Exxess Electronixx v. Heger Realty Corp.

• Decision Date: 08 June 1998
• Docket Number: No. B108515,B108515
• Citation: 64 Cal.App.4th 698,75 Cal.Rptr.2d 376
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 4396, 98 Daily Journal D.A.R. 5991 EXXESS ELECTRONIXX et al., Cross-complainants and Appellants, v. HEGER REALTY CORPORATION et al., Cross-defendants and Respondents.

Page 376

75 Cal.Rptr.2d 376

64 Cal.App.4th 698, 98 Cal. Daily Op. Serv. 4396,

98 Daily Journal D.A.R. 5991

EXXESS ELECTRONIXX et al., Cross-complainants and Appellants, v. HEGER REALTY CORPORATION et al., Cross-defendants and Respondents.

No. B108515.

Court of Appeal, Second District, Division 1, California.

June 8, 1998.

Law Offices of Ashouri & Associates, P. Patrick Ashouri and Michael F. Frank, Los Angeles, for Cross-complainants and Appellants.

Greenberg & Creyaufmiller, Lawrence R. Greenberg and Timothy P. Creyaufmiller, Los Angeles, for Cross-defendants and Respondents.

MASTERSON, Associate Justice.

After entering into a standard commercial lease, the lessee discovered several defects in the premises that interfered with its use of the property to conduct business. The lessee sued its broker for declaratory relief, constructive fraud, breach of fiduciary duty, and equitable relief, alleging that the broker should have disclosed the defects before the lease was executed. Eventually, the action was settled and dismissed.

The broker then moved for attorneys' fees pursuant to a provision in the lease which provided that "[i]f any Party or Broker brings an action or proceeding to enforce the terms hereof or declare rights hereunder, the Prevailing Party ... or Broker ... shall be entitled to reasonable attorney's fees." The trial court awarded fees to the broker. The lessee has appealed the award.

We conclude that Civil Code section 1717 precludes an award of attorneys' fees on the contract claim (declaratory relief) and that the contractual attorneys' fee provision does not authorize an award of fees on the tort claims (constructive fraud and breach of fiduciary duty) or the claims for equitable relief. Accordingly, we reverse.

BACKGROUND ¹

Masco Building Products Corporation owns a three-story building in South Gate. In 1994, Exxess Electronixx, a partnership, commenced negotiations with Masco to lease a portion of the building for the purpose of operating a business. Heger Realty Corporation acted as the broker for both parties. In July 1994, Exxess and Masco executed a "Standard Industrial/Commercial Single-Tenant Lease," a form lease prepared by the American Industrial Real Estate Association. The lease term was five years, beginning July 1, 1994. The lease acknowledged that Heger Realty was a dual agent for the lessor and lessee and required the lessor to pay a fee to Heger Realty in accordance with a separate written agreement. The lease did not describe any of Heger Realty's obligations or duties.

Paragraph 31 of the lease provided: "If any Party or Broker brings an action or proceeding to enforce the terms hereof or declare rights hereunder, the Prevailing Party (as hereafter defined) or Broker in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorney's fees.... The term 'Prevailing Party' shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense...." (Boldface in original.)

Exxess and Masco also executed an addendum to the lease. It provided in part that "[e]lectrical service will be separately metered to Lessee's Premises, and Lessee shall be responsible for procuring, maintaining, and paying all charges and taxes in connection therewith." Further, Masco agreed that within the first 30 days of the lease, it would make certain improvements to the premises (e.g., install a fire escape door, erect a fence in the yard, and repair the building's sprinkler system). With the exception of those improvements and Masco's obligation to remediate any hazardous substances, Exxess "acknowledge[d] that Lessee is leasing the Premises ... in its present 'AS IS' and 'WITH ALL FAULTS' condition.... Lessee further acknowledges that by its entering into this Lease it has made such legal, factual, and other inquiries and investigations as it deems necessary, desirable, or appropriate with respect to the Premises and the value thereof and the appurtenances, facilities, and equipment thereof and that in entering into this Lease, it will be relying solely thereon." (Boldface and capitals in original.)

In 1995, a dispute arose between Exxess and Masco regarding payment of the electric bill. In November 1995, Masco filed this action against Exxess for breach of contract, alleging that Exxess had not paid the electric bill as required by the lease. ² In December 1995, Exxess answered the complaint, denying all allegations. Exxess also filed a cross-complaint against Masco and Heger Realty. ³ The cross-complaint included claims of negligent and intentional misrepresentation against all cross-defendants. It also alleged claims for contribution and equitable indemnity against Heger Realty based on Exxess's potential liability to Masco.

In January 1996, Masco dismissed its complaint against Exxess. Proceedings continued on Exxess's cross-complaint against Masco and Heger Realty. Masco filed an answer to the cross-complaint, denying all allegations. Heger Realty filed a demurrer to the cross-complaint. By order dated March 22, 1996, the trial court sustained the demurrer in part and overruled it in part. The trial court sustained the demurrer without leave to amend as to the claims against Heger Realty for intentional misrepresentation, contribution, and equitable indemnity. ⁴ The demurrer was sustained with leave to amend as to the negligent misrepresentation claim.

In April 1996, Exxess filed a first amended cross-complaint. Exxess alleged a breach of contract claim and related tort claims against Masco for failing to perform various obligations under the lease. Against Heger Realty, Exxess alleged three causes of action. First, in a claim for constructive fraud, Exxess alleged that Heger Realty was a fiduciary and had failed to disclose certain defects in the premises, including violations of the building code, the unfitness of the premises for occupancy, and the inability of the premises to qualify for a business license from the City of South Gate. Heger Realty allegedly withheld information about the defects in order to induce Exxess to lease the property. Had Exxess known the truth, it would not have entered into the lease. ⁵ Second, in a claim for declaratory relief, Exxess requested that the court determine the rights and duties of the parties under the lease. ⁶ Finally, in a claim for breach of fiduciary duty, Exxess alleged that it had an oral or written representation agreement with Heger Realty, that Heger Realty was a fiduciary, and that Heger Realty had breached its fiduciary duty by failing to disclose defects in the premises. Exxess sought compensatory and punitive damages on the claims for constructive fraud and breach of fiduciary duty. ⁷

Heger Realty filed an answer to the first amended cross-complaint. The parties engaged in discovery. On October 21, 1996, approximately one month before trial, the case settled. Masco agreed to pay Exxess a fixed sum within 30 days, and, in return, Exxess agreed to pay for certain maintenance costs. As to Heger Realty, Exxess agreed to dismiss the cross-complaint with prejudice in exchange for Heger Realty's waiver of any claim for malicious prosecution. Heger Realty was not required to pay anything to Exxess. As part of the settlement, Heger Realty retained the right to move for costs and attorneys' fees in the action. On October 22, 1996, Exxess dismissed the cross-complaint with prejudice.

On November 1, 1996, Heger Realty filed a cost memorandum listing $31,475.50 in attorneys' fees and $246.25 in other costs. Exxess responded with a motion to tax costs, challenging Heger Realty's right to attorneys' fees. In its opposition to the motion, Heger Realty argued that it was entitled to fees pursuant to the attorneys' fee provision in the lease. The trial court agreed with Heger Realty and denied Exxess's motion.

On November 20, 1996, Heger Realty filed a motion for attorneys' fees. Exxess filed papers in opposition. By order dated December 23, 1996, the trial court granted the motion and awarded Heger Realty $36,421.50 in attorneys' fees. ⁸ Exxess timely appealed from the trial court's orders denying its motion to tax costs and granting Heger Realty's motion for attorneys' fees.

DISCUSSION

In determining whether Heger Realty is entitled to attorneys' fees, we examine the applicable statutes and provisions of the lease. Extrinsic evidence has not been offered to interpret the lease, and the facts are not in dispute. We therefore review the trial court's decision de novo. (See Californians for Population Stabilization v. Hewlett-Packard Co. (1997) 58 Cal.App.4th 273, 294, 67 Cal.Rptr.2d 621; Snyder v. Marcus & Millichap (1996) 46 Cal.App.4th 1099, 1102, 54 Cal.Rptr.2d 268; Hambrecht & Quist Venture Partners v. American Medical Internat., Inc. (1995) 38 Cal.App.4th 1532, 1539, fn. 4, 46 Cal.Rptr.2d 33.) We conclude that the trial court erred in awarding attorneys' fees to Heger Realty. ⁹

A. Timeliness of the Motion

Exxess contends that the trial court erred in awarding attorneys' fees because Heger Realty did not file its motion for attorneys' fees in a timely manner. According to Exxess, the motion had to be filed before or at the same time Heger Realty filed its cost memorandum. Heger Realty missed that alleged deadline, having filed its motion almost three weeks after the cost memorandum was filed. Admittedly, there is case authority supporting Exxess's contention. (See Russell v. Trans Pacific Group (1993) 19 Cal.App.4th 1717, 1723-1725, 24 Cal.Rptr.2d 274; Nazemi v. Tseng (1992) 5 Cal.App.4th 1633, 1637-1638, 7 Cal.Rptr.2d 762.) However, those cases were decided under former rule 870.2 of the California Rules of Court, which stated that "[a]ny notice of motion to claim attorney fees as an element of costs under Civil Code...