Reynaud v. Ellis

Filed 8/9/07 Reynaud v. Ellis CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

Appeal from an order of the Superior Court of Los Angeles County, Stanley M. Weisberg, Judge. Affirmed.

Law Office of Joseph C. Maher and Joseph C. Maher II; Law Offices of Masry & Vititoe and James W. Vititoe for Defendant and Respondent.

Paul M. Hittelman for Plaintiff and Appellant.

______________________________

INTRODUCTION

Plaintiff and appellant Annie Reynaud (Reynaud) appeals from an order to pay attorney fees to defendant and respondent Erin Brockovich Ellis (Ellis). The order was based upon an attorney fee clause in a construction contract. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The attorney fee order in issue in this case is the result of a second lawsuit involving construction at Elliss home. The procedural posture of the present appeal necessitates a recitation of facts from the first lawsuit.

1. The first lawsuit.

Ellis wished to remodel her home. Reynaud was an officer and director of Femme Fatale Development, Inc. On June 29, 2001, Ellis signed a general construction agreement to have her home remodeled. Reynaud signed the contract as president of Femme Fatale Development, Inc. The general construction agreement contained an attorney fees provision stating: In the event that there is any litigation arising out of this Agreement, the prevailing party shall be entitled to its reasonable attorneys fees and costs.

At the time the contract was signed, Reynaud knew her corporation lacked proper licensure.[1]

During the remodel there were change orders. Work on the remodel stopped in late November 2001. At the time, Femme Fatale Development, Inc. was still not licensed.

Ellis filed a complaint against Femme Fatale Development, Inc. and Reynaud, individually and doing business as Femme Fatale Construction and Development.[2] (L.A. Sup. Ct. Case No. LC 058616.) As amended, Elliss complaint stated causes of action for breach of contract, fraud and deceit, intentional interference with contractual relationship, and to recover all compensation paid to unlicensed contractor. Among other allegations, the complaint alleged that Reynaud was the sole owner of, and doing business as, Femme Fatale Construction and Development, as well as Femme Fatale Development, Inc., which were both alter egos of Reynaud. The complaint further alleged the following: Ellis had signed a written contract for remodeling on June 29, 2001, with the named defendants; work was not performed in a workmanlike manner; Reynaud made demands for payments for work not performed; there were misrepresentations regarding the licensing status of the corporate entities and Reynaud; and neither the corporate entities nor Reynaud was licensed.[3]

Femme Fatale Development, Inc. and Reynaud answered, identifying themselves collectively as FFD. Femme Fatale Development, Inc., also known as Femme Fatale Construction and Development, filed a cross‑complaint. Reynaud did not file a cross-complaint. As amended, the cross‑complaint stated that Femme Fatale Development, Inc., aka Femme Fatale Construction and Development (FFD) was a licensed contractor who entered into a written construction contract with Ellis. The amended cross‑complaint alleged causes of action for breach of contract, common count, foreclosure of mechanics lien, and misrepresentation. The amended cross‑complaint also alleged that Ellis was the director of research for the law firm of Masry & Vititoe . . . .

Ellis sought summary judgment. Ellis brought forward facts to show that neither Reynaud nor her corporate entity had the proper licenses. Ellis argued that Femme Fatale Development, Inc. could not recover because it was not licensed, it could not borrow Reynauds license because she had not been continually licensed, Reynaud had not filed the mechanics lien, and Reynaud was not a party to the contract. In her statement of undisputed facts, Ellis admitted that Reynaud was the owner of a sole proprietorship called Femme Fatale Construction and Development. This is a unique entity distinct from [Femme Fatale Development, Inc.].

On December 16, 2002, a summary judgment in favor of Ellis was entered on the cross‑complaint against Femme Fatale Development, Inc. based on Elliss argument that the general construction contract was void and unenforceable because Femme Fatale Development, Inc. was unlicensed and Reynauds personal contracting license was suspended during the pertinent period of time.

On March 25, 2004, Elliss complaint in Case No. LC 058616 was dismissed by the trial court.

2. The present case.

On April 15, 2004, Reynaud, individually, and not on behalf of Femme Fatale Development, Inc., filed a complaint against Ellis, asserting causes of action for breach of contract, common count, and misrepresentation. (L.A. Sup. Ct. Case No. LC 068235.) Reynaud alleged, in part, that On or about June 2001 [Reynaud] and [Ellis] entered into an Agreement (the Agreement) for the rendering and performance of remodeling and other construction work and repairs at the [Elliss home]. (Breach of Contract) [] . . . []  . . . [Reynaud] has duly performed all of the terms, covenants and conditions of the Agreement as modified by all applicable change orders . . . . [] . . . Brockovich has breached the Agreement as modified by all applicable change orders by failing and refusing to pay [Reynaud] for all amounts due thereunder . . . . The complaint included a prayer for attorney fees.

Thereafter, Reynaud filed a first amended complaint. Like the original complaint filed on April 15, 2004, the first amended complaint was entitled Annie Reynaud, an individual and doing business as Femme Fatale Development, Inc. v. Erin Brockovich Ellis[, et al.]. However, Reynaud reformulated her causes of action. The causes of action in the amended complaint were labeled, account stated, open book account, and work, labor services and materials. Among other allegations, Reynaud alleged as follows: At all times herein pertinent, [Reynaud] did business individually and under the fictitious business name of Femme Fatale Development, Inc. . . . . (Account Stated) [] . . . [] [W]ithin four years last past, an account was stated, in writing, between [Reynaud] and [Ellis] . . . for sums due, owing and unpaid for construction services, labor, equipment and materials provided by [Reynaud] to [Ellis] . . . at [her] special instance and request. For all three causes of action, Reynaud sought a total of $101,338.08 for contracting fee, overhead, labor, equipment, and materials for unpaid construction services. Unlike the original complaint, in the amended complaint Reynaud did not seek attorney fees.

Ellis answered.

On March 29, 2005, Ellis filed a motion for judgment on the pleadings. Ellis argued res judicata barred the second lawsuit. Ellis also argued the following: (1) the issues should have been raised in the previous lawsuit in a compulsory cross‑complaint because the cases involve the same issues, the same parties, and the same harm and operative facts; (2) Reynaud controlled the actions on behalf of her corporation and was bound by the results of the prior litigation (Code Civ. Proc.,  1908, subd. (b)); and (3) Femme Fatale Development, Inc., was a suspended corporate entity and could not proceed with a civil case.

In opposing the motion, Reynaud argued the case could proceed because she was not in privity with the corporate entities, this second case was based entirely on common counts, the issues in the present case were never litigated, and the lack of licensing did not preclude recovery.

On April 21, 2005, Ellis was given permission to file a second amended answer to Reynauds first amended complaint.

Also on April 21, 2005, the trial court granted Elliss motion for judgment on the pleadings for the reasons asserted in the motion.

On June 24, 2005, Ellis filed a motion for attorney fees based upon the attorney fee provision in the June 2001 general construction agreement. (Civ. Code,  1717.) Ellis noted that a party is entitled to attorney fees pursuant to section 1717 even when a party prevails on the ground that the contract is not applicable, invalid, unenforceable, or nonexistent, and if other parties would have been entitled to attorney fees had they prevailed. (Hsu v. Abbara (1995) 9 Cal.4th 863, 870; Care Constr., Inc. v. Century Convalescent Centers, Inc. (1976) 54 Cal.App.3d 701.) The declaration of Joseph C. Maher II, an attorney in the law firm of Masry & Vititoe, PC, accompanied the motion. Attached thereto was an itemization detailing the work performed, time spent, attorney and hourly rate, and billing. Ellis sought a total of $50,450. In a subsequent pleading, Ellis asked for an additional $1,800.

In opposing the motion, Reynaud argued, in part, that her complaint had been based upon common counts and not the general construction agreement, and that she had not been a party to the June 2001 general construction agreement. Additionally, Reynaud asserted that Ellis was not entitled to attorney fees because she had not presented any evidence as to her obligation to pay attorney fees. Reynaud stated that Ellis had not presented retainer agreements or cancelled checks to prove that she had been billed for, nor paid attorney fees. Lastly, Reynaud argued that even if Ellis was entitled to an attorneys fee award, she was limited by Civil Code section 1717.5 to $800.

On August 2, 2005, the trial court held that Ellis was the prevailing party entitled to attorney fees. In its minute order, the trial court stated, in part: Reynaud . . . filed the instant action for common count seeking recovery of funds advanced and compensation for services rendered. Although Reynaud alleges that the claims were brought by her individually, the First Amended Complaint specifically alleges that Reynaud operated Femme Fatale Development, Inc. under a fictitious business . . . . Thus[,] Reynaud contended that she acquired the rights from the original underlying construction contract between Femme Fatale Development, Inc., and . . . Ellis. To the extent that the instant complaint relied on the rights conferred under the prior construction contract, . . . Elliss success entitles her to recovery of attorneys fees. A non-party is subject to attorneys fees whether he or she is the party specified in the contract or not . . . . California Civil Code, Section 1717(a). . . . Ellis success on the prior summary judgment (i.e.[,] the determination of the contract as unenforceable) does not render the attorney fee clause void. See Santisas v. Goodin (1998) 17 Cal.4th 599, 611; California Civil Code, Section 1717. [] Reynauds argument that the recovery is limited to $800.00 under . . . Section 1717.5 [is] unpersuasive. The result of the 4/21/05 order granting judgment on the pleadings effectively is that any common count recovery is precluded . . . . The provisions of . . . Section 1717.5 are inapplicable because the common count claims were never adjudicated on their merits. The trial court awarded Ellis $39,300 in attorney fees.

On October 28, 2005 the trial court entered an order granting Ellis an award of attorney fees in the amount of $39,300. Reynaud appeals from the order.

We affirm.

DISCUSSION

1. Reynauds contentions based upon Civil Code section 1717 are not persuasive.

Civil Code section 1717 provides statutory authority to award attorney fees as costs where the contract specifically provides for such fees.[4]

With regard to the trial courts order that Ellis was entitled to attorney fees pursuant to Civil Code section 1717, Reynaud contends: (1) she was not a party to the construction contract and thus, can not be ordered to pay attorney fees based upon the attorney fee provision in that written contract; (2) section 1717 does not apply because her lawsuit was based upon common counts and was not on a contract; and (3) Ellis failed to establish that she was obligated to, and did pay, attorney fees. These contentions are not persuasive.

Reynaud admitted that she rendered construction services to Ellis . Such services were rendered pursuant to the June 2001 contract. When Reynaud filed the complaint in the present case (LC 068235), she alleged that [o]n or about June 2001 [she and Ellis] entered into an Agreement (the Agreement) for the rendering and performance of remodeling and other construction work and repairs at [Elliss] Property. When Reynaud amended this complaint, she alleged that she did business individually and under the fictitious name of Femme Fatale Development, Inc. . . . Reynaud additionally alleged that she was owed approximately $100,000 for construction services, labor, equipment, and materials, provided to Ellis. The caption of the amended complaint is Reynaud, an individual and doing business as Femme Fatale Development. Inc. Thus, Reynaud linked herself to the corporate entities and the work performed pursuant to the June 2001 written construction agreement.

Given the judicial and evidentiary admissions made by Ellis, the only reasonable conclusion is that in the present lawsuit Reynaud was suing on the general construction contract on her own behalf (doing business as Femme Fatale Development, Inc.), or she was claiming the rights of Femme Fatale Development, Inc., under the contract. Under either conclusion, Reynaud was attempting to obtain benefits from the general construction contract. (Cf. Staples v. Hoefke (1987) 189 Cal.App.3d 1397, 1412 [admission in superseded, unverified pleading is not conclusive as substantive proof, but may be offered for impeachment]; City of Pleasant Hill v. FirstBaptistChurch(1969) 1 Cal.App.3d 384, 417-420 [policy of liberalized pleading does not relieve party from explaining inconsistencies in pleadings]; Kiseskey v. Carpenters Trust for So. California(1983) 144 Cal.App.3d 222, 228-229 [superseded pleading cannot conceal fundamental defect in case]; Patane v. Kiddoo (1985) 167 Cal.App.3d 1207, 1213 [same].)

Even if Reynaud is separate from the corporate entity Femme Fatale Development, Inc., and even if Reynaud signed the general construction agreement as president of that entity, Reynaud is held to the attorney fee provision in the contract because she is attempting to reap its benefits. (Real Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375 [signatory to contract sued by nonsignatory for breach of contract under third party beneficiary theory entitled to attorney fees as prevailing party].)

Reynaud cannot avoid the ramifications of her allegations by recasting her causes of action as common counts. The premise of the present lawsuit was that Reynaud was owed money from Ellis because Ellis breached her obligations under the general construction agreement. Reynaud is thus bound by the attorney fee provision in that contract.

Lastly, Reynaud contends she cannot be forced to pay attorney fees because Ellis failed to establish she was obligated for or actually incurred any attorney fees in this action. [Ellis] failed to present [a writing proving that she was] obligated or charged [or paid] attorney fees. Reynaud does not provide any authority for this proposition.

We note, however, that a number of recent cases, not cited by either party, have addressed this and similar issues. They have all concluded that parties are entitled to attorney fee awards even if their lawyers have represented them free of charge.

The most recent case, Moran v. Oso Valley Greenbelt Assn. (2004) 117 Cal.App.4th 1029 concluded that attorney fees could be awarded pursuant to Corporations Code section 8337 when a paralegal was represented pro bono by the law firm where she worked. Moran summarized the law thusly: Modern jurisprudence does not require a litigant seeking an attorney fee award to have actually incurred the fees. [I]n cases involving a variety of statutory fee-shifting provisions, California courts have routinely awarded fees to compensate for legal work performed on behalf of a party pursuant to an attorney-client relationship, although the party did not have a personal obligation to pay for such services out of his or her own assets. (Lolley v. Campbell (2002) 28 Cal.4th 367, 373.) Moreover, the court noted: The right of a party to seek an award of statutory attorney fees is not equivalent to a right to retain such fees. (Id. at p. 373, fn. 4.) [] The [appellants] attempts to distinguish this line of cases is based entirely on factual distinctions, and utterly unpersuasive, as courts throughout California have reached similar conclusions when interpreting other statutory fee-shifting provisions. (See, e.g., Ketchum v. Moses (2001) 24 Cal.4th 1122, 1127 [attorney fees available under Code of Civil Procedure section 425.16 to litigant represented by pro bono attorney]; Do v. Superior Court (2003) 109 Cal.App.4th 1210 [discovery sanctions available to litigant represented by pro bono attorney]; In re Marriage of Ward (1992) 3 Cal.App.4th 618, 624 [statutory fee award in child support matter available to litigant represented by pro bono attorney].) (Moran, supra, at p. 1036.)

To the extent the Supreme Court in Trope v. Katz (1995) 11 Cal.4th 274 made statements suggesting a contrary result, this language has been clarified in its later opinion of PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084. In PLCM, the Supreme Court explained that its reference in Trope v. Katz to the general definition of attorneys fees as the sum a litigant actually pays or becomes liable to pay for legal representation (11 Cal.4th at p. 280) was not intended to imply that fees can be recovered only when, and to the extent that, a litigant incurs fees on a fee-for-service basis, a question not raised therein. (PLCM Group, Inc. v. Drexler, supra, at p. 1097, fn. 5.)

We further note that the attorney fee clause in the pertinent contract did not specify that the fees had to be incurred.

Reynauds arguments based upon Civil Code section 1717 are not persuasive.

2. Reynauds contention based upon Civil Code section 1717.5 is not persuasive.

Reynaud contends the award for attorney fees was limited by Civil Code section 1717.5. This statute limits an attorney fee award when the case is based upon a book account. Section 1717.5 provides in part that, Except as otherwise provided by law or where waived by the parties to an agreement, in any action on a contract based on a book account, the party prevailing may recover reasonable attorneys fees, if the contract does not provide for attorney fees as provided in section 1717. The fees awarded under section 1717.5 are elements of costs and are to be fixed by the court. The fees may not exceed $800 where the contract was primarily for personal, family, or household purposes; one thousand dollars ($1,000) for all other book accounts; or 25 percent of the principal, which ever is lesser. If there is a written agreement between the parties signed by the person to be charged, attorney fees pursuant to this section may not be awarded unless that agreement contains a statement specifying that the prevailing party is entitled to fees provided by section 1717.5. Certain actions are excluded from the provisions of section 1717.5, such as actions involving an insurance company as a party.[5]

Thus, Civil Code section 1717.5 does not apply in the case before us because the construction agreement provides for attorney fees and costs. (7 Witkin, Cal. Procedure (1997) Judgment, 166, p. 193.)

DISPOSITION

The order is affirmed. Erin Brockovich Ellis is awarded costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ALDRICH, J.

We concur:

KLEIN, P. J.

KITCHING, J.

Publication courtesy of San Diego free legal advice.

Analysis and review provided by Santee Property line attorney.

[1] In her deposition, Reynaud testified as follows:

Question: When you signed that agreement with [Ellis], did you have any understanding whether you were signing on behalf of [Femme Fatale Development, Inc.] or were you signing on behalf of [Femme Fatale Development, Inc.] and yourself individually?

Answer: So in an effort to be very clear and very honest, we listed the sole proprietors license number as a reference to what we believed the [licensing] Board would be within a very short period of time of signing the agreement, licensing the corporation. The home improvement contract was signed as an officer of the corporation in anticipation of the corporation becoming licensed.

[2] In a May 2002, hearing, information from the Secretary of State was submitted to the trial court. It showed that Femme Fatale Construction and Development was not a valid California corporation. However, Femme Fatale Development, Inc. was in good standing. The information from the Secretary of State did not address licensing, although licensing was discussed at the hearing.

[3] On our own motion, we have taken judicial notice of the amended complaint in Case No. LC 058616.

[4] Civil Code section 1717, subdivision (a) provides in part: In any action on a contract, where the contract specifically provides that attorneys fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorneys fees in addition to other costs. []  . . . [] Reasonable attorneys fees shall be fixed by the court, and shall be an element of the costs of suit.

[5] Civil Code section 1717.5 provides in part:

(a) Except as otherwise provided by law or where waived by the parties to an agreement, in any action on a contract based on a book account, as defined in Section 337a of the Code of Civil Procedure, . . . which does not provide for attorneys fees and costs, as provided in Section 1717, the party who is determined to be the party prevailing on the contract shall be entitled to reasonable attorneys fees, as provided below, in addition to other costs. The prevailing party on the contract shall be the party who recovered a greater relief in the action on the contract. The court may determine that there is no party prevailing on the contract for purposes of this section.

Reasonable attorneys fees awarded pursuant to this section for the prevailing party bringing the action on the book account shall be fixed by the court in an amount that shall not exceed the lesser of: (1) eight hundred dollars ($800) for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes; and one thousand dollars ($1,000) for all other book accounts to which this section applies; or (2) 25 percent of the principal obligation owing under the contract.

For the party against whom the obligation on the book account was asserted in the action subject to this section, if that party is found to have no obligation owing on a book account, the court shall award that prevailing party reasonable attorneys fees not to exceed eight hundred dollars ($800) for book accounts based upon an obligation owing by a natural person for goods, moneys, or services which were primarily for personal, family, or household purposes, and one thousand dollars ($1,000) for all other book accounts to which this section applies. These attorneys fees shall be an element of the costs of the suit.

If there is a written agreement between the parties signed by the person to be charged, the fees provided by this section may not be imposed unless that agreement contains a statement that the prevailing party in any action between the parties is entitled to the fees provided by this section.

(b) The attorneys fees allowed pursuant to this section shall be the lesser of either the maximum amount allowed by this section, the amount provided by any default attorneys fee schedule adopted by the court applicable to the suit, or an amount as otherwise provided by the court. Any claim for attorneys fees pursuant to this section in excess of the amounts set forth in the default attorneys fee schedule shall be reasonable attorneys fees, as proved by the party, as actual and necessary for the claim that is subject to this section.

(c) This section does not apply to any action in which an insurance company is a party nor shall an insurance company, surety, or guarantor be liable under this section, in the absence of a specific contractual provision, for the attorneys fees and costs awarded a prevailing party against its insured.

This section does not apply to any action in which a bank, a savings association, a federal association, a state or federal credit union, or a subsidiary, affiliate, or holding company of any of those entities, or an authorized industrial loan company, a licensed consumer finance lender, or a licensed commercial 1finance lender, is a party.