Second District, Division 7 Finds Reversal of Prejudgment Interest Issue Requires Reexamination of Prevailing Party Determination and the Escrow Instructions Fee Clauses Were Sufficiently Broad for Fee Entitlement Purposes
In Marina Glencoe, L.P. v. Malibu Escrow Corp., Case No. B203415 (2d Dist., Div. 7 Mar. 1, 2010) (unpublished), an apartment building purchaser recovered $100,000 from an escrow company for wrongfully withholding a deposit and $9,416.43 interest from seller in litigation over a canceled real estate transaction. Buyer had also sought additional damages for tax liability damages, a claim abandoned by buyer after 16 months of litigation. The trial court refused to award any attorney’s fees to buyer, who had moved to recover more than $380,000 against both defendants pursuant to fee clauses in the purchase agreement and escrow instructions under Civil Code section 1717.
The Second District, Division 7, in a 3-0 decision authored by Presiding Justice Perluss, reversed and remanded for reconsideration.
Although defendants challenged the fee denial appeal as untimely, the appellate panel disagreed. Seller only sent a “Notice of Ruling,” which does not comply with the strict rules for sending a “Notice of Entry.” This meant that the longer 180-day appeal period applied, with buyer’s appeal being timely in nature. (Sadler v. Turner, 186 Cal.App.3d 245, 248 (1986).) Similarly, the court’s minute order had no “Notice of Entry” of order language and was not file stamped, meaning it did not trigger the shorter appeal periods. (Alan v. American Honda Motor Co., Inc., 40 Cal.4th 894, 905 (2007).)
With respect to the fee denial as to apartment seller, the Court of Appeal agreed that this was a “mixed result” case because buyer did not gain his tax liability damages, giving the lower court discretion to determine if there was a prevailing party. Under Santisas v. Goodin, 17 Cal.4th 599 (1998) [one of our Leading Cases], nothing prevented the lower court from examining the voluntary dismissal of the tax liability claim in determining if there was a prevailing party. However, because there was a reversal on a narrow prejudgment interest issue, the fee determination was remanded for the trial court to reexamine whether buyer’s additional success on the prejudgment interest issue altered the “prevailing party” decision.
That brought Justice Perluss and his colleagues to the fee denial as to escrow company for withholding a deposit made by buyer in the canceled transaction. Escrow company argued that the lower court correctly denied fees, because the pertinent clauses were third-party indemnity rather than general attorney’s fees clauses. The appellate court nonetheless found that one of the fee clauses allowed escrow to recover fees for performance arising out of the escrow transaction, which under section 1717’s mutuality principle meant that the clause was sufficiently broad to allow for fee recovery. (Accord, Paul v. Schoellkopf, 128 Cal.App.4th 147, 152-154 (2005).)