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 Attorney's Fees-American Rule Resulting From Litigation of Contracts.

This opinion considers a question which routinely troubles trial courts attempting to identify the "prevailing party" for the purpose of awarding attorney's fees resulting from litigation of contracts. Periodic legislative modification of the "American" rule provided by Code of Civil Procedure section 1021, which generally requires litigants to pay their own attorney fees, has created uncertainty over the extent of trial court discretion to award fees. This has been particularly apparent in cases where there are multiple issues and parties, where there is recovery of extrajudicial or nontangible benefits, and where the line between "winner" and "loser" is not finely drawn. The two basic statutes regularly employed by the courts to award fees in contract cases, Code of Civil Procedure section 1032 (section 1032) and Civil Code section 1717 (section 1717) differ in their analytic approach to the issue. Trial courts may have little difficulty applying these statutes to simple victories, and within their express boundaries, but occasionally struggle to avoid an inequitable result seemingly prescribed by them. Prior appellate opinions have either taken a narrow view of the questions raised by the statutory collage created by the Legislature or have assumed, as though obvious, an inherent, equitable compensating component in the court's power to award fees. We conclude these statutes can be reconciled to inform the entire process of fee allocation while answering the specific question posed by this case: . . .
Sears v. Baccaglio (1998) 60 Cal.App.4th 1136 , 70 Cal.Rptr.2d 769

. . .

B. The legislative history of section 1717

The Legislature codified what has become commonly known as the "American" rule regarding attorney's fees in 1872, when it enacted Code of Civil Procedure section 1021, which states, in pertinent part: " 'Except as attorney's fees are specifically provided for by statute, the measure and [60 Cal.App.4th 1144] mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties ....' (See, e.g., Bruno v. Bell (1979) 91 Cal.App.3d 776, 781 [154 Cal.Rptr. 435] [154 Cal.Rptr. 435] ....)" (Trope v. Katz (1995) 11 Cal.4th 274, 278-279 [45 Cal.Rptr.2d 241, 902 P.2d 259].) As commonly understood, the American rule provides each party to a lawsuit must ordinarily pay his or her own attorney's fees. (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 504 [198 Cal.Rptr. 551, 674 P.2d 253, 44 A.L.R.4th 763]; United Services Auto. Assn. v. Dalrymple (1991) 232 Cal.App.3d 182, 187 [283 Cal.Rptr. 330].) The American rule is contrasted with the "English" rule, under which a losing party may be required to pay the winner's fees in addition to his or her own expenses. (See generally, Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 1996) ch. 7, p. 7-1.) Sears v. Baccaglio (1998) 60 Cal.App.4th 1136 , 70 Cal.Rptr.2d 769

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