Showplace Square Lofts Owners Assn. v. Mead

Filed 1/19/10 Showplace Square Lofts Owners Assn. v. Mead CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

Michael Mead, Curtis Raff, and Romiro Sanchez (for convenience, the unit owners) were defendants in an action brought against them by their homeowners association. Following a five-day court trial, the unit owners prevailed, and thereafter sought attorney fees pursuant to Civil Code section 1354, subdivision (c). The trial court issued a detailed order awarding $238,426 in fees. The unit owners contend that the amount awarded was an abuse of discretion, that they are entitled to $62,056 more. We disagree, and affirm.

THE BACKGROUND

Showplace Square Loft Owners Association (the HOA) sued the unit owners, three owners of units in Showplace Square, concerning some parking and storage spaces. The unit owners contended that Showplace Square Loft Company, LLC (LLC), the original owner and developer of the project, sold them the rights to some 30 parking and storage spaces in the project. This contention was supported by the LLC. The HOA contended that the LLC did not have the right to sell the spaces to the unit owners, and sought (a) cancellation of the deed purporting to make the transfer; (b) a declaration that the unit owners violated the governing covenants, conditions, and restrictions (CC&Rs); and (c) damages.

The case proceeded to a court trial before the Honorable Curtis E.A. Karnow. The trial lasted five days, ending on February 15, 2008.[1] Following extensive written argument, on April 8, Judge Karnow issued a 10-page Statement of Decision and Judgment, finding for the unit owners. The decision was comprehensive and thorough, addressing at length the evidence, including the CC&Rs, followed by a lengthy discussion of the applicable law. The decision ended with the conclusion that the unit owners are prevailing parties. The facts and the law underlying Judge Karnows decision are not germane to the issue before us, and need not be set forth.[2]

On April 23, the unit owners filed a Memorandum of Costs, which listed attorney fees in the amount of $297,830.11. This was followed five days later by the unit owners Motion for Attorney Fees and Costs Pursuant to Statute and for Order of Exemption re: HOA Fees. The statute referred to was Civil Code section 1354, subdivision (c), which is within the Davis-Stirling Common Interest Development Act (Civil Code, 1350 et seq.) governing common interest developments in California. Section 1354, subdivision (c) provides in its entirety as follows: In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorneys fees and costs.

The papers supporting the unit owners motion were extensive and included lengthy declarations from two of their counsel: John Carey (43 pages, including exhibits) and Lisa Lenoci (24 pages, including exhibits). The moving papers also included shorter declarations from two other counsel, Barbara Herzig (six pages) and Cathleen Moran (four pages).

The motion capsulized the unit owners legal representation this way: The firm of Bustamante OHara Gagliasso [Bustamante] represented defendants until December 2006, when the firm of Wild, Carey & Fife [Wild, Carey] was substituted as counsel. (Declaration of John Carey, 4 and Lisa Lenoci, 3) Defendants also consulted other specialized counsel for advice regarding various aspects of plaintiffs claims against them. (See Declaration of Barbara Herzig and Cathleen Moran).

The unit owners contended that the attorney declarations supported the number of hours spent and the hourly rate of counsel, and claimed a total of $278,530 for attorneys fees included:

Bustamante $26,690

Wild, Carey $246,632

Moran Law Group $615

Herzig & Berlese $4,593

The unit owners also sought as attorneys fees the amount of $18,476, representing special assessments they had paid. Finally, the unit owners sought fees incurred in connection with further proceedings.

The HOA filed opposition to the unit owners motion, asserting three fundamental arguments: (1) the request should be denied in its entirety because the unit owners did not participate in mediation before the action was filed; (2) a substantial amount of the fees and costs were duplicative; and (3) there is no authority allowing the unit owners to be reimbursed for prior association assessments.

The unit owners filed an extensive reply which among other things, claimed to support the fees incurred in connection with the motion itself, and asserted in conclusion that they be awarded a total of $316,660.

The motion was argued on June 13, and on June 18 the unit owners filed a supplemental declaration requested by Judge Karnow.

On June 24, Judge Karnow issued an Order Granting Motion for Attorney Fees . . . . This order, too, was comprehensive and well-reasoned and, following five pages of analysis and explanation, awarded a total of $238,426 in fees.

On August 21, the HOA filed an appeal from the attorney fee order. On September 10, the unit owners filed their notice of cross-appeal. The HOA later filed a dismissal of its appeal from this order (see footnote 2), and so all that remains is the unit owners cross-appeal.

JUDGE KARNOW DID NOT ABUSE HIS DISCRETION

As noted, the unit owners contend that they should have been awarded an additional $62,056, an amount comprised of five specific items the unit owners essentially contend Judge Karnow had to award them. The unit owners arguments are not persuasive, not in light of the well-settled law applicable to their appeal.

It has been noted that a party seeking attorney fees is not necessarily entitled to compensation for the value of attorney services according to the owners own notion or to the full extent claimed by the owner. (Salton Bay Marina, Inc. v. Imperial Irrigation Dist. (1985) 172 Cal.App.3d 914, 950 [inverse condemnation]; Levy v. Toyota Motor Sales, U.S.A., Inc. (1992) 4 Cal.App.4th 807, 813-814 [Song-Beverly Act].) As Levy went on to note, applying the terms of the statute applicable there, a party seeking fees has the burden of showing that the fees incurred were allowable, were reasonably necessary to the conduct of the litigation, and were reasonable in amount. (Levy v. Toyota Motor Sales, U.S.A., Inc., supra, 4 Cal.App.4th at p. 816.)

The governing law is extensively collected in PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, discussing the requirement of Civil Code section 1717 of reasonable attorneys feesthe identical words in the statute applicable here. This requirement, the Supreme Court said, reflects the legislative purpose to establish uniform treatment of fee recoveries in actions on contracts containing attorney fee provisions. (Santisas v. Goodin [(1998)]17 Cal.4th at p. 616.) Consistent with that purpose, the trial court has broad authority to determine the amount of a reasonable fee. (International Industries, Inc. v. Olen [(1978)] 21 Cal.3d at p. 224 [[E]quitable considerations . . . must prevail over  . . . the technical rules of contractual construction.] Beverly Hills Properties v. Marcolino (1990) 221 Cal.App.3d Supp. 7, 12 [the award of attorney fees under section 1717, as its purposes indicate, is governed by equitable principles]; Montgomery v. Bio-Med Specialties, Inc. (1986) 183 Cal.App.3d 1292, 1297 [trial court has wide latitude in determining the amount of an award of attorneys fees under Civil Code section 1717]; Vella v. Hudgins (1984) 151 Cal.App.3d 515, 522 [The amount to be awarded in attorneys fees is left to the sound discretion of the trial court.].) As we have explained: The []experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrongmeaning that it abused its discretion. (Serrano v. Priest (1977) 20 Cal.3d 25, 49; Fed-Mart Corp. v. Pell Enterprises, Inc. (1980) 111 Cal.App.3d 215, 228 [an appellate court will interfere with a determination of reasonable attorney fees only where there has been a manifest abuse of discretion].) (PLCM Group v. Drexler, supra, at pp. 1094-1095.)

The Supreme Court then explained how the fee setting inquiry ordinarily begins with the lodestar, i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. . . . The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. (Serrano v. Priest, supra, 20 Cal.3d at p. 49.) . . . [] Thus, applying the lodestar approach to the determination of an award under Civil Code section 1717, the Court of Appeal in Sternwest Corp. v. Ash (1986) 183 Cal.App.3d 74, 77 explained: Section 1717 provides for the payment of a reasonable fee. After the trial court has performed the calculations [of the lodestar], it shall consider whether the total award so calculated under all of the circumstances of the case is more than a reasonable amount and, if so, shall reduce the section 1717 award so that it is a reasonable figure. [] It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court . . . . [Citations.] The value of legal services performed in a case is a matter in which the trial court has its own expertise. [Citation.] The trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony. [Citations.] The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. (Melnyk v. Robledo (1976) 64 Cal.App.3d 618, 623-624.) Although the terms of the contract may be considered, they do not compel any particular award. (Vella v. Hudgins, supra, 151 Cal.App.3d at p. 520; All-West Design, Inc. v. Boozer (1986) 183 Cal.App.3d 1212, 1227 [trial court was not bound by contingency agreement in awarding fees under Civil Code section 1717]; Beverly Hills Properties v. Marcolino, supra, 221 Cal.App.3d at p. Supp. 12 [affirming an award of reasonable attorney fees for pro bono legal services].) (PLCM Group v. Drexler, supra, 22 Cal.4th at pp.1095-1096.)

We added our own observation to all this, in Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 834: There is no hard-and-fast rule limiting the factors that may justify an exercise of judicial discretion to increase or decrease a lodestar calculation.

Applying those rules here leads to the conclusion that Judge Karnow did not abuse his discretion in not awarding the amounts the unit owners seek.

1. The Assessments

The first ruling unit owners complain of is Judge Karnows refusal to award them $18,476 for two assessments they had paid, apparently for the HOA to fund the lawsuit. We find no error.

By way of background, the first time the unit owners made any claim concerning the assessments was in their motion for attorney fees . . . and for order of exemption re: HOA fees filed on April 28, 2008. The assessments were never mentioned in their answer to the complaint, never mentioned in any prayer in any pleading, and never the subject of any cross‑complaint. The subject was not mentioned in the pretrial brief; there was no evidence about it; and it was not mentioned in their posttrial brief.

Seeking the assessment as part of their post-trial motion, the unit owners brief set forth their position as follows: An unusual circumstance in this case is that defendants, as homeowners and members of plaintiff, have been required to finance two shares of plaintiffs attorney fees in support of the prosecution of the claims against themselves. Over the course of the litigation, defendants have been required to pay special assessments levied to pay plaintiffs litigation costs in the total sum of $18,476. (See Declarations of Mead and Raff) Defendants have been required to pay not only the cost of defending themselves in this action, but also the costs of plaintiffs prosecution of them. The fee shifting statutes are a departure [from] the American Rule designed to fully compensate the prevailing party for all expense incurred and the assessments for the payment of legal fees is a component of that full compensation. Defendants submit they should recover the sum they paid in assessments used to cover plaintiffs counsel fees.

Defendants could not refuse to pay the special assessments as the obligation of a homeowner to pay assessments is secured by a lien on the owners interest that can be foreclosed if the assessments are not paid. (Civ. Code  1367(b).) The HOA can record and foreclose liens against a delinquent member[]s interest. (Civ. Code  1365(d).)

Unless this court otherwise orders, defendants will also be required to contribute a pro rata share of whatever costs and fees are awarded to them by this court, as in order to pay any costs and fees in this action, the HOA will have to make a special assessment against the homeowners and again, defendants cannot refuse to pay the assessment unless they are willing to face foreclosure on their interests or file another action to challenge the assessment. Defendants request that the courts order awarding attorney fees exempt the defendants from the obligation to pay a pro rata share of that fee award.

The referenced declaration of Mead and Raff provided only as follows:

2. As a homeowner in Showplace Square Lofts I have been required to pay periodic special assessments instituted by the Board of Directors Showplace Square Lofts Homeowners Association and approved by a majority of homeowners. The special assessments were made for the purpose of paying plaintiff, Showplace Square Lofts Homeowners Association attorneys fees to prosecute this action against me.

3. My records reflect that special assessments in the sum of at least $9,238.00 have been assessed against my unit since January 24, 2006 and I have paid those special assessments. I believe that I could not refuse to pay the specialassessments as the obligation to pay the assessment can be secured by a lien on my unit and the Homeowners Association can record and foreclose on liens against my unit if the payment of the assessment becomes delinquent.

4. I therefore have been not only required to pay attorneys fees for my own representation as a defendant in this matter, but I have also been required to pay a pro rata share of plaintiffs attorneys fees in this matter.

Neither declaration attached any pertinent documents, no by-laws, no CC&Rs, no evidence that they in fact paid the assessment.

The HOA filed vigorous opposition as to this, asserting among other things that: (1) there was no legal authority for the claim, (2) the claim was not for attorney fees; (3) courts must defer to decisions of a board of directors of a homeowners association if made in good faith. (See Lambden v. La Jolla Shores Condominium Homeowners Association (1999) 21 Cal.4th 249); and (4) as shown by the declaration of the board president, the actual assessments were $3,821.44 per unit.

After discussing this issue against this background, Judge Karnow concluded as follows: [The HOA] correctly notes that I do not have the authority here to make these orders. The statutory authority I have to award attorneys fees is independent of the power of the association to levy assessment. The scope of the liability as between the association and the unit owners, and the power of the association to make the assessments for purposes the association believes worthy, are issues not before me.

The unit owners cite to nothing demonstrating that Judge Karnow was wrongcertainly nothing demonstrating the assessment amounts had to be awarded. All the unit owners say is that [t]he court has the inherent power to issue orders to assist in ensuring that its attorneys fees award to [a]ppellants is not nullified by the HOAs assessment. See Venice Canals Resident Home Owners Assn v. Superior Court (1977) 72 Cal.App.3d 675, 679 (the court may make discretionary orders with reasonable conditions; and even make subsequent limitations and modifications of prior orders in order to achieve justice); People v. Pacific Land Research Co. (1977) 20 Cal.3d 10, 19, n.9 (even in the absence of the specific authorization contained in [statute], a trial court has the inherent power to order restitution as a form of ancillary relief).

Neither case deals with an issue remotely like that here. And whatever inherent power a court has, it can hardly be an abuse of discretion not to exercise itespecially when the item was not an attorney fee of the unit owners.

2. The Bustamante Firm

The unit owners second claim concerns the fees awarded for the work of the Bustamante firm, the unit owners original counsel. Judge Karnow awarded $4,000 for this work. The unit owners claim they should have been awarded an additional $23,821.

As the HOA argued, it developed that the Bustamante firm had agreed to accept $4,000 for its work. That fact was of significance to Judge Karnow, and a fact on which the HOA places heavy reliance here. In reply, the unit owners assert that [f]ees are to be awarded to the prevailing party if they are incurred, whether or not they are ultimately paid by the client. See Vella v. Hudgins (1984) 151 Cal.App.3d 515, 519-520 (The allowance of attorneys fees is made to reimburse the defendant for fees which he has paid, or to indemnify him for fees which he has not paid, but has incurred.). The unit owners citation is less than candid, as the next page in Vella states that it does not follow that the fees awarded must necessarily equal the full amount of the clients obligation when the contract is enforceable. (151 Cal.App.3d at p. 521.) In any event, the unit owners do not demonstrate an abuse of discretion.

Judge Karnow devoted almost two pages to a discussion of this issue, and why he awarded the amount he did. His analysis is excellent, and we quote it at length:

[The HOA] have correctly suggested that there appears to be overlap of the time spent by the original Bustamante firm and of the time spent by the current firm of Wild, Carey & Fife as the case was transitioning in late 2006. I have identified on the December 30, 2006 bill about $10,544 in time devoted to having the new firm come up to speed.^[]

At argument, I raised the issue of whether the fees claimed on behalf of the Bustamante firm had actually been paid, and if not, whether they were truly incurred and whether there was some agreement concerning the clients obligation to pay. I asked for a declaration on the agreement concerning those fees. That declaration was filed, and it confirmed that the Bustamante firm had agreed to accept $4,000 of the roughly $14,510 charged to the defendants by that firm,^[] with the understanding that if the court awarded fees in excess of that $4,000 for work by the Bustamante firm, the firm would receive those.^[] [Citation.] This sort of understanding is not unusual: firms do from time to time compromise their claims with clients departing for a new firm. But just as evidence of an arms-length negotiation and payment between client and firm for a fee is fair evidence that the fee is reasonable, so too it is essential for a Court to be advised of a fee which has been, practically speaking, foregone. One does not play fair with the Court in seeking a fee which, in great part, was compromised and in effect surrendered by the firm.

The sum foregone by the Bustamante firm and that attributable to the transition costs areand this likely is not a coincidenceabout the same, i.e.[,] about $10,000. Defendants ask that I not deduct this sum twice: if not payable on behalf of Bustamante, surely the Wild, Carey firm earned the fee. I reject the conclusion. Because Wild, Carey did not in its opening papers present the full, material facts regarding the Bustamante compromise and has not sustained its burden in demonstrating the reasonableness of these fees, I deduct both sums. These total ($10,544 + $10,510) or $21,054.

In sum, one of Judge Karnows conclusions was that the unit owners had not demonstrated the reasonableness of the fees of the Bustamante firm. Perhaps more significantly, he concluded that the unit owners did not play fair with the court. There was no abuse of discretion regarding the Bustamante fee.[3]

3. The Wild, Carey Fees

In a one-paragraph argument the unit owners claim that Judge Karnow improperly disallowed $10,544 from the Wild, Carey . . . 12/30/06 Bill. The argument is apparently premised on an interpretation that Judge Karnows deduction was based on the fact that Bustamante had compromised the bill for the client.

To the contrary, Judge Karnow deducted the amount as fees related to time devoted to having the new firm come up to speed. This time to come up to speed was reasonably concluded to have been duplicative of time spent by the prior law firm representing the unit owners. (See Thayer v. Wells Fargo Bank, supra, 92 Cal.App.4th at p. 845.)

4. The Paralegal Fees

The fourth item about which the unit owners complain is a deduction of $6,870 in paralegal services. The entire argument, again in one paragraph, is as follows: The trial court reduced Wild, Carey & Fifes paralegal rate from $170/hr. to $100/hr. without any finding that the hourly rate was unreasonable. (3 AA 656-657) There was testimony by [a]ppellants attorney that this was the rate normally charged for at least four to five years. (RT (6/13/08 volume) 15:17-16:10) The only opposing evidence by . . . HOA was that their paralegal rate was $80/hour, which is not probative on whether [a]ppellants rate was unreasonable. (3 AA 656-657) This is a less than complete description of the record.

To begin with, Judge Karnows explanation of this issue included this: A. Paralegal time. Defendants have charged $175 an hour for paralegal work. This is high, given my understanding of prevailing rates, and is substantially higher than the $80/hr. rate charged by [the HOAs] paralegal who has twelve years of experience. [Citation.] The tasks done by [the unit owners] paralegals are typical: telephone calls, editing deposition summaries, document organization, photocopying, and the like. There is no evidence that these paralegals have or exercised extraordinary skills. I will reduce the rate to $100/hr., for a total reduction of $6,870.^[]

Moreover, Judge Karnow had before him evidence that the unit owners prior counsel charged $100 per hour for paralegal services. Indeed the only evidence supporting the claimed $175 per hour rate was the oral statement by the unit owners counsel that he had charged this rate for several years.

5. Post-Hearing Submission

The final item the unit owners contest is described as follows: $2,345Wild, Carey & Fifes Fees For Preparing For Post-Hearing Submission Requested by Trial Court on Attorneys Fees Motion. The unit owners assert that these fees were incurred in preparation of a supplemental brief and declaration specifically requested by the trial court; and, they again assert, the trial courts rejecting these fees was premised on its legal conclusion that because the previous firms bills were compromised, they were not actually incurred.

Again, the unit owners position is less than candid. Specifically, after reviewing the supplemental briefing, Judge Karnow first concluded that the briefing on the Bustamante fees should have been provided originally. That is, until oral argument on the fee motion, the unit owners had failed to disclose that the $23,821.86 in fees sought had not only not been paid by the unit owners, but instead had been compromised, with only $4,000 paid to the Bustamante firm. Based on this, and the fact that the unit owners had failed to establish that the Bustamante fees were reasonable, the trial court exercised its discretion in declining to award fees for supplemental briefing which should have been provided originally. . . . In addition, Judge Karnow concluded that the balance of the material in the supplemental briefing was unsolicited.

DISPOSITION

The order awarding attorneys fees is affirmed. The HOA shall recover costs on appeal.

_________________________

Richman, J.

We concur:

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Kline, P.J.

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Lambden, J.

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[1] All subsequent dates are in 2008.

[2] The HOA did file an appeal from the Judgment entered on the decision, but later dismissed the appeal.

[3] In a sub-argument on the Bustamante issue, unit owners assert that Additionally, the costs incurred by the Bustamante firm of $1,109.36 were inadvertently not claimed on the Memorandum of Costs and should be added on to the total award. The unit owners cite no authority for this argument, no foundation for this claim. In any event, the time limit for filing a Memorandum of Cost is mandatory, and it is error for a court to award costs where the Memorandum has not been filed timely. (Sanabria v. Embrey (2001) 92 Cal.App.4th 422, 425.)