Filed 1/31/18 Thompson v. T.D. Service Company CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

Paul Thompson and Kathleen Thompson (the Thompsons) appeal from the trial court’s order awarding attorney fees to T.D. Service Company (TDS). TDS was the trustee in a foreclosure sale of property associated with the Thompsons. The Thompsons were not the borrowers, but they guaranteed repayment of a loan made to the borrower, 620 Third Street, LLC (LLC). When the borrower defaulted and the Thompsons did not repay the loan, the lender sued both the borrower and the Thompsons, and initiated non-judicial foreclosure proceedings.

Instead of making the authorized bid of $1.767 million, as instructed by the lender, TDS submitted a bid in the amount of the total indebtedness under the loan, some $4.476 million. TDS rescinded the bid and completed a second sale as authorized by the lender. Based on this mistake by TDS at the first foreclosure sale, the Thompsons and LCC cross-complained against TDS. Later, the Thompsons, as purported assignees of the lender’s claims, filed a separate complaint against TDS. After a court trial, the court entered judgment in favor of TDS on the cross-complaint and the complaint. The court awarded TDS approximately $400,000 in attorney fees.

On appeal, the Thompsons contend the court erred as a matter of law in making an award of attorney fees, or abused its discretion in awarding “excessive and duplicative fees” to TDS for defending against the cross-complaint. We affirm.

FACTUAL AND PROCEDURAL HISTORY

1. The Loan

Luther Burbank Savings (LBS) provided a loan to LLC in the amount of $3,945,100 to purchase the real property located at 620 Third Street, in Santa Rosa, California (the Property). The loan was evidenced by a promissory note, dated January 3, 2007, as modified on March 6, 2008 (collectively, the Note), and it was secured by a deed of trust (Deed of Trust). Paul Thompson, the manager of PK Property LLC, which, in turn, was the sole member of LLC, signed the Note and the Deed of Trust. The Thompsons executed a repayment guarantee to induce LBS to make the loan (the Guaranty).

B. The LBS Complaint and the Foreclosure Proceedings

In early 2009, when LLC defaulted on the loan and the Thompsons did not repay it, LBS filed a complaint against LLC and the Thompsons seeking judicial foreclosure, specific performance, and alleging the Thompsons breached the Guaranty. Later, LBS initiated non-judicial foreclosure proceedings against the Property. LBS substituted TDS as its trustee under the Deed of Trust to complete the foreclosure.

An Agreement for Services governed the relationship between LBS and TDS. TDS agreed to indemnify LBS for attorney fees incurred by LBS “to the extent caused by [TDS’s] breach of this Agreement or by the negligence or willful misconduct of [TDS].” LBS and TDS could not assign any rights under the Agreement for Services “without the prior written consent of the other party.”

At the trustee’s sale on December 16, 2009, TDS made an opening bid for the Property in the amount of $4,476,028.46, which represented the total outstanding indebtedness on the loan, instead of the authorized bid of $1,767,000. TDS prepared a trustee’s deed upon sale, but it was not recorded. Less than a week later, TDS rescinded the sale at the instruction of LBS. At a second trustee’s sale, on January 25, 2010, TDS bid $1,767,000 for the Property. No one else bid for the Property, and LBS was declared the high bidder. TDS drafted and recorded a trustee’s deed upon sale based on the second sale.

3. The Thompsons’ Cross-Complaint, LBS’s First Amended Complaint, and the Settlement of the LBS Action

As a result of this irregularity in the foreclosure proceedings, in August 2010, the Thompsons and LLC filed a cross-complaint against TDS, alleging the first trustee’s sale could not be rescinded, and asserting causes of action against TDS for breach of contract and violation of statute.[1] The Thompsons and LLC alleged TDS breached the Deed of Trust and violated statutory obligations by failing to sell the Property for the highest possible price. They alleged they “incurred and will continue to incur expenses in the form of attorneys’ fees, court costs, and other litigation expenses to defend against the [LBS] Complaint, and are entitled to recover such fees (including any fees awarded against them and in favor of [LBS]) . . . from . . . [TDS].”

In September 2010, LBS filed a first amended complaint dismissing LLC as a party, and asserting causes of action against the Thompsons, based on their Guaranty, seeking the deficiency, or, in other words, seeking the difference between the total owed on the loan and its acquisition of the Property for $1,767,000. In their answer, the Thompsons asserted affirmative defenses, including the defense that LBS made a “full credit bid” for the Property at the foreclosure sale, which constituted “a total satisfaction of the secured obligation,” extinguishing the debt, and barring LBS from any further recovery against the Thompsons.

In August 2011, shortly before the scheduled trial date in the LBS action, LBS and the Thompsons settled. The Thompsons agreed to pay LBS $1,950,000 in exchange for the dismissal of LBS’s first amended complaint, and an assignment by LBS of its potential claims against TDS arising from TDS’s processing of the foreclosure.

4. The Thompsons’ Complaint, Consolidation, and the Court’s Statement of Decision

In December 2012, based on the assignment of claims in the settlement agreement with LBS, the Thompsons filed a complaint against TDS for breach of contract, express contractual indemnity, and breach of the implied covenant of good faith and fair dealing. (Thompson et al., v. TD Service Company et al. (Super. Ct. Sonoma County, 2012, No. 252917).) The complaint alleged TDS breached its obligations under the Agreement for Services, and was required to indemnify the lender for the damages the lender suffered as a result of TDS’s actions during the non-judicial foreclosure sale.

In September 2013, the court consolidated the two cases. In October 2014, the Thompsons, LLC, and TDS stipulated to a bifurcated trial, with the first phase to proceed as a court trial of certain legal issues based on stipulated facts. In September 2015, the court issued its statement of decision. Addressing the causes of action in the cross-complaint, the court found that neither the Thompsons nor LLC had standing to sue TDS. The Thompsons did not have standing because they were “guarantors only,” not the borrowers, and the court could not identify any obligations running to them breached by TDS. LLC did not have standing because its corporate status was cancelled, and, even if it was a viable entity, it sustained no damages as a result of TDS’s mistake because it could not be subject to a deficiency judgment following LBS’s non-judicial foreclosure.

With regard to the Thompsons’ complaint, the court found the Thompsons, as purported assignees of LBS, lacked standing to sue TDS. The court found LBS did not have valid causes of action for breach of contract or negligence that could be assigned to the Thompsons because “the second sale appears on its face to have obtained for LBS all of the benefits that LBS intended to achieve by means of the foreclosure.” The court found LBS did not validly assign claims to the Thompsons because the Agreement for Services prohibited assignments without the consent of the other party, and TDS never consented to LBS’s assignment which it made as part of the settlement agreement. The court entered judgment in favor of TDS on the complaint filed by the Thompsons, and on the earlier cross-complaint filed by the Thompsons and LLC.

5. The Court Awards Attorney Fees to TDS

TDS moved for attorney fees against the Thompsons^[2] based on section 1717 of the Civil Code and “the terms of the applicable agreements.” After a hearing, the court granted the motion. The court’s order was based on a proposed order submitted by TDS, and the court added some handwritten notes, which we italicize. The order provides in part:

“[TDS]’s Motion for an Award of Attorneys’ Fees against [the Thompsons] is GRANTED. (See, compl. paras. 20 and 24 and prayer # 2; x-complaint par. 16 and prayer #2)

“1. [The Thompsons] are ordered to pay [TDS] and their counsel of record, Lewis Brisbois Bisgaard & Smith, LLP attorneys’ fees in the amount of $ 175,092.50; after reviewing Docs. in support & opposition, fees and hours are reasonable; fee is lodestar.

“2. [The Thompsons] are ordered to pay [TDS] and their counsel of record, The Dreyfuss Firm attorneys’ fees in the amount of $ 224,910; and after reviewing Docs. in support & opposition, fees and hours are reasonable; fee is lodestar.”

DISCUSSION

On appeal, the Thompsons challenge the award of fees TDS incurred defending against the cross-complaint. The Thompsons make four arguments. First, they contend section 1717 of the Civil Code does not apply because the cross-complaint sought fees as damages, not costs. Second, they contend TDS was not entitled to attorney fees incurred defending against the cross-complaint under the terms of the Deed of Trust, the Note, the Guaranty, or the Agreement for Services. Third, the Thompsons argue the court failed to properly allocate or apportion fees. Fourth, they claim the court “rubberstamped” excessive and duplicative fees.

Assuming, without deciding, that section 1717 of the Civil Code does not apply to the cross-complaint because it sought fees as damages, not costs, or that the terms of the applicable agreements do not entitle TDS to recover the attorney fees it incurred defending against the cross-complaint, we nonetheless affirm the court’s order. We begin with the standard of review.

Standard of Review

“ ‘ “On review of an award of attorney fees after trial, the normal standard of review is abuse of discretion.” ’ ” (Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751.) However, a determination of the legal basis for an attorney fee award is a question of law to be reviewed de novo. (Ibid.) Absent a request for a statement of decision, trial courts are not required to explain the rationale for a fee award. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1140 (Ketchum); Maria P. v. Riles (1987) 43 Cal.3d 1281, 1294; In re Tobacco Cases I (2013) 216 Cal.App.4th 570, 589.) “The absence of an explanation of a ruling may make it more difficult for an appellate court to uphold it as reasonable, but we will not presume error based on such an omission.” (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 67 (Gorman).) Instead, “ ‘ “[a]ll intendments and presumptions are indulged to support [the judgment] on matters as to which the record is silent, and error must be affirmatively shown.” ’ ” (Ketchum, at p. 1140.) We should reverse the fee award if “there is no apparent reasonable basis for the award in the record.” (Gorman, at p. 101.)

II.

The Court’s Decision Not to Allocate Fees Between the Complaint and the Cross-Complaint Was Reasonable

Here, the rationale for the court’s order awarding attorney fees is not clear. Based on the court’s handwritten notes, we can infer it took into account certain allegations from the Thompsons’ complaint and the cross-complaint. But we do not know how those allegations factored into the court’s decision.

We presume the ruling was correct. (Ketchum, supra, 24 Cal.4th at p. 1140.) We focus on whether the Thompsons have shown it was unreasonable for the court to award TDS the attorney fees it incurred defending against the cross-complaint. (Ibid; Gorman, supra, 178 Cal.App.4th at p. 101.) We begin with the part of the fee award the Thompsons do not contest.

1. The Thompsons Do Not Contest TDS’s Entitlement to Attorney Fees Incurred Defending Against Their Complaint

In their complaint, the Thompsons, as purported assignees of LBS’s potential claims against TDS, sued TDS for breach of the Agreement for Services, breach of its implied covenant of good faith and fair dealing, and express contractual indemnity. The Agreement for Services provides that “n the event an action or proceeding is brought regarding this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and its costs and expenses from the other party.” By filing their complaint, the Thompsons brought an action regarding the Agreement for Services, and TDS prevailed on the causes of action in the complaint.

Allocation of fees “is a matter within the trial court’s discretion.” ([i]Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1604 (Amtower).) “Attorney’s fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed.” (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129–130 (Reynolds); see also Drouin v. Fleetwood Enterprises (1985) 163 Cal.App.3d 486, 493 [“Attorneys fees need not be apportioned between distinct causes of action where plaintiff’s various claims involve a common core of facts or are based on related legal theories”].)

“The governing standard is whether the ‘issues are so interrelated that it would have been impossible to separate them into claims for which attorney fees are properly awarded and claims for which they are not’ ” (Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 829–830 (Brown Bark).) Allocation is not required when claims are “ ‘ “inextricably intertwined” ’ [citation], making it ‘impracticable, if not impossible, to separate the multitude of conjoined activities into compensable or noncompensable time units.’ ” (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111 (Abdallah).)[3]

3. The Cross-Complaint and the Complaint Concerned Interrelated Issues

Here, the causes of action in the cross-complaint and the complaint stemmed from TDS’s mistake during the first foreclosure sale. The cross-complaint alleged TDS made a “full credit bid” for the Property at the first trustee’s sale, purported to rescind the sale, and bid much less for the Property at the second trustee’s sale. Based on these allegations, LLC and the Thompsons asserted causes of action against TDS for breach of the Deed of Trust and statutory violations, contending TDS was required to sell the Property for the highest possible price. Similarly, in their complaint, the Thompsons alleged that TDS’s failure to follow LBS’s instructions at the first trustee’s sale breached the Agreement for Services and its implied covenant of good faith and fair dealing, and that its actions were negligent giving rise to indemnity obligations.

Where the court’s award of attorney fees incurred defending against the complaint was justified, and where the complaint and the cross-complaint concerned common issues, then the court had discretion not to allocate fees in its award to TDS. (See Amtower, supra, 158 Cal.App.4th at pp. 1604–1605 [no abuse of discretion by failing to allocate fees where “[a]ll of the causes of action in the pleading relied upon the same factual allegations.”].) Both the cross-complaint and the complaint concerned TDS’s mistake at the foreclosure sale, so the court could reasonably find the activities TDS undertook to defend against the cross-claims were “ ‘ “inextricably intertwined” ’ ” with the activities it undertook to defend against the complaint, “making it ‘impracticable, if not impossible, to separate the multitude of conjoined activities into compensable or noncompensable time units.’ ” (Abdallah, supra, 43 Cal.App.4th at p. 1111.)

In arguing the issues in the cross-complaint and the complaint were not interrelated, the Thompsons contend the cross-complaint focused on the legal issue of whether TDS’s rescission of the first trustee’s sale was proper, but that issue was “irrelevant” to the complaint. They argue the date the complaint was filed provides a “clear line of demarcation” that the court should have utilized to allocate fees. They also contend the attorneys’ description of their work provides “an additional clear line of demarcation” because “The Dreyfuss Firm handled the issues of the foreclosure while Lewis Brisbois handled issues related to the Agreement for Services.” Describing “the propriety of the foreclosure” as “the Cross-Complaint issue,” the Thompsons contend “all work done by The Dreyfuss Firm was noncompensable.”

We are not persuaded by these arguments. First, the court consolidated the two lawsuits. Courts do so when actions “involv[e] a common question of law or fact.” (Code Civ. Proc., § 1048, subd. (a).) The court’s decision to consolidate supports TDS’s argument that the cross-complaint and the complaint raised numerous overlapping issues.

Second, even though the cross-complaint and the complaint address distinct legal questions, the causes of action in both relate to the same underlying factual allegations regarding TDS’s processing of the non-judicial foreclosure sale. We agree with TDS that the same discovery regarding “the manner in which the foreclosure was processed” was necessary for TDS to defend against the causes of action in both the cross-complaint and the complaint. Furthermore, there was some overlap of legal issues because both the cross-complaint and the complaint gave rise to questions of whether the Thompsons has standing to sue TDS.

Third, we reject the Thompsons’ argument that the legal issue of whether TDS’s rescission of the first trustee’s sale was proper was “irrelevant” to the complaint. In the complaint, the Thompsons alleged that TDS’s negligence during the foreclosure proceedings gave rise to indemnity obligations. In its statement of decision, the court found otherwise, determining that TDS “acted properly by promptly correcting its mistake and rescinding the sale based on the erroneous full credit bid.” This determination was related to the court’s conclusion that TDS’s conduct was not negligent. The court decided that “[a]s between [TDS] and LBS, as a result of the rescission of the first foreclosure sale based on the mistaken credit bid, and the subsequent foreclosure sale based on the authorized credit bid of $1,767,000, LBS had no claim against [TDS] for indemnification . . . or for negligence or breach of contract.” The court’s decision indicates the legal issue of whether TDS’s rescission of the first trustee’s sale was proper was relevant to the complaint.

Based on these overlapping issues, the court had discretion not to allocate fees. (Reynolds, supra, 25 Cal.3d at pp. 129–130.) We presume the court determined these issues were inextricably intertwined, making it impractical or impossible to reduce TDS’s fee award. (Ketchum, supra, 24 Cal.4th at p. 1140; Brown Bark, supra, 219 Cal.App.4th at pp. 829–830; Abdallah, supra, 43 Cal.App.4th at p. 1111.)

In arguing otherwise, the Thompsons rely primarily on Sweeney v. McClaran (1976) 58 Cal.App.3d 824. Contrary to the Thompsons’ contention, the case is neither “controlling” nor “dispositive.” In Sweeney, the court reversed an award of attorney fees to an interpleading surety based on its “reading of the interpleader statutes” which led it to conclude “that fees must be limited to those incurred only in pursuit of the stakeholder’s remedy,” and not for other causes of action asserted by the surety. (Id. at p. 830.) The Sweeney case sheds no light on how the trial court could have determined that TDS should not have been compensated for some of the work performed by its attorneys.

The Thompsons also suggest the court should not have awarded fees TDS incurred before the cross-complaint. But they fail to explain in any detail the nature of this work or how the court could have allocated those fees. “The trial court, having heard the entire case, was in the best position to determine whether . . . the issues were so intertwined that allocation would be impossible.” (Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 556.) Having concluded TDS was entitled to attorney fees incurred defending against the complaint, and that the factual and legal issues raised by the complaint and the cross-complaint were interrelated, the Thompsons have not demonstrated the court should have allocated or apportioned fees.

III.

The Thompsons Fail to Establish the Fees Awarded Were Excessive or Duplicative

The Thompsons’ final argument is that the court abused its discretion by “rubber-stamping” excessive and duplicative fee requests. The Thompsons point out that, prior to their complaint, TDS incurred attorney fees for approximately 260 hours of legal work, but, afterwards, it incurred 840 hours. They also complain that Lewis Brisbois billed almost as many hours in one year as The Dreyfuss Firm did in five years.

Considering these arguments, we cannot conclude the court awarded excessive or duplicative fees. Lewis Brisbois associated into the case one month before a scheduled trial date, and it was provided with a voluminous file based on the prior four years of litigation. We may reasonably infer the trial court reviewed counsels’ declarations and the billing records before concluding the fee requests were not excessive or duplicative. (See Ketchum, supra, 24 Cal.4th at p. 1140 [“ ‘ “[a]ll intendments and presumptions are indulged to support [the judgment] on matters as to which the record is silent” ’ ”].)

In arguing the requested fees were excessive or duplicative, the Thompsons rely on In re Vitamin Cases (2003) 110 Cal.App.4th 1041. Their reliance on this case is misplaced because it concerned the settlement of 34 private putative class actions, and attorney fee requests by 52 or more law firms, which raised “the specter of duplicative and superfluous litigation and hence unnecessary fees and costs.” (Id. at p. 1054.) This case raises no similar specter.

Based on In re Marriage of Siegel (2015) 239 Cal.App.4th 944, the Thompsons argue it was an abuse of discretion for the court to award attorney fees in excess of the relief sought in the notice of motion. This claim is meritless. In In re Marriage of Siegel, the family court issued an order far in excess of what was requested, and the former husband had “no way of knowing” the family court would do so. (Id. at p. 954.) But here, while the notice of motion mistakenly requested $392,372.50 in attorney fees and costs, both the memorandum of points and authorities and the declarations in support of the motion put the Thompsons on notice that TDS was requesting over $400,000 in fees.

The Thompsons note the trial court awarded “the full $400,002.50 requested in the attorney’s declarations,”[4] and they contend the trial court failed “to carefully scrutinize the requested fees for duplicative efforts.” Based on the court’s handwritten notes, we can infer it reviewed the documents in support of and in opposition to the motion. We presume the trial court properly considered the briefs, counsels’ declarations and the billing records before making its fee award. (Ketchum, supra, 24 Cal.4th at p. 1140.)

The Thompsons fail to identify any particular entry in the billing records that was duplicative or that indicates the legal work undertaken by TDS’s attorneys was excessive. “General arguments that fees claimed are excessive, duplicative, or unrelated do not suffice.” (Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 564.) The Thompsons have not established it was unreasonable for the court to award TDS approximately $400,000 in attorney fees.

DISPOSITION

We affirm the order granting TDS’s motion for attorney fees. TDS is entitled to costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

_________________________

Jones, P. J.

We concur:

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Simons, J.

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Bruiniers, J.

A148281