Beverly Hills Properties v. Marcolino

A case discussed at oral argument is instructive. In Beverly Hills Properties v. Marcolino (1990) 221 Cal. App. 3d Supp. 7 270 Cal. Rptr. 605, a landlord sued its tenant, who obtained pro bono representation. The tenant prevailed and the trial court awarded fees. (Id. at p. Supp. 9.) The lease had the following sentence after a standard attorney fees clause: " 'If the attorney for the successful party is not going to charge such successful party, then the successful party shall not be entitled to an award of attorneys fees.' " (Id. at p. Supp. 10.) As a matter of contract interpretation, the tenant was not entitled to fees, since such fees exceeded the limitation contained in the agreement. The court rejected such attempt to undermine a signal purpose of section 1717, which is to protect litigants in an economically disadvantageous position: "Section 1717 does not expressly require the prevailing party to incur legal expenses. The statute simply provides that a prevailing party is entitled to attorney fees and costs, 'which are incurred to enforce that contract.' ( 1717, subd. (a)). Thus, the statute is ambiguous. It does not state who, the prevailing party or the attorney representing him, must incur the legal fees and costs." (221 Cal. App. 3d at p. Supp. 11.) The court considered the purposes of the statute (mutuality of remedy and to prevent oppressive use of fee provisions) and concluded "These two purposes compel us to interpret section 1717 to provide a reciprocal remedy for a prevailing party who has not actually incurred legal fees, but whose attorneys have incurred costs and expenses in defending the prevailing party on the underlying agreement. Had appellant (the landlord) prevailed in this action, respondent clearly would have been liable for attorney fees . . . . Since respondent prevailing instead, he, too, may recover attorney fees pursuant to section 1717. Moreover, the award of attorney fees under section 1717, as its purposes indicate, is governed by equitable principles. We know from our own experience reviewing landlord/tenant disputes on appeal that the person who is most likely to need and receive free legal services is the tenant, not the landlord. Appellant's interpretation would prevent many tenants from being entitled to attorney fees (under 1717). . . .Equity will not allow such a result." (Id. at pp. Supp. 11-12; cited with approval by PLCM Group, supra, 22 Cal. 4th at p. 1095.)