Supreme Court of California Justia
Citation 47 Cal. 4th 1327, 223 P.3d 77, 104 Cal. Rptr. 3d 219
Goodman v. Lozano

Filed 2/4/10

IN THE SUPREME COURT OF CALIFORNIA

RANDALL L. GOODMAN et al.,
Plaintiffs and Appellants,
S162655
v.
Ct.App. 4/3 G036774, G037091
JESUS LOZANO et al.,
Orange County
Defendants and Respondents. )
Super. Ct. No. 01CC02874

Under certain circumstances, a trial court must award costs and even
attorney fees in favor of a “prevailing party” in an action. (Code Civ. Proc.,1 §
1032, subd. (b).) “Prevailing party,” as relevant here, includes “the party with a
net monetary recovery.” (§ 1032, subd. (a)(4); hereafter, section 1032(a)(4).) In
this case, the plaintiffs settled with several defendants and later obtained a damage
award against nonsettling defendants in an amount less than the settlement
proceeds. By statute, an award in favor of a nonsettling defendant is offset by the
amount the plaintiff has received from the settling defendants. (§ 877, subd. (a).)
If the settlement amount is greater than the damage award, the award is entirely
offset, resulting in a zero judgment. (Syverson v. Heitmann (1985) 171
Cal.App.3d 106, 110 (Syverson).)

1
All further statutory references are to the Code of Civil Procedure unless
otherwise noted.
1


Based on the plain language of these statutes, we conclude that the
plaintiffs here, ordered to take nothing against the nonsettling defendants due to
the settlement offset, did not obtain a “net monetary recovery.” As we explain
further below, we disapprove of Wakefield v. Bohlin (2006) 145 Cal.App.4th 963,
982-983 (Wakefield), which reached a contrary conclusion. We also distinguish
the following cases that suggest otherwise: Great Western Bank v. Converse
Consultants, Inc. (1997) 58 Cal.App.4th 609, 613 (Great Western); Zamora v.
Shell Oil Co. (1997) 55 Cal.App.4th 204, 213-215 (Zamora); Pirkig v. Dennis
(1989) 215 Cal.App.3d 1560, 1566 (Pirkig); see also Syverson, supra, 171
Cal.App.3d at p. 113 (interpreting prior version of section 1032); Ferraro v.
Southern Cal. Gas Co. (1980) 102 Cal.App.3d 33, 52-53 (Ferraro) (same).
FACTUAL AND PROCEDURAL BACKGROUND
In March 2000, Randall Goodman and Linda Guinther (collectively,
plaintiffs) contracted with Jesus and Natalia Lozano to purchase a newly
constructed house in Laguna Beach for $1.25 million. The house was built by
AMPM Construction, a company formed by Alberto and Patricia Mobrici in 1996.
The Mobricis were equal partners with the Lozanos on numerous residential
construction projects; Jesus Lozano “provide[d] the money to build,” and Alberto
Mobrici was the “construction arm of the venture.”
In 2001, plaintiffs sued the Lozanos, Alberto Mobrici, AMPM
Construction, the architect, and the real estate brokers, based on construction
defects in their new house. Plaintiffs sued several of the defendants for various
causes of action (including negligence, fraud, breach of warranties and negligent
misrepresentation), but sued only the Lozanos for breach of contract. In 2004,
Alberto Mobrici and AMPM Construction settled with plaintiffs for $200,000, and
other defendants — except for the Lozanos — settled with plaintiffs for a total of
over $30,000. The trial court found these settlements were made in good faith.
2
Plaintiffs subsequently rejected the Lozanos‟ section 998 settlement offer of
$35,000.
In 2005, a bench trial was held on plaintiffs‟ action against the Lozanos.
The trial judge, who was not informed of plaintiffs‟ settlement with the other
defendants, found in favor of plaintiffs and calculated a “total damage award” of
just under $146,000, of which $64,000 went to plaintiffs‟ contract claim. After
learning that the prior settlements totaled over $230,000, the judge determined that
the Lozanos should receive credit for the settlements. Because the settlement
amount easily surpassed the $146,000 awarded to plaintiffs, the trial judge found
that plaintiffs should receive nothing by the action. Exercising his discretion
under section 1032(a)(4), the trial judge determined that the Lozanos were the
prevailing parties because they paid nothing under the judgment. He awarded the
Lozanos $132,000 in attorney fees and $12,000 in costs. Plaintiffs appealed from
both the net zero judgment and the order finding the Lozanos to be the prevailing
parties and awarding them fees and costs.
The Court of Appeal affirmed. It expressly disagreed with the majority in
Wakefield, supra, 145 Cal.App.4th at page 969, which held that a party who
receives a damage award against a defendant but whose judgment is reduced to
zero by operation of section 877, “categorically qualifies as a prevailing party”
“with a net monetary recovery” under section 1032(a)(4). Construing what it
found to be the plain language of section 1032(a)(4), the Court of Appeal here
reasoned: “A litigant cannot actually recover or „gain‟ anything without an order
or a judgment. An award or verdict without a judgment is merely symbolic. The
fact that the litigant may have had an award or verdict prior to a zero judgment is
meaningless for purposes of whether that litigant qualifies as „the party with a net
monetary recovery‟ if the award or verdict produces nothing tangible. „Recovery,‟
not „award,‟ is the word chosen by the Legislature.” Rejecting plaintiffs‟ claim
3
that they were “categorically” the prevailing party under the reasoning of
Wakefield, supra, 145 Cal.App.4th 963, the Court of Appeal concluded that the
trial court did not abuse its discretion in determining that the prevailing party were
the Lozanos.
We granted review to resolve the conflict.2
DISCUSSION
Generally, a trial court‟s determination that a litigant is a prevailing party,
along with its award of fees and costs, is reviewed for abuse of discretion. (See
Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94;
PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.) However, the issue
here involves the interpretation of a statute, a question of law that we review de
novo. (See California Teachers Assn. v. San Diego Community College Dist.
(1981) 28 Cal.3d 692, 699 (California Teachers).)
In interpreting a statute, our primary goal is to determine and give effect to
the underlying purpose of the law. (People v. Valladoli (1996) 13 Cal.4th 590,
597.) “Our first step is to scrutinize the actual words of the statute, giving them a
plain and commonsense meaning.” (Ibid.) “ „If the words of the statute are clear,
the court should not add to or alter them to accomplish a purpose that does not
appear on the face of the statute or from its legislative history.‟ ” (California
Teachers, supra, 28 Cal.3d at p. 698.) In other words, we are not free to “give
words an effect different from the plain and direct import of the terms used.”
(California Fed. Savings & Loan Assn. v. City of Los Angeles (1995) 11 Cal.4th
342, 349; see § 1858.) However, “ „the “plain meaning” rule does not prohibit a
court from determining whether the literal meaning of a statute comports with its

2
Accordingly, we do not address plaintiffs‟ additional claims, including their
claim that the trial court erred by offsetting the judgment to zero.
4


purpose or whether such a construction of one provision is consistent with other
provisions of the statute.‟ ” (County of San Bernardino v. City of San Bernardino
(1997) 15 Cal.4th 909, 943.) To determine the most reasonable interpretation of a
statute, we look to its legislative history and background. (Doe v. City of Los
Angeles (2007) 42 Cal.4th 531, 543 (Doe).)
We begin with the language of sections 1032 and 877.
A. Sections 1032 and 877
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); § 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: “[1] the party with a net monetary
recovery, [2] a defendant in whose favor a dismissal is entered, [3] a defendant
where neither plaintiff nor defendant obtains any relief, and [4] 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 [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”].) We are concerned with the first category of section 1032(a)(4), “the
party with a net monetary recovery.”
Also relevant to the issue here, section 877, subdivision (a), provides that if
a party gives a release to “one or more other co-obligors mutually subject to
contribution rights,” that party‟s “claims against the others” may be reduced by the
amount of the prior settlement. (§ 877, subd. (a).) “Section 877 establishes that a
5
good faith settlement bars other defendants from seeking contribution from the
settling defendant (§ 877, subd. (b)), but at the same time provides that the
plaintiff‟s claims against the other defendants are to be reduced by „the amount of
consideration paid for‟ the settlement (§ 877, subd. (a)). Thus, while a good faith
settlement cuts off the right of other defendants to seek contribution or
comparative indemnity from the settling defendant, the nonsettling defendants
obtain in return a reduction in their ultimate liability to the plaintiff.” (Abbott
Ford, Inc. v. Superior Court (1987) 43 Cal.3d 858, 873; Wade v. Shrader (2008)
168 Cal.App.4th 1039, 1046 (Wade).) As noted above (see ante, p. 1), if a
plaintiff‟s settlement completely offsets a damage award against a nonsettling joint
tortfeasor or co-obligor, “it reduces the judgment to zero by operation of law.”
(Syverson, supra, 171 Cal.App.3d at p. 110.)
The Court of Appeal here followed the Wakefield dissent, which explained:
“The common meaning of the word „net‟ is „free from all charges or deductions‟
or „to get possession of: GAIN.‟ (Webster‟s Collegiate Dict. (10th ed. 1993) p.
780.) The word „monetary‟ obviously means „relating to money.‟ (Webster‟s
Collegiate Dict. (10th ed. 1993) 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. (10th ed. 1993), 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.).)
We agree with the instant Court of Appeal and the Wakefield dissent that
the term “net monetary recovery” is clear and that we must give effect to it
6
“ „according to the usual, ordinary import of the language employed . . . .‟ ”
(California Teachers, supra, 28 Cal.3d at p. 698.) The Wakefield dissent‟s
interpretation of “net monetary recovery” reflects the common understanding of
these words. (Wasatch Property Management v. Degrate (2005) 35 Cal.4th 1111,
1121-1122 [“When attempting to ascertain the ordinary, usual meaning of a word,
courts appropriately refer to the dictionary definition of that word”].) There is
nothing to suggest that the Legislature intended to define these words with a
different meaning. (See Fairbanks v. Superior Court (2009) 46 Cal.4th 56, 63.)
While the Wakefield majority concluded that “any success in pressing . . . claims
against the losing party results in a net award” (Wakefield, supra, 145 Cal.App.4th
at p. 981), this amorphous concept of “success” is contrary to the language of
section 1032(a)(4), which uses the specific term “net monetary recovery.”
Moreover, a plain meaning interpretation of “net monetary recovery” is also
consistent with the statutory language of 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; see
Reed v. Wilson (1999) 73 Cal.App.4th 439, 444-445 (Reed) [“the word „claims‟ in
section 877 generally refers to a claim of liability for damages and not to costs
awarded to a prevailing party after a claim of liability has been adjudicated”].)
Thus, any reduction for prior settlements is made before the entry of judgment.
(See Wade, supra, 168 Cal.App.4th at p. 1048 [“In cases where entitlement to and
the amount of the settlement credit [are] not in dispute, the nonsettling defendant
may raise the issue after the verdict but before judgment so that the trial court may
calculate the judgment with the settlement credit in mind”].) Accordingly, when a
plaintiff‟s prior settlement is more than the award received at trial, the plaintiff
7
ultimately recovers nothing. (See Syverson, supra, 171 Cal.App.3d at p. 110.) In
other words, the net recovery is zero.3
Although we conclude that the meaning of “net monetary recovery” is
plain, it is helpful to look at section 1032‟s legislative history in light of the
conflict on this issue. (See Doe, supra, 42 Cal.4th at p. 543.)
B. Section 1032’s Legislative History
In 1986, the Legislature repealed the former version of section 1032 and
added it in its current form. (Stats. 1986, ch. 377, §§ 5, 6, p. 1578.) Before its
repeal, former section 1032 provided that costs are allowed for either a plaintiff or
a defendant “upon a judgment in his favor” in various actions, and in other actions
not mentioned, the trial court may award costs in its discretion. (Former § 1032,
subds. (a)-(c), as amended by Stats. 1957, ch. 1172, p. 2464.) The purpose of the
1986 legislation, which was sponsored by the California Judges Association
(CJA), was to streamline the rules and procedures on the award of litigation costs,
which were deemed “hard to find and hard to follow.” (Sen. Rules Com., Off. of
Sen. Floor Analyses, Rep. on Sen. Bill No. 654 (1985-1986 Reg. Sess.) as
amended July 8, 1986, p. 3 (Report on Senate Bill No. 654).)

3
While plaintiffs are correct that a plaintiff would not necessarily get double
recovery by obtaining costs from a nonsettling defendant (see Reed, supra, 73
Cal.App.4th at pp. 444-445), this argument misses the point. This conclusion in
Reed does not answer the question whether plaintiffs here have a “net monetary
recovery” and are entitled to costs in the first place, a question we have answered
in the negative.

Moreover, we reject their contention that we must construe section
1032(a)(4) in light of Civil Code section 1717. (See Sears v. Baccaglio (1998) 60
Cal.App.4th 1136, 1143 [“Rather than focusing on who receives the net monetary
award, section 1717 defines the prevailing party as the one who recovers „a greater
relief in the action on the contract‟ ”].)
8


The Wakefield majority concluded that the revision from “judgment” to
“net monetary recovery” “makes it even easier to distinguish between a jury
verdict awarding net damages to a litigant (a net recovery) and the ultimate
judgment, which necessarily comes later and may reflect offsets from other
parties‟ contributions.” (Wakefield, supra, 145 Cal.App.4th at p. 982.)
Additionally, the majority based its decision on cases interpreting the prior version
of section 1032. (Wakefield, supra, 145 Cal.App.4th at pp. 981-982.) Ultimately,
the Wakefield majority concluded that “net monetary recovery” is determined
“without regard to settlements or other contributions from unrelated defendants or
from other parties.” (Id. at p. 982.) The Court of Appeal below, however,
criticized both the Wakefield majority‟s analysis and its reliance on earlier cases.
Echoing the Wakefield majority, plaintiffs here argue that the 1986 legislation did
not break from earlier cases that had construed the prior statutory phrase (a party
with “a judgment in his favor”) without regard to any offsets to the litigant‟s
award (see Ferraro, supra, 102 Cal.App.3d at pp. 52-53; Syverson, supra, 171
Cal.App.3d at p. 113), and rely on the CJA‟s statement that its sponsored
legislation was “not intended to substantively change existing law.” (Rep. on Sen.
Bill No. 654, supra, at p. 3.) We disagree with plaintiffs.
The CJA‟s statement above refers to the then existing law regarding “which
costs are, and are not, allowable.” (Rep. on Sen. Bill No. 654, supra, at p. 3
[legislation necessary to avoid having “to search through myriad statutes, cases
and treatises in order to determine whether a particular cost item is allowable”];
Assem. Com. on Judiciary, Rep. on Sen. Bill No. 654 (1985-1986 Reg. Sess.) as
amended Mar. 31, 1986, p. 1 [lists of costs “are essentially restatements of existing
law, and to a large extent are codifications of case law”].) It 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
9
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.)
We conclude that the Wakefield dissent persuasively reasoned that the
Legislature effectively rejected the holdings of Ferraro and Syverson through this
1986 legislation. (See Wakefield, supra, 145 Cal.App.4th 963, 994-996 (dis. opn.
of Mihara, J.).) The Wakefield dissent first observed that the Courts of Appeal in
Ferraro and Syverson found that the respective plaintiffs had failed to obtain
“ „net judgment[s],‟ ” and were “ „not entitled to recover‟ ” any damages from the
defendants due to so-called “indirect offsets” (that is, offsets from a plaintiff‟s
settlement with other defendants). (Wakefield, supra, 145 Cal.App.4th at p. 995
(dis. opn. of Mihara, J.), quoting Syverson, supra, 171 Cal.App.3d at pp. 112-113;
Ferraro, supra, 102 Cal.App.3d at pp. 51, fn. 4, 52.) Nonetheless, these courts
held that the respective plaintiffs had received judgments “ „in [their] favor‟ ”
within the meaning of former section 1032, subdivision (a). (Wakefield, supra,
145 Cal.App.4th at p. 995.)
Based on the foregoing, the Wakefield dissent concluded: “The
Legislature‟s decision in July 1986, after both Ferraro and Syverson, to repeal the
„judgment in his favor‟ language in former section 1032 and replace it with „the
party with a net monetary recovery‟ in the new section 1032 can easily be seen as
a rejection of the results in Ferraro and Syverson. Ferraro and Syverson both
dealt with indirect offsets and characterized the results of these indirect offsets as
the absence of a recovery and the absence of a „net‟ judgment. In light of Ferraro
and Syverson, the Legislature‟s decision to use the phrase „net monetary recovery‟
without any qualification that precluded consideration of indirect offsets
demonstrated that the Legislature was aware that a party whose judgment was
reduced to zero by indirect offsets would not be considered „the party with a net
10
monetary recovery‟ and that the Legislature intended that the trial court not be
required to designate such a party as a prevailing party.” (Wakefield, supra, 145
Cal.App.4th 963, 995-996 (dis. opn. of Mihara, J.).) We find this analysis to be
persuasive. Contrary to plaintiffs‟ assertion, it is not dispositive that the
Legislature did not specifically reject the Ferraro or Syverson decisions when it
repealed and reenacted section 1032. (See People v. Mendoza (2000) 23 Cal.4th
896, 916 [Legislature‟s repeal of prior statute “together with its enactment of a
new statute on the same subject … with significant differences in language,
strongly suggests the Legislature intended to change the law”].)
Indeed, those cases reaching a contrary conclusion on the import of these
prerevision cases did not critically analyze section 1032‟s legislative history.
Pirkig, the first decision to conclude that the 1986 legislation did not substantially
change the definition of “prevailing party,” and that, as such, Ferraro and
Syverson were still controlling, did not rely on or provide any analysis of section
1032‟s legislative history. (Pirkig, supra, 215 Cal.App.3d at pp. 1566-1568 & fn.
5.) Other cases following Pirkig, including Wakefield, have also adopted this
conclusion with little critical analysis. (Wakefield, supra, 145 Cal.App.4th at pp.
981-982; Great Western, supra, 58 Cal.App.4th at p. 613; Zamora, supra, 55
Cal.App.4th at pp. 214-215.) Significantly, except for Wakefield, none of these
cases dealt with section 1032(a)(4)‟s category of prevailing party (“the party with
a net monetary recovery”) at issue in this case.
In sum, while 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. (See
Syverson, supra, 171 Cal.App.3d at p. 113; Ferraro, supra, 102 Cal.App.3d at pp.
52-53.) In that regard, as we explain below, the Wakefield majority also
11
erroneously relied on the reasoning of cases following Ferraro and Syverson to
conclude that settlement offsets do not affect a prevailing party determination in
this context. (See, e.g., Great Western, supra, 58 Cal.App.4th at p. 613; see also
Zamora, supra, 55 Cal.App.4th at pp. 213-215; Pirkig, supra, 215 Cal.App.3d at
p. 1566.)
C. Settlement Offsets
To reach its holding that a damage award that is offset to zero constitutes a
“net monetary recovery,” the Wakefield majority also relied on the broad
conclusion that “ „[s]ettlements by other parties and corresponding offsets do not
affect a prevailing party determination.‟ ” (Wakefield, supra, 145 Cal.App.4th at
p. 982, quoting Great Western, supra, 58 Cal.App.4th at p. 613.) Great Western,
however, dealt with a different category of prevailing party — a cross-defendant
in whose favor a cross-complaint is dismissed. (Great Western, supra, 58
Cal.App.4th at p. 613; see § 1032(a)(4) [prevailing party includes “a defendant in
whose favor a dismissal is entered”]; id., subd. (a)(2) [“ „defendant‟ ” includes a
cross-defendant]; see Crib Retaining Walls, Inc. v. NBS/Lowry, Inc. (1996) 47
Cal.App.4th 886, 890.) And Great Western did not concern the effect of
settlement proceeds under section 877 on a prevailing party determination. (See
Great Western, supra, 58 Cal.App.4th at p. 614 [good faith settlement dismissal of
a cross-complaint under § 877.6].) Thus, at the very least, Great Western‟s
observation that settlement offsets do not affect a prevailing party determination is
strictly dicta. Moreover, we conclude that this observation is overly broad in that
the cases Great Western relies on — Zamora, Pirkig, and Syverson — dealt with
specific categories of “prevailing party” under section 1032, including one that has
been eliminated, and as such, their holdings do not necessarily extend to all
categories defining a “prevailing party.”
12
Based on the foregoing, we conclude that the Wakefield majority erred by
misinterpreting the plain language of “net monetary recovery” (§ 1032(a)(4)) (see,
ante, p. 7), and by concluding that settlement offsets do not otherwise affect
whether a party has such a “net monetary recovery.” As noted, we disapprove of
Wakefield, supra, 145 Cal.App.4th 963, to the extent it is inconsistent with this
opinion.4
D. Application
Plaintiffs maintain that even if they are not deemed the prevailing party in
this case, the Court of Appeal nonetheless erred by applying the abuse of
discretion standard because the Lozanos would otherwise qualify under another
mandatory category of prevailing party. (See § 1032(a)(4).) We need not address
this precise contention because we conclude that the trial court did not abuse its
discretion in awarding costs and attorney fees to the Lozanos.
“ „The appropriate test for abuse of discretion is whether the trial court
exceeded the bounds of reason. When two or more inferences can reasonably be
deduced from the facts, the reviewing court has no authority to substitute its
decision for that of the trial court.‟ ” (Walker v. Superior Court (1991) 53 Cal.3d

4
Contrary to plaintiffs‟ assertion, we fail to see how this interpretation of
section 1032(a)(4) would create absurd results. 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. Unless a party otherwise fits into one of the
remaining three categories of prevailing party under section 1032(a)(4), a trial
court will have the discretion to make the determination as to a prevailing party
under the section.

Because we have concluded the statutory language and legislative history
support this interpretation of section 1032(a)(4), it is not necessary to discuss any
public policy considerations. (See MacIsaac v. Waste Management Collection &
Recycling, Inc.
(2005) 134 Cal.App.4th 1076, 1084.)
13


257, 272 (Walker); see Lincoln v. Schurgin (1995) 39 Cal.App.4th 100, 105-106;
Slavin v. Fink (1994) 25 Cal.App.4th 722, 726.) Under this test, we conclude that
the trial court did not abuse its discretion.
In finding the Lozanos to be the prevailing party, the trial court observed:
“The plaintiffs came to this trial with substantial moneys in hand from prior
settlements. Both sides acknowledged that those funds would reduce any damages
proven at this trial. Plaintiffs presented evidence regarding their entire list of
dozens of alleged deviations and defects. The defendants did not dispute all of
these claims and, in fact, acknowledged some errors. Although the defendants
suggested lower corrective costs than the plaintiffs demanded, the defendants
never suggested that no damages should be found by this court. The defendants‟
clear and undisputed trial goal was to get a decision awarding less damages than
the sum of the prior settlements. They fully achieved this objective. It is also
noteworthy that the settlements were consummated well before this trial, in ample
time for the plaintiffs to reassess their strategy. Furthermore, these payments were
not contingent or uncollected, but had been received by the plaintiffs before they
sought further recovery from the Lozanos.”
The trial court, which was also the trier of fact, carefully assessed the
parties‟ bargaining strengths and litigation objectives going into trial against the
results actually achieved in this case. Because both parties recognized that the
prior settlements would offset any damage award, the trial court properly
considered whether plaintiffs had reasonable prospects of recovering money in
excess of the settlement amount. Indeed, although plaintiffs sought damages in
the amount of $550,000, the court awarded them $146,000, well below the
$230,000 received in settlement. On the other hand, the Lozanos achieved their
goal of proving damages in an amount less than the settlement proceeds, by which
they avoided having to pay plaintiffs anything. (See Syverson, supra, 171
14
Cal.App.3d at p. 110.) Based on the foregoing, we cannot say that the trial court
“exceeded the bounds of reason.” (Walker, supra, 53 Cal.3d at p. 272.)
CONCLUSION
We affirm the judgment of the Court of Appeal.
CHIN, J.
WE CONCUR:

GEORGE, C.J.
KENNARD, J.
BAXTER, J.
WERDEGAR, J.
MORENO, J.
CORRIGAN, J.
15


See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Goodman v. Lozano
__________________________________________________________________________________

Unpublished Opinion


Original Appeal
Original Proceeding
Review Granted
XXX 159 Cal.App.4th 1313
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S162655
Date Filed: February 4, 2010
__________________________________________________________________________________

Court:

Superior
County: Orange
Judge: Ronald L. Bauer

__________________________________________________________________________________

Attorneys for Appellant:

Silverstein & Huston, Steven A. Silverstein, Mark W. Huston and Robert I. Cohen for Plaintiffs and
Appellants.

__________________________________________________________________________________

Attorneys for Respondent:

Law Offices of Craig D. Weinstein Craig D. Weinstein; Spierer, Woodward, Corbalis & Goldberg and
Stephen B. Goldberg for Defendants and Respondents.

Stephen H. Bennett, in pro. per., as Amicus Curiae.


Counsel who argued in Supreme Court (not intended for publication with opinion):

Mark W. Huston
Silverstein & Huston
701 South Parker Street, Suite 5500
Orange, CA 92868
(714) 547-2511

Stephen B. Goldberg
Spierer, Woodward, Corbalis & Goldberg
707 Torrance Boulevard, Suite 200
Redondo Beach, CA 90277
(310) 540-3199


Petition for review after the Court of Appeal affirmed an award of attorney fees in a civil action. This case presents the following issue: When a plaintiff settles with one tortfeasor and goes to trial against another but obtains no additional recovery because the amount of damages awarded is less than the setoff amount based on the pretrial settlement, is that plaintiff nevertheless a prevailing party as a matter of law for purposes of an award of fees and costs under Code of Civil Procedure section 1032?

Opinion Information
Date:Citation:Docket Number:Category:Status:
Thu, 02/04/201047 Cal. 4th 1327, 223 P.3d 77, 104 Cal. Rptr. 3d 219S162655Review - Civil Appealsubmitted/opinion due

Parties
1Goodman, Randall L. (Plaintiff and Appellant)
Represented by Mark W. Huston
Silverstein & Huston
701 S. Parker Street, Suite 5500
Orange, CA

2Guinther, Lynda M. (Plaintiff and Appellant)
Represented by Mark W. Huston
Silverstein & Huston
701 S. Parker Street, Suite 5500
Orange, CA

3Lozano, Jesus (Defendant and Respondent)
Represented by Stephen B. Goldberg
Speierer Woodward et al.
707 Torrance Boulevard, Suite 200
Redondo Beach, CA

4Lozano, Jesus (Defendant and Respondent)
Represented by Craig Weinstein
Attorney at Law
820 Manhattan Avenue, Suite 203
Manhattan Beach, CA

5Lozano, Natalia (Defendant and Respondent)
Represented by Craig Weinstein
Attorney at Law
820 Manhattan Avenue, Suite 203
Manhattan Beach, CA

6Bennett, Stephen H. (Amicus curiae)
26400 La Alameda, Suite 200
Mission Viejo, CA 92691


Opinion Authors
OpinionJustice Ming W. Chin

Dockets
Apr 15 2008Petition for review filed
  Appellant Randall L. Goodman and Lynda M. Guinther Attorney Mark W. Huston
Apr 15 2008Record requested
 
Apr 21 2008Received Court of Appeal record
  #G036774 one file folder/briefs #G037091 one file folder/transcript
Jun 12 2008Time extended to grant or deny review
  The time for granting or denying review in the above-entitled matter is hereby extended to and including July 14, 2008, or the date upon which review is either granted or denied.
Jun 18 2008Petition for review granted (civil case)
  The petition for review is granted. George, C.J., was absent and did not participate. Werdegar and Corrigan, JJ., were absent and did not participate. Votes: Chin, A.C.J., Kennard, Baxter, and Moreno, JJ.
Jul 7 2008Certification of interested entities or persons filed
  by Craig Weinstein, counsel for respondents.
Jul 10 2008Certification of interested entities or persons filed
  Randall Goodman et al., plaintiffs and appellants Mark Huston, counsel
Jul 10 2008Request for extension of time filed
  for plaintiffs and appellants to file opening brief on the merits, to 8-22. Stipulation of parties also provided.
Jul 17 2008Extension of time granted
  On application of appellants and good cause appearing, it is ordered that the time to serve and file the opening brief on the merits is extended to and including August 22, 2008.
Aug 22 2008Opening brief on the merits filed
  Randall L. Goodman and Lynda M. Guinther, appellants submitted concurrent with a request for judicial notice & exhibits in support of motion for judicial notice
Aug 22 2008Request for judicial notice filed (granted case)
  Randall L. Goodman and Lynda M. Guinther, appellants submitted concurrent with opening brief/merits and exhibits in support under separate cover
Aug 22 2008Received:
  Randall L. Goodman and Lynda M. Guinther, appellant's exhibit 1 in support of motion for request to take judicial notice [submtited concurrent w/opening brief]
Sep 16 2008Request for extension of time filed
  for respondents to file the answer brief on the merits, to 10-22-08
Sep 26 2008Extension of time granted
  On application of respondents and good cause appearing, it is ordered that the time to serve and file the answer brief on the merits is extended to and including October 22, 2008.
Oct 22 2008Answer brief on the merits filed
  Respondents Jesus Lozano and Natalia Lozano ~Attorneys Craig Weinstein and Stephen B. Goldberg
Nov 10 2008Reply brief filed (case fully briefed)
  Appellants Randall L. Goodman and Lynda M. Guinther ~Attorney Mark W. Huston
Dec 3 2008Received application to file Amicus Curiae Brief
  Stephen Bennett, CPA, on his own behalf application and brief under same cover
Dec 11 2008Permission to file amicus curiae brief granted
  The application of Stephen H. Bennett for permission to file an amicus curiae brief is hereby granted. An answer thereto may be served and filed by any party within twenty days of the filing of the brief.
Dec 11 2008Amicus curiae brief filed
  Stephen H. Bennett
Sep 4 2008Returned record
  exhibit, petition of writ of h.c., appellants motion, opening brief of the merits
Oct 29 2009Case ordered on calendar
  to be argued Tuesday, December 8, 2009, at 9:00 a.m., in Los Angeles
Dec 2 2009Request for judicial notice granted
  The request for judicial notice filed on August 22, 2008, is hereby granted.
Dec 8 2009Cause argued and submitted
 
Feb 3 2010Notice of forthcoming opinion posted
  To be filed Thursday, February 4, 2010 @ 10 a.m.

Briefs
Aug 22 2008Opening brief on the merits filed
 
Oct 22 2008Answer brief on the merits filed
 
Nov 10 2008Reply brief filed (case fully briefed)
 
Dec 11 2008Amicus curiae brief filed
 
Brief Downloads
application/pdf icon
Respondents' Brief on the Merits.pdf (225905 bytes) - Respondents' Brief on the Merits
application/pdf icon
Answer Brief on the Merits.pdf (3526337 bytes) - Answer Brief on the Merits
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
Jan 5, 2011
Annotated by dperkins

FACTS:

In March 2000, Randall Goodman and Linda Guinther (collectively, Plaintiffs) contracted with Jesus and Natalia Lozano to purchase a recently constructed house for $1.25 million. The Lozanos were equal partners in the house’s construction with Alberto and Patricia Mobrici, who owned AMPM Construction (the company that built the house); the Lozanos provided the funding necessary to build the home while the Mobricis carried out the construction itself.

In 2001, Plaintiffs sued the Lozanos, Alberto Mobrici, AMPM Construction, the architect of the house, and the real estate brokers, based on construction defects in their new house. While Plaintiffs sued several of the defendants for various causes of action (including negligence, fraud, breach of warranties and negligent misrepresentation), only the Lozanos were sued for breach of contract. Plaintiffs reached settlements with all of the defendants, except for the Lozanos, for a total of over $230,000. Though the Lozanos made a settlement offer of $35,000, this offer was rejected by the plaintiffs.

PROCEDURAL HISTORY:

In 2005, a bench trial was held on Plaintiffs’ action against the Lozanos. The trial judge found in favor of Plaintiffs and calculated a “total damage award” of $146,000, assigning $64,000 to Plaintiffs’ contract claim. However, because the “total damage award” was less than the $230,000 of settlements already received by the plaintiffs, the trial judge found that the plaintiffs’ award should be reduced to zero under Code of Civil Procedure § 877 (which states that if a plaintiff reaches a settlement agreement with “one or more other co-obligors mutually subject to contribution rights . . . claims against the others” can be reduced by the amount of the prior settlement); consequently, the trial judge held that the Lozanos were the “prevailing party.” Given that the prevailing party is entitled to recover costs and attorney’s fees (in certain circumstances) under Code of Civil Procedure § 1032, the trial judge awarded the Lozanos $132,000 in attorney’s fees and $12,000 in costs.

Plaintiffs appealed both the net zero judgment and the order finding the Lozanos to be the prevailing party and awarding them attorney’s fees and costs. The Court of Appeal affirmed the trial court’s decision, and expressly disagreed with the majority in Wakefield v. Bohlin, which held that a party receiving a damage award but whose judgment is reduced to zero by operation of § 877 “categorically qualifies as a prevailing party” “with a net monetary recovery” under § 1032(a)(4). 145 Cal. App. 4th 963, 995 (2006). Indeed, the Court of Appeal held that, according to the plain language of § 1032(a)(4), a plaintiff only receives a “net monetary recovery” when an order or judgment is issued in his favor; correspondingly, an award or verdict prior to a zero judgment is meaningless. Thus, the Court of Appeal concluded that the trial court did not abuse its discretion in determining that the Lozanos were the prevailing party. Plaintiffs then appealed to the California Supreme Court.

ISSUE:

When a plaintiff goes to trial against a tortfeasor and is awarded an amount less than the sum of the settlements he has received from other tortfeasors in the same action (and thus receives no additional recovery due to the operation of California Code of Civil Procedure § 877), is that plaintiff nevertheless a “prevailing party” for the purposes of an award of fees and costs under Code of Civil Procedure § 1032?

HOLDING:

No. In order for a plaintiff to be considered the “prevailing party” for the purposes of an award of fees and costs (and for a court to find that the plaintiff has received a “net monetary recovery” under § 1032(a)(4)), the plaintiff must have been awarded money that is free from deductions. Since the plaintiffs’ settlements in the present case reduce the trial court’s judgment to zero under § 877, the plaintiffs cannot be considered the prevailing party.

ANALYSIS (by Chin, J.):

The present case hinges on the California Supreme Court’s statutory interpretation of § 1032(a)(4), and its determination of whether Plaintiffs can be considered the “prevailing party.”

In its analysis, the Court first noted that its role in interpreting a statute is to determine and give effect to the underlying purpose of the law. People v. Valladoli, 13 Cal. 4th 590 (1996). It also explained that there are two primary ways for a court to determine a law’s purpose – first, through the actual words of the statute (as courts should give words their “plain and commonsense meaning” in interpreting a statute, id. at 597), and second, by examining the statute’s legislative history.

With respect to the actual words of the statute, the Court focused its analysis on the common meaning of the term “net monetary recovery,” since “the party with a net monetary recovery” is the “prevailing party” under § 1032(a)(4). On this issue, Plaintiffs argued that the Court should follow the majority decision in Wakefield, which concluded that “any success in pressing . . . claims against the losing party results in a net reward,” regardless of whether the judgment has been reduced to zero by operation of § 877. Meanwhile, both the trial court and the instant Court of Appeal cited the Wakefield dissent in holding otherwise. This dissent analyzed the meanings of the words “net,” “monetary,” and “recovery” in determining that 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.” Wakefield, 145 Cal. App. 4th at 992 (Minara, J., dissenting). Thus, under this view, when § 877 reduces a judgment to zero, the plaintiff cannot be considered to have a “net monetary recovery.” Here, the Court agreed with the instant Court of Appeal in holding that the Wakefield dissent adequately captured the “common understanding” of the meaning of “net monetary recovery;” it further held that the “success” standard used by the Wakefield majority was “amorphous” and inconsistent with the language of § 1032(a)(4).

The Court also found that a plain meaning interpretation of “net monetary recovery” is consistent with the statutory language of § 877. Under § 877, a plaintiff’s settlement with a defendant “reduce[s] the claims against” the remaining codefendants; “claims” in this context generally refers to a claim of liability for damages rather than costs awarded to a prevailing party after the liability claim has been adjudicated. Reed v. Wilson, 73 Cal. App. 4th 439, 444-45 (1999). Hence, when the amount of a plaintiff’s settlements is greater than the award he receives, he recovers nothing – in other words, the plaintiff’s net recovery is zero (and he is not the prevailing party).

Next, the Court examined the legislative history of § 1032. Prior to 1986, § 1032 stated that costs should be awarded to a plaintiff or defendant “upon a judgment in his favor.” However, this law was repealed by the California Legislature and replaced with § 1032 in its present form (which replaces the “judgment” standard with the “net monetary recovery” standard) because judges found the prior statute ambiguous and difficult to follow.

In addressing this statutory change, the Wakefield majority held that while “ultimate judgment necessarily comes later and may reflect offsets from other parties’ contributions . . . net monetary recovery [is determined] without regard to settlements or other contributions from unrelated defendants or other parties.” 145 Cal. App. 4th at 981-82. Similarly, Plaintiffs argued that the 1986 legislation was consistent with pre-1986 cases where courts did not consider a plaintiff’s prior settlements in determining the prevailing party. See Ferraro v. Southern Cal. Gas Co., 102 Cal. App. 3d 33 (1980); Syverson v. Heitmann, 171 Cal. App. 3d 106 (1985). However, the Wakefield dissent observed that while the plaintiffs in Ferraro and Syverson received judgments “in [their] favor” under former § 1032, the Court of Appeal in these cases also found that the plaintiffs were “not entitled to recover” any damages due to their prior settlements with other defendants. 145 Cal. App. 4th at 995 (Mihara, J., dissenting). Thus, the dissent concluded that given the holdings of Ferraro and Syverson, the Legislature’s decision to use the phrase “net monetary recovery” “without [a] qualification [precluding] consideration of [a plaintiff’s prior settlements]” demonstrates that a plaintiff whose award is reduced to zero under § 877 is not the prevailing party. Id. at 995-96.

The Court again found the Wakefield dissent’s reasoning to be convincing, and emphasized that when the Legislature repeals a prior statute and enacts a new statute “on the same subject . . . with significant differences in language, [this] strongly suggests the Legislature intended to change the law.” People v. Mendoza, 23 Cal. 4th 896, 915 (2000). Additionally, the Court explained that post-1986 Court of Appeal decisions controlled by Syverson and Ferraro failed to “critically analyze” § 1032’s legislative history in a manner that would have led to the correct finding. See, e.g., Pirkig v. Dennis, 215 Cal. App. 3d 1560 (1989); Wakefield, 145 Cal. App. 4th 963 (2006); Great Western Bank v. Converse Consultants, Inc., 58 Cal. App. 4th 609 (1997).

Thus, the Court held that both the actual language and legislative history of § 1032(a)(4) indicate that Plaintiffs did not have a “net monetary recovery” and therefore were not the “prevailing party;” as such, the trial court did not abuse its discretion in awarding costs and fees to the Lozanos.

RELATED CASES:

Ferraro v. Southern Cal. Gas Co., 102 Cal. App. 3d 33 (1980)
Syverson v. Heitmann, 171 Cal. App. 3d 106 (1985)
Pirkig v. Dennis, 215 Cal. App. 3d 1560 (1989)
Great Western Bank v. Converse Consultants, Inc., 58 Cal. App. 4th 609 (1997)
Wakefield v. Bohlin, 145 Cal. App. 4th 963 (2006)

RELATED STATUTES:

California Code of Civil Procedure § 877
California Code of Civil Procedure § 1032

TAGS: net monetary recovery, prevailing party, Code of Civil Procedure 1032, Code of Civil Procedure 877, total damage award, claim reduction, net zero judgment, award of fees, award of costs

Annotation by: D. Marcus Perkins