INTERNATIONAL INDUSTRIES INC v. OLEN (1977)

Defendant Maurice Olen appeals from an order (1) denying his motion for entry of a judgment dismissing plaintiff's action for rent after plaintiff, International Industries, Inc., filed a voluntary request for dismissal without prejudice, and (2) granting plaintiff's motion to tax costs and to strike defendant's memorandum of costs.

Plaintiff's action filed December 24, 1975, sought ‘damages, according to proof, in an amount in excess of $5,000,’ representing the amount by which the unpaid rent under a sublease for the balance of the term thereof after judgment of possession in an unlawful detainer action¹ exceeded the amount of the rental loss that the defendant as sublessee proved could be reasonably avoided. (See Civ.Code, § 1951.2.) The complaint further sought reasonable attorney's fees under the provisions of the sublease authorizing such fees for plaintiff.

Sometime shortly prior to January 9, 1976, defendant quit the premises and sent the key to plaintiff's counsel. On January 9, 1976, plaintiff's counsel acknowledged receipt of the key and advised that ‘pursuant to Code of Civil Procedure Section 1951.2(d), by accepting the key and seeking to relet the premises thereby mitigating its damages, International Industries, Inc. does not intend to and does not waive its rights against you to recover damages as provided in said Section 1951.2.’ Plaintiff thereafter re-leased the premises ‘in an effort to mitigate damages.’

The record does not disclose the date of service of the complaint. It appears, however, that the defendant contacted his attorney on or about February 11, 1976, on which date the attorney telephoned plaintiff's counsel and obtained an extension of time to plead to February 17, 1976. During that conversation plaintiff's attorney demanded a total of $700 to settle both lawsuits.

On February 17, 1976, defendant filed his answer alleging that ‘plaintiff waived all payment of rent until March 1, 1976,’ that defendant ‘never occupied the demised premises,’ and that ‘plaintiff rejected defendant's tender of rent payments.’ The answer also denied the damage allegations and alleged in this connection that defendant was informed and believed ‘that the plaintiff has subleased the premises subject of the complaint to another person at a rental which exceeds, by far, the rental which was provided to be paid under the lease.’ The answer sought attorney's fees pursuant to Civil Code section 1717,² based upon the provision of the sublease authorizing such fees for plaintiff.

On February 17, 1976, defendant also filed 15 interrogatories directed to plaintiff. When these interrogatories remained unanswered on April 19, 1976, despite a letter request of March 29, 1976 for answers, defendant's counsel filed a notice of motion to compel answers. Said motion was set for hearing April 29, 1976.

On April 26, 1976, plaintiff filed its request for dismissal without prejudice, and on that date the clerk entered the dismissal in accordance with such request. However, no notice of the request for entry of dismissal was given by plaintiff to defendant prior to April 29, 1976, and on that date the motion to compel answers was heard and granted. Plaintiff was ordered to answer the interrogatories ‘without objections, within 15 days,’ and the court further ordered ‘plaintiff and its counsel . . . to pay to counsel for moving defendant the total sum of $200.00 attorneys fees.’

By letter of May 6, 1976, to defendant's attorney, counsel for plaintiff forwarded a check in the sum of $200 pursuant to the April 29 order and advised that in view of having filed a request for dismissal, plaintiff would not be filing answers to the interrogatories.

On May 7, 1976, defendant filed a memorandum of costs and disbursements showing as costs clerk's fees in the sum of $35 and ‘Attorney's fees incurred by Prevailing Party, Civil Code 1717 $1,250.00.’ On May 20, 1976, plaintiff filed its motion to tax costs and to strike defendant's memorandum of costs ‘on the ground that defendant is not the prevailing party, and is therefore not entitled to costs and attorney's fees.’ Plaintiff's motion was supported by the declaration of Barbara Hindin, one of the attorneys representing plaintiff. The declaration recited the facts heretofore stated concerning the disposition of the unlawful detainer action, the surrender of the premises, and the subsequent re-lease thereof and stated:

‘8. The Requests for Dismissal in this action and the Municipal Court action were filed only after and as a result of defendant's submission to plaintiff's demand to pay rent or quit the premises. It is clear, therefore, that defendant was not the prevailing party in this action. On the contrary, the dismissal followed defendant's relinquishment of the premises and plaintiff's successful efforts in reletting the premises, thereby rendering the lawsuit moot.’

Declarations of counsel for defendant were filed in opposition to the motion to tax costs and in support of defendant's ‘Motion for Court Order of Judgment Upon Voluntary Dismissal by Plaintiff.’ These declarations showed plaintiff's February 11 demand for $700 in settlement, the attorney hours devoted to the conduct of the case by defendant's counsel, and the fact that defendant's first knowledge of the dismissal was received May 6 in the letter enclosing the $200 check in payment of the discovery sanction. Defendant's motion was filed May, 26, 1976, after the clerk's notification of May 24 that the memorandum of costs had not been entered for the reason ‘No Judgment posted to Register of Actions to date. You must notify this office when Judgment is entered to have Cost bill processed.’

Both plaintiff's and defendant's motions were heard on June 7, 1976, on which date the court made its order denying defendant's motion for entry of judgment and granting plaintiff's motion ‘to tax costs' and to strike defendant's ‘memorandum of costs.’

Contentions

Defendant contends that: (1) the court erroneously disallowed as costs the clerk's fees of $35 paid by defendant, and (2) defendant was also entitled, as the ‘prevailing party,’ to an award of attorney's fees pursuant to Civil Code section 1717.

Plaintiff contends that: (1) the entry of a voluntary dismissal did not entitle defendant to costs, such a result being ‘necessary to avoid the anomalous situation in which a plaintiff is forced to pay the costs of suit of a defendant who ‘gives in’ to the plaintiff's demands,' and (2) defendant was not the ‘prevailing party’ under Civil Code section 1717 because no final judgment was rendered in his favor.

Defendant Was Entitled to Costs as a Matter of Course Upon Plaintiff's Voluntary Dismissal Without Prejudice

Until 1933 when Code of Civil Procedure section 1032 was adopted, the right of a defendant to costs was governed by prior sections which generally provided that the defendant was entitled to costs ‘upon a judgment in his favor.’ Under these former provisions, our Supreme Court, by way of dictum, acknowledged the right of a defendant to recover a judgment for costs after entry in the clerk's register of a voluntary dismissal. In Hopkins v. Superior Court, 136 Cal. 552, 69 P. 299, the clerk refused to enter the dismissal unless the plaintiff paid the defendant the amount of his costs. The court held that the clerk had no authority to make any such requirement and issued a writ of prohibition restraining further proceedings. The court said (136 Cal. at p. 554, 69 P. at p. 300):

‘The clerk is not charged with the judicial functions of taxing costs and settling a cost bill. He cannot say what costs of the defendant the plaintiff is under obligation to pay. The utmost of a defendant's right under the circumstances is to present his cost bill in due time after dismissal, to have it settled, and take judgment for his costs against plaintiff accordingly.’ (Emphasis added.)

In Spinks v. Superior Court, 26 Cal.App. 793, 148 P. 798 on the day preceding the day set for trial, the plaintiff filed a voluntary dismissal which was entered in the register of actions. Thereupon, defendant filed his memorandum of costs and the court rendered a judgment in his favor for the amount of such costs. Supplemental proceedings comprising an examination of the plaintiff corporation's resident and secretary followed in which they refused to comply with a court order. The contempt proceedings against them were dismissed by the trial court on the ground that ‘the judgment of the court was void upon its face, in that there was no authority in the court after dismissal made by the clerk to enter any judgment for costs. . . .’ (26 Cal.App. at p. 794, 148 P. at p. 799.) A peremptory writ of mandate was issued by the Court of Appeal directing the trial court to hear the contempt proceeding. The court said (26 Cal.App. at pp. 795–796, 148 P. at p. 799):

‘The sole question involved is as to whether, where plaintiff in an action exercises his right to dismiss, in those cases where the Code provides that he may do so by filing a request with the clerk, the opposite party is entitled to recover the costs that he may have incurred. Section 581 of the Code of Civil Procedure, provides that an action may be dismissed: ‘1. By the plaintiff himself, by written request to the clerk, filed with the papers in the case, at any time before the trial, upon payment of his costs; provided a counterclaim has not been set up, or affirmative relief sought by the cross-complaint or answer of the defendant. . . .’ Section 1024 of the same Code gives to a defendant the right to collect costs incurred by him, as of course, ‘upon a judgment in his favor,’ in certain classes of actions of which that here involved was one. It has been held that the costs referred to in section 581 as being required to be paid by the plaintiff when he files his dismissal with the clerk, are only the costs of entering the order of dismissal. Kaufman v. Superior Court, 115 Cal. 152, 46 P. 904; Todhunter v. Klemmer, 134 Cal. 60, 66 P. 75. This provision of the section so construed, respondent insists, furnishes the whole measure of its liability upon the dismissal of the action. On the other hand, the petitioner asserts that a dismissal so made does not interfere at all with his right to have a judgment following it entered, as he did, which would secure to him the expenses incurred in the action, and which were in their nature proper costs. We are in complete accord with this contention and think that it proposes but a fair and reasonable construction for the statute. The dismissal as entered by the clerk upon the application of a plaintiff in such cases determines that action in favor of the opposite party; that suit is then forever ended. While the matter of the recovery of costs is one which rests wholly upon the authority of the statutes, it cannot be contemplated that the Legislature, having provided authority and means for the securing of costs to litigants, intended to leave a defendant remediless against a plaintiff who chose to bring an action and put a defendant to great costs in preparing to meet the same and then dismiss the suit. This case is a typical illustration of the hardship which might result. Here the plaintiff filed several complaints, defendant made his verified answer, and proceedings were had to set the case for trial. Then, on the day before the trial was to take place, plaintiff appeared at the clerk's office and dismissed its action. The defendant presumably prepared himself for the trial and subpoenaed his witnesses on the assumption that the plaintiff would proceed at the time regularly set. A construction of the statute which will allow the recovery of costs in such cases is one that will appeal to the sense of fairness and justice of everyone and is the one which we will assume the legislature intended should be given to its declarations upon that subject. While the language may be taken as dictum, our supreme court in the case of Hopkins v. Superior Court, 136 Cal. 552, 69 P. 299, has given an intimation in favor of a defendant's right to recover costs in this kind of a case. It is there said that the clerk in entering a dismissal cannot settle a cost-bill, and this language follows: ‘The utmost of a defendant's right under the circumstances is to present his cost-bill in due time after dismissal to have it settled, and take judgment for his costs against plaintiff accordingly.’' (Emphasis added.)

In Hauptman v. Heebner, 34 Cal.App.2d 600, 94 P.2d 48, a voluntary dismissal was filed by plaintiff but it apparently was not entered in the clerk's register. Thereafter, the defendant obtained a judgment signed by the trial judge dismissing the action and awarding her costs. The cost bill was not filed until several months after the voluntary dismissal was filed. The holding in the case was that until entry of the dismissal by the clerk in the register the time within which to file the cost bill did not run. Consequently, the cost bill was not filed too late. In respect to the recoverability of the costs, the court noted (34 Cal.App.2d at p. 601, 94 P.2d at p. 49):

‘It is conceded that, under section 1032, Code of Civil Procedure, the defendant was entitled to her costs upon the dismissal of the action. Hence, though the judgment may have been unnecessary in view of the voluntary dismissal under subdivision one of section 581, nevertheless the cost bill could be filed at that time because the attempt to dismiss had not then become complete or effective.’

Section 1032 of the Code of Civil Procedure, enacted in 1933, provides in pertinent part as follows:

‘In the superior court, except as otherwise expressly provided, costs are allowed of course:

‘(a) Plaintiff. To plaintiff upon a judgment in his favor: in an action for the recovery of real property; in an action to recover the possession of personal property; in an action for the recovery of money or damages; in a special proceeding; in an action which involves the title or possession of real estate or the legality of a tax, impost, assessment, toll, or municipal fine.

‘(b) Defendant. To the defendant upon a judgment in his favor in special proceedings and in the actions mentioned in subdivision (a) of this section, or as to whom the action is dismissed. When there are several defendants in any action mentioned in subdivision (a) of this section, not united in interest, and making separate defenses by separate answers, and plaintiff fails to recover judgment against all, the court must award costs to such of the defendants as have judgment in their favor.’ (Emphasis added.)

In 1947, our Supreme Court cited with approval both Hopkins v. Superior Court, supra, and Spinks v. Superior Court, supra, for the proposition that a plaintiff's opportunity to dismiss, after a reversal (and remand for new trial) of an erroneous judgment in his favor cannot deprive defendant of his right to statutory costs, saying in this respect:

‘While the rule again opens up the plaintiffs' opportunity to dismiss, it is likewise applicable to prevent the dismissal from depriving the defendant of any relief to which she may be entitled by virtue of the reversal. Its application has been so limited to guard a defendant's right to statutory costs. (Hopkins v. Superior Court, 136 Cal. 552, 69 P. 299; Matson v. Fortuna High School Dist., 54 Cal.App. 586, 202 P. 167; Spinks v. Superior Court, 26 Cal.App. 793, 148 P. 798.) A similar result should obtain in the present case, wherein a dismissal by the plaintiff may not be deemed to divest the court of jurisdiction to enforce upon reversal the defendant's right to restoration of benefits lost pursuant to the erroneous judgment.’

(Schubert v. Bates, 30 Cal.2d 785, 790, 185 P.2d 793, 796.)

More recently in MacLeod v. Tribune Publishing Co., 157 Cal.App.2d 665, 321 P.2d 881, the court upheld the right of a defendant to an award of costs and statutory attorney's fees in a defamation suit (pursuant to Code of Civil Procedure section 836), made after a voluntary dismissal without prejudice was entered in the clerk's register. Defendant filed a memorandum of costs and the court made and entered a judgment of dismissal in favor of defendant awarding the fees and costs. In rejecting plaintiff's claim that the memorandum of costs was not timely filed, the court noted: ‘Section 1032 of the Code of Civil Procedure provides that a defendant, as to whom the action is dismissed, is entitled to his costs as a matter of course.’ (157 Cal.App.2d at p. 667, 321 P.2d at p. 883.) It then proceeded to discuss Code of Civil Procedure section 581d (enacted in 1947), as follows:

‘Code of Civil Procedure, section 581(d), reads as follows: ‘A written dismissal of an action shall be entered in the clerk's register or in the docket in the justice court, as the case may be, and is effective for all purposes when so entered.

‘All dismissals ordered by the court shall be entered upon the minutes thereof or in the docket in the justice court, as the case may be, and such orders when so entered shall constitute judgments and be effective for all purposes, and the clerk in superior and municipal courts shall note such judgments in his register of actions in the case.’

‘The first paragraph of section 581(d) expressly provides that a written dismissal of an action which is entered in the clerk's register is a bar to any further proceedings in that action, but it does not provide that such written dismissal so entered in the clerk's register is a judgment, but merely that it is effective as a dismissal of the principal action. The second paragraph, however, clearly contemplates court orders of dismissal and further provides that such orders shall constitute judgments. It is apparent that the order obtained by the respondents here on April 30, 1956, which was entered on May 2, 1956, was a judgment such as is contemplated by the second paragraph of this section. We hold, therefore, that section 581(d) in order to be consonant with the other provisions of the Code of Civil Procedure and with the just and proper award of costs to a party who has been put to expense in defending a suit which is subsequently dismissed, requires that section 581(d) be construed as providing for a dismissal of the particular action by the first paragraph thereof, but that it must be read in the light of section 1033 and section 836 of the same code and that the second paragraph thereof provides when and how a judgment after such dismissal shall be obtained. To hold otherwise would be to place the burden upon a person involved in any litigation of constantly checking the clerk's records to see whether or not a dismissal has been entered without notice to him. We feel that this was not the intention of the legislation, and that the second paragraph of section 581(d) of the Code of Civil Procedure must be read so as to provide for the payment of costs to the prevailing party, in accordance with that portion of section 1033 of the Code of Civil Procedure, which reads as follows: ‘The clerk or judge must include in the judgment entered up by him, any interest on the verdict or decision of the court, from the time it was rendered or made, and the costs, if the same have been taxed or ascertained; and he must within two days after the same are tried or ascertained, if not included in the judgment, insert the same in a blank left in the judgment for that purpose, and must make a similar insertion of the costs in the copies.’'

(157 Cal.App.2d at pp. 667–668, 321 P.2d at p. 883.)

The holding in MacLeod that a defendant is entitled to a judgment of dismissal, as well as a judgment for costs, does not conflict with the contrary dictum in Hopkins since Code of Civil Procedure section 581d, upon which the former is based, was not in effect at the time Hopkins was decided. It is unnecessary, however, to decide which view is preferable. Under either rule, it is clear that the defendant is entitled to a judgment for his costs when the plaintiff voluntarily dismisses the action because a voluntary dismissal determines the action ‘in favor of the opposite party.’ (Spinks v. Superior Court, supra, 26 Cal.App. at p. 795, 148 P. at p. 799.)

Plaintiff's argument that the ‘denial of defendant's request for costs is necessary to avoid the anomalous situation in which a plaintiff is forced to pay the costs of suit of a defendant who ‘gives in’ to the plaintiff's demands' is not supported by the record. The declaration of plaintiff's attorney shows that defendant quit the premises shortly prior to January 9, 1976, and that ‘the premises were subsequently re-leased by plaintiff in an effort to mitigate damages.’ The conclusion, however, which said declaration draws from these facts does not follow. It is asserted that the dismissals of both actions ‘were filed only after and as a result of defendant's submission to plaintiff's demand to pay rent or quit the premises.’ (Emphasis added.) But the superior court action did not seek possession, as it was limited to recovery of rent for the period after plaintiff regained possession. Reference is made to ‘plaintiff's successful efforts in re-letting the premises' but the terms of the new sub-lease are not set forth. Plaintiff did not controvert defendant's claim that on February 11, 1976, plaintiff demanded $700 to settle. The terms of this demand suggest that the property had already been re-leased at that time.³ If the result of the new lease were that plaintiff could show no damages under Civil Code section 1951.2, ‘thereby rendering the lawsuit moot,’ plaintiff should have immediately dismissed the action. Defendant then would not have been required to prepare or file an answer or undertake discovery. Had plaintiff followed this course, no costs or fees would have been incurred by defendant. Instead, plaintiff persisted in pressing the superior court action until, as a result of the extensive efforts on the part of defendant's counsel, it was threatened with discovery sanctions for failure to respond to legitimate interrogatories. On the other hand, if the property was not re-leased upon terms eliminating plaintiff's damage claim, defendant did not ‘give in’ to plaintiff's demands, since there is no evidence defendant paid plaintiff anything for the dismissal.

As a Party Entitled to Judgment for Costs Defendant Was a ‘Prevailing Party’ Entitled to Statutory Fees Under Civil Code Section 1717

As above held, plaintiff's filing of a voluntary dismissal entitled defendant to recover his costs. As stated by our Supreme Court in Hopkins, taxing costs and settling a cost bill are ‘judicial functions,’ the result of which is a ‘judgment for . . . costs.’ Though such judgment for costs is not a determination of the merits of the main claim, it is in all respects a final judgment.

Civil Code section 1717 imposes only one requirement for becoming a ‘prevailing party,’ to wit, being ‘the party in whose favor final judgment is rendered.’ No requirement is stated that the judgment be a judgment on the merits nor that it be a judgment on the main claim. In view of the purposes of section 1717, it is not legitimate to impose any such requirement.

In System Inv. Corp. v. Union Bank, 21 Cal.App.3d 137, 163, 98 Cal.Rptr. 735, 752, this court discussed the purpose of the Legislature in enacting section 1717 as follows:

‘With reference to the intent of the Legislature in enacting section 1717, it was said (Review of Selected 1968 Code Legislation Con.Ed.Bar pp. 35–36): ‘To secure a basis for recovering fees of counsel in contract litigation, parties dictating the contract terms have routinely required an attorney's fee clause. If a dispute developed over the contract, the party not having the benefit of the clause found himself at a serious disadvantage. If, for example, a lessee was wrongfully billed for damage to the premises, he faced a choice between settlement on the lessor's terms or litigation in which he would have to pay the legal expenses of both sides if he lost, but would receive no reimbursement of his expenses if he won. Section 1717 was enacted to make all parties to a contract, especially an ‘adhesion contract,’ equally liable for attorney's fees and other necessary disbursements. An attorney's fee clause is made reciprocal if it does not otherwise benefit all parties.' Respondents herein argue that section 1717 was enacted pursuant to the policy of the state to protect the unequal bargaining power of the ‘little man’ in contracts of adhesion. If the bank had been the prevailing party herein it is apparent that it would have been entitled to attorneys' fees under the contracts irrespective of the fact that section 1717 was enacted after the contracts were made; and, as above indicated, it appears that it was the intent of the Legislature, in furtherance of public policy, to make such contractual provisions reciprocal to all parties to the contract.'

In light of such remedial purpose, section 1717 should be liberally construed so as to give maximum effect to such purpose. ‘The section is remedial in nature and should be liberally construed to give effect to the remedy which it authorizes.’ (McClearen v. Superior Court, 45 Cal.2d 852, 856, 291 P.2d 449, 451.)

If the purpose of the Legislature to make ‘all parties to a contract . . . equally liable for attorney's fees' is to be accomplished, restrictive interpretations of the statutory language should be avoided. The party having the benefit of an attorney's fee clause need only meet the conditions stated in the contract, which normally permit him to recover if the litigation is disposed of in his favor. Full reciprocity is, therefore, denied if the party not having the benefit of the clause must satisfy technical requirements not mandated by the language employed in the statute.

Further, when attorney's fees are recoverable pursuant to statutory authorization, they are deemed costs. In System Inv. Corp., supra, the court said in this respect (21 Cal.App.3d at p. 162, 98 Cal.Rptr. at p. 751):

‘Respondents argue that attorneys' fees awarded under section 1717 are in the nature of costs; and that the award of costs was governed by the law as it existed when judgment was entered. They cite Woodward v. Bruner, 104 Cal.App.2d 83, 85, 230 P.2d 861, wherein it was said: ‘This rule of the common law that counsel fees were to be classed as costs and not damages is a part and parcel of our law, except to the extent that a statute or a contract between the parties provides otherwise.’ Appellant bank argues that attorneys' fees are in the nature of special damages; and that such fees could not, therefore, be awarded retroactively. The bank cites Genis v. Krasne, 47 Cal.2d 241, 246, 302 P.2d 289, 292, wherein it was said: ‘The texts accept the view of those cases which characterize attorneys' fees recoverable only by virtue of contract (and not as costs either by statute or by case law) as ‘damages.’ . . . But attorneys' fees are not like the usual item of damages, for the court may allow a reasonable attorneys' fee in the judgment without hearing evidence or making a finding as to the amount of such fee.' It is to be noted that in the present case, the attorneys' fees were awarded pursuant to statute (Civ.Code, § 1717). Other statutes which provide for attorneys' fees in litigation refer to attorneys' fees as costs. For example, section 836 of the Code of Civil Procedure, which relates to actions for damages for libel, provides that if the defendant recovers judgment he shall be allowed one hundred dollars ‘to cover counsel fees in addition to other costs'; section 796 of the Code of Civil Procedure, which relates to actions for partition of property, provides for recovery of ‘the costs of partition, including reasonable counsel fees'; and section 1255a of the Code of Civil Procedure, which relates to eminent domain proceedings, provides that recoverable costs include reasonable attorneys' fees.’

In view of the many statutory references to statutory attorney's fees as an element of costs, it is reasonable to construe section 1717 as providing for their recovery whenever other costs are properly recoverable. Code of Civil Procedure section 1032 does not provide that the defendant as to whom the action is dismissed shall recover only part of his costs. But such is the effect of an interpretation of Civil Code section 1717 which denies attorney's fees to the defendant as to whom the litigation is terminated by the filing of a voluntary dismissal.

Three decisions of this court have reached conclusions contrary to those above stated. In Associated Convalescent Enterprises v. Carl Marks & Co., Inc., 33 Cal.App.3d 116, 108 Cal.Rptr. 782, this Division held that the defendant as to whom the action was dismissed and who had received a judgment for his other costs was not entitled to an award of attorney's fees under Civil Code section 1717. The ground for the decision was that the defendant was not a prevailing party because a voluntary dismissal was a ‘nonjudicial act’ and because ‘[n]o final judgment was ‘rendered’ or could have been rendered under the circumstances of this case.' (33 Cal.App.3d at p. 121, 108 Cal.Rptr. at p. 785.) In Associated Convalescent Enterprises, however, we overlooked the fact that the award to defendant of costs other than attorney's fees was both a ‘judicial function’ and a final ‘judgment.’ (Hopkins, supra, 136 Cal. at p. 554, 69 P. 299.)

Under comparable facts, the same result was reached in Gray v. Kay, 47 Cal.App.3d 562, 120 Cal.Rptr. 915. Principal reliance was placed upon Associated Convalescent Enterprises. The court quoted and distinguished an unpublished opinion of this court (per Justice William P. Clark, Jr.) as follows (47 Cal.App.3d at pp. 566–567, 120 Cal.Rptr. at p. 918):

‘There, after dismissal of the action, the trial court awarded attorney's fees to a defendant. The court rejected a contention that a dismissal without prejudice was not a final judgment within the meaning of section 1717. The court said: ‘. . . The only difference between a dismissal without prejudice and a judgment on the merits is that the former does not have the effect of res judicata or collateral estoppel as to any issue raised by the pleadings. That single difference is immaterial in light of the purpose of the statute, which is to provide an equal right to attorney fees to both parties to a contract so long as the litigation is terminated. A victory for either party is no less a victory, and the prevailing party's attorney fees are no less costly by reason that another action might later be brought upon the same facts on which the dismissed action was based. . . .’

‘The unpublished decision is distinguishable. The dismissal in that case was not a voluntary one by the plaintiff but rather was a dismissal ordered by the court because of plaintiff's failure to file answers to interrogatories. While it was not explicitly referred to in the court's discussion of the question quoted above, this distinction reconciles the unpublished case with the later decided Associated Convalescent Enterprises v. Carl Marks & Co., Inc., supra, 33 Cal.App.3d 116, 108 Cal.Rptr. 782. The order of the court in the unpublished case was a judicial act equivalent to the rendition of judgment (cf. Catania v. Halcyon Steamship Co. (1975) 44 Cal.App.3d 348, 352, 118 Cal.Rptr. 513). There was no judicial act in the present case.’ (Emphasis added.)

Again, the clear facts that (1) there was a judicial act (the award of costs) which (2) resulted in a judgment for costs being rendered, were overlooked.

More recently in Samuels v. Sabih, 62 Cal.App.3d 335, 133 Cal.Rptr. 74, an even more restrictive interpretation of Civil Code section 1717 was adopted. In Samuels, the court granted a dismissal of the action after five years for failure to prosecute. On motion of defendant, other costs were awarded but attorney's fees were denied. In Samuels, 62 Cal.App.3d at p. 339, 133 Cal.Rptr. 74; Associated Convalescent Enterprises was cited for the proposition that section 1717 required a ‘final judgment,’ and (2) the decision of our Supreme Court in Southern Pac. R. R. Co. v. Willett, 216 Cal. 387, 390, 14 P.2d 526, 527, was cited for the proposition that a dismissal under section 583 “is not a judgment at all in the strict sense.” (Id.) However, as pointed out in the remainder of the sentence quoted from Southern Pac. R. R. Co., such an order is treated as a judgment ‘for all the purposes of taking an appeal, because it finally disposes of the particular action and prevents further proceedings as effectually as would any formal judgment based on ruling on demurrer, or on findings or verdict on the facts.’ (216 Cal. at p. 390, 14 P.2d at p. 527.)

Voluntary dismissals most often have a like effect. As pointed out in the quotation from the unreported case in Gray, the fact that the effect of a dismissal is not a determination of the merits has little bearing upon its efficacy as a termination of the litigation. There is no reason that a plaintiff who chooses to terminate a litigation that is not to his liking should escape responsibility for the attorney's fees of the defendant, just because he may renew the action at a later time. If he does so, and if he prevails in such renewal, he will be entitled to his attorney's fees in the action in which he prevails.

The remedial purpose of Civil Code section 1717 is to promote equality of rights as between a party not having the benefit of an attorney's fee clause and the other contracting party having such benefit. As stated in System Inv. Corp., the Legislature sought to overcome the ‘serious disadvantage’ of a lessee who ‘faced a choice between settlement on the lessor's terms or litigation in which he would have to pay the legal expenses of both sides if he lost, but would receive no reimbursement of his expenses if he won.’ (21 Cal.App.3d at p. 163, 98 Cal.Rptr. at p. 752.) That disadvantage is not eliminated by an interpretation of section 1717 which denies reimbursement when a litigation is terminated by voluntary dismissal or failure to prosecute, both of which are ways in which nonmeritorious litigation customarily is terminated. The language employed by the Legislature defining the prevailing party as the party ‘in whose favor final judgment is rendered’ does not indicate a legislative intent to deny fees to a defendant by requiring any particular kind of final judgment. If the action is terminated in a manner entitling the defendant to costs, a final judgment, at least for such costs, is his right. Inasmuch as attorney's fees provided by statute are recoverable as costs, any termination of the litigation by which the defendant is the prevailing party for the purpose of recovering a judgment for costs, and in fact recovers such a judgment, constitutes the defendant ‘the party in whose favor a final judgment is rendered.'⁴

We must, therefore, respectfully disagree with the prior decisions of this court in Associated Convalescent Enterprises, Gray, and Samuels and conclude that the trial court erred in denying defendant any allowance of attorney's fees in the cost judgment.

The order appealed from is reversed and remanded for further proceedings consistent with the views above expressed.

FOOTNOTES

1.  A separate unlawful detainer action was filed in the municipal court, also on December 24, 1975.

2.  Civil Code section 1717 reads as follows:‘In any action on a contract, where such contract specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract, shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements.‘Attorney's fees provided for by this section shall not be subject to waiver by the parties to any contract which is entered into after the effective date of this section. Any provision in any such contract which provides for a waiver of attorney's fees is void.‘As used in this section ‘prevailing party’ means the party in whose favor final judgment is rendered.'

3.  The sub-lease rental was $500 per month for the first year, $600 per month for the second and third years, and $700 per month for the fourth and fifth years.

4.  We do not base our decision in any respect upon the fact that defendant was awarded $200 attorney's fees as a discovery sanction at the April 29, 1976 hearing. The voluntary dismissal of the action entered April 26 deprived the court of jurisdiction to pass upon the motion to compel answers to interrogatories. The $200 attorney's fee was properly allowable under Civil Code section 1717, or not at all.

POTTER, Associate Justice.

ALLPORT, Acting P. J., and COBEY, J., concur.