Kelley v. Bredelis (45 Cal. App. 4th 1819, 1996)

Opinion

HOLLENHORST, Acting P. J.

After an unfavorable award at a judicial arbitration, the plaintiffs, Jack E. Kelley, Jr., and Jeanette Bailey-Kelley, requested a trial de novo, but later voluntarily dismissed their action with prejudice. The trial court vacated the dismissal, reinstated the arbitration award, and entered judgment against the plaintiffs pursuant to that award. Concluding that the trial court’s order is both appealable and correct, we affirm.

Procedural Background and Facts

On March 14, 1990, plaintiffs, the daughter and son-in-law of defendant Jean Bredelis, filed suit against her for damages for breach of contract and specific performance of an alleged written lease and option contract concerning defendant’s home. The lease contained the following attorney fee provision: “Should any litigation be commenced between the parties hereto concerning the demised premises, this lease, or the rights and duties of either in relation thereto, the party, Lessee or Lessor, prevailing in such litigation shall be entitled, in addition to such other relief as may be granted, to a reasonable sum as and for his attorney’s fees in such litigation.”

On August 29, 1990, defendant filed her verified answer to the complaint. In her answer, defendant alleged that the contract had been modified prior to execution to eliminate the option to purchase and to substitute a provision enabling defendant to elect not to sell the property. However, if defendant failed to sell the property, she had an obligation to return 10 percent of the rent paid under the lease.

The case was assigned to judicial arbitration by mutual agreement of the parties. The arbitration hearing was scheduled for March 5, 1991. Both parties and their counsel participated in the arbitration. Plaintiffs’ position in the arbitration was that the lease was valid and that the purchase option had been timely exercised. Defendant contended that the lease did not contain a valid option to purchase, and that she therefore had no obligation to sell the property to plaintiffs. On March 7, 1991, the arbitrator issued his award in favor of defendant, awarding her attorney fees and costs, except for an offset of $2,400 in favor of plaintiffs, representing a return of the rent which was due by virtue of defendant’s election not to proceed with the sale of the subject property.

On March 13, 1991, plaintiffs filed and served their request for trial de novo pursuant to Code of Civil Procedure section 1141.20 and California Rules of Court, rule 1616(a). Plaintiffs then filed an at-issue memorandum and trial was initially set for November 4,1991. The trial date was continued to February 4, 1992. Pursuant to stipulation of both parties and their counsel, the trial was again continued to May 26, 1992. However, on May 11, 1992, approximately two weeks before the trial date, plaintiffs filed a request for dismissal with prejudice.

Thereafter, defendant filed a memorandum of costs, motion for attorney fees, and motion for an order vacating the plaintiffs’ request for trial de novo and entering judgment on the arbitration award. The trial court granted defendant’s motions, entered judgment on the arbitration award, and subsequently set the amount of attorney fees recoverable by defendant at $21,500. Plaintiffs appeal from that judgment.

Is the Judgment Appealable?

Defendant contends that this appeal should be dismissed because it has been taken from a nonappealable judgment.

If no party requests a trial de novo within 30 days of the filing of the award by the arbitrator, the clerk of the court “shall enter the award as a judgment forthwith . . . (Rule 1615(c); and see § 1141.23.) “The judgment so entered shall have the same force and effect in all respects as, and is subject to all provisions of law relating to, a judgment in civil action or proceeding, except that it is not subject to appeal . . . .” (Rule 1615(c); accord, § 1141.23, italics added.)

Here, the arbitrator specifically determined that the defendant should recover her attorney fees as the prevailing party, but did not determine the amount of those fees. The plaintiffs, however, do not contest the reasonableness of the fees awarded. Instead, they contend that the defendant is not statutorily entitled to recover attorney fees in any amount.

In Dickens v. Lee (1991) 230 Cal.App.3d 985 [281 Cal.Rptr. 783], the court held that “where a judicial arbitrator awarded a specific amount of attorney fees but unspecified costs, a judgment on the award was appealable as to the costs but not as to the attorney fees, which could be challenged only by request for trial de novo.” (Id.., at p. 986.) In that case, as in this, the tenants challenged the award of attorney fees. The court held that those issues were not properly before the court because they were nonappealable. (Id., at p. 987.) “The only exception [to the rule of nonappealability] is where the arbitrator’s award does not specify the amount of recoverable costs. In such a case there can be no request for a trial de novo as to costs, since the court determines costs in the first instance, and thus the portion of the court’s judgment awarding costs must be appealable, because otherwise there would be no opportunity for appellate review.” (Ibid.) In other words, the award of the arbitrator was nonappealable, but the subsequent award of costs by the trial court was appealable. We are thus confined to a review of the actions of the trial court.

Since the trial court granted defendant’s motion for entry of judgment on the arbitration award and set the amount of the attorney fees awarded by the arbitrator, we consider whether the trial court erred in doing so.

Did the Trial Court Err in Granting Defendant’s Motion to Vacate Plaintiffs’ Request for Trial De Novo?

Following plaintiffs’ request for dismissal, defendant moved to vacate plaintiffs’ request for trial de novo, to enter judgment on the arbitration award, and to set the amount of her attorney fees. In support of her motions, defendant argued that as the prevailing party on the arbitration award she was entitled to her attorney fees. Citing Herbert Hawkins Realtors, Inc. v. Milheiser (1983) 140 Cal.App.3d 334 [189 Cal.Rptr. 450], she contended that plaintiffs’ voluntary dismissal of their action following their request for trial de novo amounted to a repudiation of their previous election for trial de novo. The trial court agreed and so do we.

In Herbert Hawkins, plaintiffs requested a trial de novo after receiving a judicial arbitration award in favor of defendants. Plaintiffs then voluntarily dismissed their breach of contract action without prejudice. Defendants moved for an order of dismissal with prejudice and awarding costs. The trial court denied defendants’ motion and the appellate court reversed. The sole issue before the appellate court was whether plaintiffs were “entitled to voluntarily dismiss their breach of contract action without prejudice after having requested a trial de novo following a judicial arbitration award favoring defendants.” (Herbert Hawkins Realtors, Inc. v. Milheiser, supra, 140 Cal.App.3d 334, 336.) In deciding this issue, the court began with an examination of the statutory provisions governing dismissals and judicial arbitration.

In response to the demand for efficient resolution of small civil claims, the Legislature enacted the Judicial Arbitration Act (see ch. 2.5, §§1141.10, 1141.20 added by Stats. 1975, ch. 1006, §1, p. 2364) and “expressly declared arbitration hearings be simple, economical, informal and private in procedural character to insure prompt and equitable dispute resolution.” (Herbert Hawkins Realtors, Inc. v. Milheiser, supra, 140 Cal.App.3d 334, 338; §1141.10, subd. (b)(1) and (2).) Acknowledging that article I, section 16 of the California Constitution gives every party the right to trial by jury, the Legislature also provided the means by which a party, dissatisfied with the arbitration award, could elect to have a trial de novo. (§ 1141.20; rules 1615(c) and 1616(a).) However, absent a request, the arbitration award is final. (§ 1141.20.)

Co-existent with the statutes providing for judicial arbitrations is section 581, which allows a plaintiff to dismiss his case at any time before the actual commencement of the trial. As the court noted, this right to voluntary dismissal appears to be absolute. However, recognizing its “statutory duty to construe each provision of the Code of Civil Procedure liberally and with a view to effect its objects and promote justice. [Citation.]” (Justus v. Atchison (1977) 19 Cal.3d 564, 579 [139 Cal.Rptr. 97, 565 P.2d 122], overruled on other grounds Ochoa v. Superior Court (1985) 39 Cal.3d 159, 171 [216 Cal.Rptr. 661, 703 P.2d 1]), the court found that “permitting [plaintiffs] to voluntarily dismiss without prejudice defeats the express legislative purpose of ‘expediting and removing complexities from the judicial process relating to small civil claims . . . .’ [Citation.] Such a construction of the interrelationship of the relevant statutes produces absurd consequences and promotes mischievous lawyering. [H No party has the right to avoid the judicial arbitration award at their whim, and the party requesting a trial de novo may either proceed with a trial de novo or allow the award to be entered as a judgment, challengeable as provided by section 1286.2 or Judicial Council rules. (§ 1141.32)” (Herbert Hawkins Realtors, Inc. v. Milheiser, supra, 140 Cal.App.3d 334, 339-340, fn. omitted.)

Consistent with the holding in Herbert Hawkins, the Supreme Court stated that “once a general demurrer is sustained with leave to amend and plaintiff does not so amend within the time authorized by the court or otherwise extended by stipulation or appropriate order, he can no longer voluntarily dismiss his action pursuant to section 581, subdivision 1, even if the trial court has yet to enter a judgment of dismissal on the sustained demurrer.” (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 789 [176 Cal.Rptr. 104, 632 P.2d 217]; see also Goldtree v. Spreckels (1902) 135 Cal. 666, 672-673 [67 P. 1091].)

Turning to the instant case, we know that plaintiffs had their day in court as a result of having participated in a judicial arbitration. However, the arbitration award was favorable to defendant. Thus, plaintiffs filed a request for trial de novo. In effect, plaintiffs sought a second day in court. Just two weeks prior to trial, after all parties had completed the necessary preparation for trial, plaintiffs decided to dismiss their action with prejudice. The result of such action would be the avoidance of paying attorney fees to the prevailing party, namely, defendant. However, applying the reasoning set forth in the Herbert Hawkins case, we, like the trial court, find that plaintiffs did not have the absolute right to dismiss their case. Instead, plaintiffs’ request for dismissal resulted in a repudiation of their request for trial de novo and a reinstatement of the arbitration award. Such a reconciliation of the competing interests between the voluntary dismissal statute and the judicial arbitration statutes promotes “a wise policy rather than mischief or absurdity.” (Herbert Hawkins Realtors, Inc. v. Milheiser, supra, 140 Cal.App.3d 334, 338.) To allow otherwise neither makes good sense nor good law.

Thus, we conclude that the trial court was correct in vacating the request for trial de novo and entering judgment on the arbitration award. In reaching such conclusion, we have not broadly interpreted the holding in Herbert Hawkins. Although this case involves a dismissal with prejudice while Herbert Hawkins involved a dismissal without prejudice, we find no significant reason to treat the two types of dismissal differently under the facts of this case.

First, we note that California public policy strongly favors arbitration. (§§ 1141.10-1141.32, 1280-1294.2) “In the Report and Recommendation on Effectiveness of Judicial Arbitration, adopted November 19, 1983, the Judicial Council of California concluded that the judicial arbitration program has emerged as an essential calendar management tool for the courts, permitting the disposition of civil active cases, including those not ordered to arbitration, to occur on the whole more quickly and economically, while providing litigants in smaller civil cases with a desirable alternative to conventional litigation.” (Robinson, Practicing Cal. Judicial Arbitration (Cont.Ed.Bar Supp. 1995) § 1.1, p. 1.) With these thoughts in mind, “[t]here is no reason a dissatisfied party should be able to render the entire arbitration proceeding a judicial nullity by the simple procedural tactic of requesting a trial de novo and then dismissing that request." (Calderon v. Kane (1995) 36 Cal.App.4th 1663, 1667 [43 Cal.Rptr.2d 480].) Regardless of the type of dismissal, with or without prejudice, that is precisely what plaintiffs have attempted to do in this case.

Second, while we recognize that a dismissal without prejudice could result in the filing of a new action, we note that such repetitious litigation is only possible if the statute of limitations has not run. However, more important than the type of dismissal is the fact that the plaintiffs are dismissing the case after having requested a trial de novo following a judicial arbitration award favoring defendants. To allow such absolute right merely because plaintiffs have entitled the dismissal as with prejudice results in an unreasonable reconciliation of the judicial arbitration and dismissal statutes, and shows a lack of common sense.

Furthermore, it makes no difference that this case involves a dismissal following an arbitration as opposed to one following a trial because we find the two to be equal in their results.

Absent a request for a trial de novo, the clerk of the court “shall enter the award as a judgment forthwith . . . .” (Rule 1615(c); and § 1141.23.) “The judgment so entered shall have the same force and effect in all respects as, and is subject to all provisions of law relating to, a judgment in civil action or proceeding, except that it is not subject to appeal. . . .” (Rule 1615(c); § 1141.23.) Moreover, a party is not entitled to more than one section 170.6 peremptory challenge in a case. If the section 170.6 challenge is exercised against the arbitrator, it cannot be used later against a judge. (Matthews v. Superior Court (1995) 36 Cal.App.4th 592 [42 Cal.Rptr.2d 521].)

Based upon the above authorities, an arbitration is viewed as a trial on the merits. Again, absent a request for a trial de novo, the award becomes a final judgment. In fact the only way to stop an arbitration award from becoming a final judgment is to either settle the case, or go through a trial de novo. If a party fails to do either, then he or she has had his or her day in court.

Accordingly, we find the trial court’s application of the holding in Herbert Hawkins to this case to be correct.

The dissent disagrees. To begin with, the dissent states that “[t]he decision to award [attorney] fees in this procedural circumstance requires the balancing of competing public policy interests. On the one hand, public policy favors the voluntary resolution of disputes. On the other, it also favors the enforcement of attorney fee clauses in agreements. [^Q Our Supreme Court has decided that when these policy interests conflict, the balance must be resolved in favor of voluntary dispute resolution and against the recovery of attorney fees.” (Dis. opn., post, at p. 1834.) In support of this statement, the dissent refers to the case of International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, 224-225 [145 Cal.Rptr. 691, 577 P.2d 1031]. However, that case is factually and legally distinguishable. Factually, Olen is distinguishable because, in that case, the complaint was dismissed without prejudice within four months of filing, i.e., before any discovery had been conducted and before there had been a determination of the action on its merits. That is not the case here. Here, there was a determination of the action on its merits by the arbitrator and there was a final determination in which defendant was adjudged to be the prevailing party and was adjudged to be entitled to her attorney fees. The only action left for the trial court, and the only proper subject of this appeal, is the propriety of the trial court’s actions and specifically, whether the plaintiffs’ tactic of filing a dismissal would be effective to avoid an award of attorney fees.

Legally, we find no support for the argument that Olen established a rule barring recovery of attorney fees whenever there is a voluntary dismissal. Olen acknowledges that, unlike Civil Code section 1717, section 1032 expressly defines a prevailing party as including a defendant who is dismissed voluntarily before trial. As explained below, the award of attorney fees here under Civil Code section 1717 was proper, but, even if it was not, attorney fees were properly awarded under sections 1032 and 1033.5. Olen has been largely superseded by subsequent legislative developments, including the enactment of sections 1032 and 1033.5. (Honey Baked Hams, Inc. v. Dickens (1995) 37 Cal.App.4th 421, 428-429 [43 Cal.Rptr.2d 595].)

It is reading Olen far too broadly to suggest that it means that attorney fees authorized by contract may never be awarded in the event of a voluntary dismissal after arbitration but before trial de novo. “Read in context, it is apparent Olen was not making any broad pronouncement about the effect of section 1717 on the private contractual relations of consenting parties. . . . ['JQ • • • [