Opinion
— In this case, defendant moved for an award of attorney fees as costs under Code of Civil Procedure section 998 after plaintiff dismissed its breach of guarantee action against him. (All undesignated statutory references are to the Code of Civil Procedure.) Defendant argued that he was entitled to attorney fees because plaintiff failed to obtain a more favorable judgment than his earlier settlement offer. (§ 998, subd. (c)(1).) The trial court denied the request and defendant appealed from the order.
As we will explain, section 998 does not create an independent right to attorney fees and defendant’s only avenue for the recovery of attorney fees was subdivision (a) of Civil Codе section 1717, which creates a bilateral right to attorney fees where, as here, a contract contains a unilateral attorney fee provision. However, this path to fees is blocked by subdivision (b)(2) of Civil Code section 1717, which bars any award of contractual attorney fees where an action has been voluntarily dismissed.
FACTUAL AND PROCEDURAL BACKGROUND
In September 2004, defendant D&S Mine, Inc. (D&S Mine), executed a written agreement to lease three trucks from Ford Motor Credit Company (Ford Credit). The lease agreement сontained a provision allowing Ford Credit to recover its attorney fees if the agreement was placed with an attorney for collection. Dennis R. Hunsberger, the president of D&S Mine, signed the lease agreement and a written guаrantee on behalf of the corporation. After Ford Credit delivered the trucks, it had Hunsberger execute a personal guarantee of D&S Mine’s contractual obligations under the lease agreement.
When D&S Mine failed to pay under the lease agreement, Ford Credit filed this action against it for damages and to recover possession of its trucks and sought recovery against Hunsberger under the personal guarantee. After D&S Mine defaulted, Hunsberger served on Ford Credit a written offer to compro *1530 mise pursuant to section 998 whereby he offered to pay nothing and waive his attorney fees and costs in exchange for a dismissal with prejudice. Ford Credit allowed the offer to expire and then moved for summary judgment against Hunsberger, but the trial court denied the motion on the ground triable issues of material fact existed as to the enforceability of the personal guarantee. Ford Credit then dismissed its action against Hunsberger without prejudice and Hunsberger submitted a cost bill and moved for an award of attorney fees.
The trial court tentatively denied Hunsberger’s request for attorney fees and partially granted his request for costs. After considering supplemental briefing, the trial court adopted its tentative ruling and Hunsberger timely appealed.
DISCUSSION
Hunsberger claims the trial court erred in denying his request for attorney fees because he was entitled to an award of fees under Civil Code section 1717 and Code of Civil Procedure sections 1032, 1033.5 and 998. As explained below, wе disagree.
“[Rjecoverable litigation costs . . . include attorney fees, but only when the party entitled to costs has a legal basis, independent of the cost statutes and grounded in an agreement, statute, or other law, upon which tо claim recovery of attorney fees.”
(Santisas v. Goodin
(1998)
Hunsberger argued below that the lease agreement between Ford Credit and D&S Mine cоntained an attorney fee clause that allowed him to recover attorney fees as an item of costs. Ford Credit did not address this argument in its opposition papers; rather, it argued that Hunsberger was not entitled to attorney fеes under subdivision (b)(2) of Civil Code section 1717 because it dismissed the only cause of action against Hunsberger. Thus, Ford Credit *1531 tacitly conceded that Hunsberger could rely on the attorney fee clause contained in the lease agreеment and the trial court impliedly agreed when it addressed the arguments regarding application of Civil Code section 1717 on their merits. There was no need for the trial court to even address Civil Code section 1717 if it found Hunsberger was not a party to a contract that provided for an award of attorney fees.
For the first time on appeal, Ford Credit contends Hunsberger cannot rely on the attorney fee provision contained in the lease agreement because he was not a party to the lease and the lease and the guarantee were separate contracts. Hunsberger correctly argues that Ford Credit waived this argument by failing to raise it below.
(Richmond v. Dart Industries, Inc.
(1987)
Assuming that the attorney fee provision in the lease agreement allows Hunsberger to recover his attorney fees, we turn to Ford Credit’s argument that subdivision (b)(2) of Civil Code section 1717 precludes such recovery. This argument raises a question of statutory construction that we address de novo.
(Silver
v.
Boatwright Home Inspection, Inc.
(2002)
Under subdivision (b)(2) of Civil Code section 1717, attorney fees shall be awarded to a prevailing party in an action on a contract that contains an attorney fee provision, but “[w]here an action has been voluntarily dismissed . . . there shall be no prevailing party for purposes of this section.” The Legislature added the quoted language in 1981 as a codification of thе holding in
International Industries, Inc. v. Olen
(1978)
Here, the trial court concluded that Hunsberger was not a prevailing party because Ford Credit voluntarily dismissed its only cause of action against him. Hunsberger first contends the trial court erred because subdivision (b)(2) of Civil Code section 1717 only applies where the entire action has been voluntarily dismissed, not just one cause of action or party. We reject Hunsberger’s argument because it is inconsistent with the purpose of subdivision (b)(2) of Civil Code section 1717 — encouraging parties to dismiss pointless litigation and thereby avoid liability for attorney fees based on a contract cause of action. This purpose would be undermined if the voluntary dismissal of “an action” for purposes of subdivision (b)(2) of Civil Code section 1717 required the dismissal of all other claims being adjudiсated in the same proceeding.
(Gattuso v. Harte-Hanks Shoppers, Inc.
(2007)
Hunsberger next argues that he is entitled to attorney fees under section 998, subdivision (c)(1), which states in relevant part: “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall . . . pay the defendant’s costs from the time of the offer.” Hunsberger asserts that section 998 allows the recovery of attorney fees as costs and avoids the reach of subdivision (b)(2) of Civil Code section 1717.
Subdivision (a) of section 998 provides that “[t]he costs allowed under Sections 1031 and 1032 shall be withheld or augmented as provided in this section.” Section 998 is a cost-shifting statute that allows for the recovery of costs, including attorney fees as costs if there is a contractual or other statutory basis for them. Stated differently, section 998 does
not
independently create a statutory right to attorney fees; thus, it is different from numerous statutes wherein the Legislature expressly allowed for the recovery of attorney fees. (See generally Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 2007) ch. 5, Attorney Fee Awards Under Other Fee-Shifting Statutes;
id.,
ch. 17, Selected Cal. Fee-Shifting Statutes.) In situations where there is an indеpendent statutory right to attorney fees, a dismissal under subdivision (b)(2) of Civil Code section 1717 will not bar the fee award.
(Damian v. Tamondong
(1998)
Because this case does not involve a statute that creates an independent right to attorney fees, Hunsberger’s only avenue for the recovery of attorney fees is contractual. Specifically, Hunsberger must rely on the unilateral *1533 attorney fee provision contained in the lease agreement that becomes bilateral by opеration of law. (Civ. Code, § 1717, subd. (a).) This path is blocked, however, by subdivision (b)(2) of Civil Code section 1717. While Hunsberger correctly observes there is no case law holding that subdivision (b)(2) of Civil Code section 1717 trumps Code of Civil Procedure section 998, a plain rеading of the relevant statutes leads to this result.
The requirements for the recovery of costs and attorney fees under section 998 must be read in conjunction with subdivision (b) of section 1032. (§ 998, subd. (a);
Murillo
v.
Fleetwood Enterprises, Inc.
(1998)
Thus, a defendant in whose favor a dismissal has been entered can recover his attorney fees as costs “[e]xcept as otherwise expressly рrovided by statute.” (§ 1032, subd. (b).) The other statute that so provides is subdivision (b)(2) of Civil Code section 1717. As our Supreme Court explained, the legislative history of Civil Code section 1717 reflects an intent “to establish uniform treatment of fee recoveries in actions on contracts containing attorney fee provisions and to eliminate distinctions based on whether recovery was authorized by statute or by contract. A holding that in contract actions there is still a separate cоntractual right to recover fees that is not governed by [Civil Code] section 1717 would be contrary to this legislative intent.”
(Santisas, supra,
Finally, Hunsberger argues we should “harmonize” the two statutes by holding that “[w]hen a defendant serves a [section] 998 Offer and the plaintiff opts to voluntarily dismiss the action without exceeding the statutory offer, the plaintiff will not be liable for
pre-offer
contractual attorneys’ fees (in accord with [Civil Code] Section 1717 (b)(2)) but will be liable for all
post-offer
costs, including attorneys’ fees (thus complying with the ‘stiсk’ of Section 998).” The Legislature, however, did not provide for such a result and it was presumably aware of section 998 when it amended Civil Code section 1717 to include subdivision (b)(2).
(People v. Cruz
(1996)
*1534 DISPOSITION
The order is affirmed. Respondent is entitled to its costs on appeal.
Appellants’ petition for review by the Supreme Court was denied September 17, 2008, S165515.