Second District, Division 8 Follows Myers-Campbell-Carr Line of Cases In a Scholarly Unpublished Decision.
In our category “Indemnity,” we have surveyed cases where attorney’s fees have and have not been awarded where contracts contain indemnity clauses. The result frequently depends on the wording of the clauses. If the clauses only really cover exposure relating to third party disputes, no fees will be recoverable. However, if the clause also has a direct attorney’s fees entitlement among the indemnity provisions, then recovery will be allowed. (See Baldwin Builders v. Coast Plastering Corp., 125 Cal.App.4th 1339, 1344-1346 (2005).) An indemnity clause came up for review in the next unpublished decision that we examine.
The lower court in Amini v. Cimarron Escrow, Inc., Case No. B205927 (2d Dist., Div. 8 June 16, 2009) (unpublished) awarded an escrow company $263,250 in attorney’s fees and $11,446.08 in costs (out of a requested $297,180 in fees and $19,902.04 in costs) after it prevailed in an owner-buyers dispute occurring on the eve of a tax-lien sale. The basis for the award was an indemnity provision in the escrow agreement, which provided: “If conflicting demands or notices are made or served upon you or any controversy arises between the parties or with any third person arising out of or relating to this escrow, you shall have the absolute right to withhold and stop all further proceedings in, and in performance of, this escrow until you receive written notification satisfactory to you of the settlement of the controversy by written agreement of the parties, or by the final order or judgment of a court of competent jurisdiction. All of the parties to this escrow, jointly and severally, promise to pay promptly on demand, as well as to indemnify you and to hold you harmless from and against all administrative, governmental investigations, audit and legal fees, litigation and interpleader costs, damages, judgments, attorneys’ fees, arbitration costs and fees, expenses, obligations and liability of every kind (collectively ‘costs’) which in good faith you may incur or suffer in connection with or arising out of this escrow, whether said costs arise during the performance of or subsequent to this escrow, directly or indirectly, and whether at trial, or on appeal, in administrative action or in arbitration … If the parties do not pay any fees, costs or expenses due you under the escrow instructions or do not pay for costs and attorneys’ fees incurred in any litigation, administrative action and/or arbitration, on demand, they each agree to pay a reasonable fee for any attorney services which may be required to collect such fees or expenses, whether attorneys’ fees are incurred before trial, at trial, on appeal or in arbitration.” (Emphasis supplied by appellate panel.)
Both parties appealed the fee award, buyers challenging the entirety of it and escrow company challenging the failure to award nonstatutory costs and the reduction of fees for 45 hours in travel time.
Buyers won this one, based on the distinction we noted in the opening paragraph of this post.
Initially, escrow company argued that buyers were estopped from arguing the fee issue because they asserted a contractual right to fees in their complaint. No, said the Court of Appeal in 3-0 opinion authored by Acting Presiding Justice Rubin, following the majority rule that holds this circumstance is not enough to create an estoppel. (See Myers Building Industries, Ltd. v. Interface Technology, Inc., 13 Cal.App.4th 949, 963 (1993); see also cases collected under our category “Estoppel”.)
The appellate panel then examined the indemnity provisions in Carr Business Enterprises, Inc. v. City of Chowchilla, 166 Cal.App.4th 14, 19 (2008) [no fee recovery; reviewed in our August 25, 2008 post]; Campbell v. Scripps Bank, 78 Cal.App.4th 1328, 1337 (2000) [no fee recovery; similar indemnity clause]; Baldwin, supra, 125 Cal.App.4th at 1344-1346 [fee recovery allowed; separate fees language permitting first party recovery]; Kangarlou v. Progressive Title Co., Inc., 128 Cal.App.4th 1174, 1177 (2005) [fee recovery allowed; clause gave right to fees if a party failed to pay escrow costs]; and Myers, supra, 13 Cal.App.4th at 973-975 [no fee recovery; indemnity only covered third party claim fees and costs]. In the end, it found the clause under examination to fall within the Carr-Campbell reasoning. “Thus, we conclude that, read in context, the clause at issue here provided for attorney’s fees only in the event of litigation arising out of conflicting demands made on the escrow holder or a dispute or controversy between the principals and any third person regarding the terms of the escrow and did not signal the intent of the parties to entitle the prevailing party to attorney’s fees in any action brought for breach of any provision of the escrow instructions.” (Slip Opn., at p. 20.)
Escrow company argued that the fee grant in an older case, Bruckman v. Parliament Escrow Corp., 190 Cal.App.3d 1051, 1058-1060 (1987), was persuasive. (BLOG OBSERVATION—Co-contributors Marc and Mike have seen escrow companies rely on this case when fees are at issue.) However, the Amini panel did not find Bruckman helpful because “the case contains no substantive discussion of the attorney’s fees clause ….” (Slip Opn., at p. 21.)
In this case, the wording of the indemnity clause was not broad enough and did not have the specific fee entitlement language that led to a different result in Baldwin. As a result, a $275,000 fee/costs award went POOF!