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The Morrison Law Journal
February 2012
Volume VII, Edition 2

Another Ruling In Favor Of Awarding Attorney's Fees: Court of
Appeals Holds That Plaintiff May Recover Attorney's Fees Based On
Rejected Statutory Offer Even Though The Trial Court Properly Ruled
That The Plaintiff Was Not A Prevailing Party Under Contract

By: Edward F. Morriso n, Jr., Esq.
Larry A. Schwartz, Esq.

In a case dealing with the interplay between the offer to allow judgment
statute found in Code of Civil Procedure section 998 and the recovery of
attorney's fees statute found in Civil Code section 1717, the Court of Appeals,
First District, ruled in SCI California Funeral Services, Inc. v. Five Bridges
(2012) Westlaw 447991 that a cemetery asset purchaser which
brought an action against the seller could recover attorney's fees based on the
offer to allow judgment statute even though the Trial Court properly ruled that
both the plaintiff and seller had prevailed at trial as to significant issues and
neither party would otherwise have been entitled to attorney's fees based on
their contract.

The SCI California Funeral Services, Inc. matter concerned over ten years
of legal disputes involving large parcels of real property that had been dedicated
for uses as a cemetery, or areas adjacent to a cemetery, dating back to 1895.

In brief, the Olivet Memorial Park ("Olivet") had been operated as a
cemetery in Colma, California since approximately 1895. All of the land on
which Olivet Memorial Park was located was owned by Cypress Abbey
Company (“Cypress Abbey”), which also owned a cemetery known as Cypress
Lawn. Olivet would develop land owned by Cypress Abbey for cemetery
purposes and then sell grave sites. Olivet would pay Cypress Abbey a portion of
the sale price. Thus, under the terms of the contract between them, Olivet
acquired land from Cypress Abbey and sold it on an as needed basis when grave
sites were sold.

In the late 1970’s, Olivet and Cypress Abbey restructured their
relationship. As part of that restructuring, an ornamental easement was
provided which permitted Olivet to place and maintain signage at the entrance
of the cemetery. In the mid 1990’s, Olivet began exploring the possibility of
selling its cemetery assets and, in 1995, Olivet began to furnish information to
SCI California Funeral Services, Inc. (“SCI”) for that purpose. After lengthy


negotiations, SCI ultimately purchased the cemetery from Olivet, which was
later renamed the Five Bridges Foundation.

In 1998, disputes developed between SCI and Cypress Abbey over options
which SCI contended had been issued to Olivet/Five Bridges Foundation to
purchase adjoining parcels (SCI contended that if it had not been able to
purchase the adjoining parcels, there would be no additional grave sites to sell
and there would be very limited value to the cemetery). In 1999, SCI sued
Cypress Abbey in San Mateo Superior Court seeking declaratory relief and
specific performance of an option agreement. In 2002, the Trial Court entered a
judgment in the Cypress Abbey litigation. The Trial Court found the alleged
option agreement at issue provided no viable mechanism for determining a
purchase price and further ruled that the alleged option agreement was not
specifically enforceable. The Trial Court also found that there was an enforceable
oral agreement for the reconveyance of the ornamental easement for the signage
at the entrance of the park back to Cypress Abbey.

In 2003, SCI filed an action against the Five Bridges Foundation. The Five
Bridges Foundation also filed a Cross-Complaint. The matter was tried to the
Court in March of 2007. The Trial Court in that case ruled that the Five Bridges
Foundation had adequately disclosed the risk that Cypress Abbey might refuse
to sell additional real property to SCI. On that basis, the Trial Court concluded
that the Five Bridges Foundation had not breached its sale agreement with SCI
insofar as any option to purchase real property from Cypress Abbey was
concerned (a significant victory for the Five Bridges Foundation). However, the
Trial Court found that the Five Bridges Foundation had breached its sale
agreement by failing to convey the ornamental easement for signage at the
entrance to the park (a significant victory for SCI). The Trial Court then awarded
$1,700,000 to SCI for breach of contract on the ornamental easement claim. The
Trial Court also found that there was no prevailing party within the meaning of
the parties' contractual attorney's fees clause because both sides enjoyed
significant victories and no attorney's fees, therefore, were awardable under Civil
section 1717. However, the Trial Court did deem SCI to be the prevailing
party for purposes of statutory costs under Code of Civil Procedure section 1032.

Both sides appealed.

As relevant to this article, the Court of Appeal ruled that, while the Trial
Court had properly held that there was no prevailing party under the parties'
contract (because both sides - SCI and the Five Bridges Foundation, had
prevailed on significant issues in the case), the Court of Appeal ruled that the
Trial Court had improperly denied attorney's fees under the offer to allow
judgment statute under Code of Civil Procedure section 998.


In that regard, the Court of Appeal noted that SCI had offered to settle the
action against the Five Bridges Foundation, via a Statutory Offer, in exchange for
a payment of $799,000, and the Five Bridges Foundation had not accepted the
Offer. The Court of Appeal, in construing the offer to allow judgment statute,
held that the statute applied equally to plaintiffs and defendants and applied to
attorney's fees (if the litigants' contract called for attorney's fees to be paid to the
prevailing party) as well as expert witness fees. The Court of Appeal also held
that the offer to allow judgment statute applied irrespective of the fact that
attorney's fees could not be awarded under contract pursuant to Civil Code
section 1717 in that case (given that there was no prevailing party). The Court of
Appeal, in its holding, cited the reasoning in Scott Company of California v
Blount, Inc.
(1999) 20 Cal.4th 1103, where the California Supreme Court liberally
construed the offer to allow judgment statute in favor of a general contractor
which suffered an award for $422,054 in contract damages after having offered
$900,000 before trial.

The SCI decision is certainly an important and interesting decision.
Essentially, it now holds that even if a party is unable to recover attorney's fees
as a prevailing party under contract, post-offer attorney's fees still can be
awarded under contract based on the offer to allow judgment statute.

About the Authors: Edward F. Morrison, Jr. is the founding partner and
Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional
corporation. Their biographies can be viewed at

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