Opinion
B200301
7-2-2008
DNS CONTRACTORS, INC., Cross-complainant and Respondent, v. CALIFORNIA PORTLAND CEMENT COMPANY, Cross-defendant and Appellant.
Monteleone & McCrory, William J. Ingalsbe, Gerald W. Mouzis and Martha Eager for Cross-defendant and Appellant. Andrade & Associates, Richard B. Andrade and Kimberly J. Wind for Cross-complainant and Respondent.
Not to be Published
Cross-defendant and appellant California Portland Cement Company, doing business as Catalina Pacific Concrete, appeals from an order granting a motion filed by cross-complainant and respondent DNS Contractors, Inc. to strike appellants memorandum of costs. The trial court ruled that, given the "totality of the circumstances," appellant was not a prevailing party entitled to costs under Code of Civil Procedure section 1032.
We reverse. Pursuant to section 1032, subdivision (a)(4), appellant was a prevailing party entitled to costs as a matter of right by reason of the dismissal of DNSs cross-complaint.
FACTUAL AND PROCEDURAL BACKGROUND
The underlying litigation stemmed from construction of a sea lion exhibit at the Los Angeles Zoo (project) in 2003 and 2004. The City of Los Angeles (City) contracted with KPRS Construction Services, Inc. (KPRS) as the prime contractor for the project and other renovation work at the zoo. KPRS hired DNS Contractors, Inc. (DNS) as the concrete subcontractor, responsible for the placement of concrete material at the project. DNS, in turn, hired appellant to supply the concrete mix for the project. XYPEX Chemical Corporation (XYPEX) was the fabricator and supplier of Xypex C-1000, a waterproofing additive which appellant added to the concrete that was ultimately poured at the project.
When the concrete failed, KPRS refused to pay DNS, and in December 2003 DNS initiated this litigation by filing a complaint against KPRS seeking money owed for its work on the project. In January 2005, KPRS cross-complained against DNS, XYPEX and the City, seeking over $13 million in damages. KPRS did not sue appellant.
Thereafter, in June 2005, XYPEX filed a cross-complaint seeking full and comparative indemnity against KPRS and DNS, later serving appellant as a Roe defendant. In September 2005, appellant filed a cross-complaint against KPRS, XYPEX, the City, DNS and a bonding company. It sought damages in the amount of $37,687.61, which was the alleged balance due for materials and services it had provided in connection with the project. DNS also filed a cross-complaint in October 2005 against KPRS, XYPEX and appellant, alleging a cause of action for breach of contract against appellant and seeking indemnity and declaratory relief as to all cross-defendants.
In September 2006, the trial court denied appellants initial motion for good faith settlement, ruling that a good faith determination was not appropriate for appellants proposed settlement of a $100,000 payment and an assignment of its rights to KPRS.
Thereafter, KPRS, XYPEX and appellant reached a different settlement. According to the operative terms of the settlement, appellant agreed to pay KPRS $100,000 and to assign its affirmative claim, which by then had a value of $77,922.63, as a full and final settlement of the matter; and XYPEX agreed to pay KPRS $ 350,000 as a full and final settlement of the matter. Upon a good faith settlement determination, KPRS agreed to release claims for delay damages due to concrete defects, totaling over $4 million, against all defendants and cross-defendants including DNS, and the parties agreed that all cross-complaints against appellant and XYPEX would be dismissed in their entirety. Appellants assignment of its affirmative claim was also designed to serve as a credit in favor of DNS in the amount of $37,687.61, which was the principal amount owed to appellant.
In November 2006, appellant filed its motion for determination of good faith settlement pursuant to section 877.6 and request for dismissal of all cross-complaints against it. KPRS and XYPEX filed separate motions for a good faith settlement determination also in November 2006. In its motion, appellant argued that the DNS cross-complaint should be dismissed—notwithstanding that it alleged a cause of action for breach of contract—because the claim was effectively one for indemnity. DNS filed a notice of nonopposition to the motions.
Following a December 2006 hearing, the trial court filed an order in February 2007 granting the motions. It found the settlement to be in good faith pursuant to section 877.6 and ordered the cross-complaints against XYPEX and appellant dismissed with prejudice. Shortly thereafter, appellant filed a memorandum of costs (cost memorandum), requesting reimbursement of costs from DNS in the amount of $22,345. DNS moved to strike the cost memorandum on the ground that appellant was not a prevailing party entitled to costs under section 1032 or California Rules of Court, rules 3.1700 and 3.1702. Appellant opposed the motion to strike on the ground that the dismissal of DNSs cross-complaint established that it was a prevailing party under section 1032, subdivision (a)(4).
Following a May 2, 2007 hearing, the trial court granted the motion to strike, ruling that "[g]iven the totality of the circumstances, CPC [appellant] is not a prevailing party." This appeal followed.
DISCUSSION
Appellant contends that the trial court erred in striking the cost memorandum, asserting it was a prevailing party as a matter of law because it was a cross-defendant in whose favor a dismissal was entered. (See § 1032, subd. (a)(4).) "Where, as here, the determination of whether costs should be awarded is an issue of law on undisputed facts, we exercise de novo review. (Acosta v. SI Corp. (2005) 129 Cal.App.4th 1370, 1374.)" (City of Long Beach v. Stevedoring Services of America (2007) 157 Cal.App.4th 672, 678 (City of Long Beach).)
"`[T]he right to recover costs is purely statutory, and, in the absence of an authorizing statute, no costs can be recovered by either party. [Citation.]" (Davis v. KGO-T.V., Inc. (1998) 17 Cal.4th 436, 439.) Section 1032, subdivision (b), is an authorizing statute, providing that "[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding." Defining the term "prevailing party," section 1032, subdivision (a)(4) states: "`Prevailing party includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. When any party recovers other than monetary relief and in situations other than as specified, the `prevailing party shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034."
In Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 975-977 (Wakefield), the court analyzed section 1032, subdivision (a)(4), explaining that prevailing parties are classified into two distinct groups. The first group is comprised of four categories of litigants—including "a defendant in whose favor a dismissal is entered"—who qualify automatically as prevailing parties. Wakefield explained that "the trial court has no discretion to deny prevailing party status to a litigant who falls within one of the four statutory categories in the first prong of the provision. `As rewritten [in 1986], section 1032 now declares that costs are available as "a matter of right" when the prevailing party is within one of the four categories designated by statute. (§ 1032, subds. (a)(4), (b).) [Citations.]" (Wakefield, supra, at pp. 975-976; accord, Michell v. Olick (1996) 49 Cal.App.4th 1194, 1197-1198.)
The statute then identifies a second group—parties who recover other than monetary relief and those in situations other than as specified in the first prong of the statute—for which the trial court may exercise its discretion to determine who is the prevailing party and award costs accordingly. (Wakefield, supra, 145 Cal.App.4th at p. 977.) "The operation of this second prong has been described as follows: `Where the prevailing party is one not specified, [] section 1032, subdivision (a)(4) permits the trial court to determine the prevailing party and then allow costs or not, or to apportion costs, in its discretion. The statute requires the trial court to determine which party is prevailing and then exercise its discretion in awarding costs. [Citations.] . . . . [¶] This prong of the statute thus calls for the trial court to exercise its discretion both in determining the prevailing party and in allowing, denying, or apportioning costs. It operates as an express statutory exception to the general rule that a prevailing party is entitled to costs as a matter of right. [Citation.]" (Ibid.)
Here, the trial court appears to have applied the second prong of the statute, exercising its discretion to determine that "the totality of the circumstances" warranted the conclusion that appellant was not a prevailing party entitled to costs. In doing so, the trial court necessarily determined that appellant was not a prevailing party as described by the first prong of section 1032, subdivision (a)(4). But because appellant was a cross-defendant in whose favor a dismissal was entered, it was entitled to costs as a matter of right. (§ 1032, subd. (a)(4); see also § 1032, subd. (a)(2) ["`Defendant includes a cross-defendant"].) The trial court therefore had no basis to apply the discretionary second prong of section 1032, subdivision (a)(4) to deny costs to appellant.
The circumstances here are no different than those in Crib Retaining Walls, Inc. v. NBS/Lowry, Inc. (1996) 47 Cal.App.4th 886 (Crib Retaining Walls). There, the plaintiffs sued Crib Retaining Walls (Crib) for construction defects, and Crib cross-complained against NBS/Lowry (NBS) seeking indemnity. The plaintiffs settled with NBS, and NBS obtained an order granting its motion for a good faith settlement determination and an order dismissing Cribs cross-complaint. (Id. at p. 889.) The appellate court reversed the trial courts denial of costs to NBS, which it had premised on a "balancing of the equities." (Ibid.) It found that NBS fell with the definition of a prevailing party under the first prong of section 1032, subdivision (a)(4), as "NBS is a party `in whose favor a dismissal is entered: Cribs cross-complaint against NBS was dismissed following the order approving the plaintiffs settlement with NBS as a `good faith settlement." (Crib Retaining Walls, supra, at p. 890.) Importantly, the court found no basis for the trial court to exercise its discretion "to deny costs otherwise recoverable under section 1032 to a `prevailing party because the dismissal was the result of a section 877.6 order approving a good faith settlement." (Crib Retaining Walls, supra, at p. 890, fn. omitted.) Subsequently, the court in Great Western Bank v. Converse Consultants, Inc. (1997) 58 Cal.App.4th 609, 614 (Great Western Bank), reached the same conclusion, stating: "Converse is the prevailing party on the cross-complaints within the meaning of Code of Civil Procedure section 1032, because it is a cross-defendant in whose favor a dismissal of the cross-complaint is entered. Under the clear and unambiguous words of the statute, Converse is entitled to its costs as a matter of right."
Here, as part of the order granting appellants motion for a good faith settlement determination, the trial court ordered that all cross-complaints against appellant, including that filed by DNS, be dismissed with prejudice. As a cross-defendant in whose favor a dismissal was entered, appellant was a prevailing party as a matter of right entitled to costs under section 1032, subdivision (a)(4). (Great Western Bank, supra, 58 Cal.App.4th at p.614; Crib Retaining Walls, supra, 47 Cal.App.4th at p. 890; see also City of Long Beach, supra, 157 Cal.App.4th at p. 680 [cross-defendant in whose favor a cross-complaint was dismissed as moot entitled to costs as a matter of right].)
We are unpersuaded by DNSs arguments to the contrary. DNS contends that appellant was precluded from seeking costs because it assigned its right to do so as part of the settlement. The settlement agreement and release proved in relevant part: "CPC has also asserted in the Suit a right to be paid for certain concrete that was delivered to the Project. CPC has filed a stop notice with the City for that payment, and has filed a cross-complaint naming City, KPRS, and DNS. . . . By this Agreement, CPC hereby assigns and transfers any and all right to collect the amount due under the Stop Notice, including any right to interest, attorneys fees and costs, to KPRS." We construe a settlement agreement according to the same rules that apply to any other contract. (Vaillette v. Firemans Fund Ins. Co. (1993) 18 Cal.App.4th 680, 686.) General rules of contract construction require that "the words of the document are to be given their plain meaning and understood in their common sense; the parties expressed objective intent, not their unexpressed subjective intent, governs. [Citations.]" (Ibid.) According to the plain language of the settlement agreement, appellant assigned to KPRS only the right to pursue the claims it asserted in its own cross-complaint and the stop notice. Nowhere in the settlement agreement did appellant assign its right to seek costs as a prevailing party on any cross-complaint filed against it.
DNS also contends that it, not appellant, was the prevailing party under section 1032, subdivision (a)(4) because it obtained a net monetary recovery from KPRS. The record belies this claim. Pointing to its own separate settlement agreement with KPRS, DNS recites the provisions requiring a $100,000 payment from KRPS as well as a release of any obligation to pay any amount due on the claim assigned by appellant to KPRS as evidence of its net recovery. But the settlement agreement between KPRS and DNS expressly acknowledged that the mutual releases were contingent upon a $350,000 payment from DNS to KPRS. According to that agreement, "KPRS, after deduction of the [$100,000] payment set forth in paragraph 1 of this Agreement from the gross payments to KPRS, is to receive a minimum net payment of Three Hundred and Fifty Thousand Dollars ($350,000.00) from DNS and its insurance carriers." Given the terms of the settlement between KPRS and DNS, there was no basis for the trial court to conclude that DNS obtained a net monetary recovery.
DNS further contends that appellant was not the prevailing party because DNS achieved its litigation objectives against it to the extent that KPRS dropped its claim for delay damages and ultimately released the assigned claims against it. None of the cases cited by DNS in support of this principle, however, involved a prevailing party determination under section 1032 standing alone. For example, Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 452, involved the interplay between Civil Code section 1717 and section 1032. There, the court reasoned that "whether the parties have reached their litigation objectives by settlement, judgment, or other means" was relevant to the determination of who should be considered a prevailing party for the purpose of recovering attorneys fees as costs on noncontract claims in an action on a contract. (Silver v. Boatwright Home Inspection, Inc., supra, at p. 452; see also Galan v. Wolfriver Holding Corp. (2000) 80 Cal.App.4th 1124, 1129 [a dismissal rendering the defendant a prevailing party under section 1032 did not confer prevailing party status on the defendant for the purpose of recovering attorney fees under section 1942.4].)
In determining who is a prevailing party under section 1032, subdivision (a)(4), the consideration of litigation objectives is relevant only to the second, discretionary prong of section 1032, subdivision (a)(4). (See Lincoln v. Schurgin (1995) 39 Cal.App.4th 100, 105, 106 [where case did not fit into the first prong of section 1032, subdivision (a)(4), trial court had discretion to order parties to bear their own costs where defendants prevailed on some but not all claims and plaintiffs "lost the `partnership war but won the `battle for some monetary recovery based upon allegations found in the amended complaint filed midtrial"]; Pirkig v. Dennis (1989) 215 Cal.App.3d 1560, 1565, 1566 [where plaintiffs received the primary relief sought in the case, court found them to be prevailing parties because they "clearly fall within the latter defined categories" of section 1032].) Where, as here, a party fits squarely within one of the prevailing party definitions contained in the first prong of section 1032, subdivision (a)(4), the trial court has no discretion to deny otherwise allowable costs by considering factors such as the attainment of litigation objectives. (See Great Western Bank, supra, 58 Cal.App.4th at pp. 614-615 [cross-defendant in whose favor a cross-complaint was dismissed entitled to costs as a matter of right notwithstanding that it paid money to the plaintiffs and the cross-complainant was able to use that payment as an offset against its own obligation to the plaintiffs].)
Accordingly, because appellant was a prevailing party under section 1032, subdivision (a)(4) entitled to costs as a matter of right, the trial court lacked discretion to deny costs according to the totality of the circumstances.
DISPOSITION
The order striking appellants cost memorandum is reversed and the matter is remanded to the trial court. Appellant is to recover its costs on appeal.
We concur:
BOREN, P. J.
CHAVEZ, J. --------------- Notes: Unless otherwise indicated, all further statutory references are to the Code of Civil Procedure.