Mai v. HKT Cal, Inc.

• Decision Date: 12 July 2021
• Docket Number: D076708
• Citation: 66 Cal.App.5th 504,281 Cal.Rptr.3d 255
• Court: California Court of Appeals Court of Appeals
• Parties: Hue Thi Dang MAI, Cross-complainant and Appellant, v. HKT CAL, INC., et al., Cross-defendants and Respondents.

66 Cal.App.5th 504

281 Cal.Rptr.3d 255

Hue Thi Dang MAI, Cross-complainant and Appellant,

v.HKT CAL, INC., et al., Cross-defendants and Respondents.

D076708

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

Filed July 12, 2021

Certified for Partial Publication.^*

Mark Stuart Rosen, Santa Ana, for Cross-complainant and Appellant.

Blake Law Firm, Steven Wilson Blake, San Mateo, and Danielle S. Ward for Cross-defendant and Respondent HKT Cal, Inc.

Manning & Kass, Ellrod, Ramirez, Trester, Rinat Klier-Erlich and Mark R. Wilson, Emeryville, for Cross-defendant and Respondent Victoria Robinson.

DATO, J.

Hue Thi Dang Mai was sued for breach of contract by a prospective purchaser of the apartment building she owned, a suit occasioned by fraudulent conduct on the part of Mai's real estate agent. The prospective purchaser ultimately dismissed the breach of contract action, and Mai invoked the "tort of another" doctrine in suing, by cross-complaint, the agent and her employer to recover the attorney's fees Mai incurred defending the contract action. In the course of that second phase of the litigation, Mai's counsel failed to appreciate the difference between presenting a claim for attorney's fees as damages at trial, and one for fees as costs of suit in a posttrial motion. By its own admission, the trial court shared in this confusion for a period of time.

Into this mix on the eve of trial, the cross-defendants submitted as dispositive authority the Court of Appeal decision in Copenbarger v. Morris Cerullo World Evangelism, Inc. (2018) 29 Cal.App.5th 1, 239 Cal.Rptr.3d 838 ( Copenbarger ), which seemed to have the same effect as tossing a lit firecracker into the middle of a crowded dance floor. Acknowledging significant discomfort, the trial court apologized to Mai's counsel and reversed course on earlier tentative evidentiary rulings. Considering its hands tied by Copenbarger , the court decided it had no discretion to guide the case to what it believed was a fair resolution. Urging Mai to appeal the decision, it ultimately and regretfully concluded it could not award anything on her claim for attorney's fees.

Mai's appeal presents two issues. First, to what extent does Copenbarger accurately define the minimum showing required to sustain an award of attorney's fees as damages? Second, was the trial court correct in believing that Copenbarger eliminated its discretion to allow Mai to present her attorney's fee claim on the merits? As to the first issue, we believe Copenbarger 's analysis, some of which is dicta, may mislead trial courts by causing them to disregard well-established and, in several instances, binding precedent that predates it. For that reason, we offer a narrow reading of Copenbarger that harmonizes it with other case authority to the extent that is possible. Regarding the second issue, even accepting Copenbarger 's analysis at face value does not, as the trial court here seemed to believe, eliminate all discretion the court possessed to make mid-trial adjustments and accommodations that respect defendants' right to a fair trial while also allowing plaintiffs to litigate the merits of their claims. Accordingly, we reverse and remand for a limited retrial on the issue of attorney's fees as damages in which the court can both apply the proper legal principles and exercise its discretion to achieve substantial justice between the parties.

FACTUAL AND PROCEDURAL BACKGROUND

In 2016, Mai was surprised to learn that John Fike was under the impression he had purchased an apartment building she owned. Although Mai listed the building for sale in 2015 and received an offer from Fike at that time, he never responded to her counteroffer. Then the building nearly sold to Dawn Oree, but the purchase fell through when Oree could not obtain financing. In the course of due diligence for that sale, Mai provided various documents about the building and her associated finances to her real estate agent, Victoria Robinson, to give to Oree.

Trusting Robinson with this information turned out to be a fateful decision. In late 2016, Robinson used her knowledge about Mai's building to arrange a fraudulent sale to Fike.¹ She forged Mai's signature on numerous documents, including the sales contract, and then tried to retroactively convince Mai to sell the property in a series of almost 60 increasingly desperate text messages. Mai's single, firm response indicated she did not want to sell the building at that time.

Unfortunately, from Fike's perspective Robinson qua Mai had already done so. As a result, Fike sued Mai in 2017 for breach of contract and specific performance. Mai cross-complained, alleging various claims against Robinson and her employer, HKT Cal, Inc. doing business as Keller Williams Commercial (KW), including fraud as to Robinson and negligence as to both parties. After Mai's cross-complaint was filed, Fike added Robinson, KW and another individual as defendants in his action. He settled with those parties two years later and dropped his suit against Mai. In the meantime, however, she had been forced to defend the breach of contract claim. Mai's cross-complaint against Robinson and KW, which proceeded to trial, was primarily aimed at recovering the attorney's fees she paid to defend the Fike suit under the "tort of another" doctrine. She also sought recovery for emotional distress and punitive damages.

Following a bench trial, the court's written decision noted the stark inconsistencies and contradictions in the testimony. Mai claimed she never signed any documents pertaining to the sale of her property to Fike, while Robinson insisted she witnessed Mai sign the papers. The evidence ultimately convinced the trial judge that Robinson was not credible. In addition to a visible mismatch between Mai's authenticated signature and her supposed signatures on the sale contract and associated documents, the date of the text messages—in which Robinson pleaded with Mai to consider Fike's offer days after Mai allegedly signed the contract—and the fact that Robinson impersonated Mai to get information from her utility provider buttressed the court's conclusion that Robinson forged Mai's signature to orchestrate the fraudulent sale. She did all of this, apparently, to collect what would have been a sizeable commission on a sale that exceeded $1 million and assuming she could convince Mai to agree to the transaction. In addition to these factual findings, the court also determined that Robinson breached her fiduciary duty to Mai. And while it found KW had no corresponding independent duty to Mai, the employer was nonetheless liable for Robinson's tort because she was acting under the broker's real estate license at the time.

As to damages, Mai was awarded $50,000 for emotional distress and $200 in punitive damages against Robinson—the latter paltry figure due to Robinson's minimal net worth. The court recognized that Mai's principal damage claim "was the attorney's fees caused by having to defend Fike's lawsuit," a sum she claimed was nearly $200,000. But it concluded it could not award Mai anything on this claim. The court reached this conclusion despite having "no doubt that work was done" and "attorney's fees ... incurred." And it was convinced from an equitable perspective that "there ought to be a way to get at least some damages." But the court believed it was bound by the Court of Appeal decision in Copenbarger, supra , 29 Cal.App.5th 1, 239 Cal.Rptr.3d 838, which it viewed as dictating that "Mai was unable to provide admissible evidence in support of her attorney's fees." Mai's primary contention on appeal is that the trial court erred in reaching this conclusion.

DISCUSSION

The principal issue in this case involves the recovery of attorney's fees as damages and the Copenbarger decision's restrictive view of how plaintiffs must offer proof of attorney's fees in such cases. We therefore begin with some helpful background regarding attorney's fees as damages, followed by a detailed summary of Copenbarger and a procedural description of the trial proceedings that demonstrates how fundamentally the trial court's understanding of Copenbarger affected its view of this case and the ultimate decision it reached.

We go on to analyze various aspects of the Copenbarger holding in light of other relevant California authority—only some of which was considered by Copenbarger. Based in part on this broader focus, we restate the applicable legal principles that define the minimum showing necessary to support an award of attorney's fees as damages. These principles do not create the legal straightjacket that the trial court believed Copenbarger had constructed. Moreover, Copenbarger did not eliminate the trial court's ability and discretion to make mid-trial adjustments in procedure that would remedy what it considered a manifestly unfair result. We therefore reverse and remand for further proceedings. As to the remaining issues, we reject both KW's overly narrow framing of its own liability and Mai's contention that the trial court's punitive damages award was too low as a matter of law.

1. Background Information on Attorney's Fees as Damages

In limited circumstances, it is permissible for plaintiffs to recover attorney's fees as damages. The claim that Mai made here—that she was forced to procure the services of an attorney to defend herself in the Fike suit as a result of Robinson's fraud—falls into one of these limited categories known as the "tort of another" theory.² While such doctrines are sometimes described as exceptions to the general "American rule" that each party pays for their own attorney's fees (see, e.g., Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 505, 198 Cal.Rptr. 551, 674 P.2d 253 ; Flyer's Body Shop Profit Sharing Plan v. Ticor Title Ins. Co. (1986) 185 Cal.App.3d 1149, 1155, 230 Cal.Rptr. 276 ), this characterization can be misleading. It is better to conceptualize these cases as claims for...