Buma v. The Chelsea Co.

Filed 12/7/07 Buma v. The Chelsea Co. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Andrew P. Banks, Judge. Affirmed.

Stuart W. Knight for Defendants and Appellants.

Allan Dean Epstein for Plaintiff and Respondent.

* * *

Defendants The Chelsea Company, Daybreak Group, Inc. (Daybreak), and John Rigsby appeal from a judgment quieting title to certain real property in favor of plaintiff Donald Buma and awarding attorney fees to plaintiff. They contend the court made various evidentiary errors. They further contend plaintiff could not rely upon a deed of trusts attorney fee provision because he did not bring an action on the contract. We see no abuse of discretion in the courts evidentiary rulings. And because Daybreak sought to foreclose on the property pursuant to the deed of trust, plaintiff could recover his attorney fees pursuant to its terms. We affirm.

FACTS

Plaintiffs brother owned real property in Buena Park. He borrowed $58,000 from Household Finance Corporation (Household) in 1991 pursuant to a promissory note, secured by a recorded deed of trust. Plaintiffs brother and Household reached an agreement in 1997 that Household would consider the note paid in full in exchange for a payment of $10,000. Plaintiffs brother made the payment.[1]

Nonetheless, Household sold the promissory note and assigned the deed of trust to Daybreak for $7,500 in 2002. Daybreak contacted plaintiffs brother, who explained he had repaid the loan. Daybreak recorded a notice of default against the property.

Plaintiffs brother contacted Household. Household contacted Daybreak and offered to refund the $7,500 it had paid to buy the note. Daybreak demanded twice that amount, which Household refused to pay. Daybreak ceased its foreclosure efforts.

Plaintiffs brother conveyed the property to plaintiff in 2004. Plaintiff discovered the notice of default when he tried to refinance the property. Plaintiff contacted Household, which recorded a reconveyance of the deed of trust. Daybreak discovered the reconveyance and recorded a second notice of default. It intended to foreclose on the property.

Plaintiff filed this action. He asserted causes of action for quiet title, slander of title, and injunctive relief. The court conducted a bench trial. A Household branch manager testified the loan was settled in full in 1997, based on her review of Household computer records.

The court issued a minute order, ruling in plaintiffs favor on the quiet title and injunctive relief causes of action. It denied plaintiffs prayer to recover attorney fees. Plaintiff moved the court to reconsider awarding attorney fees. Meanwhile, the court entered judgment quieting title to plaintiff, enjoining defendant from foreclosing on the deed of trust, and providing that attorney fees are to be determined. Defendants filed a notice of appeal from the judgment and Any Order for Attorney Fees. The court ultimately awarded $37,500 in attorney fees to plaintiff.

DISCUSSION

Defendants Identify No Reversible Evidentiary Error

Defendants assert the court made several evidentiary errors. The trial court is vested with broad discretion in ruling on the admissibility of evidence. [Citation.] [T]he courts ruling will be upset only if there is a clear showing of an abuse of discretion. [Citation.] The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. . . . Moreover, even where evidence is improperly excluded, the error is not reversible unless it is reasonably probable a result more favorable to the appellant would have been reached absent the error. (Tudor Ranches, Inc. v. State Comp. Ins. Fund (1998) 65 Cal.App.4th 1422, 1431.)

Defendants contend the court wrongly admitted the Household branch managers testimony. They claim she gave opinion testimony about Household computer records. But she testified simply that the records showed the loan had been settled in full. She did not offer any opinion testimony.

Defendants also claim the Household computer records about which the branch manager testified, exhibits 8 and 9, were not admitted into evidence. Wrong. Defendants objected to exhibit 8 on the ground it contained improper conclusions not covered by the business records exception. The court informed defendants, If there are things that you want redacted because they constitute those opinions . . . you have to identify them. And Ill rule on them. . . .  [] But the whole record doesnt stay out it if it has appropriate matter. The court clarified that defendants counsel [is] going to tell me specifically what portions need to be redacted or excised because theyre opinions. Defendant later objected to exhibit 9 on the same grounds. The court ruled, Its received subject to redaction, unless we redact the entirety in which case [it is] going to not be received, [exhibit] 8 as well as 9. Thus, the court admitted exhibits 8 and 9, subject to redaction proposed by defendants. Defendants concede they never proposed any such redaction. Thus, the exhibits were admitted into evidence in their entirety.

On a similar issue, defendants contend the court admitted the Household computer records, if at all, in violation of the hearsay rule. But the computer records fell within the business records exception. (Evid. Code, 1271.)[2] The branch manager identified the records and explained she had become familiar with their mode of preparation during her 10 years of experience at Household. Her testimony suggested the records were made in the regular course of business, at or near the time the underlying events occurred, and were trustworthy. (Ibid.) The court did not abuse its discretion by finding the records were business records. [3]

Contrary to defendants claim, the branch manager could establish the business records exception even though she did not create the records. The custodian or other qualified witness who vouches for the records authenticity must be knowledgeable about the identity of the record and its mode of preparation; but he or she need not necessarily be the person who observed or recorded the act or event. (Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2006) 8:1639.)

Defendants further contend the court wrongly allowed plaintiffs brother to testify in the narrative. Defendants failed to preserve this claim by objecting on the specific ground of improper narrative. (Evid. Code,  353, subd. (a).) Also, whether a witness may testify in the narrative is primarily addressed to the sound discretion of the trial court, and unless prejudice is shown, it can scarcely be said that such action amounted to an abuse of discretion. (Silva v. Dias (1941) 46 Cal.App.2d 662, 664.) Defendants contend they suffered prejudice because plaintiffs brother would say anything. The witnesss credibility was for the court, sitting as the factfinder in this bench trial, to decide. We see no abuse of discretion.

Finally, defendants contend the court wrongly excluded evidence to support their unclean hands defense. During cross-examination of plaintiffs brother, defendants asked him whether plaintiff had paid him anything for the property. The court sustained plaintiffs relevance objection. Defendants unsuccessfully argued the question was relevant because it would tend to show plaintiffs brother fraudulently transferred the property to plaintiff to evade tax obligations.[4]

The court did not abuse its wide discretion . . . to decide the relevance of [the] proferred evidence. (Mesnick v. Caton (1986) 183 Cal.App.3d 1248, 1262 [affirming exclusion of unclean hands evidence].) To be sure, it is a familiar maxim that equity may refuse to grant relief to a plaintiff who comes into court with unclean hands. (Id. at p. 1263.) Ordinarily, however, this maxim applies to conduct between the litigants themselves, not to conduct of a litigant towards a nonparty. The courts cannot use this doctrine to penalize a litigants supposed inequitable conduct which is both unrelated to a matter before the court and addressed toward a party not involved in that pending matter. (Id. atp. 1263 [plaintiffs encroachment on one neighbors property did not bar him from quieting title against another neighbors claim].) The alleged fraudulent transfer may be pursued, if at all, by the appropriate agencies. We note only that it does not impede plaintiffs quiet title action.

The Court Permissibly Awarded Attorney Fees to Plaintiff

The court found plaintiff was entitled to recover attorney fees incurred in prosecuting the quiet title and injunctive relief causes of action to the extent Plaintiff was seeking to remove documents from title that Defendant recorded in connection with its pursuit of its remedies under the Deed of Trust. We independently review the courts determination whether a legal basis exists to award attorney fees. (Sessions Payroll Management, Inc. v. Noble Construction Co. (2000) 84 Cal.App.4th 671, 677.)

The deed of trust contains an attorney fees provision. It provides, upon Borrowers breach of any covenant or agreement of Borrower in this Deed of Trust . . . Lender . . . may invoke the power of sale and any other remedies permitted by applicable law. Lender shall be entitled to collect all reasonable costs and expenses incurred in pursuing the remedies provided in [this] paragraph . . . including, but not limited to, reasonable attorney[] fees.

A prevailing party may recover attorney fees as part of their cost award if authorized by contract. (Code Civ. Proc.,  1033.5, subd. (a)(10)(A) & (B).) In any action on a contract, where the contract specifically provides that attorney[] 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 attorney[] fees in addition to other costs. ( 1717, subd. (a).)

Thus, despite its unilateral phrasing in favor of the lender, the attorney fees provision authorizes the borrower to recover attorney fees in an action seeking to prevent the lender from enforcing its rights under the deed of trust. The primary purpose of section 1717 is to ensure mutuality of remedy for attorney fee claims under contractual attorney fee provisions. (Santisas v. Goodin (1998) 17 Cal.4th 599, 610 (Santisas).) [W]hen a party litigant prevails in an action on a contract by establishing that the contract is invalid, inapplicable, unenforceable, or nonexistent, section 1717 permits that partys recovery of attorney fees whenever the opposing parties would have been entitled to attorney fees under the contract had they prevailed. (Id. at p. 611.) And the attorney fees provision applies to the parties here as the successors and assigns of the original parties to the deed of trust.

Defendants contend plaintiff was not entitled to recover attorney fees because this is not a contract action on the deed of trust. California courts liberally construe the term on a contract as used within section 1717. [Citation.] As long as the action involve [s] a contract it is on [the] contract within the meaning of section 1717. (Dell Merk, Inc. v. Franzia (2005) 132 Cal.App.4th 443, 455 (Dell Merk).)

Plaintiffs quiet title cause of action sufficiently involved the deed of trust, such that it was on the deed of trust. Daybreaks principal testified it had recorded a notice of default against the property and was pursuing a foreclosure sale when plaintiff filed this action. Daybreak voluntarily suspended the foreclosure sale pending this action. Plaintiffs quiet title cause of action was essentially a defense to foreclosure pursuant to Daybreaks rights under the deed of trust. Because the foreclosure would be undoubtedly on the deed of trust, entitling Daybreak to recover its attorney fees, plaintiff should recover his attorney fees in this action. ( 1717, subd. (a); Santisas, supra,17 Cal.4th at pp. 610-611 [prevailing party may recover attorney fees under contract if opposing party would have recovered fees had it prevailed]; Dell Merk, supra, 132 Cal.App.4th at p. 455 [liberally interpreting, on a contract].)

Similarly, plaintiffs claim for injunctive relief sought and obtained an injunction barring defendants from foreclosing on the deed of trust. This, too, was an action on the deed of trust. ( 1717, subd. (a); cf. Baugh v. Garl (2006) 137 Cal.App.4th 737, 742-743 [injunction enforcing contract is an action on the contract justifying attorney fees award].)

DISPOSITION

The judgment is affirmed. Plaintiff shall recover his costs on appeal.

IKOLA, J.

WE CONCUR:

ARONSON, ACTING P. J.

FYBEL, J.

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Analysis and review provided by San Diego County Property line attorney.

[1] Some evidence suggested the repayment amount was $11,000.

[2] Evidence Code section 1271 provides, Evidence of a writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule when offered to prove the act, condition, or event if: [] (a) The writing was made in the regular course of a business; [] (b) The writing was made at or near the time of the act, condition, or event; [] (c) The custodian or other qualified witness testifies to its identity and the mode of its preparation; and [] (d) The sources of information and method and time of preparation were such as to indicate its trustworthiness.

[3] Defendants claim that the note could not be modified by an oral agreement is without merit. A contract in writing may be modified by an oral agreement to the extent that the oral agreement is executed by the parties. (Civ. Code, 1698, subd. (b).) Here, the evidence showed performance of the modified note by both parties. Plaintiffs brother paid the agreed sum of $10,000, and Household accepted that sum as payment in full.

All further statutory references are to the Civil Code unless otherwise stated.

[4] Defendants also contended the alleged fraudulent transfer was relevant to showing plaintiff was not a real party in interest. But plaintiff was the propertys record owner. He is the real party in interest in this quiet title action.