Hsu v. Abbara

Decision Date06 April 1995
Docket NumberNo. S037574,S037574
Citation9 Cal.4th 863,891 P.2d 804,39 Cal.Rptr.2d 824
CourtCalifornia Supreme Court
Parties, 891 P.2d 804 Chia-Lee HSU et al., Plaintiffs and Appellants, v. Maher J. ABBARA et al., Defendants and Appellants.

Mantalica & Treadwell, Mark A. Treadwell and Denis White, Los Angeles, for plaintiffs and appellants.

KENNARD, Justice.

When a contract contains a provision granting either party the right to recover attorney fees in the event of litigation on the contract, Civil Code section 1717 (hereafter section 1717) gives the "party prevailing on the contract" a right to recover attorney fees, whether or not that party is the party specified in the contract. It defines the phrase "party prevailing on the contract" as "the party who recovered a greater relief in the action on the contract," and it provides that a trial court "may also determine that there is no party prevailing on the contract for purposes of this section."

The issue we address here is whether a trial court may determine that there is no "party prevailing on the contract" when the court renders a simple, unqualified decision in favor of the defendant on the only contract claim in the action. We conclude that in that situation the defendant, who is unquestionably the sole victor, is the party prevailing on the contract as a matter of law and therefore entitled to reasonable attorney fees under section 1717.


On June 5, 1987, defendants Maher J. and Diane Abbara (husband and wife; hereafter the Abbaras) signed an agreement with Roy Rhino (a real estate agent; hereafter Rhino) and Merrill Lynch Realty (Rhino's employer; hereafter Merrill Lynch), listing their single family home in Diamond Bar, California, for sale at a price of $299,900.

On June 8, 1987, plaintiffs Chia-Lee and Tammy Hsu (husband and wife; hereafter the Hsus) viewed the Abbaras' home in the company of their own real estate agent, Ben Lin. Later that day, using a standard real estate form, the Hsus made a written offer to purchase the home for $285,000. The form included this provision for attorney fees: "In any action between Broker, BUYER or SELLER arising out of this agreement, the prevailing party shall be entitled to reasonable attorney's fees and costs." On June 9, the Abbaras made a written counteroffer, also on a standard real estate form, at a price of $297,000, with the counteroffer to expire at 5 p.m. on June 10. The counteroffer incorporated by reference the terms and conditions of the offer, including the provision for attorney fees.

When Lin informed the Hsus of the counteroffer, they asked to see the Abbaras' house again. After their second view of the house, the Hsus told Lin they would like to raise their offer to $292,000. On the bottom of the counteroffer form, on the space provided to specify proposed amendments to the counteroffer, Lin wrote: "All terms are accepted except price to be $292,000" and "Unless the above is accepted on or before 6/10, 1987 at 11:00 AM, it shall be deemed revoked." The Hsus then signed the form. Lin told the Hsus he thought the price of $292,000 was still too low. The Hsus asked Lin to find out the lowest price the Abbaras would accept.

During the evening of June 9, 1987, Lin telephoned Rhino. Lin said $297,000 was "too high" and asked whether the Abbaras would consider a sale price between $285,000 and $297,000. Rhino advised Lin to present any new offer in writing. Lin telephoned Rhino a second time that evening to report that the Hsus were "at $292,000 and firm." Rhino told Lin he would communicate this new offer to the Abbaras the next morning.

On the morning of June 10, 1987, Rhino told the Abbaras about his conversations with Lin. The Abbaras told Rhino they would not accept $292,000, and that they would "go back to asking full price" because the house had only recently been placed on the market.

That afternoon, Rhino received an envelope containing the Abbaras' written counteroffer, now bearing the signature of the Hsus. The form contained two checkboxes by which the buyers could indicate whether their acceptance of the counteroffer was unconditional or subject to proposed amendments. Neither box had been checked. The handwritten words "All terms are accepted except price to be $292,000" had been lined out and "Offer terms are accepted" was handwritten below the lined-out writing. But the document still contained the handwritten notation that it would be deemed revoked if not accepted "on or before 6/10, 1987 at 11:00 AM." The document was not accompanied by a check or other form of "good faith" deposit.

After receiving this document, Rhino telephoned the Abbaras to report that the Hsus had agreed to the counteroffer price of $297,000. The Abbaras stated that anything less than the list price was no longer acceptable. They also mentioned that it appeared they would be unable to buy a suitable replacement home. They had planned to purchase a house with a particular floor plan in a particular tract, but they had just learned there were no acceptable homes remaining for sale in that tract. Over the next few days, Rhino attempted to locate a suitable replacement home for the Abbaras, but he did not succeed. In the meantime, Rhino prepared escrow instructions for a sale at $297,000, and he delivered these instructions to an escrow agent. The Hsus signed the instructions; the Abbaras did not.

On June 18, 1987, the Abbaras sent notes to Lin and to the escrow agent stating that they would not be selling their home to the Hsus. Rhino drafted the notes and dictated them to Diane Abbara, who signed and mailed them. The notes cited the Abbaras' failure to find a replacement home, rather than a lack of agreement on price, as the reason why the Abbaras were not proceeding with the sale.

On June 22, 1987, the Hsus commenced this action against the Abbaras. Their unverified complaint alleged the formation of a contract of sale and requested specific performance of that contract. The Abbaras answered with a general denial. In 1989, after obtaining new counsel, the Abbaras cross-complained against their agents (Rhino and Merrill Lynch) seeking indemnity and damages on various theories, including negligence, breach of fiduciary duty, and breach of the listing agreement.

The action was tried to the court in March 1992. The trial was bifurcated, with trial on the complaint to be followed by trial on the cross-complaint. When the Hsus rested their case, the trial court granted the Abbaras' motion for judgment on the complaint. 1 (Code Civ.Proc., § 631.8.) The trial court found that after the Abbaras had made a counteroffer at $297,000, the Hsus (through Lin's telephone conversations with Rhino) made a new offer at $292,000, which the Abbaras rejected. The trial court apparently reasoned that because the new oral offer at $292,000 extinguished the Abbaras' counteroffer at $297,000, the Hsus purported acceptance of the $297,000 counteroffer was actually another new offer, and the Abbaras "had no obligation to accept any further counteroffers or offers by the [Hsus]." Thus, the trial court concluded that no contract was ever formed.

Following the announcement of the court's ruling on the complaint, the parties stipulated that the issue of attorney fees would be "submitted to the court through written briefs." 2

The Abbaras argued in their brief that they should be awarded attorney fees from the Hsus under section 1717 as the parties prevailing on the contract cause of action. They argued also that they should be awarded attorney fees from their agents on the cross-complaint, either under section 1717 and the attorney fee provision of the listing agreement 3 or under the "tort of another"" doctrine (see Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 198 Cal.Rptr. 551, 674 P.2d 253) on the theory that the agents had caused the Abbaras to incur attorney fees by their negligent or intentional misrepresentation to the Hsus that the Abbaras had accepted the Hsus' counteroffer at $297,000. 4

The agents asserted in their reply brief that "the issue of the cross-complaint was made moot by the court's ruling on the motion for nonsuit," and that for this reason the Abbaras could recover nothing on the cross-complaint. Therefore, the agents reasoned, they should be entitled to recover their attorney fees from the Abbaras under section 1717 and the attorney fee provision in the listing agreement as the prevailing parties on the cross-complaint. 5

For their part, the Hsus argued that they were entitled to recover their attorney fees from the Abbaras and from the Abbaras' agents. They maintained that the Abbaras' agents had negligently or intentionally misrepresented to them that a contract had been formed at a sale price of $297,000, and that the Abbaras were vicariously liable for the conduct of their agents. They claimed that the Abbaras had not informed them until long after they (the Hsus) had filed suit for specific performance that the Abbaras were claiming there had been no agreement as to price. The Hsus insisted that in so doing the Abbaras had acted inequitably and thereby provided the court with an independent ground to deny the Abbaras' request for fees and to instead award fees to the Hsus.

After receiving the parties' briefs, the trial court ruled on the issues of attorney fees and costs. The court awarded the Abbaras their costs of suit from the Hsus, but denied the Abbaras any recovery of attorney fees from the Hsus. The court provided no explanation of the ruling, which was first announced in the judgment. The judgment further provided that the Abbaras would recover nothing from the cross-defendants.

The Abbaras appealed from the portion of the judgment that denied them attorney fees. The Hsus cross-appealed from the judgment for the Abbaras on the complaint. The Court of Appeal affirmed the...

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