Who Pays The Costs When Both Sides Prevail And The Judge Has Discretion?

The trial court awarded $12,731.92 to the defendant for costs after the parties placed the following settlement on the record just before a jury panel was called: “[I]n consideration for dismissal with prejudice of the two claims of breach of contract and breach of covenant, Defendant will pay Plaintiff within 10 days $23,500.” Defense counsel “will prepare a judgment on the remaining claims which references the dismissal with prejudice and which preserves the right of appeal of the rulings of this court on the remaining causes of action … .”  “[T]he parties will not file any motions or memoranda for costs or attorney fees[,] holding off until the completion of the appeal … .” Code of Civil Procedure section 1032 states: “(b) Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding,” and subdivision (a)(4) provides a nonexclusive definition of  ‘prevailing party,’  listing four categories. Three of the categories apply only to defendants, namely “a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant.” Only one category ‒ “the party with a net monetary recovery” ‒ is applicable to both defendants and plaintiffs. The appellate court, after noting that both sides prevailed in some way and that the trial court exercised its discretion, ruled: “We will reverse the order awarding costs to Employer and denying costs to Employee, determining that, since the parties’ settlement was silent regarding costs, Employer’s payment of $23,500 triggered mandatory costs as a ‘net monetary recovery’ under the plain language of the statute.” (deSaulles v. Community Hospital of the Monterey Peninsula (Cal. App. Sixth Dist.; May 2, 2014) 225 Cal.App.4th 1427.)