Nostrati v. Gonzalez CA2/7

Filed 1/13/23 Nostrati v. Gonzalez CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
M. SAEID NOSRATI et al., B317588
Plaintiffs and Respondents, (Los Angeles County
Super. Ct.
v. No. LC102860)
MANUEL GONZALEZ,
Defendant and Appellant.
APPEAL from an order of the Superior Court of
Los Angeles County, Virginia Keeny, Judge. Affirmed.
Practus and Steven E. Young; Alon, Edward E. Alon and
Jonathan A. Alon for Defendant and Appellant.
J. Hartley Law and Jura Andrew Hartley for Plaintiffs and
Respondents.
INTRODUCTION
M. Saeid Nosrati and Nooshin Haroonian sued Manuel
Gonzalez and Sheila Gonzalez (who is not a party to this appeal),
alleging the Gonzalezes failed to disclose defects in a home they
sold to Nosrati and Haroonian. Shortly before trial the
Gonzalezes accepted Nosrati’s demand for rescission of the
purchase agreement, and the trial court granted the Gonzalezes’
motion to rescind the agreement. Following a four-day nonjury
trial, the court awarded Nosrati and Haroonian monetary
damages and prejudgment interest and, after applying some
offsets, entered judgment in their favor. The Gonzalezes did not
appeal from the judgment, but Nosrati and Haroonian did,
arguing the trial court should have awarded them additional
prejudgment interest. We agreed and directed the trial court to
recalculate the (greater) amount of prejudgment interest to
award to Nosrati and Haroonian.
Meanwhile, the trial court granted a motion by Nosrati and
Haroonian for attorneys’ fees pursuant to a provision in the
purchase agreement, but awarded them only $88,297.26 of the
$260,412.87 they requested. Nosrati and Haroonian did not
appeal from the order, but the Gonzalezes did, arguing the court
abused its discretion in finding Nosrati and Haroonian were the
prevailing parties. We affirm.
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FACTUAL AND PROCEDURAL BACKGROUND
A. Nosrati and Haroonian File This Action Against the
Gonzalezes
In 2013 Nosrati and Haroonian purchased residential
property from the Gonzalezes for approximately $1 million. After
buying the home, Nosrati and Haroonian discovered defects in
the property the Gonzalezes had not disclosed. Nosrati and
Haroonian claimed they spent more than $400,000 repairing and
remodeling the property.
Nosrati filed this action in April 2015 against the
Gonzalezes, alleging causes of action for fraud, intentional
misrepresentation, negligent misrepresentation, breach of
contract, and failure to disclose information on the real estate
disclosure statement required by Civil Code section 1102.6.1
Nosrati sought damages and rescission of the purchase
agreement. In September 2018 Nosrati filed the operative, third
amended complaint, adding his wife, Haroonian, as a plaintiff.
B. The Gonzalezes Agree To Rescind the Purchase
Agreement, and the Court Orders Rescission
In April 2019 Gonzalez filed a document titled “Verified
Notice of Acceptance of Plaintiffs’ Rescission of Contract,” which
stated he was “ready willing and able to restore everything of
value received under the contract (to wit: the closing
1 Nosrati also alleged causes of action against the
Gonzalezes’ son and the real estate agents involved in the
transaction, which the court later dismissed. Undesignated
statutory references are to the Civil Code.
3
consideration of $1,005,526); subject to restoration of everything
of value Plaintiffs received under the contract (to wit: an
executed deed conveying the single family residence).” When
Nosrati and Haroonian did not respond, the Gonzalezes filed
what they called a “motion to enforce plaintiffs’ rescission and to
dismiss all other claims as moot.” In their opposition to the
motion, Nosrati and Haroonian stated that they had demanded
rescission four years earlier, that the Gonzalezes’ delay in
agreeing to rescission until the “eve of trial” prejudiced Nosrati
and Haroonian by forcing them to litigate the case for four years,
and that the Gonzalezes had not offered to reimburse Nosrati and
Haroonian for the cost of repairs or for their attorneys’ fees.
In its tentative ruling on the Gonzalezes’ motion, the court
stated it had “no framework to evaluate the motion” because the
Gonzalezes provided “no procedural authority for the motion.”
After hearing oral argument, however, the court granted the
motion, ordered the contract rescinded, and scheduled a court
trial to determine how to “adjust the equities between the
parties” (§ 1692) to return them to the pre-contract status quo.
C. The Trial Court Awards Nosrati and Haroonian
Damages and Prejudgment Interest
The trial focused on damages and equitable adjustments
due under section 1692.2 The parties agreed the Gonzalezes
2 Section 1692 provides: “A claim for damages is not
inconsistent with a claim for relief based upon rescission. The
aggrieved party shall be awarded complete relief, including
restitution of benefits, if any, conferred by him as a result of the
transaction and any consequential damages to which he is
entitled; but such relief shall not include duplicate or inconsistent
4
would pay Nosrati and Haroonian the $1,022,762 they paid for
the property, plus $157,361 in interest on the promissory note
they signed to purchase the property, $98,688 in property taxes
they paid while they owned the property, $16,718 in homeowners’
insurance premiums they paid, and $59,800 in utility payments
they made while they lived at the property, for a total of
$1,355,329 (rounded up). The court found Nosrati and Haroonian
were also entitled to $216,943 they paid to repair and remodel
the property. The parties agreed the Gonzalezes were entitled to
an offset of $53,193 for certain escrow and closing costs.
The court awarded the Gonzalezes an additional $293,000
in offsets for the reasonable rental value of the property for the
time Nosrati and Haroonian occupied it and $19,000 for the
amount the real estate agent defendants paid Nosrati and
Haroonian in a settlement. The court awarded Nosrati and
Haroonian prejudgment interest on the $1,022,762 purchase
price from August 6, 2019, the date the court ordered rescission,
in the amount of $170,460.3 The court reserved jurisdiction to
items of recovery.” (See Sharabianlou v. Karp (2010)
181 Cal.App.4th 1133, 1145 [“the ‘[r]elief given in rescission
cases—restitution and in some cases consequential damages—
puts the rescinding party in the status quo ante, returning him to
his economic position before he entered the contract’”]; Leaf v.
Phil Rauch, Inc. (1975) 47 Cal.App.3d 371, 377 [“In an action to
enforce rescission, the successful plaintiff is entitled to recover
not only the consideration he gave under the contract, but also
consequential damages.”].)
3 As stated, Nosrati and Haroonian appealed from the
judgment. We reversed the judgment, ruling the trial court
should have awarded prejudgment interest from the date Nosrati
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determine “whether either party [was] the prevailing party for
purposes of awarding fees and costs, as well as the amount of any
such award.”
D. The Trial Court Awards Nosrati and Haroonian
Attorneys’ Fees
Nosrati and Haroonian filed a motion seeking $260,413 in
attorneys’ fees under a prevailing-party attorneys’ fees provision
in the purchase agreement. The Gonzalezes opposed the motion,
arguing Nosrati and Haroonian were not the prevailing parties.
At the hearing on the motion, the court stated its preliminary
view that Nosrati and Haroonian were the prevailing parties, but
continued the hearing and directed Nosrati and Haroonian to
submit additional evidence showing the fees requested were
reasonable.
Counsel for Nosrati and Haroonian submitted a declaration
and billing records in support of the motion for fees, and the
Gonzalezes submitted a supplemental opposition. In their
supplemental opposition, the Gonzalezes cited allegations by
Nosrati and Haroonian in a malpractice lawsuit they filed
against their former lawyers claiming that the former lawyers
did not advise Nosrati and Haroonian they were seeking
rescission, that the former lawyers did not tell Nosrati and
Haroonian rescission would require them to return the property
to the Gonzalezes, and that Nosrati and Haroonian “were forced
to accept a remedy they did not want.” The Gonzalezes argued
served the original complaint. (See Nosrati v. Cronen (Oct. 13,
2022, B315738) [nonpub. opn.].)
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Nosrati and Haroonian were not the prevailing parties because
they achieved a result they did not want.
Taking judicial notice of the complaint in the legal
malpractice action, the trial court ruled the complaint in that
case was “an admission by [Nosrati and Haroonian] in this case
that they were vehemently opposed to rescission and did not
want that relief at any point in this action. . . . The court agrees
with [the Gonzalezes] that it would be inequitable to hold either
party to be the prevailing party on the aspect of this case that led
up to the court ordering rescission. However, the remainder of
the litigation focused on competing claims for damages and
offsets. As to this portion of the litigation, [Nosrati and
Haroonian] prevailed.” The trial court denied Nosrati and
Haroonian’s request for $178,619 in fees incurred by their former
lawyers for work performed before the court ordered rescission
“because as to that aspect of the case there was no prevailing
party per se.”4 The court awarded Nosrati and Haroonian
$88,297.26 in fees incurred by their current lawyers to
“establish[ ] the amount of compensation and offsets owed to
them.” The Gonzalezes timely appealed from the order awarding
attorneys’ fees.5
4 The trial court also ruled Nosrati and Haroonian did not
lay a proper foundation “for the work actually done” by their
former lawyers and did not prove that work “was reasonably
required and performed.”
5 An order awarding attorneys’ fees is appealable. (Code Civ.
Proc., § 904.1, subd. (a)(2); Riskin v. Downtown Los Angeles
Property Owners Assn. (2022) 76 Cal.App.5th 438, 444, fn. 5.)
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DISCUSSION
A. Applicable Law and Standard of Review
Section 1717, subdivision (a), authorizes the trial court to
award reasonable attorneys’ fees to the prevailing party in a
contract action if the contract provides for such an award.
(City of Los Angeles Dept. of Airports v. U.S. Specialty Ins. Co.
(2022) 79 Cal.App.5th 1039, 1043.) “[T]he party prevailing on the
contract shall be the party who recovered a greater relief in the
action on the contract.”” (§ 1717, subd. (b)(1); see
DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5th 968,
973.) “‘[I]n deciding whether there is a “party prevailing on the
contract,” the trial court is to compare the relief awarded on the
contract claim or claims with the parties’ demands on those same
claims and their litigation objectives as disclosed by the
pleadings, trial briefs, opening statements, and similar sources.
The prevailing party determination is to be made only upon final
resolution of the contract claims and only by “a comparison of the
extent to which each party ha[s] succeeded or failed to succeed in
its contentions.”’” (DisputeSuite, at p. 974; see Hsu v. Abbara
(1995) 9 Cal.4th 863, 876.) “This is necessarily a fact-driven
inquiry that requires courts to consider the unique circumstances
of each case.” (City of Los Angeles Dept. of Airports, at p. 1043.)
“If neither party achieves a complete victory on all the
contract claims, it is within the discretion of the trial court to
determine which party prevailed on the contract or whether, on
balance, neither party prevailed sufficiently to justify an award of
attorney fees.” (DisputeSuite.com, LLC v. Scoreinc.com, supra,2 Cal.5th at p. 973; see Zintel Holdings, LLC v. McLean (2012)
209 Cal.App.4th 431, 439-440.) In “determining litigation
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success, courts should respect substance rather than form, and to
this extent should be guided by ‘equitable considerations.’” (Hsu
v. Abbara, supra, 9 Cal.4th at p. 877; see City of Los Angeles
Dept. of Airports v. U.S. Specialty Ins. Co., supra, 79 Cal.App.5th
at p. 1043.)
“‘A trial court has wide discretion in determining which
party is the prevailing party under [Civil Code] section 1717, and
we will not disturb the trial court’s determination absent “a
manifest abuse of discretion, a prejudicial error of law, or
necessary findings not supported by substantial evidence.”’”
(Blue Mountain Enterprises, LLC. v. Owen (2022) 74 Cal.App.5th
537, 558; see Regency Midland Construction, Inc. v. Legendary
Structures Inc. (2019) 41 Cal.App.5th 994, 1000 [“We review for
abuse of discretion the trial court’s assessment of which party
prevailed.”].) “We are required to uphold a reasonable ruling
even if we may not have ruled the same way and a contrary
ruling would also be sustainable.” (In re Tobacco Cases I (2013)
216 Cal.App.4th 570, 578.)
B. The Trial Court Did Not Abuse Its Discretion in
Awarding Attorneys’ Fees to Nosrati and Haroonian
The Gonzalezes argue the trial court erred in awarding fees
to Nosrati and Haroonian because the court ruled Nosrati and
Haroonian were “not the prevailing party with respect to the trial
court’s rescission order,” which the Gonzalezes say was the main
issue in the case. The trial court, however, did not award Nosrati
and Haroonian the attorneys’ fees they incurred in obtaining
rescission, and the court did not abuse its discretion in awarding
them the fees they incurred in connection with other claims on
which they prevailed.
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It was within the trial court’s discretion to analyze the two
parts of the litigation separately for purposes of determining
whether there was a prevailing party. (See DisputeSuite.com,
LLC v. Scoreinc.com, supra, 2 Cal.5th at p. 973 [“trial court
ruling on a motion for fees under section 1717 is vested with
discretion in determining which party has prevailed on the
contract”]; Zintel Holdings, LLC v. McLean, supra,
209 Cal.App.4th at p. 439 [trial court has broad discretion in
making a prevailing party determination].) For the first part of
the litigation, which resulted in an order rescinding the purchase
agreement, the trial court ruled neither party prevailed.
Although Nosrati and Haroonian sought rescission in their
complaint, the allegations in their malpractice action against
their former lawyers, along with “similar statements disavowing
the request for rescission in this case,” revealed that rescission
was not one of Nosrati and Haroonian’s litigation objectives. As a
result, the trial court concluded, finding either side a prevailing
party on the rescission claim would be inequitable. For this
reason, among others, the trial court denied Nosrati and
Haroonian’s request for $178,619 in fees for “work performed by
counsel prior to the court order of rescission.”
But for the second part of the case, which included the trial
on monetary damages, offsets, and equitable adjustments, the
trial court reasonably concluded Nosrati and Haroonian
recovered greater relief than the Gonzalezes. Here’s why that’s
so: Nosrati and Haroonian recovered $549,510 for interest on
their promissory note, property taxes, utility payments,
homeowners’ insurance premiums, and repairs to the property.
Nosrati and Haroonian also recovered, over the Gonzalezes’
objection, $170,460 in prejudgment interest. Of course, as the
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trial court recognized, Nosrati and Haroonian did not obtain “an
unqualified win” on the contested damages, offsets, and equitable
adjustments. In particular, they did not recover as much as they
wanted for the repairs they made to the property or any of the
punitive damages they sought on their fraud cause of action. In
addition, the court awarded the Gonzalezes more in offsets than
Nosrati and Haroonian argued they were entitled to. In the end,
it was a mixed result, and the court ruled Nosrati and Haroonian
were the prevailing parties on the second part of the case because
they obtained a net recovery of $354,317. The court awarded
them $88,297.26 in fees incurred in proving the amounts they
recovered.
Considering “the unique circumstances” of this case (City of
Los Angeles Dept. of Airports v. U.S. Specialty Ins. Co., supra,
79 Cal.App.5th at p. 1043), the trial court did not abuse its
discretion in awarding fees for work performed for the portion of
the case where Nosrati and Haroonian recovered greater
monetary relief, but denying fees for work for the portion of the
case where Nosrati and Haroonian obtained rescission of the
purchase agreement, something they did not want. (See Blue
Mountain Enterprises, LLC. v. Owen, supra, 74 Cal.App.5th at
p. 559 [although the plaintiff “did not achieve all of its litigation
goals, the trial court carefully considered this factor, and it
disallowed a significant amount of attorney fees incurred by [the
plaintiff] where its law firm’s activities did not meaningfully
advance the objective of” the successful contract claim]; In re
Tobacco Cases I, supra, 216 Cal.App.4th at pp. 586-587 [trial
court has broad discretion whether to apportion fees between
successful and unsuccessful contract claims]; Acree v. General
Motors Acceptance Corp. (2001) 92 Cal.App.4th 385, 404 [same].)
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The Gonzalezes argue that the monetary relief Nosrati and
Haroonian recovered was “merely a part of the rescission
judgment” and that Nosrati and Haroonian “did not prevail on
rescission.” But that one outcome of the litigation—rescission—
was not a “win” for Nosrati and Haroonian did not mean another
aspect—a net recovery of $354,317 in consequential damages—
was not a “win,” even though the second outcome was related to
the first. (See Hsu v. Abbara, supra, 9 Cal.4th at p. 877 [courts
should respect substance over form in assessing litigation
success].) When the trial court stated neither party was “the
prevailing party on the aspect of this case that led up to the court
ordering rescission,” that was shorthand for the court’s finding
that, because Nosrati and Haroonian did not want to rescind the
purchase agreement, obtaining rescission was not a litigation
success for them. The trial court acted within its discretion in
ruling that, although Nosrati and Haroonian were the prevailing
parties, they could only recover a portion of the attorneys’ fees
they incurred.
The Gonzalezes also argue that, by focusing on Nosrati and
Haroonian’s monetary recovery and ignoring the rescission of the
purchase agreement, the trial court awarded fees to the party
“who prevailed on a minor battle but who lost the war.” But the
trial court did not view monetary claims as a minor battle or
rescission as the war, and there is no reason to disturb that
assessment. (See Harris v. Rojas (2021) 66 Cal.App.5th 817, 825
[trial court, which “gains familiarity with the parties and the
attorneys during the case and the trial,” is “well positioned to
evaluate what counts as a win”].)
Finally, the Gonzalezes argue the trial court erred in ruling
Nosrati and Haroonian recovered greater relief because the
12
property Nosrati and Haroonian must return to the Gonzalezes is
now worth more than the purchase price the Gonzalezes must
return to Nosrati and Haroonian. The Gonzalezes, however, cite
no authority for the proposition that the trial court, when
evaluating whether Nosrati and Haroonian prevailed on their
monetary claims, had to consider appreciation of the property,
particularly when there was no evidence at trial of the property’s
appreciation or depreciation.6 They quote the following
statement in the trial court’s statement of decision: “Returning
the parties to the status quo prior to the sale of the subject
property is impossible in this case” because, among other reasons,
“the value of [the] property has increased substantially” in the
eight years since Nosrati and Haroonian purchased the property
from the Gonzalezes. This statement by the trial court (which
had nothing to do with who were the prevailing parties) was not
based on any evidence of the property’s past or current value.
But even if the value of the property increased during the
litigation, the Gonzalezes have not shown the trial court erred in
ruling Nosrati and Haroonian were the prevailing parties. As
discussed, the trial court analyzed the parties’ relative success on
the rescission claims separately from their relative success on the
monetary claims. On the rescission cause of action, the court
ordered the Gonzalezes to refund the purchase price to Nosrati
and Haroonian and ordered Nosrati and Haroonian to return the
6 In opposition to the motion for attorneys’ fees, the
Gonzalezes cited estimates of the property’s value listed on two
real estate advertising and brokerage websites. The record on
appeal, however, does not include printouts of the websites
attached to counsel for the Gonzalezes’ declaration or evidence
making the print-outs admissible (or any indication they were
admitted).
13
property to the Gonzalezes. (See Wong v. Stoler (2015)
237 Cal.App.4th 1375, 1386 [when a real estate purchase
agreement is rescinded, the seller must refund the purchase
price, and the buyer must restore the property to the seller].)
The increase in the property’s value may have been part of the
reason Nosrati and Haroonian did not want to rescind the
agreement. And because Nosrati and Haroonian did not want to
rescind the agreement, the trial court concluded they were not
the prevailing parties on their rescission claim and declined to
award Nosrati and Haroonian attorneys’ fees for that part of the
case. But none of that shows an abuse of discretion.
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DISPOSITION
The order granting Nosrati and Haroonian’s motion for
attorneys’ fees and costs is affirmed. Nosrati and Haroonian are
to recover their costs in this appeal.
SEGAL, J.
We concur:
PERLUSS, P. J.
FEUER, J.
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