California Attorney's Fees Pursuant to Contract

Civil Code Section 1717 governs awards of attorney's fees pursuant to contract. It provides, in pertinent part: "(a) 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, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs. ... "(b)(1) The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. Except as provided in paragraph (2), 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 for purposes of this section." ( 1717, subds. (a), (b)(1).) In Hsu v. Abbara (1995) 9 Cal.4th 863, the court determined that, when the trial court renders a simple, unqualified decision in favor of the defendant on the only contract claim in the action, "the defendant, who is unquestionably the sole victor, is the party prevailing on the contract as a matter of law and therefore entitled to reasonable attorney fees under section 1717." (Hsu, supra, 9 Cal.4th at pp. 865-866.) Offers and counter-offers for the purchase of real property were transmitted between the parties. (Id. at p. 866.) The plaintiffs (buyers) purported to accept a counter-offer by the defendants (sellers), but the defendants refused to sell. (Id. at pp. 866-867.) The plaintiffs sued for specific performance of the alleged purchase contract. (Id. at p. 867.) The court found for the defendants on the ground no contract was formed. (Id. at pp. 867-868.) The defendants moved for an award of attorney's fees on the contract cause of action pursuant to section 1717. (Id. at p. 868.) The trial court awarded the defendants their costs, but not their attorney's fees, and the defendants appealed. (Id. at p. 869.) The defendants argued they were entitled to an award of attorney's fees pursuant to section 1717 as the parties prevailing on the contract cause of action. (Hsu, supra, 9 Cal.4th at p. 869.) The court explained that, "'typically, a determination of no prevailing party results when both parties seek relief, but neither prevails, or when the ostensibly prevailing party receives only a part of the relief sought.' 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-the Courts of Appeal have recognized that a trial court has no discretion to deny attorney fees to the successful litigant." (Id. at pp. 875-876.) The court held "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 has succeeded and failed to succeed in its contentions.' " (Id. at p. 876.)