Prevailing on a Contract Affirmative Defense Gives Rise to Civ. Code § 1717 Fees

Tim Kowal September 10, 2024

It’s very clear that you are entitled to contractual attorneys’ fees for prevailing on a contract claim. But what about prevailing on a contract affirmative defense? There was some unfortunate confusion on that point in the California Supreme Court’s decision in Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751, where the Court said it “cannot agree” that “an affirmative defense equates to a or constitutes an action” for purposes of Civil Code section 1717 attorneys’ fees.

But clarifying that now comes a published opinion in Am. Bldg. Innovation v. Balfour Beatty Constr. (D4d3 Sep. 3, 2024) No. G062471 [pub. opn.], holding that prevailing on an contract-based affirmative defense gave rise to contractual attorneys’ fees. The result was to affirm the attorneys’ fees award of $1.55 million.

The plaintiff-contractor here sued under the parties’ contract for payment for work rendered. But the defendant asserted an affirmative defense that the contractor was not licensed, and thus not entitled to recover. The defendant proved that affirmative defense. And the trial awarded contractual attorneys’ fees.

On appeal, the contractor argued that, under Mountain Air, an affirmative defense is not an “action on a contract,” and thus cannot give rise to section 1717 attorneys’ fees. But this “misapprehends [Mountain Air’s] holding,” the court said. The reason Mountain Air denied fees to the party who prevailed on its affirmative defense to a contract claim was because the defense was based on a different contract. There was no direct claim brought on that contract.

But here, the affirmative defense and the plaintiff’s claim were based on the same contract. So the “claim on a contract” element was met here.

Takeaway: An affirmative defense on a contract is still not the same thing as a “claim on a contract” giving rise to Civil Code section 1717 attorneys’ fees. So if you are asserting an affirmative defense based on a contract and want to establish a right to fees, consider also filing a cross-claim for declaratory relief on the contract. That way if you win, the winning theory is part of a “claim on a contract,” triggering a right to fees.

Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at CALpodcast.com, and publishes summaries of cases and appellate tips for trial attorneys. Contact Tim at [email protected] or (949) 676-9989.

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Prevailing on a Contract Affirmative Defense Gives Rise to Civ. Code § 1717 Fees

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"God made the angels to show Him splendor, … Man He made to serve Him wittily, in the tangle of his mind." — Sir Thomas More in Robert Bolt's A Man for All Seasons

"A judge is a law student who grades his own papers." — H.L. Mencken

"It may be that the court is thought to be excessively legalistic. I should be sorry to think that it is anything else." — Hon. Sir Owen Dixon, Chief Justice of Australia

"Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws." — Plato (427-347 B.C.)

"At common law, barratry was 'the offense of frequently exciting and stirring up suits and quarrels' (4 Blackstone, Commentaries 134) and was punished as a misdemeanor." — Rubin v. Green (1993) 4 Cal.4th 1187

Show neither partiality to the weak nor deference to the mighty, but judge your fellow men justly. — Leviticus

"Upon putting laws into writing, they became even harder to change than before, and a hundred legal fictions rose to reconcile them with reality." — Will Durant

"Moot points have to be settled somehow, once they get thrust upon us. If an assertion cannot be proved, then it must be settled some other way, and nearly all of these ways are unfair to somebody." —T.H. White, The Once and Future King