Wong v. City of Anaheim

Filed 9/28/06 Wong v. City of Anaheim 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 977.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

Appeals from judgments of the Superior Court of Orange County, David C. Velasquez, Judge. Affirmed in part, reversed in part and remanded.

Nossaman, Guthner, Knox & Elliott, Howard F. Harrison, K. Erik Friess and Rick E. Rayl for Defendant and Appellant.

Engstrom, Lipscomb & Lack and Robert J. Wolfe Plaintiffs and Respondents.

In a prior appeal, we affirmed the liability of the City of Anaheim (Anaheim) in connection with a landslide in a residential neighborhood. However, we also remanded a number of judgments in favor of certain homeowners for the trial court to make adjustments with respect to the amounts of their awards. After the trial court entered new judgments, Anaheim filed appeals from three of those judgments. The three sets of homeowners are jointly represented on appeal. Both Anaheim and the respondent homeowners refer to the respondent homeowners collectively as the “Salyer Plaintiffs,” so we will do so as well.

We affirm the ruling denying Anaheim an offset with respect to monies paid by the Salyer Plaintiffs’ insurance carriers in settlement of claims against them for bad faith and breach of contract. The factual stipulations between the parties did not bar an assertion by the Salyer Plaintiffs that these monies were not paid as settlement monies from the developer as to which Anaheim was entitled to an offset.

We reverse the ruling denying the recalculation of prejudgment interest following the redetermination of the amounts of the offsets on remand. Contrary to the assertion of the Salyer Plaintiffs, nothing in our prior opinion precluded the recalculation of prejudgment interest on remand. We also reverse the award of attorney fees with respect to the first appeal. The trial court erred in failing to first determine what fees were actually incurred with respect to the appeal, before evaluating whether the requested fees were reasonable. Code of Civil Procedure section 1036 does not permit an award of attorney fees on an inverse condemnation action unless the fees were actually incurred by the plaintiff. Finally, we direct the trial court to redetermine postjudgment interest as appropriate in light of the other adjustments made pursuant to this opinion.

I

FACTS

At the conclusion of the original trial proceedings, the court entered judgment in favor of Jack and Christine Salyer (the Salyers) for $1,164,682.96 in damages, plus prejudgment interest, attorney fees, engineering fees, expert fees and litigation costs. The damage award was based on a total verdict amount of $1,941,248.57, minus certain undesignated offsets or credits in favor of Anaheim.

The court also entered judgment in favor of Jason Stevens, individually and as trustee of the Stevens Family Trust, and of Clara Stevens (collectively, the Stevenses), for $1,233,100.12 in damages, plus prejudgment interest, attorney fees, engineering fees, expert fees and litigation costs. The damage award was based on a total verdict amount of $1,880,701, minus certain undesignated offsets or credits in favor of Anaheim.

In addition, the court entered judgment in favor of Robert K. Wong, individually and as trustee of the Robert K. Wong Irrevocable Trust, and of May L. Wong, individually and as trustee of the May L. Wong Irrevocable Trust (collectively, the Wongs), for $1,100,094.08 in damages, plus prejudgment interest, attorney fees, engineering fees, expert fees and litigation costs. The damage award was based on a total verdict amount of $1,762,099, minus certain undesignated offsets or credits in favor of Anaheim.

Anaheim filed a motion to vacate the judgments. Attorney Robert J. Wolfe, whose firm had prepared the judgments, filed a December 6, 2002 declaration pertaining to the manner in which the respective offsets under the Salyer Plaintiffs’ judgments were calculated. In that declaration, Attorney Wolfe explained that the offset amounts excluded the sums the Salyer Plaintiffs had received with respect to settlements with their homeowners insurance carriers pertaining to claims against the Salyer Plaintiffs. At the December 11, 2002 hearing on the motion and offset issues, the parties argued about whether the insurance payments should be included in the offset amounts and about the

effect of certain factual stipulations the parties had made. The record is somewhat unclear as to the outcome of the hearing, but the transcript of the hearing indicates that the court may have determined itself to be without jurisdiction to resolve the matter, since Anaheim already had filed notices of appeal with respect to the Salyer Plaintiffs’ judgments.

In the first appeal, Anaheim claimed that the amounts of the offsets were erroneous. The Salyer Plaintiffs had entered into a settlement agreement with the developer of their properties, 396 Investment Company (396). Anaheim claimed that it was entitled to certain offsets with respect to payments the Salyer Plaintiffs had received from 396 under the settlement agreement and with respect to debt relief in connection with the mortgages on certain of the Salyer Plaintiffs’ properties. It further claimed that the trial court had improperly determined such offsets. Anaheim did not identify any offset issues with respect to insurance coverage payments.

In our opinion, we explained, with respect to each of the Salyer Plaintiffs, why we concluded that the offset amounts were indeed incorrect, and why we had insufficient information to determine what the correct amounts of the offsets should be. Accordingly, we remanded each of these three judgments to the trial court for a determination of the correct offset amounts.

On remand, the Salyer Plaintiffs filed a motion for determination of offsets and for attorney fees. The trial court entered judgment in favor of the Salyers in the amount of $1,682,018.70, in favor of the Stevenses in the amount of $1,725,570.48, and in favor of the Wongs in the amount of $1,561,556.27. Each award included damages, attorney fees incurred through appeal, prejudgment and postjudgment interest through November 23, 2005, engineering fees, expert fees and litigation costs. Anaheim again appeals.

II

DISCUSSION

A. Introduction:

Anaheim challenges: (1) the court’s failure to award it offsets with respect to sums the Salyer Plaintiffs purportedly received with respect to bad faith and breach of contract claims against their homeowners insurance carriers; (2) the court’s failure to recalculate prejudgment interest following a redetermination of the offsets on remand; and (3) the court’s award of attorney fees with respect to the first appeal. It also requests that this court direct the trial court to adjust postjudgment interest. We address these issues in turn.

B. Offsets:

(1) Motion for determination

In their motion for determination of offsets, the Salyer Plaintiffs asserted that Anaheim wanted to include within the offset amounts certain monies that they had received from their homeowners insurance carriers in respect of their bad faith and breach of contract claims against those carriers. In their motion, they explained: “By way of background the City of Anaheim, during the pendency of the litigation, sued the Salyer Plaintiffs alleging that the Salyer Plaintiffs somehow over watered their property which caused damage to the Olive Hills Reservoir. The [Salyer] Plaintiffs tendered Anaheim’s claim to their respective homeowners’ carriers. The Salyer Plaintiffs had many issues with their insurance carriers, especially the manner in which they handled their respective claims. In May, 2000, the Salyer Plaintiffs and 396 Investment Company recognized that each had claims against the carriers -- 396 for indemnity and the Salyer Plaintiffs for bad faith and breach of contract. The settlement agreement stated:

‘Notwithstanding the other provisions of this Agreement, the Peralta Plaintiffs, [Salyer Plaintiffs and the Friedmans] with the assistance of 396 Company, shall vigorously and in

good faith pursue their claims against their personal homeowners’ insurance policies and their insurers (‘Peralta Plaintiffs’ Insurers’) for indemnity, breach of contract and bad faith. . . .any recoveries by the Peralta Plaintiffs and 396 Company from the Peralta Plaintiffs’ Insurers shall be split 2/3 to the Peralta Plaintiffs and 1/3 to the 396 Company Insurers.’ [Emphasis added.] [Citation.]

“The Salyer Plaintiffs settled their claims with their respective insurers during the pendency of the litigation against Anaheim. The Salyer Plaintiffs gave their respective insurers a policy holder’s release, released their respective carriers from any further liability towards them, and thereafter provided their own defense against the claims asserted by the City of Anaheim and others. In exchange, Defendant 396 Investment Company received one-third of the payment [representing the indemnity portion of the claim] and the Salyer Plaintiffs received two-thirds [representing the breach of contract and the bad faith portions of the claim]. The City of Anaheim should not receive a credit for the amount that represents the two-thirds payment made by the Salyer Plaintiffs respective homeowner carriers to the Salyer Plaintiffs for claims which neither defendant 396 Investment Company nor the City of Anaheim were sued.”

The motion for determination was supported by the September 30, 2005 declaration of Attorney Wolfe. He declared that the Wongs had released their homeowners insurance carrier in exchange for payment to 396 of the amount of $350,000. 396, in turn, had paid the Wongs two-thirds of that amount, or $233,333.33 as the portion to which they were entitled under the settlement agreement. He further declared that the Salyers and the Stevenses had released their respective homeowners insurance carriers in exchange for the amount of $166,666.66 each, paid to 396.

396, in turn, had paid $111,111.11 to each of the Salyers and the Stevenses, respectively.

The motion was also supported by an exhibit in which the Salyer Plaintiffs identified the amounts they had received from 396 as settlement monies. The amounts

that they requested to be offset specifically excluded the respective $233,333.33 and $111,111.11 payments they had received from 396 as insurance monies.

In its opposition to the motion for determination, Anaheim argued that the Salyer Plaintiffs were seeking to “revise history.” Anaheim explained that the parties had entered into certain factual stipulations in order to streamline the trial. According to Anaheim, the factual stipulations included agreements as to amounts that the Salyer Plaintiffs had received as settlement payments from 396. It contended that the Salyer Plaintiffs were bound by those stipulations and could not, on remand, switch horses and say that the amounts previously described as settlement payments actually included insurance monies that should not be counted as settlement payments for which offsets should be made.

At the outset of a hearing on the motion for determination, the court announced its tentative ruling to grant the motion as requested. After hearing argument, the court determined to abide by the tentative.

On the current appeal, Anaheim insists that the trial court erred in failing to include in the offset amounts the respective $233,333.33 and $111,111.11 payments the Salyer Plaintiffs received from 396.

(2) Background: the Factual Stipulations

The Phase I Trial addressed liability for the landslide. The Phase II Trial pertained to, inter alia, damages. Numerous litigants who were involved in the Phase II Trial stipulated to certain facts, as contained in the factual stipulations filed with the court on March 4, 2002. The factual stipulations stated at the outset: “Plaintiffs reserve all rights and claims that all payments received pursuant to the Peralta Plaintiffs Settlement Agreement, . . . and from their insurers are a collateral source.”

With respect to the payment of particular dollar figures, the factual stipulations also provided:

“2. Pursuant to a Settlement Agreement, General Release and Waiver (Revised) dated as of May 17, 2000, by and between: 396 Investment Company, fka The Fieldstone Company, on the one hand, and: Jack Salyer, Christine Salyer, Jason Stevens, Clara Stevens, Robert Wong as Trustee of the Robert K. Wong Irrevocable Trust, May Wong as Trustee of the May L. Wong Irrevocable Trust, Larry Friedman, and Sherrie Friedman (‘Peralta Plaintiffs Settlement Agreement’), on or about May 18, 2000, the following plaintiffs were paid collectively $3,000,000 by 396: Jack Salyer, Christine Salyer, Jason Stevens, Clara Stevens, Robert Wong as Trustee of the Robert K. Wong Irrevocable Trust, May Wong as Trustee of the May L. Wong Irrevocable Trust, Larry Friedman, and Sherrie Friedman.

“3. On or before July 30, 2001, the following plaintiffs were paid collectively an additional $100,000 by 396 pursuant to the Peralta Plaintiffs Settlement Agreement: Jack Salyer, Christine Salyer, Jason Stevens, Clara Stevens, Robert Wong as Trustee of the Robert K. Wong Irrevocable Trust, May Wong as Trustee of the May L. Wong Irrevocable Trust, Larry Friedman, and Sherrie Friedman.

“

. . .

5. On or before August 31, 2001, Jack Salyer and Christine Salyer were paid an additional $111,111.11 by 396 pursuant to the Peralta Plaintiffs Settlement Agreement.

“6. On or before August 29, 2001, Jason Stevens and Clara Stevens were paid an additional $111,111.11 by 396 pursuant to the Peralta Plaintiffs Settlement Agreement.

“7. On or before December 31, 2000, Robert Wong as Trustee of the Robert K. Wong Irrevocable Trust and May Wong as Trustee

of the May L. Wong Irrevocable Trust were paid an additional $233,333.33 by 396 pursuant to the Peralta Plaintiffs Settlement Agreement.”^[2]

(3) Analysis

On appeal, Anaheim again argues that the Salyer Plaintiffs have stipulated to the fact that they received a collective $455,555.55 as settlement payments from 396 and that they are bound by that stipulation, such that Anaheim is entitled to offsets totaling that amount. Anaheim says that the matter is a question of law for this court to review de novo.

The Salyer Plaintiffs continue to disagree with Anaheim’s contentions. Also, they cite May v. Miller (1991) 228 Cal.App.3d 404 for the proposition that the trial court’s ruling on a motion for determination of offsets under Code of Civil Procedure section 877 is reviewed for abuse of discretion.

At the outset, we observe the general rule that “[a] ruling by a trial court is presumed correct, and ambiguities are resolved in favor of affirmance. [Citations.]” (Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 631.) We also note that the trial court, in resolving the motion for determination, was required in this case to interpret the stipulation between the parties. “The authorities show that the determinative question is this: was the trial court’s ruling based on reasonable inferences, supported by substantial evidence? It was, and hence we will affirm.” (Id. at p. 627.) The stipulation was a contract between the parties, to be interpreted according to the parties’ objective manifestations of intent as to the terms of their agreement. (Id. at

p. 632.)

Anaheim says that when the parties recited that the Salyers “were paid an additional $111,111.11 by 396 pursuant to the Peralta Plaintiffs Settlement Agreement,”

that plainly meant that the money was paid by 396 as settlement monies, and that Anaheim was clearly entitled to an offset for those monies. Anaheim contends that the point of the factual stipulations was to be able to establish offsets and avoid a trial on the matter. It insists that the intent of the parties would be thwarted if the factual stipulations were interpreted to mean there would be a later battle over whether the monies recited to have been received from 396 pursuant to the Peralta Plaintiffs Settlement Agreement were to be offset or not.

The Salyer Plaintiffs, on the other hand, emphasize the portion of the factual stipulations stating that the monies were paid “pursuant to the Peralta Plaintiffs Settlement Agreement” (italics added), and remind us that the settlement agreement contains language about the pass through of insurance monies from the homeowners insurers through 396 to themselves. The Salyer Plaintiffs also highlight the introductory language of the factual stipulations stating that they reserved their arguments as to whether “payments received pursuant to the Peralta Plaintiffs Settlement Agreement, . . . and from their insurers are a collateral source.” They also point out Attorney Wolfe’s December 6, 2002 and September 30, 2005 declarations to the effect that the monies in question were pass through insurance monies, not monies paid in settlement of claims against 396.

“Here, in order to resolve the dispute regarding what the parties had agreed to, the court had to draw an inference from the available objective evidence regarding the parties’ contractual intent. Specifically, the court had to determine, based on the parties’ objective manifestations of agreement and intent, what a reasonable objective observer would believe was the intended purpose and effect of the [factual stipulations].” (Winograd v. American Broadcasting Co., supra, 68 Cal.App.4th at p. 634; see also McKinney v. Kull (1981) 118 Cal.App.3d 951, 955-956.) Substantial evidence supports the court’s determination that the recitations concerning the receipt of the disputed

monies did not constitute an agreement that the monies were intended to be offset. The introductory language of the factual stipulations made clear that the Salyer Plaintiffs reserved their rights to make arguments that the identified sums of money were from a collateral source. Moreover, the individual paragraphs containing recitals about the particular sums received made clear that they were paid pursuant to the Peralta Plaintiffs Settlement Agreement, and that document in turn makes clear that the homeowners insurance carriers were to be pursued and any monies received from them were to be divided and passed through in part from 396 to the Salyer Plaintiffs.

Furthermore, Code of Civil Procedure section 877 has bearing on the matter. It provides in part: “Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort, . . . it shall have the following effect:

(a) It shall not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater.

(b) It shall discharge the party to whom it is given from all liability for any contribution to any other parties. . . .”

The Salyer Plaintiffs contend that Anaheim is not entitled to any offset with respect to the monies in question because they were paid by their respective homeowners insurance carriers in order to obtain releases of insurance bad faith and breach of contract claims. Since Anaheim was not claimed to be liable for the tort of insurance bad faith in connection with the handling of the claims against the Salyer Plaintiffs, Anaheim cannot be entitled to an offset under Code of Civil Procedure section 877.

However, Anaheim argues that there was no evidence whatsoever to back up the Salyer Plaintiffs’ assertion that the monies in question were insurance monies paid in settlement of bad faith and breach of contract claims. It downplays the September 30,

2005 declaration of Attorney Wolfe on this matter, calling it “self-serving.” Anaheim also maintains, without citation to authority, that the hearing on the matter was insufficient and that it was entitled to a trial on the issue of whether the collective monies purported to be insurance monies were indeed as represented. Having failed to support that argument with citation to authority, the argument is waived. (People v. Morse (1993) 21 Cal.App.4th 259, 275.)

Moving on, Anaheim mentions a May 17, 2002 brief that the Salyer Plaintiffs filed and says that they acknowledged having received the total sums of $1,042,483.92, $1,280,905.05, and $563,913.54, respectively. Anaheim asserts that these dollar figures included the amounts now claimed to be insurance monies and that the Salyer Plaintiffs long ago conceded that the amounts should be offset. However, Anaheim has not seen fit to include a copy of this brief in the record on appeal, and we do not know what underlying dollar figures comprised the recited total amounts. Moreover, we observe that the brief was filed before the extensive oral argument that later took place with respect to the monetary calculations and before Attorney Wolfe had filed an explanatory declaration.

In addition, Anaheim says that even if the Salyer Plaintiffs’ assertions were “factually accurate,” they would still lose on the law. Anaheim cites Black v. County of Los Angeles (1976) 55 Cal.App.3d 920 in support of its position. In Black, the plaintiffs sued the county and certain of its employees for damages suffered in connection with an automobile accident. The county filed a cross-complaint against the driver of the car that had purportedly caused the accident. (Id. at pp. 923-924.) Verdicts were rendered against the defendants. (Id. at p. 924.) The defendants sought to have the verdicts reduced by the amount of $70,000, the amount of the settlement between the plaintiffs and the driver of the car. (Id. at p. 925.) Apparently, $30,000 of that amount represented the driver’s insurance policy limits. The remaining $40,000 was purportedly paid by the

insurance carrier “under threat of a claim for [willful] bad faith failure to settle within policy limits.” (Id. at pp. 925, 928.) The trial court permitted a $30,000 reduction only. (Id. at p. 925.)

On appeal, the defendants asserted that they should have received a reduction for the entire $70,000 amount. (Black v. County of Los Angeles, supra, 55 Cal.App.3d at p. 933.) The appellate court stated that the language of Code of Civil Procedure section 877 made “clear that the defendants [were] entitled to have the claims against them reduced ‘in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater.’ (Code Civ. Proc., § 877.)” (Black v. County of Los Angeles, supra, 55 Cal.App.3d at

p. 934.) The court, in applying section 877, then stated: “It is clear that the amount stipulated to was $70,000. It therefore is immaterial under the statute that only $30,000 was paid under the limits of the policy . . . . In our view, Code of Civil Procedure section 877 would compel a reduction of the judgments against appellants in the full sum of $70,000 as they request . . . .” (Ibid.)

According to Anaheim, Black v. County of Los Angeles, supra, 55 Cal.App.3d 920 compels the conclusion that the entire $455,555.55 should be offset, because the Salyer Plaintiffs so stipulated. But the point of the matter is that the factual stipulations are not that clear. The Salyer Plaintiffs stipulated to having received those amounts from 396 pursuant to the Peralta Plaintiffs Settlement Agreement. But they did not stipulate as to the underlying nature of the amounts received pursuant to that settlement agreement and they did not specifically stipulate that the those particular amounts were to be offset in favor of Anaheim. In fact, they reserved their right to argue over the source of the funds. Impliedly, they reserved their right to argue over whether the enumerated amounts were to be offset or not.

Anaheim quotes a sentence of our prior opinion wherein we stated: “We agree that the offset should include the total amount of the settlement payments 396 made to the Salyers, whatever that total may be.” Anaheim omits to quote the remainder of the paragraph, wherein we described the manner in which offsets pertaining to mortgage payments should be calculated. It also omits to quote our concluding directions to the trial court with respect to the Salyer offsets: “We remand the Salyer judgment to the trial court with directions to determine the proper amount of the offset, taking into consideration the total amount 396 paid to the Salyers in the form of settlement payments, the amount 396 paid for the assignment of the promissory note and reconveyance of the deed of trust, and the amount of any debt forgiveness. The rule enunciated in Smith [v. County of Los Angeles (1989)] 214 Cal.App.3d 266, regarding offsets, shall apply. The court shall modify the Salyer judgment to include the appropriate offset as so determined.”

We said nothing about monies paid with respect to homeowners insurance settlements, because no such issue had been raised in the prior appeal. Our direction to the trial court to determine the amount of money 396 paid to the Salyers in the form of settlement payments did not require the trial court to include in that amount monies paid, not in settlement, but as a pass through of homeowners insurance settlement funds. In the prior appeal, we could tell that the numbers did not add up, but we did not know why, so we sent the case back. Anaheim made no suggestion that insurance monies were at issue, even though the record reflects that it had reason to know that they were. Our remarks were not intended to resolve issues that had not been raised.

C. Prejudgment Interest:

On remand, Anaheim requested that after the trial court redetermined the offsets, it also recalculate the amounts of prejudgment interest, based on the adjustments

to the principle amounts of the damages awards. The Salyer Plaintiffs opposed the recalculation, arguing that, in our prior opinion, we had determined that Anaheim had waived the issue. The trial court stated that it was bound by this court’s opinion and therefore could not readjust the prejudgment interest calculation.

Anaheim claims this was error. It says this court’s prior opinion only addressed the interest rate, not the manner in which that interest rate was applied. We agree.

In our prior opinion we said, “Anaheim contends, with respect to all of the other judgments, that the court incorrectly applied a prejudgment interest rate of seven percent. In support of this contention, Anaheim cites a December 11, 2002 minute order in which the court stated: ‘[396] is entitled to pre-judgment interest at the rate of seven percent (7%).’ This order pertains only to 396’s judgment. It does not apply to the judgments in favor of the other parties. As to all other parties, Anaheim has failed to show that the court awarded prejudgment interest at the rate of seven percent, and Anaheim’s argument is deemed waived. (Del Real v. City of Riverside [(2002)] 95 Cal.App.4th [761,] 766, 768.)”

In other words, in the first appeal, Anaheim did not challenge the Salyer Plaintiffs’ entitlement to prejudgment interest on their inverse condemnation awards. (Customer Co. v. City of Sacramento (1995) 10 Cal.4th 368, 390 [prevailing inverse condemnation plaintiff entitled to prejudgment interest from time damage occurs].) Rather, it simply complained that the trial court had applied the wrong interest rate. We held that Anaheim had waived its argument about the particular interest rate, because it had failed to demonstrate what interest rate the trial court applied. Nothing in our opinion was intended to preclude a recalculation of prejudgment interest based on changes in the principle amounts of the damages awards on remand after the first appeal.

We again remand the judgments, this time for a recalculation of prejudgment interest based on changes in those principle amounts.

D. Postjudgment Interest:

Anaheim requests that, out of an abundance of caution, we specifically direct the trial court to recalculate postjudgment interest as well. The Salyer Plaintiffs voice no objection to this request. Accordingly, we direct the trial court, on remand, to recalculate not only the prejudgment interest, but also the postjudgment interest as appropriate. (Snapp v. State Farm Fire & Cas. Co. (1964) 60 Cal.2d 816, 818-821.)

E. Attorney Fees with Respect to First Appeal:

In their motion for determination of offsets, the Salyer Plaintiffs, relying on Code of Civil Procedure section 1036, sought attorney fees incurred on the first appeal. Code of Civil Procedure section 1036 provides: “In any inverse condemnation proceeding, the court rendering judgment for the plaintiff by awarding compensation . . . shall determine and award . . . to the plaintiff, as a part of that judgment . . . , a sum that will, in the opinion of the court, reimburse the plaintiff’s reasonable costs, disbursements, and expenses, including reasonable attorney, appraisal, and engineering fees, actually incurred because of that proceeding in the trial court or in any appellate proceeding in which the plaintiff prevails on any issue in that proceeding.”

The Salyer Plaintiffs argued that, in the first appeal, they prevailed on every issue, except that this court remanded their judgments for a determination of the appropriate offsets. Because Code of Civil Procedure section 1036 only requires that they prevail on “any issue,” the Salyer Plaintiffs claimed an entitlement to fees under the statute. They claimed attorney fees in the amounts of $58,100 for the Salyers, $58,100 for the Stevenses, and $50,962 for the Wongs, based on hours worked during the appeal

multiplied by certain hourly rates. The Salyer Plaintiffs acknowledged having received a collective attorney fees award exceeding $1 million at the conclusion of trial.

In response to the Salyer Plaintiffs’ request for additional attorney fees on appeal, Anaheim argued that they were entitled to no fees at all, because they had not incurred any on appeal. Anaheim pointed out that the Salyer Plaintiffs had previously claimed to have a contingency fee agreement with their attorneys. It then argued that because the first appeal had yielded no additional recovery for any of the Salyer Plaintiffs, and indeed that the judgments should be reduced because of offsets mandated by this court, the Salyer Plaintiffs could owe no additional attorney fees under the contingency fee agreement.

In support of its position, Anaheim cited Andre v. City of West Sacramento (2001) 92 Cal.App.4th 532. In Andre, the trial court awarded the inverse condemnation plaintiff $10,587.50 in damages. (Id. at p. 534.) She then sought attorney fees pursuant to Code of Civil Procedure section 1036. Although the plaintiff had a contingency fee agreement, she declined to disclose the contents of the agreement. Instead, she sought an attorney fees award based on her attorneys’ hourly rates and time expended. (Ibid.) The court awarded her $54,107.33 in attorney fees. (Id. at p. 535.) The defendant appealed, contending that the provisions of section 1036 were not satisfied inasmuch as the plaintiff had not “actually incurred” $54,107.33 in attorney fees. (Ibid.) The appellate court agreed. (Id. at p. 539.) It reversed the attorney fees award, stating, “Plaintiff did not introduce any evidence at trial to establish the amount of attorney fees she was obligated to pay. Instead, plaintiff emphasizes her entitlement to ‘reasonable’ attorney fees. She ignores the statute’s second requirement: While the fees must be reasonable, they must also be ‘actually incurred.’ If plaintiff did not incur $54,107.33 in attorney fees, she cannot recover that amount, no matter how ‘reasonable’ such an award might be in the abstract.” (Id. at pp. 535-536.)

In their reply to Anaheim’s opposition to the motion for determination, the Salyer Plaintiffs endeavored to show both what attorney fees were actually incurred under their contingency fee agreement and why the amount of requested fees was reasonable. The Salyer Plaintiffs claimed that, on account of the appeal, “the City of Anaheim [would] have to pay post judgment interest to the Salyer Plaintiffs[] that did not exist before the appeal.” They asserted that, under their contingency fee agreement, they incurred attorney fees equal to one-third of the postjudgment interest accruals. They did not claim that the entire amount was recoverable as attorney fees, however. They adjusted the amount downward to reflect the fact that not all of the attorney fees were incurred with respect to the inverse condemnation cause of action. Using this methodology, the Salyer Plaintiffs contended that they would be entitled to attorney fees of $61,279.91, $64,074.17, and $56,621.02, respectively. This, they emphasized, was more than they were requesting in their motion.

At the hearing on the motion for determination of offsets, Anaheim argued that there were two major flaws in the Salyer Plaintiffs’ reasoning. First, Anaheim asserted that the postjudgment interest did not accrue as a result of the appellate proceedings, inasmuch as the appellate court did not award anything new. Rather, the interest accrued on account of the awards in the trial proceedings and the mere passage of time. Second, Anaheim insisted that the amount of fees incurred under the contingency fee agreement was actually reduced, on account of the appellate ruling. That is to say, because the effect of the appellate ruling was to increase the amount of offsets in favor of Anaheim, it thereby reduced the amounts of the judgments in favor of the Salyer Plaintiffs. Furthermore, Anaheim maintained that the amount by which the judgments were reduced exceeded the amount of the postjudgment interest accruals. In other words, there was a net loss in the total amounts awarded to the Salyer Plaintiffs, taking both offsets and postjudgment interest accruals into account. Because there was a net loss,

there would be a reduction in the total attorney fees due under the contingency fee agreement. Anaheim argued that, in fact, the Salyer Plaintiffs’ attorneys would owe them a refund, if attorney fees had already been paid.

Finally, Anaheim drew to the court’s attention the fact that the Salyer Plaintiffs did not support their request for attorney fees with any declaration or other evidence to show what fees were actually incurred under the contingency fee agreement. Rather, their motion was supported only by a declaration stating the number of hours worked on the appeal. The Salyer Plaintiffs’ reply to Anaheim’s opposition to the motion for determination of offsets was not supported by any declaration or other evidence at all. Moreover, the proffered calculations of contingency fee amounts that would be owing on certain interest accruals did not take into consideration the fact that the overall damage awards were being reduced and that, therefore, the total contingency fees should be reduced.

In response to this extensive argument, the trial court concluded that the attorney hours worked and the hourly rates applied, as described in the motion for determination, were reasonable considering the massive nature of the appeal. It awarded the attorney fees sought in the motion, without requiring evidence as to the amount of fees actually incurred under the contingency fee agreement.

We agree with Anaheim that this was error. As the court in Andre v. City of West Sacramento, supra, 92 Cal.App.4th 532 explained, “Here, . . . plaintiff[s] did not introduce evidence to demonstrate the amount of attorney fees actually incurred. . . . To receive an award of fees under section 1036, the court must first determine what fees were actually incurred. It must then assess whether the fees are reasonable. In other words, the fees actually incurred are a ceiling to any fee award; fees may be reduced because they are unreasonable and pose an unnecessary burden on public funds, but they cannot be increased beyond what was ‘actually incurred.’” (Id. at p. 537.) We remand

the matter to the trial court for a determination of the total attorney fees actually incurred under the contingency fee agreement through both trial and the first appeal, taking into consideration both adjustments to the original judgment amounts on remand and postjudgment interest accruals. After the trial court determines the amount of any attorney fees actually incurred over and above the sums awarded as attorney fees as part of the original judgments, the trial court shall then determine (1) whether the requested fees are less than or equal to such amount, and (2) if the requested fees are reasonable.

III

DISPOSITION

We affirm the judgments to the extent they disallow offsets in favor of Anaheim with respect to the challenged $455,555.55 in total insurance company payments. We reverse the judgments to the extent the prejudgment interest included therein is calculated on the original damage awards before remand following the first appeal. The trial court is directed to recalculate both prejudgment and postjudgment interest consistent with this opinion and to modify the judgments accordingly. We reverse the award of attorney fees with respect to the first appeal and direct the trial court to readdress the request for attorney fees in light of the two-step process enunciated in

Andre v. City of West Sacramento, supra, 92 Cal.App.4th 532 and the instructions

expressed herein. In the interests of justice, each party shall bear its own costs on appeal.

MOORE, J.

WE CONCUR:

SILLS, P.J.

O’LEARY, J.

Publication courtesy of California pro bono lawyer directory.

Analysis and review provided by Chula Vista Property line attorney.

^[1] Orange County Superior Court Case No. 763258 has been consolidated with Case Nos. 773074; 774598; 776313; 776551; 776944; 777629; 777868; 779623; 779922; 780284; 780863; 780888; 781648; 782184; 783108; 784787; 784970; 792383; 805227; 807313; and 809688.

^[2] The judgments in favor of Larry and Sherrie Friedman are not at issue in this appeal.