However, Subcontractor Not Entitled To Fee Recovery From Homeowners Dismissing Assigned Contractor Cross-Claims Based On Voluntary Dismissal Of Contractually-Based Claims After Presentation Of Trial Evidence.
In Mulitz v. L.A. Stucco, Inc., Case Nos. B260314/B262387 (2d Dist., Div. 4 Apr. 7, 2016) (unpublished), homeowners sued both contractor and stucco subcontractor for a defective home renovation, with contractor cross-claiming against subcontractor based on contractual and indemnity/contribution noncontractual theories (with sub’s insurer eventually intervening to protects sub’s interests after it went out of business). Contractor settled with homeowners and assigned its cross-claims against the subcontractor to the homeowners. Sub’s counsel admitted at trial that sub had done a “bad” stucco job. The jury awarded homeowners $403,827 on the contract and negligence claims, which was reduced by the $110,000 contractor settlement. Then, homeowners sought Civil Code section 1717 fees based on the contractor-subcontractor contract with a fees clause, with the trial judge awarding over $566,000 in fees to homeowners. The lower court also denied subcontractor insurer’s request for attorney’s fees against homeowners after homeowners dismissed the cross-claims after presentation of evidence at trial.
Subcontractor’s appeal of the two fee rulings was not successful.
The fees to homeowners based on the contractor-subcontractor contract were justified because they were third party beneficiaries under the agreement entitled to enforce the fees clause. (Loduca v. Polyzos, 153 Cal.App.4th 334, 343-344 (2007).)
With respect to the denial of fees, the appellate court reasoned that the dismissal of the fees was voluntarily made by homeowners because they did not need to press the cross-claims in light of the earlier settlement with contractor. The Santisas rule barred recovery due to the dismissal of the contractual cross-claims, given that a voluntary dismissal even after commencement of trial will trigger the bar. (D & J, Inc. v. Ferro Corp., 176 Cal.App.3d 191, 1193-1194 (1986).) Subcontractor waived claiming any entitlement to noncontractual fees for the cross-claims dismissal, but the reviewing court also found that there was no argument presented that any fees were actually expended in litigating these claims. That meant that subcontractor’s insurer lost the bid to mitigate through a recovery of requested fees of $302,769.46 from homeowners.