International Industries, Inc. v. Olen

• Decision Date: 08 May 1978
• Citation: 21 Cal.3d 218,145 Cal.Rptr. 691,577 P.2d 1031
• Court: California Supreme Court
• Parties: , 577 P.2d 1031 INTERNATIONAL INDUSTRIES, INC., Plaintiff and Respondent, v. Maurice OLEN, Defendant and Appellant. L.A. 30760.

Page 691

145 Cal.Rptr. 691

21 Cal.3d 218, 577 P.2d 1031

INTERNATIONAL INDUSTRIES, INC., Plaintiff and Respondent, v. Maurice OLEN, Defendant and Appellant.

L.A. 30760.

Supreme Court of California, In Bank.

May 8, 1978.

[577 P.2d 1032] Myron W. Curzon, Los Angeles, for defendant and appellant

Hill, Wynne, Troop & Meisinger, Louis M. Meisinger and Barbara A. Hindin, Los Angeles, for plaintiff and respondent.

CLARK, Justice.

Proceeding to review order denying defendant costs and attorney's fees following plaintiff's voluntary dismissal without prejudice.

Plaintiff sublessor and defendant sublessee entered a written sublease providing for plaintiff's costs and attorney fees incurred in enforcing plaintiff's rights under the agreement. Plaintiff served amended notice to pay or quit in December 1975. In the same month, plaintiff filed complaints in superior court to recover rent and in municipal court for unlawful detainer. In the superior court action, plaintiff alleged damages of more than $5,000 for defendant's breach of the lease. The complaint also sought recovery of reasonable attorney fees. ¹

In January 1976, defendant returned to plaintiff the key to the demised premises. Plaintiff advised defendant acceptance of the key and efforts to relet were not to be interpreted as waiver of plaintiff's right to recover damages. (Civ.Code, § 1951.2, subd. (d).) Plaintiff subsequently relet the premises for a higher rental than that provided in the lease.

In February 1976, plaintiff agreed to defendant's request for extension of time to answer, plaintiff offering to settle for $700. Defendant rejected the offer and answered in the superior court alleging that plaintiff had waived payment of rent until 1 March 1976, that plaintiff had refused defendant's tender of rent, that defendant had never occupied the premises, and that plaintiff had relet at increased rental. Defendant also filed and served written interrogatories.

On 26 April 1976, plaintiff filed request for voluntary dismissal without prejudice in the superior court action. (Code Civ.Proc., § 581, subd. (1).) Defendant was not immediately notified of plaintiff's request. On 29 April 1976, the superior court granted defendant's motion to compel answers to interrogatories and imposed a sanction of $200 on plaintiff. Plaintiff requested dismissal of the municipal court proceeding on 30 April 1976. Defendant received notice of dismissal as to each action on 6 May 1976. Plaintiff then paid defendant the $200 sanction, informing him that in light of the dismissals plaintiff would not answer the interrogatories.

After being notified of the dismissals, defendant moved for entry of judgment in the superior court. He also filed a memorandum of costs alleging $35 filing fee and $1,285 attorney fees. Plaintiff moved to tax costs and to strike defendant's memorandum on the ground defendant was not the prevailing party. The superior court We conclude defendant is entitled to recover his filing fee as costs, but not his attorney fees.

[577 P.2d 1033] granted plaintiff's motions and denied defendant's motion for entry of judgment.

FILING FEE

Code of Civil Procedure section 1032 provides in relevant part: "In the superior court, except as otherwise expressly provided costs are allowed of course: . . . (P) (b) Defendant. To the defendant upon a judgment in his favor in special proceedings and in actions mentioned in subdivision (a) of this section, or as to whom the action is dismissed." (Italics added.)

Filing fees are recoverable as costs. (4 Witkin, Cal. Procedure (2d ed. 1971) Judgment, § 101, p. 3257; Cal. Civil Procedure During Trial (Cont.Ed.Bar 1960) § 23.26, p. 619.) The above emphasized portion of section 1032 entitles defendant to filing fees as a matter of right.

ATTORNEY FEES

Unless authorized by statute or agreement, attorney fees ordinarily are not recoverable as costs. (Code Civ.Proc., § 1021; D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 24-27, 112 Cal.Rptr. 786, 520 P.2d 10; Freeman v. Goldberg (1961) 55 Cal.2d 622, 625, 12 Cal.Rptr. 668, 361 P.2d 244; Young v. Redman (1976) 55 Cal.App.3d 827, 834-835, 128 Cal.Rptr. 86.)

Defendant contends he is entitled to attorney fees by virtue of Civil Code section 1717. Section 1717 provides: "In any action on a contract, where such contract specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract, shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements. (P) Attorney's fees provided for by this section shall not be subject to waiver by the parties to any contract which is entered into after the effective date of this section. Any provision in any such contract which provides for a waiver of attorney's fees is void. (P) As used in this section 'prevailing party' means the party in whose favor final judgment is rendered." (Italics added.) Unlike section 1032, section 1717 contains no provision specifically providing for recovery on voluntary dismissal.

Associated Convalescent Enterprises v. Carl Marks & Co., Inc. (1973) 33 Cal.App.3d 116, 108 Cal.Rptr. 782, appears identical to the present case. In Associated as here the plaintiff procured a voluntary dismissal without prejudice pursuant to Code of Civil Procedure section 581, subdivision 1; the defendant as here contended it was entitled to attorney fees by virtue of section 1717. The court held the defendant was not entitled to attorney fees because no final judgment had been rendered in its favor. (Id. at pp. 120-121, 108 Cal.Rptr. 782.) Associated reasoned the entry of judgment following voluntary dismissal is nonjudicial because performed by the clerk, and not final because such judgment does not determine the rights of the parties. (Id.) Finally, the court noted the rendition of a judgment is a judicial act, not a ministerial act like the entry of the voluntary dismissal. (Id. at p. 121, 108 Cal.Rptr. 782.)

Gray v. Kay (1975) 47 Cal.App.3d 562, 120 Cal.Rptr. 915, is also identical to the present case. Gray followed Associated in holding that a voluntary judgment of dismissal does not involve rendition of a final judgment. (Id. at p. 565, 120 Cal.Rptr. 915.) Similarly, in Samuels v. Sabih (1976) 62 Cal.App.3d 335, 133 Cal.Rptr. 74, the court held a dismissal procured by the defendant for want of prosecution (Code Civ.Proc., § 583, subd. (b)), is not an adjudication on the merits, and is not a final judgment within the meaning of section 1717. (Id. at pp. 339-340, 133 Cal.Rptr. 74.)

Section 1717 is obviously intended to create a reciprocal right to attorney fees when the contract provides the right to one party but not to the other. (System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 163, 98 Cal.Rptr. 735; Review of Selected 1968 Code Legislation (Cont.Ed.Bar) pp. 35-36.) To implement legislative intent and determine which party is entitled to attorney fees, it is necessary first to consider the rules applicable to contractual claims for attorney fees.

Prior to enactment of section 1717, a contractual provision providing for attorney fees in favor of defendant was not deemed to permit, on procedural grounds, recovery when the plaintiff voluntarily dismissed prior to trial. In Genis v. Krasne (1956) 47 Cal.2d 241, 246, 302 P.2d 289, 292, this court held that "where attorneys' fees are allowable solely by virtue of contract they cannot be recovered by merely including them in the memorandum of costs." (Italics in orig.) We specifically rejected the contrary rule of Wagner v. Shapona (1954) 123 Cal.App.2d 451, 454, 463, 267 P.2d 378. (47 Cal.2d at p. 246, fn. 2, 302 P.2d 289.) Since fees could not be taxed as costs, they could not be recovered after dismissal. Fees could not be recovered by the defendant during the proceedings prior to dismissal there would no no opportunity to secure an award because the clerk was not authorized to delay entry of dismissal for determination of the award. Accordingly, prior to adoption of section 1717 recovery of fees by the defendant under a contractual provision was effectively barred when the plaintiff voluntarily dismissed prior to trial.

While the procedural bar to recovery of attorney fees in pretrial voluntary dismissal cases may have been removed (T. E. D. Bearing Co. v. Walter E. Heller & Co. (1974) 38 Cal.App.3d 59, 63 et seq., 112 Cal.Rptr. 910), we are satisfied that sound public policy and recognized equitable considerations require that we adhere to the prior practice of refusing to permit recovery of attorney fees based on contract when the plaintiff voluntarily dismisses prior to trial.

In Ecco-Phoenix Electric Corp. v. Howard J. White, Inc. (1969) 1 Cal.3d 266, 272, 81 Cal.Rptr. 849, 461 P.2d 33, this court rejected literal and inflexible interpretation of attorney fee clauses, pointing out that literal construction of the clause before the court would permit contrary to sound public policy the promisee to recover even if he was responsible for the litigation, encouraging and in fact indemnifying vexatious and frivolous litigation. Although the contract provision in that case provided for defendant's recovery of fees for any litigation, this court held that fees could be recovered only to the extent necessary to protect the defendant's rights and that where the plaintiff is partially successful, the plaintiff's liability is limited to fees for the part of the defense which was successful. Other cases have likewise recognized that the contractual provisions for attorney fees will not be inflexibly enforced and that the form of the judgment is not necessarily controlling, but must give way to equitable considerations. (National Computer Rental, Ltd. v. Bergen Brunswig Corp. (1976) 59 Cal.App.3d 58, 63, 130 Cal.Rptr. 360; Babcock v. Omansky (1973) 31...