Opinion
Plaintiffs/appellants Audrie Lee and Nelson Lee (collectively, appellants) participated in a judicial arbitration of their complaint. (Code Civ. Proc., § 1141.10 et seq.)
I. Factual and Procedural Background
In February 2006, Audrie Lee executed a purchase agreement (Lee-Kwong Agreement) with David Shu Wai Kwong and Alice Kwong (collectively, the Kwongs), wherein Lee and/or her assignee, Nelson Lee, agreed to purchase the Kwongs’ restaurant business in Millbrae. Pursuant to the agreement, escrow was to close no later than May 8, 2006. The Lee-Kwong Agreement also provided: “In any action, proceeding, or arbitration between Buyer and Seller, arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller____”
Appellants’ complaint, filed July 11, 2007, alleges that escrow did not close and that, in December 2006, David Kwong sold or assigned an interest in the restaurant to James Ming Gao and Hanying Wang Gao (collectively, the Gaos).
The parties agreed to judicial arbitration (§ 1141.10 et seq.).
David Kwong and the Gaos filed motions to vacate the dismissal, asking that the trial court enter judgment in their favor, based on the arbitration award. They also argued their entitlement to attorney fees, relying on Civil Code section 1717 and the attorney fee provision contained in the Lee-Kwong Agreement. The court granted the motions and reinstated the arbitration award as a judgment. The court’s minute order provided: “The arbitration award awarded [respondents] statutory costs and attorney fees. The issue of attorney fees and costs shall be decided upon further motions by [respondents] should they choose to file.” Appellants filed a timely notice of appeal from the judgment.
Appellants moved for reconsideration of the court’s reinstatement of the arbitration award. David Kwong and the Gaos moved for their attorney fees incurred in the arbitration. The trial court granted the attorney fee motions and denied appellants’ motion for reconsideration. The court’s order provided: “IT IS FURTHER ORDERED that Defendant David Kwong’s Motion to Fix Amount of Attorney’s Fees As Costs in Contract Action is granted and said defendants [yz'c] are awarded fees of $31,300.00 and costs of $3,198.53 for a total of $34,498.53 against plaintiffs Audrie Lee and Nelson Lee. [f] IT IS FURTHER ORDERED that Defendants David Kwong, James Gao, And Hanying Wang Gao’s Motion for Attorneys’ Fees And Costs is granted and said defendant [wc] is awarded fees of $31,501.00 and costs of $4,021.47 for a total of $35,522.47 against plaintiffs Audrie Lee and Nelson Lee.” Appellants filed a separate notice of appeal from this order and, as noted ante, the appeals were consolidated for decision.
A. Appeal from the Judgment
Appellants contend that the trial court exceeded its jurisdiction by vacating their dismissal and reinstating the arbitration award. They contend that section 581, which allows a plaintiff to voluntarily dismiss, with or without prejudice, an action “before the actual commencement of trial . . . ,” ensures their absolute right to abandon their complaint. (§ 581, subds. (b)(1), (c).)
Section 581, subdivision (a)(6), provides: “A trial shall be deemed to actually commence at the beginning of the opening statement or argument of any party or his or her counsel, or if there is no opening statement, then at the time of the administering of the oath or affirmation to the first witness, or the introduction of any evidence.” Notwithstanding the statutory definition, “the California Supreme Court has construed the phrase ‘commencement of trial’ in section 581 to include ‘determinations on matters of law which dispose of the entire case, such as some demurrers and pretrial motions. [Citations.]’ [Citation.] Therefore, ‘commencement of trial’ under section 581 is not restricted to only jury or court trials on the merits, but also includes pretrial procedures that effectively dispose of the case. [Citations.]” (Gogri v. Jack in the Box Inc., supra, 166 Cal.App.4th at pp. 261-262.) “[T]he language in section 581, subdivision (a)(6) is not exclusive—it tells you that some things constitute a trial but it doesn’t say that those are the only things that constitute a trial . . . .” (Franklin Capital Corp. v. Wilson (2007)
Appellants contend that they were entitled to voluntarily dismiss their complaint without prejudice, pursuant to section 581, despite a judicial arbitration award in favor of respondents. They argue that, since they had requested trial de novo, trial had not commenced at the time of their dismissal.
The authority, however, is to the contrary. “[A]n arbitration is viewed as a trial on the merits,” pursuant to section 581. (Kelley; supra,
In Herbert Hawkins, supra,
On appeal, the Milheisers argued that “an arbitration before an arbiter appointed pursuant to the judicial arbitration statutes must be construed as a ‘trial’ for purposes of denying a plaintiff the absolute right to dismiss an action without prejudice under . . . [former] section 581, subdivision l.”
Given the aims of the Judicial Arbitration Act, the court agreed with the Milheisers that the plaintiff no longer had an absolute right to dismiss without prejudice following an unfavorable arbitration award. The court reasoned that “permitting [plaintiff] 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 [arbitration and dismissal] statutes produces absurd consequences and promotes mischievous lawyering, [f] . . . When parties withdraw requests for a trial de novo or voluntarily dismiss their complaints, they repudiate their previous election for a trial de novo. This factually restores the repudiating parties to their legal positions before electing the trial de novo, and triggers award finalization under section 1141.20.” (Herbert Hawkins, supra, 140 Cal.App.3d at pp. 339-340, fns. omitted.) Accordingly, the court held that “a party is not entitled to a
Recognizing that Herbert Hawkins is squarely on point, appellants do not even attempt to distinguish it. Instead, appellants argue that Herbert Hawkins was wrongly decided and that it adds an unwarranted judicial gloss to the judicial arbitration statute.
We are not alone in our view that Herbert Hawkins was correctly decided. The Fourth District reached the same conclusion in Kelley. (Kelley, supra, 45 Cal.App.4th at pp. 1825-1828.) Kelley involved the plaintiffs’ dismissal of their complaint with prejudice after seeking de novo trial on an unfavorable judicial arbitration award. (Id. at p. 1822.) The trial court granted the defendant’s motion to vacate the request for trial de novo and to enter judgment on the arbitration award, which had awarded attorney fees to the defendant. (Id. at pp. 1822-1823.) On review, a majority of the Kelley court commented: “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.” (Id. at p. 1826.) The majority concluded that, for purposes of section 581, “an arbitration is viewed as a trial on the merits.” (Kelley, at p. 1827.)
The Kelley majority went on to affirm the award of attorney fees to the defendant under Civil Code section 1717,
Appellants argue that the Herbert Hawkins rule, insofar as it allows attorney fees to be awarded after a voluntary dismissal, conflicts with Civil Code section 1717, subdivision (b)(2). But, here, as in Kelley, the request for dismissal was vacated. Thus, the trial court’s award of attorney fees to respondents in this case does not violate Civil Code section 1717, subdivision (b)(2) because the action had no longer been “voluntarily dismissed.” The dissenting opinion in Kelley, supra, 45 Cal.App.4th at pages 1836-1837 (dis. opn. of McKinster, J.), on which appellants rely, has no precedential value.
Nor does our Supreme Court’s decision in Santisas v. Goodin (1998)
We similarly reject appellants’ claim that recent appellate decisions interpreting section 581 have undermined Herbert Hawkins. None of the authority cited by appellants involves voluntary dismissal after an unfavorable arbitration award. (See Law Offices of Andrew L. Ellis v. Yang (2009)
The trial court did not err by vacating appellants’ dismissal and reinstating the arbitration award.
B. Appeal from the Attorney Fees Order
The judgment and attorney fee order are affirmed. Respondents shall recover their costs on appeal.
Simons, Acting R J., and Needham, J., concurred.
A petition for a rehearing was denied April 25, 2011, and appellants’ petition for review by the Supreme Court was denied June 29, 2011, S192894. Corrigan, J., did not participate therein.
Notes
Unless otherwise noted, all further statutory references are to the Code of Civil Procedure.
With respect to the Gaos, the complaint provides: “Plaintiffs are informed and believe and allege thereon that the Gao’s [sz'c] accepted an interest in the restaurant with full knowledge of plaintiffs [sic] contract with Kwong and with full knowledge of plaintiffs [sic] claim to ownership to the restaurant. Plaintiffs are informed and believe and allege thereon that Kwong transferred an interest in the restaurant in order [to] deprive plaintiffs’ [sic] of the benefits of their agreement.”
The complaint was separately dismissed with prejudice as against Alice Kwong. She is not a party to this appeal.
Welch has not filed a respondent’s brief.
Section 1141.10 provides: “(a) The Legislature finds and declares that litigation involving small civil cases can be so costly and complex that efficiently resolving these civil cases is
Section 1141.20, subdivision (a), provides: “An arbitration award shall be final unless a request for a de novo trial is filed within 30 days after the date the arbitrator files the award with the court.”
Respondents do not contest appealability in their briefs. In Kelley v. Bredelis (1996)
We conclude that the judgment in this case is similarly appealable. But, with respect to attorney fees, we conclude in the unpublished portion of our opinion that appellants present a challenge to the substance of the arbitration award, which is not appealable.
Section 581, subdivision (b)(1), provides: “An action may be dismissed in any of the following instances: [f] (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.” (Italics added.) Section 581, subdivision (c), provides: “A plaintiff may dismiss his or her complaint, or any cause of action asserted in it, in its entirety, or as to any defendant or defendants, with or without prejudice prior to the actual commencement of trial.” Section 581, subdivision (e), provides: “After the actual commencement of trial, the court shall dismiss the complaint, or any causes of action asserted in it, in its entirety or as to any defendants, with prejudice, if the plaintiff requests a dismissal, unless all affected parties to the trial consent to dismissal without prejudice or by order of the court dismissing the same without prejudice on a showing of good cause.”
At the time, former section 581 provided, in relevant part: “ ‘An action may be dismissed in the following cases: [f] 1. By plaintiff, by written request to the clerk ... at any time before the actual commencement of the trial . . . ” (Herbert Hawkins, supra,
Appellants contend that judicial arbitration is merely another form of alternative dispute resolution, and that on rejection of an arbitration award by a request for trial de novo, “the slate is wiped clean.” As we discuss post, this simplistic view ignores the otherwise binding and nonappealable effect of an arbitration award if a party fails to seek a de novo trial. (See §§ 1141.20, 1141.23.)
Civil Code section 1717 provides, in relevant part: “(a) 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
International Industries, Inc. v. Olen (1978)
See footnote, ante, page 1275.