The Feeling Is Mutual
Concerned Citizens of South Central Los Angeles v. City of Los Angeles, Case No. B240301 (2d Dist., Div. 5 Jan. 14, 2013) (unpublished) demonstrates the reciprocity applicable to contractual fee clauses under Civil Code section 1717. It also demonstrates the POOF! principle applicable to results that are reversed on appeal.
In this one, the defense originally prevailed and was awarded over $4.6 million in damages on breach of contract and promissory note claims, as well as almost $4,500 in costs and $127,600 in fees. The promissory note had a unilateral fee clause in favor of the lender (the defense).
That result went POOF! when the appellate court in an earlier appeal reversed the determinations, finding instead that plaintiff won. On remand, the trial court ruled that plaintiff was entitled to purchase certain property for $2.1 million and the defense was obligated to pay it $5 million in return once the $2.1 million exercise price was paid, plus reaffirming that there was no default under the promissory note in line with the appellate court’s determination. Then, the lower court awarded plaintiff fees totaling $228,136 as the prevailing party under the note.
A dismayed defense appealed, but to no avail. Even though the note only allowed fees to the defense (a unilateral clause), section 1717 grants a reciprocal right to fee when a contract provides the right to one party but not the other. (Santisas v. Goodin, 17 Cal.4th 599, 610-611 (1998).) That mutuality principle applied here, sustaining the lower court’s fee award in plaintiff’s favor.