Opinion
In this appeal from an order denying a motion for an award of attorney fees, we must decide whether a defendant who defeats a claim for breach of contract but loses a related claim for promissory estoppel is entitled to recover attorney fees when the alleged contract provides the prevailing party in any dispute between the parties shall recover such fees. We hold such a defendant is entitled to recover the attorney fees reasonably incurred in defeating the breach of contract claim. We therefore reverse the trial court’s order and remand for further proceedings.
I.
BACKGROUND
In preparing a bid for construction of a municipal library, Douglas E. Barnhart, Inc. (Barnhart), a general contractor, solicited bids from subcontractors for certain decorative metalwork. CMC Fabricators, Inc. (CMC), submitted a bid for the metalwork dated November 5, 2005. CMC’s bid provided it would “remain in force for thirty days from the above date unless accepted by [Barnhart] or withdrawn by [CMC],” and contained a space for Barnhart to indicate acceptance by signature. Although Barnhart never signed CMC’s bid, it used CMC’s price in preparing its own bid for the library project.
On December 14, 2005, Barnhart sent CMC a letter of intent that included price and scope-of-work terms that differed from those of CMC’s bid. Six days later, Barnhart sent CMC a proposed subcontract containing these altered terms. CMC did not sign Barnhart’s proposed subcontract and, months later, sent its own proposed subcontract to Barnhart with terms consistent with those of CMC’s original bid. Barnhart never signed CMC’s proposed
Barnhart sued CMC on theories of breach of contract and promissory estoppel for $66,110, the amount in excess of CMC’s bid that it had to pay the substitute subcontractor for the decorative metalwork. In its breach of contract cause of action, Barnhart alleged that CMC offered to perform the decorative metalwork for the price specified in its November 5, 2005 bid; that Barnhart accepted the offer; that a contract resulted; and that CMC refused to perform the work. In the promissory estoppel cause of action, Barnhart alleged that CMC submitted the November 5, 2005 bid to perform the decorative metalwork; that Barnhart foreseeably and reasonably relied on the bid in obligating itself to construct the municipal library; that CMC refused to honor the bid; and that injustice could be avoided only by enforcing the bid. Barnhart attached a copy of CMC’s bid to the complaint and incorporated its terms by reference into both the breach of contract and the promissory estoppel claims. Barnhart also asserted a cause of action to recover $7,500 against CMC’s contractor’s bond under Business and Professions Code section 7071.5, subdivision (c), based on CMC’s “willful failure to prosecute work with reasonable diligence.” In its complaint, Barnhart requested damages, interest and costs.
CMC filed an answer asserting a general denial and several affirmative defenses. It requested a judgment for costs and attorney fees.
After a bench trial, the court found Barnhart and CMC never entered into a contract and on that basis rejected Barnhart’s breach of contract and contractor’s bond claims. The court also found “Barnhart relied to its detriment on CMC’s proposal, submitted its bid to the [municipality], and suffered actual damages compensable under the principles of promissory estoppel.” The court awarded Barnhart $21,111 on its promissory estoppel claim and entered judgment accordingly.
CMC subsequently moved for an award of $150,484.77 in attorney fees based on the following provision of its November 5, 2005 bid: “In the event of any dispute that arise[s] between the parties, the prevailing party shall recover, in addition to any other damages, its attorney’s fees and costs incurred in litigating or otherwise settling or resolving such dispute.” Relying on Civil Code section 1717 and interpretive case law, CMC argued that because it defeated Barnhart’s breach of contract claim, it was “ ‘the party prevailing on the contract’ ” and was therefore entitled to recover attorney fees as a matter of law.
Barnhart opposed CMC’s attorney fees motion. Barnhart argued CMC was not entitled to any attorney fees because (1) CMC did not prove the contract
The trial court denied CMC’s motion for an award of attorney fees. In its order, the court stated Barnhart had prevailed on its promissory estoppel claim “and therefore received the net monetary award and achieved its objecti[ve]s in litigation.” Citing a portion of CMC’s briefing in which CMC argued attorney fees should not be apportioned because in defending against all the elements of Barnhart’s breach of contract claim it necessarily defended against all the elements of its promissory estoppel claim, the court stated the parties had agreed “a cause of action for promissory estoppel is essentially a cause of action for breach of contract.”
II.
DISCUSSION
CMC seeks reversal of the trial court’s order denying its request for attorney fees. CMC asserts a right to an award of attorney fees under the express terms of its decorative metalwork bid, which CMC claims Barnhart sought to enforce as a contract. According to CMC, “its unqualified ‘win’ against. . . Barnhart on Barnhart’s . . . cause of action for breach of a written contract, the only contract cause of action between the parties,” makes CMC “the party prevailing on the contract” entitled to fees as a matter of law. (Civ. Code, § 1717, subd. (a); undesignated section references are to the Civil Code.)
Barnhart counters that the trial court’s order should be affirmed. Barnhart contends its breach of contract claim was based not on CMC’s bid or any other “specific written document,” but on “proposed form subcontracts” “the terms of which were uncertain due to ongoing disputes between Barnhart and CMC.” “Without a defined, express written contract,” the argument continues, there is no basis for an attorney fees award. Alternatively, Barnhart argues it
This appeal thus requires us to resolve two issues: (1) whether there is a contractual basis for an award of attorney fees and, if so, (2) whether CMC or Barnhart was “the party prevailing on the contract” (§ 1717, subd. (a)) entitled to recover its attorney fees.
A. The Alleged Contract Authorizes the Prevailing Party in Litigation to Recover Attorney Fees
We first must determine whether there is a legal basis for an award of attorney fees. California follows the “American rule,” under which each party to a lawsuit must pay its own attorney fees unless a contract or statute or other law authorizes a fee award. (Code Civ. Proc., §§ 1021, 1033.5, subd. (a)(10); Musaelian v. Adams (2009)
The only basis for an attorney fees award asserted in this case was contractual: CMC requested attorney fees under the clause in its November 5, 2005 bid entitling the “prevailing party” to recover such fees in “any dispute that arise[s] between the parties.” Section 1717 governs attorney fees awards authorized by contract and incurred in litigating claims sounding in contract. (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012)
Here, had Barnhart proved its breach of contract claim, it would have been entitled to an award of attorney fees under the express terms of the contract it
Barnhart did not prevail on its breach of contract claim, however. The trial court found “no contract was ever entered into between Barnhart and CMC on the library project.” Thus, under the mutuality of remedy imposed by section .1717, CMC would have a legal right to recover the attorney fees it incurred in “establishing that the contract is . . . nonexistent” (Santisas, supra,
Barnhart tries to escape the effect of section 1717 by arguing it did not sue to enforce the terms of CMC’s November 5, 2005 bid. According to Barnhart, its “contract claim was based on CMC’s alleged breach of the CMC Subcontract,” which was not a “specific written document” but an agreement “the terms and conditions of [which] ‘were to be memorialized in a more formal agreement.’ ” Barnhart thus argues: “Because there were no definite terms to the CMC Subcontract, and no contract was found to exist, there is no evidence that the CMC Subcontract as alleged and pursued by Barnhart provided for attorneys’ fees.” We reject this disingenuous argument, which borders on frivolous.
As we earlier explained, Barnhart attached a copy of CMC’s November 5, 2005 bid to its complaint, and in the charging allegations of its breach of contract cause of action, it incorporated by reference the bid’s terms, which include an attorney fees clause. Barnhart specifically alleged that the “[b]id constituted an offer” and that “Barnhart accepted the [b]id and a contract was formed (‘CMC Subcontract’).” (Italics added.) Barnhart further alleged the “essential terms” of the contract included the price and scope-of-work terms contained in CMC’s bid. Nowhere in its complaint did Barnhart describe any specific document other than the bid, no document besides the bid was attached to the complaint, and the complaint was never amended. Thus, although Barnhart also alleged “[t]he CMC Subcontract terms and conditions were to be memorialized in a more formal agreement, namely, Barnhart’s standard form subcontract,” the terms of the alleged “CMC Subcontract” that Barnhart sought to enforce against CMC were necessarily those of CMC’s November 5, 2005 bid because Barnhart defined the “CMC Subcontract” as the contract formed by acceptance of that bid.
• B. CMC Was the Party Prevailing on the Contract
We next must determine whether CMC or Barnhart was “the party prevailing on the contract.” (§ 1717, subd. (a).) Section 1717 “vests the trial court with discretion in making the prevailing party determination.” (Hsu, supra, 9 Cal.4th at p. 871.) “[W]e will not disturb the trial court’s determination absent ‘a manifest abuse of discretion, a prejudicial error of law, or necessary findings not supported by substantial evidence.’ ” (Silver Creek, LLC v. BlackRock Realty Advisors, Inc. (2009)
Section 1717 provides in pertinent part: “(a) 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.” (Italics added.) With exceptions not applicable to this case, “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.” (Id., subd. (b)(1), italics added.)
The determination of the party prevailing on the contract for purposes of awarding attorney fees under section 1717 must be made independently of the determination of the party prevailing in the overall action for purposes of awarding costs under Code of Civil Procedure section 1032. (Zintel Holdings, LLC v. McLean (2012)
Here, the overall results of the litigation were mixed. Barnhart prevailed on its promissory estoppel claim and recovered a judgment for $21,111 against CMC. CMC defeated Barnhart’s claims for breach of contract and for recovery against CMC’s contractor’s bond, on the ground that CMC and Barnhart never entered into a contract. If the breach of contract and contractor’s bond claims were “the only contract claim[s] in the action” (as CMC argues), then CMC “is the party prevailing on the contract under section 1717 as a matter of law.” (Hsu, supra, 9 Cal.4th at p. 876, italics added.) If, however, a promissory estoppel claim is a contract claim (as Barnhart argues and the trial court ruled), then the court had discretion to determine the prevailing party “by ‘a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.’ ” (Ibid.) The dispositive issue, then, is whether a claim based on a theory of promissory estoppel is a claim “on a contract.” (§ 1717, subd. (a).)
The parties have not cited, and we have not found, any published California case that has decided whether a promissory estoppel action is an “action on a contract” within the meaning of section 1717. We therefore look for guidance to cases interpreting and applying the quoted phrase in the context of other types of actions.
“California courts construe the term ‘on a contract’ liberally.” (Turner v. Schultz (2009)
Employing this approach, courts have held the phrase “action on a contract” as used in section 1717 includes an action seeking declaratory and injunctive relief to enforce a consent decree (In re Tobacco Cases I (2011)
In contrast, courts have held the phrase “action on a contract” as used in section 1717 does not include an action asserting only tort claims (Santisas, supra,
Based on our review of cases applying section 1717, we agree with our colleagues in Division Three that “ ‘[i]t is difficult to draw definitively from case law any general rule regarding what actions and causes of action will be deemed to be “on a contract” for purposes of [section] 1717.’ ” (Hyduke’s, supra,
Barnhart’s claim for breach of contract obviously meets these requirements: In that claim, Barnhart sought damages based on CMC’s failure to perform the decorative metalwork for the price specified in its November 5, 2005 bid, and the bid contains an attorney fees clause. Similarly, Barnhart’s claim for recovery against CMC’s contractor’s bond was “on a contract”: In that claim, Barnhart alleged CMC’s “willful failure to prosecute work with reasonable diligence caus[ed] material injury to Barnhart and breach of the CMC Subcontract.” (Italics added.) The “CMC Subcontract,” we have explained (see pt. II.A., ante), was just another name for CMC’s November 5, 2005 bid, which contains an attorney fees clause. Barnhart’s promissory estoppel claim, however, does not satisfy the first requirement for being “on a contract” listed above because, as we shall explain, such a claim does not “involve” an agreement.
Under the doctrine of promissory estoppel, a “ ‘promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.’ ” (C & K Engineering Contractors v. Amber Steel Co. (1978)
A promissory estoppel claim also lacks another essential element of a contract claim: the parties’ consent. (§ 1550, item 2.) Contract formation requires the parties’ mutual assent, i.e., their “agree[ment] upon the same
Based on these significant differences between contract and promissory estoppel claims, our Supreme Court repeatedly has recognized the claims not only as distinct or alternative theories of recovery but also as mutually exclusive. For example, in Kajima, supra,
The Courts of Appeal likewise have treated promissory estoppel and contract claims as fundamentally different. For example, our colleagues in Division Three rejected as “superfluous” a promissory estoppel claim when the plaintiff also sued for breach of contract and “adequate consideration existed.” (Money Store Investment Corp. v. Southern Cal. Bank (2002)
The California appellate cases thus clearly indicate that a promissory estoppel claim is based on equitable principles, not on a contract. Because the basis of a claim is the proper focus in determining whether the claim is “on a contract” for purposes of section 1717 (Kachlon, supra,
Supportive of the conclusion that a promissory estoppel claim is not a claim “on a contract” within the meaning of section 1717 are decisions from other states holding that a party prevailing on a promissory estoppel claim may not recover attorney fees under statutes worded similarly to section 1717. For example, an Arizona statute authorizing the “successful party” in “any contested action arising out of a contract, express or implied,” to recover “reasonable attorney fees” (Ariz. Rev. Stat. § 12-341.01.A) was held not to apply to a party prevailing on a theory of promissory estoppel. (Double AA Builders, Ltd. v. Grand State Construction L.L.C. (2005)
In a case involving a lease containing an attorney fees provision but no statute authorizing an award of attorney fees, a Washington appellate court rejected a claim for an award of attorney fees incurred in defeating a promissory estoppel claim. (Tradewell Group, Inc. v. Mavis (1993)
The inherent differences between promissory estoppel and contract claims recognized in the case law also justify differential treatment of the claims under section 1717, because a promise sought to be enforced on the basis of promissory estoppel, rather than contract, does not raise the policy concerns underlying section 1717. Section 1717 was originally enacted to make one-sided attorney fees clauses reciprocal in order to prevent parties with stronger bargaining power from oppressing weaker parties by inserting into
For all of the reasons stated above, we hold a claim for promissory estoppel does not “involve” a contract and, therefore, is not a claim “on a contract” within the meaning of section 1717, subdivision (a). We further hold a plaintiff who prevails on a promissory estoppel claim but recovers nothing on a breach of contract claim (or other claim “involving” a contract) in the same action is not “the party prevailing on the contract” entitled to recover under the attorney fees clause in the alleged contract. (§ 1717, subd. (a).) Instead, the defendant who defeats the breach of contract claim (or other claim “involving” a contract) but loses on the promissory estoppel claim is “the party prevailing on the contract” entitled to recover under the attorney fees clause in the alleged contract. (Ibid.)
Barnhart nevertheless argues we should consider it the prevailing party for purposes of section 1717 because it “prevailed on its promissory estoppel claim, which was contractual in nature, and therefore recovered a greater relief in the action on the contract.” Citing language from several Court of Appeal opinions and the Restatement Second of Contracts, Barnhart asserts that generally “claims for promissory estoppel should be considered based on contract.” Barnhart then asserts its particular promissory estoppel claim “was contractual in nature” because that claim, like its companion breach of contract claim, was based on CMC’s promise to do the decorative metalwork for the library construction project for the price stated in CMC’s November 5, 2005 bid. From these premises, Barnhart concludes it was “the party prevailing on the contract” (§ 1717, subd. (a)), because a comparison of the results of the breach of contract and promissory estoppel claims indicates Barnhart “recovered a greater relief in the action on the contract” (id., subd. (b)(1)). We are not persuaded.
As additional support for the contention its promissory estoppel claim was based on contract, Barnhart relies on the Restatement Second of Contracts. In particular, Barnhart quotes the following sentence contained in a comment to section 90 of the Restatement, which defines promissory estoppel: “A promise binding under this section is a contract, and full-scale enforcement by normal remedies is often appropriate.” (Rest.2d Contracts, § 90, com. d, p. 244, italics added.) The immediately following sentences, however, qualify this seemingly absolute statement: “But the same factors which bear on whether any relief should be granted also bear on the character and extent of the remedy. In particular, relief may sometimes be limited to restitution or to damages or specific relief measured by the extent of the promisee’s reliance rather than by the terms of the promise.” (Ibid., italics added.) If a promise made enforceable by the doctrine of promissory estoppel were in all cases and for all purposes a contract, then the measure of damages could not be so limited, because when a contract is breached “[t]he aim is to put the injured party in as good a position as he would have been had performance been rendered as promised.” (Brandon & Tibbs v. George Kevorkian Accountancy Corp. (1990)
In any event, although the California Supreme Court has adopted the doctrine of promissory estoppel as defined in section 90 of the Restatement Second of Contracts (Kajima, supra,
In sum, Barnhart’s promissory estoppel claim was not a claim “on a contract.” (§ 1717, subd. (a).) Its success on that claim is therefore irrelevant to the prevailing party determination under section 1717, and the trial court erred in determining Barnhart was the prevailing party on that basis. (Frog Creek, supra,
C. Remand Is Required to Allow the Trial Court to Award CMC a Reasonable Amount of Attorney Fees
CMC requests that we direct the trial court on remand to award CMC all of its requested attorney fees. We decline to do so.
CMC is not necessarily entitled to recover all its requested attorney fees. In an action on a contract, “the party prevailing on the contract. . . shall be entitled to reasonable attorney’s fees . . . .” (§ 1717, subd. (a), italics added.) The trial court must fix a reasonable amount of attorney fees, and it has broad discretion in determining that amount. (Ibid.; PLCM Group, supra,
For the guidance of the trial court on remand, we note that “[attorney’s fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed.” (Reynolds, supra, 25 Cal.3d at pp. 129-130.) “Apportionment is not required when the claims for relief are so intertwined that it would be impracticable, if not impossible, to separate the attorney’s time into compensable and noncompensable units.” (Bell, supra,
Finally, CMC has requested an award of attorney fees incurred on appeal. When a contract or a statute authorizes the prevailing party to recover attorney fees, that party is entitled to attorney fees incurred at trial and on appeal. (Wilson v. Wilson (1960)
DISPOSITION
The order denying CMC’s motion for an award of attorney fees is reversed. The matter is remanded to the trial court to conduct further proceedings consistent with this opinion, to determine the amount of attorney
Benke, Acting P. J., and Haller, J., concurred.
A petition for a rehearing was denied December 7, 2012, and respondent’s petition for review by the Supreme Court was denied January 30, 2013, S207556.
Notes
CMC emphatically denies the existence of such an agreement: “From CMC’s first appearance through to the trial court proceedings, . . . CMC never conceded that [Barnhart’s] breach of contract or promissory estoppel causes of action were the same or had any merit.”
More recent opinions from the Texas Court of Appeals have split on the issue of the recoverability of attorney fees in promissory estoppel cases. In 2001 Trinity Fund, LLC v. Carrizo Oil & Gas, Inc. (Tex.App. 2012)_S.W.3d._,_, footnote 9 [2012 Tex.App. Lexis 8612, *60, footnote 9], the court followed Doctors Hosp. 1997, supra,
The question in US Ecology, supra,
Barnhart also points out that in distinguishing between contract and tort claims, we stated: “If based on breach of promise it is contractual; if based on breach of a noncontractual duty it is tortious.” (Arthur L. Sachs, Inc. v. City of Oceanside (1984)