Remand Was In Order For Fee Determination Against Buyer’s Assignee Vis-a-Viz The Escrow Company.
In Sushi KJ Corp. v. Hana Escrow Co., Inc., Case No. B325421 (2d Dist., Div. 2 Aug. 24, 2023) (unpublished), a buyer—an assignee of the buyer’s predecessor in interest–sued an escrow company for negligent misrepresentations arising out of a seller’s alleged tax liability misrepresentation. Buyer lost a demurrer to the escrow company, which was affirmed on appeal. There was an indemnity fees clause, but it was broader such that it was the equivalent of a fees clause in the escrow instructions. Escrow moved for $20,080 in attorney’s fees under the contract clause against buyer and buyer’s assignor (buyer’s predecessor). The lower court denied the fee requests against both, reasoning that it was on a negligent misrepresentation which was not “on the contract” under Civil Code section 1717.
The appellate court affirmed in part and reversed in part. The reversal occurred as to the buyer (the assignee) because the fee clause was broad enough, on a contractual interpretation basis, to include recovery on a negligent misrepresentation claim (the escrow clause applied to “any and all … attorney fees incurred by the escrow holder in connection with … defending litigation ….”). But the fee denial was affirmed against buyer’s assignor, given the fees clause only applied to a “party” and assignor was no longer that upon assigning rights to the assignee. Independently, because assignor was no longer a party to the contract, any negligent misrepresentation claim was not “on the contract” under section 1717. So, the matter was remanded to let escrow renew a fee motion against buyer, the assignee, in the real estate litigation upon which assignee did not prevail.