Lanyi v. Goldblum

• Decision Date: 05 February 1986
• Citation: 177 Cal.App.3d 181,223 Cal.Rptr. 32
• Court: California Court of Appeals Court of Appeals
• Parties: Thomas R. LANYI et al., Plaintiffs and Appellants, v. Benjamin GOLDBLUM et al., Defendants and Respondents. AO16641.

Page 32

223 Cal.Rptr. 32

177 Cal.App.3d 181

Thomas R. LANYI et al., Plaintiffs and Appellants, v. Benjamin GOLDBLUM et al., Defendants and Respondents.

AO16641.

Court of Appeal, First District, Division 2, California.

Feb. 5, 1986.

Thomas F. Hyde, Hyde & Drath, San Francisco, for plaintiffs and appellants.

Allan M. Schuman, Allan M. Schuman and Associates, San Francisco, for defendants and respondents.

SMITH, Associate Justice.

In an action on a contract which provides for the recovery of attorney fees by a prevailing party, may a party who accepts an offer of compromise under Code of Civil Procedure section 998 recover attorney fees under Civil Code section 1717, as an item of costs after judgment, where the compromise agreement is silent on costs and fees? We will hold that such fees are recoverable and that the superior court therefore erred in denying fees in this case.

BACKGROUND

Thomas R. Lanyi and Ricki Lanyi, appellants herein, entered into a written purchase agreement to buy real property in the City of San Rafael from respondents Benjamin Goldblum and May Britt Goldblum. The agreement provided that the prevailing party in an action on the contract would be entitled to recover reasonable attorney fees as determined by the court. ¹ Appellants initially deposited $3,000 into escrow as required under the agreement. Then, in order to protect against a potential foreclosure against respondents during the escrow period, appellants voluntarily increased their deposit by $4,000, to a total of $7,000.

When problems in obtaining financing arose, respondents sold the property to John D. Michael and Harriet L. Michael, without notice to appellants, and subsequently refused to release any of the $7,000 on deposit. Appellants filed suit in On March 11, 1981, about three weeks before the scheduled trial, respondents made the following offer of compromise under Code of Civil Procedure section 998: "[D]efendants Benjamin Goldblum and May Britt Goldblum offer to allow judgment to be taken against them and in favor of plaintiff[s] for the amount of $3,000.00 currently held in escrow." The offer made no mention of costs or attorney fees. On April 3, appellants accepted in words which mirrored the offer and also made no mention of costs or fees.

November 1979 against respondents and John and Harriet Michael, seeking specific performance, damages for breach of contract, return of their $7,000 with interest, and declaratory relief. Respondents answered, and trial was set for April 6, 1981. Appellants settled with defendants John and Harriet Michael and, by court order, obtained the release of $4,000 of the money in escrow.

Appellants moved on August 14 for entry of judgment and an award of costs and attorney fees. ² Respondents opposed the award and, alternatively, moved to rescind the compromise agreement. On January 22, 1982, judgment was entered on the agreement for $3,000 plus costs of $387.07. The judgment specifically disallowed attorney fees. Appellants filed timely notice of appeal from that part of the judgment disallowing attorney fees.

APPEAL

The sole issue presented is whether attorney fees should have been allowed as an item of costs. That issue pivots on the application of Civil Code section 1717 (hereafter cited only as section 1717) to judgments entered pursuant to Code of Civil Procedure section 998 (hereafter cited only as section 998), a question which evidently has not been decided in any published decision.

Our analysis begins with Code of Civil Procedure section 1032. Subdivision (a) of that section provides in part that, in a superior court action for the recovery of real property, for money or damages, or for title or possession of real property, costs are allowed of course to a "plaintiff upon a judgment in his favor; ..."

Section 998 provides, in subdivision (a), that "costs allowed under Section [ ] ... 1032 shall be withheld or augmented as provided in this section." Subdivision (b) of section 998 provides that, not less than 10 days prior to the start of trial, "any party may serve an offer in writing upon any other party to the action to allow judgment to be taken in accordance with the terms and conditions stated at that time. If such offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly...." Subdivision (e) of the same section states, in part, "Any judgment entered pursuant to this section shall be deemed to be a compromise settlement."

In Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256, 155 Cal.Rptr. 516, this court examined the two code sections quoted above, together with principles governing settlement agreements in general, and concluded that a section 998 compromise settlement did not foreclose a plaintiff's right to costs under section 1032 of the Code of Civil Procedure where the settlement terms were silent as to costs. (Id., at pp. 261-264, 155 Cal.Rptr. 516.) This court rejected the argument that application of general contract principles to a section 998 judgment required denial of statutory costs. ³ (Pp. 262-263, 155 Cal.Rptr The parties in this case agree that the superior court's award of costs (Code Civ.Proc., § 1032) was correct under the square holding of Rappenecker. They disagree, however, on whether the rationale of Rappenecker should be extended to the question of attorney fees awarded under section 1717 as an item of costs. While there have been two amendments of section 1717 since the 1981 compromise settlement reached in this case, the first paragraph of what is now subdivision (a) of that section reads, in substance, the same now as its predecessor paragraph did then. It currently provides: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the prevailing party, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements." ⁴

                . 516.)   Also, there had been no showing of a legislative intent to exclude costs in compromise settlements.  (P. 262, 155 Cal.Rptr. 516.)   Finally, it was noted that the matter of costs of suit fell outside the scope of the compromise terms.  We explained:  " '[A] judgment based on a stipulation of the parties "is binding only as to the matter consented to by the stipulation" [citation], is confined only to issues within the stipulation [citations], and does not cover matters not in the stipulation [citation].'  [Citation.]  Here the offer was made 'in full compromise settlement of [each plaintiff's] claims regarding his service aboard the SS Mayaguez....'  Costs of suit do not fall within such service.  'Costs are allowances which are authorized to reimburse the successful party * MESSAGE(S) *MORE SECTIONS FOLLOWto an action or proceeding and are in the nature of incidental damages to indemnify a party against the expense of successfully asserting his rights.'  [Citation.]  By its failure to draft with precision its compromise offer, defendant cannot now be heard to claim that its language precludes the award of costs."  (Pp. 263-264, 155 Cal.Rptr. 516.)
                

Urging extension of Rappenecker to section 1717 awards, appellants rely by analogy on the reasoning in Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668, 186 Cal.Rptr. 589, 652 P.2d 437. Plaintiffs in Folsom brought a taxpayer action (Code Civ.Proc., § 526a) against various government entities and officials, challenging the validity of funding allocations for street and road projects and seeking, in part, injunctive and other relief until such time as a public transportation system adequate to meet the needs of the county was put in operation. Included in their prayer was a request for costs and statutory attorney fees. (Folsom, supra, 32 The principal issue was whether the settlement agreement, which was silent as to costs and fees, "operated as a merger and bar of all issues framed by the complaint and hence left the trial court without jurisdiction to award costs or fees." (Folsom, supra, 32 Cal.3d at p. 676, 186 Cal.Rptr. 589, 652 P.2d 437.) The Supreme Court held not, relying in large part on the reasoning in Rappenecker. First, the court made these general observations: "Compromise agreements are, of course, 'governed by the legal principles applicable to contracts generally.' [Citation.] They 'regulate and settle only such matters and differences as appear clearly to be comprehended in them by the intention of the parties and the necessary consequences thereof, and do not extend to matters which the parties never intended to include therein, although existing at the time.' [Citations.] Thus they ordinarily conclude all matters put in issue by the pleadings--that is, questions that otherwise would have been resolved at trial. [Citation.] They do not, however (absent affirmative agreement of the parties), conclude matters incidental to the judgment that were no part of the cause of the action. [p] It is established that the right to costs is statutory and that costs 'are allowed solely as an incident of the judgment given upon the issues in the action. [Citation.] ... They constitute no part of a judgment at the moment of its rendition....' [Citations]." (Id., at p. 677, 186 Cal.Rptr. 589, 652 P.2d 437.) Citing Rappenecker, the court continued, "Thus it is that costs are allowed, absent the parties' express agreement to the contrary, following entry of a consent decree...." (Ibid. )

                Cal.3d at p. 673, 186 Cal.Rptr. 589, 652 P.2d 437.)   Before trial, plaintiffs entered into a settlement agreement.  Part of that agreement called for plaintiffs to dismiss their action with prejudice upon local defendants' establishment of four

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