MOUNTAIN AIR ENTERPRISES v. SUNDOWNER TOWERSAppellants’ Answer Brief on the MeritsCal.July 17, 2015SUPREME COURT FILED JUL 17 2015 $223536 Frank A. McGuire Clerk IN THE Deputy SUPREME COURT OF CALIFORNIA MOUNTAIN AIR ENTERPRISES, LLC Plaintiffand Respondent, Vv. SUNDOWNER TOWERS,LLCetal., Defendants and Appellants. ~ PETITION FOR REVIEW OF A DECISION OF THE COURT OF APPEAL, “First APPELLATE DISTRICT, DIVISION Two, CASE No. A138306, REVERSING ORDER OF THE SUPERIOR COURT OF CALIFORNIA, FOR THE COUNTY OF MARIN,CASE No. CI'V081957 ANSWERBRIEF ON THE MERITS *Joe R. Abramson (SBN 105241) *Katharine J. Galston (SBN 237442) LAW OFFICESOF JOE R. ABRAMSON DEGANI & GALSTON LLP 21700 Oxnard Street, Suite 1770 12400 Wilshire Boulevard, Suite 400 Woodland Hills, California 91367 Los Angeles, California 90025 Telephone:(818) 227-6690 Telephone: 434) 270-1900 Facsimile: (818) 227-6699 Facsimile: (424) 270-1903 E-mail: jralaw1 @pacbellnet E-mail: kate@deganigalston.com ATTORNEYS FOR DEFENDANTS AND APPELLANTS BIJAN MADJLESSI, GLENN LARSEN, AND SUNDOWNER TOWERS, LLC B. “Brought” Does Not Support An Intent To Exclude Affirmative Defenses From This Attorney Fee Provision’s Broad Scope............... 25 C. Reading “Action” And “Proceeding”In Context Supports An Inclusive—Not Exclusive—Intent 2.0.0.0... eesceeseeeeeceeeeseeeeeeeseeeeneeens 32 Il. MOUNTAIN AIR’S ALTERNATE, NARROW CONSTRUCTION OF THE ATTORNEY FEE PROVISION CREATES AN ABSURD, AND OBVIOUSLY UNINTENDED, CONSEQUENCE....... 35 CONCLUSION1.cccccccscecesreeeseneeceeesseesesenssseessssseesssssseasseeasnees 40 CERTIFICATE OF WORD COUNT 1...eeecceeeecessststsesenenenes 4] DECLARATION OF SERVICE ul TABLE OF AUTHORITIES CASES Alexanderv. Angel, (1951) 37 Cal.2d 856.0... cece cceseesseeesnececeseeceseneresaeeeetesaeonaeeeaes 28 Ali v. Federal Bureau ofPrisons, (2008) 552 U.S. 214 vee ceccceceesecesecseeeeseeeseneeeesseeseseeeseesaeersneeeas 33 ASP Properties Group v. Fard, Inc., (2005) 133 CalApp.4th 1257ooceseesseeesseressseneseessees 35 Ayoob vy. Ayoob, (1946) 74 CalApp.2d 236.00... eecesecccesseresseeeesseeeeeeeeetateenes 28 Best v. California Apprenticeship Council, (1987) 193 Cal.App.3d 1448oeceeeeeeesseeeeteeeneesseetseeeees 19 Blue Lagoon Community Assn. v. Mitchell, (1997) 55 CalApp.4th 472.0... eeceecescesesesesseeeseessssseeseeeeesees 38 California Southern R. Co. v. Southern Pac. R. Co., (1884) 65 Cal. 394.ceecccesseseeeeseerssceessesessesesessssssceseesseeess 27 Carver v. Chevron U.S.A., Inc., (2002) 97 CalApp.4th 132.0... ceceeeseceseeeseeeseeeeeseeeeees 11, 13 Connerly v. State Personnel Bd., (2006) 37 Cal.4th 1169.0... eeecseeceseeeseeessneeeseeeeesesesessaseaee 10 Curtis v. County ofLos Angeles, (1985) 172 Cal.App.3d 1243ooeeeeeeseeeeeseeeseeseeteeee 26, 27 Deutsch v. Phillips Petroleum Co., (1976) 56 Cal.App.3d 586.0... cesssccessceteeseeceeteneseeeseetateanes 22 El Escorial Owners’ Ass’n v. DLC Plastering, Inc., (2007) 154 CalApp.4th 1337ooeeeeessceeesseeeeeceeseeeseees 13, 23 Employers Reinsurance Corp. v. Phoenix Ins. Co., (1986) 186 Cal.App.3d 545...eecseeeceseeeeesseeeseereetseetsaeeaes 27 Exxess Electronixx v. Heger Realty Corp., (1998) 64 CalApp.4th 698.0... eccecesseeeeeseetneteeeeeaes passim iil First American Title Ins. Co. v. XWarehouse Lending Corp., (2009) 177 Cal.App.4th 106.00... cece eececeeeesecceeneeeeeeseeeeaneres 32 Frog Creek Partners, LLC v. Vance Brown,Inc., (2012) 206 Cal.App.4th 515 oo... eeceesseseescesseeeeteeserseeeeeeeneees 24 Gibson v. Sacramento County, (1918) 37 Cal.App. 523 ........ccccessscessecceeereseneeseeneceseseeenseerennees 22 Gil v. Mansano, (2004) 121 Cal.App.4th 739.0... eeseseeeeseeeeesseeeeeeeeseees passim Hsu v. Abbara, (1995) 9 Cal.4th 863.00... cccccssccscsneceeseeeserecseeesseeseseeeceeesseeesnees 24 In re Head, (1986) 42 Cal.3d 223 oo. cccceccccssesccesccsssecesseesceecsseeeesereeesnees 19 In re Mac-Go Corp., (Bankr. N.D. Cal. Mar. 20, 2015) 2015 WL 1372717............. 25 In re Tobacco Cases I, (2013) 216 CaLApp.4th 570.0... eeeecesceetceesseeeeseetseeeseeeeeees 13 Moore v. Wood, (1945) 26 Cal.2d 621 oo... ee eececeessceesseceeeceeseecetsneseeeseesseeeeeares 32 Palmerv. Agee, (1978) 87 Cal.App.3d 377ceieessssssesesesessesseesesseeeeeeeaees 18, 19 Parsons v. Bristol Development Co., (1965) 62 Cal.2d 861 oo... eee eeeeesseessecescerseetseseeseessseseeeesenneeens 11 People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., (2003) 107 Cal.App.4th 516.0... eecescsseeeeeereeseeeteeeceneennees 36 People v. Gutierrez, (1986) 177 CalApp.3d 92...eeesseeeseceeecseereeseeeeeseenneeseeenes 22 Salawy v. Ocean Towers Housing Corp., (2004) 121 CalApp.4th 664.000. eeeeeneeeeeeeeeeeees 24, 29, 37 Santisas v. Goodin, (1998) 17 Cal4th 599.eceeccssneeeeseeeeseees 1, 11, 15, 16, 36 1v Sears v. Baccaglio, (1998) 60 Cal.App.4th 1136.0... ceccesesssseeseetceeseeeeeeeeeseeeeees 13 Shadoan v. World Savings & Loan Assn., (1990) 219 Cal.App.3d 97 oo... iccscecescseeeceeeecssesseeeseesseeeesaneees 12 Stockton Theatres, Inc. v. Palermo, (1954) 124 Cal.App.2d 353.0... cceceseeesessceeeeeeesetseeeeeeseees 29, 30 Stonesifer v. Kilburn, (1892) 94 Cal. 33 occcccssssscccssseessseeessseeeesenseeesseeeesesseeecesenaaes 21 United States v. Gonzales, (1997) 520 ULS. Looe eecessssecessecesseeeeesseeceeseeessseesseesseseesesseaes 33 Walker v. Countrywide Home Loans, Inc., (2002) 98 CalApp.4th 1158.0... cece eccsecssseessseecseseseseseeessaeeees 14 Windsor Pacific LLC v. SamwoodCo., Inc., — (2013) 213 Cal.App.4th 263.0... .ccccscccsccssteccetecesssseesenees passim Woodland Hills Residents Assn., Inc. v. City Council, (1979) 23 Cal.3d 917... ccccscccccsscesccsseecssceseseecsssecssessesseeesseeees 13 Yield Dynamics, Inc. v. TEA Systems Corp., (2007) 154 Cal.App.4th 547.0... cccccccccscccesecestesesesssesseeessseees 11 Zellerino v. Brown, (1991) 235 Cal.App.3d 1097.0... cccccccesecesseeteeeeens 20, 21, 22 CONSTITUTIONS California Constitution, Article I, § 14...cecccesssssesseeeesssseennees 22 STATUTES California Civil Code § 1636.0... .cesccsscsccssseeessrecesseeesseeeeseeeeees 16, 36 California Civil Code § 1638.............ccscccsssstccesssseseceessssesstseeeesens 16, 36 California Civil Code § 1639.00... .ccccscccsssstsceeesssseecessseesesseseeeees 16, 36 California Civil Code § 1641 o.oo... ccceccccsseccesssescceesesseeseecceessseneeees 32 California Civil Code § 1644.0... cccccsscecesssseceeeesssnessenees 16, 17, 26 California Civil Code § 1647...........ccccccsscccessnscesseceeeessecssesenseeesensaaees 16 California Civil Code § 1717.0... ececccecsesceceessseneceeeeeseetsenes 16, 24, 38 California Code of Civil Procedure §§ 20-220...ceeesccesseeeeeeteees 18 California Code of Civil Procedure § 1021...cesses 15, 16 California Code of Civil Procedure § 1021.5 0...eeeeeneeeeees 13,19 California Code of Civil Procedure § 1858 .0........ccceccescessteessteeeeeeees 32 OTHER AUTHORITIES American Heritage Dictionary (5th ed. 2011)...eeeeeeeeeeees 17, 20 Black’s Law Dict. (10th ed. 2014) oo... cece eeceeseeeceeeeeeeeeeeteeeeees 18, 20, 28 Edwin E. Bryant, The Law of Pleading Underthe Codes of Civil Procedure 3-4 (2d ed. 1899)oeeeeeeeeees 20 Merriam-Webster Online, 2015.00... ccccceseccceeeeeeeeeeeessssaeensenes 18, 20 Vi INTRODUCTION The single issue presented to this Court is whether an affirmative defense constitutes an “action” or “proceeding” within the scope of this attorney fee provision. The majority opinion in the Court ofAppeal—applying “the ordinary rules of contract interpretation,” as this Court has instructed (Santisas v. Goodin (1998) 17 Cal.4th 599, 608)—concludedthat it does. After analyzing the plain meaning of these words within the context of this specific attorney fee provision, the majority decided that “action” and “proceeding” encompassthe entire proceeding, including the pleading of an affirmative defense. Neither the majority opinion, nor the well-reasoned, recent decision in Windsor Pacific LLC v. Samwood Co., Inc. (2013) 213 Cal.App.4th 263 (which reached the same conclusion based on the meaning of “action” and “proceeding”), decided that attorney fees “should” be available for an affirmative defense, as Mountain Air erroneously contends (Opening Brief on the Merits “OBOM”2). Underthe ordinary rules of contract interpretation, they are. In this case, the parties entered into an Option Agreementthat, by its terms, “expressly supersede[d]”all prior agreements between the parties relating to a parcel of real property. (Typed Majority Opinion (“Maj. opn.”), 19.) The Option Agreement provided for the recovery of attorney fees to the prevailing party should “any legal action or any other proceeding” be brought to enforce the Option Agreementor becauseof a dispute in connection with anyofits provisions. (Maj. opn., 11.) When Mountain Air sued to enforce a prior agreement, Defendants and Appellants Bijan Madjlessi, Glenn Larsen, and Sundowner Towers, LLC(collectively, “Defendants”) pleaded novation as an affirmative defense, asserting that the Option Agreement had extinguished that prior agreement, and Defendants prevailed. Mountain Air concedes that Defendants’ novation affirmative defense satisfied the purposes specified in the attorney fee provision—meaning it sought the enforcement of the Option Agreementor the resolution of a dispute in connection with its provisions.! Mountain Air, however, argues that Defendants hadto plead novation via a claim for declaratory relief in a complaint or cross-complaint, and not via an affirmative defense, to trigger the attorney fee provision. According to Mountain Air, only the filing of a suit is an “action” or “proceeding” within the scope of the attorney fee provision. The Option Agreement’s attorney fee provision reveals no such intent by the parties. Mountain Air twists and tortures the provision’s language to support a fiction as to whythe parties might have wanted to distinguish between pleading claims and pleading defenses. But, in ' The dissent in the Court of Appeal quarreled with the majority regarding whether Defendants’ novation affirmative defense satisfied these purposes. (Typed Dissenting Opinion (“Dis. opn.”), 8.) There wasno division between the majority and dissent as to whether an affirmative defense is an “action” or “proceeding” within the scope of the attorney fee provision. (Maj. opn., 20, fn. 12; Dis. opn., 8.) doing so, Mountain Air ignores the breadth of the provision’s text and the plain meaning of its words. The provision’s broad language reflects an inclusive intent by the parties—notthe exclusive, restrictive intent Mountain Air urges—andbelies any intent by the parties to distinguish between claims and affirmative defenses. “The idea that the parties intended such a form-over-function approach to govern recovery ofattorney fees strains credulity.” (Maj. opn., 18.) Hadthese parties intended such an arrangement whereby attorney fees would be recoverable only whena plaintiff pleads a contract-based claim, and not when a defendant pleads a contract- based affirmative defense, it is reasonable to assumethat they would have specifically spelled this out in their attorney fee provision. At the very least, parties with such an intent would not have provided that any “action” or “proceeding”triggers the fee provision, language that by definition is not limited to pleading a claim in a complaint. It takes no “stretch” of this attorney fee provision (OBOM 2)— but merely a plain and commonsensereading ofits wordsin their context—to concludethat the parties intended to include affirmative defenses within the boundsof litigation covered byits broad scope. STATEMENTOF FACTS A. Mountain Air And Sundowner Enter Into A Purchase And Repurchase Agreement Relating To Commercial Real Estate In Nevada. The underlying dispute in this case relates to commercial real estate property located in Reno, Nevada. (Maj. opn., 2.) This property wasoriginally a single parcel of real property with multiple buildings. (/bid.) On February 17, 2006, by the recordation of a map, the property was subdividedinto three legal parcels: the North Tower; the South Tower; and the Casino. (/bid.) On December 12, 2005, before the property was subdivided, Steven Scarpa and Sundowner Towers, LLC, a Nevada limited liability company (“Sundowner”) entered into two separate written agreements regarding the property. (Maj. opn., 2.) In the first written agreement, Sundowneragreedto sell the South Tower to Scarpa for $7 million (the “Purchase Agreement”). (Jbid.; 12 CT 3078.) In the second written agreement, Sundowneragreed to repurchase the South Tower from Scarpa for $7 million plus 12 percent (the “Repurchase Agreement”). (Maj. opn., 2; 12 CT 3086.) Bijan Madjlessi and Glenn Larsen, Sundowner’s two co- owners, guaranteed Sundowner’s obligations under the Repurchase Agreement. (Maj. opn., 2; 12 CT 3038) Scarpa subsequently assignedhis rights under the agreements to Mountain Air, a single-purpose California limited liability company whose sole memberis Scarpa. (Maj. opn., 2.) B. The Parties Later Execute The Option Agreement. On April 25, 2006, Mountain Air, as seller, and Madjlessi and Larsen, as buyers, executed a written option agreement whereby Mountain Air granted Madjlessi and Larsen the exclusive right to purchase the South Tower during a specified option period (the “Option Agreement”). (Maj. opn., 2; 12 CT 3092.) The Option Agreement includes an integration clause that declares that the Option Agreement“expressly supersedesall previous or contemporaneous agreements, understandings, representations, or statements between the parties respecting this matter.” (Maj. opn., 19; 12 CT 3098 [¥ 20(d)].) The Option Agreementalso contains an attorney fee provision that states in pertinentpart: Litigation Costs. If any legal action or any other proceeding, including arbitration or an action for declaratory relief; is brought for the enforcementofthis Agreementor because of an alleged dispute, breach, default, or misrepresentation in connection with any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees, expert fees and othercosts incurred in that action or proceeding, in addition to any otherrelief to which the prevailing party maybe entitled. (Maj. opn., 11-12; 12 CT 3098 [¥ 20(c)].) C. Mountain Air Acquires The South Tower And Sues WhenSundownerDoes Not Repurchase. On April 27, 2006, Sundowneracquired the South Tower from a third party and transferred it on the same day to Mountain Air pursuant to the Purchase Agreement. (Maj. opn., 2.) Sundowner did not repurchase the South Tower. (Jd.at 3.) Mountain Air filed this action against Defendants, asserting claims for breach of the Repurchase Agreementand breachofthe written guarantees. (Maj. opn., 3.) D. Defendants Plead Affirmative Defenses In Their Answer. Defendants pleaded affirmative defenses, asserting that the Option Agreement was a novation, which had extinguished the Repurchase Agreement, and that the Repurchase Agreement was illegal and thus void and unenforceable. (Maj. opn., 3; AA 17-18.) E. Defendants Prevail At Trial, And The Trial Court Rules For Defendants On Their Affirmative Defenses. After a 13-daytrial, the trial court, on October 10, 2012, ruled in Defendants’ favor on both affirmative defenses, finding for Defendants “on all issues.” (Maj. opn., 3-4; 7 CT 1754, 1757.) Thetrial court ruled that the Repurchase Agreementwasillegal, and thus void and unenforceable, because it was executed before the recordation of a subdivision map,in violation of both Nevada and California law. (Maj. opn., 3.) Thetrial court further decided that, even if the Repurchase Agreement werelegal, it was terminated by the Option Agreement, which wasa novation. (/d. at 3-4.) In ruling that Defendants prevailed on their novation affirmative defense, the trial court found “‘by clear and convincing evidencethat the parties treated the Repurchase Agreement as having been extinguished and the Option Agreementas the operative agreement.’” (Maj. opn., 3, quoting 7 CT 1788.) Thetrial court also held that the Option Agreement’s integration clause was unambiguous in expressly supersedingall prior agreements relating to the same subject matter, including the Repurchase Agreement, which involved precisely the same subject matter—thatis, the purchase of the South Tower. (/d. at 3.) The Option Agreement’s materially different terms also supported thetrial court’s determination that the agreement was a novation. (/d. at 3-4.) | On October 10, 2012, the trial court entered judgment in favor of Defendants.* (Maj. opn., 4.) F. The Trial Court Denies Attorney Fees To Defendants. On December7, 2012, Defendants moved for attorney fees as the prevailing party, relying on attorney fee provisions in both the Repurchase Agreement and the Option Agreement. (Maj. opn., 4.) Thetrial court denied the motion on March 20, 2013. (bid.; AA 79.) Thetrial court decided that it could not award attorney fees under the Repurchase Agreement, relying on the generalrule that if an entire agreementis void forillegality, then attorney fees based on that agreement are unavailable. (Maj. opn., 7; AA 82.) As to the Option Agreement’s attorney fee provision, the trial court concluded that Defendants’ affirmative defense of novation did not fall within the Option Agreement’s attorney fee provision. (Maj. opn., 13, 20; AA 83.) Thetrial court reasoned that the provision “‘only applies to actions ‘brought’ for the enforcement of the Option Agreementor because of a dispute in connection with any provision ofthe Agreement, not any action between the parties that happensto concern the Option Agreement.’” (Dis. opn., 6, quoting AA 83, original emphasis.) Thetrial court ruled that none ofthe provisions of * Mountain Airfiled a notice of appeal after the entry of judgment, but that appeal was later dismissed. (Maj. opn., 4, fn. 2.) Gocethe Option Agreementwere actually “‘in dispute 999 in this case. (Dis. opn., 6, quoting AA 83.) G. The Court of Appeal Reverses The Denial Of Fees. The Court ofAppeal reversed the trial court’s order denying Defendants attorney fees in a published opinion. (Maj. opn., 1, 21.) Although the Court of Appeal agreed with the trial court that attorney fees were not available under the Repurchase Agreement,as that agreement was void and unenforceable,it held that the trial court erred in denying Defendants attorney fees under the Option Agreement. (/d.at 1.) Reviewingthetrial court’s interpretation of the Option Agreement de novo (recognizing that “neither party [had] cite[d] extrinsic evidence that bears upon interpretation of the option agreement”), the majority heldthat the trial court erred in interpreting the attorney fee provision of the Option Agreementto exclude Defendants’ novation affirmative defense. (Maj. opn., 11-21.) The majority first considered the form of the novation defense, specifically whether Defendants’ affirmative defense “constitute[d] an ‘action or any other proceeding . . . brought’ within the meaning ofthe option agreement’s fees provision.” (Maj. opn., 13.) The majority decidedthat the trial court had “overlook[ed] the broad language” of the Option Agreement’s attorney fee provision, “which includes not only an action but ‘any other proceeding.’” (/bid.) The majority held that an affirmative defense is an “action” or “proceeding” within the scope of this attorney fee provision. (Jd. at 18.) In reaching this conclusion the majority opinion agreed with the Court of Appeal in Windsor Pacific, supra, 213 Cal.App.4th 263, as well as the dissenting opinion of Justice Armstrong in Gil v. Mansano (2004) 121 Cal.App.4th 739, and reasoned that the words “action” or “proceeding,” in their ordinary usage, ““encompass|[]the entire judicial proceeding, including the answer, and that an action in which the defendant asserted a defense based on a [contract] was an action brought to enforce the terms of the [contract] within the meaning of 299the attorney fee clause.’” (Maj. opn., 18, quoting Windsor Pacific, supra, 213 Cal.App.4th at p. 276.) The majority rejected the interpretations adopted by Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, and by the majority opinion in Gil, supra, 121 Cal.App.4th 739, both ofwhich excluded affirmative defenses from the coverage of an attorney fee provision. (Maj. opn., 18.) The majority also concludedthat the subject matter of Defendants’ novation defense fell within the two purposesspecified in the attorney fee provision—“broughteither ‘for the enforcement of [the Option] Agreement’ or ‘because of an alleged dispute, breach, default, or misrepresentation in connection with any provision of[the Option] Agreement.’” (Maj. opn., 13, 19-21.) The majority held that Defendants, in bringing their novation affirmative defense, sought to enforce the Option Agreement’s integration clause and “by doing so accomplish a material purpose of the option agreement: the extinguishmentofthe repurchase agreement.” (/d. at 19.) The majority also reasonedthat “[t]here can be no doubt here that Mountain Air and defendants disputed the meaning andeffect of the option agreement, including its integration clause,” and thus the attorney fee provision’s “in connection with” language encompassed this dispute. (/d. at 20.) Justice Richmond dissented from the majority’s opinion reversing the trial court’s denial of attorney fees under the Option Agreement. (Dis. opn., 1.) In Justice Richmond’s view,the issue was “not whether there was an ‘action’ or a ‘proceeding’” but whether Defendants’ novation affirmative defense fell within the purposes specified in the Option Agreement’s attorney fee provision. (Dis. opn., 8, emphasis added.) Justice Richmond disputed the majority’s decision that the novation defense sought to enforce the Option Agreementorto resolve a dispute in connection with that agreement. (Dis. opn., 10-13.) STANDARD OF REVIEW The question whetheran affirmative defenseis an “action” or “proceeding” within the meaning ofthis attorney fee provision, is an issue of law, reviewed on appeal de novo. (Maj. opn., 6, 20, fn. 12.) While orders granting or denying an awardofattorney fees are generally reviewed under an abuseofdiscretion standard, the determination of the legal basis for an attorney fee awardis a question of law, reviewed de novo. (See Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175 [applying de novo standard as “‘the determination of whetherthe criteria for an award ofattorney fees and costs in this context have been satisfied amounts to statutory 10 construction and a question of law,’” quoting Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142].) Whereattorney fees are claimed undera contractual attorney fee provision,“the scope of activities for which fees may be recovered is governed by the termsofthe contract.” (Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 577, citing Santisas, supra, 17 Cal.4th at p. 608; see also Carver, supra, 97 Cal.App.4th at p. 142 [“[T]o determine whether an awardofattorney feesis warranted under a contractual attorney fees provision, the reviewing court will examine the applicable statutes and provisionsofthe contract.”].) It is “solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence.” (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) Therefore, where, as here, extrinsic evidence has not been offered to interpret the contractual attorney fee provision and nofacts are in dispute, review is de novo. (Carver, supra, 97 Cal.App.4th at p. 142; see, e.g, Windsor Pacific, supra, 213 Cal.App.4th at p. 273 [““Weinterpret a contract de novoif the interpretation does not turn on the credibility of extrinsic evidence.”]; Exxess, supra, 64 Cal.App.4th at p. 705 [“review[ing] the trial court’s decision [regarding entitlement to fees] de novo”].) Mountain Air—despite its position that “the only thing that matters” to this Court’s inquiry is “the actual text of the attorney-fee provision adoptedbythe parties in this case”; despite its direction that 11 “Tilf the text of the attorney-fee clause includes affirmative defenses, then the defendants are entitled to a fee award”; and despite its characterization of the issue as a “Jexical dilemma[]” (OBOM 3, 10, 12, emphasis added)—perplexingly suggests that the Court of Appeal should have reviewedthetrial court’s decision as to the availability of attorney fees under a “deferential standard.” (OBOM 7.) Mountain Air goesso far as to proposethat the trial court’s decision should be affirmedif it is “within the range of reason.” (OBOM 8.) Mountain Air’s assertions are wholly without merit, as the applicability of the de novo standard of review to this question of law is clear. While Mountain Air proposesthat deference to the trial court is warranted “/t/o the extent that the trial court relied on its knowledge of the proceedings” (OBOM 8, emphasis added),it fails to identify what knowledge or evidencethetrial court relied on that would inform the resolution of whether an affirmative defense constitutes an “action” or “proceeding.” There is none. The cases Mountain Air cites supporting its proposed deferential standard are inapposite, as they involve how to apportion fees between qualifying and non-qualifying claims and defenses under a contract, and not a purely legal question of contract interpretation. (OBOM7, citing Shadoan v. World Savings & Loan Assn. (1990) 219 Cal.App.3d 97, 107-108 [recognizingtrial court’s discretion to apportion fees so losing party is only required to pay fees on 3 Here, the Court of Appeal expressly left any apportionment of fees to the trial court on remand. (Maj. opn., 21, fn. 15.) 12 contractual cause of action], and E/ Escorial Owners’ Ass’n v. DLC Plastering, Inc. (2007) 154 Cal.App.4th 1337, 1365-66 [rejecting challenge to fee apportionment because decision how to separate attorney time spent on contract and tort claims was within trial court’s discretion].) In such circumstances, the basis for the discretion affordedto thetrial court “is the judge’s familiarity with the proceedings and the work performed bythe attorneys.” (dn re Tobacco Cases I (2013) 216 Cal.App.4th 570, 588 (cited at OBOM 8) [holding no abuse of discretion whentrial court refused to reduce lodestar amount].) Mountain Air’s reliance on cases from other attorney fee contexts also fails because these cases similarly involve fact- dependent determinationsbythetrial court, and not pure issues of law. (OBOM 7-8, citing Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 938 [recognizing that, under section 1021.5 of the Code of Civil Procedure,trial court has discretion to award fees if it determines the action vindicated an important right so as to justify a fee award undera private attorney general theory]; Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1151-52, 1155 66[recognizing deference dueto trial court’s “prevailing party” determination asthis is a “fact intensive” inquiry that requires a “consider[ation] [of] all factors which may reasonably be considered to indicate successin the litigation”]; Carver, supra, 119 Cal.App.4th at pp. 505-506 [affirmingtrial court’s apportionment of fees based on conflicting evidence as to what percentage of the fees should be 13 allocated to noncompensable claims]; Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1180-81 [holding trial court did not abuseits discretion by declining to apportion attorney fees to contractual claim due to “monetary insignificance” of claim that indicatedto trial court that it was merely an add-on claim].) Finally, the standard of review disagreement between the majority and dissent in the Court ofAppeal does not support the deferential standard for which Mountain Air advocates. (OBOM 7.) The dissent urged deferenceto the trial court’s decision that Defendants’ novation defense did not fall within the two purposes specified in the attorney fee provision—for “enforcement of” the Option Agreementor “becauseof an alleged or becauseof an alleged dispute, breach, default, or misrepresentation in connection with any provision of [the Option Agreement].” (Dis. opn., 11.) The majority rejected “the dissent’s suggestion that deference to the trial court [wa]s in order here,” reasoning that it was a contract interpretation issue and “no question of fact is at issue.” (Maj. opn., 20, fn. 12.) Mountain Air does not challenge whether Defendants’ novation defense fell within the two purposesspecified in the attorney fee provision. (OBOM 1; see also id. at 12 [conceding that “[1]f the text of the attorney-fee clause includes affirmative defenses, then the defendants are entitled to a fee award”; Maj. opn., 21, fn. 13 [acknowledging Mountain Air’s concession that “if defendants had filed a cross-complaint for declaratory relief raising the same arguments as in their novation defense, we would have a ‘very 14 999different situation’”].) The issue on which the majority and dissent quarreled is thusirrelevant.* The standard of review for the purely legal issue of contract interpretation that Mountain Air raises to this Court is de novo. LEGALARGUMENT L THE PLAIN LANGUAGEOF THE ATTORNEY FEE PROVISION, WHICH PROVIDES FOR THE RECOVERYOF FEES “IN ANY ACTION OR ANY OTHER PROCEEDING,” INCLUDES AFFIRMATIVE DEFENSES WITHIN ITS BROAD SCOPE. It is well-settled under California law that “[e]xcept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselorsat law isleft to the agreement, express or implied, of the parties.” (Code Civ. Proc., § 1021.) This Court has explained that when interpreting the scope of an agreementthat provides for the recovery of attorney fees, courts must “apply the ordinary rules of contract interpretation.” (Santisas, supra, 17 Cal.4th at p. 608.) Under those interpretative rules, “the mutual intention of the parties at the time the contract [wa]s formed” 4 In any event, the majority properly concludedthat the standard of review regarding whether Defendants’ novation defense fell within the provision’s specified purposes wasalso de novo,as there was no conflicting evidence. (Maj. opn., 20, fn. 12.) 15 governsthe construction of an attorney fee provision.° (Jbid., citing Civ. Code, § 1636.) This Court ascertains the contracting parties’ intention,if possible, solely from the contract’s written language. (Santisas, supra, 17 Cal.4th at p. 608,citing Civ. Code, § 1639.) The Court may “also consider the circumstances under which the contract was made and the matter to whichit relates.” (Windsor Pacific, supra, 213 Cal.App.4th at p. 274, citing Civ. Code, § 1647.) The “‘clear and explicit’ meaning” of the wordsin the attorney fee provision, “interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaningis given to them by usage’ controls judicial interpretation.” (Santisas, supra, 17 Cal.4th at p. 608, quoting Civ. Code, §§ 1638, 1644.) “If contractual languageis clear and explicit and does not involve an absurdity, the plain meaning governs.” (Windsor Pacific, supra, 213 Cal.App.4that p. 274,citing Civ. Code § 1638.) Asthe majority opinion in the Court of Appeal, as well as the recent decision of the Court of Appeal in Windsor Pacific, supra, 213 Cal.App.4th 263, concluded, the ordinary meaning of the words > An attorney fee clause can provide for an attorney fee award in an action on the contract or, if worded more broadly, on noncontract actions. (Maj. opn., 6-7, citing Civ. Code, § 1717, and CodeCiv. Proc., § 1021.) Neither party, nor the Court of Appeal, has raised any issue in this case as to the application of Civil Code section 1717. Thesole issue presented here is whether Defendants’ affirmative defense is an “action” or “proceeding” within the meaning of the Option Agreement’s attorney fee provision. (OBOM1.) 16 “action” and “proceeding”includes affirmative defenses. Mountain Air’s position that, “[b]y definition” (OBOM 14), an affirmative defense is neither an “action” nor a “proceeding”necessarily fails. Neither does Mountain Air’s reliance on the word “brought” narrow the broad scope of “any legal action or any other proceeding”or evidence any intent by the parties to limit the availability of fees to the initiation of a suit by pleading a claim in a complaint. Rather, reading these words within the context of this attorney fee provision confirms that pleading an affirmative defense in an answertriggers its coverage. A. The Words “Action” And “Proceeding” Encompass Affirmative Defenses. The majority opinion in the Court of Appeal, after carefully analyzing the meaning of“action” and “proceeding” and reading those words within the context of the attorney fee provision, properly concludedthat an affirmative defense constitutes an “action” or “proceeding” within the scope of the attorney fee provision. A party whoasserts an affirmative defense brings an “action” or “proceeding”—whether these wordsare interpreted in their “ordinary and popular sense” (Civ. Code, § 1644), or afforded a specialized legal meaning. (Maj. opn., 13-15 & fn. 9.) The American Heritage Dictionary defines “action,” as used in the context of “Law,” as “[a] proceeding brought before a court to obtain relief; a lawsuit.” (American Heritage Dictionary (Sth ed. 2011) p. 17.) An “action”is “the initiating of a proceeding in a court ofjustice by which one demandsor enforces one’sright” and also 17 “the proceedingitself.” (Merriam-Webster Online, 2015. “Action” .) Similarly, Black’s Law Dictionary defines “action,” as, inter alia, “[a] civil or criminal judicial proceeding.” (Black’s Law Dict. (10th ed. 2014) p. 35, col. 1.) Mountain Air, however, would limit the meaning of “action” to the filing of a complaint or cross-complaint, initiating a lawsuit. (OBOM13,citing Gil, supra, 121 Cal.App.4th at p. 744, and Code Civ. Proc., §§ 20-22.) But the meaning of “action” is not so limited. According to each ofthe definitions discussed above, an “action” may encompassthe entire proceeding, in addition to the act that initiates the lawsuit. A party thus may bring an “action” whenit pleads an affirmative defense, just as a party brings an “action” whenit pleads a claim. As Justice Armstrong explainedin his dissenting opinion in Gil, courts have recognized in a numberof contexts that the word ““action’ is not limited and precise, but general and inclusive.” (Supra, 121 Cal.App.4th at p. 747 (dis. opn. of Armstrong, J.), citing cases.) In Palmerv. Agee (1978) 87 Cal.App.3d 377, for example, the Court ofAppeal considered the word “action” in the context of a statutory provision for the recovery of attorney fees in any “action” arising out of a special statute related to the termination of mobile hometenancies. (/d. at pp. 386-387.) Mobile home landlords had filed a complaint for unlawful detainer against tenants for nonpayment of rent, and the tenants asserted, as a defense, the fact that the 18 landlords had not complied with the special statute. The tenants prevailed on their defense. Palmer held the tenants’ defense constituted an “action” arising out of that special statute, holding an “Talction is not limited to the complaint or the documentinitiating the action but the entire judicial proceeding.” (/d. at p. 387.) “The defenses raised in the answer to the complaintare a real part of any action.” (/bid.) Both this Court and the Court of Appeal have similarly refused to restrict the meaning of the word “action”in the context of attorney fees recoverable under Code of Civil Procedure section 1021.5, which provides for fees to the successful party “in any action”resulting in the enforcement of an importantright affecting the public interest. Un re Head (1986) 42 Cal.3d 223, 228 |“action” in section 1021.5 encompasseshabeas corpusproceedings, even though habeas corpus is a special proceeding and nota civil action]; Best v. California Apprenticeship Council (1987) 193 Cal.App.3d 1448, 1460-61 [“action” in section 1021.5 encompasses administrative proceedings that precededa later-filed civil action].) “[T]Jhe use of the term ‘action’ doesnotin all contexts refer to the technical meaning of the term as defined in the Code of Civil Procedure.” (Best, supra, 193 Cal.App.3d at p. 1460.) Nonetheless, even if the word “action” in the Option Agreement’s attorney fee clause were construed narrowly here,“the inclusion of the phrase ‘or any other proceeding’ suggests something broader.” (Maj. opn., 13, emphasis added.) 19 “Proceeding”is broadly defined in ordinary usageas “[a] course of action; a procedure” (American Heritage Dict., supra, p. 1404) or, in legal usage, as “[l]egal action; litigation” (ibid.) or “the process of appearing before a court of law so a decision can be made about an argumentor claim: a legal action” (Merriam Webster Online, 2015. “Proceeding” ). Black’s Law Dictionary defines “proceeding”as “[t]he regular and orderly progression of a lawsuit, including all acts and events between the time ofcommencementandthe entry ofjudgment.” (Black’s Law Dict., supra, at p. 1398, col. 1, emphasis added.) A “proceeding” may be “[a]n act or step that is part of a larger action.” (bid.) Black’s Law Dictionary explains that the word “proceeding”is necessarily more comprehensive than the word “action,” quoting Edwin E. Bryant, The Law of Pleading Under the Codesof Civil Procedure 3-4 (2d ed. 1899), which stated that a “proceeding”is ““‘a 999word much usedto express the business done in courts’” and is “an act done by the authority or direction of the court, express or implied.’” (Black’s Law Dict., supra, at p. 1398.) “Proceeding”“‘is more comprehensive than the word ‘action,’ but it may include inits general senseall the steps taken or measures adoptedin the prosecution or defense ofan action, including the pleadings and judgment.’” (/bid., emphasis added.) Thus, as the majority opinion in the Court of Appeal concluded,“[a]n affirmative defensefalls squarely within”the definition of “proceeding.” (Maj. opn., 13-14; see also Zellerino v. Brown (1991) 235 Cal.App.3d 1097, 1105 20 coe[construing “proceeding” broadly to include “‘[a]nything done from the commencementto the termination’”in the progressofa civil action (quoting Stonesifer v. Kilburn (1892) 94 Cal. 33, 43)].) Mountain Air’s position that “/b/y definition, a defense is neither an action nor a proceeding” (OBOM 14, emphasis added) is therefore plainly incorrect. Both “action” and “proceeding” have broad meaningsthat “encompassthe entire action or proceeding, including both the complaint and any responsive pleading, such as an answer.” (Windsor Pacific, supra, 213 Cal.App.4th at p. 274.) The broad definitions of these words undermine Mountain Air’s argument that the drafters, by using these words,indicated their intent to “adopt[] a narrow[] fee provision” and exclude affirmative defenses from its scope. (OBOM 15.) Neither is there any merit to Mountain Air’s argumentthat the word “proceeding”—notwithstandingits “expansive definition”in some contexts—should be given a narrow reading here. (OBOM 16- 19.) Mountain Air criticizes the Court of Appeal’s reliance on the broad meaning of “proceeding” applied in Zellerino, 235 Cal.App.3d 1097. (OBOM 17; Maj. opn., 14.) Zellerino recognizedthat “proceeding” may have various meanings, depending on context. (Supra, 235 Cal.App.3d at p. 1105.) According to Mountain Air, the Option Agreement’s attorney fee provision, unlike the text interpreted in Zellerino, requires a narrower reading of “proceeding.” (OBOM 17.) 21 The narrower,restrictive meaning of “proceeding” for which Mountain Air advocates, however, does not support its construction of the attorney fee provision. The narrow definition of “proceeding”that Zellerino recognized (but ultimately rejected in favor of a broader meaning) was “an action or remedy before a court.” (Supra, 235 Cal.App.3d at p. 1105, emphasis added.) For this narrowerdefinition, Zellerino relied on casesthat specifically considered whether the word “proceeding” was limited to a proceedings before ajudicial tribunal or also encompassed non-judicial proceedings. (bid., citing People v. Gutierrez (1986) 177 Cal.App.3d 92, 99-100 [holding “proceeding” in article I, section 14 of the California Constitution gives a right to an interpreter during proceedings “held before a judicialtribunal,” not a probation interview], and Gibson v. Sacramento County (1918) 37 Cal.App. 523, 526 [defining “criminal proceeding” as “some authorized step taken before a judicial tribunal”].) If this narrowerdefinition of “proceeding” were employedhere and “proceeding” were defined as “an action or remedy before a court,” then there is no distinction between the meaningof “legal action” and “proceeding”in the attorney fee provision. If, as Mountain Air argues, a “legal action” is an example of a “proceeding” (OBOM 18-19), its construction fails by giving the words the same meaning. Mountain Air’s interpretation thus renderseither “legal action” or “proceeding” superfluous within the attorney fee clause, violating well-settled principles of construction. (Maj. opn., 14,citing Deutsch v. Phillips Petroleum Co. (1976) 56 Cal.App.3d 586, 590 22 [contractual provision “must be construed so as to give force and effect to every word contained within it’’].) Moreover, construing “legal action” as an example of a “proceeding” does not foreclose a reading of this provision that both claims in a complaint and affirmative defenses in an answeras examples of a “proceeding.” Mountain Air’s contention that “proceeding” can only refer to the “entirety of a suit” fails becauseit assumesthat the terms “legal action, “arbitration,” and “an action for declaratory relief’ only include the documents that initiate such proceedings. There is no support for such limitation.° Finally, reading “proceeding” to encompassthe assertion of a contract-based affirmative defenses will not render the attorney fee provision “incomprehensible”or “produce absurd results.” (OBOM 19.) Mountain Air raises the specter of every ruling in the trial court giving rise to a separate attorney fee award without any regard to whichparty ultimately prevails, but ignores that the Option 6 Mountain Air’s construction is not bolstered by language in the attorney fee provision that authorizes the recovery of fees incurred “in that action or proceeding.” (OBOM 18,original emphasis.) The phrase “in that action or proceeding” simply meansthatthe prevailing party can only recover fees incurred in whatever action or proceeding was “brought for the enforcement of this Agreement or because of an alleged dispute, breach, default, or misrepresentation in connection with any provision of this Agreement.” (See Maj. opn., 21 & fn. 15.) A prevailing party thus can only recover fees incurred on the contract- based claims or defenses. (See, e.g., E/ Escorial, supra, 154 Cal.App.4th at pp. 1365-66 [apportioning fees].) 23 Agreement only provides for the recovery of attorney fees to “the prevailing party.” (Maj. opn., 11.) Asexplained in Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515 (cited at OBOM 19), under Civil Code section 1717, “there can be only one prevailing party entitled to attorney fees as ‘the party prevailing on the contract.’” (dd.at p. 539.) That prevailing party determinationis “made only uponfinal resolution of the contract claims and only by a comparison ofthe extent to which each party has succeeded andfailed to succeedinits contentions.” (Hsu v. Abbara (1995) 9 Cal.4th 863, 876, quotations and citations omitted). Whether a party prevailed on any interim procedural steps in a lawsuit would not alter which party was ultimately deemed entitled to fees as the prevailing party. Neither does the majority opinion in Salawy v. Ocean Towers Housing Corp. (2004) 121 Cal.App.4th 664 (OBOM 19), provide support for Mountain Air’s concerns regarding whether “proceeding” should includesteps in a litigation other than the filing of a complaint. Salawy considered only whether a demurrer to a complaint was an “action... to enforce” a right and concludedit was not. (/d.at p. 670.) Mountain Air’s concerns are unfounded. It therefore “does not matter” whether the party who seeks the enforcementofthe contract or the resolution of a dispute regardingits provisions does so “by the allegations of a complaint or by affirmative defenses in an answer.” (Windsor Pacific, supra, 213 Cal.App.4th at 24 p. 274, emphasis added.) Either falls within the broad meaning of “action” or “proceeding.” B. “Brought” Does Not Support An Intent To Exclude Affirmative Defenses From This Attorney Fee Provision’s Broad Scope. To support its position that the Option Agreement’s attorney fee provision is narrower than the plain meaning of “action” and “proceeding,” Mountain Air relies on the inclusion of the word “brought.” (OBOM 15-16.) Mountain Air arguesthat, by using a form of the verb “bring”—instead of the verbs “plead,” “raise,”or “assert”—the drafters excluded (whether purposefully or not) affirmative defenses from the clause. (OBOM 15.) According to Mountain Air, the use of this verb “confirms”the parties did not intend this attorney fee provision to coveraffirmative defenses. (OBOM 15.) But, as the majority opinion in the Court ofAppeal 7 A federal bankruptcy court recently decided a similar issue regarding the availability of attorney fees under a contract and, after considering the intermediate appellate decisions in California, followed Windsor Pacific, like the majority opinion here. (in re Mac- Go Corp. (Bankr. N.D. Cal. Mar. 20, 2015) 2015 WL 1372717,at *4- 6.) The bankruptcy court recognized that, when applying California law in the absence of a controlling decision from this Court, it was boundto predict how this Court would decide the issue of California law. (d. at *6, fn. 5.) The bankruptcy court reasonedthat only Windsor Pacific followed this Court’s instruction that California courts must apply the “ordinary”rules of interpretation when analyzing an attorney fee provision, not Exxess and Gil, which “narrowly interpret[ed] fee clauses,” contrary to this Court’s authority. (Id. at *5.) 25 concluded, Mountain Air cannot narrow the broad scopeofthis attorney fee provision by placing this verb under a microscope. Mountain Air gives no reason whyanaffirmative defense in an answercould not be “brought,” just as a cause of action in a complaint could be “brought.” According to Mountain Air, affirmative defenses “are pleaded—notbrought.” (OBOM 2.) But even if other, more specific verbs or legal terms are used more often in connection with affirmative defenses—as Mountain Air contends, relying on whatit terms “normal legal parlance” (OBOM 15)—thereis no logical reason whyasserting, raising, or pleading an affirmative defense is not the same as bringing an affirmative defense, within the word’s usual and ordinary meaning. (Civ. Code, § 1644 [“The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used bythe parties in a technical sense, or unless a special meaning is given to them by usage, in which casethe latter must be followed.”’].) Mountain Air is not correct that the verb “brought” excludes Gee affirmative defenses becauseit necessarily refers “‘to the initiation of legal proceedings in a suit.”” (OBOM 21, quoting Curtis v. County of Los Angeles (1985) 172 Cal.App.3d 1243, 1249, emphasis added.) In Curtis, the Court of Appeal considered whether “brought the proceeding,”as used in a statutory attorney fee provision, meant only thefiling of a lawsuit or also included the continued maintenance of that lawsuit. (/d. at pp. 1248-52.) Curtis, in construing the language, reasoned that Black’s Law Dictionary supported both meanings and 26 ultimately held that the word “brought” encompassesnot only the filing of an action, but also its continued maintenance. (/d. at p. 1252; see also ibid. [recognizing holding wasin accord with California Southern R. Co. v. Southern Pac. R. Co. (1884) 65 Cal. 304, which held that the requirement that an eminent domain action be “brought” in the county in which the property wassituated applied not only to the filing of the action butalso to its continued maintenance].)° The majority opinion in the Court ofAppeal rightly refused to validate the technical distinction Mountain Air drawsbased on this verb choice, concluding that such a reading would “elevate[] form over substanceandfiction overreality.” (Maj. opn., 18.) As the majority reasoned—agreeing with the dissenting opinion of Justice Armstrong in Gil— “‘raising ... an affirmative defense is legally the 999same as bringing an ‘action.”’” (Maj. opn., 18, quoting Gil, supra, 121 Cal.App.4th at p. 747 (dis. opn. of Armstrong, J.), original 8 Employers Reinsurance Corp. v. Phoenix Ins. Co. (1986) 186 Cal.App.3d 545 (OBOM 21) does not support Mountain Air’s position that “brought”refers to the initiation of a lawsuit. Employers Reinsurance considered an insurancepolicy that provided for prior acts coverage “if. . . suit is brought against the insured during the policy period.” (/d. at p. 554.) The court decided that “suit is brought” here meantthatall that was required to trigger the prior acts coverage wasthefiling of the complaint—andnotthe service of process or any additional act. The court gave “suit is brought”its narrowest reading to effectuate the intent to provide for prior acts coverage. If Employers Reinsurancehas any applicationhere,it supports the majority’s interpretation that the technical distinction Mountain Air aims to draw by relying on “brought” does not defeat the parties’ apparent intent to provide for fee recovery. 27 emphasis.) Mountain Air, while seeking to distinguish claims and affirmative defenses on the groundsthat they arise in “different procedural contexts,” ignores the inherent similarities in their substance. (OBOM 11.) Anaffirmative defense is not a mere “responseto the claims of the other party,’” nor a setting forth of reasons whytheplaintiff should not succeed on its claims, as Mountain Air contends. (OBOM 14, quoting Gil, supra, 121 Cal.App.4th at p. 744, emphasis omitted.) Rather, an affirmative defenseis the “assertion of facts and arguments that, if true, will defeat the plaintiffs .. . claim, even if all the allegations in the complaintare true.” (Black’s Law Dict., supra,at p. 509, col. 1.) Just as the plaintiff bears the burden of provingits claims, the defendant bears the burden ofprovingits affirmative defense. (Black’s Law Dict., supra, at p. 509, col. 1.) For example, for the novation affirmative defense Defendants asserted here, the burden of proofin support of novation is ““upon the party asserting its existence’” and the “evidence in support of a novation must be ‘clear and convincing.’” (Alexander v. Angel (1951) 37 Cal.2d 856, 860, internal citations omitted; see also Ayoob v. Ayoob (1946) 74 Cal.App.2d 236, 250 [applying “well established rule that the burden of proving a novationis on the party asserting its existence, and that the proof in support thereof must be clear and convincing”to defendant’s pleading of novation], citations omitted.) A defendant pleading an affirmative defense in an answeris subject to the same 28 rules that relate to pleading a cause ofaction in a complaint. (Gil, supra, 121 Cal.App.4th at p. 747 (dis. opn. of Armstrong,J.) Mountain Air fails to explain why procedural differences trump such substantive similarities. They do not. Mountain Air’s criticisms of the majority opinion in the Court ofAppeal are unfounded. The majority, in refusing to credit the word “brought” with the significance for which Mountain Air advocates, neither “admit[ted]” that affirmative defenses are not “brought,” nor “deleted” the word “brought” from its construction. (OBOM 15-16.) The majority simply recognized that there is no logical, reality-based reason to conclude from the provision’s language that the parties, by their use of the word “brought,” intended to draw a narrow,technical distinction between pleading claims and pleading defenses. Mountain Air’s “overly clever, and hypertechnical” reading is nonsensical “if the context is not a laboratory analysis of language, but the ordinary lives of people, organizations, and their lawyers.” (Salawy, supra, 121 Cal.App.4th at p. 677 (dis. opn. of Armstrong, J.).) The Court of Appeal in Stockton Theatres, Inc. v. Palermo (1954) 124 Cal.App.2d 353, rejected a similar argument when considering the word “commence”in a contractual attorney fee provision. The lease at issue in Stockton Theatres provided for the recovery of prevailing party fees “[i]f either party shall commence any legal proceedings against the other for relief’ because of any default by the other party. (/d. at p. 354, emphasis added.) The Court of Appealaffirmedthe trial court’s determination that the assertion of a 29 successful defense to an unlawful detainer action, based on the other party’s default, constituted “ccommenc[ing]” legal proceedings. (/d.at p. 362.) The Court of Appeal, agreeing with the analysisofthetrial court and quoting that analysis, stated: “‘The word ‘commence’ as used in this clause can just as well mean ‘commencea successful defense.’ It would be a narrow interpretation to declare that the word ‘commence’ mustbe given the restricted construction of‘file a complaintas plaintiff.’’” (bid.) Finally, there is no merit to Mountain Air’s argumentthat the use of “brought” in combination with the attorney fee provision’s two specified purposes—“for the enforcementof [the Option] Agreement” or “because of an alleged dispute, breach, default, or misrepresentation in connection with any provision of [the Option] Agreement”—narrowsthe availability of attorney fees to thefiling of a contract-based claim. (OBOM 20-22.) In entirely circular reasoning, Mountain Air contendsthat the provision’s two specified purposes can only be served bythe filing of a complaint because these specified purposes must be “the reason that the lawsuit wasfiled.” (OBOM21.) Because, according to Mountain Air, an affirmative defense does notalter the original reason for filing a lawsuit, only pleading a contract-based claim triggers the attorney fee provision. Mountain Air’s position depends on its assumption that 99 66“bringing” “any legal action or any other proceeding” meansfiling a 99 66complaint. If “bringing” “any legal action or any other proceeding” includes bringing an affirmative defense in an answer(andit does), 30 then there is no reason why, underthe plain language of the attorney fee provision, an affirmative defense could not be brought “for enforcementof the contract” or “because of’ a dispute about the contract. Indeed, as the majority opinion in the Court of Appeal concluded—and Mountain Air does not challenge—Defendants’ novation affirmative defense was broughtfor enforcementofthe Option Agreementand because ofa dispute about the meaning and effect of the Option Agreement. (Maj. opn., 19-21.) Mountain Air’s arguments regarding the purported significance of “brought” merely repeat its efforts below to distinguish the Option Agreement’s attorney fee provision from the provisionat issue in Windsor Pacific, which held, in a well-reasoned decision, that an attorney fee clause providing for recovery in “any action or proceeding to enforce or interpret” the contract encompassed a contract-based defense. (Supra, 213 Cal.App.4th at pp. 268, 274- 276.) The majority opinion properly rejected this argument, declining to hold that provisions referring to actions “broughtto enforce” a contract should have a materially different meaning from “action[s] .. . to enforce” a contract when seekingto give effect to the intent of contracting parties.’ (Maj. opn., 18, quoting Windsor Pacific, 213 Cal.App.4th at p. 268,fn. 1.) ° Windsor Pacific distinguished Gil, supra, 121 Cal.App.4th 739, and Exxess, supra, 64 Cal.App.4th 698, as the clauses at issue in _ those cases included “bring” or “brought,” and the clause in Windsor Pacific did not. But neither Gil nor Exxess placed emphasis on the word “bring” or “brought”in its construction. (Maj. opn., 18.) 31 Thus,“brought”fails to narrow to broad meaning of “any legal action or any other proceeding”or to exclude affirmative defenses from the broad scopeofthis attorney fee provision. C. Reading “Action” And “Proceeding” In Context Supports An Inclusive—Not Exclusive—lIntent. Whenconstruing a contract,its language must be considered as a whole, taking its individual provisions, sentences, and words together, so as to give an effect to each part, if practicable. (Civ. Code, § 1641; Code Civ. Proc., § 1858.) A contract’s meaning “is not to be determinedbyisolating one term used bythe parties and defining it without reference to other language of the contract.” (Moore v. Wood (1945) 26 Cal.2d 621, 630; see also First American Title Ins. Co. v. XWarehouse Lending Corp. (2009) 177 Cal.App.4th 106, 115 [refusing to read wordin insurancepolicy “in isolation”as “Ti]t must be construedin light of the surrounding words”].) Although Mountain Air recognizes these well-settled principles of interpretation, it nonetheless dissects the contract language without ever reaching a reading that gives effect to the language ofthe attorney fee provision as a whole. The party’s inclusion of broad language throughouttheir attorney fee provision supports an inclusive intent by these parties, one which supports the interpretation that an affirmative defenseis an “action” or “proceeding” within the provision’s scope. The context does not support Mountain Air’s position that the parties “clearly” intended to adopt a “narrow[]”fee provision that limited the recovery offees to the filing of a contract- based claim in a complaint. (OBOM 15, 23.) 32 First, both “action” and “proceeding” are preceded by the word “any.” The attorney fee provision specifies that fees are recoverable “Cilf any legal action or any other proceeding”is brought for either of the two specified purposes. (Maj. opn., 11, emphasis added.) The word “any”has “an expansive meaning,that is, ‘one or some indiscriminately of whatever kind.’” (Ali v. Federal Bureau of Prisons (2008) 552 U.S. 214, 219, quoting United States v. Gonzales (1997) 520 U.S. 1, 5; see also American Heritage Dict., supra, at p. 81 [defining “any”as “[o|ne, some, every, or all without specification].) The use of the word “any” to modify a term “suggests a broad meaning.” (Ali, supra, 552 U.S. at pp. 218-219 [interpreting “any other law enforcementofficer” in a federal statute that excepted from waiver of sovereign immunity any claim arising with respect to “the detention of any . .. property by any officer of customsor excise or any other law enforcementofficer” broadly and not limiting it to officers acting in customsor excise capacity].) Therefore, in addition to the breadth of the ordinary meaning of the words “action” and “proceeding,” the provision’s use (twice) of the word “any” supports an interpretation that includes affirmative defenses within its scope, rather than excludes them. Second, the non-exclusive examples that follow “any other proceeding”—“‘includingarbitration or an action for declaratory relief’—-support the parties’ intent that the attorney fee provision have a broad application. By these examples, the parties confirmed that the recovery of attorney fees would not be limited to fees incurred in 33 proceedings before a judicial tribunal or in lawsuits seeking monetary relief. Third, the two specified purposesthat trigger the recovery of fees—that the action or proceeding be brought “for the enforcementof [the Option] Agreement”or “because of an alleged dispute, breach, default, or misrepresentation in connection with any provision of[the Option] Agreement”—also support a broad reading of the provision’s coverage. As the majority opinion in the Court of Appeal concluded, “Ttlhis is broad language.” (Maj. opn., 19.) In contrast to the attorney fee clauses that Gil, supra, 121 Cal.App.4th 739, and Exxess, supra, 64 Cal.App.4th 698, held did not encompassaffirmative defenses, the Option Agreement’s attorney fee provision includesnot only an action or proceeding brought“to enforce” the Option Agreementor to “declare rights” under the agreementbut also any action or any other proceeding brought “because ofan alleged dispute, breach, default or misrepresentation in connection with any provision of[the Option] Agreement.”'® (Maj. opn., 11, emphasis added.) Theparties’ provision for the recovery of attorney fees when a dispute arises “in connection with” the Option Agreementis indicative of an intent for the provision to have broad 10 Gil interpreted a written release that contained a clause providing for attorney fees “[i]n the event action is brought to enforce the termsofthis [release].” (Supra, 121 Cal.App.4th at p. 742.) In Exxess, the clause provided for attorney fees if a party “brings an action or proceeding to enforce the terms[of the lease] or declare rights [underthe lease].” (Supra, 64 Cal.App.4th at p. 702.) 34 coverage. It would be inconsistent with such intent to give the words “action” or “proceeding”their narrowest meaning. Mountain Air’s efforts to distinguish this attorney fee provision from cases with what it contends are “broadly worded”attorney fee clauses thusfails because this provision is broadly worded. (OBOM 14,20,citing cases.) Finally, Mountain Air cannot avoid the broad languageofthe attorney fee provision’s coverage by arguing that the parties could have wordedthis attorney fee provision even morebroadly or could have mentioned affirmative defenses by namein setting forth the provision’s coverage. (OBOM 14-15.) These arguments do notalter the breadth of the provision’s language and also belie Mountain Air’s instruction that “the only thing that matters is the actual text” of the attorney fee provision (OBOM 10). Thus, instead of supporting Mountain Air’s narrow,restrictive interpretation, the plain meaning of the words “action” and “proceeding,” read within their context, supports the interpretation that affirmative defenses are within the fee provision’s scope. Il. MOUNTAIN AIR’S ALTERNATE, NARROW CONSTRUCTION OF THE ATTORNEY FEE PROVISION CREATES AN ABSURD, AND OBVIOUSLY UNINTENDED, CONSEQUENCE. The purpose of contract law is to protect the reasonable expectations of the parties. (ASP Properties Group v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1268.) It is for this reason that the rules of contract interpretation stem from the premise that the 35 interpretation of the contract mustgive effect to the “mutual intention” of the contracting parties. (Santisas, supra, 17 Cal.4th at p. 608; Civ. Code, §§ 1636, 1639.) Courts “must give a ‘reasonable and commonsenseinterpretation’ of a contract consistent with the parties’ apparent intent” (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co.(2003) 107 Cal.App.4th 516, 526, citation omitted) and avoid any construction that would lead to absurd results (Civ. Code, § 1638). Mountain Air’s proposed construction of the contract—reading into its language a “clear[]” intent by the parties to exclude contract- based affirmative defenses from the circumstances in which attorney fees would be recoverable—is simply not reasonable and would lead only to absurd results. (Maj. opn., 18; OBOM 23.) The majority opinion reasonedthat the interpretation advanced by Mountain Air would mean that “a defendant who soughtinterpretation and enforcementof the contract via affirmative defense could not recover attorney fees, but if in addition or instead that same defendant simply filed a cross-complaint for declaratory relief assertingprecisely the samefacts and arguments, the defendant could. (Maj. opn., 18, emphasis added.) Theideathat the parties intended, when entering into the Option Agreement, “such a form-over-function approach to govern recovery ofattorney fees strains credulity.” (/bid.) Theparties’ obvious intent in including an attorney fee provision in the Option Agreement wasto provide for the recovery of attorney fees should either party be forced to incur such fees in 36 litigating its contractual obligations. The “only possible purpose”of this attorney fee provision was “to discourage litigation by providing that when twoparties get into . .. a lawsuit over the matters subject to the contract ..., the winner gets fees.” (Salawy, supra, 121 Cal.App.4th at p. 677 (dis. opn. of Armstrong, J.).) There is no logical reason to conclude that the parties—notwithstanding their use of broad, general terms in setting forth the scope of attorney fee recovery—intendedto limit recovery to when a defendantraised the contract in a cross-complaint, but not in an affirmative defense. In this case, had Defendants raised novation by pleading a claim in a complaint or cross-complaint(in addition to or instead of pleading an affirmative defense in their answer), the facts and arguments would have been the same. Defendants invoked the Option Agreementand argued that agreement’s material purpose wasto novate previous agreements betweenthe parties, relying on the Option Agreement’s integration clause. (Maj. opn., 19.) There is simply no logic in Mountain Air’s position that Defendants’ choice to plead an affirmative defense in the same action—instead offiling a complaint or cross-complaint for declaratory relief—lost Defendants the right to recoverattorney fees under this contractual provision. Mountain Air’s strained attempts to find some logicin its tortured interpretation of the attorney fee provision fail. According to Mountain Air, the provision reflects an arrangementby these parties to “retain the option of raising contract-based affirmative defenses without exposing themselves”to the risk of paying the other side’s 37 fees should they not prevail. (OBOM 11, citing Civ. Code, § 1717.) Mountain Air contendsthat the parties “clearly” agreed to this arrangement. (OBOM 23.) But there would be such a risk and reward calculus whenever attorney fees are recoverable on a contract- based argument.'! Why would it be reasonable to assumethat a party with a potentially meritorious argument would choose a form for raising its argument that wouldforeclose any possible recovery of attorney fees, when there is another form that would permit them? A party would do so only if it determined that there was a greater possibility that it would lose, rather than prevail, on its argument. Mountain Air’s position thus depends on an assumption that these parties soughtto insulate the raising of non-meritorious contract-basedaffirmative defenses from the risk of attorney fee recovery. Why would this have been the parties’ intent? The majority opinion in the Court of Appeal reasonedthatif lawyers were to agree on “‘such an unusual arrangement”for the recovery ofattorney fees under the contract, then there is no doubt “they would document that agreement with elaborate care.’” (Maj. opn., 17, quoting Gil, supra, 121 Cal.App.4th at p. 747 (dis. opn. of Armstrong,J.); see also Maj. opn., 18 [concluding that “parties who '! Mountain Air’s reliance on Blue Lagoon Community Assn.v. Mitchell (1997) 55 Cal.App.4th 472 (OBOM 11), is thus misplaced becausethere is alwaysthis “potential downside” in the recovery of contract-based attorney fees under Civil Code section 1717. (Ud. at p. 478.) It does support any intent here to avoid this reciprocal attorney fee right. 38 actually intended to adopt a fees clause that would allow a prevailing party to obtain fees only if the party were a plaintiff andnotif the party were a defendant would have goneto greater lengthsto documentit”’].) This reasoning doesnot“flip[] the burden of proof’ (OBOM 10), but merely recognizes that the construction for which Mountain Air advocates would result in an unusual arrangement regarding the recovery of contract-based attorney fees. It is not reasonable to read such an unusual arrangementinto the attorney fee provision’s broad language without any specific indication from that language (which there is not) that the parties intended to adoptit. The majority in the Court of Appeal thus properly sought the reasonable and commonsense meaning ofthis attorney fee provision, to give effect to the parties’ intent, in accordance with well-settled principles of contractual interpretation, and refused to twist the language into Mountain Air’s strained meaning. 39 CONCLUSION Forall the foregoing reasons, the Court of Appeal’s opinion shouldbeaffirmed. Respectfully submitted, Dated: July 16, 2015 DEGANI & GALSTON LLP Katharine J. Galston LAW OFFICES OF JOE R. ABRAMSON Joe R. Abramson », Lifer Katharje J. Galston Attorneysfor Defendants and Appellants Bijan Madjlessi, Alexander Kendall, Personal Representative ofthe Estate of Bijan Madjlessi, Glenn Larsen, and Sundowner Towers, LLC 40 CERTIFICATE OF WORD COUNT Pursuant to rule 8.520(c)(1) of the California Rules of Court, this brief consists of 9,727 words as counted by the Microsoft Word version 2010 word processing program used to generatethis brief. Dated: July 16, 2015 DEGANI & GALSTON LLP Katharine J. Galston LAW OFFICES OF JOE R. ABRAMSON Joe R. Abramson » Lili KatharingJ," Galston Attorneysfor Defendants andAppellants Bijan Madjlessi, Alexander Kendall, Personal Representative ofthe Estate of Bijan Madjlessi, Glenn Larsen, and Sundowner Towers, LLC 41 State of California ) Proofof Service by: County of Los Angeles ) ~ US Postal Service ) Federal Express I, Kirstin Largent , declare that I am nota party to the action, am over 18 years of age and my business address is: 631 S Olive Street, Suite 600, Los Angeles, California 90014. On 7/16/2015 declarant served the within: “"SWer Brief on the Merits upon: 1 Copies FedEx ¥ USPS Copies FedEx USPS Jeffrey Isaac Ehrlich, Esq. Electronically Submitted on the EHRLICH LAW FIRM SUPREME COURT OF CALIFORNIA, 16130 Ventura Boulevard, Suite 610 per Rule 8.44 Encino, California 91436 Attorney for Plaintiff and Respondent, Mountain Air Enterprises, LLC Copies FedEx USPS Copies FedEx USPS the address(es) designated by said attorney(s) for that purpose by depositing the numberof copies indicated above, of same, enclosed in a postpaid properly addressed wrapperin a Post Office Mail Depository, under the exclusive custody and care of the United States Postal Service, within the State of California, or properly addressed wrapper in an Federal Express Official Depository, under the exclusive custody and care of Federal Express, within the State of California I further declare that this same day the original and copies has/have been hand delivered for filing ORthe original and8 copies has/have been filed by V third party commercialcarrier for t busi day delivery to: nex ness cay ty Office of the Clerk SUPREME COURT OF CALIFORNIA 350 McAllister Street, Room 1295 San Francisco, California 94102-4797 I declare_undey péyre jury eferogoing is true and correct:
