No. D060849 12 C.D.O.S. 12848 [4th App. Dist.] (November 20, 2012)
Subcontractor could recover prevailing party contractual attorneys' fees incurred in defeating breach of contract claim, even though it lost on related claim for promissory estoppel based on prime contractor's reliance on its bid.
The prime contractor on a public construction project, Douglas E. Barnhart, Inc., sought bids for metal work, and CMC Fabricators, Inc. submitted a bid. Barnhart relied on CMC's bid in preparing its own bid for the project. Barnhart did not sign CMC's bid, but instead sent back a counterproposal. The entities never reached agreement, and Barnhart proceeded with a different subcontractor for the metal work.
Barnhart sued CMC for breach of contract and promissory estoppel. It sought recovery of the additional amount it had to pay a substitute contractor to perform the metal work. At trial, the court rejected Barnhart' s breach of contract claims, but awarded Barnhart recovery on its promissory estoppel claim. CMC sought recovery of its attorney fees under the potential contract with Barnhart, arguing that it was the prevailing party on the contract action and would have owed fees to Barnhart had it lost. The court denied the claim for fees because Barnhart had prevailed on the promissory estoppel claim and thus had achieved its objective.
The court of appeal reversed the order denying attorney fees. First, the court of appeal found that Barnhart did not prevail on its breach of contract claim. And having asserted a breach of contract claim, Barnhart assumed the risk of invoking the contract's attorney fee provision, rendering Barnhart potentially liable if it lost the breach of contract claim. Second, CMC was the prevailing party on the contract. Under Code Civil Procedure section 1717 ("section 1717"), the determination of the party prevailing on the contract, for purposes of an attorney fee award under the section, is to be made independently of the determination of the prevailing party in the overall action.
The court held that prevailing on the promissory estoppel claim did not constitute prevailing on the contract. Such a claim does not "involve" an agreement and is therefore not a claim "on a contract" under section 1717. Promissory estoppel, which is founded on equitable principles, is distinct from contract in that the promisee's justifiable and detrimental reliance on the promise is regarded as a substitute for the consideration required as an element of an enforceable contract. In addition, a promissory estoppel claim also lacks the essential element of a contract claim in the form of the parties' consent. Breach of contract and promissory estoppel claims therefore have been characterized as mutually exclusive.