Guarantor of the Note Entitled to Fees, Too, Even Though Guaranty Had No Fees Clause.
Sun v. Electro Medical Instrumentation Corp., Case No. G048547 (4th Dist., Div. 3 Mar. 27, 2014) (unpublished) was a situation where an obligor and a guarantor of a promissory note defensed a suing plaintiff based on the argument that the note terms were too uncertain. Then, the lower court awarded about $36,000 in attorney’s fees to the defense based on a fees clause in the promissory note (statutory basis was, of course, Civil Code section 1717).
The fee award was affirmed on appeal, with our local Santa Ana Court determining both obligor and guarantor had fee entitlement in a 3-0 decision authored by Acting Presiding Justice Bedsworth.
Although some real illegal contracts may result in nullification of fee recovery, this is not necessarily the rule across the board—“Attorney fee provisions in unenforceable contracts are enforceable except . . . for provisions in illegal contracts—sometimes.” The appellate court found no reason to deny section 1717 mutuality principles where a contract was found void for vagueness.
So, was the guarantor also entitled to fees? Yes, he was. This flowed from the suretyship relationship between obligor and guarantor, with the guarantor being liable for the obligations in the underlying note being guaranteed despite the absence of a fees clause in the guaranty. (National Technical Systems v. Superior Court, 97 Cal.App.4th 415, 424-425 (2002).) Because guarantor would have been liable for fees had he lost, note holder had to pay fees to guarantor after losing at trial.
Because of this symbiotic relationship, there was no need to apportion fees spent as between obligor and guarantor.