Santisas v. Goodin

• Citation: 17 Cal.4th 599,71 Cal.Rptr.2d 830,951 P.2d 399
• Decision Date: 26 February 1998
• Docket Number: No. S050326,S050326
• Court: United States State Supreme Court (California)
• Parties: , 951 P.2d 399, 98 Cal. Daily Op. Serv. 1367, 98 Daily Journal D.A.R. 1876 Benjamin SANTISAS et al., Plaintiffs and Appellants, v. Robert J. J. GOODIN et al., Defendants and Respondents.

Page 830

71 Cal.Rptr.2d 830

17 Cal.4th 599, 951 P.2d 399, 98 Cal. Daily Op. Serv. 1367,

98 Daily Journal D.A.R. 1876

Benjamin SANTISAS et al., Plaintiffs and Appellants, v. Robert J. J. GOODIN et al., Defendants and Respondents.

No. S050326.

Supreme Court of California.

Feb. 26, 1998.

Raul S. Picardo and Gilbert T. Graham, San Francisco, for Plaintiffs and Appellants.

Bronson, Bronson & McKinnon, Robert J. Stumpf, Jr., Michele K. Trausch and Richard M. Foehr, San Francisco, for Defendants and Respondents.

KENNARD, Justice.

Many contracts include a provision requiring a contracting party to pay any attorney fees that the other party incurs to enforce the contract or in litigation arising from the contract. To ensure that these contractual attorney fee provisions do not operate in an unfairly one-sided manner, the Legislature enacted Civil Code section 1717, which states in part: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce 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 party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs."

In International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, 145 Cal.Rptr. 691, 577 P.2d 1031 (Olen ), which involved a claim for attorney fees under Civil Code section 1717, a majority of this court held that "recovery of attorney fees based on contract" is not permitted "when the plaintiff voluntarily dismisses prior to trial." (Olen, supra, at p. 223, 145 Cal.Rptr. 691, 577 P.2d 1031.)

After this decision, the Legislature amended Civil Code section 1717 to state, in subdivision (b)(2), that if "an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section."

The issues here are these: When a plaintiff has voluntarily dismissed before trial an action asserting both tort and contract claims, all of which arise from a real estate sales contract containing a broadly worded attorney fee provision, may the defendant recover any of the attorney fees incurred in defending the action? Or is any or all of such recovery precluded by either Civil Code section 1717 or this court's decision in Olen, supra, 21 Cal.3d 218, 145 Cal.Rptr. 691, 577 P.2d 1031?

We conclude that in voluntary pretrial dismissal cases, Civil Code section 1717 bars recovery of attorney fees incurred in defending contract claims, but that neither Civil Code section 1717 nor Olen, supra, 21 Cal.3d 218, 145 Cal.Rptr. 691, 577 P.2d 1031, bars recovery of attorney fees incurred in defending tort or other noncontract claims. Whether attorney fees incurred in defending tort or other noncontract claims are recoverable after a pretrial dismissal depends upon the terms of the contractual attorney fee provision.

I. FACTS

Plaintiffs Benjamin and Anita Santisas brought this action against defendants Robert J.J. and Phyllis L. Goodin (the Goodins), Goodin Realty Co., Inc. (Goodin Realty), Daniel J. Guthrie, and others seeking both general and exemplary damages occasioned by certain alleged defects in a home they had purchased from the Goodins in a transaction in which Robert Goodin acted as the sellers' broker and as the agent of Goodin Realty, and in which Guthrie acted as Goodin Realty's attorney. The verified complaint's allegations were grouped into causes of action for breach of contract, negligence, deceit, negligent misrepresentation, and suppression of fact. ¹ The complaint alleged, in paragraph XXIII, that "plaintiffs and defendants entered into a written agreement, a copy of which is attached hereto as EXHIBITS A and B, and made a part hereof." Attached to the complaint as "Exhibit A" was a document entitled "Residential Purchase Agreement and Deposit Receipt." ² The document included this provision: "In the event legal action is instituted by the Broker(s), or any party to this agreement, or arising out of the execution of this agreement or the sale, or to collect commissions, the prevailing party shall be entitled to receive from the other party a reasonable attorney fee to be determined by the court in which such action is brought." The complaint sought attorney fees.

In response to the complaint, the Goodins, Goodin Realty, and Guthrie (collectively, the seller defendants) ³ jointly submitted a verified answer in which they denied, among other things, that the document attached to the complaint as Exhibit A represented the agreement entered into by plaintiffs and the Goodins. They did not deny, however, the allegations of paragraph XXIII of the complaint that plaintiffs and defendants had entered into a written agreement that consisted of the documents attached to the complaint as exhibits A and B.

After discovery proceedings, including the depositions of plaintiffs and certain of the defendants, plaintiffs voluntarily dismissed the action with prejudice. The seller defendants then moved to recover their attorney fees as costs under Code of Civil Procedure sections 1021, 1032, and 1033.5, and under the attorney fee provision in the real estate purchase agreement. In support of this motion, the seller defendants submitted a declaration by their attorney containing this statement: "By their Complaint filed May 13, 1988, Plaintiffs have placed in issue the Purchase Agreement dated March 7, 1987. A true and correct copy of that Agreement is attached hereto as Exhibit 'A.' " Attached to this declaration was a document identical to exhibit A to plaintiffs' complaint, except that it includes three additional pages. The first page bears the title "ADDENDUM TO PURCHASE AGREEMENT" and appears to have been executed on March 23, 1987; the second page is untitled, undated, unsigned, and contains terms identical to those in the addendum; and the third page bears the title "COUNTER OFFER" and appears to have been executed on March 8, 1987.

In opposition to the seller defendants' motion to recover attorney fees as costs, plaintiffs submitted a memorandum of points and authorities in which they argued that Civil Code section 1717 and this court's decision in Olen, supra, 21 Cal.3d 218, 145 Cal.Rptr. 691, 577 P.2d 1031, preclude an award of attorney fees under a contractual attorney fee provision following a voluntary dismissal of the action. In this memorandum, plaintiffs conceded that "[t]he contract on which the action was based provided for reasonable attorney fee[s] to the prevailing party to be determined by the court." They did not indicate, however, whether they conceded also that the contract at issue included the additional pages in the exhibit attached to the declaration of the seller defendants' attorney.

Rejecting plaintiffs' argument, the superior court granted the seller defendants' motion and awarded them $16,546.90 in attorney fees as costs. The appellate record does not indicate whether the superior court made any findings resolving the factual issue of which documents, in addition to exhibit A to the plaintiffs' complaint, comprised the contract between the parties.

On plaintiffs' appeal from the order granting attorney fees as costs, the Court of Appeal affirmed. The Court of Appeal majority, in an opinion authored by Justice Smith and in which Justice Phelan concurred, held "that a party who successfully defends a tort action arising from a contract which entitles the winner in any litigation to an award of attorney fees is the 'prevailing party' and may recover such fees as an element of costs, even where the plaintiff dismisses the suit voluntarily." The majority rejected plaintiffs' reliance on Civil Code section 1717 on the basis that it applies only to actions upon a contract, whereas plaintiffs' action here sounded in tort. The majority rejected plaintiffs' reliance on this court's decision in Olen, supra, 21 Cal.3d 218, 145 Cal.Rptr. 691, 577 P.2d 1031, on the same basis, that the decision applies only to contract actions, whereas plaintiffs' action here sounded in tort. The Court of Appeal majority acknowledged that this reading of Olen conflicted with Jue v. Patton (1995) 33 Cal.App.4th 456, 39 Cal.Rptr.2d 364, a decision of a different division of the same appellate district, because in Jue the Court of Appeal had construed Olen as barring recovery of attorney fees in all pretrial dismissal cases, even those alleging only tort claims, where the sole basis for awarding attorney fees is a contractual attorney fee provision.

In a concurring opinion, Presiding Justice Kline agreed with the majority that Civil Code section 1717 "does not apply to this action," but he gave a different reason for this conclusion. In his view, "Civil Code section 1717 applies only to contracts authorizing fees to one party and not the other." Because the contractual attorney fee provision at issue here authorized attorney fees to "the prevailing party," it was a reciprocal provision and therefore, in the view of Presiding Justice Kline, outside the scope of Civil Code section 1717.

Presiding Justice Kline agreed with the majority that this court's decision in Olen, supra, 21 Cal.3d 218, 145 Cal.Rptr. 691, 577 P.2d 1031, does not apply to this action, but again he gave a reason different from the majority's. The reason Olen does not govern here, in Presiding Justice Kline's view, "is that subsequent actions of the Legislature have rendered it obsolete." Specifically, the Legislature rendered Olen "obsolete," according to Presiding Justice Kline, by enacting both Code of Civil Procedure section 1032, which provides that a prevailing party is entitled to costs and defines "prevailing party" as including a defendant in whose favor a dismissal is entered, and Code of Civil Procedure section 1033.5, which defines awardable costs as...