Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_03-cv-03721/USCOURTS-cand-3_03-cv-03721-31/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

FEDERAL AGRICULTURAL

MORTGAGE CORP.,

Plaintiff(s),

v.

IT'S A JUNGLE OUT THERE ,

INC dba VINTAGE CAPITAL, 

et al.,

Defendant(s).

AND RELATED CLAIMS.

 

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No. C 03-3721 BZ

ORDER DENYING NEW CENTURY’S

MOTION FOR ATTORNEYS’ FEES

New Century Title Company’s (“New Century”) motion for

attorneys’ fees came on for hearing on May 10, 2006. On 

May 9, 2006, the court posted a tentative ruling denying New

Century’s motion. New Century did not appear at the hearing

to contest the tentative ruling. Therefore, New Century’s

motion for attorneys’ fees and costs is DENIED.

New Century claims that as the prevailing party on a

summary judgment motion against It’s a Jungle Out There, Inc.

dba Vintage Capital (“Vintage Capital”), it is entitled to

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1 See DeWitt v. Western Pacific Railroad Co., 719 F.2d

1448, 1452 (9th Cir. 1983)(affirming an award of attorneys’

fees pursuant to an indemnity “against all liability for loss,

damage, injury and/or death”); Schackman v. Universal Pictures

Co., Inc., 255 Cal.App.2d 857, 858-859 (1967)(holding that

because of the agreement “to indemnify and hold [Schackman]

harmless from and against all losses, damages, costs and

expenses,” defendant “was obligated to reimburse Schackman for

legal fees”); Citizens Suburban Co. v. Rosemont Development

Co., Inc., 244 Cal.App.2d 666, 683 (1966)(“While the word

‘costs’ does not usually embrace counsel fees, the phrase

‘costs and expenses’ does.”). But see Jacobus v. Krambo Corp., 78 Cal.App.4th 1096, 1105 (2000)(“However, the California

appellate courts have not followed DeWitt and have concluded

that unless an indemnity agreement specifically provides for

attorney fees incurred in pursuing the indemnity claim, the

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attorneys’ fees pursuant to an indemnity provision in the

parties’ escrow agreement and the reciprocity principles of

California Civil Code § 1717. New Century relies entirely on

the following provision in the escrow agreement: 

Closing Agent Liability: You [New Century] agree

to be responsible for actual losses, costs and

expenses incurred by lender in connection with

this transaction when such losses arise due to

your failure to comply with these instructions. 

(the “escrow provision”). (Mot. Page 2, lines 22-25).

California law applies in this diversity action. MRO

Communs., Inc. v. Am. T & T Co., 197 F.3d 1276, 1281 (9th

Cir. 1999). Each side is usually responsible for its

attorneys’ fees, unless a fee award is authorized by statute

or contract. Most attorneys’ fees awards based on contract

rest on language expressly providing for attorneys’ fees in

the event of suit to enforce the contract. This escrow

provision does not expressly authorize attorneys’ fees, but

it may not need to. Courts have awarded attorneys’ fees

pursuant to contracts which did not explicitly mention

“attorneys’ fees.”1 “In interpreting an express indemnity

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indemnitee is not entitled to such fees.”).

2 Under California law, courts construe prevailing

party attorneys’ fees provisions as reciprocal. Farmers Ins.

Exchange v. Law Offices of Conrado Joe Sayas, Jr., 250 F.3d

1234, 1237 (9th Cir. 2001)(“Section 1717 was enacted to provide

for a mutuality of remedy when a contract makes recovery of

attorneys’ fees available only to one party.”).

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agreement, courts look first to the words of the contract to

determine the intended scope of the indemnity agreement.” 

Smoketree-Lake Murray, Ltd. v. Mills Concrete Construction

Co., Inc., 234 Cal.App.3d 1724, 1737 (1991). The courts also

look to the parties’ intent. Campbell v. Scripps Bank, 78

Cal.App.4th 1328, 1337 (2000). Here, the parties apparently

intended the escrow provision to encompass attorneys’ fees. 

New Century seeks them now, and Vintage Capital requested

attorneys’ fees from New Century and other third party

defendants in its third party complaint for indemnity. 

(Third Party Compl. for Indemnity ¶ 30) [docket # 15]. 

Assuming the escrow provision includes attorneys’ fees

as part of the losses, costs and expenses to be recovered,

for New Century to receive attorneys’ fees under California

Civil Code § 1717, the escrow provision must be a prevailing

party fees provision which provides for attorneys’ fees to a

prevailing party as opposed to a provision which provides for

attorneys’ fees as part of an indemnity.2 California courts

have held that § 1717 does not apply to attorneys’ fees

awarded as an element of damages pursuant to an indemnity

provision. Myers Building Industries, Ltd. v. Interface

Tech., Inc., 13 Cal.App.4th 949, 971 (1993)(“provision

including attorney fees as an item of loss in an indemnity

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clause is not a provision for attorney fees” which would

trigger § 1717); Baldwin Builders v. Coast Plastering Corp.,

125 Cal.App.4th 1339, 1344 (2005)(reciprocity does not apply

“where the recovery of attorney fees is authorized as an item

of loss or expense in an indemnity” because “an indemnity

agreement is intended by the parties to unilaterally benefit

the indemnitee”)(emphasis in original). 

New Century does not dispute that the escrow provision

is an indemnity provision. It asserted repeatedly in its

motion for summary judgment that the escrow provision was an

indemnity provision. For instance, in describing the escrow

provision, New Century called it an “indemnity clause in

Vintage Capital’s escrow instructions to New Century [which]

provides for indemnity for closing agent liability.” (Third

Pty Def’t. New Century’s Mot. for Summ. J. (“SJ Memo”) Pages

6-7, lines 25-1) [docket # 120]. 

Judge Walker’s December 7, 2005 order granting summary

judgment also construes the escrow provision as an indemnity

provision. Judge Walker ruled in New Century’s favor that

New Century complied with the escrow instructions and the

indemnity only encompassed losses arising from New Century’s

breach of the written escrow instructions. Fed. Agricultural

Mortgage Corp. v. It’s a Jungle Out There, Inc., 2005 WL

3325051, at *28 (N.D. Cal. Dec. 7, 2005). 

In Campbell, the court overruled an award of attorneys’

fees under a similar indemnity provision in an escrow

agreement, where attorneys’ fees were sought as losses or

expenses recoverable under that indemnity agreement. The

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3 New Century’s categorization of the escrow provision

as being “broad” enough to go “beyond being simply an indemnity

clause and appl[ying] also to an action between the parties” is

not helpful. (Reply Page 2, lines 14-19). New Century does

not cite any authority for its proposition that a “broad”

indemnity provision should be construed as a prevailing party

attorneys’ fees provision subject to § 1717. In addition,

analyzing whether the indemnity provision is broad or narrow

does not clarify the intention of the parties regarding risk

allocation, and whether under the escrow provision, the parties

intended the indemnity to flow from New Century in favor of

Vintage Capital. 

4 Northwestern Title Security Company, the predecessor

to New Century, is the addressee of the loan closing

instructions. Neither side provided a copy of the loan closing

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court ruled that the indemnity was not reciprocal and thus

not subject to California Civil Code § 1717. 78 Cal.App.4th

at 1338. While New Century argues that the “escrow

instructions in Campbell were typical unilateral

instructions” (Reply Page 2, lines 11-12), it fails to

distinguish the provision in Campbell from the one here. 

Both make “no reference to any action to enforce the escrow

contract within the context of entitlement to attorney fees.” 

Campbell, 78 Cal.App.4th at 1335. The escrow provision here

also “simply provides for indemnification, including attorney

fees or costs, under specific circumstances.” Id. at 1335-

36. The circumstances are New Century's failure to comply

with the loan closing instructions.3 

New Century is incorrect; the escrow provision here does

involve unilateral instructions. These loan closing

instructions were express directives from Vintage Capital

(“Lender” or “us”) to New Century (addressed as “you”) in

connection with the closing of the loan to Ram Investments,

LLC.4 Such duties could not be reciprocal. Vintage Capital

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instructions, so the court used for its analysis pages 6-11 of

Exhibit D attached to the Declaration of Lee P. Bardellini in

Support of Amended Motion for Summary Judgment [docket # 121].

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would not have determined the authenticity of signatures or

faxed final documents or disbursed the loan. Those were New

Century’s jobs. It was not possible for Vintage Capital to

fail to comply with the loan closing instructions; only New

Century could. The escrow provision was meant to be a riskallocating mechanism. The parties intended and contracted to

make New Century responsible for Vintage Capital’s losses

that arose if New Century failed to comply with the

instructions. It does not make sense to interpret the escrow

provision to cover New Century’s losses or costs since they

did not arise out of Vintage Capital’s failures to comply

with the escrow instructions that were given to New Century. 

The intent of the parties and the history of this case

support the conclusion that the escrow provision is an

indemnity provision. In its third party complaint, Vintage

Capital included claims for indemnity, implied indemnity and

equitable indemnity against New Century. New Century points

to paragraph 30 of Vintage Capital’s third party complaint to

argue that Vintage Capital “intended that [the escrow

provision] entitled it to attorney’s fees in enforcing its

contract with New Century requiring application of

reciprocity under section 1717.” (Reply Page 4, lines 9-11). 

A more reasonable way to read Vintage Capital’s request for

attorneys’ fees in paragraph 30 of its third party complaint

is that Vintage Capital incurred and continued to incur

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attorneys’ fees and costs because of New Century’s failure to

indemnify as required by the escrow agreement. Vintage

Capital’s entitlement, if a trier of fact found any such

entitlement, to attorneys’ fees and costs merely extended

from the losses arising out of New Century’s failure to

comply with the escrow instructions and its subsequent

refusal to indemnify Vintage Capital. These losses would

have been an element of the damages Vintage Capital suffered

because of New Century’s failures, not a right to attorneys’

fees as a prevailing party. By its terms, application and

interpretation, the escrow provision is an indemnity

provision that flows unilaterally from New Century in favor

of Vintage Capital. It is therefore not subject to the

reciprocity principles of California Civil Code § 1717, and

New Century is not entitled to its attorneys’ fees under the

escrow provision.

For the reasons stated above, IT IS HEREBY ORDERED that

New Century’s motion for attorneys’ fees and costs is DENIED.

DATED: May 10, 2006

 Bernard Zimmerman

 United States Magistrate Judge 

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