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Bovard v. Am. Horse Enters - 201 Cal. App. 3d 832, 247 Cal. Rptr. 340 (1988)

Rule:

In an action on a contract which provides for an award of attorney's fees, the prevailing party in the action is entitled to attorney's fees. This is so even when the party prevails on grounds the contract is inapplicable, invalid, unenforceable or nonexistent, if the other party would have been entitled to attorney's fees had it prevailed.

Facts:

The seller of a business sued the buyer to recover on promissory notes executed in connection with the sale; court-supervised settlement conferences were held, but if a settlement was arrived at, it was not put on the record. Nevertheless, a stipulated judgment (unsigned by the buyer) was entered in favor of the seller. The trial court subsequently denied the buyer's motion to vacate the judgment, and the denial was reversed on appeal. On remand, the seller filed a supplemental complaint based on an agreement to settle, the trial court severed it for trial, and during trial dismissed it when it transpired that the business of the corporation included the manufacture of drug paraphernalia. The court also struck a memorandum of costs and attorney fees filed by the buyer.

Issue:

Can a claim for attorney fees be based on a provision of a contract that is unenforceable because of illegality?

Answer:

No

Conclusion:

The Court of Appeal affirmed, holding the trial court properly declared the underlying contract illegal and void as contrary to public policy. The court also held that the legality of the contract was not established by the law of the case. The court further held denial of costs was within the trial court's discretion and that a claim for attorney fees could not be based on a provision of a contract that is unenforceable because of illegality. Finally, the court held the seller's former attorney lacked standing to move for sanctions against the buyer for frivolously seeking costs and fees from him.

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