Fourth District, Division Three Finds That Abandonment of Action Must Be Clear Before Dismissal Is Entered; With Dismissal Gone, Fee/Cost Award Is Also Reversed.
California litigators frequently have heard the mantra that "cases are to be tried or heard on the merits." In line with that, there are corollary principles, such as pretrial dismissals are disfavored unless specified rules are followed. The next case illustrates that dismissals based on abandonment must strictly follow the rules. If not, subsequent orders—such as a $205,492 fee award and a $41,382.99 cost award—are also jeopardized (meaning the fee/cost awards go poof!), the situation faced in the case we review below.
In Kruse v. McLaughlin, Case No. G039240 (4th Dist., Div. 3 Dec. 12, 2008) (unpublished), plaintiffs sued defendant for nondisclosure in the sale of a single-family residence. The parties' real estate purchase agreement had an attorney's fees clause, requiring mediation as a condition precedent to a fee award. The parties unsuccessfully attempted mediation. They then engaged in nonbinding judicial arbitration where plaintiffs failed to prove damages, and defendants were awarded $197,809.60 in fees and $24,754.27 in costs. Plaintiffs filed for trial de novo. Plaintiffs moved to file a first amended complaint and sent a letter to the defense clarifying the claims upon which they were proceeding (namely, only certain defects in the home were being pursued). Defendant filed a motion to dismiss on the basis that the letter was tantamount to an "abandonment" of all the claims in the original complaint. The trial court found an abandonment and dismissed plaintiffs' action. Later, defendant moved for fees of $305,578.77 and costs of $41,382.99. The trial judge awarded defendant fees of $205,492 plus full requested costs of $41,382.99, under both Civil Code section 1717 (the contractual fee clause) and Code of Civil Procedure section 998 (plaintiffs' rejection of a 998 offer greater than the amount of their recovery). Plaintiffs appealed both the dismissal and fee/cost orders.
The Fourth District, Division Three, in a 3-0 opinion authored by Justice Fybel, reversed across the board.
Plaintiffs never clearly abandoned their case, with the letter relied on by the trial court failing to show an unequivocal abandonment. (Kaufman & Broad Bldg. Co. v. City & Suburban Mortg. Co., 10 Cal.App.3d 206, 213-214 (1970).)
Upon reversal of the judgment on which fees and costs were awarded, the appellate court had no choice but to overturn the postjudgment order awarding attorney's fees and costs. (Metropolitan Water Dist. v. Imperial Irrigation Dist., 80 Cal.App.4th 1403, 1436 (2000).) Just like that—poof!—the fee/cost award disappeared once the underlying judgment was reversed.