Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County No. VC035900. Raul A. Sahagun, Judge.
Law Office of Gary M. Weinstein, Gary Weinstein; Mazur & Mazur, Janice R. Mazur and William E. Mazur, Jr., for Plaintiffs and Appellants.
Michael J. Perry for Defendant and Respondent.
ARMSTRONG, Acting P. J.
This is an appeal from an order awarding attorney's fees to respondent United Escrow Company. We affirm, as we explain:
In December of 2001, appellants Seon Jun Hwang and the Sun Min Church sued United Escrow and others, on facts arising out of a complicated real estate transaction through which the Church's real property in Bellflower was deeded to Jung Hee Lee, also a defendant below. The transaction involved, inter alia, an escrow at United Escrow. Hwang signed the escrow instructions for himself and for the Church, of which he was the pastor, as sellers.
The cause of action against United Escrow was fraud. In brief, Hwang's theory of the case that he never intended to sell the property, but only to obtain a loan from Lee, and that United Escrow, which had a prior relationship with Lee, committed fraud by failing to disclose material facts about the transaction, for instance, that it was (or could be) a sale, and that nonpayment could lead to foreclosure.
Trial was to the court, and appellants prevailed. They sought attorney's fees, and the trial court awarded $222,500 against all defendants jointly and severally, based on paragraph 9 of the escrow instructions, which reads:
"All parties hereto further agree, jointly and severally, to pay on demand, as [well] as to indemnify and hold you harmless from and against all costs, damages, judgments, attorney's fee, expenses, obligations and liabilities of any kind or nature which, in good faith, you may incur or sustain in connection with or arising out of this escrow and you are hereby given a lien upon all the right, titles and interest of each of the parties hereto in all escrowed papers and other property and monies deposited in this escrow, to protect your rights and to indemnify and reimburse you under this agreement."
"You," and "yours" refer to United Escrow.
We reversed the judgment in November 2005, finding the evidence insufficient to support the judgment. On remand, the trial court entered judgment for defendants. United Escrow then moved for attorney's fees. The trial court awarded it $125,036.
Appellants' contentions on appeal are that United Escrow is judicially estopped from arguing that paragraph 9 is a fees provision, and that paragraph 9 is in fact not a fees provision, but an indemnification provision which does not support an award of fees here. They also argue that Civil Code section 1717 does not apply, and that United Escrow did not timely raise a claim under Code of Civil Procedure section 1021.
Judicial estoppel
Appellants point out that when paragraph 9 was first considered in the trial court, when they sought fees, United Escrow argued that the paragraph was an indemnification provision, not an attorney fee provision. They contend that United Escrow is estopped from asserting a different position now. We do not see an estoppel.
As appellants acknowledge, one of the elements of judicial estoppel is that "the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true)." (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183.) Appellants suggest that United Escrow's success on appeal satisfies the success element. However, our opinion did not consider any argument related to paragraph 9, and it thus cannot be said that on appeal United Escrow succeeded with regard to its initial interpretation of paragraph 9.
Appellants next point out that cases have suggested that because estoppel is an equitable remedy, the list of elements is not inflexible and that "circumstances may warrant application of the doctrine even if the earlier position was not adopted by the tribunal." (Jackson v. County of Los Angeles, supra, 60 Cal.App.4th at p. 184, fn. 8.) It is equally true, however, that other courts have identified the success factor as one of particular importance. (Jogani v. Jogani (2006) 141 Cal.App.4th 158, 170-171.) At any rate, we see no special circumstances which would compel us to ignore the success factor in this case. Initially, United Escrow urged a certain reading of paragraph 9 and appellants urged a different reading. The trial court agreed with appellants, finding that the paragraph provided for recovery of attorney fees in a case such as this one. Thus educated, United Escrow later sought the benefit of the clause. We do not think that United Escrow's first, unsuccessful argument should deprive it of any rights it has under the paragraph. We note, too, that while appellants' motion for fees is not in our record, it is apparent that when they sought fees, they argued that paragraph 9 is a fees clause, not an indemnity clause, contrary to the position they take now. Finding an estoppel against United Escrow would hardly be just.
Paragraph 9
We now turn to appellants' contention that paragraph 9 of the escrow instructions does not support an award of fees. The appellants characterize paragraph 9 as an indemnity clause, as opposed to an attorney fee clause and contend that as an indemnity clause, it only obligates them to indemnify United Escrow for costs arising from third party claims.
We do not think that the distinction between an indemnity clause and an attorneys' fees clause is as sharp as appellants would make it. Indemnity is "a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person." (Civ. Code, § 2772 [emphasis added]; PPG Industries, Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th 310, 318 [indemnity is the obligation resting on one party to make good a loss or damage another party has incurred].) And, while it has been said that indemnification agreements ordinarily relate to third party claims, that ordinary usage does not apply where the clause at issue includes direct liability as well as third party liability. (Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 555.) Paragraph 9 does include direct liability.
We note that several cases have held that an indemnity provision is not a provision for the award of attorney fees in an action on contract which triggers reciprocal obligations under Civil Code section 1717, which refers to actions to enforce contracts. (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 968; Baldwin Builders v. Coast Plastering Corp. (2005) 125 Cal.App.4th 1339, 1344.)
The Civil Code also provides that unless a contrary intent appears, "An indemnity against claims, or demands, or liability, expressly, or in other equivalent terms, embraces the costs of defense against such claims, demands, or liability incurred in good faith, and in the exercise of a reasonable discretion . . . ." (Civ. Code, § 2778, subd. (3).) An indemnity clause can -- and this one does -- obligate a party to the contract to pay attorney's fees arising out of litigation on the contract.
Nor are we persuaded by Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328. That case, like this one, was brought by a seller, after escrow closed. The cause of action against the escrow holder was negligence, and the allegation was failure to comply with escrow instructions. (Id. at p. 1337.) The escrow holder prevailed, and sought fees under a clause which read, "'All notices, demands and instructions must be in writing. 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.)
Campbell held that the clause did not provide for the recovery of attorney fees in actions between a principal and the escrow holder to enforce the escrow instructions. The holding is based on the second sentence of the clause, which concerns conflicting demands and disputes between the principals or with any third person relating to the escrow. Campbell reasoned that when the language concerning fees was construed with that sentence, the clause provided for attorney 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. (Ibid.) The court held: "read in context, the language in the third sentence is neither so broad to encompass the principals' obligation to pay the escrow holder attorney fees in litigation against the latter to enforce the general escrow instructions, nor clear and unambiguous to put the principals on notice of such an obligation." (Id. at p. 1338.)
Campbell was thus based on an ordinary third party indemnification clause. Paragraph 9 is not such a clause. It includes a promise to indemnify United Escrow for third party claims, but also includes another promise, to pay all attorney's fees which United Escrow might incur "in connection with or arising out of this escrow." That is a broad promise, not limited to third party claims. The clause in Campbell, of course, included similar language, but it also included limiting language, with its reference to controversies between the principles or with third parties. In contrast, paragraph 9's promise to pay attorney's fees stands on its own. Nothing limits the obligation to certain kinds of disputes, or excludes fees incurred in lawsuits such as this one, where one of the parties to the escrow sought to hold the escrow holder liable for fraud in connection with the escrow. Instead, that litigation is clearly "arising out of [the] escrow," so that there is an obligation to pay fees.
It is true that paragraph 9 is not the kind of traditional attorney's fees clause which provides for fees to the prevailing party in the event of litigation between the parties to a contract, but that is of no moment. The paragraph says what it says, and it represents the agreement of the parties.
Campbell held that, "'What the parties no doubt had in mind and which appears to be reasonable, was that although the fee the escrow holder exacts for the ordinary service of transferring the documents and money between the parties to an escrow is adequate for that purpose, it is certainly not sufficient to cover any extraordinary services arising out of the situations it may face in its status as escrow holder . . . including conflicting demands concerning ownership of funds or documents in escrow or the relations and dealings between the parties therein . . . and that under such circumstances they should provide the escrow holder with reimbursement over and above the usual escrow fee.' [Citation.]." (Campbell v. Scripps Bank, supra, 78 Cal.App.4th at p. 1338.) We can easily imagine that paragraph 9 reflects the parties' belief that escrow companies have passive roles, which depend on the activities of buyer and seller -- but we need not speculate. The words are plain and intent is not an issue.
Civil Code section 1717, Code of Civil Procedure section 1021
Finally, appellants argue that even if paragraph 9 is a fees provision, United Escrow cannot recover fees because this is a fraud action, not an action on a contract under Civil Code section 1717. This is indeed a fraud action, but United Escrow is not relying on Civil Code section 1717, and need not do so. Under Code of Civil Procedure section 1021, "Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; . . ." Thus, "parties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract" (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341) and where the agreement so provides, parties may recover fees as costs. (Code Civ. Proc., §§ 1033.5, 1032; Santisas v. Goodin (1998) 17 Cal.4th 599, 606.) Paragraph 9 is not limited to actions on the contract, but applies to litigation arising out of the escrow, as this litigation surely did.
We are not persuaded by appellants' final contention, that United Escrow cannot rely on Code of Civil Procedure section 1021 because it did not cite that statute until its reply brief below. Appellants rely on Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, footnote 3, which held that, "To withhold a point until the closing brief deprives the respondent of the opportunity to answer it or requires the effort and delay of an additional brief by permission." However, that case, and the others appellants cite (Sacramento Cable Television v. City of Sacramento (1991) 234 Cal.App.3d 232, 244; Magic Kitchen LLC v. Good Things Intern. Ltd. (2007) 153 Cal.App.4th 1144) concern points raised for the first time in a reply brief on appeal, not a reply brief in the trial court. The difference is meaningful. If a respondent raises a new point in the reply brief on appeal, the appellant cannot attempt to refute the argument. If the point is raised in a reply brief in the trial court, the appellant is not disadvantaged on appeal, but may address the point in its opening brief, as appellant has done with this issue here. We thus do not hesitate to affirm this award.
Disposition
The attorney fees order is affirmed. Respondent to recover costs on appeal.
We concur: MOSK, J., KRIEGLER, J.