Judgment Enforcement: Denial Of Judgment Collection Fee Request In 1st Action Reversed Because Judgment Creditor Did Not Have To Show He Was A “Prevailing Party” To Obtain Necessary/Reasonable Fees From Prosecuting A 2nd Fraudulent Transfer Action

Also, The Appellate Court Rejected An Argument That Judgment Debtor Had Satisfied The Judgment When There Was A Pending Request For More Judgment Collection Fees Not Factored Into The Satisfaction Tender.

               G.F. Galaxy Corp. v. Johnson, Case No. D081492 (4^th Dist., Div. 1 Feb. 26, 2024 unpublished) [certified for publication on Mar. 8, 2024] involved a situation where Galaxy, as a judgment creditor, obtained a judgment against Johnson, as a judgment debtor, in a first action, later commencing a second fraudulent transfer action to aid in collection of the judgment.  Judgment creditor filed a costs memorandum pursuant to CCP § 685.040 to collect fees and costs on the judgment, primarily derived from work in the second action.  The lower court granted judgment debtor’s motion to tax costs; it found that a costs memorandum, not a noticed motion, was a proper vehicle to make the request, but found that judgment creditor was not yet the prevailing party in the second action because it was ongoing.  Galaxy appealed, primarily arguing there is no “prevailing party” requirement under the judgment enforcement fee-shifting statutes (i.e., CCP §§ 685.040, 685.070).

               Before turning to the merits, Johnson argued that he had successfully satisfied the judgment by tendering an accepted check to judgment creditor, which did not include any of the amounts contained in the previously filed costs memorandum.  The appellate court rejected this argument, because there could be no satisfaction given that judgment creditor had filed his costs memorandum before the check was tendered so that judgment debtor knew judgment creditor was claiming more was due—distinguishable from Gray I CPB, LLC v. SCC Acquisitions, Inc., 233 Cal.App.4^th 882 (2015) because the judgment creditor in that case had not filed any request for additional costs before accepting the tender. The appellate court found the fact that the lower court had not ruled on Galaxy’s costs memorandum as not diminishing the conclusion that there was no satisfaction.

               That brought the appellate court to the merits.  It reversed the denial of judgment enforcement collection costs (most of which were incurred in the second matter) and remanded for the lower court to determine if judgment creditor’s claimed costs were necessary and reasonable under the judgment collection fee statutes.  It found no “prevailing party” requirement in section 685.040.  Further, section 685.070 has no requirement that the judgment creditor wait until resolution of the second action, which could mean that the creditor would waive fees/costs after the 2-year deadline depending on the progress of the second case—which would mean the judgment creditor would have to quickly file costs memorandum to avoid forfeiture.  Also, the fraudulent transfer act does not have a fees provision, which furthered the equities for allowing capture of those fees in the first action through the judgment collection fee statutues. 

BLOG SHOUT OUT:  Steven L. Krongold was one of the attorneys on the winning side.  He worked with co-contributor Mike at Mike’s first Orange County law firm.  Congratulations, Steve.