Brown Bark III v. Haver CA4/3
219 Cal. App. 4th 809
| Cal. Ct. App. | 2013Background
- Brown Bark III, L.P. sued Westover Financial, Westover Capital, and Haver to recover on a $1M revolving line of credit; Westover Financial defaulted and Brow n Bark obtained a default judgment against it for over $750K.
- Westover Capital was formed by Haver after Westover Financial began dissolving; Haver is Westover Capital's sole shareholder, officer, and director.
- Brown Bark asserted breach of contract against Westover Financial and Westover Capital based on the line of credit; Brown Bark also asserted conversion and fraud against Westover Capital and Haver.
- The trial was bifurcated into liability and damages; the jury heard conversion and fraud and the court reserved breach-of-contract questions, with no jury verdict on breach of contract.
- The court later entered judgment in favor of Haver and Westover Capital on all claims; Brown Bark sought attorney fees under the line-of-credit contracts, which the court denied.
- The court denied Westover Capital attorney fees on the contract claims initially, then on appeal held that Westover Capital could recover fees on contract claims under Civil Code section 1717, but not on tort claims; remanded for allocation of fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether section 1717 makes Westover Capital the prevailing party on the contract claims. | Brown Bark contends Westover Capital did not prevail on contract claims. | Westover Capital prevailed on contract claims via judgment against Brown Bark on those claims. | Yes; Westover Capital prevailed on contract claims under 1717. |
| Whether 1717 applies to successor liability theory and permits fee recovery. | Brown Bark argues successor liability is not a contract claim. | Westover Capital defeats contract claims via successor liability; 1717 should apply. | Yes; successor liability breach claims are contract claims for 1717 purposes. |
| Whether 1717 permits fee recovery on tort claims. | Brown Bark seeks fees on tort claims under broad fee provisions. | 1717 does not apply to tort claims; fees depend on contract terms. | No; 1717 does not apply to tort claims; fees denied on tort claims. |
| How to allocate fees between contract and tort claims and among represented parties on remand. | Allocation should reflect contract vs. tort and the relative recoveries. | Allocation is discretionary and should be determined on remand. | Remand to determine allocation between contract and tort, and among Westover Capital and Haver, plus appeal fees. |
Key Cases Cited
- Santisas v. Goodin, 17 Cal.4th 599 (Cal. 1998) (reciprocity applies to contract fee provisions when a party defeats the contract claim)
- Reynolds Metals Co. v. Alperson, 25 Cal.3d 124 (Cal. 1979) (reciprocal fee recovery for nonsignatories when prevailing party would recover if the contract were enforced)
- Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4th 375 (Cal. App. 1994) (noncontract claims; fee analysis depends on contract terms and prevailing party analysis)
- Pueblo Radiology Medical Group, Inc. v. Gerlach, 163 Cal.App.4th 826 (Cal. App. 2008) (alter ego/successor issues may affect contract fee recovery)
- Mepco Services, Inc. v. Saddleback Valley Unified School Dist, 189 Cal.App.4th 1027 (Cal. App. 2010) (how to determine prevailing contract party and on what basis fees are recoverable)
- Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338 (Cal. App. 1992) (broad view of on a contract for purposes of 1717)
- Exxess Electronixx v. Heger Realty Corp., 64 Cal.App.4th 698 (Cal. App. 1998) (fees on contract claims; tort claims require express provision)
- Gil v. Mansano, 121 Cal.App.4th 739 (Cal. App. 2004) (limits on contractual fee recovery for noncontract claims)
- Moallem v. Coldwell Banker Commercial Group, Inc., 25 Cal.App.4th 1827 (Cal. App. 1994) (fee provisions must identify party entitled to recover for torts)
- Scott Co. v. Blount, Inc., 20 Cal.4th 1103 (Cal. 1999) (determines prevailing contract party by relief awarded)
- Hsu v. Abbara, 9 Cal.4th 863 (Cal. 1995) (unqualified victory on contract claims entitles fee recovery)