Suing Real Estate Buyers, Who Were Defensed At Judgment On The Pleadings Stage, Were Not Stung With Real Estate Purchase Contractual Fees By Victorious Brokers, But Did Suffer Fee Exposure From Lis Pendens Expungement Proceeding

Third District Affirms Award of Lis Pendens Expungement Fees to Brokers and Sustains Denial of Attorney’s Fees to Brokers Under Real Estate Purchase Agreement Fee Clause.

            This next case deals with contractual fee awards under Civil Code section 1717 and fees assessed against a party that lost a lis pendens expungement motion.  Two lessons are learned in this case:  (1) the winning party must demonstrate that the losing party would have recovered under the contractual fee clauses vis-à-vis winning party in order to be entitled to a potential fee recovery; and (2) a writ of mandate is the exclusive mechanism to obtain review of a lis pendens expungement or associated fee award, rather than an appeal.

            The facts go like this.  Unsuccessful real estate buyers, a husband and wife, sued dual real estate agents for fraud after their purchase fell through and the brokers then bought the same residential property.  All of buyers’ claims were for monetary or injunctive relief, but prayed for “costs of suit, including attorney’s fees, if appropriate,” and were backed up by a lis pendens.     Buyer wife was not a signatory to the purchase agreement (only husband).  The trial court granted a lis pendens expungement motion on the ground the complaint did not contain a “real property claim” and deferred the question of attorney’s fees on the lis pendens issue for a later date.  The trial court granted a defense motion for judgment on the pleadings to remove wife as a plaintiff.  After plaintiffs were unsuccessful in obtaining leave to file a third amended complaint, husband voluntarily dismissed the remainder of the lawsuit without prejudice. 

            Brokers moved for over $290,000 in attorney’s fees based on several documents, with the only possibly relevant one being the fee clause in the purchase agreement.  The trial court denied this motion because husband dismissed the lawsuit and because brokers never had a right to fees against wife under the purchase agreement fee clause. The trial court also determined that the absence of pleading 1717 fees as damages precluded their recovery.   Later, on the reserved issue of fees under the lis pendens expungement motion, the trial court awarded brokers fees of $2,407.50 against both plaintiffs.  Brokers appealed from the denial of attorney’s fees, and disgruntled buyers appealed the lis pendens expungement and fee award thereunder.

            In a very elaborate and scholarly analysis, the Third District—in a 3-0 decision authored by Justice Sims—dismissed the cross-appeal by buyers and affirmed the fee denial with respect to brokers in Lair v. Hendrickson, Case No. C054514 (3d Dist. July 25, 2008) (unpublished). 

            With respect to the lis pendens expungement and accompanying fee award, the Third District determined that these were only reviewable upon a petition for writ of mandate (which did not occur) rather than an appeal.  Although not having to directly decide the issue because mandate was not sought, the appellate panel implied that the deferred fee award could have been challenged later by writ, but that the buyers never did so such that their appeal should be dismissed.

            The denial of fees to brokers spawned a more elaborate discussion.  (This unpublished opinion is 40 pages long, so that tells you we do our best to distill the decisions down to their “bottom lines.”)  The appellate court disagreed with the trial court’s belief that the failure to plead 1717 fees as damages was preclusive; it found that this omission did not necessarily preclude the brokers from recovering fees as costs under Code of Civil Procedure section 1033.5.  Justice Sims separately considered whether brokers had fee claims against husband or wife.

            No fees based on the contractual claims were recoverable because husband voluntarily dismissed the lawsuit, with the dismissal cutting off fee recovery under Santisas v. Goodin, 17 Cal.4^th 599, 619 (1998).  Tort claims, too, did not result in fee exposure for husband based on the rationale of Super 7 Motel Associates v. Wang, 16 Cal.App.4^th 541, 550 (1993), which held under similar circumstances that a broker was not entitled to fees for defeating a fraud claim because, had the buyer prevailed, broker would not have been liable for fees.  (Accord, Topanga and Victory Partners v. Toghia, 103 Cal.App.4^th 775, 786 (2002) [although a nonsignatory can recover for fees for contractual claims under the right circumstances, he cannot recover fees for noncontract claims because he was not a party to the contract with the fees clause].) 

            Wife’s situation was even simpler.  Wife and brokers were not parties to the purchase agreement, such that there was no nexus or third party beneficiary theory that could possibly ensnare wife for fee exposure.  The court also rejected a judicial estoppel theory based on wife’s prayer for fees, finding that its prior reasoning in M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One, 111 Cal.App.4^th 456, 468 (2003) was dispositive—“It is only where the parties litigate the existence of an attorney fee provision and the party claiming such a right prevails that the party should be entitled to attorney fees.  Under such circumstance, if the opponent succeeds in proving there is no attorney fee provision, it should be awarded its fees in order to further the purpose of Civil Code section 1717.”  Justice Sims found no basis that would have entitled wife to an award of attorney’s fees, such that brokers had no reciprocal right under section 1717.  (See also Loduca v. Polyzos, 153 Cal.App.4^th 334, 341 (2007).)

            The end result was that buyers avoided $300,000 in fee exposure and only had to pay brokers a little over $2,400 for losing the lis pendens expungement motion.