Attorney Fee Provision In a Real Estate Contract

In Hsu v. Abbara (1995) 9 Cal. 4th 863 39 Cal. Rptr. 2d 824, 891 P.2d 804, the defendants' motion for judgment was granted after the plaintiffs rested their case for specific performance of a real estate purchase contract containing an attorney's fee provision. The court, however, denied the defendants' request for attorney's fees under Civil Code section 1717. In the Supreme Court, the plaintiffs argued that the trial court had broad discretion to deny attorney's fees to an ostensibly prevailing party based on considerations of equity. In reversing the judgment denying an award of attorney's fees, the Supreme Court stated: ". . . It is consistent with the underlying purposes of the statute--to achieve mutuality of remedy--and it harmonizes section 1717 internally by allowing those parties whose litigation success is not fairly disputable to claim attorney fees as a matter of right, while reserving for the trial court a measure of discretion to find no prevailing party when the results are mixed. Accordingly, we hold that in deciding whether there is a 'party prevailing on the contract,' the trial court is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by 'a comparison of the extent to which each party hassucceeded and failed to succeed in its contentions.' (Bank of Idaho v. Pine Avenue Associates (1982) 137 Cal. App. 3d 5, 15 186 Cal. Rptr. 695.) . . . We agree that in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by 'equitable considerations.' For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective." (9 Cal. 4th at pp. 876-877, italics in original.) Finding that the judgment was a " 'simple, unqualified win' " (9 Cal. 4th at p. 876) for defendants, the Supreme Court concluded that the trial court had no discretion to deny defendants attorney's fees under Civil Code section 1717. With respect to mutual cross-complaints in a case, the court noted: "When there are cross-actions on a contract containing an attorney fees provision, and no relief is awarded in either action, a trial court is not obligated to find that there is no party prevailing on the contract for purposes of section 1717. If the court concludes that the defendant's cross-action against the plaintiff was essentially defensive in nature, it may properly find the defendant to be the party prevailing on the contract." (Hsu v. Abbara, supra, 9 Cal. 4th at p. 875, fn. 10.) See also Sears v. Baccaglio, supra, 60 Cal. App. 4th at page 1155: "While the trial court cannot arbitrarily deny fees to a less-than-sympathetic party, it remains free to consider all factors which may reasonably be considered to indicate success in the litigation. We agree the court may not abuse its discretion . . . ."