Jue v. Patton

• Decision Date: 24 March 1995
• Docket Number: No. A064503,A064503
• Citation: 33 Cal.App.4th 456,39 Cal.Rptr.2d 364
• Court: California Court of Appeals Court of Appeals
• Parties: Jun W. JUE et al., Cross-Complainants and Respondents, v. Mike PATTON et al., Cross-Defendants and Appellants.

Page 364

39 Cal.Rptr.2d 364

33 Cal.App.4th 456

Jun W. JUE et al., Cross-Complainants and Respondents, v. Mike PATTON et al., Cross-Defendants and Appellants.

No. A064503.

Court of Appeal, First District, Division 4, California.

March 24, 1995.

Review Denied June 22, 1995.

Godfrey L. Munter, Jr., Duane W. Dresser, Law Offices of Godfrey L. Munter, San Francisco, for cross-defendant and appellant Mike Patton.

Thomas L. Bloxham, Oakland, for cross-defendant and appellant Margaret Tam.

Charles A. Hansen, Steven M. Morger, Wendel, Rosen, Black & Dean, Oakland, for cross-complainants and respondents.

PERLEY, Associate Justice.

Mike Patton and Margaret Tam (appellants) appeal from an order denying attorney's fees pursuant to a real estate sales contract. They contend that as prevailing parties they are entitled to attorney's fees under Code of Civil Procedure sections 1032 and 1033.5. We affirm.

FACTUAL BACKGROUND

This litigation arises from a dispute concerning the purchase and sale of apartment buildings pursuant to a written agreement. Respondents were the purchasers of the buildings while Tam was the seller and Patton was Tam's agent under the agreement. Respondents financed the purchase of the buildings by assuming a loan held by Bay View Federal Savings (Bay View). In April 1992, Bay View filed the underlying complaint in this action for judicial foreclosure based on the allegation that respondents failed to make the required payments on the loan. In June 1992, respondents filed a cross-complaint against appellants alleging intentional and negligent misrepresentation and other tort claims as well as requesting rescission and equitable indemnity. In May and June of 1993, the parties discussed settling the cross-complaint. The parties were unable to settle the matter and subsequently, respondents filed a request for voluntary dismissal of their cross-complaint without prejudice. Dismissal was entered as requested in July 1993. Appellants thereafter moved for an award of attorney fees and costs. The trial court found that appellants were prevailing parties pursuant to CODE OF CIVIL PROCEDURE SECTION 1032¹ and awarded appellants costs including attorney fees pursuant to sections 1021, 1032 and 1033.5.

Following entry of the trial court's order, respondents moved for reconsideration of the order, contending appellants were not entitled to attorney's fees because under Civil Code section 1717, there is no prevailing party when an action is voluntarily dismissed. The trial court granted the motion and denied appellants an award of attorney fees.

DISCUSSION

Appellants contend that because the cross-complaint alleged tort causes of action arising from a purchase and sale agreement which has an attorney fee provision, that they, as the prevailing parties, are entitled to attorney's fees under sections 1032 and 1033.5. ² They rely on a series of cases in which attorney fees were awarded to the prevailing party on tort claims which were based on a contract containing a provision for attorney fees incurred in any action "arising out of" the contract. (See Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1343-1345, 5 Cal.Rptr.2d 154; Lerner v. Ward (1993) 13 Cal.App.4th 155, 160-161, 16 Cal.Rptr.2d 486; Palmer v. Shawback (1993) 17 Cal.App.4th 296, 299-301, 21 Cal.Rptr.2d 575.) None of those cases, however, involved the situation here where the action was voluntarily dismissed.

For example, in Xuereb, the defendants prevailed in an action alleging that real property was delivered in a defective condition. At trial, the plaintiffs also proceeded on a breach of contract claim but dropped the contract theory after the conclusion of testimony. The trial court denied the defendants attorney's fees which were sought pursuant to a provision in the purchase agreement for attorney's fees to the prevailing party " 'if this agreement gives rise to a lawsuit or other legal proceeding.' " (Xuereb v. Marcus & Millichap, Inc., supra, 3 Cal.App.4th at p. 1340, 5 Cal.Rptr.2d 154.) Division Three of this court held that the plaintiffs were entitled to attorney's fees under section 1021 ³ because the tort causes of action arose from the contract. "Under [section 1021], the allocation of attorney fees is left to the agreement of the parties. There is nothing in the statute that limits its application to contract actions alone. It is quite clear from the case law interpreting Code of Civil Procedure section 1021 that parties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract." (Id. at p. 1341, 5 Cal.Rptr.2d 154.) The court concluded that attorney fees were awardable pursuant to the purchase agreement because the attorney's fee provision was broad enough to encompass both tort and contract actions and that "but for the Purchase Agreement by which the allegedly defective property was sold to respondents, the dispute between the parties would not have arisen." (Id. at pp. 1343-1344, 5 Cal.Rptr.2d 154.)

Similarly, in Lerner v. Ward, supra, 13 Cal.App.4th at p. 159, 16 Cal.Rptr.2d 486, the plaintiffs proceeded on only a tort theory at trial and dismissed their contract claims. Lerner also involved a purchase agreement in a real estate transaction with a provision permitting attorney's fees to the prevailing party in an action " 'arising out of this agreement.' " (Id. at pp. 158-159, 16 Cal.Rptr.2d 486.) The court held that the provision permitted attorney's fees to the prevailing party on the tort claims under section 1021. (Lerner v. Ward, supra, at p. 160-161, 16 Cal.Rptr.2d 486; see also Palmer v. Shawback, supra, 17 Cal.App.4th at pp. 299-300, 21 Cal.Rptr.2d 575 [following Xuereb and Lerner and holding that attorney's fees are recoverable on tort action based on real estate purchase agreement].)

In the present case, however, both the contract and tort causes of action were voluntarily dismissed before trial. It is now well settled that in pretrial dismissal cases, the parties are left to bear their own attorney fees. (International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, 224-225, 145 Cal.Rptr. 691, 577 P.2d 1031.) In Olen, our Supreme Court held 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." (Id. at p. 223, 145 Cal.Rptr. 691, 577 P.2d 1031.) The Court reasoned that "[i]n pretrial dismissal cases, we are faced with a Hobson's choice of either (1) adopting an automatic right to attorney fees, thereby encouraging the maintenance of pointless litigation and violating the equitable principles which should govern attorney fee clauses, (2) providing for application of equitable considerations, requiring use of scarce judicial resources for trial of the merits of dismissed actions, or (3) continuing the former rule, denying attorney fees in spite of agreement. We are satisfied that concern for the efficient and equitable administration of justice requires that the parties in pretrial dismissal cases be left to bear their own attorney fees, whether claim is asserted on the basis of the contract or [Civil Code] section 1717's ⁴ reciprocal right." (Id. at p. 225, 145 Cal.Rptr. 691, 577 P.2d 1031, italics added.)

Olen is dispositive of the issue here. Recovery of attorney fees based on a...