Prevailing Party Attorney Fee Award Is Granted Based On Successful Affirmative Defense Raised In Answer

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In Windsor Pacific LLC v. Samwood Co. Inc., 2013 DJDAR 1292 (2013), the California Court of Appeal for the Second Appellate District decided a novel attorney fee issue arising out of hotly contested litigation, pertaining to the viability of a prescriptive easement. The court considered the existence of a prescriptive right versus a permissive written easement agreement, concerning undeveloped real property in Los Angeles County.

The plaintiff owned a large tract of undeveloped land in Los Angeles County. The property was adjacent to another large undeveloped tract, owned by one of the defendants, Shadow Pines LLC (defendant). The plaintiff and the defendant entered into a written easement agreement. The contract provided that the plaintiff would conditionally grant two easements to the defendant over the plaintiff’s property.

The permissive written easement agreement also provided for an award of attorney fees to the prevailing party in litigation or proceeding brought to “enforce or interpret the provisions” of the contract. The permissive written easements were never executed by the parties.

After negotiations broke down, the defendant terminated the contract. In response, the plaintiff claimed a prescriptive easement over the defendant’s property. The plaintiff then sued the defendant for quiet title, declaratory relief and ejectment, claiming that the defendant obstructed the plaintiff’s use of the two roads.

In its answer, the defendant raised an affirmative defense of equitable estoppel. In a non‑jury trial, the court found in favor of the defendant. However, the trial court denied the defendant’s subsequent attorney fees petition, concluding that the action was not covered by the fee clause contained in the executory contract.

On appeal, the second district partially reversed the decision of the trial court. The court noted that an attorney fee clause can provide for an attorney fee award in an action on the contract, but if supported by contractual language, may provide fees for any litigation between the parties. The court observed that the clause at issue in the case provided for fees in any action to “interpret” the agreement. The court further noted that the defendant was victorious in the case based on the equitable estoppel arguments.

The court of appeal concluded that even though the plaintiff did not seek an interpretation of the contract, the case still raised contract issues by virtue of the affirmative defense raised in the answer. Because the dispute involved the defendant’s authority to grant the plaintiff an easement, the litigation required the court to “interpret” the contract. The court of appeal concluded that the litigation was “an action to interpret” the contract within the meaning of the fee clause.