Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from an order of the Superior Court of San Diego County, Jacqueline M. Stern, Judge, Super. Ct. No. GIN043390
McINTYRE, J.
Arthur and Janet Valentine appeal an order awarding attorney fees to La Jolla Bank, FSB, in this action by them against the bank for its alleged negligence in disbursing construction loan funds to their joint venture partner. They contend that, in accordance with the terms of the attorney fee provisions of the loan documents, La Jolla Bank is not entitled to recover attorney fees incurred in defending against a tort cause of action. We conclude that a provision in the construction loan agreement is broad enough to authorize the recovery of attorney fees in this case and affirm the trial court's order.
FACTUAL AND PROCEDURAL BACKGROUND
In November 2001, the Valentines entered into a joint venture agreement with Coast and Desert Development Corporation, dba Casitas Development (Casitas) to build and sell a residential property in La Quinta. Pursuant to the agreement, the Valentines were to contribute the real property and participate in obtaining the funds necessary to construct a home on the property, while Casitas was responsible for overseeing the construction. The Valentines and Casitas obtained a $976,500 construction loan from La Jolla Bank for the project in April of 2002; the loan transaction was reflected in four documents signed by them: a construction loan agreement, a promissory note, a construction deed of trust on the property and a consumer security agreement. In accordance with the foregoing documents, the bank made disbursements to Casitas for the construction of the home.
After the construction was completed, a dispute arose between the Valentines and Casitas in which the Valentines accused Casitas of mismanaging the project and using construction loan proceeds for its own benefit. The dispute was ultimately settled, resulting in those parties' execution of a mutual release that resolved all claims that they had or may have had against each other. The home was sold and the construction loan was repaid in its entirety.
In March 2005, the Valentines filed this negligence action against La Jolla Bank. As alleged in their first amended complaint, the Valentines contended in part that La Jolla Bank had breached certain oral and written promises to them that it would manage and control the distributions of the construction loan funds, ensure that the funds were being spent in accordance with the project budget and inspect the property to verify that the funds were being disbursed for completed work.
After La Jolla Bank successfully moved for summary judgment on statute of limitations grounds, the court entered judgment in the bank's favor. La Jolla Bank thereafter made a motion to recover $152,005 in attorney fees. The court held that although the Valentines' action sounded in tort rather than in contract, a provision of the construction loan agreement was broad enough to authorize the recovery of fees incurred in defending a tort action and it awarded the bank fees of $116,760.00. The Valentines appeal the award of attorney fees.
DISCUSSION
Although a party who prevails in a civil action is entitled to recover its costs as a matter of right unless otherwise provided by statute (Code Civ. Proc., § 1032, subd. (b); see Lincoln v. Schurgin (1995) 39 Cal.App.4th 100, 104), California law generally requires that a party to a lawsuit pay its own attorney fees, regardless of whether it prevailed in the action. (Code Civ. Proc., § 1021; Trope v. Katz (1995) 11 Cal.4th 274, 278-279.) A well-established exception to this general rule exists where a contract, statute or other law specifically authorizes the prevailing party to recover attorney fees. (Code Civ. Proc., §§ 1021, 1033. 5, subd. (a)(10); see also Santisas v. Goodin (1998) 17 Cal.4th 599, 606.)
Where a contract between the parties authorizes the recovery of attorney fees, the court must determine whether the prevailing party is entitled to fees in accordance with the contract terms. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.)
A broadly worded contractual attorney fee provision may support an award of attorney fees to the prevailing party even in an action alleging only tort claims. (Xuereb v. Marcus & Millichap (1992) 3 Cal.App.4th 1338, 1341 ["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"]; Malibou Lake Mountain Club, Ltd. v. Smith (1971) 18 Cal.App.3d 31, 35-36.)
In determining whether a particular contract provides such authorization, the ordinary rules of contract interpretation apply. (See Santisas v. Goodin, supra, 17 Cal.4th at p. 608.) Under these rules, the mutual objective intention of the parties at the time of contracting govern (Civ. Code, § 1636), which intent is to be inferred, if possible, solely from the written provisions of the contract. (Civ. Code, § 1639.) In the absence of extrinsic evidence that the parties applied some special meaning to the terms used, the "clear and explicit" meaning of those terms, as interpreted in their "ordinary and popular sense," controls judicial interpretation. (Civ. Code, § 1638; see also Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807.) Under such circumstances, appellate review of the trial court's decision is de novo. (Frei v. Davey (2004) 124 Cal.App.4th 1506, 1511.)
Here, the construction loan agreement between the parties provided in relevant part:
"General Project Provisions. The following provisions relate to the construction and completion of the Project:
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Actions. [La Jolla Bank] shall have the right to commence, appear in, or defend any action or proceeding purporting to affect the rights, duties, or liabilities of the parties to this Agreement, or the disbursement of funds from the Loan Fund. In connection with this right, [La Jolla Bank] may incur and pay reasonable costs, expenses and attorneys' fees. [The Valentines and Casitas] covenant[] to pay to [La Jolla Bank] on demand all such expenses, together with interest . . . .
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are part of this Agreement:
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Attorneys' Fees . . . . [The Valentines and Casitas] agree[] to pay all of [La Jolla Bank's] costs and expenses, including . . . attorneys' fees and . . . legal expenses, incurred in connection with the enforcement of this Agreement."
Here, the trial court concluded that the language of the "Actions" provision of the construction loan agreement authorized an award of attorney fees to the bank in this case. The Valentines contend that the court erred in so doing because their lawsuit did not "relate to the construction and completion of the Project." However, a review of their first amended complaint shows otherwise. For example, it alleged in part that:
"Prior to making the construction loan to [the Valentines], and to convince [the Valentines] to borrow from the bank, [La Jolla Bank] promised, in part verbally and in part in writing, that [it] would exercise management and control over the distribution of the construction loan funds. [La Jolla Bank] promised that [it] would only disburse construction loan funds based on the budget, that [it] would conduct inspections so as to make certain that construction loan funds were disbursed based on the value of the work completed. In addition, [La Jolla Bank] promised that loan proceeds would not be distributed without complete documentation of materials and services provided, which would be compared to the budget, and verified by the inspections."
Clearly, such promises "relate[d] to the construction and completion of the Project." Moreover, the "Actions" provision expressly authorized an award of fees in actions "affect[ing] the rights, duties, or liabilities of the parties to [the construction loan agreement], or the disbursement of funds from the Loan Fund," which would encompass an action like this one, for alleged negligence in the disbursement of construction loan funds.
The Valentines contend, however, that despite the broad language of the "Actions" provision, its placement in the general contract provisions governing the construction and completion of the project precludes an award of fees here. There is no question that a contract is to be considered as a whole and in the context of the other provisions in it so as "to give effect to every part, if reasonably practicable[.]" (Civ. Code, § 1641.) Here, although the "Actions" section was part of the general provisions relating to the construction and completion of the project (including provisions governing change orders and the bank's right to inspect the property), those general provisions also included the clause requiring the Valentines and Casitas to indemnify the bank against third party claims arising out of the project. Viewing the general project provisions as a whole, and keeping in mind the meaning of the modifying word "general," we reject the Valentines' suggestion that the placement of the "Actions" provision somehow modifies or limits the express language therein authorizing the recovery of attorney fees in an action affecting the rights, duties, or liabilities of the parties under the construction loan agreement or the disbursement of loan funds.
Finally, the Valentines cite to authorities interpreting language of contractual attorney fee provisions as too narrow to support an award of fees under the circumstances presented in those cases. However, although those cases would be aptly cited if we were being asked to interpret the construction loan agreement's "Attorneys' Fee" clause, the language at issue in those cases render them inapposite here. (See Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 708 [holding that a lease provision authorizing the recovery of attorney fees in an action "to enforce the [lease terms] or declare [the parties'] rights [t]hereunder" did not provide a basis for awarding fees in a tort action alleging constructive fraud and breach of fiduciary duty]; Loube v. Loube (1998) 64 Cal.App.4th 421, 429 [holding that a contractual provision in an agreement between an attorney and its clients authorizing the recovery of attorney fees in an action "to enforce [the contract's] terms" did not authorize an award of fees in the clients' subsequent action for legal malpractice].)
For the reasons set forth above, we hold that the "Actions" provision of the construction loan agreement is sufficiently broad to authorize the recovery of attorney fees in this negligence action. Accordingly, we affirm the trial court's order.
DISPOSITION
The order is affirmed. La Jolla Bank is awarded its costs of appeal.
WE CONCUR: HUFFMAN, Acting P.J., AARON, J.