Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Kern County. Sidney P. Chapin, Judge. Super. Ct. No. CV252638
Law Office of Stephen P. Wainer and Stephen P. Wainer for Plaintiffs and Appellants.
Borton, Petrini & Conron and Dee H. Stasnopolis for Defendant and Respondent.
OPINION
Kane, J.
Thomas Anton, Thomas Anton & Associates, Inc., and Anton, Misner & Associates (collectively appellants) appeal from a postjudgment order granting contractual attorney’s fees to Galbraith Van & Storage, Inc. (respondent). The litigation stemmed from a dispute regarding the amount due respondent for moving appellants’ property and providing related services in connection with appellants’ office relocation. Following acceptance by appellants of a Code of Civil Procedure section 998 settlement offer, judgment was entered in favor of respondent in the sum of $8,499. Respondent then filed a motion for recovery of attorney fees based on a provision in a preexisting storage contract, which allegedly came into play during the move. The trial court granted the motion and awarded respondent $73,632 in attorney fees. Appellants appeal, contending that the provision in the storage contract did not provide a basis for recovery of attorney fees in the parties’ litigation. We agree and reverse the order granting attorney fees.
For convenience, we generally refer to appellants together, but when helpful to our discussion we refer to individual appellants individually by name. We note that Anton, Misner & Associates was apparently a “dba” of Thomas Anton & Associates, Inc.
BACKGROUND FACTS
In late March of 2003, appellants hired respondent to move selected items of furniture from their current office to a new office located across the street. Respondent’s estimate for the job was $614, which included moving the furniture on hand-pushed dollies to the new office. In addition, it was understood by Thomas Anton that the original estimate included moving a few property items that were then in storage with respondent under a preexisting storage contract.
On the day of the move, appellants informed respondent that the new premises were not ready for occupancy. However, it was still necessary that appellants move out of the old building. Appellants requested that respondent move their entire office onto trucks, to be transported to respondent’s warehouse and stored (aboard the trucks) for two or three days until appellants’ new premises were ready, whereupon respondent would move the property from storage and into the new premises. Respondent agreed to undertake the move under the changed circumstances, subject to increased charges. When the entire job was finished, the amount charged by respondent for the move, including the two days of storage related thereto, was $2,929.48.
Appellants refused to pay the invoice and insisted that respondent was bound by its original estimate. On March 5, 2004, respondent made a claim in the small claims court to recover amounts due for “failure to pay moving bill.”
On April 2, 2004, appellants responded by filing a complaint in superior court against respondent, alleging fraud in the inducement, breach of contract and related causes of action. Appellants then successfully moved to have the small claims case transferred and consolidated into the superior court action. The complaint included a request for recovery of attorney fees, but no basis was alleged to support an award of such fees.
On June 25, 2004, respondent filed a cross-complaint against appellants for breach of contract, quantum meruit and fraud. After a series of demurrers, a third amended cross-complaint was filed on February 14, 2005. In addition to allegations regarding appellants’ failure to pay the move bill, the third amended cross-complaint included a claim that appellants also failed to pay delinquent amounts due under a storage contract entered in 2001 by Thomas Anton “acting individually and on behalf of … Thomas Anton and Associates.” Respondent’s prayer for relief included a request for attorney fees “pursuant to contract,” although the contractual provision being relied upon was not identified.
On August 29, 2006, respondent dismissed the fraud claims (i.e., the fourth and fifth causes of action) from its third amended cross-complaint.
On September 15, 2006, about one month prior to the scheduled trial date, appellants accepted respondent’s Code of Civil Procedure section 998 settlement offer to have judgment entered in respondent’s favor in the sum of $8,499 (the section 998 offer). The accepted section 998 offer was filed with the court and judgment was entered in accordance with that offer on September 27, 2006.
For simplicity, we refer herein to the dollar amounts but not the cents. As to the basis for the amount of the section 998 offer, respondent’s motion for attorney fees indicated the $8,499 included $2,929 in moving charges and $5,473 in unpaid warehouse storage fees under the 2001 storage contract. Although appellants accepted the section 998 offer, they note that the parties’ dispute was originally about the moving charges alone, as the small claims complaint demonstrates, and contend that respondent attempted to link the storage contract to the original dispute regarding moving charges by refusing to release the items in storage until the moving charges were paid.
On October 10, 2006, respondent filed its motion to be declared the prevailing party and for an award of costs and attorney fees. Respondent concurrently filed a memorandum of costs detailing the attorney fees incurred during the litigation. Appellants opposed the motion, primarily arguing the attorney fees clause in the storage contract was inapplicable to the parties’ dispute.
The trial court granted the motion on December 5, 2006, declared respondent to be the prevailing party and awarded total costs of $76,876, of which amount the attorney fees award was $73,632. An amended judgment was entered on December 28, 2006, which incorporated the cost award. Appellants timely appealed on the ground the trial court erred in awarding attorney fees.
DISCUSSION
Appellants contend the trial court erred in granting attorney fees in this case for the following reasons: (a) the attorney fees clause in the storage contract was inapplicable to the entire litigation and did not provide a basis for recovery of attorney fees in an action on the contract; (b) the attorney fees clause in the storage contract was inapplicable to the claims regarding move charges and therefore the award must be apportioned; and (c) respondent’s claim for contractual attorney fees was waived because the section 998 offer was silent on the issue of attorney fees. As explained below, we conclude that the first ground fully disposes of this appeal.
Appellants contend the claim for unpaid storage fees under the 2001 storage contract was a distinct matter that was severable from the primary litigation herein regarding the move charges. Appellants further contend the attorney fees clause in the storage contract was inapplicable to the dispute about the move charges. Although not clearly expressed, appellants are apparently arguing that even if attorney fees were recoverable on the claim for storage fees, an apportionment of the fee award is required because attorney fees were not recoverable on the remainder of the litigation regarding the move charges. (See, e.g., Reynolds Metal Co. v. Alperson (1979) 25 Cal.3d 124, 129 [discussing apportionment].) In light of our conclusion that the provision does not provide for attorney fees in an action on the contract, and thus the trial court erred in awarding any attorney fees, we find it unnecessary to address appellants’ contention regarding apportionment.
Although we need not address this matter, we note the cases do not support appellants’ argument of waiver under such circumstances. (See Ritzenthaler v. Fireside Thrift Co. (2001) 93 Cal.App.4th 986, 989.)
I. Standard of Review
On review of an award of attorney fees, the normal standard of review is abuse of discretion. However, where the legal basis for the fees award is in question, such as where the court must construe the meaning of a contractual attorney fees provision to determine whether fees are recoverable, and no extrinsic evidence was offered to interpret the contract, the question of construction is one of law which we review de novo. (Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 705; Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2007) ¶¶ 8:94.2 to 8:94.4, pp. 8-40 to 8-41 (rev. #1, 2007).)
Of course, the interpretation of a written contract presents a question of law which we review de novo, unless the interpretation turns upon the credibility of extrinsic evidence. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) Here, there was no extrinsic evidence to consider.
II. Principles Regarding Contractual Attorney Fees Award
A prevailing party may be awarded attorney fees, as an item of costs, only if authorized by a contract or statute. (Code Civ. Proc, §§ 1021, 1033.5, subd. (a)(10); Paul v. Schoellkopf (2005) 128 Cal.App.4th 147, 151.) Regarding contractual attorney fees provisions, Civil Code section 1717 “was enacted to establish mutuality of remedy where contractual provision makes recovery of attorney’s fees available for only one party [citations], and to prevent oppressive use of one-sided attorney’s fees provisions. [Citation.]” (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at p. 128.) Under Civil Code section 1717, “‘if a contract gives one party the right to recover attorney fees in an action arising out of the contract, the other party, [if it prevails], is [also] entitled to fees.’ [Citation.]” (Paul v. Schoellkopf, supra, at p. 152.)
Civil Code section 1717 (hereafter section 1717) provides, in relevant part, as follows:
“(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.
“Where a contract provides for attorney’s fees, as set forth above, that provision shall be construed as applying to the entire contract, unless each party was represented by counsel in the negotiation and execution of the contract, and the fact of that representation is specified in the contract.
“Reasonable attorney’s fees shall be fixed by the court, and shall be an element of the costs of suit.”
Santisas v. Goodin (1998) 17 Cal.4th 599 explains two basic situations in which section 1717 creates mutuality of remedy regarding contractual attorney fees: “The first situation in which section 1717 makes an otherwise unilateral right reciprocal, thereby ensuring mutuality of remedy, is ‘when the contract provides the right to one party but not to the other.’ [Citation.] In this situation, the effect of section 1717 is to allow recovery of attorney fees by whichever contracting party prevails, ‘whether he or she is the party specified in the contract or not’ (§ 1717, subd. (a)). [¶] The second situation in which section 1717 makes an otherwise unilateral right reciprocal, thereby ensuring mutuality of remedy, is when a person sued on a contract containing a provision for attorney fees to the prevailing party defends the litigation ‘by successfully arguing the inapplicability, invalidity, unenforceability, or nonexistence of the same contract.’ [Citation.] … To ensure mutuality of remedy in this situation, it has been consistently held that when a party litigant prevails in an action on a contract by establishing that the contract is invalid, inapplicable, unenforceable, or nonexistent, section 1717 permits that party’s recovery of attorney fees whenever the opposing parties would have been entitled to attorney fees under the contract had they prevailed. [Citations.]” (Santisas v. Goodin, supra, at pp. 610-611, italics added.)
Section 1717 also ensures mutuality of remedy in a third situation. The second paragraph of subdivision (a) thereof states: “Where a contract provides for attorney’s fees … that provision shall be construed as applying to the entire contract, unless each party was represented by counsel in the negotiation and execution of the contract, and the fact of that representation is specified in the contract.” The Legislature added this language to section 1717 in 1983 for the purpose of overturning Sciarrotta v. Teaford Custom Remodeling, Inc. (1980) 110 Cal.App.3d 444 (Sciarrotta). (Harbor View Hills Community Assn. v. Torley (1992) 5 Cal.App.4th 343, 349.)
In Sciarrotta, property owners prevailed in an action against a contractor for breach of contract to build a house in a good and workmanlike manner, and they sought attorney fees under a provision in the contract that limited recovery of fees to certain types of contract claims -- namely, claims relating to default in payment of the contract price. (Sciarrotta, supra, 110 Cal.App.3d at p. 446.) The trial court denied the motion for fees. On appeal, the Sciarrotta court affirmed, concluding that the property owners were not entitled to an award of attorney fees because “the contractual language was clear, explicit and unambiguous in limiting attorney’s fees to a certain kind of action,” and the property owners’ action did not relate to a failure to pay the contract price. (Id. at p. 452.) The Legislature “disagreed, and amended the law ‘to provide complete mutuality of remedy where a contractual provision makes recovery of attorney fees available to one party.’” (Paul v. Schoellkopf, supra, 128 Cal.App.4th at p. 153, quoting Harbor View Hills Community Assn. v. Torley, supra, 5 Cal.App.4th at p. 349.) It was recognized by the Legislature that “to allow parties with superior bargaining strength to so limit attorney’s fee provisions otherwise made reciprocal by Civil Code section 1717 would ‘thwart the salutary purposes sought to be achieved by the statute.’ [Citations.]” (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 971.) As a result of the 1983 amendment, when a contractual provision confers a right to recover attorney fees as defined in section 1717, but purports to limit such right to a particular type of claim on the contract (e.g., failure to make payments), it will be construed as extending to the entire contract. (Myers Building Industries, Ltd. v. Interface Technology, Inc., supra, at p. 971; Paul v. Schoellkopf, supra, at p. 153 [“parties may not limit recovery of attorney fees to a particular type of claim, such as failure to pay escrow costs”].)
Finally, the cases recognize that section 1717 does not apply to an indemnification arrangement in which attorney fees are included as an item of loss in a third party claim indemnity provision. (Myers Building Industries, Ltd. v. Interface Technology, Inc., supra, 13 Cal.App.4th at pp. 971-973; Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328, 1337-1338; Building Maintenance Service Co. v. AIL Systems, Inc. (1997) 55 Cal.App.4th 1014, 1028-1031.) “The very essence of an indemnity agreement is that one party hold the other harmless from losses resulting from certain specified circumstances. The provisions of Civil Code section 1717 were never intended to inflict upon the indemnitee the obligation to indemnify his indemnitor in similar circumstances. Indemnification agreements are intended to be unilateral agreements. The Legislature has indicated no intent to make them reciprocal by operation of law. Indeed a contrary intent is evidenced by Civil Code section 2778, subdivision 3, including attorney fees as a matter of law as an item of recoverable loss in an indemnity agreement.” (Myers Building Industries, Ltd. v. Interface Technology, Inc., supra, at p. 973.) Accordingly, “the inclusion of attorney fees as an item of loss in a third party claim indemnity provision does not constitute a provision for the award of attorney fees in an action on contract as is required to trigger operation of Civil Code section 1717. [Citations.]” (Campbell v. Scripps Bank, supra, at p. 1337.)
Of course, if the relevant provision reflects that the parties intended to provide for attorney fees recovery in an action on the contract between the contracting parties, such provision is subject to section 1717 even if it is set forth within a part of the contract addressing indemnification. (See Baldwin Builders v. Coast Plastering Corp. (2005) 125 Cal.App.4th 1339, 1344-1346.) However, standard indemnification clauses are usually intended to cover expenses or losses (such as attorney fees) incurred in third party claims, therefore courts have been reluctant to interpret them as attorney fees provisions applicable to actions on the contract. (See, e.g., Building Maintenance Service Co. v. AIL Systems, Inc., supra, 55 Cal.App.4th at pp. 1030-1031 [indemnification provision did not permit inference that contracting parties intended to address claims made against each other on the contract]; Myers Building Industries, Ltd. v. Interface Technology, Inc., supra, 13 Cal.App.4th at p. 974 [provision intended only to deal with third party claims]; Campbell v. Scripps Bank, supra, 78 Cal.App.4th at p. 1337 [standard indemnification clause did not put the principals to the escrow on notice that it was an attorney fees clause providing for an award of fees to a prevailing party in litigation to enforce the escrow instructions].)
With these principles in mind, we now turn to the attorney fees provision involved in the instant case.
III. Analysis of Attorney Fees Language in the Storage Contract
The only contractual provision relied upon by respondent as a potential basis for the recovery of attorney fees is set forth in paragraph 1 of the storage contract dated September 21, 2001. The storage contract was ostensibly entered into by Thomas Anton alone, as “Depositor,” and respondent, as “Company,” but the trial court implicitly concluded, in accord with respondent’s allegations, that Thomas Anton entered the storage contract “individually and on behalf of” the other appellants herein. There was substantial evidence to support such conclusion. We therefore consider the agreement as binding on appellants.
It is undisputed that the invoices and other written documents related to the move services did not contain an attorney fees provision.
The storage contract provided, in paragraph 1, as follows:
“1. OWNERSHIP OF GOODS: Depositor has represented to the Company that the Depositor has the lawful possession of and legal right and authority to store all of the property herein described, in accordance with the provisions, limitations, terms and conditions herein set forth; and if there be any litigation concerning the property, the Depositor agrees to pay all attorney’s fees, which this Company may reasonably incur or become liable to pay in connection therewith. This Company shall have a lien on said property for all storage and other Charges and for such costs and expenses.”
Appellants’ position is that the above provision concerning attorney fees addresses property ownership only, and therefore it was never intended to cover actions on the contract. They assert that cases dealing with indemnity provisions constitute “similar situations,” and in their reply brief they explicitly call paragraph 1 of the storage contract an indemnity provision. Respondent’s position is that the language “any litigation concerning the property” is broad and reasonably encompasses all litigation affecting the property, which would include respondent’s claim on the contract to collect unpaid storage fees. Respondent adds that since the move did include some items of the property in storage under the storage contract, and since during the move appellants’ office property was “stored” on trucks at respondent’s warehouse for two days, it was reasonable for the trial court to apply the attorney fees provision in the storage contract to the parties’ move.
Because the trial court construed the above provision without resorting to extrinsic evidence, we apply de novo review. (Campbell v. Scripps Bank, supra, 78 Cal.App.4th at p. 1336.) In construing the agreement, our goal is to give effect to the mutual intention of the parties as it existed at the time of contracting. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264; Civ. Code, § 1636.) “We interpret the intent and scope of the agreement by focusing on the usual and ordinary meaning of the language used and the circumstances under which the agreement was made.” (Lloyd’s Underwriters v. Craig & Rush, Inc. (1994) 26 Cal.App.4th 1194, 1197-1198; Civ. Code, §§ 1637-1644, 1647.) “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” (Civ. Code, § 1641.)
Viewing the language of paragraph 1 of the storage contract in context, we conclude that appellants’ interpretation is correct. Not only is the attorney fees language intentionally placed under the subject heading entitled “Ownership of Goods,” but it is an integral part and continuation of the same sentence in which “the Depositor” affirms his representation of rightful ownership of the property. This structure indicates the scope of the phrase “and if there be any litigation concerning the property,” was intended to be tethered to the preceding phrase in which rightful ownership was the sole concern. Thus, the attorney fees provision was intended to apply only in the event of claims or lawsuits regarding ownership rights, which, in the context of the parties’ depositor-warehouseman relationship, would likely be understood as referring to (and protecting against) conflicting ownership claims to the specific property received for storage. (See Paul v. Schoellkopf, supra, 128 Cal.App.4th at p. 154 [“we look to the parties’ reasonable expectations to determine whether section 1717 creates the right for recovery of attorney fees”].) Thus, although worded with an unfortunate lack of precision, the provision is most reasonably construed as a form of indemnity protection for respondent’s benefit, applicable in the event of third party claims or lawsuits regarding ownership of the property, in which case respondent would be entitled to recovery of any attorney fees it incurred therein. This interpretation is strongly confirmed by paragraph 12 of the storage contract, which provides for arbitration of all disputes that may arise between the contracting parties in connection with the property or for breach of the terms of the storage contract. Paragraph 12 states that the losing party in such disputes must pay “Court costs,” but nothing is said regarding recovery of attorney fees.
Paul v. Schoellkopf, supra, 128 Cal.App.4th 147, illustrates the point that courts will not apply section 1717 to create a right to attorney fees outside the intended relationship or transaction in which such fees were contemplated. In that case, the court held that a limited attorney fees provision in escrow instructions, which addressed the rights and obligations of the escrowholder to the buyer and seller, was not applicable to an action between the buyer and seller that was based solely on the rights and obligations between buyer and seller. The court said: “The parties did not agree and could not reasonably have expected that there was a right to recover attorney fees in a dispute between the buyer and seller, which had nothing to do with the performance of escrow services.” (Id. at p. 154; see also Brittalia Ventures v. Stuke Nursery Co., Inc. (2007) 153 Cal.App.4th 17, 31 [because section 1717 is based on equitable principles, it “‘cannot be bootstrapped to provide for attorney fees for breach of a contract that has no attorney fees provision’”].)
For all of these reasons, we conclude that paragraph 1 of the storage contract is a limited indemnification clause that does not put the parties on notice that attorney fees are recoverable in actions on the storage contract itself, and hence that provision cannot provide a basis for recovery of fees in this case. (See Campbell v. Scripps Bank, supra, 78 Cal.App.4th 1328 at p. 1337 [so holding regarding indemnification clause in escrow instructions].)
Moreover, any ambiguity in regard to the language of the storage contract, which is obviously a preprinted form agreement that purports on its face to be “Non-Negotiable,” will be construed in this case against respondent as the drafter thereof. “In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” (Civ. Code, § 1654.)
Finally, we must reject respondent’s suggestion that it is entitled to an award of attorney fees merely because appellants included a request for attorney fees in the prayer of their complaint. The correct rule in applying section 1717 is that “a prevailing party is entitled to attorney fees only if it can prove it would have been liable for attorney fees had the opponent prevailed.” (M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One (2003) 111 Cal.App.4th 456, 467; Reynolds Metal Co. v. Alperson, supra, 25 Cal.3d at p. 129.) Here, paragraph 1 of the storage contract did not provide either party with a basis for recovery of attorney fees concerning an action on the contract. Thus, even had appellants prevailed at trial, respondent would not have been liable for appellants’ fees.
DISPOSITION
The order granting attorney fees is reversed. Costs are awarded to appellants.
WE CONCUR: Vartabedian, Acting P.J., Gomes, J.