Prevailing Party Determination Was Discretionary, With The Lower Court Not Abusing Its Discretion.
Under Civil Code section 1717, if no side gets an unqualified win, a lower court determines the prevailing party on the contract by comparing the relief awarded on claims with the parties’ claim demands and their litigation objectives as well as the extent to which each party succeeded or failed to succeed in its contentions. (DisputeSuite.com, LLC v. Scoreinc.rom, 2 Cal.5th 968, 974 (2017) [our Leading Case #21].) In doing so, courts should respect substance over form. (Hsu v. Abbara, 9 Cal.4th 863, 877 (1995) [our Leading Case #2].)
In McNiven v. Dreyfus, Case No. A169807 (1st Dist., Div. 3 July 14, 2025) (unpublished), adjacent property owners got into a dispute over certain common areas under a restrictive covenant to preserve the shared property in a certain way, with the covenant allowing for injunctive relief, damages, and recovery of reasonable attorney’s fees and costs. Plaintiffs/cross-defendants kicked things off by suing for encroachment and injunctive relief relating to the covenant, while defendants/cross-complainants brought elder abuse and slander of title cross-claims. The defense acknowledged that certain construction plans violated the covenant at some point while the dispute was festering. The trial judge granted plaintiffs’ request for a preliminary injunction to prevent construction in violation of the covenant. The lower court also sustained the cross-defense’s demurrer to cross-complainants’ elder abuse claims. After a subsequent 9-day trial, the lower court concluded that the covenant was enforceable and ran with the land. Both parties moved for prevailing party attorney’s fees: defendants/cross-complainants sought over $1.56 million claiming the other side only prevailed against their cross-claims, while plaintiffs/cross-defendants sought over $1.015 million arguing they enforced the covenant and prevented a threatened violation of the covenant.
The lower court sided with plaintiffs/cross-defendants, awarding them $927,249.19 in fees, and denying the other side’s request for fees. This triggered an appeal by defendants/cross-complainants. The 1/3 DCA affirmed.
The appellate court agreed that, when considering the entire case, plaintiffs/cross-defendants vindicated the covenant and obtained the greater relief, given the covenant issue was the “most important issue” in the case. The record also could lead to the inference that defendants/cross-complainants intended to construct in violation of the restrictive covenant, justifying the preliminary injunction and the resources expended by the other side to vindicate the covenant.