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Audrie Lee et al v. David Shu Wai Kwong et al

March 29, 2011


Superior Court of San Mateo County, No. CIV 464379, Joseph C. Scott, Judge. (San Mateo County Super. Ct. No. CIV 464379)

The opinion of the court was delivered by: Bruiniers, J.


Plaintiffs/appellants Audrie Lee and Nelson Lee (collectively, appellants) participated in a judicial arbitration of their complaint. (Code Civ. Proc., § 1141.10 et seq.)*fn2 After suffering an unfavorable arbitration award, appellants first requested a trial de novo but then filed a voluntary dismissal of their complaint without prejudice. Several of the defendants/respondents moved to vacate the dismissal and to reinstate the arbitration award, and sought recovery of attorney fees as prevailing parties in the arbitration. The trial court granted the motion, entered judgment on the arbitration award and subsequently fixed the amount of the fees. Appellants filed separate appeals from the judgment (Appeal No. A126027) and from the postjudgment attorney fees order (Appeal No. A126670), which we have consolidated. In the published portion of our decision we affirm reinstatement of the arbitration award and entry of judgment thereon. In the nonpublished portion of our opinion we also affirm the attorney fees order.

I. Factual and Procedural Background

In February 2006, Audrie Lee executed a purchase agreement (Lee-Kwong Agreement) with David 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).*fn3 Appellants alleged causes of action for specific performance against both the Kwongs and the Gaos, for breach of contract against the Kwongs, and for tortious interference with contract against both David Kwong and the Gaos.*fn4 The complaint also included causes of action for breach of a lease agreement and interference with contract, against Joseph Welch and the Welch Family Partnership (collectively, Welch), owners of the restaurant premises.*fn5

The parties agreed to judicial arbitration (§ 1141.10 et seq.)*fn6 . The arbitrator denied appellants' claims and awarded costs and attorney fees, "upon appropriate filing with the Court," to the Kwongs, the Gaos, and Welch (collectively, respondents). Appellants requested a trial de novo, pursuant to section 1141.20, subdivision (a).*fn7 Trial was set for May 4, 2009. On March 17, 2009, appellants filed a request for dismissal of the complaint without prejudice. The court clerk entered the dismissal as requested.

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 [sic] 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. [¶] 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 [sic] 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.*fn8

II. Discussion

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).)*fn9 "Upon the proper exercise of [a plaintiff's right to voluntary dismissal pursuant to section 581], a trial court would thereafter lack jurisdiction to enter further orders in the dismissed action." (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 784, italics added.) Thus, the question is whether appellants properly exercised their right to voluntary dismissal under section 581. The trial court's application of section 581 to undisputed facts is a question of law and we review the trial court's determination de novo. (Gogri v. Jack in the Box Inc. (2008) 166 Cal.App.4th 255, 262.)

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) 148 Cal.App.4th 187, 194.)

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 ...

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