Court Opinion

ID: 858466
Source: CourtListenerOpinion
Date Created: 2013-04-18 20:14:49.162207+00
Date Added: 2024-06-11T15:10:51.395475
License: Public Domain

Filed 4/18/13 Savas v. Gerber 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                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION ONE

PAT SAVAS, Individually and as Trustee,                              B236101, B237539
etc.,
                                                                     (Los Angeles County
         Plaintiff, Cross-defendant and                              Super. Ct. No. BC399264)
         Appellant,

         v.

SOL GERBER and RUTH GERBER, as
Trustees, etc., et al.,

         Defendants, Cross-complainants and
         Appellants.

         APPEALS from a judgment and an order of the Superior Court of Los Angeles
County. Yvette M. Palazuelos, Judge. Affirmed.
         Rosario Perry for Plaintiff, Cross-defendant and Appellant.
         Marcus, Watanabe & Dave, David M. Marcus and Daniel J. Enowitz for
Defendants, Cross-complainants and Appellants.

                                            _____________________
       In this case, two promissory notes, one for $500,000 and another for $300,000,
were secured by one deed of trust on real property. When the trustor-debtor defaulted,
the real property was sold under the power of sale in the deed of trust. In subsequent
litigation over the ownership of the real property, the trial court ruled that each of the
note holders were entitled to a five-eighths and three-eighths interest, respectively. On
appeal, the five-eighths owners claim they were entitled to the entirety of the real
property, arguing that the unraveling of a settlement of an earlier dispute to which they
were not a party somehow deprived the three-eighths owner of its interest. We disagree
because the earlier settlement had nothing to do with the rights of the five-eighths
owners, who received the benefit of their bargain. They also argue that the interests of
the three-eighths owner disappeared by virtue of the merger of title doctrine. We
disagree because there was no merger of title as title of that interest was never held by the
same parties. And as to the claim of the three-eighths owner for attorney fees, we
conclude that the lack of an attorney fees provision in any contract between the three-
eighths owner and the five-eighths owners defeats its claim. We affirm the judgment and
the order denying attorney fees.
                                     BACKGROUND
A. The complaint and cross-complaint
       In 2009, Korinth Enterprises, Inc. (Korinth), and Patricia Savas, as trustee of the
Pat Savas Family Trust (Savas Trust), filed a first amended complaint against Sol Gerber
and Ruth Gerber, as trustees of the Gerber Family Trust, and Todd H. Kurtin and Jon R.
Kurtin, as trustees of the Kurtin Family Trust (referred to collectively as Gerber Trust and
Kurtin Trust), regarding real property located in Los Angeles (real property). Korinth’s
cause of action was for quiet title challenging a second deed of trust; Savas Trust’s causes
of action were for breach of contract and specific performance pertaining to notes secured
by the second deed of trust.
       Gerber Trust and Kurtin Trust filed a cross-complaint for quiet title, fraud,
negligent misrepresentation, slander of title, unjust enrichment, declaratory relief, and
equitable lien relating to the real property against Korinth, Savas Trust, Patricia

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Savapoulos (Pat Savas), Thomas Savapoulos (Tom Savas), Athena Savas, Chris Savas,
Daniel Kupper, and Mid City.
       After a bench trial, the trial court entered judgment, in pertinent part, in favor of
Savas Trust and against Gerber Trust and Kurtin Trust, awarding Savas Trust a three-
eighths interest and Gerber Trust and Kurtin Trust a five-eighths interest in the real
property; against Korinth and in favor of Gerber Trust and Kurtin Trust on Korinth’s
claim of quiet title; against Gerber Trust and Kurtin Trust in favor of Savas Trust, Tom
Savas, Pat Savas, and Athena Savas; and against Chris Savas, Mid City, and Daniel
Kupper in favor of Gerber Trust and Kurtin Trust. The judgment awarded Savas Trust
attorney fees and costs from Gerber Trust and Kurtin Trust. At a subsequent hearing, the
trial court denied Savas Trust and Pat Savas’s motion for attorney fees.
       In their appeal from the judgment, Gerber Trust and Kurtin Trust challenge that
part of the judgment holding that Savas Trust was entitled to a three-eighths interest in
the real property, but not “the portion of the Judgment awarding [Gerber Trust and Kurtin
Trust] a 5/8 ownership interest in the Subject Property.” Gerber Trust and Kurtin Trust
contend that the rescission of the settlement agreement and cancellation of the sale of the
real property by Korinth to Mid City voided the second deed of trust as to Savas Trust
only. Therefore, Gerber Trust and Kurtin Trust contend, the nonjudicial foreclosure sale
held pursuant to the second deed of trust did not convey to Savas Trust a three-eighths
ownership interest in the real property. Gerber Trust and Kurtin Trust also contend that
when the settlement agreement was “‘rescinded,’” Savas Trust’s three-eighths interest in
the real property “was extinguished as a matter of law, before the [nonjudicial foreclosure
sale of the real property] occurred, pursuant to the doctrine of ‘merger of title’ . . . .”
       Savas Trust and Pat Savas appeal from the trial court’s order denying their motion
for attorney fees. Korinth, Athena Savas, Chris Savas, Daniel Kupper, and Mid City did
not appeal.
B. The joint stipulation of facts
       A “Joint Stipulation of Facts for Purposes of Trial” (joint stipulation of facts) was
lodged with the trial court prior to trial. It stated, in part, as follows. Tom Savas and Pat

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Savas are married and have two children, Chris Savas and Athena Savas. Tom, Pat,
Chris, and Athena are referred to collectively as the Savas Family. The Savas Family is
the sole shareholder of Korinth, which acquired title to the real property “subject to” a
purchase money deed of trust in favor of Broadway Federal Bank. In 2004, a quitclaim
deed “was executed which purported to convey the [real property] from Korinth to [Mid
City].” Mid City is owned by Chris Savas and Daniel Kupper.
       In 2004, Korinth filed a complaint against Mid City, Chris Savas, and Daniel
Kupper, seeking cancellation of the quitclaim deed and monetary damages (Korinth v.
Mid City et al. (Super. Ct. L.A. County, 2008, No. BC325764)) (the underlying action).
The complaint alleged that Chris Savas “illegally attempted to transfer the [real property]
to Mid City via the Quitclaim Deed, without any consent or authority from the president
and authorized representative of Korinth, Athena Savas.”
       In May 2007, the parties reached a settlement in the underlying action, the
material terms of which were recorded before the trial court as follows. “a. Title to the
[real property] was to be quieted in favor of Mid-City, and Korinth/Savas Family was to
quitclaim any interest they had in the [real property] to Mid-City; [¶] b. An escrow was
be [sic] opened, in which Korinth would be deemed the seller of the [real property] and
Mid-City would be deemed the buyer, and into which $500,000 was to be
loaned/deposited by [Gerber Trust and Kurtin Trust], to be secured by a deed of trust in
second lien position against the [real property]; [¶] c. At the close of escrow, from the
$500,000 to be loaned/deposited into escrow by [Gerber Trust and Kurtin Trust],
$250,000 (less 36% of the title and escrow fees) was to be released to Korinth/Savas
Family, with Mid-City/Kupper receiving the other $250,000 (less 64% of the title and
escrow fees); [¶] d. The second deed of trust securing [Gerber Trust and Kurtin Trust’s]
$500,000 loan would be in the total amount of $850,000, and would also secure a
promissory note in the amount of $350,000 to be executed by Mid-City/Kupper in favor
of Korinth/Savas Family; [¶] e. Remaining attorneys’ fees owed by Kupper/Mid-City to
their attorneys in the amount of $75,000 would be secured by a deed of trust in third lien

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position against the [real property]; and [¶] f. Chris Savas would release any interest he
had in both Korinth and Mid-City.”
          The parties agreed to draft and sign a written settlement agreement that reflected
the agreed-upon terms. On July 2, 2007, the parties executed a written settlement
agreement which provided that Gerber Trust and Kurtin Trust “were to make a $500,000
loan secured by a deed of trust against the [real property].” Gerber Trust and Kurtin
Trust were not signatories to the written settlement agreement or parties to the underlying
action.
          Subsequently, Tom Savas, Pat Savas, Athena Savas, Chris Savas, and Daniel
Kupper opened escrow with First American Title Company and signed escrow
instructions incorporating the terms of the written settlement agreement. Gerber Trust
and Kurtin Trust deposited $500,000 into escrow. “The Loan was secured by a deed of
trust executed by Mid-City in second lien position against the [real property] (the
‘Second Trust Deed’), behind the First Trust Deed in favor of Broadway [Federal Bank].
The Second Deed of Trust was recorded on July 9, 2007, . . . with the Los Angeles
County Recorder’s Office. [Fn. omitted.] [¶] . . . The Second Deed of Trust [was] in
the amount of $800,000, and purport[ed] to secure the $500,000 Loan made by the
[Gerber Trust and Kurtin Trust] and a $300,000 promissory note executed by Mid-
City/Kupper in favor of Korinth/the Savas Trust.”
          “[After] escrow closed, Korinth/Savas Family asserted that there was a
discrepancy between the settlement put on the record before [the trial court] and the
parties’ written [s]ettlement [a]greement. Specifically, Korinth/Savas Family asserted
that in the settlement put on the record before [the trial court], the promissory note to be
executed by Mid-City in favor of Korinth/Savas Family was to be in the amount of
$350,000, while the written [s]ettlement [a]greement provided that the promissory note to
be executed by Mid-City in favor of Korinth/Savas Family was in the amount of
$300,000.”
          Thereafter, Korinth “recommenced litigation” of the underlying action. Mid-
City’s and Chris Savas’s answers to Korinth’s complaint were stricken and their defaults

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were entered. Korinth submitted “an Amended Accounting After Rescission” to the trial
court. “The Judgment signed by Judge Chirlin on August 29, 2008, canceled the
Quitclam [sic] Deed which transferred the Subject Property from Korinth to Mid City,
awarded Korinth monetary damages against Chris Savas in the amount of $500,000 and,
in accordance with the Amended Accounting, monetary damages against Daniel Kupper
in the amount of $225,197.00” (the underlying judgment).
       “From in or about August 2007 to in or about March 2008, payments were made
in accordance with the terms of the Loan secured by the Second Deed of Trust.
However, beginning on or about April 15, 2007, the payments ceased. [¶] . . . On or
about July 1, 2008, [Gerber Trust and Kurtin Trust] caused to be recorded a Notice of
Default and Election to Sell under the Second Deed of Trust. [¶] . . . On or about
November 12, 2008, a Notice of Trustee’s Sale on the [real property] pursuant to the
Second Deed of Trust was recorded. [¶] . . . In December of 2008, Korinth filed for
Chapter 11 Bankruptcy. [¶] . . . On April 14, 2009, the United States Trustee’s Office’s
Motion to Dismiss Korinth’s Bankruptcy was granted by the Bankruptcy Court. [¶] . . .
On April 22, 2009, a trustee’s sale (the ‘Trustee’s Sale) [sic] pursuant to the Second Deed
of Trust was held. [¶] . . . [Gerber Trust and Kurtin Trust] were the successful bidders at
the Trustee’s Sale.” In a footnote, the joint statement of stipulated facts concluded as
follows. “As part of this lawsuit, Korinth is seeking to set aside [Gerber Trust and Kurtin
Trust’s] title to the [real property] acquired at the Trustee’s Sale. Therefore, the parties
stipulate only that [Gerber Trust and Kurtin Trust] were the successful bidders at the
Trustee’s Sale. Whether the Trustee’s Sale held pursuant to the Second Deed of Trust
was valid, and whether or not [Gerber Trust and Kurtin Trust] acquired valid title to the
[real property] as a result of the Trustee’s Sale held pursuant to the Second Deed of Trust,
will be determined by the trier of fact.”
C. Testimony and exhibits introduced at trial
       At the trial of the instant matter, the trial court considered testimony, the joint
stipulation of facts, and a joint stipulation of exhibits. The evidence presented to the trial
court was as follows.

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       Pat Savas is the trustor and trustee of Savas Trust. The beneficiaries of the Savas
Trust are Pat Savas’s sister and grandson. Tom Savas is not a beneficiary or trustee of
Savas Trust. Pat Savas testified that Savas Trust was “separate property” and that Tom
Savas had no “share in it.” Pat Savas testified that it was her understanding that pursuant
to the settlement agreement, Savas Trust “would be getting a portion of the promissory
note that was going to be recorded on the property.” Pat Savas testified that the $300,000
promissory note was “made payable” to Savas Trust because Tom Savas “was the owner
of Korinth and we felt that we should share the money and so, therefore [the money] was
to be put into my trust.” Tom Savas testified that he had “no part of” Savas Trust, which
was set up by an attorney. He testified that only Savas Trust had the right to the proceeds
from the $300,000 promissory note.
       A recorded fictitious deed of trust (which is a multi-page form deed of trust
containing various obligations incorporated by reference in short form deeds of trust),
states, “A. To protect the security of this Deed of Trust, Trustor agrees: [¶] . . . [¶]
(3) To appear in and defend any action or proceeding purporting to affect the security
hereof or the rights or powers of Beneficiary or Trustee and to pay all costs and expenses,
including cost of evidence of title and attorney’s fees in a reasonable sum, in any such
action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought
by Beneficiary to foreclose this Deed. [¶] (4) . . . [¶] Should Trustor fail to make any
payment or to do any act as herein provided, then Beneficiary or Trustee . . . may . . .
appear in and defend any action or proceeding purporting to affect the security hereof . . .
and, in exercising any such powers, pay necessary expenses, employ counsel and pay his
reasonable fees. [¶] . . . [¶] B. It is mutually agreed: [¶] . . . [¶] (5) That as additional
security, Trustor hereby gives to and confers upon Beneficiary the right to . . . sue for or
otherwise collect such rents, issues, and profits, including those past due and unpaid, and
apply the same, less costs and expenses of operation and collection, including reasonable
attorney’s fees, upon any indebtedness secured hereby, and in such order as Beneficiary
may determine.”

                                               7
       The second deed of trust does not contain an attorney fees provision, but contains
a provision incorporating subdivisions A and B of the fictitious deed of trust. A rider to
the second deed of trust states, “Any beneficiary may commence a foreclosure action and
all beneficiaries under the $300,000 note and the $500,000 note shall share in the costs
and proceeds equally after satisfying the First Mortgage.”
       The $500,000 promissory note payable to Gerber Trust and Kurtin Trust and
secured by the second deed of trust states, “If any attorney is engaged by Lender to
enforce or construe any provision of this Note or the Deed of Trust as a consequence of
any default or event of default, with or without the filing of any legal action or
proceeding, then Borrower shall immediately pay on demand all attorneys’ fees and all
other costs incurred by Lender . . . .” The $300,000 promissory note contains the same
attorney fees clause.
       The purported settlement agreement states, “In any action to enforce this
Agreement, or in any action arising out of this Agreement, whether by way of judicial,
arbitration, mediation or administrative proceedings or otherwise, the prevailing party in
such proceeding shall be entitled to recover reasonable costs and attorneys’ fees from the
non-prevailing party.”
       The underlying judgment, filed on August 29, 2008, states, “The revised written
settlement agreement dated July 2, 2007 is rescinded.”
D. The statement of decision
       The trial court issued a statement of decision, which was filed on May 6, 2011.
The statement of decision provided, in part, as follows.
       Chris Savas forged a quitclaim deed which purported to convey the real property
from Korinth to Mid City. Korinth and Savas Trust filed a quiet title action against Mid
City, Chris Savas, and Daniel Kupper and subsequently reached a settlement, the terms of
which were recited “in open court and on the record.”
       Korinth’s attorney, Lawrence Levine, prepared a draft settlement agreement (draft
settlement agreement) that the parties agreed conformed to the terms of the oral
settlement agreement. In Levine’s absence, Chris Savas persuaded Tom Savas, Pat

                                              8
Savas, and Athena Savas to sign a settlement agreement (purported settlement agreement)
that, unbeknownst to them, Chris Savas had drafted. A material difference between the
draft settlement agreement and the purported settlement agreement was that the “[draft
settlement agreement] provided for [Savas Trust] to receive a $350,000 note from Mid
[City] secured by the Joint Second Deed of Trust with Kurtin Family Trust in the
combined amount of $850,000. The [purported settlement agreement] provided for
[Savas Trust] to receive only a $300,000 note from Mid [City] secured by the Joint
Second Deed of Trust with Kurtin Family Trust in the combined amount of $800,000.”
       The terms of the second deed of trust were approved by Gerber Trust and Kurtin
Trust. The second deed of trust provided, among other things, that it “would be owned
jointly” by Gerber Trust and Kurtin Trust and Savas Trust; “‘[n]one of the Beneficiaries
shall have any right superior to the others.’ [Fn. omitted.]”; “[e]ach owner would share
proportionately to their percentage ownership interest in the proceeds realized from the
sale of the [real property]”; and “[e]ach party shall have a right to distribution
‘proportionate to their original loan balance, and adjusted for accounting. This language
means that the [Savas Trust] would be entitled to 3/8th interest in the [real property] and
that [Gerber Trust and Kurtin Trust] would be entitled to a 5/8th interest in the [real
property] upon a non-judicial foreclosure by either party.”
       The statement of decision held that the purported settlement agreement was “void
ab initio” and therefore the escrow instructions were “void” because they were signed
“under mistake” based on the purported settlement agreement. The purported settlement
agreement and escrow instructions conveyed no property interest to Mid City. Further,
Gerber Trust and Kurtin Trust did not rely on the purported settlement agreement or
escrow instructions in making the loan to Mid City and relied “solely upon the title
insurance policy for purposes of insuring good title. Therefore, there is no legal
argument which [Gerber Trust and Kurtin Trust] can make based on estoppel or
detrimental reliance.”
       “[Gerber Trust and Kurtin Trust] should not be held accountable for the misdeeds
of Chris Savas and Daniel Kupper nor for the [purported settlement agreement].”

                                              9
Therefore, the second deed of trust was recorded properly and became a valid lien on the
real property. “Furthermore, even though Mid City never had any legal interest in the
[real property], and normally Mid City could not legally place a lien on the [real
property] by signing the Joint Second Deed of Trust in favor of [Gerber Trust and Kurtin
Trust and Savas Trust], because Korinth signed the escrow instructions and the Forged
Deed of Trust, Korinth encumbered the [real property] with the Joint Second Deed of
Trust.” The trustee’s sale legally transferred title from Korinth to Gerber Trust and
Kurtin Trust in joint ownership with Savas Trust.
       The statement of decision held that the trial court in the underlying action did not
rule on the validity of the second deed of trust. It noted that Tom Savas testified that “he
intended to give [Savas Trust] the $300,000 (actually $350,000) promissory note from
Mid City, as a distribution of its ownership interest. . . . Indeed the transfer to [Savas
Trust] of part interest in the Joint Second Deed of Trust, insured that Pat Savas as
beneficiary of [Savas] Trust would have economic security.” Further, Gerber Trust and
Kurtin Trust did not prove that Savas Trust is the alter ego of Tom Savas and Pat Savas,
or that Korinth is the alter ego of Tom Savas and Pat Savas.
       The statement of decision determined that the application of the doctrine of
merger, as proposed by Gerber Trust and Kurtin Trust, “would result in an unfair windfall
to [Gerber Trust and Kurtin Trust]” and would be unfair to Savas Trust. Gerber and
Kurtin did not present any evidence showing that inequity resulted from permitting Savas
Trust to continue to own its three-eighths interest in the second deed of trust, and
subsequent to the trustee’s sale, in the real property. Savas Trust’s ownership interest “in
the Joint Second Deed of Trust is not invalidated by the doctrine of merger. [Gerber
Trust and Kurtin Trust] incompletely argue that somehow the [Savas Trust’s] ownership
of the $300,000 note was ‘merged’ with the ownership of the [real property] by Korinth
. . . because all parties were owned by each other. In other words, [Gerber Trust and
Kurtin Trust] are arguing that Tom Savas, Pat Savas, Korinth, and [Savas Trust] are one
and all the same. It is clear from the evidence that [Savas Trust] is independent and not
under the control or ownership of Tom Savas. It is also clear from the evidence that

                                             10
Korinth is independent and not under the control or ownership of Pat Savas. [¶]
However, even if [Gerber Trust and Kurtin Trust] were correct, the doctrine of ‘merger’
is not effective. Whether or not a merger occurs is a factual question and depends upon
the intent of the person in whom the interests are united. [Citation.] Here neither [Savas
Trust] nor Pat Savas nor Tom Savas seek merger. Even in the absence of expressed
intent, implied intent to avoid merger when all the circumstances show that the interest of
the person in whom the two estates have been united would be best served by keeping
them separate. [Citation.] [¶] A merger is held not to occur if a junior lien intervenes
between the ownership and security interests that are allegedly united. [Citation.] In
other words, since Broadway Federal owns a first trust deed which is secured on the
property between the fee ownership interest and the Joint Second Trust Deed, even if
Tom Savas owned both the $300,000 note secured by the Joint Second Trust Deed and
the fee interest in the [real property], the existence of Broadway Federals’ [sic] First
Deed of Trust blocks merger (and also therefore the removal of the $300,000 note).”
       Finally, the statement of decision held that Korinth was not entitled to judgment
on its quiet title claim. It also held that the “non-judicial foreclosure sale based on the
Joint Second Deed of Trust was legal, transferring title from Korinth to [Savas Trust]
(three-eighths) and [Gerber Trust and Kurtin Trust] (five-eighths).” The statement of
decision stated, “[Savas Trust] shall recover its Attorney’s fees and costs from [Gerber
Trust and Kurtin Trust], in an amount to be determined by the Court upon noticed motion
and cost bill.”
E. Motion for attorney fees
       Savas Trust and Pat Savas filed a motion for attorney fees, arguing that they were
entitled to attorney fees pursuant to Civil Code section 1717 because the promissory
notes contained a provision allowing the prevailing party to recover attorney fees and the
second deed of trust incorporated a “universal Deed of Trust” which allowed the
prevailing party to recover attorney fees. The trial court heard and denied Savas Trust
and Pat Savas’s motion for attorney fees, holding that “both the deed of trust and
promissory notes provide that attorneys’ fees may be awarded to the beneficiaries and

                                              11
lenders. However, such attorneys’ fees are payable only by the Trustor or the Borrower,
not by a fellow beneficiary or a fellow lender. [¶] . . . [¶] . . . Gerber and Kurtin were not
the trustors as stated in the Deed of Trust, and they did not step into the shoes of the
trustor through an assignment or other instrument. Instead, Gerber and Kurtin were also
listed as Beneficiaries under the Deed of Trust. Furthermore, Gerber and Kurtin were not
even listed on the promissory note that would entitle Savas to a recovery of fees, and
there is no evidence that Gerber or Kurtin stepped in the shoes of the lender, Mid City
Development.”
       These appeals followed.
                                       DISCUSSION
A. Standard of review
       A trial court’s decision based on undisputed facts is subject to de novo review by
the appellate court. (Mayer v. C.W. Driver (2002) 98 Cal.App.4th 48, 57.) “The
substantial evidence standard of review applies to both express and implied findings of
fact made by the court in its statement of decision.” (Ermoian v. Desert Hospital (2007)
152 Cal.App.4th 475, 501.) “Under the substantial evidence standard of review, our
review begins and ends with the determination as to whether, on the entire record, there is
substantial evidence, contradicted or uncontradicted, which will support the trial court’s
factual determinations.” (Ibid.)
       We apply a de novo review to that part of the trial court’s decision based on the
undisputed facts of the joint stipulation of facts and a substantial evidence of review to
that part of the decision in which the court made factual findings based on testimony and
evidence at trial.
B. The rescission of the purported settlement agreement did not void the second
deed of trust as to Savas Trust
       Gerber Trust and Kurtin Trust contend that the rescission of the purported
settlement agreement and cancellation of the quitclaim deed voided the second deed of
trust as to Savas Trust only. We disagree because the earlier settlement had nothing to do
with the rights of the five-eighths owners, who received the benefit of their bargain.

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       Gerber Trust and Kurtin Trust contend that Korinth agreed to sell the real property
to Mid City, in exchange for, among other things, the $300,000 promissory note. They
claim that when the purported settlement agreement was rescinded, Korinth’s $300,000
promissory note was rescinded, and therefore the note was no longer secured by the
second deed of trust. To reach this conclusion, they argue that Savas Trust “was
designated as the ‘payee’ of the promissory note to be executed by Mid City, solely as the
‘nominee’ of Korinth.” They contend that Savas Trust did not loan $300,000 to Mid City
in exchange for the promissory note and that any rights held by Savas Trust to the
$300,000 promissory note and the second deed of trust “were all as a result of the
[purported] settlement” agreement. Therefore, they assert, Korinth “obtained” the
$300,000 promissory note “from Mid City as part of the [purported settlement
agreement].”
       Gerber Trust and Kurtin Trust then cite the general rule that when an agreement
has been rescinded, the parties must be restored to their former positions by requiring
each to return whatever consideration has been received, relying on Nmsbpcsldhb v.
County of Fresno (2007) 152 Cal.App.4th 954, 959–960. Gerber Trust and Kurtin Trust
thus contend that when the purported settlement agreement was rescinded and the
quitclaim deed was canceled, Korinth was restored to its original position in that it
maintained title to the real property––but at the same time it could not “retain” the rights
to the “$300,000 Promissory Note that it had obtained from Mid City as part of the
settlement . . . .” Gerber Trust and Kurtin Trust also cite IMO Development Corp. v. Dow
Corning Corp. (1982) 135 Cal.App.3d 451 for the proposition that a contract entered into
under duress must be rescinded in its entirety because a party “‘may not retain the rights
under it which he deems desirable and repudiate the remainder [citation].’” (Id. at p. 458,
italics omitted.) Gerber Trust and Kurtin Trust argue that “Korinth could not rescind
only the portion of the Settlement Agreement which transferred title to the [real property]
to Mid City, while at the same time retaining the $300,000 Promissory Note it received
from Mid City.”

                                             13
       We disagree with Gerber Trust and Kurtin Trust’s logic. First, while Gerber Trust
and Kurtin Trust’s $500,000 loan in exchange for the promissory note and second deed of
trust were referred to in the purported settlement agreement, Gerber Trust and Kurtin
Trust were not parties to the purported settlement agreement and did not act in reliance
on it. As the trial court stated, Gerber Trust and Kurtin Trust did not rely on the
purported settlement agreement or escrow instructions in making the loan to Mid City
and relied “solely upon the title insurance policy for purposes of insuring good title.”
Thus, although the purported settlement agreement was rescinded and the quitclaim deed
that conveyed the real property from Korinth to Mid City was canceled, Gerber Trust and
Kurtin Trust’s rights were not affected because the trial court held that the second deed of
trust was valid, and Korinth did not appeal this ruling. Subsequently, when Korinth failed
to make payments on Gerber Trust and Kurtin Trust’s $500,000 loan, Gerber Trust and
Kurtin Trust were entitled to, and did, hold a trustee’s sale pursuant to the second deed of
trust. In sum, they got the benefit of their bargain.
       The rescission of the purported settlement agreement likewise did not affect Savas
Trust’s three-eighths interest in the real property. Contrary to Gerber Trust and Kurtin
Trust’s assertions, the evidence supports the trial court’s conclusion that Savas Trust and
Korinth were separate entities. Pat Savas was the trustor and trustee of Savas Trust. Tom
Savas was not a beneficiary or trustee of Savas Trust and did not have the right to receive
payments under the $300,000 promissory note. Savas Trust, and not Korinth, was the
holder and beneficiary of the $300,000 promissory note.
       Nevertheless, Gerber Trust and Kurtin Trust assert that “Korinth nominated the
Savas Trust as the ‘payee’ on the $300,000 Promissory Note, and the beneficiary of the
Second Deed of Trust.” (Italics added.) They claim that “the rights accruing pursuant to
the $300,000 Promissory Note, and the Second Deed of Trust securing the $300,000
Promissory Note, belonged to Korinth, and not the Savas Trust.” In support of their
argument that Savas Trust was the nominee of Korinth, Gerber Trust and Kurtin Trust
miscite the joint stipulation of facts, which states at paragraph 10.d., “The second deed of
trust securing [Gerber Trust and Kurtin Trust’s] $500,000 loan would be in the total

                                             14
amount of $850,000, and would also secure a promissory note in the amount of $350,000
to be executed by Mid-City/Kupper in favor of Korinth/Savas Family.” In their opening
brief on appeal, Gerber Trust and Kurtin Trust replaced the term “Korinth/Savas Family”
with the term “Korinth, or its ‘nominee(s).’” (Italics added.)
       Gerber Trust and Kurtin Trust’s contentions fail. We conclude that Gerber Trust
and Kurtin Trust’s reliance on the general rules that parties to a rescinded contract must
be restored to their original position and a contract entered into under duress must be
rescinded in its entirety, is misplaced because, as noted, they got the benefit of their
bargain and were in no way affected by the rescission of the purported settlement
agreement. Their attempts to void Savas Trust’s interest in the real property on those
grounds fail.
       Further, Gerber Trust and Kurtin Trust contend that when the purported settlement
agreement among Korinth, Savas, and others was “‘rescinded,’” Savas Trust’s three-
eighths interest in the real property “was extinguished as a matter of law, before the
Trustee’s Sale occurred, pursuant to the doctrine of ‘merger of title.’” Gerber Trust and
Kurtin Trust cite Sheldon v. La Brea Materials Co. (1932) 216 Cal. 686 for the
proposition that “‘[w]hen a greater and lesser estate coincide and meet in one and the
same person, in the same right without any intermediate estate, the latter is in law merged
in the greater.’” (Id. at p. 689.) But Gerber Trust and Kurtin Trust’s argument based on
the doctrine of merger is unavailing. As previously stated, the evidence supports the trial
court’s conclusion that Korinth and Savas Trust are separate entities. Further, Gerber
Trust and Kurtin Trust have shown no evidence of Korinth’s and Savas Trust’s intent to
merge their interest in the real property. (Kolodge v. Boyd (2001) 88 Cal.App.4th 349,
362 [“While it is presumed that there is no merger where merger would work an inequity,
the presumption against merger can be overcome by evidence that the parties intended a
merger upon the union of two or more estates, and as to this question the person claiming
merger has the burden of proof”].) And even if Korinth and Savas Trust were the same
entity and had the intent to merge their interests, the doctrine of merger does not apply
because Broadway Federal Bank’s first trust deed was an intermediary estate between

                                              15
Korinth’s ownership interest and Savas Trust’s second deed of trust. (Anglo-Californian
Bank v. Field (1905) 146 Cal. 644, 653 [equity will prevent a merger where there is a
junior lien].)
       Finally, we reject Gerber Trust and Kurtin Trust’s argument that because Gerber
Trust and Kurtin Trust were the winning bidders at the trustee’s sale, they acquired the
entire ownership interest in the real property. The rider to the second deed of trust states,
“Any beneficiary may commence a foreclosure action and all beneficiaries under the
$300,000 note and the $500,000 note shall share in the costs and proceeds equally after
satisfying the First Mortgage.”
C. Pat Savas and Savas Trust are not entitled to attorney fees
       1. Applicable statutes and standard of review
       “‘Whether a party to litigation is entitled to recover costs is governed by Code of
Civil Procedure section 1032, which provides, in subdivision (b), that “[e]xcept as
otherwise expressly provided by statute, a prevailing party is entitled as a matter of right
to recover costs in any action or proceeding.” For the purpose of determining entitlement
to recover costs, Code of Civil Procedure section 1032 defines “prevailing party” as
including, among others, “a defendant in whose favor a dismissal is entered.” (Code Civ.
Proc., § 1032, subd. (a)(4).)’ Also, a defendant against whom the plaintiff does not
recover any relief is a prevailing defendant. [Citation.] [¶] Under Code of Civil
Procedure section 1033.5, subdivision (a)(10), attorney fees are allowable as costs under
Code of Civil Procedure section 1032, ‘when authorized by any of the following: [¶]
(A) Contract. [¶] (B) Statute. [¶] (C) Law.’” (Carver v. Chevron U.S.A., Inc. (2002) 97
Cal.App.4th 132, 143.)
       Civil Code section 1717, subdivision (a) provides, in pertinent part: “In any action
on a contract, where the contract specifically provides that attorney’s fees and costs,
which are incurred to enforce that contract, shall be awarded either to one of the parties
or to the prevailing party, then the party who is determined to be the party prevailing on
the contract, whether he or she is the party specified in the contract or not, shall be
entitled to reasonable attorney’s fees in addition to other costs.”

                                              16
       “On review of an award of attorney fees after trial, the normal standard of review
is abuse of discretion. However, de novo review of such a trial court order is warranted
where the determination of whether the criteria for an award of attorney fees and costs in
this context have been satisfied amounts to statutory construction and a question of law.”
(Carver v. Chevron U.S.A., Inc., supra, 97 Cal.App.4th at p. 142.) “Stated another way,
to determine whether an award of attorney fees is warranted under a contractual attorney
fees provision, the reviewing court will examine the applicable statutes and provisions of
the contract. Where extrinsic evidence has not been offered to interpret the [contract],
and the facts are not in dispute, such review is conducted de novo.” (Ibid.)
       2. Savas Trust and Pat Savas are not entitled to attorney fees based on the
purported settlement agreement
       Savas Trust and Pat Savas argue they are entitled to attorney fees based on the
purported settlement agreement. We disagree.
       We first note that Savas Trust and Pat Savas argued in their motion below that
they were entitled to attorney fees pursuant to Civil Code section 1717 because the
promissory notes secured by the second deed of trust “allow the prevailing party in the
action to recover its attorney’s fees,” and the second deed of trust incorporated the
fictitious deed of trust, which allows the prevailing party to recover attorney fees. On
appeal, they raise new theories which we will address because they are questions of law
applied to undisputed facts in the record. (In re Marriage of Moschetta (1994) 25
Cal.App.4th 1218, 1227 [party may not raise new contention on appeal unless new point
of law is decided after trial “or where the new theory ‘presents a question of law to be
applied to undisputed facts in the record’”].)
       Savas Trust and Pat Savas argue they are entitled to attorney fees either as a third
party beneficiary to the “settlement agreement,” a signatory to the escrow instructions
that incorporate the “settlement agreement,” or as a third party beneficiary to the escrow
instructions that incorporate the “settlement agreement,” citing Pacific Preferred
Properties, Inc. v. Moss (1999) 71 Cal.App.4th 1456 (Pacific). Savas Trust and Pat
Savas’s reliance on Pacific is misplaced. In Pacific, a real estate purchase contract

                                             17
prepared by the broker, who was named in the contract and was both the listing and
selling agent, specifically stated, “In any legal action, proceeding or arbitration arising
out of this agreement, whether instituted by or against the Buyer or Seller, or the Brokers
named herein, the prevailing party(s) shall be entitled to reasonable attorney’s fees and
costs.” (Id. at p. 1460.) Thus, the Court of Appeal held that the company that operated
the brokerage firm was included “unambiguously” within the attorney fees provision and
rejected the trial court’s “[attempt] to evade the implication of party status arising from
this salient consideration by characterizing the broker as an intended third party
beneficiary of the buyer-seller contract.” (Id. at p. 1462.)
       The purported settlement agreement states, “In any action to enforce this
Agreement, or in any action arising out of this Agreement, whether by way of judicial,
arbitration, mediation or administrative proceedings or otherwise, the prevailing party in
such proceeding shall be entitled to recover reasonable costs and attorneys’ fees from the
non-prevailing party.” But Gerber Trust and Kurtin Trust were not signatories to the
purported settlement agreement. And Pacific does not hold, as Savas Trust and Pat Savas
claim, that third party beneficiaries are entitled to attorney fees; even so, we do not agree
with their conclusion that Gerber Trust and Kurtin Trust were third party beneficiaries to
the purported settlement agreement. Also, their action for quiet title, breach of contract
and specific performance against Gerber Trust and Kurtin Trust was not an action to
enforce the purported settlement agreement or arising out of the purported settlement
agreement. Accordingly, Savas Trust and Pat Savas’s arguments fail.
       3. Savas Trust and Pat Savas are not entitled to attorney fees under equitable
principles of “‘practical liability’”
       Savas Trust and Pat Savas argue that they are entitled to attorney fees under
equitable principles of “‘practical liability.’” Again, we disagree.
       Savas Trust and Pat Savas argue that “[t]he Fictitious Deed of Trust, which was
incorporated into the actual recorded Deed of Trust allow Gerber (Beneficiary) to collect
attorney fees from Mid City (Trustor) in the event that Mid City (Trustor) breaches any
terms of the Deed of Trust” and the promissory notes secured by the second deed of trust

                                              18
allow Gerber Trust and Kurtin Trust to collect attorney fees from Mid City in the event of
Mid City’s breach. Thus, Savas Trust and Pat Savas contend, they are entitled to attorney
fees because they “had to bring suit to maintain their equity in the property” and Mid City
could have collected attorney fees against Gerber Trust and Kurtin Trust in a successful
action to stop the foreclosure of the real property; they are similar to the “nonassuming
grantee” entitled to attorney fees in Saucedo v. Mercury Sav. & Loan Assn. (1980) 111
Cal.App.3d 309 (Saucedo). We disagree.
       In Saucedo, the Court of Appeal held that a nonassuming grantee, which is a
purchaser of real property who takes property “‘subject to’” an existing loan, is entitled to
attorney fees in a successful action to enjoin the trust deed holder from enforcing a due-
on-sale clause in the promissory note secured by the deed of trust. (Saucedo, supra, 111
Cal.App.3d at p. 315.) The court held that “in every case in which the nonassuming
grantee has sufficient interest in the property to warrant his resisting foreclosure, he
would as a real and practical matter be required to pay reasonable attorney fees incurred
by trustee and/or beneficiary should they prevail in the action to prevent foreclosure. [¶]
While the nonassuming grantee would not have been personally liable for payment of
attorney fees under the note and deed of trust, the trustee and/or beneficiary would have
been entitled to attorney fees under the provisions of the deed of trust had they prevailed,
and these fees would have become part of the debt secured by the deed of trust. To
prevent foreclosure of his interest, the nonassuming grantee would have had to pay off
the secured debt, including the attorney fees, by refinancing or otherwise. [Citations.]
This practical ‘liability’ of the nonassuming grantee is sufficient to call into play the
remedial reciprocity established by Civil Code section 1717.” (Saucedo, supra, at
p. 315.)
       Savas Trust and Pat Savas are not in a position similar to that of a nonassuming
grantee who, although not personally liable for payment of attorney fees under the note
and deed of trust, would have to pay off the debt secured by the trust deed, which
includes attorney fees, to prevent foreclosure of his interest. Thus, Gerber Trust and
Kurtin Trust’s right to attorney fees against Mid City based on a breach of the $500,000

                                              19
promissory note and second deed of trust does not confer upon Savas Trust and Pat Savas
the right to attorney fees in its action against Gerber Trust and Kurtin Trust.
       Accordingly, we conclude Savas Trust and Pat Savas are not entitled to attorney
fees under equitable principles of “‘practical liability.’”
       4. Savas Trust is not entitled to attorney fees as a “third party beneficiary” to
the $500,000 promissory note secured by the second deed of trust
       Savas Trust contends it is entitled to attorney fees as a “third party beneficiary” to
the $500,000 promissory note secured by the second deed of trust. We disagree.
       Savas Trust cites Real Property Services Corp. v. City of Pasadena (1994) 25
Cal.App.4th 375 (Real Property) for the proposition that Savas Trust is an intended third
party beneficiary to the $500,000 promissory note secured by the second deed of trust. In
that case, the City of Pasadena (City) and BWC Development Corp. (BWC) entered into
a lease for the development of a parking garage and movie theater. The lease provided
that a prevailing party would be entitled to attorney fees in an action brought by either
party under the lease. Real Property Services Corp. (RPS) was not a signatory to the
lease, but the lease expressly provided for RPS to be the sublessee who would operate the
movie theater. After the construction project was abandoned and the City and BWC
terminated the lease, RPS sued the City for breach of contract and requested attorney
fees. The Court of Appeal stated, “A party is entitled to recover its attorney fees pursuant
to a contractual provision only when the party would have been liable for the fees of the
opposing party if the opposing party had prevailed. Where a nonsignatory plaintiff sues a
signatory defendant in an action on a contract and the signatory defendant prevails, the
signatory defendant is entitled to attorney fees only if the nonsignatory plaintiff would
have been entitled to its fees if the plaintiff had prevailed.” (Id. at p. 382.) The court
noted, “It is settled law that ‘if a lessor has expressly agreed to a sublease, the sublessee
is a third party beneficiary to the implied covenant of quiet enjoyment in the original
lease and has the right to go directly against the lessor for its breach.’ [Citation.] Where
there is a sufficient nexus between the lessor and sublessee, a nonsignatory sublessee is
entitled to enforce an attorney fee provision in the lease as a third party beneficiary

                                              20
against a signatory landlord. [Citations.]” (Id. at p. 383.) The court determined that a
nexus between the City and RPS existed because the lease expressly provided for RPS to
be the sublessee who would operate the theater and that RPS was entitled to proceed
against the City for breach of the lease. Thus, had RPS been successful, the City would
have been liable for costs and attorney fees.
         But Savas Trust does not establish that it was a third party beneficiary as
contemplated under Real Property. In support of its argument that it was a third party
beneficiary of the $500,000 promissory note secured by the second deed of trust, Savas
Trust merely argues that the $500,000 promissory note “references” Savas Trust’s
$300,000 promissory note and that Savas Trust and Gerber Trust and Kurtin Trust are
“named as Beneficiaries in that Deed of Trust.” But Savas Trust is not like the sublessee
in Real Property, who was a third party beneficiary to the implied covenant of quiet
enjoyment in the original lease and had the right to sue the lessor for breach. (Real
Property, supra, 25 Cal.App.4th at p. 383.) Thus, Gerber Trust and Kurtin Trust’s right
to attorney fees against Mid City based on a breach of the $500,000 promissory note
secured by the second deed of trust does not confer upon Savas Trust the right to attorney
fees in its action against Gerber Trust and Kurtin Trust.
         Accordingly, we conclude that Savas Trust is not entitled to attorney fees as a
“third party beneficiary” to the $500,000 promissory note secured by the second deed of
trust.
         5. Savas Trust and Pat Savas are not entitled to attorney fees under “equitable
provisions”
         Savas Trust and Pat Savas urge they are entitled to attorney fees under “equitable
provisions.” We disagree.
         Savas Trust and Pat Savas argue that Gerber Trust and Kurtin Trust filed a cross-
complaint alleging that Pat Savas was the alter ego of Savas Trust. Without citation to
the record or authority, they contend, “Had Gerber/Kurtin Trust prevailed on its alter ego
claim, Pat Savas individually would have been liable to Gerber/Kurtin Trust for its
attorney’s fees pursuant to the Deed of Trust.” But we are not convinced by Savas Trust

                                                21
and Pat Savas’s unsupported argument and conclude that Savas Trust and Pat Savas are
not entitled to attorney fees under “equitable provisions.”
       And to the extent Savas Trust and Pat Savas argue they are entitled to attorney
fees “based on the July 18, 2011 Judgment which awarded it attorneys’ fees,” they are
incorrect. As stated, attorney fees are allowable as costs under Code of Civil Procedure
section 1032, “when authorized by any of the following: [¶] (A) Contract. [¶]
(B) Statute. [¶] (C) Law.” (Code Civ. Proc., § 1033.5, subd. (a)(10).) Thus, a statement
of decision stating that Savas Trust shall recover its attorney fees and costs from Gerber
Trust and Kurtin Trust, upon noticed motion and cost bill, cannot be grounds for an
award of attorney fees when unsupported as a matter of law, let alone in light of the trial
court’s subsequent denial of attorney fees.
       In addition, Gerber Trust and Kurtin Trust argue that Savas Trust and Pat Savas
are not entitled to attorney fees based on “‘procedural’ defects regarding service of their
motion for attorneys’ fees.” Because we concluded that Savas Trust and Pat Savas are
not entitled to attorney fees on substantive grounds, we do not address Gerber Trust and
Kurtin Trust’s “procedural” argument.
       We conclude that Savas Trust and Pat Savas are not entitled to attorney fees
because they have not shown the existence of an attorney fees provision in any contract
between Gerber Trust and Kurtin Trust on the one hand, and Savas Trust on the other.

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                                   DISPOSITION
      The judgment and the order denying attorney fees are affirmed. Each party to bear
its own costs on appeal.
      NOT TO BE PUBLISHED.

                                              MALLANO, P. J.
We concur:

      ROTHSCHILD, J.

      JOHNSON, J.

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