California-American Water Co. v. Marina Coast Water DistrictAnnotate this Case
California-American, a water utility, and Marina and Monterey, public water agencies, entered into contracts to collaborate on a water desalination project, stating that the prevailing party of “any action or proceeding in any way arising from [their a]greement” would be entitled to an award of attorney fees and costs. After learning that a member of Monterey’s board of directors had a conflict of interest, having been paid for consulting work to advocate on behalf of Marina, California-American sued to have the contracts declared void under Government Code section 1090. Monterey agreed that the contracts were void. Marina filed cross-claims seeking a declaration that the contracts were “valid and enforceable.” Years of litigation culminated in a holding declaring the agreements void. Marina challenged post-judgment orders that California-American and Monterey were entitled to costs as prevailing parties under Code of Civil Procedure sections 1032 and 1717 and granting them specific attorney fees awards. The court of appeal affirmed, rejecting Marina’s argument that they were not entitled to awards because the underlying contracts were declared void. The illegality exception to the rule of mutuality of remedies applies when the contract's subject matter is illegal but does not apply when the litigation involves the “invalidity” or “unenforceability” of an otherwise legal contract.