Elms

—The issue in this case is whether a defendant who is sued on a contract entitling a successful litigant to attorney’s fees under Civil Code section 1717 may recover such fees where the plaintiff’s action is dismissed because it was not brought to trial within five years. Because we answer this question in the affirmative, we reverse the post-judgment order denying the motion of defendant, Builders Disbursements, Inc. (Builders), for attorney’s fees and costs from plaintiffs, Lonnie and Sharon Elms (the Elms).

Background

In October 1983, the Elms, Geodesic Dome Specialists (Geodesic) and Builders agreed that Builders would control and disburse construction loan funds for Geodesic to build a dome house for the Elms. Paragraph 20 of the agreement recites:

In September 1984, the Elms sued Geodesic, Builders, and others for breach of contract and fraud. In this and in an amended complaint, the only cause of action against Builders was for breach of contract.

In September 1989, the trial court denied the Elms’s motion for preference and dismissed their action sua sponte (Code Civ. Proc., § 583.360, subd. (a)) “as to the Defendants who appeared in opposition to Plaintiff’s…