Wells Fargo v. B.C.B.U.

Filed 9/27/06 Wells Fargo v. B.C.B.U. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a postjudgment order of the Superior Court of Orange County, Clay M. Smith, Judge. Reversed and remanded with directions.

Kevin E. Monson for Defendants and Appellants.

Kutak Rock, Edwin J. Richards, Paul F. Donsbach and Grace Y. Horoupian, for Plaintiff and Respondent.

B.C.B.U., Inc., and Dee R. Bangerter, its president (collectively, B.C.B.U.), appeal from a postjudgment order that awarded attorney fees to Wells Fargo Bank Minnesota, National Association (Wells Fargo) in this breach of contract action.^[1] B.C.B.U. argues the fee motion was untimely, and Bangerter argues he is not liable for fees under the fee clause in a guaranty he signed. We agree with Bangerter, and so reverse with directions to modify the order accordingly.

* * *

In a published opinion filed simultaneously with this decision, we affirm the judgment for Wells Fargo against B.C.B.U. and Bangerter. (Wells Fargo Bank Minnesota, National Association v. B.C.B.U. (Sept. 27, 2006, G035470) __ Cal.App.4th __.) The facts relating to the underlying dispute are set out in full in that opinion and will not be repeated here, save for what is necessary to decide the instant matter.

The judgment awarded Wells Fargo damages for breach of contract against B.C.B.U., declared Bangerter’s guaranty was enforceable,^[2] and awarded Wells Fargo fees and costs to be determined on motion. Notice of entry was served on February 28, 2005.

Wells Fargo initially moved for fees on March 1, 2005. On April 1, 2005, the trial court found the evidence insufficient and denied the motion without prejudice, according to a declaration from one of the five Wells Fargo lawyers who worked on the case (Grace Horoupian). The declaration states the trial judge encouraged the parties to settle the fee issue, they attempted to do so, but by early May it became clear no deal was possible.

On May 13, 2005, Wells Fargo filed the instant motion requesting fees of $132,218 as the prevailing party in an action on a contract. (Civ. Code, § 1717.) The trial judge found the motion was timely, and in the event it was not, he ordered the time to bring the motion extended to the filing date. He awarded Wells Fargo fees of $118,518 “against both defendants.”

I

B.C.B.U. contends the fee motion had to be filed within 60 days after notice of entry of the judgment (April 29, 2005), and the trial judge had no discretion to extend that time. But that misreads the applicable law.

California Rules of Court, rule 870.2 sets the time for filing a fee motion. Subdivision (b)(1) provides a notice of motion for attorney fees for work up to judgment must be filed “within the time for filing a notice of appeal under rules 2 and 3.” Subdivision (b)(2) permits the parties to extend that time period until 60 days after expiration of the time to file a notice of appeal “by stipulation filed before the expiration of the time allowed under subdivision (b)(1).” Subdivision (d) gives the trial judge even greater latitude: “For good cause, the trial judge may extend the time for filing a motion for attorney fees in the absence of a stipulation or for a longer period than allowed by stipulation.”

Pursuing negotiations at the behest of the trial judge certainly amounts to good cause for his extending the time to file a fee motion. Here, the trial judge encouraged the parties to attempt to settle the fee issue, and those negotiations did not end until early May 2005, shortly after the deadline for filing an appeal from the judgment on April 29, 2005. The trial judge acted within his discretion in finding the motion timely filed.

B.C.B.U.’s reliance on Russell v. TransPacific Group (1993) 19 Cal.App.4th 1717 and Nazemi v. Tseng (1992) 5 Cal.App.4th 1633 is misplaced. Both were decided under a prior version of rule 870.2, since repealed. Former rule 870.2 required a fee motion to be filed at the same time as a memorandum of costs,^[3] and it did not give the trial judge discretion to extend the time to file a fee motion that is found in current rule 870.2, subdivision (d). Former rule 870.2 was repealed in 1994 and replaced with a new rule 870.2. (See Historical Notes, West’s Ann. Cal. Codes (1996 ed.) vol. 23, pt. 2, foll. rule 870.2, pp. 594-595.) Current rule 870.2 reflects additional amendments in 1999 that added provisions not relevant here, and renumbered various other provisions.

Under the former rule, Russell held the trial court had no discretion to consider a fee request included in a memorandum of costs, where no fee motion was ever filed. (Russell v. TransPacific Group, supra, 19 Cal.App.4th at p. 1725.) Nazemi held it was an abuse of discretion to consider a fee motion filed after the judgment was affirmed on appeal, more than a year and a half after the then applicable statutory time to file a fee motion. (Nazemi v. Tseng, supra, 5 Cal.App.4th at pp. 1636, 1641.) These cases, decided under a different rule, do not prevent the trial judge from exercising his discretion to extend the time to file a fee motion under the current rule 870.2, subdivision (d). The fee motion was timely.

II

Bangerter argues the fee clause in his guaranty is narrowly worded and cannot be construed to include this declaratory relief action against him. We have to agree.

The fee clause provides, in relevant part, as follows. “In the event of a default by Lessee . . . or in the event of failure of Lessee to make any or all payments of money required of it under the Lease, Guarantor unconditionally promises to pay to Lessor . . . all sums at any time due and unpaid under the Lease, plus costs of collection, including reasonable attorney fees . . . .”

A prevailing party is entitled to attorney fees “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce the contract, shall be awarded either to one of the parties or to the prevailing party . . . .” (Civ. Code, § 1717, subd. (a).) A declaratory relief action to determine the rights and duties of the parties to a contract may be considered an action on the contract if the fee clause is worded broadly enough. (See, e.g., Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 703, 707 [fees recoverable in declaratory relief action where contract provided prevailing party entitled to fees in an action to “enforce the terms hereof or declare rights hereunder”].)

We have two problems with the fee award. The first is there is no fee clause in the guaranty, so Wells Fargo is not entitled to fees for prevailing on the declaratory relief claim against Bangerter. The guaranty does not provide, for example, that the prevailing party in an action for a declaration of rights shall recover fees, or anything to that effect. Rather, it mentions fees only as one component of the obligation guaranteed, saying Bangerter promises to pay all sums due under the lease, including attorney fees as a cost of collection. So the fee order cannot be sustained as an award to the prevailing party in an action on a contract that provides for attorney fees.

The second problem is Wells Fargo did not sue Bangerter for breach of contract, so it was not entitled to fees as part of the obligation guaranteed. Bangerter was not sued for breach of his promise, and he was never afforded the opportunity to dispute the meaning of the guaranty. Nor did Wells Fargo obtain a money judgment against Bangerter for sums due under the guaranty. Without a finding that Bangerter breached the guaranty, Wells Fargo is not entitled to fees for such a breach. The fee order cannot stand.

Wells Fargo’s several attempts to get around these defects are to no avail. It claims the trial court “awarded a monetary judgment, which includes the attorneys’ fees, against Bangerter.” But that is just not true. No money judgment was entered against Bangerter.

Wells Fargo also contends the trial court has the power to award damages in a declaratory relief action, and it formulates a claim that occurred here by characterizing the judgment as “providing a declaration of [Wells Fargo’s] rights under the Guaranty executed by Bangerter and providing monetary damages in conjunction thereto.” A nice try, but it does not work. Artful though the description may be, the fact remains that the judgment did not award money damages against Bangerter. Under the language of the fee clause, Wells Fargo is not entitled to attorney fees on its declaratory relief judgment against Bangerter.

III

We briefly address two remaining points raised by Bangerter. First, Bangerter contends he was the prevailing party on a contract claim. Bangerter’s theory is Wells Fargo’s trial brief and other papers at one point claimed he was liable for breach of contract, and no such judgment was entered against him. Suffice it to say that is a bit far-fetched, since the complaint contains no such cause of action.

Bangerter’s other argument is the trial court should have allocated the fee award between the two defendants, with B.C.B.U. bearing the larger share as the primary defendant. In light of our holding that Bangerter is not liable for fees, we do not reach this point.

Although the fee motion was filed in a timely fashion, the language of the fee clause does not support a fee award against Dee R. Bangerter. The postjudgment

order appealed from is reversed, and the matter remanded to the trial court with directions

to enter a new order awarding fees solely against B.C.B.U. Appellant Bangerter is entitled to costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

O’LEARY, J.

IKOLA, J.

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^[1] Although B.C.B. U. is a corporation, it was not named as such in the caption of the complaint or the judgment. Hence our caption likewise omits the corporate designation.

^[2] The judgment against Bangerter provided as follows: “Judgment is hereby rendered in favor of Plaintiff and against Defendant Dee R. Bangerter, individually, on the Third Cause of Action for Declaratory Relief. By this judgment, it is declared that Lease No. 03157-1000-1 (also known as Lease No. 4459) and the corresponding Guaranty are valid, binding, and enforceable by their terms.”

^[3] Former Rule 870.2 provided: “Any notice of motion to claim attorney fees as an element of costs under Civil Code section 1717 shall be served and filed before or at the same time the memorandum of costs is served and filed.”