Port Blue v. Perlstein CA2/1 ( 2023 )

Filed 6/27/23 Port Blue v. Perlstein CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
PORT BLUE LLC, B313030
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. LC106964)
v.
DANIEL S. PERLSTEIN et al.,
Defendants and
Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Huey P. Cotton, Judge. Affirmed in part,
reversed in part, and remanded with directions.
Yourist Law Corporation and Daniel J. Yourist for
Defendants and Appellants.
Michael N. Sofris for Plaintiff and Respondent.
__________________________________
In the proceedings below, the trial court entered a
judgment finding that the amount owed to appellants Ronald and
Judith Perlstein on a 1994 promissory note was $130,833.10, and
that appellants were not entitled to attorneys’ fees. Appellants
contend: (1) the court’s finding that $130,833.10 was owed is
unsupported by the record; (2) the court erred by refusing to
include late fees or use a higher interest rate in calculating the
amount owed; and (3) the court erred in finding appellants were
not entitled to attorneys’ fees.
We conclude that the court’s finding on the amount owed is
not supported by substantial evidence, but that the remainder of
appellants’ arguments lack merit. We therefore reverse the
portion of the judgment regarding the amount owed and remand
with directions for the court to redetermine that amount. We
affirm the remainder of the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
A. Port Blue Files a Complaint
In March 2018, respondent Port Blue LLC, as trustee for
the Atlantic Trust, filed a complaint for fraud in the inducement
and rescission against Ronald and Judith (as individuals and as
trustees of the Perlstein Trust of 1982), their son Daniel
Perlstein, and Western Fidelity Trustees.1 In April 2018, Port
Blue filed a Verified First Amended Complaint, adding causes of
action for accounting and declaratory and injunctive relief. In
1 Because the Perlsteins share a surname, we refer to them
by their first name. Daniel and Western Fidelity are not parties
to the appeal.
2
July 2018, the defendants demurred. In September 2018, the
court granted the demurrer, with leave to amend.
In October 2018, Port Blue filed a Verified Second
Amended Complaint (SAC). The SAC discussed two pieces of real
property located at 11199 S. Atlantic Avenue and 12224 S.
Atlantic Avenue in the city of Lynwood (the Atlantic Properties).
It alleged that in 1994, a Deed of Trust was recorded against
12224 S. Atlantic Avenue in favor of Ronald and Judith as Co-
Trustees of the Perlstein Trust of 1982 (the 1994 DOT), and that
in 2007, a Deed of Trust was recorded against both Atlantic
Properties in favor of Daniel (the 2007 DOT). The 2007 DOT was
also recorded against a piece of real property located at 18350
Honey Lane in Lake Elsinore. The 1994 DOT secured a $225,000
loan made by appellants, which was evidenced by a promissory
note (the 1994 Note), and the 2007 DOT secured a $387,000 loan
made by Daniel, which was also evidenced by a promissory note
(the 2007 Note). Francisco Soria was the borrower on both notes
and the trustor on both Deeds of Trust.
The 1994 Note provided a 10-year term for repayment, with
interest accruing at 7 percent for the first two years, 9 percent for
the next three years, and 11 percent for the remaining five years.
All amounts due and owing on the 1994 Note were to be repaid in
a balloon payment due in March 2004. The 1994 Note also
provided that “[i]n the event any payment is not paid within 10
days of the due date, Trustor shall pay to Beneficiary a late
charge of Ten (10%) [sic] in addition to each payment due and
unpaid” and that “[i]f action be instituted on this note I promise
to pay such sum as the Court may fix attorney’s fees. [sic]” The
note contained no provisions addressing what would happen if
the balloon payment was not made.
3
The SAC further alleged that, in December 2017, Western
Fidelity posted a Notice of Trustee’s Sale regarding the Atlantic
Properties, and a Notice of Trustee’s Sale regarding 18350 Honey
Lane. Both Notices of Trustee’s Sale claimed Soria was in default
under the 2007 DOT. Daniel purchased 18350 Honey Lane and
Port Blue purchased the Atlantic Properties.
Port Blue alleged that after it purchased the Atlantic
Properties, appellants made a demand for payment of the
“ ‘arrearages’ ” under the 1994 Note and followed up the demand
with a Notice of Default and Election to Sell under the 1994 DOT.
Port Blue claimed that it had no knowledge of the 1994 Note or
1994 DOT before buying the Atlantic Properties. Port Blue
accused the defendants of a “conspiracy” to obtain an amount of
money that “would be materially greater than both the fair
market value of the Property and the actual indebtedness of
Francisco [Soria] under the 1994 Note and 2007 Note . . . .”
Port Blue also alleged that, after its purchase, it discovered
there were underground storage tanks beneath the Atlantic
Properties, previously used to store gasoline. The tanks would
need to be removed and the properties remediated before
development thereon would be permitted, but the cost for the
removal and remediation would likely exceed the amount Port
Blue paid for the properties. Port Blue further alleged that the
defendants knew or should have known about the underground
storage tanks.
Port Blue therefore alleged causes of action for: (1)
rescission of the sale of the Atlantic Properties to Port Blue; (2)
fraud in the inducement based on the defendants’ non-disclosure
of the 1994 Note and the underground storage tanks, as well as
the defendants’ “conspiracy”; (3) money had and received on the
4
theory that the defendants had received “benefits” consisting of
the proceeds from the purchase of the Atlantic Properties, the
purchase of 18350 Honey Lane, and payments made by Soria on
both the 2007 Note and the 1994 Note, and that Port Blue was
entitled to $400,000 of the amount appellants received, and that
the value of what appellants received “must be credited to
Defendants’ account for purposes of calculating any sum due
pursuant to the 1994 Note”; (4) an accounting setting forth the
amounts actually due under the 1994 Note and the 2007 Note;
and (5) declaratory relief that it purchased the Atlantic
Properties free and clear of the 1994 DOT.
B. The Court Orders an Accounting
In December 2018, defendants demurred to all but the
accounting cause of action, arguing that Port Blue assumed the
risks associated with buying property at a foreclosure sale and
that Port Blue had constructive notice of the 1994 DOT.
Defendants also argued that Port Blue’s fraud cause of action
lacked the requisite specificity regarding misrepresentations and
justifiable reliance. Port Blue opposed the demurrer and
defendants replied. In January 2019, the court sustained the
demurrer without leave to amend, and in February 2019,
defendants filed a verified answer to the SAC.
In April 2019, Port Blue filed a motion for an accounting
and a reference, asking the court to find an accounting was
necessary and to appoint an experienced forensic accountant
under Code of Civil Procedure section 639 to determine the
5
amounts due on the 1994 Note and 2007 Note.2 Defendants
opposed, arguing the case was insufficiently complex to require
the appointment of an accountant, and that they should not be
required to pay for an accountant. In June 2019, the court
appointed Samuel Biggs as an Accounting Referee.
C. The Accountant Files His Initial Report
In December 2019, Biggs filed a “Report on Review of Note,
Payments, Charges and Related Records.” He opined that the
2007 DOT was “a totally separate, distinct and unrelated
transaction from” the 1994 DOT, and thus he “did not review” the
loan transactions relating to the 2007 DOT. As to the 1994 Note,
he found that it was “in the amount of $225,000 for a period of
ten (10) years and [was] due on March 9, 2004, with a balloon
payment of $211,591.60.” Interest was to be in the amount of 7
percent for the first two years, 9 percent for the next three years,
and 11 percent for the remaining five years. The 1994 Note also
provided that if Soria failed to make a payment more than ten
days after that payment’s due date, he would “pay to the
Beneficiary a late charge of Ten (10%) [sic] in addition to each
payment due and unpaid.” Soria also agreed to pay attorneys’
fees should an action be “instituted on this note.” The 1994 Note
had no provisions for default interest, referenced no payment
2 (Code Civ. Proc., § 639, subd. (a) [“When the parties do not
consent, the court may, upon the written motion of any party, . . .
appoint a referee in the following cases . . . : [¶] (1) When the trial
of an issue of fact requires the examination of a long account on
either side . . . . [¶] (2) When the taking of an account is necessary
for the information of the court before judgment, or for carrying a
judgment or order into effect”].)
6
amortization schedule, and contained no provisions for
continuation of the terms of the note after maturity. Biggs noted
that after April 5, 2013, interest appeared to be calculated at an 8
percent rate.
Despite missing repayment information from the inception
of the 1994 Note until January 2006, Biggs devised a method to
calculate the amount due on February 1, 2018 (eight days after
Port Blue purchased the Atlantic Properties) and determined
that $163,443.40 was due as of that date, consisting of
$161,875.78 in principal and $1,567.62 in interest. Biggs also
calculated the interest accrued from February 1, 2018, through
October 31, 2019, using two alternate rates of interest:
$22,600.51 at a rate of 8 percent and $31,057.72 at a rate of 11
percent. Biggs found “no substantive basis for calculating late
fees” because the “late fees charged by the Note Holder were
sporadic, inconsistent in amounts and never at 10% of any
payment made.” He also noted that in his calculations, “Legal
and Other Costs were accumulated but not added to the unpaid
Note principal balance.”
D. Biggs Files a Supplemental Report
In January 2020, defendants filed an objection to some of
the conclusions in Biggs’s report, arguing that: (1) the 8 percent
interest rate Biggs used was barred by the statute of frauds
because that rate was “orally offered to” Soria “as a courtesy
when Soria fell behind in making his loan payments”; (2) late fees
should have been applied; and (3) attorneys’ fees should have
been included in the amount owed, subject to the court’s final
decision as to their amount.
Two weeks later, Port Blue filed a motion asking the court
to order Biggs to calculate the amount of offset to which Port
7
Blue would be entitled if the court were to determine that the
amount owed under the 1994 Note should be reduced by either
the surplus from the Atlantic Properties foreclosure sale or the
difference between the amount for which Daniel purchased the
Honey Lane property and the amount he sold it for two months
later.
In March 2020, the court instructed Biggs to calculate the
“surplus that resulted when the 2007 lien was paid in full,”
emphasizing that it was not deciding at this point whether the
surplus would be used as an offset. The court also ruled that
amounts owed after April 2013 accrued interest at a rate of 8
percent. The court overruled all other objections from both
parties and noted that “Biggs was not tasked with determining
legal issues. Thus, issues of whether attorney’s fees will be
available, or whether an offset should be made[,] were not within
the scope of the report.”
In January 2021, Biggs submitted a supplemental report,
stating that of the $595,100 paid for the Atlantic Properties,
$464,266.90 was paid to Daniel, $4,387.27 was paid to Western
Fidelity for fees and costs, $8,724.64 was paid to Los Angeles
County for property taxes, $7,631.00 was paid to Edgar Allen
Kemp to satisfy a judgment lien, and the remaining $110,090.19
was returned to Soria. In response, Port Blue sent a letter to
Biggs, asking him to confirm that the “surplus” he was asked to
calculate was $130,833.10 (i.e., $595,100 (amount paid for the
Atlantic Properties) minus $464,266.90 (amount paid to Daniel)).
This letter was included in a March 2021 filing with the court.
In April 2021, Port Blue filed a “Memorandum re Equitable
Set Off of Surplus.” In this memorandum, Port Blue claimed that
“the amount received by Defendants from the sale of the Atlantic
8
and Elsinore Properties was $130,833.10 greater than the
amount of the 2007 Note and 2007 DOT.”
On April 26, 2021, the court held a hearing on whether any
surplus funds would be credited against the amount owed on the
1994 Note. It ruled that Port Blue was “not entitled to surplus
funds,” and also that there would be “no award of attorneys fees.”
When Port Blue asked whether the court had calculated what
amount was due under the 1994 Note, the court responded: “I
have not. I’m glad you offered your calculation. What was it[,
$]130,000? Let me see. The amount was consistent with
[Biggs’s] . . . calculation, let’s see. I had it circled and now I can’t
find it. $130,833.10.” When asked why attorneys’ fees would not
be awarded, the court responded, “It’s discretionary and I’m not
awarding it.” Defendants were ordered to prepare a proposed
judgment.
E. The Court Enters an Erroneous Judgment
On May 4, 2021, Port Blue objected to defendants’ proposed
judgment and asked the court to enter its proposed judgment
instead.3 One objection raised by Port Blue concerned the
amount owing on the 1994 Note; Port Blue claimed the court had
determined this amount to be $130,833.10. Port Blue’s proposed
judgment reflected the $130,833.10 amount.
On May 5, 2021, defendants responded to Port Blue’s
objection, stating that Port Blue was claiming that “the amount
of the surplus, $130,833.10, that Plaintiff tried, but failed to have
the Court order a credit against what Plaintiff owes on the [the
3Defendants’ proposed judgment does not appear to be in
the appellate record.
9
1994 DOT], is all that is currently owed on” the 1994 DOT, which
claim “makes no sense whatsoever.”
On May 7, 2021, the court signed Port Blue’s proposed
judgment. Ten days later, defendants filed an ex parte
application to amend the judgment to conform with the
accounting reports. They argued the judgment contained a
clerical error because it “mistakenly referenced the wrong
accounting referee report.” The court denied the application,
finding it lacked jurisdiction to consider it. Defendants timely
appealed.4
DISCUSSION
A. Substantial Evidence Does Not Support the
Judgment
Appellants contend that the court erred in finding
$130,833.10 was the amount owed under the 1994 Note. “When
the trial court has resolved a disputed factual issue, the appellate
courts review the ruling according to the substantial evidence
rule. If the trial court’s resolution of the factual issue is
supported by substantial evidence, it must be affirmed.”
(Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th
624, 632.) However, “[r]eversal is proper when there is a
complete lack of evidentiary support for a finding essential to the
judgment.” (Claussen v. First Am. Title Guar. Co. (1986) 186
Cal.App.3d 429, 437.) Such is the case here.
According to Biggs, as of February 1, 2018, $163,443.40
was owed on the 1994 Note, consisting of $161,875.78 in principal
4Port Blue also timely filed a Notice of Cross-Appeal but, at
Port Blue’s request, we dismissed it in November 2022.
10
and $1,567.62 in interest. The court found that, thereafter,
interest accrued at 8 percent per year. However, when the court
entered judgment, it stated that “the amount due to Defendants”
on the 1994 Note “is determined to be $130,833.10.” There is no
evidentiary basis for this determination.
The court’s error appears to originate from the April 2021
hearing on surplus funds. At that hearing, after the court ruled
that Port Blue was not entitled to offset the amount owed on the
1994 Note with surplus funds from the Atlantic Properties sale,
Port Blue asked the court whether it had calculated the amount
due under the 1994 Note. The court stated it had not done so,
but was glad Port Blue had offered its “calculation” and then
ruminated, “What was it[, $]130,000? Let me see. The amount
was consistent with [Biggs’s] . . . calculation, let’s see. I had it
circled and now I can’t find it. $130,833.10.”
While the court did not clarify what Port Blue calculation it
was referencing, in a memorandum filed in advance of the April
2021 hearing, Port Blue had stated that “the amount received by
Defendants from the sale of the Atlantic and Elsinore Properties
was $130,833.10 greater than the amount of the 2007 Note and
2007 DOT.” Similarly, in a letter Port Blue had written to
Biggs—included as an attachment to a March 2021 memorandum
Port Blue filed—Port Blue had asked him to confirm that the
“surplus” he was asked to calculate was $130,833.10 ($595,100
(amount paid for the Atlantic Properties) minus $464,266.90
(amount paid to Daniel)). Thus, as Port Blue acknowledged,
$130,833.10 was the “Surplus,” not the amount due under the
1994 Note. Contrary to the court’s statement, $130,833.10 was
not “consistent with [Biggs’s] calculation”—Biggs calculated that
$163,443.40 was owed on the 1994 Note as of February 1, 2018.
11
On appeal, Port Blue admits that Biggs calculated
$163,443.40 was owed on the 1994 Note as of February 1, 2018.
Nevertheless, it urges us to reject appellants’ argument because:
(1) appellants allegedly failed to raise this issue below; (2)
appellants allegedly failed to provide an adequate record on
appeal; and (3) the court found that the amount Biggs found
owing under the 1994 Note should be reduced by some portion of
the “surplus funds,” and the record supports the court’s
determination of that reduction. None of Port Blue’s contentions
is well-taken.
1. Appellants Did Not Forfeit Their
Argument
Port Blue argues that, because appellants “never sought
proper procedural reconsideration of the trial court’s judgment,”
they have forfeited their arguments on appeal because they
“failed to give the trial court an opportunity to review the claimed
‘error’.”
We need not consider whether appellants’ ex parte
application constituted seeking “proper procedural
reconsideration” or whether appellants were required even to
seek such reconsideration. It is undisputed that two days before
the judgment was signed, appellants explained to the court that
Port Blue was claiming that “the amount of the surplus,
$130,833.10, that Plaintiff tried, but failed to have the Court
order a credit against what Plaintiff owes on the [1994 Note], is
all that is currently owed on” the 1994 Note, which claim “makes
no sense whatsoever.” (Underlining in original.) This objection
sufficiently preserved the issue for appellate review.
12
2. There Is an Adequate Record on Appeal
Port Blue argues that appellants do not “reference . . . any
Reporter’s Transcripts of proceedings in which the trial court
made rulings that are at issue in the appeal.” Port Blue does not
specify which reporter’s transcripts are allegedly missing, and we
discern none. The reporter’s transcript for the April 2021 hearing
in which the court made its erroneous determination of
$130,833.10 is included in the record. Nothing in the record
indicates the court held a hearing to discuss appellants’
objections to Port Blue’s proposed judgment prior to signing it.
3. The Court Did Not Find the Amount Owed
Should Be Reduced by Any of the Surplus
Funds
Port Blue contends that “[w]hile it is true the trial court
denied Plaintiff’s request for an offset of all of the surplus
amounts, the trial court did find that the surplus funds were used
to reduce the actual amounts due and owing under the DOT as
found in the Supplemental Report filed by Mr. Biggs.” (Emphasis
in original.) As near as we can decipher, Port Blue is claiming
that while the court denied its request to offset the entire
“surplus” from the amount owed to appellants, the court agreed
that the amount owed should be reduced by some portion of the
surplus, and the amount owing after that reduction was
$130,833.10. We reject this argument for two reasons.
First, such an argument requires us to believe that the
amount to which the court reduced the balance owing on the 1994
Note—which reduction the court effectuated without ever stating
that it was doing so—just happens to be identical to the amount
Port Blue called the “Surplus” (i.e., the difference between the
13
amount it paid for the Atlantic Properties and the amount paid to
Daniel on the 2007 Note). Such a coincidence strains credulity.
Second, Port Blue cites nothing in the record to support its
incredible claim, and our independent review of the record
reveals nothing either. In fact, the record supports only the
opposite conclusion: when the court stated that Port Blue was
“not entitled to any surplus funds,” its meaning could only have
been that the amount owed by Port Blue was not to be offset by
any of the surplus funds. (Emphasis added.)
Substantial evidence does not support the court’s finding
regarding the amount owed on the 1994 Note, and thus that
portion of the judgment must be reversed.
B. The Statute of Frauds Is Inapplicable
Appellants admit that, at some point, as a courtesy to
Soria, Ronald orally agreed to an 8 percent annual interest rate
for the 1994 Note. In the proceedings below, the court
determined that, after April 2013, interest on the 1994 Note
should accrue at 8 percent per year. The court also refused to
order Port Blue to pay any late fees. Appellants contend the
court erred in both decisions because both enforcing Ronald’s
previous oral acquiescence to an 8 percent interest rate, and not
requiring Port Blue to pay late fees despite the language of the
1994 Note providing for such fees, amounted to permitting an
oral modification of the written 1994 Note, violating the statute
of frauds. We reject the premise of appellants’ argument.
The 1994 Note provided for a ten-year repayment period,
with three different interest rates: 7 percent for the first two
years, 9 percent for the next three years, and 11 percent for the
remaining five years. At the end of ten years, Soria was to repay
all amounts due and owing. The note also provided that if “any
14
payment is not paid within 10 days of the due date, Trustor
[Soria] shall pay to Beneficiary a late charge of Ten (10%) [sic] in
addition to each payment due and unpaid.”
The 1994 Note contained no provisions on what interest
rate would apply should Soria fail to make the final balloon
payment. Therefore, Ronald and Soria’s agreement to an 8
percent interest rate, which took place after the ten-year term of
the 1994 Note, did not require modifying the terms of the note.
Similarly, while the late payment provision referred to “any
payment,” because the 1994 Note only contemplated payments
from April 1994 through March 2004, we conclude that “any
payment” refers to payments made within that time period, not
thereafter. Therefore, the court’s refusal to require the payment
of late fees after the ten-year period of the 1994 Note also did not
require modification of the note. The statute of frauds is
inapplicable.
C. The Court Did Not Err in Refusing to Award
Attorneys’ Fees
At the April 2021 hearing on surplus funds, the court
informed the parties that there would be “no award of attorney’s
fees.” Appellants contend the court erred in refusing to award
them fees. We disagree.5
Preliminarily, we note that the appellate record reflects
5
no express motion or request for attorneys’ fees, and neither
party cites anything in the record to show such a request was
made. However, in their verified answer to the SAC, both
appellants requested “costs” and “such other and further relief as
the Court deems just and proper.” “Costs” can include attorneys’
fees when permitted by contract. (Code Civ. Proc., § 1033.5,
(Fn. is continued on the next page.)
15
“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.” (Civ. Code,
§ 1717, subd. (a), emphasis added.) “ ‘ “[T]he determination of the
legal basis for an attorney fee award is subject to independent
review.” ’ ” (Soni v. Cartograph, Inc. (2023) 90 Cal.App.5th 1, 7–
8, quoting Wohlgemuth v. Caterpillar Inc. (2012) 207 Cal.App.4th
1252, 1258.) We find there is no legal basis for an attorneys’ fees
award.
Citing Hsu v. Abbara (1995) 9 Cal.4th 863, 876 appellants
argue that “ ‘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,’ ” and that appellants were entitled to fees
because they “successfully defended against all attacks Port Blue
made to the validity of the 1994 Note and the related Deed of
Trust.”
Civil Code section 1717 is inapplicable here because none of
Port Blue’s causes of action was “on a contract” providing for fees.
subd. (10)(A).) Additionally, in objecting to Biggs’s initial report,
appellants requested that their legal fees be added to the amount
owed on the 1994 Note. As Port Blue has not argued that we
should affirm the court’s denial of fees due to the lack of an
express request for fees from appellants, we will assume that all
parties agree that fees were properly requested, and determine
whether the court erred in denying them.
16
In their reply brief, appellants claim they prevailed on three
“contract-based” causes of action: (1) rescission, (2) money had
and received, and (3) declaratory relief. But while these actions
may be “contract-based” in certain circumstances, here, they were
not based on the contract containing an attorneys’ fees provision
(i.e., the 1994 Note).
Where a party seeks rescission of a contract based on fraud,
“courts have concluded such claim does sound in contract and
permits the award of fees.” (Super 7 Motel Associates v. Wang
(1993) 16 Cal.App.4th 541, 549.) However, Port Blue sought to
rescind not the 1994 Note, but Port Blue’s agreement to purchase
the Atlantic Properties. As such, its rescission cause of action
was not an action “on” the 1994 Note.
Similarly, Port Blue’s cause of action for money had and
received alleged that appellants had received “benefits”
consisting of the proceeds from the purchase of the Atlantic
Properties, the purchase of 18350 Honey Lane, and payments
made by Soria on both the 2007 Note and the 1994 Note, and that
Port Blue was entitled to at least $400,000 of the amount
appellants received. Port Blue also alleged that the value of what
appellants received “must be credited to Defendants’ account for
purposes of calculating any sum due pursuant to the 1994 Note.”
But while the 1994 Note was mentioned in this cause of action,
Port Blue sought neither to enforce nor to invalidate the note,
merely to ensure that amounts Port Blue contended appellants
received were credited to any amount claimed to be owing on the
note. This does not constitute a cause of action “on” the note.
(Cf. Brown v. West Covina Toyota (1994) 26 Cal.App.4th 555, 565
[action “ ‘grounded not upon the contract, but upon the duty
springing from the relation created by it’ ” not action “on a
17
contract”], disapproved on other grounds in Murillo v. Fleetwood
Enterprises, Inc. (1998) 17 Cal.4th 985, 996.)6
Finally, Port Blue’s declaratory relief cause of action sought
a declaration that Port Blue held title to the Atlantic Properties
free and clear of any claim appellants could assert. While
appellants correctly note that this cause of action sought a
declaration that “the 1994 Note was and is equitably
subordinated to the P[ort] B[lue] Deed,” we do not interpret this
request literally, as it would make no sense. It was not the 1994
Note that gave appellants the right to foreclose on 12224 S.
Atlantic Avenue, but the 1994 DOT.7 (See Alliance Mortgage Co.
v. Rothwell (1995) 10 Cal.4th 1226, 1235 [deed of trust “ ‘entitles
the lender to reach some asset of the debtor if the note is not
paid’ ”].) Port Blue’s request to have the 1994 Note subordinated
to its own deed can only be understood as a request that the court
find the 1994 DOT subordinated. As such, while the declaratory
6 Appellants cite Weitzenkorn v. Lesser (1953) 40 Cal.2d
778, 794 for the proposition that a common count for money had
and received is based in contract. Weitzenkorn discussed the
nature of a “common count of quantum valebant for the
reasonable value of goods sold and delivered,” and stated that
“[u]nder the code system of pleading, as at common law, the
common counts are sufficient to state a cause of action upon
either a contract implied in fact [citation] or a contract implied in
law.” (Id. at pp. 792, 793.) But even if Port Blue were alleging a
contract implied in fact in its cause of action for money had and
received, appellants’ alleged breach of that implied contract
would not be an action on the 1994 Note.
7As appellants admit, the 1994 Note was not even
recorded.
18
relief cause of action undoubtedly related to the 1994 Note, it was
not an action “on” that contract.
Therefore, while appellants indisputably prevailed on all
three causes of action discussed above, none of these actions was
contract-based causes of action as contemplated by Civil Code
section 1717. As such, appellants were not entitled to attorneys’
fees for their victory, and the court did not err in declining to
award them.8
DISPOSITION
The portion of the court’s judgment determining the
amount owed on the 1994 Note is reversed. On remand, the court
is to enter a new judgment determining the amount due on the
1994 Note, using as a basis the accountant’s determination that
$163,443.40 was due as of February 1, 2018, and taking into
account any additional interest owed at 8 percent and any
payments that may have been made after the original judgment
was entered. The remainder of the original judgment is affirmed.
8 When asked why it was not awarding fees, the court
stated only that the award was “discretionary” and it was
disinclined to award fees. The judgment entered by the court
stated that it found there was “no prevailing party and therefore
declines to award fees and costs.” But “[a] fundamental principle
of appellate review is that a judgment correct in law will not be
reversed merely because given for the wrong reason; we review
the trial court’s judgment, not its reasoning.” (Mayer v. C.W.
Driver (2002) 98 Cal.App.4th 48, 64.) Thus, we need not consider
the court’s reasoning for declining to award attorneys’ fees.
19
In the interests of justice, each party shall bear their own costs
on appeal.
NOT TO BE PUBLISHED
CHANEY, J.
We concur:
ROTHSCHILD, P. J.
BENDIX, J.
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