Section 1717: No Basis For Fee Recovery Where Operative Contract Had No Fees Clause, Even Though Later Contract Did Have Fees Clause

Analysis of Fee Recovery Under Multiple Agreements Must Focus On Contract With Fee Clause Predicate.

     Many decisions we have examined in the past under Civil Code section 1717 involve situations where multiple contracts (some with fees clauses and some without) are part of an integrated transaction or where apportionment between contract/noncontract claims was unnecessary because all the issues were “inextricably intertwined.” However, if there are multiple contracts with an intervening time gap, one must carefully examine the governing operative agreement to see if it has a fee recovery basis. If not, fee recovery may be denied or remanded for reconsideration.

     That is exactly what happened in Alford v. Constanza, Case No. B210315 (2d Dist., Div. 4 Feb. 16, 2010) (unpublished).

     There, owners of a house sued the tenants for unlawful detainer, and tenants sought specific performance of an option agreement to purchase the house. The eviction suit was based on a 1998 agreement with a fees clause, while the tenants’ specific performance action was grounded upon a later 2000 agreement without a fees clause. Eventually, the trial court denied tenants’ specific performance request, concluding tenants owed landlords over $50,000 in unpaid rent. The lower court also found that one of the tenants owed over $70,000 in attorney’s fees, prompting an appeal of both the merits judgment (which was lost) and the fee award (which was reversed and remanded for further proceedings).

     The principal reason driving fee order reversal was that section 1717 only allows recovery, among multiple agreements, to a claim that is based on a contract with a fees clause. (See, e.g., Pellegrini v. Weiss, 165 Cal.App.4^th 515, 534 (2008); Paul v. Schoellkopf, 128 Cal.App.4^th 147, 153 (2005); Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co., 47 Cal.App.4^th 464, 491 (1996).) In this instance, the specific performance claim related to the 2000 agreement sans a fee provision, which meant there was no contractual predicate for the larger fee award. Even though landlords might have been entitled to some fees for successfully prosecuting the unlawful detainer action under the 1998 agreement with a fees clause, a remand was necessary to limit fee recovery to only those fees incurred in pursuing of the breach of contract claim under an agreement having a fees provision. The testimony and evidence in the two lawsuits were presented at separate times, concerned different agreements, and was not overlapping. The result was to remand for further proceedings, limiting fees only to pursuit of the contract with the fees clause.