Filed 1/4/23 San Jose Nihonmachi v. Miraido Corp. CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion 

has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

SAN JOSE NIHONMACHI, LLC,

Plaintiff and Appellant,

v.

MIRAIDO CORPORATION, et al.,

Defendants and Respondents.

 B323093

 (Santa Clara County 

Super. Ct. No. 17CV316504)

Appeal from an order of the Superior Court of Santa Clara 

County, Sunil R. Kulkarni, Judge. Reversed.

Gates Eisenhart Dawson, Marc A. Eisenhart, James L. 

Dawson and Steven D. McLellan for Plaintiff and Appellant 

San Jose Nihonmachi, LLC.

The Keegan Law Firm, William J. Keegan; Law Office 

of Gerald Clausen and Gerald Clausen for Defendants and 

Respondents Japantown Development, L.P., A.F. Evans Co., Inc., 

and AFE Urban, Inc.
2

Brothers Smith and Mark V. Isola for Defendants and 

Respondents Miraido Corporation and Yoshihiro Uchida.

_______________________________

Plaintiff and appellant San Jose Nihonmachi, LLC (SJN) 

seeks reversal of the trial court’s October 25, 2019 order 

awarding $287,380.75 in attorney fees to defendant and 

respondent Miraido Corporation (Miraido) (collectively with 

defendant and respondent Yoshihiro Uchida (Uchida), Miraido 

respondents) and $392,723.37 in attorney fees to A.F. Evans Co., 

Inc. (A.F. Evans), AFE Urban, Inc. (AFE Urban), and Japantown 

Development, L.P. (Japantown Development) (collectively, 

Japantown respondents). We reverse the award as to Miraido 

because the contractual fee provision on which the award 

is based permits the recovery of only those fees incurred 

in arbitration or litigation following arbitration, and the parties 

agree that the underlying claims here never were arbitrated. 

We also reverse the fee award as to Japantown respondents 

because we conclude that SJN’s voluntarily dismissed breach 

of fiduciary duty claim was “on a contract,” and Civil Code 

section 1717, subdivision (b)(2)1 thus bars any fee award.

1 All unspecified statutory references are to the Civil Code.
3

FACTUAL SUMMARY AND PROCEDURAL HISTORY2

A. Overview of Parties’ Historical Relationship

The parties to this appeal have been working with each 

other for more than 30 years—and litigating against each other 

for nearly as long. The chronicle giving rise to the 2017 lawsuit

by SJN (the 2017 action) that forms the basis for this appeal

begins in 1987, when a group of businesspeople, including 

Uchida, decided to pursue development of a Japanese cultural 

center and low-income housing project in the “Japantown” area of 

San Jose, California (the project). They formed an entity for this 

purpose, and individual investors provided capital to the entity to 

enable it to purchase land.

In January 1992, the entity acquired title to real property 

located at the corner of 6th Street and Jackson Street in 

San Jose, California (the property). Because the investors’ funds 

were insufficient to pay the purchase price for the property, 

Uchida provided a $4.2 million loan to the entity. The entity was 

unable to stay current on the loan payments to Uchida, however, 

and in October 1992, the entity agreed to convey the property 

to Miraido, Uchida’s wholly owned corporation, in exchange for 

Uchida’s forgiveness of the loan.

In June 1993, Uchida and a few other individuals agreed 

to create a new entity, Nihonmachi-Miraido Partners, L.P. 

(NMP), to make a renewed effort at development of the property. 

Pursuant to the June 7, 1993 limited partnership agreement 

governing NMP (the NMP agreement), Miraido served as NMP’s 

general partner, and SJN’s predecessor-in-interest, San Jose 

2 We summarize here only the facts and procedural history 

relevant to our resolution of this appeal. 
4

Nihonmachi Corporation, served as its limited partner.3 The 

42-page agreement sets forth the terms of the partnership and, 

as discussed, post, contains a provision authorizing the recovery 

of attorney fees under certain circumstances.

In connection with forming the partnership, Miraido 

transferred the beneficial interest in the property to NMP. SJN 

did not transfer any assets to NMP, but received credit for its 

historical cash contribution in the original (now-defunct) entity 

established to purchase and develop the property. Miraido 

respondents contend that the purpose of recognizing SJN’s 

historical contribution was to allow all the original investors to 

maintain an interest in the project without investing any new 

funds.

In June 1995, development of the project again stalled, and 

NMP therefore sold the property to the San Jose Redevelopment 

Agency (RDA). Then, on May 1, 1997, NMP entered into a 

limited partnership agreement with A.F. Evans, forming a new 

entity—Japantown Development—to take over development of 

the property (the Japantown agreement). Respondents contend 

that NMP formed Japantown Development for the purpose of 

entering into a “ground lease” with the RDA, and “to tap into the 

talent and experience of Art Evans [(Evans)],” the chief executive 

officer (CEO) of A.F. Evans, “for management of the construction 

of the project, as well as its operations once it was completed.” 

SJN contends, in contrast, that NMP entered into the Japantown 

3 The parties agree that SJN acquired all the rights of 

San Jose Nihonmachi Corporation in 2003, and the distinction 

between the two entities is not pertinent to the issues on appeal.

In the interest of simplicity, we therefore refer only to SJN in the 

remainder of the opinion. 
5

Development partnership because, without A.F. Evans, Miraido 

could not qualify for the loans necessary to develop the property.

The Japantown agreement designated A.F. Evans as 

Japantown Development’s general partner and NMP as its

sole limited partner. Like the NMP agreement, the Japantown 

agreement contains a provision (set forth in full, post) permitting 

the recovery of certain attorney fees. Soon after Japantown 

Development’s formation, in 1997, construction began at the 

property on the development of what would become a 109-unit 

multifamily residential rental facility known as Miraido Village.

In the midst of construction, in August 1998, SJN filed a 

lawsuit against Miraido, Uchida, A.F. Evans, and Japantown 

Development (the 1998 action) seeking, inter alia, invalidation of 

the June 1995 sale of the property to the RDA and recalculation 

of the NMP capital accounts for Miraido and SJN. After nearly 

five years of litigation, the parties entered into a settlement 

agreement in February 2003 (the 2003 settlement). The 2003 

settlement does not contain a provision permitting the recovery 

of attorney fees; instead, paragraph 13 of the settlement provides 

that “[t]he lawsuit [i.e., the 1998 action] will be dismissed with 

prejudice upon signing of the releases and all parties will bear 

their own costs and attorney[ ] fees.”

Construction had continued during the 1998 action and

the project was completed by the end of 1999. The property, 

however, had significant, on-going environmental clean-up 

issues stemming from a prior owner’s industrial use of the land.

Although the issue did not prevent leasing the units at Miraido 

Village, respondents contend that the problem consumed funds 

generated from the lease payments.
6

SJN contends that A.F. Evans filed for bankruptcy in 2009,

and, on January 1, 2014, Evans and Uchida therefore executed 

an amendment to the Japantown agreement pursuant to which 

AFE Urban—another entity for which Evans served as CEO—

replaced A.F. Evans as Japantown Development’s general 

partner.

In December 2016, AFE Urban negotiated the sale of the

project from Japantown Development to a third-party buyer 

for a purchase price of $37 million. Thereafter, AFE Urban, with 

Miraido’s consent, agreed to several amendments to the initial 

sales agreement, including a reduction in the purchase price 

and the payment by Japantown Development of certain expenses.

The sale of the property closed escrow on September 29, 2017, 

with a final sales price of approximately $34.5 million. SJN 

contends that AFE Urban and Miraido agreed to the sale and 

reduction in purchase price without its consent, despite their

alleged knowledge that the partnership agreements required 

SJN’s consent for such transactions. SJN contends further that, 

although AFE Urban “justified the reduction in sales price based 

upon remedial work relating to window and water pipes,” Evans 

“knew about these repair issues long before the sale . . . [y]et 

A.F. Evans . . . and AFE Urban . . . delayed making any timely 

repairs,” and failed to seek reimbursement from the company 

that improperly installed the windows.

B. SJN’s 2017 Action Against Respondents

On September 29, 2017, the day the sale closed, SJN 

filed the 2017 action against respondents in connection with 

the project. In tandem with its complaint, SJN filed an

application for a temporary restraining order (TRO) requiring 

that all the proceeds from the property’s sale be held in escrow.
7

Miraido respondents argued in opposition to the TRO that, by 

“bringing th[e] action in [the superior c]ourt, SJN [was] violating 

the binding arbitration provision.” They concede, however, that 

they “then allowed [the arbitration requirement] to be waived,” 

and proceeded to litigate against SJN in the superior court. The 

trial court issued the TRO, but on November 7, 2017, it denied 

SJN’s application for a preliminary injunction.

The parties’ subsequent litigation over the sufficiency of 

the pleadings culminated in SJN’s filing of its third amended 

complaint (TAC)—the operative complaint for purposes of 

this appeal—on June 14, 2018.4

4 On April 9, 2018, approximately two months before 

SJN filed the TAC, Miraido respondents filed a cross-complaint 

asserting claims for breach of contract, breach of fiduciary 

duty, defamation, and two causes of action for declaratory relief 

against SJN and two of SJN’s members, Larry Yamaoka and 

Albert Kogura. On October 17, 2018, the court dismissed the 

claims for breach of contract and defamation, and struck one 

paragraph of the breach of fiduciary duty claim, in response to 

“anti-SLAPP” special motions to strike filed by SJN, Yamaoka, 

and Kogura. Then, on December 14, 2018, SJN filed a motion 

to compel and stay arbitration of the cross-complaint’s fifth 

cause of action for declaratory relief. The trial court granted 

SJN’s motion on January 22, 2019, ordering that the claim be 

arbitrated, but staying the arbitration pending resolution of 

the claims before the trial court. While respondents’ fee motions

(discussed, post) were pending, on September 30, 2019, Miraido 

respondents dismissed their fifth cause of action for declaratory 

relief against SJN, without prejudice. They subsequently 

dismissed, without prejudice, all remaining causes of action in 

their cross-complaint on December 4, 2019, a little over a month 

after the court ruled on respondents’ fee motions.
8

The TAC asserts four claims: (1) accounting, (2) breach 

of fiduciary duty, (3) declaratory relief, and (4) conversion. 

The parties’ dispute here hinges on SJN’s breach of fiduciary 

duty claim against Miraido, Japantown Development, and 

AFE Urban—specifically, the portion of that claim premised 

on the alleged negligent repair of windows, alleged concealment 

of certain facts in connection with those repairs, and alleged 

negligence in negotiating the sale of the project.

SJN’s allegations concerning the negligent repair of 

windows and related misrepresentations appear primarily in 

paragraph 81 of the TAC, which provides:

“81. As a general partner of Japantown Development . . . ,

defendant AFE Urban . . . owed the highest duties of loyalty, 

honesty and care to its limited partner, NMP . . . . By engaging 

in the wrongful conduct described herein, AFE Urban . . ., by 

and through its President/CEO . . . Art Evans, and through 

the actions of its limited partner Miraido, by and through 

its President/CEO, defendant . . . Uchida, breached these 

duties by failing to timely disclose and remedy window repairs, 

by concealing the failed actions of the general partners 

of Japantown Development . . . , AFE Urban . . . , and its 

predecessor[,] [A.F. Evans], and by improperly attempting 

to pass the cost of these defendants’ failed actions [to the 

partnerships], currently estimated at $1,400,000.00 (comprised 

of the $400,000.00 earlier repair costs and the $1,000,000.00 

price reduction).”

In addition, paragraph 75 of the TAC indicates that 

the breach of fiduciary claim “incorporates by reference the 

allegations of [p]aragraphs 1 through 74,” and SJN contends 
9

that additional allegations concerning the negligent repairs and 

related misrepresentations appear in paragraphs 17, 44, and 45.

Finally, the TAC goes on to allege that—despite 

these provisions in the Japantown agreement—“defendants 

A.F. Evans . . . and AFE Urban . . . failed to timely seek 

reimbursement” from Devcon Construction Inc. (Devcon) for 

repair of the leaking windows and related water damage at 

Miraido Village, even after allegedly discovering that Devcon 

had improperly installed the windows.

With respect to alleged negligence in the sale of the 

project, SJN contends that the relevant allegations appear

primarily in paragraphs 34 through 37, 40, and 77 of the TAC.

Although the parties litigated the 2017 action for nearly 

two years, both sets of respondents contend that SJN’s claims 

were meritless, and that SJN never intended to pursue the 

action through trial. The respondents maintain, for example, 

that the releases in the 2003 settlement barred many of SJN’s 

claims. And they assert that SJN failed meaningfully to pursue 

its claims, including by failing to depose key witnesses.

C. SJN’s Voluntary Dismissal of Its Claims

On December 21, 2018, the court set trial for May 20, 

2019. The parties did not reach a resolution of their claims at 

the May 15, 2019 mandatory settlement conference. On May 16, 

2019, SJN voluntarily dismissed, without prejudice, all but its 

first claim for an accounting. Less than a week later, on May 21, 
10

2019, SJN dismissed, without prejudice, its remaining accounting

claim.5

D. Respondents’ Motions for Attorney Fees and 

Relevant Fee Provisions

Following SJN’s voluntary dismissal of its claims,

on July 22, 2019, both sets of respondents filed motions for 

prevailing party attorney fees. Japantown respondents’ motion 

relied upon the fee provision in section 13.2 of the Japantown

agreement, which provides:

“Attorneys’ Fees. In any legal action between or among 

the partners to enforce or interpret any of the terms of this 

agreement, or in any action in any way pertaining to the 

partnership affairs or to this agreement, the prevailing party 

in such action shall be entitled to recover expenses incurred 

by it in such proceeding, including reasonable attorneys’ fees.” 

(Capitalization & underscoring omitted.)

In their separate motion, Miraido respondents relied upon 

the following provision in section 8.9 of the NMP agreement to 

support their fee request:

“Arbitration and attorneys’ fees. Any controversy or claim

arising out of or relating to this agreement, the partnership 

or the partners’ rights or duties shall be in accordance with 

the commercial rules of the American Arbitration Association, 

and judgment upon the award may be entered in any court of 

5 In August 2019, SJN filed a new action against 

Japantown Development, NMP, AFE Urban, and Uchida (the 

2019 action), which is the subject of a related appeal. (San Jose 

Nihonmachi, LLC v. Japantown Development, L.P. et al. (Jan. 4, 

2023, B323095) [nonpub. opn.].)
11

competent jurisdiction. The arbitrators shall apply California 

substantive law to the proceeding. The arbitrators shall have 

the power to grant all legal and equitable remedies and award 

compensatory damages provided by California law, but shall not 

have the power to award punitive damages. The arbitrators shall 

prepare in writing and provide to the parties an award including 

factual findings and the reasons on which the decision is based. 

The arbitrators shall not have the power to commit errors of law 

or legal reasoning, and the award may be vacated or correction

[sic] pursuant to . . . Code of Civil Procedure sections 1286.2 

or 1286.6 for any such error. The prevailing partner or partners 

in such arbitration and any ensuing legal action shall be 

reimbursed by the partner or partners who do not prevail for 

their reasonable attorney’s, accountants’, and experts’ fees and 

the costs of such arbitration and action.” (Capitalization & 

underscoring omitted.) SJN opposed both motions.

E. Trial Court’s Order Awarding Fees

The trial court heard respondents’ fee motions on 

September 5, 2019. On October 25, 2019, the court issued its 

order on the motions. The court declined to award any fees in 

connection with SJN’s claims for conversion, accounting, and 

declaratory relief. It concluded that Miraido respondents could 

not recover fees on the conversion claim because (1) SJN asserted 

that cause of action only against Uchida, and (2) Uchida was not 

a signatory to the NMP agreement containing the relevant fee 

provision. The court also declined to award fees in connection 

with SJN’s accounting and declaratory relief claims. It reasoned 

that because those claims were “on a contract” and had been 

voluntarily dismissed, section 1717, subdivision (b)(2) barred 

any fee award on those causes of action.
12

The court applied similar reasoning in concluding that

respondents could not recover fees in connection with the

portion of SJN’s breach of fiduciary duty claim “based on

alleged accounting deficiencies”; however, the court found that

Miraido and Japantown respondents could recover fees on the 

portion of that claim arising out of SJN’s allegations that certain 

respondents “breached their fiduciary duties by ‘failing to timely 

disclose and remedy window repairs, by concealing the failed 

actions of the general partners of [Japantown Development,] . . .’

[and by] . . . negligently negotiat[ing] the sale of the [p]roject.” 

The court concluded that these allegations were not “on a 

contract”—and thus not subject to the prohibition in section 1717, 

subdivision (b)(2)—and that the partnership agreements’ 

respective attorney fee provisions were “broad[ ] enough to cover 

this tort claim.”

Finally, although the court noted that the fee provision 

in the NMP agreement “envisions arbitration, not standalone 

litigation,” it nonetheless proceeded to award $287,380.75 in 

fees to Miraido6 in connection with the 2017 action because “SJN 

never raise[d] this ‘fees only for arbitration’ issue in its attorney 

fees opposition to the Miraido [respondents’] . . . brief” and 

thus “ha[d] forfeited this argument.” The court also awarded 

6 The trial court’s order states expressly that “Uchida . . . 

cannot obtain attorney fees because he is not a signatory to a 

contract with an attorney fees provision.” The conclusion of 

the order, however, awards $287,380.75 in fees to the “Miraido 

[d]efendants”—a group the order defines as consisting of Miraido 

and Uchida. This appears to be a clerical error, and the parties 

agreed at oral argument that the trial court did not award any 

fees to Uchida in his individual capacity. 
13

Japantown respondents $392,723.37 in fees. SJN timely 

appealed the fee awards. 

DISCUSSION

A. Standard of Review 

We review the asserted legal basis for contractual attorney 

fees de novo. (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc.

(2012) 211 Cal.App.4th 230, 237 (Barnhart).)

B. The Plain Language of the NMP Partnership 

Agreement Precludes the Fee Award to Miraido 

1. Law Governing Interpretation of Attorney Fee 

Provisions

“Unless a contract or statute provides otherwise, each 

party to a lawsuit must pay its own attorney fees.” (Kangarlou v.

Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1178

(Kangarlou), citing Code Civ. Proc., § 1021.) Where, as here, 

a contract provides the basis for a party’s entitlement to fees, 

that contract “ ‘must be analyzed on its own terms, and in 

context, pursuant to the usual rules of contract interpretation 

for determining the actual intent of the parties. [Citations.]’ ” 

(GoTek Energy, Inc. v. SoCal IP Law Group, LLC (2016) 3 

Cal.App.5th 1240, 1249, quoting Rideau v. Stewart Title of 

California, Inc. (2015) 235 Cal.App.4th 1286, 1297.)

2. Application

SJN argues that the trial court erred in awarding fees to 

Miraido because the NMP partnership agreement’s attorney fee 

provision applies only to arbitrated disputes, and the parties here 

never participated in arbitration. We agree. 
14

The fee provision in the NMP partnership agreement 

provides, in relevant part:

“Arbitration and attorneys’ fees. Any controversy or claim

arising out of or relating to this agreement, the partnership 

or the partners’ rights or duties shall be in accordance with 

the commercial rules of the American Arbitration Association, 

and judgment upon the award may be entered in any court of 

competent jurisdiction. . . . The prevailing partner or partners in 

such arbitration and any ensuing legal action shall be reimbursed 

by the partner or partners who do not prevail for their reasonable 

attorney’s, accountants’, and experts’ fees and the costs of such 

arbitration and action.” (Capitalization and underscoring 

omitted and italics added.)

The provision is unambiguous in permitting the 

recovery of only those attorney fees incurred as the result

of an “arbitration and any ensuing legal action.” The word

“ensuing” means “to take place afterward or as a result.” 

(See Merriam-Webster.com Dict., Merriam-Webster,

<https://www.merriam-webster.com/dictionary/ensue>

[“ensue” (as of Jan. 3, 2023)]; accord, Collins English Dict.

<https://www.collinsdictionary.com/dictionary/english/ensuing>

[“ensuing . . . 1. following subsequently or in order[;] [¶] 

2. following or occurring as a consequence; resulting” (as of

Jan. 3, 2023)]; see also Scott v. Continental Ins. Co. (1996) 44 

Cal.App.4th 24, 30 [courts may discern ordinary meaning of 

words from dictionary definitions].) By its plain language, the 

NMP agreement’s fee provision thus applies only to fees incurred 

in (1) an arbitration and (2) legal actions that follow an 

arbitration. Because the parties here agree that no arbitration 

ever occurred, the provision does not authorize a fee award. 
15

(Accord, Kalai v. Gray (2003) 109 Cal.App.4th 768, 777 (Kalai) 

[“The parties’ agreement allows for an award of fees only in favor 

of the ‘prevailing party to [the a]rbitration.’ Simply put, there 

has not yet been a prevailing party to the arbitration, because 

there has not been an arbitration.”].)

Miraido’s various arguments in opposition do not convince 

us otherwise. First, we are unpersuaded that, by failing to raise 

the issue below, SJN waived the argument that the fee provision 

applies only to arbitrated disputes. Miraido does not dispute 

that it bore the burden of establishing its entitlement to fees 

before the trial court. (See, e.g., ComputerXpress, Inc v. Jackson

(2001) 93 Cal.App.4th 993, 1020−1021.) Moreover, Miraido 

concedes that where—as here—the facts are undisputed, the 

interpretation of a contract is a pure question of law that we 

may consider even if raised for the first time on appeal. (See, 

e.g., Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1,

24 [“[u]nder settled law, the Court of Appeal ha[s] discretion 

to address the issue even though it ha[s] not been raised in 

the trial court”].) Finally, the principle animating the forfeiture 

rule—“ ‘to encourage parties to bring errors to the attention of 

the trial court, so that they may be corrected’ ” (In re Sheena K.

(2007) 40 Cal.4th 875, 881)—simply is not at play here, where 

the court expressly noted that the NMP agreement’s fee provision 

“envisions arbitration, not standalone litigation.”

Second, we find unconvincing Miraido’s contention that 

the fee provision is ambiguous and can be read as permitting 

the recovery of fees in any “action” involving a breach of the NMP 

agreement. Miraido’s insistence that the contract does not state 

“express[ly]” that arbitration is a condition precedent to a fee 

award is belied by the plain language of the fee provision. And as 
16

set forth, ante, we disagree that the phrase “any ensuing legal 

action” is ambiguous. Nor are we persuaded by the argument 

that the 2003 settlement reveals a latent ambiguity in the fee 

provision. Miraido urges that the language in paragraph 13 

of the settlement—that “[t]he lawsuit will be dismissed with 

prejudice upon signing of the releases and all parties will bear 

their own costs and attorney[ ] fees”— suggests that the parties 

“had a shared understanding” that the NMP agreement permits

the recovery of fees even in the absence of an arbitration. 

Miraido argues that “[o]ne can infer from that language that 

the parties believed in 2003 that[,] without that provision, the 

prevailing party could have sought to recover its attorneys’ fees 

incurred in the 1998 [a]ction, and the parties (i.e., [a]ppellant and 

[r]espondents) wanted to be certain that this was not allowed.”

A court “provisionally receives any proffered extrinsic 

evidence that is relevant to prove a meaning to which the 

language of the instrument is reasonably susceptible. [Citations.] 

If, in light of the extrinsic evidence, the language is reasonably 

susceptible to the interpretation urged, the extrinsic evidence 

is then admitted to aid the court in its role in interpreting the 

contract.” (Wolf v. Walt Disney Pictures & Television (2008) 162 

Cal.App.4th 1107, 1126.) Paragraph 13 of the 2003 settlement, 

however, does not demonstrate that the NMP agreement’s fee 

provision is reasonably susceptible to Miraido’s construction.

As an initial matter, the language in paragraph 13 is keyed 

expressly to settling only “the lawsuit,” namely, the 1998 action. 

Moreover, the parties to the 2003 settlement included Japantown 

Development, A.F. Evans, and Miraido. As SJN points out, the 

settlement contemplated that Miraido and SJN would become 

limited partners in Japantown Development, and the Japantown 
17

agreement’s fee provision does not limit the recovery of fees to 

those in arbitration or ensuing actions. And we agree with SJN 

that “a waiver of fees as between Japantown, its general partner, 

and [its] potential limited partners is entirely consistent with 

waiving the broad attorney’s fees clause in the Japantown 

agreement.” (Italics omitted.) We therefore fail to see how 

the 2003 settlement creates any inference as to what the parties 

intended with respect to the NMP agreement’s fee provision, and 

the settlement thus does not establish a latent ambiguity as to 

what “ensuing action” means. Finally, we note that Miraido’s

request that we consider the 2003 settlement does not affect our 

conclusion, ante, that interpretation of the NMP agreement’s fee 

provision is a legal question. “When there is no material conflict 

in the extrinsic evidence, the . . . court interprets the contract as 

a matter of law” (Wolf, supra, 162 Cal.App.4th at p. 1126), and

here, there is no dispute that the 2003 settlement contains the 

language quoted by Miraido. 

Third, Miraido’s attempt to distinguish Kalai fails. In 

Kalai, supra, 109 Cal.App.4th 768, the Court of Appeal reversed 

an attorney fee award in a dispute between a homeowner and a 

contractor. (Id. at p. 771.) Notwithstanding the homeowner’s 

consent to a mandatory arbitration clause in his agreement with 

the contractor, the homeowner filed suit against the contractor 

in superior court. (Id. at p. 772.) Rather than move to compel 

arbitration, however, the contractor moved for summary 

judgment based on the arbitration clause. (Ibid.) The court 

granted summary judgment for the contractor, as well as the 

contractor’s subsequent request for attorney fees. (Id. at 

pp. 773−774.) The Court of Appeal reversed the fee award, 

explaining that “there has not yet been a prevailing party to the 
18

arbitration, because there has not been an arbitration.” (Id. at 

p. 777.)

Miraido insists that the case is distinguishable because, 

unlike SJN, “the appellant in Kalai had presented his argument 

to the trial court.” But the reasoning in Kalai did not hinge on 

that fact, and as set forth, ante, we are unpersuaded by Miraido’s

arguments concerning forfeiture. Also unpersuasive is Miraido’s

assertion that “the fees provision in the NMP [agreement] is 

much broader” than the fee provision in Kalai because “[t]he 

provision in [the Kalai] contract expressly limited attorneys’ fees 

only to the prevailing party to the arbitration.” (Capitalization 

omitted.) Miraido fails to explain how the additional language 

in the NMP agreement—permitting the recovery of fees incurred 

in “arbitration and any ensuing legal action”—distinguishes 

this case from Kalai. (Italics added.) Here, as in Kalai, the

parties can recover fees only once their dispute has been 

arbitrated. And here, as in Kalai, no such arbitration took place. 

Accordingly, we conclude that the plain language of the fee 

provision in the NMP partnership agreement precludes an award 

of attorney fees to Miraido in this case.7 

7 In light of this conclusion, we need not address SJN’s

arguments concerning (1) Miraido’s voluntary dismissal of the

fifth cause of action in the cross-complaint, and (2) whether the 

trial court abused its discretion in awarding all but 15 percent 

of Miraido’s requested fees. We also need not address Miriado 

respondents’ arguments that SJN’s claims are not “on a 

contract,” including its contention that SJN effectively conceded 

before the trial court that its claims were not subject to the 

NMP agreement’s arbitration provision—and thus not “on a 

contract”—by pursuing its own claims in superior court, while
19

C. Section 1717, Subdivision (b)(2) Bars the 

Fee Award to Japantown Respondents

Unlike the NMP agreement, the Japantown agreement

does not limit the recovery of attorney fees to those incurred 

in or following arbitration. And SJN does not dispute that 

the Japantown agreement’s fee provision is broad enough 

to encompass the litigation underlying this appeal. Instead, 

SJN contends that (1) the TAC alleges that its breach of 

fiduciary duty claim against Japantown respondents is “on a 

contract,” and (2) because SJN voluntarily dismissed the claim, 

section 1717, subdivision (b)(2) mandates that there was no 

“prevailing party” in the underlying litigation, thereby precluding

any attorney fee award. We agree because we conclude that 

it is “unclear” whether SJN’s breach of fiduciary duty claim is 

“on a contract.” (Kangarlou, supra, 128 Cal.App.4th at p. 1178 

[“ ‘[i]f unclear[,] the action will be considered based on contract 

rather than tort’ ”].)

1. Section 1717

“[C]ontractual attorney fee provisions are generally 

enforceable in voluntary pretrial dismissal cases except as 

barred by section 1717.” (Santisas v. Goodin (1998) 17 Cal.4th 

599, 622.) An action involving contract claims is an action “on 

a contract,” and section 1717 governs entitlement to contractual 

attorney fees. When an action “on a contract” is voluntarily 

dismissed, section 1717, subdivision (b)(2) directs that “there 

simultaneously seeking to compel arbitration of one of Miraido 

respondents’ cross-claims for declaratory relief. Finally, our 

conclusion compels denial of Miraido respondents’ request for 

attorney fees on appeal.
20

shall be no prevailing party for purposes of this section.” (§ 1717, 

subd. (b)(2).) Section 1717, subdivision (b)(2) operates to bar 

recovery of fees in this circumstance “even though the contract on 

its own terms authorizes recovery of those fees.” (Santisas, supra,

17 Cal.4th at p. 617.)

“This bar, however, applies only to causes of action that 

are based on the contract and are therefore within the scope of 

section 1717. If the voluntarily dismissed action also asserts 

causes of action that do not sound in contract, those causes 

of action are not covered by section 1717, and the [contract’s] 

attorney fee provision, depending upon its wording, may afford 

the defendant a contractual right, not affected by section 1717, 

to recover attorney fees incurred in litigating those causes of 

action.” (Santisas, supra, 17 Cal.4th at p. 617.) 

“ ‘California courts construe the term “on a contract”

liberally.’ [Citation.]” (Barnhart, supra, 211 Cal.App.4th

at p. 240.) The phrase “includes not only a traditional action 

for damages for breach of a contract containing an attorney 

fees clause [citation], but also any other action that ‘involves’ 

a contract under which one of the parties would be entitled 

to recover attorney fees if it prevails in the action [citation].” 

(Ibid.) A cause of action “involves” a contract where it “arises 

out of, is based upon, or relates to an agreement by seeking to 

define or interpret its terms or to determine or enforce a party’s 

rights or duties under the agreement.” (Id. at p. 242.) “[T]he 

dispositive question is whether [the] pleading served to put 

the contract theory in issue.” (Perry v. Robertson (1988) 201 

Cal.App.3d 333, 338 (Perry).)

“An act such as breach of fiduciary duty may be both 

a breach of contract and a tort.” (Kangarlou, supra, 128 
21

Cal.App.4th at p. 1178.) “ ‘Whether an action is based 

on contract or tort depends upon the nature of the right sued 

upon, not the form of the pleading or relief demanded. If based 

on breach of promise, it is contractual; if based on breach of a

noncontractual duty it is tortious. [Citation.] If unclear[,] the

action will be considered based on contract rather than tort. 

[Citation.]’ ” (Id. at pp. 1178−1179, quoting Arthur L. Sachs, 

Inc. v. City of Oceanside (1984) 151 Cal.App.3d 315, 322.)

2. Application

The trial court awarded Japantown respondents attorney 

fees based solely on its conclusion that a portion of SJN’s breach 

of fiduciary claim—namely, SJN’s allegations concerning the 

“negligent repair of windows, misrepresentations about the 

repairs, and . . . negligence in negotiating the sale of the 

[p]roject”—sound in tort. We agree with SJN, however, that it is 

at least “unclear” whether these allegations invoke a contractual 

duty, and we therefore conclude that this portion of the breach 

of fiduciary duty claim is “on a contract.” (See Kangarlou, supra, 

128 Cal.App.4th at pp. 1178−1179; Amtower v. Photon Dynamics, 

Inc. (2008) 158 Cal.App.4th 1582, 1602 (Amtower).)

Turning first to SJN’s allegations concerning negligent 

window repairs and related misrepresentations, paragraph 45 of 

the TAC—incorporated by reference into the breach of fiduciary 

duty claim by paragraph 75—refers expressly to duties imposed 

by the Japantown agreement: “The duty owed by A.F. Evans . . . , 

and now its predecessor AFE Urban . . . , is unavoidable under the 

terms of the Japantown . . . agreement. The controlling provisions 

are: [Paragraph] 5.1 which mandates that the day-to-day 

business affairs ‘shall be managed by the [g]eneral [p]artner, 

[A.F. Evans].’ This provision also states that the day-to-day 
22

business affairs expressly included ‘to cause the construction 

of the [p]roject . . . .’ It continues: ‘During construction of the 

[p]roject, [A.F. Evans] shall . . . oversee construction and approve 

change orders . . . .’ And, finally, paragraphs 5.5 and 3.1(b) 

confirm [A.F. Evan’s] duty as the Japantown [Development] 

general partner related directly to the construction services 

provided by Devcon.” (Italics added.)

SJN’s allegations concerning the negligent sale of the 

project similarly make express reference to the Japantown 

agreement and the duty it allegedly imposed on AFE 

Urban to obtain SJN’s consent prior to selling the property. 

Paragraphs 34 and 35 of the TAC provide in relevant part, 

for example: “ . . . The Japantown . . . agreement, as amended, 

indicates that there should be documentation from or by the 

partners consenting to a sale of the partnership’s primary 

asset . . . . [¶] . . . The [Japantown agreement] further states in 

the relevant portion of paragraph 5.1(b) requiring the consent 

of the limited partner to [sic]: ‘(i) make any change in the scope 

of the project; . . . (ix) admit additional partners including, 

without limitation, the tax credit investor(s) . . . ; (xiv) do any act

in contravention of this agreement.’ ” (Capitalization omitted.) 

Moreover, paragraph 37 alleges that “AFE Urban . . . [is] 

fully aware that the controlling partnership agreement[ ] (for 

Japantown Development . . . ) . . . required disclosure and 

consent from SJN . . . , the limited partner of NMP . . . ,” and 

that AFE Urban engaged in a “pattern of ignoring and failing 

to comply with the requirements of the controlling partnership 

agreement[ ].”

Thus, at a minimum, the TAC’s allegations render it 

“unclear” whether SJN’s breach of fiduciary duty claim sounds 
23

in contract or tort—a conclusion that compels us to treat the 

claim as “on a contract.” (See Amtower, supra, 158 Cal.App.4th 

at p. 1602; Kangarlou, supra, 128 Cal.App.4th at pp. 1178−1179.)

Japantown respondents advance four arguments in 

opposition to SJN’s contention that its breach of fiduciary 

duty claim is contractual. None is persuasive. First, Japantown 

respondents argue that SJN ignores the first sentence of 

paragraph 81 in the TAC. “Context is important,” Japantown 

respondents urge, and a close reading of “the complete paragraph 

81” should convince us that SJN “was intending to invoke 

statutory duties as opposed to contractual duties.” (Underscoring 

omitted.) As set forth, ante, the first sentence of paragraph 81 

provides: “As general partner of Japantown Development . . . , 

defendant AFE Urban . . . owed the highest duties of loyalty,

honesty and care to its limited partner.” (Capitalization and 

italics omitted.) Japantown respondents argue that this sentence 

demonstrates that “SJN alleges not that these duties arise from 

the Japantown agreement, but rather that they are imposed 

by AFE Urban’s status ‘[a]s a general partner,’ ” pursuant to 

Corporations Code section 15904.08. (Capitalization and 

underscoring omitted.)

In further support of this argument, Japantown 

respondents contend that (1) the language in paragraph 81 

“paraphrases [Corporations Code] section 15904.08”; and 

(2) “in an early pleading[,] SJN cited section 15904.08 as the 

basis of its negligence claim.” They also point to the absence 

of the phrase “ ‘as required under the limited partnership 

agreement’ ” in paragraph 81 (a phrase that does appear in 

paragraph 82 of the TAC, in connection with accounting-related 
24

allegations), urging that this confirms that SJN intended its 

claim to sound in tort.

Notwithstanding their assertion that “[c]ontext is 

important,” Japantown respondents fail to explain how we 

can reconcile their arguments with the TAC’s other allegations, 

including those in paragraph 45, suggesting that SJN intended 

to invoke a contractual duty in its breach of fiduciary duty claim. 

They do not dispute that paragraph 75 of the TAC incorporates 

these allegations by reference into the breach of fiduciary duty 

cause of action; instead, Japantown respondents offer only the 

conclusory assertion that we should ignore these allegations

because they appear “up to 19 pages before[ ]” paragraph 81.

Moreover, even assuming that paragraph 81 “paraphrases” 

Corporations Code section 15904.08, Japantown respondents 

offer no authority for the proposition that this is sufficient to 

demonstrate that SJN intended to invoke statutory, rather than 

contractual, duties. And as SJN notes, the “early pleading” in 

which it allegedly “cited [Corporations Code] section 15904.08 

as the basis of its negligence claim”—SJN’s reply brief in support 

of its request for a preliminary injunction—“makes plain that the 

[reference] to [Corporations Code] section 15908.07 support[ed] 

SJN’s accounting claim.” Finally, while we agree that SJN could 

have made its intention to invoke a contractual duty clearer by

including in paragraph 81 the phrase “as required under the 

limited partnership agreement,” the absence of that language 

does not demonstrate that SJN intended its claim to sound in 

tort.

Second, Japantown respondents contend that SJN 

mischaracterizes the “on a contract” inquiry set forth in

Barnhart. SJN, however, expressly agrees with Japantown 
25

respondents’ formulation of the Barnhart standard, and 

argues persuasively that the standard is met here because 

the paragraphs of the TAC, set forth, ante, “identify[ ] various 

contractual provisions that were put at issue and would 

necessarily be analyzed, defined, and interpreted to determine 

whether a breach of fiduciary duty occurred.” 

Also unavailing is Japantown respondents’ related 

argument that the Kangarlou and Perry cases on which SJN 

relies are distinguishable. In Kangarlou, the court held that 

each of several fiduciary duties breached by an escrow agent was 

“on a contract.” (See Kangarlou, supra, 128 Cal.App.4th at p. 

1179.) Similarly, in Perry, the court held that a homeowner’s 

claims against real estate brokers and salespersons for 

negligence in drafting the sales agreement for her home were 

“on a contract.” (See Perry, supra, 201 Cal.App.3d at p. 344.) In 

reaching its conclusion, the Perry court explained: “Defendants’ 

central argument concerning the pleading is that, because it 

alleges that they were negligent, it must present only a legal 

theory in tort. This argument is fundamentally flawed. It selects 

the means of breach of contract as the determinant of its legal 

form. If the contract theory is negligence in the performance of 

contractual obligations, the allegation of negligence is integral to 

the statement of a cause of action for breach of contract.” (Id.

at p. 341.) Moreover, although Japantown respondents argue 

that the cases are distinguishable, they do not challenge the rule 

articulated in Kangarlou—which is dispositive here—that, where 

it is “unclear” whether an action is based in contract or tort, an 

action must be considered “on a contract.”

Nor do the authorities to which Japantown respondents 

cite convince us that the breach of fiduciary duty claim alleged 
26

in the TAC clearly sounds in tort. (See Stout v. Turney (1978) 

22 Cal.3d 718, 730 (Stout) [involving alleged fraud in the 

inducement of an agreement, rather than breach of a fiduciary 

duty arising from existing agreement]; Eads v. Marks (1952) 39 

Cal.2d 807, 811−812 [not involving analysis of whether a claim 

was “on a contract” under section 1717]; Loube v. Loube (1998) 64 

Cal.App.4th 421, 430 (Loube) [suggesting in dicta that a breach 

of fiduciary duty claim sounds in tort, but holding that legal 

malpractice claim, which did not depend on interpretation of 

retainer agreement to determine scope of relevant duties, 

arose in tort]; Moallem v. Coldwell Banker Com. Group, Inc.

(1994) 25 Cal.App.4th 1827, 1830 [no analysis of whether breach 

of fiduciary duty claim was “on a contract”]; DeMirjian v. Ideal 

Heating Corp. (1949) 91 Cal.App.2d 905, 910 [no discussion 

of any breach of fiduciary duty cause of action and expressly 

distinguished by Perry].)

Third, Japantown respondents argue that the portion of

SJN’s breach of fiduciary duty claim alleging that AFE Urban

“ ‘conceal[ed] the failed actions of the general partners’ ” in 

connection with the negligent window repairs constitutes a claim 

for fraud that can never be considered “on a contract.” But none 

of the four cases on which Japantown respondents rely compels 

the conclusion that the “concealment” allegation in SJN’s breach 

of fiduciary duty claim necessarily sounds in tort. Although 

Loube notes the general rule that fraud actions arise in tort, 

the claim underlying the fee request in that case was not fraud, 

but legal malpractice. (Loube, supra, 64 Cal.App.4th at p. 430.)

And Stout, supra, 22 Cal.3d at p. 730, Orozco v. WPV San Jose, 

LLC (2019) 36 Cal.App.5th 375, 409, and Super 7 Motel 

Associates v. Wang (1993) 16 Cal.App.4th 541, 544, all involved 
27

alleged fraud in the inducement of a contract, rather than an 

allegation that a party breached a duty in an existing contract by 

concealing certain information. (See Stout, supra, 22 Cal.3d at p. 

730 [involving misrepresentations by defendant concerning 

sewage disposal system at a mobile home park to induce plaintiff 

to enter agreement to purchase park]; Orozco, supra, 36 

Cal.App.5th at pp. 409−410 [“overall nature of . . . complaint 

sounded in tort and was not ‘on a contract’ ” where “[t]he key 

question at trial was whether [one party] fraudulently induced 

[another] . . . to enter into [a] long-term lease,” and there was no 

argument “that [the party] had breached the lease in any way”]; 

Super 7 Motel Associates, supra, 16 Cal.App.4th at p. 544 

[involving alleged fraud by seller and broker arising out of failure 

to disclose certain information to induce buyer to purchase 

property].) Accordingly, Japantown respondents’ argument 

concerning the generally tortious nature of fraud claims does not 

alter our conclusion that it is “unclear” whether SJN’s particular

breach of fiduciary duty claim here arises in contract or tort.

Fourth, Japantown respondents argue that SJN’s request 

for punitive damages, a tort remedy, demonstrates “[t]hat SJN 

understood it was making a tort claim” via the breach of fiduciary 

duty cause of action. Japantown respondents cite a number of 

cases in support of their assertion that “the remedy requested 

can be an important factor” in the “on a contract” analysis.

Even assuming, however, that we should treat SJN’s request for 

punitive damages as an “important factor,” when considered in 

conjunction with the other allegations in the TAC, the punitive 

damages request is not enough to make it “clear” that SJN 

intended to pursue the breach of fiduciary duty claim in tort.
28

In sum, because we conclude that it is “unclear” whether 

SJN’s voluntarily dismissed breach of fiduciary duty claim 

sounds in contract or tort, we must treat it as a claim “on a 

contract.” (See Amtower, supra, 158 Cal.App.4th at p. 1602; 

Kangarlou, supra, 128 Cal.App.4th at pp. 1178−1179.) As a 

result, section 1717, subdivision (b)(2) bars any prevailing 

party fee award, and we therefore reverse the trial court’s 

order awarding fees to Japantown respondents. 
29

DISPOSITION

The court’s October 25, 2019 order awarding attorney fees 

is reversed. Respondents Miraido Corporation’s and Uchida’s 

request for attorney fees on appeal is denied. Appellant San Jose 

Nihonmachi, LLC is awarded its costs on appeal.

NOT TO BE PUBLISHED.

ROTHSCHILD, P. J.

We concur:

BENDIX, J.

WEINGART, J.