It has long been the rule in California law that a victorious party in a
breach of contract case is entitled to attorney’s fees where the parties’ contract
provides for the award of attorney’s fees to the prevailing party. See, Civil Code
section 1717 and Hsu v. Abbarra (1995) 9 Cal.4th 863. Thorny issues have arisen,
however, as to whether attorney’s fees are to be awarded, and to which party,
where a party does not achieve all relief sought or where there are competing
contract claims and both sides obtain a measure of relief. The recently published
opinion in Silver Creek, LLC v. BlackRock Realty Advisors, Inc. (2009) Westlaw
1394183 (“Silver Creek Case”), issued by the California Fourth District Court of
Appeal on May 20, 2009, sheds further light on this important issue. The Silver
Creek Case is noteworthy given that attorney’s fees were awarded even though
the prevailing party (i) had lost on one of two contract claims and (ii) was
ordered to return a deposit of $1,130,000.
When Attorney’s Fees Are Awardable Under Contract
If neither party achieves a complete victory on all the contract claims, the
courts have ruled that it is “within the discretion of the trial court to determine
which party prevailed on the contract or whether, on balance, neither party
prevailed sufficiently to justify an award of attorney fees.” Scott Company of
California v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109. The presumption is that,
because the statute governing recovery of attorney’s fees (Civil Code section
1717) allows such discretion, the trial court has also been “empowered to identify
the party obtaining ‘a greater relief ’ by examining the results of the action in
relative terms: the general term ‘greater’ includes ‘[l]arger in size than others of
the same kind’ as well as ‘principal’ and ‘[s]uperior in quality.’” [citations
omitted]. Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1151. In making that
determination, the trial court “is to compare the relief awarded on the contract
claim or claims with the parties' demands on those same claims and their
litigation objectives as disclosed by the pleadings, trial briefs, opening
statements, and similar sources.” Hsu v. Abbarra, supra, 9 Cal.4th at 876.
Silver Creek Case Decision
The facts of the Silver Creek Case are common enough.
In that matter, Silver Creek, LLC (“Silver Creek”) and another entity
entered into agreements in 2005 with BlackRock Realty Advisors, Inc.
(“BlackRock”) to convey two commercial properties for a total purchase price of
$29,750,000. BlackRock, in turn, deposited a total of about $1,130,000 into escrow
accounts. The purchase agreements specified that, among other things,
BlackRock would assume existing loans on the two properties, the loan
assumption agreements had to be satisfactory to Silver Creek and the sale
transactions would close no later than July 1, 2005.
During the escrow period, a dispute arose between the parties regarding
the terms of the loan assumption agreements. Shortly after the July 1, 2005
deadline for closing, Silver Creek notified BlackRock that it considered the
agreements and escrow terminated for failure to comply with the closing
deadline and to obtain satisfactory loan assumption agreements. After
BlackRock declined to acknowledge the termination, Silver Creek notified
BlackRock of its position that it was entitled to terminate the agreements but
offered to relinquish its rights to the $1,130,000 deposit upon execution of an
acceptable settlement agreement.
After BlackRock declined to at least formally respond to that notice, Silver
Creek filed a declaratory relief action seeking a declaration that it had validly
terminated the agreements and was entitled to retain the $1,130,000 deposit.
BlackRock filed a cross-complaint alleging that Silver Creek had breached its
obligation to act reasonably in approving a loan release and that its purported
termination of the agreements was invalid. BlackRock sought damages and
return of its deposit for Silver Creek's alleged breach of the agreements or,
alternatively, specific performance of the agreements. Before trial, the parties
confirmed that entitlement to the $1,130,000 deposit was a disputed issue.
The matter proceeded to a bench trial and the court heard testimony from
a Silver Creek representative that it did not want the deposit, but wanted to get
the properties back on the market. BlackRock representatives testified that their
goal was to obtain title to the two properties and the entity was not willing to
merely accept its deposit and walk away from the deal. The trial court later
issued a detailed statement of decision finding in favor of Silver Creek on the
complaint and BlackRock's cross-complaint, but concluded that BlackRock was
entitled to a return of the $1,130,000 deposit.