Johnson v. Johnson
| Decision Date | 26 February 2018 |
| Docket Number | F073191 |
| Parties | LAIRD JOHNSON, Plaintiff and Appellant, v. DEBRA A. JOHNSON, Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINIONAPPEAL from a judgment of the Superior Court of Stanislaus County. Timothy W. Salter, Judge.
Downey Brand, Janlynn R. Fleener and Katie Konz for Plaintiff and Appellant.
Crabtree Schmidt and Michael R. Dennis for Defendant and Respondent.
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This appeal involves an award of attorney fees in a dispute between siblings arising out of their real estate partnership. The partnership agreement stated the prevailing party was entitled to recover attorney fees "actually expended" if "litigation is instituted with respect to any matter regarding the covenants in this Agreement." The trial court determined the sister, who won a defense verdict on three tort causes of action submitted to the jury, was the prevailing party and awarded her costs and approximately $135,000 in attorney fees. The brother appealed, arguing he was the prevailing party because the jury awarded him $12,822 on his breach of contract claim.
On the question of costs, we conclude the provisions of Code of Civil Procedure section 1032 apply and the brother meets the statutory definition of "prevailing party" because he is "the party with a net monetary recovery" as that phrase is used in subdivision (a)(4) of the statute. As such, he "is entitled as a matter of right to recover costs in [the] action." (Code Civ. Proc., § 1032, subd. (b).) Therefore, costs should have been awarded to the brother and the award of costs to the sister was erroneous.
On the question of attorney fees, we must interpret the attorney fees provision in the partnership agreement and determine its scope before addressing who, if anyone, was the prevailing party for purposes of attorney fees. Initially, we conclude the attorney fees provision's reference to litigation with respect to any matter "regarding the covenants" of the partnership agreement is ambiguous as to scope. To resolve part of this ambiguity, we conclude the attorney fees provision covers both contractual and noncontractual claims that are part of a dispute "regarding the covenants" of the partnership agreement. Thus, the attorney fees provision is not limited to contractual claims. To resolve the ambiguity as to scope presented by the phrase "regarding the covenants," we interpret "regarding" to mean directly or indirectly relating to the covenants. With these ambiguities resolved, we conclude the entire controversy addressed in the lawsuit was covered by the attorney fees provision because (1) the four causes of action submitted to the jury had either a direct or secondary relationship to the covenants in the partnership agreement and (2) the declaratory relief cause of action decided by the trial court also was directly related to the covenants in the partnership agreement.
As to whether the trial court erred in deciding the sister was the prevailing party for purposes of attorney fees, we conclude Civil Code section 17171 does not apply to theclaims for attorney fees and, thus, its definition of "prevailing party" does not apply. The record is unclear about how the trial court interpreted the attorney fees provision and the standards used to determine the sister was the prevailing party. Faced with this uncertainty, the brother made a sufficient demonstration of apparent legal error in connection with that prevailing party determination by showing (1) he was awarded damages by the jury and (2) he achieved prelitigation objectives with a financial benefit to him of over $300,000. (See Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 65, fn. 13.) Thus, there is a reasonable probability he would have been deemed the prevailing party under the proper interpretation of the attorney fees provision. When the record is unclear and the appellant establishes apparent error, "we may reverse the award and remand the case to the trial court for further consideration and amplification of its reasoning." (In re Vitamin Cases (2003) 110 Cal.App.4th 1041, 1052.) Therefore, we remand this matter for the trial court to apply our interpretation of the attorney fees provision and determine which party, if any, prevailed.
As to the order imposing sanctions under Code of Civil Procedure sections 128.7 and 1008, subdivision (d), we conclude it did not comply with the mandatory 21-day notice period set forth in subdivision (c)(2) of Code of Civil Procedure section 128.7. Also, the court did not issue an order to show cause "describing the specific conduct that appears to violate" the sanctions statute. (Ibid.)
We therefore reverse the sanctions order, reverse the judgment insofar as it addresses attorney fees and costs, and remand for further proceedings.
Plaintiff Laird R. Johnson and defendant Debra A. Johnson, Ph.D., are brother and sister. Laird is a resident of Union County, New Jersey. In 1999, he retired as a colonel in the New Jersey National Guard and in 2007 he retired from his position as a captain with Continental Airlines. Debra is a psychologist and a resident of Stanislaus County, California.
On March 16, 1982, Debra and Laird created a partnership named "D & L Associates" by executing a partnership agreement. The purpose of the partnership was to hold, develop and rent real property. The partnership agreement described the capital contributions of the partners and stated withdrawal of capital or voluntary contributions of capital required the consent of both partners. It also provided for the maintenance of a capital account and an income account for each partner, with each partner's distributive share of profits, losses and withdrawals being credited or debited to his or her income account. The partnership's fiscal year ended on December 31 and its books were kept on a cash basis. As soon as practicable after the close of a fiscal year, a yearly accounting was to be made available to any partner for inspection. The term "net profit" was defined by reference to federal income tax law. The partnership agreement required the partners to divide profits equally during the term of the agreement.
Drawing money out of the partnership was to be done as mutually agreed by Laird and Debra. The partnership agreement stated: The partnership agreement addressed a variety of other matters, such as withdrawal, retirement, disability, or death of a partner; grounds for terminating the other partner; the remaining partner's option to purchase the other's share; and partnership liquidation.
The partnership agreement required the keeping of adequate books and records setting forth an accurate account of all business transactions of the partnership and granted partners "the right at all times to have access to, and to inspect and copy the partnership books." The partnership agreement's attorney fees provision, the interpretation of which is an issue in this appeal, states in full: "In the event that litigation is instituted with respect to any matter regarding the covenants in thisAgreement, the prevailing party shall be entitled to an award of attorney's fees actually expended and costs actually incurred."
Debra managed the day-to-day affairs of the partnership, including maintaining its books and financial records. The partnership eventually owned two commercial properties in Modesto and three residential properties. Debra's psychology business, which she conducted through a California corporation, operated out of commercial properties owned by the partnership. In 2007, the partnership acquired its last property, which was located on Roth Court in Turlock and was the residence of Debra's wife. The mortgage for the Turlock property was about $220,000 and was taken out in Laird's name.
Another residential property held by the partnership was a beach house in Harvey Cedars, New Jersey. It had been built by their parents and was passed to Debra and Laird upon the death of their mother in 1994. In 2007, at Debra's request, Laird took out a $175,000 mortgage on the beach house and sent the money to Debra for use by the partnership.
In 2009, Laird began to have questions about how the partnership was being run. He flew to California, looked at some financial records, but did not receive a full copy of the books and had a difficult time getting in to look at the property. After further requests for financial information were not satisfied, Laird contacted a law firm.
In April 2010, Laird filed a lawsuit against Debra in Stanislaus County Superior Court (the "first lawsuit"). The complaint alleged causes of action for accounting, breach of fiduciary duty, breach of the partnership agreement, conversion and appointment of receiver.
In June 2012, the parties agreed to mediation. At the end of the mediation, Laird and Debra signed a two-page handwritten settlement agreement. Debra agreed to give upher 50 percent interest in the beach house in New Jersey and Laird agreed to give up his 50 percent interest in the California properties. Any California property in Laird's name was to be transferred by quitclaim deed to Debra and she was to assume the mortgages on the California properties. The monthly mortgage payments on the New Jersey beach house were to be made by the partnership until December 31, 2012. Debra agreed to pay Laird...
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