Horowitz v. Brown CA4/3

Filed 8/30/21 Horowitz v. Brown CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

LEONA HOROWITZ, Individually and as

Trustee, etc., et al.

G057412

Plaintiffs and Appellants,

(Super. Ct. No. 30-2013-00679652)

v.

OPINION

JOSEPH G. BROWN et al.

Defendants and Appellants.

LEONA HOROWITZ, Individually and as

Trustee, etc., et al.

Plaintiffs and Respondents.

v.

HUSITE, L.P. et al.

Defendants and Appellants.

Appeals from an order of the Superior Court of Orange County, Walter P.

Schwarm, Judge. Affirmed in part, reversed in part and remanded with instructions.

Ferguson Case Orr Patterson LLP, Wendy C. Lascher and Joshua S.

Hopstone for Defendants and Appellants Debbie A. Brown Marheine, Donna M. Brown

Snider, and Joseph G. Brown.

George & Shields, LLP, Timothy F. Shields and Katherine K. Meleski for

Defendants and Appellants Husite, L.P., Sure Save I, L.P., Pacific Medical Plaza, L.P.

and Harbor 91 Limited Partnership.

Ervin Cohen & Jessup LLP, Geoffrey M. Gold, Jason L. Haas for Plaintiffs

and Appellants and Plaintiffs and Respondents.

INTRODUCTION

In this complex, multi-party case, one plaintiff firmly established that she

had been the victim of financial elder abuse on a massive scale, but only some of the

defendants were found liable for it. We enter the fray not to review the trial court’s

findings on liability, but to unspool numerous statutes and doctrines pertaining to its

posttrial rulings on cross-motions for attorney fees and costs. The primary threads on the

spool, in our estimation, are three. First, Welfare and Institutions Code section 15657.5,

which requires the trial court to award a successful elder abuse plaintiff reasonable

attorney fees and costs.1 (Id. at subd. (a).) Second, Code of Civil Procedure section

1032, which entitles a statutorily-defined prevailing party to costs as a matter of right,

“[e]xcept as otherwise expressly provided by statute[.]” (Id. at subd. (b).) And third, the

equitable common fund and/or substantial benefit doctrines, especially as applied to

Corporations Code section 15910.05, subdivision (b) to derivative actions on behalf of

limited partnerships.

1 All further statutory references are to the Welfare and Institutions Code unless otherwise

indicated.

2

The trial court is to be commended for the patience and thoughtfulness

exhibited in piloting this matter through difficult waters. While we affirm some of the

challenged rulings, we must reverse and remand others for further proceedings, but the

lion’s share of this lengthy opinion is spent explaining why we conclude the trial court

got most of it right.

FACTS

“Byzantine.” Such was the word chosen by one of the cross-appellants,

Leona Horowitz, to describe this litigation. The choice was apt, considering the case

took five years from filing to judgment and covered a course of alleged misconduct

spanning decades. Mindful of the legal and factual morass with which we are presented,

our goal is to isolate only those facts and issues which are relevant to resolving the

appeals.

Leona is an 81-year-old retired social worker who has no work experience

in the field of real estate.2 She was, however, married to someone who did: Ralph

Horowitz, a real estate lawyer with whom she had three children, amongst them plaintiff

and appellant/plaintiff and respondent Jill Groeschel, before divorcing.

Ralph invested in real estate with Harold Joseph “Joe” Brown, a licensed

broker and property developer. 3 After the divorce, Ralph and Joe went their separate

ways, but Leona continued to receive proceeds from the investments made during the

couple’s marriage. She became friends with Joe, and began asking for his advice on

some of her financial matters. Eventually, Joe suggested he take charge of investing her

money so she would not have to manage it.

All things considered, this was a mistake – not because the investments

were unsuccessful, but because they resulted in entanglements that compromised Leona’s

2 Because many individuals in this case are related to one another, we refer to them by their first

names to more easily identify and distinguish them. We intend no disrespect.

3 Joe was a defendant in the proceedings below but is not a party to any of the three appeals.

3

control over her money. It resulted in the sowing of the seeds of the present litigation: a

network of investments and entities formed largely at Joe’s behest and financed by a

consortium consisting of him, his children – defendants and appellants Debbie A. Brown

Marheine, Donna M. Brown Snider, and Joseph G. “Joey” Brown (collectively, the

Brown children) – their affiliates, and Leona. The entities – defendants and appellants

Pacific Medical Plaza, L.P. (PMP); Husite, L.P. (Husite), and Harbor 91, L.P. (H91)

(which is not a party to the appeal) – have consequently become financial footballs, if the

briefing is any indication. But while the lawsuit itself alleged wrongdoing on a larger

scale, its resolution requires that we focus only on a few transactions described below.4

All three jointly-owned entities were limited partnerships with the same

basic structure. PMP was a limited partnership that was formed in April 2005 to own and

manage real property, specifically, a commercial medical property in Costa Mesa called

Pacific Medical Plaza (the PMP property). Husite and H91, too, owned property or did

business in California. The general partner of each entity was another entity controlled

by Debbie, Donna, and Joey called Brown Associates II, LLC (Brown II). Leona,

Debbie, Donna, and Joey were each limited partners. Respondent Sure Save I, L.P. (Sure

Save), an entity managed by Joey, was a limited partner in Husite as well. Joey, Debbie,

and Donna were both general and limited partners in Sure Save and Leona was a limited

partner.

Leona was also individually invested in parcels of real estate with the

Browns. One was the Anchor Park trailer park in Costa Mesa, in which she and the

Brown children had ownership interests. Another was the so-called Bumblebee property,

a commercial tuna processing facility in Santa Fe Springs. Through her trust, Leona also

owns her primary residence in Pacific Palisades.

4 The trial court found Joe liable to Leona for financial elder abuse and numerous breaches of

fiduciary duty during his time “tak[ing] care of [her] as [he] would [his] own family.”

4

Pacific Medical Plaza

The PMP property was leased for use as a medical facility, and PMP had

invested significant money in building out the space for such purpose. However, in 2011,

one of its main tenants, Renaissance Surgery Center (Renaissance), went into bankruptcy,

and its lease reverted to PMP. To recoup the loss, Joe wanted to reopen a new surgery

center, Pacific Surgery Center (PSC), in Renaissance’s stead – and quickly, before its

accreditation expired.5 Leases were drawn up between PSC, LLC (an entity managed by

Joe), and PMP in 2012, for an undisclosed amount of rent.6 Brown II, through Joey and

Donna, signed the leases on behalf of PMP.

In February 2014, a presumably related company, Pacific Surgery Center

Holdings, LLC (PSC Holdings) sold PSC’s lease to a third party for $5.2 million,

retaining proceeds of over $4.5 million. None of this money went to PMP or its partners,

even though PMP owned the space. The trial court found Brown II and Joe had breached

their fiduciary duties to PMP by allowing PSC to use and improve the space and sell the

lease without PMP receiving any of the sale proceeds. Deducting amounts used on

improvements, the court found a net profit of $2,373,900 from this sale, constituting an

injury to PMP which harmed all of the partners equally. Even though Joey and Donna

had signed the offending “sweetheart” leases on behalf of PMP, the trial court determined

they had no personal liability for this transaction because they had no fiduciary duty to

5 It appears Joe and other Brown family members were also investors in Renaissance, so the loss of

the tenant did not just involve the loss of rental income.

6 Leona alleged it was an under-market rate.

5

Leona.7 The trial court found PSC and PSC Holdings liable for aiding and abetting

Brown II and Joe’s breach. However, it also found the injury from the PSC transaction

was derivative in nature, so Leona was not directly awarded any damages for it.

Husite Loan

Husite’s main function was owning and operating a property in Nevada

which housed a commercial fitness facility. Brown II took fees for managing the

property, and the trial court did not find these fees illegitimate. However, in 2011,

Brown II caused Husite to borrow $3.2 million against its property which it then

distributed to PMP and other Brown affiliated entities. According to the trial court, this

loan did not inure at all to Husite’s benefit, as it received no interest once it disbursed the

funds to the Brown entities, and there was no writing solidifying terms of repayment.

Indeed, the reverse occurred: Husite lost $3.2 million of equity in the property and loss of

use of those funds on better investments. Thus, the trial court found, Brown II breached

its fiduciary duty to Husite. But again, the damage was derivative, since the court found

all Husite partners were equally damaged by the breach. The court awarded Husite

damages of $3.2 million plus prejudgment interest, but credited the $3.2 million because

the originating bank was repaid before entry of judgment.

7 The basis for this determination seems a bit murky. In part, the trial court cited to Corporations

Code section 17703.04, which shielded all the members of Brown II from individual liability for acts committed on

Brown II’s behalf. (Id. at subd. (a)(2) [Liabilities of the LLC “do not become the debts, obligations, or other

liabilities of a member or manager solely by reason of the member acting as a member or manager acting as a

manager for the limited liability company.”].) However, the statement of decision itself represents that Joey and

Donna did not sign these leases on Brown II’s behalf, but rather, on PMP’s as “managing partner[s].” The PMP

partnership agreement indicated Leona, Debbie, Joey, and Donna were its limited partners, and Brown II was the

general partner. Limited partners do not owe each other fiduciary duties as a matter of law (see Corp. Code, §

15903.05, subd. (a)), but this is because “limited partners have very limited power of any sort in the regular

activities of the limited partnership and no power whatsoever justifying the imposition of fiduciary duties either to

the limited partnership or fellow partners.” (6B West’s U. Laws Ann. (2016) U. Limited Partnership Act, editors

note for com. to § 15903.05, p. 88.) And so it appears it should have been at PMP – the PMP partnership agreement

pretty much precluded limited partners like Joey and Donna from acting for the partnership or taking part in its

business. Yet they purported to act as “managing partners” for PMP in signing the PSC leases, thus potentially

catapulting their relationship with Leona into a realm more fiduciary in nature. Our thoughts on this issue must

remain wholly academic, however, as Leona has not substantively challenged the statement of decision on appeal.

6

In her pleading, Leona had also alleged the Browns themselves received

personal distributions from these loan proceeds, and there was conflicting evidence at

trial as to whether this occurred.8 The statement of decision made no conclusions as to

whether any wrongful distributions were made from the loan.

The Bumblebee Property

The Bumblebee property was purchased in February 2004 by Leona along

with H91 and the Brown children as tenants-in-common. In the summer of 2012, Joe

sought to extract equity from this property (which, we note, he did not even own) in order

to shore up PMP. So the Brown children signed a loan agreement on behalf of H91 and

another Brown affiliated entity, defendant 1400 E. Foothill, L.P. (Foothill), to borrow

$2.6 million against the property with themselves, Joe, and Leona as individual

guarantors.

The evidence showed Leona was not at all comfortable acting as a

guarantor for this loan, and indeed, the transaction appeared to be the first time Leona

realized Joe might not be acting with her best interest in mind. On August 6, 2012,

Leona had an e-mail conversation with Joe. She said she was “scared out of [her] mind”

that she was putting her savings and holdings at risk by signing the guarantee, and she

asked him to assure her she was not in fact doing that. She “just want[ed] to understand”

what she was being asked to do in the transaction. Joe initially responded with anger,

telling her she was being “inaccurate” and “put[ting] words in [his] mouth.” He then

attempted to appeal to her confidence in him, saying he had “protected [her] and [her]

family [and] provided [her with] a lifestyle” for the previous 30 years. Leona was

concerned enough to enlist a close friend, Trevor Grimm, to attempt to gather

information from Joe about her investments, at which time, Joe began threatening to cut

off Leona’s usual monthly payments from those investments, which she was using at the

8 Joey testified some of the funds were “park[ed]” in an account in Debbie and Donna’s names.

However, the Browns’ accountant, Amy Thompson, claimed the funds eventually ended up going to PMP.

7

time to keep up the mortgage on her house. A little over a year later, this lawsuit was

filed. Joe nonetheless signed the guarantee agreement on her behalf; the trial court

reasonably determined this was a breach of his fiduciary duty to her and constituted

financial elder abuse.

In December 2012, the Bumblebee property was sold for $10.75 million

and the $2.6 million loan was paid off. But the trial court found the removal of $2.6

million in equity from the property damaged Leona because she received no benefit from

guaranteeing the loan, and thus lost her share of that equity in the sale.

The Brown children and H91 were deemed liable for financial elder abuse

and breach of fiduciary duty as cotenants for taking Leona’s share of that equity after the

sale. The court found they were liable for approximately $224,000 in damages.

However, the court credited against those damages a stipulated $376,000

payment the Brown children had made to Leona early in the litigation. Back in January

2014, Leona had obtained the right to attach $1.225 million in PMP and Brown II

property in service of her claims in the lawsuit. In exchange for $376,000 and other

payments described in the stipulation, Leona and Jill had agreed in August 2014 not to

attach any further PMP or Brown II assets. This payment was not couched as an offer of

compromise under Code of Civil Procedure section 998. At the close of trial, the court

found the Brown children had engaged in financial elder abuse by in the handling of the

Bumblebee loan and sale, but because of the stipulated payment, Leona walked away

with no money in hand as to the claim.

The Lawsuit

Leona’s original complaint was brought on behalf of herself and her trust

against Joe, Brown II, and PMP and stated causes of action for financial elder abuse,

breach of fiduciary duty, breach of oral contract, common counts, and accounting. But as

discovery proceeded, the pleading went through five amendments and by the time of trial,

it was in its sixth iteration. Jill was now also a plaintiff, and the cadre of defendants

8

numbered 15, including Joey, Debbie, Donna, Husite, Sure Save, PSC, PSC Holdings,

Foothill, and another Brown-related entity, New Brown Corporation (New Brown). The

claims had also expanded significantly to a total of 13.

In addition to her original claims, Leona alleged that all defendants had

aided and abetted Joe’s and Brown II’s breaches and converted her payments and

distributions through various transactions. She accused all defendants of financial elder

abuse, including the entities in which she was invested: H91, along with the Brown

children, had taken more than its share from the Bumblebee property sale. Husite and

Sure Save had distributed the proceeds of the $3.2 million loan amongst the Browns and

their entities, without giving her a share.

She also brought a claim for declaratory relief against these entities,

arguing the circumstances (transfers and loans, contributions, and Joe’s representations)

might warrant adjusting her stake in all the partnerships. She asked the court to make a

judicial determination of each partner’s interest in each entity and how much extra she

was owed in distributions thereby. She wished to remove Brown II, Debbie, Donna, and

Joey from management of the partnerships on account of their self-dealing. And she

wanted the PMP property sold so she could recoup amounts she invested in it at Joe’s

request.

Jill’s only involvement in the case was the fifth and sixth claims for breach

of contract and common counts. Her claim was against Joe, Brown II and Foothill. She

alleged Joe had asked her for a $190,000 loan many years before, for which Foothill

and/or himself and Brown II were liable. The trial court found Jill had in fact been repaid

pursuant to the parties’ agreement and she did not prevail on her claims.

Beginning with her third amended complaint, Leona proclaimed she was

seeking relief in the derivative “[t]o the extent required” to protect the partnership

property of PMP, H91, Sure Site, and Husite, whom she named as nominal defendants.

These entities obtained counsel of their own, and filed a motion to compel Leona to elect

9

between her individual and derivative theories, because her filings had indicated she was

both suing for their benefit and seeking to collect a large money judgment against them

simultaneously. They argued she could not do this; either she had to elect between the

theories, or the trial court had to dismiss the derivative claims. The trial court deferred a

ruling, saying it wished to hear the evidence in order to determine if the claims were

direct or derivative.

After a bench trial spanning what we can only imagine was an exhausting

51 days, the trial court’s final statement of decision, 80 pages in length, issued on May

31, 2018. We have already touched upon its most important conclusions above. The

judgment, a mixed bag in terms of relief, was entered on June 5, 2018. Leona had large

recoveries against Joe, Brown II, and PMP on her financial elder abuse claim, but

recovered nothing as against the Brown children after the $376,000 payment was

credited. Judgment was for Husite, Sure Save, and H91 on the elder abuse claim. Leona

was also unsuccessful on her contract claim against Joe, Brown II, and PMP and her

declaratory relief claim as to all defendants except H91 and PMP. As noted above, Jill

was unsuccessful on all claims.

The court found that four of Leona’s causes of action were partly direct and

partly derivative in nature.

Breach of fiduciary duty was a claim premised on multiple transactions.

Leona was successful in a direct capacity against Joe, Brown II, and the Brown children

(even though she acquired no actual monetary recovery against the latter). She obtained

a derivative recovery of over $1.3 million for Husite against Brown II, and over $3.3

million for PMP from Joe and Brown II.

On aiding and abetting breach of fiduciary duty, Leona’s direct claims

against Sure Save, H91, and Husite were unsuccessful, but she obtained a derivative

recovery for PMP of over $3 million from PSC and PSC Holdings.

10

On conversion, Leona was successful against the Brown children and H91

based on the Bumblebee transaction but, as already explained, recovered nothing. She

was unsuccessful against Joe, Brown II, PMP, Husite, Sure Save, Foothill, New Brown,

PSC and PSC Holdings. None of the four partnerships obtained a recovery on this claim

in a derivative capacity. And neither Leona nor the partnerships were successful on her

equitable relief claim.

As to Leona’s unfair business practices claim, she was successful only

against PMP, Brown II, and Joe. None of the four partnerships recovered in a derivative

capacity.

Posttrial Motions

After a complex and demanding trial came a stream of costs memoranda,

motions to strike or tax them, and motions for attorney fees: a total of 11 in all. We

discuss only those implicated by this appeal. In a bit of a head-scratcher given the court’s

findings, Joe, his children, PSC, PSC Holdings, Brown II, and New Brown sought to

recover their costs. Plaintiffs also filed a memorandum of costs, as did Husite and Sure

Save together.

Leona filed two motions for attorney fees, one for her direct claims (Motion

1) and one for her derivative claims (Motion 2). Her counsel, Geoffrey Gold, filed a

declaration breaking down the fees sought into four categories: (1) those incurred on

Leona’s direct claims regarding PMP, recoverable from Brown II, PMP, and Joe (over

$1.1 million), (2) those incurred on Leona’s direct claims related to the Bumblebee

property, recoverable from the Brown children ($462,396.77), (3) those incurred

prosecuting derivative claims on Husite’s behalf, recoverable from Husite and Brown II

($441,711.77), and (4) those incurred prosecuting derivative claims on PMP’s behalf,

recoverable from Husite and Brown II ($467,083.97).

11

The Gold declaration provided charts allocating fees between these

categories as between the various defendants. It also discussed each phase of the

litigation in an effort to assist the trial court in allocating and calculating fees.

Motion 1 was based primarily on section 15657.5, the elder abuse costs and

fees statute, although Leona did seek expert fees under the PMP partnership agreement in

the alternative. On Motion 2, she sought 30 percent of the Husite judgment to

compensate her for attorney fees expended on its behalf. Alternatively, she sought

attorney fees and costs under the PMP and Husite partnership agreements against Brown

II “assuming that either or both of the . . . Agreements [we]re given effect.” She noted

the court had discretion to award her attorney fees from Husite’s own recovery under

Corporations Code section 15910.05 and the common fund and/or substantial benefit

doctrines.9 Citing Cziraki v. Thunder Cats, Inc. (2003) 111 Cal.App.4th 552 (Cziraki),

Baker v. Pratt (1986) 176 Cal.App.3d 370 (Baker), and this court’s decision in Avikian v.

WTC Financial Corp. (2002) 98 Cal.App.4th 1108 (Avikian), Husite and PMP argued

Leona could not recover such fees because her objective throughout the litigation was not

to advance the entities’ interests, but her own.

The Brown children filed a motion to strike or tax plaintiffs’ memorandum

of costs (Motion 4). They said Jill had not prevailed and was not entitled to costs. And

Leona was not a prevailing party because she had no monetary recovery.

Husite and Sure Save sought attorney fees from Leona pursuant to

provisions in their respective partnership agreements, arguing section 15657.5 did not bar

them from recovering contractual fees (Motion 7). Leona opposed. She also filed a

motion to strike or tax Husite and Sure Save’s memorandum of costs, arguing they were

not prevailing parties because of the derivative recovery she obtained (Motion 8). They

9 Section 15910.05, subdivision (b) of the Corporations Code states: “If a derivative action is

successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable

attorney’s fees, from the recovery of the limited partnership.”

12

sought to strike her memorandum of costs in Motion 3, arguing she did not prevail

against them.

In Motion 10, the Brown children pursued over $1.2 million in attorney

fees from Leona based on the partnership agreements, claiming the outcome of the

litigation had made them prevailing parties under Code of Civil Procedure section 1032.

Leona opposed, and she and Jill filed a motion to strike or tax the memorandum of costs

filed by Joe, his children, Brown II, New Brown, Foothill, and the PSC entities (Motion

11). They argued Joe, Brown II, and the PSC entities lost on some claims, and thus could

not be prevailing parties under Code of Civil Procedure section 1032. The Brown

children were liable for financial elder abuse and thus owed Leona her costs. As to New

Brown and Foothill, plaintiffs asked that costs be apportioned, since the majority of costs

incurred did not pertain to those entities.

The rulings were issued in one minute order. On Motion 1, Joe, Brown II,

and PMP were ordered to pay over $1 million in Leona’s attorney fees, and the Brown

children were ordered to pay $411,955.07, for which they were jointly and severally

liable. The trial court denied Motion 2, agreeing with Husite that Leona had acted for

personal benefit under Cziraki, Baker, and Avikian and so was not entitled to fees on the

derivative victories. It granted Motion 3, deciding Leona had not prevailed against

Husite or Sure Save. However, it also denied Motions 7 and 10. Relying on Wood v.

Santa Monica Escrow Co. (2007) 151 Cal.App.4th 1186 (Wood), it concluded it had no

authority to award Husite contractual attorney fees because all of Leona’s claims against

Husite and Sure Save were factually overlapping with her financial elder abuse claim

against them, which was governed by section 15657.5.10

10 The court also ruled Sure Save could not recover contractual fees because the fee provision in its

partnership agreement did not encompass the present dispute. We find this point moot because we conclude Sure

Save could not recover fees even if the provision did encompass the dispute.

13

As for Motions 8 and 11, the court determined Husite, Sure Save, the PSC

entities, and New Brown were all prevailing parties as against Leona and could recover

costs. But its rulings on Motions 4 and 11 as it pertained to the Brown children were

internally contradictory. The court denied Motion 4 because, pursuant to section

15657.5, Leona was entitled to recover costs. However, it declined to strike the Brown

children’s memorandum of costs in Motion 11, finding they were prevailing parties under

Code of Civil Procedure section 1032 because they had “obtained a net monetary relief”

against Leona. The trial court did not address apportionment of costs from this

memorandum.

Leona, Jill, Husite, Sure Save, and the Brown children all now appeal the

rulings with respect to Motions 1, 2, 3, 7, 8, 10, and 11.

DISCUSSION

There are knots within knots to be untangled here. First, the Brown

children claim they should not have been liable for attorney fees because Leona walked

away with nothing in the judgment. In fact, they assert they are the ones entitled to fees

pursuant to fee provisions in the H91, PMP, and Husite partnership agreements. Husite

and Sure Save similarly claim contractual entitlement to attorney fees based on the

respective partnership agreements, but they also argue they are not liable for Leona’s

attorney fees incurred on the successful derivative causes of action. And Leona contends

the trial court erred in failing to award her attorney fees under the equitable common fund

or substantial benefit doctrines for her derivative success on behalf of Husite.11 But she

does not want to pay costs for those causes of action on which she was unsuccessful.

Both Leona and Jill also claim the court erred in some of its costs awards under Code of

Civil Procedure section 1032, subdivision (a)(4).

11 In her opening brief, Leona sought fees against both PMP and Husite based on this argument, but

abandoned the quest against PMP in her reply brief. Accordingly, we analyze her argument only as it relates to

Husite.

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I. Standard of Review

As we have observed, abuse of discretion is generally the standard of

review for a trial court’s award or denial of attorney fees after trial, except “‘“‘where the

determination of whether the criteria for an award of attorney fees and costs in this

context have been satisfied amounts to statutory construction and a question of law.’”’

[Citation.]” (Sandlin v. McLaughlin (2020) 50 Cal.App.5th 805, 828-829.) In such

event, our review is de novo. (See Collins v. City of Los Angeles (2012) 205 Cal.App.4th

140, 152.) “Whether a party falls within one of the four categories authorizing the

recovery of costs as a matter of right is a question of law we review de novo. [Citations.]

We otherwise review a trial court’s cost award for abuse of discretion. [Citations.]”

(Charton v. Harkey (2016) 247 Cal.App.4th 730, 739 (Charton).)

II. The Trial Court’s Rulings on Attorney Fees

There are two main factors a trial court must consider in deciding a motion

for attorney fees. First, since attorney fees are not available to the prevailing party as a

matter of right, the court must ascertain whether a valid basis exists for an attorney fee

award in the moving party’s favor. (See Code Civ. Proc., § 1021.) Second, it must

determine a reasonable amount of fees to be awarded once a valid basis is established.

Generally speaking, the party seeking attorney fees has the burden of proof on both

issues. (See Corbett v. Hayward Dodge, Inc. (2004) 119 Cal.App.4th 915, 926; see also

Center for Biological Diversity v. County of San Bernardino (2010) 188 Cal.App.4th 603,

615.)

A. Entitlement to Attorney Fees

The four potential bases for recovery of attorney fees in this case were

section 15657.5, the common fund doctrine and/or its close relative, the substantial

benefit doctrine, and the partnership agreements. As to the direct claims by Leona, we

agree with the trial court that section 15657.5 has primacy in the analysis, and because of

it, the contractual fee provisions do not apply. As to Leona’s derivative claims, we

15

conclude the trial court abused its discretion in denying reimbursement of her attorney

fees under the common fund doctrine.

1. Direct Claims: Section 15657.5

Under the statute’s fee-shifting provision, any defendant proven by a

preponderance of the evidence to be “liable for financial abuse” must pay the plaintiff’s

reasonable attorney fees and costs. (§ 15657.5, subd. (a).) A defendant is not entitled to

reciprocal attorney fees should it prevail on a financial elder abuse claim. (Bates v.

Presbyterian Intercommunity Hospital, Inc. (2012) 204 Cal.App.4th 210, 216 (Bates).)

“Such nonreciprocal fee provisions ‘are created by legislators as a deliberate stratagem

for advancing some public purpose, usually by encouraging more effective enforcement

of some important public policy.’ [Citations.]” (Carver v. Chevron U.S.A., Inc. (2004)

119 Cal.App.4th 498, 504 (Carver); see also Bates, supra, 204 Cal.App.4th at pp. 216-

217.)

“Some courts have taken an additional step and concluded that where all of

a plaintiff’s claims are closely related to claims falling under a statutory scheme with a

one-way attorney fee provision, a successful defendant may not recover fees even where

another relevant statutory or contractual provision would arguably permit the court to

award them.” (Bates, supra, 204 Cal.App.4th at p. 217, citing Carver, supra, 119

Cal.App.4th at pp. 503-506 [discussing the Cartwright Act’s one-way fee provision,

Business & Professions Code, § 16750, subd. (a)] and Wood, supra, 151 Cal.App.4th at

p. 1191 [discussing section 15657.5].) These courts believe allowing prevailing

defendants to recover attorney fees for work on the statutory issues “simply because the

statutory claims have some arguable benefit to other aspects of the case would

superimpose a judicially declared principle of reciprocity on the statute’s fee provision, a

result unintended by the Legislature, and would thereby frustrate the legislative intent to

‘encourage improved enforcement of public policy.’ [Citation.]” (Carver, supra, 119

Cal.App.4th at p. 504.) Thus, where all causes of action overlap with an elder abuse

16

cause of action, the prevailing defendant is not entitled to an attorney fee award. (See

Wood, supra, 151 Cal.App.4th at p. 1191.)

a) Brown Children (Motions 1 and 10)

The trial court found against the Brown children on Leona’s elder abuse

claim, at least with respect to the sale of the Bumblebee property. They do not dispute

this. But they argue the trial court incorrectly applied section 15657.5 in a vacuum,

without consideration of Code of Civil Procedure section 1032, which states in

subdivision (b) as follows: “Except as otherwise expressly provided by statute, a

prevailing party is entitled as a matter of right to recover costs in any action or

proceeding.” The subdivision preceding defines a “prevailing party” as, amongst other

things, “the party with a net monetary recovery” and “a defendant as against those

plaintiffs who do not recover any relief against that defendant.” (Code Civ. Proc., §

1032, subd. (a)(4).) Citing to Sanders v. Lawson (2008) 164 Cal.App.4th 434 (Sanders),

the Brown children argue section 15657.5 merely “invokes application of Code of Civil

Procedure section 1032, and by reference, the cost list in Code of Civil Procedure section

1033.5.” (Id. at p. 439.) And because Leona did not actually recover any relief against

them, she is not the prevailing party – under either statute – and cannot recover her costs,

including attorney fees.

This is a dubious manipulation of language in the statutes and in Sanders.

First, the quoted language from Sanders is either inartfully worded or simply inapposite.

It was discussing whether a prevailing plaintiff could recover trustee’s fees as an item of

costs, not attorney fees. (Sanders, supra, 164 Cal.App.4th at pp. 438-439.)12 Neither

statute explicitly addresses trustee’s fees. But as to attorney fees and costs in general,

both statutes are crystal clear. The prevailing party determination for costs under

12 There was an award of attorney fees in Sanders, and the Second District Court of Appeal

determined it was “[e]rroneous,” but the portion of the opinion analyzing the attorney fee award is not published.

(Id. at p. 438.)

17

subdivision (a)(4) of Code of Civil Procedure section 1032 applies “[e]xcept as otherwise

expressly provided by statute[.]” (Id. at subd. (b).) The statute expressly providing

otherwise in this instance is section 15657.5; it requires an award of both attorney fees

and costs against any defendant shown to be liable for financial abuse. (Id. at subd. (a).)

The trial court was on the money, so to speak, in applying section 15657.5 and not Code

of Civil Procedure section 1032 to the Brown children.

They also erroneously contend they were not held “liable” for financial

abuse because liability requires harm or damage, and Leona’s outcome against them

meant there was none. This, too, we find to be a distortion of the statutory language.

Liability under section 15657.5 infers responsibility.13 The trial court clearly found the

Brown children responsible for the act of taking Leona’s equity from the Bumblebee

property. It merely credited the stipulated payment against her damages. This does not

eliminate the Brown children’s responsibility for the wrong.

And, in point of fact, Leona’s outcome against the Brown children existed

only because they had already paid her the damages the trial court ultimately determined

they owed. This distinguishes the case from one like Goodman v. Lozano (2010) 47

Cal.4th 1327 (Goodman), which the Brown children cited in the trial court and here.14

The prevailing defendants in Goodman had not paid any monies to the plaintiff at all,

prior to the trial or after. Instead, they had extended an offer under Code of Civil

Procedure section 998 which the plaintiffs had rejected. (Id. at p. 1331.) The other

defendants in the case had paid settlement monies to the plaintiffs prior to trial, and the

trial court offset those monies from plaintiffs’ damages. (Ibid.) Under those

circumstances, the non-settling defendants had clearly prevailed because they had paid

13 The dictionary definition for “liable” in this context is “bound or obligated according to law or

equity” or “responsible” or “answerable.” (Webster’s 3d New Internat. Dict. (1981) p. 1302.) Black’s Law

Dictionary takes a similar view, defining “liable” as: “[r]esponsible or answerable in law; legally obligated.”

(Black’s Law Dict. (11th ed. 2019) p. 1099.)

14 Another distinguishing factor was Goodman did not involve a fee-shifting statute like section

15657.5.

18

nothing. It defies credulity to accord the Brown children the same status just because

they paid damages earlier in the litigation than they otherwise would have.15

Our conclusion is further strengthened by a recent decision out of Division

Two of this district, Arace v. Medico Investments, LLC (2020) 48 Cal.App.5th 977

(Arace). The jury in Arace found for the plaintiff but awarded her no damages on her

elder abuse claim. (Id. at p. 981.) The defendant appealed the award of attorney fees in

her favor. Division Two held that section 15657.5 was “not discretionary in nature,”

requiring the trial court to award attorney fees as “a mandatory form of relief regardless

of whether the plaintiff is awarded any other form of relief.” (Id. at p. 983.) We agree

with our sister court’s construction of the statute.

The reasoning of Carver and Wood also forecloses an attorney fee award in

favor of the Brown children for those non-statutory claims on which they were

successful. The trial court correctly observed that all of Leona’s claims against them

were based on an interconnected set of facts – though unlike Wood, the claims pertained

to multiple transactions, rather than just one. (See Wood, supra, 151 Cal.App.4th at p.

1191.) But importantly, each of the transactions alleged in this case was part and parcel

of Joe’s overall effort to gain and exert control over Leona’s money so that it would be

available to help fund the family’s commercial and real estate ventures – PMP in

particular. And while Joe and Brown II were primarily held liable for that scheme – the

Brown children were facilitators. They were the managing members of Brown II, and

Joey admitted he and Joe were its “decision makers.” Joey and Debbie were willing to

sign whatever Joe wanted them to sign.16 The Brown children were also deeply involved

in PMP. They were the only other three partners along with Brown II and Leona.

15 The Brown children paid this amount in order to avoid further attachment of their property, not to

settle the case, as they have continuously asserted. And even if they did pay this amount to settle the case, their

payment would constitute a net monetary recovery for Leona under Code of Civil Procedure section 1032,

subdivision (a)(4). (See DeSaulles v. Community Hospital of Monterey Peninsula (2016) 62 Cal.4th 1140, 1144.)

16 It appears Donna was as well since she and Joey signed the sweetheart lease agreements with Joe’s

PSC entities.

19

We also note that the only reason the trial court found for the Brown

children on most of the transactions was because it concluded they were not Leona’s

fiduciaries and thus owed her no duties.17 It was not because the trial court found they

had no involvement. In this light, the result was not the vindication the Brown children

claim it was. Because all claims in the lawsuit were inextricably connected to the

financial abuse scheme, the Brown children cannot recover attorney fees under the

contracts and Motion 10 was properly denied.

b) Husite and Sure Save (Motion 7)

Husite and Sure Save take a different tack. They say Leona’s claim against

them was not a financial elder abuse claim at all, but merely a shareholder derivative

action masquerading as a financial elder abuse claim. Under Hilliard v. Harbour (2017)

12 Cal.App.5th 1006 (Hilliard), they contend, Leona should not be immunized by section

15657.5 or Wood from paying prevailing party attorney fees under the partnership

agreements, because she did not allege or prove conduct amounting to financial elder

abuse on their part. They are wrong.

To start, Leona’s operative pleading did allege financial elder abuse directly

against both Husite and Sure Save. She alleged they had “distributed to the Browns but

not Plaintiff the proceeds of the loan, failing to give Plaintiff her” rightful share. This is

an allegation of unequal distributions or “disguised dividends,” which is individual, not

derivative, in nature. (See Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238,

1258-1259.) It details an alleged injury that was not inflicted on the entities, but by the

entities.18 And this allegation was sufficient to state a claim for financial elder abuse

17 Interestingly, a fiduciary relationship is not a required element of financial elder abuse. (See §

15610.30.) But, again, the findings themselves were not appealed.

18 Sure Save had a 29.9 percent interest as a limited partner in Husite. Leona had a 50 percent

interest in Sure Save. She alleged Husite distributed loan proceeds to all of its partners (Sure Save included) except

her. In turn, Sure Save made distributions to all of its partners except her. Those partners were the Brown children.

We do not opine on the merit of these allegations – only that they were in fact alleged, thus refuting Sure Save’s

representation that there were no “specific factual allegations against it” in the complaint.

20

against both entities – i.e., an appropriation of property of an elder for a wrongful use.

(See § 15610.30, subd. (a)(1).) In the final decision, the trial court apparently did not

find this allegation meritorious. But this does not mean Leona failed to allege it.

Moreover, the gravamen of the lawsuit sounds in financial elder abuse, so

Hilliard does not provide a useful analogy.19 In Hilliard, the plaintiff was the controlling

shareholder, and presumably the founder of, several companies. (Hilliard, supra, 12

Cal.App.5th at p. 1008.) The companies took out loans from Wells Fargo over the years,

secured by their assets. At a certain point, the loans went into default and plaintiff

Hilliard began negotiating with Harbour, Wells Fargo’s representative, about liquidating

certain personal interests and providing further collateral in order to satisfy the debt. (Id.

at pp. 1008-1009.) In final settlement of the debt, Hilliard agreed to sell a radio station

by a date certain and give Wells Fargo the proceeds. However, he was unable to sell the

radio station by that date, and Wells Fargo sold the loan to a new creditor, who instituted

legal action against the companies and ultimately obtained a judgment. (Id. at pp. 1009-

1010.) Hilliard filed a complaint with a single cause of action for financial elder abuse,

alleging Wells Fargo took the companies from him for a wrongful use. (Id. at p. 1010.)

Wells Fargo and Harbour filed a demurrer, claiming Hilliard lacked standing because his

claim was derivative and not personal, and the trial court sustained it without leave to

amend. (Ibid.)

The appellate court affirmed, and in the process, extensively discussed

Sutter v. General Petroleum Corp. (1946) 28 Cal.2d 525 (Sutter) as an example of a

viable direct action for fraud in the shareholder context. (Hilliard, supra, 12 Cal.App.5th

at pp. 1013-1014.) In contrast to Sutter, where the shareholder was defrauded into

forming a corporation and investing money in a project which eventually met its demise,

Hilliard had not been induced to form the debtor companies. (Id. at pp. 1014-1015.)

19 Leona points out Hilliard is also distinguishable because it was decided on demurrer. While this

is true, it is not the main reason we find Hilliard unpersuasive.

21

Those companies already existed and “[b]ut for his shareholder status, Hilliard would not

have been injured by Harbour’s conduct and that of the Bank.” (Id. at p. 1015.) The

court went on to state: “Nothing in the [Elder Abuse] Act, its legislative history, or the

cases interpreting the measure suggest it was designed to confer on elders broader

standing to sue than allowed by the legal principle applied in Nelson [v. Anderson (1999)

72 Cal.App.4th 111, 124]. Hilliard created the Companies as an LLC in order to limit his

liability; there is no policy reason to permit him to enjoy the benefits of that limitation

without accepting the concomitant burdens it entails.” (Id. at p. 1015.)

Leona’s claims align more with Sutter than Hilliard. She did not

independently form or invest in Husite. She was advised by Joe to invest in it. It was but

one vehicle through which he consolidated his control over her money. She did not even

sign the Husite partnership agreement; the trial court found she had authorized Joe to act

as her agent with respect to such matters and she had ratified the agreement by accepting

partnership distributions. As in Sutter, the damages may have been represented (at least

in part) by a diminution in the value of Leona’s interest, but they flowed from a set of

abusive circumstances which preceded her interest. (See Hilliard, supra, 12 Cal.App.5th

at p. 1014 [“The point of the Supreme Court opinion is that while Sutter lost his

investment, which was represented by the value of the stock, and its reduction in value

was the measure of his loss, the damages all flowed from the defendants’ tort that

preceded and induced the investment”], citing Sutter, supra, 28 Cal.2d at p. 531.)

Because of this, we have difficulty viewing this particular transaction in a vacuum, as

Husite and Sure Save seem to be urging.

At its heart, Leona’s fundamental claim against Husite and Sure Save was

that they too participated in the elder abuse scheme by making unfair or unequal

distributions to the defendant partners. This was the allegation behind all causes of

22

action against them in the sixth amended complaint.20 As such, the reasoning of Wood

and Carver applies: Husite and Sure Save cannot recover contractual attorney fees.21

2. Derivative Claims (Motion 2)

We now turn to Motion 2, Leona’s request for fees on the successful

derivative claim she brought on behalf of Husite, by which it recovered a judgment of

over $1 million against Brown II.22 The trial court declined Leona’s invitation to apply

the common fund or substantial benefit doctrines to award her fees as a representative

plaintiff, and we believe this was an abuse of discretion.

These doctrines grew out of the equitable principle, recognized in Trustees

v. Greenough (1881) 105 U.S. 527, that a person securing a fund from which a common

group of persons may benefit should be reimbursed the expenses of having done so from

the fund itself, and barring that, from proportionate contributions from those who stand to

benefit. (Id. at p. 532.) This principle is based on three main considerations: (1)

“fairness to the successful litigant, who might otherwise receive no benefit because his

recovery might be consumed by the expenses,” (2) “correlative prevention of an unfair

advantage to the others who are entitled to share in the fund and who should bear their

share of the burden of its recovery,” and (3) “encouragement of the attorney for the

successful litigant, who will be more willing to undertake and diligently prosecute proper

20 Husite and Sure Save argue the declaratory relief cause of action is unrelated to the elder abuse

claim, but through it, Leona merely sought a determination as to whether an adjustment of ownership interests in all

of the partnerships was required due to the elder abuse.

21 For this reason, we need not reach Husite’s and Sure Save’s arguments concerning the

interpretation of the fee provisions in the respective partnership agreements.

22 In the statement of decision, the trial court indicated Husite’s damages for the loss of its equity

were $3.2 million. But Husite was only awarded $1,306,138.02 in the judgment.

We decline to consider Leona’s appeal of her request for attorney fees against Brown II pursuant

to the Husite or PMP partnership agreements. Contrary to Leona’s suggestion, the trial court did not “fail to decide”

the issue. Rather, Leona failed to properly preserve it. (See Black v. Financial Freedom Senior Funding Corp.

(2001) 92 Cal.App.4th 917, 925, fn. 9.) The trial court ruled Leona’s memorandum of points and authorities was

insufficient to bring the issue to the court’s and opposing counsel’s attention under California Rules of Court, rule

3.1113. Leona claims the lack of any opposition to the request from Brown II was enough to grant it, but the trial

court was clearly not satisfied anyone – including it – had received adequate notice of the argument based on the

barebones, one-paragraph treatment it was given in her moving papers. We will not disturb its judgment in that

regard.

23

litigation for the protection or recovery of the fund if he is assured that he will be

promptly and directly compensated should his efforts be successful.” (Estate of Stauffer

(1959) 53 Cal.2d 124, 132 (Stauffer).)

“The substantial benefit theory is derived from the common fund principle.

A litigant whose action has been responsible for conferring on a group substantial

nonpecuniary benefits may similarly be awarded his attorneys’ fees. The earliest

California case employing this theory (Fletcher v. A. J. Industries, Inc. [(1968)] 266

Cal.App.2d 313 [(Fletcher)]) involved a corporate derivative action. The efforts of the

stockholder plaintiffs, while not resulting in a common fund of money, produced

significant benefits in the form of changes in corporate management policies or

procedures – corporate therapeutics (Mills v. Electric Auto-Lite (1970) 396 U.S. 375,

396) – which inured to the benefit of all shareholders. By awarding fees payable by the

defendant corporation the costs of suit were spread among those who benefited thereby –

the shareholders.” (Coalition for L.A. County Planning etc. Interest v. Board of

Supervisors (1977) 76 Cal.App.3d 241, 247.)

The common fund doctrine was approved by the California Supreme Court

in the corporate shareholder context in Fox v. Hale & Norcross S. M. Co. (1895) 108 Cal.

475 (Fox), the high court stating as follows: “The action was not prosecuted by the

plaintiff in his own right or for his own exclusive benefit. He sued in behalf of the

corporation to recover a fund in which others were equally interested, and the judgment

in his favor was for the use and benefit of the corporation. He was, therefore, not entitled

to receive the amount of the judgment himself, but clearly was entitled to an allowance

out of the moneys collected of his reasonable expenses, including counsel fees.” (Id. at p.

477.) Thus, even from its inception, courts have recognized that the common fund

doctrine can be limited by the extent to which the party seeking fees pursues the litigation

for her exclusive benefit or adverse personal interest.

24

The California Supreme Court provided a good example of an adverse

personal interest in Gabrielson v. City of Long Beach (1961) 56 Cal.2d 224 (Gabrielson).

Gabrielson was an attorney who had represented a Long Beach resident intervening in a

taxpayer lawsuit aiming to prohibit the city from using revenues from natural resources

extraction in coastal tidelands for general municipal purposes. (Id. at p. 227.) The

tidelands had been granted to the city in 1911 by the state in trust for purposes related to

development of Long Beach Harbor, but once oil was discovered under the tidelands in

1937, there was a question as to how production revenues could be used. The Legislature

in 1951 passed a statute allotting 50 percent of non-dry gas revenue for purposes outside

the trust. (Id. at pp. 226-227.) This was the 1951 statute being attacked in the lawsuit.

(Id. at p. 227.) Gabrielson’s client contended the statute effectuated a partial revocation

of the trust, and any released revenues should revert to the state. This contention was

successful on appeal, and a few years later, the Legislature decided to settle the dispute

by dividing the oil and gas revenue between the state and city and requiring the city’s

share to be used only for trust purposes. (Ibid.)

Gabrielson sought reimbursement for his fees, arguing a common fund

entitlement – he had established the state’s right to the released funds. The city and state

both opposed the request. (Gabrielson, supra, 56 Cal.2d at p. 228.) The state said it had

never consented to the action, and it was ultimately an action against both the city and the

state, especially because both Gabrielson’s and his client’s “purpose in intervening was to

defeat both the state’s and city’s interests by tying up the revenues in litigation until they

could establish personal interests therein under federal mineral leasing applications.”23

(Ibid.) Under these circumstances, the California Supreme Court determined no fees

23 Gabrielson’s client, Mrs. Alma Swart, had sought an oil and gas lease for some of the tidelands

some years prior to the lawsuit, but due to a question as to federal or state ownership of the lands, the applications

had not been granted. The trial court in the intervention lawsuit felt this demonstrated Mrs. Swart and Gabrielson’s

“real purpose” was to prevent any expenditure of revenues from the lands until the applications could be granted.

(Id. at p. 231.)

25

could be awarded because “the attorney’s and his client’s ultimate objective [wa]s not to

secure or preserve a common fund but to establish personal adverse interests therein.”

(Id. at p. 229.) The court went on to state: “Litigation so motivated calls for no added

incentive in the form of fees from the common fund should the ultimate objective fail.

Moreover, to allow them in such a case merely because the attorney’s services have

benefited the class to whom the fund belonged would place his interests in conflict with

those of his client. An attorney retained to recover or protect a common fund so that it

would be available when and if his client could establish an adverse right thereto might

be induced to forsake his client’s interest in the hope of securing more substantial fees

from the common fund. Thus, if the evidence supports the trial court’s finding that

petitioner’s and Mrs. Swart’s purpose in intervening was to defeat both the state’s and the

city’s interests, the judgment must be affirmed even though their ultimate objective was

not achieved and petitioner’s services were therefore of benefit to the state.” (Id. at pp.

229-230.)

The doctrines and the exception were later applied to a closely held

corporation in Baker. Baker involved a dispute between two shareholders who jointly

owned two companies. The prevailing shareholder had sought involuntary dissolution of

both companies. (Baker, supra, 176 Cal.App.3d at p. 376.) In such a context, the Second

District Court of Appeal found there was no reason to apply either the common fund or

substantial benefit doctrine: “The actions resulted in findings that appellant had

misappropriated corporate funds and property, but this was to no one’s detriment other

than respondent’s. Respondent and appellant were the only shareholders in each of the

corporate entities.” (Id. at pp. 378-379.) Thus, it could not “be claimed that there were

parties other than respondent from whom fees could be sought and who were similarly

situated with mutual interests in and mutual rights to proceed and recover the sums

representing the fund.” (Id. at p. 379.) As for substantial benefit, the court found “the

rule can only be applied where a substantial benefit is extended to a clearly identifiable

26

class of persons.” (Id. at p. 380.) Since no such class of persons existed in Baker, no fees

were warranted under the doctrine. (Ibid.)

But it is Cziraki which is most on point. Thunder Cats, Inc. was a close

corporation owned by Cziraki, Phillis and Van Den Berg. Phillis and Van Den Berg had

applied for patents for certain designs and had promised to assign the interest in those

patents to Thunder Cats so the designs could be manufactured by the company. Phillis

and Van Den Berg then left and formed a separate company called Vanlar without

Cziraki, giving Vanlar the benefit of the patents. They never assigned the patents to

Thunder Cats and Cziraki was frozen out of their use and exploitation. (Cziraki, supra,

111 Cal.App.4th at p. 555.) Cziraki sued Thunder Cats, Phillis, and Van Den Berg for

derivative and individual claims (which, we note, is what Leona did in this case). There

were both direct and derivative claims against Phillis and Van Den Berg for breach of

fiduciary duty, but Cziraki also sought a constructive trust as to the patents. (Id. at pp.

555-556.) He wanted Phillis and Van Den Berg to assign the patents to Thunder Cats.

After prevailing at trial, Phillis and Van Den Berg were ordered to pay damages and also

assign the patents to Thunder Cats as originally agreed. Cziraki sought attorney fees

incurred on his derivative claim based on the common fund and substantial benefit

doctrines. (Id. at p. 556.) The trial court denied the motion, but it appeared from the

record that it did not believe either doctrine could be applied where all three shareholders

in a close corporation had participated in the litigation. (Id. at pp. 556-557.)

The appellate court reversed. It determined Cziraki had created a common

fund in the form of a monetary judgment, and also a substantial benefit from protecting

the patent assignment, which was Thunder Cats’ main asset. (Cziraki, supra, 111

Cal.App.4th at pp. 557-558.) The trial court had misconstrued the holding of Baker – it

did not preclude application of the doctrines in the close corporation context. Instead, the

doctrines did not apply in Baker because the prevailing shareholder would have been the

only one to benefit; the lawsuit would result in the dissolution of the entities involved.

27

(Id. at p. 561.) In contrast, Thunder Cats would remain intact with its main asset

preserved, and the award to it “would not be immediately passed on to individual

shareholders through a dissolution proceeding.” (Ibid.) The appellate court held the

doctrines should apply “whenever (1) a shareholder derivative suit results in a substantial

benefit to the corporation on whose behalf the plaintiff has brought suit, and (2) the

judgment confers upon the plaintiff no individual benefit separate from that received by

all of the shareholders.” (Id. at p. 559.)

In 2008, an additional landmark emerged on the horizon. The Legislature

passed the Uniform Limited Partnership Act of 2008 (ULPA)(Corp. Code, § 15900 et

seq.), and through it Corporations Code section 15910.05. This provision clarified that,

because “proceeds or other benefits of a derivative action . . . belong to the limited

partnership,” the court could award a plaintiff bringing a wholly or partially successful

derivative claim her reasonable attorney fees from the limited partnership’s recovery.

(Id. at subds. (a)(1) and (b).) We agree with Leona that this statute appears to codify the

common fund doctrine in the limited partnership context. But it does not take away the

trial court’s discretion. And we do not believe the trial court abused it in at least

considering the adverse personal interest exception. After all, as stated elsewhere in

ULPA, “[u]nless displaced by particular provisions of this chapter, the principles of law

and equity supplement this chapter.” (Corp. Code, § 15901.07, subd. (a).)

We do, however, think the trial court abused its discretion in its ultimate

conclusion. It applied the adverse personal interest exception because it found Leona

sought primarily to vindicate her individual rights, and her derivative claims were

“secondary.” Some of this language it derived from our ruling in Avikian, in which we

upheld the denial of attorney fees to shareholders who were “seeking to advance their

individual interests” through litigation. (Avikian, supra, 98 Cal.App.4th at p. 1118.)

While we appreciate the trial court’s understandable desire to follow to the

letter our language in Avikian, we feel its reliance on the case was misplaced. The

28

corporation involved in Avikian, WTC Financial Corp., was an insurance company in

liquidation under the auspices of the Insurance Commissioner. The shareholders there

had brought the action in violation of a restraining order vesting such claims in the

Insurance Commissioner. (Ibid.) Thus they did not even have a right to pursue litigation

in a derivative capacity. Moreover, they accomplished nothing through their lawsuit.

The Insurance Commissioner reached his own settlement with the defendants on behalf

of the company. (Id. at p. 1113.) Thus, in Avikian, it was crystal-clear that the plaintiffs

were acting exclusively out of personal interest. Here, the situation is much different.

Leona was entitled to pursue derivative litigation on Husite’s behalf, and she was

successful in obtaining a judgment for it.

Indeed, Leona’s derivative claim aligns squarely with the raison d’etre of

the common fund and substantial benefit doctrines. She unquestionably created a

common fund which would not have existed without her prosecution of the claim. And

her claim remitted to Husite the value of its asset, which would benefit the health of the

entity and also “raise the standards of fiduciary relationships and of other economic

behavior” necessary to maintain it in the future. (See Fletcher, supra, 266 Cal.App.2d at

pp. 324-325.)

Husite believes the personal adverse interest exception ought to apply in

large part because of Leona’s pursuit of both direct and derivative claims against it. It

claims this is unprecedented and untenable. But just like the entity defendant in Denevi

v. LGCC, LLC (2004) 121 Cal.App.4th 1211, Husite has failed to cite any authority so

stating. (Id. at p. 1223.) Moreover, Husite fails to appreciate two important

considerations.

First, the breach for which Leona was seeking redress had two arguably

separate components. The trial court found Brown II had harmed Husite by encumbering

its main asset to the tune of $3.2 million. However, as we stated earlier, Leona was also

suing Husite for the separate and independent act of making unequal distributions of the

29

loan proceeds – an act, potentially, of financial elder abuse. So, even though the same

loan may have been at issue, there were two acts and two wrongs alleged with respect to

it. Brown II committed the first act, and Husite itself committed the second.

Additionally, the trial court deferred ruling on the partnerships’ motion to

require Leona to elect between her direct and derivative causes of action until after the

evidence was in.24 This indicates even the trial court was having trouble discerning the

nature of the injury and who may have been responsible. This situation was not present

in Cziraki. There was no wrongful conduct alleged by Thunder Cats itself, and thus, no

reason to name it as a direct defendant.

Having classified the claim as derivative and entered judgment creating a

common fund, the trial court’s denial of fees failed to do equity. Leona did not benefit

from this judgment as it pertained to Husite. Yet she was left to bear the expense of

prosecuting the claim. The doctrines exist to “prevent[] unjust enrichment” (See Serrano

v. Unruh (1982) 32 Cal.3d 621, 627), “so that the active litigator who extends a benefit to

a class of passive beneficiaries is not made to bear the cost of litigation on his or her

own.” (Baker, supra, 176 Cal.App.3d at p. 380.) Our Supreme Court outlined factors in

Stauffer which guide application of the doctrines, and those factors militate in Leona’s

favor. (Stauffer, supra, 53 Cal.2d at p. 132.) It would be unfair for Leona’s share of the

Husite recovery to be almost completely consumed by the expense of bringing the claim.

There are other Husite shareholders besides Brown II and the Brown children who will be

“entitled to share in the fund.”25 (Stauffer, supra, 53 Cal.2d at p. 132.) These

shareholders are precisely the type of passive beneficiaries who would be unfairly

advantaged if Leona were made to bear the expense on her own. And while Leona’s

24 Husite concedes this ruling is not being challenged on appeal.

25 Brown II is Husite’s general partner, but in addition to persons and entities already party to this

litigation, its limited partnership includes five other persons or entities who have not been involved in the litigation.

30

attorneys have already obtained sizeable fee awards against other defendants, they have

recovered nothing from Husite and neither has she.

Indeed, the trial court seems to have taken the personal adverse interest

exception further than the relevant cases have. In Fox, our high court noted the plaintiff

therein had not pursued the litigation for his “exclusive benefit” or in his own right.

(Fox, supra, 108 Cal. at p. 477.) But this is a far cry from saying a shareholder may not

pursue his or her own interest simultaneously with the company’s interest at all. Baker

applied the exception not so much because the shareholder therein primarily sought to

benefit himself, but because there was literally no one else who could benefit besides

himself. (Baker, supra, 176 Cal.App.3d at p. 379.) Cziraki court noted the plaintiff had

not derived an individual benefit from the litigation and no “adverse personal interest”

was served. (Cziraki, supra, 111 Cal.App.4th at pp. 560-561.) But, again, this is not the

same as saying Cziraki did not stand to gain himself from the litigation.

In fact, it can fairly be said that most, if not all, shareholders primarily hope

to vindicate a personal right somewhere along the line. They are invested in the entity,

after all, and any injury to the entity impacts their interest. The personal stake is what

gives a shareholder standing to bring a claim in a derivative capacity in the first place.

“Because a derivative claim does not belong to the stockholder asserting it, standing to

maintain such a claim is justified only by the stockholder relationship and the indirect

benefits made possible thereby, which furnish the stockholder with an interest and

incentive to seek redress for injury to the corporation.” (Grosset v. Wenaas (2008) 42

Cal.4th 1100, 1114.) If such a personal stake itself precludes reimbursement of fees, the

common fund or substantial benefit doctrines could never be applied to a limited

partnership. As Leona persuasively argues, this would directly contravene Corporations

Code section 15910.05.

This is why the shareholder’s interest must be adverse to the partnership.

Husite argues this case is more similar to Gabrielson, because Leona has consistently

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sought remedies that would benefit her individually and that might dissipate its assets. It

points to the trial court’s minute order outlining several places in the record where Leona

sought her share of damages due the corporate entities. But this evidence does not prove

the point Husite wishes to make. True, Leona consistently framed her claim against

Husite as direct because she viewed it as a claim for disguised dividends, and she asserted

the derivative claim in the alternative in case the trial court concluded the claim was

Husite’s instead. But we see nothing problematic in this. As we’ve intimated, Leona can

be forgiven somewhat for pleading the claim as both a direct and derivative claim given

the complexity of the facts. Moreover, unlike the intervenors in Gabrielson, she did not

pursue a personal interest adverse to the common fund by seeking her share of Husite’s

recovery. Instead, she was seeking the amount which would have been owed to her had

she brought the action solely in a derivative capacity. And even if Leona’s interest was

to recover amounts due to her personally, the fact remains that she recovered nothing vis-

à-vis the Husite loan. As Gabrielson counsels, it is acceptable for litigation expenses to

go unreimbursed when intervention litigation was prosecuted for the purpose of

establishing an adverse interest in the common fund. (Gabrielson, supra, 56 Cal.2d at

pp. 229-230.) But from our reading of Gabrielson, it would not be acceptable to leave a

shareholder holding the bag for creating a common fund from which all shareholders, and

not just herself, could equally benefit.

Finally, we must remind ourselves that the case overall sounds in financial

elder abuse. If anything, the adverse personal interest at stake here was Leona’s statutory

right as an elder to seek redress for the taking or appropriation of property rightfully

belonging to her. There can be no doubt the Legislature deems this a particularly

important one.

Accordingly, we reverse the trial court’s denial of Motion 2 against Husite

and find she was entitled to reimbursement under the common fund or substantial benefit

doctrine.

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B. Calculation of Fee Award (Motions 1 and 2)

We thus conclude the only party in this appeal entitled to attorney fee

awards is Leona – one award from the Brown children (which the trial court granted) and

one from Husite (which the trial court did not). We remand the calculation of the latter

award. As to the Brown children, in its ruling on Motion 1, the trial court ordered them

to pay a total of $411,955.07 in attorney fees to Leona after she requested $462,396.77.

They claim this amount is excessive because Leona was only successful on one of her

allegations of financial elder abuse against them. They believe the amount should be

apportioned so they pay only for those fees incurred on the Bumblebee property issue up

to August 2014, when the stipulated payment was made.26

In making an award of attorney fees in an elder abuse case, the trial court

should look to the factors in section 15657.1: those “set forth in Rule 4-200 of the Rules

of Professional Conduct of the State Bar of California, and all of the following: [¶] (a)

The value of the abuse-related litigation in terms of the quality of life of the elder or

dependent adult, and the results obtained. [¶] (b) Whether the defendant took reasonable

and timely steps to determine the likelihood and extent of liability. [¶] (c) The

reasonableness and timeliness of any written offer in compromise made by a party to the

action[.]” The Brown children claim it would be counterproductive under this statute to

award Leona her full fees for the Bumblebee property issue when she received their

stipulated payment very early on in the action. They also argue it was inherently

unreasonable for Leona to continue to litigate the Bumblebee property claim after

receiving the stipulated payment.

We do not consider the stipulated payment an offer in compromise. The

Brown children did not offer to settle the entire litigation against them in exchange for

$376,000. They stipulated to pay Leona $376,000 to keep her from continuing to

26 Mr. Gold admitted Leona had only incurred $50,751.62 in fees on the Bumblebee claim by then.

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successfully attach their properties. Had they desired to settle the action in full, there

were avenues available to them for doing so. We find it instructive that they never used

them.

Even though Leona ultimately was awarded less than the amount of the

stipulated payment, it was not unreasonable for her to have litigated the claim to

judgment. In order to recover her attorney fees under section 15657.5, there had to be a

finding of liability on the Brown children’s part. This could only happen through a trial.

We do not believe the trial court abused its discretion in awarding Leona the full amount

of attorney fees incurred on the Bumblebee property claim, and we affirm its award

against the Brown children on Motion 1.

III. The Trial Court’s Rulings on Costs (Motions 3, 8 and 11)

There are two overarching issues raised with respect to costs: the prevailing

party determinations and apportionment of costs as between prevailing and non-

prevailing defendants who were jointly represented. We take each issue up separately.

A. Prevailing Party Determinations

Leona contends the trial court erroneously declared Husite, Sure Save,

PSC, PSC Holdings, and the Brown children prevailing parties. Having obtained a

significant derivative recovery for Husite, she argues, it is unfair to find it and Sure Save

prevailed against her on her direct claim, which was posited on the same facts. Because

she obtained a similar derivative recovery for PMP against the PSC entities, she also

thinks it was error for the trial court to find they prevailed against her on her direct

claims. Finally, she says the trial court was inconsistent in ruling the Brown children

were prevailing parties while also awarding her costs against them on her elder abuse

claim.

We start with the final argument because it is the most swiftly resolved. As

we have already said, the Brown children were held liable for financial elder abuse, and

under section 15657.5, Leona was entitled to both attorney fees and costs. In its ruling on

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Motion 11, the trial court erred in declaring the Brown children prevailing parties for

purposes of costs, because, pursuant to our discussion above, section 15657.5 carves out

a statutory scheme separate from Code of Civil Procedure section 1032. Under section

15657.5, Leona was entitled to recover her costs from the Brown children, not the other

way around. And as we previously stated, we do not believe the Brown children were

prevailing parties under Code of Civil Procedure section 1032, subdivision (a)(4)

anyway. Leona most certainly did have a net monetary recovery against them; it was

just paid to her earlier in the litigation. As such, her motion should have been granted as

to any costs incurred by the Brown children, and we reverse and remand the ruling on

that basis.

Leona was ultimately unsuccessful in holding Husite, Sure Save, PSC or

PSC Holdings liable for financial elder abuse. As a result, section 15657.5 does not

govern the analysis for these defendants and we revert to Code of Civil Procedure section

1032. In this conclusion, we are guided by Murrillo v. Fleetwood Enterprises, Inc.

(1998) 17 Cal.4th 985 (Murrillo), in which our high court found the unilateral fee-

shifting provision in the Song-Beverly Consumer Warranty Act did not operate to

preclude a prevailing defendant from obtaining an award of costs under Code of Civil

Procedure section 1032. This statute applies as a matter of course unless “expressly

provided” by another statute, and the Song-Beverly fee provision did not expressly

preclude prevailing defendants from costs. (Id. at pp. 990-991.) The Bates court later

relied on Murrillo in extending this analysis to section 15657.5.27 (Bates, supra, 204

Cal.App.4th at pp. 218-219.)

27 We note the analysis is different for costs as opposed to attorney fees, because costs are a statutory

right for a litigant who meets the definition of a prevailing party under Code of Civil Procedure section 1032,

subdivision (a)(4). (See id. at subd. (b).) In contrast, attorney fees are not available to a prevailing party by default.

They are left to the parties’ agreement unless expressly provided otherwise by statute. (See Murrillo, supra, 17

Cal.4th at p. 999; see also Code Civ. Proc., §§ 1021, 1033.5, subd. (a)(10).)

35

Leona forcefully argues her success on the derivative claims should have

colored the trial court’s prevailing party determination under Code of Civil Procedure

section 1032 with respect to Husite and the PSC entities. But, as our Supreme Court has

stated, we have no power to “ignore the actual words of the statute in an attempt to

vindicate our perception of the Legislature’s purpose in enacting the law.” (Murrillo,

supra, 17 Cal.4th at p. 993.) Leona “[did] not recover any relief against” Husite, Sure

Save, PSC, or PSC Holdings. (See Code Civ. Proc., § 1032, subd. (a)(4).) She only

recovered money in a derivative capacity for Husite. She recovered nothing personally

against Sure Save and nothing in a derivative capacity for Sure Save. And with respect

to PSC and PSC Holdings, the recovery goes to PMP.28 Leona was only bringing the

claims in PMP’s stead, and the claim has always belonged to it.

But there is another basis for costs against Husite over and above Code of

Civil Procedure section 1032. By way of Motion 2, Leona also sought her costs from

Husite pursuant to Corporations Code section 15910.05 and the common fund and

substantial benefit doctrines. In Motion 8, Leona reminded the trial court of this. But the

trial court did not address this issue in denying Motion 8. Because Corporations Code

section 15910.05 allows a successful derivative plaintiff to recover “reasonable

expenses” from a limited partnership, and because we reverse and remand the trial court’s

ruling on Motion 2, we also remand Motion 8 for further proceedings.

B. Apportionment of Costs

Finally, Leona and Jill take issue with the trial court’s ruling on Motion 11

as it pertained to New Brown and Foothill. They argued these defendants incurred no

costs other than their first appearance fees, with the other costs in the memorandum being

28 We deny Leona’s and Husite’s requests for judicial notice of documents pertaining to a

postjudgment arbitration occurring between the parties. Leona claims the documents clarify the withdrawal of her

appeal as to PMP, and Husite contends the documents show Leona’s inconsistency with respect to enforcing or

interpreting the Husite partnership agreement. Ultimately, these documents are not germane to our resolution of the

appeals.

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incurred by other Brown-related defendants. They also claimed only Jill should be

responsible for Foothill’s first appearance fee, and only Leona should be responsible for

New Brown’s first appearance fee. The trial court did not address this argument in its

final ruling on the motion. However, during the hearing, the trial court expressed its

reluctance to conduct such an apportionment because all defendants “had to be [t]here”

during the trial.

As we have already stated, the ruling on Motion 11 must be reversed and

remanded because it erroneously concludes the Brown children are prevailing parties,

which they are not. But remand is also required for a proper apportioning of costs.

“All costs awarded to a prevailing party must be (1) incurred by that party,

whether or not paid; (2) ‘reasonably necessary to the conduct of the litigation rather than

merely convenient or beneficial to its preparation’; and (3) reasonable in amount. (§

1033.5, subd. (c)(1)-(3); see El Dorado Meat Co. v. Yosemite Meat & Locker Service,

Inc. (2007) 150 Cal.App.4th 612, 616.)” (Charton, supra, 247 Cal.App.4th at p. 739.)

Therefore, “‘“[w]hen a prevailing party has incurred costs jointly with one or more other

parties who are not prevailing parties for purposes of an award of costs, the judge must

apportion the costs between the parties’ [based on the reason the costs were incurred and

whether they were reasonably necessary to the conduct of the litigation by the jointly

represented party who prevailed].”’ (Wakefield [v. Bohlin (2006)] 145 Cal.App.4th [963,]

986; see Ducoing Management, Inc. v. Superior Court (2015) 234 Cal.App.4th 306, 315

[]; Fennessy v. Deleuw–Cather Corp. (1990) 218 Cal.App.3d 1192, 1196–1197 [].)

(Charton, supra, 247 Cal.App.4th at pp. 743-744.)

Here, it appears the trial court refused to apportion simply because all

defendants were party to the litigation to the very end of trial. This was improper; it had

to conduct an apportionment analysis to the extent of any jointly incurred costs. “. . .

[W]hen allocating costs between jointly represented parties, the court must examine the

reason each cost was incurred, whether the cost was reasonably necessary to the conduct

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of the litigation on behalf of the prevailing party, and the reasonableness of the cost.”

(Charton, supra, 247 Cal.App.4th at p. 745, italics added.) Because Joe, Brown II, New

Brown, Foothill, PSC, PSC Holdings, and the Brown children were jointly represented

and filed a joint memorandum of costs, the court had to undertake the following analysis:

(1) ascertain the costs incurred by just the prevailing parties, and deduct any amounts

incurred by the non-prevailing parties, (2) determine which of the costs incurred by just

the prevailing party were necessary and reasonable, and (3) ascertain which of the jointly

incurred costs was necessary and reasonable for the prevailing defendants. On remand,

this process could be rendered easier by taking additional briefing or submissions to

arrive at the correct amount.

As to who is liable for costs as between Jill and plaintiff, the court’s ruling

on Motion 11 indicates it did not apprehend or resolve the issue. In fact, its ruling

suggests it thought the motion was brought only by Leona. In any event, the record does

not contain the amended judgment, which would contain the final cost awards entered

upon resolution of the motions to strike or tax costs. (See Code Civ. Proc., § 685.090,

subd. (a).) Thus, it is not clear the issue is ripe for our review. It can and should be dealt

with on remand.

DISPOSITION

The rulings denying contractual attorney fees to the Brown children,

Husite, and Sure Save (Motions 7 and 10) and awarding Leona attorney fees against the

Brown children (Motion 1) are affirmed. The rulings denying Leona attorney fees and

costs as to her derivative claim on behalf of Husite (Motion 2) and declaring Husite the

prevailing party for purposes of costs (Motions 3 and 8) are reversed and remanded to the

trial court for further proceedings to (1) calculate an appropriate award of attorney fees

payable by Husite under the common fund or substantial benefit doctrines and (2) resolve

the related costs issue. The ruling on Leona and Jill’s motion to strike or tax the Brown

defendants’ memorandum of costs (Motion 11) is also reversed and remanded for further

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proceedings consistent with this opinion. The rulings are affirmed in all other respects.

Leona is to recover her costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

FYBEL, J.

GOETHALS, J.

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