APPEAL from an order of the Superior Court of San Diego County, Judith Hayes, Judge. Reversed and remanded. (Super. Ct. No. GIC851670).
The opinion of the court was delivered by: McINTYRE, J.
CERTIFIED FOR PUBLICATION
In this case, we conclude the trial court abused its discretion when it decided there was no prevailing party on a contract for purposes of awarding attorney's fees under subdivision (b) Civil Code section 1717 because the record clearly revealed that one party obtained greater relief on the contract in this mixed result case. (All undesignated statutory references are to the Civil Code.) Accordingly, we reverse the order denying attorney's fees and remand the matter for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
In 2005, BlackRock Realty Advisors, Inc. (BlackRock) executed agreements to purchase two commercial properties owned by Silver Creek, LLC and Griffin Properties, LLC (together Silver Creek) for a total purchase price of $29.75 million and deposited a total of about $1.13 million into escrow accounts. The agreements specified that, among other things, BlackRock would assume existing loans on the properties, the loan assumption agreements had to be satisfactory to Silver Creek and the sale transactions would close no later than July 1, 2005.
During escrow, a dispute arose between the parties regarding the terms of the loan assumption agreements. Shortly after the deadline for closing, Silver Creek notified BlackRock that it considered the agreements and escrow terminated for failure to comply with the closing deadline and obtain satisfactory loan assumption agreements. When BlackRock refused to acknowledge the termination, Silver Creek send a detailed letter averring that it was not in default under the agreements but offering to relinquish its rights to the deposit upon execution of an acceptable settlement agreement. After BlackRock failed to formally respond to its letter, Silver Creek filed the instant action for declaratory relief seeking a declaration that it validly terminated the agreements and was entitled to retain the deposit.
BlackRock filed a cross-complaint alleging that Silver Creek had breached its obligation to act reasonably in approving a loan release and thus its purported termination of the agreements was invalid. BlackRock sought damages and return of its deposit for Silver Creek's alleged breach of the agreements or, alternatively, specific performance of the agreements. Before trial, the parties certified under penalty of perjury that entitlement to the deposit was a disputed issue.
The matter proceeded to a bench trial and the court heard testimony from a Silver Creek representative that it did not want the deposit, but wanted to get the properties back on the market. BlackRock representatives testified that BlackRock's goal was to obtain the properties and it was not willing to merely accept its deposit and walk away from the deal. In a posttrial brief, Silver Creek noted that the agreements provided that the deposit would be paid to it if the deal did not close by the closing date and that BlackRock would get the deposit if Silver Creek disapproved the loan assumption and terminated the agreements. Silver Creek also reiterated that it sought to regain control of the properties, "[k]eeping the deposit has never been an objective" and it deferred to the court on resolution of that issue.
The trial court issued a detailed statement of decision finding in favor of Silver Creek on the complaint and BlackRock's cross-complaint, but concluding that BlackRock was entitled to a return of the deposit. The trial court noted that the primary issue before it was whether Silver Creek was in default of the agreements when it gave notice of the termination and "secondarily" the proper disposition of the deposit. The trial court found that Silver Creek did not act in bad faith or engage in any financial impropriety or deceptive or sharp practices and had "in every respect acted in good faith."
As relevant to this appeal, the trial court found that: (1) Silver Creek's disapproval of the loan assumption was reasonable and in good faith and that no reasonable person in its position would have approved the proposed loan assumption agreements; and (2) BlackRock had not done what it was required to do under the agreements and was not "in any respect ready to perform" under the agreements by the July deadline. The trial court then looked to the language of the agreements to resolve the disposition of the deposit, stating that the agreements provided that if BlackRock was unable to negotiate an assumption of the loans it would be entitled to return of the deposit. The trial court entered a judgment declaring that Silver Creek had properly terminated the agreements, denying all of BlackRock's claims and returning the deposit to BlackRock. Although BlackRock appealed from the judgment, the appeal has since been dismissed and the judgment is now final.
Silver Creek filed a motion for attorney's fees claiming it was the prevailing party on the contract under section 1717 and the agreements. Specifically, the agreements provided that if any proceeding is brought in connection with the agreements that the prevailing party "shall be entitled" to recover reasonable attorney's fees and that "[t]he parties intend this provision to be given the most liberal construction possible and to apply in any circumstances in which such party reasonably incurs expenses."
The trial court found that Silver Creek did not "win an unqualified victory" because BlackRock was entitled to return of the deposit. Accordingly, it concluded that it had discretion on finding a prevailing party and denied the motion because Silver Creek had succeeded on its contentions regarding termination of the agreements, but BlackRock had succeeded on its claim for the deposit and it could not "determine at this time that one party has obtained greater relief than the other." Silver Creek timely appealed from this order.
I. Legal Principles and Standard ...