Rideau v. Stewart Title of California CA4/1
235 Cal. App. 4th 1286
Cal. Ct. App.2015Background
- Earl and Marina Rideau deposited $239,700 with escrow holder Stewart Title to buy a Mexican condominium; escrow Instructions required release to a specified fund control company (California Fund Control).
- Stewart Title released the funds to other entities; the project failed and the Rideaus lost their deposit.
- On prior appeal this court held Stewart Title breached the escrow Instructions by releasing funds to entities other than the specified fund control company and directed entry of judgment for the Rideaus on their breach of contract claim.
- On remand the Rideaus sought contractual attorney fees and extra costs under Civil Code §1717, relying on the final sentence of the Instructions’ Section IV (a “hold harmless” clause mentioning defense and attorneys’ fees).
- Stewart Title argued the clause is a unilateral indemnity protecting the escrow holder (attorney fees as an item of loss) and thus not subject to §1717 reciprocity; the trial court agreed and denied fees.
- The Court of Appeal affirmed, holding the clause is an indemnity provision that does not authorize reciprocal contractual fee recovery for the Rideaus in this enforcement action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the hold-harmless/attorney-fees sentence in Section IV of the escrow Instructions is a reciprocal contractual fee clause triggering Civil Code §1717 | The Rideaus contended the sentence functions as a unilateral attorney-fee provision that should be given reciprocal effect under §1717 | Stewart Title argued the language is an indemnity clause (attorney fees as an item of loss for the indemnitee) and thus not subject to §1717 reciprocity | The court held the clause is an indemnity provision protecting Stewart Title for costs defending third-party or conflicting claims; it does not authorize reciprocal fee recovery by the Rideaus in their contract enforcement action, so §1717 does not apply |
Key Cases Cited
- Baldwin Builders v. Coast Plastering Corp., 125 Cal.App.4th 1339 (2005) (indemnity clauses that expressly allow fees in actions to enforce the indemnity can trigger §1717 reciprocity)
- Myers Bldg. Indus. v. Interface Tech., 13 Cal.App.4th 949 (1993) (indemnity agreements generally create unilateral obligations and fees as items of loss are not made reciprocal by §1717)
- Campbell v. Scripps Bank, 78 Cal.App.4th 1328 (2000) (escrow indemnity clauses construed to determine if they notify parties that fees are recoverable in enforcement actions)
- Continental Heller Corp. v. Amtech Mech. Servs., 53 Cal.App.4th 500 (1997) (attorney-fee language in an indemnity may cover fees incurred enforcing the indemnity if contract language so provides)
- Carr Bus. Enters., Inc. v. City of Chowchilla, 166 Cal.App.4th 14 (2008) (summary of doctrines distinguishing indemnity-based fee provisions from contractual fee clauses triggering §1717)
- Zalkind v. Ceradyne, Inc., 194 Cal.App.4th 1010 (2011) (general principles defining indemnity and recoverable items)
- Summit Fin. Holdings v. Continental Lawyers Title Co., 27 Cal.4th 705 (2002) (escrow holder is agent/fiduciary; failure to follow escrow instructions gives rise to breach of contract claim)
- Meininger v. Larwin-Northern Cal., 63 Cal.App.3d 82 (1976) (application of §1717 requires action to be "on the contract")
- Amen v. Merced County Title Co., 58 Cal.2d 528 (1962) (escrow holder's duties and remedies for failure to perform)
- Diaz v. United California Bank, 71 Cal.App.3d 161 (1977) (public policy limit on enforcing exculpatory clauses)
- Akin v. Business Title Corp., 264 Cal.App.2d 153 (1968) (same)