Litigant Failing to Dismiss After Losing a Demurrer With Leave May Be in Danger, Fourth District, Division Two Rules.
Under Santisas v. Goodin, 17 Cal.4th 599, 602, 622 (1998) [see our Leading Cases], litigants potentially exposed to fee awards under Civil Code section 1717 can avoid adverse consequences by voluntarily dismissing their actions way short of actual adjudications against them. However, what happens to litigants that simply allow an action to be dismissed after losing a pleading motion with leave to amend and after opting not to amend? The answer is peril at least from a fee exposure perspective, as the next case—Maudsley v. Eslamieh, Case No. E045298 (4th Dist., Div. 2 Nov. 24, 2008) (unpublished)—demonstrates.
Maudsley involved a plaintiff seeking to enforce terms of a recorded easement with covenants and restrictions against defendants, with the easement containing a fees clause. This, of course, triggers the potential application of Civil Code section 1717, which allows the prevailing party in a dispute involving a contractual fees clause to recover a fee award. Defendants successfully demurred to a first amended complaint, but plaintiff was granted leave to amend. Plaintiff failed to amend and failed to voluntarily dismiss the action as to himself as a plaintiff. The defense obtained a judgment of dismissal against a plaintiff, and the trial court awarded attorney’s fees against him based on the recorded easement fees clause.
Plaintiff appealed unsuccessfully to the Fourth District, Division Two.
Initially, he argued that the award was premature because the litigation was ongoing as to other parties such that it was impossible to determine who “prevailed.” Wrong, said the appellate panel. As between plaintiff and the demurring defendants, the litigation was concluded so that a prevailing side could be determined—and that prevailing party side happened to be the defendants winning the judgment of dismissal. (First Sec. Bank of Cal. v. Paquet, 98 Cal.App.4th 468, 474-475 (2002).)
Plaintiff next tried to fit the facts into the Santisas paradigm. The only problem was that the facts did not fit into the paradigm. Even though plaintiff had the opportunity to voluntarily dismiss before the time had run to file an amended pleading, he failed to do so and suffered a subsequent judgment of dismissal. Santisas was no lifesaver under the circumstances.
Finally, plaintiff argued the fee award was improper because he was not a party to the contract with the fees provision. This argument was unavailing because plaintiff, had he prevailed, would have been entitled to an award of fees. Section 1717’s reciprocity principles meant that defendants were likewise entitled to fees for prevailing given that plaintiff would have reaped fees for a victory. (See Milman v. Shukhat, 22 Cal.App.4th 538, 544-545 (1994).)
The fees award was affirmed, and the Court of Appeal awarded costs to defendants—meaning more fees can be applied for in the future for the winning respondents on appeal.