Second District, Division Seven Awards Fees To Broker Based On Fraud and Fees Clause in Brokerage Agreement.
Normally, Civil Code section 1717 does not allow recovery for fraud counts, unless the fees clause is broadly worded. (See our category “Cases: Section 1717.”) However, practitioners should not forget that fee recovery may be possible under Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal.4th 979, 992 (2004). The next decision we discuss is a good illustration of a situation justifying fee recovery under Robinson Helicopter.
Plaintiff broker sued a property seller for breach of contract and fraud arising out of a listing agreement when seller failed to consummate a sale at the specified price, depriving plaintiff of a $225,000 commission. The listing agreement had a fees clause. Plaintiff’s fraud theory was based on seller’s admission that he never intended to sell the property, but “only wanted to ascertain its value”—an intention never disclosed to broker. The trial court credited these admissions and found that seller’s execution of the listing without disclosing such intention constituted fraud. The trial judge awarded broker $225,000, prejudgment interest, and $39,005 in attorney’s fees. Seller appealed and lost across the board.
In affirming the fee award, the Second District, Division 7 in Amber Hotel Co. v. Chen, Case No. B200271 (2d Dist., Div. 7 Jan. 13, 2009) (unpublished) determined that Robinson Helicopter sustained the fee recovery in plaintiff’s favor. Where fraud damages are ordered in relation to contractual obligations, the fraud plaintiff may recover “out-of-pocket” damages in addition to “benefit-of-the-bargain” damages. (Id. at p. 992.) Because broker affirmed the fraudulently induced contract and sued for fraud damages, damages may include both measures, with attorney’s fees being “proper under either measure of fraud damages.” (Robinson Helicopter, supra, 34 Cal.4th at 992; Fragale v. Faulkner, 110 Cal.App.4th 229, 236 (2003).)