Filed 10/7/19 Rhee v. Nguyen 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SARAH RHEE,

Plaintiff and Respondent,

v.

PHITON NGUYEN,

Defendant and Appellant.

G056584

(Super. Ct. No. 30-2016-00895164)

O P I N I O N
Appeal from a judgment and postjudgment order of the Superior Court of Orange County, Gregory H. Lewis, Judge. Affirmed.

Hochfelsen & Kani, Steven I. Hochfelsen and David W. Kani for Defendant and Appellant.

Gordinier Kang & Kim, John Chiwon Kang, Patricia Cymerman; Kang, P.C., John Chiwon Kang and Patricia Cymerman for Plaintiff and Respondent.

* * *

INTRODUCTION

Phiton Nguyen appeals from a postjudgment order granting a motion for attorney fees brought by Sarah Rhee and from an amended judgment reflecting the attorney fees award. Rhee sought and was awarded attorney fees incurred in connection with Nguyen’s cross complaint, which Rhee defeated by summary judgment. Rhee did not seek attorney fees incurred in connection with her complaint, which she voluntarily dismissed after the trial court granted her motion for summary judgment on the cross complaint and after she had achieved one of her major litigation objectives. The complaint and cross complaint alleged breaches of a settlement agreement with an attorney fees provision.

Nguyen contends he, not Rhee, was the prevailing party within the meaning of Civil Code section 1717 (section 1717) (he does not challenge the amount of the fee award). We conclude the trial court did not abuse its discretion in finding Rhee was the prevailing party and granting her motion for attorney fees. We therefore affirm.

FACTS

I. The Underlying Lawsuit and Settlement Agreement

In July 2010, Rhee filed a lawsuit alleging Nguyen and others engaged in fraud, including the use of Rhee’s identity information, to obtain credit cards and loans of more than $1.6 million in Rhee’s name. The loans were secured by a deed of trust on a piece of real property in Garden Grove (the Enloe Property) and a deed of trust on a piece of real property in Santa Ana.

The parties reached a settlement at a voluntary mediation in June 2012. The material terms of the settlement were placed on the record before a court reporter, and the parties signed the reporter’s transcript, which we refer to as the Settlement Agreement. The Settlement Agreement required Nguyen and the other defendants to pay Rhee monetary compensation and to “exercise their best efforts to remove [Rhee] from liability on all loans covering both properties, whether through refinance, sale, or otherwise, and shall continue to do so for 24 months from the date of this agreement.”

As part of the Settlement Agreement, Nguyen and the other defendants delivered to Rhee two deeds of trust. The Settlement Agreement states: “Plaintiff will be granted a Deed of Trust on the property in Santa Ana and on the [Enloe Property], securing all obligations under this agreement. [¶] The Deed of Trust on each property will be released when [Rhee] is released from liabilities on all loans covering that property.” The Settlement Agreement also provides that the prevailing party in any litigation arising out of the agreement will be entitled to recover his or her attorney fees.

II. Rhee’s Complaint and Nguyen’s Cross complaint

Over four years later, Rhee had not been released from liability on the loans. Her attorney contacted Nguyen’s attorney and asked what efforts were being made to refinance the Enloe Property loan but was not given any specific information. In December 2016, Rhee filed this lawsuit against Nguyen and others to enforce the terms of the Settlement Agreement and to be removed from the fraudulent loans. The complaint included causes of action for declaratory relief, breach of written contract, breach of oral contract, and breach of the implied covenant of good faith and fair dealing.

When Rhee filed this lawsuit, defendants had not removed her from liability on the loans secured by the Enloe Property and had not made their best efforts to remove her from the loans. Defendants had not listed the Enloe Property for sale and efforts to refinance the Enloe Property had been minimal. Rhee remained liable on two loans on the Enloe Property, which together had an outstanding principal balance of $805,000.

Nguyen filed a cross complaint against Rhee alleging three causes of action: (1) breach of the Settlement Agreement; (2) breach of covenant of good faith and fair dealing; and (3) declaratory relief. The cross-complaint sought $460,000 in compensatory damages, punitive damages, and “attorney fees pursuant to the settlement agreement.”

In May 2017, Nguyen obtained a loan that removed Rhee from liability on the two existing loans. In response, Rhee immediately released the deeds of trust she had received as part of the Settlement Agreement. Although Rhee had complied with the Settlement Agreement, Nguyen continued pursuing the cross complaint against her and, in July 2017, filed a first amended cross complaint (the amended cross complaint) for breach of the Settlement Agreement and declaratory relief. The amended cross complaint repeated the allegations of the cross complaint, including the prayer for $460,000 in compensatory damages and “attorney fees pursuant to the settlement agreement.” The amended cross complaint alleged Nguyen had obtained a commitment for new loans to pay off the loans on the Enloe Property but Rhee “refused to cooperate and refused to remove her Deed of Trust although she was required to under the settlement agreement.”

In September 2017, Rhee filed a motion for summary judgment or summary adjudication of the amended cross complaint. The trial court granted the motion. A few weeks later, Rhee filed requests for dismissal of her complaint without prejudice. Judgment was entered in Rhee’s favor and against Nguyen on the cross complaint.

III. Rhee’s Motion for Attorney Fees

Defendants other than Nguyen filed a memorandum of costs. The trial court granted Rhee’s motion to strike the cost memorandum in its entirety and found that Rhee was the prevailing party.

Rhee filed a memorandum of costs to recover costs incurred in connection with defending the cross-complaint and the amended cross-complaint. She did not seek to recover costs incurred in connection with the complaint. Nguyen and the other defendants filed a motion to strike or tax costs. The trial court granted the motion in part, and Rhee was awarded $9,616.04 in costs. The court found Rhee “is the prevailing party on the Cross-Complaint and entitled to recover costs, as reflected in the Judgment.”

Rhee also filed a motion for attorney fees against Nguyen. The motion sought a determination that Rhee was the prevailing party in an action on a contract for purposes of section 1717. She sought only attorney fees incurred in defending the cross complaint and the amended cross complaint and did not seek attorney fees incurred in connection with her complaint.

The trial court granted Rhee’s motion for attorney fees and awarded her $174,360. In the order granting the motion, the court found: “[Rhee] has established she is entitled to an award of attorney’s fees. The Settlement Agreement provides that the prevailing party in any litigation or proceeding arising out of the agreement will be entitled to his or her attorney’s fees. [Rhee] is the prevailing party. The February 28, 2018 judgment on the cross-complaint was in favor of Cross-Defendant Sarah Rhee and provided she is to ‘recover her costs and attorneys’ fees.’ . . . [Rhee] also provides detailed billing records, broken down by timekeeper and day. [Citation.] [¶] The court finds that of the attorney’s fees sought by [Rhee] in this motion, the sum of $174,360.00 was reasonably and necessarily incurred in defense of the Cross Complaint and awards that amount in attorney’s fees against Cross Complainant Phiton Nguyen.”

An amended judgment including the award of costs and attorney fees was entered. Nguyen filed a notice of appeal from the order granting Rhee’s motion for attorney fees and the amended judgment reflecting the attorney fees award.

DISCUSSION

I. Standard of Review

The trial court has discretion under section 1717 in making a prevailing party determination. (Hsu v. Abbara (1995) 9 Cal.4th 863, 871 (Hsu).) We will not reverse the trial court’s determination of prevailing party status absent a manifest abuse of discretion, a prejudicial error of law, or necessary findings that are not supported by substantial evidence. (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 239.) “[T]he trial court’s determination of the prevailing party for purposes of awarding attorney fees is an exercise of discretion, which should not be disturbed on appeal absent a clear showing of abuse of discretion.” (Kim v. Euromotors West/The Auto Gallery (2007) 149 Cal.App.4th 170, 176.)

The normal rules of appellate review apply to an order granting or denying attorney fees; i.e., the order is presumed correct, all intendments and presumptions are indulged to support the order, conflicts in the evidence are resolved in favor of the prevailing party, and the trial court’s resolution of factual disputes is conclusive. (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1322.) The reviewing court will infer all findings necessary to support the order. (Apex LLC v. Korusfood.com (2013) 222 Cal.App.4th 1010, 1017.) The trial court’s express or implied findings of fact are reviewed for substantial evidence (ibid.), its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious (Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 882).

II. The Trial Court Did Not Err in Finding Rhee Was the Prevailing Party Under Section 1717.

Attorney fees, when authorized by contract, are allowable as costs. (Code Civ. Proc., § 1033.5, subd. (a)(10)(A).) Code of Civil Procedure section 1021 leaves the “measure and mode of compensation” for attorney fees to the agreement of the parties. Section 1717 governs fee awards for enforcing contracts that include fee-shifting clauses. Section 1717, subdivision (a) awards attorney fees in “any action on a contract” to “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.” Section 1717, subdivision (b)(1) defines prevailing party as “the party who recovered a greater relief in the action on the contract.”

“[T]o invoke section 1717 and its reciprocity principles a party must show (1) he or she was sued on a contract containing an attorney fee provision; (2) he or she prevailed on the contract claims; and (3) the opponent would have been entitled to recover attorney fees had the opponent prevailed.” (Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 820.) Only the second element is in issue in this appeal.

When determining which party prevailed within the meaning of section 1717, the trial court “is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources.” (Hsu, supra, 9 Cal.4th at p. 876.) In determining litigation success, courts should respect substance rather than form, and may be guided by equitable considerations connected to litigation success. A party who is denied direct relief on a claim may nonetheless be a prevailing party if it is clear the party has otherwise achieved its main litigation objective. (Id. at p. 877.)

The cross complaint and amended cross complaint alleged Rhee breached the Settlement Agreement. Rhee prevailed on the merits of the amended cross complaint when the trial court granted her motion for summary judgment. Judgment was entered in her favor. She was unquestionably “the party prevailing on the contract” within the meaning of section 1717.

Nguyen argues he, not Rhee, was the prevailing party in an action on the Settlement Agreement because she voluntarily dismissed her complaint against him. Nguyen relies on Code of Civil Procedure section 1032, subdivision (a)(4), which defines “prevailing party” for purposes of recovering costs to include “a defendant in whose favor a dismissal is entered.”

There are several reasons why Nguyen’s argument fails. First, the prevailing party for an award of costs under Code of Civil Procedure section 1032 is not necessarily the prevailing party for the award of attorney fees in an action on a contract under section 1717. (Zintel Holdings, LLC v. McLean (2012) 209 Cal.App.4th 431, 438; Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1142.) The prevailing party under section 1717, subdivision (b)(1) is the “the party who recovered a greater relief in the action on the contract.” Although Rhee dismissed her complaint against Nguyen, she did so only after she had gained a primary litigation objective of being removed from liability on the loans covering the Enloe Property.

Second, Code of Civil Procedure section 1032, subdivision (a)(4) states that “[i]f any party recovers other than monetary relief and in situations other than as specified,” then the trial court, in its discretion, may determine the prevailing party. Here, Rhee recovered “other than monetary relief” because her complaint prompted Nguyen to release her from liability on the fraudulent loans covering the Enloe Property. We infer the trial court made an implied finding that Rhee was the prevailing party under section 1032, subdivision (a)(4) on her complaint. Such a finding is supported by substantial evidence.

Third, Rhee was the prevailing party on Nguyen’s cross complaint. (See Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 55 [prevailing party on cross complaint entitled to recover attorney fees].) When, as here, there are cross actions on a contract with an attorney fees provision, and no relief is awarded in either action, the trial court retains discretion to find there is a party prevailing on the contract for purposes of section 1717. (Hsu, supra, 9 Cal.4th at p. 875, fn. 10.) Because Rhee prevailed on the cross complaint, and achieved a major litigation objective of her complaint, the trial court did not abuse its discretion in finding that she recovered a greater relief in an action on a contract. (Id. at p. 877.)

In sum, the trial court did not err by finding that Rhee was the prevailing party within the meaning of section 1717 because she obtained summary judgment in her favor on the cross complaint and achieved a major litigation objective on her complaint before dismissing it. Further, Rhee did not seek attorney fees incurred in connection with the complaint; she only sought fees incurred in connection with the cross complaint.

Nguyen argues he was the prevailing party on the contract and should have been awarded costs and attorney fees. But he never sought a determination he was the prevailing party: He did not file a cost memorandum or a motion to recover attorney fees. He claims a motion for attorney fees would have been considered moot because the dismissal of the complaint was served on March 29, 2018 and by May 28 the trial court had determined Rhee was the prevailing party. Notice of entry of the dismissals of the complaint was served in January 2018. Judgment was entered on February 28, 2018, and notice of entry of judgment was served on March 8, 2018. Rhee filed her motion for attorney fees on March 15, 2018, and there is nothing in the record to suggest Nguyen could not have filed his own motion at or about the same time.

DISPOSITION

The judgment and postjudgment order awarding Rhee attorney fees are affirmed. Respondent to recover costs on appeal.

FYBEL, ACTING P. J.

WE CONCUR:

IKOLA, J.

THOMPSON, J.