Fourth District, Division Three Finds Appealability and Affirms Fees In a Rescissionary Case.
Our local Santa Ana-based appellate court, the Fourth District, Division Three, faced an appeal of a fee award based upon a rescissionary theory. It affirmed the award in Deen v. Fisler, Case No. G038907 (4th Dist., Div. 3 June 27, 2008) (unpublished), a 3-0 decision authored by Acting Presiding Justice Rylaarsdam. This case teaches that rescission is a basis for finding that a fee award is “on the contract” within the meaning of Civil Code section 1717.
Plaintiff buyer sued for specific performance of a contract to sell commercial real estate in which defendant seller executed a note and trust deed. Defendant, in turn, cross-complained for rescission, restitution, cancellation of instruments, and slander of title, premised on the primary theory that the failure to agree on an interest rate meant there was no agreement to enforce. The trial court agreed with defendant, entering judgment in favor of defendant in both actions. Defendant moved for attorney’s fees based on provisions in the note and trust deed, with the trial court awarding defendant $50,000 in fees and costs.
Plaintiff appealed, losing challenges to both the merits judgment and to the fee award.
In a very familiar threshold challenge, defendant initially argued that the appellate court lacked jurisdiction because plaintiff failed to separately appeal from the order awarding attorney’s fees. (See sidebar link for decisions listed in “Cases: Appealability.”) The Court of Appeal rejected this argument in light of the operative circumstances. Plaintiff did appeal from the specific minute order granting attorney’s fees, although not appealing from the subsequent formal order. Because the appellate panel liberally construed the premature appeal from a subsequent appealable order, there was no fatal infirmity. Unlike the other situations we have reviewed, plaintiff did specify the minute order actually fixing fees, even if it was formally entered at a later point in time. “Because plaintiff ‘expressly specified’ both the judgment and liberally construed order awarding attorney fees in a single notice of appeal, we have jurisdiction over the appeal of the order awarding attorney fees.” (Slip Opn., at p. 5.)
Although overcoming the jurisdictional hurdle, plaintiff did not catapult to a win on the merits.
Defendant obtained a rescission of all agreements relating to the real estate transaction, including a rescission of the note and trust deed. This was sufficient to authorize recovery of fees under the contractual fees clauses, as mandated by Civil Code section 1717. It mattered little whether plaintiff attempted to enforce the note and trust deed; rather, because integrated real estate documents were involved, defendant’s successful rescission of the entire transaction—which included the note and trust deed—triggered fee recovery under section 1717. (Slip Opn., at p. 8.) Result: fee award affirmed.
(BLOG OBSERVATION—Alternatively, there are cases holding that a party prevailing on a rescission claim, as the defendant did in this case, qualifies for section 1717 “on the contract” recovery. See, e.g., Leaf v. Phil Rauch, Inc., 47 Cal.App.3d 371, 378-379 (1975); Care Constr., Inc. v. Century Convalescent Centers, Inc., 54 Cal.App.3d 701, 705-707 (1976); Hambarian v. City of Orange, 2006 WL 1756835 at *3-4 (4th Dist., Div. 3 June 28, 2006) (Fybel, J.). Similarly, the result in Deen is nearly identical to the conclusion reached in Neptune Society Corp. v. Longanecker, 194 Cal.App.3d 1233, 1249-1250 (1987) [rescission of partnership agreement and promissory notes—where notes had fee clauses—triggered section 1717 because notes were inherent part of the entire transaction and fee clauses applied to entire transaction].)