Goodman v. Lozano

• Decision Date: 04 February 2010
• Docket Number: No. S162655.,S162655.
• Citation: 47 Cal.4th 1327,223 P.3d 77
• Court: California Supreme Court
• Parties: RANDALL L. GOODMAN et al., Plaintiffs and Appellants, v. JESUS LOZANO et al., Defendants and Respondents.

47 Cal.4th 1327

223 P.3d 77

RANDALL L. GOODMAN et al., Plaintiffs and Appellants, v. JESUS LOZANO et al., Defendants and Respondents.

No. S162655.

Supreme Court of California.

February 4, 2010.

Silverstein & Huston, Steven A. Silverstein, Mark W. Huston and Robert I. Cohen for Plaintiffs and Appellants.

Law Offices of Craig D. Weinstein, Craig D. Weinstein; Spierer, Woodward, Corbalis & Goldberg and Stephen B. Goldberg for Defendants and Respondents.

Stephen H. Bennett, in pro. per., as Amicus Curiae.

OPINION

CHIN, J.

Under certain circumstances, a trial court must award costs and even attorney fees in favor of a "prevailing party" in an action. (Code Civ. Proc.,¹ § 1032, subd. (b).) "Prevailing party," as relevant here, includes "the party with a net monetary recovery." (§ 1032, subd. (a)(4); hereafter, section 1032(a)(4).) In this case, the plaintiffs settled with several defendants and later obtained a damage award against nonsettling defendants in an amount less than the settlement proceeds. By statute, an award in favor of a nonsettling defendant is offset by the amount the plaintiff has received from the settling defendants. (§ 877, subd. (a).) If the settlement amount is greater than the damage award, the award is entirely offset, resulting in a zero judgment. (Syverson v. Heitmann (1985) 171 Cal.App.3d 106, 110 (Syverson).)

Based on the plain language of these statutes, we conclude that the plaintiffs here, ordered to take nothing against the nonsettling defendants due to the settlement offset, did not obtain a "net monetary recovery." As we explain further below, we disapprove of Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 982-983 (Wakefield), which reached a contrary conclusion. We also distinguish the following cases that suggest otherwise: Great Western Bank v. Converse Consultants, Inc. (1997) 58 Cal.App.4th 609, 613 (Great Western); Zamora v. Shell Oil Co. (1997) 55 Cal.App.4th 204, 213-215 (Zamora); Pirkig v. Dennis (1989) 215 Cal.App.3d 1560, 1566 (Pirkig); see also Syverson, supra, 171 Cal.App.3d at page 113 (interpreting prior version of § 1032); Ferraro v. Southern Cal. Gas Co. (1980) 102 Cal.App.3d 33, 52-53 (Ferraro) (same).

FACTUAL AND PROCEDURAL BACKGROUND

In March 2000, Randall L. Goodman and Linda Guinther (collectively, plaintiffs) contracted with Jesus and Natalia Lozano to purchase a newly constructed house in Laguna Beach for $1.25 million. The house was built by AMPM Construction, a company formed by Alberto and Patricia Mobrici in 1996. The Mobricis were equal partners with the Lozanos on numerous residential construction projects; Jesus Lozano "provide[d] the money to build," and Alberto Mobrici was the "construction arm of the venture."

In 2001, plaintiffs sued the Lozanos, Alberto Mobrici, AMPM Construction, the architect, and the real estate brokers, based on construction defects in their new house. Plaintiffs sued several of the defendants for various causes of action (including negligence, fraud, breach of warranties and negligent misrepresentation), but sued only the Lozanos for breach of contract. "Plaintiffs' residential purchase agreement with the Lozanos contained a bilateral provision authorizing attorney fees for a prevailing party." In 2004, Alberto Mobrici and AMPM Construction settled with plaintiffs for $200,000, and other defendants—except for the Lozanos—settled with plaintiffs for a total of over $30,000. The trial court found these settlements were made in good faith. Plaintiffs subsequently rejected the Lozanos' section 998 settlement offer of $35,000.

In 2005, a bench trial was held on plaintiffs' action against the Lozanos. The trial judge, who was not informed of plaintiffs' settlement with the other defendants, found in favor of plaintiffs and calculated a "total damage award" of just under $146,000, of which $64,000 went to plaintiffs' contract claim. After learning that the prior settlements totaled over $230,000, the judge determined that the Lozanos should receive credit for the settlements. Because the settlement amount easily surpassed the $146,000 awarded to plaintiffs, the trial judge found that plaintiffs should receive nothing by the action. Exercising his discretion under section 1032(a)(4), the trial judge determined that the Lozanos were the prevailing parties because they paid nothing under the judgment. He awarded the Lozanos $132,000 in attorney fees and $12,000 in costs. Plaintiffs appealed from both the net zero judgment and the order finding the Lozanos to be the prevailing parties and awarding them fees and costs.

The Court of Appeal affirmed. It expressly disagreed with the majority in Wakefield, supra, 145 Cal.App.4th at page 969, which held that a party who receives a damage award against a defendant but whose judgment is reduced to zero by operation of section 877, "categorically qualifies as a prevailing party" "with a net monetary recovery" under section 1032(a)(4). Construing what it found to be the plain language of section 1032(a)(4), the Court of Appeal here reasoned: "A litigant cannot actually recover or `gain' anything without an order or a judgment. An award or verdict without a judgment is merely symbolic. The fact that the litigant may have had an award or verdict prior to a zero judgment is meaningless for purposes of whether that litigant qualifies as `the party with a net monetary recovery' if the award or verdict produces nothing tangible. `Recovery,' not `award,' is the word chosen by the Legislature." Rejecting plaintiffs' claim that they were "categorically" the prevailing party under the reasoning of Wakefield, supra, 145 Cal.App.4th 963, the Court of Appeal concluded that the trial court did not abuse its discretion in determining that the prevailing party were the Lozanos.

We granted review to resolve the conflict.²

DISCUSSION

Generally, a trial court's determination that a litigant is a prevailing party, along with its award of fees and costs, is reviewed for abuse of discretion. (See Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94 [14 Cal.Rptr.3d 67, 90 P.3d 1223]; PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 [95 Cal.Rptr.2d 198, 997 P.2d 511].) However, the issue here involves the interpretation of a statute, a question of law that we review de novo. (See California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699 [170 Cal.Rptr. 817, 621 P.2d 856] (California Teachers).)

(1) In interpreting a statute, our primary goal is to determine and give effect to the underlying purpose of the law. (People v. Valladoli (1996) 13 Cal.4th 590, 597 [54 Cal.Rptr.2d 695, 918 P.2d 999].) "Our first step is to scrutinize the actual words of the statute, giving them a plain and commonsense meaning." (Ibid.) "`If the words of the statute are clear, the court should not add to or alter them to accomplish a purpose that does not appear on the face of the statute or from its legislative history.'" (California Teachers, supra, 28 Cal.3d at p. 698.) In other words, we are not free to "give the words an effect different from the plain and direct import of the terms used." (California Fed. Savings & Loan Assn. v. City of Los Angeles (1995) 11 Cal.4th 342, 349 [45 Cal.Rptr.2d 279, 902 P.2d 297]; see § 1858.) However, "`the "plain meaning" rule does not prohibit a court from determining whether the literal meaning of a statute comports with its purpose or whether such a construction of one provision is consistent with other provisions of the statute.'" (County of San Bernardino v. City of San Bernardino (1997) 15 Cal.4th 909, 943 [64 Cal.Rptr.2d 814, 938 P.2d 876].) To determine the most reasonable interpretation of a statute, we look to its legislative history and background. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 543 [67 Cal.Rptr.3d 330, 169 P.3d 559] (Doe).)

We begin with the language of sections 1032 and 877.

A. Sections 1032 and 877

(2) Unless otherwise provided by statute, a "prevailing party" is entitled to recover costs in any action or proceeding "as a matter of right." (§ 1032, subd. (b); see § 1033.5, subd. (a)(10)(A)-(C) [allowable costs under § 1032 include attorney fees authorized by contract, statute, or law].) "Prevailing party" for purposes of section 1032(a)(4) is defined as including: "[1] the party with a net monetary recovery, [2] a defendant in whose favor a dismissal is entered, [3] a defendant where neither plaintiff nor defendant obtains any relief, and [4] a defendant as against those plaintiffs who do not recover any relief against that defendant." If a party recovers anything other than monetary relief and in situations not specified above, a trial court shall determine the prevailing party and use its discretion to determine the amount and allocation of costs, if any. (Ibid.; Michell v. Olick (1996) 49 Cal.App.4th 1194, 1198 [prevailing party is "entitled to costs as a matter of right; the trial court has no discretion to order each party to bear his or her own costs"].) We are concerned with the first category of section 1032(a)(4), "the party with a net monetary recovery."

(3) Also relevant to the issue here, section 877, subdivision (a), provides that if a party gives a release to "one or more other co-obligors mutually subject to contribution rights," that party's "claims against the others" may be reduced by the amount of the prior settlement. (§ 877, subd. (a).) "Section 877 establishes that a good faith settlement bars other defendants from seeking contribution from the settling defendant (§ 877, subd. (b)), but at the same time provides that the plaintiff's claims against the other defendants are to be reduced by `the amount of consideration paid for' the settlement (§ 877, subd. (a)). Thus, while a good faith settlement cuts off the right of other defendants to seek contribution or comparative indemnity from the settling defendant, the nonsettling defendants obtain in return a...