Marina Pacifica Homeowners Ass'n v. S. Cal. Fin. Corp.

20 Cal.App.5th 191

228 Cal.Rptr.3d 799

MARINA PACIFICA HOMEOWNERS ASSOCIATION, Plaintiff and Appellant,

v.SOUTHERN CALIFORNIA FINANCIAL CORPORATION, Defendant and Appellant.

B276719

Court of Appeal, Second District, Division 8, California.

Filed February 5, 2018

Locke Lord, Susan A. Kidwell, Daniel A. Solitro, Los Angeles; Lewis Brisbois Bisgaard & Smith and Christopher J. Bakes for Plaintiff and Appellant.

Greenberg Traurig, Scott D. Bertzyk, Adam Siegler and Matthew R. Gershman, Los Angeles for Defendant and Appellant.

GRIMES, J.

SUMMARY

Both plaintiff and defendant appeal from a postjudgment order concluding neither of them was the prevailing party in litigation over an assignment fee, and consequently neither of them was entitled to attorney fees under Civil Code section 1717 ( section 1717 ) or to costs under Code of Civil Procedure section 1032 ( section 1032 ). We affirm the trial court's order.

FACTS

This is the fifth appeal in litigation over the assignment fee that began in 2006. Three of the previous appeals are pertinent in one way or another to this appeal, and we will describe them as needed.¹ The history of the dispute is described in detail in Marina Pacifica Homeowners Assn. v. Southern California Financial Corp. (2014) 232 Cal.App.4th 494, 497-504, 181 Cal.Rptr.3d 271 ( Marina Pacifica I ). We summarize here the background and other facts pertinent to the attorney fee and costs issues the parties present in this appeal, borrowing liberally from the recitations in our earlier opinions.

The plaintiff is Marina Pacifica Homeowners Association. When unit owners in the Marina Pacifica complex in Long Beach purchased their units, they bought an ownership interest in their individual units and a share of an undivided leasehold interest in the land on which the complex was built. That leasehold interest included the obligation to pay monthly rent to the landowner and an assignment fee to the developers. These two obligations were to continue until 2041. Both payments were to be nominal until 2006, when the rent and assignment fee would be recalculated so that together they would equal 10 percent (on an annual basis) of the fair market value of the land underlying the units. ( Marina Pacifica I, supra, 232 Cal.App.4th at pp. 497-498, 181 Cal.Rptr.3d 271.) Thus the unit lease provided that as of October 2006, monthly rent would become the greater of (1) $25 or (2) one-twelfth of 6 percent of the fair market value of the leasehold premises. ( Id. at p. 498, 181 Cal.Rptr.3d 271.) The monthly assignment fee would " ‘be equal to the amount, if any, by which one-twelfth (1/12) of ten percent (10%) of the fair market value of the leasehold premises on October 1, 2006 exceed[ed] the monthly rent payable under’ " the unit lease. ( Ibid. ) Another recalculation would occur as of October 1, 2021. ( Id. at p. 499, 181 Cal.Rptr.3d 271.)

In 1999, plaintiff bought the land underlying the development and sold pro rata shares to the individual unit owners, thus terminating rent payments under the unit leases. The assignment fee, however, created a separate contractual obligation from the unit owner to the developers. ( Marina Pacifica I, supra, 232 Cal.App.4th at pp. 499, 498, 181 Cal.Rptr.3d 271.)

In 2000, plaintiff bought out the assignment fee rights of two of the three development partners. But the remaining partner, William Lansdale, retained his 43.75 percent interest in those fees. In 2005, Mr. Lansdale and plaintiff began to litigate disputes over the appraisal process that would determine the fair market value of the property for purposes of readjustment of the assignment fee. ( Marina Pacifica I, supra, 232 Cal.App.4th at p. 499, 181 Cal.Rptr.3d 271.)

In 2007, the Legislature enacted Civil Code sections 1098 and 1098.5 to regulate "transfer fees." A transfer fee was defined broadly to include fees imposed in any document affecting the transfer of an interest in real property. For transfer fees imposed before January 1, 2008, the recipient of the fee was required to record a separate document meeting specified requirements. In order to continue collecting transfer fees on and after January 1, 2009, this separate document had to be recorded on or before December 31, 2008. ( § 1098.5, subd. (a).) There were, however, nine exceptions to the definition of a transfer fee. One of these exceptions was for fees in documents recorded by December 31, 2007, that met specified requirements and that also substantially complied with certain statutory provisions concerning notice to the prospective transferee and other items. (Former § 1098, subd. (i).)

In January 2008, Mr. Lansdale transferred his right to the assignment fees to defendant. By December 2008, the appraisal litigation had been concluded, an arbitration had been held, and the fair market value of the property for purposes of calculating the assignment fee was set at $60,615,500. Defendant began billing the unit owners for their respective shares of the readjusted assignment fee. Defendant did not record the separate document described in Civil Code section 1098.5. ( Marina Pacifica I, supra, 232 Cal.App.4th at pp. 500-501, 181 Cal.Rptr.3d 271.)

Defendant billed the unit owners using a "10 percent formulation." This formulation took advantage of the fact that unit owners, having purchased the land, no longer paid rent to the landowner. So, defendant charged a monthly assignment fee calculated as 10 percent of $60,615,500 (the fair market value) divided by 12, minus zero (rather than minus the 6 percent the unit owners would have paid to the landowner had they not bought the land). In other words, defendant would receive 10 percent rather than the 4 percent it would have received if the unit owners had not purchased the land and eliminated their rent payments.

Plaintiff instructed unit owners not to pay the assignment fee bills defendant sent, and in March 2009 plaintiff sued defendant. Plaintiff's operative complaint alleged numerous causes of action for declaratory relief, breach of contract, breach of the covenant of good faith and fair dealing, reformation, and restitution. As we stated in Marina Pacifica I , "[t]he gravamen of the [complaint was] that the assignment fee is invalid or unenforceable for several reasons, or assuming it is valid and enforceable, [defendant's] billing vastly overstated the amount owing." ( Marina Pacifica I, supra, 232 Cal.App.4th at p. 501, 181 Cal.Rptr.3d 271.)

Plaintiff's claims that the assignment fee was void from its inception or from a merger of estates in 1999 were eliminated by summary adjudication. The court bifurcated the trial of the remaining issues into several phases. The phases tried first concerned (1) the remaining arguments that the assignment fee was invalid (principally because of the transfer fee statute), and (2) the proper calculation of the assignment fee, if it was valid. ( Marina Pacifica I, supra, 232 Cal.App.4th at p. 502, 181 Cal.Rptr.3d 271.)

The trial court's July 23, 2013 judgment

The trial court's statement of decision and the later judgment presented "mixed results" for the parties. ( Marina Pacifica I, supra , 232 Cal.App.4th at p. 502, 181 Cal.Rptr.3d 271.) The trial court held the assignment fee was a transfer fee, and could not be collected after December 31, 2008, because defendant did not comply with recording requirements. ( Id. at pp. 502-503, 181 Cal.Rptr.3d 271.) And, the trial court held the fees imposed before that date should have been calculated based on 4 percent of the fair market value rather than the 10 percent formulation (but nevertheless found this did not amount to a breach of contract). ( Id. at pp. 503-504, 181 Cal.Rptr.3d 271.) In addition, the trial court held the escalation in the assignment fee in 2006 and 2021 did not fail for lack of consideration. The judgment set forth the amounts owing to defendant for each unit owner under the 4 percent formulation. ( Id. at p. 504, 181 Cal.Rptr.3d 271.)

The trial court's order on fees and costs

The parties then filed motions for fees and costs. The trial court held that as between plaintiff and defendant, there was no prevailing party on the contract. "[The trial court] did ‘not make this finding lightly, and [did] so after careful deliberation.’ Both parties' claims to prevailing party status had some merit, which was why the decidedly mixed result in the litigation resulted in no clearly prevailing party as between the two. On the one hand, [plaintiff] achieved ‘a primary goal’ in the holding that the assignment fee was a transfer fee and not collectible after December 31, 2008. As well, it prevailed in its position that the 4 percent formulation controlled the calculation of the fee. But it mostly failed in its larger challenge to the assignment fee from its inception in the 1970's or the merger of estates in 1999. On the other hand, [defendant] obtained a substantial monetary award for unpaid assignment fees through December 31, 2008, because many unit owners had not paid the fee for years while the controversy was ongoing. But [defendant's] recovery was still significantly less than the amount it claimed under the 10 percent formulation." ( Marina Pacifica Homeowners Assn. v. Southern California Financial Corp. (Mar. 4, 2016, B255413, 2016 WL 837486 ) [nonpub. opn.] ( Marina Pacifica II ).)

The appeals and cross-appeals

Defendant appealed and plaintiff cross-appealed from the judgment on the merits. This court reversed the trial court's judgment to the extent it held the assignment fee was an uncollectible transfer fee after December 31, 2008. We affirmed the trial court's ruling that defendant should have used the 4 percent formulation to calculate the fees, and held that defendant breached the unit lease by not doing so. We remanded the case for proceedings to amend the judgment accordingly, including "amended amounts due and owing for the assignment fee." ( Marina Pacifica I, supra, 232 Cal.App.4th at pp. 512-513, 181 Cal.Rptr.3d 271.)

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