Third District Agrees With Lower Court that Breach of Fiduciary Duty/Implied Indemnity Claims Do Not Cover Fees.
Here is an interesting one that is a follow-up of sorts to Lange v. Schilling, 163 Cal.App.4th 1412 (2008), in which winning buyer in real estate fraud/negligence case was disqualified from obtaining attorney’s fees because he did not seek mediation under a CAR mediation condition precedent clause. Buyer, not to be denied, entered into a settlement agreement with sellers by which buyer obtained an assignment of sellers’ claims, bringing a lawsuit against sellers’ brokers as assignees for breach of fiduciary duty and implied contractual indemnity for purposes of recovering over $76,000 in sellers’ attorney’s fees. Nice try at an end-around, said the Third District, but this won’t work.
In Lange v. Segerstrom Real Estate, Inc., Case No. C062052 (3d Dist. Nov. 18, 2010) (unpublished), buyer of a residential property earlier had obtained a $13,475 damages award against sellers and sellers’ brokers, with most against the brokers and a small amount (4%) against sellers. Buyer previously was denied fees because he failed to mediate per the CAR condition precedent clause. After entry of judgment, sellers assigned theirs claims against brokers to buyer. Buyer then brought an action for breach of fiduciary duty and implied contractual indemnity against brokers, seeking to recover one item of damages–what else, sellers’ attorneys fees of $76,835.75.
The trial court sustained a demurrer to the complaint without leave. The Third District agreed that the dismissal was proper upon buyer’s subsequent appeal.
The fatal flaw with the breach of fiduciary duty claim was that there was a lack of causation. Buyer could not plead that brokers’ fiduciary duty breach caused sellers to incur attorney’s fees in the first place, especially given that sellers were required to defend and incur fees because of their own conduct. Sellers, directly, were unable to recover their fees because Lange was the prevailing party.
The implied indemnity claim failed because no joint legal obligation applied with respect to sellers’ attorney’s fees. Although the indemnity theory did apply to the underlying judgment, sellers’ attorneys were not injured parties and brokers had no legal obligation to pay the sellers’ attorneys. “A joint tortfeasor’s attorney fees are not the kind of obligation to which the doctrine of implied contractual indemnification or equitable indemnification applies.” (Slip Opn., pp. 10-11.)