Fourth District, Division Three So Holds In Case Involving Separate Recoveries Under Separate Contracts.
One might intuitively think that there can only be one prevailing party under Civil Code section 1717. You are right, if there is one contract that is at issue. However, what happens if there are two separate contracts involved? Same result? Have we got you hooked? Hopefully that is the case, but only because you are lawyers with inquiring minds (which need to know). So, if we have got you tuned in for more, here is a recent unpublished case from our local Santa Ana-based appellate court that explores and answers the questions posed above.
In HB Parkco Constr. Co. v. A&A Ready Mixed Concrete, Inc., Case No. G039354 (4th Dist., Div. 3 June 20, 2008) (unpublished), our local court—in a 3-0 panel authored by Justice Aronson—faced this very issue and decided it in very convincing fashion.
Here are the facts. Concrete supplier and purchasing contractor got into a donnybrook based upon interrelated credit and purchase agreements, each of which presumably contained attorney’s fees clauses. Supplier claimed it had been stiffed for payment of ready made concrete, while contractor defended and cross-claimed based upon supplier’s delivery of defective concrete containing too little fly ash. After a bench trial, supplier was awarded $91,352.19, while contractor was awarded $172,336.16. Both parties moved for fee awards as prevailing parties, with supplier claiming fees of $66,150 and contractor claiming fees of $80,131. The trial court decided that both parties prevailed, awarding full sought-after fees to each party—resulting in a net award of $13,981 in fees to contractor. Contractor appealed.
Justice Aronson, writing for the Fourth District, Division Three panel, affirmed.
Because Civil Code section 1717 mandates a comparison to determine which litigant obtained “the greater relief” in litigation, the appellate court reasoned that the analysis shifts somewhat where separate contracts are involved. Citing to Hunt v. Fahnestock, 220 Cal.App.3d 628, 630 (1990) and Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co., 47 Cal.App.4th 464, 491 (1996), Justice Aronson determined that section 1717 prevailing party determinations could be based on separate contracts such that there might be offsetting fee awards in the right circumstances.
Contractor argued there could only be one prevailing party because its purchased agreement claims were “closely interrelated” with credit agreement claims. Not quite correct here, the appellate court observed. Contractor asserted purchase agreement claims as defenses to supplier’s credit agreement claims, but still lost. So, “[w]e must therefore assume the trial court found the parties’ respective contract claims were not completely interrelated.” (Slip Opn., a p. 9.)