Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 04CC01195, Hugh Michael Brenner, Judge.
Victor E. Hobbs for Plaintiffs and Appellants.
Law Offices of Mark John Tundis and Mark John Tundis for Defendant and Respondent.
OPINION
ARONSON, J.
Plaintiffs Aial Adar Saig and Aharon Saig challenge the trial court’s dismissal of their action with prejudice against defendant Asset Reliance, Inc., (ARI) after plaintiffs failed to appear for a case review hearing. We reverse the judgment because the trial court failed to notify plaintiffs it might dismiss their case and failed to consider the imposition of lesser sanctions for plaintiffs’ failure to attend a case review hearing. Accordingly, we reverse.
I
Factual and Procedural Background
In July 2003, plaintiffs purchased all of the outstanding stock in Mica Industries, Inc., for $2,200,000. They financed part of the purchase price through a $1,295,000 Small Business Administration (SBA) loan. Before it would make the loan, the SBA required plaintiffs to obtain an appraisal of the business. Plaintiffs paid ARI $10,000 to perform the appraisal. Plaintiffs later learned ARI’s appraisal contained a number of false statements, which resulted in plaintiffs overpaying for the company.
In July 2004, plaintiffs filed a petition to compel arbitration against Mica’s seller, ARI, and a number of individuals based on an arbitration clause in the purchase agreement. In November 2004, the trial court denied the petition to compel arbitration as to ARI and two individuals, but granted it as to all of the other respondents. The trial court also ordered the case stayed as to ARI and the two individuals pending completion of arbitration.
In May 2006, plaintiffs informed the trial court the arbitration had been completed. Plaintiffs settled with each of the parties who participated in the arbitration, and in September 2006, the trial court vacated a previously set November 2006 trial date. In October 2006, the trial court denied ARI’s motion for judgment on the pleadings. In November 2006, plaintiffs filed a complaint against ARI and two individuals who did not participate in the arbitration, alleging breach of contract, negligence, and fraud. In December 2006, the court granted the motion of plaintiffs’ attorney to withdraw as counsel of record.
James Greenwood David, one of the settling parties, filed a motion for good faith settlement, which ARI opposed. At the January 30, 2007 hearing on the motion, the trial court continued both the good faith settlement hearing and a review hearing, previously scheduled for February 5, 2007, to March 12, 2007. Although plaintiffs did not attend the January 30 hearing, ARI and the clerk sent plaintiffs notice that the good faith settlement and review hearings had been rescheduled for March 12.
Plaintiffs did not appear at the March 12 hearings. The trial court granted David’s good faith settlement motion and dismissed plaintiffs’ action with prejudice. The court’s minute order dismissing plaintiffs’ action did not specify a reason for the dismissal, and the review hearing was unreported. On March 29, 2007, plaintiffs filed a motion to set aside the dismissal, which the court heard on May 8, 2007.
Plaintiffs, represented by new counsel at the hearing, asserted they never received ARI’s notice of the March 12 hearings, but admitted they received the clerk’s notice. They argued, however, that the clerk’s listing of two hearings scheduled for the same date on the same notice was confusing, and they had not yet obtained counsel to help them decipher the notice. Moreover, they believed they did not need to appear because they were not involved with the good faith settlement motion. Plaintiffs represented they discussed the issue with a paralegal who assured them appearance at the hearing was unnecessary. The trial court denied the motion to vacate, and subsequently entered judgment. Plaintiffs now appeal.
I
Discussion
A. No Basis Supports ARI’s Contention the Trial Court Dismissed the Action for Failure to Prosecute
Although the March 12 hearing was unreported, the trial court explained the reason it had dismissed the case at the hearing on the motion to vacate: “What I was thinking was there had been two failures to appear, there was some evidence there had been some settlements going on. And, frankly, I thought the plaintiffs had been out of the lawsuit. A lot of times these cases just eventually when everybody sort of gets what they want or think they can get, they just never turn up again. And we have to do something about our inventories in keeping track of these cases. [¶] So after two failures to appear, and as I say settlement –– indications of settlement, we would actually think they abandoned the case, so we would dismiss it.” Following the court’s explanation, plaintiffs’ counsel offered to pay the other parties’ attorney fees and costs incurred in opposing the motion to vacate as a condition to reinstatement. The trial court rejected this offer: “I appreciate that. Here is the thing, counsel, I say this to counsel to the plaintiffs, there is a long, long history to this case, was all these earlier proceedings. It does appear to me at this point there were two failures to appear . . . . [¶] Your clients did get notice from the court. That was kind of glossed over to some extent; but, I think the court is justified in assuming that they had made in this particular case, and perhaps that was their intention at this time. As you indicated, they sought advice on whether to be here or not, and one reason or another decided not to. [¶] So I am going to deny the motion to set aside the judgment.”
Thus, the trial court dismissed plaintiffs’ action because they failed to appear at two court hearings. But the first of these hearings, held on January 30 2007, concerned only David’s good faith settlement motion and ARI’s opposition to it. No review hearing was scheduled for that date. Thus, plaintiffs’ nonappearance did not impede the court’s ability to proceed at the hearing, nor would it demonstrate plaintiffs’ intention to abandon their case. We are therefore left to consider whether plaintiffs’ failure to appear at a single case review hearing may support the trial court’s dismissal of their case with prejudice.
Curiously, ARI notes plaintiffs’ failure to appear at the February 5, 2007 review hearing. As noted above, however, this hearing was continued on January 30, 2006, and there is no question plaintiffs received notice of the continuance from the clerk.
The trial court did not cite to any statute or rule supporting its action. ARI attempts to justify the dismissal under Code of Civil Procedure section 583.410, which authorizes dismissal of an action for failure to prosecute. But a court acting to dismiss a case under that section must comply with California Rules of Court, rule 3.1340(b), which provides, in relevant part: “If the court intends to dismiss an action on its own motion, the clerk must set a hearing on the dismissal and mail notice to all parties at least 20 days before the hearing date.” Here, plaintiffs received no notice their case might be dismissed at the March 12 hearing.
Code of Civil Procedure section 583.410 provides: “(a) The court may in its discretion dismiss an action for delay in prosecution pursuant to this article on its own motion or on motion of the defendant if to do so appears to the court appropriate under the circumstances of the case. [¶] (b) Dismissal shall be pursuant to the procedure and in accordance with the criteria prescribed by rules adopted by the Judicial Council.”
ARI contends plaintiffs received adequate notice and hearing when they learned of the dismissal and moved to set it aside. We disagree. In determining whether to dismiss a case for failure to prosecute, the court is expressly required to consider the factors set forth in California Rules of Court, rule 3.1342(e). Because the trial court did not reference Code of Civil Procedure section 583.410 in its order dismissing the case, plaintiffs would have had no reason to address the rule 3.1342(e) factors in their motion to vacate. Moreover, nothing in the record suggests the trial court considered these factors, either at the March 12 or May 8 hearings.
California Rules of Court, rule 3.1342(e), provides, in relevant part: “[T]he court must consider all matters relevant to a proper determination of the motion, including: [¶] (1) The court’s file in the case and the declarations and supporting data submitted by the parties and, where applicable, the availability of the moving party and other essential parties for service of process; [¶] (2) The diligence in seeking to effect service of process; [¶] (3) The extent to which the parties engaged in any settlement negotiations or discussions; [¶] (4) The diligence of the parties in pursuing discovery or other pretrial proceedings, including any extraordinary relief sought by either party; [¶] (5) The nature and complexity of the case; [¶] (6) The law applicable to the case, including the pendency of other litigation under a common set of facts or determinative of the legal or factual issues in the case; [¶] (7) The nature of any extensions of time or other delay attributable to either party; [¶] (8) The condition of the court’s calendar and the availability of an earlier trial date if the matter was ready for trial; [¶] (9) Whether the interests of justice are best served by dismissal or trial of the case; and [¶] (10) Any other fact or circumstance relevant to a fair determination of the issue.”
Finally, Code of Civil Procedure section 583.410 authorizes a trial court to dismiss a case without prejudice. (Code Civ. Proc., § 581, subd. (b)(4); Franklin Capital Corp. v. Wilson (2007) 148 Cal.App.4th 187, 215 [recognizing courts lack authority to dismiss with prejudice for lack of prosecution].) Because the trial court purported to dismiss plaintiffs’ action with prejudice, Code of Civil Procedure section 583.410 cannot provide authority for the trial court’s action.
B . The Trial Court Erred in Dismissing the Action as a Sanction for Plaintiffs’ Failure to Appear at the Case Review Hearing
Having disposed of respondent’s principal argument for affirmance, we are left to consider whether dismissal was an appropriate sanction under local or state rules for failure to appear at a review hearing. We conclude it was not.
Although no local rule specifies dismissal as a sanction for failure to appear at a case review hearing, we consider the general sanction provision of Orange County Superior Court rule 454 (local rule 454), which provides: “Upon notice and after hearing, if the court finds any counsel, a party represented by counsel, or a party in propria persona has failed to comply with these local court rules or has not proceeded with due diligence in preparing the case for trial, the court, on motion of a party or on its own motion, may: (1) strike all or any part of any pleading of that party; (2) dismiss the action or proceeding or any part thereof; (3) enter a judgment by default against that party; (4) impose other penalties of a lesser nature as provided by law, and/or; (5) order that party or his or her counsel to pay the moving party the reasonable expenses incurred in making, and/or appearing at the hearing of, the motion, including reasonable attorney fees.”
In reviewing local rule 454, two things become apparent. First, the rule expressly requires notice and an opportunity to be heard. As discussed above, the trial court failed to provide plaintiffs with notice their case would be dismissed, nor did it provide any notice of the reason why it had done so until the hearing on the motion to vacate. Second, local rule 454 provides for not only dismissal, but lesser sanctions as well. A trial court’s discretion to choose among the various options in the rule is not unfettered.
Local rule 454 was created under the authority of Government Code section 68608, subdivision (b), which provides: “Judges shall have all the powers to impose sanctions authorized by law, including the power to dismiss actions or strike pleadings, if it appears that less severe sanctions would not be effective after taking into account the effect of previous sanctions or previous lack of compliance in the case.” (Italics added.) Accordingly, “dismissal is appropriate only if less severe sanctions would be ineffective . . . .” (Tliche v. Van Quathem (1998) 66 Cal.App.4th 1054, 1061-1062.) As one court observed: “The involuntary dismissal of a civil case has potentially serious consequences for the citizen who has sought to redress his or her grievances in a court of law. It signifies the unfavorable termination of the lawsuit, a refusal to resolve the merits of the dispute. [A] court considering the dismissal of a case must have a substantial reason significant enough to overcome the legislative and judicial policy of this state that litigation should be disposed of ‘on the merits rather than on procedural grounds.’ [Citations.]” (Traweek v. Finley, Kumble, etc. Myerson & Casey (1991) 235 Cal.App.3d 1128, 1136.)
Here, the trial court simply dismissed the case without attempting to determine whether plaintiffs intended to continue the case or whether lesser sanctions could compel their attendance at future case review conferences. We recognize the circumstances at the March 12 hearings suggested to the court the case had effectively concluded. But the court erred in dismissing the case without notice and refusing to vacate its dismissal when it became clear plaintiffs wished to continue.
III
Disposition
The judgment of dismissal is reversed. Plaintiffs are entitled to their costs of the appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J., FYBEL, J.