Court Opinion

ID: 9352122
Source: CourtListenerOpinion
Date Created: 2023-01-05 00:01:32.078045+00
Date Added: 2024-06-11T16:58:01.338932
License: Public Domain

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   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                        DIVISION ONE

 SAN JOSE NIHONMACHI, LLC,                                               B323093

            Plaintiff and Appellant,                                     (Santa Clara County
                                                                         Super. Ct. No. 17CV316504)
           v.

 MIRAIDO CORPORATION, et al.,

             Defendants and Respondents.

      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.
     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.

                                      2
  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

      2We summarize here only the facts and procedural history
relevant to our resolution of this appeal.

                                    3
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.

                                    4
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.

                                    5
       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.

                                    6
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.

                                    7
       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

                                    8
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,

                                   9
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

      5In 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.].)

                                   10
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.

                                  11
       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.

                                    12
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.

                                   13
       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,

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

[“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.

                                   14
(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

                                   15
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

                                    16
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

                                    17
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

                                   18
      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.

                                   19
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

                                    20
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

                                   21
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

                                     22
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

                                  23
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

                                   24
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

                                    25
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

                                  26
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.

                                   27
      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.

                                  28
                        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.

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