May 2, 2014
MAUREEN DESAULLES, Plaintiff and Appellant,
COMMUNITY HOSPITAL OF THE MONTEREY PENINSULA, Defendant and Respondent.
[REVIEW GRANTED BY CAL. SUPREME COURT]
Monterey County Superior Court Superior Court No. M85528 Hon. Lydia Villarreal
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Henry Joachim Josefsberg for Plaintiff and Appellant.
Fenton & Keller and Christopher Edward Panetta for Defendant and Respondent.
Dismissal of a civil complaint is said to be voluntary when requested by the plaintiff and involuntary when ordered by the court. A dismissal may be
partial, as in this case, where plaintiff Maureen desaulles (Employee) agreed to dismiss two of her seven causes of action with prejudice in exchange for a payment of $23, 500 from defendant Community Hospital of the Monterey Peninsula (Employer). A civil judgment may also be described as voluntary when entered by stipulation or involuntary when entered by the court after either a judicial decision or a jury verdict.
When an action ends in any of these ways, if the parties have not otherwise agreed on who will pay the costs of litigation, one party may be deemed the prevailing party entitled to mandatory costs. In this appeal by Employee challenging a costs award to Employer, both sides claim entitlement to mandatory costs.
Mandatory costs are governed by Code of Civil Procedure section 1032. As revised in 1986 (Stats. 1986, ch. 377, §§ 5, 6, p. 1578), section 1032 states: “(b) Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” Section 1032, subdivision (a)(4) (subdivision (a)(4)) provides a nonexclusive definition of “ ‘prevailing party, ’ ” listing four categories. Three of the categories apply only to defendants, namely “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.” (Subd. (a)(4).) Only one category ‒ “the party with a net monetary recovery” ‒ is applicable to both defendants and plaintiffs.
Employee characterizes Employer’s settlement payment to her as a net monetary recovery, while Employer says that settlement payments must be disregarded under Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175 [82 Cal.Rptr.3d 586] (Chinn). Without separately appealing, Employer contends that it is a defendant in whose favor a dismissal was entered, and also contends that, as the judgment provides that Employee “recover nothing, ” it is a defendant against whom Employee recovered no relief.
The trial court awarded costs of $12, 731.92 to Employer in the exercise of its discretion, as a trial court may do when costs are not mandatory. “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 ….” (Subd. (a)(4).)
This appeal requires us to determine whether either party was entitled to mandatory costs. As we will explain, the case ended in three stages without
a trial on the merits. Employer did not obtain a favorable dismissal of the action, but did obtain a judgment denying Employee relief. However, Employer obtained the judgment by making a settlement payment that can be considered a net monetary recovery by Employee. As section 1032 does not contemplate both sides prevailing, the trial court exercised discretion in awarding costs. We will reverse the order awarding costs to Employer and denying costs to Employee, determining that, since the parties’ settlement was silent regarding costs, Employer’s payment of $23, 500 triggered mandatory costs as a “net monetary recovery” under the plain language of the statute.
II. PROCEDURAL HISTORY
A. PREJUDGMENT PROCEEDINGS
Employee was hired in February 2005 as a part-time patient business services registrar. Employee began complaining about her work shift assignments to the emergency room in June 2005. Employer placed Employee on a leave of absence in January 2006 and terminated her employment in July 2006.
In July 2007, Employee filed a complaint alleging that Employer had: (1) failed to accommodate Employee’s physical disability or medical condition (susceptibility to infection as a result of cancer); (2) retaliated against Employee for exercising her rights under the California’s Fair Employment and Housing Act (Gov. Code, § 12900); (3) breached implicit conditions of an employment contract; (4) breached an implied covenant of good faith and fair dealing; (5) negligently and (6) intentionally inflicted emotional distress; and (7) wrongfully terminated Employee in violation of public policy.
On August 1, 2008, the trial court entered a nine-page order ruling on Employer’s alternative motions for summary judgment or summary adjudication. The court denied summary judgment, but granted Employer’s motion for summary adjudication of the first cause of action alleging a failure to accommodate. The trial court found triable factual issues as to the remaining causes of action and denied summary adjudication of those claims.
Based on the summary adjudication, Employer filed several in limine motions. After hearing argument on September 2, 2008, the trial court orally granted motions in limine numbered 1, 8, and 11, specifically precluding argument by Employee “that [Employer] failed to accommodate [Employee’s] disability or to engage the interactive process or that [Employee] was harassed, discriminated or retaliated against in connection with any claims of failure to accommodate or failure to engage the interactive process, ” or “regarding
[Employee’s] safety complaints, retaliation on union issues … ” and excluding “evidence of discrimination or failure to accommodate or retaliation claims against [Employer] based on failure to accommodate or engage in the interactive process or make complaints about failure to accommodate or engage in the interactive process.”
At the conclusion of those rulings and before a jury panel was called, the parties placed the following settlement on the record: “[I]n consideration for dismissal with prejudice of the two claims of breach of contract and breach of covenant, Defendant will pay Plaintiff within 10 days $23, 500.” Defense counsel “will prepare a judgment on the remaining claims which references the dismissal with prejudice and which preserves the right of appeal of the rulings of this court on the remaining causes of action ….” “[T]he parties will not file any motions or memoranda for costs or attorney fees[, ] holding off until the completion of the appeal ….”
B. THE JUDGMENT AND POST-JUDGMENT COSTS CLAIMS
On October 6, 2008, pursuant to the settlement, Employee filed a request for dismissal with prejudice of the breach of contract and breach of covenant claims. On January 6, 2009, the trial court entered an amended judgment which stated: “Having considered the arguments, oral and written, of all the parties, the records and file herein, and the pre-trial motions and oppositions thereto filed herein, and having granted defendant’s Motion in Limine No. 1 to Preclude Any Argument That Defendant Failed to Accommodate Plaintiff’s Disability or to Engage in the Interactive Process, or That Plaintiff Was Harassed, Discriminated or Retaliated Against in Connection Therewith, the Court finds that plaintiff will be unable to introduce any evidence that would establish plaintiff’s second cause of action for retaliation, her fifth and sixth causes of action for intentional and negligent infliction of emotional distress, or her seventh cause of action for wrongful termination in violation of public policy; and, [¶] The Court having previously granted summary adjudication of Plaintiff’s first cause of action for failure to accommodate; and, [¶] The parties having settled plaintiff’s third cause of action for breach of implied in fact contract and fourth cause of action for breach of the covenant of good faith and fair dealing, IT IS HEREBY ADJUDGED that, [¶] 1. Plaintiff recover nothing from defendant; and [¶] 2. The Parties shall defer seeking any recovery of costs and fees on this Judgment coming final after the time for all appeals.”
Employee filed an appeal from the amended judgment, and this court affirmed the judgment in an unpublished opinion filed on June 29, 2011.
After this court issued a remittitur, Employer filed a memorandum in the trial court seeking costs of $11, 918.87. Employee filed a memorandum seeking costs of $14, 839.71 and a motion to strike Employer’s memorandum, asserting that Employer was not the prevailing party. Employer responded with a motion to strike Employee’s memorandum, asserting that Employee was not the prevailing party. Each side filed opposition to the other’s motion to tax costs.
After a hearing, the trial court stated, “The Court believes it can exercise its discretion in determining which party did prevail, and because [Employer] prevailed on significant causes of action and thereafter entered into a settlement on the remaining costs, the Court finds that [Employer] is the prevailing party.” The trial court awarded Employer costs of $12, 731.92, which added $813.05 to the amount sought in Employer’s memorandum for costs of the first appeal. The trial court denied Employee’s request for costs.
III. STATUTORY SCHEME
The California Supreme Court has summarized the statutory scheme for awarding costs to the prevailing party. “Unless otherwise provided by statute, a ‘prevailing party’ is entitled to recover costs in any action or proceeding ‘as a matter of right.’ (§ 1032, subd. (b); see § 1033.5, subd. (a)(10)(A)-(C) [allowable costs under § 1032 include attorney fees authorized by contract, statute, or law].) ‘Prevailing party’ for purposes of section 1032(a)(4) is defined as including: ‘ 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.’ If a party recovers anything other than monetary relief and in situations not specified above, a trial court shall determine the prevailing party and use its discretion to determine the amount and allocation of costs, if any. (Ibid.; Michell v. Olick (1996) 49 Cal.App.4th 1194, 1198 [57 Cal.Rptr.2d 227] [prevailing party is ‘entitled to costs as a matter of right; the trial court has no discretion to order each party to bear his or her own
costs’].)” (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1333 [104 Cal.Rptr.3d 219, 223 P.3d 77] (Goodman).)
The parties agree that under the current statute, a trial court has no discretion to deny costs completely when an award is mandatory, though it may exercise discretion over the amount awarded. (Acosta v. SI Corp. (2005) 129 Cal.App.4th 1370, 1375-1376 [29 Cal.Rptr.3d 306]; Michell v. Olick, supra, 49 Cal.App.4th 1194, 1197-1198; see Goodman, supra, 47 Cal.4th 1327, 1338, fn. 4; Lincoln v. Schurgin (1995) 39 Cal.App.4th 100, 105 [45 Cal.Rptr.2d 874] [costs discretionary when no party qualifies for mandatory award].) Accordingly, in ruling on a request for costs a trial court must determine whether an award is mandatory based on one and only one party “prevailing” according to a statutory definition.
“[S]ince the question of appealability goes to our jurisdiction, we are dutybound to consider it on our own motion.” (Olson v. Cory (1983) 35 Cal.3d 390, 398 [197 Cal.Rptr. 843, 673 P.2d 720]; see Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 436 [129 Cal.Rptr.2d 436] (Nguyen).)
Section 904.1, subdivision (a)(1) provides that a judgment is appealable if it is not an interlocutory judgment. Subdivision (a)(2) provides that “an order made after a judgment made appealable by paragraph (1)” is appealable.
Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644 [25 Cal.Rptr.2d 109, 863 P.2d 179] (Lakin) explained at page 651, “Despite the inclusive language of Code of Civil Procedure section 904.1, subdivision (b), not every postjudgment order that follows a final appealable judgment is appealable. To
be appealable, a postjudgment order must satisfy two additional requirements.” (Fn. omitted.) One requirement “is that the issues raised by the appeal from the order must be different from those arising from an appeal from the judgment.” (Lakin, supra, at p. 651.) The other requirement is the postjudgment order must “affect the judgment or relate to its enforcement.” (Id. at p. 654.) The court explained that an “order denying attorney fees is not preliminary to future proceedings and will not become subject to appeal after a future judgment. Rather, it resembles the orders we have held appealable. It affects the judgment or relates to its enforcement in that it finally determines the rights of the parties arising from the judgment.” (Ibid.) In finding the order before it appealable, Lakins found support in cases that had “expressly or impliedly held appealable similar postjudgment orders concerning costs, interest, and attorney fees, ” including Norman I. Krug Real Estate Investments, Inc. v. Praszker (1990) 220 Cal.App.3d 35 [269 Cal.Rptr. 228] (Praszker). (Lakins, supra, at p. 654.) The court in Praszker flatly stated, “A postjudgment order which awards or denies costs or attorney’s fees is separately appealable.” (Praszker, supra, at p. 46.)
In Nguyen, supra, 105 Cal.App.4th at page 436, this court stated, “Under the ‘one final judgment’ rule, an order or judgment that fails to dispose of all claims between the litigants is not appealable under Code of Civil Procedure section 904.1, subdivision (a). ‘[A]n appeal cannot be taken from a judgment that fails to complete the disposition of all the causes of action between the parties even if the causes of action disposed of by the judgment have been ordered to be tried separately, or may be characterized as “separate and independent” from those remaining.’ (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743 [29 Cal.Rptr.2d 804. 872 P.2d 143] . . . .)"
We requested supplemental briefing discussing the applicability of the final judgment rule and the decision in City of Gardena v. Rikuo Corp. (2011) 192 Cal.App.4th 595 [120 Cal.Rptr.3d 699] (Rikuo Corp.). Rikuo Corp. discussed the requirement that a final judgment must completely dispose of the matter in controversy. The judgment in that case appeared to do so, as “the consent judgment expressly provide[d] that it was intended to resolve all of the issues in controversy between the parties, including the manner in which disputes over the cost of remediation would be resolved.” (Id. at p. 603.) In settling an eminent domain case, the parties agreed that the trial court retained jurisdiction to apportion expenses of remediating contaminated property. (Id at pp. 598‒599.) The property owner later filed an appeal from a partial determination of expenses. The appellate court determined that the order was not appealable as a postjudgment order. A postjudgment order is appealable when it follows a judgment made appealable under section 904.1, subdivision (a)(1). (192 Cal.App.4th at p. 601.) However, the judgment was a consent judgment that was not appealable. (Id. at pp. 600-601.)
The appellate court concluded, alternatively, that even if the judgment was appealable because it left open an unsettled issue of remediation expenses for the court to determine, then the challenged order was not appealable because the judgment was not yet final. “[E]ven after entry of those orders, there were issues remaining between the parties concerning further costs of remediation and the entitlement to the remainder of the deposit." (Rikuo Corp., supra, 192 Cal.App.4th at p. 602.)
Employer argues that Employee seeks recognition as prevailing on her contract claims, which were resolved by settlement. Because Employee consented to dismiss these two causes of action, “no appeal lies from a costs award based on a nonappealable consent judgment.” Employer contends that in settling her contract claims, Employee “settled all issues, including costs issues, concerning those claims.”
Employee points out that Rikuo Corp. was distinguished by Ruiz v. California State Automobile Association Inter-Insurance Bureau (2013) 222 Cal.App.4th 596 [165 Cal.Rptr.3d 896] (Ruiz) because the settlement agreement in Ruiz did not dispose of all issues, but “expressly left open the amounts of the attorney fees and incentive payment, and provided that those amounts would be set by the trial court, up to a specified maximum.” (Id. at p. 606.) Ruiz concluded that Rikuo Corp. was distinguishable “where the Agreement expressly contemplated further court proceedings and a separate ruling on the attorney fee and incentive payment issues ….” (Ibid.)
We conclude that our situation is like Ruiz and not Rikuo Corp. Employee agreed to dismiss her remaining two contract claims in exchange for a settlement payment in order to facilitate an appeal of the court’s rulings on her remaining claims. The settlement did not dispose of all of Employee’s claims. The settlement further contemplated presentation of claims for costs and fees to the trial court upon conclusion of the earlier appeal. We properly treated the original judgment as appealable and the later order on competing costs claims is also appealable.
When a costs award or the amount of costs is not mandatory but discretionary, the award is reviewed for an abuse of discretion. However, whether the undisputed facts mandate a costs award is a question of law for de novo review. (Goodman, supra, 47 Cal.4th 1327, 1332; Kim v. Euromotors West/The Auto Gallery (2007) 149 Cal.App.4th 170, 176 [56 Cal.Rptr.3d 780].)
As both sides claim entitlement to mandatory costs, we first consider whether the facts of the case fit squarely into any of the statutory definitions of “prevailing party.”
A. EMPLOYEE’S ENTITLEMENT TO MANDATORY COSTS
Employee argues on appeal that she is due mandatory costs because Employer’s settlement payment of $23, 500 qualifies as a “net monetary recovery.”
1. DOES A PARTY PREVAIL WHEN AN ACTION IS SETTLED?
Nothing in section 1032 indicates that there can be no prevailing party when an action has been dismissed or a judgment entered based on full or partial settlement. Section 1032 has no provision like that in Civil Code section 1717, subdivision (b)(2), concerning an award of attorney fees provided for by contract: “Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”
Under the pre-1986 version of section 1032, case law established that a settling party could be awarded costs even if the settlement agreement is silent as to costs. The leading case is Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256 [155 Cal.Rptr. 516] (Rappenecker), which concluded that plaintiffs could be awarded costs after obtaining compromise judgments under section 998. The appellate court reasoned that a compromise judgment still qualified as a judgment under former section 1032. (Rappenecker, supra, at pp. 263-264.)
In Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668 [186 Cal.Rptr. 589, 652 P.2d 437] (Folsom), the central question was whether a settlement agreement operated “as a merger and bar of all preexisting claims, depriving the trial court of jurisdiction to award costs and statutory attorney fees. (Code Civ. Proc., §§ 1032, 1021.5.)” (Folsom, supra, at p. 671; fn. omitted.) Citing Rappenecker, Folsom stated that “costs are allowed, absent the parties’ express agreement to the contrary, following entry of a consent decree.” (Id. at p. 677.) “Therefore, absent affirmative agreement of the parties to the contrary, the trial court retains jurisdiction after the filing of a compromise agreement to entertain a cost bill.” (Id. at p. 679.)
While these cases establish that costs can be awarded after a settlement that is silent about costs, nothing in these cases discusses whether such costs are mandatory or discretionary. Cases after the 1986 revision of section 1032 do not resolve whether a settlement payment qualifies as a “net monetary recovery” for purposes of a mandatory award. (Subd. (a)(4).)
Section 1032, subdivision (c) authorizes parties to make their own agreements regarding the responsibility for costs. By negative implication, when there is no agreement on this topic, the other provisions of section 1032 for a costs award apply.
2. IS “NET MONETARY RECOVERY” LIMITED TO RECOVERY BY JUDGMENT?
The “net monetary recovery” definition of prevailing party was added in the 1986 revision of section 1032. (Subd. (a)(4).) "[F]ormer section 1032 provided that costs are allowed for either a plaintiff or a defendant ‘upon a judgment in his favor’ in various specified actions and, in other actions not specified, the trial court might award costs in its discretion. (Former § 1032, subds. (a)-(c), as amended by Stats. 1957, ch. 1172, § 1, p. 2464.)” (Goodman, supra, 47 Cal.4th 1327, 1335.) Although the former statute did not expressly require a calculation of the net monetary recovery, case law has long required assessing the “net result of the judgment” when a plaintiff and a defendant have each recovered on claims against the other.
Shelley v. Hart (1931) 112 Cal.App. 231 [297 P. 82] (Shelley) was the leading case holding that the defendant was entitled to an award of costs
when “[t]he net result of the judgment” was “favorable to the defendant.” (Id. at p. 243.) In Shelley, the plaintiff sued for breach of contract because a truck he purchased did not perform as promised, and the defendant cross-complained for nonpayment of the purchase price. (Id. at pp. 237-238.) The plaintiff was awarded $1, 500, while the defendant was awarded $2, 500, yielding a net of $1, 000 to the defendant, who was awarded costs on that basis. (Id. at p. 243.)
Does “net monetary recovery” include amounts received through settlement? We have found no definitive authority, but we do find guidance in Goodman, supra, 47 Cal.4th 1327, which interpreted the 1986 amendment of section 1032 to determine the continued viability of this court’s decision in Wakefield v. Bohlin (2006) 145 Cal.App.4th 963 [52 Cal.Rptr.3d 4001 (Wakefield), in which a plaintiff who obtained a trial award was regarded as prevailing, even though the trial award was effectively reduced to zero due to offsetting settlement payments from other defendants. In Goodman, home buyers sued for construction defects and eventually obtained a trial award of $146, 000 against the sellers, but a zero net judgment due to $230, 000 settlements received from the home builder and other defendants being credited against the trial award. The trial court concluded that the home sellers were prevailing parties entitled to fees and costs. (Goodman, supra, at p. 1331.) The Court of Appeal agreed, as did the Supreme Court.
In expressly disapproving of the majority opinion in Wakefield, the high court reasoned: “ ‘The common meaning of the word “net” is “free from all charges or deductions” or “to get possession of: GAIN [sic].” (Merriam-Webster’s Collegiate Dict. (10th ed. 1993) p. 780 (Webster’s).) The word “monetary” obviously means “relating to money.” (Webster's Collegiate Dict.[, supra, at p. 750.) The word “recover” means “to gain by legal process” or “to obtain a final legal judgment in one’s favor.” (Webster's Collegiate Dict.[, supra, at p. 977.) Thus the common meaning of the phrase “the party with a net monetary recovery” is the party who gains money that is “free from... all deductions.” [¶] A plaintiff who obtains a verdict against a defendant that is offset to zero by settlements with other defendants does not gain any money free from deductions. Such a plaintiff gains nothing because the deductions reduce the verdict to zero.’ (Wakefield, supra, 145 Cal.App.4th 963, 992 (dis. opn. of Mihara, J.).)” (Goodman, supra, 47 Cal.4th 1327, 1333-1334.)
The court noted that this interpretation is consistent with section 877. “Under section 877, subdivision (a), a plaintiff’s settlement with a defendant serves to ‘reduce the claims against’ the remaining codefendants. (§ 877, subd. (a), italics added; [citation].) … Thus, any reduction for prior settlements is made before the entry of judgment. [Citation.] … Accordingly, when a plaintiff’s prior settlement is more than the award received at trial, the plaintiff ultimately recovers nothing. [Citation.] In other words, the net recovery is zero.” (Goodman, supra, 47 Cal.4th at pp. 1334-1335; fn. omitted.)
Goodman considered the legislative history of the 1986 revision and reasoned that the replacement of the phrase “judgment in his favor” with “the party with a net monetary recovery” was intended to reject the results of Ferraro v. Southern Cal. Gas Co. (1980) 102 Cal.App.3d 33 [162 Cal.Rptr. 238] (Ferraro) and Syverson v. Heitmann (1985) 171 Cal.App.3d 106 [214 Cal.Rptr. 581] (Syverson). (Goodman, supra, 47 Cal.4th 1327, 1335-1337.) Goodman pointed out that the history “did not refer to the definition of a ‘prevailing party.’ The legislative history reveals instead that at the time current section 1032 was reenacted, the ‘existing statutes d[id] not fully explain the concept of the “prevailing party, ” ’ and that a ‘comprehensive definition’ was necessary to ‘further eliminate confusion.’ (Rep. on Sen. Bill No. 654, supra, at pp. 1, 3.)” (Goodman, supra, 47 Cal.4th at p. 1336.) “[W]hile section 1032’s legislative history does not specifically address the precise question before us, it is nonetheless consistent with the conclusion that the meaning of ‘net monetary recovery’ (§ 1032(a)(4)) is not controlled by those cases construing the prior version of section 1032.” (Id. at p. 1337; fn. omitted.)
The conclusion of Goodman was that the plaintiff was not entitled to costs as a matter of right, not that an award of costs to the plaintiff was precluded by the statute. “Our holding today is simply that a plaintiff whose damage award is offset to zero by a prior settlement does not categorically qualify as a prevailing party (‘the party with a net monetary recovery’) as a matter of law.” (Goodman, supra, 47 Cal.4th 1327, 1338, fn. 4.) Goodman treated a settlement payment as an offset against a monetary recovery in a judgment,
but did not discuss whether the payment itself qualified the plaintiff as a prevailing party against the settling defendants.
Our facts present legal issues not discussed in Goodman, but its analysis of the phrase “net monetary recovery” is nevertheless helpful. The court’s interpretation is broad enough to include obtaining an amount of money either by a favorable judgment or otherwise by legal process.
At oral argument, Employer disputed that a settlement payment is a recovery by legal process. In the circumstances of this case, when the parties agreed on the day of trial to settle two causes of action and stipulated to settlement “orally before the court” (§ 664.6),  we regard the settlement as accomplished through legal process. We need not speculate about settlements in dissimilar circumstances.
3. THE SETTLEMENT PAYMENT HERE QUALIFIES AS A NET MONETARY RECOVERY
In this case, Employer’s settlement payment may be regarded as Employee’s net monetary recovery, while Employer argues that it is due mandatory costs for obtaining a partial dismissal in its favor in exchange for its payment and later a judgment denying Employee any relief on the remaining causes of action. We agree with the Second District Court of Appeal in Chinn, supra, 166 Cal.App.4th 175 that the Legislature can not have intended to identify both parties as prevailing and due mandatory costs, as this would lead to an unreasonable, if not absurd, result. (Id. at p. 188.) Two issues were presented on appeal in Chinn after a tenant had dismissed with prejudice her tort claims against the property manager and property owner of her apartment complex in exchange for their settlement payment to her of $23, 500. (166 Cal.App.4th at p. 181.) One was whether the trial court erred in denying the tenant attorney fees as the prevailing party under her lease. The appellate court reversed and remanded for a determination “whether there is a prevailing party for the purpose of an award of attorney fees based on a pragmatic assessment of the extent to which [the plaintiff and the defendant] realized their objectives through the settlement.” (Id. at p. 193.)
The other issue in Chinn, supra, 166 Cal.App.4th 175 was whether the trial court erred in not awarding the tenant enough costs as the prevailing party. The appellate court concluded that the defendants were actually the prevailing
parties under section 1032 and due a mandatory costs award. After observing the absurdity of awarding mandatory costs to both sides, the court reasoned that it was not a situation other than as specified. “We recognize that ‘in situations other than specified, ’ the trial court has discretion to award costs under section 1032. However, a net monetary recovery and a dismissal in the defendant’s favor are not situations other than specified; they are both specified situations. If the Legislature had intended more than one party to qualify as a prevailing party under the mandatory cost award provision, it easily could have provided for the trial court to exercise discretion to award costs in the event that more than one party qualified as a prevailing party.” (Chinn, supra, at p. 189.)
Chinn, supra, 166 Cal.App.4th 175 resolved the conflict by “[c]onstruing the term ‘net monetary recovery’ in context, ” concluding that “the Legislature did not intend to include settlement proceeds received by the plaintiff in exchange for a dismissal in favor of the defendant. The definition of prevailing party provided in section 1032 requires the court to award costs as a matter of right in specified situations. By precluding consideration of settlement proceeds as a ‘net monetary recovery’ when a dismissal is entered in favor of the defendant, only one party qualifies for a mandatory award of costs, consistent with the prior law.” (Id. at p. 188.) The court concluded that the property owner and management company, “as defendants with a dismissal entered in their favor, were the prevailing parties for the purposes of an award of costs as a matter of right under section 1032.” (Id. at p. 190.)
As indicated, Chinn described its interpretation of the current version of section 1032 as a continuation of law existing under the earlier version of the statute. The court stated, “The legislative history of Senate Bill No. 654 (1985-1986 Reg. Session) does not indicate any change in the law to consider settlement proceeds or provide costs to a plaintiff after a dismissal.” (Chinn, supra, 166 Cal.App.4th 175, 189.) After reviewing some of the legislative history, the court reiterated, “Nothing in the background materials accompanying the proposed amendment mentioned settlement proceeds or suggested the definition of ‘prevailing party’ in section 1032 would change existing law to permit an award of costs to a plaintiff following a dismissal.” (Id. at p. 190.)
When presented with a situation similar to our case, Chinn reconciled the competing claims by simply deeming settlement proceeds disqualified as a
net monetary recovery where a dismissal was also involved. While we agree that the Legislature did not intend to identify opposing parties as both due mandatory costs, we cannot subscribe to Chinn’s other reasoning.
Employer relies on Chinn as requiring the trial court to discount the amount Employee received from Employer by way of settlement. Employer contends, like the defendants in Chinn, it obtained a favorable dismissal. As we will explain, however, the partial dismissal in this case does not establish Employer as a prevailing party. Our case is factually distinguishable from Chinn. But more fundamentally, we disagree with Chinn’s view that a settlement payment can never qualify as a net monetary recovery under section 1032, subdivision (a)(4) when an action is dismissed. Contrary to Employer’s argument, nothing in section 1032 requires a trial court to disregard a settlement payment as a “net monetary recovery.”
Chinn implied that prior law precluded a plaintiff’s recovery of costs following a dismissal. This position overlooked the holding of Rappenecker, which upheld costs awards to plaintiffs based on their recovery of settlement payments pursuant to compromise judgments. We note, however, that Chinn did rely on Rappenecker among other cases in reversing a denial of attorney fees to the plaintiff, concluding that the plaintiff might be deemed a prevailing party for purposes of attorney fees. (Chinn, supra, 166 Cal.App.4th at pp. 184-185.)
Two years after Chinn, Goodman observed that, while there is no clear indication of the legislative intent regarding settlement payments, use of the phrase “net monetary recovery” did reflect an intent to change the law regarding the impact of settlement payments on a plaintiff’s net monetary recovery from a nonsetttling defendant. While Goodman did not mention Chinn, we believe it implicitly rejected Chinn’s narrow construction of “net monetary recovery” as not including settlement payments.
When costs are sought under section 1032, subdivision (a)(4), a trial court must determine whether one and only one party fits a statutory definition of prevailing party. From Employee’s perspective, though one of her seven causes of action succumbed to a partial summary judgment and four more causes of action were eliminated by motions in limine, she was ultimately paid $23, 500 to dismiss her remaining two causes of action on the eve of trial. Although Employer obtained a dismissal for its payment, except for the unpersuasive reasoning of Chinn, we see no reason why this settlement payment does not fall within Goodman’s interpretation of “net monetary recovery.” Accordingly, the trial court should have recognized Employee as entitled to mandatory costs under the statutory definition of “prevailing party.”
B. EMPLOYER’S ENTITLEMENT TO MANDATORY COSTS
1. DID EMPLOYER OBTAIN A FAVORABLE DISMISSAL?
Employer has insisted in briefing and oral argument that it is due mandatory costs as “a defendant in whose favor a dismissal is entered” (subd. (a)(4)) and that the dispositions in this case are tantamount to a dismissal.
Our review of the record discloses that the trial court never entered a judgment expressly dismissing the action. Employee did file a dismissal with prejudice of the two remaining causes of action after the trial court eliminated her other five causes of action in two stages. On August 1, 2008, the trial court summarily adjudicated the failure to accommodate cause of action and denied summary adjudication of the remaining causes of action. That ruling did not purport to dismiss that cause of action. On September 2, 2008, the trial court granted motions in limine precluding evidence and argument concerning various claims, but the order sustaining the motions in limine did not purport to dismiss the other four causes of action.
Section 581 lists a number of situations authorizing involuntary dismissal of an action or cause of action, not including summary adjudication or a successful in limine motion. In response to our request for supplemental briefing, Employer accurately points out that section 581 is not exclusive.
A trial court’s “limited, inherent discretionary power” to dismiss civil claims with prejudice is recognized in case law (see Lyons v. Wickhorst (1986) 42 Cal.3d 911, 915 [231 Cal.Rptr. 738. 727 P.2d 1019], and cases there cited) and in section 581, subdivision (m): “The provisions of this section shall not be deemed to be an exclusive enumeration of the court’s power to dismiss an action or dismiss a complaint as to a defendant.” (Stats. 1993, ch. 456, § 9, pp. 2528-2529.) We find nothing in the record reflecting that the trial court exercised its inherent authority to dismiss this action. A ruling should not be regarded as a dismissal unless it reflects an explicit or implicit intent to dismiss an action or cause of action.
Employer argues that the failure to label a judgment a dismissal is not determinative, relying on Schisler v. Mitchell (1959) 174 Cal.App.2d 27 [344 P.2d 61), which held that a judgment ordering the plaintiff to take nothing was appealable although the trial court did not order a dismissal after sustaining a demurrer without leave to amend. (Id. at p. 29.)
Here, a judgment was eventually entered providing that Employee “recover nothing” from Employer. That judgment recited the earlier dispositions of the various causes of action, beginning with the summary adjudication, then the sustaining of motions in limine, and finally “[t]he parties having settled plaintiff’s third cause of action for breach of implied in fact contract and fourth cause of action for breach of the covenant of good faith and fair dealing ….” The judgment did not mention Employee’s dismissal with prejudice or the settlement payment and reflects no intent to dismiss any causes of action. Indeed, it appears intended to facilitate appellate review of the earlier rulings, as it deferred requests for costs and fees until after the time for all appeals.
Section 581d states in pertinent part: “A written dismissal of an action shall be entered in the clerk’s register and is effective for all purposes when so entered.
[¶] All dismissals ordered by the court shall be in the form of a written order signed by the court and filed in the action and those orders when so filed shall constitute judgments and be effective for all purposes ….” This statute may be only applicable to dismissals specifically authorized by section 581 (Lavine v. Jessup (1957) 48 Cal.2d 611, 615-616 [311 P.2d 8]) (Lavine), but it suggests that the proper form of a dismissal is to order dismissal. (Boonyarit v. Payless Shoesource, Inc. (2006) 145 Cal.App.4th 1188, 1192-1193 [52 Cal.Rptr.3d 241] (Boonyarit).) Employer contends that the dismissal in this case was pursuant to the trial court’s inherent authority and not pursuant to a particular provision in section 581.
While Employee dismissed two causes of action in exchange for a settlement payment, the trial court itself did not dismiss any causes of action. It makes sense to mandate costs under subdivision (a)(4) only when a dismissal ends the action against a defendant and not when a voluntary dismissal leaves the plaintiff with pending claims against that defendant. Under the pre-1986 version of section 1032, courts had determined that a plaintiff who obtained a favorable judgment was entitled to costs, even if some of the plaintiff’s claims failed at trial or were withdrawn. (Sierra Water & Mining Co. v. Wolff (1904) 144 Cal. 430, 433-434 [77 P. 1038] [plaintiffs recovered only part of land sought]; Western Concrete Structures Co. v. James I. Barnes Const. Co. (1962) 206 Cal.App.2d 1, 11 [23 Cal.Rptr. 506] [judgment favored plaintiff though defendant defeated some causes of action].) Fox v. Hale & Norcross Silver-Mining. Co. (1898) 122 Cal. 219 [54 P. 731] (Fox) stated that “[t]he prevailing party is entitled to costs incurred by him[, ] whether his recovery be for the whole or a portion of his claim, or whether his claim be made up of one or several causes of action.” (Id. at p. 223.) At
oral argument, Employer conceded that subdivision (a)(4) does not mandate costs in the case of a partial dismissal when the plaintiff retains live claims.
The summary adjudication did not end the action in Employer’s favor. The sustaining of in limine motions did not end the action in Employer’s favor, as two causes of action remained for trial. The case ended without a trial on the merits because Employee agreed to dismiss her remaining two causes of action, but the judgment entered did not purport to dismiss the entire action. The judgment was intended by its terms to preserve Employee’s right to appeal the court’s rulings on her other claims. Employee did indeed appeal in an ultimately unsuccessful attempt to resurrect those causes of action.
Employee voluntarily dismissed two causes of action and a judgment was entered on the remaining causes. Employer obtained at most a partial voluntary dismissal, which we conclude did not, without more, trigger a mandatory costs award to Employer. In contrast, the defendants in Chinn, supra, 166 Cal.App.4th 175 obtained a complete dismissal of the plaintiff’s action in exchange for their settlement payment.
2. DID EMPLOYEE RECOVER NO RELIEF AGAINST EMPLOYER?
The amended judgment provides that “Plaintiff recover nothing from defendant.” At least superficially this fits the category of “a defendant as against those plaintiffs who do not recover any relief against that defendant, ” and Employer so argues in its response to our request for supplemental briefing. (Subd. (a)(4).)
We observe that section 1032 distinguishes among different forms of relief. A “net monetary recovery” is one form of relief mandating costs, but the statute also contemplates nonmonetary relief. (Subd. (a)(4).) One issue in Friends of the Trails v. Blasius (2000) 78 Cal.App.4th 810 [93 Cal.Rptr.2d 193] (Blasius) was whether the plaintiffs had recovered any type of relief. They had “sought to quiet title to a public easement for recreational purposes” and “also sought injunctive and declaratory relief.” (Id. at p. 819.) The defendants were property owners and an irrigation district, which used a road easement over the property to maintain a ditch. (Id. at p. 818.) The plaintiffs obtained a declaration by the trial court that a public easement had been created (id. at pp. 819-820), but the judgment also stated, “ ‘No relief is granted in favor of plaintiffs against [the irrigation district].’ ” (Id. at p. 820.) Nevertheless, the trial court awarded costs to the plaintiffs against the irrigation district. (Ibid.)
On appeal the irrigation district contended that it was the prevailing party under section 1032, subdivision (a)(4), based on the judgment provision denying plaintiffs relief. (Blasius, supra, 78 Cal.App.4th 810, 839.) The appellate court rejected the argument, stating “the meaning of that recital is that the court was rejecting the [plaintiffs’] request for affirmative relief against [the irrigation district], i.e., reiterating the [irrigation district] easement or granting injunctive relief. Notwithstanding the recital, in the circumstances of this case, the court could find that relief had been granted in favor of [the plaintiffs] against [the irrigation district] on the quiet title claim. (See Code Civ. Proc., § 761.030, subd. (b) [‘If the defendant disclaims in the answer any claim, or suffers judgment to be taken without answer, the plaintiff shall not recover costs’]; see generally Hsu v. Abbara (1995) 9 Cal.4th 863, 877 [‘We agree that in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by “equitable considerations.” For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party [under Civ. Code, § 1717] if it is clear that the party has otherwise achieved its main litigation objective.’ (Original italics.).].) [¶] We conclude that the trial court did not err in determining that this was a case where [plaintiffs] recovered ‘other than monetary relief’ as to [the irrigation district] and in awarding costs against [the irrigation district].” (Blasius, supra, 78 Cal.App.4th 810, 839.)
Employer, like the irrigation district in Blasius, contends it is due mandatory costs based on the judgment provision that Employee shall “recover nothing.” Blasius illustrates that a costs award should be based on all aspects of a lawsuit’s final disposition rather than on an isolated phrase in the judgment. The judgment in this case provided that Employee shall recover nothing and also recited that the parties had settled two of the seven causes of action. But the judgment failed to mentioned that Employee was paid $23, 500 in exchange for dismissing those causes of action. This was not a case where Employee recovered no relief. Employer does not qualify under this definition of prevailing party.
If Employer had qualified as a “prevailing party, ” this case could be among the “situations other than as specified” for purposes of awarding mandatory costs. (§ 1032, subd. (a)(4).) However, because we conclude that Employer was not a prevailing party under the statute, the case did not present the trial court with occasion to exercise discretion to determine which party prevailed based on the merits of the case. When only one party fits a “prevailing party” definition, section 1032 operates mechanically to mandate costs and does not afford the trial court discretion to decide the issue in light of the circumstances, such as by discounting a nuisance settlement. Of course, parties can avoid this mechanical approach by taking care to provide for costs in their settlements. But it is not for this court to rewrite the statute to provide for discretion where it does not now exist.
The order awarding costs to Employer and denying costs to Employee is reversed.
Rushing, P.J., and Marquez, J., concurred.