Santisas, Unilateral Fee-Shifting, And Section 1717 Principles Led To The Reversal.
Cross-complainants voluntarily dismissed their cross-complaint for breach of contract, breach of the implied covenant of good faith and fair dealing, disgorgement, Business and Professions Code section 7160 fraudulent inducement to enter a contract, and unjust enrichment as against two individual cross-defendants alleged to be the alter ego of a contractor who sued for nonpayment in a Paradise residential renovation project. The voluntarily dismissed individuals then moved for attorney’s fees, primarily under Civil Code section 1717 based on a contractual fees clause in the construction contract. They sought $164,616.25 against the dismissing cross-complaints, with the lower court making some adjustments and an apportionment to arrive at a $108,501.40 fee award to the two cross-defendants.
That fee award was reversed on appeal, as a matter of law, in Prius v. Edwards, Case No. C102018 (3d Dist. Feb. 20, 2026) (unpublished).
Fees for the contractually based claims were barred by the Santisas prohibition (Santisas being our Leading Case No. 6).
Fees based on the fraudulent inducement count was infirm because Business Code section 7160 is a unilateral fee-shifting statute favoring only prevailing plaintiffs/cross-complainants such that it could not give rise to fee entitlement. (See, e.g., Carver v. Chevron U.S.A., Inc., 97 Cal.App.4th 132, 143-148 (2002); Carver v. Chevron U.S.A., Inc., 119 Cal.App.4th 498, 503-504 (2004); Turner v. Assn. of Am. Med. Colleges, 193 Cal.App.4th 1047, 1059-1062, 1071, 1073 (2011); Earley v. Superior Court, 79 Cal.App.4th 1420, 1429 (2000); Martinez v. SAI Long Beach B, Inc., 108 Cal.App.5th 367, 375-379 (2025); Dane-Elec Corp., USA v. Bodokh, 35 Cal.App.5th 761, 771-776 (2019); Ling v. P.F. Chang’s China Bistro, Inc., 245 Cal.App.4th 1242, 1247, 1253-1256 (2016), disapproved on another ground in Naranja v. Spectrum Security Services, Inc., 13 Cal.5th 93, 117 (2022); Wood v. Santa Monica Escrow Co., 151 Cal.App.4th 1186, 1188-1191 (2007).)
The reciprocity principles of Civil Code section 1717 did not apply to the noncontract claims for disgorgement, fraudulent inducement, and unjust enrichment. Furthermore, the individual cross-defendants did not sign the construction contract in individual capacities, so they were non-signatories having no ability to enforce the contract and thus not entitled to fee recovery. (Topanga and Victory Partners v. Toghia, 103 Cal.App.4th 775, 786 (2002); Super 7 Motel Associates v. Wang, 16 Cal.App.4th 541, 545-547 (1993).)