Opinion

Hom v. Petrou

Court: California Court of Appeal
Filed: Aug 3, 2021
Status: Published
Cited by: 0 cases
Authority: More cited than 16.0%

The opinion

Filed 8/3/21

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

STEPHEN HOM, as Trustee, etc.,

Cross-complainant and

Appellant, A161770

v. (City & County of San Francisco

DENNIS PETROU et al., Super. Ct. No. CGC-13-536307)

Cross-defendants and

Respondents.

Stephen Hom appeals the trial court’s order awarding attorney’s

fees to Dennis Petrou and Brian Utter after the settlement and

dismissal of a cross-complaint Hom filed against them and others. He

argues the trial court erred because Petrou and Utter were not

prevailing parties on Hom’s claim for declaratory relief concerning a

lease containing the attorney’s fees provision and further asserts that

Petrou and Utter could not collect fees on his tort claims because they

were not parties to the lease. We conclude the trial court correctly

awarded fees and will affirm the order.

BACKGROUND

Hom’s parents rented out a building they owned in San Francisco

to Pure Entertainment, LLC to operate a bar and restaurant. Besides

addressing the rent due, the term of the lease, and similar provisions,

the lease Pure Entertainment signed allowed Pure Entertainment to

encumber its leasehold in favor of any of its lenders. Two of the lease’s

nine pages gave various rights and responsibilities to a lender with an

encumbrance on Pure Entertainment’s leasehold, including the rights

to do anything required of Pure Entertainment under the lease,

foreclose on the leasehold, receive copies of notices due to Pure

Entertainment, cure any breach of the lease by Pure Entertainment,

and enter into a new lease at the lender’s option following any default

by Pure Entertainment. The lease also specified that Pure

Entertainment and the landlord would not modify or cancel the lease

without the written consent of the lender. The last sentence of the

lease further stated, “Should any dispute arise from this Lease or the

tenancy hereby created, and the parties cannot settle it between

themselves, then the prevailing party will be entitled to reimbursement

of its reasonable attorneys’ fees, in addition to any other remedy

awarded.” Pure Entertainment later signed promissory notes with

Petrou and Utter in which Pure Entertainment pledged all of its assets

as security for certain debts Pure Entertainment owed Petrou and

Utter.

A dispute arose between Pure Entertainment and Hom’s parents

that resulted in litigation. Pure Entertainment filed a complaint for

breach of contract. After his parents passed away and Hom became the

trustee to the trust holding title to the property, Hom filed a second

amended cross-complaint against Pure Entertainment and, among

others, Petrou and Utter. As relevant here, the cross-complaint alleged

that Petrou and Utter became lenders with leasehold encumbrances for

the purpose of interfering with Hom’s ability to collect rent and evict

Pure Entertainment. The cross-complaint further alleged Petrou and

Utter did not qualify as lenders as contemplated in the lease and their

loans were a sham. The cross-complaint asserted claims against Petrou

and Utter for intentional and negligent interference with contract,

conspiracy, and a declaration of Hom’s rights and obligations under the

lease.

Hom and Pure Entertainment ultimately executed a settlement

agreement that required Hom to dismiss the entire cross-complaint

with prejudice. The trial court enforced the settlement by dismissing

the cross-complaint with prejudice.

Petrou and Utter then moved for attorney’s fees based on the

lease’s attorney’s fees provision. The trial court granted their motion

and awarded them approximately $150,000 in fees.

DISCUSSION

I. Legal principles and standard of review

“A party may not recover attorney fees unless expressly

authorized by statute or contract. [Citations.] In the absence of a

statute authorizing the recovery of attorney fees, the parties may agree

on whether and how to allocate attorney fees. [Citation.] They may

agree the prevailing party will be awarded all the attorney fees

incurred in any litigation between them, limit the recovery of fees only

to claims arising from certain transactions or events, or award them

only on certain types of claims. The parties may agree to award

attorney fees on claims sounding in both contract and tort.” (Brown

Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 818 (Brown Bark).)

When a party seeks to enforce a contractual fees provision and

requests fees related to litigation of claims “on a contract,” Civil Code 1

section 1717 makes the attorney’s fees provision reciprocal, in at least

1 All statutory references are to the Civil Code.

two ways. (§ 1717, subd. (a); Brown Bark, supra, 219 Cal.App.4th at

p. 819.) First, section 1717 allows either party to collect fees if the

contract allows one party but not the other to do so. (Brown Bark, at

p. 819.) Second, section 1717 allows “a party who defeats a contract

claim by showing the contract did not apply or was unenforceable to

nonetheless recover attorney fees under that contract if the opposing

party would have been entitled to attorney fees had it prevailed.”

(Ibid.) Aside from mandating reciprocity, section 1717 also addresses

how to determine which party is the prevailing party for the purposes

of a request for fees in an action on a contract. (§ 1717, subd. (b).) As

relevant here, section 1717, subdivision (b)(2) states that “[w]here an

action has been voluntarily dismissed or dismissed pursuant to a

settlement of the case, there shall be no prevailing party for purposes of

this section.”

Because section 1717 only applies to an action “on a contract,” the

statute and its reciprocity rules do not apply to claims for fees for tort

or other non-contract claims. (Santisas v. Goodin (1998) 17 Cal.4th

599, 602 (Santisas).) For such claims, “the question of whether to

award attorneys’ fees turns on the language of the contractual

attorneys’ fee provision, i.e., whether the party seeking fees has

‘prevailed’ within the meaning of the provision and whether the type of

claim is within the scope of the provision.” (Exxess Electronixx v. Heger

Realty Corp. (1998) 64 Cal.App.4th 698, 708.) Because there is no

requirement of reciprocity for non-contract claims, a provision that

awards fees for such claims to only one party will be enforced according

to its terms, regardless of any apparent unfairness. (Moallem v.

Coldwell Banker Com. Group, Inc. (1994) 25 Cal.App.4th 1827, 1832–

1833 (Moallem).)

To interpret the scope and meaning of a contractual fees

provision, “we apply the ordinary rules of contract interpretation.

‘Under statutory rules of contract interpretation, the mutual intention

of the parties at the time the contract is formed governs interpretation.

[Citation.] Such intent is to be inferred, if possible, solely from the

written provisions of the contract. [Citation.] The ‘clear and explicit’

meaning of these provisions, interpreted in their ‘ordinary and popular

sense,’ unless ‘used by the parties in a technical sense or a special

meaning is given to them by usage’ [citation], controls judicial

interpretation. [Citation.] Thus, if the meaning a layperson would

ascribe to contract language is not ambiguous, we apply that

meaning.’ ” (Santisas, supra, 17 Cal.4th at p. 608.)

We review de novo the trial court’s application of section 1717

and its interpretation of the lease’s attorney’s fees provision. (Khan v.

Shim (2016) 7 Cal.App.5th 49, 55.)

II. Analysis

The trial court ruled that all of Hom’s claims against Petrou and

Utter were “on the contract” and that Petrou and Utter prevailed on

those claims. But the parties now agree that only Hom’s declaratory

relief claim was on the contract, so section 1717 applies only to that

claim. Hom also argues and Petrou and Utter do not dispute that

Petrou and Utter do not qualify as prevailing parties for the

declaratory relief claim under section 1717. But Petrou and Utter

argue that Hom cannot exclude from the fees award those amounts

apportionable to the declaratory relief claim because Hom failed to seek

such apportionment in the trial court. Hom in turn disclaims any

reliance on an apportionment theory and says that he raises the issue

with the declaratory relief claim only as part of his overall argument

that the entire fee award should be reversed.

Although Hom did not cite the specific subdivision, he did

adequately raise the application of section 1717 below in his briefing

and at the hearing below, so he has not forfeited the issue. We agree

with Hom that section 1717, subdivision (b)(2) would bar an award of

fees on Hom’s declaratory relief claim because the trial court dismissed

it pursuant to a settlement. (§ 1717, subd. (b)(2) [“Where an action has

been . . . dismissed pursuant to a settlement of the case, there shall be

no prevailing party for purposes of this section”].) Because Hom does

not request apportionment of the fee award, however, this error

warrants reversal only if the award of fees on the non-contract claims

was also improper. We must therefore determine whether the trial

court properly awarded Petrou and Utter their attorney’s fees on Hom’s

non-contract claims.

This inquiry would normally entail examining the fees provision

to see (1) if it covers non-contract claims, (2) whether Petrou and Utter

may claim the benefit of it, and (3) whether Petrou and Utter are

prevailing parties within its meaning. (Brown Bark, supra,

219 Cal.App.4th at pp. 827–828; Santisas, supra, 17 Cal.4th at pp. 608–

609.) But we may omit the first and third of these steps because Hom

does not dispute that the fees provision is broad enough to apply to his

tort claims, nor does he dispute that Utter and Petrou prevailed on

those claims within the meaning of the fees provision. Instead, he

contends they cannot claim the benefit of the fees provision. Hom

argues primarily that nonsignatories to a contract can never collect fees

relating to tort claims, except in the rare circumstance that the

contract expressly identifies them as entitled to do so. For this

argument, Hom relies on Topanga and Victory Partners v. Toghia

(2002) 103 Cal.App.4th 775, 783–787 (Topanga); Sweat v. Hollister

(1995) 37 Cal.App.4th 603, 615–616 (Sweat), disapproved of on other

grounds by Santisas, supra, 17 Cal.4th at p. 609, fn. 5; Super 7 Motel

Associates v. Wang (1993) 16 Cal.App.4th 541, 549–550 (Super 7); and

Brown Bark, supra, 219 Cal.App.4th 809. We therefore examine each

of these cases in turn to determine whether they establish a per se rule

barring nonsignatories from collecting attorney’s fees on tort claims

under a contractual fees provision.

Topanga

In Topanga, a landlord sued a tenant corporation and a

shareholder/officer of the corporation as its alter ego for breach of

contract and tort claims. (Topanga, supra, 103 Cal.App.4th at p. 778.)

After the landlord settled the case with the corporation and voluntarily

dismissed the shareholder with prejudice, the shareholder moved to

collect his attorney’s fees related to the landlord’s tort claims based on

the contract’s attorney’s fees provision. (Ibid.) The provision allowed

the prevailing party to collect attorney’s fees “ ‘[i]f either

Landlord . . . or Tenant . . . commences or engages in . . . any action or

litigation or arbitration against the other party arising out of or in

connection with the Lease, the Premises or the Building or the

Property.’ ” (Id. at pp. 778–779.) The provision further specified, “ ‘If

Landlord becomes involved in any litigation or dispute, threatened or

actual, by or against anyone not a party to the Lease, but arising by

reason of or related to any act or omission of Tenant or Tenant’s

Employees, Tenant agrees to pay Landlord’s reasonable attorneys’ fees

and other costs incurred in connection with the litigation or dispute.’ ”

(Id. at p. 779.) The Court of Appeal held that because section 1717 and

its reciprocity rules did not apply to the tort claims, and because the

shareholder “simply was not a party to” the lease, he could not invoke

the contract’s fees provision to collect fees on the tort claims. (Id. at

p. 786.)

Unlike Hom, we do not read Topanga as establishing a blanket

rule that a nonsignatory is barred in every instance from recovering

attorney’s fees on tort claims pursuant to a contractual fees provision.

The court’s conclusion that the shareholder could not collect fees

because he was not a party to the contract is not surprising, given that

the contract’s attorney’s fees provision was limited to the expressly

named landlord and tenant. The shareholder relied primarily on

section 1717, and there is no indication that he raised any other theory

by which he could have claimed the benefits of the fees provision, such

as a third party beneficiary theory. This is likely because the contract

expressly addressed litigation between a party to the contract and third

parties by giving the landlord a non-reciprocal right to attorney’s fees

in such situations. Topanga therefore cannot be read to establish as a

matter of law that nonsignatories are necessarily barred from obtaining

fees under a contract. (Sanjiv Goel, M.D., Inc. v. Regal Medical Group,

Inc. (2017) 11 Cal.App.5th 1054, 1063 [“ ‘Language used in any opinion

is of course to be understood in the light of the facts and the issue then

before the court, and an opinion is not authority for a proposition not

therein considered’ ”].)

Super 7 and Sweat

In Super 7, supra, 16 Cal.App.4th at page 544, a buyer of real

estate sued the seller and the seller’s broker for fraud and rescission of

the sale. The purchase agreement included a fees provision that read,

“ ‘In any action or proceeding arising out of this agreement, the

prevailing party shall be entitled to reasonable attorney’s fees and

costs.’ ” (Ibid.) The document included a separate section titled

“Acceptance,” which the seller had signed to indicate his acceptance

and which stated that the seller would pay the broker a commission.

(Ibid.) The broker signed on another line in the “Acceptance” section.

(Ibid.) The “Acceptance” section included its own fees provision, stating

that the prevailing party could recover attorney’s fees in any action

between the broker and seller arising out the agreement. (Ibid.)

The Court of Appeal held that the broker could not collect his

attorney’s fees from the buyer under the purchase agreement. (Super

7, supra, 16 Cal.App.4th at p. 544.) The court reasoned that the broker

was not a party to the purchase contract because, even though the

contract referred to him in one clause, the broker had no contractual

obligations or interest in the sale of the property. (Id. at p. 545.) The

court rejected the broker’s argument that he was a party based on his

signature in the “Acceptance” section. (Id. at p. 546.) The court found

that the “Acceptance” section containing the broker’s commission

agreement was a separate agreement from the buy-sell agreement, and

that the broker was a stranger to the latter agreement. (Ibid.) The

buyer’s suit did not arise from the broker’s commission agreement.

(Ibid.) Applying the rules for interpreting contracts, the court further

reasoned that allowing the broker to collect fees under the buy-sell

agreement would render the separate fees provision in the broker’s

commission agreement redundant and unnecessary. (Ibid.)

Super 7 also rejected the broker’s theory that was he was a third

party beneficiary of the buy-sell agreement, for two reasons. (Super 7,

supra, 16 Cal.App.4th at pp. 546–547.) First, the court found the

broker cited no authority allowing a third party beneficiary to do

anything other than collect the benefits due under the contract. (Id. at

p. 546.) The court further noted that “the basic premise underlying

attorney fee clauses, i.e., a party is not liable for attorney fees unless he

agrees to the clause, is inconsistent with [the broker’s] theory, because

a third party beneficiary does not participate in reaching the

agreement. [The broker’s] theory would have the third party

beneficiary bound by an agreement to which he did not consent.”

(Ibid.) The second and more fundamental problem, according to the

court, was that the agreement did not confer third party beneficiary

status on the broker because the buy-sell agreement contained no

promise to pay the broker and the broker’s rights arose solely from the

separate broker’s commission agreement. (Id. at pp. 546–547.)

The third case Hom cites, Sweat, supra, 37 Cal.App.4th at

pages 605–606, involved essentially the same fact pattern as Super 7:

A buyer of property sued the sellers and the sellers’ brokers for

misrepresentation and nondisclosure. The purchase agreement’s fees

provision was similar, if not identical, to the one at issue in Super 7,

and the facts were no different. (Id. at pp. 615–616.) Sweat followed

Super 7 and held that the brokers could not collect fees based on the

purchase agreement because they were not parties to that contract.

(Id. at p. 616.)

Super 7 and Sweat do not establish a blanket rule against

allowing nonsignatories to collect fees any more than does Topanga. To

the contrary, those decisions’ focus on the specific language in the

contracts at issue demonstrates that the relevant question is simply

whether the language of the attorney’s fees provision covers

nonsignatories. The purchase agreements at issue in Super 7 and

Sweat did not, because the brokers were not parties to the agreements

and could not be considered third party beneficiaries in light of the side

agreements providing for the broker’s commissions.

Super 7’s remarks about the incompatibility of a third party

beneficiary theory and an attorney’s fees provision appear to be dicta,

since the court concluded that the purchase agreement did not confer

third party beneficiary status on the broker in that case. (Super 7,

supra, 16 Cal.App.4th at p. 546.) But even if those remarks were not

dicta, we find them unpersuasive. The court found no authority

indicating that a third party beneficiary “has any right other than to

collect the benefits the contracting parties agreed to confer on him.”

(Ibid.) This begs the question, however, because the issue at hand is

whether one of the benefits the contracting parties agreed to confer on

a third party beneficiary is the right to recover attorney’s fees in

litigation arising from the contract. Super 7’s remark about it being

inconsistent to allow a third party beneficiary to collect attorney’s fees

under a contract which the beneficiary did not negotiate or to which the

beneficiary did not consent (ibid.) is puzzling, because, by definition, a

third party beneficiary is not a party to the agreement whose benefits

the beneficiary seeks to enforce. Moreover, attorney’s fees provisions

need not be reciprocal with regard to non-contract claims, so the fact

that a third party beneficiary cannot be liable for attorney’s fees on

such claims presents no bar to allowing a third party beneficiary to

collect such fees. (Moallem, supra, 25 Cal.App.4th at pp. 1832–1833

[fees provisions can be non-reciprocal for non-contract claims]; accord,

Brown Bark, supra, 219 Cal.App.4th at pp. 828–829.)

Brown Bark

Hom claims, based on a remark in Brown Bark, that the only

exception to the blanket rule prohibiting nonsignatories from collecting

attorney’s fees is when the fees provision “expressly identifies that

party as a party entitled to its benefits.” (Brown Bark, supra,

219 Cal.App.4th at p. 828.) Although Brown Bark dealt with a claim

for fees by a successor in interest to a contracting party, the passage

Hom quotes was not referring to nonsignatories or third parties. The

court there was merely describing the principle that section 1717 does

not make a fees provision reciprocal for tort claims, so anyone seeking

fees for tort claims under a contract must prove the contractual fees

provision applies to that person. (Ibid.) The decision Brown Bark cited

for this statement, Moallem, was similar. (Ibid., citing Moallem, supra,

25 Cal.App.4th at pp. 1830–1832 [Moallem not entitled to fees on tort

claims under section 1717; unilateral fees provision allowed only

defendant broker to recover fees associated with tort claims].) These

decisions do not recognize a blanket rule prohibiting nonsignatories

from collecting fees on tort claims, nor do they establish or acknowledge

any exceptions to such a rule.

The language of the attorney’s fees provision in the lease

The absence of a blanket rule regarding fees for nonsignatories in

these authorities should not be surprising. Santisas makes clear that

the scope of a contractual right to attorney’s fees on non-contract claims

is a question of contractual intent. (17 Cal.4th at p. 617 [for non-

contract claims not covered by section 1717, “the attorney fee provision,

depending upon its wording, may afford the defendant a contractual

right, not affected by section 1717, to recover attorney fees incurred in

litigating those causes of action,” italics added]; id. at p. 619 [because

section 1717 does not apply to tort claims, “it does not bar recovery of

attorney fees that were incurred in litigation of those claims and that

are otherwise recoverable as a matter of contract law”].) Because the

language in contractual fees provisions will vary from contract to

contract, it scarcely seems possible to establish a blanket rule

regarding the availability of fees for nonsignatories. We must therefore

examine the language of the lease here to determine whether the fees

provision covers Petrou’s and Utter’s tort claims. (Sessions Payroll

Management, Inc. v. Noble Construction Co. (2000) 84 Cal.App.4th 671,

680 [examining fees provision to determine if it covered third party

beneficiaries] (Sessions).)

The parties have not pointed to any extrinsic evidence on the

question, so our analysis focuses solely on with the language of the

lease, which we interpret as a question of law. (Khan v. Shim, supra,

7 Cal.App.5th at p. 55.) Because Petrou and Utter seek the benefits of

the lease even though they did not sign it, we begin with the law

concerning third party beneficiaries. 2 A nonsignatory is entitled to

bring an action to enforce a contract as a third party beneficiary if the

nonsignatory establishes that it was likely to benefit from the contract,

that a motivating purpose of the contracting parties was to provide a

benefit to the third party, and that permitting the third party to

enforce the contract against a contracting party is consistent with the

objectives of the contract and the reasonable expectations of the

2 Hom contends Petrou and Utter do not claim to be third party

beneficiaries, but we disagree. They argue they are entitled to the

benefits of the fees provision whether they are considered parties or

beneficiaries. Hom further argues that Petrou and Utter did not raise

a third party beneficiary theory below. While they did not use the

specific phrase, the substance of their argument was that they were

entitled to the benefit of the lease because of their status as lenders. To

the extent that the third party beneficiary theory is a new argument on

appeal, we exercise our discretion to entertain it as an issue of law.

(Sweat, supra, 37 Cal.App.4th at p. 610, fn. 6 [“it is within the power of

this court to grant relief based on pure issues of law, even though the

same are raised for the first time on appeal”].)

contracting parties. (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817,

821.)

There can be little doubt that Petrou and Utter qualify as third

party beneficiaries of the lease as a whole. They were lenders to Pure

Entertainment with encumbrances on its leasehold, and two of the

lease’s nine pages specify the rights such lenders would have with

respect to the lease. Those rights include the right to receive copies of

notices due to Pure Entertainment; prevent the parties to the lease

from modifying the lease without the lenders’ consent; do anything

required of Pure Entertainment under the lease; foreclose on the

leasehold; cure any breach of the lease by Pure Entertainment; and

enter into a new lease at the lenders’ option following any default by

Pure Entertainment. Given the detail with which the lease specified

the lenders’ rights, one of the contracting parties’ motivating purposes

was evidently to allow Pure Entertainment to use its leasehold as

collateral for loans from future lenders such as Petrou and Utter, and

to permit Petrou and Utter to protect the value of their encumbrance

on the leasehold. Permitting Petrou and Utter to obtain benefits under

the lease is therefore consistent with the parties’ expectations.

Turning to the language of the fees provision, we further conclude

that one of the benefits to which the lenders were entitled under the

lease was the right to collect attorney’s fees in an action arising from

the lease. The attorney’s fees provision in the lease here states in full,

“Should any dispute arise from this Lease or the tenancy hereby

created, and the parties cannot settle it between themselves, then the

prevailing party will be entitled to reimbursement of its reasonable

attorneys’ fees, in addition to any other remedy awarded.” The phrase

“any dispute” is broad and is not limited to disputes between the

contracting parties. The lease’s fees provision is broader than the

provision entitling a prevailing party to fees “ ‘[i]n the event of any

action or proceeding brought by either party against the other under

this Lease,’ ” which another court held would allow third party

beneficiaries to collect fees. (Real Property Services Corp. v. City of

Pasadena (1994) 25 Cal.App.4th 375, 377, 383; see Cargill Inc. v Souza

(2011) 201 Cal.App.4th 962, 965, 969–970 [contract allowed third party

to collect attorney’s fees where the fees provision applied “[i]n the event

that any party hereto obtains a judgment in its favor in connection with

the enforcement or interpretation of this Agreement”].) It is at least as

broad as the provision, “ ‘If a court action is brought, prevailing party to

be awarded attorneys fees and collection costs,’ ” which Loduca v.

Polyzos (2007) 153 Cal.App.4th 334, 343, held allowed a third party

beneficiary to collect his fees.

The “any dispute” phrase is also more expansive than other

phrases that courts have held extend only to contracting parties, such

as “ ‘[i]n the event it becomes necessary for either party to enforce the

provisions of this Agreement’ ” (Sessions, supra, 84 Cal.App.4th at

p. 681) or in “ ‘any litigation between the parties hereto to enforce any

provision of this Agreement’ ” (Blickman Turkus, LP v. MF Downtown

Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 896, italics removed). For

the same reason, it is distinguishable from the fees provision at issue in

in the lease in Topanga, which specifically named the landlord and

tenant as the parties entitled to collect attorney’s fees. (Topanga,

supra, 103 Cal.App.4th at pp. 778–779.) In comparison with these

decisions, the fees provision’s expansive language is broad enough to

encompass claims by third party beneficiaries like Petrou and Utter. 3

The parties spar over the proper interpretation of the fees

provision’s clause allowing fees for any dispute if “the parties cannot

settle it between themselves.” Hom maintains that this reference to

“parties” indicates that the provision was intended to apply solely to

the contracting parties. Petrou and Utter counter that the clause

relates to the “any dispute” phrase, since the “it” in the clause refers

back to “dispute.” Petrou’s and Utter’s interpretation is more

reasonable, but it is not so conclusive as to foreclose Hom’s contrary

interpretation, so we conclude that the reference to “parties” in the fees

provision is ambiguous. (Solis v. Kirkwood Resort Co. (2001) 94

Cal.App.4th 354, 360 [“An ambiguity exists when a party can identify

an alternative, semantically reasonable, candidate of meaning of a

writing”].) To resolve the ambiguity, we interpret the phrase using the

ordinary rules of contractual interpretation. (Santisas, supra,

17 Cal.4th at p. 608.)

Hom notes that the lease elsewhere uses “party” or “parties” to

refer to the landlord and Pure Entertainment, and he cites the rule

that a word used multiple times in a contract is generally given the

same meaning, unless the contract indicates otherwise. (E.M.M.I. Inc.

v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 475.) We conclude

3 Hom distinguishes these decisions construing fees provisions

because they involved reciprocity analysis under section 1717. Section

1717 and its reciprocity analysis are not applicable here, but these

decisions’ interpretations of various fees provisions as part of that

analysis are nonetheless relevant to our task of interpreting the lease’s

fees provision.

the lease here does indicate otherwise. “Landlord” and “Tenant” are

both specifically defined terms in the lease, while “parties” is not. This

shows the term was intended to be context-dependent, rather than

have a fixed and unchanging meaning. A comparison of the various

uses of “parties” in the lease confirms this and demonstrates why the

term in the fees provision is more reasonably read to include lenders.

In one paragraph, the lease defines the acts that will constitute a

default and breach of the lease to include the making “by either party”

of a general assignment for the benefit of creditors, the filing “by either

party” of a petition for bankruptcy or reorganization, or the assignment

of a receiver to take possession of substantially all of the assets of

“either party.” The use of “either” denotes one of two things and refers

to the original parties to the lease. Reading “party” in this clause to

include lenders would also be unreasonable because it would make the

tenant’s default under the Lease contingent on actions by its lenders,

who are beyond the tenant’s control.

In another paragraph, the lease states that the “parties” agreed

the tenant would prepay a fixed amount for the last month’s rent due

under the lease. Similarly, earlier in same paragraph containing the

attorney’s fees provision, the lease contains an integration clause

stating that the lease “encompasses the entire understanding of the

parties with respect to the subject matter covered herein.” Because

there were no Lenders with rights under the Lease when the Lease was

first executed and the tenant had to prepay the last month’s rent,

“parties” in these two instances naturally refers only to the Landlord

and Tenant.

The fees provision is different. As described above, the lease

confers extensive rights on lenders. Because the lease goes into such

detail regarding lenders’ rights, it was reasonably foreseeable that

disputes involving lenders would arise over those rights. It is natural,

then, to conclude that the landlord and tenant intended to give lenders

the same rights to attorney’s fees as the direct parties to the contract.

The lease is substantially different in this regard from the agreement

at issue in Super 7 and Sweat, which those courts held used “parties”

consistently to refer only to signatories to the contract. (Super 7, supra,

16 Cal.App.4th at p. 546, fn. 3; Sweat, supra, 37 Cal.App.4th at

pp. 615–616 [fees provision was essentially identical to that in Super

7].) The real estate purchase agreements in Super 7 had only a single,

inconsequential reference to the broker trying to collect fees under

them, while the lease here describes Petrou’s and Utter’s rights as

lenders in detail. (Super 7, at p. 546, fn. 3; Sweat, at pp. 615–616.) The

Super 7 and Sweat agreements also allowed the buyer and seller to

modify the agreement without the broker’s consent, whereas here the

lease could not be modified without a lender’s consent after a lender

obtained an encumbrance over Pure Entertainment’s leasehold and the

landlord received notice of it. (Super 7, at p. 546, fn. 3; Sweat, at

pp. 615–616.) The substantial rights the lease accords to lenders like

Petrou and Utter, as well as the language in the fees provision that ties

the word “parties” to “any dispute” in which attorney’s fees might be

incurred, indicates that “parties” in the fees provision here, unlike the

fees provision in Super 7 and Sweat, was intended to have a different

meaning from the rest of the lease and encompass third party

beneficiaries.

In sum, we conclude Petrou and Utter are entitled to collect their

attorney’s fees related to Hom’s non-contract claims as third party

beneficiaries to the lease and its broad attorney’s fees provision.

Because Hom does not seek apportionment of the fees award, this

means Petrou and Utter are also entitled to their fees related to Hom’s

declaratory relief claim.

DISPOSITION

The trial court’s order is affirmed. Petrou and Utter are entitled

to their attorney’s fees and costs on appeal. “ ‘ “Although this court has

the power to fix attorney fees on appeal, the better practice is to have

the trial court determine such fees.” ’ ” (SASCO v. Rosendin Electric,

Inc. (2012) 207 Cal.App.4th 837, 849.) We therefore remand for the

trial court to determine the total amount of fees to which Petrou and

Utter are entitled.

BROWN, J.

WE CONCUR:

STREETER, ACTING P. J.

TUCHER, J.

Hom v. Petrou et al. (A161770)

Trial Court: San Mateo County Superior Court

Trial Judge: Hon. Harold Khan

Counsel:

Law Office of Jocelyn Sperling, Jocelyn Sperling; Rencher Law Group,

D.L. Rencher for Cross-complainant and Appellant.

Kilpatrick Townsend & Stockton, James A. Smith for Cross-defendants

and Respondents.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.