Filed 6/30/20 Western Overseas Corp. v. KRBL 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

WESTERN OVERSEAS CORPORATION,

Plaintiff and Appellant,

v.

KRBL, LLC,

Defendant and Respondent.

G057515

(Super. Ct. No. 30-2016-00852262)

O P I N I O N

Appeal from a postjudgment order of the Superior Court of Orange County, Linda S. Marks, Judge. Reversed and remanded with directions.

Law Offices of Matthew C. Mickelson and Matthew C. Mickelson for Defendant and Respondent.

Scopelitis, Garvin, Light, Hanson & Feary, and Christopher C. McNatt, Jr., for Plaintiff and Appellant.

* * *

This appeal is from a postjudgment order denying the motion of plaintiff Western Overseas Corporation (Western) for contractual attorney fees following entry of judgment for Western in its breach of contract action against defendant KRBL, LLC (KRBL). In the challenged order, the trial court denied Western’s entire attorney fees request because Western failed to identify which of the fees belonged to the category of fees the court deemed “recoverable,” based on a mistakenly narrow interpretation of the contract’s attorney fees provision.

As explained below, we conclude the trial court erred in ruling the attorney’s fees provision entitled Western to recover only certain fees incurred in the underlying breach of contract action. Consequently, we reverse the order denying Western’s motion for attorney fees and remand the matter to the trial court with directions to award Western the attorney fees requested, including attorney fees on appeal.

I.

FACTS

A. The Two Contracts

KRBL is in the business of importing rice from India. Western is a U.S. customs broker and international freight forwarder which facilitates the importation of overseas cargo into the United States.

In August 2013, KRBL hired Western as a customs agent to facilitate and manage the entry of KRBL’s rice cargo into the United States. The parties entered into a three-page written agreement entitled “CUSTOMS POWER OF ATTORNEY [and] DESIGNATION OF EXPORT FORWARDING AGENT And Acknowledgement of Terms and Conditions” (the 2013 Contract). On the first page of the 2013 Contract, KRBL appointed Western to act as its agent in certain enumerated respects, and it expressly “acknowledge[d] receipt of [Western’s] Terms and Conditions of Service governing all transactions between the Parties.”

Attached to that first page was a two-page addendum entitled “WESTERN OVERSEAS CORPORATION Terms & Conditions of Service” (the Terms & Conditions). The Terms & Conditions included provisions on a variety of topics, such as indemnification, limitations of liability, retaining records, choice of venue, and the right to recover costs of collection, including attorney’s fees. According to the Terms & Conditions, they “constitute[d] a legally binding contract between [Western] and [KRBL].”

In February 2015, KRBL retained Western to provide drayage (i.e., transportation) and warehouse services for KRBL’s rice cargo, and the parties entered into a second written agreement entitled “DRAYAGE AND WAREHOUSING AGREEMENT” (the 2015 Contract). The 2015 Contract defined Western’s “Scope of Work” as: (1) “Container Pickup – Drayage service from the ports of NY and NJ to warehouse,” (2) “Receiving and Palletizing at the warehouse,” (3) “Warehousing of Palletized cargo,” and (4) “Outbound delivery of Palletized cargo.”

The 2015 Contract included a “SCHEDULE OF RATES AND CHARGES” setting forth specific prices for the various components of those four services. The schedule also set rates for “[h]ourly labor for special projects, if required.” Importantly, the 2015 Contract was silent on whether other charges would be incurred or billed to KRBL. Although the contract provided “[a]ny additional activity performed as authorized by KRBL will be billed as per mutually agreed,” it did not address the issue of costs that were not preauthorized by KRBL. Moreover, the 2015 Contract did not include an attorney’s fees provision.

Western handled about 21 shipments of rice for KRBL under the 2015 Contract and sent KRBL invoices for that work. Western’s invoices included not just the costs listed in the 2015 Contract’s schedule of rates and charges, but also additional expenses Western incurred from third parties while performing the drayage and warehousing services for KRBL (the third party expenses). These third party expenses included items such as fees for truck chassis rentals, overweight container charges, USDA examination fees, and the costs of purchasing equipment and supplies at the warehouse. Upon receiving the invoices, KRBL objected to the charges for these third party expenses, contending it had no duty under the 2015 Contract to pay third party expenses. KRBL paid only the undisputed amounts.

B. The Breach of Contract Action

Western claimed KRBL owed it about $36,000 for third party expenses and filed a complaint against KRBL alleging breach of the 2013 Contract and common counts. In a bench trial, Western asserted the disputed expenses were chargeable to KRBL under the 2013 Contract’s Terms & Conditions, and KRBL breached the 2013 Contract when it refused to pay the invoices for these expenses. KRBL maintained the Terms & Conditions were inapplicable and the charges were not permitted under the 2015 Contract.

The trial court ruled in favor of Western, explaining in its statement of decision that the 2013 Contract’s Terms & Conditions “clearly state that costs incurred as a result of services rendered by third parties will be passed on to KRBL.” The court concluded, based on a preponderance of the evidence, Western met its “burden of proof that amounts were billed but not paid by KRBL for services provided.” The court awarded Western $18,213.94 for the unpaid third party expenses, deriving this figure from the reduced amount Western sought at trial, less a $12,135 charge from a third party which the court determined was not recoverable.

The statement of decision included a finding on Western’s entitlement to contractual attorney’s fees. “[T]here is an attorney [fees] provision” in the Terms and Conditions of the 2013 Contract, and “[t]o the extent that charges reflect amounts owing for services under the [2013 Contract], . . . Western is entitled to recover attorney fees and costs under that agreement. [The 2015 Contract] has no attorney fee provision, and attorney fees under that agreement are not recoverable, and each party will bear their own costs.”

The trial court entered a judgment for Western on its claims for breach of contract and common counts, awarding Western $18,213.93, plus interest, “and attorney’s fees, if any, to be determined by motion.” KRBL appealed from the judgment.

C. The Prior Appeal

In its appeal from the judgment, KRBL argued it had no contractual duty to pay the third party expenses Western incurred in performing the 2015 Contract. Our opinion in that appeal, final as of June 21, 2019, concluded otherwise. (Western Overseas Corporation v. KRBL, LLC (April 19, 2019, No. G056123 [nonpub.opn.] (Western I).) We summarize here our reasoning in Western I because it is directly relevant to the present appeal from the order denying Western’s motion for attorney fees.

In Western I, we affirmed the trial court’s determination the Terms & Conditions of the 2013 Contract required KRBL to pay third party expenses incurred under the 2015 Contract. We reached that conclusion in three steps. We began by noting the 2015 Contract is silent on the issue of third party expenses. Next, we found the 2013 Contract’s Terms & Conditions expressly require KRBL to pay third party expenses. We cited several sections of the Terms & Conditions which address third party expenses and concluded, “Though perhaps no model of drafting clarity, these provisions collectively show Western was not responsible for third party expenses incurred while performing services for KRBL under the 2013 Contract. Instead, KRBL agreed to pay those costs.” (Western I, supra, *8.)

The third step in our reasoning, and the most important for our present purposes, was our conclusion the 2013 Contract’s Terms & Conditions apply to Western’s performance under the 2015 Contract. We wrote that the “central issue” of Western I is “whether the 2013 Contract’s Terms & Conditions apply to the drayage and warehousing services performed under the 2015 Contract. We conclude they do. After all, the first page of the 2013 Contract specifically states the attached ‘Terms and Conditions of Service govern[ ] all transactions between the Parties.’ (Italics added.) (See also Civ. Code, § 1642 [‘Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.’].)” (Western I, supra, *8.)

We found further support for our conclusion the 2013 Contract’s Terms & Conditions apply to Western’s services under the 2015 Contract in the latter contract’s lack of an integration clause. We observed the 2015 Contract contains “no such provision” declaring itself “the entire and exclusive agreement between the parties concerning Western’s drayage and warehousing services.” (Western I, supra, *9.) Having concluded the trial court properly interpreted the 2013 Contract as governing performance of the 2015 Contract, we affirmed the judgment holding KRBL liable for breaching the 2013 Contract by failing to pay third party expenses in issue.

D. Western’s Motion for Attorney Fees

While the prior appeal was pending, Western filed a motion for attorney fees under Civil Code section 1717. (All further undesignated statutory references are to the Civil Code.) That statute provides, in relevant part, that “[i]n 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 to either one of the parties or to the prevailing party,” then the prevailing party “shall be entitled to reasonable attorney’s fees in addition to other costs.” (§ 1717, subd. (a).)

Western’s motion for attorney fees asserted the trial court already determined in its Statement of Decision both that Western “is clearly the prevailing party” and that Western is entitled to attorney fees as one of the “remedies for its unpaid contractual services . . . based on [the] attorney fees provision under the [2013 Contract].” In a footnote, Western identified the applicable attorney fees provision as paragraph 11 in the 2013 Contract’s Terms & Conditions (paragraph 11 or the paragraph 11 attorney fees provision). The motion further asserted the reasonableness of the hours Western’s counsel worked and the hourly rates he charged, and sought recovery of all legal fees billed in the case, totaling $31,713.50.

In opposition to Western’s motion, KRBL argued essentially three points. First, KRBL argued the attorney fees clause in paragraph 11 did not apply to disputes between the parties. Instead, KBRL asserted, paragraph 11 was “a simple indemnification clause, requiring the Customer [KRBL] to indemnify Company [Western] from any ‘liability, fines, penalties and/or attorney fees’ that a third party seeks to impose on [Western] for Customer conduct that harmed that third party, or that led to imposition of a government fine or penalty on [Western].”

KRBL’s second argument focused on the fact Western’s motion relies on an attorney fees provision in the 2013 Contract ––“a contract that did not govern the dispute at issue in this case.” KRBL’s contention was a rehash of its argument at trial: that the 2015 Contract governed whether KRBL owed Western for the third party expenses Western incurred in performing the 2015 Contract. But the trial court wholly rejected that argument at trial, finding KRBL breached the 2013 Contract by failing to pay Western those third party expenses. Nevertheless, in opposing the attorney fees motion, KRBL resurrected its failed contention the 2015 Contract governed “the dispute in this case.” Building on that premise, KRBL made the following argument: “[T]he Court has already determined [the 2015 Contract] does not have an attorney fee-shifting provision. Since the vast majority (if not all) of this dispute was governed by a contract without an attorney fee provision, Plaintiff is not entitled to fees.”

KRBL’s third argument was the trial court should deny Western’s motion as a “penalty” for Western’s conduct in filing the case in unlimited civil court. Given Western recovered at trial a damage award of just over $18,000 plus interest, below the $25,000 jurisdictional minimum of the court, KRBL argued Western should have filed the action as a limited civil action. KRBL asserted Western acted “unreasonably” in filing the case as an unlimited civil action.

KRBL’s opposition did not question the reasonableness of the amount of attorney fees Western requested in the motion. KRBL only argued Western should not recover any attorney fees.

E. The Trial Court’s Supplemental Briefing Orders and Final Order

Despite having ruled at trial the 2013 Contract governed the parties’ respective responsibilities for paying third party expenses incurred in performing the 2015 Contract, the trial court rejected the notion the 2013 Contract similarly governed entitlement to attorney fees in the litigation. Instead, the court concluded the 2013 Contract and the 2015 Contract both governed the prevailing party’s right to attorney fees in this action. Put simply, the trial court concluded the 2013 Contract, which had an attorney fees provision, governed Western’s right to recover billed fees “that directly relate” to the 2013 Contract and its Terms & Conditions, while the 2015 Contract, which lacked an attorney fees provision, governed Western’s entitlement to fees related to the enforcement of that contract.

In the court’s view, because the 2015 Contract had no attorney fees provision, Western could not recover any fees incurred in attempting to collect on invoices for services or items “related” to the 2015 Contract. Based on this interpretation of the two contracts, the court ordered supplemental briefing and directed Western to “provide . . . a breakdown of attorney fees which have been billed that directly relate to the [2013 Contract’s Terms & Conditions.]” The court said Western “should undertake a review of billing statements and provide a detailed line item statement indicating what fees may be recoverable under the [2013 Contract’s Terms & Conditions].” The implication of the order was the court would award only those fees identified as “related to” the 2013 Contract.

Western declined to provide the requested breakdown of fees. Western explained it had sued to enforce its right under the 2013 Contract to payment for third party expenses incurred in performing the 2015 Contract. In other words, all the disputed invoices necessarily “related to” both contracts. Western asserted it was impossible to divide invoices between those “related to” the 2013 Contract and those “related to” the 2015 Contract; the court’s categorization of invoices simply did not make sense.

Instead of dividing billed fees into the designated categories, only one of which the trial court deemed “recoverable,” Western insisted it was contractually entitled to recover all its fees as the prevailing party: “[A]ll claims in this case were made under the [2013 Contract], and so all attorney time was spent litigating under that agreement.” Because “that agreement” had an attorney fees provision, so the argument went, all the fees billed in the case were recoverable.

The trial court disagreed and denied Western’s motion for attorney fees in its entirety. The court explained its ruling in a minute order as follows: “Plaintiff is the prevailing party in this action and is entitled to reasonable attorney fees and costs as to amounts owing under the [2013 Contract]. Plaintiff has failed to demonstrate that all fees sought are in connection with the [2013 Contract]. The gravamen of the issues presented and resolved at trial dealt with third party payments and focused on the [2015 Contract]. It is unclear to the Court whether all the invoices at issue were incurred under the [2013 Contract], and the Terms [&] Conditions therein. As a result, the Court has twice requested further briefing, however, the Court has not received a breakdown of attorney fees which have been billed that directly relate to the attorney provision within the [2013 Contract]. Therefore, the Court is unable to determine with any confidence what amounts have been incurred, and as a result will not make any order associated with attorney fees.”

II

DISCUSSION

In this appeal, Western argues the trial court erred in denying its motion for attorney fees. We agree. As we explain below, Western was entitled to recover its attorney fees for the simple reason it was the prevailing party in an action on a contract which had an attorney fees provision. Given those circumstances, section 1717, subdivision (a), required an award of reasonable attorney fees to Western.

The court correctly concluded the 2013 Contract had an attorney fees provision. The court also concluded Western was the prevailing party in the action. The court erred, however, in concluding the attorney fees provision in the 2013 Contract did not apply to any dispute over unpaid invoices “related to” the 2015 Contract. That overly narrow interpretation of the scope of the attorney fees provision conflicts with the court’s determination in the statement of decision KRBL breached the 2013 Contract when it failed to pay those same invoices.

More importantly, the trial court’s restrictive view of the attorney fees provision in the 2013 Contract’s Terms & Conditions conflicts with our findings in Western I, which are res judicata in this appeal. In Western I, we found the 2013 Contract’s Terms & Conditions govern “‘all transactions between the Parties’” and specifically apply to Western’s performance under the 2015 Contract. (Western I, supra, *8.) We further found KRBL had a duty under the 2013 Contract’s Terms & Conditions to pay all third party expenses Western incurred in performing under the 2015 Contract. In other words, in Western I we held the duty KRBL breached was a duty under the 2013 Contract. Consequently, when Western sued for breach of that duty, it sued to enforce a contract with an attorney fees provision, which entitled it under section 1717, subdivision (a), to reasonable fees upon prevailing in the action.

KRBL tries to muddy the waters here, arguing this is not “a simple contractual interpretation case” where the de novo standard of review applies; instead, KRBL asserts, “the trial court’s analysis” of the scope of the attorney fees provision is based “upon a factual determination” which is unassailable absent “some facts or argument showing that the [court’s] conclusion on that issue was an abuse of discretion.” KRBL is wrong.

The trial court did not rely on extrinsic evidence about the intended meaning of the contracts in ruling the attorney fees provision in the 2013 Contract did not apply to disputes over invoices “related to” the 2015 Contract. Instead, the court simply misanalysed the issues presented. Our res judicata findings in Western I are determinative here. In Western I, we decided KRBL breached the 2013 Contract when it failed to pay the invoices incurred under the 2015 Contract. Because the 2013 Contract had an attorney fees provision, Western was entitled to reasonable attorney fees upon prevailing on its contract claim. (§ 1717, subd. (a).) The trial court clearly erred in denying Western’s attorney fees motion.

A. Assertion the Order Can Be Affirmed on “Alternate Grounds”

KRBL argues in the event we conclude the trial court erred in denying Western’s motion for attorney fees for the reason stated in its order, we should affirm the order on alternate grounds. (See Muller v. Fresno Community Hospital & Medical Center (2009) 172 Cal.App.4th 887, 906-907 [judgment or order correct on any theory will be affirmed, even if trial court’s reasoning was erroneous].)

Specifically, KRBL contends the specific attorney fees provision Western relied on in its motion for attorney fees does not provide for attorney fees “in this situation.” KRBL argues the paragraph 11 attorney fees provision was a “simple indemnification clause” requiring the customer (KRBL) to indemnify Western from any “‘liability, fines, penalties, and/or attorney fees’” that a third party seeks to impose on Western for “Customer conduct that harmed that third party, or that led to imposition of a government fine or penalty on [Western].” KRBL cites several cases with indemnification language similar to paragraph 11 which all hold the indemnification provision does not permit recovery of attorney fees in a dispute between the parties.

We need not consider the merits of this argument, however, because even if KRBL is correct paragraph 11 does not provide for attorney fees in a dispute between the parties, there are two other attorney fees provisions in the 2013 Contract’s Terms & Conditions which clearly apply to the present matter. Paragraph 13 is entitled “Costs of Collection.” This provision states: “In any dispute involving monies owed to Company (here, Western), the Company shall be entitled to all costs of collection, including reasonable attorney’s fees and interest at 15 [percent] per annum or the highest rate allowed by law, whichever is less unless a lower amount is agreed to by Company.”

Paragraph 19, entitled “Compensation of Company,” also contains an attorney’s fees provision. Paragraph 19 provides in pertinent part as follows: “In any referral for collection or action against the Customer for monies due the Company, upon recovery by . . . the Company, the Customer shall pay the expenses of collection and/or litigation, including a reasonable attorney fee.”

Both of these attorney fees provisions support awarding fees to Western as the prevailing party in the action on the 2013 Contract. We reject KRBL’s contention we should not consider any other attorney fees provision in the 2013 Contract because Western relied solely on paragraph 11. While it is true the moving papers cited only paragraph 11, in subsequent briefing Western specifically cited the attorney fees clause in paragraph 19 as a basis for awarding fees. (Western’s Third Further Briefing, p. 2.) In any event, the two-page Terms & Conditions was attached an exhibit to the attorney fees motion. The trial court was free to rely on any part of the contract in ruling on the motion

KRBL’s other proposed “alternate grounds” for affirming the order denying the attorney fees motion similarly lack merit. KRBL argues the trial court should have refused to grant the attorney fees motion as a penalty for Western’s “unreasonable” decision to file the case as an unlimited civil action. The trial court did not share KRBL’s dim view of that filing decision. The court did not criticize Western’s filing decision in the statement of decision or in any of the several minute orders related to the attorney fees motion.

Finally, KRBL argues we should affirm the order denying Western’s motion for attorney fees because Western was not the prevailing party in the action. The trial court specifically found in its statement of decision at trial, and again in the order denying the attorney fees motion, that Western was the prevailing party in the case. Given Western obtained a judgment of over $18,000 plus interest at trial, we find no abuse of discretion in that determination.

Because KRBL did not question the reasonableness of the amount of attorney fees Western sought in its motion, and to foreclose the possibility of yet more litigation in regard to the attorney fees award, we direct the superior court upon remand to enter an attorney fees award in Western’s favor in the amount requested.

III

DISPOSITION

The order denying Western’s motion for attorney’s fees is reversed. The matter is remanded to the superior court with directions to award Western the attorney fees requested. Western shall recover its costs on appeal, including attorney fees.

ARONSON, ACTING P. J.

WE CONCUR:

IKOLA, J.

THOMPSON, J.