Normally, a contractual provision providing for an award of attorney fees is enforceable against either party to the contract. What happens, however, when the contract is assigned for the benefit of creditors? If the assignee sues and loses, who bears the burden of the attorney fees?
According to the Second District Court of Appeal, the assignee gets a free ride. In this case, the assignee for a bankrupt tenant sought to invoke the attorney fees for the benefit of the creditors when it brought the law suit against the tenant’s landlord. When the assignee lost, however, it argued that it had no obligation to pay attorney fees. Since it was not bound by the contract, the assignee argued, it could not be liable for attorney fees under that contract. The appellate court agreed, and the landlord was left to try to collect the fee award from the bankrupt tenant.