Opinion
NOT TO BE PUBLISHED
San Francisco City and County Super. Ct. No. 465159
Lambden, J.
INTRODUCTION
Respondent Surindar Sandhu sold her San Francisco rental property with the help of appellants. After completion of the sale, the proceeds were placed with an intermediary whose subsequent bankruptcy resulted in the loss of nearly $1 million by respondent, who filed an action against appellants alleging five torts. None of her claims was based on breach of contract. After the verdict in their favor, appellants moved for an award of attorney fees based on the real estate sales agreement between the parties and the trial court correctly denied appellants’ motion. We affirm the order.
BACKGROUND
The plaintiff and respondent in this case is an 88-year-old immigrant woman who speaks Punjabi as her first language. She listed her San Francisco rental with appellants Puri and Jafran, Inc. and signed the “Residential Listing Agreement” which they prepared, using a form supplied by the California Association of Realtors. The property was sold for in excess of $1 million and respondent alleged that she was persuaded by appellants to place the proceeds of the sale into a 1031 exchange fund held by an intermediary entity known as “1031 Advance, Inc.” An Internal Revenue Code section 1031 exchange, also called a “like kind exchange, ” is a method of structuring the sale of certain types of property. The method permits the seller to defer taxes on profits and capital gains. Respondent’s money from the sale was intended to be used for the purchase of a replacement commercial property of equivalent value in Union City. Here, however, the exchange of value was not simultaneous, as required by section 1031. The cash from the sale was transferred to 1031 Advance, which was expected to deliver the proceeds from the sale of the old property into the escrow set up for the purchase of the new property being “exchanged.” Shortly after receiving the funds, 1031 Advance filed a petition in bankruptcy and respondent lost the entire proceeds from the sale in the approximate amount of $1 million.
She is, of course, the real party in interest represented here by her trustee.
Section 1031, title 26 of the United States Code states: “[n]o gain or loss shall be recognized on the exchange of property held for productive use in trade or business or for investment if such property is exchanged solely for the property of like kind which is to be held either for productive use in a trade or business or for investment.”
Respondent filed suit against appellants, among others, some of whom apparently settled before trial. She contended that appellants recommended the bankrupt intermediary, and knew or should have known that it was unsound and under-insured. The complaint alleged five causes of action, all torts: fraud and deceit, breach of fiduciary duty, professional negligence, negligent misrepresentation, and elder abuse. (Welf. & Inst. Code, § 15600 et seq.) As noted, respondent’s complaint did not allege breach of contract. Throughout the proceedings, respondent sought to recover “all the money that was lost when 1031 Advance went bankrupt, ” including the “net proceeds due [appellants] with the addition of defendants’ undeserved commissions” in the amount of $17,500.
Appellants’ answers consisted of general denials and several affirmative defenses including: limitations, failure to mitigate damages, estoppel and intervening causation. No cross complaint was filed and the answers of the appellants affirmatively prayed only for “costs of suit.” However, prior to opening statements, appellants requested leave to amend their complaint to include a prayer for attorney fees “under the listing agreement.” In response to the trial judge’s questions, they contended that they had not waived their claim for fees because their answers included a prayer for “costs of suit”; and that they were only moving to amend to “clarify” their claim for fees. The trial judge denied the motion to amend and deferred the fee question saying, “You can worry about it afterwards.”
Appellants’ responsive pleadings were not included in the clerk’s transcript on appeal, and we obtained copies of two “Answers to Complaint” (filed August 22, 2007, and February 20, 2008) from the San Francisco Superior Court.
After a two-week trial, a jury returned a complete defense verdict. The jury was apparently persuaded by appellants’ Fifth Affirmative Defense as described in Special Verdict form No. 6: “Intentional or Criminal Act as Superseding Cause, ” which expressly concluded that the defendants neither knew nor could have reasonably foreseen the defalcations of 1031 Advance.
Appellants filed a motion requesting $157,365 in attorney fees “pursuant to the contract between the parties.” Respondent’s attorneys filed opposition and, after hearing argument, the court denied appellants’ motion for attorney fees. Appellants filed this timely appeal.
DISCUSSION
The sole issue presented is whether the attorney fees provision in the listing agreement entitles either party to recover fees in this case. The parties agree that in the absence of extrinsic evidence to interpret the contract, our standard of review is de novo. (Thompson v. Miller (2003) 112 Cal.App.4th 327, 334-335.) It is also undisputed that the traditional “American rule” requires each party to bear the expense of his or her own attorney fees, unless the general rule is modified by statute or contract. (Santisas v. Goodin (1998) 17 Cal.4th 599, 607, fn. 4 (Santisas).) No statutory basis for fees is presented here, except to the extent that Code of Civil Procedure section 1021 recognizes that “the measure and mode of compensation... is left to the agreement, express or implied, of the parties....” Accordingly, our analysis must turn on the contract provision upon which appellants rely.
“If a contractual attorney fee provision is phrased broadly enough... it may support an award of attorney fees to the prevailing party in an action alleging... tort claims.” (Santisas, supra, 17 Cal.4th at p. 608.) In cases involving torts, the answer to the question of whether to award fees to disputatious parties to an implicated contract depends not only upon who “ ‘prevailed’ ” on a claim, but also upon whether the claim was within the ambit of the language in the contract relating to attorney fees. (Thompson v. Miller supra, 112 Cal.App.4th at p. 335.) There is no doubt that appellants prevailed on all counts, therefore, the question is whether the following language of section 15 of the Listing Agreement can support an award of fees: “In any action, proceeding or arbitration between Seller and Broker regarding the obligation to pay compensation under this Agreement, the prevailing Seller or Broker shall be entitled to reasonable attorneys fees.”
We answer this question by applying “the ordinary rules of contract interpretation” to determine the parties intent at the time they made the contract. (Santisas, supra, 17 Cal.4th at p. 608.) Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636.) In the absence of circumstances permitting resort to extrinsic evidence, the parties’ intent is to be inferred solely from the written provisions of the contract. (§ 1639.) The meaning of such provisions is to be interpreted in their “ordinary and popular sense... unless used by the parties in a technical sense or a special meaning is given to them by usage....” (§ 1644.) There was no extrinsic evidence of intent or evidence of jargon offered in this case. Accordingly, the contract language itself controls our judicial interpretation. (§ 1638.) “ ‘Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning.’ ” (Santisas, at p. 608.)
All further unspecified code references are to the Civil Code.
Appellants summarize their own argument as follows: “the attorney fee clause was not limited to a contract action but applied to any action or proceeding regarding the obligation to pay compensation. The tort action in this case sought to recover the commission paid to appellant, the listing broker. The tort action in this case is an action within the meaning of the contract.” Appellants thus contend: first, that this attorney fee provision is very broad on its face; and secondly, that by arguing for return of the “undeserved” $17,500 commission at trial, respondent opened the door for appellants to recover all of their attorneys fees, even though the case never included any cause of action sounding in contract.
The Attorney Fees Provision is Narrow
Appellants argue that the contract does not “limit the provision to a specific type of action” because “the contract specifies that it applies ‘[i]n any action, proceeding or arbitration....’ ” This contention begs the question of the parties’ intention, because it ignores the immediately following, and most significant clause, in the fee provision: “regarding the obligation to pay compensation under this Agreement....” (Italics added.) All other parts of the fee provision depend upon this limitation of entitlement to a single, specific obligation. If the parties had intended this fee provision to be very broad, as appellants argue, the first way to achieve their goal could have been by eliminating the very phrase upon which appellants rely. This language can only be properly described as intended to narrow the scope of the recovery of fees.
The narrowness of the fee provision reflects the self-interest of the drafter, the California Real Estate Association. Most of the litigation likely to take place between a seller of property and a listing agent is brought by the seller against the agent. The only litigation a broker is likely to initiate is for its fee. Real estate professionals would have little interest in exposing themselves to not just liability for the broad array of negligence claims that could be made against them, but also the sellers’ attorney fees incurred in bringing such claims. Brokers and agents would gain from having their fees paid by the sellers they sue to recover their fee, as the fee provision would help induce a seller to pay the fee, and they would not likely commence a suit without being confident of winning. This is an obvious reason why real estate brokers would seek to narrow the application of any fee provision to such commission lawsuits; and in any event, we are constrained by section 1654 to construe any uncertainty of such contract provisions against the drafter.
Due to the narrowness of this particular fee provision, appellants’ reliance on Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338 (Xuereb), is unjustified. The fee provision in Xuereb, which provided that the prevailing party would recover its attorney fees and costs in any legal proceeding to which the parties’ agreement merely “ ‘gives rise’ ” (i.e., tort or contract), is a quintessentially “broad” attorney fee provision. (Xuereb, at pp. 1342-1343.) In contrast, the provision in the instant case, which entitles the prevailing party to attorney fees “[i]n any action... regarding the obligation to pay compensation under the Agreement” (italics added) is confined to a specific contract claim. As respondent points out, numerous cases emphasize the breadth of the Xuereb provision and point out that the relevance of the court’s analysis is confined to attorney fee provisions using the “gives rise” language or similar language that can reasonably be construed as extending beyond an action under the contract to which the fee provision refers. (See, e.g., Loube v. Loube (1998) 64 Cal.App.4th 421, 430; Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129.)
Narrow attorney fees provisions generally preclude recovery for tort claims. For example, in Gil v. Mansano (2004) 121 Cal.App.4th 739, the court pointed out that “[w]here a contract authorizes an award of attorney fees in an action to enforce... the contract, tort claims are not covered.” (Id. at p. 743, italics added; accord, Santisas, supra, 17 Cal.4th at p. 622, fn. 9; McKenzie v. Kaiser-Aetna (1976) 55 Cal.App.3d 84, 89; DeMirjian v. Ideal Heating Corp. (1949) 91 Cal.App.2d 905, 909-910.) The fee provision in our case, which allows fees only in litigation to enforce “the obligation to pay compensation under the Agreement, ” is clearly the narrow type that precludes a fee award regarding tort claims.
Appellants rely on language in Xuereb stating that “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 contract.” (Xuereb, supra, 3 Cal.App.4th at p. 1341, italics added; accord, Lerner v. Ward (1993) 13 Cal.App.4th 155, 161.) However, in Xuereb and the other cases appellants rely upon, the fee agreement provided for attorney fees in litigation sounding in tort, as well as in contract. That is clearly not the case with respect to the narrow provision in this listing agreement.
Our dissenting colleague points out that there are “many cases in which contractual attorney fees provisions have been enforced under section 1021.” However, all of the cases cited in the dissent involved broad fee provisions of the sort described in Xuereb. (Skyway Aviation, Inc. v. Troyer (1983) 147 Cal.App.3d 604, 610-611 [involved an all-inclusive express indemnity provision in an aircraft rental agreement]; Lerner v. Ward, supra, 13 Cal.App.4th 155 [involved the provision “arising out of this agreement” and the court refused to invoke the reciprocity of section 1717 for lack of a contract claim]; Palmer v. Shawback (1993) 17 Cal.App.4th 296, 299 [involved a very broad provision in a tort action: “ ‘arising out of the execution of this agreement or the sale, or to collect commissions, ’ ” but the defendants’ motion for fees was based on the wrong code section (§ 1717) and the opinion merely applied the correct statute de novo]; Moallem v. Coldwell Banker Com. Group, Inc. (1994) 25 Cal.App.4th 1827, 1831 [“This language is broad... as in Xuereb and its progeny.... However, the critical difference between this case and the Xuereb cases is that in those cases the attorney fees provision specifically covered and benefited all parties to the contract, while in this case the provision specifically limits entitlement to attorney fees to Coldwell.” The reciprocity of section 1717 therefore did not apply in an action sounding in tort, and the request for fees “was properly denied”]; Johnson v. Seigel (2000) 84 Cal.App.4th 1087, 1100 [involved the “arising out of” language in one provision but a second provision prohibited any fee award to a party who did not attempt to mediate before “ ‘resorting to arbitration or court action.’ ” Relying on Santisas, the court held that the asymmetric remedy regarding fees was permitted by the terms of the contract]; Childers v. Edwards (1996) 48 Cal.App.4th 1544 [involved the broad “arising out of” language in a tort case. The court found the defendants had misrepresented water problems regarding the house they sold to plaintiffs, but granted non-suit because the plaintiffs failed to prove damages. Defendants convinced the Court of Appeal that they prevailed under Code Civ. Proc., § 1032].)
This Case Sounded Entirely in Tort
Every case cited by appellants in the line of cases following Xuereb is distinguishable from this case not only because the fee provision in each was significantly broader than the one at issue here, but also because those cases have all involved both contract and tort claims. In contrast, respondent’s complaint does not include a single cause of action based on a contract theory. Her causes of action-for fraud and deceit, breach of fiduciary duty, professional negligence, and elder abuse-always sounded only in tort, and were not combined with any contract claim. Neither appellants nor our dissenting colleague have cited any case in which attorney fees were awarded, based on a narrow fee provision similar to this one, to a party after litigation of a case in which all of the causes of action sounded in tort. Our independent research has disclosed none.
Claims involving professional malpractice can be characterized as torts involving a contractual relationship. However, such mixed claims are not excepted from the general rules regarding fee awards: “It is true that, unlike ordinary negligence, professional negligence breaches a duty that exists only because the parties have a contractual agreement, and it has been recognized that an action for professional negligence constitutes both a tort and a breach of contract. [Citations.] Nonetheless, ... [section 1717] did not authorize an award of attorney fees incurred in prosecuting a case against real estate agents for negligence and breach of fiduciary duty in connection with a purchase of real estate.... It is also well settled that ‘... an action for fraud seeking damages sounds in tort, and it is not “on a contract” for purposes of an attorney fee award, even though the underlying transaction in which the fraud occurred involved a contract containing an attorney fee clause.’ [Citations.]” (Loube v. Loube, supra, 64 Cal.App.4th at pp. 429-430.)
Appellants concede the fact that the complaint contains no cause of action asserting any contract claim by arguing that respondent did, in effect, make such a claim because of several factors: (1) in closing argument her counsel referred to “the unlawful commissions defendants took, ” and noted that respondent was seeking not only damages but also a return of “the $17,500 which is the commissions the broker and Mr. Puri received”; (2) the prayer for relief at the end of the complaint seeks “compensatory and general damages according to proof”; (3) in opposing a motion for nonsuit respondent’s counsel cited a case holding a mortgage broker liable for elder abuse because it received fees in connection with a real estate transaction on her behalf; (4) respondent’s counsel stated in a trial brief that the defendants “intentionally failed to disclose material facts so that they could earn their commissions from the sale of the Second Avenue Property, and (5) because appellant submitted a proposed jury instruction seeking (in addition to the $992,572.43 in damages due to her from the sale of her property) return of the $17,500 she paid appellants in commissions. All of these factors cited by appellants relate to the single, undisputed fact that respondent asked for return of the commission as an item of damage.
Appellants can cite no authority justifying attorney fees based on such factors in any case where the complaint at issue did not include at least one cause of action based on a contract theory. There are opinions suggesting that not only the prayer for relief in the original complaint but also the pleadings and contentions put forward in the course of litigation must be considered to determine the relief sought in the action. (See Greenup v. Rodman (1986) 42 Cal.3d 822; Damele v. Mack Trucks, Inc. (1990) 219 Cal.App.3d 29; Singleton v. Perry (1955) 45 Cal.2d 489; American Motorists Ins. Co. v. Cowan (1982) 127 Cal.App.3d 875.) However, none of these cases relates to the types of claims for which attorney fee awards may be made under Code of Civil Procedure section 1021 or Civil Code section 1717. For example, Greenup holds that in all default judgments, the demand sets a ceiling on recovery and that when an answer is stricken as a sanction for the defendant’s obstruction of discovery, it is as if no answer had been filed in the first instance. (Greenup, at p. 828.) These cases have nothing to do with the issue in our case and certainly do not suggest that a contract claim justifying a fee award can be produced by a prayer in a complaint that incidentally seeks the return of a commission as a damage remedy for injury caused by entirely tortious conduct.
Certainly the mere use of the terms “compensation” or “compensatory damages” in the context of pleading and arguing tort claims does not bring the entire case within the ambit of this attorney fees clause, as the dissent suggests.
At the hearing of the motion for an award of fees the respondent relied on Hasler v. Howard (2004) 120 Cal.App.4th 1023 (Hasler). Hasler involved a complaint sounding entirely in tort (i.e. alleging fraud, breach of fiduciary duty and breach of a duty to disclose), which was voluntarily dismissed by the plaintiff prior to trial. (Id. at p. 1025.) The defendant real estate broker moved for fees under a contract provision identical to the one before us and also pointed out that the complaint contained a prayer for attorney fees, even though there was no cause of action based in contract. (Id. at p. 1027.) The defendant also attempted to introduce a settlement conference statement (in which the plaintiff discusses the return of the defendant broker’s commission as an element of damages) to establish that the underlying suit was “ ‘regarding the obligation to pay compensation.’ ” (Ibid.)
The Second Appellate District affirmed exclusion of the settlement conference statement but also endorsed the alternative reasoning that the settlement conference statement would have made no difference if it had been admitted, stating: “That Hasler’s offer to compromise contained statements about his broker’s liability to return her commission, does not mean the underlying lawsuit involved the obligation to pay the broker’s compensation.” (Hasler, supra, 120 Cal.App.4th at pp. 1026-1027.) The appellant in Hasler, like appellants in this case, relied on Xuereb and similar cases to contend that identical contract language was broad enough to cover tort actions. (Hasler, at p. 1027.) The opinion concluded that the contract did not contain “such broad language”; and that, because “the complaint does not allege a contract, or for that matter, any other basis for its request for fees... [n]either a general prayer for fees, nor a general prayer for all damages that will compensate plaintiff is sufficient to bring [the] action within the attorney’s fees provision of the listing agreement.” (Id. atpp. 1026-1027.)
In denying the motion for attorney fees in this case, the trial court pointed out that, “the fact that a damage instruction was given concerning the request to refund [the] commission is not sufficient to invoke the standard language in the contract.” We agree. In the absence of any contract claim, respondent’s efforts to recover the commission as an item of tort damages was not a sufficient basis upon which to invoke the narrow attorney fee provision, which itself is easily distinguished from the broad provisions discussed in line of cases permitting fee recoveries in tort cases.
DISPOSITION
The order denying appellants’ motion for an award of attorney fees is affirmed and respondent is awarded her costs on appeal.
I concur: Kline, P.J.
Dissenting Opinion of Haerle, J.
I respectfully dissent. I believe the law is now quite clear, especially from an abundance of authority not considered by my colleagues, that, under Code of Civil Procedure section 1021 (section 1021), even in a pure tort action such as the instant one, a prevailing party is entitled to recover reasonable attorney fees, and is entitled to do so because of and pursuant to contractual clauses reading similarly to the one at issue here. I will discuss these two points in that order.
A. Attorney fees are recoverable in tort actions under section 1021.
In the second section of their opinion, my colleagues state that their “independent research has disclosed” no cases in which “attorney fees were awarded based on a fee provision similar to this one, to a party after litigation of a case in which all of the causes of action sounded in tort.” (Maj. opn., p. 8.) I respectfully disagree. Leaving aside the issue of the similarity of relevant fee provisions (which I will discuss in part B, post), my research has disclosed many cases in which contractual attorney fees provisions have been enforced under section 1021 where the relevant judgment has been based entirely or principally on tort causes of action.
The first such case appears to date from 1983, and is cited by the majority: Skyway Aviation, Inc. v. Troyer (1983) 147 Cal.App.3d 604 (Skyway). There, the appellate court reversed a superior court order which had denied the successful plaintiff its attorney fees. That plaintiff had brought both contract and tort causes of actions against the defendant, an airplane lessee from it, and the jury found in its favor on both. In ruling that the trial court erred in not awarding the plaintiff airplane-lessor attorney fees, the appellate court noted that the jury’s award of damages to it was “based on [the defendant’s] negligence” (id. at p. 611) and that, therefore, an award of attorney fees was appropriate. It stated the rule as follows in a simple, single sentence which the majority’s opinion unfortunately ignores: “The parties to a contract may validly agree to allow for the award of attorney’s fees, even though the suit is based on tort rather than contract.” (Id. at p. 610.)
Next came the case the majority acknowledges is the leading one on this issue, namely, the decision by a unanimous Division Three of this court in Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338 (Xuereb). There, the court also reversed a trial court’s denial of an award of attorney fees, this time in litigation similar to that here, i.e., arising out of an alleged breach of a real estate contract. The prevailing parties were the defendant real estate brokers, but the trial court (there as here the San Francisco Superior Court) denied them any attorney fees under that contract because “the case had been tried on tort theories rather than on the contract.” (Id. at p. 1340.) In reversing the trial court, our colleagues in Division Three relied exclusively on section 1021-and specifically not on Civil Code section 1717 (section 1717)-and held that such made no difference: “In short, we conclude that the various tort causes of action set forth against appellants in respondents’ complaint and tried before the jury must be said to have arisen from the Purchase Agreement. None of them was ‘quite independent of the basic contractual arrangement’; they arose from the underlying transactional relationship between the parties, as memorialized by the Purchase Agreement.” (Xuereb at p. 1344.)
I will, of course, return to Xuereb in the next section of this dissent regarding the issue of the breadth of the contract clause there versus the one in the case before us.
The year after Xuereb was published, a panel of the Second District joined the ranks in holding that, under section 1021, even in an action which went to trial exclusively as a tort action, attorney fees are recoverable. In Lerner v. Ward (1993) 13 Cal.App.4th 155 (Lerner), the appellate court, in an opinion authored by Justice Gilbert, again reversed a trial court which had denied attorney fees to a successful defendant. The plaintiffs in that case alleged that the defendants had falsely represented that the property they were purchasing could be subdivided and originally sued on for both breach of contract and fraud and negligence. However, before trial they dismissed the breach of contract cause of action and proceeded against the ultimately successful defendants “only on the fraud cause of action.” (Id. at p. 157.) After they successfully defended this action, the defendants appealed the trial court’s denial of their motion for attorney fees, citing both sections 1717 and 1021. The appellate court agreed with the trial court that the successful defendants-appellants could not recover under section 1717, because that statute applied only to actions based on a contract. But, the court held, they could recover such fees under section 1021. Citing Xuereb, it ruled: “It is true when the Lerners voluntarily dismissed their contract cause of action before trial and proceeded only on a tort theory, they gave up the opportunity to obtain attorney fees pursuant to Civil Code section 1717. They still, however, had the opportunity to obtain attorney fees pursuant to Code of Civil Procedure section 1021. This is because the tort cause of action arose out of the written agreement.” (Lerner at p. 160.)
In so ruling, the court quoted the sentence we also quote above from Skyway. (Lerner, supra, 13 Cal.App.4th at p. 161.) Further the holding in Lerner and other cases cited hereafter effectively undermines the majority’s premise that attorney fees are not recoverable under section 1021 in an action which sounds “Entirely in Tort” (maj. opn., p. 7).
Five months after the decision in Lerner, our colleagues in Division One ruled similarly in a pure tort action involving-as here, in Lerner, and in Xuereb, a successful real estate seller defendant who had been denied attorney fees by the trial court. Citing those two cases, that court ruled that the successful defendants were entitled to an award of attorney fees under section 1021. (Palmer v. Shawback (1993) 17 Cal.App.4th 296, 299-300 (Palmer).) Because there was no contract cause of action in the complaint when the case went to trial (see id. at p. 299), this holding also rebuts the majority’s premise that there can be no recovery of attorney fees when an action such as this is tried on pure tort causes of action.
Next, in Moallem v. Coldwell Banker Commercial Group, Inc. (1994) 25 Cal.App.4th 1827 (Moallem) another panel of the Second District agreed with the holdings of Xuereb, Lerner and Palmer. It summarized those holdings thusly: “Like the present case, the Xuereb line of cases all involved tort claims arising out of real estate sales transactions, in which the contract provided that attorney fees would be allowed to the prevailing party in any action ‘arising out of’ the contract (or similar language). In each case, the court held that although the prevailing party could not claim attorney fees under section 1717-because the action in which it had prevailed had been in tort, rather than ‘on the contract’-the contract’s ‘arising out of’ or equivalent language extended beyond simply actions ‘on the contract, ’ and embraced the tort claims that had been decided. Therefore, under authority of Code of Civil Procedure section 1021, which permits parties to contract for attorney fees, the prevailing party was entitled to an award of fees by dint of the contract itself.” (Moallem at p. 1831.) And, going to a point to which we will return in part B, post, the Moallem court held that a contract clause encompassing any “ ‘legal action... relating to’ the contract” was broad enough to come within the Xuereb line of cases. (Ibid.)
Two years after the decision in Moallem, our colleagues in the Third District joined the throng. In Childers v. Edwards (1996) 48 Cal.App.4th 1544 (Childers), once again the court reversed a trial court’s denial of a motion by a successful real estate seller defendant to recover its attorney fees in a action which went to trial solely on “fraud and negligent misrepresentation” causes of action. (Id. at p. 1548.) Our colleagues in the Third District unanimously reversed this denial. In so doing, and citing most of the authority noted above, they summarized the-now operative law in this succinct sentence: “Using section 1021 as a foundation, a line of cases has held that the type of contractual attorney fee provision at issue here is broad enough to authorize a request for attorney fees in a tort-based misrepresentation action arising out of the contract. [Citations.]” (Id. at p. 1549.)
Finally, in 2000 our colleagues in the Sixth District also came aboard. In Johnson v. Siegel (2000) 84 Cal.App.4th 1087, 1101 (Johnson), that court cited both Xuereb and Lerner the proposition that a provision in a real estate sales agreement “allowed for the recovery of attorney fees for causes of action sounding in tort as well as in contract.”
The majority, incorrectly in my view, relies on Loube v. Loube (1998) 64 Cal.App.4th 421 (Loube) in support of their contention that pure tort actions are not, indeed cannot be, covered by contract clauses such as that here. But the contract in that case was an attorney-client retainer agreement, and the clause involved was, as the opinion itself notes, basically a copy of section 1717, i.e., recited “ ‘[I]f legal action... is necessary to enforce the terms of this Agreement, the prevailing party shall recover reasonable attorneys’ fees.’ ” (Id. at p. 429.) But the action in question was patently not brought to “ ‘enforce the terms of this Agreement;’ ” rather, it was an action alleging legal malpractice by the attorneys. (Loube at pp. 425, 429-431.)
Which brings me to the present case, a case involving-as many of the other cases above do also-a real estate sales dispute, more specifically a dispute between a real estate seller and her brokers. Those parties had, as the majority correctly recites, a three-page form contract, a form agreement apparently prepared by the California Association of Realtors. Paragraph 15 of that agreement provided: “In any action, proceeding or arbitration between Seller and Broker regarding the obligation to pay compensation under this Agreement, the prevailing Seller or Broker shall be entitled to reasonable attorney fees and costs from the non-prevailing Seller or Broker....”
Clearly, there was an “action... between Seller and Broker” here. Equally clearly, the “Broker, ” i.e., appellants, prevailed in that action. The question at issue here was whether the action was “regarding the obligation to pay compensation” by the seller, respondent Sandhu, to the appellants, the brokers and agent Puri and Jafran, Inc. For the reasons that follow, I believe it did.
Respondent’s complaint alleged five causes of action against appellants and the other originally-named defendants: fraud and deceit, breach of fiduciary duty, professional negligence, negligent misrepresentation, and elder abuse. Neither those causes of action nor the factual allegations of the complaint preceding them specifically mention the broker’s commission issue, although in one general allegation it is alleged that all the defendants acted “in order to obtain the money of Sandhu... as well as to receive referral kickbacks and other compensation to ensure... continuation of the scheme which provided the co-conspirators with large fees and income.” (Emphasis supplied.)
Similarly, the prayer for relief at the end of the complaint did not specifically mention the compensation received by troof” and “[s]pecial damages according to proof” to describe what respondent sought.he defendant broker and listing agent, but did use broad terms such as “[c]ompensatory and general damages according to p
However, during the course of pre-trial and trial proceedings, respondent’s counsel was much more specific about what they and their client were seeking. This specificity was, at least according to the record before us, first illustrated in respondent’s amended trial brief, filed a week or so before trial. In it, her counsel argued that the defendants “intentionally failed to disclose material facts so that they could earn their commissions from the sale of the Second Avenue Property, ” and then concluded by contending that respondent was requesting an award of over $1 million in damages “which consists of the net proceeds [from the sale] due to Plaintiff with the addition of Defendants’ undeserved commissions.”
Even more significantly, in one of the jury instructions submitted by respondent the court instructed the jury: “The following are the specific items of damages claimed by Surindar Sandhu: [¶] 1. Surindar Sandhu requests damages in the amount of $992,572.43, which consists of the net proceeds due to her from the sale; and [¶] 2. Surindar Sandhu requests damages in the amount of $17,500.00, which consists of the commissions earned by the Defendants.”
In their opening brief to us, appellants contend that this instruction was proposed by respondent, and respondent’s counsel seems to concede as much in their brief to us.
Finally, in closing argument to the jury, respondent’s counsel made it clear-indeed, twice-that her client was specifically seeking, as one item of damage payable to her by appellants, the commission they had received. That counsel’s first statement to that effect was that her client was “only seeking what she would have received from the sale of the Second Avenue property and the unlawful commissions Defendants took.” In concluding her argument, the same counsel stated, even more specifically: “[A]s I indicated earlier, we are only asking for one amount of damages, which is $992,572.43 which is the net proceeds due to Ms. Sandhu from the sale of the Second Avenue property, and the $17,500 which is the commissions the broker and Mr. Puri received.”
To summarize: at multiple times in their pretrial pleadings, arguments at trial, and proposed (and given) instructions, respondent’s counsel very specifically requested that the appellants’ commissions be returned to her as an element of damage.
Contrary to my colleagues contention, the fact that brokers’ commissions were not specifically mentioned in the prayer for relief in the complaint in this case is not relevant. The law is clear that the relief sought in litigation is determined by all the pleadings and contentions put forward in the course of litigation, not just the prayer for relief in the original complaint. As our Supreme Court has held “section 580 [of the Code of Civil Procedure] specifically provides that the court is not bound by the demand of the complaint, but may award any relief consistent with the case made by the plaintiff.” (Greenup v. Rodman (1986) 42 Cal.3d 822, 827.) Thus, “a plaintiff may secure relief different from or greater than that demanded in the complaint.” (Damele v. Mack Trucks, Inc. (1990) 219 Cal.App.3d 29, 39; see also Singleton v. Perry (1955) 45 Cal.2d 489, 499-500; American Motorists Ins. Co. v. Cowan (1982) 127 Cal.App.3d 875, 883; 5 Witkin, Cal. Procedure (5th ed. 2008) Pleadings, § 933.)
To sum up: I believe the majority is incorrect when it says, in the second portion of its opinion, that the many cases allowing attorney fees in actions such as this “have all involved both contract and tort claims.” (Maj. opn., p. 7.) The authority cited above makes clear that this is not so.
B. The attorney fees clause in the relevant contract is not unduly narrow.
As noted above, appellants sought fees based on the contractual term that such fees are to be awarded “[i]n any action, proceeding or arbitration between Seller and Broker regarding the obligation to pay compensation under this Agreement....” My colleagues contend (see maj. opn., pp. 5-7) that this language is too narrow to permit the award of attorney fees to appellants. Again, I respectfully disagree.
It is correct, as the majority notes, that in some of the cases cited and discussed above, there was a somewhat broader attorney fees clause. Thus, the agreement at issue in the Xuereb case read: “ ‘[i]f this Agreement gives rise to a lawsuit or other legal proceeding... the prevailing party shall be entitled to recover... reasonable attorney fees....’ ” (Xuereb, supra, 3 Cal.App.4th at p. 1340.) Similar language, i.e., “arising out of this agreement” was contained in the real estate contracts at issue in Skyway, Lerner, Childers and Johnson. However, the language in the contracts in Palmer and Moallem was different. Thus, in Palmer the relevant contract language was narrower; it provided: “ ‘In the event legal action is instituted by the Broker(s), or any party to this agreement, or arising out of the execution of this agreement or the sale, or to collect commissions, the prevailing party shall be entitled to receive from the other party a reasonable attorney fee....’ ” (Palmer, supra, 17 Cal.App.4th at p. 299.) Similarly, in Moallem, the attorney fee clause was triggered “ ‘[i]f broker... is required to institute legal action against Owner... relating to this Schedule or any agreement of which it is a part....’ ” (Moallem, supra, 25 Cal.App.4th at pp. 1829-1830.)
My colleagues contend that, because the contract here uses the phrase “regarding the obligation to pay compensation” instead of broader terms such as “arising out of this agreement, ” it is too narrow to encompass attorney fees required to litigate tort claims brought against a real estate broker. I disagree. The key issue is whether the action, whether in tort or contract or some combination of each, implicated “the obligation to pay compensation” to the brokers. I submit that such was clearly the case here because of the many times respondents’ counsel made clear that they were in fact litigating “the obligation to pay compensation” to the brokers and, indeed, were specifically seeking the return of the $17,500 paid to them by way of commissions. As noted above, these occasions included: (1) respondent’s amended trial brief which specified that she was seeking “Defendants’ undeserved commissions”; (2) respondent’s proposed jury instruction stating that “Surindar Sandhu requests damages in the amount of $17,500, which consists of the commissions earned by the Defendants”; and (3) the twice-repeated oral argument to the jury by respondent’s counsel that respondent was, indeed, seeking to recover the commissions appellants earned.
Yes, this litigation involved much more than these commissions, i.e., the almost-$1 million in the proceeds from the sale which respondent did not receive. But no case cited by the majority, nor any I have found, suggests that a contract clause encompassing litigation “regarding the obligation to pay compensation” must be interpreted to mean litigation “principally regarding the obligation to pay compensation.”
For these reasons, I respectfully dissent. I believe the trial court’s order should be reversed and the matter remanded to it for the determination of reasonable attorney fees to be awarded to appellants.