Second District, Division 2 Applies Classic Reciprocity Principles Under 1717.
Baker v. Oleander Corp., Case No. B221193 (2d Dist., Div. 2 Nov. 8, 2010) (unpublished) is another reminder of how reciprocity principles under Civil Code section 1717 operate in cases involving contractual nonsignatory and signatory litigants. It also shows how trial courts will apportion out fees to be awarded to a prevailing party with respect to work expended in connection with litigating against the nonsignatory.
In this one, a prevailing party at the trial court was found not to prevail on appeal because the defendant was an unlicensed contractor,
meaning that the opposite side (Baker) actually prevailed. Defendant’s shareholder/officer brought a cross-complaint against the ultimately winning plaintiff, but the trial judge did not adjudge the matter or award any fees to shareholder/officer. On remand after winning at the previous appellate level, Baker sought to recover $274,615 in attorney’s fees from both unlicensed contractor and its shareholder/officer. The lower court awarded Baker fees of $186,040 against unlicensed contractor under a contractual fees clause but awarded no fees against shareholder/officer, apportioning out fees incurred by Baker in litigating claims against shareholder/officer when fashioning the award against unlicensed contractor. Baker appealed because she wanted more fees and wanted them also assessed against shareholder/officer.
The appellate court affirmed the lower’s court fee award.
Even under Civil Code section 1717, shareholder/officer (the nonsignatory cross-complainant) could not claim attorney’s fees if he prevailed against Baker (signatory defendant) because the nonsignatory was not a party to the contract with the fees clause. Under 1717 reciprocity principles, if nonsignatory cross-complainant was not entitled to fees, then Baker was not entitled to fees either. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4th 858, 897 (2008); Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4th 375, 382 (1994); Sessions Payroll Management, Inc. v. Noble Construction Co., 84 Cal.App.4th 671, 679 (2000).) Merely because shareholder/officer prayed for fees in his complaint did not mean the estoppel theory applied, with the appellate panel lining up with the majority viewpoint on this issue. (Blickman, supra, 162 Cal.App.4th at 897-901.)
Also, the appellate panel affirmed the trial court’s exclusion of $88,575 in fees, finding that this was equitable because work relating to shareholder/officer was not a factor in trial given that the lower court determined it was belatedly filed and not adjudged on the merits.