29 Cal. App. 5th 1
Cal. Ct. App. 5th2018Background
- MCWE (sublessor) and the Maag Trust (creditor/trustee) entered a 2012 Settlement Agreement resolving disputes including an unlawful detainer (UD) action; the Agreement required MCWE to dismiss the UD Action with prejudice.
- MCWE did not dismiss the UD Action until October 2015 and then dismissed without prejudice. The Maag Trust contended this breach caused it to incur additional attorney fees defending the UD Action.
- The Maag Trust sued for declaratory relief and breach of the Settlement Agreement and sought $118,000 in attorney fees as damages for MCWE’s failure to dismiss the UD Action.
- At bench trial the court found MCWE breached the Agreement and awarded $118,000 based solely on testimony from Lloyd Copenbarger that invoices existed totaling that amount; the actual invoices and attorney testimony were not introduced.
- On appeal MCWE did not challenge breach but argued (a) attorney fees for the UD Action are costs of suit and not recoverable as damages, and (b) the Maag Trust failed to prove the amount/nature of fees with admissible evidence.
- The Court of Appeal held fees could be damages in principle but reversed because the Maag Trust failed to present admissible, competent evidence establishing the amount or nature of the fees; directed entry of judgment for MCWE.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether attorney fees incurred in the UD Action are recoverable as contract damages for breach of the Settlement Agreement | Fees defending the UD Action are direct damages because the Agreement’s purpose was to stop that litigation | Such fees are merely costs of suit and not recoverable as contract damages except by statutory or contractual right in the enforcement action | Court: Fees may be recoverable as damages in principle (Brandt principle applied); did not decide definitively because plaintiff failed to prove them admissibly |
| Whether the Maag Trust proved the amount and nature of the attorney fees claimed ($118,000) | Copenbarger’s testimony that invoices totaled ~$118,000 sufficed | Testimony was hearsay/secondary evidence; invoices or attorney testimony were required to prove hours/rates and work performed | Held: Plaintiff failed to prove damages; testimony was inadmissible hearsay and insufficient; reversal directed and judgment for MCWE ordered |
| Admissibility of billing statements offered through Copenbarger (secondary evidence/hearsay) | Copenbarger testified he had the invoices and relied on them to estimate fees | Objects under Evidence Code §§1521/1523 and hearsay rules; invoices not produced or authenticated | Held: Trial court erred to admit that testimony as proof; invoices could have been admitted as business records with proper foundation or attorneys could have testified |
| Whether trial court left unresolved claim re: delivery of Plaza del Sol note and deed of trust | Maag Trust had pleaded multiple breaches including failure to turn over the note/deed | MCWE argued Maag Trust conceded that claim at trial and thus was entitled to a ruling in its favor | Held: Maag Trust conceded it presented no evidence on that claim; appellate disposition (judgment for MCWE) resolves all claims in MCWE’s favor without remand |
Key Cases Cited
- Brandt v. Superior Court, 37 Cal.3d 813 (recognizing attorney fees can be recoverable as tort damages where fees were consequence of wrongful denial)
- Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811 (statutory statement of contract damages requirement)
- Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503 (contract damages aim to approximate benefit of performance)
- Trope v. Katz, 11 Cal.4th 274 (American Rule re attorney fees; parties generally bear their own fees)
- Olson v. Arnett, 113 Cal.App.3d 59 (court held attorney fees cannot be recovered as damages in that context)
- Navellier v. Sletten, 106 Cal.App.4th 763 (plaintiffs could not rely on attorney fees as damages where no statutory or contractual basis appeared)
- Frank v. County of Los Angeles, 149 Cal.App.4th 805 (remedy where plaintiff’s evidence insufficient: reverse and direct entry of judgment for defendant)
- Essex Ins. Co. v. Five Star Dye House, Inc., 38 Cal.4th 1252 (distinguishing Brandt fees as damages vs ordinary costs of suit)