Flanagan v. Donohue
Filed 6/13/13
Flanagan v. Donohue CA1/4
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST
APPELLATE DISTRICT
DIVISION
FOUR
REGINA
FLANAGAN,
Cross-Complainant and Respondent,
v.
JOHN
DONOHUE et al.,
Cross-Defendants and Appellants.
A136055
(Alameda County
Super. Ct. No. RG10525950)
I.
Introduction
John
Donohue, Elizabeth Donohue (also sometimes referred to in the record before us
as Elizabeth Flynn), Heather Donohue, and Kerry Donohue (appellants) appeal
from the trial court’s denial of their motion for attorney fees. The motion was made following the pretrial
Flanagan’s (Flanagan) cross-complaint against appellants, and after appellant
John Donohue filed for bankruptcy.
Appellants raise a number of contentions asserting that the trial court
erred in denying their motion. However,
the dispositive issue is whether the trial court erred in its conclusion that,
even if appellants were otherwise entitled to bring a motion under Civil Code
section 1717 (section 1717), they were not entitled to attorney fees, because
Flanagan voluntarily dismissed her cross-complaint before trial under Code of
Civil Procedure section 581, subdivision (b)(1).
We
agree with the trial court, and affirm the order denying attorney fees.
II.
Procedural and Factual Backgrounds
This
civil litigation began with the filing of a complaint on July 16, 2010, by
Victoria Marina Delaware LLC (VMD) against Margaret Waterhouse (Waterhouse),
Tara Donohue, and Flanagan for breach of a lease agreement. The complaint alleged that defendant Tara
Donohue was the assignee of rights as tenant under a written lease originally
entered into between VMD and Waterhouse.
After Tara Donohue breached the lease by failing to pay rent as it
became due, VMD commenced proceedings to recover possession. Flanagan was named as a defendant because she
allegedly signed a written guarantee agreeing to be legally responsible for
Tara Donohue’s performance under the lease.
Before eviction proceedings began, Tara Donohue relinquished possession
of the premises. As a result of her
illegal possession, VMD contended that it suffered damages of approximately
$125,000, less certain credits to which the defendants were entitled.
On
November 15, 2010, Flanagan filed a cross-complaint against appellants
entities alleging 11 causes of action.
The general allegations in the cross-complaint stated that Flanagan was
induced to give a personal guarantee for the obligations Tara Donohue assumed
under the lease with VMD, by promises made by appellants that they would
indemnify Flanagan from any liability arising out of the personal
guarantee. Flanagan alleged that she was
sued by VMD and Waterhouse to perform under her personal guarantee, and
appellants wrongfully refused to indemnify her.
Among other damages sought, the cross-complaint claimed that Flanagan
was entitled to recover attorney fees and costs incurred to enforce the
“Flanagan Agreements.â€
Appellants
thereafter filed a demurrer to the cross-complaint on the following grounds:
(1) it could not be ascertained from the cross-complaint whether the
contract alleged was written, oral, or implied; (2) if based on a written
contract, the terms were not quoted in the cross-complaint nor was it attached
as an exhibit; (3) agreement violated the statute of frauds; and (4) there
was no partnership among appellants as alleged.
The
court filed its order overruling the demurrer on all grounds on January 27,
2011. Several weeks later, appellants
filed an answer generally denying the allegation against them. No affirmative defenses were pleaded.
In
January 2012,
title="">[2] as part of its
pretrial proceedings, the court entered its order deciding various motions
brought by both sides. Further
14, 2012.
appellants’ counsel notified Flanagan and the court that John Donohue had
recently filed for bankruptcy. Because
Flanagan’s counsel indicated that Flanagan had sought recovery primarily
against John Donohue, a motion to dismiss without prejudice was made and
granted.
In
May, appellants filed a motion to recover attorney fees against Flanagan
totaling $68,818.75, pursuant to section 1717, claiming they were the
prevailing parties on the cross-complaint for purposes of that statute, and
thus entitled to recover their attorney fees.
Flanagan filed an opposition to the motion on May 23 contending
that, because she had voluntarily dismissed her cross-complaint after being
advised about the bankruptcy of John Donohue, appellants were not the
prevailing parties within the meaning of section 1717.
On
June 7, the trial court issued its order denying the motion for attorney fees
under section 1717 on three grounds: (1) it was “questionable†whether
section 1717 applied to the promises of the parties since there was no
recitation in the Flanagan Agreements that the prevailing party would recover
attorney fees, except for those incurred in defending the main action against
VMD and Waterhouse; (2) under section 1717, subdivision (b)(2),
appellants were not prevailing parties because the case was resolved by
Flanagan’s voluntary dismissal of the cross-complaint; and (3) other than
under section 1717, appellants had failed to allege any other statutory or
contractual basis for an award of attorney fees.
This
timely appeal followed.
III.
Analysis
On appeal,
appellants claim the trial court misread section 1717 and misapplied the case
law interpreting this statute in finding that Flanagan’s voluntary dismissal of
her cross-complaint precluded the trial court from declaring appellants
prevailing parties and awarding them attorney fees. In addressing the merits of appellants’ arguments, our
review is de novo. (Leamon v.
Krajkiewcz (2003) 107 Cal.App.4th 424, 431.)
Our
resolution of this appeal begins and ends with the
1717. In relevant part, subdivision (a)
of section 1717 sets forth when a party is entitled to seek attorney fees
incurred in a contract action: “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.â€
(§ 1717, subd. (a).)
It
is undisputed that Flanagan made a motion
to dismiss her cross-complaint against appellants without prejudice at the
March 14 hearing, which was granted by the trial court. That motion was made pursuant to Code of
Civil Procedure section 581, subdivision (b)(1), which states:
“(b) An action may be dismissed in any of the following instances:
[¶] “(1) With or without prejudice, upon written request of the
plaintiff to the clerk, filed with papers in the case, or by oral or written
request to the court at any time before the actual commencement of trial, upon
payment of the costs, if any.â€
In
light of that dismissal, subdivision (b)(2) of section 1717 clarifies that a
party dismissed by motion under Code of Civil Procedure section 581,
subdivision (b)(1), may not be found to be a prevailing party in an action
brought on a contract for purposes of recovering attorney fees. That section provides “[w]here 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.†(§ 1717, subd. (b)(2).)
Interpreting
section 1717, subdivision (b)(2),
the California Supreme Court in Santisas v. Goodin (1998) 17 Cal.4th
599, 613 (Santisas), stated: “When
a plaintiff files a complaint containing causes of action within the scope of
and based on a contract containing an attorney fee provision), and the
plaintiff thereafter voluntarily dismisses
the action, section 1717 bars the defendant from
recovering attorney fees incurred in defending those causes of
action . . . .†(
policy meant to encourage plaintiffs to discontinue litigation rather than
continue in an effort to avoid a fee award.
(International Industries, Inc. v. Olen (1978) 21 Cal.3d 218,
224-225; Santisas, at
p. 613.)
Despite
its plain text and the statutory
interpretation rendered by our high court, appellants claim that section
1717, subdivision (b)(2) does not “operate to divest the Court of jurisdiction
to award fees after the plaintiff has voluntarily dismissed the action
. . . .†Appellants
interpret section 1717, subdivision (b)(2) as “merely remov[ing] the statutory
presumption . . . which would otherwise automatically establish that
the dismissed defendant is deemed to be a ‘prevailing party.’ †In short, appellants argue that section 1717,
subdivision (b)(2) does not entirely foreclose their entitlement to attorney
fees, and that the trial court still retained discretion to determine whether
they were prevailing parties for purpose of awarding attorney fees under
section 1717.
Appellants’
interpretation of section 1717, subdivision (b)(2) as giving the trial court
discretionary authority to award attorney fees despite Flanagan’s voluntary
dismissal of her cross-complaint is without legal support. In Topanga
and Victory Partners v. Toghia (2002) 103 Cal.App.4th 775 (
sued an entity called Omni Medical Centers, Inc. and its principal, Nicholas
Toghia, for breach of contract, torts, and statutory claims. A demurrer brought by defendants was
overruled, and the case proceeding to trial.
Following opening statements and after two days of testimony, counsel
for Topanga informed the court that all of the parties, except Toghia had
reached a settlement as to all claims.
Topanga entered a dismissal against Toghia. (Id.
at p. 778.)
Toghia
then filed a motion for attorney fees under section 1717. The motion did not seek fees incurred in the
defense of the contract-related claims because Toghia was not the prevailing
party in light of the voluntary dismissal of the action as to him, and under
section 1717, subdivision (b)(2).
name="_ftnref4" title="">[4] Nevertheless, the trial awarded Toghia
$134,885.87 in attorney fees. (
not entitled to an award of attorney fees under any of its causes of action,
including non-contract based claims, in light of the voluntary dismissal of the
entire action. (Ibid.)
Similarly,
in Marina Glencoe, L.P. v. Neue
Sentimental Film AG (2008) 168 Cal.App.4th 874 (Marina Glencoe), the bar on the recovery of attorney fees under
section 1717, subdivision (b)(2), was applied after the plaintiff suing on a
commercial lease against an “alter ego†defendant dismissed its complaint. The dismissal came after the commencement of
trial and after the trial judge took under submission the mid-trial motion by
the alter ego defendant for judgment pursuant to Code of Civil Procedure
section 631.8.
title="">[5] (Marina
Glencoe, at p. 876.) The
before or during trial, is “voluntaryâ€
within the meaning of section 1717 and prevents an attorney fee award. (Marina
Glencoe, at pp. 877-878.)
Other decisions have similarly
held that a defendant who has been voluntarily dismissed from an action is not
a prevailing party under section 1717, and thus is not entitled to recover
attorney fees under that statute. (
Cal.App.4th 158, 164-165; Aronson v.
Advanced Cell Technology (2011) 196 Cal.App.4th 1043, 1050.)
In
light of these authorities, we have no hesitation in agreeing with the trial
court that, in light of Flanagan’s voluntary pretrial dismissal of her
cross-complaint against appellants, appellants were not entitled to recover
their attorney fees against Flanagan under section 1717.
Despite
these authorities, appellants argue that the cases are in “conflict†with
166 Cal.App.4th 175 (Chinn). There is no conflict. The civil action in Chinn did not involve claims based on contract, but only for negligence
against the property management company managing the property where plaintiff
was assaulted by the property manager. (
section 1717 was inapplicable because “Civil Code section 1717 does not apply
to attorney fees incurred to litigate noncontract causes of action. [Citation.]â€
(Chinn, at p. 192.) Moreover, in the Chinn opinion’s discussion concerning the applicability of the
Supreme Court decision in Santisas,
reaffirmed the unassailable legal rule that a party to an action brought on a
contract may not recover attorney fees under section 1717 where the plaintiff
voluntarily dismisses the complaint, because the dismissed defendants are not
“prevailing parties†under the statute.
(Chinn, at p 193.) Therefore, there is nothing in the
conflicts with Topanga and
We
also reject appellants’ contention that the trial court erred because it denied
them attorney fees, not under section 1717, subdivision (b)(2), but because of
“its mistaken belief that because the action terminated by way of a dismissal
rather than by way of trial, the Court no longer had jurisdiction to award
fees.†The trial judge was not laboring
under any mistaken belief that it lacked jurisdiction to award fees.
In
discussing the effect of section 1717, subdivision (b)(2) on appellants’
motion, the court stated in full:
“Second, even if section 1717 did apply to the Contract, the statute
expressly provides that ‘[w]here an action has been voluntarily dismissed
. . . , there shall be no prevailing party for purposes of this
section.’ [Citation.] The cross-complaint was voluntarily dismissed
before any verdict or determination on the merits. Thus, Cross-Defendants cannot be determined
to be prevailing parties on the Contract for purposes of section 1717. (See, e.g., Topanga[, supra,] 103
Cal.App.4th [at p.] 786.)â€
There
is nothing to suggest that the court refused to award fees because it lacked
jurisdiction to do so. Clearly, the
court refused to award fees because section 1717, subdivision (b)(2) declared
the cross-defendants were not prevailing parties under the statute, and
therefore, not entitled to fees.
Equally
meritless is appellants’ argument that section 1717 entitles them to fees
because an indemnity agreement in the Flanagan Agreements contained a clause by
which she “accepts all responsibility for legal fees, costs and expenses
incurred by Waterhouse, Landlord, or Guarantor . . . .†This assertion is simply a rebuttal to the
trial court’s initial concern that it was “questionable†whether appellants’
could be entitled to attorney fees under section 1717 based on the above-quoted
language in the indemnity agreement. The
point the trial court was making, and which we reinforce here, is that even if
there were a clause meeting the requirements of section 1717 for attorney fee
purposes, the dismissal prevents appellants from being declared prevailing
parties under subdivision (b)(2) of the statute.
IV.
DISPOSITION
The
order denying appellants’ attorney fees is affirmed. Flanagan is entitled to recover her
_________________________
RUVOLO,
P. J.
We concur:
_________________________
REARDON, J.
_________________________
HUMES, J.
Donohue was not named as a cross-defendant or as an appellant in the notice of
appeal.
docket, there is scant evidence in the record of what transpired in the
litigation from January 2011 and January 2012.
Appellants’ appendix on appeal is only one volume. In any case, detailed discussion concerning
pretrial developments is not necessary in order to decide the pivotal issue
raised on appeal.
