58 Cal.App.5th 955
Cal. Ct. App.2020Background
- Waterwood Enterprises bought property from the City of Long Beach in 2005 and leased it back; the lease required the City (tenant) to maintain and make repairs to the demised premises.
- After the 10-year lease expired in 2015, Waterwood sued the City for breach of the written lease, alleging roof leaks, HVAC failures, and asphalt/concrete damage and seeking at least $150,000 plus fees.
- The City answered with a general denial and 18 affirmative defenses, did not allege or tender any amount as owed, and disputed most of Waterwood’s replacement-cost theories (admitting only some limited repair liability in communications but not by tender).
- A jury found the City breached the lease and awarded Waterwood $45,050 in damages on the single contract cause of action (special verdict was a lump sum without itemization).
- The trial court awarded Waterwood costs but, relying on settlement offers and pretrial negotiations, found the City was the prevailing party under the lease’s attorney-fee clause and ordered Waterwood to pay $172,375 in attorney fees to the City.
- On appeal, the court reversed that portion of the judgment, holding the trial court abused its discretion in finding the City the prevailing party and remanded to determine either that Waterwood prevailed or that no party prevailed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court erred in finding the City the prevailing party under Civil Code §1717 after losing the sole contract claim | Waterwood: it won the only contract claim and thus is the prevailing party | City: its litigation objective was limited payment; settlement offers and partial concessions show it achieved its objectives and therefore prevailed | Reversed — trial court abused discretion; City lost the only contract claim and never tendered payment, so cannot be deemed prevailing under §1717 |
| Whether the lease’s definition of “prevailing party” controls over §1717 | Waterwood: contract definition supports finding it prevailed | City: lease definition supports City as prevailing | Rejected — §1717’s definition governs and contractual definitions inconsistent with §1717 cannot alter the statute |
| Whether the trial court properly relied on settlement communications and §998 offers to decide prevailing party status | Waterwood: settlement offers are irrelevant to litigation objectives under §1717 | City: settlement offers reflect the parties’ litigation objectives and are proper to consider | Reversed — settlement communications and §998 negotiations are not proper sources for assessing litigation objectives under §1717 (and City’s §998 offer did not exceed the judgment) |
| Whether the City’s alleged admission it owed some repairs or the jury’s smaller lump-sum verdict made it a prevailing party absent a tender | Waterwood: admission is not a tender; City must allege tender/deposit as required by §1717(b)(2) | City: its admissions and the verdict being close to its offer show practical victory | Rejected — §1717(b)(2) requires an allegation of tender and deposit (or payment) to confer prevailing-party status on a defendant; City never tendered or alleged tender |
Key Cases Cited
- Hsu v. Abbara, 9 Cal.4th 863 (1995) (trial court must compare relief awarded with parties’ demands and litigation objectives when applying §1717)
- Santisas v. Goodin, 17 Cal.4th 599 (1998) (contract definitions cannot override Civil Code §1717)
- Scott Co. v. Blount, Inc., 20 Cal.4th 1103 (1999) (trial court has discretion to determine prevailing party when partial recovery occurs)
- DisputeSuite.com, LLC v. Scoreinc.com, 2 Cal.5th 968 (2017) (recognizes trial-court discretion under §1717)
- Marina Pacifica Homeowners Assn. v. Southern California Financial Corp., 20 Cal.App.5th 191 (2018) (settlement communications are not proper sources for determining litigation objectives under §1717)
- Exxess Electronixx v. Heger Realty Corp., 64 Cal.App.4th 698 (1998) (reinforces that §1717’s prevailing-party definition is mandatory)
- de la Cuesta v. Benham, 193 Cal.App.4th 1287 (2011) (partial monetary recovery does not automatically bar fee awards; trial court must exercise discretion considering comparative relief)
- Joseph Magnin Co. v. Schmidt, 89 Cal.App.3d Supp. 7 (1978) (tender/deposit before or alleged in answer can determine prevailing-party status under analogous statute)