Fourth District, Division 1 Distinguishes Its Own Otay Decision.
It is interesting that certain issues pop up and are discussed by different appellate courts around the same time frame.
In our February 20, 2008 post, we explored Hall-Mark Services, Inc. v. Harris & Associates, an unpublished Third District decision that distinguished Otay River Constructors v. San Diego Expessway, 158 Cal.App.4th 79, 807 (2008), a Fourth District, Division One opinion. Otay decided that a victory in a petition to compel arbitration (with no action appended to it) was a final resolution for purposes of recovering fees under Civil Code section 1717 to the prevailing party. In contrast, Hall-Mark Services held that a victory in a petition to compel action (obtained in a pending action) was only an interim win, with the final prevailing party determination having to await what happened down the line.
Now, the Fourth District, Division One has distinguished Otay when confronted with a unique factual pattern in Center Associates v. Altman, Case No. D051583 (4th Dist., Div. 1 Feb. 25, 2008) (unpublished).
Center Associates involved a developer which had a declaratory relief action dismissed without prejudice when it was unable to serve a large number of resident homeowners whom the trial court felt were indispensable parties to the action. A group of homeowners sought an award of $40,375 in attorney’s fees on the ground they were prevailing parties under section 1717. The trial court denied the request, and the Court of Appeal affirmed.
The Fourth District, Division 1 found that, unlike Otay, “the dismissal without prejudice of the complaint does not conclusively show that [homeowners] have prevailed on the merits of a severable contractual issue (e.g., arbitrability), for purposes of awarding contractual attorney fees.” The dismissal without prejudice based on service technicalities was not comparable to final dismissals with prejudice that have given rise to section 1717 fee awards. (See, e.g., Elms v. Builders Disbursements, Inc., 232 Cal.App.3d 671, 674-675 (1991) [dismissal for lack of prosecution]; Winick Corp. v. Safeco Ins. Co., 187 Cal.App.3d 1502, 1508 (1986) [dismissal for lack of timely return of summons].) “The theory of those cases was that the defendants had prevailed because the plaintiffs’ contract claims were completely thrown out. It did not matter that those dismissals were procedural in nature, for lack of prosecution, etc., because those plaintiffs’ claims could not survive, to be reasserted in another forum or action.”
Rather, the homeowners did not yet win on the merits, but only succeeded from moving the determination on the merits from one courtroom to another. (Citing In re Estate of Drummond, 149 Cal.App.4th 46, 52-53 (2007).)
Otay was limited to its facts by the very appellate court originally deciding the matter.