California Court of Appeals, First District, Third Division
Superior Court of Sonoma County, No. SCV-247728, Patrick Broderick, Judge.
Counsel for Plaintiff and Respondent: THE PREIST LAW OFFICES, William G. Priest
Counsel for Defendant and Appellant: FRITZ LAW OFFICES, William F. Fritz
We here confront the recurring issue of determining the prevailing party for the purpose of awarding attorney fees under a contractual attorney fee provision. Defendant BTI Group, Inc. (BTI) appeals a postjudgment order denying its motion for attorney fees, contending that although it was held liable for damages to the plaintiff, Catherine Maynard, under her cause of action for negligence, it was nonetheless the prevailing party entitled to attorney fees under Civil Code section 1717 (section 1717) because plaintiff did not recover under her cause of action for breach of the contract containing the attorney fee provision.
Under the broad language of the attorney fee provision, the trial court correctly rejected defendant’s request for attorney fees. Unlike some attorney fee provisions that restrict the right to recover attorney fees to the party prevailing on a breach of contract claim, in which case the outcome of other claims does not affect the right to recover attorney fees, the agreement in this case entitles the party who prevails in the overall dispute to recover its attorney fees. Under the terms of this provision plaintiff is the prevailing party although she recovered on a tort theory rather than a contract theory. Therefore, we shall affirm the trial court’s order.
Facts and Procedural History
Plaintiff and BTI were parties to a listing agreement under which BTI acted as the broker in the sale of plaintiff’s retail business. The business was sold but the buyer subsequently filed for bankruptcy protection and a portion of the purchase price went unpaid. Because BTI failed to obtain security from the buyer as plaintiff had requested, plaintiff sued BTI for the balance of the purchase price, alleging seven causes of action: breach of contract, breach of fiduciary obligations, negligence, negligent misrepresentation, fraud in the inducement, fraudulent misrepresentation, and rescission. In a bench trial, the court found BTI liable on the negligence cause of action, awarding her damages of $24, 000 plus interest, but found for BTI on all of the other causes of action including the two grounded on contract theories.
The listing agreement contained the following attorney fee provision: “All parties to this agreement agree to mediate, in good faith, any dispute prior to initiating arbitration or litigation. The prevailing party in the event of arbitration or litigation shall be entitled to costs and reasonable attorney fees except that any party found in those proceedings to have failed to mediate in good faith shall not be so entitled.” Following the trial court’s decision on the merits of plaintiff’s claims, plaintiff and BTI both sought attorney fees. Plaintiff asserted that because she obtained a “net judgment against BTI, ” she was the prevailing party for the purpose of awarding attorney fees, as she was for the purpose of recovering other costs of suit. (Code of Civ. Proc., §1032.) BTI argued it was the prevailing party as it “successfully defended the breach of contract claim[s]” and, thus, was the prevailing party pursuant to section 1717. The court ruled that plaintiff was the prevailing party and awarded her attorney fees. BTI’s request for attorney fees was denied. BTI filed a timely notice of appeal from the denial of its request for its attorney fees.
BTI’s claim for attorney fees proceeds on the assumption that section 1717 is the operative statutory provision, overlooking the significance of section 1021. Section 1021 states, “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties....” “It is quite clear from the case law interpreting... section 1021 that parties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves....” (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341.) Before section 1717 comes into play, it is necessary to determine whether the parties entered an agreement for the payment of attorney fees and, if so, the scope of the attorney fee agreement.
As made clear in Xuereb, and in numerous cases that have followed, a contractual provision may provide that the party who prevails in litigation over noncontractual claims shall recover its attorney fees. (Xuereb v. Marcus & Millichap, Inc., supra, 3 Cal.App.4th at p. 1342 [“under proper circumstances attorney fees may be awarded pursuant to section 1021 in a tort action”]; see, e.g., Childers v. Edwards (1996) 48 Cal.App.4th 1544, 1548-1549, and cases cited therein.) However, it is often unclear in contractual attorney fee provisions entitling the “prevailing party” (or words to that effect) to an award of attorney fees whether the parties intended fees to be recovered by the party who prevails only on a breach of contract claim or by the party who prevails in a broader sense, considering the action as a whole. If the latter, neither section 1717 nor any other provision precludes an award of attorney fees to a party prevailing on a tort claim, or authorizes an award to a party who has prevailed in defending a breach of contract cause of action but has been held liable on other related causes of action.
If the contractual provision limits an award of attorney fees to the party who has prevailed on the contract, fees may be awarded only to that party, and section 1717 is invoked. As the Supreme Court pointed out in Hsu v. Abbara (1995) 9 Cal.4th 863, in 1987 the Legislature replaced the term “prevailing party” in section 1717, subdivision (a) with the term “party prevailing on the contract, ” “evidently to emphasize that the determination of prevailing party for purposes of contractual attorney fees was to be made without reference to the success or failure of noncontract claims.” (9 Cal.4th at pp. 873-874.) “Section 1717 as amended in 1987, makes it clear that the party who obtains greater relief on the contract action is the prevailing party entitled to attorney fees under section 1717, regardless of whether another party also obtained lesser relief on the contract or greater relief on noncontractual claims.” (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 531.)
Thus, when the attorney fee provision provides that the party who prevails on the contract claim shall recover its attorney fees, only that party may recover its fees even if the other party obtains greater relief under a noncontractual cause of action. (Korech v. Hornwood (1997) 58 Cal.App.4th 1412.) In Korech, the plaintiff subcontractor sought recovery of amounts due for the performance of electrical work under causes of action for breach of contract and enforcement of a mechanics lien. Plaintiff recovered on the noncontractual mechanics lien claim but not on the contract claim. The attorney fee provision in what the plaintiff had alleged to be the controlling contract, fairly read,  provided for an award of attorney fees only ...