Filed 9/23/19 Pacifica Companies v. Patel CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

PACIFICA COMPANIES LLC et al.,

Plaintiffs, Cross-defendants and Appellants,

v.

SHAILESH PATEL et al.,

Defendants, Cross-complainants and Respondents.

D074358

(Super. Ct. No. 37-2012-00092404-
CU-NP-CTL)

APPEAL from an order of the Superior Court of San Diego County, Joel R. Wohlfeil, Judge. Affirmed.

Vantage Law Group and Michael H. Riney for Plaintiffs, Cross-defendants and Appellants.

Vivoli Saccuzzo, Michael W. Vivoli and Jason P. Saccuzzo for Defendants, Cross-complainants and Respondents.

I

INTRODUCTION

This is the second appeal arising from a dispute about a letter of intent agreement between Shailesh Patel and Chhatrala Business House (India) Private LTD (together Patel) and Deepak Israni and Pacifica Companies LLC (together Pacifica) related to a potential development project for property in India. In the first appeal, Pacifica Companies, LLC et al. v. Patel (July 14, 2017, D066885) [nonpub. opn.], opinion modified August 10, 2017 (Pacifica I), we affirmed a judgment on Pacifica’s complaint in favor of Patel and defendants who had not signed the letter of intent agreement: Chhatrala India Hotel Groups, Chhatrala India Hotel Group, Hemant Chhatrala, The Chhatrala Group, and Chhatrala Hotel Group, Inc. (collectively Chhatrala). We also reversed the court’s order denying a request for attorney fees after determining Chhatrala and Patel (together, defendants) were entitled to recover contractual attorney fees based on the letter of intent agreement. We remanded the matter for the court to enter an order awarding reasonable prejudgment attorney fees. The trial court on remand considered and awarded reasonable attorney fees and ordered interest from the date of the original judgment.

The sole question in this appeal is when does interest start to run on the prejudgment attorney fees award: from the date of the original judgment or from the date the court entered the fee award upon remand? We conclude, as did the trial court, interest accrues from the date of the original judgment because our decision in Pacifica I was effectively an upward modification of the judgment directing the court to include prejudgment attorney fees as an item of costs. Therefore, we affirm the order.

II

PROCEDURAL BACKGROUND

The factual background of the dispute between the parties is summarized in our decision in Pacifica I. We describe only the pertinent procedural background related to the issue on appeal.

A

A jury determined a joint venture existed between Patel and Pacifica based on a letter of intent agreement for a development project in India. The jury also found Patel did not knowingly act against Pacifica’s interests in connection with the proposed project. The trial court entered judgment on July 24, 2014 in favor of defendants on Pacifica’s causes of action for breach of fiduciary duty and alter ego.

As prevailing parties, defendants sought an award of more than $2.4 million in attorney fees incurred prior to the judgment. Pacifica opposed the motion for fees by contending the letter of intent agreement did not support a claim for attorney fees because it was only an agreement to enter into a future contract that would contain a provision for attorney fees, a position consistent with a prior order from the trial court. Pacifica did not specifically challenge the reasonableness of the fees requested. The court awarded defendants costs as the prevailing parties. However, the court denied the motion for attorney fees concluding the letter of intent agreement did not provide for recovery of attorney fees because it contemplated a future agreement would include such a provision. Given the ruling, the trial court did not address the reasonableness of the requested fees.

B

In Pacifica I, we affirmed the judgment on the merits, but we reversed the court’s order denying defendants their attorney fees because we concluded the letter of intent agreement was sufficiently certain to be applicable and enforceable in the parties’ dispute regarding the scope of the letter of intent agreement. Our original decision remanded the matter with direction for the trial court to enter a new order awarding defendants their requested attorney fees because Pacifica had not challenged the reasonableness of the fees in response to the motion for fees.

Pacifica petitioned for rehearing stating it had not opposed the reasonableness of the requested fees in the trial court because it did not believe the court would change its view that the letter of intent agreement did not contain an enforceable claim for attorney fees. Pacifica asked this court to allow the trial court on remand to determine the reasonableness of the amount of attorney fees claimed. We issued an order denying rehearing but modifying the disposition and directing the trial court “to determine and award reasonable attorney fees to all defendants.”

C

After remand, defendants refiled their motion for attorney fees with the same evidence and supporting declarations filed in 2014. They again sought more than $2.4 million in prejudgment attorney fees with a lodestar enhancement.

Pacifica obtained permission from the trial court to engage in discovery related to the fee motion. Pacifica then opposed the motion for attorney fees disputing the reasonableness of billed hours and the fees charged by the attorneys for Chhatrala based on a fee dispute between Chhatrala and their attorneys. Pacifica contended the court should reduce the recoverable hours for the firm by more than a third. It sought to reduce the hours charged by other attorneys who represented Patel by 10 percent based on alleged file-churning by Chhatrala’s attorneys. Pacifica also disputed the request for a lodestar enhancement. Pacifica finally contended interest on the award should not accrue from the original judgment because our disposition in Pacifica I amounted to a reversal of the prior judgment, not merely a modification.

In its tentative ruling, the court commented about the exceptional ability and skill of the lawyers in representing their respective clients in this case. The court noted Pacifica’s counsel informed the jury that Pacifica’s principal, Israni, is a billionaire and it appeared to the court Pacifica spared no expense in prosecuting its claims. The court said the skill and success achieved by the defendants’ attorneys was impressive.

The court awarded defendants a total of $1,420,595.16 for prejudgment attorney fees. The award included 72 percent of the fees requested for Chhatrala’s attorneys. The court denied the request for a 1.5 lodestar enhancement.

Pacifica objected to a proposed amended judgment that provided for interest on the award from the date of the original judgment. Pacifica contended interest should accrue from the date of the fee award because our decision in Pacifica I constituted a reversal. Defendants moved for postjudgment interest on the award of prejudgment attorney fees contending the interest should accrue from the date of the original judgment because our decision in Pacifica I constituted a modification of the judgment.

The trial court awarded interest on the prejudgment attorney fees from the date of the original judgment. The court noted the original judgment determined defendants were entitled to costs as the prevailing parties and our decision in Pacifica I consisted of “an upward adjustment of the original award for costs, as set forth within the original judgment.” The trial court further stated, “The attorney fee award would have been included in the original judgment in the same amount, if not for this Court’s error.” Interest on the prejudgment fees amounted to $531,263.73.

III

DISCUSSION

A

The issue on appeal is whether interest on the award of prejudgment attorney fees accrues from the date of the original judgment or from the date the award was entered on remand. The parties agree this is a question of law, which we review de novo. (Chodos v. Borman (2015) 239 Cal.App.4th 707, 712 (Chodos).)

B

Attorney fees authorized by contract, statute, or law are allowable as costs under Code of Civil Procedure section 1033.5, subdivision (a)(10). Generally, an award of costs is added to and becomes part of the judgment (§ 685.090, subd. (a)) and interest accrues on the judgment from the date of entry of the judgment (§ 685.020, subd. (a)).

“A judgment bears legal interest from the date of its entry in the trial court even though it is still subject to direct attack. [Citation.] When a judgment is modified upon appeal, whether upward or downward, the new sum draws interest from the date of entry of the original order, not from the date of the new judgment. [Citations.] On the other hand, when a judgment is reversed on appeal the new award subsequently entered by the trial court can bear interest only from the date of entry of such new judgment.” (Stockton Theatres, Inc. v. Palermo (1961) 55 Cal.2d 439, 442–443 (Stockton Theatres); 7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 333, p. 938.)

C

Resolution of when interest accrues, therefore, turns on whether our decision in Pacifica I was a reversal or a modification. We consider several instructive cases.

Stockton Theatres, supra, 55 Cal.2d 439 involved numerous appeals. After an appeal on the merits of the judgment, the appellate court allowed plaintiffs to recover costs on appeal. Plaintiff filed a memorandum of costs with the trial court seeking the premium for an appellate bond as an item of cost. In a 1954 order, the trial court disallowed the bond premium concluding it was not a recoverable item of cost under the statutory scheme. (Id. at p. 440.) The appellate court reversed the order concluding bond premiums were recoverable by statute as a cost on appeal so long as the expenditure was “necessary” to preserve rights on appeal. The appellate court directed the trial court to determine on remand whether the bond was necessary. (Id. at p. 441.)

After a hearing in 1957, the trial court determined the expenditure for a bond premium was unnecessary and again disallowed the item of cost. The appellate court again reversed concluding the bond premium was necessary based on the evidence developed at the hearing and remanded with direction to allow the premium. (Stockton Theatres, supra, 55 Cal.2d at p. 441.) The trial court then awarded the premium on the bond as an item of costs, but made the order effective from the date of its award in 1959 and allowed interest only from that date. (Ibid.)

The Supreme Court in Stockton Theatres concluded the reversal of the 1954 order disallowing the bond premium was a legal reversal because it directed a hearing and a factual determination about whether the expenditure was necessary for the appeal. (Stockton Theatres, supra, 55 Cal.2d at p. 443.) However, the court concluded the reversal of the 1957 order was “in legal effect” a modification because it increased the original amount awarded as costs after finding the bond premium was necessary and the trial court should have allowed the bond premium as an item of costs. As a result, the Supreme Court determined interest accrued from the 1957 order. (Id. at pp. 443–444.)

Similarly, in Snapp v. State Farm Fire & Casualty Co. (1964) 60 Cal.2d 816, the Supreme Court determined an appellate court decision reversing a judgment with direction to increase a damage award was a modification of the judgment and interest accrued from the original judgment. (Id. at pp. 821–822.) “It is not the form of the order on the … appeal that controls, but the substance of that order.” (Id. at p. 821.)

Munoz v. City of Union City (2009) 173 Cal.App.4th 199 (Munoz) involved a wrongful death action arising from a police shooting in which a jury allocated 50 percent fault to the police officer, 45 percent fault to the city for direct negligence, and 5 percent fault to the victim. In the first appeal, the appellate court reversed the judgment against the city based on direct negligence, but the parties conceded the city remained vicariously liable for the police officer’s conduct. (Id. at pp. 201–202.) The trial court on remand reduced the plaintiff’s judgment to reflect only damages attributed to the police officer based upon the jury’s finding of the officer’s 50 percent fault. In a second appeal, the appellate court reversed the judgment with directions to enter a new judgment apportioning the damages awarded by the jury using a ratio based on the jury’s findings of comparative fault between the officer and the victim. (Id. at p. 203.) The trial court did so and awarded interest from the date of the original judgment. The city appealed the interest award. (Ibid.)

Although litigation continued after the first appeal regarding the consequences of eliminating the city’s liability for direct negligence, the Munoz court concluded the officer’s portion of liability for damages was established in the original judgment and the reversal in the second appeal effectively modified upward the liability assigned to the officer in the original judgment. (Munoz, supra, 173 Cal.App.4th at p. 206.) The court stated, “Since the plaintiffs’ entitlement to recovery was established by the original judgment, the trial court correctly determined that postjudgment interest should run from the date of that judgment.” (Id. at p. 207.)

Finally, in Chodos, supra, 239 Cal.App.4th 707, the court held an appellate decision, although couched in terms of reversal with directions, actually modified a judgment by reducing recovery of attorney fees as damages. Therefore, interest was recoverable from the original judgment. (Id. at p. 714.) The Chodos court also concluded the plaintiff was entitled to interest on trial court costs from the date of the original judgment. (Id. at p. 715 citing Lucky United Properties Investment, Inc. v. Lee (2010) 185 Cal.App.4th 125, 137–138 [“Where costs are established by the judgment, but the amount of the award is ascertained at a later time, the court clerk enters the costs on the judgment after the amount is determined” and “interest ordinarily begins to accrue on the prejudgment cost and attorney fees portion of the judgment as of the same time it begins to accrue on all other monetary portions of the judgment—upon entry of judgment”].)

D

In this case, the trial court awarded costs to defendants as the prevailing parties at the time of the original judgment. In Pacifica I, we determined defendants were entitled to contractual attorney fees as a matter of law based on the evidence established at the trial and the fees should have been awarded as an item of costs at the time of the original judgment. Thus, our disposition was an upward modification of the judgment directing the court to include contractual attorney fees as an item of cost.

Unlike the first appeal on the bond issue in Stockton Theatres, where the court reversed on the issue of whether a bond premium was a potentially recoverable item of cost, there was no dispute in this case that attorney fees were an allowable category of cost. Our decision in Pacifica I was like the second appeal on the bond issue in Stockton Theatres where the court found plaintiff was entitled to recover the premium as an item of cost because the bond premium was necessary to preserve rights on appeal.

The fact that the trial court after remand held a hearing and considered evidence on the amount of fees requested does not change our view that our disposition in Pacifica I was a modification, not a reversal. We note Pacifica made a tactical decision after the original judgment to challenge the defendants’ motion for attorney fees by only arguing the defendants were not entitled to fees under the letter of intent agreement. Pacifica did not at that time specifically challenge the reasonableness of the fees requested. Only after we issued our original decision in Pacifica I directing the court to award costs in the amount requested by the defendants did Pacifica seek rehearing and ask us to allow the trial court to exercise discretion in setting the amount of the attorney fees.

After we modified our opinion to allow the court to exercise its discretion in fixing the amount of the fees, the defendants on remand refiled the same declarations and evidence submitted after the original judgment and sought the same amount of fees. With permission of the court, Pacifica then conducted discovery and challenged the fees from one of four law firms that provided services to the defendants along with the lodestar enhancement request.

The trial court did not make a factual determination on remand about entitlement to fees; we made that determination in Pacifica I. The trial court simply fixed the amount of recoverable costs, as it should have done at the time of the original motion. As the trial court stated, “The attorney fee award would have been included in the original judgment in the same amount, if not for this Court’s error.” Had that been the case, there would be no question interest on the award of costs accrued from the date of the original judgment. (§§ 685.020, subd. (a), 685.090, subd. (a).) Therefore, the court correctly determined interest accrued from the date of the original judgment.

IV

DISPOSITION

The order is affirmed. Defendants shall recover their costs on appeal.

McCONNELL, P. J.

WE CONCUR:

BENKE, J.

AARON, J.