Allocation/Estoppel/Fee Clause Interpretation/Section 1717/Reasonableness Of Fees: Real Estate Buyer’s Tort Claims Did Not Give Rise To Fee Exposure Under Narrowly-Worded Fees Clause

 

However, Sellers Were Liable To Third-Party For Losing Their Contractual/Indemnity Claims, Which Were Intertwined And Needed No Apportionment.

     Real estate buyer lost tort/statutorily-based nondisclosure claims to the sellers in a dispute where a purchase agreement had a fees clause mandating fees in an action brought “with respect to the subject matter of enforcement of this Agreement.” Sellers had cross-claimed for indemnity (contractual and equitable) against a billboard company, but lost on the cross-complaint. Sellers sought $514,155.72 in fees against buyer under Civil Code section 1717 (based on the fees clause), a request denied by the lower court. Billboard company moved for fees, requesting over $450,000 for its successful defense of the cross-complaint and was awarded $335,127.75 as against sellers. Sellers appealed both fee rulings in Sierra Industries West, L.P. v. Hosseinioum, Case Nos. A137517/A137874 (1^st Dist., Div. 4 Apr. 10, 2014) (unpublished), consolidated for argument/decision.

     Both fee determinations were affirmed.

     Sellers’ Appeal of Fee Denial in Buyer’s Favor. The obstacle here for Sellers was that Buyer had no contractually-based claims, such that they could not satisfy the “on the contract” requirement of section 1717. Tort and other noncontract claims are not subject to section 1717’s reciprocity principles. (Brown Bark III, L.P. v. Haver, 219 Cal.App.4^th 809, 820 (2013).) Sellers sought to avoid this conclusion by arguing the fees clause was broad enough to encompass the noncontract actions, but the appellate court actually found it was narrow and did not reach contractual claims. (Exxess Electronixx v. Heger Realty Corp., 64 Cal.App.4^th 698, 702 (1998).) Sellers’ last volley was to argue judicial estoppel based on buyer’s prayer for fees, but the reviewing court found that this theory was properly disapproved in Bear Creek Planning Committee v. Ferwerda, 193 Cal.App.4^th 1178, 1187-1188 (2011) and cases therein.

     Sellers’ Appeal of Fee Award to Cross-defendant Billboard Company. Cross-defendant was the prevailing party, because it totally defeated sellers’ indemnity cross-complaint. Apportionment of time on contractual versus equitable indemnification claims was a discretionary call by the lower court, which determined the time was inextricably intertwined. (Erickson v. R.E.M. Concepts, Inc., 126 Cal.App.4^th 1073, 1085-1086 (2005).) Beyond that, sellers did not provide a reporter’s transcript of the fee hearing such that an inadequate record was presented for review. (Vo v. Las Virgenes Municipal Water Dist., 79 Cal.App.4^th 440, 447-448 (2000).) Finally, the trial judge did discount the fee request and had revised billings aplenty to make a reasoned award.