Opinion
No. B183955
12-6-2006
SUZANNE PAIR, an individual and as Trustee, etc., Plaintiff, Cross-Defendant and Appellant, v. AFSHIN MOGHAVEM, et al., Defendants, Respondents and Cross-Appellants.
Epport, Richman & Robbins and Steven N. Richman for Plaintiff, Cross-Defendant and Appellant. Shafron & Kammer, Shelly Jay Shafron, Kevin David Kammer and Douglas G. Carroll for Defendants, Respondents and Cross-Appellants. June Babiracki Barlow, Vice President and General Counsel, and Neil D. Kalin, Assistant General Counsel, for California Association of Realtors ® , as Amicus Curiae on behalf of Appellant Suzanne Pair.
SUMMARY
A real estate sellers complaint for malicious prosecution was dismissed. In connection with the buyers cross-complaint, judgment was entered in the sellers favor on causes of action for quasi-specific performance and breach of contract and in the buyers favor on a cause of action for declaratory relief regarding an escrow deposit. Thereafter, both sides claimed "prevailing party" status and sought attorney fees and costs. The trial court denied the sellers motions for fees and to strike the buyers costs; it denied the buyers motion for attorney fees and granted its motion to strike the sellers costs. We affirm all of the trial courts orders.
FACTUAL AND PROCEDURAL SYNOPSIS
In a prior appeal (Pair v. Moghavem (July 11, 2005, B175371 [nonpub.opn])), we summarized the proceedings to date as follows:
"I. Underlying Action
"A. General Background
"On December 23, 2001, [Afshin and Pauline] Moghavem[] and [Suzanne] Pair[, Trustee of the Suzanne Pair Revocable Living Trust,] entered into a purchase agreement (`Purchase Agreement) pursuant to which Pair agreed to sell to the Moghavems a residence (`the Property) located in Beverly Hills for $2.2 million. Although the property was worth $2.7 million, Pair reduced the price and decided to sell it on an "as is" basis because it needed extensive repairs.
"Escrow was opened at MB Escrow. The Moghavems placed an initial deposit of $63,000 into escrow, with the balance to be paid at the close of escrow.
"Pursuant to the Purchase Agreement, the Moghavems were obligated to purchase the Property within 60 days (by February 21, 2002). However, by written amendment to the escrow instructions, the closing date was extended to April 30, 2002. In exchange for the extension, among other consideration, Pair received a $17,000 increase in the purchase price and a release to Pair of $17,000 from the Moghavems escrow deposit.
"On April 17, the lower level/basement of the residence flooded with ankle deep water.
"B. Purchase Agreement and Escrow Instructions
"In part, the Purchase Agreement provided: the seller had to maintain the Property in substantially the same condition as on the date of acceptance; the seller had to file an amended transfer disclosure statement (`TDS) if she became aware of adverse conditions materially affecting the Property; any repairs performed by the seller had to comply with the applicable law; and the buyer had a right to make a final inspection within five days prior to the close of escrow.
"The cancellation provision of the escrow instructions provided that any party who had fully complied with its obligations might demand in writing the return of its money and documents, and if no demand to cancel was made, escrow was to close as soon as possible.
"C. The Moghavems position
"At the time the Purchase Agreement was signed, no leak was disclosed or existed from the main sewer line in the basement. Pursuant to the Purchase Agreement, because the leak in the basement was due to a break in the main sewer line, Pair was obligated to repair the leak and the slab which was cut to facilitate repair of the sewer line as Pair was obligated to maintain the Property in substantially the same condition as on the date of acceptance and to issue an amended TDS.
"Arrangements were made for the Moghavems contractor, together with Pairs contractor, to inspect the flood damage and repairs on April 26. When the Moghavems and their contractor appeared at the designated time, there was no one at the Property. The Moghavems were not able to inspect the repairs until April 30, the day escrow was scheduled to close.
"By April 30, all Pair had done were repairs to a pipe she felt was the immediate cause of the flooding. The repairs did not comply with Pairs obligations under the Purchase Agreement because she did not obtain the required plumbing building permit for the repair of the pipe, have the pipe pressure tested in order to pass city inspection, or obtain the required building permit when her plumber cut a huge hole in the slab foundation. Pair did not obtain the permits or have the pipe pressure tested until after she repudiated the Purchase Agreement. Pair waived the April 30 closing because she had not completed the repairs.
"The Moghavems were ready, willing and able to close the sale through either institutional or private financing.
"On May 2, [Pairs counsel] wrote [the Moghavems counsel] that Pair would repair the flood damage. The letter did not demand a close of escrow. [The Moghavems counsel] wrote back the repairs were unlawful because of the lack of permits, city inspections and numerous other problems. Then on May 5, [Pairs counsel] wrote that Pair would not make any further repairs as that was the Moghavems obligation and stated Pair would terminate the Purchase Agreement unless the Moghavems purchased the Property in its unrepaired condition by depositing the full balance of the purchase price into escrow.
"On May 8, Pair cancelled escrow and sought the forfeiture of the Moghavems remaining escrow deposit. The Moghavems objected to the cancellation and demanded Pair comply with her obligations.
"D. Pairs Position
"Pair formally disclosed the water intrusion and leak problems in the Purchase Agreement, which provided in part: `Buyers acknowledge that they are aware that there are or may be leaks in the master bedroom, nursery, dining room, family room, bar area and living room. The Purchase Agreement provided that the Property was being sold in `as is condition and that time was of the essence.
"Even with the extended escrow deadline, the Moghavems failed to close escrow or otherwise tender performance. The Moghavems breached at least six provisions of the Purchase Agreement because: they failed to sign the escrow instructions; they failed to increase their cash deposit by $1,575,000; they failed to sign and deposit loan documents to complete the financing portion of their purchase in the sum of $462,000; they failed to close escrow or otherwise complete their purchase of the Property in any fashion; they failed to tender the purchase price for the Property; and Pauline failed to sign any of the operative documents.
"When the water was discovered in the basement, Pair removed the standing water, and even though she was under no obligation to do so, she had the pipe repaired within one week. The Moghavems used the leak to delay their tender of the purchase price although they had been obligated to close this transaction several weeks before the leak, and they were purchasing the Property on an `as is basis and had already waived their appraisal contingency.
"E. Procedural Background
"On June 4, the Moghavems filed a complaint for specific performance and breach of contract against Pair as trustee and recorded a lis pendens. . . .
"Pair brought a motion pursuant to [Code of Civil Procedure] section 405.34 to require the Moghavems to post an undertaking in order to maintain their lis pendens. The Moghavems opposed the motion principally on the ground that since the Property had gone up in value, no bond was required, i.e., there was no requirement to post a bond to guarantee a sellers potential profit; a bond was required only if the value of the property had dropped below the purchase price.
"The court ordered the Moghavems to post an undertaking in the amount of $654,000. Under the order, the Moghavems had until December 19 to post the bond or have their lis pendens expunged.
"On December 17, the Moghavems decided to dismiss their complaint without prejudice for financial and economic reasons. According to their counsel, the Moghavems withdrew their lis pendens on December 19.
"II. Instant Action
"On December 15, 2003, Pair filed her complaint for malicious prosecution against the Moghavems and their attorneys.
"On February 5, 2004, the Moghavems and their attorneys brought anti-SLAPP motions to strike. The court granted the motions on the basis Pair had not established a favorable termination, leading to the dismissal of Pairs complaint. The court also denied Pairs motion for reconsideration."
Pair appealed from the trial courts order granting the anti-SLAPP motions to strike, and we affirmed the trial courts ruling. (Pair v. Moghavem, supra, B175371, p. 12.)
The Moghavems also filed and served a cross-complaint in February 2004, asserting three causes of action based on the purchase agreement: breach of contract, quasi-specific performance and declaratory relief, seeking return of their deposit. The property had since been repaired and sold to a third party for $700,000 over the price in the agreement so the Moghavems requested monetary damages rather than specific performance.
At trial, in January 2005, a jury reached a special verdict in connection with the second cause of action for damages, finding that the Moghavems had not performed as required under the Agreement. The trial court then determined that the Moghavems were not entitled to specific or quasi-specific performance. However, the trial court granted the Moghavems request for declaratory relief, finding the Moghavems were entitled to return of their $46,000 deposit held by MB Escrow, Inc. plus interest and damages. As a result, the trial court entered judgment in Pairs favor and against the Moghavems on the first and second causes of action (for specific performance and breach of contract, respectively) and entered judgment in the Moghavems favor against Pair on the third cause of action for declaratory relief as to entitlement to the escrow deposit in the amount of $46,000, plus prejudgment interest of $9,200 and a $1,000 penalty pursuant to Civil Code section 1057.3.
Each claiming to be the "prevailing party," both the Moghavems and Pair filed motions for attorney fees (the Moghavems seeking about $30,000 and Pair requesting about $290,000) and motions to strike or tax the costs sought by the other (the Moghavems sought almost $19,000 while Pair sought almost $40,000). In detailed rulings, the trial court denied both parties requests for fees, granted the Moghavems motion to strike Pairs cost bill and denied Pairs motion to strike the Moghavems costs (but granted her motion to tax two particular items of costs). Pair filed an appeal from the trial courts orders, and the Moghavems cross-appealed.
DISCUSSION
Pairs Appeal
According to Pair, the trial court erred in denying her attorney fees and costs because she was the prevailing party. We disagree.
I. Pairs Motion for Attorneys Fees Was Properly Denied.
Paragraph 22 of the Agreement contains a provision permitting recovery of attorney fees by a prevailing party: "In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller, except as provided in paragraph 17A." (Italics added.)
Paragraph 17A of the Agreement specifies: "A. MEDIATION: Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action. Paragraphs 17B (2) and (3) below apply whether or not the Arbitration provision is initialed. Mediation fees, if any, shall be divided equally among the parties involved. If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action. THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION PROVISION IS INITIALED. [¶] B. . . . [¶] (2) EXCLUSIONS FROM MEDIATION AND ARBITRATION: The following matters are excluded from mediation and arbitration: (i) a judicial or non-judicial foreclosure or other action or proceeding to enforce a deed of trust, mortgage, or installment land sale contract as defined in Civil Code § 2985; (ii) an unlawful detainer action; (iii) the filing or enforcement of a mechanics lien; (iv) any matter that is within the jurisdiction of a probate, small claims, or bankruptcy court; and (v) an action for bodily injury or wrongful death, or any right of action to which Code of Civil Procedure § 337.1 or § 337.15 applies. The filing of a court action to enable the recording of a notice of pending action, for order of attachment, receivership, injunction, or other provisional remedies, shall not constitute a violation of the mediation and arbitration provisions." (Italics added.)
Quoting from the trial courts ruling acknowledging "[t]here are no California cases deciding whether a party asserting a claim for malicious prosecution must comply with a mediation agreement like Paragraph 17A, or whether, in the context of a mediation provision, a malicious prosecution claim arises out of or results from the contract between the parties," Pair says she was not obligated to pursue mediation before filing her complaint for malicious prosecution. As the trial court went on to observe, however, Pairs malicious prosecution action "has roots in and arises out of the purchase agreement and the relationship the agreement created between the parties," (Merrick v. Writers Guild of America, West, Inc. (1982) 130 Cal.App.3d 212, 219) and there are numerous cases holding that a party asserting a claim for malicious prosecution must comply with an arbitration agreement with language similar to Paragraph 17A. (See e.g., Rogers v. Peinado (2000) 85 Cal.App.4th 1, 8-9, disapproved on other grounds in Brennan v. Tremco, Inc. (2001) 25 Cal.4th 310, 317; Merrick v. Writers Guild of America, West, Inc., supra, 130 Cal.App.3d at pp. 217-219; Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 681, 685.)
Even if she was required to request mediation prior to filing her complaint for malicious prosecution, she says, her failure to do so should not preclude her from recovering her attorney fees in defending against the Moghavems cross-complaint because the cross-complaint constituted a separate action. Even assuming Pair is correct, however, Pair ignores the fact that she is similarly barred from recovering her attorney fees because she refused the Moghavems subsequent requests to mediate shortly after the filing of their cross-complaint. Either way, Pair is barred from recovering her attorney fees. The trial court lamented the fact that "both parties had decided . . . to litigate this case beyond all reason," and, quoting Frei v. Davey (2004) 124 Cal.App.4th 1506, 1512 observed: "[T]his case is a textbook example of why agreements for attorney fees conditioned on participation in mediation should be enforced."
In its amicus brief, the California Association of Realtors argues that Pairs participation in mediation in the underlying action should have sufficed to satisfy the mediation requirement, but this argument (made without citation to any authority) ignores the plain language of the provision and the facts of this case. "An action is an ordinary proceeding in a court of justice by which one party prosecutes another for the declaration, enforcement, or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense." (Code Civ. Proc., § 22.) The underlying contract action (initiated by the Moghavems) had been voluntarily dismissed, but Pair, as the trial court observed, was "not content to let sleeping dogs lie," and filed a new action for malicious prosecution. Under the mediation provision, Pair was required to pursue mediation first before filing her action in order to recover her attorney fees.
Furthermore, even if the mediation requirement did not preclude Pairs recovery of attorney fees, we would still conclude that Pair has failed to demonstrate error in the trial courts denial of her motion for fees. "When a party obtains a simple, unqualified victory by completely prevailing on or defeating all contract claims in the action and the contract contains a provision for attorney fees, [Civil Code] section 1717 entitles the successful party to recover reasonable attorney fees incurred in prosecution or defense of those claims." (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109, citation omitted.) However, "[i]f 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." (Ibid., italics added.) Here, the record supports the conclusion that Pair did not prevail because she "obtained only a `mixed result" or that it was otherwise "not `equitable to designate [Pair] as a prevailing party." (See Biren v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125, 140, citing Hsu v. Abbara (1995) 9 Cal.4th 863, 875-877.)
II. Pair Has Failed to Demonstrate Error in the Trial Courts Award of Costs to the Moghavems.
In Pairs view, the trial court erred in determining that the Moghavems were entitled to their costs as prevailing parties. We disagree.
As the trial court found: "The Moghavems unquestionably obtained a `net monetary recovery in this action. Pair obtained no relief on her complaint, and the judgment . . . awarded the Moghavems $ 56,200.00. . . . The Moghavems, having obtained a `net monetary recovery, are the `prevailing party under Section 1032, and are entitled to their costs as a matter of right." "It is clear from the statutory language [of Code of Civil Procedure section 1032] that when there is a party with a `net monetary recovery (one of the four categories of prevailing party [for purposes of the cost determination]), that party is entitled to costs as a matter of right; the trial court has no discretion to order each party to bear his or her own costs." (Michell v. Olick (1996) 49 Cal.App.4th 1194, 1198.)
Although, the court acknowledged, in "unique factual circumstances," a trial court has discretion to find that the party with the net monetary recovery is not the prevailing party for purposes of an award of costs, it also specifically concluded "[t]here are no unique circumstances warranting departure from the statutes plain language here."
The Moghavems Cross-Appeal
III. The Trial Court Properly Denied the Moghavems Motion for Attorney Fees.
The trial court entered judgment in the Moghavems favor and against Pair on the third cause of action for "Declaratory Relief re Entitlement to Escrow Deposit" and awarded the Moghavems "damages in the sum of $46,000.00 with prejudgment interest on this sum of $9,200.00, plus $1,000.00 per Civil Code section 1057.3." (All further statutory references are to the Civil Code.) Later, the Moghavems sought their attorney fees in connection with this cause of action, relying upon section 1057.3 as well as their claimed status as prevailing party.
Civil Code section 1057.3 states, in pertinent part, as follows:
"(a) It shall be the obligation of a buyer and seller who enter into a contract to purchase and sell real property to ensure that all funds deposited into an escrow account are returned to the person who deposited the funds or who is otherwise entitled to the funds under the contract, if the purchase of the property is not completed by the date set forth in the contract for the close of escrow or any duly executed extension thereof.
"(b) Any buyer or seller who fails to execute any document required by the escrow holder to release funds on deposit in an escrow account as provided in subdivision (a) within 30 days following a written demand for the return of funds deposited in escrow by the other party shall be liable to the person making the deposit for all of the following:
"(1) The amount of the funds deposited in escrow not held in good faith to resolve a good faith dispute.
"(2) Damages of treble the amount of the funds deposited in escrow not held to resolve a good faith dispute, but liability under this paragraph shall not be less than one hundred dollars ($100) or more than one thousand dollars ($ 1,000).
"(3) Reasonable attorneys fees incurred in any action to enforce this section. . . ."
As the Moghavems counsel acknowledged at oral argument, the Moghavems were only entitled to seek attorney fees if they were not required to mediate before filing their cross-complaint; as they further concede, they did not seek to mediate until more than two weeks after filing their cross-complaint. Consistent with our determination that Pairs failure to mediate bars her attempt to recover attorney fees, however, we conclude that the Moghavems motion for attorney fees was properly denied for the same reason. Under the plain language of the mediation provision of Paragraph 17A, the Moghavems (just like Pair) agreed to mediate "any dispute or claim arising between them [and Pair] out of this Agreement, or any resulting transaction, before resorting to . . . court action." (Italics added.) "If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action." (Italics added.)
In filing their cross-complaint, the Moghavems "commence[d] an action" without first attempting to resolve the matter through mediation and, therefore, lost any right they might have had to attorney fees. The Moghavems claim that the word "action" can only mean the filing of an "entire lawsuit" so here, the only obligation was on Pair. We disagree. The Moghavems arguments are essentially the same arguments our Supreme Court rejected in Bertero v. National General Corp. (Bertero) (1974) 13 Cal.3d 43, 53, in concluding that an action for malicious prosecution lies "when predicated on a claim for affirmative relief asserted in a cross-pleading even though intimately related to a cause asserted in the complaint."
Similar to the Moghavems arguments, the defendants in Bertero insisted that their cross-complaint did not "initiate a judicial proceeding," that it was "in effect only an affirmative defense" which they were obligated to assert under penalty of waiver and that it did not interject any theories or burdens not already raised by their answer to the complaint. (Bertero, supra, 13 Cal.3d at p. 50.) The court rejected these arguments: "For our purposes no sound reason appears for treating a cause of action initiated by a cross-pleading as only an integral part of that cause initiated by the complaint. In Skaff v. Small Claims Court (1968) 68 Cal.2d 76 . . . , we acknowledged that the filing of a counterclaim instituted a `. . . separate, simultaneous action and reasoned that for purposes of the cross-action, the cross-defendant was a defendant, noting: `[i]n analyzing counterclaims and cross-complaints, this court has recognized that "these cross-actions . . . are still distinct and independent causes of action, so that when properly interposed and stated the defendant becomes in respect to the matters pleaded by him, an actor, and there are two simultaneous actions pending between the same parties wherein each is at the same time both a plaintiff and a defendant." [Citations.] In other instances case and statutory law recognize that a cross-pleading creates an action distinct and separate from an initial pleading.[]" (Bertero, supra, 13 Cal.3d at pp. 51-52, italics added, citations and footnote omitted.)
As the court emphasized, by rewriting the provisions relating to cross-actions and "dictating that a complaint meant a complaint or cross-complaint," the Legislature further reinforced the "treatment of all cross-actions as independent suits for purposes of establishing liability for malicious prosecution." (Bertero, supra, 13 Cal.3d at p. 52, fn. 2, italics added.)
As the Bertero court further observed, "Dismissal of the complaint, for instance, does not affect the independent existence of the cross-complaint or counterclaim." (Bertero, supra, 13 Cal.3d at p. 52.) Indeed, here, it was only the Moghavems cross-complaint that proceeded to trial; Pairs malicious prosecution complaint was dismissed a year earlier. Moreover, by seeking affirmative relief, defendants do "more than attempt to repel [the plaintiffs] attack; they t[a]k[e] the offensive in attempting to prosecute . . . cause[s] of action of their own." (Id. at p. 53.)
The Bertero court reasoned, "The cross-defendant, like the defendant in an original cause maliciously prosecuted, is compelled to expend attorneys fees in defending against the false charge and may suffer the same mental or emotional distress and possible loss of reputation and standing in the community." (Bertero, supra, 13 Cal.3d at p. 51.) The same reasoning applies here. The language of the parties agreement provides: "If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request to mediate has been made, then that party shall not be entitled to recover attorney fees . . . ." (Italics added.) In filing their cross-complaint, the Moghavems "instituted a `. . . separate, simultaneous action." (Bertero, supra, 13 Cal.3d at p. 51, italics added, citation omitted.) "[I]n respect to the matters pleaded by [the]m," the Moghavems were the "actor[s]"—not only defendants but plaintiffs as well. (Id. at p. 52.) Pair, in turn, became a (cross-)defendant compelled to expend attorney fees in defense of the Moghavems action.
The language in the agreement means what it says—a party may not recover attorney fees at the conclusion of the litigation if "that party commenced an action without first attempting to resolve the matter through mediation." (Johnson v. Siegel 2000) 84 Cal.App.4th 1087, 1100, original italics.) "There is a good reason the mediation clause was in the Agreement, and the legal consequences specified by the Agreement for refusing to mediate will be enforced." (Frei v. Davey, supra, 124 Cal.App.4th at p. 1512 [addressing prior version of same mediation provision in real estate purchase agreement and discussing the policy underlying the mediation requirement].) Because any award of attorney fees to the Moghavems was contingent on their compliance with the mediation provision of the agreement and the Moghavems failed to satisfy this requirement, they lost the right to seek attorney fees to which they might otherwise have been entitled.
The Moghavems reliance upon Johnson v. Siegel, supra, 84 Cal.App.4th 1087, is entirely misplaced. There, they argue, the court "h[e]ld that only the party that initiates the lawsuit must request mediation, and not a defendant." The argument is disingenuous. In Johnson, the defendant had merely answered; he had not filed a cross-complaint and therefore had not "commenced an action" of his own. Because the Moghavems filed a cross-complaint and thus "commenced an action" of their own, Johnson undermines rather than supports the Moghavems position.
To the extent the Moghavems attempt to argue that their involvement in mediation in the underlying action (in which they initially sued Pair for breach of contract and specific performance) satisfied any mediation requirement in connection with the filing of their cross-complaint in this subsequent action, their argument fails for the same reason it failed as to Pair. (See footnote 1, ante.) The language of the agreement specifies that "Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to . . . court action. . . . If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation. . . , then that party shall not be entitled to recover attorney fees . . . ." (Italics added.) The underlying action had long since been dismissed and the property had since been sold to a third party. The Moghavems commenced a new action without first attempting to resolve that matter through mediation. Consequently, the Moghavems lost any right they might have had to seek attorney fees.
Indeed, the Moghavems take the entirely contrary position in response to Pairs argument that her participation in mediation in the underlying action satisfied any obligation she had to mediate.
DISPOSITION
The orders denying Pairs motions for attorneys fees and for costs and denying the Moghavems motion for attorneys fees are affirmed.
The parties are to bear their own costs of appeal.
We concur:
JOHNSON, Acting P.J.
ZELON, J.