Prevailing Party And Fee Clause Interpretation Issues: Court Of Appeal Sustains Trial Court Denial Of Fees To Either Side

Fourth District, Division 1 Utilizes “Pragmatic” Prevailing Party Test and Determines Narrow Fee Clause Did Not Allow For Recovery on Successful Tort Claim.

     In a dispute involving a brokerage arrangement with respect to a mobile home, seller won a small compensatory and punitive damages jury verdict against brokers for breach of fiduciary duty, although seller lost a contractual claim and brokers lost a contract-based cross-claim after having it dismissed because no supporting evidence was presented at trial. Seller moved for $89,772.50 in contractual attorney’s fees for prevailing on his tort claim, and brokers moved for $61,217.50 in contractual fees and costs for obtaining a directed verdict on seller’s breach of contract claim. The trial court denied fees to either side, and both sides appealed claiming each one respectively should have been awarded fees.

     The Fourth District, Division 1 affirmed the fee denials in Whitton v. AAAmerican Pacific Manufactured Homes, Inc., Case No. D053737 (4^th Dist., Div. 1 Nov. 24, 2009) (unpublished).

     The appellate court found that under the Hsu v. Abbara, 9 Cal.4^th 863 [one of our Leading Cases] “pragmatic” test, brokers did not prevail overall despite defensing seller’s contract claim through a directed verdict. The reason is that broker suffered a defeat by losing their contract cross-claim, with no authority being cited to show that the trial court had to ignore this defeat when determining if brokers prevailed for purposes of fee recovery.

     That brought the panel to seller’s claim that it was entitled to fees under a fees clause for winning his tort claim. Not so, said the Court of Appeal. The fee clause at issue was very narrow, only encompassing contractual enforcement rather than broader claims “arising out of” the agreement. The fiduciary duty claim was not brought to enforce the agreement. (Exxess Electronixx v. Heger Realty Corp., 64 Cal.App.4^th 698, 709 (1998).) Thus, the more narrow nature of the fees clause prevented seller from recovering his fees, meaning the lower court’s interpretation of the contract was correct.