Date: 08-31-2019

Case Style:

Case Number: B285793

Judge: Bigelow, P.J.

Court: California Court of Appeals Second Appellate District, Division Eight on appeal from the Superior Court, County of Los Angeles

Plaintiff's Attorney: Kousha Berokim

Defendant's Attorney: J. Andrew Douglas and Max Yueh

Description: Appellants William Greene, California Consulting Group
(CCG), and R & R Trust1 obtained a judgment in their favor and
against respondent Karen de la Carriere (Carriere). The trial
court declared Greene the prevailing party and awarded him
attorney fees pursuant to a contractual attorney fees provision.
Greene nonetheless appealed, contending the trial court erred in
calculating his damages. After we questioned whether Greene
waived his right to appeal by accepting payment on the judgment
and executing an acknowledgment of satisfaction of judgment,
Greene voluntarily dismissed his appeal. Carriere then moved
for an award of attorney fees incurred on appeal, which the trial
court granted. In this appeal, Greene contends the trial court
erred in awarding Carriere her attorney fees given he is the
prevailing party in the action. We agree and reverse the trial
court’s order.
FACTUAL AND PROCEDURAL BACKGROUND
Greene and Carriere were close friends for many years.
In 1997, Greene agreed to loan Carriere $175,000 to help her
purchase a home. As part of the agreement, Carriere executed a
promissory note (Note) and deed of trust (Trust Deed), which
named Greene’s retirement trust—R & R Trust—as beneficiary,
and his consulting business—CCG—as trustee. The interest rate
on the loan was 14.5 percent, and the loan came due in 2008.
In 2012, the parties’ relationship soured, and Greene
demanded payment on the loan. By that time, Carriere had
made only a few payments, all of which went to interest. Greene
threatened to foreclose Carriere’s property if she did not pay the
full amount due.
1 For the sake of simplicity, we refer to the appellants
interchangeably as “Greene.”
3
On October 5, 2012, Carriere filed a complaint against
Greene, seeking to void the Note and Trust Deed. Greene, in
turn, filed a cross-complaint against Carriere, asserting a claim
for breach of the Note.
The trial court conducted a four-day bench trial in April
2015, after which it found Carriere’s claims meritless and entered
judgment of dismissal against her. On Greene’s cross-complaint,
the court found Carriere breached the Note, but agreed with her
that the interest rate was usurious. After subtracting the
usurious interest payments from the outstanding principal, the
court entered judgment against Carriere and in favor of Greene
for $150,329.21.
The court additionally awarded Greene $123,975 in
attorney fees pursuant to a provision in the Note stating “[i]f any
action is instituted on this note, the undersigned promise(s) to
pay such sum as the Court may fix as attorney’s fees.” The court
explained the basis for its decision: “Carriere commenced this
action with a complaint that asserted incendiary claims such as
forgery, self-dealing and breach of professional responsibilities.
The Defendants have defeated those claims, and CCG has
recovered affirmative relief on its cross-complaint. Under these
circumstances, the Court rules that Greene, R & R Trust and
CCG are the prevailing parties within the meaning of [Civil
Code] §1717(b)(1).”
Carriere and Greene filed cross notices of appeal. (Case
No. B267781.) In his opening brief on appeal, Greene argued the
trial court erred in subtracting interest payments from the
principal owed under the Note.
4
While the appeals were pending, Carriere paid Greene the
full amount owed under the judgment and as attorney fees.
Greene, in turn, executed an acknowledgement of full satisfaction
of judgment (acknowledgment of satisfaction), which Carriere
filed in the trial court. According to Carriere, Greene also agreed
to reconvey the Trust Deed and return the Note and Trust Deed,
but failed to do so. As a result, Carriere filed in the trial court a
motion to expunge lis pendens and compel reconveyance of
encumbrances, which the court apparently denied for lack of
jurisdiction while the appeal was pending.
Around the same time, Carriere filed a motion in this court
to dismiss Greene’s appeal as moot. We issued an order to show
cause (OSC) inviting Greene to address why the appeal should
not be dismissed. We noted the general rule that a party cannot
accept the benefits of a judgment while challenging it on appeal,
but noted there are exceptions to this rule. Rather than respond
to the OSC, Greene requested dismissal of his appeal, which we
granted. The remittitur noted that Carriere “shall recover costs
on appeal.” The next day, Carriere requested dismissal of her
cross-appeal.
Carriere then filed in the trial court a motion for attorney
fees incurred in Greene’s appeal and her post-trial motion to
expunge lis pendens and compel reconveyance of encumbrances.
She made the request pursuant to Civil Code section 1717 and
the attorney fees provision in the Note. Carriere alternatively
requested the court sanction Greene pursuant to Code of Civil
Procedure section 128.5, for pursuing a frivolous appeal.
Greene opposed the motion, arguing the trial court had
already determined he was the prevailing party in the lawsuit.
He also argued that Carriere was not the prevailing party on
5
appeal given he had voluntarily dismissed his appeal.
The trial court awarded Carriere $67,238 in attorney fees,
explaining: “[A]ppeal and post-judgment are separate phases of
the proceedings. [California Rules of Court, rule 8.278]
designates the standards for determining the prevailing party for
recovering costs on appeal, and the Court of Appeal’s remittitur
specifically designated de la Carriere as the prevailing party
entitled to costs on appeal. Based on this court’s review of the
post-trial proceedings related to the lis pendens, de la Carriere
was the prevailing party for those procedures as well. [Citation.]
As the prevailing party, de la Carriere is entitled to recover fees
under Civ. Code § 1717.”
Greene timely appealed.
DISCUSSION
I. Carriere is Not Entitled to Attorney Fees under Civil
Code section 1717
Greene contends the trial court erred in awarding Carriere
attorney fees given he is the prevailing party in the action. We
agree.
A prevailing party is entitled to recover costs in any action
or proceeding, “[e]xcept as otherwise expressly provided by
statute.” (Code Civ. Proc., § 1032, subd. (b).) “These costs,
however, do not include the attorney fees the prevailing party has
incurred in the litigation unless (1) an agreement between the
parties provides for the recovery of those fees, or (2) a statute
creates a right of recovery.” (Butler-Rupp v. Lourdeaux (2007)
154 Cal.App.4th 918, 923; see Code Civ. Proc., §§ 1021, 1033.5,
subd. (a).) “On appeal this court reviews a determination of the
legal basis for an award of attorney fees de novo as a question of
6
law.” (Sessions Payroll Management, Inc. v. Noble Construction
Co. (2000) 84 Cal.App.4th 671, 677.)
Here, Carriere sought attorney fees pursuant to the terms
of the Note and Civil Code section 1717, which provides generally
that, “in any action on a contract” with an attorney fees
provision, the party “prevailing on the contract” shall be entitled
to reasonable attorney fees in addition to other costs. (Civ. Code,
§ 1717, subd. (a).) Civil Code section 1717, subdivision (b)(1),
clarifies that “the party prevailing on the contract shall be the
party who recovered a greater relief in the action on the
contract.” “[U]nder Civil Code section 1717, there may only be
one prevailing party entitled to attorney fees on a given contract
in a given lawsuit.” (Frog Creek Partners, LLC v. Vance Brown,
Inc. (2012) 206 Cal.App.4th 515, 520 (Frog Creek); see
DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5th 968, 977
[“fees under section 1717 are awarded to the party who prevailed
on the contract overall”]; Roberts v. Packard, Packard & Johnson
(2013) 217 Cal.App.4th 822, 831 (Roberts) [“section 1717
contemplates that only one side in a lawsuit can be the prevailing
party”].)
An “action on a contract,” as used in Civil Code section
1717, refers to “the whole of a lawsuit rather than to discrete
proceedings within a lawsuit.” (Frog Creek, supra, 206
Cal.App.4th at p. 527, fn. 6; see Roberts, supra, 217 Cal.App.4th
at p. 832 [“[p]rocedural steps taken during pending litigation are
not an ‘action’ within the meaning of section 1717”].) The trial
and appeal, therefore, are considered part of the same action for
purposes of determining contractual attorney fees. (Wood v.
Santa Monica Escrow Co. (2009) 176 Cal.App.4th 802, 806
(Wood).)
7
In Wood, supra, 176 Cal.App.4th 802, the plaintiff
dismissed his complaint with prejudice and the defendant moved
for attorney fees. The trial court denied the motion, which was
affirmed on appeal. The plaintiff then moved for an award of
attorney fees incurred on appeal, pursuant to a contractual
provision allowing attorney fees to the prevailing party in any
“action or proceeding.” The trial court denied the motion.
In affirming the trial court’s order, the Court of Appeal
rejected the plaintiff’s argument that his success on appeal
entitled him to attorney fees, regardless of the outcome of the
underlying lawsuit. (See Wood, supra, 176 Cal.App.4th at
p. 805.) The court explained that “section 1717 does not support
an award to the prevailing party on appeal, but only to the
prevailing party in the lawsuit.” (Wood, at p. 808.) The
defendant was unquestionably the prevailing party in the lawsuit
given the complaint was dismissed. (Id. at p. 807.) Because the
plaintiff’s success on appeal did not change that fact, the court
held he was not entitled to an award of attorney fees. (Ibid.)
The same is true here. The trial court determined that
Greene was the prevailing party in the lawsuit after finding he
defeated Carriere’s claims and obtained affirmative relief on the
cross-complaint. Carriere’s subsequent success on appeal and her
post-judgment motion did not affect that determination. Indeed,
both before and after appeal, Greene received a net judgment of
$150,329.21. Consequently, he recovered the “greater amount on
the action on the contract” and remains the prevailing party for
purposes of Civil Code section 1717. As such, he is the only party
entitled to attorney fees under the Note. The trial court erred in
finding otherwise.
8
Contrary to Carriere’s suggestions, the fact that we
awarded her costs in connection with the prior appeal does not
conclusively establish her entitlement to attorney fees.
California Rules of Court, rule 8.278(d)(2), provides that “[u]nless
the court [of appeal] orders otherwise, an award of costs [on
appeal] neither includes attorney’s fees on appeal nor precludes a
party from seeking them under rule 3.1702.” We did not “order
otherwise.” Consequently, our cost award did not determine, or
even indicate, who was the prevailing party for the purpose of
awarding attorney fees. (See Mustachio v. Great Western Bank
(1996) 48 Cal.App.4th 1145, 1150 [provisions allowing costs on
appeal are entirely separate from the contractual provision for
fees]; Wood, supra, 176 Cal.App.4th at p. 807 [“an award of costs
on appeal does not determine, or even indicate, who is the
prevailing party in the lawsuit for the purpose of awarding
fees”].)
Nor are we persuaded by Carriere’s contention that,
because Greene executed an acknowledgement of satisfaction, the
underlying action was “fully resolved” and the appeal constituted
a “separate matter, standing on its own merits” for purposes of
awarding attorney fees. Initially, Carriere cites no authority—
nor have we found any in our independent research—to support
her assertion that an appeal constitutes a new matter separate
from the underlying lawsuit upon execution of an
acknowledgement of satisfaction. Moreover, the underlying
action was not “fully resolved” when Greene executed the
acknowledgment of satisfaction, as Carriere claims. Even
assuming Greene’s appeal was barred at that point, Carriere’s
cross-appeal remained pending, which could have resulted in
reversal of the judgment.
9
Even if we accepted Carriere’s contention that the appeal
constituted a separate “action,” she still would not be entitled to
attorney fees. Civil Code section 1717, subdivision (b)(2),
provides there “shall be no prevailing party” for purposes of
contractual attorney fees where “an action has been voluntarily
dismissed . . . .” Here, Greene voluntarily dismissed his appeal.2
Equally meritless is Carriere’s suggestion that, absent an
award of attorney fees under Civil Code section 1717, a party
could “indefinitely drag the other . . . through multiple frivolous
appeals without recourse.” Code of Civil Procedure section 907
provides that a reviewing court may “add to the costs on appeal
such damages as may be just” when it appears an “appeal was
frivolous or taken solely for delay.” Similarly, California Rules of
Court, rule 8.276, permits a court of appeal to impose sanctions
on a party or attorney for “[t]aking a frivolous appeal or
appealing solely to cause delay.” (Cal. Rules of Court, rule
8.276(a)(1).) There was nothing to prevent Carriere from seeking
such sanctions in this court.
2 Relying on Cravens v. State Bd. of Equalization (1997)
52 Cal.App.4th 253 (Cravens), Carriere contends the dismissal
was not voluntary because it was made after we issued an order
to show cause. Such reliance is misplaced. Cravens stands for
the proposition that a trial court need not accept a plaintiff’s lastminute
request for dismissal where entry of summary judgment
against the plaintiff is imminent. (Id. at p. 257.) Here, we
accepted Greene’s request for dismissal. Cravens, therefore, is
inapposite.
10
II. Carriere is Not Entitled to Attorney Fees under Code
of Civil Procedure Section 128.5
In her respondent’s brief, Carriere asserts that, even if she
is not entitled to attorney fees under Civil Code section 1717,
“this Court could award fees under Code of Civil Procedure
section 128.5.” Section 128.5 provides that a “trial court may
order a party, the party’s attorney, or both, to pay the reasonable
expenses, including attorney’s fees, incurred by another party as
a result of actions or tactics, made in bad faith, that are frivolous
or solely intended to cause unnecessary delay.” (Code Civ. Proc.,
§ 128.5, subd. (a).) Carriere contends that such sanctions are
warranted against Greene for pursuing a frivolous appeal.
We disagree.
Initially, it is not clear whether Carriere is urging us to
affirm the trial court’s order under Code of Civil Procedure
section 128.5 (section 128.5), or if she is asking us to impose such
sanctions in the first instance. If the latter, we reject her
request; section 128.5 expressly vests the sanctioning power in
the trial court. (Code Civ. Proc., § 128.5, subd. (a).)
We would also decline any invitation to affirm the trial
court’s order under section 128.5. Because the trial court
awarded Carriere attorney fees under Civil Code section 1717,
it did not consider imposing sanctions under section 128.5. The
trial court has broad discretion under section 128.5 (see Olson
Partnership v. Gaylord Plating Lab, Inc. (1990) 226 Cal.App.3d
235, 240), and we do not presume to know how it would have
exercised that discretion if called upon to do so. The standards
under the two statutes are distinct, so the fact that the court
awarded fees under Civil Code section 1717 does not establish
that it would have imposed sanctions under section 128.5.
11
Although we would typically end our analysis there, in
order to foreclose more wasteful litigation, we further note that
Carriere failed to show that sanctions are warranted. Section
128.5 does not explicitly permit the trial court to impose
sanctions against a party for pursuing a frivolous appeal, and
Carriere has not provided any authority suggesting it does so
implicitly. In contrast, as we discussed above, Code of Civil
Procedure section 907 and California Rules of Court, rule
8.276(a)(1), expressly provide such sanctioning power to the
reviewing court. It would make sense that the Legislature
intended to vest such authority exclusively in reviewing courts,
given they are in the best position to determine whether an
appeal is frivolous.
Even if the trial court had such authority, Carriere failed to
show that Greene’s appeal was frivolous. An action or tactic is
frivolous for purposes of section 128.5 if it is “totally and
completely without merit or for the sole purpose of harassing an
opposing party.” (Code Civ. Proc., § 128.5, subd. (b)(2).) Carriere
asserts that Greene’s appeal was frivolous because it was moot
once he accepted full payment on the judgment and executed the
acknowledgment of satisfaction. However, in Heacock v. IvoretteTexas,
Inc. (1993) 20 Cal.App.4th 1665—a case Carriere should
be familiar with given we cited it in our OSC—the court held a
plaintiff’s appeal was not barred even though she collected the
full amount of the judgment and filed an acknowledgement of
satisfaction. (Id. at pp. 1670–1672.) Regardless of how we would
have ultimately ruled on Carriere’s motion to dismiss, given such
authority, we cannot say Greene’s appeal was “totally and
completely without merit or for the sole purpose of harassing an
opposing party.” Sanctions, therefore, would not have been
warranted under section 128.5.

Outcome: The order awarding attorney fees is reversed. Appellants are awarded costs on appeal.

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