Filed 6/24/15 Torigian v. WT Capital Lender Services CA5




                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIFTH APPELLATE DISTRICT

ANDRE TORIGIAN et al.,
                                                                                           F068393
         Plaintiffs and Respondents,
                                                                           (Super. Ct. No. 10CECG03800)
                   v.

WT CAPITAL LENDER SERVICES,
                                                                                          OPINION
         Defendant and Appellant.



         APPEAL from a judgment of the Superior Court of Fresno County. Donald S.
Black, Judge.
         Adelson, Hess & Kelly, Phillip M. Adleson, Lisa J. Parrella; Powell & Pool, Don
J. Pool and Matthew G. Backowski for Defendant and Appellant.
         Wright, Finlay & Zak, T. Robert Finlay and Jonathan D. Fink for United Trustees
Association as Amicus Curiae on behalf of Defendant and Appellant.
         Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, Catherine E. Bennett,
David J. Cooper and Connie M. Parker for Plaintiffs and Respondents.
                                                        -ooOoo-
       WT Capital Lender Services (WT Capital) appeals from a postjudgment order
awarding Andre Torigian and Takoohi Torigian (the Torigians) their attorney fees and
costs incurred in the litigation. The litigation involved both contract and tort causes of
action. In its decision, the trial court considered only which party prevailed on the
contract causes of action and failed to take into account the tort causes of action. We
conclude the attorney fees provision in issue was broad enough to entitle the party
prevailing in the action as a whole, not merely on the contractual claims, to an award of
attorney fees and costs.
       WT Capital did not contest the contract causes of action and successfully defended
against the tort causes of action. Under these circumstances, we conclude either WT
Capital prevailed on the contract causes of action or neither party could be found to have
prevailed on the contract causes of action. In either case, WT Capital prevailed on the
tort causes of action with a simple, unqualified win. The trial court thus abused its
discretion by finding the Torigians were the prevailing parties. We reverse and remand
to the trial court to enter a new order determining WT Capital to be the prevailing party
and awarding WT Capital its attorney fees and costs.
                 FACTUAL AND PROCEDURAL BACKGROUND
       In February 2006, the Torigians borrowed $80,000 from defendant Gerald S.
Shmavonian; the loan was confirmed by a promissory note and secured by a deed of trust
on commercial property owned by the Torigians. The initial trustee on the deed of trust
was Chicago Title Company. The Torigians paid off the loan in March 2006, but the
deed of trust was not reconveyed to the Torigians.
       In July 2010, Shmavonian retained WT Capital as his agent and instructed WT
Capital to initiate a nonjudicial foreclosure against the Torigians. After WT Capital
recorded a notice of default and election to sell under the deed of trust, the Torigians took
their cancelled checks to WT Capital and advised it that the note had been paid. WT


                                             2.
Capital contended it contacted Shmavonian, who said the note had not been paid and the
payments the Torigians had made were for other loans. WT Capital advised the
Torigians that it could not resolve the dispute between the trustor and the beneficiary. On
October 27, 2010, a substitution of trustee was recorded, substituting WT Capital for
Chicago Title Company as trustee under the deed of trust. On the same date, WT Capital
recorded a notice of trustee’s sale on Shmavonian’s instructions.
       On October 28, 2010, the Torigians filed their complaint against Shmavonian, WT
Capital, and Debra Berg, an officer of WT Capital.1 Against WT Capital the Torigians
alleged causes of action for quiet title, declaratory relief, slander of title, negligence, and
injunction. On November 24, 2010, without opposition from WT Capital, the Torigians
obtained a preliminary injunction enjoining the trustee’s sale.
       On November 29, 2010, WT Capital filed a declaration of nonmonetary status
pursuant to Civil Code section 2924l, in which it represented WT Capital was the trustee
under the deed of trust and reasonably believed it had been named as a defendant in the
Torigians’ action solely in its capacity as trustee and not due to any act or omission in the
performance of its duties as trustee. The declaration stated WT Capital agreed to be
bound by whatever nonmonetary order or judgment the trial court issued regarding the
deed of trust.
       On the same date, WT Capital demurred to the original complaint, asserting WT
Capital claimed no interest in the property in issue and had no actual controversy with the
Torigians. It contended the causes of action for slander of title and negligence were
barred by the litigation privilege of Civil Code section 47, subdivision (c)(1), and the
cause of action for negligence also failed to allege a breach of any duty owed by the
trustee to the trustor under the deed of trust or applicable statutes. The demurrer did not


       1Berg’s   motion for summary judgment was granted, and she is not a party to this
appeal.


                                               3.
challenge the cause of action seeking injunctive relief. The Torigians subsequently filed
a first, second, and third amended complaint, containing the same causes of action against
WT Capital.
       On January 6, 2011, prior to the filing of the first amended complaint, the
Torigians moved for leave to file a late objection to WT Capital’s declaration of
nonmonetary status. WT Capital did not oppose the motion and it was granted. The
Torigians filed an objection to the declaration, asserting they were suing WT Capital for
monetary damages for negligence and slander of title and “[had] reason to believe that
WT Capital participated in wrongful acts or omissions based on a capacity outside of its
alleged substituted trustee duties, which are not privileged.” Because of the Torigians’
objection to WT Capital’s declaration of nonmonetary status, WT Capital remained an
active defendant in the action.
       WT Capital successfully moved for summary adjudication of the negligence and
slander of title (monetary) causes of action. Trial was bifurcated and the first phase
addressed the Torigians’ claims for monetary damages against Shmavonian; WT Capital
did not participate in that phase of the trial. The second phase of trial addressed the
equitable, nonmonetary claims against Shmavonian and WT Capital; WT Capital
appeared at trial but did not oppose the Torigians’ equitable claims. WT Capital asserts it
appeared at the second phase of trial only because it was compelled to do so by a notice
to appear.
       Judgment was entered in favor of the Torigians and against Shmavonian on the
monetary claims against him. The Torigians were awarded damages of $16,500.
Judgment was entered in favor of the Torigians and against Shmavonian and WT Capital
on the causes of action for quiet title, declaratory relief, and permanent injunction. The
trial court enjoined the trustee’s sale and ordered WT Capital to execute and record a
reconveyance of the deed of trust, a notice of rescission of the notice of default, and a
notice of rescission of the notice of trustee’s sale.

                                               4.
       Both the Torigians and WT Capital filed memoranda of costs and motions to be
awarded their attorney fees pursuant to an attorney fees provision in the deed of trust,
claiming to be the prevailing party. Each party challenged the other’s right to recover
attorney fees and costs. The trial court granted the Torigians’ motion for attorney fees
and awarded them $120,834.50 against WT Capital and Shmavonian, jointly and
severally. It granted the Torigians’ motion to strike WT Capital’s memorandum of costs,
denied WT Capital’s motion for attorney fees, and denied WT Capital’s motion to strike
the Torigians’ memorandum of costs. WT Capital appeals from the order awarding the
Torigians attorney fees and costs and denying WT Capital its attorney fees and costs.
                                       DISCUSSION
I.     Standard of Review
       Generally, an award of attorney fees is reviewed for abuse of discretion.
(Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175.) The determination of
which party is the prevailing party and the determination of the amount to award as
attorney fees are subject to review for abuse of discretion. (Smith v. Krueger (1983) 150
Cal.App.3d 752, 756-757 (Smith); Glendora Community Redevelopment Agency v.
Demeter (1984) 155 Cal.App.3d 465, 474.) “When applying the deferential abuse of
discretion standard, ‘the trial court’s findings of fact are reviewed for substantial
evidence, its conclusions of law are reviewed de novo, and its application of the law to
the facts is reversible only if arbitrary and capricious.’” (In re C.B. (2010) 190
Cal.App.4th 102, 123.)
       Under the abuse of discretion standard, we will reverse when “the trial court
exceeded ‘“the bounds of reason, all of the circumstances before it being considered”’”
(Smith, supra, 150 Cal.App.3d at p. 757) or “when there is no substantial evidence to
support the trial court’s findings” (Frei v. Davey (2004) 124 Cal.App.4th 1506, 1512). A
ruling based upon a misinterpretation of applicable law is also an abuse of discretion.
(Katiuzhinsky v. Perry (2007) 152 Cal.App.4th 1288, 1294.)

                                              5.
II.    Bases for Award of Attorney Fees as Costs
       The trial court may make an award of attorney fees when such an award is
specifically provided for by statute or agreed to by contract. (Code Civ. Proc., § 1021.)
Attorney fees authorized by contract are recoverable as costs by the prevailing party in
the action. (Id., §§ 1032, subd. (b), 1033.5, subd. (a)(10)(A).) As such, they must be
reasonably necessary to the conduct of the litigation and reasonable in amount. (Id.,
§ 1033.5, subd. (c)(2), (3).)
       When a contractual provision for attorney fees “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,” Civil Code section 1717 applies.
(Id., subd. (a).) It provides that, under those circumstances, “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.”
(Ibid.) “In determining whether an action is ‘on the contract’ under section 1717, the
proper focus is not on the nature of the remedy, but on the basis of the cause of action.”
(Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 347 (Kachlon).)

       “The prevailing party determination under section 1717 must be based on
       the results of the litigated contract claims, ‘without reference to the success
       or failure of noncontract claims.’ [Citations.] ‘When a party obtains a
       simple, unqualified victory by completely prevailing on or defeating all
       contract claims in the action and the contract contains a provision for
       attorney fees, section 1717 entitles the successful party to recover
       reasonable attorney fees incurred in prosecution or defense of those claims.
       [Citation.] 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.’ [Citation.] Hence, ‘the
       party who obtains greater relief on the contract action is the prevailing party
       entitled to attorney fees under section 1717, regardless of whether another
       party also obtained lesser relief on the contract or greater relief on
       noncontractual claims.’” (Douglas E. Barnhart, Inc. v. CMC Fabricators,
       Inc. (2012) 211 Cal.App.4th 230, 239-240.)


                                              6.
       A declaratory relief claim seeking a declaration that the promissory note must be
cancelled and the deed of trust reconveyed because the note was paid in full and the
foreclosure violated the terms of the deed of trust is an action on the contract. (Kachlon,
supra, 168 Cal.App.4th at pp. 347-348.) Further, a claim for an injunction based on an
allegation a nonjudicial foreclosure proceeding violated the terms of the deed of trust and
a quiet title claim seeking to enforce the provisions of a deed of trust requiring
reconveyance upon satisfaction of the underlying debt constitute actions on the contract.
(Id. at p. 348.) Thus, equitable, nonmonetary claims for quiet title, declaratory relief, and
injunction, such as those asserted in the Torigians’ pleadings, constitute claims on the
contract for purposes of Civil Code section 1717.
       The parties to a contract may agree to a broader attorney fees provision, not
limited to actions or causes of action on the contract. The basic authorization for a
contractual attorney fees provision states: “Except as attorney’s fees are specifically
provided for by statute, the measure and mode of compensation of attorneys and
counselors at law is left to the agreement, express or implied, of the parties.” (Code Civ.
Proc., § 1021.) “Under this statute, the allocation of attorney fees is left to the agreement
of the parties. There is nothing in the statute that limits its application to contract actions
alone. It is quite clear from the case law interpreting Code of Civil Procedure section
1021 that parties may validly agree that the prevailing party will be awarded attorney fees
incurred in any litigation between themselves, whether such litigation sounds in tort or in
contract.” (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341
(Xuereb).) When the attorney fees provision is broad enough to encompass tort causes of
action, Civil Code section 1717 does not apply. (Brown Bark III, L.P. v. Haver (2013)
219 Cal.App.4th 809, 827-828.)
       Contractual provisions for attorney fees have been held to apply only to actions on
the contract when they provided that a purchaser agreed “‘to pay all expenses, including
reasonable attorney’s fees … incurred in the collection, by suit or otherwise, of any

                                              7.
amount payable under this contract’” (Berge v. International Harvester Co. (1983) 142
Cal.App.3d 152, 163, fn. 8) and where a lessee agreed to “‘pay all costs and reasonable
attorney’s fees incurred [by the lessor] in any action brought by [the lessor] to enforce
this agreement’” (Plemon v. Nelson (1983) 148 Cal.App.3d 720, 724, fn. 2).
       In contrast, broader attorney fees provisions that are not limited to fees incurred to
enforce the agreement or collect under it have been held to encompass awards of attorney
fees incurred in litigation of tort or other noncontract causes of action. A fee agreement
entitling the prevailing party to attorney fees “‘[i]n any action, proceeding, or arbitration
arising out of this agreement’” (Adam v. DeCharon (1995) 31 Cal.App.4th 708, 711, 712)
or in an action “‘arising out of the execution of this agreement’” (Santisas v. Goodin
(1998) 17 Cal.4th 599, 603, 608 (Santisas)) is broad enough to encompass both tort and
contract actions (Adam, at p. 712; Santisas, at p. 608). Likewise, a provision for recovery
by the prevailing party of attorney fees “[i]f this Agreement gives rise to a lawsuit or
other legal proceeding between any of the parties hereto” (Xuereb, supra, 3 Cal.App.4th
at p. 1340) is broad enough to encompass both contract and tort causes of action (id. at
pp. 1342-1343). In Maynard v. BTI Group, Inc. (2013) 216 Cal.App.4th 984 (Maynard),
the contract provided that “‘All parties to this agreement agree to mediate, in good faith,
any dispute prior to initiating arbitration or litigation. The prevailing party in the event of
arbitration or litigation shall be entitled to costs and reasonable attorney fees.’” (Id. at
p. 989.) The court held the provision for recovery of fees in “any dispute” encompassed
all claims, in contract, tort, or otherwise, and was governed by Code of Civil Procedure
section 1021. (Maynard, at pp. 993-994.)
       In the deed of trust here, the Torigians agreed “to pay all costs and expenses,
including cost of evidence of title and attorney’s fees in a reasonable sum, in any action
or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by
Beneficiary to foreclose this Deed.” The language “in any action or proceeding in which
Beneficiary or Trustee may appear” is broader than a provision authorizing an award of

                                               8.
attorney fees only in an action on the contract. It is broad enough to encompass an award
of attorney fees on both contract and tort causes of action. Consequently, the trial court’s
determination of which party, if any, was entitled to an award of attorney fees should
have been based on consideration of which party prevailed in the action as a whole, not
just which party prevailed on the causes of action on the contract. The determination
should have been made pursuant to the applicable provisions of the Code of Civil
Procedure, not pursuant to Civil Code section 1717. (Maynard, supra, 216 Cal.App.4th
at pp. 993-994.)
       The trial court, in its decision on the parties’ motions for attorney fees, did not
discuss or analyze the scope of the attorney fees provision in the deed of trust to
determine whether it was broad enough to encompass noncontract causes of action.
Rather, it assumed the issue was governed by Civil Code section 1717, concluded only
attorney fees incurred in litigating contract claims were in issue, and refused to consider
WT Capital’s success on the slander of title and negligence claims in determining which
party, if any, was entitled to an award of attorney fees. This was error.
III.   Prevailing Party
       A.     Definition
       “‘If … the contract allows the prevailing party to recover attorney fees but does
not define “prevailing party” … a court may base its attorney fees decision on a
pragmatic definition of the extent to which each party has realized its litigation
objectives, whether by judgment, settlement, or otherwise.’” (Maynard, supra, 216
Cal.App.4th at p. 992.) “If the attorney fee provision does encompass noncontractual
claims, the prevailing party entitled to recover fees normally will be the party whose net
recovery is greater, in the sense of most accomplishing its litigation objectives, whether
or not that party prevailed on a contract cause of action.” (Ibid.)
       The trial court may exercise its discretion to determine which party prevailed by
comparing the relief sought with the relief obtained on the same claims, and the parties’

                                              9.
litigation objectives as disclosed by their pleadings, trial briefs, opening statements and
similar sources. (Hsu v. Abbara (1995) 9 Cal.4th 863, 876.) The trial court should
consider the parties’ relative success on all causes of action in determining which party
prevailed for purposes of an award of attorney fees. (Maynard, at p. 988.) The question
to be determined is which party prevailed in the lawsuit, not which party prevailed “on
the contract.” (Id. at p. 993.)
       B.     Tort causes of action
       WT Capital prevailed on the tort causes of action. It moved for and was granted
summary adjudication of the slander of title and negligence causes of action. It achieved
a simple, unqualified win on those causes of action. (See, Hsu, supra, 9 Cal.4th at p. 876
[holding that, where the contract provided for attorney fees for the party prevailing on the
contract, and the defendants obtained a simple, unqualified win on the only contract
claim in the action, the defendants were the prevailing parties on the contract as a matter
of law].)
       C.     Contract causes of action
       Determining the prevailing party on the contract causes of action—the equitable
claims for quiet title, declaratory relief, and injunction—calls for analysis of the parties’
litigation objectives, the relief they sought, and the relief they obtained or failed to obtain.
(Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 188; Santisas, supra,
17 Cal.4th at p. 622.)
       The Torigians claim their “main litigation objective was to save their property
from wrongful foreclosure and prevent WT Capital [from] pursuing nonjudicial
foreclosure.” They assert they achieved a simple, unqualified win on the equitable
claims, preventing foreclosure and confirming their title to the property. They conclude
they prevailed on the contract and therefore were entitled to their attorney fees.
       WT Capital argues that on the equitable causes of action, its litigation objective
was to remain neutral in the dispute between trustor and beneficiary. It attempted to

                                              10.
remain neutral by filing the declaration of nonmonetary status, refraining from opposing
the equitable claims once it was compelled to respond to the complaint and putting in
issue only the allegations about which it had no knowledge or information of record and
leaving the other parties to resolve their disputes. WT Capital contends that because it
filed the declaration of nonmonetary status indicating it did not oppose the equitable
claims, the Torigians’ only viable litigation objective as to WT Capital was to obtain a
monetary recovery on the tort causes of action, which they failed to do. Thus, WT
Capital concludes it was the prevailing party or, at worst, there was no prevailing party
on the nonmonetary causes of action.
       The “‘pleadings, briefs, and other such sources’” indicate the litigation objectives
of the parties. (Chinn, supra, 166 Cal.App.4th at p. 188.) Civil Code section 2924l
authorizes the filing of a declaration of nonmonetary status in an action against the trustee
under a deed of trust.

       “In the event that a trustee under a deed of trust is named in an action or
       proceeding in which that deed of trust is the subject, and in the event that
       the trustee maintains a reasonable belief that it has been named in the action
       or proceeding solely in its capacity as trustee, and not arising out of any
       wrongful acts or omissions on its part in the performance of its duties as
       trustee, then, at any time, the trustee may file a declaration of nonmonetary
       status.” (Id., subd. (a).)
       The declaration must identify the trustee as trustee under the deed of trust in issue,
set forth the basis for [the trustee’s] belief it has been sued only as trustee and not for any
acts or omissions in the performance of its duties as trustee, and state “that it agrees to be
bound by whatever order or judgment is issued by the court regarding the subject deed of
trust.” (Civ. Code, § 2924l, subd. (b).) Other parties have 15 days to object to the
declaration. (Id., subd. (c).) If no objection is filed, “the trustee shall not be required to
participate any further in the action or proceeding, shall not be subject to any monetary
awards as and for damages, attorneys’ fees or costs, shall be required to respond to any
discovery requests as a nonparty, and shall be bound by any court order relating to the


                                              11.
subject deed of trust that is the subject of the action or proceeding.” (Id., subd. (d).) If an
objection is filed, the trustee must participate in the action. (Id., subd. (e).)
       The Torigians’ original complaint alleged causes of action against WT Capital for
quiet title, declaratory relief, injunction, slander of title, and negligence. As its initial
response to the complaint, WT Capital filed both a declaration of nonmonetary status and
a demurrer.
       The declaration of nonmonetary status filed by WT Capital identified the deed of
trust in issue and stated WT Capital was the current trustee of record under the deed of
trust, which was executed by the Torigians as trustors and Shmavonian as beneficiary.
The declarant, WT Capital’s senior vice-president, stated she reasonably believed WT
Capital was named as a defendant in the matter solely in its capacity as a trustee under
the deed of trust, and “has not been named as a defendant … due to any acts or omissions
on its part in the performance of its duties as Trustee, inasmuch as the Complaint fails to
contain any allegations of wrongdoing as to this defendant. The basis for this belief is
that the alleged wrongdoing set forth in the Complaint is based solely on WT’s
performance of its statutory duties as Trustee and is privileged pursuant to California
Civil Code section 47, subsection (c)(1).” The declaration additionally stated: “WT does
hereby agree to be bound by whatever nonmonetary order or judgment is issued by this
Court regarding the subject Deed of Trust.”
       WT Capital demurred to the slander of title and negligence causes of action on the
ground they were barred by the common interest privilege of Civil Code section 47,
subdivision (c)(1) and to the negligence cause of action on the additional ground WT
Capital owed no duty to the Torigians that was breached by the actions the Torigians
alleged as breaches of duty. Additionally, the demurrer asserted the quiet title and
declaratory relief causes of action failed to state a cause of action against WT Capital
because WT Capital did not claim any interest in the Torigians’ property and the only
actual dispute alleged was between the Torigians and Shmavonian.

                                               12.
       WT Capital did not demur to the cause of action for injunctive relief. Initially,
WT Capital’s only response to that cause of action was its declaration of nonmonetary
status, in which it submitted to whatever order the trial court might enter. The cause of
action for injunctive relief sought to restrain the nonjudicial foreclosure sale and compel
reconveyance of the deed of trust and rescission of the notice of default and the notice of
trustee’s sale. This is the relief that corresponds to the Torigians’ professed main
litigation objective: to prevent the nonjudicial foreclosure and the trustee’s sale of their
property. Through its declaration of nonmonetary status, WT Capital indicated from the
outset that it did not oppose that relief.
       Thus, in both the demurrer and the declaration of nonmonetary status, WT Capital
took the position that the tort causes of action contained in the complaint did not state
viable causes of action against WT Capital because the conduct alleged was privileged or
did not constitute breach of any duty owed by WT Capital to the Torigians. WT Capital
did not contest the Torigians’ request for injunctive relief and indicated it would submit
to the trial court’s order on the nonmonetary claims.
        The Torigians filed an objection to WT Capital’s declaration of nonmonetary
status. It stated: “The complaint includes claims for monetary damages against WT
Capital for negligence and slander of title. [Citation.] Mr. and Mrs. Torigian asserted
these claims based on their information and belief that … WT Capital consciously and
recklessly disregarded its duties by pursuing the foreclosure while on notice that the
Torigians satisfied the underlying loan.” The Torigians also asserted WT Capital’s
demurrer was evidence of its “resistance to be subject to any court order in this action.”
       The Torigians contend their “main litigation objective was to save their property
from wrongful foreclosure and prevent WT Capital [from] pursuing nonjudicial
foreclosure.” WT Capital, however, did not oppose the cause of action for an injunction,
which sought to enjoin the foreclosure. The Torigians filed a first, second, and third
amended complaint, each asserting the same tort causes of action against WT Capital as

                                             13.
in the original complaint. The Torigians’ complaints and their objection to WT Capital’s
declaration of nonmonetary status suggest another objective of the Torigians in this
litigation was to recover monetary damages from WT Capital for alleged slander of title
and negligence. The Torigians failed to achieve that objective.
       On the declaratory relief and quiet title causes of action, the Torigians obtained a
judgment in their favor against the named defendants and all persons unknown claiming
any legal or equitable right, title, or interest in the subject property; the judgment declared
that the Torigians were the “100% legal and equitable owners” of the real property in
issue, and it declared any adverse title invalid. It further declared that Shmavonian had
no contractual right to declare a default, to instruct WT Capital to record a notice of
default, or to instruct WT Capital to record a notice of trustee’s sale. The judgment
permanently enjoined all defendants from participating in any sale, transfer, or
foreclosure of the property under the deed of trust and ordered WT Capital to execute and
record a full reconveyance of the deed of trust to the Torigians, a notice of rescission of
the notice of default, and a notice of rescission of the notice of trustee’s sale.
       WT Capital never claimed any adverse interest in the Torigians’ property, so it
was not affected by the provisions of the judgment relating to the Torigians’ title. The
other relief the Torigians were awarded was relief WT Capital indicated in its declaration
of nonmonetary status that it would not oppose, but agreed to be bound by. Thus, on the
nonmonetary causes of action, the Torigians obtained a judgment in their favor, but
obtained no relief other than that to which WT Capital submitted at the outset of the
litigation. The Torigians could have achieved the same result without litigating their
equitable claims against WT Capital simply by accepting the declaration of nonmonetary
status without objection. The Torigians’ only claim to prevailing party status is that they
prevailed on claims WT Capital did not contest. Obtaining judgment on uncontested
claims does not constitute a simple, unqualified win, as they assert. When the result on
the equitable causes of action is combined with the result in favor of WT Capital on the

                                              14.
tort causes of action, the facts do not support a finding that the Torigians were the
prevailing party in the action as a whole.
       D.      Kachlon v. Markowitz
       The trial court and the Torigians both relied on Kachlon, supra, 168 Cal.App.4th
316, as authority for the award to the Torigians. They claim the facts in that case are
almost exactly the same as those here. Not so.
       The trial court rejected WT Capital’s argument that it should be determined to be
the prevailing party because the Torigians obtained nothing more than the relief to which
WT Capital agreed in the declaration of nonmonetary status, and WT Capital did not
oppose, contest, or defend against the Torigians’ nonmonetary claims. The trial court
concluded instead that a trustee under a deed of trust may be held liable for the trustor’s
attorney fees, despite filing a declaration of nonmonetary status, when the trustor objects
to the declaration and the trustee consistently allies itself with the beneficiary during the
litigation. The trial court’s conclusion WT Capital failed to remain neutral on the
nonmonetary claims, indicating one of its litigation objectives was to defeat the
nonmonetary claims, is not supported by the evidence.
       In Kachlon, the trustors, under a deed of trust, sued the beneficiaries and the
substituted trustee for wrongfully initiating nonjudicial foreclosure proceedings under the
deed of trust, contending the promissory note that was secured by the deed of trust had
been satisfied fully. (Kachlon, supra, 168 Cal.App.4th at pp. 324, 329.) Against the
trustee, the plaintiffs alleged causes of action for quiet title, declaratory relief, injunction
against foreclosure, slander of title, and negligence. (Id. at p. 329.)
       The trial court found in favor of the trustee on the slander of title and negligence
causes of action on the ground the trustee’s conduct was privileged pursuant to Civil
Code sections 47 and 2924. (Kachlon, supra, 168 Cal.App.4th at pp. 330, 331-332.) It
granted the plaintiffs relief on the equitable causes of action, cancelling the promissory
note, ordering the trustee to reconvey the deed of trust and rescind the foreclosure,

                                               15.
enjoining the beneficiaries and trustee from claiming a default or exercising the power of
sale, and quieting title in favor of the plaintiffs. (Id. at pp. 330-331.)
       The plaintiffs then moved for an award of attorney fees on the equitable claims;
they were found to be the prevailing parties and were awarded fees pursuant to Civil
Code section 1717 against the trustee and the beneficiaries, jointly and severally.
(Kachlon, supra, 168 Cal.App.4th at p. 331.) Subsequently, the trustee filed a declaration
of nonmonetary status and unsuccessfully moved to vacate the plaintiffs’ award of
attorney fees. (Id. at p. 332.)
       The court upheld the attorney fees award against the trustee. Although the
language of the attorney fees provision in Kachlon was almost identical to the provision
in the deed of trust here, and broad enough to encompass both tort and contract claims,
the Kachlon court analyzed it only under Civil Code section 1717. In determining the
prevailing party, the court considered only the outcome of the equitable causes of action,
which it found to be “on the contract.” (Kachlon, supra, 168 Cal.App.4th at pp. 346-
348.) Thus, the court failed to consider the effect of the trustee’s victory on the tort
causes of action in making its prevailing party determination.
       In determining the prevailing party under Civil Code section 1717, the Kachlon
court applied “‘“a pragmatic definition of the extent to which each party has realized its
litigation objectives.”’” (Kachlon, supra, 168 Cal.App.4th at p. 349.) The court rejected
the trustee’s claim it had remained neutral throughout the litigation and its only litigation
objective was to defeat the tort causes of action, which it fully achieved. (Id. at p. 349.)
The court concluded the record supported a pragmatic determination the trustee had not
remained neutral on the equitable causes of action. (Id. at pp. 349-350.) Rather, it
“consistently allied itself with the [beneficiaries] on the essential issues relevant to the
claims on the note and deed of trust.” (Id. at p. 350.)
       In its answer, the trustee “denied that it caused a false notice of default to be
recorded, denied that the notice of default was improper, denied that the promissory note

                                              16.
had been paid in full, and denied that the deed of trust improperly remained of record.”
(Kachlon, supra, 168 Cal.App.4th at p. 350.) It also asserted the trustors were not
entitled to injunctive relief or quiet title. (Ibid.) The trustee joined in the beneficiaries’
opposition to one plaintiff’s motion for summary judgment, substituted the beneficiaries’
counsel as its own, filed a joint trial brief with the beneficiaries, and declared in the trial
brief that it would hotly contest the allegation that the promissory note had been paid in
full. (Ibid.) Further, the trustee filed its declaration of nonmonetary status only after the
trial had been completed.
       The court acknowledged the trustors likely would have objected to the declaration
if it had been filed earlier, but noted that “by filing such a declaration, at least prior to the
trial court’s bifurcated determination of the equitable claims based on the note and deed
of trust, [the trustee] would have timely articulated the position that it considered itself
merely a nominal defendant on those claims with no interest in the outcome. That [the
trustee] failed to do so reinforces the conclusion that it was not neutral in the litigation
and that its objectives were not limited to defending against the damage claims.”
(Kachlon, supra, 168 Cal.App.4th at p. 350.)
       Here, WT Capital filed a declaration of nonmonetary status at the time it
responded to the original complaint -- long before the equitable causes of action went to
trial. In the declaration, WT Capital noted the monetary causes of action were based on
privileged conduct and “agree[d] to be bound by whatever nonmonetary order or
judgment [was] issued by the Court regarding the subject Deed of Trust.” Consistent
with these assertions, WT Capital demurred to the complaint, asserting privilege as a bar
to the tort causes of action and asserting it claimed no interest in the Torigians’ property
and had no dispute with the Torigians to bring it within the quiet title and declaratory
relief causes of action. WT Capital never demurred to the cause of action seeking
injunctive relief against the nonjudicial foreclosure. After the first amended complaint
was filed, WT Capital demurred only to the tort causes of action.

                                               17.
       WT Capital did not oppose the Torigians’ request for a temporary restraining order
and a preliminary injunction to enjoin the nonjudicial foreclosure sale. It did not
participate in the first phase of the trial and, at the second phase of the trial, which
addressed the equitable claims, WT Capital appeared but did not oppose the Torigians’
claims.
       The trial court concluded that WT Capital, like the trustee in Kachlon, failed to
remain neutral with respect to the equitable claims. It stated:

       “After filing its Declaration of Non-Monetary Status, WT filed a verified
       answer to plaintiffs’ third amended complaint in which it disputed
       plaintiffs’ claims for quiet title and denied that plaintiffs were the one
       hundred per cent owners of the property and denied that Shmavonian’s
       attempted enforcement of the deed of trust was wrongful. WT also denied
       plaintiffs’ claim for declaratory relief and their allegations in support of a
       permanent injunction. WT prayed that plaintiffs take nothing by reason of
       their complaint. WT engaged in discovery with regard to the factual issue
       of whether plaintiffs paid off the $80,000 note, the core issue in the case.”
       The trial court concluded the declaration of nonmonetary status did not insulate
WT Capital from an award of attorney fees “because it was objected to and because, both
before and after … its filing, WT was not a neutral participant in the case but rather
actively opposed the relief, both monetary and non-monetary, sought by plaintiffs.”
       The answer to a complaint is required to contain “[t]he general or specific denial
of the material allegations of the complaint controverted by the defendant” and “[a]
statement of any new matter constituting a defense.” (Code Civ. Proc., § 431.30,
subd. (b)(1), (2).) When the complaint is verified, the answer is required to be verified.
(Id., § 446, subd. (a).) A general denial is not appropriate in a verified answer. (City of
Hollister v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 476, fn. 19.) Rather, “the
denial of the allegations shall be made positively or according to the information and
belief of the defendant.” (Code Civ. Proc., § 431.30, subd. (d).) “If the defendant has no
information or belief upon the subject sufficient to enable him or her to answer an



                                              18.
allegation of the complaint, he or she may so state in his or her answer and place his or
her denial on that ground.” (Id., subd. (e).) Thus, if a defendant has insufficient
information on which to either admit or deny an allegation, a denial based on lack of
information is an appropriate response.
       Because the third amended complaint was verified, WT Capital was required to
file a verified answer if it wished to contest any of the claims alleged. In its verified
answer, WT Capital admitted some allegations, denied others, denied some on the basis
of its information, and denied some on the ground it lacked sufficient information to
either admit or deny the allegations. The trial court, by considering isolated allegations
contained in WT Capital’s answer, concluded WT Capital did not remain neutral.
       While WT Capital’s answer to the quiet title cause of action denied some of the
facts alleged by the Torigians, the answer as a whole did not dispute the Torigians’
equitable claims. In response to the general allegations of the third amended complaint,
WT Capital denied, based on lack of information, that the Torigians paid the full amount
owed under the note and deed of trust in March 2006; it asserted Shmavonian disputed
the Torigians’ claim the obligation was repaid. This denial was consistent with
Shmavonian’s verified answers to the original and third amended complaints, which
alleged that the $80,000 check the Torigians contended proved payment of the loan
actually reflected payment on other loans he had made to them. WT Capital was required
to admit or deny the allegations of the Torigians’ third amended complaint. The trial
court interpreted WT Capital’s denial, based on lack of information, that the Torigians
paid the debt in full as evidence of WT Capital’s lack of neutrality. An admission that
the Torigians paid the obligation in full, however, would not have been consistent with
neutrality; rather, it would have suggested WT Capital was siding with the Torigians.
       In response to the quiet title and declaratory relief causes of action, WT Capital
acknowledged the dispute between the Torigians and Shmavonian about whether the debt
secured by the deed of trust in issue had been paid. In response to the cause of action for

                                             19.
injunctive relief, WT Capital repeatedly asserted that it had filed a declaration of
nonmonetary status in which it agreed to be bound by whatever nonmonetary order or
judgment the court issued regarding the deed of trust. Additionally, in WT Capital’s 15th
affirmative defense, which was not limited to any particular cause of action, WT Capital
again asserted it had filed a declaration of nonmonetary status in which it agreed to be
bound by any nonmonetary order entered by the trial court. Thus, the allegations of WT
Capital’s answer, taken as a whole, reflect that the Torigians claimed payment of the
debt, Shmavonian disputed payment had been made, WT Capital lacked information
concerning whether payment had been made, and on that basis it denied the Torigians’
allegations that the nonjudicial foreclosure proceeding was wrongful; WT Capital also
agreed to be bound by whatever nonmonetary judgment the trial court entered on the
equitable causes of action.
       The trial court also noted the answer contained a prayer that “plaintiffs take
nothing by the complaint.” One commentator states: “Although not really necessary, it
is customary to include the following wording at the end of the answer: [¶]
‘WHEREFORE, defendant prays that plaintiff take nothing by the complaint, and that
defendant be awarded judgment in this action .…’” (Weil & Brown, Cal. Practice Guide:
Civil Procedure Before Trial (The Rutter Group 2014) ¶ 6:482, p. 6-129 (rev. #1, 2013).)
Consistent with this custom, WT Capital included at the end of its answer a prayer that
the Torigians take nothing by their complaint. Such a prayer was appropriate as to the
tort causes of action, in which the Torigians sought monetary damages from WT Capital.
In determining the prevailing party in an action, courts are to “‘respect substance rather
than form, and to this extent … be guided by “equitable considerations.”’” (Maynard,
supra, 216 Cal.App.4th at p. 992.) The formal addition to the answer of language
requesting that the Torigians take nothing by the complaint, which was consistent with
WT Capital’s position on the monetary damages claims, should not be interpreted to
override the express representations in both the answer and WT Capital’s declaration of

                                             20.
nonmonetary status that WT Capital agreed to be bound by whatever nonmonetary order
the trial court entered concerning the deed of trust. The allegations of the answer do not
support the trial court’s conclusion that WT Capital opposed or lacked neutrality as to the
equitable causes of action.
       The trial court’s conclusion that WT Capital did not remain neutral on the
equitable causes of action also was based on its finding that “WT engaged in discovery
with regard to the factual issue of whether plaintiffs paid off the $80,000 note, the core
issue in the case.”
       The slander of title cause of action was based on allegations WT Capital falsely
published a notice of default, a notice of trustee’s sale, and an ongoing deed of trust
against the property. It alleged WT Capital knew or should have known that the
Torigians had paid the note in full and that the foreclosure sale was unlawful, but it
proceeded with the foreclosure sale despite this knowledge. The negligence cause of
action alleged that WT Capital, as trustee under the deed of trust, owed a duty to the
Torigians as trustors to abstain from or suspend pursuit of the unlawful foreclosure sale
of the property. It alleged WT Capital breached its duty by continuing to pursue the
foreclosure sale, despite being put on notice of its unlawfulness.
       The central premise of each tort cause of action is that the attempted nonjudicial
foreclosure sale of the property was unlawful because the Torigians already had paid the
underlying obligation in full. Consequently, discovery concerning this central issue was
relevant to, and justified by, WT Capital’s defense of the tort causes of action alleged
against it. Although WT Capital ultimately prevailed on the tort causes of action on
grounds other than nonpayment of the debt, that outcome does not demonstrate that
discovery into an alternative means of defeating the claims was unnecessary or improper,
rather than the strategy of a prudent, careful attorney. Conducting discovery on a key
issue common to the tort and equitable causes of action is not evidence of a lack of
neutrality on the equitable causes of action.

                                                21.
       Thus, this case is distinguishable from Kachlon. Unlike the trustee in Kachlon,
WT Capital did not share counsel with the beneficiary; it did not file papers jointly with
the beneficiary; it did not oppose a plaintiff’s motion for summary judgment; and it did
not file a joint trial brief with the beneficiary that declared the trustee would hotly contest
the allegation that the note was paid in full.
       Unlike the trustee in Kachlon, WT Capital filed its declaration of nonmonetary
status at the outset of the litigation, not after the trial, timely articulating its position that
it was merely a nominal defendant on the equitable claims, with no interest in the
outcome. Consistent with that declaration, WT Capital asserted in its answer that it had
no knowledge regarding whether the Torigians had paid their loan, and it denied payment
on that basis; it agreed to be bound by any decision of the trial court on the equitable
causes of action. WT Capital did not oppose the Torigians’ requests for a temporary
restraining order and a preliminary injunction preventing further actions in the
nonjudicial foreclosure proceeding. Although WT Capital appeared at the second phase
of trial, it did not oppose the causes of action for equitable relief and it did not contest the
Torigians’ claim they had paid the debt in full.
       Unlike Kachlon, the trustee’s conduct here does not demonstrate it had litigation
objectives beyond defending against the tort causes of action seeking monetary relief and
remaining neutral and submitting to the trial court’s judgment on the nonmonetary causes
of action.
       The Torigians argue WT Capital’s lack of neutrality and broader litigation
objectives are demonstrated by the bills it incurred for attorney fees prior to the date the
Torigians filed their objection to WT Capital’s declaration of nonmonetary status. The
Torigians contend that if WT Capital had believed the statements it made in the
declaration—that it was not sued for any acts or omissions in the performance of its
duties as trustee—then WT Capital would not have participated in the action and incurred
attorney fees.

                                                 22.
       This argument fails for several reasons. First, the trial court did not base its
exercise of discretion on WT Capital’s bills for its attorney fees. Further, the Torigians’
argument ignores their moving for leave to file an untimely objection to the declaration of
nonmonetary status three months before they filed it, giving WT Capital advance notice
that an objection would be filed later.2
       This argument also ignores the state of the pleadings and the position WT Capital
took in response to the Torigians’ complaints. The Torigians’ initial complaint contained
causes of action for slander of title and negligence against WT Capital, so it did allege
wrongdoing by WT Capital. WT Capital took the position, however, that the allegations
failed to state a cause of action against it because WT Capital’s acts in connection with
the nonjudicial foreclosure proceedings were privileged and the negligence cause of
action did not allege breach of any duty WT Capital actually owed to the Torigians. WT
Capital attempted to dispose of the tort causes of action at the outset by establishing their
invalidity by demurrer. The pleading stage of the litigation was not completed until after
the Torigians filed their objection to the declaration of nonmonetary status. WT Capital
was not successful at resolving the tort causes of action in its favor by demurrer, but it
later was successful at disposing of them by motion for summary adjudication on similar
grounds. Thus, the attorney fees incurred prior to the filing of the Torigians’ declaration
of nonmonetary status were incurred during the pleading stage of the litigation and do not
indicate WT Capital actively was litigating the Torigians’ equitable claims.
       E.     WT Capital as substituted trustee
       The Torigians contend the attorney fees provision in the deed of trust does not
benefit WT Capital because WT Capital was not the trustee of record at the time the
actions giving rise to the slander of title and negligence causes of action occurred.


       2WT   Capital did not oppose the Torigians’ motion for relief to enable them to file
a late objection to the declaration of nonmonetary status.


                                             23.
       The notice of default and election to sell was recorded in July 2010. The
substitution of trustee naming WT Capital as the new trustee and the notice of trustee’s
sale were recorded on October 27, 2010.
       The Torigians’ original complaint was filed the next day, October 28, 2010. Their
operative complaint, the third amended complaint, alleged: WT Capital recorded the
notice of default and mailed a copy to the Torigians in July, 2010; the Torigians and their
attorney communicated with WT Capital in August 2010, trying to convince WT Capital
that the Torigians already had paid off the loan and were not in default; and WT Capital
also recorded a notice of trustee’s sale.
       The slander of title cause of action is based on WT Capital’s alleged false
recording of the notice of default and notice of trustee’s sale and its refusal to suspend the
trustee’s sale in light of the Torigians’ evidence of payment. The negligence cause of
action alleged WT Capital breached duties to the Torigians by actively pursuing a
nonjudicial foreclosure sale, including giving notice of a date for the trustee’s sale. Thus,
the Torigians’ causes of action against WT Capital alleged conduct that occurred both
before and at the time the substitution of trustee was recorded and continued thereafter.
The Torigians’ contention that all the pertinent conduct occurred before WT Capital
became the trustee is not supported by the record.
       Further, the provision for attorney fees is broad:

       “To protect the security of this Deed of Trust, Trustor agrees: [¶]…[¶]

       “(3) To appear in and defend any action or proceeding purporting to affect
       the security hereof or the rights or powers of Beneficiary or Trustee; and to
       pay all costs and expenses, including cost of evidence of title and attorney’s
       fees in a reasonable sum, in any action or proceeding in which Beneficiary
       or Trustee may appear, and in any suit brought by Beneficiary to foreclose
       this Deed.”
       This provision required plaintiffs to “defend any action … purporting to affect …
the rights or powers of Beneficiary or Trustee.” In this action, the Torigians challenged


                                             24.
the right of the beneficiary and trustee to conduct a nonjudicial foreclosure sale of the
Torigians’ property. They sought to impose an obligation on the trustee to investigate the
status of the underlying debt and determine whether the Torigians actually were in
default before the trustee could proceed with a nonjudicial foreclosure. The attorney fees
provision also obligated the Torigians to pay reasonable attorney fees “in any action … in
which Beneficiary or Trustee may appear.” This was an action in which the trustee
appeared. WT Capital was the trustee under the deed of trust at the time the litigation
against it was initiated and throughout the litigation. All of WT Capital’s attorney fees in
the litigation for which it sought compensation were incurred while it was the trustee of
record. Consequently, the Torigians’ argument that the attorney fees provision does not
apply to WT Capital because it was not the trustee at the time all of the challenged
conduct fails.
IV.    Costs
       Generally, the party prevailing in litigation is entitled to recover its costs as a
matter of right. (Code Civ. Proc., § 1032, subd. (b).)

       “‘Prevailing party’ includes the party with a net monetary recovery, a
       defendant in whose favor a dismissal is entered, a defendant where neither
       plaintiff nor defendant obtains any relief, and a defendant as against those
       plaintiffs who do not recover any relief against that defendant. When any
       party recovers other than monetary relief and in situations other than as
       specified, the ‘prevailing party’ shall be as determined by the court, and
       under those circumstances, the court, in its discretion, may allow costs or
       not and, if allowed may apportion costs between the parties on the same or
       adverse sides pursuant to rules adopted under [Code of Civil Procedure]
       Section 1034.” (Id., subd. (a)(4).)
       Under this section, costs are available as a matter of right when the prevailing
party falls within one of the four categories expressly designated. (Chinn, supra, 166
Cal.App.4th at p. 188.)
       Neither party in this case falls within any of those categories—neither party
obtained a monetary recovery, the claims against WT Capital were not dismissed, and the


                                              25.
Torigians obtained a judgment against WT Capital. Hence, this action falls within the
catch-all provision because the situation was “other than as specified,” and the court was
required to determine the prevailing party. (Code Civ. Proc., § 1032, subd. (a)(4).)
When the case falls within the catch-all provision, “the trial court in its discretion
determines the prevailing party, comparing the relief sought with that obtained, along
with the parties’ litigation objectives as disclosed by their pleadings, briefs, and other
such sources.” (On-Line Power, Inc. v. Mazur (2007) 149 Cal.App.4th 1079, 1087.)
Thus, the standard is the same as that applied in determining the prevailing party for
purposes of an award of attorney fees under Code of Civil Procedure section 1021.
       WT Capital accomplished its objective of defeating the tort claims against it and
did not oppose nonmonetary relief. The Torigians failed to obtain any monetary relief
and obtained only the nonmonetary relief that was unopposed by WT Capital. We
conclude the trial court abused its discretion by determining the Torigians to be the
prevailing parties for purposes of an award of costs.
                                      DISPOSITION
       The August 21, 2013, order awarding the Torigians their attorney fees and costs
against WT Capital and denying WT Capital its attorney fees and costs against the
Torigians is reversed. The trial court is directed to enter a new order determining WT
Capital to be the prevailing party in the action and awarding WT Capital its attorney fees
and costs against the Torigians. The matter is remanded to the trial court to determine the
amount of attorney fees and costs to be awarded to WT Capital. The portion of the
August 21, 2013, order awarding the Torigians their attorney fees and costs against
Shmavonian is unaffected by this disposition. WT Capital shall recover its costs on
appeal.




                                             26.
                               _____________________
                                  CORNELL, Acting P.J.
WE CONCUR:


 _____________________
KANE, J.


 _____________________
POOCHIGIAN, J.




                         27.
