T. Bearing Co. v. Walter E. Heller & Co.

• Citation: 112 Cal.Rptr. 910,38 Cal.App.3d 59
• Parties: T.E.D. BEARING COMPANY, Plaintiff and Appellant, v. WALTER E. HELLER & COMPANY et al., Defendants and Respondents. Civ. 42112.
• Decision Date: 25 March 1974
• Court: California Court of Appeals

Page 910

112 Cal.Rptr. 910

38 Cal.App.3d 59

T.E.D. BEARING COMPANY, Plaintiff and Appellant, v. WALTER E. HELLER & COMPANY et al., Defendants and Respondents.

Civ. 42112.

Court of Appeal, Second District, Division 4, California.

March 25, 1974.

Frank Gafkowski, Jr., South Gate and Daniel W. Gage, Los Angeles, for plaintiff and appellant.

Kaplan, Livingston, Goodwin, Berkowitz & Selvin, and Charles M. Levy, Beverly Hills for defendant and respondent Walter E. Heller & Co.

Jones & Bednar, and Clayton Straub, Los Angeles, for defendant and respondent Lawrence Warehouse Co.

KINGSLEY, Associate Justice.

This appeal is the second of two appeals resulting from an amended complaint filed on behalf of T.E.D. Bearing Company, plaintiff (hereinafter T.E.D.) against defendants Walter E. Heller & Company (hereinafter Heller) and Lawrence Warehouse Company (hereinafter Lawrence).

This complaint alleged various counts. After the court sustained demurrers, an order of dismissal was granted by the court in favor of Lawrence, and T.E.D. entered a stipulation for an order of dismissal, allowing Heller $26 in trial costs. ¹ On appeal, the trial court's determination was upheld. The Court of Appeal's remittitur was filed, and it provided that 'It is ordered, adjudged and decreed by the court that the judgment is affirmed. Respondents to recover costs.' Heller's and Lawrence's memoranda of costs included attorney's fees 'from inception of matter to date.' T.E.D. filed a motion to tax costs and the trial court allowed costs as prayed for in Heller's and Lawrence's memoranda. Plaintiff T.E.D. appeals. ²

Plaintiff's first argument is that, where attorneys' fees are predicated on contract, recovery must be predicated on that contract and not be given as costs under Code of Civil Procedure section 1021, and the fees must be alleged and demanded in the complaint. Section 1021 reads as follows: 'Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to costs and disbursements, as hereinafter provided.'

Plaintiff is correct in contending that attorney's fees which are based on contract rather than on statute cannot be taxed as Costs under section 1021 of the Code of Civil Procedure (Genis v. Krasne (1956) 47 Cal.2d 241, 302 P.2d 289; City Investment Co. v. Pringle (1920) 49 Cal.App. 353, 193 P. 504), and that contracts providing that the aggrieved party may recover attorney's fees, which are recoverable as special damages and not as costs, must be alleged and demanded in the complaint. (City Investment Co. v. Pringle, Supra, at p. 355, 193 P. 504.) The rule is 'that where attorneys' fees are allowable Solely (italics added) by virtue of contract they Cannot (italics in original) be recovered by merely including them in the memorandum of costs.' (Genis v. Krasne, Supra, 47 Cal.2d 241, at 246, 302 P.2d 289, 292, quoting Pringle.)

But where attorney's fees are awarded pursuant to a statute rather than by contract, they are costs. (System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 162, 98 Cal.Rptr. 735.) ³ Therefore, the problem before this court is to determine whether Heller and Lawrence were entitled to attorneys' fees by virtue of a contract, such that they could not be awarded attorneys' fees as 'costs,' or whether Heller and Lawrence were entitled to attorneys' fees by virtue of a statute, such that the trial court could make its award as part of a memorandum of costs, even though there was no special demand in the complaint for attorneys' fees.

It is clear that Heller and Lawrence predicated their claim to attorneys' fees in part on contract; that is, they originally relied on certain language in each of their agreements with T.E.D. which required T.E.D. to pay any attorneys' fees incurred by defendants Heller and Lawrence. ⁴ Had we had nothing more before us than these contracts, respondents could not properly have recovered attorneys' fees as costs; respondents' rights would then be based on contract and they would have had to specially plead and prove the attorneys' fees, which respondents failed to do.

However, section 1717 of the Civil Code provides as follows: In any action on a contract, where such contract specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract, shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements.

'Attorney's fees provided for by this section shall not be subject to waiver by the parties to any contract which is entered into after the effective date of this section. Any provision in any such contract which provides for a waiver of attorney's fees is void.

'As used in this section 'prevailing party' means the party in whose favor final judgment is rendered.'

The primary purpose Civil Code section 1717 is to transfer a unilateral contractual contract right to attorneys' fees into a reciprocal provision giving the right to recover to Either party. (Associated Convalescent Enterprises v. Carl Marks & Co., Inc. (1973) 33 Cal.App.3d 116, 108 Cal.Rptr. 782.) In the agreements before us the contracts provided that attorneys' fees and costs will be awarded to only one of each of the contracting parties, Lawrence in one contract, and Heller in the other contract, and not to T.E.D., thus bringing those unilateral contracts for attorneys' fees within the reciprocal provisions of Civil Code section 1717. Accordingly, respondents Heller and Lawrence had rights to attorneys' fees by virtue of statute (§ 1717), as well as by virtue of contract.

The legal situation before us is, perhaps, unique in the sense that Civil Code section 1717 has been used in the past to benefit the prevailing party in cases where the prevailing party was not also the party to be benefited by the unilateral contractual provisions granting attorneys' fees. That is, the case we have found have generally dealt with the granting of attorneys' fees to the prevailing party, under Civil Code section 1717, where the contract had granted attorneys' fees solely to The other contracting party who lost the law suit. But the language of Civil Code section 1717 is not so limited as this. The statute says that attorneys' fees shall be awarded to 'the prevailing party, whether he is the party specified in the contract or not.' The language of Civil Code section 1717 does not say that attorney fees will be awarded to the party not benefited by the provision granting attorneys' fees if that party prevails. The language is broader than that, and it awards attorneys' fees to 'the prevailing party' whether he is the one specified in the contract or whether he was the one to be disadvantaged by the contract. Therefore, in the case before us, while Heller and Lawrence had rights to attorneys' fees by contract, they also had rights to attorneys' fees by statute--that is, they had rights as the 'prevailing' parties under Civil Code section 1717.

Case law is consistent with this view. It has been judicially determined that the 'prevailing party's' rights to attorneys' fees under section 1717 is a statutory right. ⁵ (Associated Convalescent Enterprises v. Carl Marks & Co., Inc., Supra, 33 Cal.App.3d 116, 120, 108 Cal.Rptr. 782.) It has also been judicially determined that attorneys' fees awarded under Civil Code section 1717 are 'costs' similar to the situation under other statutes which provide for attorneys' fees in litigation and refer to them as costs. (System Inv. Corp. v. Union Bank, Supra, 21 Cal.App.3d 137, 169, 98 Cal.Rptr. 735.) As such, the trial court properly could grant attorneys' fees as 'costs' to the 'prevailing' parties, Heller and Lawrence, that is, to the parties 'in whose favor final judgment is rendered.'

T.E.D. argues that Heller and Lawrence waived their rights to attorneys' fees. The rule of law requiring that attorneys' fees be specially averred where they are special damages as a function of contract (Hunt v. Smyth (1972) 25 Cal.App.3d 807, 101 Cal.Rptr. 4) has no application where an award of attorneys' fees is statutory. In any event, it has been held that, where a party's right to attorneys' fees rests on section 1717, the fact that the entire contract was before the court in the original action is a sufficient 'pleading' to authorize an attorneys' fee award. (San Luis Obispo Bay Properties, Inc. v. Pacific Gas & Elec. Co. (1972) 28 Cal.App.3d 556, 570--573, 104 Cal.Rptr. 733.) That was the case here. All of the pertinent contractual documents were included in the complaint and amended complaint filed by T.E.D., and were relied on by it as the foundation for its action. T.E.D. is in no position, at this stage, to deny that the contract provision was incorporated in the contracts between the parties, thus triggering the application of section 1717.

T.E.D. contends that the superior court had no jurisdiction to grant attorneys' fees on appeal, arguing that, for a superior court to hear an application for attorneys' fees on appeal after judgment has become final, jurisdiction must be conferred on it by the appellate court or by statute. T.E.D. cites American City Bank v....