Pollyrich Properties LLC vs River Oaks Ranch & Vineyard LLC et al
Case No: 16CV03510
Hearing Date: Wed Apr 03, 2019 9:30

Nature of Proceedings: Motion to Tax Costs; Motion for Attorney Fees

TENTATIVE RULING:

(1) For the reasons set forth herein, the motion of plaintiff and cross-defendant Pollyrich Properties, LLC, for an order awarding attorney fees is granted in part. The court awards reasonable attorney fees in favor of plaintiff and cross-defendant Pollyrich Properties, LLC, and against defendant and cross-complainants River Oaks Ranch & Vineyard, LLC, Hartb LLC, Glenn Hartman, and Colette Hartman, in the amount of $206,304.37.

(2) For the reasons set forth herein, the motion of defendants and cross-complainants River Oaks Ranch & Vineyard, LLC, Hartb LLC, Glenn Hartman, and Colette Hartman for an award of attorney fees and reimbursement of litigation expenses is denied.

(3) For the reasons set forth herein, the motion of plaintiff and cross-defendant Pollyrich Properties, LLC, to tax costs and determine that there is no prevailing party for purposes of statutory costs is granted. The court determines that there is no prevailing party within the meaning of Code of Civil Procedure section 1032. The court strikes the memorandum of costs filed by defendants and cross-complainants River Oaks Ranch & Vineyard, LLC, Hartb LLC, Glenn Hartman, and Colette Hartman on the grounds that these defendants and cross-complainants are not prevailing parties and are not entitled to any award of costs. The court determines not to award statutory costs to any party.

Background:

Plaintiff Pollyrich Properties, LLC, (Pollyrich) filed its original complaint in this action on August 11, 2016, asserting as against defendants River Oaks Ranch & Vineyard, LLC (River Oaks), Hartb LLC (Hartb), Glenn Hartman, and Colette Hartman causes of action for quiet title and declaratory relief. (Note: The complaint also asserted a petition for writ of mandate against respondent County of Santa Barbara that is not relevant to the motions now before the court.)

On August 12, 2017, River Oaks, Hartb, Glenn Hartman, and Colette Hartman (collectively, cross-complainants) filed their cross-complaint against Pollyrich asserting causes of action for quiet title to express easement, quiet title to equitable easement, quiet title to prescriptive easement, reformation, and declaratory relief.

Following a bench trial, the court issued its statement of decision on September 25, 2018. The statement of decision contains a full statement of the background, contentions, and findings of the court, which statement of decision is incorporated herein by reference. In brief summary, this action involves a dispute over the existence and scope of an easement on real property owned by Pollyrich (Parcel 74) for the benefit of property owned by HartB (Parcels 31 and 17, collectively referred to as the “1000 Acre Parcel”). Between Parcel 74 and the 1000 Acre Parcel lies Parcel 33, owned by River Oaks. The eastern boarder of Parcel 74 contains a 20-foot wide paved driveway within a 30-foot wide area bordered by fencing on both sides. Parcel 33 has a 60-foot wide deeded easement over this driveway. The dispute between the parties was whether the 1000 Acre Parcel had easement rights over the driveway and whether the easement rights for the 1000 Acre Parcel and for Parcel 33 consist of rights over the entire deeded 60-foot wide area or only over the 30-foot wide area within the fencing. In support of this dispute, cross-complainants asserted contract rights under a Declaration of Reciprocal Easement Rights and Covenants Running with the Land (the Declaration), recorded on April 6, 2005.

As analyzed in the statement of decision, the court found that there were no express rights over the driveway on Parcel 74 by virtue of the Declaration for the benefit of the 1000 Acre Parcel, but found an implied easement and a prescriptive easement over the driveway for the benefit of 100 Acre Parcel. The court further found that any 60-foot wide easement rights had been limited by prescription to the 30-foot wide area. The court also found that Pollyrich failed to meet its burden to show that a proposed use of the easement is greater than the historic use to a burdensome extent.

On January 3, 2019, the court entered judgment on the complaint and cross-complaint consistent with the statement of decision. The judgment concluded by stating that the determination of entitlement to costs and attorney fees, if any, would be made by post-judgment motions.

On February 11, 2019, cross-complainants filed a memorandum of costs claiming costs, not including attorney fees, in the amount of $7,771.24.

On February 26, 2019, Pollyrich filed its motion for an order awarding it attorney fees. Pollyrich concurrently filed a motion to tax costs and for the court to determine that no party is the prevailing party for purposes of an award of ordinary costs. Also on February 26, cross-complainants filed their motion for an order awarding them attorney fees. All motions are opposed. As discussed below, the parties base their respective motions on their characterizations of the attorney fee provision in the Declaration and on their respective success or lack of success at trial.

Analysis:

(1) Scope of Attorney Fee Provision

Both Pollyrich and cross-complainants rely upon the same attorney fee provision for their respective arguments why they are entitled to an award of attorney fees to the exclusion of the other. The Declaration contains the following provision:

“In the event any action or proceeding is commenced in order to enforce any term, covenant, condition and restriction contained herein, the prevailing party in any such action shall be entitled to recover all costs and expenses incurred in connection therewith, including reasonable attorneys’ fees.” (Declaration, ¶ 19.) (Note: The Declaration is attached in multiple places, including as exhibit A to the declaration of Steven Evans Kirby.)

Pollyrich argue that this is a “narrow” attorney fee provision which applies solely to contract claims to enforce the Declaration. Because the attorney fee provision is limited to contract claims, Pollyrich asserts that it is the prevailing party as to contract claims by virtue of the court’s determination that cross-complainants had no express easement rights by virtue of the Declaration. Cross-complainants argue that this is a “broad” attorney fee provision which applies to all claims between the parties. Because the attorney fee provision covers all claims, cross-complainants argue that they succeeded in their litigation goals broadly and are the prevailing parties.

To resolve this dispute, the court must first determine whether the provision is “narrow” or “broad” in its scope. Both parties point to cases dealing with similar interpretation controversies. In Khan v. Shim (2016) 7 Cal.App.5th 49, 53 (Khan) the court addressed whether an attorney fee provision covered tort claims that allowed “the prevailing party to be awarded fees if ‘any litigation … is commenced between the parties to this Contract of Sale … concerning its terms, interpretation or enforcement or the rights and duties of any party in relation thereto ….’” The Kahn court usefully summarized the two sides of the “broad” and “narrow” dispute:

“On the one hand are those cases interpreting broadly worded clauses, which [the defendant], not surprisingly, argues are analogous to the fee provision [in Khan]. In [Santisas v. Goodin (1998) 17 Cal.4th 599], for example, a home purchase agreement fee provision covered claims ‘ “arising out of the execution of this agreement or the sale” ’ and the Supreme Court interpreted it as being broad enough to cover tort claims. [Citations.] So too were a fee provision covering ‘ “any action or proceeding arising out of this agreement” ’ (Lerner v. Ward (1993) 13 Cal.App.4th 155, 159 …) and one allowing for fees ‘ “[i]f this Agreement gives rise to a lawsuit or other legal proceeding between any of the parties hereto.” ’ (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1340 ….) A lease providing for fees to the prevailing party ‘ “[i]f [a] civil action is instituted in connection with this Agreement …” ’ was also interpreted to cover tort claims (Cruz v. Ayromloo (2007) 155 Cal.App.4th 1270, 1277 …) as was a lease allowing fees for ‘ “any legal action brought by either party to enforce the terms hereof or relating to the demised premises.” ’ (Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794, 1799 ….)

“On the other side of the ledger are cases involving narrower contracts. Rather than using broad phrases, such as ‘arising from,’ these cases typically interpret provisions referring to the award of fees in an action to ‘enforce’ the agreement at issue. For example, where an agreement allowed for the recovery of fees in ‘ “an action or proceeding to enforce the terms hereof or declare rights hereunder,” ’ it was interpreted as excluding tort claims (Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 702-703, 708-709 … (Exxess); see id. at pp. 703, 708-709), as was a provision stating that fees could be awarded if ‘ “legal action or arbitration is necessary to enforce the terms of this Agreement ….” ’ (Loube v. Loube (1998) 64 Cal.App.4th 421, 429 …) Likewise, the language, ‘ “[i]n the event action is brought to enforce the terms of this [Release], the prevailing party shall be paid his reasonable attorney[ ] fees” ’ was also interpreted as applying only to contract claims and not to torts. (Gil v. Mansano (2004) 121 Cal.App.4th 739, 742 ….)

“Our responsibility here, of course, is to interpret the contract that these parties agreed to—not to mechanistically decide the issue based on whether we consider the fee provision to be broad or narrow in a general sense. Prior cases, however, do serve to highlight how the parties could have worded their agreement, but chose not to. Most tellingly, the prior cases point to the frailty of [the plaintiff’s] main argument urging us to adopt a narrow construction. Pointing to the language in the fee provision here, [the plaintiff] asserts that tort actions do not establish the terms of a contract, do not enforce a contract, do not interpret it, and do not declare the rights and duties of parties under the contract. (See, Exxess, supra, 64 Cal.App.4th at p. 709 … [where a fee provision applies to action to ‘enforce’ the contract, tort claims not included].) True enough. Had the parties decided to limit the recovery of fees to such actions, they could easily have negotiated a fee provision similar to the one in Exxess, which allowed fees for ‘ “an action or proceeding to enforce the terms hereof or declare rights hereunder.” ’ [Citation.]” (Khan, supra, 7 Cal.App.5th at pp. 60-61.)

In support it their position, cross-complainants focus on the phrases “any action,” “in any such action,” and “in connection therewith” in the Declaration’s attorney fee provision. Cross-complainants argue that the condition (“In the event …”) is met because the word “action” refers to the entire litigation and not to a single claim and the litigation here did assert a claim to enforce the Declaration, specifically in the cross-complaint. The “any such action,” according to cross-complainants, then refers to any action which includes a contract claim and thus attorney fees are to be awarded to the prevailing party in the litigation as a whole because all such attorney fees are “in connection” with “any such action.”

In support of its position, Pollyrich argues that the “action” referenced in the condition is defined as an action “to enforce any term, covenant, condition and restriction contained herein,” which narrowly defines the application of the provision to actions on the contract. According to Pollyrich, the “in connection therewith” refers to the action to enforce the contract.

While there is room for argument between the parties, the stronger interpretation is the interpretation argued by Pollyrich. As pointed out by Khan, one useful approach to distinguishing between broad and narrow attorney fee provisions is to consider how the parties may have worded the attorney fee provision if they intended one type of provision or the other. The language used here falls squarely within the types of agreements prior courts have construed as “narrow,” limiting itself to actions to enforce the contract. Had the parties intended a “broad” interpretation of this language, the parties could have used “arising from” or similar language.

When the nature of the Declaration is considered, the language makes much more sense narrowly construed. The stated purpose of the Declaration is to create certain easements and to define their rights and obligations respecting the easements that run with the land. (Declaration, recitals D, F.) It is reasonable that parties would provide for attorney fees for disputes that arise out of that specific agreement. However, read as cross-complainants argue the provision should be interpreted, the attorney fee provision would apply to any and all disputes between the owners of the properties related to the properties as long as enforcement of the Declaration is but one claim. It is a less reasonable construction of the Declaration, which is intended to bind all subsequent owners of the properties, that the attorney fee provision would so generally modify the traditional American rule of attorney fees.

The court concludes that the attorney fee provision is “narrow” and applies solely to the contract claims and not to non-contract claims. “If a cause of action is ‘on a contract,’ and the contract provides that the prevailing party shall recover attorneys’ fees incurred to enforce the contract, then attorneys’ fees must be awarded on the contract claim in accordance with Civil Code section 1717.” (Exxess, supra, 64 Cal.App.4th at p. 706.)

“In any action on a contract, where the contract specifically provides that attorney’s 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’s fees in addition to other costs.” (Civ. Code, § 1717, subd. (a).) “[With an exception not present here], the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section.” (Civ. Code, § 1717, subd. (b)(1).)

“[W]hen the results of the litigation on the contract claims are not mixed—that is, when the decision on the litigated contract claims is purely good news for one party and bad news for the other—the Courts of Appeal have recognized that a trial court has no discretion to deny attorney fees to the successful litigant. Thus, when a defendant defeats recovery by the plaintiff on the only contract claim in the action, the defendant is the party prevailing on the contract under section 1717 as a matter of law.” (Hsu v. Abbara (1995) 9 Cal.4th 863, 875-876.)

Here, there was one contract claim, specifically, the cause of action for quiet title as to an express easement, that is, to enforce an express easement granted pursuant to the Declaration. As discussed in the statement of decision, the court rejected this claim and found unequivocally in favor of Pollyrich. In opposition to Pollyrich’s motion, cross-complainants argue instead that cross-complainants succeeded in enforcing the terms of the Declaration by enforcing the Declaration’s mandate for reciprocal rights of ingress and egress to facilitate the development of the affected properties. (Opposition, at p. 7.) The court rejected this argument as an argument to enforce the Declaration. Specifically, the court found that the Declaration was not a source of rights of access over the driveway as to the 1000 Acre Parcel. The court looked to different, non-contractual bases for the easement rights that it found benefited the 1000 Acre Parcel. In sum, cross-complainants lost their only contract claim.

Whether viewed as a matter of discretion or as a matter of right, the court finds that Pollyrich is the prevailing party on the contract claim and is entitled to an award of reasonable attorney fees for the contract claim. The extent of the award is discussed below. The court correspondingly finds that cross-complainants are not prevailing parties under the attorney fee provision of the Declaration and are not entitled to any award of attorney fees. Cross-complainants’ motion for an award of attorney fees will therefore be denied. Cross-complainants’ motion as it relates to costs is discussed below.

(2) Reasonable Attorney Fees

“Where a cause of action based on the contract providing for attorney’s fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney’s fees under section 1717 only as they relate to the contract action. [Citations.] Describing the attorney’s fees provision, section 1717 specifically refers to fees ‘incurred to enforce the provisions of such contract.’ A litigant may not increase his recovery of attorney’s fees by joining a cause of action in which attorney’s fees are not recoverable to one in which an award is proper.” (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129.) “Conversely, plaintiff’s joinder of causes of action should not dilute its right to attorney’s fees. 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.” (Id. at pp. 129-130.)

Pollyrich asserts that all of the fees incurred are recoverable. While the court finds that there was overlap and that the contractual issues were significant issues in the litigation, the court does not find that the issues were so intertwined that apportionment as between contract issues and non-contract issues cannot and should not appropriately be made. Unfortunately, the evidence presented by Pollyrich does not provide a basis for apportionment by review of specific attorney time entries. Pollyrich tacitly acknowledges this evidentiary problem by its statement, “If the Court were to discount Pollyrich’s fees on an apportionment theory, any discount should be nominal, say 5%.” (Opposition, p. 10.)

Pollyrich seeks an award of attorney fees, not including the making of this motion, in the amount of $398,608.75, with an additional fee request for the attorney fee motions of $7,000.00. (Kirby decl., ¶ 10.) The court finds the attorney fee rates requested to be reasonable. (See Kirby decl., ¶ 8.) In view of the absence of evidence from which the court can more specifically apportion attorney fees by reference to specific time entries, the court exercises its discretion on the basis of its familiarity with the case, with the amount and quality of time spent addressing particular issues, at trial and otherwise, and by reference to the court’s experience in addressing other attorney fee issues. (See El Escorial Owners’ Assn. v. DLC Plastering, Inc. (2007) 154 Cal.App.4th 1337, 1365; see also ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1020 [the party claiming fees bear the burden of documenting the appropriate hours expended, the court may require the party to produce records sufficient to provide a proper basis for determining how much time was spent on particular claim, and the “court may properly reduce compensation on account of any failure to maintain appropriate time records”]; Fed-Mart Corp. v. Pell Enterprises, Inc. (1980) 111 Cal.App.3d 215, 227 [court may make attorney fee award based on experience of trial court].) On this basis, the court determines that, not including fees for these motions, the amount of reasonable attorney fees allocated to the contract is $199,304.37. The court finds reasonable the attorney fee motion fees of $7,000.00, for a total award of $206,304.37.

(3) Costs

“Prejudgment costs allowable under this chapter shall be claimed and contested in accordance with rules adopted by the Judicial Council.” (Code Civ. Proc., § 1034, subd. (a).) “A prevailing party who claims costs must serve and file a memorandum of costs within 15 days after the date of service of the notice of entry of judgment or dismissal by the clerk under Code of Civil Procedure section 664.5 or the date of service of written notice of entry of judgment or dismissal, or within 180 days after entry of judgment, whichever is first. The memorandum of costs must be verified by a statement of the party, attorney, or agent that to the best of his or her knowledge the items of cost are correct and were necessarily incurred in the case.” (Rules of Court, rule 3.1700(a)(1).) The parties stipulated, and the court ordered, that memoranda of costs may be filed and served on or before February 11, 2019. (See Rules of Court, rule 3.1700(a)(3).)

Cross-complainants timely filed their memorandum of costs asserting ordinary costs as the prevailing party in the amount of $7,771.24.

Pollyrich has filed a motion to tax costs on the grounds that the court should determine that there is no prevailing party. (Note: Because this motion seeks to disallow all costs because of a lack of right rather than as an objection to specific costs, the motion is more properly characterized as a motion to strike the memorandum of costs. (See Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256, 261.) However, motions to tax are in effect the same as motions to strike and are treated functionally as the same motion regardless of title. (Markart v. Zeimer (1925) 74 Cal.App. 152, 156.))

“Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” (Code Civ. Proc., § 1032, subd. (b).) “ ‘Prevailing party’ includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed, may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.” (Code Civ. Proc., § 1032, subd. (a)(4).)

“Because it is well established that the prevailing party for purposes of a contractual attorney fees award under Civil Code section 1717 (section 1717) is not necessarily the prevailing party for purposes of a costs award under Code of Civil Procedure section 1032 (section 1032), we analyze the attorney fees and costs issues separately.” (David S. Karton, A Law Corp. v. Dougherty (2014) 231 Cal.App.4th 600, 607.)

This action involved “other than monetary relief” which was awarded by way of the court’s declaration of rights set forth in the judgment. Under the definition of “prevailing party” of section 1032 where there is “other than monetary relief” the court determines in its discretion who is the prevailing party and may allow costs “or not.” Pollyrich argues that there is no prevailing party because the result was mixed. Cross-complainants argue that they are the prevailing party because their right of access was vindicated.

In making its determination, the court considers the respective litigation success of the parties. (Cf. Hsu v. Abbara, supra, 9 Cal.4th at p. 877 [“We agree that in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by ‘equitable considerations.’ (applying Civ. Code, § 1717)].) It is clear that neither side had a clear “win” relative to their respective original goals. Pollyrich sought alternative declarations ranging from no rights in the driveway to rights limited to historical use; cross-complainants sought to establish their rights to include a 60-foot wide easement. The court explained in its statement of decision that the litigation arose because of the County of Santa Barbara’s approval of plans to develop a commercial Adventure Park on the 1000 Acre Parcel with the driveway as its primary access. With this background, the dispute over the scope of the easement at 60 feet was extremely important to the litigation goals of the respective parties. Thus, in many ways, cross-complainants, while formally establishing their rights to access as a successful aspect of their litigation result, also suffered significant litigation defeat by failing to obtain rights to the driveway beyond the historical 30/20-foot wide use. Based upon the totality of the circumstances, the court finds that there is no prevailing party within the meaning of Code of Civil Procedure section 1032.

Accordingly, the court will grant Pollyrich’s motion to tax costs. Cross-complainants are not entitled to an award of costs.

Similarly, cross-complainants are not entitled to an award of costs based upon the contractual provision for attorney fees and costs in the Declaration for the same reasons discussed above that cross-complainants are not prevailing parties under the Declaration entitled to an award of attorney fees. Cross-complainants’ motion will be denied as to costs.