Llоyd Copenbarger, as Trustee of the Hazel I. Maag Trust (the Maag Trust), sued Morris Cerullo World Evangelism, Inc. (MCWE) for declaratory relief and breach of a settlement agreement made to resolve various disputes, including an unlawful detainer action.
Following a bench trial, the trial court found MCWE had breached the settlement agreement by not timely dismissing with prejudice the unlawful detainer action. As damages, the court awarded the Maag Trust $118,000-representing the attorney fees it claimed to have incurred during the relevant time period.
On appeal, MCWE does not challenge the finding that its failure to dismiss the unlawful detainer action constituted a breach of the settlement agreement. Instead, MCWE makes a number of arguments challenging the damages awarded. Most significantly, MCWE argues (1) the Maag Trust could not as a matter of law recover its attorney fees incurred in the unlawful detainer action as damages for breach of the settlement agreement because attorney fees are costs of suit, and (2) the Maag Trust failed to present competent evidence sufficient to prove the amount of damages.
It appears to us the Maag Trust could recover, as damages for breaсh of the settlement agreement, its attorney fees incurred in the unlawful detainer action. One purpose for the Maag Trust entering into the settlement agreement was to avoid continuing to run up attorney fees in the unlawful detainer action; had MCWE performed its obligations under the settlement agreement by dismissing the action, the Maag Trust would not have incurred those fees.
We reverse the judgment against MCWE, however, because there was a wholesale failure of proof of the amount of damages on the part of the Maag Trust. At trial, the Maag Trust did not attempt to authenticate as business records its attorney invoices and admit them into evidence. Nor did the Maag Trust present testimony from its attorneys, or anyone else, of billing rates and the work performed in the unlawful detainer action. The Maag Trust offered only the testimony of Lloyd Copenbarger, whose testimony about the invoices was hearsay and violated the secondary evidence rule, and who testified he did not know what the Maag Trust's attorneys did in the unlawful detainer action. As the evidence was insufficient to support the judgment, we reverse with directions to enter judgment in favor of MCWE on the Maag Trust's complaint.
FACTS
MCWE is the lessee of a 50-year ground lease (the Ground Lease) of real property (the Property) in Newport Beach. The Property was improved with
In 2004, MCWE subleased the Property and sold all of the Improvements to NHOM (the Sublease). The Sublease terminates on November 18, 2018. Paul Copenbarger and Kent McNaughton were the members and managers of NHOM.
Starting in 2009, NHOM experienced cash flow problems due to "a shortage of rents." In July 2009, Paul Copenbarger described NHOM's cash flow as "rather grim." Necessary maintenance and repairs were not made, and NHOM's property manager began notifying NHOM of deferred maintenance issues at the Property. In late August 2009, the Maag Trust notified NHOM of defaults of NHOM's obligations under the Maag Note, including failure to maintain the Property and to make timely loan payments.
In 2010, the Maag Trust offered to make NHOM's note payments to Plaza del Sol if MCWE agreed to forbear from declaring a default of the Sublease for one year. MCWE agreеd. In April 2010, Cerullo, Plaza del Sol, and the Maag Trust entered into an "Agreement re: Assignment and Transfer of Promissory Note and Deed of Trust and Ground Lease Enforcement" (the Agreement Re: Assignment). Under the terms of the Agreement Re: Assignment, the Maag Trust agreed to make certain payments on the Plaza del Sol Note, reimburse Plaza del Sol for real property taxes it paid on the Improvements and the Property, and make future payments to Plaza del Sol in an amount equal to payments due on the Plaza del Sol Note as such payments became due. MCWE and Plaza del Sol agreed not to declare a default under the Sublease on account of then-existing defaults so long as the Maag Trust made the agreed-upon рayments.
In June 2011, MCWE commenced an unlawful detainer action against NHOM, Orange County Superior Court Case No. 30-2011-00485656 (the UD Action), based on allegations NHOM failed to maintain and undertake
In August 2012, MCWE, Plaza del Sol, and the Maag Trust entered into a settlement agreement (the Settlement Agreement). The Settlement Agreement "rescind[ed] and cancel[ed] the Agreement Re: Assignment," required the Maag Trust to pay $400,000 (split into two payments) to MCWE, and obligated Plaza del Sol to assign the Plaza dеl Sol Note and the Plaza del Sol Deed of Trust to the Maag Trust. The Settlement Agreement states each party would bear its own costs and attorney fees, but that "[i]n any dispute involving the enforcement of this [Settlement] AGREEMENT, the prevailing party shall be entitled to recover ... its reasonable attorneys' fees and all other reasonable costs and expenses incurred therein."
The Settlement Agreement states MCWE "[w]ill, and hereby does, dismiss the UD [Action] with prejudice." Lloyd Copenbarger wanted to end the litigation and stop paying attorney fees in the UD
PROCEDURAL HISTORY
In October 2012, counsel for MCWE sent a letter to the Maag Trust purporting to rescind the Settlement Agreement. Two weeks later, the Maag Trust filed a complaint against MCWE and Plaza del Sol for declaratory relief and breach of contract.
MCWE and Plaza del Sol filed a cross-complaint for rescission of the Settlement Agreement. However, in 2015, MCWE and Plaza del Sol changed
A bench trial was conducted over four days in May 2016. The trial court granted MCWE's motion in limine to exclude evidence and argument that MCWE breached the Settlement Agreement by failing to turn over the Plaza del Sol Note and the Plaza del Sol Dеed of Trust. The Maag Trust's only theory of damages presented at trial was that it incurred $118,000 in attorney fees defending the UD Action between August 2012, when the Settlement Agreement was executed, and November 2015, when MCWE dismissed the UD Action. In support of this theory of damages, Lloyd Copenbarger testified he had received invoices from his attorney in the amount of $118,000. The trial court overruled MCWE's objections to that testimony based on hearsay and the secondary evidence rule. Lloyd Copenbarger testified he had the invoices, but did not bring them to court and had never reviewed them. Lloyd Copenbarger claims he had paid about $90,000 toward the invoices out of his own pocket.
The trial court ruled in favor of the Maag Trust and against MCWE and Plaza dеl Sol on the declaratory relief and breach of contract causes of action and awarded the Maag Trust $118,000 in damages. Plaza del Sol moved to correct the judgment or for a new trial on the ground there was no evidence it had done anything to breach the Settlement Agreement. The court granted the motion, vacated the previously entered judgment, and entered a new judgment and statement of decision in January 2017.
The new judgment awarded the Maag Trust $118,000 in damages against MCWE only, awarded judgment in favor of Plaza del Sol on the Maag Trust's first amended complaint, and awarded judgment in favor
In the statement of decision, the trial court found the Settlement Agreement was "valid, binding, and of full force and effect" and rejected MCWE's claim for its reformation. The court found MCWE materially breached the Settlement Agreement by "not promptly dismissing with prejudice the UD [Action]" and this breach excused further performance by the Maag Trust. The court concluded the Maag Trust could recover the attorney fees incurred in the UD Action as damages for breach of the Settlement Agreement: "The entire purpose of the Settlement Agreement was to halt litigation in the UD [A]ction. Specifically, MCWE agreed to promptly dismiss with prejudice the UD [A]ction. Accordingly, the natural consequence of breaching this particular provision of the Settlement Agreement was the Maag Trust incurring аdditional attorney fees and costs of litigation in the UD [A]ction."
In addition, the trial court, on its own initiative, took judicial notice of documents filed in the UD Action from September 2012 until the UD Action was consolidated with this litigation in April 2013. The court found: "Litigation activity, including ones before an appointed referee, occurred in the action between August 2012 and April 10, 2013. The jury trial on the UD [A]ction was stayed on April 19, 2013. [¶] The Court also notes activity within this matter after the UD [A]ction was consolidated. ... The stay was lifted approximately six months later on October 25, 2013. With the exception of settlement activities, the matter was also stayed from May 20, 2014 to January 20, 2015 while the parties discussed settlement of both the UD [A]ction and this action as consolidated. When the matter was not stayed, some litigation activity in the UD [Action] occurred between October 25, 2013 and October 7, 2015, such as opposing a motion for relief from the court's order dismissing the UD [A]ction and continued settlement activities. The court determines that Maag Trust is entitled to $118,000 as damаges from MCWE's breach of the Settlement Agreement."
MCWE timely filed a notice of appeal from the judgment entered in January 2017. Plaza del Sol is not a party to this appeal. The Maag Trust did not appeal from the judgment in favor of Plaza del Sol on the Maag Trust's complaint, and Plaza del Sol did not appeal from the judgment on its cross-complaint.
DISCUSSION
I.
Whether the Maag Trust Could Recover Attorney Fees Incurred in the UD Action as Damages for Breach of the Settlement Agreement.
The Maag Trust's theory of damages was MCWE's refusal to dismiss the UD Action, as required by the Settlement Agreement, resulted in the Maag Trust incurring attorney fees of $118,000 in defending the UD Action from the date the Settlement Agreement was signed to the date the UD Action was
An element of a breach of contract cause of action is damages proximately caused by the defendant's breach. ( Oasis West Realty, LLC v. Goldman (2011)
Detriment caused by MCWE's breach of the Settlement Agreement would include the attorney fees incurred by the Maag Trust in defending the UD Action. A benefit, and intended goal, of the Settlement Agreement was for the Maag Trust to avoid incurring more attorney fees in the UD Action-hence, the Settlement Agreement required immediate dismissal with prejudice of the UD Action. Had MCWE dismissed the UD Action with prejudice as required by the Settlement Agreement, the Maag Trust would not have incurred attorney fees defending the UD Action from the date on which thе Settlement Agreement was signed to the date on which MCWE dismissed the UD Action. Thus, the Maag Trust's attorney fees incurred in the UD Action within that time frame fall within the scope of statutory breach of contract damages.
As MCWE emphasizes, California follows the American rule, under which each party to a lawsuit ordinarily must pay his or her own attorney fees incurred in that lawsuit. ( Trope v. Katz (1995)
There is a difference, however, between attorney fees sought qua damages and attorney fees sought qua costs of suit. In Brandt v. Superior Court (1985)
Although Brandt dealt with a tort cause of action, the principle that attorney fees qua damages are recoverable as damages, and not as costs of suit, applies equally to breach of contract. In this case, for example, the Maag Trust's attorney fees incurred in defending the UD Action are damages caused by MCWE's breach of the Settlement Agreement. Those attorney fees were not costs of suit because they were not costs incurred in the action to enforce the Settlement Agreement. In contrast, the Maag Trust's attorney fees incurred in the lawsuit for breach of the Settlement Agreement would be, if recoverable,
MCWE relies on two Court of Appeal opinions in support of the argument that attorney fees may never be recovered as damages for breach of contract. In Olson v. Arnett (1980)
Navellier v. Sletten (2003)
Although it appears to us attorney fees may be recovered as damages for breach of contract, we do not need to decide the issue. Nor do we need to decide whether, as MCWE contends, the Maag Trust had to plead attorney fees as special damages
II.
The Maag Trust Failed to Prove Damages for Breach of the Settlement Agreement.
"No damages can be recovered for breach of contract which are not clearly ascertainable in both their nature and origin." ( Civ. Code, § 3301.) " 'Damages which are remote, contingent, or merely possible cannot serve as a legal basis for recovery.' " ( Westside Center Associates v. Safeway Stores 23, Inc. (1996)
The Maag Trust's proof of its damages came solely from the testimony of Lloyd Copenbarger. He testified he had received invoices from the attorneys
Lloyd Copenbarger was asked, based on his review of the invoices, how much the Maag Trust paid in attorney fees. MCWE objected on grounds of the secondary evidence rule and hearsay. The court overruled the objections, and Lloyd testified, "approximately $118,000." When asked on cross-examination if he had written checks for the $118,000, he answered he had not, he thought he had paid about $90,000, and he was not sure "what рortion went to what portion." He testified the $118,000 "represents the unlawful detainer fees that were paid that had to be incurred because [MCWE] didn't dismiss the [UD A]ction."
Lloyd Copenbarger testified he had copies of the invoices for the attorney fees, but did not bring the invoices with him to trial and had "nothing here today in regard to those fees." When asked what work was done for the $118,000 in attorney fees, he answered, "I don't know the specific actions. I just ... know the billing statement information that I was given by ... my attorney." Asked if he had reviewed the invoices before testifying at trial, he answered: "I didn't review the billings period. There are no funds with which to pay those attorneys at this time, ... and-I'm not disputing any of their bills, and so I didn't review them."
Lloyd Copenbarger was also asked what services he received from his attorneys in the UD Action. He answered: "I don't know. The attorneys were doing what they had to do involved in the case. Whether they had to do nothing or whether they were involved in substantial actions, I don't know. ... The record will show, and that will be something for [attorney] Hampton and whoever would have that information. I don't recall participating in anything. Maybe I signed some papers, but I was not involved-physically or personally involved to any degree in any of this litigation, except for depositions where I was being deposed."
Lloyd Copenbarger testified he had no independent recollection of what work was performed or the specific dollar amounts. He later testified: "I was not a litigation
Lloyd Copenbarger's testimony about the attorney invoices was inadmissible as hearsay and under the secondary evidence rule. An invoice itself is hearsay, and is not admissible to prove the work or services reflected in the invoice were performed, unless a foundational showing is made of an exception to the hearsay rule. ( Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968)
The Maag Trust did nothing to lay the foundation for admitting the invoices into evidence; the Maag Trust did not even bring the invoices to trial. Lloyd Copenbarger's testimony about the invoices is therefore double hearsay.
Evidence Code section 1521, known as the "Secondary Evidence Rule," provides: "(a) The content of a writing may be proved by otherwise admissible secondary evidence. The court shall exclude secondary evidence of the content of writing if the court determines either of the following: [¶] (1) A genuine dispute exists concerning material terms of the writing and justice requires the еxclusion. [¶] (2) Admission of the secondary evidence would be unfair. [¶] (b) Nothing in this section makes admissible oral testimony to prove the content of a writing if the testimony is inadmissible under Section 1523 (oral testimony of the content of a writing). [¶] (c) Nothing in this section excuses compliance with Section 1401 (authentication)."
Evidence Code section 1523, subdivision (a) provides: "Except as otherwise provided by statute, oral testimony is not admissible to prove the content of a writing." Oral testimony is admissible to prove the content of a writing if the proponent does not have possession or control of a copy of the document and the original has been lost or destroyed, or if the proponent does
Lloyd Copenbarger's testimony, even if admissible, was insufficient to prove the amount of attorney fees or the nature of the work performed. Although the trial court found Lloyd Copenbarger to be credible, the problem is not credibility: The problem is Lloyd Copenbarger provided no relevant information of the time spent, work performed, or the hourly rates of attorneys in the UD Action. A party seeking fees as a prevailing party must present evidence of the time spent and the hourly rate of each attorney. (E.g., El Escorial Owners' Assn. v. DLC Plastering, Inc. (2007)
Lloyd Copenbarger testified (1) he did not review the invoices, (2) did not recall participating in or supervising counsel in the UD Action, (3) did not know what his attorneys did or what legal services were performed in the UD Action, and (4) did not know which part of the fees were incurred in, and what services were performed for, the UD Action and which were for the lawsuit for breach of the Settlement Agreement. This is a wholesale failure of proof. No admissible evidence was presented of the nature of the legal work performed on behalf of the Maag Trust in the UD Action, the attorney billing rates, or of the amount of attorney fees incurred.
The trial court took judicial notice of documеnts filed in the UD Action from September 2012 until the UD Action was consolidated with this litigation in April 2013. MCWE argues the trial court, by doing so, committed misconduct. We do not address that argument. The documents filed in the UD Action have little materiality. "While judicial notice may be taken of court records ( Evid. Code, § 452, subd. (d) ), the truth of matters asserted in such documents is not subject to judicial notice." (
Thе Maag Trust's presentation of evidence did not afford MCWE the ability to meaningfully cross-examine and challenge the reasonableness of the fees incurred. "The evidence should allow the court to consider whether the case was overstaffed, how much time the attorneys spent on particular claims, and whether the hours were reasonably expended." ( Christian Research Institute v. Alnor (2008)
The Maag Trust did not present any evidence to substantiate the amount of attorney fees incurred in the UD Action. The Maag Trust easily could have done so. Lloyd Copenbarger had possession of the invoices and they could have been made admissible quite easily as business records. In addition, or in the alternative, the attorneys who represented the Maag Trust in the UD Action could have testified about their hourly rates, the work performed, and the amount of time spent on various tasks. Such evidence is required when a prevailing party requests attorney fees by motion. No less is required when attorney fees are sought as damages.
The Maag Trust argues MCWE could have called as witnesses the attorneys who represented the Maag Trust in the UD Action, but chose not to do so. But the Maag Trust, not MCWE, bore the burden of proving damages. ( Richman v. Hartley, supra,
Absent actual damages, a plaintiff might recоver nominal damages for breach of contract. ( Midland Pacific Building Corp. v. King (2007)
Proof of damages resulting from breach are an element of a breach of contract cause of action. The Maag Trust had a full and fair opportunity to present its evidence, but that evidence was insufficient to prove the Maag
III.
The Trial Court Should Have Resolved All Claims Presented in the Breach of Contract Cause of Action.
MCWE alsо contends the trial court failed to completely dispose of all the claims asserted in the Maag Trust's breach of contract cause of action in that the court did not rule on the claim that MCWE failed to deliver the Plaza del Sol Note and the Plaza del Sol Deed of Trust to the Maag Trust. MCWE argues the Maag Trust conceded that claim, and, therefore, MCWE is entitled to a ruling in its favor on it.
The trial court issued a tentative statement of decision on September 14, 2016. The Maag Trust's counsel submitted a proposed statement of decision which was the same as the tentative statement of decision. In the tentative and proposed statements of decision the court found: "The Settlement Agreement did not specifiсally require MCWE to turn over the [Plaza del Sol] Note and Trust Deed. Rather, the Settlement Agreement required [Plaza del Sol] Real Estate Trust to 'assign the [Plaza del Sol Note] and [Plaza del Sol Deed of Trust]' to the Maag Trust. ... However, such a requirement could be reasonably read as an implicit requirement of the Settlement Agreement. Accordingly, MCWE further breached the Settlement Agreement by failing to turn over possession of the [Plaza del Sol] Note and Trust Deed."
MCWE filed an ex parte application to clarify, add to, and/or delete from the tentative
In response, the Maag Trust conceded: "The Maag Trust's pleadings in this action alleged multiple breaches of the Settlement Agreement. Prior to trial,
In response to MCWE's objections and the Maag Trust's response, the trial court changed the tentative statement of decisiоn. The final statement of decision includes this finding: "Because the Settlement Agreement was materially breached by MCWE's failure to promptly dismiss with prejudice the UD [Action], the Court need not decide whether [the] Maag Trust suffered damages as a direct and proximate result of MCWE's alleged failure of not turning over possession of the [Plaza del Sol] Note and Trust Deed."
The trial court's decision not to decide the issue of delivery of the Plaza del Sol Note and the Plaza del Sol Deed of Trust was expressly based on the court's decision that MCWE breached the Settlement Agreement by failing to timely dismiss the UD Action. However, both claims (failure to deliver the note and failure to dismiss the UD Action) were pleaded in the complaint and they appear to be independent of each other. The Maag Trust conceded it presented no evidence or argument at trial that MCWE breached the Settlement Agreement by failing to turn over possession of the Plaza del Sol Note and the Plaza del Sol Deed of Trust. MCWE therefore was entitled to a ruling in its favor on that claim.
It is unnecessary to remand for the trial court to make new findings or revise the statement of decision for two reasons. First, we are reversing the judgment with directions to enter judgment in MCWE's favor, and that judgment is a final resolution in MCWE's favor of all claims presented in the breach of contract cause of action. Second, this opinion becomes law of the case in further proceedings in this matter.
DISPOSITION
The judgment in favor of the Maag Trust and against MCWE on the Maag Trust's complaint is reversed. The matter is remanded with directions to enter
WE CONCUR:
O'LEARY, P. J.
BEDSWORTH, J.
Notes
This is the fifth appeal arising out of a sublease between MCWE as sublessor and Newport Harbor Offices & Marina, LLC (NHOM) as sublessee of real property in Newport Beach, and related agreements, business dealings, and disputes. The other four were Newport Harbor Offices & Marina, LLC v. Morris Cerullo World Evangelism (2018)
The Maag Trust later filed an amended complaint adding causes of action for declaratory relief and breach of contract based on the Agreement re: Assignment. The Maag Trust dismissed those causes of action before triаl.
Both the Navellier and Olson opinions mention the lack of an attorney fees provision in the contracts. (Navellier, supra ,