Campbell v. Scripps Bank

In Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328, the escrow holder prevailed in a negligence action brought against it by the seller for failing to comply with the escrow instructions. (Id. at p. 1337.) The trial court awarded the escrow holder attorney's fees under a clause in the escrow instructions which in part read: " 'If conflicting demands are made or notice served on you or any dispute or controversy arises between the Principals or with any third person relating to this escrow, you shall have the absolute right, at your election, to withhold and stop all further proceedings in this escrow without liability and without determining the merits of the demands, notices, or litigation; or sue in interpleader; or both. The Principals, jointly and severally, hereby promise and agree to pay promptly on demand, as well as to indemnify you and hold you harmless against and in respect of any and all litigation and interpleader costs, claims, losses, damages, recoveries, judgments, and expenses, including, without limitation, reasonable attorneys fees that you may incur or suffer, which arise, result from or relate to this escrow." (Id. at p. 1336.) The court of appeal reversed the attorney's fee award, finding the relevant clause did not provide for the recovery of attorney's fees in actions between a principal and the escrow holder to enforce the escrow instructions. The clause provided for attorney's fees only in the event of litigation arising out of conflicting demands made on the escrow holder or a dispute or controversy between the principals or any third person regarding the terms of the escrow and did not "encompass the principals' obligation to pay the escrow holder attorney fees in litigation against the latter to enforce the general escrow instructions . . . ." (Id. at p. 1338.) In Campbell v. Scripps Bank, the Court was presented with the question of whether an indemnity clause in escrow instructions constituted an attorney fee clause or a clause that only operated in favor of the escrow company to protect it against expenses and liabilities incurred in third party actions. In that case, the escrow instructions provided that the buyer and seller "'promise and agree to pay promptly on demand, as well as to indemnify you and hold you harmless against and in respect of any and all litigation and interpleader costs, claims, losses, damages, recoveries, judgments, and expenses, including, without limitation, reasonable attorneys fees that you may incur or suffer, which arise, result from or relate to this escrow.'" (Id. at p. 1336, ) Campbell sued Scripps Bank, the company that handled the escrow, asserting that it had negligently allowed the escrow to close with loan terms that did not comply with the terms of a subordination agreement. (Id. at pp. 1331-1332.) After the court granted Scripps Bank summary judgment on Campbell's claims, the court awarded Scripps Bank attorney fees as the prevailing party on the escrow agreement. (Id. at p. 1332.) Campbell appealed, contending, among other things, that the above quoted indemnity clause in the escrow instructions did not provide for an award of attorney fees to the prevailing party in an action on that agreement, but only indemnification to the escrow company under certain circumstances. (Id. at pp. 1335-1336.) The Court concluded that Campbell was correct and reversed the trial court's award of attorney fees. (Campbell, supra, 78 Cal.App.4th at pp. 1336-1338.) In doing so we held that the language in the contract was clearly an indemnity provision, which allowed the escrow company to be reimbursed for damages, including attorney fees, it incurred in actions related to the escrow. (Id. at pp. 1337-1338.) The Court also concluded, however, that such a clause is not an attorney fee provision that would allow the parties to the contract to recover fees as the prevailing party in an action on that contract. (Ibid.)