Judge: Mark H. Epstein, Case: 21SMCV01794, Date: 2025-04-21 Tentative Ruling

Case Number: 21SMCV01794    Hearing Date: April 21, 2025    Dept: I

The fee motion is DENIED.  To understand why the plaintiff in a successful action cannot seek fees under a contract with a prevailing party fee recovery clause still loses, one must step back.

This case stems from a lease.  Plaintiff owns certain property located at (guess where) 7627 Sunset Boulevard.  Plaintiff and defendant entered into a lease by which defendant agreed to lease the premises.  As part of that lease, plaintiff retained control over the exterior of the “northwest wall.”  Defendant could not obstruct the view of that wall or otherwise interfere with plaintiff’s use of it in any way.  But oops.  Plaintiff, who wrote the lease, meant to say “southwest” wall.  That is significant.  The premises are on the north side of Sunset.  The southwest wall presents a large area that faces the street and can be readily seen by motorists.  It is great for advertising.  Defendant suggested that it was relying on using that wall to advertise its business.  It was perfectly happy to let the landlord use the northwest wall, which could not be seen by anyone other than a stray pedestrian.  That mistake became apparent pretty quickly after the contract was signed.  Plaintiff had a contract with a third party that pre-existed the lease to use the wall for advertising.  Defendant, however, wanted to use the wall for its own purposes, although the business was not yet up and running.  That led plaintiff to seek a TRO and preliminary injunction to stop defendant from painting over the advertising on the southwest wall.  The court granted the TRO and later the preliminary injunction, but largely on status quo and balance of hardships grounds.  Before the dispute, the landlord had exclusive use of the wall and was in fact using it.  If the landlord had to stop using it, the landlord would be in breach of contract.  The tenant, on the other hand, was not yet open and did not have any specific critically important use of the wall.  The court recognized that the landlord had a steep hill to climb on the merits, for the theory had to be unilateral mistake—and it was the landlord’s mistake and the landlord wrote the offending language.  But the court was also aware that the tenant knew which wall was which, and the tenant also likely knew that this was a mistake because it would make no sense at all for the landlord to retain control of the northwest facing wall—something the tenant knew from the pre-lease inspection.  So the court allowed the PI to issue, but there were storm clouds on the horizon for plaintiff as to the ultimate merits.  However, as it turns out, the PI was the case.  The tenant abandoned the property and abandoned the case.  That led the plaintiff to obtain a default and later a default judgment.  While the court believes that both were appropriate here, the fees are a bridge too far.

First, it just seems wrong that the landlord, who is the cause of the mistaken term’s insertion into the contract, can recover fees for its own error.  To the extent that the court has any discretion or any equitable powers at all in this case, the court will not exercise them to reward the party that caused the problem in the first place.  Second, plaintiff only prevailed because it was allowed—preliminarily—to rewrite the contract.  And if plaintiff ever recovered at trial, it would be for the same reason.  Even on default, the theory is that the contract contained an error.  And the evidence is pretty plain that had the contract been written properly, the defendant never would have signed it.  The court believes that if the plaintiff is going to rely on the theory that the contract was in material error, it cannot then also rely on a fee clause to which the parties never would have agreed had the contract been enforced according to its terms.  One takes the contract as is, or one does not.  Plaintiff will not take the contract as it is—that is its whole theory of the case and for the TRO and PI.  Accordingly, the court will not allow it to add insult to injury and enforce the parts it likes while rewriting the parts it does not.

The court stands by its TRO and PI decisions, and the court’s hands were tied as to the default and default judgment.  But the court will go no further.  The motion is DENIED.