "If 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." (Italics added.) The Maag Trust recovered "other than monetary relief" by obtaining both the dismissal of the UD Action and a judicial declaration that the Settlement Agreement was valid and binding. (See Marina Pacific Homeowners Assn. v. Southern California Financial Corp., supra, 20 Cal.App.5th at p. 209 ["'other than monetary relief'" under section 1032 includes declaratory relief].) Because the Maag Trust recovered other than monetary relief, the trial court had discretion to determine which party, or neither, was the prevailing party under section 1032.
C. The Maag Trust Did Not Violate the Duty of Candor
MCWE argues the Maag Trust violated its duty of candor by failing to cite authority which, MCWE contends, is adverse to the Maag Trust. MCWE claims the Maag Trust violated California Rules of Professional Conduct, rule 3.3(a) (miscited by MCWE as rule 3.3 of the California Rules of Court) by failing to cite adverse authority and making "false statements of fact or law." (Rules Prof. Conduct, rule 3.3(a)(1).)
California Rules of Professional Conduct, rule 3.3(a) states that a lawyer shall not "knowingly make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer" and shall not "fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel, or knowingly misquote to a tribunal the language of a book, statute, decision or other authority." (Rules Prof. Conduct, rule 3.3(a)(1) & (2).)
These claims have no merit. The Maag Trust cited relevant authority, including adverse authority, and its interpretation and application of such authority satisfied the duties imposed by rule 3.3 of the Rules of Professional Conduct. MCWE's contention that the Maag Trust failed to quote the entire holding of Hsu is patently wrong: As the Maag Trust points out, at page 14 of its opening brief, the Maag Trust quoted the entire passage from Hsu that MCWE contends had been omitted.
D. MCWE, Not the Maag Trust, Has Made False Statements
MCWE contends the Maag Trust made the following false statements of fact:
1. "'There can be no dispute that by filing this action, Maag Trust achieved its litigation objective of obtaining a dismissal of the UD Action.'"
2. "'Maag Trust achieved its litigation objective in obtaining dismissal of the UD Action, while MCWE achieved no litigation objective.'"
3. "'The overwhelming evidence in the record is that Maag Trust not only achieved its litigation objective but that MCWE achieved none of its litigation objectives.'"
The assertions made in the first and second statements that the Maag Trust had achieved its litigation objection of obtaining a dismissal of the UD Action are true. The trial court found that the Maag Trust had achieved that objective. The assertion in the second and third statements that MCWE achieved none of its litigation objectives is fair advocacy because the Maag Trust defeated MCWE's cross-complaint and the Maag Trust obtained a declaration that the Settlement Agreement was valid and binding. The assertion in the third statement that the Maag Trust achieved its litigation objective is true because, when read in context, the litigation objective referred to was dismissal of the UD Action.
It is MCWE, not the Maag Trust, which has violated California Rules of Professional Conduct, rule 3.3(a). We have recited the instances in MCWE's appellate briefs and motion for sanctions in which MCWE has misrepresented the record, made blatantly false statements, mischaracterized our opinions, and ignored adverse findings.
In this opinion, we have concluded that attorneys for MCWE committed misconduct and violated a Rule of Professional Conduct. Under Canon 3D(2) of the California Code of Judicial Ethics, we are required to take appropriate action. The Advisory Committee Commentary states that writing about such misconduct and violation of a Rule in a judicial opinion may constitute appropriate action. We do so in this opinion, and take no further action, but caution counsel for MCWE that if there is a "next time," appropriate action will be more serious.
DISPOSITION
The order denying the Maag Trust's motion for attorney fees is affirmed. In the interest of justice, no party may recover costs.
WE CONCUR: O'LEARY, P.J., BEDSWORTH, J.