CALIFORNIA ATTORNEY'S FEES

Lis Pendens: Challenge To A Lis Pendens Expungement Fee Award Must Be Made Through A Writ Proceeding, In Most Cases

A Good Reminder To Real Estate Practitioners.

            Norton v. Haskins, Case No. D078431 (4^th Dist., Div. 1 Aug. 17, 2022) (unpublished) is a good reminder to real estate litigators/practitioners that, in general, a challenge to a lis pendens expungement fee order must be done through a writ petition, not just a normal appeal.  (See Shah v. McMahon, 148 Cal.App.4^th 526, 529 (2007).)

Lis Pendens: Fifth District Reverses Expungement Motion In Right Of First Refusal Dispute, Remanding To The Lower Court To Set Attorney’s Fees For The New Prevailing Party

Case Has A Nice Discussion of Lis Pendens And Right Of First Refusal Principles.

            In J&A Mash & Barrell, LLC v. Superior Court, Case No. F083104 (5^th Dist. Jan. 19, 2022) (published), the appellate court confronted a mandate writ proceeding to review a lower court’s lis pendens expungement order in a dispute brought by a tenant claiming that its landlord dishonored a contractual right of first refusal when it came to selling the property.  A writ petition is the only available means to review an expungement order.  The Fifth District, in a nice discussion of lis pendens and right of first refusal principles, vacated the expungement order.  It also determined that tenant had achieved its litigation objectives and that landlord has no substantial justification for its expungement, which means that tenant was entitled to seek attorney’s fees and costs for its expungement opposition activities under Code of Civil Procedure section 405.38 (the lis pendens expungement fee-shifting provision).  Tenant further was entitled to appellate costs in winning at the appellate level.

Appealability, Lis Pendens: Aggrieved Party Suffering $4,500 Fee Award With Respect to Lis Pendens Expungement Could Not Raise The Issue Through A Subsequent Appeal

Litigant Had To Raise The Issue In A Writ Petition, Which Litigant Did Not Do—Appellate Court Lacked Jurisdiction To Consider The Fee Award.

            A probate litigant in Wilkin v. Nelson, Case No. B294530 (2d Dist., Div. 6 Feb. 3, 2020) (certified for partial publication Feb. 26, 2020; fee discussion not published) was ordered to pay $4,500 in attorney’s fees incurred after the probate court successfully granted the other side’s motion to expunge a lis pendens on some real property.   The trial judge can make such a fee award under Code of Civil Procedure section 405.38. 

            The aggrieved litigant subsequently appealed the fee award after bringing an unsuccessful writ petition to challenge the lis pendens expungement.  The 2/6 DCA found it had no jurisdiction to consider the appeal of the fee award.  The reason?  Answer:  the litigant did not raise the issue of attorney’s fees in the writ petition, such that he waived the only recourse for appellate review. 

Suing Real Estate Buyers, Who Were Defensed At Judgment On The Pleadings Stage, Were Not Stung With Real Estate Purchase Contractual Fees By Victorious Brokers, But Did Suffer Fee Exposure From Lis Pendens Expungement Proceeding

Third District Affirms Award of Lis Pendens Expungement Fees to Brokers and Sustains Denial of Attorney’s Fees to Brokers Under Real Estate Purchase Agreement Fee Clause.

            This next case deals with contractual fee awards under Civil Code section 1717 and fees assessed against a party that lost a lis pendens expungement motion.  Two lessons are learned in this case:  (1) the winning party must demonstrate that the losing party would have recovered under the contractual fee clauses vis-à-vis winning party in order to be entitled to a potential fee recovery; and (2) a writ of mandate is the exclusive mechanism to obtain review of a lis pendens expungement or associated fee award, rather than an appeal.

            The facts go like this.  Unsuccessful real estate buyers, a husband and wife, sued dual real estate agents for fraud after their purchase fell through and the brokers then bought the same residential property.  All of buyers’ claims were for monetary or injunctive relief, but prayed for “costs of suit, including attorney’s fees, if appropriate,” and were backed up by a lis pendens.     Buyer wife was not a signatory to the purchase agreement (only husband).  The trial court granted a lis pendens expungement motion on the ground the complaint did not contain a “real property claim” and deferred the question of attorney’s fees on the lis pendens issue for a later date.  The trial court granted a defense motion for judgment on the pleadings to remove wife as a plaintiff.  After plaintiffs were unsuccessful in obtaining leave to file a third amended complaint, husband voluntarily dismissed the remainder of the lawsuit without prejudice. 

            Brokers moved for over $290,000 in attorney’s fees based on several documents, with the only possibly relevant one being the fee clause in the purchase agreement.  The trial court denied this motion because husband dismissed the lawsuit and because brokers never had a right to fees against wife under the purchase agreement fee clause. The trial court also determined that the absence of pleading 1717 fees as damages precluded their recovery.   Later, on the reserved issue of fees under the lis pendens expungement motion, the trial court awarded brokers fees of $2,407.50 against both plaintiffs.  Brokers appealed from the denial of attorney’s fees, and disgruntled buyers appealed the lis pendens expungement and fee award thereunder.

            In a very elaborate and scholarly analysis, the Third District—in a 3-0 decision authored by Justice Sims—dismissed the cross-appeal by buyers and affirmed the fee denial with respect to brokers in Lair v. Hendrickson, Case No. C054514 (3d Dist. July 25, 2008) (unpublished). 

            With respect to the lis pendens expungement and accompanying fee award, the Third District determined that these were only reviewable upon a petition for writ of mandate (which did not occur) rather than an appeal.  Although not having to directly decide the issue because mandate was not sought, the appellate panel implied that the deferred fee award could have been challenged later by writ, but that the buyers never did so such that their appeal should be dismissed.

            The denial of fees to brokers spawned a more elaborate discussion.  (This unpublished opinion is 40 pages long, so that tells you we do our best to distill the decisions down to their “bottom lines.”)  The appellate court disagreed with the trial court’s belief that the failure to plead 1717 fees as damages was preclusive; it found that this omission did not necessarily preclude the brokers from recovering fees as costs under Code of Civil Procedure section 1033.5.  Justice Sims separately considered whether brokers had fee claims against husband or wife.

            No fees based on the contractual claims were recoverable because husband voluntarily dismissed the lawsuit, with the dismissal cutting off fee recovery under Santisas v. Goodin, 17 Cal.4^th 599, 619 (1998).  Tort claims, too, did not result in fee exposure for husband based on the rationale of Super 7 Motel Associates v. Wang, 16 Cal.App.4^th 541, 550 (1993), which held under similar circumstances that a broker was not entitled to fees for defeating a fraud claim because, had the buyer prevailed, broker would not have been liable for fees.  (Accord, Topanga and Victory Partners v. Toghia, 103 Cal.App.4^th 775, 786 (2002) [although a nonsignatory can recover for fees for contractual claims under the right circumstances, he cannot recover fees for noncontract claims because he was not a party to the contract with the fees clause].) 

            Wife’s situation was even simpler.  Wife and brokers were not parties to the purchase agreement, such that there was no nexus or third party beneficiary theory that could possibly ensnare wife for fee exposure.  The court also rejected a judicial estoppel theory based on wife’s prayer for fees, finding that its prior reasoning in M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One, 111 Cal.App.4^th 456, 468 (2003) was dispositive—“It is only where the parties litigate the existence of an attorney fee provision and the party claiming such a right prevails that the party should be entitled to attorney fees.  Under such circumstance, if the opponent succeeds in proving there is no attorney fee provision, it should be awarded its fees in order to further the purpose of Civil Code section 1717.”  Justice Sims found no basis that would have entitled wife to an award of attorney’s fees, such that brokers had no reciprocal right under section 1717.  (See also Loduca v. Polyzos, 153 Cal.App.4^th 334, 341 (2007).)

            The end result was that buyers avoided $300,000 in fee exposure and only had to pay brokers a little over $2,400 for losing the lis pendens expungement motion. 

LIS PENDENS WITHDRAWAL—YOU STILL MIGHT GET AWARDED ATTORNEYS’ FEES SHORT OF AN EXPUNGEMENT

Castro Holds That A Practical Prevailing Party Test Governs An Award of Fees When A Lis Pendens Is Withdrawn.

        Code of Civil Procedure section 405.38 provides that the prevailing party on a motion to expunge a lis pendens is entitled to an award of reasonable attorney’s fees and costs in bringing or opposing the motion unless the opponent acted with substantial justification or unless the imposition of fees/costs would be unfair under the circumstances of the particular case. However, the provision does not address what happens if a lis pendens is withdrawn before the ruling on an expungement motion. Is the trial court divested of jurisdiction to award fees/costs or can fees/costs be assessed depending on the circumstances of what happened in the case below? Happily, there is a published case to answer this question, a case holding that the trial court can award fees/costs for a withdrawn lis pendens after applying a multi-prong test for determining if one is a section 405.38 prevailing party.

        Castro v. Superior Court, 116 Cal.App.4th 1010 (2004) articulated a “practical approach” to determining if a litigant is a prevailing party when a lis pendens is withdrawn rather than expunged. Beyond that, however, the decision elucidated the factors that should be used in determining whether one is a prevailing party under section 405.38 in lis pendens withdrawal situations.

        The crucial issue for determination in Castro was defining exactly who is a “prevailing party” under section 405.38, because the statute contains no definition of the term. This presented a perfect legal question for the Second District, Division Three to decide. No less than Justice Croskey, a veteran jurist and an eloquent writer, was selected to be the author penning the “prevailing party” test under the lis pendens fee-shifting scheme.

        Justice Croskey took on his task with rigor on behalf of the Second District.

        Castro initially decided that a “practical approach” to prevailing party status should be adopted under section 405.38, accepting identical results reached in analogs under Civil Code section 1717 pretrial dismissals (Santisas v. Goodin, 17 Cal.4th 599, 622 (1998)) and the SLAPP statute (Coltrain v. Shewalter, 66 Cal.App.4th 94, 107 (1998)). It expressly rejected a rigid formula, focusing instead on a multifaceted test.

        With the basics out of the way, after announcing the general test, Justice Croskey proceeded to put some meat on the bones of this prevailing party standard under section 405.38. It is not enough to consider that there has been a lis pendens withdrawal; rather, three nonexhaustive factors must be weighed in determining if there is a prevailing party when a lis pendens has been withdrawn: (1) whether the party moving for fees/costs would have prevailed on the lis pendens expungment motion (a mini-merit determination); (2) whether the lis pendens withdrawal was for reasons unrelated to the expungement motion merits (e.g., there was a settlement that achieved plaintiff’s objectives or the withdrawing party had financial difficulties); and (3) whether the imposition of fees against the nonmoving party would be just (general equitable factors). See Castro, supra, 116 Cal.App.4th at 1023.

        This practical test for determining the prevailing party in a lis pendens withdrawal context gives considerable discretion to the trial judge. Although not stated in Castro, we believe that a determination on this issue would be reviewed under the abuse of discretion standard.

        Incidentally, the Castros sought $116,657 in fees for bringing a second expungement motion—a very hefty sum. The trial court denied the request, reasoning that the lis pendens withdrawal effectively mooted the matter before a formal expungement ruling was made. The matter did not need to be realistically decided because the parties settled before the Castro decision was filed. Nevertheless, the Second District decided to resolve the issue in a published decision because it was a matter of continuing public interest—honoring the settlement between the parties, but still giving guidance to the public and the bar. This is a classic illustration of when a matter will still be adjudicated on appeal, even though the named parties come to a resolution that moots the writ proceeding.

        (BLOG OBSERVATION—In discussing the prevailing party issue, Justice Çroskey observed that the defense goal usually is to “make the plaintiff go away with its tail between its legs….” Contributor Mike Hensley agrees that this is the correct read on the topic, because his dog Riffle usually wins the “prevailing party” contest in getting a walk at the end of a long day, with plaintiff Mike dragging his proverbial tail as Riffle joyously walks with uplifted tail through a nearby park.)