In Zintel Holdings LLC v. McLean, 2012 DJDAR 13133 (2012), the California Court of Appeal for the Second Appellate District decided an interesting landlord/tenant case involving an attorney fee award.

A landlord sued two of its tenants, seeking to rescind a lease. One of the tenants filed a cross-complaint, alleging breach of the right to quiet enjoyment of the premises. The lease included an attorney fee provision. It provided for the award of fees to the prevailing party for litigation made pursuant to the lease.

The trial court rejected the claims made by the plaintiff as to the cross-complaint. The tenant sought costs from the trial court pursuant to California Code of Civil Procedure Section 1032. That code section awards costs to the prevailing party in litigation. However, the trial court concluded that there was no prevailing party under the reciprocal attorney fee provision of California Civil Code Section 1717, a different statute. The court declined to award the tenant attorney fees on that basis. The tenant appealed the decision with respect to the denial of attorney fees.

The court of appeal reversed the trial court’s decision denying fees to the plaintiff. The court’s reasoning was somewhat convoluted. The court reasoned that when a trial court declines to award damages on both a plaintiff’s complaint and a defendant’s cross-complaint, the defendant is deemed the prevailing party under the cost provisions of Section 1032. However, that is not the case under Section 1717 where neither party obtains the relief requested.

The court of appeal concluded that where the dispute involves a contract and involves Civil Code Section 1717, the trial court has latitude to decide that there is no prevailing party in the litigation. The court concluded that there was no real winner in the case between the landlord and the tenant. For this reason, the trial court concluded that the court did not have authority to determine that the tenant who was not a party to the cross-complaint, was not a “prevailing party” for purposes of awarding attorney fees. The impact of the court’s rather circular reasoning here remains to be seen.