Unlike Other Situations, Side Agreement Was Not Integrated With Stock Purchase Agreement Requiring Mediation First, Resulting in $162,983.81 Fee Recovery to Prevailing Party Under Side Agreement.
In many cases we have posted on, Civil Code section 1717 worked to deny a fee recovery because several agreements were part of an integrated transaction, and the prevailing party did not satisfy a mediation first condition in one of the contracts (even though the condition was not in all the related documents).
However, that was not the situation in San Leandro Land v. Nicholas K. Corp., Case Nos. A131679/A132045 (1st Dist., Div. 2 Mar. 7, 2013) (unpublished).
There, one document was a stock purchase agreement with a fees clause and the other a side agreement with a fees clause. So far so good. However, importantly as it turned out, the stock purchase agreement had an integration clause as well as a mediation pre-condition precedent clause relating to fee recovery. However, the side agreement did not have a mediation first condition. Equally salient, the two contracts were not between the same two parties.
Prevailing party under the side agreement recovered $162,983.81 in costs, disbursements and attorney’s fees after recovering $439,569 for breach of the side agreement. Losing party argued that the fee recovery was forbidden because winner did not satisfy the mediation first condition of the stock purchase agreement because it was to be construed in tandem with the side agreement.
The appellate court said no. Given the unique circumstances relating to the separate agreements and the different parties involved, Civil Code section 1647’s mandate to consider related agreements together did not apply. That meant that prevailing party’s win under the stock purchase agreement (which had a fees clause) entitled it to fee recovery without having to exhaust the mediation first requirement.
Comments