Appellate Court Determined That Seller “Commenced The Action,” So Mediation Did Not Apply To Buyer’s Responsive Cross-Complaint.
In Triad Properties v. Pini, Case No. B333958 (2d Dist., Div. 6 May 28, 2025) (unpublished), the issue focused on whether a real estate contract mediation clause, where a party commencing a suit had to attempt mediation first before filing suit, prevented a cross-complainant real estate buyer from claiming attorney’s fees for efforts in prosecuting the cross-complaint to a cross-complaint by seller based on a contract because buyer did not commence mediation beforehand. The lower court said no fees to buyer on its cross-complaint because it did not satisfy the condition-precedent mediation clause, with the appellate court reversing and remanding for a reasonable fee to be awarded cross-complaining buyer.
The facts in these situations are convoluted. Real estate seller, with an escrow pending with real estate buyer, was sued by various tenants for uninhabitable lease conditions. Buyer did not participate in those actions. Seller then sued buyer alleging that buyer contractually was obligated to indemnify or contribute to damages alleged in tenants’ actions. Buyer then filed its own cross-complaint against seller alleging breach of the real estate purchase agreement by failing to disclose all known material facts/defects on the property. Neither seller nor buyer offered to mediate before filing their cross-complaints. Seller/owner settled the tenants’ case and dismissed its cross-complaint against buyer, even though seller paid buyer $200,000 to settle buyer’s cross-complaint—with both sides agreeing to submit the question of attorney’s fees to the trial court to a maximum of $500,000. The lower court denied buyer’s fee request for two reasons: (1) seller dismissed its cross-complaint so no fees were owed under that based on Santisas; and (2) buyer could not recover fees for its cross-complaint efforts because it did not seek mediation before commencing the cross-complaint.
The 2/6 DCA reversed and remanded for a determination of reasonable fees incurred by buyer in prosecuting its cross-complaint against seller. Buyer did not contest that it could not recover fees for seller’s dismissal of the cross-complaint under Santisas, a wise concession. However, both sides’ cross-complaints were intertwined and based on the real estate purchase agreement. With respect to the mediation compliance “failure” by buyer on its cross-complaint, the appellate court believed that since seller was the prime mover on its cross-complaint, buyer had no choice but to respond such that its responsive action—including a cross-complaint—did not fall within the spirit of the action commencement language of the condition-precedent mediation clause.