Attorney Fee Provisions In Contracts

In Hunt v. Smyth (1972) 25 Cal. App. 3d 807 [101 Cal. Rptr. 4], the plaintiffs were makers of a promissory note providing that if suit be instituted on the note, maker would pay attorney's fees. Upon judgment being rendered for defendants in the plaintiffs' action to enjoin foreclosure of the property securing the note, the plaintiffs objected to an award of attorney's fees. The plaintiffs contended that since the action was not instituted to collect on the note, the attorney's fees clause was not applicable. In overruling the objection the court stated: "It is generally recognized that a provision for attorney's fees will be applicable even though the action is instigated by the obligor rather than the obligee. 'Attorney's fees may be recovered where the adverse claim is made by the mortgagor or grantor. . . .' " (Id. at p. 832; see Techow v. Pollack (1952) 111 Cal. App. 2d 556, 558 [244 P.2d 915]; Hewlett v. Evans (1922) 56 Cal. App. 344, 347 [205 P. 492].) See also Covenant Mutual Ins. Co. v. Young, supra, 179 Cal. App. 3d 318, 323: ". . . assume a lease agreement provides the tenant must pay the landlord's attorney fees if the landlord sues him successfully under the lease. But assume also the lease agreement fails to mention the tenant's right to recover attorney fees if he wins. the Legislature has intervened to effectively rewrite this lease. No matter what the agreement says section 1717 allows the tenant to recover his attorney fees should he rather than the landlord win." In International Industries, Inc. v. Olen (1978) the Supreme Court set forth the Legislature's philosophy in passing Civil Code section 1717: "Section 1717 is obviously intended to create a reciprocal right to attorney fees when the contract provides the right to one party but not to the other. . . . Enactment of section 1717 commands that equitable consideration must rise over formal ones. Building a reciprocal right to attorney fees into contract, and prohibiting its waiver, the section reflects legislative intent that equitable considerations must prevail over both the bargaining power of the parties and the technical rules of contract construction." (21 Cal. 3d at pp. 223-224.) The high court reaffirmed in Santisas v. Goodin, supra, 17 Cal. 4th 599, 610, that "the primary purpose of section 1717 is to ensure mutuality of remedy for attorney fee claims under contractual attorney fee provisions."