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Patch v. Hanley11/22/2002
of the fees incurred to pursue indemnification. (See Continental Heller Corp. v. Amtech Mechanical Services, Inc., supra, 53 Cal.App.4th at pp. 508-509 [agreement with indemnity clause, plus separate provision awarding fees for any breach of the parties' obligations].) But cases construing indemnity provisions generally bar recovery for this expense. (Otis Elevator Co. v. Toda Construction (1994) 27 Cal.App.4th 559, 566; Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 962-963, 975; Hillman v. Leland E. Burns, Inc. (1989) 209 Cal.App.3d 860, 870; County of San Joaquin v. Stockton Swim Club (1974) 42 Cal.App.3d 968, 974.) Otis Elevator Co. v. Toda Construction, supra, 27 Cal.App.4th 559 declared, " . . . ` provision including attorney fees as an item of loss in an indemnity clause is not a provision for attorney fees in an action to enforce the contract.' [Citation.]" (Id. at p. 564.)
In Otis, the court recognized De Witt v. Western Pacific R. Co. (9th Cir. 1983) 719 F.2d 1448 reached the opposite conclusion. Otis refused to follow De Witt, noting it relied on two California appellate decisions that primarily dealt with the procedural question of whether an award of fees on appeal should be made by the reviewing court or the trial court. (Otis Elevator Co. v. Toda Construction, supra, 27 Cal.App.4th at p. 565.) Otis also recognized that later decisions had disagreed with those two cases. (Id. at pp. 565-566.)
The partnership agreement's indemnification clause refers to expenses and costs "that may arise out of or by reason of" a partner's "violation" of the agreement, and for "costs and . . . legal counsel" necessitated by a "proceeding, action, or arbitration instituted against the Partnership." (Italics added.) There is no indication this clause was intended to include the fees incurred to enforce the indemnity provision itself. Since "the indemnity agreement at issue here did not explicitly provide for attorney fees incurred in pursuing an indemnity claim," the indemnitee "was not entitled to them." (Otis Elevator Co. v. Toda Construction, supra, 27 Cal.App.4th at p. 566; see also Jacobus v. Krambo Corp. (2000) 78 Cal.App.4th 1096, 1104-1106 [attorney fees incurred in employee's action for indemnification under Lab. Code, ยง 2802 not recoverable.].) The trial court properly rejected Patch's request for these fees.
In summary, the trial court's award legal expenses to Patch must be reduced by the amount paid by American Equity ($147,047.05) and the amount claimed for Patch & Wolff's services ($27,012.70). Furthermore, Patch is not entitled to recover the attorney fees incurred to prosecute the cross-complaint against Hanley. Thus, Patch is entitled to recover from Hanley, in his corporate capacity only, $42,678.43 in legal expenses for the Opfell litigation.
Declaratory Relief
The cross-complaint's fourth cause of action alleged " n actual controversy . . . exists . . . concerning [the parties'] respective rights and duties [for Opfell's] claims." Patch prayed for a declaration "that (a) each Cross-Defendant indemnify Cross-Complainants for all expenses incurred by Cross-Complainants with respect to Plaintiff's claims; (b) Cross-Defendants provide for all costs and necessary legal counsel to defend against the present action and Plaintiff's claims; and (c) Cross-Complainants are entitled to and may use the funds withheld from Hanley to pay for costs and necessary legal counsel to defend against the present action and Plaintiff's claims, and may use the remainder of such funds, if any, to indemnify Cross-Complainants for any amount they may be required to pay Plaintiff."
The trial court issued a pr
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