Opinion
A150265 A151532
09-27-2018
PYRAMID DESIGN (SERIES D) LLC et al., Plaintiffs and Appellants, v. GERALD LOWE et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco County Super. Ct. No. CGC-14543375)
Defendants agreed to sell a parcel of commercial real property to plaintiffs, who own an adjoining parcel. At the conclusion of a bench trial, the trial court found that "a binding agreement was reached in April 2014"; that "[p]laintiffs timely performed under the contract"; and "[d]efendants breached the agreement by refusing to convey . . . when plaintiffs tendered performance." The court entered a judgment directing defendants to specifically perform the contract, and thereafter made an order awarding plaintiffs contractual attorney fees in the sum of $658,499.
A note about the parties. This action was commenced by Pyramid Design (Series D) LLC, which is described in its complaint as "a duly organized and existing Delaware limited liability company . . . formed for the specific purpose of acquiring, owning and redeveloping the Property and is the approved assignee of the real estate purchase agreement for the Property." The other plaintiff was Klaus Burmeister, as trustee of the Burmeister Family Trust, which was the original buyer, and therefore, apparently, the assignor to Pyramid. Burmeister is described in the complaint as "the managing director of Pyramid" and "the owner of a corporation doing business" on the adjoining parcel. The named defendants are Gerald R. Lowe and Jacqueline A. Lowe, sued as trustees of the Lowe Family Trust, which was the seller.
Defendants did not appeal, but plaintiffs did. They contend the court erred in not awarding "incidental damages" for the period defendants did not perform, and that the court abused its discretion in not awarding the full amount of their attorney fee request. Claiming the appeals are frivolous, defendants ask for sanctions. We address each claim separately.
Incidental Damages
"The following general rules are applicable where damages are awarded incident to a decree of specific performance: A party to a contract for the purchase or exchange of land who is entitled to a decree of specific performance is also ordinarily entitled to a judgment for the rents and profits from the time he was entitled to a conveyance. The compensation awarded as incident to a decree for specific performance is not for breach of contract and is therefore not legal damages. The complainant affirms the contract as being still in force and asks that it be performed. If the court orders it to be performed, the decree should as nearly as possible require performance in accordance with its terms. One of the terms is the date fixed by it for completion, and since that date is past, the court, in order to relate the performance back to it, gives the complainant credit for any losses occasioned by the delay and permits the defendant to offset such amounts as may be appropriate. The result is more like an accounting between the parties than like an assessment of damages." (Ellis v. Mihelis (1963) 60 Cal.2d 206, 219-220.)
Plaintiffs claimed such "incidental" damages but were rebuffed by the trial court as follows: "[T]he evidence plaintiffs introduced was insufficient. They claimed lost rents, but their cited evidence was of transfers among entities Burmeister controlled, not rental amounts in an open market. Moreover, plaintiffs failed to adduce evidence of their offsetting expenses."
It is also useful to consider what the court next addressed: "Plaintiffs also pled breach of the implied covenant of good faith and fair dealing. This effectively repeated their breach of contract claim and was thus superfluous. In any event, the 'losses' plaintiffs sought were identical to those 'incidental to' specific performance, which were not supported by the trial evidence."
Plaintiffs contend "[t]he question whether incidental losses should have been awarded is a question of law, requiring review de novo," and that they are "entitled to an award of lost rental income" and accrued interest in the sum of $448,304.85. Defendants respond that plaintiffs have forfeited the point "by omitting the majority of trial testimony from the appellate record." Defendants further contend that "contrary to Pyramid's assumption that de novo review applies, this court can reverse only if the trial court was compelled to credit Pyramid's evidence." Defendants are correct.
Whether plaintiffs could recover incidental damages for defendants' breach of their contract is, in the abstract, a question of law, one already decided by our Supreme Court. The issue before the trial court was a question of fact, specifically, whether plaintiffs had proven that they incurred or suffered incidental damages. The trial court found against plaintiffs because it felt they had not carried that burden of proof. In this situation, the losing party has a higher hurdle on appeal than simply arguing about the presence or absence of substantial evidence.
" 'In the case where the trier of fact has expressly or implicitly concluded that the party with the burden of proof did not carry the burden and that party appeals, it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment. This follows because such a characterization is conceptually one that allows an attack on (1) the evidence supporting the party who had no burden of proof, and (2) the trier of fact's unassailable conclusion that the party with the burden did not prove one or more elements of the case [citations]. [¶] Thus, where the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant's evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding." ' " (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 465-466 (Sonic Manufacturing Technologies).)
Ordinarily, a reviewing court presumes the record contains sufficient evidence to sustain every factual determination made by the trial court, and it is the appellant's burden to prove otherwise by setting forth in the opening brief a summary of all material evidence on the point challenged. (E.g., In re Marriage of Fink (1979) 25 Cal.3d 877, 887; Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) The need to have all the evidence described is even more acute when, as here, we are asked to determine whether the evidence is so one-sided that a question of fact becomes one of law.
Plaintiffs make no genuine attempt to provide in the record or to describe in their brief all the evidence. We know from the appellants' appendix prepared by plaintiffs that there were at least eight volumes of reporter's transcript. Plaintiffs produced only one for their appeal. Granted, it is a volume with Klaus Burmeister's testimony, which might be assumed to have the testimony referenced in the statement of decision quoted above. On the other hand, defendants have augmented the record with portions of Burmeister's testimony on three other days of the trial. So, it appears that Burmeister testimony occupied all or part of four of the eight days of trial. The appendix has many trial exhibits, but we have no way of knowing whether all exhibits received in evidence have been included, or what is their pertinence to the issues of plaintiffs' claimed incidental damages.
With so much of Burmeister's testimony not before us, with no assurance that all relevant exhibits are in the record, it is not possible for this court to conclude that plaintiffs' evidence " 'was . . . "uncontradicted and unimpeached" and . . . "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding." ' " (Sonic Manufacturing Technologies, supra, 196 Cal.App.4th at p. 466.) And we certainly cannot conclude that plaintiffs' evidence " 'compels a finding [in their] favor . . . as a matter of law.' " (Ibid.)
Even though that portion of Burmeister's testimony in the volume provided by plaintiffs might seem to be uncontradicted, the trial court, as the trier of fact, was entirely free to reject it, or to treat it as impeached for the reasons noted by the trial court. (See (Sonic Manufacturing Technologies, supra, 196 Cal.App.4th at pp. 465-466 [the trial court "can reject evidence as unworthy of credence . . . even if that testimony is uncontradicted"].) As will be seen shortly, on another point the trial court was clearly unwilling to accept Burmeister's "say so" alone. His testimony about plaintiffs' lost rents is equally vulnerable.
Attorney Fees
The contract between the parties included this provision: "If any Party or Broker brings an action or proceeding (including arbitration) involving the Property whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term 'Prevailing Party' shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred."
Plaintiffs requested attorney fees of $1,255,532.44. The trial court awarded $658,499. Plaintiffs contend the fee order is inadequate in three respects: (1) the trial court made no award for any of their first attorney's work; (2) it reduced the award for second attorney; and (3) it disallowed the entire claim for legal work provided by plaintiff Klaus Burmeister.
Defendants argue we are without jurisdiction to consider plaintiffs' claims because their notice of appeal was untimely. Each side has submitted a request for judicial notice of materials they believe are pertinent to that issue. The requests are denied. Defendants raised the same point with a motion to dismiss, which was considered carefully and denied. We see no reason to revisit the point in this opinion.
Although it is entirely natural for an appellant to focus on perceived defects in the judicial product, reviewing courts are more inclined to look to the bottom line, particularly with something like a fee order. We quote the relevant portions of the order to place in context the parts plaintiffs challenge.
"Hourly Rates. I litigated cases in the San Francisco legal market for 23 years and have been a trial judge for seven years. During those 30 years, I have had constant exposure to attorneys' hourly rates in our market. I find Schiff Hardin LLP's rates in this case reasonable.
The "rates" appear to be $530 for lead counsel, $390 second counsel, and $300 for the paralegal.
"Staffing. I also find that Schiff Hardin staffed the case reasonably—with a litigation partner, junior associate and paralegal. Burmeister first hired another law firm [Buchman Provine], soon replaced by Schiff Hardin. The first firm's fees of $2,216 are denied.
" 'Attorneys' Fees.' Plaintiffs initially claimed . . . $141,511 in costs billed through Schiff Hardin. However, the parties' contract limited recovery to 'reasonable attorney fees,' and plaintiffs now concede that costs are not attorneys' fees.
"Damages. Plaintiffs' claims for $13 million in contract damages and incidental costs were overreaching and poorly supported. I am given discretion to decide whether time spent on unsuccessful legal theories was reasonably incurred. (Serrano v. Unruh (1982) 32 Cal.3d 621, 639 [Serrano].) I find the time spent on this part of the case—some 10 percent of the total—was not reasonably incurred, and so reduce the award by 10 percent of Schiff Hardin's fees: $73,167.
"Burmeister. Plaintiffs seek $351,320 for 'Burmeister's legal work on this case.' However, as plaintiffs concede, 'an attorney who chooses to litigate in propria persons' and 'does not pay or become liable to pay consideration in exchange for legal representation cannot recover contractual attorneys' fees.' (Trope v. Katz (1995) 11 Cal.4th 274, 292 [Trope].)
Burmeister was described in the statement of decision as " a former international transactions lawyer."
"Plaintiffs say Burmeister 'was not litigating in propria persona for himself,' but he in fact did represent himself against defendant's cross-claims. Plaintiffs also note that Burmeister was a plaintiff as trustee of his family trust. The cases focus on whether a lawyer's work is for his 'own benefit.' (See, e.g., Ellis Law Group, LLP v. Nevada City Sugar Loaf Properties, LLC (2014) 230 Cal.App.4th 244, 253.) Placing his assets into his family trust did not keep Burmeister from being benefitted.
Defendants filed a cross-complaint against Pyramid and Klaus Burmeister "individually and as trustee of the Burmeister Family Trust." The causes of action alleged were for (1) "Breach of Written Contract"; (2) "Breach of Implied Covenant of Good Faith and Fair Dealing"; (3) "Fraud and Deceit—Intentional Misrepresentation/Concealment"; (4) "Fraud and Deceit—Negligent Misrepresentation/Concealment"; (5) "Financial Elder Abuse"; and (6) "Declaratory Relief." The only new matter put at issue by the cross-complaint was the question of elder abuse. It was handled in the statement of decision as follows: "The elder abuse cross-claim was not seriously pursued at trial. Nothing approaching fraud or undue influence was shown. Rather, [Gerald] Lowe was an experienced businessman, represented by several lawyers and a real estate broker. He testified at trial, and I found him intellectually acute for his—or any—age."
"Further, plaintiffs failed to adduce sufficient evidence that they paid or became liable to pay for Burmeister's legal work. (See Trope, 11 Cal.4th at 278.) Only Burmeister's say-so was provided, but no attorney-retention document, no invoice for attorneys' fees, no indicia of payment such as checks.
"Even were all of this not true, I would deny the unreasonably inflated claim for Burmeister's 'fees.' (Serrano v. Unruh, 32 Cal.3d at 635 ('A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether.').) Burmeister acted as a client at trial. He examined no witness, argued no motion. Yet $550 an hour is sought for his attendance at 60 hours of trial. Burmeister also seeks payment for watching Schiff Hardin in depositions on eight days. Moreover, while $550 may be a reasonable rate for Burmeister on corporate work, he has never tried a case and his efforts reflected his lack of litigation experience."
Plaintiffs acknowledge that ordinarily a fee order can be overturned only upon a showing that the considerable discretion vested in the trial court was abused, but maintain their first argument deserves independent review because the trial court's decision to disallow the $2,216 for the Buchman Provine firm was contrary to "undisputed evidence" that those fees were reasonably incurred.
Initially, we note that some of this amount was for "costs advanced," which plaintiffs conceded should not be covered by the attorney fee provision. More substantively, we do not examine the order in bits and pieces, but as an organic whole, that is, we look to the "big picture" of the entire order. The picture we discern is the trial court making a first-hand assessment of what was a "reasonable" fee award for this litigation. That assessment was entrusted to the trial court's broad discretion to be governed by equitable principles. (E.g., PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1094-1095; Burkhalter Kessler Clement & George LLP v. Hamilton (2018) 19 Cal.App.5th 38, 43.) " 'This determination is necessarily ad hoc and must be resolved on the particular circumstances of each case.' " (In re Marriage of Minkin (2017) 11 Cal.App.5th 939, 954.) Discretion is said to be abused when its use exceeds the bounds of reason. (E.g., People v. Fuiava (2012) 53 Cal.4th 622, 650; Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 349.) "A ruling that constitutes an abuse of discretion has been described as one that is 'so irrational or arbitrary that no reasonable person could agree with it.' " (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773.)
Attorney fee provisions can be broad or narrow depending on the language chosen by the parties. The provision here definitely appears to be a broad one. According to Burmeister, the work performed by Buchman Provine "consisted of learning the facts of the case, performing legal research, responding to Defendants' motion to continue the trial date, and scheduling depositions." Such work is a long way from actual litigation, and thus an obvious target for exclusion and may well have been wasted time since plaintiffs quickly replaced that firm with Schiff Hardin, which presumably also had to come up to speed on the case. Viewed in the context of the entire order, excising an item of approximately $2,000 out of $1.25 million request does not qualify as beyond the scope of reason.
Next, plaintiffs contend the Schiff Hardin fees should not have been reduced by 10 percent for the "overreaching and poorly supported" claims advanced at trial, because the trial court "conflate[d]" "two distinct legal 'theories,' " "misunderstood the significance of the particular issues to the overall dispute, and did not base the 10% reduction on the actual work provided by Schiff Hardin on those issues, as evidenced by their timesheets and invoices." The root of plaintiffs' reasoning is that "[t]he court misunderstood the nature of the '13 million in contract damages,' namely that the actual money damages request was an alternative remedy, but not an additional claim." This is a distinction without a difference. It does not matter whether trial time is spent on remedies or claims. If it was not a productive use, it is an obvious target. Plaintiffs spend much time explaining and defending the "alternative remedy," which they insist was lost due to "motions in limine concerning expert testimony and third party damages."
If plaintiffs mean to impeach pretrial rulings, attacking a post-trial fee order is not the best vehicle. If plaintiffs mean to vindicate their trial strategy, an appeal from the judgment would be the obvious opportunity to do so. Plaintiffs did appeal from the judgment, but they did not raise any argument concerning a trial strategy they were not allowed to present. Without a complete record of the trial, this court is unable to orient itself as to the percentage of time devoted to that strategy during the course of the trial. Moreover, because it was a bench trial, we would be especially deferential to a trial court statement that ten percent of a trial was wasted on "overreaching and poorly supported" claims and thus "was not reasonably incurred." In short, and again, the reduction does not establish a trampling of reason.
Plaintiffs' major effort is devoted to their third point, overturning the disallowance of any fees for Burmeister, blasting it as "inconsistent with the record, relies on inapplicable precedents, makes inaccurate assumptions, and demonstrates arbitrary determinations." The trial court based its decision on three grounds: (1) Burmeister was working for himself, (2) insufficient supporting documentation, and (3) the "unreasonably inflated" size of the claim. Plaintiffs must demonstrate that none of these grounds are sound in order to secure a reversal. Conversely, if one of the three grounds is good, the others become moot. In short, "one good reason is sufficient to sustain the order from which the appeal was taken." (Sutter Health Uninsured Pricing Cases (2009) 171 Cal.App.4th 495, 513; accord, 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal § 342, p. 392.)
In Trope v. Katz, supra, 11 Cal.4th at page 292, our Supreme Court held that "an attorney who chooses to litigate in propria persona and therefore does not pay or become liable to pay consideration in exchange for legal representation cannot recover 'reasonable attorney's fees' under [Civil Code] section 1717 as compensation for the time and effort he expends on his own behalf." From this has come the principle that self-interest, and personal benefit can doom a fee request. (E.g., Soni v. Wellmike Enterprise Co. Ltd. (2014) 224 Cal.App.4th 1477, 1488 ["The teaching of Trope and its progeny is that law firms and attorney litigants are precluded from recovering attorney fees for self-representation"]; 1 Pearl, Cal. Attorney Fee Awards (3d ed. 2017) § 4.60, p. 4-47 ["An attorney who represents himself or herself is not eligible for a fee award under [Civil Code,] § 1717"].)
Plaintiffs insist "Burmeister's work was not for 'his own benefit' " because, as trustee of the family trust, he "acted in his representative capacity." They reason: "The complaint was filed by Pyramid, a separate legal entity, as the real party in interest and, out of an abundance of caution, co-filed by Mr. Burmeister in his representative capacity as trustee for the Burmeister Family Trust, the assignor of the contract in dispute. Under California law, a trustee appearing for a trust is considered, not to act in propria persona, but rather for the benefit of others." Moreover, Burmeister "had no 'benefits' from the litigation."
If the trial court was to be guided by equitable principles, one of the most elemental of those principles is that "equity regards substance rather than form." (Smitton v. McCullough (1920) 182 Cal. 530, 534; see 2 Pomeroy's Equity Jurisprudence (5th ed. 1941) § 378, pp. 40-42; Civ. Code, § 3528.) Such is entirely consistent with our Supreme Court repeatedly recognizing that " '[E]quitable considerations [under Civil Code section 1717] must prevail over . . . technical rules of contractual construction.' " (PLCM Group v. Drexler, supra, 22 Cal.4th at p. 1095, quoting International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, 224; cf. Hsu v. Abbara (1995) 9 Cal.4th 863, 877 ["in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by 'equitable considerations,' " italics omitted].)
Plaintiffs' arguments are almost entirely based upon strict adherence to the formalities of the Burmeister Family Trust. Plaintiffs do not challenge the recital in the order that Mr. Burmeister put his own assets into the corpus of the trust, thereby blurring the line between trustee and beneficiary, or that his involvement was not always and only as that of trustee. And it is undisputed that Mr. Burmeister is the owner of the business on the adjoining lot, business that was to be expanded by the purchase of defendants' parcel. (See fn. 1, ante.) Moreover, plaintiffs did try to establish his personal liability for elder abuse. In these circumstances, the trial court could conclude that the substance of Mr. Burmeister's legal input was for, and to, his personal benefit. (Cf. Gillotti v. Stewart (2017) 11 Cal.App.5th 875, 904, review dismissed, March 21, 2018 [upholding reduction of fees "because in addition to being Gillotti's lawyer and husband, Quade had a personal pecuniary interest in the lawsuit as cotrustor of the trust that held title to the subject property"].) In the spirit of equitable realities, that conclusion is not " 'so irrational or arbitrary that no reasonable person could agree with it.' " (Sargon Enterprises, Inc. v. University of Southern California, supra, 55 Cal.4th at p. 773.)
As already noted, we could stop here because there is an adequate basis to affirm the fee order. (Sutter Health Uninsured Pricing Cases, supra, 171 Cal.App.4th at p. 513.) However, we cannot forbear from commenting on plaintiffs' reasoning concerning the trial court's "grossly inflated" basis for denying fees for Mr. Burmeister's time as an attorney.
The trial court quoted language from the Supreme Court decision in Serrano v. Unruh, supra, 32 Cal.3d 621 as empowering the court to deny a grossly inflated request on that basis alone. Plaintiffs would have us treat the quoted language as mere dicta. In their brief, plaintiffs cite Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, but they fail to appreciate that the Supreme Court not only cited and quoted its prior words concerning grossly inflated fee requests, it then flatly stated: "This fact alone was sufficient, in the trial court's discretion, to justify denying attorney fees altogether." (Id. at p. 991, italics added.) This full-throated embrace makes the dicta argument utterly tenable.
Plaintiffs also state: "Diligent research has found no prior application of Serrano [] to any case involving the enforcement by the prevailing party of a private contractual attorneys' fee clause, such as this Fee Award Appeal." In Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, the Court of Appeal quoted from Serrano and Chavez and stated, in words exceedingly germane to plaintiffs' situation: "[T]he trial court cited [appellant's] grossly inflated fee request as only one of several reasons for denying a fee award. [Having already identified one ground for affirmance,] [w]e therefore need not consider whether this alternate ground for denying fees to [appellant] would alone support the trial court's order." (Id. at pp. 884-885.)
Sanctions
"[A]n appeal should be held to be frivolous only 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.) Defendants assert both of plaintiffs appeals cross this threshold, warranting sanctions in the amount of $30,440. Although there are aspects of plaintiff's appeals, particularly the one from the fee order, which might seem to qualify as frivolous, we deny defendant's request for sanctions.
Plaintiffs prevailed in their effort to make defendants live up to their contract, and, because the judgment was not stayed, may now be presumed to be in possession. Thus, plaintiffs cannot be charged with trying to delay the effect of an adverse judgment. The goal of plaintiffs' appeal is to get money—in the form of "incidental damages" or more attorney fees. Given that these issues were raised below, renewing them on appeal does not necessarily constitute "evidence of subjective bad faith" (In re Marriage of Flaherty, supra, 31 Cal.3d at p. 651), because that is what appeals are for. Plaintiffs' appeal for the incidental damages was not, on its face, a hopeless cause. It was a long shot, one made even longer by plaintiffs' tactical decision concerning the record, but not one that "any reasonable attorney would agree . . . [was] totally and completely without merit." (Id. at p. 650.) The appeal from the fee order was also a long shot, but not one that every reasonable lawyer would have shunned.
In any event, the contract will allow defendants, as the prevailing party on both appeals, to recover additional fees incurred in the preparation of the lengthy (and able) briefs on the appeals. (E.g., Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 547; Butler-Rupp v. Lourdeaux (2007) 154 Cal.App.4th 918, 923.) We decline defendants' request that we fix the amount of those fees in the first instance.
DISPOSITION
The judgment and the order are affirmed. Defendants are awarded costs on both appeals.
/s/_________
STEWART, J. We concur. /s/_________
KLINE, P.J. /s/_________
RICHMAN, J.