Indemnity: Escrow Holder Improperly Awarded Over $61,000 In Attorney’s Fees Under Escrow Instruction Indemnity Clause

Clause Encompassed Third-Party Claims, Not Akin To A True Attorney’s Fees Clause.

            We have a category “Indemnity” which has many cases on the subject matter resulting in a reversal of an attorney’s fees award to a prevailing escrow holder as against the sellers in a real transaction, as in the next case we review.

            What happened in Choi v. Prima Escrow, Inc., Case No. B288871 (2d Dist., Div. 7 Oct. 15, 2019) (unpublished) is that escrow holder was awarded nearly $65,000 in compensatory damages against sellers after a real estate transaction was cancelled, with the trial judge concluding that escrow fees were still owed even after cancellation of the transaction.  The lower court then awarded escrow company $61,692.50 in attorney’s fees under an escrow clause which provided “[w]e agree to save you harmless as Escrow Holder hereunder from all losses and expenses, including reasonable attorney’s fees and court costs sustained by reason of any claim, demand, or action filed, legal or otherwise, which may in any manner arise out of, or from the property which is the subject of this escrow, or out of or from this escrow, before or after closing, notwithstanding anything in these instructions to the contrary, and in addition hereto, we jointly and severally agree to pay reasonable escrow fees therefor.”

            The appellate court reversed the fee award.  Based on de novo contractual review, it determined that the provision was a third-party indemnity clause, not a true attorney’s fees clause applicable between principals (the sellers) and the escrow company.  (Cf. Campbell v. Scripps Bank, 78 Cal.App.4^th 1328, 1332, 1336 (2000).)