Filed 12/31/13 Yamtob v. Alon CA2/5
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION FIVE




JOHNNY YAMTOB,                                                       B247453

         Plaintiff and Appellant,                                    (Los Angeles County Super. Ct.
                                                                      No. BC469465)
         v.

ELIRAN ALON,

         Defendant and Respondent.




         APPEAL from a judgment of the Superior Court of Los Angeles County, Victor
Chavez, Judge. Affirmed in part and reversed in part.
         Kaplan, Kanegos & Kadin, Jerry Kaplan and David Scott Kadin for Plaintiff and
Appellant.
         Calderone Law Firm and Vincent Calderone for Defendant and Respondent.


                                      ____________________________
       Plaintiff and appellant Johnny Yamtob appeals from a judgment including awards
of attorney fees and costs in favor of defendant and respondent Eliran Alon. Yamtob
contends the contract sued upon did not provide for attorney fees, and costs should not
have been awarded to Alon because Yamtob obtained a net monetary recovery at trial.
We reverse the trial court’s award of attorney fees and affirm the remainder of the
judgment, including the award of costs to Alon.


                 FACTUAL AND PROCEDURAL BACKGROUND


       The parties to this appeal were once participants in a business arrangement to
procure and sell diamonds. As the relationship between the parties began to deteriorate,
Yamtob filed a complaint alleging causes of action for breach of contract and money had
and received.1 The contract sued upon is entitled “Personal Guarantee For Money To
Buy Two Pieces Of Approximately 32 Carat And 15.80 Carat of Rough Diamonds” and
states, in its entirety: “I Eliran Alon Received this Loan in sum of 71750$ in U S dollars
and personally and jointly responsible for the obligations to pay back the entire amount to
Mr. Johnny Yamtob’s demand plus all the cost occurs. I promise to pay the entire
amount by may of 2011.” Alon cross-complained,2 primarily seeking payment from
Yamtob pursuant to various consignment memoranda under which Alon allegedly gave
Yamtob diamonds to either sell or return to Alon. Alon’s first amended cross-complaint
stated causes of action for breach of oral and written contracts, conversion, accounting,
and common counts for goods and services rendered, open book account, and account
stated. After a bench trial, the court ruled: (1) Yamtob did not prove his claim for
breach of contract against Alon; (2) Yamtob did prove he was entitled to recover $10,000

       1 Yamtob’s complaint also named Simon Setton as a defendant. A default
judgment was entered against Setton in the amount of $71,750. Setton is not a party to
this appeal.

       2Alon’s cross-complaint also names Advanta Gems Corporation as a cross-
defendant. Advanta is not a party to this appeal.


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from Alon on the common count of money had and received; (3) Alon established he
was entitled to recover $67,900.50 from Yamtob; (4) Yamtob was entitled to a default
judgment in the amount of $71,750 against Simon Setton; and (5) costs of suit are
awarded to Alon. Alon was ordered to submit a proposed judgment.
       On December 19, 2013, Alon submitted a proposed judgment and filed a
memorandum of costs as well as a motion for attorney fees and prejudgment interest.
Yamtob filed an “Objection to Proposed Judgment” on January 2, 2013, and an
opposition to the motion for attorney fees and prejudgment interest on January 15, 2013.
Neither document addressed the memorandum of costs or the trial court’s decision to
award costs to Alon. Alon filed a reply brief on January 18, 2013. The court entered
judgment, including attorney fees and prejudgment interest. Yamtob filed a timely
appeal.


                                       DISCUSSION


No Designation of Reporter’s Transcript


       Alon initially contends this court should refuse to reach the merits of Yamtob’s
arguments on appeal because he failed to designate a reporter’s transcript. The issue of
whether the contract sued upon contained an attorney fee provision does not require a
reporter’s transcript or suitable substitute. The contract is contained in the record, its
contents are not in dispute, and we conduct a de novo review of its interpretation. (Gil v.
Mansano (2004) 121 Cal.App.4th 739, 743 (Mansano); Siligo v. Castellucci (1994) 21
Cal.App.4th 873, 880.) We may decide an appeal based on a clerk’s transcript alone if
we find “an error which is manifest on the face of the record and which requires
reversal.” (Cooper v. County of Los Angeles (1975) 49 Cal.App.3d 34, 40.)
       The issue of the award of costs, however, does require a reporter’s transcript or
suitable substitute such as a settled statement for effective appellate review. Yamtob’s
argument on appeal is that the trial court erred when it awarded costs to Alon, rather than


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Yamtob, because Yamtob received a net monetary recovery. (Code Civ. Proc. § 1032,
subdivisions (a)(4) & (b) [prevailing party, including party with net monetary recovery,
entitled to recover costs].) But Yamtob never objected in his papers to the award of
costs, and in the absence of a record of oral proceedings at trial, he cannot show that this
issue has been preserved for appeal. “‘“[A] reviewing court ordinarily will not consider
a challenge to a ruling if an objection could have been but was not made in the trial court.
[Citation.] The purpose of this rule is to encourage parties to bring errors to the attention
of the trial court, so that they may be corrected.” [Citation.] The critical point for
preservation of claims on appeal is that the asserted error must have been brought to the
attention of the trial court.’ [Citations.] ‘ “It is unfair to the trial judge and to the adverse
party to take advantage of an alleged error on appeal where it could easily have been
corrected at trial. [Citations.]” [Citation.]’ [Citation.]” (DiPirro v. Bondo Corp. (2007)
153 Cal.App.4th 150, 177-178.)
       Nothing in the written record reflects any efforts by Yamtob to bring the purported
error to the trial court’s attention, despite ample opportunity to do so. Because Yamtob
did not object in his opposition to the court’s cost award, and he has not shown that he
made an oral objection at the hearing on the motion, we deem the issue forfeited and
decline to reach its merits on appeal.


Standard of Review


       We review de novo the trial court’s determination of the legal basis for an award
of attorney fees. (Sessions Payroll Management, Inc. v. Noble Construction Co. (2000)
84 Cal.App.4th 671, 677.) We apply ordinary rules of contract interpretation to
determine whether the contract entitles either party to attorney fees. (Mansano, supra,
121 Cal.App.4th at p. 743.)




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Award of Attorney Fees


       Yamtob contends that Alon cannot recover attorney fees under Civil Code
section 17173 because there is no contractual provision for attorney fees. We agree. The
trial court erred when it awarded attorney fees against Yamtob and in favor of Alon,
because no contract or statute supports an award of attorney fees to either party.
       “California follows the ‘American rule,’ under which each party to a lawsuit
ordinarily must pay his or her own attorney fees.” (Musaelian v. Adams (2009) 45
Cal.4th 512, 516.) A prevailing party may recover attorney fees only when they are
authorized by statute or by the parties’ agreement. (Santisas v. Goodin (1998) 17 Cal.4th
599, 607, fn. 4 (Santisas).) A prevailing party is entitled to recover costs in an action or
proceeding, but costs ordinarily do not include attorney fees unless authorized by statute
or agreement. (Code Civ. Proc., §§ 1021, 1032, subd. (b), 1033.5, subd. (a)(10);
Reynolds Metal Co. v. Alperson (1979) 25 Cal.3d 124, 127 [“Unless authorized by either
statute or agreement, attorney’s fees ordinarily are not recoverable as costs.”].)
       “In any action on a contract, where the contract specifically provides that
attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded
either to one of the parties or to the prevailing party, then the party who is determined to
be the party prevailing on the contract, whether he or she is the party specified in the
contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”
(§ 1717, subd. (a), italics added.) “The primary purpose of section 1717 is to ensure
mutuality of remedy for attorney fee claims under contractual attorney fee provisions.”
(Santisas, supra, 17 Cal.4th at p. 610.) “Where a contract accords a right to attorney’s
fees to one party but not the other, . . . section 1717 creates a statutory reciprocal right to
attorney fees in all parties to the contract.” (Myers Bldg. Industries, Ltd. v. Interface
Technology, Inc. (1993) 13 Cal.App.4th 949, 968.) The prevailing party may recover
attorney fees under section 1717 even if it prevailed by demonstrating that the contract in

       3   All further statutory references are to the Civil Code unless otherwise stated.


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question is “inapplicable, invalid, unenforceable or nonexistent . . . .” (Hsu v. Abbara
(1995) 9 Cal.4th 863, 870, quoting Bovard v. American Horse Enterprises, Inc. (1988)
201 Cal.App.3d 832, 842.)
       If it is unclear whether a contract contains an attorney fee provision applicable to
the dispute in question, “a prevailing defendant may recover attorney fees only if it can
demonstrate that it would have been liable for fees if the plaintiff had prevailed.
[Citation.]” (Linear Technology Corp. v. Tokyo Electron, Ltd. (2011) 200 Cal.App.4th
1527, 1538, discussing M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One
(2003) 111 Cal.App.4th 456, 467 (M. Perez); see also Brittalia Ventures v. Stuke Nursery
Co., Inc. (2007) 153 Cal.App.4th 17, 29 (Brittalia Ventures) [§ 1717 permits recovery of
attorney fees “whenever the opposing parties would have been entitled to attorney fees
under the contract had they prevailed”].)
       Alon argues that Yamtob is “judicially estopped” from denying that the contract
authorizes attorney fees because he claimed attorney fees under the same contract in his
complaint, in answers to interrogatories, and in his opening argument at trial. Alon relies
on International Billing Services, Inc. v. Emigh (2000) 84 Cal.App.4th 1175
(International Billing Services), where the Third District upheld an award of attorney fees
based on an arguably ambiguous attorney fee provision on the ground that when a party
asserts a right to attorney fees, the doctrine of judicial estoppel prevents that party from
later arguing that the provision does not authorize attorney fees and therefore
section 1717 does not apply. The court emphasized that its analysis “applies only where
a party brings a breach of contract action and the contract contains some provision which
the party asserts operates as a fees provision.” (Id. at p. 1187.) The court rejected the
appellant’s argument that the prevailing party must first demonstrate that it would have
been liable for attorney fees under the contract before section 1717 would authorize
recovery. Instead, it broadly concluded: “Where a party claims a contract allows fees
and prevails, it gets fees. Where it claims a contract allows fees and loses, it must pay
fees.” (Id. at p. 1190.)




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       However, the Third District later disavowed the broad rule stated in International
Billing Services. In M. Perez Co., supra, 111 Cal.App.4th 456, the appellate court
declined to follow its earlier decision in International Billing Services, explaining that the
opinion “sweeps too broadly” to the extent it announced a rule making a losing party
liable for attorney fees where the contract did not provide for attorney fees. (Id at
pp. 465-470.) The logical outcome of the rule in International Billing Services would be
that any party claiming a right to attorney fees on a contract—regardless of whether the
contract language supported such a claim or not—would be liable for attorney fees if it
lost. However, the opposing party would still have the right to contest the claim of
attorney fees, arguing that the party initially claiming fees did so erroneously. Noting
that section 1717 is “designed to assure fairness between the parties,” the rule stated in
International Billing Services “fails to serve this purpose by allowing attorney fees to one
party where the other would not be entitled to them.” (M. Perez, supra, at p. 469.)
Instead, the court agreed with “many state court decisions refusing to apply estoppel
against a losing party who sought attorney fees under circumstances where that party
would not have been entitled to such fees had it prevailed.” (Id. at p. 470.)
       At least two subsequent cases from the Third District have reversed attorney fee
awards, concluding that a court cannot award such fees under section 1717 if the contract
sued upon does not provide for attorney fees. In Bear Creek Planning Committee v.
Ferwerda (2011) 193 Cal.App.4th 1178 (Bear Creek), the plaintiff sued the area’s
planning committee for blocking his efforts to build on a vacant lot. The committee’s
regulations are binding on area property owners. (Id. at pp. 1180-1182.) The appellate
court held that because the planning committee lacked authority to adopt an attorney fee
provision as part of its regulations, the committee could not recover its attorney fees from
the plaintiff, despite prevailing in the underlying litigation. (Id. at p. 1185-1187.) The
committee argued that because the plaintiff asked for attorney fees if he prevailed, he was
liable for attorney fees if he lost. Citing M. Perez’s disapproval of International Billing
Services, the court explained that because plaintiff had not established his right to
attorney fees—and could not establish such a right since the committee lacked authority


                                              7
to adopt an attorney fee provision—the committee could not rely on section 1717 to make
such a right reciprocal. (Bear Creek, supra, at pp. 1187-1188.) In Brittalia Ventures,
supra, 153 Cal.App.4th at pages 28-31, the appellate court reversed the trial court’s
award of attorney fees because the contract sued upon did not contain any attorney fee
provision.
       The contract in this case does not “specifically provide[] that attorney’s fees and
costs . . . shall be awarded either to one of the parties or to the prevailing party . . .” as
required for an award under section 1717. The personal guarantee simply states that
Alon is obligated “to pay back the entire amount to Mr. Johnny Yamtob’s demand plus
all the cost occurs.” Under California law, attorney fees are distinct from costs. (Code
Civ. Proc. § 1021 [parties are entitled to their costs, but attorney fees are left to the
agreement of the parties, unless specifically provided for by statute]; see, e.g., Davis v.
KGO-T.V., Inc. (1998) 17 Cal.4th 436, 439 [“The ‘costs’ of a civil action consist of the
expenses of litigation, usually excluding attorney fees”]; People v. U.S. Fire Ins. Co.
(2012) 210 Cal.App.4th 1423 [“the general rule in civil litigation is that the term ‘costs’
excludes attorney’s fees”].) “California case law has long recognized ‘the usual and
ordinary meaning of the words “attorney’s fees,” both in legal and in general usage, is the
consideration that a litigant actually pays or becomes liable to pay in exchange for legal
representation.’ [Citations.] The definition of attorney’s fees must be contrasted with the
definition of ‘costs,’ which has been construed to mean ‘“those fees and charges which
are required by law to be paid to the courts, or some of their officers’ or an amount which
is expressly fixed by law as recoverable as costs. [Citations.]’ [Citations.] ‘The “costs”
of a civil action . . . usually exclud[e] attorney fees.’ [Citation.]” (Benson v. Kwikset
Corp. (2007) 152 Cal.App.4th 1254, 1279.)
       Here, the contract only provided for costs, not attorney fees. There are no grounds
on which the trial court could award attorney fees. Following the reasoning of M. Perez,
supra, 111 Cal.App.4th at pages 465-470, because Yamtob would not have been entitled
to attorney fees had he prevailed on his breach of contract claim, there is no basis for
awarding Alon attorney fees under section 1717.


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                                     DISPOSITION


      The order for attorney fees is reversed. In all other respects, the judgment is
affirmed. The parties are to bear their own costs on appeal.




             KRIEGLER, J.




We concur:




             TURNER, P. J.




             O’NEILL, J.*




*     Judge of the Ventura County Superior Court assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.


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