Joint venture advantages and disadvantages

Plaintiff general contractor sued defendant subcontractor for the amount in excess of the subcontractor's bid that the general contractor had to pay a substitute subcontractor. After a bench trial, the Superior Court of San Diego County, California, awarded damages to the general contractor on promissory estoppel claims, but found for the subcontractor on breach of contract and bond claims. The subcontractor appealed the denial of attorney fees.

The court of appeal held that a promissory estoppel claim was not a claim "on a contract," for purposes of Civ. Code, § 1717, subd. (a), and therefore the general contractor's success on that claim was irrelevant to the prevailing party determination under § 1717. A plaintiff who prevailed on a promissory estoppel claim but recovered nothing on a breach of contract claim (or other claim involving a contract) in the same action was not the party prevailing on the contract entitled to recover under the attorney fees clause in the alleged contract. Instead, a defendant who defeated a breach of contract claim but lost on a promissory estoppel claim was the Joint venture advantages and disadvantages party prevailing on the contract and was entitled to recover attorney fees reasonably incurred in defeating the breach of contract claim, when the alleged contract provided that the prevailing party in any dispute between the parties would recover such fees. Thus, the subcontractor in the current action, having defeated the general contractor's only contract claims, was the party prevailing on the contract under § 1717 as a matter of law. The trial court had no authority to deny entirely its request for fees.

The court reversed the trial court's order and remanded for further proceedings to determine the amount of attorney fees reasonably incurred in defending against the contract claims at trial and in prosecuting the appeal, and to enter an order awarding that amount.

Defendant broker appealed a judgment of the Superior Court of Los Angeles County (California), which found in favor of plaintiff borrowers on their claims predicated upon violations of the real property loan law relating to the regulation of real property loan brokers and the maximum legal cost, expenses, charges, and interest which the broker could make for his services.

The borrowers obtained funds to purchase various lots and construct buildings. The loans were negotiated by the broker with different individual lenders and he received a 10 percent fee immediately upon the closing of each loan escrow. The trial court found in favor of the borrowers on their action against the broker and on appeal, the court affirmed. The court held that there was substantial evidence to support the finding against the existence of a joint venture between the broker and each lender. The trial court was justified in finding no joint venture because: (1) there was no sharing of profits or losses; (2) the broker specifically agreed that the lenders should suffer no losses and personally guaranteed to hold the lenders harmless; (3) the lenders had no management control once the loan had been made; (4) lenders merely supplied the money; (5) no lenders had authority to act on behalf of the broker; (6) no joint venture tax returns were filed; and (7) the deeds of trust were taken in the lenders' names only. There was sufficient substantial evidence to support the determination that each loan was a separate transaction.

The judgment in favor of the borrowers on their action against the broker for violation of real property loan law relating to the regulation of real property loan brokers and the maximum legal cost, expenses, charges, and interest which the broker could make for his services was affirmed.

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