Opinion
H046916
08-11-2020
ONERENT, INC., Plaintiff and Respondent, v. ELENA GALANTER, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. 17-CV312428)
This is an appeal by defendant and appellant Elena Galanter from a postjudgment order denying her motion for attorney fees. The underlying action was brought by Onerent, Inc. (Onerent), as property manager for the landlord, against Elena and Gennady Galanter, as tenants/occupants of an apartment unit in Palo Alto.
Because the defendants have the same surname, we will refer to them by their first names. We do so as a matter of clarity and convenience and intend no disrespect. (See Rubinstein v. Rubenstein (2002) 81 Cal.App.4th 1131, 1136, fn. 1.)
After dismissal of the action, Elena filed a motion for attorney fees, which was opposed by Onerent. In an order filed June 14, 2018 (the order), the court denied the motion for attorney fees. Elena challenges the order on appeal, contending that she was the prevailing party on the contract action. We conclude that the trial court did not err. Accordingly, we will affirm.
I. PROCEDURAL BACKGROUND
Onerent filed the instant lawsuit against Elena and Gennady on June 29, 2017. In its first amended complaint (hereafter, the complaint), Onerent alleged one cause of action for unlawful detainer. It alleged that it was the property manager for the subject property, an apartment unit located on Park Boulevard in Palo Alto (the premises), and that Onerent was authorized to act on the owner's behalf to take legal action concerning the premises. Gennady was the tenant of the premises pursuant to written lease, and, as of February 1, 2017, Elena was an additional household occupant. As alleged in the complaint, the formal documents reflecting the leasehold arrangement between the landlord and designated tenant of the premises are detailed in the two paragraphs herein that follow.
For convenience and to avoid repetition, in this paragraph and the succeeding four paragraphs, we describe the specific allegations of the complaint without repeating in each sentence the prefatory phrase, "Onerent alleged."
On December 14, 2015, Gennady, as tenant, entered into a written lease with Onerent, as landlord, to rent the premises for 13 months, beginning January 1, 2016, through January 31, 2017. The lease provided that the monthly rental was $3,300. On April 14, 2016, at the request of Gennady and Elena, Onerent re-executed the lease agreement, adding Elena as a signatory and naming her as a cotenant (hereafter, the lease). In the lease that was re-executed (as well as in the December 2015 lease signed only by Gennady), there was a paragraph captioned "ATTORNEY FEES:" reading as follows: "In any action or proceeding arising out of this Agreement, the prevailing party between Landlord and Tenant shall be entitled to reasonable attorney fees and costs, except as provided in paragraph 39A [concerning presuit mediation]."
The re-executed lease names the tenants as Gennady Gallanter [sic] and Elena Pashkova. It is alleged in the complaint that Elena Pashkova is also known as Elena Galanter.
On December 23, 2016, before expiration of the initial lease term, Gennady, as "Tenant," and Onerent, as "Landlord," executed an agreement, which was referred to in the complaint as "the lease extension agreement" (hereafter, the December 2016 Agreement or the Agreement). Under the Agreement, the lease term was extended 12 months from February 1, 2017, through January 31, 2018. The December 2016 Agreement identified the tenant as Gennady; increased the monthly rent to $3,650; indicated that the "[s]ecurity deposit shall be increased by $ 0.00"; and provided that "[a]ll other terms and conditions shall remain the same." (Original emphasis.) Elena did not sign the December 23, 2016 Agreement, but she continued to occupy the premises.
The December 2016 Agreement between Onerent and Gennady was referred to by Onerent in its complaint as "the lease extension agreement," and Elena contends on appeal that the agreement constituted an extension of the original lease. As we discuss, post, because the agreement did more than extend the term of the original lease (i.e., it increased the monthly rental rate) and was not signed by both cotenants under the original lease, it was not a true lease extension. We therefore do not refer to such agreement as a lease extension in this opinion.
Throughout the occupancy of the premises, rent was paid to Onerent only by Gennady. The last month for which Gennady paid rent was January 2017; Gennady did not pay rent for the months of February through June 2017. Onerent served Gennady, who was the named tenant on the December 2016 Agreement, with a three-day notice to pay rent or quit on June 23, 2017.
Onerent sought restitution of the premises, forfeiture of the lease, past due rent of $18,250, and damages of $121.66 per day from July 1, 2017, to the date of restitution of the premises. Onerent also requested recovery of reasonable attorney fees and costs incurred in the proceeding.
In September 2017, Gennady and Elena filed a demurrer to the complaint. By order filed January 2, 2018, the court sustained the demurrer with five days' leave to amend as to Elena; the court otherwise overruled the demurrer.
On January 22, 2018, Onerent filed a request for dismissal without prejudice of the entire action as to all parties. Thereafter, Gennady and Elena filed a motion for entry of judgment in their favor with prejudice. By order filed February 5, 2018, the court granted the motion as to Elena. The court ordered entry of a judgment of dismissal with prejudice as to Elena, nunc pro tunc to January 22, 2018; it otherwise denied the motion.
Elena filed a motion for attorney fees on February 13, 2018, seeking fees of $11,512.50, invoking Code of Civil Procedure sections 1032 and 1033.5, and Civil Code section 1717. Onerent opposed the motion on multiple grounds. After a hearing and submission of the matter, the court filed its order on June 14, 2018. The court denied the motion, concluding that, because Elena "[was not] a " 'Tenant' under the Lease/Extension of Lease from which the attorney fees provision derives, there does not appear to be a basis in contract upon which [Elena] may recover attorneys' fees from [Onerent]." Elena filed a timely notice of appeal from the postjudgment order.
All further unspecified statutory references are to the Civil Code.
II. DISCUSSION
A. Standard of Review
The parties present disparate views concerning the standard of review applicable to our consideration of the trial court's order denying the motion for attorney fees. Elena contends that this court must independently review the trial court's denial of her motion for attorney fees. Onerent disagrees; it contends, quoting Morgan v. Imperial Irrigation District (2014) 223 Cal.App.4th 892, 929, that under " 'the normal standard of review' " for attorney fee orders, this court should review the order for abuse of discretion.
Onerent is correct that a posttrial order on a motion for attorney fees is ordinarily reviewed for abuse of discretion. (Carver v. Chevron USA, Inc. (2002) 97 Cal.App.4th 132, 142.) In this regard, the trial court unquestionably is vested with broad discretion in determining the amount of attorney fees it deems to be reasonable in a fee award. (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095.) But " 'de novo review of such a trial court order is warranted where the determination of whether the criteria for an award of attorney fees and costs in this context have been satisfied amounts to statutory construction and a question of law.' " (Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175.) In some instances, where the legal basis for an attorney fee order involves "a mixed question of law and fact" and the issues of fact predominate, a deferential abuse of discretion standard of review will be appropriate. (Ibid.) But in such mixed question cases, if there is little or no dispute concerning the relevant facts, review of the attorney fee award is de novo. (Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751 (Mountain Air).)
The issues presented in Elena's challenge of the order here concern her claimed contractual entitlement to attorney fees under section 1717, subd. (a) (hereafter, § 1717(a)). To the extent the issues concern mixed questions of law and fact, the facts are not disputed. Rather, the central facts are based upon the documents attached to the complaint—the original lease executed by Gennady and Elena as cotenants and the December 2016 Agreement executed by Gennady, only, as "Tenant." These documents are not disputed; rather, the legal effect of them is what is in dispute. The issues in this appeal concern Elena's legal entitlement to an award of attorney fees, including a determination of whether section 1717(a) applies to her fee claim. As we discuss, post, the issues we must resolve are whether (1) Elena was a tenant (and thus a contracting party) under the December 2016 Agreement, entitling her to attorney fees; (2) even if it were concluded that Elena was not a contracting party, a fee award was mandated under section 1717(a), which provides for a mutuality of remedies; (3) Elena was entitled to attorney fees under the Agreement because she was a third party beneficiary to the contract; and (4) equitable principles underlying section 1717(a) compel that Elena be found entitled to recover attorney fees. Accordingly, our review of the order is de novo. (See Paul v. Schoellkopf (2005) 128 Cal.App.4th 147, 151 [de novo review of entitlement to attorney fees under fee provision in contract pursuant to § 1717]; Sessions Payroll Management, Inc. v. Noble Const. Co., Inc. (2000) 84 Cal.App.4th 671, 677 [de novo review of order awarding attorney fees under contractual provision pursuant to § 1717; appellate court concludes that trial court erred in holding prevailing defendant who was party to contract was entitled to award of attorney fees from nonsignatory plaintiff asserting rights as third party beneficiary].)
B. No Error in Denial of Motion for Attorney Fees
1. Contentions of the Parties
Elena argues on appeal that the trial court erred in denying her motion for attorney fees. She emphasizes that Onerent named her as an additional defendant in the complaint, admitted that she occupied the premises, and it made no distinction between Gennady and her in the prayer of the complaint. Elena notes that Onerent recovered nothing in the action, and specifically did not recover possession of the premises. She contends that section 1717(a) authorized an attorney fee award on the contract (the subject lease) in this instance. Elena urges that she was a contracting party under the December 2016 Agreement, and that the intentions of the parties under that document were that Elena would remain a tenant of the premises for an additional one-year term. She argues further that, even were it concluded that she was not a named party to the contract, she was nonetheless entitled to recover attorney fees under section 1717(a). Additionally, Elena asserts that she was a third party beneficiary under the December 2016 Agreement, and on this basis, she was entitled to recover the attorney fees she incurred in the action. Lastly, she contends that under equitable principles of reciprocity as provided in section 1717, she is entitled to recover her attorney fees.
Onerent responds that Elena was not a tenant, i.e., a contracting party under the December 2016 Agreement, and she was therefore not entitled to recover her attorney fees. It asserts further that because the dismissal of the action was on procedural grounds, Elena was not the prevailing party under section 1717(a) entitled to attorney fees. Onerent also contends that Elena erroneously asserts that reciprocity language under section 1717(a) permits her to recover attorney fees even though she was not a contracting party under the December 2016 Agreement; rather, Onerent asserts, the statutory language, "whether he or she is the party specified in the contract or not," establishes a "mutuality of remedy where [a] contractual provision makes recovery of attorney's fees available for only one party" signing the contract.
2. Elena Was Not a Tenant Under the December 2016 Agreement
We address initially Elena's contention that she was entitled to attorney fees as one of the contracting parties, i.e., a cotenant, under the December 2016 Agreement. Rules of interpretation of contracts generally apply to lease agreements. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266 (ASP Properties).) A modification of a contract has as its "essential elements . . . [the following]: (1) Parties capable of contracting; (2) their consent; (3) a lawful object; and (4) a sufficient cause or consideration." (American Bldg. Maintenance Co. v. Indem. Ins. Co. of North America (1932) 214 Cal. 608, 615 (American Bldg. Maintenance).) "The terms of a written lease may be altered or modified by a subsequent written contract or by an executed oral agreement." (10 Miller and Starr, California Real Estate (4th ed. 2018) § 34:55, fn. omitted; see § 1698, subds. (a), (b).)
Focusing on the second element identified in American Bldg. Maintenance, supra, 214 Cal. at page 615, "[a] modification of a contract can be made only with the consent of all parties to it." (Riverside Rancho Corp. v. Cowan (1948) 88 Cal.App.2d 197, 208 (Riverside Rancho); see also (American Bldg. Maintenance, supra, at p. 615 ["the offer of modification never reached the person having authority to accept the same, and, this being so, necessarily there was no acceptance, no consent, and consequently, no binding contract"].) Here, the December 2016 Agreement, to the extent it contained, as significant new terms, alteration of the term of the lease (adding one year) and an increase in the monthly rental rate, constituted a modification of the original lease. Because it was not executed by Elena, however, the Agreement was not effective as to her, since she did not give her consent to it. (American Bldg. Maintenance, supra, 214 Cal. At p. 615; Riverside Rancho, supra, at p. 208.) The Agreement was thus a new one-year lease between Gennady only, as tenant, and Onerent, as landlord, at a new rental rate, otherwise incorporating the terms of the lease of December 14, 2015 (reexecuted in April 2016 to add Elena as a tenant)..
Elena argues, however, that she was a party to the December 2016 Agreement, because "the contract was only extended rather than superseded or renewed." Citing, among other authorities, Howell v. City of Hamburg C. (1913) 165 Cal. 172, 177 (Howell), she argues that there is a distinction between a lease renewal, under which there is the contemplation of the lessor's execution of a new lease, and a lease extension, where the parties do not intend to execute a new lease and "the option to renew is construed as a continuation of the tenancy under the old lease. [Citations.]" Elena's argument is without merit.
"A 'renewal' creates a new and distinct tenancy [citations], whereas an 'extension' is in effect the 'stretching or spreading out' of a former term [citations]." (Burroughs v. Ben's Auto Park (1945) 27 Cal.2d 449, 454.) While Elena claims that the December 2016 Agreement here constituted simply a lease extension under which she was still a tenant, the authorities she relies on do not support her position. In the Howell court's discussion of the distinction between a lease renewal and a lease extension, the significant fact that distinguishes it from this case was that the underlying two-year lease of a lot contained a provision granting the tenant an option " 'to renew this lease for a period of three years' " at a specified rental rate. (Howell, supra, 165 Cal. at p. 174.) In this context, the Supreme Court rejected the tenant's contention that the lease was renewed rather than extended, concluding that the lease did not contemplate the landlord's execution of a new lease. (Id. at pp. 176-177.) The high court explained: "The authorities . . . [reflect] that a covenant for renewal of a lease at the option of the lessee 'imports the giving of a new lease' [citation], . . . , 'requires the making of a new lease' [citation], 'involves the making of a new lease' [citation] . . . . On the other hand, if the lessee is simply given by the original lease the option to retain the premises for a specified additional term, without the execution of any new lease, the covenant is merely one for an extension of the original lease, and when the lessee gives the notice of exercise of his [or her] option, if notice be required by the terms of his lease, he [or she] is 'entitled to hold for the additional term under the original lease,' which then becomes a lease 'for both the original and extended terms.' [Citation.] Although the word 'renew' is used in the eighth subdivision of the lease before us, we do not think that the giving of any new lease was within the contemplation of the parties. The lessor did not covenant to renew the lease, the language being that 'the privilege is hereby given the lessee to renew this lease,' etc., which implies that the notice subsequently provided to be given by the lessee of his intention to exercise the privilege was the only thing essential to give the right to the additional term." (Id. at p. 177, italics omitted.)
In contrast, here, the lease contained no similar provision granting the tenant an option to extend or renew the lease for an additional term. To the contrary, the lease provided that "[t]he term begins on (date) 1/1/2016 ('Commencement Date), . . . [¶] . . . [¶] . . . Lease: and shall terminate on (date) 1/31/2017 at 12:00 PM. Tenant shall vacate the Premises upon termination of the Agreement unless . . . Landlord and Tenant have extended this Agreement in writing or signed a new agreement . . . ." As there was no option granted to extend the lease, the Agreement did not constitute an extension of the original lease. Howell has no application here.
Other authorities cited by Elena in support of her lease extension argument similarly afford no support for her position because they are factually distinguishable. (See Smith v. Arthur D. Little, Inc. (1969) 276 Cal.App.2d 391, 394 [containing sublease provision that " 'Sublessor grants to sublessee option to renew and/or extend this lease for an additional five year period at the rate of $2,200.00 per month' "]; Schmitt v. Felix (1958) 157 Cal.App.2d 642, 644 [lessees granted under the lease "an option for an additional year . . . on the same terms and conditions"]; Robertson v. Drew (1917) 34 Cal.App. 143, 144 [one-year lease providing that tenant had "the privilege to . . . 'renewing the lease' for a further term of from one to five years"].) Likewise, the remaining case cited by Elena, Knox v. Wolfe (1946) 73 Cal.App.2d 494 (Knox), offers no support for her position. In Knox, the lease of a restaurant and bar did not provide the lessee with an option to extend or renew. Rather, "[t]he lease contained a provision that if the lessee held possession after the expiration of the term of the lease with the consent of the lessor the lessee should become a tenant from month to month 'at the monthly rental of . . . and upon all of the terms and conditions herein specified.' " (Id. at p. 497.) The lessee held over with the consent of the lessor at the same rental rate specified in the lease, and the court addressed whether a new lease or tenancy resulted from the holdover. (Id. at pp. 501-502.) It concluded that, under section 1945, the lessee's "holding over was a continuation of possession under the lease," finding that there "was no modification of any of the provisions of the lease and no new agreement was made." (Knox, supra. at p. 502.) Here, there was no holdover by the cotenants (Gennady and Elena) under the lease; there was a new Agreement, for an additional specific one-year term at a different rental rate, between Gennady, as the sole tenant, and Onerent, the landlord.
Elena argues further that, applying contract interpretation principles (see ASP Properties, supra, 133 Cal.App.4th at p. 1266), it was the parties' intention to extend the lease term and increase the rental rate, but otherwise leave all terms of the lease intact, including the identity of the "Tenant" as both Gennady and Elena. This contention is without merit. Regardless of whether it may have been the intention of the parties signing the December 2016 Agreement to have Elena remain a cotenant of the premises under the Agreement, the fact remains that she did not sign the Agreement, was not a party to it, and therefore could not be bound by anything signed by Gennady and Onerent. (See Riverside Rancho, supra, 88 Cal.App.2d at p. 208.) Thus, the intentions of the parties to the Agreement to bind Elena to a new lease term at a different rental rate—assuming arguendo the existence of such intentions—were legally irrelevant.
Elena also relies on Drybread v. Chipain Chiropractic Corp. (2007) 151 Cal.App.4th 1063 (Drybread). There, the sublessors under an expired one-year sublease brought an unlawful detainer action against the sublessee, alleging that its continued possession of the premises was malicious. (Id. at pp. 1065-1066.) They sought attorney fees in the complaint pursuant to a provision in the sublease. (Id. at p. 1066.) Pursuant to the sublessors' request, a voluntary dismissal without prejudice of the case was entered. (Id. at p. 1068.) The sublessee filed a motion for attorney fees under Code of Civil Procedure section 1032 and 1033. 5, subdivision (a)(10), which was denied by the trial court after it concluded that Civil Code section 1717, subdivision (b)(2) barred such recovery after a voluntary pretrial dismissal of the action. (Drybread, supra, at pp. 1068-1069.)
Section 1717, subdivision (b)(2) provides: "Where 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."
The appellate court reversed. Relying on Santisas v. Goodin (1998) 17 Cal.4th 599, 622 (Santisas), the Drybread court observed that the statutory prohibition against recovery of attorney fees after a voluntary dismissal as stated in subidivision (b)(2) of section 1717 applies to contract claims only. (Drybread, supra, 151 Cal.App.4th at pp. 1070-1071.) The appellate court explained that "section 1717 does not bar recovery of attorney's fees for noncontract claims voluntarily dismissed by the plaintiff, as long as the attorney's fees clause is broad enough to encompass such noncontract claims." (Id. at p. 1071.) It explained that unlawful detainer actions could be based upon a breach of lease during its term and thus arguably a contract claim, or based on a circumstance in which the tenant holds over after the expiration of the lease term, which would "arguably suggest[] tort claims for unlawful possession." (Id. at p. 1073.) In this instance, the appellate court found that the sublessors' claim, as pleaded, sounded in tort because it "was based on a claim of unlawful holdover possession after expiration of the lease [and] . . . was not based on a breach of the lease itself." (Id. at p. 1076.) The court thus concluded that section 1717 did not apply, and that the sublessee was entitled to attorney fees as the prevailing party after the sublessors' voluntary dismissal of the action under Code of Civil Procedure section 1032, subdivision (a)(4). (Drybread, supra, at p. 1077.)
In contrast to Drybread, here there was no holdover tenancy after the lease expired. Rather, the landlord and Gennady, one of the two tenants under the original lease, agreed that Gennady would lease the premises for an additional year at a higher rental rate. Further, in contrast to Drybread—where the sublessors pleaded an action sounding in tort based upon a holdover tenancy after expiration of the lease term—Onerent here pleaded an unlawful detainer claim sounding in contract based upon Gennady's breach of the Agreement (nonpayment of rent). Drybread is distinguishable and has no application to the instant case.
We therefore conclude that there is no merit to Elena's claim that she, as a party to the contract (the December 2016 Agreement), was entitled to recover attorney fees in the action.
3. Fee Award Not Authorized Under Civil Code Section 1717
Elena contends that even if she were not a party to the contract, this was no impediment to her fee claim; she asserts that under section 1717(a), she was nonetheless entitled to recover attorney fees as the prevailing party in Onerent's contract action. She relies on the following emphasized language of the statute: "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." (§ 1717(a), italics added.) Elena's argument suggests that section 1717 be interpreted as authorizing a nonsignatory prevailing litigant in a contract action to recover attorney fees under all circumstances. This is not the law.
As the California Supreme Court has explained: "The primary purpose of section 1717 is to ensure mutuality of remedy for attorney fee claims under contractual attorney fee provisions. [Citation.] Courts have recognized that section 1717 has this effect in at least two distinct situations. [¶] The first situation in which section 1717 makes an otherwise unilateral right reciprocal, thereby ensuring mutuality of remedy, is 'when the contract provides the right to one party but not to the other.' [Citation.] In this situation, the effect of section 1717 is to allow recovery of attorney fees by whichever contracting party prevails, 'whether he or she is the party specified in the contract or not' (§ 1717, subd. (a)). [¶] The second situation in which section 1717 makes an otherwise unilateral right reciprocal, thereby ensuring mutuality of remedy, is when a person sued on a contract containing a provision for attorney fees to the prevailing party defends the litigation 'by successfully arguing the inapplicability, invalidity, unenforceability, or nonexistence of the same contract.' [Citation.] Because these arguments are inconsistent with a contractual claim for attorney fees under the same agreement, a party prevailing on any of these bases usually cannot claim attorney fees as a contractual right. If section 1717 did not apply in this situation, the right to attorney fees would be effectively unilateral—regardless of the reciprocal wording of the attorney fee provision allowing attorney fees to the prevailing attorney—because only the party seeking to affirm and enforce the agreement could invoke its attorney fee provision." (Santisas, supra, 17 Cal.4th at pp. 610-611.) The second circumstance described in Santisas is inapplicable here. And because Elena was not a party to the December 2016 Agreement—she was not the other contracting party in a case in which " 'the contract provides the right to one party but not to the other' " (ibid.)—the first situation under which section 1717(a) provides for reciprocity in a contract containing an attorney provision as described in Santisas is likewise inapplicable.
Contrary to Elena's urging, a nonsignatory prevailing in an action on a contract enjoys no generalized right to attorney fees under section 1717(a). As "fundamental principle[]" governing recovery of attorney fees in an action, "[o]rdinarily attorney fees can only be awarded when the lawsuit (1) involves a claim covered by a contractual attorney fee clause [citation] and (2) is between the parties to that contract [citation]." (Super 7 Motel Associates v. Wang (1993) 16 Cal.App.4th 541, 544-545.) The exception to this principle concerning nonsignatories, as enunciated by the California Supreme Court more than 40 years ago, is that the purposes of section 1717 are to "be interpreted to . . . provide a reciprocal remedy for a nonsignatory defendant, sued on a contract as if he [or she] were a party to it, when a plaintiff would clearly be entitled to attorney's fees should he [or she] prevail in enforcing the contractual obligation against the defendant." (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 128, italics added (Reynolds Metals).)
A litigant who is a nonsignatory may be found under section 1717(a) to be entitled to attorney fees as the prevailing party—or conversely obligated to pay attorney fees as the nonprevailing party—under myriad circumstances. For instance, the Supreme Court held that individuals who successfully defended a suit on a corporate obligation based upon an alter ego theory were entitled to recover their attorney fees. (Reynolds Metals, supra, 25 Cal.3d at p. 129.) Our high court explained: "Had plaintiff prevailed on its cause of action claiming defendants were in fact the alter egos of the corporation [citation], defendants would have been liable on the notes. Since they would have been liable for attorney's fees pursuant to the fees provision had plaintiff prevailed, they may recover attorney's fees pursuant to section 1717 now that they have prevailed." (Ibid.) Likewise, it was held that attorney fees were recoverable by a nonsignatory successor to a borrower that successfully defended an action by the creditor on lines of credit obtained by the borrower; because the creditor would have been entitled to recover its fees from the successor had it prevailed under the lines of credit, "section 1717's reciprocity principles entitle[d the successor] to the benefit of those attorney fee provisions." (Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 826-827; see also Montgomery v. Bio-Med Specialties, Inc. (1986) 183 Cal.App.3d 1292, 1295 [successful defendants, principal shareholders, who intervened behalf of corporation that was contracting party, entitled to recover attorney fees].).)
Under the reciprocity principle enunciated in Reynolds Metal discussed above, a nonsignatory who is unsuccessful in a contract action in which there is an attorney fee provision may be held liable for attorney fees under section 1717(a) under certain circumstances. For instance, where the nonsignatory is found to have "step[ped] into the shoes" of the signatory, it may be held liable for attorney fees as the nonprevailing party on a contract action. (Texas Commerce Bank v. Garamendi (1994) 28 Cal.App.4th 1234, 1245 [state insurance commissioner litigating position on behalf of insolvent insurer stood in shoes of insurer in contract litigation].) Similarly, it was held that individual plaintiffs who unsuccessfully brought derivative claims based on a corporation's contracts with officers and directors that contained attorney fee provisions were liable for attorney fees under section 1717. (Brusso v. Running Springs Country Club, Inc. (1991) 228 Cal.App.3d 92, 110-111; see also Niederer v. Ferreira (1987) 189 Cal.App.3d 1485, 1505 [successful creditor suing on guaranty without fee provision, where underlying promissory note included attorney fee clause, could recover attorney fees from guarantor].)
Elena was not entitled to recover section 1717(a) attorney fees under the reciprocity principles of Reynolds Metals. As discussed, ante, Elena was neither a signatory to the Agreement nor a party to it. She was not a tenant under the Agreement, and she undertook no obligations under it. Accordingly, had Onerent prevailed against her in the action, it would have had no basis to claim an entitlement to attorney fees from Elena. Thus, since this is not an instance in which the "a plaintiff [Onerent] would clearly be entitled to attorney's fees should [it have] prevail[ed] in enforcing the contractual obligation against the defendant [Elena]" (Reynolds Metals, supra, 25 Cal.3d at p. 128), there is no legal basis for imposing the reciprocal remedy in favor of the nonsignatory, Elena, under section 1717(a).
The case of Artesia Medical Development Co. v. Regency Associates, Ltd. (1989) 214 Cal.App.3d 957 (Artesia Medical) is instructive. There, the commercial lessor (Artesia) brought an unlawful detainer action against the lessee (Regency) and the lessee's purported assignee (Lite), contending that the assignment violated the provisions of the lease prohibiting assignments without the lessor's written consent. (Id. at p. 959.) On appeal, Regency, inter alia, challenged an award of attorney fees to Lite. (Id. at p. 961.) The lease included an attorney fee provision, and Lite, relying on Reynolds Metals, supra, 25 Cal.3d 124 argued it was entitled to recover section 1717 attorney fees, notwithstanding the fact that it had not signed the lease. (Artesia Medical, supra, at p. 962.) The appellate court disagreed, concluding that had Artesia prevailed against Lite, it would not have been entitled to recover its attorney fees from the purported assignee. (Id. at p. 963.) The court reasoned: "In the instant case Artesia sued Lite in unlawful detainer proceedings to recover possession of real property occupied by Lite under a purported assignment of a lease. The trial court determined that the assignment was invalid as the lessee, Regency, had not obtained the consent of the lessor, Artesia. Thus the court held that Lite was illegally in possession. [¶] Because the basis for the plaintiff Artesia's unlawful detainer action is founded on the proposition that Lite was in illegal and wrongful possession of the premises without consent of Artesia, it cannot be said that the action against Lite is contractual. There is no contractual basis for Artesia to recover fees against Lite, and Lite, even if it prevailed, is not entitled under Civil Code section 1717 to attorney's fees on the mutuality provisions of that statute." (Ibid.)
Similarly, here Onerent sued Gennady for unlawful detainer based upon his breach of the Agreement by failing to pay agreed-upon rent, and it named Elena as an additional party based upon her occupancy of the premises. Had Onerent prevailed as against Elena in the breach of contract, it would not have been entitled to recover attorney fees from her. She was thus—parallel to the circumstances of the purported assignee, Lite, in Artesia Medical—"not entitled under Civil Code section 1717 to attorney's fees on the mutuality provisions of that statute." (Artesia Medical, supra, 214 Cal.App.3d at p. 963.)
4. Elena's Third Party Beneficiary Argument Fails
Elena contends that, "even if view[ed] as only a third-party beneficiary of the extended contract, [she was] still entitled to enforce the attorney's fees provision of that contract." In support of this argument, she relies on Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004 (Spinks).
Elena did not make this argument below. She did not argue that she was entitled to attorney fees as a third party beneficiary to the Agreement between Gennady and Onerent in either her motion papers or in her reply memorandum. And although the trial court permitted lengthy argument of the motion, Elena did not assert at the hearing that she was a third party beneficiary to the Agreement.
" 'An appellate court will ordinarily not consider procedural defects or erroneous rulings, in connection with relief sought or defenses asserted, where an objection could have been but was not presented to the lower court by some appropriate method . . . . The circumstances may involve such intentional acts or acquiescence as to be appropriately classified under the headings of estoppel or waiver . . . . Often, however, the explanation is simply that it is unfair to the trial judge and to the adverse party to take advantage of an error on appeal when it could easily have been corrected at the trial.' [Citation.]" (Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184-185, fn. 1, original italics.) A party's failure to preserve a claim at the trial level forfeits it on appeal. (In re S.B. (2004) 32 Cal.4th 1287, 1293, fn. 2, superseded on other grounds by statute as stated in In re S.J. (2008) 167 Cal.App.4th 953, 962.) This principle is applicable here. Elena's failure to argue below that she was entitled to recover attorney fees based upon her being a third party beneficiary to the Agreement forfeited the claim on appeal. (Cf. Saville v. Sierra College (2005) 133 Cal.App.4th 857, 872-873 [if forfeiture doctrine were not applied to unasserted issue in opposing summary judgment motion, losing parties "could attempt to embed grounds for reversal on appeal into every case by their silence"].)
Even were we to consider the merits of Elena's forfeited third party beneficiary argument, we would conclude there was no error. "A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it." (§ 1559.) " 'The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract. [Citation.] If the terms of the contract necessarily require the promisor to confer a benefit on a third person, then the contract, and hence the parties thereto, contemplate a benefit to the third person. The parties are presumed to intend the consequences of a performance of the contract.' [Citations.]" (Spinks, supra, 171 Cal.App.4th at p. 1022.) "[I]t is not enough that the third party would incidentally have benefited from performance." (Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891.) Although the third party need not be specifically identified in the contract, "the contracting parties must have intended to benefit that individual and such intent appears on the terms of the agreement. [Citations.]" (Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1087 (Harper).)
In this instance, there is nothing in the Agreement evidencing that the parties intended that Elena benefit from the contract. (Harper, supra, 56 Cal.App.4th at p. 1087.) The extrinsic fact that Elena continued to occupy the premises after the lease term expired on January 31, 2017, does not result in the conclusion that the parties to the Agreement, in executing it, intended to benefit her. Her contention that she was entitled to attorney fees as a third party beneficiary of the contract fails.
The case upon which Elena relies, Spinks, supra, 171 Cal.App.4th 1004, is in event, readily distinguishable. There, a panel of this court reversed the trial court where it had granted summary judgment in lessors' favor in an action by an apartment resident whose former employer was the lessee. (Id. at p. 1015.) The Spinks court concluded, based upon a variety of matters, that there was a triable issue of fact as to whether the plaintiff was a third party beneficiary of the lease, thereby precluding summary judgment. (Id. at p. 1030.) The factors that led the Spinks court to this conclusion were, inter alia, that the lease had a space identifying " 'Occupants' " left blank (id. at p. 1027); the plaintiff was specifically identified as the occupant in a lease extension letter (ibid.);, the language of the lease clearly provided that lessors were to provide housing for the lessee's staff (ibid.); because the plaintiff was a staff member of the lessee at the time the lease was signed, she "arguably was among a class of intended beneficiaries" (ibid.); a letter of responsibility signed by the lessee on the same date the lease was signed identified the plaintiff "as the 'Occupant' " who would reside at the leased premises (id. at p. 1029); and the plaintiff's employment agreement, which specified a work assignment corresponding with the lease term, called for her employer (the lessee) to supply her " 'with furnished housing and utilities during her temporary work assignment' " (id. at p. 1029). None of the circumstances existing in Spinks indicative of an intention by the contracting parties to benefit Elena as a third party to the Agreement exists here.
5. Equitable Principles Do Not Support Elena's Position
Elena, lastly, argues that she was entitled to an award of attorney fees under equitable principles of reciprocity intended under section 1717. She asserts that Onerent "sought to enforce the contract's [attorney] fee provision interchangeably against both defendants," and after Onerent lost the case, it argued against application of the attorney fee provision in connection with Elena's motion. In support of her position, Elena relies on North Associates v. Bell (1986) 184 Cal.App.3d 860 (North Associates) and Jones v. Drain (1983) 149 Cal.App.3d 484 (Jones).
In North Associates, the lessee-defendant challenged the trial court's award of attorney fees in favor of the lessor-plaintiff in an unlawful detainer action. There was an initial lease between the parties that contained an attorney fee provision that included an option to an extend the lease for six months, which the lessee exercised. (North Associates, supra, 184 Cal.App.3d at pp. 861-862.) Thereafter, although the parties engaged in negotiations and the lessee continued to occupy the premises, no new lease was executed. (Id. at p. 862.) The lessor brought an unlawful detainer action, incorporating by reference the original lease; the lessee denied the lessee's allegation that there had been no further written lease extensions, and he further denied that he was a holdover tenant. (Id. at p. 863.) In affirming the award of attorney fees, the appellate court noted that many cases had applied section 1717 to permit an attorney fee award to the prevailing party where it was ultimately determined that the contract containing the fee provision was "unenforceable, rescinded, or nonexistent." (North Associates, supra, at p. 865, citing Reynolds Metals, supra, 25 Cal.3d at p. 128.) The court concluded that, had the lessee prevailed in his position that he had received lease extensions, he would have been entitled to recover his attorney fees. (Ibid.) Since the lessor prevailed, albeit with a finding by the trial court that the original lease had expired, "[i]t would be inequitable to deny attorney fees to [the lessor], the prevailing party, when [the lessee] would have been entitled to an award of attorney fees had he prevailed under the same facts." (Id. at p. 866.)
North Associates is distinguishable. Here, Onerent did not bring suit against Elena under the original lease which, as amended, was signed by Gennady and Elena. Rather, it brought suit for breach of the new December 2016 Agreement between Onerent and Gennady, alleging that Elena was not a tenant but an additional occupant. Moreover, the fundamental principle of Reynolds Metals relied on by the court in North Associates—that section 1717 "provide[s] a reciprocal remedy for a nonsignatory defendant, sued on a contract as if he were a party to it, when a plaintiff would clearly be entitled to attorney's fees should he [or she] prevail in enforcing the contractual obligation against the defendant" (Reynolds Metals, supra, 25 Cal.3d at p. 128)—does not apply here. Onerent, had it prevailed, would not have been entitled to recover its attorney fees from Elena.
In Jones, supra, 149 Cal.App.3d 484, the sellers of real property (the Drains) were sued by their broker under an exclusive listing agreement. (Id. at pp. 485-486.) After prevailing by summary judgment, the Drains unsuccessfully sought attorney fees. (Id. at p. 486.) They argued they were entitled to a fee award because they were sued on a contract that included an attorney fee provision; the broker countered that since the trial court found that no contract existed between the parties, the Drains were not entitled to an award of attorney fees. (Ibid.) Relying on the reciprocal remedy principle enunciated in Reynolds Metals, supra, 25 Cal.3d at page 128, the appellate court defined as "[t]he critical issue" to be whether the broker "clearly would have been entitled to attorney fees had it prevailed in enforcing the contract action against the defendants Drains." (Jones, supra, at p. 487.) It answered the question in the affirmative, concluding that "it [would be] extraordinarily inequitable to deny a party who successfully defends an action on a contract, which claims attorney's fees, the right to recover its attorney's fees and costs simply because the party initiating the case has filed a frivolous lawsuit. As a consequence, we find that a prevailing defendant sued for breach of contract containing an attorney's fees provision and having had to defend the contract cause of action is entitled to recover its own attorney's fees and costs therefor, even though the trial court finds no contract existed." (Id. at pp. 489-490.)
Jones is also distinguishable. In this case, Onerent did not sue Elena on a contract. Nor was there a finding that the contract upon which Onerent brought suit—the December 2016 Agreement between Onerent and Gennady—did not exist. And, unlike in Jones, in this case, had Onerent prevailed, it would not have been entitled to recover its attorney fees from Elena, since she was not a party to the Agreement.
The fact that Onerent in its complaint did not distinguish between Gennady and Elena in requesting attorney fees—a matter noted on several occasions in Elena's opening and reply briefs—does not support her claim of error. The argument that, as a form of judicial estoppel, a litigant who requested attorney fees under a contract, if unsuccessful, is liable to the prevailing party for fees was discussed at length and rejected by a panel of this court. (See Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 896-899 (Blickman Turkus).) This court in Blickman-Turkus relied in part on Leach v. Home Savings & Loan Assn. (1986) 185 Cal.App.3d 1295 (Leach). In Leach, the court held, under Reynolds Metals, supra, 25 Cal.3d at page 129, that in order to claim section 1717 attorney fees, a party must "establish that the opposing party actually would have been entitled to receive them if he or she had been the prevailing party." (Leach, supra, at p. 1307, original italics.) This court in Blickman-Turkus concluded as well that the judicial estoppel theory did not apply to permit a party to recover fees under section 1717 to which that party would not otherwise be entitled: "We know of nothing in our law that justifies awarding such fees to a party merely because his opponent asked for them. Certainly section 1717(a) does not create such a regime. So long as there is reciprocity in the allowance or disallowance of fees, the policy of that statute is satisfied. The statute does not purport to authorize an award where neither party would otherwise be entitled to one." (Blickman Turkus, supra, at p. 899, original italics.)
There is no basis for Elena's contention that attorney fees were awardable to her under equitable principles of reciprocity under section 1717.
6. Conclusion
For the reasons discussed above, Elena, who was not a party to the underlying contract (i.e., the December 2016 Agreement between Onerent and Gennady), was not entitled to recover her attorney fees as the prevailing party in the litigation. In reviewing the trial court's order denying Elena's motion, we conclude there was no error. (See Mountain Air, supra, 3 Cal.5th at p. 751.)
As discussed, ante, the parties do not agree as to the applicable standard of review in this case. Of course, even were we to apply the deferential abuse of discretion standard as advocated by Onerent, we would conclude there was no error.
III. DISPOSITION
The order of June 14, 2018, denying Elena Galanter's motion for attorney fees is affirmed.
/s/_________
BAMATTRE-MANOUKIAN, J. WE CONCUR: /s/_________
PREMO, ACTING P.J. /s/_________
ELIA, J.