Barto/Signal Petroleum, Inc. v. Boneyard, LLC CA2/8 ( 2021 )

Filed 4/29/21 Barto/Signal Petroleum, Inc. v. Boneyard, LLC CA2/8
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
BARTO/SIGNAL PETROLEUM, B299794
INC.,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. NC061431)
v.
BONEYARD, LLC et al.,
Defendants and Appellants.
APPEALS from a judgment and postjudgment order of the
Superior Court of Los Angeles County. Maurice A. Leiter and
Gary Y. Tanaka, Judges. Affirmed.
Schilling Law Group, Linda Schilling, Charity M. Gilbreth and
Tyler H. Hunt for Plaintiff and Appellant.
Enterprise Counsel Group, Holland & Knight, David A.
Robinson and Thomas J. Eastmond for Defendants and Appellants.
**********
Plaintiff and appellant Barto/Signal Petroleum, Inc., appeals
from the trial court’s entry of judgment in favor of Defendants and
appellants Boneyard, LLC, Brawley-Memphis, LLC and Geoffrey Le
Plastrier. The court found three of plaintiff’s four causes of action,
for breach of contract, specific performance and fraud, were barred
by the statutes of limitations, and the fraud cause of action failed to
state a claim. The court denied summary adjudication of plaintiff’s
declaratory relief cause of action, after which the parties resolved
that claim by way of a stipulation that was incorporated into the
final judgment.
Defendants cross-appeal from the trial court’s postjudgment
order awarding them $410,115.50 in attorney fees, which reduced
their fee request by over $250,000. Defendants contend the court, a
different judge than the judge who ruled on the summary judgment
motion, abused its discretion in reducing their fee award in violation
of applicable law governing contractual fee awards.
We conclude the trial court properly granted judgment in
favor of defendants, and defendants have failed to demonstrate the
trial court abused its discretion in calculating a reasonable fee
award. We therefore affirm both the judgment and the
postjudgment order.
FACTUAL AND PROCEDURAL BACKGROUND
This contract dispute concerns real property in the Signal Hill
neighborhood of Long Beach known as the Boneyard Property. The
facts summarized in this background discussion are undisputed.
In the 1990’s, the Boneyard Property was owned by Alamitos
Land Company. It consisted of 106 lots, 85 planned for residential
development (the Residential Lots) and 21 designated for oil-
producing operations (the Oil Lots). The Oil Lots were interspersed
among the Residential Lots.
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The Boneyard Property is located within an active oil field
called the Signal Hill East Unit, operated by plaintiff Barto/Signal
Petroleum, Inc. Alamitos Land Company held working and royalty
interests in the Signal Hill East oil field. A dispute arose between
plaintiff and Alamitos Land Company that resulted in the filing of a
quiet title action. The terms of the settlement of the quiet title
action are the subject of this lawsuit.
The quiet title action was settled in November 1999. Plaintiff
and Alamitos Land Company executed a written settlement
agreement (the Settlement Agreement), as well as a second
agreement called the Surface Use Relinquish Agreement and Grant
of Easement (the SURGE Agreement).
In the Settlement Agreement, defendants promised to convey
the 21 Oil Lots in the Boneyard Property to plaintiff after
defendants completed development of the 85 Residential Lots and
closed escrow on the sale of 95 percent of the Residential Lots to
third parties. The SURGE Agreement granted easements to
plaintiff over portions of the Boneyard Property for use in its oil
operations. The SURGE Agreement, and subsequent amendments
not relevant here, were recorded in the chain of title.
Sometime in 2002, title to the Boneyard Property was
transferred to Alamitos Ridge, LLC, and then to defendant
Boneyard, LLC several years later. Under the terms of the
Settlement Agreement, the successor owners of the Boneyard
Property assumed the obligations originally owed to plaintiff by
Alamitos Land Company.
Development proceeded, beginning with “horizontal
improvements” such as grading, roads, utilities and water lines, as
well as improvements to the Oil Lots and relocation of some oil
facility infrastructure to accommodate both the development of the
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Residential Lots and plaintiff’s ongoing oil operations. The
Settlement Agreement expressly required defendants to coordinate
their development activities with plaintiff to minimize disruption of
plaintiff’s oil operations. The Settlement Agreement included
provisions requiring plaintiff’s knowledge and signature on certain
plans and permits, and reimbursement to plaintiff if development
activities interrupted plaintiff’s operations. (E.g., paragraph 3.4.1
“Interference with Oil Operations,” paragraph 3.4.3 “Relocation of
Oil Facilities,” paragraph 3.5.1.1 “Compensation for Loss of Oil
Production,” paragraph 3.6 “Development Cooperation.” (Italics
omitted.))
In late 2009, defendant Boneyard filed a Chapter 11
bankruptcy petition. During the bankruptcy proceedings, Boneyard
obtained court approval to sell the Residential Lots to Lennar
Homes. Plaintiff filed an objection to the sale but ultimately
withdrew its objection and allowed finalization of the sale. Sale of
the 85 Residential Lots to Lennar Homes was completed in
February 2010, when development was about 80 percent complete.
Boneyard emerged from bankruptcy still holding title to the 21 Oil
Lots.
Development of the Residential Lots was completed by
September 2012, and all the Residential Lots had been sold to third
parties by then. But defendants took no steps to convey the Oil Lots
to plaintiff despite its promise to do so in the Settlement Agreement.
Meanwhile, in late 2010, Boneyard stopped paying property
taxes on the Oil Lots. Consequently, in 2016, all 21 Oil Lots were
sold by the Los Angeles County Office of the Assessor in a tax sale.
Defendant Brawley-Memphis, one of defendant Geoffrey Le
Plastrier’s business entities, purchased six of the Oil Lots, and the
remaining 15 lots were purchased by third parties. Plaintiff was
4
able to purchase five of the lots sold to third parties. Plaintiff made
a demand on Boneyard for transfer of the six lots purchased by
Brawley-Memphis but was refused. Plaintiff filed this action on
October 13, 2017.
1. Paragraph 3.4.5 of the Settlement Agreement
We quote below key provisions in paragraph 3.4.5, titled
“Transfer of the Oil Lots,” that are pertinent to our analysis.
“Provided that Signal performs all of its material obligations
pursuant to this Settlement Agreement and the Exhibits hereto,
Alamitos and/or its successors shall convey to Signal, by grant deed,
the Oil Lots, at such time as Alamitos, and/or its successors, has
completed all development with respect to the Boneyard lots
(including without limitation the entitlements, subdivision and
improvement) and sold and closed escrow on ninety-five percent
(95%) or more of the subdivided lots and property within the
Boneyard (other than the Oil Lots) to an unaffiliated third party. . . .
[With exceptions specifically identified in provisions we omit from
this opinion for the sake of brevity], the grant shall be on an ‘As-Is’
and ‘With-All Faults’ basis, with no representation or warranty of
any kind and subject to all encumbrances, taxes, pro-rata share of
assessments, and matters of record; provided that such Oil Lots
shall not be encumbered with any monetary deed of trust, mortgage
or mechanics liens at the time of the grant, and all delinquent real
estate taxes and assessments shall have been paid. . . . As
consideration for Alamitos’ performance of all conditions of
conveyance to Signal, which shall be deemed performed by Signal’s
receipt and recordation of the grant deed, for each Oil Lot deeded to
Signal, Signal shall concurrently execute in favor of Alamitos a
Promissory Note in the form of Exhibit ‘N’ attached hereto, each in
the amount of $30,000, each of which shall be secured by a
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concurrently recorded first priority Deed of Trust in the form of
Exhibit ‘O’ attached hereto encumbering the respective Oil Lot. Any
Alamitos successors as owner of the Boneyard, other than a home
builder or homeowner, must specifically assume the obligations in
this [paragraph] 3.4.5; however, such assumption shall not relieve
Alamitos of such obligations. Moreover, Alamitos agrees that,
following recordation of the final subdivision map for the Boneyard,
Alamitos shall not sell or transfer the Oil Lots to any party other
than Signal as provided in this [paragraph] 3.4.5.”
2. The Complaint
On October 13, 2017, plaintiff filed this action against
Alamitos Land Company, Alamitos Ridge, LLC, Boneyard, LLC,
Brawley-Memphis, LLC and Geoffrey Le Plastrier alleging
four causes of action: (1) breach of contract; (2) specific performance;
(3) declaratory relief; and (4) fraudulent concealment.
The contract cause of action alleged defendants breached
paragraph 3.4.5 of the Settlement Agreement (quoted above) in
December 2016 by allowing the Oil Lots to be sold to third parties at
a tax sale. Plaintiff did not allege any breach arising from the
failure to convey title following completion of development of the
Residential Lots in September 2012. Plaintiff alleged it first learned
of the tax sale and the purchase by Brawley-Memphis of six of the
Oil Lots in April 2017. Plaintiff demanded transfer of title as to
those six lots. Defendants refused. Plaintiff alleged it was able to
purchase five of the Oil Lots from the third parties that acquired
them at the tax sale. Plaintiff sought damages for having to
purchase the lots to which it was entitled under the Settlement
Agreement and the loss of its right to acquire all 21 Oil Lots.
The second cause of action for specific performance sought an
order compelling transfer of the six Oil Lots still owned and
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controlled by the “Boneyard Defendants.” The third cause of action
for declaratory relief alleged there was a dispute between the parties
regarding the alleged control by the “Boneyard Defendants” over the
six Oil Lots purchased by defendant Brawley-Memphis and also
requested a declaration as to the continuing validity of plaintiff’s
easements granted under the SURGE Agreement.
The fourth cause of action for fraudulent concealment alleged
defendants owed plaintiff a duty to disclose “any event or
circumstance” that would prevent them from conveying the Oil Lots
to plaintiff as required by the Settlement Agreement, and
defendants concealed their scheme to not pay property taxes so they
could force a tax sale and avoid their obligation to transfer the Oil
Lots to plaintiff.
3. The Summary Judgment Motion
Defendants’ motion for summary judgment was based
primarily on the defense of the statute of limitations. Defendants
argued the four-year statute of limitations for actions founded on a
written instrument (Code Civ. Proc., § 337, subd. (a)) applied to the
first, second and third causes of action, and the three-year statute
applied to the fraud cause of action (§ 338, subd. (d)). Plaintiff does
not dispute these are the applicable statutes of limitations.
Defendants argued all of plaintiff’s claims accrued in
September 2012, more than five years before this action was filed,
when the development conditions under paragraph 3.4.5 of the
Settlement Agreement were satisfied. Plaintiffs disputed their
claims accrued in 2012.
Defendants also argued the fraud cause of action failed to
state a claim because the tax status of the Oil Lots was a matter of
public record, and the Settlement Agreement did not impose any
duty of disclosure regarding the tax status of the property.
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Defendants also contended the fraud claim was legally deficient
since it did not allege the breach of an independent tort duty but
only a duty arising from contract.
Defendants presented as evidence the deeds transferring all
85 Residential Lots to third parties that were recorded by
September 2012, the certificates of occupancy for all properties, and
the recorded copy of the subdivision tract map for the Boneyard
Property. Defendant also relied on plaintiff’s responses to written
discovery in which plaintiff initially admitted the development
conditions identified in paragraph 3.4.5 were completed no later
than October 12, 2013 (four years one day before this action was
filed), and later admitted those conditions were completed by
September 2012 (over five years before this action was filed).
Defendant submitted the declaration of Frawn Morgan, the
manager of defendant Boneyard, attesting to the undisputed facts
described above. Ms. Morgan also described a conversation she had
in October 2010 with David Slater, the chief operating officer of
Signal Hill Petroleum which managed plaintiff. She said Mr. Slater
had sent her an email inquiring about the status of the transfer of
the Oil Lots. They arranged to speak by phone. Ms. Morgan said
she told Mr. Slater the development conditions were nearly satisfied,
and she broached the subject of a transfer of the Oil Lots to plaintiff.
She proposed the parties share pro rata the property taxes that were
due in six-month installments, based on an expected date of
transfer. Mr. Slater declined the offer. Ms. Morgan was not aware
plaintiff made any further inquiries about transfer of the Oil Lots
until April 2017. Plaintiff disputed this conversation took place.
4. Plaintiff’s Opposition to the Motion
Plaintiff admitted most of defendants’ material facts were
undisputed, including that the development of the Residential Lots
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was completed no later than September 2012, and all deeds
documenting the sales of those lots to third parties were recorded in
the office of the Los Angeles County Registrar-Recorder/County
Clerk by then. Plaintiff admitted its oil producing operations were
located, in part, on the Oil Lots and that representatives of plaintiff
were at the Boneyard Property “on a daily basis” to conduct oil
operations since at least 2009.
Plaintiff argued these undisputed facts were irrelevant
because it alleged the breach of contract occurred in 2016 when
defendants lost title to the Oil Lots in the tax sale in violation of the
last sentence of paragraph 3.4.5 (“Alamitos shall not sell or transfer
the Oil Lots to any party other than [plaintiff]”). Plaintiff also
argued defendants were not obligated to transfer title to the Oil Lots
in 2012 because they had not satisfied all the preconditions imposed
by the Settlement Agreement. Plaintiff said paragraph 3.4.5
required defendants to provide clear title to the Oil Lots, and in
2012, they remained burdened with a lien by Pacific Western Bank
and unpaid taxes.
Plaintiff presented the deposition testimony of Ms. Morgan
and defendant Geoffrey Le Plastrier in which both admitted that, in
2012, title to the Oil Lots was clouded by delinquent property taxes
and the lien by Pacific Western Bank. Ms. Morgan and Mr. Le
Plastrier also admitted in their depositions that Boneyard stopped
paying taxes on the Oil Lots in late 2011 because it no longer had
any beneficial interest in the properties. Mr. Le Plastrier testified
Boneyard stopped paying the property taxes on the Oil Lots because
it did not have a significant income stream, had no beneficial
interest in the Oil Lots, and plaintiff had not shown any interest in a
transfer of title.
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Plaintiff also submitted the declaration of Mr. Slater disputing
that he ever had the conversation described in Ms. Morgan’s
declaration regarding a proposed tender of the Oil Lots. He also
said plaintiff had no knowledge of the delinquent tax status until
April 2017.
In support of its fraud claim, plaintiff relied primarily on the
deposition testimony of Ms. Morgan and Mr. Le Plastrier that
defendants had not notified plaintiff of the tax status of the Oil Lots.
5. The Trial Court’s Order and Judgment
The trial court’s tentative was to grant defendants’ motion as
to the breach of contract, specific performance and fraud causes of
action and deny it as to the third cause of action for declaratory
relief. The court indicated its intent to deny adjudication of the
declaratory relief claim because the motion failed to address that
portion of the claim seeking a declaration acknowledging the
continuing validity of plaintiff’s easements in the Oil Lots pursuant
to the SURGE Agreement. During the hearing on the motion, the
court discussed the issue with counsel. The parties ultimately
agreed to a stipulation acknowledging plaintiff’s continuing
easement rights. The court issued its written ruling on the motion
and the parties’ stipulation as to the declaratory relief claim was
incorporated into the final judgment.
Judgment in favor of defendants was entered on July 10, 2019.
6. Defendants’ Attorney Fees Motion
Defendants filed a memorandum of costs and a motion for
attorney fees pursuant to paragraph 7.16 of the Settlement
Agreement. Plaintiff filed a motion to tax costs. The postjudgment
motions were not heard by Judge Leiter, who ruled on the summary
judgment motion, but by Judge Gary Tanaka.
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In their fee motion, defendants argued they were the
prevailing parties under the contract despite the court having
denied summary adjudication of the third cause of action.
Defendants submitted redacted billing records documenting the
work performed on the case for almost two years. The bills reflected
15 separate timekeepers, including two partners, seven associate
attorneys, three paralegals and three law clerks for a total of
1,518.40 hours. The billable rates ranged from $95 to $850 per hour.
Additional fees were requested for time spent preparing a reply brief
for the fee motion and arguing the postjudgment motions.
Defendants requested $666,539.50 in total fees. Defense counsel
attested that defendants had paid all the billed fees and costs.
Plaintiff opposed the motion, arguing defendants were not
prevailing parties because plaintiff achieved a significant success,
namely confirmation that its easement rights under the SURGE
Agreement remained valid. Plaintiff also argued the fees requested
were excessive and unreasonable. Plaintiff said the billing
statements reflected extensive duplication of work, overstaffing,
inflated hourly rates and improper block billing.
After lengthy oral argument, the court took the matter under
submission. Plaintiff’s counsel submitted supplemental papers,
including billing records showing, in contrast to the defense,
plaintiff’s counsel billed for only 839.60 hours of work for total
attorney fees of $295,884.50.
Thereafter, the trial court issued its ruling finding defendants
were the prevailing parties. In a seven-page ruling, the court
explained the bases for its calculation of a reasonable fee of
$410,115.50. After taxing $12,050.97 in costs, the court awarded
defendants total costs in the amount of $9,009.13.
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7. The Appeal and Cross-appeal
Plaintiff timely appealed from the trial court’s grant of
judgment in defendants’ favor. Plaintiff argues its claims are not
time barred, the fraudulent concealment claim properly sounds in
tort, and the fee award must be reversed if this court reverses the
judgment.
Defendants cross-appealed from the trial court’s order
awarding attorney fees, arguing the court abused its discretion in
reducing the amount of recoverable fees.
DISCUSSION
The Summary Judgment Motion
Summary judgment is appropriate where “all the papers
submitted show that there is no triable issue as to any material fact
and that the moving party is entitled to a judgment as a matter of
law.” (Code Civ. Proc., § 437c, subd. (c).) Since the 1992 and 1993
amendments to the summary judgment statute, our Supreme Court
has made clear that the purpose of the amendments was “ ‘to
liberalize the granting of [summary judgment] motions.’ ” (Perry v.
Bakewell Hawthorne, LLC (2017) 2 Cal.5th 536, 542; Aguilar v.
Atlantic Richfield Co. (2001) 25 Cal.4th 826, 848.) Summary
judgment is no longer referred to as a “disfavored” remedy. (Perry,
at p. 542.) “Summary judgment is now seen as a ‘particularly
suitable means to test the sufficiency’ of the plaintiff’s or defendant’s
case.” (Ibid.)
On appeal, “we take the facts from the record that was before
the trial court . . . . ‘ “We review the trial court’s decision de novo,
considering all the evidence set forth in the moving and opposing
papers except that to which objections were made and sustained.” ’ ”
(Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037, citation
omitted.)
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“ ‘While resolution of the statute of limitations issue is
normally a question of fact, where the uncontradicted facts
established through discovery are susceptible of only one legitimate
inference, summary judgment is proper.’ ” (NBCUniversal Media,
LLC v. Superior Court (2014) 225 Cal.App.4th 1222, 1231
(NBCUniversal).)
1. The Contract Claims
A contract cause of action ordinarily “accrues at the time of
breach, and the statute begins to run at that time regardless
whether any damage is apparent or whether the injured party is
aware of his or her right to sue.” (3 Witkin, Cal. Procedure, 5th
Actions § 520 (2020), italics added; Romano v. Rockwell
International, Inc. (1996) 14 Cal.4th 479, 488 [contract cause of
action accrues at time of breach].)
Plaintiff argues it never pled a 2012 breach and framed its
complaint as arising from the alleged breach in 2016 when the Oil
Lots were sold at a tax sale due to the property tax delinquencies.
Plaintiff argues it could not sue until it could prove damages, and it
did not suffer damages until 2016 because it continued to have
beneficial use of the Oil Lots pursuant to its easement rights. We
agree with the trial court that plaintiff’s causes of action arose in
2012 when defendants became obligated to transfer the Oil Lots to
plaintiff but did not do so.
“ ‘Ordinarily, the objective intent of the contracting parties is a
legal question determined solely by reference to the contract’s
terms.’ ” (Wind Dancer Production Group v. Walt Disney Pictures
(2017) 10 Cal.App.5th 56, 69.) Paragraph 3.4.5 of the parties’
agreement provided that defendant Alamitos and its successors
“shall convey” the Oil Lots to plaintiff by grant deed when the
residential development was completed and escrow had closed on
13
the sale of 95 percent or more of the lots to unaffiliated third parties.
Plaintiff admits the development was completed and escrow had
closed on the sale of 95 percent of the lots to third parties by
September 2012. Under the contract, defendants were required to
transfer title to the Oil Lots by September 2012. Plaintiff suffered a
legally cognizable injury when defendants failed to transfer title by
September 2012.
Real property is unique. (Union Oil Co. of California v. Greka
Energy Corp. (2008) 165 Cal.App.4th 129, 134 [it is presumed “ ‘that
the breach of any agreement to transfer real property cannot be
adequately compensated for by money damages’ ”].) In recognition
of this ancient principle of real property transactions, the
Settlement Agreement provided at paragraph 7.19 that each party
acknowledged the other party “would suffer irreparable harm by a
violation of, or failure to comply with” paragraph 3.4.5 and that such
party would be entitled to seek injunctive and other equitable relief.
The failure to transfer title in 2012 was a material breach of
the Settlement Agreement giving rise, at a minimum, to a cause of
action for specific performance more than five years before plaintiff
filed this action. The fact that plaintiff had ongoing easement rights
in the Oil Lots is irrelevant to the accrual analysis.
So too is the fact that title was clouded by a bank lien and
unpaid taxes. Defendants promised to convey the Oil Lots
unencumbered by any deed of trust, mortgage or mechanics liens
and to pay all delinquent real estate taxes and assessments. These
promises did not create a precondition to plaintiff’s right to obtain
title to the Oil Lots, nor did breach of these promises delay
defendants’ duty to convey title. Defendants’ breach of these
promises gave plaintiff the right to sue for injunctive relief and
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damages; it did not give plaintiff the right to wait until defendants
lost title to the Oil Lots before bringing suit.
Plaintiff was required to act reasonably and diligently in
asserting its right under the Settlement Agreement to obtain title to
the Oil Lots. The fact defendants lost title in 2016 and could no
longer comply with their obligations under the Settlement
Agreement was a consequence of plaintiff failing to timely assert its
rights. It is not evidence of a new, discreet injury for which a new
cause of action accrued, separate and apart from the 2012 breach.
Plaintiff also asserts the discovery rule tolled the statutes of
limitations. The discovery rule “postpones accrual of a cause of
action until the plaintiff discovers, or has reason to discover, the
cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005)
35 Cal.4th 797, 807.) “A plaintiff has reason to discover a cause of
action when he or she ‘has reason at least to suspect a factual basis
for its elements.’ ” (Ibid.)
Most often applied in the tort context, the discovery rule has
been applied in contract actions in unusual cases with facts and
circumstances not present here. It has been applied to breaches of
contract “which can be, and are, committed in secret and, moreover,
where the harm flowing from those breaches will not be reasonably
discoverable by [the plaintiff] until a future time.” (April
Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 832.)
“A plaintiff’s inability to discover a cause of action may occur ‘when
it is particularly difficult for the plaintiff to observe or understand
the breach of duty, or when the injury itself (or its cause) is hidden
or beyond what the ordinary person could be expected to
understand.’ ” (NBCUniversal, supra, 225 Cal.App.4th at p. 1232.)
Here, nothing was secret or hidden. Everything happened
right out in the open. The Settlement Agreement required
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defendants to coordinate the development with plaintiff’s knowledge
and involvement. It was undisputed plaintiff was at the Boneyard
Property every day conducting its oil operations during defendants’
construction and sales activities. The recorded deeds and
subdivision map were matters of public record. No facts or evidence
justify application of the discovery rule to delay accrual of plaintiff’s
contract claims. (Eleanor Licensing LLC v. Classic Recreations LLC
(2018) 21 Cal.App.5th 599, 611, fn. 10 [no basis for applying delayed
discovery rule to contract claim for failure to transfer legal title to
classic car where there was “nothing secret or hidden” about the
defendant’s refusal to transfer title].)
The dispute over whether Mr. Slater had the conversation
with Ms. Morgan in late 2010 about the status of the properties and
arrangements for a transfer of title is immaterial. Whether or not a
tender of title was discussed in 2010, it was undisputed the
development conditions required by paragraph 3.4.5 were satisfied
no later than September 2012.
2. The Fraud Claim
In addition to the statute of limitations defense, defendants
also sought summary adjudication of plaintiff’s fraudulent
concealment cause of action for failure to state a claim. (Sequoia
Ins. Co. v. Superior Court (1993) 13 Cal.App.4th 1472, 1481 [“where
a complaint is insufficient to state a cause of action, a defendant’s
motion for summary judgment is in legal effect a motion for
judgment on the pleadings, and factual controversies are essentially
irrelevant”].) Defendants argued plaintiff failed to allege an
independent duty arising in tort and not from the parties’ contracts.
Plaintiff’s fraud cause of action alleged defendants owed a
duty to disclose to plaintiff “any event or circumstance that would
prevent the Boneyard Defendants from being able to convey the Oil
16
Lots to Plaintiff as required under the Settlement Agreement” and a
“duty not to intentionally jeopardize the obligation to convey the Oil
Lots to Plaintiff.” Plaintiff alleged defendants intentionally
concealed the fact they had allowed the Oil Lots to go into tax
default as part of a scheme to retain ownership of at least some of
the Oil Lots.
“ ‘[C]onduct amounting to a breach of contract becomes
tortious only when it also violates a duty independent of the contract
arising from principles of tort law.’ ” (Robinson Helicopter Co., Inc.
v. Dana Corp. (2004) 34 Cal.4th 979, 989.) Plaintiff has not alleged
or created a material dispute that defendants owed any duty to
plaintiff other than to fulfill the contract promises. Plaintiff
contends an independent tort duty did exist, citing the principle that
“where one party to a transaction has sole knowledge or access to
material facts and knows that such facts are not known or
reasonably discoverable by the other party, then a duty to disclose
exists.” (Shapiro v. Sutherland (1998) 64 Cal.App.4th 1534, 1544.)
The undisputed facts here do not show defendants had sole
knowledge of facts that were unknown to or were not reasonably
discoverable by plaintiff. Plaintiff concedes the Settlement
Agreement did not impose a duty on defendants to timely pay
property taxes and in fact contemplated the possibility of a default
on property taxes. Moreover, the tax status of the Oil Lots was a
matter of public record. The trial court did not err in finding the
fraud claim was defective as a matter of law.
The Motion for Attorney Fees
A challenge to the amount of a fee award is reviewed under
the deferential abuse of discretion standard. (PLCM Group, Inc. v.
Drexler (2000) 22 Cal.4th 1084, 1095 (PLCM).) “An appellate court
will interfere with the trial court’s determination of the amount of
17
reasonable attorney fees only where there has been a manifest abuse
of discretion. [Citation.] ‘ “The ‘experienced trial judge is the best
judge of the value of professional services rendered in [the] court,
and while [the judge’s] judgment is of course subject to review, it
will not be disturbed unless the appellate court is convinced that it
is clearly wrong[’] ”—meaning that [the trial judge] abused [his or
her] discretion.’ ” (Heritage Pacific Financial, LLC v. Monroy (2013)
215 Cal.App.4th 972, 1004.)
Initially, defendants point out the fee motion was not heard by
Judge Leiter, who ruled on the summary judgment and was in the
best position to understand the work that was required to obtain a
successful outcome. Although Judge Tanaka did not rule on the
summary judgment motion, his ruling on the attorney fees motion is
nonetheless entitled to deference. The court read the parties’
papers, discussed the issues at length with counsel at oral
argument, took the matter under submission and reviewed the
billing records at least twice before issuing a ruling.
The court found defendants were the prevailing parties,
entitled to a reasonable fee award under paragraph 7.16 of the
Settlement Agreement. Paragraph 7.16 of the Settlement
Agreement states, in pertinent part, that the losing party in any
action arising from the agreement “shall pay to the prevailing party
a reasonable sum for attorney fees and costs incurred in bringing or
defending such action or proceeding.”
“ ‘The “burden is on the party seeking attorney fees to prove
that the fees it seeks are reasonable. [Citation.] It is also [the
appellant’s] burden on appeal to prove that the court abused its
discretion in awarding fees.” ’ ” (Gonzalez v. Santa Clara County
Dept. of Social Services (2017) 9 Cal.App.5th 162, 169.)
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Defendants requested $666,539.50 in fees. They submitted
billing records spanning almost two years of work on the case by
15 separate timekeepers (two partners, seven associate attorneys,
three paralegals and three law clerks)—over 1,500 hours. The
billable rates ranged from $95 to $850 per hour. The court found
defendants’ rates were “on par with those in the community and
correlate with the resumes of the respective attorneys.”
The trial court performed the basic lodestar calculation based
on the billing records and then made a determination to reduce that
amount to account for fees the court found to be unreasonable and
excessive, as well as a percentage reduction for block billing entries.
Making such reductions to arrive at a reasonable fee was well within
the trial court’s discretion. (PLCM, supra, 22 Cal.4th at p. 1096
[Once the lodestar is determined, the court “ ‘shall consider whether
the total award so calculated under all of the circumstances of the
case is more than a reasonable amount and, if so, shall reduce the
[Civil Code] section 1717 award so that it is a reasonable figure.’ ”];
accord, EnPalm, LLC v. Teitler (2008) 162 Cal.App.4th 770, 774–775
[trial court entitled to reduce lodestar to a reasonable figure after
concluding “much of the litigation [was] unnecessary” and therefore
“most of the lodestar figure represented attorney fees that were
unreasonable”].)
The court wrote a lengthy ruling explaining the reasons for its
deductions. The court explained that upon its initial review of
defendants’ billing records, it found “a total of $39,851.50 of charges
that represent[ed] excessive collaboration . . . . These entries
involved instances such as multiple higher-level attorneys reviewing
the same documents or duplicative review of discovery responses.
This initial pass was hampered by defense counsel’s block billing;
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the Court was unable to differentiate time spent, for example, on
research versus time counsel spent conferring with one another.”
The court explained that it then reviewed the billing records a
second time “and determined $91,631.50 to have been unnecessary
charges related to discovery. The block billed entries were treated
separately from the preceding figures. The Court has determined at
least $176,830 was block billed included in these billings were
excessive time spent on the three depositions, additional written
discovery, and interoffice communications. On review of these
entries, the Court finds a 65% reduction ($114,939.50) in these bills
is appropriate.” The court also deducted $10,001.50 in fees related
to the second motion for judgment on the pleadings which the court
found to be unnecessary and therefore not reasonable.
Defendants argue that block billing is not per se prohibited
and that it ordinarily becomes an issue only where the trial court
must apportion fees between claims for which fees are properly
awarded and those where they are not. Defendants say there is no
apportionment required here because all the work is compensable
under the terms of the contractual fee provision. Defendants are
correct block billing is not prohibited. The trial court did not reduce
the fee award because it believed block billing is prohibited. The
court reduced the fee award because it concluded defendants did not
establish their fee request was reasonable.
“Block billing occurs when ‘a block of time [is assigned] to
multiple tasks rather than itemizing the time spent on each task.’ ”
(Mountjoy v. Bank of America, N.A. (2016) 245 Cal.App.4th 266, 279;
see also Jaramillo v. County of Orange (2011) 200 Cal.App.4th 811,
830 [“[B]lock billing is not objectionable ‘per se,’ though it certainly
does increase the risk that the trial court, in a reasonable exercise of
its discretion, will discount a fee request.”].) Prevailing parties “are
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not automatically entitled to all hours they claim in their request for
fees. They must prove the hours they sought were reasonable and
necessary.” (El Escorial Owners’ Assn. v. DLC Plastering, Inc.
(2007) 154 Cal.App.4th 1337, 1366.) Block billing made the court’s
task much more difficult.
For instance, the trial court found there appeared to be
duplicative work and excessive amount of time spent on
“collaboration” and “interoffice communications” but that block
billing hampered its review and determination of whether that time,
or part of it, was reasonable or excessive. (Ketchum v. Moses (2001)
24 Cal.4th 1122, 1132 [“[T]rial courts must carefully review attorney
documentation of hours expended; ‘padding’ in the form of inefficient
or duplicative efforts is not subject to compensation.”].) The trial
court found the block billing made it impossible in some instances to
determine whether time incurred was reasonable. The court acted
within the bounds of its discretion in reducing the fees. Defendants
have not affirmatively shown the fee award of $410,115.50 was an
abuse of discretion.
DISPOSITION
The judgment dated July 10, 2019 in favor of Boneyard, LLC,
Brawley-Memphis, LLC and Geoffrey Le Plastrier is affirmed.
The postjudgment order awarding attorney fees to Boneyard,
LLC, Brawley-Memphis, LLC and Geoffrey Le Plastrier in the
amount of $410,115.50 is affirmed.
The parties shall bear their respective costs of appeal.
GRIMES, Acting P. J.
WE CONCUR:
STRATTON, J. WILEY, J.
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