By Paul James

In its recent decision in Hemphill v. Wright Family LLC , California's Fourth District Court of Appeal awarded attorneys' fees and costs to an injured owner of a mobile home in a negligence and premises liability action against a mobile home park.  At trial, the Plaintiff successfully established that the mobile home park was liable for injuries the Plaintiff sustained after stepping into an uncovered drainage hole on a common area lawn.  When the Plaintiff sought to recover attorneys' fees based on the prevailing-party provision in the Plaintiff's lease, the trial court denied the motion.  On appeal, however, the Court held that the language in the lease, which provided for fees to the prevailing party in “any action aris[ing] out of the Homeowner’s tenancy,” was broad enough to support an award of attorneys’ fees under California Code of Civil Procedure section 1021.

Section 1021 generally requires parties to litigation to bear their own fees and costs unless otherwise provided by statute or contract.  The underlying action itself was not to enforce the owner's lease with the mobile home park.  Furthermore, the legal duty owed to the homeowner did not arise from the lease agreement. Nevertheless, the Court held that the lease agreement, which required the mobile home park to maintain common areas, was broad enough to sustain fees to this action, which was an  “action aris[ing] out of the Homeowner’s tenancy.”  In so holding, the Court reasoned the agreement included no definition of “Homeowner’s tenancy” and pursuant to rules of contract interpretation specified in Civil Code section 1654, ambiguities are to be interpreted “most strongly against the party who caused the uncertainty to exist.”

This decision helps to provide two important lessons.  First, it underscores the importance of including specific definitions of ambiguous terms of lease agreements that otherwise risk being broadly interpreted against the party drafting the agreement.  Second, a defendant facing a tort action brought by someone with whom there is contractual privity should evaluate whether there is a prevailing-party provision in the contract and carefully assess the potential for recovery of fees when electing whether or not to settle the case.