Tuesday, November 7, 2017
Court of Appeal:
Voluntary Dismissal Didn’t Render Defendant ‘Prevailing Party’
Request for Dismissal, Filed Two Days Before Trial Was to Start and After ‘Critical’ Evidence Was Barred By Granting of In Limine Motions, Didn’t Justify Contractual Attorney Fee Award, Bigelow Says
By a MetNews Staff Writer
The Court of Appeal for this district held yesterday that a plaintiff’s voluntary dismissal without prejudice, after the judge granted the defendant’s motion in limine excluding appraisals and expert testimony as to the value of real property in issue, did not justify the award of contractual attorney fees to the defendant as the prevailing party.
The decision came in an unpublished opinion by Presiding Justice Tricia Bigelow of Div. Eight. It reverses an order by Los Angeles Superior Court Judge Stephanie M. Bowick.
California Bank and Trust (“CBT”) sued Meruelo Properties, Inc., which had received a construction loan from Pacific Commerce Bank. The plaintiff, as assignee of Pacific, alleged breach of a guaranty of completion and performance.
CBT alleged that the property, sold to Pacific Commerce at a foreclosure sale, was worth about $4 million less on account of the breach.
Meruelo sought exclusion of expert testimony because CBT, while identifying two appraisers as witnesses, had not designated them as experts. About 90 minutes after Bowick granted motions barring that testimony, as well as appraisals, CBT filed its request for dismissal.
At issue was an interpretation of Civil Code §1717, under which a court sets attorney fees where a contract provides that the prevailing party is to receive them.
Although a subsection provides that “[w]here an action has been voluntarily dismissed…, there shall be no prevailing party for purposes of this section,” Bowick said in her written ruling on Aug. 16, 2016 that “the dismissal by Plaintiff in this action was not truly ‘voluntary,’ but rather as a result of determinative rulings by this Court.”
She pointed, in particular, to the motion in limine she granted excluding testimony as to market value, commenting:
“This ruling was clearly unfavorable to Plaintiff CBT. While the Court agrees with Plaintiffs assessment that the rulings on the motions in limine were not officially dispositive of the case, and opening statements had not been given or witnesses sworn, the rulings were substantive and critically affected Plaintiff’s ability to move forward at trial. The Court finds that by excluding Plaintiffs market value evidence, it affected Plaintiffs ability to present sufficient evidence as to the damages and therefore the outcome was akin to a dispositive motion.”
Bowick awarded the defendant $240,731 in attorney fees.
Bigelow, in explaining the reversal, acknowledged that the excluded evidence was “critical,” but pointed out:
“[T]here was no dispositive motion pending, no public and formal indication by the trial court regarding the merits of the case overall…, no procedural failing on the part of California Bank that would make a defense judgment inevitable…, and no showing that an adverse judgment was a foregone conclusion….[W]hile it was clear California Bank’s case was damaged by the ruling on the motions, a defense judgment was not a foregone conclusion, a mere formality, or the inevitable result of the court’s ruling.”
Bowick had cited the Court of Appeal’s 2012 decision in Bank of America v Mitchell in declaring that, as there, “the Court finds that in light of the circumstances involved and Plaintiffs dismissal at such a late stage in the proceedings subsequent to the Court’s substantive rulings against it, fairness dictates allowing Defendant to seek its attorneys’ fees.”
Bigelow, on the other hand, cited that case, and others, for the proposition that “the trial court could not award Meruelo contractual attorney fees without first finding the dismissal was invalid.” She said in Bank of America, “the court vacated a voluntary dismissal as untimely when it was entered after the court had sustained a demurrer without leave to amend.”
Observation in Footnote
The jurist said in a footnote:
“At a hearing on the attorney fee motion, the trial court noted that had the case continued, Meruelo likely would have filed a motion for nonsuit. Had Meruelo filed a motion for nonsuit, it would presumably have occurred after California Bank made its opening statement or presented evidence. The trial court would then have been called upon to determine whether, as a matter of law, California Bank’s evidence was insufficient to permit a jury to find in its favor….No such determination was made in this case.”
The case is California Bank and Trust v. Meruelo Properties, B277691.
Barry A. Smith, Michael B. Fisher, and Robert M. Dato of Buchalter argued for CBT, and Paul S. Marks and Jennifer Miko Levine of Neufeld Marks represented Meruelo.
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