Opinion
NOT TO BE PUBLISHED
Siggins, J.
San Mateo County Super. Ct. No. 409726
Fox, Shjeflo, Wohl & Hartley, LLP (Fox) appeals a postjudgment order awarding its former landlord, Washington Mutual Bank, FA (Washington Mutual), $561,840.10 in attorney fees and $128,332.91 in expenses. We conclude the trial court erred in ruling (1) the parties’ lease contained an attorney fees clause that entitled Washington Mutual to recover its fees; and (2) Fox was judicially estopped from contesting whether the lease entitled Washington Mutual to fees. We therefore reverse.
BACKGROUND
This is the second time this lease dispute has come before us. Fox formerly leased office space in a building owned by Washington Mutual. In Washington Mutual Bank, FA v. Fox, Shjeflo, Wohl, Newkold & Hartley LLP (Feb. 28, 2003, A095214 [nonpub. opn.]), we reversed a declaratory judgment regarding amounts due under the lease and remanded for a new trial. Following retrial, judgment was entered in favor of Washington Mutual.
Washington Mutual moved for an award of attorney fees pursuant to Civil Code section 1717 and argued the award was authorized by paragraph 13 of its lease with Fox. Paragraph 13 provides: “HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against and from any and all claims arising from Tenant’s use of the premises for the conduct of its business or from any activity, work or other thing done, permitted or suffered by the Tenant in or about the Building, and shall indemnify and hold harmless Landlord against and from all claims arising from the breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any act or negligence of the Tenant, or any officer, agent, employee, guest, or invitee of Tenant, and from and against all cost, attorney’s fees, expenses and liabilities incurred by reason of any such claim or any action or proceeding brought against Landlord by reason of any such claim. Tenant upon notice from Landlord shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord. Tenant as a material part of the consideration to Landlord hereby assumes all risk of damage to property or injury to persons, in, upon or about the Premises, from any cause other than Landlord’s negligence, and Tenant hereby waives all claims in respect thereof against Landlord.”
Civil Code section 1717, subdivision (a) provides in relevant part: “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.” Unless otherwise noted, all further statutory references are to the Civil Code.
According to Washington Mutual, paragraph 13 encompassed claims between the parties and, therefore, it applied to the parties’ dispute over the rental rate. Fox contends the clause was a third party indemnity provision and not a reciprocal fee provision authorizing fees in an action between the parties on the lease. Alternatively, it argued Washington Mutual was not entitled to fees if paragraph 13 were construed as a fee clause because the landlord was not a prevailing party and the fees requested were unreasonable.
The court granted the fee motion. It ruled “The Court finds that the Defendant is judicially estopped from asserting that there is no attorney’s fees provision governed by Civil Code section 1717 in the agreement between the parties. See, International Billing Services, Inc. vs. Emigh, 84 Cal.App.4th 1175 (2000). The Court further finds that the clause at issue in this case does contemplate attorney’s fees and expense for litigation on the contract. See, Continental Heller Corporation vs. Amtech Mechanical Services, Inc., 53 Cal.App.4th 500, 508-509 (1997). The Court further finds that Plaintiff is the prevailing party because the judgment was more bad news for Defendant than Plaintiff in that Defendant lost on two counts—the rental rate was increased and the Defendant did not prevail on its rescission claim.” The court further found that “[u]nfortunately, given the language of the contractual provision at issue,” it lacked discretion “to reduce the attorney’s fees to a reasonable or by any amount, as Defendant has made no showing that any of the fees or expenses was not ‘incurred.’ ” The court awarded Washington Mutual the full amount of fees and expenses sought. Fox filed a timely appeal.
DISCUSSION
I. Paragraph 13
We turn first to whether paragraph 13 of the lease supports the award of attorney fees pursuant to section 1717. Washington Mutual contends the trial court was correct that the provision is a general attorney fee clause based on the contractual language that: “Tenant . . . shall indemnify and hold harmless Landlord against and from all claims arising from the breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, . . . and from and against all cost, attorney’s fees, expenses and liabilities incurred by reason of any such claim . . . .” Fox asserts this language provides an indemnity covering only third-party claims brought against Washington Mutual as a result of Fox’s default in the lease. Because no extrinsic evidence was introduced on the meaning of the disputed provision, its interpretation is a question of law that we review de novo. (Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328, 1336; Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 705.) Washington Mutual is wrong.
While section 1717 makes unilateral attorney fee provisions reciprocal and applicable to the entire agreement (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 968 (Myers Building)), “[t]he 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.” (Id. at p. 973.)
“Under Civil Code section 1717, a reciprocal right to attorney fees in all parties to a contract arises where the contract accords a right to such fees to one party but not the other. [Citation.] However, 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.] Regardless whether this clause is characterized as an indemnification or an attorney fees provision, the usual rules of construing a contract govern our interpretation, as we strive to determine the actual intent of the parties.” (Campbell v. Scripps Bank, supra, 78 Cal.App.4th at p. 1336-1337, italics added; Myers Building, supra, 13 Cal.App.4th at pp. 968-969.)As the court explained in Baldwin Builders v. Coast Plastering Corp. (2005) 125 Cal.App.4th 1339, 1344, “[b]ecause an indemnity agreement is intended by the parties to unilaterally benefit the indemnitee, holding it harmless against liabilities and expenses incurred in defending against third party tort claims [citation], application of [section 1717’s] reciprocity principles would defeat the very purpose of the agreement.”
Here, the provision of the lease Washington Mutual contends is an attorney fees clause is captioned “HOLD HARMLESS,” and specifies that the tenant “shall indemnify and hold harmless Landlord” against any and all claims arising from the tenant’s use of the premises; and shall “indemnify and hold harmless Landlord against and from all claims arising from the breach or default in the performance of any obligation on Tenant’s part.” (Italics added.) “A clause which contains the words ‘indemnify’ and ‘hold harmless’ is an indemnity clause which generally obligates the indemnitor to reimburse the indemnitee for any damages the indemnitee becomes obligated to pay third persons.” (Myers Building, supra, 13 Cal.App.4th at p. 969.) Also significant, as in Building Maintenance Service Co. v. AIL Systems, Inc. (1997) 55 Cal.App.4th 1014 (Building Maintenance), is the absence of any contractual language specifically providing for attorney fees in an action between the parties. Certainly they could have included such language had it been intended.
That paragraph 13 is not a general attorney fee clause is supported by the language that requires Fox to defend the claims specified in paragraph 13, i.e., “any such claim or any action or proceeding brought against Landlord by reason of any such claim,” at Fox’s expense and “by counsel reasonably satisfactory to Landlord.” It would make no sense to require Fox to obtain Washington Mutual’s consent to its choice of counsel to defend an action that Washington Mutual brought against Fox, and yet that would be required under the unreasonable construction urged by Washington Mutual. Washington Mutual contends that the selection of counsel portion of paragraph 13 applies only to the last phrase of the immediately preceding sentence, and not to any claim otherwise within the scope of paragraph 13. This strained and formalistic interpretation goes against basic principles of contract law. (See County of Marin v. Assessment Appeals Bd. (1976) 64 Cal.App.3d 319, 325 [interpret contracts to avoid surplusage and absurdity]; § 1641 [give effect to every clause if practicable].)
The cases relied on by Washington Mutual are not persuasive. International Billing Services, Inc. v. Emigh, supra, 84 Cal.App.4th 1175 (International Billing) concerned a fees provision that has little resemblance to the disputed provision in this case. In relevant part, it read: “ ‘ “You promise to reimburse Company for any legal fees, liability, or loss which Company incurs as a result of any unauthorized disclosure or use of Confidential Information by You.” ’ ” (Id. at p. 1180.) It was not captioned a hold harmless clause and did not use the terms “indemnify” or “hold harmless” as the lease does in this case; nor was construing it as a fee provision irreconcilable with any other part of the contract. In Wilshire-Doheny Associates, Ltd. v. Shapiro (2000) 83 Cal.App.4th 1380, the court construed disputed provisions to harmonize with Corporations Code section 317 (concerning a corporation’s power to indemnify its agents) and the corporation’s articles of incorporation, which were “virtually identical” to section 317 and explicitly applied to an “ ‘action or suit by or in the right of the corporation to procure a judgment in its favor.’ ” (Wilshire-Doheny Associates, supra, at p. 1396.) Since the language in the articles tracked section 317, the court found the indemnity provisions were not limited to third party lawsuits. (Wilshire-Doheny Associates, supra, at pp. 1396-1397.) There is no comparable basis here to conclude that the parties intended paragraph 13 of the lease to govern a breach of contract action between them.
The entire disputed provision read: “ ‘After You cease to be an employee of Company, regardless of the reason for the ending of employment, You agree to hold all Confidential Information in trust and confidence for Company and not to use such Confidential Information other than for the benefit of Company. Except as authorized in writing by an officer of Company, You agree not to disclose or divulge any Confidential Information, by publication or otherwise, to any person or entity. You promise to reimburse Company for any legal fees, liability, or loss which the Company incurs as a result of any unauthorized disclosure or use of Confidential Information by You.” (International Billing, supra, 84 Cal.App.4th at p. 1182.)
The issue in Continental Heller Corp. v. Amtech Mechanical Services, Inc. (1997) 53 Cal.App.4th 500, is similarly distinguishable because in addition to a standard indemnity provision, the contract that was disputed in that case contained a second clause requiring the defendant subcontractor to indemnify the contractor from “ ‘any and all loss, damage, costs, expenses and attorney’s fees suffered or incurred on account of any breach of the aforesaid obligations and covenants, and any other provision or covenant of this Subcontract.’ ” (Id. at p. 508-509.) The appellate court agreed that if the standard indemnity provision obligating the subcontractor to indemnify the contractor from all loss, including fees, “ ‘aris[ing] out of or . . . in any way connected with’ ” (id. at p. 508) the performance of the subcontracted work were the only clause regarding fees, the general contractor would not have been entitled to recover the fees it incurred prosecuting the subcontractor. But the second provision specifically required indemnification for breach of any contract provision, including a breach of the indemnification clause due to the existence and phrasing of this separate provision. The court concluded a fee award was appropriate. (Id. at p. 509.) In contrast, the same court that decided the Continental Heller case distinguished it in Building Maintenance, on the ground that the Continental Heller indemnification clause did not contain a provision unambiguously allowing fees incurred in a breach of contract action between the parties. (Building Maintenance, supra, 55 Cal.App.4th at p. 1031.) So too here. The Fox contract contains no such separate fee clause and, as in Myers Building, construing the indemnity provision as a reciprocal fee provision is irreconcilable with other provisions of the contract. Myers Building and Building Maintenance are more closely on point and control here.
We conclude that paragraph 13, read as a whole and in context, is simply an indemnification clause that does not provide for a fee award to a prevailing party in litigation on the lease and therefore does not support the fee award to Washington Mutual. This determination renders moot the parties’ dispute over whether the court properly determined the nature and amount of costs allowable under the indemnity provision. It also puts to rest Washington Mutual’s contention that, as the trial court found, Fox is judicially estopped from denying that paragraph 13 is a fee provision. The court based its estoppel finding on the majority opinion in International Billing, supra, 84 Cal.App.4th 1175, which was later disapproved by the same court. In M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One (2003) 111 Cal.App.4th 456, 470, after revisiting International Billing’s judicial estoppel analysis, the Third District concluded “there is no sound policy or legal basis for the broad rule adopted by this court in International Billing. That rule would instead violate the very policy considerations it purports to serve. We agree with the many state court decisions refusing to apply estoppel against a losing party who sought attorney fees under circumstances where that party would not have been entitled to such fees had it prevailed.” (Id. at p. 470, italics added.)
Consistent with this holding, the weight of authority has explicitly rejected estoppel as a basis for imposing an attorney fees award that is not supported by a contractual right. (See Sessions Payroll Management, Inc. v. Noble Construction Co. (2000) 84 Cal.App.4th 671, 681-682; Myers Building, supra, 13 Cal.App.4th at p. 962, fn. 12; Leach v. Home Savings & Loan Assn. (1986) 185 Cal.App.3d 1295, 1307.) Washington Mutual implicitly concedes that M. Perez Co., not International Billing, represents the law, but attempts to distinguish it on the ground that Fox’s lease contains a valid reciprocal fee provision that would have entitled it to fees had it prevailed. As we explained above, it does not. The court’s determination that Fox was judicially estopped from disputing that paragraph 13 was a fee clause was erroneous.
DISPOSITION
The order awarding attorney fees is reversed. Appellant shall recover costs on appeal.
We concur: Parrilli, Acting P.J., Pollak, J.