Register v. Gabriel








Filed 12/12/11 Register v. Gabriel CA2/7





NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

NANCY STEELE REGISTER, Plaintiff and Respondent, v. JONATHAN G. GABRIEL, et al., Defendants and Appellants.

B226844 (Los Angeles County Super. Ct. No. BC398674)

APPEAL from a judgment the Superior Court of Los Angeles County, John P. Shook, Judge. Affirmed.

Jones Day, Philip E. Cook, Geoffrey P. Forgione and Orian J. Lee for Plaintiff and Respondent.

Jonathan G. Gabriel, Jeffrey P. Alpert and David S. Mayes for Defendants and Appellants.

__________________________

Appellants Jonathan G. Gabriel and California Association Lien Collections, LLC (CALC) appeal from a judgment after a bench trial and an order denying appellants’ motions for summary judgment on respondent Nancy Steele Register’s complaint alleging breach of statutory duties relating to the distribution of proceeds from a foreclosure sale, unfair competition, conversion and breach of fiduciary duty. The lower court found that CALC, a trustee hired to conduct the foreclosure proceeding on Register’s condominium, and CALC’s lawyer Gabriel had improperly withheld the surplus funds from the foreclosure sale and used those funds to pay for CALC’s defense in Register’s lawsuit seeking to set-aside the foreclosure.
Before this court, appellants assert that the lower court erred when it denied appellants’ motions for summary judgment, finding that appellants had no authority to use the surplus funds to pay CALC’s legal fees. In addition, appellants contend that the trial court erred at trial when it (1) excluded certain evidence; (2) found appellants liable in tort and awarded compensatory damages; and (3) prepared an inadequate statement of decision. As we shall explain, appellants’ claims are without merit. Accordingly, we affirm the judgment.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Foreclosure on Register’s Condominum and the Surplus Funds from the Sale. In 1996, respondent Nancy Register purchased a condominium in Pacific Palisades (the Property) for $70,000 in cash. According to the homeowner association for the property, Casa Gateway Homeowners’ Association (the “HOA”, at some point in 2004 Register stopped paying her HOA dues owed pursuant to the Covenants, Conditions and Restrictions (“CC&R” and declaration between the HOA and Register. Accordingly, in late 2004 the HOA decided to begin non-judicial foreclosure proceedings on Register’s condominium to satisfy the debt. The HOA hired appellant CALC to serve as the trustee to conduct a non-judicial foreclosure sale of the property.
On June 2, 2005, CALC conducted the sale and the property sold for $59,100. At the time of the sale Register was the vested owner of the property. Pursuant to Civil Code^[1] section 2924k, as trustee, CALC received proceeds from the sale for distribution among potential claims and claimants. According to the form CALC used to document the distribution, on June 7, 2005, the HOA was paid $7,214 to satisfy Register’s unpaid HOA fees,^[2] CALC’s retained $1,506.50 for its costs and expenses to conduct the sale and $756 for title posting companies. After CALC made all of the statutorily allowable post-sale distributions, $48,319.06 in surplus funds (the “Surplus Funds” remained from the sale of the property. CALC transferred the Surplus Funds to the law firm of McCarthy & Holthus for the purpose of conducting an investigation to determine whether any person or entity was entitled to the Surplus Funds. The investigation conducted never identified any other claimant, other than Register. According to Register, she was never given notice that she could make a claim on the Surplus Funds.
Register’s Previous Lawsuit Concerning the Foreclosure.
On July 15, 2005, Register, in pro per, filed an action, Register v. Gateway Homeowners Association, et al. (LASC No. SC086284) against the HOA, the company that managed the property, and the purchaser of the property at the foreclosure sale to set aside the foreclosure and restore Register’s title to the property (the “Underlying Action”. The complaint in the Underlying Action also contained a claim for damages against CALC for alleged misconduct in administering the sale, and for conspiring with the HOA to deprive her of the property. Appellant, Jonathan Gabriel represented CALC in the Underlying Action, while the HOA was represented by separate counsel in the lawsuit.
After the Underlying Action was filed, CALC directed McCarthy & Holthus to transfer the Surplus Funds to its counsel, Gabriel because CALC was concerned that McCarthy & Holthus would return the Surplus Funds to Register. When he received the funds in December 2005, Gabriel knew that the Surplus Funds were from the sale of the Property and he knew that Register was the only remaining claimant to those funds.
CALC directed Appellant Gabriel to apply the Surplus Funds to pay CALC attorneys’ fees that CALC was incurring in the Underlying Action. Gabriel agreed and began to deduct his legal fees from Surplus Funds in defense of CALC. It appears that by mid-2006, Gabriel had dissipated all of the Surplus Funds to pay CALC’s defense costs.
In the Underlying Action, CALC filed a cross-complaint against the HOA for indemnity pursuant to an indemnity clause in the contract between CALC and the HOA. The indemnity agreement included a provision for attorney fees that CALC might incur in connection with its conduct as trustee of the foreclosure sale. In November 2008, the parties settled the indemnity claim for $30,000. In exchange, CALC agreed to release any and all current and future claims arising from the nonjudicial foreclosure sale of the Property.
By mid-2007, the HOA had been dismissed from the Underlying Action. Only CALC, the purchaser of the Property and the property management company charged with collecting HOA assessments, remained as defendants in Register’s complaint in the Underlying Action. Register obtained the services of pro bono counsel who assisted her in amending the complaint to include additional claims against CALC (and the property management company) for elder abuse and emotional distress and a request for an award of punitive damages.^[3]
On October 16, 2007, the court sustained the purchaser’s demurrer without leave to amend and dismissed the causes of action pursuant to which Register sought to cancel the sale. Until October 2007, when the purchaser was dismissed, Gabriel had taken the position that because Register was challenging the validity of the purchaser’s title and the possibility existed that Register could be reinstated as the owner of the Property, Gabriel would not release the Surplus Funds to ensure that they remained intact.^[4]
After the purchaser was dismissed, Register contacted CALC and Gabriel and demanded that they release the Surplus Funds to her. She also requested an accounting. Gabriel refused.^[5] Thereafter, in January 2008, Register filed a motion for leave to amend her complaint in the Underlying Action to seek relief against CALC and Gabriel for their refusal to release the Surplus Funds. In opposition to the motion, CALC conceded that it had instructed Gabriel to apply the Surplus Funds that he was holding to pay CALC’s attorneys’ fees incurred in defending the Prior Action. The court in the Underlying Action, denied the leave to amend, but stated that if Register wished to pursue her claim to recover the Surplus Funds she should file a new lawsuit.
In late September 2008, the court in the Underlying Action granted CALC’s motion for summary judgment as to all of the causes of action remaining in the complaint. No party in the Underlying Action sought an award of attorneys’ fees.
Current Action.
Shortly before the hearing on the motion for summary judgment in the Underlying Action, Register filed the current action against CALC and Gabriel for failing to release the Surplus Funds. Specifically, Register asserted claims against CALC for (1) breach of statutory duty under section 2924k in failing to release the Surplus Funds; (2) unfair competition under Business and Professions Code section 17200 and (3) conversion. She also asserted causes of action against Gabriel for: (1) conversion; (2) breach of fiduciary duty; and (3) constructive fraud.
In the fall of 2009, Register filed a motion for summary adjudication on the claims for breach of statutory duty, conversion and breach of fiduciary duty.
CALC and Gabriel also filed motions for summary judgment on all claims. They argued that section 2924k and section 1367.1 provided them with a defense to Register’s claims. Specifically they argued that section 2924a allowed CALC, as the trustee for the sale of the Property, to charge the costs and expenses incurred in connection with the foreclosure, and that such costs and expenses would include CALC’s attorneys’ fees defending its conduct in administering the foreclosure. They also argued that under section 1367.1 pertaining to HOA liens, attorneys’ fees of CALC became a part of the original delinquent assessment lien that resulted in the sale because such a lien includes the “costs of collection” of delinquent assessment payments. Gabriel also argued that he was entitled to immunity from liability because he was merely acting as CALC’s agent in the proceedings.
In opposition to Register’s motion, CALC and Gabriel also mentioned, in passing, that attorneys’ fees provisions in the CC&R’s entitled CALC to received its attorneys’ fees to defend the foreclosure sale and the collection of delinquent HOA fees.
After a hearing on the motions, the court denied Register’s motion for summary adjudication, finding that she had not “satisfied her initial burden of showing that she is entitled to the entire $48,319.06.” The court concluded that Register had not shown that the amount sought was the actual amount that remained after the section 2924a payment of claims was completed, that is, Register had not shown how she had “arrived” at the $48,319.06 figure.
The court also denied CALC and Gabriel’s motions. The court rejected CALC and Gabriel’s reliance on sections 1367.1 and 2924k, finding that the attorneys’ fees incurred in connection with the defense of CALC in the Underlying Action were not part of Register’s debt under section 1367.1 and did not constitute “reasonable fees and costs of collection” of a delinquent assessment. Likewise, the court concluded that attorneys’ fees do not fall within the “costs and expenses” that may be charged by a trustee under section 2429k. In addition, the court found, that even assuming that these statutes allowed CALC to pay its attorneys’ fees from the remainder of the sale proceeds, CALC and Gabriel had failed to show that the attorney fees were “reasonable” such that there were no Surplus Funds to distribute to Register. Finally, the court rejected Gabriel’s argument that the agent’s immunity rule shielded him from liability. The court noted that the rule only applied to claims of conspiracy, which had not been alleged by Register.^[6]
The case proceeded to a bench trial. Following the trial, the court found in favor of Register on all of her causes of action, except constructive fraud. In the Statement of Decision, the court found that Register was entitled to the Surplus Funds remaining “after all known statutory fees and costs were paid.” The court found: (1) the statutory fees and costs of the sale of the Condo were paid in full, including the lien upon which the foreclosure sale was based, but the Surplus Funds which remained were never returned to Register; and (2) there were no other claimants to the Surplus Funds, including mortgage or junior lien claimants within the meaning of section 2429k. “Therefore Ms. Register is entitled to the immediate release and distribution of the entire amount of the Surplus Funds.” The court also found that CALC had engaged in unfair business practices under Business and Professions Code section 17200, when it withheld from Register the Surplus Funds and that she was entitled to a restitution of those funds because she had a right to those funds CALC used to pay Gabriel. The court also ruled in favor of Register on her claim against Gabriel and CALC for conversion—in the amount of the Surplus Funds owed plus $30,000 in compensatory damages. The court additionally found that Gabriel had a fiduciary obligation to protect the funds owed to Register even though she was not his client—that at the time the funds were withheld, Register had a legal right to the funds in Gabriel’s possession and that Gabriel violated his duty as a fiduciary and trustee of those funds when he dissipated them to pay CALC’s legal fees. The court also awarded Register $30,000 in compensatory damages against Gabriel for breach of his fiduciary duties.
During a subsequent proceeding to determine pre-judgment interest, the court granted Register’s motion for prejudgment interest in the amount of $15,050.04. During the proceedings concerning the award of interest, appellants complained that the statement of decision did not identify a date certain that the Surplus Funds were owed to Register. Register responded that the court had ruled that she was entitled to the Surplus Funds after all of the claims associated with the sale were paid, but that she would not object to the court using a later date to calculate the interest. She noted that she did not object to Gabriel holding the funds in trust until her efforts to regain ownership of the Property failed on October 16, 2007—when the claims against the purchaser were dismissed in the Underlying Action. At the hearing, the court stated that the “evidence at trial showed that the date of October 16, 2007” was the appropriate date to use to calculate the award of prejudgment interest.
This timely appeal followed.
DISCUSSION
Before this court appellants argue that the lower court erred in denying their respective motions for summary judgment with respect to the application of section 2924 and 1367.2, and more generally on the issue of whether a trustee in a non-judicial foreclosure sale may recover (or deduct) from the sale proceeds the legal fees it incurs in defending the sale. Appellants also complain that the court made several errors at the subsequent trial, including excluding certain evidence, finding appellants liable in tort and awarding compensatory duties, and preparing an insufficient Statement of Decision. We address these claims in turn.
I. Summary Judgment Claims.
In denying the appellants’ motions for summary judgment the lower court rejected CALC and Gabriel’s reliance on sections 1367.1 and 2924k, finding that the attorneys’ fees incurred in connection with the defense of CALC in the Underlying Action were not part of Register’s debt under section 1367.1 and did not constitute “reasonable fees and costs of collection” of a delinquent assessment or fall within the “costs and expenses” that may be charged by a trustee under section 2429k. The trial court’s ruling was correct.
Under the “American Rule” each party is responsible to pay its own attorneys’ fees in litigation. (Hensley v. Eckerhart (1983) 461 U.S. 424, 429.) In general, attorneys’ fees are not recoverable unless a fee award is expressly authorized by either statute or the parties’ contract. (Real Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 379.) Here as we shall explain, CALC’s conduct in deducting its legal fees from the Surplus Funds owed to Register to pay for its defense in the Underlying Action was neither authorized under the statute, case law, or contract.
A. Statutory Provisions Governing Homeowner Associations, Foreclosure Proceedings on Real Property, and Attorneys’ Fees.
Sections 1366, 1367 and 1367.1 describe the manner in which homeowner associations may levy and collect assessments from the owners of separate interests within the association’s common interest development, as well as the means to place and enforce liens against the separate ownership interests. Specifically, section 1366 allows an association to “levy regular and special assessments sufficient to perform its obligations under the governing documents . . . .” (Civ. Code, § 1366, subd. (a).) The section further states that if an assessment is delinquent, the association shall recover, inter alia, reasonable costs incurred in collecting the assessment, including attorney’s fees. (Civ. Code, § 1366, subd. (e)(1).)
Section 1367 provides: “(a) A regular or special assessment and any late charges, reasonable costs of collection, and interest, as assessed in accordance with Section 1366, shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied. Before an association may place a lien upon the separate interest of an owner to collect a debt which is past due . . . , the association shall notify the owner in writing by certified mail of the fee and penalty procedures of the association, provide an itemized statement of the charges owed by the owner, including items on the statement which indicate the assessments owed, any late charges and the method of calculation, any attorney's fees, and the collection practices used by the association, including the right of the association to the reasonable costs of collection.” Subdivision (b) also advises that the amount of the assessment and costs of collection “shall be a lien on the owner’s interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment, which shall state the amount of the assessment and other sums imposed in accordance with Section 1366.” (Civ. Code, § 1367. subd. (b).)
Similarly section 1367.1 provides that: “A regular or special assessment and any late charges, reasonable fees and costs of collection, reasonable attorney's fees, if any, and interest, if any, as determined in accordance with Section 1366, shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied.” (Civ. Code, § 1367.1, subd. (a).) Section 1367.1, subdivision (a) also states that prior to recording a lien on the separate interest of the owner to collect a debt that is past due, the association must give the owner written notice of the lien, enforcement procedures, and an itemized statement of the charges owed including “items on the statement which indicate the amount of any delinquent assessments, the fees and reasonable costs of collection, reasonable attorney's fees, any late charges, and interest, if any.” (Civ. Code, § 1367.1, subd. (a)(2).)
Section 1367, subdivision (e) and 1367.1, subdivision (g) further describe the methods to enforce the lien—“in any manner permitted by law, including sale by the court, sale by the trustee designated in the notice of delinquent assessment, or sale by a trustee substituted pursuant to Section 2934a. Any sale by the trustee shall be conducted in accordance with Sections 2924, 2924b, and 2924c applicable to the exercise of powers of sale in mortgages and deeds of trust.” (Civ. Code, §§ 1367, subd. (e) and 1367.1, subd. (g).)
In sum, sections 1366, 1367 and 1367.1 by their express terms apply only to homeowner associations. These sections allow homeowner associations to collect reasonable attorney fees to enforce a debt owed to the association, and indicate that any fees incurred in the collection of the debt become part of the lien on the property. This statutory scheme does not, however, authorize a trustee (who conducts the sale on behalf of an association) to collect any legal fees that it incurs in connection with a sale of the property. Instead, the fees and costs allowed the trustee are provided elsewhere in the Civil Code in sections relating to foreclosure proceedings.
Section 2924 et seq. pertain to non-judicial foreclosures on real property, the process undertaken by a lien holder, here, the HOA. Sections 2924 through 2924k provide a comprehensive framework for the regulation of a non-judicial foreclosure sale pursuant to a power of sale contained in the CC&R’s, the HOA governing documents and sections 1367 and 1367.1. “This comprehensive statutory scheme has three purposes: ‘“(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.”’” (See Wells Fargo Bank v. Neilsen (2009) 178 Cal.App.4th 602, 613.) The manner in which the sale must be conducted is governed by section 2924g, subdivision (a), which requires, inter alia, that the property be sold at public auction to the highest bidder in the county where the property is located.
Sections 2924j and 2924k are the relevant provisions regarding the disposition of the proceeds of a foreclosure sale of the sort conducted here. Section 2924h provides that, after a non-judicial foreclosure sale, where there are proceeds remaining after the payment of (a) the costs and expenses of the sale, including trustee fees and attorney fees, (see § 2924k, subds. (a)(1)) and (b)) any obligation secured by the deed of trust or mortgage which was the subject of the sale, “the trustee shall send written notice to all persons with recorded interest in the real property . . . .” (§ 2924j, subd. (a).) Thereafter, after timely claims are received by the trustee, it “shall exercise due diligence to determine the priority of the written claims received” by him, failing which the trustee must “deposit the funds with the clerk of the court” who, in turn, “shall deposit the amount with the county treasurer.” (§ 2924j, subds. (b) & (c).)
Section 2429d (governing the costs and expenses of foreclosure) and 2429k (governing the distribution of proceeds from a trustee’s sale) allow a trustee to deduct “the costs and expenses of exercising the power of sale and of the sale, including the payment of trustee fees and attorneys’ fees to the extent permitted under sections 2429k, subdivision (b) and 2429d, subdivision (b). More specifically, section 2429k, subdivision (b) allows the trustee to charge: “such items as mailing and a reasonable fee for services rendered in connection with the distribution of the proceeds from a trustee’s sale, including, but not limited to, the investigation of priority and validity of claims and the disbursement of funds. If the fee charged for services rendered pursuant to this subdivision does not exceed one hundred dollars ($100), or one hundred twenty-five dollars ($125) where there are obligations specified in paragraph (3) of subdivision (a), the fee is conclusively presumed to be reasonable.” (Civ. Code, § 2429k, subd. (b).)
Similarly 2924d, subdivision (b) states that “upon the sale of property pursuant to a power of sale, a trustee, or his or her agent or successor in interest, may demand and receive from a beneficiary, or his or her agent or successor in interest, or may deduct from the proceeds of the sale, those reasonable costs and expenses, to the extent allowed by subdivision (c) of Section 2924c,[^[7]] which are actually incurred in enforcing the terms of the obligation and trustee's or attorney's fees which are hereby authorized to be in an amount which does not exceed four hundred twenty-five dollars ($425) or one percent of the unpaid principal sum secured, whichever is greater. . . . Any charge for trustee’s or attorney’s fees authorized by this subdivision shall be conclusively presumed to be lawful and valid where that charge does not exceed the amount authorized herein.” (Civ. Code, § 2429d, subd. (b).)
In short, sections 2924d and 2924k provide a statutory basis for a trustee, such as CALC to deduct costs and fees, including legal fees, to process a foreclosure sale of real property from the proceeds of the sale. However, the amount of any such fees and costs are expressly limited by statute to recovering expenses related to the trustee’s actual ministerial duties in conducting the sale and in subsequently distributing the sale proceeds. Indeed, these fees must be identified in the notice of foreclosure. To that end, shortly after the foreclosure sale in this case, CALC paid HOA the amount owed on the lien ($7,214) from the proceeds of the sale, and deducted the fees and cost it incurred ($1,506.50) in conducting sale as allowed under section 2924k. As Register correctly notes, however, nothing in the section 2924 et. seq. statutory scheme allowed CALC to retain the remaining Surplus Funds to pay its attorneys’ fees in litigating against Register when she sued CALC for misconduct in conducting the foreclosure sale.
Indeed, there is no language in the foreclosure statutes that expressly or implicitly endorses CALC’s conduct or supports appellants’ interpretation of sections 2924 through 2924k. These statutes clearly place a statutory maximum on the amount a trustee can deduct; they do not provide an independent source of attorneys’ fees for trustees in post foreclosure litigation. It appears that extraordinary fees of the type at issue here are only available if a contract or agreement exists between the parties that contains an attorneys’ fees provision. (See e.g., Civ. Code, § 2924d, subd. (e) [providing “[w]hen a court issues a decree of foreclosure, it shall have discretion to award attorney's fees, costs, and expenses as are reasonable, if provided for in the note, deed of trust, or mortgage. . . .”].)
B. Case Law Governing Attorneys’ Fees in Foreclosure Proceedings.
Likewise, contrary to what appellants contend, the common law does not support their view. Specifically, appellants cite Buck v. Barb (1983) 147 Cal.App.3d 920, 925 (Buck), Passanisi v. Merit-McBride Realtors, Inc. (1987) 190 Cal.App.3d 1496, 1511 (Passanisi), Bruntz v. Alfaro (1989) 212 Cal.App .3d 411, 421 (Bruntz), De la Cuesta v. Superior Court (1984) 152 Cal.App.3d 945, 948-949 (Cuesta), Jones v. Union Bank of California (2005) 127 Cal.App.4th 542, 547 (Jones), and Bear Creek Master Association v. Edwards (2005) 130 Cal.App.4th 1470, 1488 (Bear Creek), to support their contention that fees and costs incurred by a trustee in defending the sale are added to the amount of the lien, and are recoverable from the sale proceeds as costs of sale. However, none of these cases offer such support for a trustee such as CALC who has no contractual relationship with the trustor such as Register.
Specifically Buck, Passanisi, Bruntz, Jones, Bear Creek and Cuesta permitted recovery of attorneys’ fees and costs incurred by trust beneficiaries/creditors in connection with foreclosure proceedings where the contractual terms between the parties provided for such fees in defending suits by trustors/mortgagors attempting to enjoin an impending foreclosure sale. (See Buck, supra, 147 Cal.App.3d at p. 925 [where the deed of trust authorized the beneficiary to protect the security and the beneficiary incurred attorney’s fees and costs in successfully defending against the trustor’s attempt to enjoin the foreclosure, the “previously incurred attorney’s fees are like any collateral advances made by the beneficiary, which may be added to his claim.”]; see also, Passanisi, supra, 190 Cal.App.3d at p. 1511 [creditor successfully defended against the debtor’s attempt to enjoin a trustee’s sale, and pursuant to its deed of trust the creditor was entitled to charge attorney’s fees and costs incurred in defending its security to the debtor’s obligation]; Bruntz, supra, 212 Cal.App.3d at p. 421 [“Other expenses, including legal fees, may be incurred for other purposes (than foreclosure) and, depending upon contractual provisions, may be treated as part of the secured debt.”]; Jones, supra, 127 Cal.App.4th at p. 547 [pursuant to the express terms of the promissory note, lender allowed to collect attorney fees (as foreclosure expenses) in defending the security interest beyond the maximum statutory fees allowed in section 2924c and 2924d]; Bear Creek Master Association, 130 Cal.App.4th at p. 1488 [Homeowner association attorneys’ fees and costs that continue to accrue during the foreclosure process may become part of the outstanding lien on the property pursuant to the association’s CC&R’s entitling it to collect attorneys’ fees as prevailing party in foreclosure action]; and Cuesta, supra, 152 Cal.App.3d at pp. 948-949 [deeds of trust authorized prevailing party in an action to enjoin a foreclosure sale, to add its litigation costs to the amount of the trustor’s unsatisfied debt].)
Significantly, all of the aforementioned cases involve a party—a creditor, trust beneficiary or mortgagee—that has some kind of contractual relationship (which included a provision for attorneys’ fees) with the trustor/debtor/mortgagor. None of these cases involves a foreclosure trustee attempting to collect such fees from trustor in absence of a contractual agreement providing for such fees.
Appellants acknowledge this in their opening brief on appeal. They concede the statutory limits “prescribed for ordinary fees that a trustee may charge for processing a sale do not include extraordinary fees that the trustee has to incur when it gets sued. Such ‘extraordinary’ fees may be recovered provided they are permitted by the applicable contract between the parties.” They nevertheless maintain they were entitled to their attorney fees based on provisions in the CC&R’s. Appellants are incorrect.
C. Contractual Basis for fees.
Appellants argue that because CALC was the HOA’s agent to conduct the foreclosure to collect the unpaid assessments owed by Register, CALC “had the same right to recoup its costs of collection, including its attorneys’ fees as the HOA.” They claim that to “preserve the validity of the sale (and protect the security) CALC was forced to defend” itself in the Underlying Action. There are several flaws to this argument.
Preliminarily, appellants did not properly assert this argument below. While they mentioned it in passing in their opposition to Register’s motion for summary adjudication, they failed to raise it in their own motions for summary judgment. Their belated effort to present it in their reply brief was procedurally improper. (See San Diego Watercrafts, Inc. v. Wells Fargo Bank N.A. (2002) 102 Cal.App.4th 308, 317 [holding that trial court erred in considering matters raised for the first time in a reply on a motion for summary judgment].) Therefore, we need not consider it on appeal. Nonetheless, even were we to consider appellants’ CC&R’s argument, it fails on the merits.
First, CALC is not a party to the CC&R’s or any of the other governing agreements between the HOA and Register. Ordinarily attorney fees can only be awarded when the lawsuit (1) involves a claim covered by a contractual attorney fee clause (Meininger v. Larwin-Northern California, Inc. (1976) 63 Cal.App.3d 82, 84); and (2) is between the parties to that contract (Canal-Randolph Anaheim, Inc. v. Wilkoski (1978) 78 Cal.App.3d 477, 485.) Under some circumstances, however, the reciprocity principles of Civil Code section 1717 will be applied in actions involving signatory and nonsignatory parties. (Reynolds Metal Co. v. Alperson (1979) 25 Cal.3d 124, 128.) “Its purposes require [Civil Code] section 1717 be interpreted to further provide a reciprocal remedy for a nonsignatory defendant, sued on a contract as if he were a party to it, when a plaintiff would clearly be entitled to attorney’s fees should he prevail in enforcing the contractual obligation against the defendant.” (Ibid.) Appellants, however, have not suggested that Register would have been entitled to seek attorneys’ fees (based on the fees provisions in the CC&R’s) from CALC had she prevailed in the Underlying Action. In fact, as the lower court observed, under CALC’s attorneys’ fees theory, it would be entitled to its fees no matter what—as a cost of defending the foreclosure sale.^[8] Moreover, CALC has not demonstrated that it was entitled to status as a third party beneficiary under the CC&R’s.
Furthermore, in the Underlying Action, CALC was not defending the HOA’s actions or the claims in which Register sought to set aside the sale. Rather, CALC was defending only its own conduct—claims sounding in tort and breach of statutory duties. The claims against CALC were unrelated to CC&R’s. Appellants simply have presented no legal authority nor offered any plausible legal theory to support their conclusions that it was entitled to rely on any fees provisions in the CC&R’s.
In any event, even were we to conclude that CALC could rely on the attorneys’ fees provisions in the CC&R’s to seek its fees from Register, the attorneys’ fees provision in the CC&R’s do not excuse CALC’s conduct in unilaterally deducting their fees from the Surplus Funds. Section 5.9 of the CC&R’s describing the HOA’s right to enforce assessment liens, provides that: “[a]ny recovery resulting from a suit in law or equity initiated pursuant to this Section may include reasonable attorneys’ fees as fixed by the court.” Thus, the CC&R’s provide appellants no safe harbor.
Finally, we note that CALC was not left without a remedy for its fees in this case. Relying on its agreement with HOA to conduct the foreclosure, CALC sought indemnification from HOA for “any lawsuit involving the HOA and Register,” arising out of the foreclosure sale. This indemnity provision included attorneys’ fees. CALC and HOA settled that claim for indemnity for $30,000.
In view of the foregoing, we conclude the lower court did not err when it denied appellants’ motions for summary judgment and rejected their argument that CALC could retain the Surplus Funds and deduct its attorneys’ fees from those funds in defense of the Underlying Action.
II. Trial Claims.
Appellants assert the court made a number of errors^[9] in connection with the trial. Appellants claim that the court erred (1) in granting several of Register’s motions in limine; (2) in finding appellant Gabriel liable for conversion and that he had breached a fiduciary duty to Register; and (3) awarding Register compensatory damages. Appellants also complain that the court’s statement of decision was insufficient and did not support the award of prejudgment interest. We address these claims in turn.
A. Motions in Limine.
Appellants complain that the court erred in ruling in limine that evidence of the procedural history and merits of the Underlying Action were irrelevant to the issues at trial. Appellants maintain that such evidence was relevant to establish the reasonableness of Gabriel’s attorney fees and that Register’s claims in the Underlying Action lacked merit. Appellants have failed to demonstrate how these matters were material to the issues contested in the trial. To that end, the parties stipulated prior to trial that Register would not contest Gabriel’s contention that his legal fees in the Underlying Action were reasonable and necessary. Thus, it was not necessary to present evidence on an uncontested matter. Likewise, whether or not Register’s prior action lacked merit is unrelated to the central issues in the case, i.e., whether CALC had a right to retain the Surplus Funds to pay its legal fees, and the amount of Surplus Funds that remained after all legitimate claims were paid. Appellants have not demonstrated to this court that the lower court abused its discretion in excluding this evidence. (See People v. Nakai (2010) 183 Cal.App.4th 499, 516.)
Appellants also complain that the court erred when it granted an in limine motion precluding them from offering expert testimony about the legal effect of the foreclosure statutes, and specifically the effect of sections 2429 et seq., and the custom and practices in the foreclosure industry. The court did not err in rejecting this evidence. First, the court had already rejected appellants’ claim that the foreclosure statutes and relevant case law allowed them to retain the Surplus Funds when that argument was raised in appellants’ summary judgment motion. Therefore, the subject matter of the expert’s opinion had already been litigated and resolved by the court earlier in the litigation. In addition, because the court had already determined that CALC was not legally entitled to withhold and deduct its attorneys’ fees from the Surplus Fund as a matter of law, any evidence of industry custom and practice on these matters would not have been relevant. Finally, to the extent that the expert intended to offer his legal interpretation of the foreclosure statutes, the court properly refused to consider such evidence. (See Adams v. City of Fremont (1998) 68 Cal.App.4th 243, 266 [court properly refused to admit expert testimony offered at trial on a question of law for the court to determine].)
B. Contentions Concerning the Tort Claims and Damages.
Appellants make several assertions regarding the tort claims and the award of damages. None of these assertions contain merit.
First, appellants contend the court erred in awarding Register $30,000 in compensatory damages in addition to the $48,319.06 representing the Surplus Funds. Appellants claim that Register was only entitled to an award reflecting the withheld Surplus Funds plus interest. To support this contention, they rely on section 3302, which states “a detriment caused by the breach of an obligation to pay money only, is deemed to be the amount due by the terms of the obligation. . . .”
Appellants’ reference to section 3302 does not assist them. As Register correctly points out, section 3302 applies to liquidated sums due for breach of contract. Register, however, did not allege a breach of contract claim against appellants; she asserted tort claims and violation of duties imposed by statute. Appellants have not presented any authority to support the notion that section 3302 would apply to Register’s claims against them. Consequently, appellants’ contention with respect to the compensatory damage award fails.
Second, appellants assert that the court erred in finding appellant Gabriel^[10] breached a fiduciary duty to Register.^[11] They argue that because Gabriel and Register did not have an attorney client relationship, he owed her no duty of care. We disagree. As the court found below, when CALC transferred the Surplus Funds to Gabriel and instructed him to apply them to his fees, Gabriel knew Register had a right to those funds pursuant to statute. In fact, according to Register, when she inquired about the Surplus Funds while the Underlying Action was pending, Gabriel acknowledged that he held them and was awaiting outcome of the action. His knowledge of her claim of entitlement and his statements concerning the status of the funds during the Underlying Action, at the very least, imposed upon him the duty not to dissipate those funds.
In our view, the duty to safeguard the Surplus Funds existed notwithstanding the fact that Gabriel did not represent Register. And his failure to preserve the Surplus Funds constituted a breach of a fiduciary duty. (See Johnstone v. State Bar (1966) 64 Cal.2d 153, 155-156.) In Johnstone, counsel received a personal injury settlement on behalf of his client. At the time counsel received those funds, he was aware that his client had separately agreed to pay a portion of the settlement to the worker’s compensation insurer in exchange for a release of the insurer’s lien against any recovery in the personal injury action. Counsel, however, failed to pay the insurer, and was sanctioned by the state bar for breach of the fiduciary duties owed to the insurer, even though counsel did not have an attorney client relationship with the worker’s compensation insurance company. The Johnstone Court upheld the discipline imposed upon counsel, observing “[w]hen an attorney receives money on behalf of a third party who is not his client, he nevertheless is a fiduciary as to such third party. Thus the funds in his possession are impressed with a trust, and his conversion of such funds is a breach of the trust.” (Johnstone v. State Bar, supra, 64 Cal.2d at pp. 155-156.). Similarly, an attorney violates his or her ethical duties and may be liable for conversion where the attorney holding funds in trust for a third party, releases them at his client’s instruction. (See Matter of Respondent P. (1993) 2 Cal. State Bar Ct. Rptr. 622, 632-633 [attorney violated Rules of Professional Conduct where he at the direction of his client released funds the attorney held that belonged to a non-client]; Miller v. Rau (1963) 216 Cal.App.2d 68, 76 [attorney committed conversion where he released funds to his client that attorney held for non-client].)
Appellants’ citation to Gilman v. Darby (2009) 176 Cal.App.4th 606, does not convince us the lower court erred. In Gilman the court found counsel did not have a fiduciary obligation to a non-client who claimed an entitlement to funds held by counsel because the non-client, as a matter of law, did not have any superior right to the funds. (Id. at pp. 614-615, 620.) Here, by contrast, from the time the foreclosure sale was completed until the purchaser was dismissed from the Underlying Action, by operation of law, the Surplus Funds belonged either to Register or the Purchaser, but not to CALC or Gabriel. At the very least, Register had an absolute right under statute to those funds when her efforts to set-aside the foreclosure and quiet title resulted in the purchaser retaining title to the property in October 2007. Consequently, we find no error in the court’s finding on the fiduciary duty claim.
C. Contentions Relating to the Court’s Statement of Decision.
Appellants’ claim that the court’s Statement of Decision was insufficient in several respects.
First, they complain that they could not be found liable for conversion because the court failed to specify in the Statement of Decision when the actual conversion occurred. Appellants point out that until the purchaser was dismissed from the Underlying Action, Register did not have any ownership interest in the funds that could support a claim for conversion.
Although the statement of decision does not express a date certain that the conversion took place, the court’s findings are more than sufficient to establish Register’s ownership at the time appellants misappropriated the funds. (See Jackins v. Bacon (1923) 63 Cal.App. 463, 467 [If conversion claim is otherwise proper “[t]he actual date of the defendant Bacon’s conversion of said stock or the actual act by which his conversion thereof was made manifest is not material . . . .”].) The court’s decision states that once all of the known legitimate claims were paid out of the proceeds of the sale, Register became entitled to the Surplus Funds: “the Court finds that Plaintiff is entitled to $48,319.06, the amount of the Surplus Funds remaining after all known legitimate claims were paid.” According to the evidence presented at trial all of those claims were paid out in June 2005, and other than Register no other legitimate claimants emerged after that. In addition, the court further found that Register was entitled to the Surplus Funds at the time the funds were used to pay Gabriel’s legal fees: “the Court finds that at the time of the withholding of the Surplus Funds, Register had a legal right to the funds in Mr. Gabriel’s possession.” In view of these findings, we conclude the Statement of Decision is sufficient to support the judgment on the conversion claim.
Second, appellants assert that the court’s findings in the Statement of Decision are at odds with and insufficient to support an award of $15,050.04 in prejudgment interest. Appellants claim that because the court used the date of October 17, 2007 (the date the Purchaser was dismissed from the Underlying Action) to calculate interest on the judgment, the court implicitly found that Register was not entitled to the funds prior to that date. We disagree. As described above, the court’s Statement of Decision established that Register was entitled to the funds after all of the legitimate claims had been paid. The court used the October 17, 2007 date because it was the date suggested by Register’s counsel. Register expressly waived her claim to prejudgment interest prior to that date, not because she lacked a right to claim those funds before then, but because she did not request to have funds returned until the Purchaser was dismissed and Register knew she could not undo the foreclosure sale. Her right to those funds (and the point at which she was entitled to them) was established pursuant to section 2924k, not when she sought return of those funds. Consequently, we find no reversible error with respect to the sufficiency of the Statement of Decision or the order awarding prejudgment interest.
DISPOSITION
The judgment is affirmed. Respondent is entitled to her costs on appeal.



WOODS, Acting P. J.

We concur:



ZELON, J. JACKSON, J.

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