Cosco Fire Protection v. Siry Investments CA4/1 ( 2015 )

Filed 2/20/15 Cosco Fire Protection v. Siry investments CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
COSCO FIRE PROTECTION, INC., D062427
Plaintiff, Cross-defendant and
Appellant,
(Super. Ct. No.
v. 37-2008-00097567-CU-BC-CTL)
SIRY INVESTMENTS et al.,
Defendants and Appellants;
SIRY INVESTMENTS, L.P.,
Cross-complainant and Appellant.
SIRY INVESTMENTS, L.P. et al.,
Plaintiffs and Appellants;
(Super. Ct. No.
D'AMATO CONVERSANO, INC., 37-2009-00095017-CU-BC-CTL)
Defendant and Appellant;
SALEHI ENGINEERING CORPORATION,
Defendant and Appellant.
APPEALS from a judgment of the Superior Court of San Diego County, Joel R.
Wohlfeil, Judge. Affirmed.
Ropers Majeski Kohn & Bentley, Stephan A. Barber, Enedina S. Cardenas and
Alan J. Hart for Plaintiff, Cross-defendant and Appellant Cosco Fire Protection, Inc.
Wilson, Elser, Moskowitz, Edelman & Dicker, Robert Cooper and Gregory D.
Hagen for Defendants and Appellants Siry Investments et al., for Cross-complainant and
Appellant Siry Investments, L.P., and for Plaintiffs and Appellants Siry Investments, L.P.
et al.
Byron & Edwards, Michael M. Edwards and Craig A. Weeber for Defendant and
Appellant D'Amato Conversano, Inc.
Garcia & Birge and Marian H. Birge for Defendant and Appellant Salehi
Engineering Corporation.
Plaintiffs Siry Investments, L.P., and 1835 Columbia Street, L.P. (together Siry)
appeal a judgment after the trial court granted the motion of defendant Salehi
Engineering Corporation, formerly known as Salehi & Salehi, Inc. (Salehi), for
contractual attorney fees and costs after it prevailed in Siry's action against it. On appeal,
Siry contends the trial court erred by: (1) awarding Salehi any attorney fees because
Salehi did not submit sufficient admissible evidence in support of its motion; and (2) not
apportioning Salehi's attorney fees among the three causes of action alleged against it.
In its cross-appeal, plaintiff and cross-defendant Cosco Fire Protection, Inc.,
(Cosco) appeals a judgment against Siry after the trial court denied its motion for
contractual attorney fees and costs after it prevailed in its action against Siry. On appeal,
2
Cosco contends the trial court erred by: (1) not presenting its special instructions and
questions to the jury; and (2) finding the terms and conditions in the document that
included an attorney fee provision were not incorporated into its written contracts with
Siry.
In its cross-appeal, defendant D'Amato Conversano, Inc. (DCI) appeals a
judgment against Siry after the trial court granted in part Siry's motion to tax DCI's costs.
The court denied DCI's request to recover from Siry its costs, including expert witness
fees, incurred after it made a settlement offer pursuant to Code of Civil Procedure1
section 998. On appeal, DCI contends the trial court erred by finding its settlement offer
to Siry was not a valid offer under section 998.
FACTUAL AND PROCEDURAL BACKGROUND
In 2008, Cosco filed an action (Super. Ct. San Diego County, 2008, No. 37-2008-
00097567-CU-BC-CTL) against Siry Investments, L.P., and Moe Siry for nonpayment of
invoices in the total amount of $48,535.64 for its design, materials, and labor in installing
fire sprinklers and fire alarm and detection equipment in connection with the construction
(or reconstruction and remodeling) of the Bayview Motel, now known as the Porto Vista
Hotel (Project). Cosco alleged causes of action for breach of two written contracts. In
turn, Siry filed a cross-complaint against Cosco, alleging causes of action for breach of
contract, negligent misrepresentation, and negligence.
1 All statutory references are to the Code of Civil Procedure unless otherwise
specified.
3
Siry then filed a separate action (Super. Ct. San Diego County, 2009, No. 37-
2009-00095017-CU-BC-CTL) against DCI, Salehi, and other defendants, alleging breach
of contract and negligence causes of action relating to the Project. DCI provided
structural engineering services to the architects for the Project. Salehi provided
mechanical, plumbing, and electrical design engineering services to Siry for the Project.
Siry alleged DCI, Salehi, and the other defendants wrongfully discontinued or delayed
work on the Project and provided services that were untimely and/or below the standard
of care in the industry that caused damages to Siry in excess of $5,000,000. The trial
court subsequently granted Siry's motion to consolidate the two actions (i.e., Case Nos.
37-2008-00097567-CU-BC-CTL and 37-2009-00095017-CU-BC-CTL).
In late January 2012, a jury trial began on the consolidated actions and lasted for
about six weeks. On March 8, after deliberating for about one day, the jury returned
verdicts against Siry and in favor of Salehi, Cosco, and DCI. On Cosco's claim against
Siry Investments, L.P., the jury awarded it $51,324.64 in damages. On April 16, the trial
court entered judgment on the jury's verdicts.
As discussed in greater detail below, Salehi and Cosco filed separate motions for
contractual attorney fees and costs, and DCI filed a memorandum of costs, seeking
recovery of its postsettlement offer costs, including expert witness fees. Siry opposed the
attorney fee motions and moved to tax DCI's costs. The trial court issued minute orders
granting Salehi's motion in part, denying Cosco's motion, and granting in part Siry's
motion to tax DCI's costs.
4
On August 7, the trial court entered an amended judgment against Siry, reflecting
its rulings on the posttrial motions. Siry timely filed a notice of appeal challenging the
judgment and posttrial rulings in favor of Cosco and DCI.2 DCI timely filed a notice of
cross-appeal challenging the court's order granting in part Siry's motion to tax its costs.
Cosco timely filed a notice of cross-appeal challenging the court's order denying its
motion for attorney fees and costs. Finally, Siry timely filed a notice of appeal
challenging the court's order granting Salehi's motion for attorney fees and costs.
DISCUSSION
SIRY'S APPEAL
I
Awards of Contractual Attorney Fees and Costs Generally
" ' " 'An order granting or denying an award of attorney fees is generally reviewed
under an abuse of discretion standard of review; however, the "determination of whether
the criteria for an award of attorney fees and costs have been met is a question of law."
[Citations.]' " ' [Citation.] An issue of law concerning entitlement to attorney fees is
reviewed de novo." (Carpenter & Zuckerman, LLP v. Cohen (2011) 195 Cal. App. 4th
373, 378.) Likewise, we apply de novo review and exercise our independent judgment in
interpreting a contract if there is no disputed extrinsic evidence on its interpretation.
(Campbell v. Scripps Bank (2000) 78 Cal. App. 4th 1328, 1336.)
2 Siry apparently has since abandoned that appeal.
5
"Code of Civil Procedure section 1021 provides the basic right to an award of
attorney fees." (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal. App. 4th 1338, 1341
(Xuereb).) Section 1021 provides that, in general, "the measure and mode of
compensation of attorneys and counselors at law is left to the agreement, express or
implied, of the parties . . . ." However, "[t]here is nothing in [section 1021] that limits its
application to contract actions alone. It is quite clear . . . that parties may validly agree
that the prevailing party will be awarded attorney fees incurred in any litigation between
themselves, whether such litigation sounds in tort or in contract." (Xuereb, at p. 1341.)
Furthermore, Civil Code section 1717 provides for reciprocity of contractual
attorney fee provisions, stating:
"(a) In any action on a contract, where the contract specifically
provides that attorney's fees and costs, which are incurred to enforce
that contract, shall be awarded either to one of the parties or to the
prevailing party, then the party who is determined to be the party
prevailing on the contract, whether he or she is the party specified in
the contract or not, shall be entitled to reasonable attorney's fees in
addition to other costs. [¶] Where a contract provides for attorney's
fees, as set forth above, that provision shall be construed as applying
to the entire contract . . . . [¶] . . . [¶]
"(b)(1) The court, upon notice and motion by a party, shall
determine who is the party prevailing on the contract for purposes of
this section . . . . [T]he party prevailing on the contract shall be the
party who recovered a greater relief in the action on the contract.
The court may also determine that there is no party prevailing on the
contract for purposes of this section."
"[Civil Code] section 1717 makes an otherwise unilateral right reciprocal, thereby
ensuring mutuality of remedy, . . . when a person sued on a contract containing a
provision for attorney fees to the prevailing party defends the litigation 'by successfully
6
arguing the inapplicability, invalidity, unenforceability, or nonexistence of the same
contract.' [Citation.] . . . [I]t has been consistently held that when a party litigant
prevails in an action on a contract by establishing that the contract is invalid,
inapplicable, unenforceable, or nonexistent, section 1717 permits that party's recovery of
attorney fees whenever the opposing parties would have been entitled to attorney fees
under the contract had they prevailed." (Santisas v. Goodin (1998) 17 Cal. 4th 599, 611,
quoting North Associates v. Bell (1986) 184 Cal. App. 3d 860, 865; italics added.)
The limited purpose of Civil Code section 1717 is to establish mutuality of remedy
and is triggered when there is a unilateral contractual provision that provides attorney
fees are available to only one of the contracting parties. (Hsu v. Abbara (1995) 9 Cal. 4th
863, 870.) Civil Code section 1717 is not an independent statutory basis for recovering
attorney fees (Chelios v. Kaye (1990) 219 Cal. App. 3d 75, 79), but instead "simply
transforms a unilateral contractual right into a reciprocal right." (Hambrose Reserve, Ltd.
v. Faitz (1992) 9 Cal. App. 4th 129, 132.)
"When a party obtains a simple, unqualified victory by completely prevailing on
or defeating all contract claims in the action and the contract contains a provision for
attorney fees, section 1717 entitles the successful party to recover reasonable attorney
fees incurred in prosecution or defense of those claims." (Scott Co. v. Blount, Inc. (1999)
20 Cal. 4th 1103, 1109.)
"Civil Code section 1717 has a limited application. It covers only contract actions,
where the theory of the case is breach of contract, and where the contract sued upon itself
7
specifically provides for an award of attorney fees incurred to enforce that contract."
(Xuereb, supra, 3 Cal.App.4th at p. 1342.)
"To achieve its goal, [Civil Code section 1717] generally must apply in favor of
the party prevailing on a contract claim whenever that party would have been liable under
the contract for attorney fees had the other party prevailed." (Hsu v. Abbara, supra, 9
Cal.4th at pp. 870-871.) Hsu noted that in 1987 the Legislature amended Civil Code
section 1717 to replace "the term 'prevailing party' with the term 'party prevailing on the
contract,' evidently to emphasize that the determination of prevailing party for purposes
of contractual attorney fees was to be made without reference to the success or failure of
noncontract claims." (Hsu, at pp. 873-874, italics added.) Accordingly, Hsu concluded:
"When a defendant obtains a simple, unqualified victory by defeating the only contract
claim in the action, [Civil Code] section 1717 entitles the successful defendant to recover
reasonable attorney fees incurred in defense of that claim if the contract contained a
provision for attorney fees. The trial court has no discretion to deny attorney fees to the
defendant in this situation by finding that there was no party prevailing on the contract."
(Hsu, at p. 877, italics added.) Alternatively stated, "when a defendant defeats recovery
by the plaintiff on the only contract claim in the action, the defendant is the party
prevailing on the contract under [Civil Code] section 1717 as a matter of law." (Hsu, at
p. 876, italics added.)
A trial court is not required to apportion attorney fees between contract claims and
noncontract claims when it reasonably finds all claims in the case were inextricably
intertwined. (Abdallah v. United Savings Bank (1996) 43 Cal. App. 4th 1101, 1111.)
8
"Attorney's fees need not be apportioned when incurred for representation on an issue
common to both a cause of action in which fees are proper and one in which they are not
allowed." (Reynolds Metals Co. v. Alperson (1979) 25 Cal. 3d 124, 129-130.)
Consistent with the purpose of Civil Code section 1717, a trial court "has broad
authority to determine the amount of a reasonable fee." (PLCM Group, Inc. v. Drexler
(2000) 22 Cal. 4th 1084, 1095 (PLCM Group).) "The 'experienced trial judge is the best
judge of the value of professional services rendered in his court, and while his judgment
is of course subject to review, it will not be disturbed unless the appellate court is
convinced that it is clearly wrong.' " (Serrano v. Priest (1977) 20 Cal. 3d 25, 49.)
Although a trial court's fee-setting inquiry ordinarily begins with the "lodestar" (i.e., the
number of hours reasonably expended multiplied by the reasonable hourly rate), a trial
court may base its determination on other factors. (PLCM Group, at pp. 1095-1096.)
"The value of legal services performed in a case is a matter in which the trial court has its
own expertise. [Citation.] The trial court may make its own determination of the value
of the services contrary to, or without the necessity for, expert testimony. [Citations.]
The trial court makes its determination after consideration of a number of factors,
including the nature of the litigation, its difficulty, the amount involved, the skill required
in its handling, the skill employed, the attention given, the success or failure, and other
circumstances in the case." (Melnyk v. Robledo (1976) 64 Cal. App. 3d 618, 623-624,
quoted with approval in PLCM Group, at p. 1096.)
9
II
Sufficient Evidence to Support Award of Attorney Fees to Salehi
Siry contends the trial court erred in awarding Salehi any attorney fees because
Salehi did not submit sufficient admissible evidence in support of its motion for attorney
fees and costs.
A
On May 22, 2012, Salehi filed a posttrial motion for an award of attorney fees and
costs pursuant to contract. Salehi based its motion on the written proposal, on which it
was unsuccessfully sued by Siry, that contained an attorney fee provision (paragraph 7)
stating:
"IN THE EVENT OF A DISPUTE BETWEEN THE PARTIES
RELATING TO THE INTERPRETATION OR ENFORCEMENT
OF THE PROVISION [sic] OF THIS AGREEMENT, THEN THE
PREVAILING PARTY IN DISPUTE SHALL BE ENTITLED TO
IT'S [sic] REASONABLE COSTS AND ATTORNEY'S FEES."3
Citing section 1021 and Civil Code section 1717, Salehi, as the prevailing party, sought a
total award of $369,869.85 for attorney fees, statutory costs, and nonstatutory costs.
Salehi sought $347,820.00 for attorney fees based on 581.4 hours worked by attorney
Silvia Garcia from July 29, 2009, through September 8, 2011, and 578 hours worked by
attorney Marian Birge from September 2011 through and after the trial. In support of its
motion, Salehi submitted the declaration of Birge, who stated she had been Garcia's
3 Siry does not appear to contend on appeal that the attorney fee provision set forth
in the written proposal is unenforceable by Salehi.
10
partner for 12 years. Garcia initially represented Salehi as lead counsel from July 2009
until September 2011, when Birge took over the case because Garcia's cancer treatment
prevented her from performing most of the functions of her job. Garcia eventually died
on April 17, 2012. Birge took over as lead counsel and began preparing for trial in
November 2011. In so doing, she reviewed voluminous files and discovery responses
and read 19 deposition transcripts. She stated Siry filed a first amended complaint in
September 2010 that added a breach of written contract claim to the original complaint's
professional negligence and breach of oral contract claims. Birge declared that "the same
factual allegations formed the underpinnings of both [of Siry's] contract claims and the
negligence claim." She stated she "believe[d] all the work performed before September
2010 was reasonably necessary and would have been accomplished had Ms. Garcia
and/or I been defending Siry's breach of written contract claim alone." She further stated:
"Siry's oral and written contract claims and the professional
negligence claims are based on identical factual allegations of
defective work, delaying, and abandoning work in violation of
professional standards. I find the claims to be so entwined as to be
analogous. I am unable to logically separate work done for an
express purpose of defending the breach of written contract claim
from the original oral contract claim. Similarly, I am unable to
logically separate the negligence claim from the contract claim,
because the underlying factual allegations go to all the causes of
action upon which plaintiff failed to prevail."
Birge stated that her and Garcia's billing rate was $300 per hour, consistent with hourly
rates of other San Diego attorneys with similar experience and qualifications. Birge
attached to her declaration copies of Garcia's hours spent representing Salehi in this
matter, which totaled 581.4 hours. Birge also attached to her declaration copies of her
11
own hours spent representing Salehi in this matter, which totaled 578 hours. She also
attached a copy of the written proposal on which Siry based its breach of written contract
claim. Birge declared the total amount of attorney fees for which Salehi sought
reimbursement was $347,820.00, total statutory costs of $17,461.35, and total
nonstatutory costs of $13,571.04, subject to supplementation at the time of the hearing on
Salehi's motion.
Siry opposed Salehi's attorney fee motion, arguing the written proposal's attorney
fee provision was ambiguous and inapplicable and the attorneys' time entries submitted
by Salehi were inadmissible and excessive. Siry argued Birge testified at her deposition
that she prepared Garcia's time entries by reviewing Garcia's computer records, but did
not know the manner in which Garcia entered those records. Siry also noted that Birge
testified she did not know whether Garcia's time entries had been submitted to Salehi as a
bill and that Salehi had paid only $25,000 for their firm's work on the case. Siry also
argued there were some inaccuracies and inconsistencies in Garcia's time entries. Siry
argued that because Garcia's time entries were wholly unreliable, the trial court should
reject them in their entirety or at least greatly reduce them.
In its reply, Salehi argued the attorney fees it requested were reasonable and
necessary. It also argued there was no need for the trial court to apportion those fees
between work done on the contract claims and the negligence claim because there were
common issues. In support of its reply, Salehi submitted a second declaration of Birge in
which she stated she worked diligently in preparing for the lengthy trial. Salehi also
12
requested additional fees and costs totaling $2,670.00 incurred since the filing of its
motion.
At the July 27, 2012, hearing on Salehi's attorney fee motion, Siry's counsel
argued that although Birge had conceded less than 10 hours of work was excessive, he
believed the hours were excessive by a factor of four to 10 times as that conceded by
Birge. He also argued Birge admitted that some of her pretrial work was duplicative of
work done by Garcia. In response, Salehi's counsel (Birge) stated she acknowledged a
small sample of time entries did not appear to be logical and/or had the wrong dates on
them. Nevertheless, she argued those flaws should not result in a finding that every time
entry was in error. The trial court stated:
"The Court remains convinced that the total of $347,820 is well
within the ballpark of what is reasonable and necessary, given a
whole host of factors, not the least of which was the complexity of
this litigation; the years that multiple lawyers[,] four of whom
splendidly represented their clients while trying this case in front of
the jury in this court several months ago; and the heavy litigation
that all sides engaged in for a period of years, dating back to [2008].
" . . . [T]his Court tries my best, based upon my years of experience
as a trial lawyer to evaluate these types of issues in the real world.
And in the real world lawyers get sick. Lawyers die. Unfortunately
this happened with Ms. Birge.
"Services were performed. And in part she had to climb an
extremely steep learning curve. Her client Salehi could have
chose[n] to go in a different direction but they chose not to [do] so.
They remained with Ms. Birge's firm. The fact that Ms. Birge and
Ms. Garcia were partners for, I think I saw 15 years, though she
didn't have knowledge of every entry, or every service performed by
Ms. Garcia in this case, they were partners.
"The inference that the court draws from that many years of working
together is that Ms. Garcia was at least familiar with the way her
13
partner did business, generally the record keeping. Generally the
way bills were prepared and sent or not sent to clients, such as
Salehi.
"The fact that Salehi paid very little of this bill is of little relevancy
to the court's perception of whether the services that were performed
were reasonable and necessary.
"The court acknowledges that there [were] some inaccuracies in the
bills that Ms. Birge pointed out or acknowledged, but the court has
offset what appears to be a relatively small percentage of
inaccuracies by denying the supplemental request for fees by Salehi.
"The Court confirms the tentative [ruling] as the order of the Court."
On July 27, the trial court issued a minute order granting in part and denying in
part Salehi's motion for attorney fees and costs. Citing the written proposal's attorney fee
provision, the court stated:
"[Siry's] breach of contract claim was based upon specific
allegations of professional negligence (untimely performance, failure
to meet standards of care, design errors and omissions,
discontinuation and lack of professional performance[).] The claims
relate to the specific services provided under the contract.
" . . . Under Civil Code section 1717, there is [a] presumption that
the provision for attorney fees applies to the entire contract. . . .
[¶] . . . [¶]
"Finally, the Court has held that a prevailing party is entitled to
attorneys' fees under a contract even in circumstances where the
finder of fact finds that no contract was formed. [Citation.]
"The Court finds that 1) Ms. Birge's hourly rate of $300 is
reasonable; 2) the nature and extent of the services performed by
Ms. Birge and Ms. Garcia were reasonable and necessary,
particularly given Ms. Birge's explanation in her May 25, 2012[,]
declaration . . . ; 3) though not perfect, the corroboration of the
services performed by Ms. Birge and Ms. Garcia is reasonable; and
4) Salehi's request for fees in the amount of $347,820 is granted; 5)
Salehi's request for additional fees in its Reply is denied."
14
B
Siry asserts the trial court erred by awarding any attorney fees and costs to Salehi
because it did not present sufficient admissible evidence in support of its motion. Siry
argues Birge's two declarations did not provide an adequate foundation under Evidence
Code section 1271 for the admission of Garcia's time entries.
Evidence Code section 1271 provides:
"Evidence of a writing made as a record of an act, condition, or
event is not made inadmissible by the hearsay rule when offered to
prove the act, condition, or event if:
"(a) The writing was made in the regular course of a business;
"(b) The writing was made at or near the time of the act, condition,
or event;
"(c) The custodian or other qualified witness testifies to its identity
and the mode of its preparation; and
"(d) The sources of information and method and time of preparation
were such as to indicate its trustworthiness."
In opposing Salehi's attorney fee motion, Siry objected to Exhibit 1 to Birge's first
declaration, citing a lack of foundation, no personal knowledge, and hearsay (i.e.,
"Evidence Code § 1200, et seq."). Siry argued Birge admitted at her deposition that she
had no knowledge of how or when Garcia's time entries were created or whether the
hours billed were accurate. In granting in part Salehi's motion for attorney fees, the trial
court expressly overruled Siry's objections to Birge's declarations. In so doing, the court
implicitly overruled Siry's specific objections based on Evidence Code section 1200 et
seq. (e.g., Evid. Code, § 1271) and a lack of foundation.
15
We conclude the trial court properly exercised its discretion by overruling Siry's
objections to Birge's declaration. As discussed above, Birge's declarations showed she
had been Garcia's partner for 12 years. Birge stated Garcia initially represented Salehi as
lead counsel from July 2009 until September 2011, when Birge took over the case
because Garcia's cancer treatment prevented her from performing most of the functions of
her job. Prior to September 2011, Birge had performed a "few tasks" relating to the
Salehi litigation (e.g., defending a deposition, attending a deposition and mediation,
drafting or editing some motions and discovery). Garcia died on April 17, 2012 (i.e.,
about one month after the trial ended). Birge attached as Exhibit 1 to her declaration
copies of Garcia's hours spent representing Salehi in this matter, which totaled 581.4
hours. Birge declared those time entries were true and correct copies of Garcia's hours
spent in representing Salehi in the instant litigation. Birge declared the attorney fees and
costs sought by Salehi "reflect[ed] actual and reasonable fees and costs incurred by my
firm . . . ." In opposing Salehi's motion, Siry argued Birge testified at her deposition that
she created Exhibit 1 by reviewing Garcia's "hard" (i.e., paper) files and computer
records. Siry attached excerpts from Birge's deposition testimony. At her deposition,
Birge testified that to locate Garcia's billing records she went into Garcia's computer and
also reviewed the Salehi files, looking for invoices, and found them. Based on that and
other evidence in the record, the trial court could reasonably infer that Birge had
sufficient knowledge of Garcia and her billing records and practices to support admission
of Garcia's time entries in support of Salehi's motion for attorney fees.
16
Contrary to Siry's assertion, the court could reasonably infer from Birge's
declarations, deposition testimony, and the detailed billing records she found in Garcia's
files and computer that Garcia's time entries were made in the regular course of Garcia's
business, at or near the time when her services were performed, and were adequately
identified by Birge to indicate their trustworthiness under Evidence Code section 1271.
Because Garcia died before Salehi filed its motion for attorney fees, she was unable to
personally confirm that all of the Evidence Code section 1271 requirements were
satisfied. Nevertheless, as the trial court noted, attorneys do become ill or die and may be
unavailable to verify that their billing records satisfy the requirements for the business
records exception to the hearsay rule. In those circumstances, a trial court may
reasonably rely on the declarations and/or testimony of attorneys and other persons
regarding the unavailable attorney's billing and/or business practices in determining
whether the billing records should be admitted into evidence in support of a motion for
attorney fees. Although, as Siry asserts, Birge did not have personal knowledge of
exactly how and when Garcia entered her time for services rendered to Salehi, the court
could reasonably infer from her 12-year partnership with Garcia, as well as from the
nature and content of the time entries themselves, that they were made in the regular
course of Garcia's business at or near the time she rendered those services and were
trustworthy. The court did not abuse its discretion by admitting Garcia's time entries into
evidence in support of Salehi's motion for attorney fees and costs.
Contrary to Siry's assertion, the fact that some of Garcia's periodic time entry
listings or invoices were denoted "this is not a bill" does not show her records were
17
untrustworthy or that Salehi had not incurred the attorney fees it sought pursuant to its
motion. Likewise, contrary to Siry's assertion, the fact some of Garcia's time entries
contained erroneous date descriptions (presumably due to typographical errors) or other
inaccuracies does not necessarily prove all of Garcia's time entries were untrustworthy.
Rather, the trial court acted within its reasonable discretion by reducing Salehi's
requested fees by the $2,670 amount it sought as supplemental fees incurred after filing
its initial motion to, in effect, account for certain mistakes or inaccuracies in Garcia's
(and/or Birge's) time entries. Siry has not carried its burden on appeal to persuade us the
trial court abused its discretion by not excluding Garcia's time entries as untrustworthy
and by not denying all of the attorney fees requested by Salehi. None of the cases or
other authorities cited by Siry (e.g., Christian Research Institute v. Alnor (2008) 165
Cal. App. 4th 1315) are apposite to this case or otherwise persuade us to reach a contrary
conclusion.
To the extent there may have been minor deficiencies in the evidence submitted in
support of Salehi's motion for attorney fees, the trial court could reasonably rely on its
direct observation of Garcia and Birge's services in this case, as well as its own expertise
and personal experience in the legal system, to provide additional support for its findings
that the nature and extent of the services performed by Garcia and Birge were reasonable
and necessary and the fees sought by Salehi (i.e., $347,820) were reasonable. (PLCM
Group, supra, 22 Cal.4th at p. 1095-1096; Serrano v. Priest, supra, 20 Cal.3d at p. 49;
Melnyk v. Robledo, supra, 64 Cal.App.3d at pp. 623-624.)
18
III
Apportionment of Attorney Fees
Siry contends the trial court abused its discretion by not apportioning Salehi's
attorney fees between the contract causes of action and the tort cause of action. It argues
Salehi cannot recover fees incurred before September 2010 when Siry amended its
complaint to add a cause of action for breach of written contract to the original causes of
action for breach of oral contract and professional negligence. It further argues the court
was required to apportion post-September 2010 fees between the written contract and
other two causes of action.
As Siry asserts, the record shows it did not amend its complaint until September
2010 to add a cause of action for breach of written contract. However, as Salehi asserted
below and the trial court found, the breach of written contract claim involved issues
common to Siry's original claims for breach of oral contract and professional negligence.
Civil Code section 1717's reciprocity provision covers only contract actions (i.e.,
for breach of contract) where the contract specifically provides for an award of attorney
fees incurred to enforce that contract. (Xuereb, supra, 3 Cal.App.4th at p. 1342.)
Nevertheless, the parties to a contract may validly agree that the prevailing party will be
awarded attorney fees incurred in any litigation between them, including both tort and
contract causes of actions. (§ 1021; Xuereb, at p. 1341.)
In this case, the written proposal provided that in the event of a dispute between
the parties "relating to the interpretation or enforcement of the provision [sic] of this
agreement," the prevailing party is entitled to reasonable attorney fees and costs.
19
Although Salehi suggests we interpret that provision broadly as covering all disputes
"relating to" or "arising out of" the contract, we decline to do so. On its face, the express
language of that contract provision limits recovery of attorney fees to actions relating to
interpretation or enforcement of the agreement, which is much narrower than actions
relating to or arising out of the agreement. For purposes of this opinion, we presume Siry
correctly asserts the written proposal's attorney fee provision expressly covered only its
cause of action for breach of written contract and not its causes of action for breach of
oral contract and professional negligence.
Nevertheless, we must make all presumptions and reasonable inferences to support
the trial court's order granting in part Salehi's motion for attorney fees and costs.
(Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal. App. 4th 959, 970; Wilson v.
Sunshine Meat & Liquor Co. (1983) 34 Cal. 3d 554, 563; Denham v. Superior Court
(1970) 2 Cal. 3d 557, 564.) Absent express findings to the contrary, "[w]e imply all
findings necessary to support the judgment, and our review is limited to whether there is
substantial evidence in the record to support these implied findings." (In re Marriage of
Cohn (1998) 65 Cal. App. 4th 923, 928.) "The burden of affirmatively demonstrating
error is on the appellant." (Fundamental Investment etc. Realty Fund v. Gradow (1994)
28 Cal. App. 4th 966, 971.)
In this case, although the trial court made certain statements at the hearing on
Salehi's motion and in its minute order granting in part that motion, "we may not impeach
the trial court's ultimate judgment with its remarks at the hearing on the petition or in
announcing its ruling from the bench." (Smith v. City of Napa (2004) 120 Cal. App. 4th
20
194, 199.) Rather, we make all presumptions and reasonable inferences to support the
court's order granting in part Salehi's attorney fee motion. In so doing, we infer the court
found there were common issues between the breach of written contract claim and other
claims, those causes of action were inextricably intertwined, and, based on those findings,
exercised its discretion to not apportion Salehi's attorney fees between the breach of
written contract claim and other claims. The record supports that inference. In its reply
papers, Salehi argued there was no need for the trial court to apportion its requested
attorney fees between work done on the contract claims and the negligence claim because
there were common issues. By granting Salehi almost all of its requested attorney fees
without apportioning them between the written contract claim and other claims, we infer
the court impliedly found there were common issues among the claims, which were
inextricably intertwined, and therefore no apportionment of fees was practical or
warranted. As Salehi asserts, Siry's three causes of action against Salehi alleged that it
wrongfully discontinued and/or delayed work on the Project and provided labor, material,
and services that were untimely and/or did not meet the standard of care in the industry.
Birge's first declaration stated the "same factual allegations formed the underpinnings of
both contract claims and the negligence claim" and those claims were "based on identical
factual allegations of defective work, delaying, and abandoning work in violation of
professional standards." Birge stated she found "the claims to be so entwined as to be
analogous" and she was "unable to logically separate work done for an express purpose
of defending the breach of written contract claim from the original" oral contract and
21
negligence claims. Therefore, the trial court reasonably found there were common issues
among the three claims and they were inextricably intertwined.4
As discussed above, a trial court is not required to apportion attorney fees between
contract claims and noncontract claims when it reasonably finds all claims in the case
were inextricably intertwined. (Abdallah v. United Savings Bank, supra, 43 Cal.App.4th
at p. 1111.) Furthermore, attorney fees need not be apportioned when incurred for
representation on an issue common to both a cause of action in which fees are proper and
one in which they are not allowed. (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at
pp. 129-130.) By impliedly finding all three causes of action involved common issues
and were inextricably intertwined as to make apportionment impractical or unwarranted,
the trial court reasonably exercised its discretion by not apportioning Salehi's attorney
fees between the written contract claim and the other claims and instead awarding Salehi
almost all of the fees it requested pursuant to the written proposal's attorney fee
provision. (Abdallah, at p. 1111; Reynolds Metals Co., at pp. 129-130; Amtower v.
Photon Dynamics, Inc. (2008) 158 Cal. App. 4th 1582, 1604 [trial court has discretion
whether and/or how to apportion attorney fees among claims]; Erickson v. R.E.M.
Concepts, Inc. (2005) 126 Cal. App. 4th 1073, 1085-1086 [same].) We conclude the trial
court did not abuse its discretion by awarding Salehi $347,820 in attorney fees. Siry has
not carried its burden on appeal to show otherwise.
4 Contrary to Siry's assertion, the record does not show Salehi misled the trial court
by asserting the court did not have any discretion to apportion its requested attorney fees
between the written contract claim and other claims.
22
Contrary to Siry's assertion, the record supports a reasonable inference that the
trial court did, in fact, exercise its discretion by deciding not to apportion Salehi's
attorney fees. (Cf. Contractors Labor Pool, Inc. v. Westway Contractors, Inc. (1997) 53
Cal. App. 4th 152, 168; Ramos v. Countrywide Home Loans, Inc. (2000) 82 Cal. App. 4th
615, 629.) Furthermore, Siry has not shown the court abused its discretion by awarding
Salehi its attorney fees incurred before September 2010 when Siry amended its complaint
to add the cause of action for breach of written contract. Assuming arguendo Salehi may
not have been entitled to attorney fees under the written proposal's attorney fee provision
if Siry had not alleged at any time a cause of action for breach of written contract (i.e.,
the written proposal), the trial court could reasonably find that all work done by Salehi's
attorneys before Siry's September 2010 amendment adding the breach of written contract
claim would nevertheless have been required to be done to defend the written contract
claim. Alternatively stated, the court could reasonably find that had Siry alleged only a
breach of written contract claim, Salehi's attorneys nevertheless would have performed
the same work to defend that claim as it would have to defend Siry's breach of oral
contract and professional negligence claims. Therefore, Siry does not show the court
abused its discretion by not apportioning Salehi's fees between work done before
September 2010 and after September 2010.
IV
Attorney Fees and Costs Incurred on Appeal
Salehi asserts it is also entitled to an award of attorney fees and costs incurred on
appeal pursuant to the written proposal's attorney fee provision. Based on our affirmance
23
of the trial court's order granting in part Salehi's motion for attorney fees, we conclude
Salehi is the prevailing party on appeal. Accordingly, after issuance of the remittitur in
this case, the trial court should exercise its discretion to award Salehi those reasonable
attorney fees and costs incurred on appeal that it may request in a promptly filed motion.
(Harbour Landing-Dolfann, Ltd. v. Anderson (1996) 48 Cal. App. 4th 260, 263-265.)
V
Salehi's Request for Sanctions
Salehi requests that we impose sanctions on Siry for filing a frivolous appeal.
Based on our consideration of this appeal, we decline to impose sanctions on Siry. (In re
Marriage of Flaherty (1982) 31 Cal. 3d 637, 649-650.)
COSCO'S CROSS-APPEAL
VI
Special Jury Instructions and Verdict Form
Cosco contends the trial court erred by denying its motion for contractual attorney
fees and costs after it prevailed in its action against Siry. Cosco asserts the trial court
erred by not submitting its special instructions and verdict form questions to the jury.
A
During trial, Cosco filed a brief arguing that its document setting forth its general
terms and conditions (GTCs) was incorporated into its contracts with Siry. Cosco
requested that the trial court give the jury two special instructions on the incorporation of
documents into a contract and then give the jury its proposed special verdict, or "special
findings," form asking the jury to decide the question of whether Cosco's GTCs were
24
incorporated into its contracts with Siry.5 Cosco's proposed form for "special findings"
would ask the jury to decide whether Cosco's GTCs were included within its two
contracts with Siry.
The trial court denied Cosco's requests for special jury instructions and special
findings by the jury on the issue of whether its GTCs were incorporated into its contracts
with Siry. The court stated:
"Cosco's proposed special findings verdict goes beyond asking the
jury to make findings on elements but rather to adjudicate what
almost appear to be triable issues of material fact. And in doing so,
they appear to asking the jury to put more weight on this factual
dispute than the countless numbers of other contested issues of fact
that exist in this case. I'm just not persuaded that that is fair to the
countless numbers of other facts that are at issue between the other
parties and, specifically in this case, to Siry's theory of the case. It
seems to slant the playing field in favor of Cosco's theory, and I'm
just not comfortable [doing that]."
The court subsequently stated:
5 The first requested special instruction stated: "[Cosco] contends that its General
Terms and Conditions were a part of the fire alarm and fire protection contracts between
Cosco and [Siry]. Siry denies that Cosco's General Terms and Conditions are a part of
these contracts. [¶] The law permits parties to incorporate by reference into their contract
the terms of another document. The General Terms and Conditions are a part of these
contracts if you find that: [¶] (1) The reference to the General Terms and Conditions is
clear and unequivocal; [¶] (2) The reference to the General Terms and Conditions is
called to the attention of the other party or the other party is guided to the General Terms
and Conditions; and [¶] (3) The terms of the incorporated document are known or easily
available to the contracting parties." Cosco's second special instruction stated in relevant
part: "Cosco also claims that its General Terms and Conditions are a part of the contracts
between Cosco and Siry. Siry denies that Cosco's General Terms and Conditions are a
part of the contracts. You will decide whether Cosco's General Terms and Conditions are
a part of the contracts between Cosco and Siry in accordance with instructions that I will
give to you. During your deliberations, you will be asked to answer questions regarding
Cosco's General Terms and Conditions and whether they are a part of the contracts."
25
"The Court agrees with Cosco's argument that, depending upon the
verdict, those [special] findings may be helpful, if not very helpful,
in evaluating post trial motions. One of the arguments made by
Cosco's counsel is, depending upon [the] jury's findings in the
contract claim, the existence or absence of terms and conditions may
entitle or not the prevailing party to be awarded their attorneys fees.
[¶] However, the Court is not persuaded that the findings Cosco is
asking the jury to make are necessary for judgment to be entered."
After the jury returned its verdict in favor of Cosco, Cosco filed a motion for
contractual attorney fees and costs, arguing its GTCs were incorporated into its contracts
with Siry and the GTCs contained an attorney fees provision. Cosco cited language from
its contracts that stated:
"This quote is valid for 30 days and is subject to [Cosco's] general
terms and conditions. Please do not hesitate to call me at 858-444-
2000 should you have any questions regarding this or any other
project."
Cosco also cited language from its GTCs that stated:
"PAYMENT. . . . Purchaser shall pay all attorney's fees incurred in
the collection of past due accounts."
Siry opposed Cosco's motion for attorney fees and costs, arguing Cosco's GTCs were not
incorporated by reference into its contracts with Cosco.
At the hearing on Cosco's attorney fee motion, Cosco confirmed its GTCs were set
forth on a separate document and were not on the back of the contracts. Although Cosco
argued it was its custom and practice to give the GTCs document to customers, Siry
argued none of Cosco's witnesses testified that he or she actually provided that document
to Siry and that Mr. Siry denied receiving it. The trial court issued a minute order
denying Cosco's motion for contractual attorney fees, stating:
26
"The evidence is in conflict with whether the [GTCs] were attached
to the contract at the time of contracting. [Siry] point[s] to the
testimony from Mr. Siry that he never received them and did not
review them. Further, attached to the contract was a third page
which contained general labor rates and other information, which
was confusing and could have been construed as the 'terms and
conditions.' Further, the GTCs were not produced in discovery,
according to [Siry] and were only unearthed at the time of trial. . . .
"The evidence seems to be that: (1) Curt Moon failed to identify
GTCs in [his] deposition; (2) the fire alarm contract . . . does not
attach or contain the GTCs; (3) the Siry job file does not contain
them; (4) Mr. Siry testified that he did not receive them; (5) Cosco
did not produce them in discovery or in response to the court's order
that project documents be produced. Cosco could only point to
testimony of a 'custom and practice' to provide the GTCs. Cosco
does not point to evidence that the GTCs were actually provided or
attached to the contract.
"The fact that the GTCs were attached to the [fire alarm] contract
admitted at trial [citation] does not mean that the jury found that the
GTCs were, in fact, a part of the contract.
"Based on this, the Court cannot find that the reference to the GTCs
and the attorney fees clause therein was clear and unequivocal. The
Court also notes that [Siry] did not pray for attorney fees in their
July 2009 Cross-Complaint, which appears to support [Siry's] denial
that they were provided the GTCs."
B
Cosco argues the trial court erred by denying its requests for special jury
instructions and special jury findings on the question of whether its GTCs were
incorporated into its contracts with Siry. However, Cosco's argument appears to be based
on a faulty premise—i.e., that a jury must decide all questions of disputed fact that may
be relevant to a trial court's rulings on posttrial motions (e.g., motions for contractual
attorney fees and costs). The case law is clear that a party does not have a right to a jury
27
trial on motions for attorney fees.6 (See, e.g., Mabee v. Nurseryland Garden Centers,
Inc. (1979) 88 Cal. App. 3d 420, 426.) Cosco does not cite any case or other authority to
the contrary. Therefore, Cosco was not entitled to either special jury instructions or
special jury findings on questions of fact relating to its then-anticipated posttrial motion
for attorney fees.
Furthermore, the trial court properly exercised its discretion by denying the
requested instructions and jury findings based on its conclusion they were not necessary
for the jury to decide Cosco's claims against Siry and on the possibility they would cause
the jury to place more importance on those issues than the many other factual questions
before it. (Cf. Pantoja v. Anton (2011) 198 Cal. App. 4th 87, 129.) Cosco merely argues
that jury findings on the question of incorporation of its GTCs would have been helpful
to the court when subsequently deciding its posttrial motion for contractual attorney fees.
To the extent that may be true, we nevertheless conclude Cosco has not carried its burden
on appeal to show the trial court erred by denying its requests for the special instructions
and special jury findings or, for that matter, that Cosco was prejudiced by that purported
error (i.e., it is reasonably probable Cosco would have obtained a more favorable result
6 A different rule applies when attorney fees are sought as damages in a civil action.
(See, e.g., Brandt v. Superior Court (1985) 37 Cal. 3d 813, 819-820; Cal. Const., art. I,
§ 16; Code Civ. Proc., § 592.)
28
had the jury been so instructed and made special findings).7 (People v. Watson (1956) 46
Cal. 2d 818, 836.)
VII
Incorporation of General Terms and Conditions
Cosco also contends the trial court erred by denying its motion for attorney fees
because there is insufficient evidence to support its finding that Cosco's GTCs document
that included an attorney fee provision was not incorporated into its written contracts
with Siry.
A
"A contract may validly include the provisions of a document not physically a part
of the basic contract. . . . 'It is, of course, the law that the parties may incorporate by
reference into their contract the terms of some other document. [Citations.] But each
case must turn on its facts. [Citation.] For the terms of another document to be
incorporated into the document executed by the parties the reference must be clear and
unequivocal, the reference must be called to the attention of the other party and he must
consent thereto, and the terms of the incorporated document must be known or easily
available to the contracting parties.' " (Williams Constr. Co. v. Standard-Pacific Corp.
(1967) 254 Cal. App. 2d 442, 454 (Williams).)
7 We also reject Cosco's conclusory assertion that the trial court and/or jury
necessarily concluded its GTCs document was incorporated into its contracts with Siry.
29
"Whether a document is incorporated into the contract depends on the parties'
intent as it existed at the time of contracting. The parties' intent must, in the first
instance, be ascertained objectively from the contract language. [Citation.] However,
'[t]he use of extrinsic evidence to show [whether] several written instruments were
intended to constitute a single contract does not involve a violation of the parol evidence
rule.' [Citation.] The applicability of Civil Code section 1642 is a question of fact for the
trial court, and the appellate court will affirm the court's resolution if it is supported by
substantial evidence." (Versaci v. Superior Court (2005) 127 Cal. App. 4th 805, 814-815.)
Civil Code section 1642 provides: "Several contracts relating to the same matters,
between the same parties, and made as parts of substantially one transaction, are to be
taken together."
B
Contrary to Cosco's assertion, we conclude there is substantial evidence to support
the trial court's finding that its GTCs document was not incorporated into its contracts
with Siry. First, there is substantial evidence to support the court's finding the contracts'
reference to the GTCs document was not "clear and unequivocal," as required for
incorporation. (Williams, supra, 254 Cal.App.2d at p. 454.) The parties presented
conflicting parol evidence on the question of the contracts' provisions and whether the
GTCs were included in those contracts. Although Cosco's witnesses testified it was their
custom and practice to give copies of the GTCs document to their customers, Moe Siry
testified that before Cosco filed the instant action he did not receive a copy of that
document at the time he signed the contracts or thereafter. Furthermore, as the trial court
30
found, a third page titled "Time Material Rates," containing general labor rates and other
information, was attached to the fire sprinkler contract and therefore was confusing and
could have been reasonably construed by Siry as the "terms and conditions" referenced in
the main contract. Also, the GTCs document was not produced by Cosco in discovery,
but disclosed to Siry only at the time of trial. We conclude there is substantial evidence
to support the trial court's finding the contracts' references to Cosco's GTCs were not
clear and unequivocal. (Versaci v. Superior Court, supra, 127 Cal.App.4th at pp. 814-
815; Williams, at p. 454.) Therefore, the court properly concluded the GTCs document,
including its attorney fees provision, was not incorporated into the contracts.8 Because
that attorney fee provision was not incorporated into Cosco's contracts with Siry, the
court correctly denied Cosco's motion for contractual attorney fees. Cosco has not
carried its burden on appeal to persuade us otherwise.9
8 Because we conclude there is substantial evidence to support the trial court's
finding that one of the requirements for incorporation by reference was not satisfied, we
need not address the sufficiency of the evidence to support findings on the other three
requirements discussed above. (Williams, supra, 254 Cal.App.2d at p. 454.)
9 We are not persuaded by Cosco's citation to a previous contract (i.e., Exh. 6003)
with Siry as proof that Moe Siry was aware of its GTCs document. First, Cosco does not
cite to the record on appeal where that previous contract is included, nor has it transferred
that exhibit to this court for our consideration. Second, to the extent the trial court
considered that evidence, it was merely part of the disputed evidence on the issue of
incorporation, which issue the court found in Siry's favor. It is not our function on appeal
to reweigh the evidence.
31
DCI'S CROSS-APPEAL
VIII
Section 998 Offer
DCI contends the trial court erred by finding its pretrial settlement offer to Siry
was not a valid section 998 offer and, based thereon, granting in part Siry's motion to tax
its costs, including expert witness fees, incurred after its settlement offer.
A
After the jury returned its verdict in DCI's favor and against Siry, DCI filed a
memorandum of costs that requested a total of $289,407.26, including $241,023.59 in
expert witness fees. Siry filed a motion to tax DCI's costs, arguing DCI's settlement
offers were not valid under section 998 and therefore it was not entitled to its expert
witness fees. Siry asked the trial court to strike $253,842.94 of the $289,407.26 total
amount of costs DCI requested. Siry argued DCI's settlement offers were improperly
made jointly to two distinct plaintiffs (i.e., Siry Investments, L.P., and 1835 Columbia
Street, L.P.) and were not apportioned between them. Siry argued both plaintiffs were,
and should be considered, separate entities and parties. Siry also argued the settlement
offer improperly required both offerees to release all known and unknown claims against
DCI. In support of its motion to tax costs, Siry submitted a declaration of its counsel,
Gregory Hagen, who stated he had received two settlement offers from DCI before trial.
On February 8, 2011, he received an offer from DCI to settle the case for $100,000. On
or about March 8, 2011, he received an offer from DCI to settle the case for $150,000 and
attached a copy of that offer to his declaration. (Because the March 8 offer superseded
32
the earlier February 8 offer, we discuss only the terms and conditions of the March 8
offer in deciding this appeal.) DCI's March 8 offer stated in part:
"[DCI] hereby offers to compromise all of PLAINTIFFS' claims
against DCI for a total amount of $150,000 . . . with all parties to
bear their respective attorney's fees and costs. This Offer to
Compromise is made pursuant to . . . Section 998. This Offer to
Compromise is conditioned upon the following: [¶] . . . [¶]
"2. This Offer to Compromise, if accepted, will proceed by way of a
mutual settlement and release of any and all claims known and
unknown, as between PLAINTIFFS on the one hand, and DCI, on
the other hand; a mutual waiver of Civil Code Section 1542 and
dismissal with prejudice of PLAINTIFFS' operative complaint and
not by way of the entry of any judgment. [Citation.]"
DCI opposed Siry's motion to tax its costs, arguing its settlement offers were valid
under section 998 because the two offerees/plaintiffs had a unity of interest and the Civil
Code section 1542 waiver provision is common in settlement agreements. In reply to
DCI's opposition, Siry again argued that the joint settlement offer was invalid under
section 998.
At the hearing on Siry's motion to tax DCI's costs, the trial court noted the jury
instructions and verdict forms treated the two Siry plaintiffs as separate entities and DCI
conceded the jury could have returned a verdict in favor of one plaintiff and not the other.
On June 13, 2012, the court issued a minute order that granted in part Siry's motion to tax
costs and taxed DCI's expert witness fees. First, the court rejected Siry's argument that
DCI's settlement offer was invalid because it required Siry to release both known and
unknown claims against DCI, as well as requiring a Civil Code section 1542 waiver.
Second, the court agreed with Siry's argument that DCI's settlement offer was invalid
33
under section 998 because it was made jointly to the two offerees/plaintiffs, stating: "A
single offer to more than one person must generally be apportioned and unconditional."
Rejecting DCI's argument that the two offerees/plaintiffs should be considered to be a
single entity, the court stated:
"[T]he jury was instructed pursuant to CACI 103 and 104,
identifying Siry Investments and 1835 Columbia as separate legal
entities and as separate parties requiring separate consideration.
There is no support for DCI's contention that either Plaintiff could
have accepted the offer for both entities. While Siry Investments
and 1835 Columbia filed a unitary lawsuit and may have had a
unitary trial strategy, 1835 Columbia and Siry Investments are both
separate persons and separate parties. Corporations Code [section]
207 provides that a corporation shall have all the powers of a natural
person in carrying out its business activities. The same is true of a
partnership, which is an entity 'distinct from its partners.' [Citation.]
In addition, Siry Investments and 1835 Columbia were listed
separately on the jury verdict forms.
" . . . DCI, as the offeror, has not carried its burden to show Siry
Investments and 1835 Columbia possessed 'a unity of interest such
that there is a single indivisible injury.' [Citation.] Offers are
strictly construed in favor of the party sought to be subjected to the
penalties of . . . [section] 998. [Citation.]"
The court further found that if it had found DCI's offer valid under section 998, it would
have found DCI's expert witness fees to be reasonable in amount. The court also granted
in part Siry's motion to tax certain costs other than DCI's expert witness fees. The trial
court subsequently entered a judgment in favor of DCI and ordered that DCI shall recover
from Siry costs in the amount of $38,903.90.
B
Under section 998, any party may, at least 10 days before trial, "serve an offer in
writing upon any other party to the action to allow judgment to be taken or an award to be
34
entered in accordance with the terms and conditions stated at that time." (§ 998, subd.
(b).) The failure to timely accept a section 998 offer can have adverse consequences for
the offeree. If a plaintiff/offeree does not obtain a more favorable result at trial, that
plaintiff/offeree cannot recover its postoffer costs, must pay the defendant/offeror's
postoffer costs, and may be required to pay the defendant/offeror's reasonably incurred
expert witness fees. (§ 998, subd. (c)(1).) The purpose for such penalties against a party
that does not accept a section 998 offer is to encourage the settlement of lawsuits before
trial. (Taing v. Johnson Scaffolding Co. (1992) 9 Cal. App. 4th 579, 583 (Taing).)
In general, " 'a section 998 offer made to multiple parties is valid only if it is
expressly apportioned among them and not conditioned on acceptance by all of them.' "
(Burch v. Children's Hospital of Orange County Thrift Stores, Inc. (2003) 109
Cal. App. 4th 537, 544.) "With unallocated settlement offers to multiple plaintiffs, it may
be impossible to determine whether any one plaintiff received a less than favorable result
at trial than that plaintiff would have received under the offer. [Citation.] Further, a
lump-sum section 998 offer places an offeree who wishes to accept at the mercy of an
obstinate offeree who does not." (McDaniel v. Asuncion (2013) 214 Cal. App. 4th 1201,
1206.) "This [general] rule has been applied to both plaintiff and defendant offerors, and
both where the offer is explicitly and impliedly conditioned on joint acceptance by the
offerees." (Menees v. Andrews (2004) 122 Cal. App. 4th 1540, 1544.)
"There is an exception to this [general] rule: where there is more than one
plaintiff, a defendant may still extend a single joint offer, conditioned on acceptance by
all of them, if the separate plaintiffs have a 'unity of interest such that there is a single,
35
indivisible injury.' " (Peterson v. John Crane, Inc. (2007) 154 Cal. App. 4th 498, 505.) To
show a unity of interest or that one entity is the alter ego of another, courts consider
whether there is " 'such unity of interest and ownership that the separate personalities of
the corporation and the individual no longer exist . . . .' " (Alexander v. Abbey of Chimes
(1980) 104 Cal. App. 3d 39, 46-47 (Alexander).) In so doing, trial courts consider a
number of factors, including: "the commingling of funds and assets of the two entities,
identical equitable ownership in the two entities, use of the same offices and employees,
disregard of corporate formalities, identical directors and officers, and use of one as a
mere shell or conduit for the affairs of the other. [Citation.] 'No one characteristic
governs, but the courts must look at all the circumstances to determine whether the
doctrine should be applied. [Citation.]' " (Troyk v. Farmers Group, Inc. (2009) 171
Cal. App. 4th 1305, 1342.)
The party making the purported section 998 offer has the burden of proving the
offer is a valid one under section 998. (Barella v. Exchange Bank (2000) 84 Cal. App. 4th
793, 799 (Barella); Taing, supra, 9 Cal.App.4th at p. 585.) Accordingly, courts strictly
construe a purported section 998 offer in favor of the offeree. (Barella, at p. 799.)
"Finally, our Supreme Court has held that the legislative purpose of section 998 is
generally better served by 'bright line rules' that can be applied to these statutory
settlement offers—at least with respect to the application of contractual principles in
determining the validity and enforceability of a settlement agreement." (Ibid.)
In reviewing a trial court's determination regarding "the validity, or
reasonableness, of a section 998 offer," we apply the abuse of discretion standard of
36
review. (Mesa Forest Products, Inc. v. St. Paul Mercury Ins. Co. (1999) 73 Cal. App. 4th
324, 329.) In reviewing a trial court's factual finding based on disputed evidence and
inferences regarding whether two section 998 offerees had a unity of interest or one entity
was the alter ego of the other, we apply the substantial evidence standard of review.
(Alexander, supra, 104 Cal.App.3d at p. 46.) To the extent the trial court's ruling is based
on undisputed evidence and inferences, we apply the de novo standard of review.
(Barella, supra, 84 Cal.App.4th at pp. 797-798.)
C
We conclude DCI has not carried its burden on appeal to show the trial court
abused its discretion by finding its settlement offer to Siry was not valid under section
998. The record shows DCI made a joint offer to the two Siry plaintiffs. Its March 8,
2011, offer stated that DCI "hereby offers to compromise all of PLAINTIFFS' claims
against DCI for a total amount of $150,000." (Italics added.) The offer did not apportion
that total amount between the two plaintiffs, Siry Investments, L.P., and 1835 Columbia
Street, L.P. As discussed above, a section 998 offer made to two parties is generally
valid only if it is expressly apportioned between them and not conditioned on acceptance
by both of them. (Burch v. Children's Hospital of Orange County Thrift Stores, Inc.,
supra, 109 Cal.App.4th at p. 544; Menees v. Andrews, supra, 122 Cal.App.4th at
p. 1544.) Therefore, unless DCI carried its burden to show an exception to that general
rule applied, DCI's joint offer was not valid under section 998. (Barella, supra, 84
Cal.App.4th at p. 799 [offeror has burden of proof to show offer is valid under section
998]; Taing, supra, 9 Cal.App.4th at p. 585 [same].)
37
As discussed above, an exception to the general rule prohibiting joint section 998
offers exists where the separate offerees have a unity of interest such that there is a
single, indivisible injury. (Peterson v. John Crane, Inc., supra, 154 Cal.App.4th at
p. 505.) To show a unity of interest or that one entity is the alter ego of another, courts
consider whether there is such unity of interest and ownership that the separate
personalities of the entities no longer exist. (Alexander, supra, 104 Cal.App.3d at pp. 46-
47.)
Based on our review of the disputed evidence and inferences regarding whether
Siry Investments, L.P., and 1835 Columbia Street, L.P., had a unity of interest or one
entity was the alter ego of the other, we conclude there is substantial evidence to support
the trial court's finding that the two Siry offerees/plaintiffs did not have a unity of interest
for purposes of the section 998 joint offer exception.10 (Alexander, supra, 104
Cal.App.3d at p. 46.) The two offerees/plaintiffs were organized as separate limited
partnerships and had different interests in the Project. In attempting to show the two
entities had a unity of interest, DCI argued below that they had litigated the instant case
with the same purpose, theory, and allegations and purportedly sought a mutual recovery
against DCI. DCI cited to their pleadings and discovery actions and their own joint
section 998 offer to DCI. However, we cannot conclude that unified trial strategy and
conduct necessarily proves, as a matter of law, that two offerees/plaintiffs have a unity of
10 To the extent DCI argues the evidence and inferences therefrom were undisputed,
we disagree and conclude the substantial evidence standard of review applies to the trial
court's finding on this issue.
38
interest within the meaning of the section 998 joint offer exception. On the contrary, we
believe, as the trial court found, that two offerees/plaintiffs can, and should be able to, act
in a similar or mutual manner in a particular lawsuit without losing their separate
identities for purposes of section 998. Likewise, a joint offer by plaintiffs to a single
defendant does not prove that they had a unity of interest for purposes of the defendant's
own joint offer to those plaintiffs.
Furthermore, although DCI argued Moe Siry was the principal of both Siry
offerees/plaintiffs, that fact did not prove the two entities necessarily had, as a matter of
law, a unity of interest for purposes of the section 998 joint offer exception. A person
can be the managing partner or principal of each of two limited partnerships without
making those entities unified for purposes of the section 998 joint offer exception.
Although DCI cites to selected excerpts from Moe Siry's trial testimony in which he
apparently shows some confusion regarding the ownership of the two entities, that
testimony did not constitute an admission of unity of interest of the entities under section
998, nor was the trial court required by that testimony to find such unity of interest.11
On the contrary, the court could reasonably consider all of the evidence presented at trial,
together with the evidence and arguments presented by the parties on DCI's motion to tax
costs, and find the two offerees/plaintiffs were not, in fact, unified in interest for purposes
of the section 998 joint offer exception. None of the cases cited by DCI are apposite to
11 We reach a similar conclusion regarding Moe Siry's trial testimony regarding
Siry's settlement agreement with the Project's architect in which he stated the two limited
partnerships were a "team," were the "same," and were "interlocked."
39
this case, and they do not persuade us to reach a contrary conclusion. (See, e.g., Vick v.
DaCorsi (2003) 110 Cal. App. 4th 206 [involving a husband and wife's community
property interest].) Because DCI has not carried its burden on appeal to show there is
insufficient evidence to support the trial court's finding that there was no unity of interest
between Siry Investments, L.P., and 1835 Columbia Street, L.P., for purposes of the
exception to the general rule prohibiting joint offers under section 998, we conclude the
trial court did not abuse its discretion by finding DCI's joint offer to those two plaintiffs
was not a valid offer under section 998, granting in part Siry's motion to tax DCI's costs,
and awarding DCI costs in the amount of $38,903.90 against Siry.12
DISPOSITION
The judgment is affirmed. Salehi is entitled to reasonable attorney fees and costs
incurred on appeal. All other parties are to bear their own costs on appeal.
McDONALD, J.
WE CONCUR:
McCONNELL, P. J.
McINTYRE, J.
12 Because we have disposed of DCI's appeal based on the above ground, we need
not address the parties' other arguments (e.g., whether DCI's joint offer improperly
included language requiring Siry to release unknown claims against DCI).
40