Second District, Division 6 Affirms Substantial Fee Award Based on “Tenaciousness” Factor.
For all attorneys winning contentious real estate litigation with a contractual fees clause, you may have a good chance of recouping most of your fees on behalf of clients under Civil Code section 1717, especially where your opponent was aggressive and tenacious throughout the litigation. Peak-Las Positas Partners v. Bollag, Case No. B205091 (2d Dist., Div. 6 Mar. 16, 2009) (certified for publication) is a classic embodiment of how this principle may play out in the real estate litigation context.
The opening sentences of this opinion, authored by Presiding Justice Gilbert (who has his own colorful blog), segue in well with the mantra of our blog that fees can be the “be all/end all” of many litigated actions: “Parties agree to act reasonably in their contractual relationship. This case demonstrates that when a party acts unreasonably, no one prospers, except the attorneys.”
In Bollag, seller contracted to purchase buyer’s contiguous piece of Santa Barbara property for purposes of building a future housing project for $475,000, subject to contingencies based on developmental obstacles that revolved around a lot line adjustment that had to be approved by governmental authorities. Buyer paid most of the purchase price, incurred about $5 million in lot line adjustment expenses, and the parties agreed to a first purchase agreement amendment by which future extensions of escrow would be agreed to by and Buyer and Seller through “mutual consent” which “shall not be unreasonably withheld or delayed.” Based on City of Santa Barbara delays, buyer was several months late in obtaining certain approvals. However, the approvals were obtained. Buyer brought a specific performance action to keep the deal alive after seller refused to extend escrow any further. The trial court did extend escrow another 60 days and awarded $511,282.50 in attorney’s fees and $19,003.76 in costs to prevailing party based on a contractual fees clause in the purchase agreement.
Seller was miffed, and appealed.
Aside from finding that the “unreasonable” consent language involved an interpretation that was fact intensive in the escrow extension context, Justice Gilbert rebuffed the reasonableness challenges to the substantial fee award.
Seller mainly grumbled that it was outrageous that the fee award exceeded the $475,000 purchase price—apparently ignoring the $5 million lot line adjustment expenses by buyer. Wake up to modern litigation was the basic appellate retort, reinforced by the reality that no fungible, ordinary piece of real estate was involved. The appellate panel found that seller had interjected collateral issues and that his vigorous defense of the specific performance action necessitated a great deal of work by experienced attorneys. The trial court only reduced requested attorney’s fees by $2,1717 and paralegal fees by 25% in awarding $511,282.50 in fees.
The main point made in the opinion is that the aggressive litigation posture by the losing party is a factor that should indeed be weighted when awarding fees under section 1717. Quoting from International Longshoremen’s & Warehousemen’s Union v. Los Angeles Export Terminal, Inc., 65 Cal.App.4th 287, 304 (1999), Division Six did observe that a defendant “cannot litigate tenaciously and then be heard to complain about the time necessarily spent by the plaintiff in response.”
This is a good case for real estate litigators to keep in mind when seeking fees. Two factors should be stressed in similar fee petition situations, namely (1) the tenaciousness or aggressiveness of the other side, and (2) the uniqueness of the real property that gave rise to the overall contentiousness of the litigation.