Opinion
The issue in this case is whether a unilateral attorney fee clause included in an indemnity agreement between a general contractor and a subcontractor is subject to the reciprocity principles set forth in Civil Code section 1717, subdivision (a) (section 1717(a)). We conclude that where, as here, the contractual provision is not included as an item of loss or expense under the indemnity agreement, but instead separately provides for the recovery of attorney fees incurred in enforcing the indemnity agreement, section 1717 applies and authorizes a prevailing indemnitor/subcontractor to recover attorney fees so incurred. We also hold that where the indemnitor/subcontractor is required to prove its lack of fault in defending against a claim under the indemnity, it is entitled to recover the fees incurred therefor.
*1342 FACTUAL AND PROCEDURAL BACKGROUND
Baldwin Builders (Baldwin) was the developer of Paloma, a seven-subdivision, 239-unit community in San Marcos. Coast Plastering Corporation (Coast) and T&M Framing, Inc. (T&M) entered into subcontracts with Baldwin to perform certain construction work in the Tierra subdivision of the Paloma development. Although the subcontraсts included general indemnity provisions, Coast and T&M each executed a stand-alone indemnity agreement with Baldwin, agreeing in relevant part: “The undersigned Subcontractor hereby agrees to indemnify [Baldwin] . . . against any claim, loss, damage, expense or liability arising out of acts or omissions of Subcontractor in any way connected with the performance of the subcontrаct . . . unless due solely to [Baldwin’s] negligence. . . . Subcontractor shall, on request of [Baldwin] . . . but at Subcontractor’s own expense, defend any suit asserting a claim covered by this indemnity. Subcontractor shall pay all costs, including attorney’s fees, incurred in enforcing this indemnity agreement.”
In November 1998, the Paloma homeowners filed this action against Baldwin for construction defects in the homes. Baldwin requested that Coast and T&M defend and indemnify it against the claims, but after they refused, it cross-complained against them for express contractual indemnity, implied indemnity, equitable indemnity, contribution, breach of contract, breach of implied warranty, breach of express warranty, negligence and declaratory relief. Prior to trial, the court entered an order bifurcating the trial so that the claims of the homeowners in the Tierra subdivision, and Baldwin’s related cross-claims against its subcontractors, would be conducted first. The parties stipulated that the issue of attorney fees and costs between Baldwin and its subcontractors would proceed in a postverdict bench trial. At trial, the jury returned special verdicts finding that Baldwin was negligent, but neither Coast nor T&M was negligent, in performing their work in the subdivision.
Thereafter, Coast and T&M filed motions and cost memoranda seeking to recover in part attorney fees and nonstatutory costs based on the indemnity agreements. (They also sought statutory costs, which are not at issue on this appeal.) In support of their requests, Coast and T&M argued that the indemnity agreements’ attorney fee provisions were subject tо the reciprocity principles of section 1717(a), thus entitling them to recover fees and non-statutory costs notwithstanding the unilateral language of the agreements. They sought to recover all of their costs and fees incurred in defending against Baldwin’s claims. Baldwin opposed these arguments, vigorously contending that attorney fee provisions in the indemnity agreements were not subject to section 1717(a).
*1343 After oral argument, the court issued an order awarding Coast $218,832.43 in attorney fees and $63,894.06 in nonstatutory costs and T&M $65,793.88 in attorney fees and nonstatutory costs. The court held that although the attorney fee provisions were contained in the indemnity agreements, they authorized recovery of “attorney’s fees and costs incurred to enforce the indemnity agrеement, as opposed to fees [and costs] incurred to defend or indemnify against claims asserted against Baldwin” and thus were subject to reciprocity under section 1717(a). Baldwin moved for reconsideration, reiterating its earlier arguments and arguing alternatively that, to the extent section 1717(a) applied, Coast and T&M were only entitled to recover fees and nonstatutory costs incurred in enforcing the indemnity provision. The court denied the reconsideration motion based on Baldwin’s failure to establish new or different facts or law, although it also indicated that it would have rejected Baldwin’s arguments on the merits as well. The court awarded Coast an additional $2,500, and T&M an additional $1,000, in attorney fees and thereafter entered judgment, from which Baldwin now appeals. (In the proceedings below, the parties and the trial court implicitly assumed that the recoverability of nonstatutory costs pursuant to the attorney fee clauses was coextensive with the recoverability of attorney fees. The parties’ appellate briefs are based on the same implicit assumption. Because the parties hаve not raised any separate issue regarding the recoverability of nonstatutory costs, we will assume, without deciding, that the parties’ assumption is correct.)
DISCUSSION
1. Recoverability of Fees
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)
This rule of reciprocity is itself subject to an exception where the recovery of attorney fees is authorized
as an item of loss or expense
in an indemnity agreement or provision.
(Campbell
v.
Scripps Bank
(2000)
Here, the attorney fee provisions are set forth in the parties’ indemnity agreements and thus the paramount issue in this case is whether those provisions are attоrney fee clauses that section 1717(a) requires to be reciprocal or are instead an element of loss within the scope of the indemnity agreements, thus rendering the statute inapplicable. There is no question that if Baldwin had been entitled to recover attorney fees incurred in defending against the homeowners’ claims pursuant to the indemnity agreements (see Civ. Cоde, § 2778, subd. (3)), section 1717(a) would not have applied to create a reciprocal right on the part of Coast and T&M to recover attorney fees incurred in defending claims against them arising out of their work under the subcontracts. (See
Campbell v. Scripps Bank, supra,
78 Cal.App.4th at pp. 1337-1338;
Myers, supra,
By contrast to the general provisions requiring Coast and T&M to indemnify Baldwin in the event of third party claims, the attorney fee clauses unambiguously contemplate an action
between the parties
to enforce the indemnity agreements (a point that Baldwin’s counsel recognized at oral argument in the procеedings below) and thus section 1717(a) would appear to be applicable. (See
Continental Heller Corp. v. Amtech Mechanical Services, Inc.
(1997)
In
Perez,
the general contractor and the owner of property to be developed entered into an indemnity agreement that provided in part that the general contractor was required to indemnify the owner against third party claims arising from the general contractor’s performance under the construction agreement. The indemnity agreement also included an “obligation [by the general contractor] to ‘[Reimburse [the owner] ... for any and all legal expense incurred’ in connection with any action covered by the indemnity provisions
or to enforce the indemnity.” (Perez, supra,
In the language on which Baldwin now relies, the
Perez
court observed that the general contractor was not asserting a direct right to recover attorney fees pursuant to the indemnity provision and theorized that this was because the general contractor “[n]o doubt recogniz[ed] that the indemnity provisions . . . [did] not constitute a prevailing-party-attorney-fee provision [subject to section 1717(a).]”
(Perez, supra,
Even if the language in Perez was not dicta, however, we would reject Baldwin’s argument on its merits. We agree with the Perez court’s conclusion that the indemnity provision allоwing the recovery of attorney fees incurred in defending against third party claims under the construction contract was not within the purview of section 1717(a); however, to the extent the opinion can be read as holding that the indemnity provision’s authorization of the recovery of attorney fees in a direct action to enforce that provision was also not subjeсt to section 1717(a), we simply cannot agree with such an interpretation of the contractual language and the statute. (Continental Heller Corp. v. Amtech Mechanical Services, Inc., supra, 53 Cal.App.4th at pp. 508-509.)
Here, the express language of the attorney fee clauses authorizes the recovery of attorney fees where one of the parties to the agreement brings an action to enforce the indemnity; such an action is one “on [the] contract” within the meaning of section 1717(a) and thus the attorney fee clauses are subject to the statutory requirement of reciprocity. (Campbell v. Scripps Bank, supra, 78 Cal.App.4th at pp. 1337-1338.) The fact that the attorney fee clauses are set forth in the indemnity agreements does not alter this conclusion. (Continental Heller Corp. v. Amtech Mechanical Services, Inc., supra, 53 Cal.App.4th at pp. 508-509.)
2. Extent of Recoverable Fees
Baldwin contends thаt, even if the attorney fee provisions were subject to section 1717(a), the statutory reciprocity principles would entitle Coast and T&M to recover only those fees and nonstatutory costs incurred in enforcing the indemnity agreements. Coast and T&M agree that the contractual language authorizes the recovery of only those attorney fees and nonstatutory costs incurred “in enforcing [the] indemnity agreement^].” (See
Maryland Casualty Co v. Bailey & Sons, Inc.
(1995)
As this court recognized in
Heppler
v.
J.M. Peters Co.
(1999)
Like the agreements in Heppler, the indemnity agreements between the parties here do not contain unequivocal language requiring Coast and T&M to indemnify Baldwin even in the absence of their fault or negligence. Thus the success of Baldwin’s attempts to enforce the indemnity agreements depended on whether Coast and T&M were at fault for any of the defects at the Paloma development and a showing of fault, or lack thereof, was a necessary component of any claim to enforce those agreements.
Baldwin cites
Myers, supra,
In addition to arguing that it was entitled to reciprocal benefit of the indemnity agreement, the general contractor also contended that it was entitled to recover attorney fees pursuant to certain subcontracts that had been assigned to it by its subcontractors. The appellate court rejected this alternative argument, finding that althоugh the general contractor prevailed on its claims against the property owner, it did not prevail on the subcontracts that included the attorney fee provisions.
(Myers, supra,
Baldwin’s reliance on the dicta in Myers is misplaced. In this case, the subcontractors seek to recover attorney fees they incurred in defending against Baldwin’s attempts to enforce the indemnity agreements, pursuant to the attorney fee provisions in those agreements. Thеy are not relying on the attorney fee provisions as a basis for recovering fees incurred to enforce some other contracts, as the general contractor was attempting to do in Myers. Myers is inapposite here and does not support a conclusion that Coast and T&M are precluded from recovering fees and costs incurred in establishing their lack оf fault for the alleged construction defects.
Because Coast and T&M were required to establish that they were not negligent in performing the work under their respective subcontracts in order to defeat Baldwin’s express indemnity claim, the trial court could properly have included the fees and costs incurred in making that showing as an element of the fees and costs incurred to enforce the indemnity agreements. As Coast and T&M were not pursued as defendants by the Paloma homeowners during most of the underlying proceedings, it appears that they would be entitled to recover a large portion of the fees they incurred. However, a cursory review of the record suggests that certain of the fees and costs the court awarded to Coast and T&M were unrelated to the enforcement of the indemnity agreements (that is, did not relate to the subcontractors’ liability for defects in the development or to the indemnity agreements themselves). Accordingly, we remand the matter for further proceedings on the issue of what attorney fees and costs are properly characterized as relating to the enforcement of the indеmnity agreements and thus recoverable under the express language of the attorney fee provisions of those agreements.
*1349 DISPOSITION
The judgment is reversed insofar as it grants Coast and T&M attorney fees and nonstatutory costs. The matter is remanded for further proceedings as to the amount of such fees and costs that Coast and T&M are entitled to recover under the attorney fee provisions in the indemnity agreements. In all other respects, the judgment is affirmed. Each party is to bear its own costs on appeal.
Nares, Acting P. J., and Haller, J., concurred.