Opinion
B190707
4-24-2007
ROBERT ABDALLA, Plaintiff and Appellant, v. BAHRAM HOJABRI, Defendant and Respondent.
Mesisca, Riley & Kreitenberg, Dennis P. Riley and Rena E. Kreitenberg for Plaintiff and Appellant. Schuler & Brown, Daniel E. Hoffman and Sam D. Ekizian for Defendant and Respondent.
NOT TO BE PUBLISHED
SUMMARY
A contract for the purchase and sale of residential property contained a mediation clause. Under the contract, a request for mediation before the commencement of litigation was a condition precedent to the recovery of attorney fees. The buyer of the property filed a lawsuit without first seeking mediation, but promptly dismissed the action and sought mediation for several months. The seller refused the buyers repeated mediation requests, and the buyer then filed a second action in which he was the prevailing party. We hold the mediation clause does not bar the buyer from recovering attorney fees incurred in prosecuting the second lawsuit, and the trial court erred in refusing to award fees on that ground.
FACTUAL AND PROCEDURAL BACKGROUND
Robert Abdalla and Bahram Hojabri entered into an agreement for the purchase and sale of residential property owned by Hojabri. Hojabri eventually refused to proceed with the sale. Abdalla filed a lawsuit against Hojabri and his brokers (initial action), asserting causes of action for breach of contract against Hojabri and for fraud and deceit against Hojabri and the brokers. The complaint was served on Hojabri on January 17, 2004. Several weeks later, on February 10, 2004, Abdalla dismissed the lawsuit without prejudice.
Abdalla dismissed the initial action because his attorney had failed to notice that the purchase and sale contract contained a mediation clause. The mediation clause required the parties to mediate before resorting to litigation, and further provided that a party who commenced litigation without first attempting to resolve the matter through mediation could not obtain attorney fees, even if fees would otherwise be available to him.
On the same day she dismissed Abdallas initial action, Abdallas counsel sent Hojabri a request for mediation. She also advised him the lawsuit had been dismissed and he need not respond to it, and enclosed a copy of the dismissal. Over the next several months, Abdallas counsel sent further letters in connection with her request for mediation on March 9, 2004, March 22, 2004, April 2, 2004, April 28, 2004, and May 11, 2004. The May 11 letter advised Hojabris counsel that Abdalla would proceed with filing an action, absent confirmation by May 13 of an agreement to a mediator Abdalla had proposed and of dates Hojabri and his counsel would be available.
Hojabri failed to cooperate with Abdallas repeated attempts to obtain mediation of the dispute. On June 10, 2004, Abdalla filed a complaint against Hojabri (second action), alleging causes of action for breach of contract, fraud, and specific performance. Abdalla eventually prevailed in the second action, obtaining a judgment for damages and specific performance.
This court reversed the judgment in part, because it provided Abdalla a double recovery not permitted under California law. The matter was remanded with directions to the trial court to enter an order requiring Abdalla to elect either specific performance or contract damages, and to conduct a new trial on damages in the event Abdalla chooses the damages remedy. (CV Properties, Inc. v. Hojabri (April 23, 2007, B189235) [nonpub. opn.].)
Abdalla filed a motion for an award of attorney fees of $265,039.81. Hojabri opposed the motion on the sole ground that Abdalla did not comply with a contractual condition precedent to his recovery of attorney fees, because he filed the initial action without first requesting mediation. The trial court agreed with Hojabri and refused to award fees, observing:
"I know it seems harsh to [Abdalla] with respect to the attorney fees. This was tried very aggressively by both sides and the fees, the court has no quarrel with the fees. Theyre reasonable fees. [¶] The quarrel that the court has is, as indicated, I think that it breached the agreement about the mediation . . . ."
Abdalla filed a timely notice of appeal from the courts ruling denying attorney fees.
DISCUSSION
The mediation clause in the parties purchase and sale agreement provides as follows:
"Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement . . . before resorting to arbitration or court action. . . . If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action."
The question presented by the facts in this case is whether a partys filing of a lawsuit, voluntarily dismissed a few weeks later, prevents that party from obtaining attorney fees in a subsequent lawsuit arising from the same facts. We conclude it does not. Our conclusion is supported by the law relating to voluntary dismissals, as well as by the contract language, public policy considerations, and common sense.
First, Abdalla had a statutory right to dismiss his initial lawsuit. A plaintiff may dismiss his complaint in its entirety, with or without prejudice, before the actual commencement of trial. (Code Civ. Proc., § 581, subds. (b)(1) & (c).) As long as the plaintiff has the right to dismiss voluntarily, the dismissal must be given immediate effect, and (with certain exceptions not applicable here) deprives the court of both subject matter and personal jurisdiction. (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2004) ¶ 11:34, p. 11-15; Harris v. Billings (1993) 16 Cal.App.4th 1396, 1405-1406 [trial court had no jurisdiction to vacate plaintiffs dismissal without prejudice or to enter a new order dismissing the case with prejudice; local rules could not be construed to revive jurisdiction that had expired with the dismissal].) In short, when Abdalla dismissed his initial action, that action was over and the court had no further jurisdiction over it. Accordingly, we can discern no basis for the trial courts use of the first action, which had terminated, to bar an award of attorney fees in the second action.
Second, our conclusion that the mediation clause does not bar Abdalla from obtaining his attorney fees in the second action is the only reasonable interpretation of the contractual language. The contract states that if a party "commences an action" without first attempting to resolve the matter through mediation, that party is not entitled to recover attorney fees "even if they would otherwise be available to that party in any such action." In our view, "any such action" necessarily refers to the action the party commenced without seeking mediation. In this case, that action — the initial action which Abdalla had the right to and did dismiss — is over, and no attorney fees were sought or available in that action. Moreover, Hojabris contention that the commencement of a lawsuit without a mediation request operates as an absolute bar to recovery of attorney fees in a later action is inconsistent with the purposes of a mediation clause and, necessarily, with the intent of parties who include a mediation clause in their contract. The purpose of the clause is to benefit the parties by "reducing the cost, time, and stress" of dispute resolution (see Code Civ. Proc., § 1775, subd. (c)), a purpose best achieved "when used early, before substantial discovery and other litigation costs have been incurred." (Code Civ. Proc., § 1775, subd. (d).) That is exactly what Abdalla sought to do in this case. But under Hojabris interpretation of the clause, an initial misstep in commencing litigation cannot be undone, even though no litigation costs have yet been incurred. We decline to interpret the mediation clause as having that untoward effect.
See Sanabria v. Embrey (2001) 92 Cal.App.4th 422, 424, fn. 1 [Civil Code section 1717 precludes an award of contractual attorney fees following a voluntary dismissal].
Hojabri cites and discusses several cases holding that mediation clauses like the one in his contract bar a party who fails to seek mediation from later recovering attorney fees. (See, e.g., Frei v. Davey (2004) 124 Cal.App.4th 1506, 1508 [prevailing parties were barred from recovering attorney fees because they refused a request to mediate; provision "means what it says and will be enforced"]; Leamon v. Krajkiewcz (2003) 107 Cal.App.4th 424, 427 [prevailing homeowner did not satisfy the contractual condition precedent of seeking mediation before commencing her quiet title action, and as a result was not entitled to recover attorney fees]; Johnson v. Siegel (2000) 84 Cal.App.4th 1087, 1101 [seeking mediation is a condition precedent to the recovery of attorney fees by the party who initiates the action].) We have no disagreement with these cases, none of which involve the effect of a voluntary dismissal and repeated demands for mediation prior to the filing of a new lawsuit.
Finally, public policy and common sense support our construction of the mediation clause as applying, seriatim, to any and every action that might be brought under the contract. Consider the facts in this case. Abdalla filed a lawsuit, but dismissed it immediately upon realizing that mediation was a precondition to bringing suit. Abdalla sought mediation in good faith over a period of several months. Hojabri adamantly refused all attempts to mediate the lawsuit — conduct which would prohibit him from obtaining attorney fees had he prevailed in the suit — and effectively forced Abdalla to file a second action. Fortunately, we need not reward Hojabris intransigence because, as we have seen, both legal principles applicable to voluntary dismissals and the language of the contract support our interpretation.
We emphasize that, on remand, no attorney fees may be awarded to Abdalla in connection with the initial action.
DISPOSITION
The order denying Robert Abdallas motion for attorney fees is reversed and the cause is remanded to the trial court with directions to vacate its order and, after Abdalla has elected his remedy in accordance with the decision in CV Properties v. Hojabri (April 23, 2007, B189235) [nonpub. opn]), and after a new judgment has been entered, to enter a new order awarding reasonable attorney fees. The trial court is at liberty to reconsider the amount of the award in light of the partial reversal of the underlying judgment in No. B189235 and any further proceedings, and is directed to include in the award attorney fees incurred in the prosecution of this appeal (but not in the prosecution of the appeal in No. B189235). Abdalla is entitled to recover his costs.
We concur:
RUBIN, Acting P. J.
FLIER, J.