Attorney's Fees Case Law in California

Civil Code section 1717, subdivision (a) states: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, . . . shall be entitiled to reasonable attorney's fees in addition to other costs." ( 1717, subd. (a).) Section 1717, subdivision (b), further states: "The court, upon notice and motion by a party, shall determine who is the prevailing party on the contract for purposes of this section . . . The party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract . . ." ( 1717, subd. (b).) The mandates of section 1717 have been interpreted to mean that "a determination of no prevailing party results when both parties seek relief, but neither party prevails or when the ostensibly prevailing party receives only a part of the relief sought." (Deane Gardenhome Assn. v. Denktas (1993) 13 Cal.App.4th 1394, 1398.) " By contrast, when the results of the litigation on the contract claims are not mixed - that is, when the decision on the litigated contract claims is purely good news for one party and bad news for the other - courts . . . have recognized that a trial court has no discretion to deny attorney fees to the successful litigant." (Hsu v. Abbara (1995) 9 Cal.4th 863, 876.) "A plaintiff who obtains all relief requested on the only contract claim in the action must be regarded as the party prevailing on the contract for purposes of attorney fees under section 1717. " (Ibid.) In Hsu v. Abbara, plaintiffs sued defendants for breach of contract, alleging that defendants had failed to follow through on a contract for the sale of their home. (Hsu v. Abbara, supra, 9 Cal.4th at pp. 863, 867-868.) The trial court, finding no contract had been formed between the parties, ruled in favor of defendants. The real estate form at issue in the case provided that " 'the prevailing party shall be entitled to attorney's fees and costs.' " (Id. at p. 866.) Upon receiving defendants' request for attorney's fees the trial court, without explanation, denied defendants "any recovery of attorneys fees." (Id. at p. 869.) The California Supreme Court reversed the trial court's denial of attorney's fees, stating that while a trial court enjoys "a measure of discretion" under section 1717 to "determine that there is no party prevailing on the contract" (id. at p. 875), when the judgment results in a "simple, unqualified victory" for one of the parties, the court has no discretion to deny that party attorney's fees by finding there was no prevailing party on the contract claim. (Id. at p. 877.) On the other hand, denial of attorney's fees has been widely upheld in cases where the verdicts involved something less than a "simple, unqualified victory" for one of the parties. In such a case, the trial court can exercise its discretion to determine which party, if any, has prevailed on its causes of action. (Hsu v. Abbara, supra, 9 Cal.4th at p. 877.) Upon review, the trial court's exercise of that discretion will not be disturbed absent clear abuse. (Id. at p. 871; see also Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158; Nasser v. Superior Court (1984) 156 Cal. App. 3d 52, 59, 202 Cal. Rptr. 552; Smith v. Krueger (1983) 150 Cal. App. 3d 752, 756-757, 198 Cal. Rptr. 174.) In Kytasty v. Godwin, the defendant in a quiet title action prevailed on his claim of an easement over the plaintiff's property, but the trial court found the easement was narrower than the defendant had claimed. (Kytasty v. Godwin (1980) 102 Cal. App. 3d 762, 765, 162 Cal. Rptr. 556.) In upholding the trial court's denial of attorney's fees, the court of appeal stated: "Under Civil Code section 1717, attorneys' fees are available to the prevailing party and, as expressed by the trial court, we are unable to determine who is the prevailing party, if there is one. The judgment as well as this opinion must be considered good news and bad news to each of the parties, and in good conscience we cannot say attorneys' fees should be awarded . . ." (Id. at p. 774.) Similarly, in Nasser v. Superior Court, a lessee brought an action against the lessor to validate his option to renew under the lease and to establish a monthly rental during the extension period. (Nasser v. Superior Court, supra, 156 Cal. App. 3d at pp. 55, 59.) The trial court ruled in favor of the lessee, finding an enforceable option agreement, but setting the rental amount at a rate higher than the lessee had requested. (Id. at p. 55.) The Court of Appeal found that the trial court had acted within its discretion in denying attorney's fees, reasoning that the judgment " 'must be considered good news and bad news to each of the parties. ' " (Id. at p. 60.)