Second District, Division 1 Reverses Fee Denial as Too Restrictive.
We have reviewed many decisions involving interpretation of contractual fees clauses, which involve a construction of the ambit of Civil Code section 1717. In the next case, the appellate court reversed based on the determination that the lower court interpreted the scope of the fees clause too restrictively. Contractual interpretation is a nice issue on appeal, because it is a judicial function in the absence of conflicting parol evidence.
Dayco Funding Co. v. Schneider, Case No. B196591 (2d Dist., Div. 1 Mar. 27, 2009) (unpublished) involved a defendant who defeated a specific performance claim based on a purchase option provision in a residential lease agreement. The lease clause provided that “[i]n the event that legal action is undertaken by any party to enforce the terms of this lease or to recover possession of the premises, the prevailing party shall be entitled to recover from the other party all costs incurred in connection with such action, including reasonable attorney fees and collection costs, with or without suit.” The trial court did not award fees to defendant under this provision.
The appellate court reversed.
It found that (1) Civil Code section 1717 did apply, (2) defendant won decisively because plaintiff failed to achieve its litigation objective, and (3) there was no support for the conclusion defendant was not entitled to fees because the lease was “limited to the terms of the tenancy.” Rather, because the opposite losing party would have been entitled to fees based on the broadly-worded lease option provision, the section 1717 mutuality principle required the same result with respect to defendant. (Care Construction, Inc. v. Century Convalescent Centers, Inc., 54 Cal.App.3d 701, 705-706 (1976), disapproved on unrelated grounds in Canal-Randolph Anaheim, Inc. v. Wilkoski, 78 Cal.App.3d 477, 497 (1978).)