PhxCap II, LLC v. AG Mobile Rest. Concepts, LLC

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of San Diego County No. 37-2017-00027948-CU-UD-CTL, Timothy B. Taylor, Judge. Reversed.

Burkhardt & Larson and Philip Burkhardt for Defendant and Appellant.

Law Offices of Howard F. Burns and Howard F. Burns for Plaintiff and Respondent.

IRION, J.

In this commercial unlawful detainer case, defendant AG Mobile Restaurant Concepts, LLC (Tenant), appeals from a judgment that deems the "issue of possession" of the leased premises moot and awards plaintiff PhxCap II, LLC (Landlord), attorney fees and costs. The only issue Tenant

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raises on appeal is the propriety of the attorney fees award-both Landlord's entitlement to fees and the amount of the fees awarded.

This is the second time this case is before us. In an August 2019 opinion, this court interpreted an ambiguous provision in the lease, reversed a judgment following a jury trial and a postjudgment order in favor of Tenant, and remanded for the trial court to resolve the remaining issues based on the interpretation of the ambiguous provision. (PhxCap II, LLC v. AG Mobile Restaurant Concepts, LLC (Aug. 28, 2019, D073914) [nonpub.opn.] (Appeal l).)^[1] During the pendency of Appeal 1, Tenant surrendered possession of the premises. Upon issuance of the remittitur in Appeal 1, Landlord filed a motion for the attorney fees it had incurred in the trial and appellate courts. Landlord based its motion on the argument that, because Tenant abandoned the premises, Landlord was the prevailing party "on the contract" (i.e., on the lease). However, no judgment had been entered. Moreover, in support of its motion, Landlord presented no evidence regarding possession of the premises and expressly argued that there remained unresolved the issue of its "entitle[ment] to damages based on [Tenant's] failure to pay rent." Nonetheless, in opposition to Landlord's motion, Tenant's representative testified that Tenant had paid rent until surrendering possession of the premises. Based on this testimony, the trial court determined that the only remaining issues to be resolved were attorney fees and costs; and the court awarded Landlord more than $220, 000 in attorney fees. More than a month later, the court filed its judgment.

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The trial court erred. There was no final judgment either at the time Landlord filed its motion or at the time the court awarded attorney fees as costs. Thus, Landlord did not present, and Tenant was prejudiced by not being able to oppose, evidence or argument regarding entry of a final judgment or, for purposes of the award of attorney fees as costs, the determination of a prevailing party based on such a judgment. Accordingly, we will vacate the order granting Landlord's attorney fees motion and reverse the judgment.

I. FACTUAL AND PROCEDURAL BACKGROUNDS^[2]

The dispute in the case involves a commercial lease (Lease) of retail space in a strip mall on Garnet Avenue in San Diego (Premises). In July 2017, Landlord filed the underlying unlawful detainer action, naming Tenant and Alex Gould as defendants. ^[3] In the prayer of the complaint for unlawful detainer (Judicial Council form UD-100), Landlord requested: (1) possession

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of the Premises; (2) past-due rent of $8, 475.50; (3) daily damages of $256.83 based on the fair rental value of the Premises from July 1, 2017, for each day that Tenant remained in possession through entry of judgment; (4) forfeiture of the Lease; (5) reasonable attorney fees; and (6) costs incurred in this proceeding.

In December 2017, the case went to trial before a jury. Based on the jury's answer to the first question on a 10-question special verdict form, the trial court entered judgment in favor of Tenant and a postjudgment order awarding Tenant attorney fees (as the prevailing party in an action on a contract (i.e., the Lease)).^[4] Landlord appealed, initiating Appeal 1, where the principal issue was whether, based on language in the Lease, Landlord had delivered possession of the Premises for purposes of the commencement of Tenant's rent obligation. In Appeal 1, we held: "[T]he only reasonable and commonsense interpretation of the ambiguous language [in the Lease] is that ... no later than January 24, 2017 .. . Landlord had delivered possession of the Premises to Tenant for purposes of Tenant's obligation to pay rent." We then directed: "On remand, the trial court is to resolve all remaining issues given" the foregoing interpretation of the ambiguous language.^[5] Appeal 1 concluded by awarding Landlord "costs on appeal," citing California Rules of Court, rule 8.278(a)(2). The remittitur issued on November 6, 2019.

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In mid-December 2019, Landlord filed a motion for an award of reasonable attorney fees and expenses under Civil Code section 1717.^[6] The basis of the motion was that Landlord "is the prevailing party to an action based upon a written contract[-i.e., the Lease-]containing a provision of [sic] the award of fees and expenses."^[7] More specifically, Landlord argued that it "is the prevailing party in this case because . . . [Tenant] abandoned the [P]remises after [Appeal 1] was filed. Therefore, [Landlord] substantially obtained the relief it sought-possession." Landlord requested a total of $292, 902.53 for all fees and expenses it incurred related to the unlawful detainer action, including Appeal 1. The evidence Landlord submitted in support of its motion was limited to a declaration from Landlord's principal, who testified as to the fees and expenses it paid and provided copies of invoices from the various attorneys who assisted Landlord. Landlord

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presented no evidence that Tenant had surrendered the Premises or paid any rent.

Tenant opposed Landlord's motion on a number of grounds.^[8] The first sentence of the opposition reads: "The motion for attorney fees is premised on the erroneous notion that a final judgment has been entered in this case." Tenant's argument continued by emphasizing that, without a resolution of the remaining issues in the remanded proceedings (as directed in Appeal 1), there can be no determination of the prevailing party in this action. In response to Landlord's suggestion that Landlord prevailed because it "obtained the relief it sought-possession," Tenant submitted the declaration of its principal, who explained: During the pendency of Appeal 1, Tenant "continued to tender rent. . ., notwithstanding ongoing legal difficulties with the [L]andlord"; despite Tenant's tender of rent, in July 2018, Landlord served Tenant with a 30-day notice terminating the tenancy; a month later, Landlord filed and served a second unlawful detainer action; and, "accepting the Landlord's claim that [Tenant's] possessory rights were terminable at the election of the Landlord," Tenant "surrendered possession of the leased [P]remises" in late September 2018 in order to "eliminate[ ] a potential long-term liability."

Tenant explained that it presented this evidence only because Landlord did not inform the court "of the circumstances under which the tenancy was terminated." According to Tenant, contrary to Landlord's unsubstantiated argument regarding Tenant's abandonment of the Premises, "[Tenant] never

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surrendered possession as a result of [Landlord's] claims in this case"; to the contrary, in this case, Tenant "fought vigorously to retain possession in the context of Landlord's claim that Tenant breached the Lease. Instead, Tenant's presentation continued, Tenant surrendered the Premises as a result of Landlord's notice of termination of the tenancy in the second unlawful detainer action. In closing, Tenant stated that, regardless of the issue of possession, "[t]his case is not over." Before a prevailing party can be determined, Tenant concluded, the court must consider and resolve the remaining issues in this case-which, based on the special verdict from the jury trial that preceded Appeal 1, included a number of unresolved issues.^[9]

In reply, Landlord reduced its request to only those fees it incurred in Appeal 1-i.e., $127, 000. Landlord argued an entitlement to the fees in Appeal 1, because: Appeal 1 determined Landlord "was the prevailing party on the appeal and . . . entitled to its costs"; and" '[c]osts' on appeal can include attorney fees."

Following briefing, the trial court issued a tentative ruling. Based on Tenant having abandoned the Premises, the court deemed moot "the 'remaining issues' of possession, back rent, etc." From "both a practical and legal perspective," the tentative ruling continued, all that remained for resolution was an award of attorney fees and costs: "[W]ith the exception of the fees and costs, the case is in fact 'over.'" In response to Tenant's argument that an award of fees was premature without a final judgment, the

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tentative ruling: (1) mentioned "an interim judgment in [Landlord's] favor"; ^[10] _and (2) proposed a finding that, based on the results in Appeal 1 and Tenant's abandonment of the Premises, Landlord "achieved its main litigation goals" of (a) establishing that it had delivered possession of the Premises in January 2017, and (b) obtaining possession of the Premises. In the tentative ruling, the court then conducted a thorough review of the evidence in support of the amount of the fees and expenses Landlord requested ($292, 902.53) and stated: "Prior to receipt of the reply brief, the court was prepared to make an award as against [Tenant] only in the amount of $221, 849.00 .... To the court's surprise, however, [Landlord] explicitly revised its request substantially downward, to $127, 000.00. . . . The court takes [Landlord] at its word, and awards $127, 000.00."

At the hearing on Landlord's motion, Landlord's...