Harvard Investment Co. v. Gap Stores, Inc.

• Decision Date: 31 May 1984
• Citation: 202 Cal.Rptr. 891,156 Cal.App.3d 704
• Court: California Court of Appeals Court of Appeals
• Parties: HARVARD INVESTMENT COMPANY, a corporation, Plaintiff and Respondent, v. The GAP STORES, INC., a corporation, Defendant and Appellant. A015342. Civ. 54267.

Page 891

202 Cal.Rptr. 891

156 Cal.App.3d 704

HARVARD INVESTMENT COMPANY, a corporation, Plaintiff and Respondent, v. The GAP STORES, INC., a corporation, Defendant and Appellant.

A015342.

Civ. 54267.

Court of Appeal, First District, Division 2, California.

May 31, 1984.

As Modified on Denial of Rehearing June 26, 1984.

Neil E. Falconer, Steinhart & Falconer, San Francisco, for defendant and appellant.

Pillsbury, Madison & Sutro, Harlan M. Richter, Michael H. Salinsky, Sarah G. Flanagan, San Francisco, for plaintiff and respondent.

ROUSE, Associate Justice.

Defendant The Gap Stores, Inc. (The Gap) appeals from a judgment in favor of plaintiff Harvard Investment Company (Harvard) in an action against The Gap for waste and breach of a lease agreement.

The facts necessary to the disposition of this appeal are undisputed. ¹ Harvard bought a building in which The Gap was a tenant. Sometime after The Gap vacated the premises, Harvard sued it for waste and breach of the lease. Harvard prayed for more than $400,000 in actual damages. Harvard also sought attorney's fees pursuant to a clause in the lease agreement that provided that if either party sued the other on the lease, "the losing party shall pay the successful party a reasonable sum for attorneys' fees ...." Prior to answering the complaint, The Gap made an offer of judgment, pursuant to section 998 of the Code of Civil Procedure, of $65,000. ² Harvard rejected this offer. The Gap then answered the complaint, denying all liability and also seeking its attorney's fees. Discovery commenced and the lawsuit continued. The case was to be tried on December 15, 1980. On December 5, 1980, The Gap made a second offer of judgment, this time for $125,000, inclusive of all costs and attorney's fees. Again Harvard rejected the offer. After a continuance, the trial began on February 23, 1981, and lasted for 13 1/2 days. On March 20, 1981, the court filed an intended decision, finding in favor of Harvard for $131,669 ($81,669 for actual damages and $50,000 in attorney's fees). On April 6, 1981, The Gap filed a request for findings of fact and conclusions of law on three specific issues, only two of which figure in this appeal:

"1. (a) The value of attorneys' fees incurred by plaintiff for services rendered on those issues upon which plaintiff was successful, and (b) the value of attorneys' fees incurred by plaintiff for services rendered on those issues as to which plaintiff was not successful.

"Said allocation is necessary by reason of defendant's contention that plaintiff is not entitled to recover attorneys' fees for services rendered on those issues as to which plaintiff was not successful.

"2. (a) The value of attorneys' fees incurred by plaintiff for services rendered during the period ending on December 5, 1980, and the value of attorneys' fees incurred by the plaintiff for services rendered during the period commencing on December 6, 1980, to the conclusion of the trial, and (b) the allocation of the Court's allowance of attorneys' fees to plaintiff as between said two periods.

"Said allocation is necessary by reason of the fact that on December 5, 1980, defendant served upon plaintiff a Statutory Offer of Judgment pursuant to § 998 of the Code of Civil Procedure."

Harvard objected to this request for findings. On April 16, 1981, the court entered judgment in accordance with its intended decision. In addition, the court denied The Gap's request for findings. After entry of judgment, The Gap filed a motion to vacate the judgment on grounds that the court's failure to make the requested findings rendered the judgment defective. The Gap renewed its request for the findings and also moved for various orders amending the judgment. First, on the theory that Harvard did not recover more than The Gap's statutory offer of $125,000, The Gap sought an order under section 998 of the Code of Civil Procedure that (1) limited Harvard's awardable costs to those incurred up to the date of the offer, and (2) granted The Gap the costs which it incurred after the date of the offer. Second, on the theory that The Gap was the "successful party" within the meaning of the fee clause in the lease from the date that Harvard rejected The Gap's offer, The Gap sought an order awarding it the attorney's fees that it incurred from the date of Harvard's rejection. Third, on the theory that the fee clause permitted the recovery of fees by the successful party on an issue-by-issue basis, The Gap sought fees which were incurred from the commencement of the action with respect to the issues on which it prevailed at trial. The court denied The Gap's motions "for the reasons set forth in [Harvard's] opposition (filed 4/9/81)," namely, (1) that a request for findings on fewer than all material issues is unauthorized and unlawful and therefore must be denied; and (2) assuming that limited findings are proper, the specific findings requested need not be made because they did not involve material issues. The Gap here contends that the court erred when it denied its request for findings on certain specified issues.

At the time of The Gap's request, section 632 of the Code of Civil Procedure provided, in pertinent part: ³ "Where findings are required, they shall fairly disclose the court's determination of all issues of fact in the case." (Emphasis added.)

Also at this time, rule 232(e) of the California Rules of Court provided, in pertinent part: "Findings shall fairly disclose the court's determination of all issues of fact material to the judgment in the case and shall be concisely and chronologically stated whenever practicable." ⁴ (Emphasis added.)

From this authority, it appears that the trial court concluded that, if a court intends to issue findings, it must make findings on all material issues; ⁵ further, that a party can only request findings on all material issues. Thus the court denied The Gap's request because, in its view, such request invited the court to commit error by making incomplete findings.

This unfortunate application of the rules exalted the allegedly defective form of The Gap's request over its legitimate substance. Clearly, The Gap sought findings of some sort; however, because it asked for findings on only some and not all issues in the case, the court treated its request as a nullity, as if no request had been made at all. Even assuming the validity of the rules divined by the court, it does not follow from them that a party who "erroneously" requests limited findings is therefore not entitled to any findings. Under these circumstances, it would have been appropriate for the court to have treated The Gap's limited request as a request for findings on all issues. Doing so would have provided The Gap with the only findings it really wanted and also would have protected the court from the error of failing to make a requested finding. (Cf. Chapple v. Big Bear Super Market No. 3 (1980) 108 Cal.App.3d 867, 873-874, 167 Cal.Rptr. 103 [where a finding on a material issue is requested, a judgment rendered in the absence of such a finding is reversible].) In this connection, we note that, in its opposition to The Gap's requested findings, Harvard asked that the request be denied, but alternatively suggested that the court make findings on all issues. We believe that, at the very least, the court should have permitted The Gap to amend its request to ask for findings on all issues. ⁶ All things considered, we conclude that the court's summary denial of The Gap's request was error. Whether such error constitutes a basis for reversal of the court's judgment depends on whether the findings requested by The Gap involved material issues.

As noted, The Gap requested that the court make findings concerning what part of the $50,000 attorney's fee award represented fees for services rendered to Harvard up to December 5, the date of the statutory offer. This request was based upon the contention that section 998 was applicable.

Under section 998 of the Code of Civil Procedure, if Harvard's actual recovery was less than The Gap's December 5 offer of $125,000, then (1) The Gap would be liable for only the pre -offer costs incurred by Harvard; and (2) Harvard would be liable for the post -offer costs incurred by The Gap. (See Shain v. City of Albany (1980) 106 Cal.App.3d 294, 297-298, 165 Cal.Rptr. 69.) Superficially, it appears that section 998 was inapplicable, and, therefore, that the court properly denied The Gap's request for a finding. The face of the judgment shows that Harvard recovered $131,669, $6,669 more than The Gap's offer. The Gap contends, however, that despite this appearance, Harvard did not obtain a judgment more favorable than its $125,000 offer.

The Gap points out that, in determining whether a party has obtained a more favorable judgment, the court must exclude from the total recovery the costs incurred after the offer was made. The rationale for this rule was stated by the court in Bennett v. Brown (1963) 212 Cal.App.2d 685, 688, 28 Cal.Rptr. 485: ⁷ "We believe that the Legislature enacted section 997 of the Code of Civil Procedure for the purpose of encouraging the settlement of litigation without trial. The section was designed to give a defendant the right to offer to allow judgment to be taken against him for a specified amount and to provide that if the plaintiff did not accept said offer he could not recover any costs incurred after the date of the offer if he failed 'to obtain a more favorable judgment.' To determine whether a plaintiff has recovered a more favorable judgment costs incurred after the offer has been received must be excluded. If not, the portion of section 997 denying plaintiff his costs becomes meaningless. [p] It is true, as respondent contends, that one must look to the judgment in order to determine whether it is more favorable than the offer of settlement.... [Wh]en you have a cause of action seeking damages only and the...