Filed 8/26/13 Brown Bark III v. Haver 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication 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

BROWN BARK III, L.P.,

 Plaintiff and Respondent,

v.

JAIMIE HAVER, et al.,

 Defendants and Appellants.

 G047198

 (Super. Ct. No. 30-2009-00122631)

 O P I N I O N

Appeal from an order of the Superior Court of Orange County, Derek W.

Hunt, Judge. Affirmed in part, reversed in part, and remanded.

AlvaradoSmith, W. Michael Hensley, Kevin A. Day and Gregory G. Snarr 

for Defendants and Appellants.

Lanak & Hanna, Jennifer M. Schildbach and Mac W. Cabal for Plaintiff 

and Respondent.

* * *
2

Plaintiff and respondent Brown Bark III, L.P. sued defendants and 

appellants Jaimie Haver and Westover Capital Corporation to recover funds Westover 

Financial, Inc. failed to repay on a revolving line of credit.1 Although Westover Capital 

was not a party to the contracts that created the line of credit, Brown Bark sued Westover 

Capital for breach of those contracts on a successor liability theory. Brown Bark also 

sued Haver and Westover Capital for conversion and fraud, alleging they converted the 

Westover Financial assets pledged as security for the line of credit and made 

misrepresentations to prevent and delay Brown Bark‟s efforts to recover the outstanding 

balance from Westover Financial. Following a bifurcated jury and court trial, Haver and 

Westover Capital obtained a favorable judgment on all of Brown Bark‟s causes of action. 

They subsequently sought their attorney fees under the fee provisions in the line of credit 

contracts, but the trial court denied their fee motion. Haver and Westover Capital now 

appeal.

We conclude the trial court erred in failing to award Westover Capital its 

attorney fees on the breach of contract causes of action. Civil Code section 1717 makes 

an otherwise unilateral attorney fee provision reciprocal and entitles a noncontracting 

party to recover contractual attorney fees when it defeats a contract-based cause of action 

that would have made the noncontracting party liable for contractual attorney fees had it 

lost.2 Brown Bark would have recovered its attorney fees if it had prevailed on its 

successor liability theory against Westover Capital because the line of credit contracts 

made its fee provisions binding on the contracting parties‟ successors. Section 1717 

therefore allows Westover Capital to recover its attorney fees because it defeated claims 

 

1 We will refer to Brown Bark III, L.P. as Brown Bark, Jaimie Haver as 

Haver, Westover Capital Corporation as Westover Capital, and Westover Financial, Inc. 

as Westover Financial. Westover Financial is not a party to this appeal.

2 All statutory references shall be to the Civil Code unless otherwise stated.
3

for breach of the line of credit contracts that would have exposed Westover Capital to 

attorney fee liability had it lost. Section 1717 only applies to contract causes of action, 

however. We therefore affirm the trial court‟s order denying Westover Capital attorney 

fees on the tort causes of action.

We also affirm the trial court‟s order denying Haver‟s fee motion. She was 

not a party to the line of credit contracts and Brown Bark did not sue her for breaching 

those contracts. Because Haver never faced attorney fee liability under the line of credit 

contracts, she may not invoke section 1717 to recover her fees.

We remand the matter to the trial court to determine (1) whether and how to 

allocate Westover Capital‟s attorney fees between the breach of contract and successor 

liability issues and the tort issues; (2) whether and how to allocate the fees for the 

attorneys who jointly represented Westover Capital and Haver; and (3) the amount of 

attorney fees Westover Capital may recover for this appeal. 

I

FACTS AND PROCEDURAL HISTORY

Westover Financial was a leasing and equipment finance company Joseph 

G. Woodley founded in the mid-1980‟s. Woodley, his wife, and Steven R. Jones were 

the only shareholders. Westover Financial later hired Haver as an employee and she 

eventually became corporate secretary, but she never held any shares or voting rights and 

lacked authority to bind the corporation. 

In 2007, Westover Financial opened a $1 million revolving line of credit 

with First Heritage Bank, N.A. (First Heritage). To open the line of credit Westover 

Financial entered into several contracts with First Heritage, including the “Credit 

Agreement,” the “Revolving Line of Credit Promissory Note” (Promissory Note), the 

“Security and Pledge Agreement” (Security Agreement), and the “Custodian Agreement” 

(collectively, “Line of Credit Contracts”). Woodley and Jones also personally guaranteed 
4

Westover Financial‟s performance. The Line of Credit Contracts each contained 

unilateral attorney fees provisions entitling the “Lender” or “Secured Party” to recover 

from the “Borrower” or “Debtor” all attorney fees incurred in any dispute relating to the 

interpretation, enforcement, or performance of any of the Line of Credit Contracts. 

Westover Financial failed to repay more than $850,000 it borrowed from 

First Heritage under the line of credit. In January 2009, the Federal Deposit Insurance 

Corporation, as receiver for First Heritage, sold and assigned all interests in Westover 

Financial‟s line of credit to Brown Bark. 

In May 2009, Brown Bark filed this action against Westover Financial, 

Woodley, and Jones, seeking the outstanding balance on the line of credit plus interest, 

penalties, costs, and attorney fees. Brown Bark quickly obtained an ex parte right to 

attach order against Westover Financial. Around the time Brown Bark filed this action, 

Westover Financial began the process of dissolving as a corporation. It completed the 

process and filed its certificate of dissolution in November 2009. 

Westover Financial‟s decision to dissolve left Haver unemployed. She 

subsequently formed Westover Capital in June 2009 to capitalize on the leasing and 

equipment finance expertise she acquired while working for Westover Financial. Haver 

filed the articles of incorporation and all other documents necessary to incorporate 

Westover Capital just 10 days after Brown Bark obtained its right to attach order against 

Westover Financial. Haver is Westover Capital‟s sole shareholder, officer, and director. 

Brown Bark amended its complaint to add Haver and Westover Capital as 

defendants when it learned Haver continued to operate a business in the leasing and 

equipment finance industry. Brown Bark took Westover Financial‟s default when it 

failed to respond to any of Brown Bark‟s complaints and dismissed Woodley and Jones 

after they each filed for bankruptcy protection. The operative third amended complaint 

alleged the following causes of action against the remaining defendants: (1) breach of the 

Credit Agreement, Promissory Note, and Security Agreement against Westover Financial 
5

and Westover Capital; (2) breach of the Custodian Agreement against Westover Financial 

and Westover Capital; (3) conversion against Westover Capital and Haver; (4) fraud 

against Westover Capital and Haver; and (5) suppression of material facts against 

Westover Capital and Haver. 

Brown Bark alleged Westover Capital was liable for Westover Financial‟s 

breach of the Line of Credit Contracts because Westover Capital was either Westover 

Financial‟s alter ego or a successor in interest formed to fraudulently avoid Westover 

Financial‟s debts and liabilities. According to Brown Bark, Haver was an officer and 

director of both Westover Financial and Westover Capital, she transferred Westover 

Financial‟s assets to Westover Capital without any consideration, and she used those 

assets to conduct the same business under the Westover Capital name. The conversion 

cause of action alleged Haver and Westover Capital converted all of Westover 

Financial‟s assets it pledged as collateral for the line of credit. Finally, the two fraud 

claims alleged Haver and Westover Capital misrepresented and concealed facts from 

Brown Bark to prevent or delay its efforts to collect on Westover Financial‟s line of 

credit.3 

On the first day of trial, Brown Bark dismissed its alter ego allegations and 

proceeded against Westover Capital on the breach of contract claims based solely on a 

successor liability theory. Westover Capital asked the trial court to bifurcate the trial and 

hear the successor liability issues first. Brown Bark opposed that motion because it 

intended to offer the same evidence to prove the successor liability theory and the 

conversion and fraud claims. The trial court decided to bifurcate the trial, but not as 

Westover Capital had requested. Instead, the court bifurcated the trial into a liability 

phase and a damages phase. The court explained the successor liability theory and the 

 

3 The third amended complaint also alleged causes of action for claim and 

delivery and injunctive relief and included Westover Financial on the conversion, fraud, 

and suppression of material fact claims, but Brown Bark later dismissed those claims. 
6

conversion and fraud claims would both be tried during the liability phase, with the jury 

deciding the conversion and fraud claims and the court deciding the successor liability 

theory. The court also explained it would treat the liability phase as a default prove-up 

for the breach of contract claims against Westover Financial. 

At the close of trial, the court instructed the jury on the conversion and 

fraud claims only. Although the record fails to explain why, the parties agreed not to 

submit the breach of contract claims to the jury. The court therefore did not instruct the 

jury on breach of contract and the jury did not return a verdict on the breach of contract 

claims. The court‟s instructions told the jury “not to be concerned about” Brown Bark‟s 

claim that Westover Capital was Westover Financial‟s successor in interest, but rather to 

simply assume that claim was true. The jury returned a verdict in Haver and Westover 

Capital‟s favor, finding they neither converted Brown Bark‟s property nor “defrauded 

[Brown Bark] by the creation of Westover Capital.” 

The trial court did not make any express findings or rulings regarding the 

successor liability theory, but entered judgment for Haver and Westover Capital on all 

causes of action. Specifically, the court‟s judgment stated (1) Brown Bark “sought 

adjudication of its First and Second Causes of Action for Breach of Contract against 

Westover Capital Corporation on a theory of successor liability”; (2) Brown Bark “shall 

recover nothing from Defendants Jaimie Haver and Westover Capital Corporation on the 

following causes of action: [¶] First and Second Causes of Action for Breach of 

Contract; [¶] Sixth Cause of Action for Conversion; and [¶] Eighth and Ninth Causes 

of Action for Fraud”; and (3) Brown Bark “shall take nothing from Defendants Jaimie 

Haver and Westover Capital Corporation on any cause of action in the Third Amended 

Complaint.” The judgment awarded Brown Bark a default judgment against Westover 

Financial on the breach of contract claims in the principal amount of more than $750,000. 

After entry of judgment, Haver and Westover Capital jointly sought more 

than $170,000 in attorney fees and costs based on the attorney fee provisions in the 
7

Line of Credit Contracts. The trial court denied the motion, finding Haver and Westover 

Capital were not entitled to the benefit of the Line of Credit Contracts‟ attorney fee 

provisions because Brown Bark did not sue Haver on those contracts and Haver and 

Westover Capital only prevailed on the two tort causes of action, not a contract cause of 

action. 

Haver and Westover Capital timely appealed the trial court‟s decision 

denying their fee motion. Neither side appealed from the trial court‟s judgment.

II

DISCUSSION

A. Governing Legal Principles on Contractual Attorney Fee Awards

A party may not recover attorney fees unless expressly authorized by 

statute or contract. (Code Civ. Proc., § 1021; Sessions Payroll Management, Inc. v. 

Noble Construction Co. (2000) 84 Cal.App.4th 671, 677 (Sessions).) In the absence of a 

statute authorizing the recovery of attorney fees, the parties may agree on whether and 

how to allocate attorney fees. (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 

1338, 1341 (Xuereb).) They may agree the prevailing party will be awarded all the 

attorney fees incurred in any litigation between them, limit the recovery of fees only to 

claims arising from certain transactions or events, or award them only on certain types of 

claims. The parties may agree to award attorney fees on claims sounding in both contract 

and tort. (Id. at pp. 1341-1342.)

To ensure mutuality of remedy, however, section 1717 makes an attorney 

fee provision reciprocal even if it would otherwise be unilateral either by its terms or in 

its effect. (Santisas v. Goodin (1998) 17 Cal.4th 599, 610 (Santisas); Reynolds Metals 

Co. v. Alperson (1979) 25 Cal.3d 124, 128 (Reynolds).) Specifically, section 1717 states, 

“In any action on a contract, where the contract specifically provides that attorney[] fees 

and costs, which are incurred to enforce that contract, shall be awarded either to one of 
8

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[] fees in addition to other costs.” (§ 1717, 

subd. (a).)

Section 1717 makes an otherwise unilateral attorney fee provision 

reciprocal in at least two situations relevant to this appeal. The first “is „when the 

contract provides the right to one party but not to the other.‟ [Citation.] In this situation, 

the effect of section 1717 is to allow recovery of attorney fees by whichever contracting 

party prevails, „whether he or she is the party specified in the contract or not‟ [citation].” 

(Santisas, supra, 17 Cal.4th at pp. 610-611.)

“The second situation in which section 1717 makes an otherwise unilateral 

right reciprocal . . . is when a person sued on a contract containing a provision for 

attorney fees to the prevailing party defends the litigation „by successfully arguing the 

inapplicability, invalidity, unenforceability, or nonexistence of the same contract.‟ 

[Citation.] Because these arguments are inconsistent with a contractual claim for 

attorney fees under the same agreement, a party prevailing on any of these bases usually

cannot claim attorney fees as a contractual right. If section 1717 did not apply in this 

situation, the right to attorney fees would be effectively unilateral . . . because only the 

party seeking to affirm and enforce the agreement could invoke its attorney fee 

provision.” (Santisas, supra, 17 Cal.4th at p. 611.) Accordingly, section 1717 allows a 

party who defeats a contract claim by showing the contract did not apply or was 

unenforceable to nonetheless recover attorney fees under that contract if the opposing 

party would have been entitled to attorney fees had it prevailed. (Ibid.)

This second situation arises not only when a signatory to a contract defeats 

another signatory‟s claims, but also when a nonsignatory defeats a signatory‟s efforts to 

enforce the contract. As our Supreme Court explained in the seminal Reynolds case: “Its 

purposes require section 1717 be interpreted to further provide a reciprocal remedy for a 
9

nonsignatory defendant, sued on a contract as if he were a party to it, when a plaintiff 

would clearly be entitled to attorney[] fees should he prevail in enforcing the contractual 

obligation against the defendant.” (Reynolds, supra, 25 Cal.3d at p. 128; see also Real 

Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 382 (Real 

Property Services) [“in cases involving nonsignatories to a contract with an attorney fee 

provision, the following rule may be distilled from the applicable cases: A party is 

entitled to recover its attorney fees pursuant to a contractual provision only when the 

party would have been liable for the fees of the opposing party if the opposing party had 

prevailed”].)

In Reynolds, the signatory plaintiff sued two nonsignatories to recover on a 

promissory note, alleging they were liable as the alter egos of the corporation that signed 

the note. (Reynolds, supra, 25 Cal.3d at p. 127.) The nonsignatories prevailed by 

showing they were not the corporation‟s alter egos and therefore the plaintiff could not 

enforce the note against them. The Supreme Court allowed the nonsignatories to recover 

their attorney fees under a fee provision in the note because the plaintiff would have been 

entitled to recover its fees under that provision if the plaintiff had succeeded in enforcing 

the note against the nonsignatories. (Id. at p. 129; see also Pueblo Radiology Medical 

Group, Inc. v. Gerlach (2008) 163 Cal.App.4th 826, 828-829 (Pueblo).)

Section 1717 and its reciprocity principles, however, have “limited 

application. [They] cover[] only contract actions, where the theory of the case is breach 

of contract, and where the contract sued upon itself specifically provides for an award of 

attorney fees incurred to enforce that contract. [Section 1717‟s] only effect is to make an 

otherwise unilateral right to attorney fees reciprocally binding upon all parties to actions 

to enforce the contract.” (Xuereb, supra, 3 Cal.App.4th at p. 1342, original italics.) 

Tort and other noncontract claims are not subject to section 1717 and its 

reciprocity principles. (Santisas, supra, 17 Cal.4th at p. 615; Gil v. Mansano (2004) 

121 Cal.App.4th 739, 742-743 (Gil).) The parties to a contract are free to agree that one 
10

or more of them shall recover their attorney fees if they prevail on a tort or other 

noncontract claim, but the right to recover those fees depends solely on the contractual 

language. (Gil, at p. 743; Exxess Electronixx v. Heger Realty Corp. (1998) 

64 Cal.App.4th 698, 708 (Exxess).) Section 1717 does not make a unilateral fee 

provision reciprocal on tort or other noncontract claims. (Moallem v. Coldwell Banker 

Com. Group, Inc. (1994) 25 Cal.App.4th 1827, 1831-1832 (Moallem).)

Accordingly, to invoke section 1717 and its reciprocity principles a party 

must show (1) he or she was sued on a contract containing an attorney fee provision; 

(2) he or she prevailed on the contract claims; and (3) the opponent would have been 

entitled to recover attorney fees had the opponent prevailed. (Santisas, supra, 17 Cal.4th 

at pp. 610-611; Reynolds, supra, 25 Cal.3d at pp. 128-129; Exxess, supra, 64 Cal.App.4th 

at p. 706.) The court must disregard any tort claims included in the action when 

determining whether section 1717 applies. (Santisas, at p. 615; Exxess, at p. 708.) 

“On appeal this court reviews a determination of the legal basis for an 

award of attorney fees de novo as a question of law.” (Sessions, supra, 84 Cal.App.4th at 

p. 677; see also Dell Merk, Inc. v. Franzia (2005) 132 Cal.App.4th 443, 450 (Dell 

Merk).)

B. Section 1717 Entitles Westover Capital to Recover Its Attorney Fees on the Breach 

of Contract Claims

Westover Capital sought to recover its attorney fees based on the attorney 

fee provisions in the Line of Credit Contracts between First Heritage and Westover 

Financial. Each of these Contracts included a unilateral attorney fee provision entitling 

the “Lender” or “Secured Party” to recover its attorney fees and costs from the 

“Borrower” or “Debtor.” For example, the Credit Agreement provided, “in the event that 

any dispute arises (whether or not such dispute is with Borrower) relating to the 

interpretation, enforcement or performance of this Agreement or any of the other Loan 

Documents, Lender shall be entitled to collect from Borrower on demand all reasonable 
11

fees and expenses incurred in connection therewith, including but not limited to fees of 

attorneys . . . .” 

As a nonsignatory seeking to recover its attorney fees for successfully 

defeating Brown Bark‟s efforts to hold it liable for Westover Financial‟s breach of the 

Line of Credit Contracts, Westover Capital must show (1) Brown Bark sued Westover 

Capital on the Line of Credit Contracts; (2) Westover Capital prevailed on Brown Bark‟s 

breach of contract claims; and (3) Brown Bark would have been entitled to its attorney 

fees had it prevailed on the breach of contract claims.

1. Brown Bark Sued Westover Capital on the Line of Credit Contracts 

“California courts construe the term „on a contract‟ liberally. „“As long as 

the action „involve[s]‟ a contract it is „“on [the] contact”‟ within the meaning of 

section 1717. [Citations.]” [Citations.]‟ [Citation.]” (Turner v. Schultz (2009) 

175 Cal.App.4th 974, 979-980; Dell Merk, supra, 132 Cal.App.4th at p. 455.) To 

determine whether an action is on the contract, we look to the complaint and focus on the 

basis of the cause of action. (Mepco Services, Inc. v. Saddleback Valley Unified School 

Dist. (2010) 189 Cal.App.4th 1027, 1047 (Mepco); Kachlon v. Markowitz (2008) 

168 Cal.App.4th 316, 347; Kangarlou v. Progressive Title Co., Inc. (2005) 

128 Cal.App.4th 1174, 1178-1179.) Any action that is based on a contract is an action on 

that contract regardless of the relief sought. (See Kachlon, at pp. 347-348 [lawsuit to 

quiet title and for declaratory and injunctive relief is an action on a contract because the 

action was based on a promissory note and deed of trust].)

The third amended complaint named Westover Capital as a defendant on 

both the first and second causes of action for breach of contract. These claims alleged 

both Westover Financial and Westover Capital breached the Line of Credit Contracts, 

and sought to recover damages caused by Westover Financial‟s failure to repay the funds 

borrowed under those contracts. Brown Bark alleged Westover Capital was liable for 
12

those damages on a successor liability theory because Westover Capital was a mere 

continuation of Westover Financial that Haver fraudulently formed so Westover 

Financial could escape it debts and liabilities. Brown Bark pursued its successor liability 

theory against Westover Capital throughout this action. For example, it amended its 

complaint several times seeking to adequately allege the breach of contract claims based 

on successor liability, it opposed Westover Capital‟s summary adjudication motion 

challenging the breach of contract claims, it argued the successor liability theory in its 

trial brief, and it presented evidence at trial seeking to prove Westover Capital was 

merely a continuation of Westover Financial. Accordingly, Brown Bark sued Westover 

Capital on the Line of Credit Contracts. 

Brown Bark nonetheless argues it did not sue Westover Capital on the Line 

of Credit Contracts or any other contract, but rather it sued Westover Capital on a 

successor liability claim only. To support this contention, Brown Bark relies on an 

unpublished federal district court case, Sunnyside Development Co., LLC v. Opsys, Ltd.

(N.D.Cal., Aug. 29, 2007, C 05 0553 MHP) 2007 WL 2462141 (Sunnyside), which 

concluded attorney fees could not be recovered on a successor liability claim because 

“successor liability is an equitable doctrine [citation] and is therefore not a contract claim. 

[Citation].” (Id. at p. *4.) We disagree with Brown Bark‟s characterization of its claims 

against Westover Capital and decline to follow Sunnyside for three reasons.4

First, successor liability is not a separate claim independent of Brown 

Bark‟s breach of contract claims. To the contrary, successor liability is an equitable 

doctrine that applies when a purchasing corporation is merely a continuation of the 

selling corporation or the asset sale was fraudulently entered to escape debts and 

 

4 We also note Sunnyside is an unpublished federal district court case that we 

are not required to follow. (Gomes v. Countrywide Homes Loans, Inc. (2011) 

192 Cal.App.4th 1149, 1155 & fn. 6.)
13

liabilities.5 (Franklin, supra, 87 Cal.App.4th at p. 621; Rosales v. Thermex-Thermatron, 

Inc. (1998) 67 Cal.App.4th 187, 195-196.) Successor liability requires an underlying 

cause of action and merely extends the liability on that cause of action to a corporation 

that would not otherwise be liable. (Cf. Design Associates, Inc. v. Welch (1964) 

224 Cal.App.2d 165, 171 [as an equitable doctrine extending a corporation‟s liabilities to 

the individuals who control it, the alter ego doctrine requires an underlying cause of 

action]; McMartin v. Children’s Institute International (1989) 212 Cal.App.3d 1393, 

1406 [civil conspiracy requires an underlying tort because it merely extends liability for 

the tort to individuals who shared in the tortfeasor‟s plan or design, but did not actually 

commit the tort].) 

Second, successor liability‟s nature as an equitable doctrine does not 

prevent it from forming the basis for a contractual claim under section 1717. For 

example, alter ego is an equitable doctrine that also extends a corporation‟s liability on a 

cause of action to another corporation or individual when the doctrine‟s requirements are 

met.6 (Webber v. Inland Empire Investments, Inc. (1999) 74 Cal.App.4th 884, 900-901.) 

 

5 Although not relevant to this action, the purchasing corporation also may be 

held liable for the selling corporation‟s debts and liabilities when (1) it expressly or 

impliedly agrees to assume those debts and liabilities; (2) the asset sale amounts to a 

consolidation or merger of the two corporations; or (3) a consumer is injured by one of 

the selling corporation‟s products that the purchasing corporation continues to 

manufacture and sell. (Franklin v. USX Corp. (2001) 87 Cal.App.4th 615, 621 

(Franklin); see also Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28, 30, 34 (Ray).) These 

situations are all exceptions to the general rule that one corporation is not liable for the 

debts and liabilities of another corporation simply because it purchased the corporation‟s 

assets. (Ibid.)

6 “In California, two conditions must be met before the alter ego doctrine 

will be invoked. First, there must be such a unity of interest and ownership between the 

corporation and its equitable owner that the separate personalities of the corporation and 

the shareholder do not in reality exist. Second, there must be an inequitable result if the 

acts in question are treated as those of the corporation alone.” (Sonora Diamond Corp. v. 

Superior Court (2000) 83 Cal.App.4th 523, 538.)
14

It is well settled a breach of contract claim based on an alter ego theory is still a claim on 

the contract and a nonsignatory who successfully defends against the claim may recover 

its attorney fees under section 1717. (Reynolds, supra, 25 Cal.3d at pp. 128-129; Pueblo, 

supra, 163 Cal.App.4th at pp. 828-830 [“The claim of „alter ego‟ was a step directly 

implicated in the contract action”].) In the same manner, a breach of contract claim 

based on a successor liability theory is still a claim on the contract under section 1717.

Brown Bark contends Reynolds and its progeny do not apply to breach of 

contract claims based on a successor liability theory because alter ego and successor 

liability are distinct concepts. This argument misses the mark. Although the showing 

required to invoke these two equitable doctrines is different, their effect is the same. 

Under both doctrines, the legal distinction between two corporations (or a corporation 

and an individual) is disregarded and they are treated as one entity, at least when the basis 

for the successor liability is that one corporation is a mere continuation of another 

corporation. 

Here, Brown Bark based it successor liability theory on its claim Westover 

Capital was a mere continuation of Westover Financial and therefore they should be 

treated as the same entity. In applying section 1717 and Reynolds, it is irrelevant whether 

the plaintiff sought to disregard a corporation‟s separate legal existence because the 

individuals running the corporation failed to respect its separate existence (alter ego 

doctrine) or transferred all of the corporation‟s assets to another corporation to escape 

liability (successor liability doctrine). The critical point is that the corporation and its 

shareholders or another corporation are treated as one for determining the underlying 

liability.

Third, Sunnyside does not address a defendant‟s right to recover attorney 

fees for defeating a breach of contract claim brought on a successor liability theory. 

Sunnyside involved a plaintiff who prevailed on a breach of lease and other claims 

against one defendant, but lost on its claims against a second defendant. The district 
15

court granted the plaintiff‟s attorney fee motion, but limited the fees to those incurred on 

the successful breach of lease claim. The court denied fees on tort claims that were not 

covered by the attorney fee provision and on the plaintiff‟s unsuccessful successor 

liability claim against the second defendant. (Sunnyside, supra, 2007 WL 2462141, *4.) 

Because the party seeking attorney fees in Sunnyside was the plaintiff who lost on the 

successor liability theory, Sunnyside did not consider whether Reynolds and its progeny 

required an attorney fee award to a defendant who defeats a breach of contract claim 

brought on a successor liability theory. Sunnyside therefore does not support Brown 

Bark‟s position. (Nevarrez v. San Marino Skilled Nursing & Wellness Centre, LLC

(2013) 216 Cal.App.4th 1349, 1363 [“A case is not authority for a proposition the court 

did not consider”].) 

2. Westover Capital Prevailed on Brown Bark‟s Breach of Contract Claims 

Section 1717 defines “the prevailing party on the contract” as “the party 

who recovered a greater relief in the action on the contract.” (§ 1717, subd. (b)(1).) The 

prevailing party determination is made by “„compar[ing] the relief awarded on the 

contract claim or claims with the parties‟ demands on those same claims and their 

litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and 

similar sources.‟ [Citation.]” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109 

(Scott).) 

Here, the trial court did not make an express ruling on the successor 

liability theory, but the court‟s judgment declared Brown Bark “sought adjudication of its 

First and Second Causes of Action for Breach of Contract against Westover Capital 

Corporation on a theory of successor liability” and determined Brown Bark “shall take 

nothing from . . . Westover Capital Corporation on any cause of action in the Third 

Amended Complaint.” (Italics added.) Westover Capital therefore prevailed on the 

contract claims because it recovered the greater relief. (§ 1717, subd. (b)(1).) 
16

Specifically, Brown Bark sought to recover more than $850,000 in principal, interest, 

attorney fees, and costs from Westover Capital on the breach of contract claims, but it 

recovered nothing and the trial court entered judgment in Westover Capital‟s favor. 

When a defendant completely defeats all breach of contract claims alleged against it, the 

defendant is the prevailing party under section 1717 as a matter of law. (Hsu v. Abbara

(1995) 9 Cal.4th 863, 866, 876 (Hsu).)

The trial court nonetheless denied Westover Capital‟s fee motion because it 

found Westover Capital prevailed only on the two tort claims for conversion and fraud. 

The court acknowledged Brown Bark sued Westover Capital on the Line of Credit 

Contracts, but it concluded Westover Capital did not prevail on those contract claims 

because the parties agreed not to submit the breach of contract causes of action to the 

jury. The trial court erred in reaching this conclusion.

Whether the parties submitted the breach of contract claims to the jury is 

irrelevant to the question of who prevailed on those claims. (See Mepco, supra, 

189 Cal.App.4th at p. 1047.) Indeed, it does not matter how or why a party prevailed on 

the contract; it only matters that the party prevailed. (Real Property Services, supra, 

25 Cal.App.4th at p. 384, fn. 7.) Section 1717 required the trial court to determine the 

prevailing party by comparing the relief sought and the relief obtained on the Line of 

Credit Contracts. (§ 1717, subd. (b)(1); Scott, supra, 20 Cal.4th at p. 1109.) That 

comparison shows Westover Capital prevailed on Brown Bark‟s two breach of contract 

claims because Brown Bark obtained nothing from Westover Capital on those claims. 

Brown Bark contends it prevailed on the breach of contract claims because 

it obtained a default judgment against Westover Financial for the full amount due under 

the Line of Credit Contracts. This argument fails because it ignores that Westover 

Capital and Westover Financial are independent entities and the trial court‟s judgment did 

not hold Westover Capital responsible for any of Westover Financial‟s liabilities. When 

a plaintiff sues more than one independent party on the same contract, the trial court must 
17

separately determine who prevailed on the plaintiff‟s claim against each independent 

defendant. (Cf. Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 

47 Cal.App.4th 464, 491 [“When an action involves multiple, independent contracts, each 

of which provides for attorney fees, the prevailing party for purposes of . . . section 1717 

must be determined as to each contract regardless of who prevails in the overall action”]; 

7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 94, p. 633 [“One defendant who 

prevails may recover costs even though the plaintiff recovers against another 

defendant”].) Brown Bark‟s default judgment against Westover Financial on the breach 

of contract claims in no way changes the outcome on the breach of contract claims 

between Brown Bark and Westover Capital. Westover Capital remains the prevailing 

party because it obtained a judgment against Brown Bark on those claims.

Brown Bark also argues Westover Capital failed to show the trial court 

abused the broad discretion it had under section 1717 to determine the prevailing party. 

Brown Bark overstates the extent of the trial court‟s discretion. If neither party achieves 

a complete victory, a trial court has discretion to determine which party, if any, prevailed. 

(Scott, supra, 20 Cal.4th at p. 1109.) A trial court, however, lacks discretion to determine 

whether there was a prevailing party when one party obtains “a simple, unqualified 

victory by completely prevailing on or defeating all contract claims.” (Ibid.) In that 

situation, the party obtaining the unqualified victory is entitled to attorney fees under 

section 1717 as a matter of law. (Hsu, supra, 9 Cal.4th at pp. 866, 876.) Here, Westover 

Capital obtained an unqualified victory and therefore the trial court had no discretion to 

determine Westover Capital did not prevail.

3. Brown Bark Would Have Been Entitled to Its Attorney Fees Had It 

Prevailed on the Breach of Contract Claims

If Brown Bark had succeeded in showing Westover Capital was merely a 

continuation of Westover Financial that Haver formed to fraudulently avoid Westover 

Financial‟s debts and liabilities, then the successor liability doctrine would allow Brown 
18

Bark to recover from Westover Capital for Westover Financial‟s breach of the Line of 

Credit Contracts. (Franklin, supra, 87 Cal.App.4th at p. 621; Ray, supra, 19 Cal.3d at 

p. 28.) Moreover, Brown Bark would have been entitled to recover its attorney fees 

under the Line of Credit Contracts‟ attorney fee provisions because those agreements 

included the following provision making all their terms binding on the contracting 

parties‟ successors: “This Agreement . . . shall be binding upon and inure to the benefit 

of Borrower and Lender and their respective successors and assigns . . . .” (Italics 

added.) Accordingly, because Westover Capital would have been subject to the burden 

of the Line of Credit Contracts‟ attorney fee provisions if Brown Bark had prevailed, 

section 1717‟s reciprocity principles entitle Westover Capital to the benefit of those 

attorney fee provisions and authorize it to recover the fees it reasonably incurred in 

prevailing on Brown Bark‟s breach of contract claims. (Reynolds, supra, 25 Cal.3d at 

pp. 128-129; Pueblo, supra, 163 Cal.App.4th at pp. 828-829.)

The trial court, however, denied Westover Capital‟s fee motion because it 

found Westover Capital would not have been liable for Brown Bark‟s attorney fees had 

Brown Bark prevailed. According to the trial court, Brown Bark‟s successor liability 

claim “was nothing more than a theory” on which Brown Bark could never prevail 

because “it was quite clear” Westover Capital was not a continuation of Westover 

Financial. The trial court erred in reaching this conclusion. 

Whether Brown Bark‟s successor liability theory lacked merit is irrelevant 

to whether Westover Capital could recover its attorney fees under section 1717. (Dell 

Merk, supra, 132 Cal.App.4th at p. 455.) Regardless of the theory‟s merit, Brown Bark 

sued Westover Capital on that theory and forced Westover Capital to incur attorney fees 

to defend against it through trial. “[T]he pertinent inquiry for purposes of . . . 

section 1717 is whether [Brown Bark] would have been entitled to attorney fees in a 

hypothetical situation in which [it] did prevail on its claim[s].” (Mepco, supra, 

189 Cal.App.4th at p. 1047.) Had Brown Bark succeeded in proving Westover Capital 
19

was Westover Financial‟s successor, the Line of Credit Contracts would have allowed 

Brown Bark to recover its attorney fees from Westover Capital. Accordingly, Westover 

Capital is entitled to recover its attorney fees on the breach of contract claims under the 

Line of Credit Contracts‟ attorney fee provisions.

C. Westover Capital May Not Recover Attorney Fees on the Conversion and Fraud 

Causes of Action 

In addition to the two breach of contract claims, Brown Bark also sued 

Westover Capital on tort claims for conversion and fraud. The jury rejected these claims 

and returned a verdict for Westover Capital. The trial court concluded Westover Capital 

had no right to recover attorney fees on these tort claims because the Line of Credit 

Contracts‟ attorney fee provisions did not identify Westover Capital as a party entitled to 

the benefit of those provisions. We agree.

“[S]ection 1717 does not apply to tort claims; it determines which party, if 

any, is entitled to attorney[] fees on a contract claim only. [Citations.] As to tort claims, 

the question of whether to award attorney[] fees turns on the language of the contractual 

attorney[] fee provision, i.e., whether the party seeking fees has „prevailed‟ within the 

meaning of the provision and whether the type of claim is within the scope of the 

provision. [Citation.] This distinction between contract and tort claims flows from the 

fact that a tort claim is not „on a contract‟ and is therefore outside the ambit of 

section 1717. [Citations.]” (Exxess, supra, 64 Cal.App.4th at p. 708, original italics; 

see also Santisas, supra, 17 Cal.4th at p. 615; Gil, supra, 121 Cal.App.4th at pp. 742-743; 

Xuereb, supra, 3 Cal.App.4th at p. 1342.)

Section 1717‟s reciprocity principles therefore make a unilateral attorney 

fee provision reciprocal only on contract claims; they do not make a unilateral provision 

reciprocal on tort claims. (Gil, supra, 121 Cal.App.4th at pp. 742-743; Exxess, supra, 

64 Cal.App.4th at p. 708; Xuereb, supra, 3 Cal.App.4th at p. 1342.) A party may recover 

attorney fees on a tort claim only if an attorney fee provision broad enough to cover tort 
20

claims expressly identifies that party as a party entitled to its benefits. (Moallem, supra, 

25 Cal.App.4th at pp. 1830-1832.) 

In Moallem, the plaintiff successfully sued its real estate broker for 

negligence and breach of fiduciary duty and then sought attorney fees under a fee 

provision in the brokerage agreement. (Moallem, supra, 25 Cal.App.4th at 

pp. 1828-1829.) Although the fee provision‟s language was otherwise broad enough to 

cover the plaintiff‟s tort claims, the Moallem court affirmed the trial court‟s decision 

denying the plaintiff‟s fee motion because the fee provision‟s language limited the right 

to recover attorney fees to the broker only; it did not authorize the plaintiff to recover 

attorney fees on any type of claim. Because the claims at issue were not on the contract, 

the plaintiff could not rely on section 1717‟s reciprocity principles to make the unilateral 

fee provision reciprocal. (Moallem, at pp. 1831-1832.)

As explained above, the attorney fee provisions in each of the Line of 

Credit Agreements authorized the “Lender” or “Secured Party” to recover its attorney 

fees from the “Borrower” or “Debtor.” The provisions did not authorize the Borrower or 

Debtor to recover its attorney fees under any circumstance. Westover Capital may rely 

on section 1717 and its reciprocity principles to recover its attorney fees on the contract 

claims, but those principles do not apply to Brown Bark‟s tort claims. (Gil, supra, 

121 Cal.App.4th at pp. 742-743; Exxess, supra, 64 Cal.App.4th at p. 708; Xuereb, supra, 

3 Cal.App.4th at p. 1342.)

Westover Capital argues it is entitled to recover its attorney fees on the tort 

claims because the fee provisions in the Line of Credit Contracts are broad enough to 

cover tort claims. But the type of claims the fee provisions cover is only half of the 

analysis. The fee provisions also must identify Westover Capital as a party entitled to the 

benefit of those provisions. (Moallem, supra, 25 Cal.App.4th at pp. 1830-1832.) The fee 

provisions, however, are unilateral provisions that only authorize the Lender or Secured 

Party to recover attorney fees. Even the “sharp quillets of the law” will not permit 
21

Westover Capital to invoke section 1717 and make the unilateral fee provisions 

reciprocal as to the tort claims. (Henry VI, part 1, act 2, scene 4, line 19.) The trial court 

therefore properly denied Westover Capital‟s motion to recover the attorney fees it 

incurred on the tort claims. 

D. Haver Is Not Entitled to Recover Any of Her Attorney Fees Under the Line of 

Credit Contracts 

Brown Bark did not name Haver as a defendant on either of the breach of 

contract causes of action, but rather sued her only on the conversion and fraud claims. 

The trial court denied the fee motion as to Haver because she was not sued on a contract 

and therefore had no right to recover attorney fees under any of the Line of Credit 

Contracts. We agree.

As explained above, section 1717 only applies when a party is sued on a 

contract. Because Brown Bark did not sue Haver on the Line of Credit Contracts, she 

may not invoke section 1717 to seek the benefit of the attorney fee provisions in those 

Contracts. The trial court therefore properly denied the fee motion as to Haver.

E. The Trial Court Must Determine Whether and How to Allocate Attorney Fees 

Between the Contract and Tort Claims and Between Westover Capital and Haver

“Where a cause of action based on the contract providing for attorney[] fees 

is joined with other causes of action beyond the contract, the prevailing party may 

recover attorney[] fees under section 1717 only as they relate to the contract action.” 

(Reynolds, supra, 25 Cal.3d at p. 129; Amtower v. Photon Dynamics, Inc. (2008) 

158 Cal.App.4th 1582, 1603-1604 (Amtower).) The prevailing party therefore must 

generally allocate the attorney fees it incurred between the causes of action on the 

contract and the noncontract causes of action. (Ibid.) 

Attorney fees, however, “need not be apportioned when incurred for 

representation on an issue common to both a cause of action in which fees are proper and 

one in which they are not allowed. All expenses incurred with respect to [issues common 
22

to all causes of action] qualify for award.” (Reynolds, supra, 25 Cal.3d at pp. 129-130; 

Amtower, supra, 158 Cal.App.4th at pp. 1603-1604.) The governing standard is whether 

the “issues are so interrelated that it would have been impossible to separate them into 

claims for which attorney fees are properly awarded and claims for which they are not.” 

(Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1133 (Akins); see also 

Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111 (Abdallah) 

[allocation not required when the claims are “„“inextricably intertwined”‟ [citation], 

making it „impracticable, if not impossible, to separate the multitude of conjoined 

activities into compensable or noncompensable time units‟”].)

Allocation also is generally required when the same lawyer represents one 

party who is entitled to recover its attorney fees and another party who is not. As with 

allocation among causes of action, allocation among jointly represented parties “is not 

required when the liability of the parties is „so factually interrelated that it would have 

been impossible to separate the activities into compensable and noncompensable time 

units. . . . [Citation.]‟ [Citation.]” (Cruz v. Ayromloo (2007) 155 Cal.App.4th 1270, 

1277; Zintel Holdings, LLC v. McLean (2012) 209 Cal.App.4th 431, 443.)

Here, the trial court did not address allocation because it found neither 

Westover Capital nor Haver was entitled to recover attorney fees on any cause of action. 

“The trial court[, however,] is the best judge of the value of professional services 

rendered in its court” (Akins, supra, 79 Cal.App.4th at p. 1134) and allocation of attorney 

fees “is a matter within the trial court‟s discretion” (Amtower, supra, 158 Cal.App.4th at 

p. 1604; Abdallah, supra, 43 Cal.App.4th at p. 1111). Accordingly, on remand the trial 

court must determine (1) whether and how to allocate Westover Capital‟s attorney fees 

between the breach of contract and successor liability issues and the tort issues; 

(2) whether and how to allocate the fees for the attorneys who jointly represented 

Westover Capital and Haver; and (3) the amount of attorney fees Westover Capital may 

recover for this appeal (Akins, at p. 1134). 
23

III

DISPOSITION

We affirm the trial court‟s order denying Haver her attorney fees and 

denying Westover Capital attorney fees on the conversion and fraud causes of action. 

We reverse the trial court‟s order denying Westover Capital attorney fees on the breach 

of contract claims and remand for further proceedings to determine the amount of fees 

Westover Capital may recover consistent with the views expressed in this opinion. 

Westover Capital and Haver shall recover their costs on appeal.

ARONSON, J.

WE CONCUR:

BEDSWORTH, ACTING P. J.

FYBEL, J.