CALIFORNIA ATTORNEY'S FEES

Fee Clause Interpretation, Judgment Enforcement, Section 1717: $70,635 Attorney’s Fees Award Favorable To Nonsignatory To A Contract, Reversed As A Matter Of Law

Plaintiffs’ Claims Against Nonsignatory Did Not Seek To Enforce The Contract, With No Judgment Enforcement Fees Available To The Nonsignatory.

               Crooymans v. Foumberg, Case No. B325110 (2d Dist., Div. 3 June 18, 2024) (unpublished) is a stark reminder that a nonsignatory to a contract, more often than not, does not face fee exposure under a contractual fees clause when that litigant was not a party to the underlying contract.

               In this case, plaintiffs obtained a favorable arbitration award against their late-father’s tax planning attorney, with a separate $1.7 million fee component embedded in the award under an attorney engagement letter with a fees clause.  But the relevant part of the case is that plaintiffs sued defendant Foumberg, a nonsignatory to the attorney engagement agreement, because he did some estate planning transfers for the tax planning attorney and his wife, with plaintiff claiming he was a shill for the judgment creditor attorney.  Foumberg won on a demurrer on the merits (not at issue) and then moved for attorney’s fees under Civil Code section 1717 based on the engagement letter to which he was not party.  The lower court awarded him $70,635 in attorney’s fees, prompting an appeal.

               The 2/3 DCA panel reversed as a matter of law.  The primary flaw was that Foumberg, a nonsignatory to the attorney engagement letter with a fees clause, was not sued under that agreement—the “on the contract” requirement of section 1717 was not satisfied.  In fact, the merger doctrine applicable when a judgment is entered which extinguishes contractual rights all the more so dictated the conclusion that no contractual fee recovery was available:  this meant plaintiff could not recover fees against Foumberg, so he could not do so either.  (Chelios v. Kaye, 219 Cal.App.3d 75, 79-80 (1990), abrogated by statute in Code Civ. Proc., § 685.040 in some regards; GrayI CPB, LLC v. SCC Acquisitions, Inc., 233 Cal.App.4^th 882, 890 (2015).)  Plaintiffs argued that Foumberg had alter ego exposure, but this did not resonate for two reasons:  (1) plaintiffs attempted “reverse piercing” which is not generally allowed; and (2) plaintiffs were attempting recovery on a tort—not contract—claim which was not within the scope of the attorney engagement contractual fees clause, relying on the reasoning in Brown Bark III, L.P. v. Haver, 219 Cal.App.4^th 809, 828-829 (2013).  Finally, because plaintiffs argued Foumberg was accountable for fees as an alter ego, the appellate panel found that plaintiffs had not sued the attorney under traditional alter ego analysis, had sought unconventional reverse piercing, and had obtained a judgment against attorney which was based on tort rather than on a contract. 

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.

Judgment Enforcement: Despite Contractual Cap On Attorney’s Fees, Postjudgment Enforcement Fees Were Not Similarly Capped

Case Demonstrates That Enforcement Fees May Eclipse The Underlying Small Fee Award By Exponential Amounts.

            In Nash v. Aprea, Case No. B322796 (2d Dist., Div. 7 Oct. 3, 2023) (published), a default judgment of $59,191 was entered against defendant, with $1,000 of that being contractual attorney’s fees because the contract capped recoverable fees at that amount.  Later, the lower court awarded plaintiffs $27,721 in post-judgment enforcement fees under CCP § 685.040.  Because the underlying judgment did have a fee award (although small), this predicate justified enforcement fees even though they were almost 30 times more than the nominal fee award.

Judgment Enforcement, SLAPP: Briggs Opinion Now Published

Plaintiff/Judgment Debtor’s Failure To Move To Tax Costs Had Consequences.

            On May 30, 2023, we posted on Briggs v. Elliott, Case No. D080283 when it was unpublished (4^th Dist., Div. 1 May 26, 2023 unpublished, certified for publication on June 16, 2023).  We can now report that the opinion has been published, dealing with a plaintiff/judgment debtor being unable to raise challenges to a SLAPP fee award made in connection with a costs memorandum which was never contested through a motion to tax costs. 

Discovery, Judgment Enforcement, Sanctions: Lower Court’s Failure To Include Discovery Sanctions In Post-Trial Judgment Was Not Erroneous

Discovery Sanctions Was An Independent Monetary Judgment Subject to Post-Judgment Enforcement.

            In Marriage of Bush, Case No. G061202 (4^th Dist., Div. 3 June 15, 2023) (unpublished), a family law judge issued $3,635 in discovery sanctions against wife, but the judge stayed any payment until a trial determined who owed what.  However, the monetary sanction was not included in the post-trial judgment, which wife claimed was error.  Not so, said the 4/3 DCA in an opinion authored by Justice Delaney.  The monetary sanction was an independent monetary judgment subject to execution, although it was stayed for a while.  (Newland v. Superior Court, 40 Cal.App.4^th 608, 615 (1995).)  Although there might be some logistical benefit to including such an award in the pre-trial judgment (Constellation-F, LLC v. World Trading 23, Inc., 45 Cal.App.5^th 22, 31 (2020)), it was not error to omit the sanctions award from the post-trial judgment because the monetary sanctions judgment was independently enforceable. 

Judgment Enforcement, SLAPP: SLAPP Post-judgment Enforcement Fees/Costs Award Affirmed On Appeal

SLAPP-ed Plaintiff/Judgment Debtor Liable For Post-judgment Enforcement Costs Because He Did Not Move To Tax A Post-judgment Enforcement Costs Memo, A Procedural Deadline Which Was Independent Of Any Subsequent Satisfaction Of Judgment Requests.

            In Briggs v. Elliott, Case No. D080283 (4^th Dist., Div. 1 May 26, 2023) (unpublished), two political rivals were involved in litigation, with plaintiff’s complaint SLAPP-ed by defendant and with the lower court awarding $28,873 in attorney’s fees to defendant as the prevailing SLAPP party.  After trying to collect the unsatisfied judgment for fees, defendant/judgment creditor filed a verified costs memorandum to the tune of $13,789.10 in post-judgment fees and costs, after not accepting a cashier’s check to satisfy what plaintiff/judgment debtor thought would do it on the prior judgment in order not to lose the specter of recovering post-judgment collection costs.  The trial court then awarded defendant the claimed costs as well as prejudgment interest.

            Plaintiff/judgment debtor’s appeal was unsuccessful. 

            Plaintiff’s main problem was that he failed to file a motion to tax the post-judgment costs memorandum, which was an independent deadline not tethered to plaintiff’s efforts to force satisfaction of the prior judgment before collection costs were at issue.  Initially, fees incurred to enforce a SLAPP fee award are recoverable post-judgment collection costs under CCP § 685.040.  (York v. Strong, 234 Cal.App.4^th 1471, 1478 (2015).)  Fees can be claimed through a costs memorandum, with judgment debtor needing to move to tax these costs in order to avoid mandatory allowance by the clerk.  (David S. Karton, A Law Corp. v. Dougherty, 171 Cal.App.4^th 133, 147 (2009).)  Although there were sharply contested facts on plaintiff’s efforts to force satisfaction of judgment, the time frames for a judgment creditor to respond to a demand for partial/full judgment satisfaction are independent of the deadline relating to moving to tax post-judgment requested costs.  Fee award affirmed, with the lower court to determine any appellate fees award to defendant as the prevailing party on appeal.

UPDATE: We can now report that this opinion was certified for publication on June 16, 2023.

Judgment Enforcement: Prior Recordation of Interlocutory Judgment Containing Monetary/Constructive Trust Relief Beat Out Later Deed Of Trust Recorded By Attorneys To Secure Fees

Race-Notice Gave Victory To The Interlocutory Judgment Recordation.

            In The 12 Tribes of Israel, U.S.A., Inc. v. Barnum, Case No. B315528 (2d Dist., Div. 5 May 4, 2023) (unpublished), the nub of the appeal came down to a race-notice issue.  Did an earlier interlocutory judgment containing monetary and constructive relief beat out a subsequent deed of trust recorded by attorneys attempting to secure fees?  The answer was that the interlocutory judgment was prior in time.  The opposition argued that there needed to be an abstract of judgment recorded (which was done, but after the deeds of trust).  However, the recordation of the interlocutory judgment was senior to the deeds of trust.

Judgment Enforcement: Judgment Creditor Properly Awarded Attorney’s Fees For Pursuing A Wage Garnishment Order Against Ex-Husband For A Community Debt Judgment Against A Wife

No Conspiracy Between A Judgment Debtor And Relevant Third Party Is Required.

            Code of Civil Procedure section 685.040 authorizes a trial court to award reasonable and necessary costs of enforcing a judgment to the judgment creditor, if (1) the fees were incurred to “enforce” a judgment, and (2) the underlying judgment included an award of fees pursuant to specific provisions of the CCP (such as provisions which are allowed by contract, statute, or law, most frequently Civil Code section 1717). 

            In Direct Capital Corp. v. Brooks, Case No. C095817 (3d Dist. Feb. 27, 2023) (unpublished), DCC leased computer equipment to wife Mary Brooks, who was married to Grant Brooks at the time.  DCC obtained a judgment against Mary while the marriage was intact, then attempted to garnish Grant’s wages on the theory the debt was a community obligation.  Both the trial and appellate courts agreed in several proceedings and two prior appeals.  DCC then sought over $67,000 in attorney’s fees against Grant, fees for the wage garnishment efforts and in defending the two appeals.  The trial judge awarded some fees to the DCC for the garnishment efforts, but no fees for defending the appeals.  Grant appealed.

            His principal argument was that, under Cardinale v. Miller, 222 Cal.App.4^th 1020 (2014), no section 685.040 fees were recoverable because there was no conspiracy between the judgment debtor and relevant third party.  The Third District recognized that there was a conspiracy in Cardinale, but rejected the argument that a conspiracy is a prerequisite to imposition of section 685.040 fees against a third party such as Grant.  DCC satisfied the two parts of the 685.040 test, such that this alone sufficed—with Grant erroneously conflating Cardinale’s application of the 685.040 two-part test with the test itself. 

Costs, Judgment Enforcement: CourtCall and Electronic Filing Fees Are Discretionary Costs Which Can Be Awarded

Appellant’s Claim For An Offset Based On An Appellate Costs Award Was Rejected Because Appellant Failed To Renew His Judgment Before The 10-Year Deadline Ran.

            In Henry v. Dawson, Case No. G061115 (4^th Dist., Div. 3 Nov. 15, 2022) (unpublished), the 4/3 DCA affirmed that CourtCall and electronic filing expenses are allowable in the discretion of the lower court.  (Code Civ. Proc., § 1033.5(c)(4); LandWatch San Luis Obispo County v. Cambria Community Services Dist., 25 Cal.App.5^th 638, 646 (2018) [CourtCall is not a prohibited telephone charge, but a means by which a party can make an appearance without being physically present in court].)  Appellant also requested an offset for a prior appellate costs award; however, because such an award constitutes a separate judgment (Los Angeles Unified School Dist. v. Wilshire Center Marketplace, 89 Cal.App.4^th 1413, 1419 (2001)), his failure to renew the appellate costs judgment—which was still valid when a motion was filed—means there was no valid judgment to offset given that the motion did not toll the mandate to renew the judgment (something which was not done).

            Justice Moore authored the 3-0 opinion.

Judgment Enforcement: Trial Court’s Denial On Remand Of Code Of Civil Procedure section 685.040 Fees For Bringing An Unreasonable And Unnecessary Motion To Compel Affirmed On Appeal

Defendants Were Attempting To Comply With The Judgment, But Plaintiffs’ Were Intentionally Thwarting Their Attempts.

            In our November 26, 2020 post, we discussed the unpublished decision in Buechler v. Butker, Case No. G058054 (4^th Dist. Div. 3 November 23, 2020), wherein the trial court had denied the $37,052.50  in fees sought by plaintiff pursuant to Code Civ. Proc. § 685.040 for enforcement of judgment regarding a dispute over the use of a lateral sewer line – determining that defendant’s failure to comply was not willful and was in part due to plaintiff’s interference.  Ultimately, the 4/3 DCA reversed and remanded for a determination as to whether the fees incurred were “reasonable and necessary” as they are required to be in order to be recoverable.

            Back to the trial court they went – the parties in Buechler v. Butker, Case No. G060470 (4^th Dist., Div. 3 October 25, 2022) (unpublished).  This time, plaintiff sought over $60,000 after adding in $15,127 for fees incurred in the first appeal, $7,215 for the second fee motion, and another $1,000 in fees for preparing for and appearing at the hearing on the fee motion.  Again, the trial court denied plaintiff’s motion – concluding the requested fees were not reasonable and necessary because plaintiffs’ contempt motion was not the catalyst for defendants’ compliance because defendants were attempting to comply with the judgment prior to the contempt motion, but “Buechler’s actions were intended to impede Defendants’ efforts to comply with the Judgment and to make it as difficult and costly as possible for Defendants to construct a new sewage disposal system for their property.”  In what the 4/3 DCA described, in a 3-0 opinion authored by Acting Presiding Justice Bedsworth, as “an admirable ‘extra mile,’” the trial court took the time to explain what it would have awarded if it had concluded that the contempt motion was the catalyst for defendants’ compliance – $6,750 for the contempt motion itself, $7,100 for the appeal, and $5,200 for the attorney fee motions, for a total of $19,050.

            Affirming the trial court’s fee denial, the panel first explained that Code Civ. Proc., section 685.040 does not authorize an award of fees for an appeal from an order denying fees not incurred in connection with an enforcement proceeding, which left only the fees incurred in bringing the contempt motion at issue.  Although section 685.040 does not require a moving party for judgment enforcement to prevail, it does require that the proceeding be necessary in order to recover fees – something that did not exist here where plaintiffs “threw a monkey wrench into [defendants’] efforts to comply with the Judgment.”

Equity, Judgment Enforcement, Tort Of Another: Law Corporation’s Attempts To Setoff Adverse Judgment For Tort Of Another Fees Were Rebuffed By Court Of Appeal

Nothing Demonstrated Setoff For Tort Of Another Fee Damages Could Be Obtained In A Postjudgment Phase.

            The result in David S. Karton, A Law Corporation v. Musick, Peeler, Garrett LLP, Case No. B305837 (2d Dist., Div. 1 Oct. 3, 2022) (published), was driven by a prior appellate opinion where a default in favor of the law corporation was found to be void, such that an assignor of adverse judgments impacting the law corporation to Musick, Peeler became the prevailing party.  (Substantial fees were spent on both sides for a claimed law corporation receivable of $65,246.23.)  The lower court denied law corporation’s motion to set off from the adverse judgment certain claimed “tort of another” fees incurred in actions alleging that judgment assignor had attempted to hinder the collection of the vacated default judgment.

            The appellate court determined that set off was procedurally and substantively not available.  On the procedural front, CCP § 431.70 does not allow for postjudgment set off versus simply pleading it as an affirmative defense in an answer, and law corporation failed to meet the judgment satisfaction acknowledgment requirements in trying to obtain a set off.  On the merits, the “tort of another” doctrine was not available because no third-party litigation was involved in the hinderance lawsuits in other states, which substantively meant there could be no set off on this basis.

Deadlines, Judgment Enforcement: $38,115 In Attorney’s Fees For Prior Appeal And Judgment Enforcement Reversed As A Matter Of Law, Leaving About $26,055 In Fees Intact

Prior Appeal Fees Were Untimely Sought And Judgment Enforcement Request Related To A Judgment Without A Fees Clause Award.

            In Peng v. F.M. Tarbell Co., Case No. B317907 (2d Dist., Div. 2 July 25, 2022) (unpublished), a trial judge awarded an additional $64,170 in attorney’s fees relating to appeal expenses and judgment enforcement costs as against appellant.  The 2/2 DCA affirmed, but it modified the award to reflect that $38,115 had to be excluded as a matter of law.  Specifically, $14,715 related to work on a first appeal, costs which were not timely claimed under the 40-day post-remittitur deadline in light of the costs being requested in connection with the second appeal.  The “stricken” other $23,400 amount was infirm because it did not constitute judgment enforcement costs recoverable because the judgment did not contain a fee award at the time the enforcement costs were incurred.  (Conservatorship of McQueen, 59 Cal.4^th 602, 605, 608-610 (2014) [efforts by a party to oppose an appeal from an underlying judgment are not efforts undertaken to enforce the judgment but to defend it against reversal or modification].)

Equity, Judgment Enforcement: Lower Court’s Denial Of Fees To Judgment Debtor In State Case Based On ERISA Fee Shifting Statute and Denial Of Judgment Debtor’s Motion To Tax Costs Were Both Sustained On Appeal

ERISA Fee Entitlement Not Shown And The Winning ERISA Argument Was Not Raised Until Judgment Creditor’s Assignee Racked Up More Judgment Enforcement Expenses.

            Everyone does need to keep in mind, within certain legal strictures, that attorney’s fees awards are frequently driven by the equities of a case.  Coastline JX Holdings LLC v. Bennett, Case No. G059552 (4^th Dist., Div. 3 July 7, 2022) (published) demonstrates that perfectly.

            This case involved very protracted, tenacious litigation between a judgment creditor’s assignee and judgment debtor, with a lower court eventually concluding that certain assets of the debtor were exempt from levy based on ERISA protections even though those winning arguments were raised deep into the proceedings such that the trial judge had to exercise inherent authority to redetermine the dispositive issue.  Judgment creditor was granted some additional post-judgment enforcement costs under CCP §§ 685.040 and 685.070 (with judgment debtor’s motion to tax costs being denied).  The lower court also denied judgment debtor’s request for attorney’s fees as the “prevailing” party.

            The 4/3 DCA affirmed, in an opinion authored by Orange County Superior Court Judge Linda Marks, sitting by assignment.  With respect to the fee denial, it was correct because (1) judgment debtor brought it with no invitation to do so by the lower court, and (2) judgment debtor provided no authority that this was a true ERISA action which allows prevailing party fees as opposed to raising an ERISA argument in a civil state court action.  Furthermore, granting fees to judgment debtor would be inequitable given his stalwart resistance to the other side’s collection efforts.  On the post-judgment costs awarded to judgment creditor’s assignee, that ruling was no abuse of discretion given that the ERISA argument was raised late in the game and the issues were complex, justifying the costs claimed by the other side. 

Discovery, Judgment Enforcement: Peripheral Objector’s Unsuccessful Opposition to Motions To Compel Compliance To Judgment Enforcement Third Party Subpoenas Affirmed On Appeal

Sanctions Order Was Only $6,750, Although Losing Objector Is Now Liable For Substantially More In Appellate Fees.

            This next case, Vision en Analisis y Estrategia v. Erwin Legal, Case No. G059669 (4^th Dist., Div. 3 Feb. 17, 2022) (unpublished), demonstrates that sometimes a losing party/objector should take minor bumps rather than pursue an appeal which affirms the result and will result in imposition of likely more substantial appellate fees against the loser.

            The case involved plaintiffs’ efforts to obtain postjudgment asset information against losing defendants through third-party subpoenas, with appellant/objector being the secretary/CFO of one of the defendants.  Objector retained counsel who objected and then unsuccessfully opposed plaintiffs’ motion to compel after meet and confer efforts.  The lower court saw no reason not to compel the production, awarding sanctions of $6,750 (out of a requested $44,000) and objector and objector’s counsel under CCP §1987.2, relating to third-party discovery.

            The 4/3 DCA, in an opinion authored by Justice Goethals, affirmed.   Objector failed to show what privacy interest she had which was being infringed.  However, the potential bleeding did not stop at $6,750.  Plaintiffs were entitled to appellate fees and costs for winning the appeal, an amount us bloggers anticipate would be much more than the $6,750 at issue.  (Roe v. Halbig, 29 Cal.App.5^th 286, 313 (2018).)

Deadlines, Judgment Enforcement, SLAPP, Special Fee Shifting Statutes: Where Trial Court Correctly Determined Reimbursement Of Fees/Costs Sought By Prevailing SLAPP Defendant Were For Judgment Enforcement, Not Appellate Fees, Motion Was Timely Filed

Distinction Between Enforcement Fees And Appellate Fees Set Forth In McQueen Governed.

            In Laue v. Ortiz, Case No. H047475 (6^th Dist., January 7, 2022) (unpublished), defendant successfully SLAPPed plaintiff’s complaint and was awarded fees and costs as mandated under Code Civ. Proc. § 425.16(c)(1) – the anti-SLAPP fee shifting provision.  After unsuccessfully appealing the order granting defendant’s anti-SLAPP motion and having his appeal of the fees/costs award dismissed as a nonappealable order, plaintiff filed an unsuccessful motion in the trial court to set aside the order granting defendant’s anti-SLAPP motion and awarding defendant fees/costs.  In its order denying the set aside motion, the trial court awarded further attorney fees and costs to defendant. Plaintiff appealed the order and defendant moved to dismiss the appeal – a motion denied as moot when plaintiff filed an abandonment of his appeal.

            More than 60 days later, defendant moved in the trial court, under Code Civ. Proc. §§ 425.16(c)(1) (anti-SLAPP) and 685.040 (judgment enforcement) for reimbursement of the attorney fees she incurred in connection with plaintiff’s abandoned appeal. Plaintiff opposed – claiming defendant was mischaracterizing the fees as being incurred in judgment enforcement, which provides for a two-year deadline from the date costs were incurred, because she had missed the deadlines under California Rules of Court for seeking fees/costs properly categorized as appellate fees/costs. The trial court disagreed – determining the fees to be properly categorized as judgment enforcement – and granted defendant’s motion. 

            Plaintiff appealed – arguing that defendant’s fee motion was for appellate fees/costs and therefore not timely.  However, the Sixth District concluded that the trial court was correct in its determination and affirmed. As set forth in Conservatorship of McQueen, 59 Cal.4th 602 (2014) [discussed in our July 11, 2014 post], when a fee-shifting statute authorizes the award of attorney fees, fees incurred in enforcement of the judgment – such as defending the judgment from attack – are recoverable under section 685.040.  Further, appellate fees are those incurred on direct appeal from the judgment at issue. (McQueen, 59 Cal.4^th at p. 610.) Here, although the fees/costs were incurred on appeal, they were not incurred on direct appeal from the judgment.

Judgment Enforcement: 2/1 DCA Finds That Proportionality Analysis Can Be Used In Postjudgment Enforcement Fee Recovery Efforts

Upshot Is That Judgment Creditors May Need To Pursue The Most Cost Effective Remedy.

            In Wertheim, LLC v. Currency Corp., Case No. B304655 (2d Dist., Div. 1 Oct. 14, 2021) (published), the Court of Appeal determined that a judgment creditor’s pursuit of over $800,000 in fees against a judgment debtor where the base judgment was a little over $39,000 (although it had swelled to $250,000 with interest and costs) was disproportional to the judgment amount at issue.  Put another way, disproportionality analysis can be used, in postjudgment fee proceedings with the key factor here being that judgment creditor failed to timely file a collection motion against a surety bond but opted instead to file a separate lawsuit where fees escalated.  This opinion suggests that judgment creditors need to carefully think about using the most efficient postjudgment collection strategy in this area of the law.  One of the things, though, that this opinion did not consider was that judgment creditor tried to negotiate an informal solution with the judgment debtor, which led to not timely filing a surety collection motion. 

Appeal Sanctions, Judgment Enforcement, Tort Of Another: Judgment Creditor Denied Contractual, Statutory, Or Tort Fees Where Thrust Of Dispute Involved Claim Under A Separate Contract Not Involving Judgment Debtors And Having No Contractual Fees Clause

Attorney Was Not A Party To The Judgment Collection Settlement Agreement And Defenses Asserted In An Answer Do Not Provide A Tort Of Another Damages Predicate; Appellate Sanctions Request Denied. 

            Bush v. Cardinale, Case No. A159689 (1^st Dist., Div. 4 Aug. 13, 2021) (unpublished) was a situation where a judgment creditor reaching judgments against and an agreement with certain judgment debtors, but then had to defend judgment creditor’s former attorney’s suit requesting a certain percentage of proceeds from the judgment creditor-judgment debtors’ settlement based on a separate contingency agreement among judgment creditor, attorney, and another attorney.  Attorney was not a party to the settlement agreement, and judgment creditor only alleged defenses in attorney’s action as a potential setoff.  Former attorney lost in her action, with no damages awarded to anyone.  However, judgment creditor requested attorney’s fees against former attorney based on the post-judgment enforcement statutes (CCP § 685.040), on the tort of another doctrine, and on a contractual fee provision under the settlement agreement.  The trial judge denied the fee requests.

            The 1/4 DCA affirmed.  The appellate court concluded former attorney’s action was too attenuated to be an “enforcement” action relating to the earlier judgments against judgment debtors, given that former attorney’s lawsuit did not challenge the prior judgments and did not challenge the settlement agreement, but only sought to enforce rights under a separate contingency fee agreement.  The “tort of another” doctrine did not succeed because judgment creditor did not allege any affirmative claims against former attorney (just answering) such that there were no damages which could be pled and proven under the doctrine.  Finally, the contingency fee agreement had no fees clause, with nothing in the settlement agreement indicating that former attorney was a party or third beneficiary to the settlement agreement. 

            Former attorney filed a frivolous appeal motion, but that request was denied because the case was convoluted and there was enough plausibility to some arguments given the uniqueness of the case circumstances. 

Judgment Enforcement, Section 1717, Undertaking: Denial Of § 1717 Attorney Fees To Third Party Entities Defeating Postjudgment Alter Ego Claims Reversed, But Denial Of Release Of Undertaking To Successful Member/Partner Affirmed

The Third District Followed The Reciprocity Principle Of § 1717 Set Forth In Reynolds Metals, MSY Trading, And 347 Group In Reversing The Fees Denial, But Affirmed Trial Court’s Denial Of Release Of Undertaking Based On Member/Partner’s Failure To Provide Notice.

            In Westwood Homes, Inc. v. AGCPII Villa Salerno Member, LLC, Case No. C089127 (3d Dist., June 21, 2021) (published), two third party entities were denied the $34,212 in prevailing party attorney fees they sought under Civ. Code § 1717 after defeating judgment creditors’ postjudgment attempt to add them as alter ego judgment debtors.  Additionally, a member/partner of the entities unsuccessfully moved, under Code Civ. Proc. § 720.160, to have a $10,000 undertaking posted by one of the judgment creditors released to her to partially cover the $43,450 in fees she incurred in establishing a third party claim of superior right of possession to real property on which that judgment creditor had obtained a writ of execution. Third party entities and member/partner appealed.

            Based on the reciprocity principle of § 1717, the Third District reversed and remanded as to the fees denial – finding that “[s]o far as the substance of the alter ego allegations is concerned, it is as though [third party entities] were parties to the original action, and prevailed.”  Had third party entities defeated the alter ego claims in the underlying action, they would have been prevailing parties under § 1717 and entitled to fees under the CC&R’s supporting judgment creditors’ entitlement to fees in the underlying action.  (Reynolds Metals Co. v. Alperson, 25 Cal.3d 124 (1979) [our Leading Case No. 5]; MSY Trading Inc. v. Saleen Automotive, Inc., 51 Cal.App.5^th 395 (2020) [discussed in our June 30, 2020 post]; and 347 Group, Inc. v. Philip Hawkins Architect, Inc., 58 Cal.App.5^th 209 (2020) [discussed in our December 8, 2020 post].)

            As to member/partner’s request for release of a $10,000 undertaking posted by one of the judgment creditors, the panel found no error in the trial court’s denial.  Member/partner’s noticed motion for fees, under Code Civ. Proc. § 720.160, made no mention of releasing the undertaking as a partial fee award.  Instead, member/partner orally requested release of the undertaking at the hearing on her motion – thus denying judgment creditors with a proper opportunity to address her request.  However, as the panel pointed out, member/partner’s request was denied without prejudice leaving her free to move, on a properly noticed motion, for an order releasing the undertaking.

Judgment Enforcement, Liens For Attorney Fees: $155,524.55 In Funds Transferred To Former Client Through Successor Counsel’s Client Trust Account Properly Awarded To Former Counsel

Successor Trustee’s Transfer Of Client’s Funds From His Client Trust Account Into His General Account Did Not Transform The Funds Into Successor Counsel’s Money Nor Affect Former Counsel’s Ability To Enforce His Lien.

The Queen Mary, once a proud ocean liner, then a floating hotel, Long Beach, California.  Between 1980 - 2006. Photographer, Carol M. Highsmith.  Library of Congress.

            After obtaining a default judgment for unpaid legal fees against his former client, attorney filed a lien against the former client’s interest in a fraud action against the developers of a Queen Mary project – serving notice of lien on the former client, successor counsel, and all parties involved in the fraud action.  More than five years later, former client received a $12 million judgment – ultimately receiving $155,524.55, due to judgment-proof status of defendants, which was disbursed to former client by a deposit into successor counsel’s client trust account.  Three days later, successor counsel transferred the $155,524.55 into his general account to pay fees owed to him.

            Former counsel then served a Notice of Levy under Writ of Execution, which identified successor counsel as a “Third Person in Possession of Funds,” on former client and successor counsel, and successfully renewed his judgment against former client.  Former counsel then filed two actions against successor counsel which the trial court related – one for declaratory and injunctive relief, and the second for failure to honor the notice of levy – obtaining a $155,524.55 judgment entered in his favor. 

            Successor counsel appealed – arguing that: (1) the original lien was ineffective because service of the notice of lien was not made to the address provided for former client in the court’s order, nor to his agent, and that the original lien did not exist because there was no valid writ of execution for it; (2) the later execution lien did not relate back to the original lien; and (3) that successor counsel did not possess or ever receive funds described by the notice of levy because the funds he received did not belong to former client as they were payment for successor counsel’s fees, but the 2/7 DCA affirmed in Nossaman v. Norgaard, Case No. B291410 (2d Dist., Div. 7 April 19, 2021) (unpublished).

            First, former counsel’s service of the notice of lien was indeed valid because it had been made to successor counsel and to former client at the Indonesian prison where he was located at the time – with Code Civ. Proc. § 708.410(c) requiring only that the notice of lien be served on all parties to the action in which the judgment creditor files the lien in a pending action.  Further, California Rules of Court, Rule 1.21(a) provides that service is effected by serving a represented party’s counsel.  Additionally, successor counsel’s contention that the original lien did not exist for lack of a writ of execution was without merit as a lien in a pending action is not subject to execution until after final judgment in the action. (Code Civ. Proc. § 699.720(a).)

            Next, pursuant to Code Civ. Proc. § 697.020(b), the later execution lien related back to the original lien, and substantial evidence supported the trial court’s finding.  The funds transferred to former client through successor counsel’s client trust account were covered by former counsel’s lien in the fraud action as former client’s entitlement to the funds arose from the judgment in the fraud action.   

            Finally, successor counsel’s quick transfer of former client’s funds from his client trust account to his general account did not transform the funds into successor counsel’s money nor affect former counsel’s ability to enforce his lien.

Judgment Enforcement: $118,148 In Postjudgment Enforcement And Appellate Fees Affirmed In Favor Of Prevailing Party

Many Of Appellant’s Challenges Foreclosed By Resolution In Prior Appeal Which Was Dismissed, With Remaining Challenges Not Surviving An Abuse Of Discretion Deferential Review Standard.

            In Locke Management Assn. v. Esch, Case Nos. C087137/C088192 (3d Dist. Apr. 2, 2021) (unpublished), defendant lost a right of first refusal challenge by plaintiff where there were contractual and Davis-Stirling Act fee shifting entitlement provisions.  She lost an earlier merits appeal of the lower court judgment and an award of about $150,000 in attorney’s fees to plaintiff (failing to raise fee entitlement challenges in the earlier appeal).  Sadly, she continued to fight, such that plaintiff moved for postjudgment enforcement and appellate fees of $118,148 for its further efforts in the case—which were granted.  (Plaintiff did a smart thing at the lower court level, only requesting $35,000 out of $54,028 in incurred appellate fees.)  She appealed again in the consolidated cases, but appellant lost again.  Appellant forfeited many arguments because (1) she failed to provide record citations, (2) she argued fee entitlement issues which should have been raised in the prior appeal or were implicitly decided in the prior appeal when it was dismissed, (3) she did not raise timely a failure by plaintiff to adhere to an ADR procedure by a demurrer at an earlier stage of the proceedings, and (4) the lower court’s amended judgment, one which included postjudgment fees, did not reopen earlier substantive determinations about fee entitlement.  

Judgment Enforcement: Trial Court’s Denial Of Judgment Assignee’s Motion for Code Civ. Proc. § 685.040 Attorney’s Fees, Where Underlying Judgment Entitled Judgment Creditors To Fees, Reversed And Remanded

Although Original Judgment Creditors Did Not Move For Fees In The Underlying Judgment, The Underlying Judgment Obligating Judgment Debtor To Pay Reasonable Attorney Fees Was Sufficient To Trigger § 685.040.

            Code Civ. Proc. § 685.040 entitles a judgment creditor to the reasonable and necessary costs of enforcing a judgment – including attorney fees which can be included as costs – if the underlying judgment includes an award of fees to the judgment creditor pursuant to Code Civ. Proc. § 1033.5.

            An assignee of a judgment may seek attorney fees for enforcement of the judgment under § 685.040 if the original judgment creditor would be entitled to recovery under that statute. (Miller v. Givens, 30 Cal.App.4th 18, 22 (1994).)

            In Guo v. Moorpark Recovery Service, LLC, Case No. A159195 (1^st Dist., Div. 5 February 8, 2021) (published), an assignee of the original judgment creditors engaged in collection efforts against judgment debtors and moved for attorney fees under § 685.040. Although the original judgment creditors had been deemed the prevailing parties under Code Civ. Proc. § 1032 and entitled to recover their costs of suit and reasonable attorney fees, the trial court denied assignee’s motion – relying on Imperial Bank v. Pim Electric, Inc., 33 Cal.App.4^th 540 (1995), and concluding it could not award attorney’s fees or paralegal fees because the original judgment creditors never filed a motion for fees and, therefore, fees were not “awarded” in the underlying judgment.

            Assignee appealed, and the 1/5 DCA reversed and remanded.  Case law interpreting section 685.040 looks to the judgment rather than the contract itself when determining a party’s entitlement to fees.  (Jaffe v. Pacelli, 165 Cal.App.4th 927, 935 (2008); Tomaselli v. Transamerica Ins. Co., 25 Cal.App.4th 1766, 1770 (1994).)  Though the underlying judgment did not specify an amount to be awarded, it clearly provided for an award of fees to the original judgment creditors.  As such, the judgment included an obligation by judgment debtor to pay reasonable attorney fees, and no more was required for § 685.040 to apply.  Additionally, the panel disagreed with Imperial’s conclusion that a judgment awarding reasonable attorney fees is not an award of attorney fees for purposes of § 685.040 – also finding that Imperial did not address whether a judgment that includes an award of “reasonable attorney fees” but not an award of a specified amount is an “award” of fees under § 685.040.  As a result, the 1/5 DCA found Imperial was not authority for this case. 

Judgment Enforcement: Trial Court’s Denial Of § 685.040 Fees To Unsuccessful Plaintiff And Cross-Defendant Seeking To Hold Defendants In Contempt For Failure To Comply With Judgment Reversed On Appeal

Reversal Based On Trial Court’s Errors In Determining Two Elements Required For § 685.040 Fees, But 4/3 DCA Instructs Trial Court To Reconsider The Fees Motion On Remand Based On A Third Required Element – Whether The Incurred Fees Were Reasonable And Necessary.

            A dispute over the use of a lateral sewer line was at issue in Buechler v. Butker, Case No. G058054 (4^th Dist. Div. 3 November 23, 2020) (unpublished).  The parties reached a settlement agreement whereby defendants agreed to detach their sewer system from the line.  After several months passed without detachment, plaintiff and a cross-defendant successfully moved to have the settlement entered as judgment pursuant to Code Civ. Proc., § 664.6.  Pursuant to a fees provision in the settlement agreement authorizing fees to the prevailing party on a § 664.6 motion, the trial court also awarded plaintiff and cross-defendant $5,140.00 in attorney’s fees and costs for bringing the motion. 

            Plaintiff and cross-defendant later filed an unsuccessful motion to hold defendants in contempt of court for their alleged failure to comply with the judgment – with the trial court determining that defendants’ failure to comply was not willful and was in part due to plaintiff’s interference.  Afterward, plaintiff and cross-defendant moved for attorney fees in the amount of $37,052.50 as costs of enforcing the judgment pursuant to Code Civ. Proc. § 685.040, and the trial court denied – finding two elements for determining whether postjudgment attorney fees may be awarded pursuant to § 685.040 were not satisfied.  First, the fees incurred were not for enforcement of the judgment and the contempt proceeding was unsuccessful.  Second, the trial court concluded that the parties’ stipulated settlement agreement, which was reduced to judgment, contained no provision for attorney fees. 

            Plaintiff and cross-defendant appealed the fees denial, and the 4/3 DCA reversed.

            On the first element, the panel concluded the trial court erred as the contempt proceedings were enforcement proceedings as the gist of the judgment required performance of a physical act – with the primary means by which performance may be compelled is to hold the nonperforming party in contempt.  Although plaintiff and cross-defendants’ contempt proceedings were unsuccessful, nothing in § 685.040 requires the moving party to prevail in order to recover enforcement costs.

            On the second element, § 685.040 does not require that the judgment contain a provision for further attorney fees – only that the judgment contain an award of contractual attorney fees, which the judgment in this case did.

            However, as the 4/3 DCA pointed out in a 3-0 opinion authored by Justice Ikola, neither the parties nor the trial court addressed the third element required by § 685.040 – an element vested in the sound discretion of the trial court – whether the fees incurred in the contempt motion were “reasonable and necessary” as they are required to be in order to be recoverable. 

            On remand, the appellate panel instructed the trial court to reconsider the fees motion in light of this third element.  Nevertheless, as the panel put it, “[T]he evidence supports a conclusion that [plaintiff’s] shifting position on how defendants were to replace their sewer connection, and the fees incurred in connection with that, were counterproductive and, rather than enforcing the judgment, actually inhibited the enforcement of the judgment.”

Judgment Enforcement: $60 Filing Fee For Post-jugment Debtor Examination Was Not Allowable Where It Was Not Approved By The Judge Conducting The Proceeding

Result Followed From The Clear Wording Of CCP §685.070(a)(5).

            In Banda v. Wash, Case No. F077727 (5^th Dist. Sept. 30, 2020) (unpublished), plaintiff obtained a civil harassment restraining order and concomitant attorney’s fees/costs of $16,814.  She then filed a postjudgment debtor examination proceeding to require judgment creditor to appear for an examination, paying a mandatory $60 filing fee under Government Code section 70617(a)(6).  This filing fee can be recovered under the Enforcement of Judgments Law (EJL) as a cost if it is a reasonable and necessary cost of enforcing the judgment.  Plaintiff/judgment creditor filed a memorandum of costs after judgment claiming the $60 fee, which judgment debtor moved to tax and with the lower court deciding the fee was a proper cost item.

            The Fifth District reversed as a matter of law, observing early on that the issue “presented a question of law not resolved in a published decision.”  Judgment debtor argued that the fee was not allowable because the judge conducting the exam did not approve the reasonableness or necessity of the filing fee.  Judgment creditor, conversely, argued that no approval was required because the fee is mandatory and set by statute.  The appellate court sided with judgment debtor based on the literal wording of CCP § 685.070(a)(5) which has the qualifier that the costs “have been approved as to amount, reasonableness, and necessity by the judge or referee conducting the proceeding.”  Further support for this conclusion came from the fact that the alternate way of claiming enforcement costs is to file a noticed motion for allowing costs which allows the trial judge to assess their propriety under the circumstances of the case.  After all, automatically allowing costs—even though mandatory—which are unreasonable and unnecessary would fly in the face of limiting post-judgment expenses to ones which are reasonable and necessary. 

Judgment Enforcement, SLAPP: Lower Court Did Not Err In Granting Only Minimal Postjudgment Fees/Costs Of $735 To Winning SLAPP Defendant Where Plaintiff Interpled $22,000 As An Undertaking To Secure Underlying Trial-Level SLAPP Fee Award

Requested Fees/Costs Of Almost $6,700 Were Not Reasonable Or Necessary Under CCP § 685.040.

            In Padilla III v. Jakubaitis, Case No. G057424 (4^th Dist., Div. 3 June 30, 2020) (unpublished), a SLAPP defendant successfully had stricken one cause of action, with the trial court awarding it about $14,300 in mandatory fees/costs.  While things were on appeal, plaintiff interpled $22,000 as the equivalent of an appellate undertaking.  However, defendant undertook some postjudgment enforcement efforts, then moving to recover almost $6,700 in fees and costs under CCP § 685.040, a postjudgment fee-shifting statute allowing recovery of reasonable and necessary as collectible costs after the SLAPP grant was affirmed. The trial judge found most of the fees/costs were not reasonable or not necessary, awarding only $735.  Defendant appealed, but the appellate court affirmed because the record showed plaintiff did try to “secure” the trial level fee/costs award, and the defense did not demonstrate its activities met the “reasonable/necessity” standard.  Justice Fybel penned the 3-0 decision for the court.

Judgment Enforcement, Section 1717: In A Case Of First Impression, The 4/3 DCA Affirms Section 1717 Attorney Fees To Prevailing Alter Ego Defendant In An Enforcement Action For An Underlying Breach Of Contract Judgment

Prevailing Alter Ego Defendant Would Have Been Entitled To Section 1717 Fees For Defeating Plaintiffs’ Claims If Made In The Underlying Action Even Though He Was Not A Signatory On The Contract.

            In MSY Trading Inc. v. Saleen Automotive, Inc., Case No. G057093 (4^th Dist., Div. 3 June 26, 2020) (published), judgment creditor plaintiffs brought an enforcement action against three defendants seeking to hold them liable on the underlying breach of contract judgment as alter egos of the judgment debtors.  The trial court granted the motion as to only one of the defendants and denied as to the other two defendants.

            Afterward, one of the defendants moved for attorney fees – with the trial court holding that equitable considerations entitled prevailing defendant to fees pursuant to Civil Code § 1717.  Although the immediate action was for enforcement rather than breach of contract, the trial court reasoned that defendant would have become liable for the underlying judgment as well as the attorney fees if plaintiffs had succeeded in having him added as a judgment debtor.

            On appeal, plaintiffs argued that because the action was an enforcement action and not “on a contract,” there was no statutory basis for an award of fees to prevailing defendant.  The 4/3 DCA disagreed with this “facial[ly] appealing” argument and affirmed.

            In an opinion authored by Justice Ikola, the 4/3 DCA found the principles in Reynolds Metals Co. v. Alperson, 25 Cal.3d 124 (1979) persuasive.  Reynolds holds that the intent of section 1717 is to ensure mutuality in the availability of attorney fees, and that “[i]ts purposes require [Civil Code] section 1717 be interpreted to further provide a reciprocal remedy for a nonsignatory defendant, sued on a contract as if he were a party to it, when a plaintiff would clearly be entitled to attorney’s fees should he prevail in enforcing the contractual obligation against the defendant.” (Id. at p. 128.)  Observing that if plaintiffs had brought the same alter ego allegations against defendant in the underlying breach of contract action, and defendant had prevailed, he would have been entitled to attorney fees, the appellate panel found defendant’s argument on point – that the timing of the alter ego claim should not be the basis for determination of the right to fees. 

            After all, if the timing of the alter ego claim was the deciding factor in the right to fees, all alter ego claims would be made post-judgment.

Judgment Enforcement: Because Judgment Was Not Satisfied, Post-Judgment Enforcement Fees And Costs Properly Awarded

Minor Remand Ordered For Appellate Work Scrutiny, Based On How It Was Brought.

            If you search on our blog under the “Judgment Enforcement” topical bar, you will see that the next case, Quiles v. Parent, Case No. G056687 (4^th Dist., Div. 3 Mar. 4, 2020) (unpublished) pops up quite often.  We now post on this most recent case.

            Plaintiff obtained compensatory and punitive damages in a case, with plaintiff being granted post-judgment enforcement fees of $493,017 and costs of $27,879.09.  Except to look over some appellate fee/costs on remand, the 4/3 DCA affirmed in an opinion authored by Justice Fybel.

            The main problem for the judgment debtor was that the judgment had not been satisfied, which led to the conclusion that post-judgment enforcement fees/costs/interest were still in play.  In this area, prejudgment interest begins to run at the time judgment is entered, such that an amended judgment adding fees and costs does not start a “new clock” for purposes of interest.  “No legal authority suggests the amount of that interest is wiped out instead of adjusted in light of the amendments to the original judgment as occurred here.”  (Slip Op., p. 16.) 

            The defense argued that plaintiff never served plaintiff (versus plaintiff’s counsel) with the post-judgment fees/costs motion, but this argument did not prevail given that defendant still opposed and there was no prejudice shown by the allegedly defective service.

            With respect to appellate fees/costs, the 4/3 DCA panel was careful to observe that the procedure for claiming appellate work is not governed under the Enforcement of Judgment Laws, but by CCP § 1034(b) and CRC 3.1702(c).  So, there was a reversal, but without prejudice to renewing under the proper procedural regimen.

Judgment Enforcement: It Was Abuse Of Discretion To Award Judgment Creditor Plaintiff Attorneys’ Fees For Voluntarily Dismissed Causes Of Action

Code Of Civil Procedure section 685.040 Entitled Plaintiff Only To Fees Incurred On The Single Cause Of Action On Which He Prevailed.

            Code of Civil Procedure section 685.040 allows a judgment creditor to recover reasonable and necessary attorneys’ fees incurred in enforcing a judgment if the underlying judgment includes an award of attorneys’ fees to the judgment creditor.

            In Hadaegh v. Khaligh, Case No. B291303 (2d Dist., Div. 7 January 22, 2020) (unpublished) Plaintiff filed an action to enforce a prior judgment – also alleging causes of action for fraud, fraudulent transfer, aiding and abetting fraudulent transfer, civil conspiracy, and resulting trust against Judgment Debtor and Other Defendants.

            The trial court granted Plaintiffs’ motion for judgment on the pleadings as to the enforcement of the prior judgment, and Plaintiff continued to litigate the remaining causes of action for another 15 months before voluntarily dismissing them without prejudice.

            Plaintiff then moved for attorneys’ fees in the amount of $204,575 pursuant to Code Civ. Proc. section 685.040 as the earlier judgment included attorneys’ fees.  After some reductions for fees incurred for actions against Other Defendants, the trial court awarded Plaintiff $171,687.50 against Judgment Debtor.

            Judgment Debtor appealed – arguing that a Chapter 7 Bankruptcy she had previously filed had discharged the attorneys’ fees and costs from the underlying judgment (although the underlying judgment was otherwise found to be nondischargeable) thereby “forever barr[ing] any claim for attorney’s fees, costs or expenses involved in or related to” the underlying judgment, and that the trial court had abused its discretion in awarding Plaintiff attorneys’ fees on the causes of action he voluntarily dismissed. 

            The 2/7 DCA agreed with Judgment Debtor’s argument as to the fees awarded on the dismissed causes of action – finding Plaintiff not entitled to fees incurred for causes of action for which he did not prevail.  However, Judgment Debtor’s argument related to her earlier Chapter 7 discharge of fees went nowhere.  Judgment Debtor had waived that argument by failing to timely raise it in the trial court.  Nonetheless, the 2/7 DCA included a nice discussion of this issue – ultimately finding the argument meritless.

            The judgment was reversed with direction to determine the reasonable and necessary attorneys’ fees Plaintiff incurred prior to the trial court’s grant of judgment on the pleadings.

Judgment Enforcement: Fees/Costs Incurred In Successfully Adding Judgment Debtors, Including Appellate Work To Obtain That Successful Outcome, Were Prejudgment Costs Not Governed By EJL Procedures Or Deadlines

Award Of $80,000 Each In Fees To Two Successful Plaintiffs Remanded For A Re-Do.

            In Highland Springs Conference and Training Center v. City of Banning, Case No. E069248 (4^th Dist., Div. 2 Nov. 21, 2019) (published), two CEQA petitioners obtained a successful judgment relating to an EIR certification, obtaining significant attorney’s fees under the private attorney general statute, each, against the main real party in interest.  After real party lost certain property to a foreclosure and exhausted around $14 million in capital, petitioners filed a motion under CCP § 187 to add a new party as a judgment debtor to the judgment.  The trial judge denied the motion based on a lack of diligence, but the appellate court reversed in a prior decision (see 244 Cal.App.4^th 267, 273, 282-289 (2016)).  Petitioners then sought attorney’s fees connected with the 187 motion and attendant appellate work reversing the earlier denial order; petitioners sought fees over $1,274,000 in fees based on the private attorney general statute (which included a 1.5 multiplier).  The trial court refused to award fees for the 187/appellate work, primarily determining that the Enforcement of Judgments Law (EJL) postjudgment procedures/limitations applied.  The trial judge awarded each petitioner $80,000 in fees, rejecting the lodestar request, under CCP § 11021.5.

            The 4/2 DCA reversed and remanded.

            The appellate court concluded that prejudgment costs procedures, not EJL directives, applied to petitioners’ fee work for ultimately obtaining the 187 addition of judgment debtor order (inclusive of appellate work in the prior appeal).  They reached this conclusion even though petitioners had caused confusion by indicating they were making requests under the EJL, with the appellate court piercing to the substance and determining instead that prejudgment costs were at stake.  With respect to the remand, the appellate court did not voice any definitive guidance, but did remind the trial judge that private attorney general fee awards should generally be fully compensatory in nature.  This decision has a very good discussion of the differences between prejudgment and EJL postjudgment costs procedures/ limitations (especially parsing through the germane California Rules of Court).

Judgment Enforcement, Prevailing Party: Trial Court Properly Denied Plaintiff’s Motion For Attorney Fees In An Action Brought Under The Uniform Foreign-Country Money Judgments Recognition Act

The Foreign Judgment Was Never Recognized In The California Court Given The Parties Entered Into A Settlement Agreement Prior To A Determination On The Request For Recognition.

            The Uniform Foreign-Country Money Judgments Recognition Act (Code Civ. Proc., § 1713 et seq.) (UFCMJRA) allows California courts to recognize and enforce judgments entered by courts in foreign countries.  However, recognition of a foreign judgment is not a foregone conclusion.  Rather, the party seeking recognition and enforcement of a foreign judgment must first file an action in trial court, and has the burden of establishing that the foreign judgment is entitled to recognition.  Once this burden is met, the opposing party then has the burden of establishing that a ground for nonrecognition exists.

            In Vischer AG v. Appollo Enterprise Solutions, Case No. B289410 (2d Dist., Div. 1 October 25, 2019) (unpublished), plaintiff brought a motion under UFCMJRA based on a judgment entered in its favor by the Commercial Court of the Canton of Zurich, Switzerland.  Defendant opposed the request for recognition and enforcement, but settled the dispute with plaintiff, approximately eleven months after the action was initiated, for slightly more than half of the amount plaintiff sought.

            Plaintiff then moved for an award of attorney fees for the UFCMJRA action claiming entitlement as the prevailing party for having achieved more than half of what it was seeking in the California action.  The trial court denied – determining that “[i]n a settlement there’s no prevailing party,” that there was no statutory basis for awarding attorney fees in this case, and that the Swiss judgment had never been recognized under the UFCMJRA as the action was dismissed following the parties’ settlement agreement.  

            On appeal, plaintiff argued that it was entitled to attorney fees for its judgment enforcement efforts under Swiss law and was therefore entitled to the same under the UFCMJRA.  The Second District disagreed.  The Swiss judgment had no force in California courts because it was never recognized under the UFCMJRA, and therefore could not provide a basis for an award of attorney fees. 

            BLOG COMMENT – The 2/1 DCA referenced its earlier decision Wertheim LLC v. Currency Corp. (2019) 35 Cal.App.5^th 1124, 1131 in applying the standard of review for statutory entitlement to attorney fees.  Co-contributor Mike was one of the appellate counsel on the Wertheim case which was discussed in our June 10, 2019 post.

Appeal Sanctions, Employment, Judgment Enforcement, Undertaking: Employer Fails In Multiple Attempts To Reduce Fee Award, CEO Is Properly Denied Fees Following Successful Alter Ego Challenge, And Attorney Sanctioned $7,765 For Meritless Challenge

The Fees Award Against Employer Had Been Affirmed By The Sixth District Three Years Prior, The CEO Could Not Prove Employee’s Alter Ego Claims Were Frivolous, But Employer’s Motion To Release Surety Bond So Frivolous It Warranted 6^th District’s Issuance Of Sanctions On Its Own Motion.

            We originally posted on Khanna v. Sonasoft Corp. on July 13, 2016.  Now, more than three years later, we post again on the same case.

            Our previous post pertained to the attorneys’ fees issue resolved on appeal – whether silence in the settlement agreement as to fees precluded postjudgment entitlement.  It did not where, as here, postjudgment fee recovery was allowable under a fee-shifting statute.  We now revisit that 2016 appeal as it impacts the current appeal in Khanna v. Sonafoft Corp., Case No. H044374 (6^th Dist., Sept. 27, 2019) (unpublished)

            An employee had sued his employer and its CEO for failure to promptly and fully pay his wages.  His complaint included alter ego allegations with respect to the employer and CEO.  Judgment was entered against employer pursuant to the parties’ judicially supervised confidential agreement providing a money judgment of $173,000 (adjusted from $227,000 after credit of some payments)., and later amended to include trial court awarded costs of $12,554.65, attorney fees of $153,840, and postjudgment interest of $26,794.54.  A second amended judgment was also entered to add CEO as additional judgment debtor based on the alter ego theory.

            In the 2016 appeal, employer challenged the postjudgment awards of attorney fees, costs and interest to no avail.  However, CEO successfully challenged the amendment adding him as judgment debtor. 

            Upon return to the trial court, CEO unsuccessfully moved for an award of attorney fees incurred on appeal, employer failed in its motion to have the judgment amended to reduce the fees/costs/interest awards by one-half because “equal efforts were directed to each defendant,” and employee’s motion to add surety bond issuer as judgment debtor was granted with the trial court’s finding that the requirements had been satisfied for adding the surety bond under Code Civ. Proc. section 996.440. 

            The 6^th District affirmed.

            CEO was not entitled to his fees as he failed to demonstrate that employee had brought the action against him in bad faith as required by Labor Code section 218.5(a). 

            Employer’s motion to reduce the fees/costs/interest effectively sought to relitigate issues that could no longer be raised.  It ignored the effect of the 6^th District’s affirmance of the awards in the 2016 appeal, and provided no authority empowering the trial court to amend the judgment after the 6^th District affirmed it without qualification.  

            Finally, employer’s motion to release the surety bond was filed with no supporting evidence as required by Rules of Court for motions based on matters outside the record on appeal.  Employer also failed to inform the 6^th District that it had unsuccessfully brought a similar motion in the trial court – to which it had also filed an unsuccessful motion for reconsideration.  Additionally – while acknowledging it still owed employee the awarded postjudgment interest – employer argued that it was “entitled to an automatic stay of proceedings without an undertaking” because Code Civ. Proc. section 917.1(d) provides that an undertaking is not required solely for awarded costs.  The 6^th District concluded the motion to be frivolous and completely without merit – imposing sanctions against employer’s appellate attorney on its own motion.

Interest, Judgment Enforcement: Reversal Of Judgment And Remand, Which Really Was An Upward Modification, Required That Interest On The Attorney’s Fees Award Should Run From The Date Of Original Judgment

Substance Of The Order Was Determinative.

            In Pacifica Companies LLC v. Patel, Case No. D074358 (4th Dist., Div. 1 Sept. 23, 2019) (unpublished), the 4/1 DCA in an earlier decision reversed a trial judge order denying a request for contractual attorney’s fees based upon a letter of intent agreement, remanding so that the trial judge could enter an award of reasonable prejudgment attorney’s fees.  On remand, the trial judge did just that, awarding defendants over $1.42 million in fees (out of a requested more than $2.4 million) and denying the request for 1.5 lodestar enhancement.  The trial judge then ordered that interest on the fee award should run from the date of the original judgment rather than the date of the fee award on remand.

            Plaintiffs appealed on the interest trigger date, but they lost their challenge.  After surveying several California decisions, the Pacifica II appellate panel decided that the substance of the remand was an upward modification of the judgment (even though framed like a reversal), such that interest ran from the date of the original judgment. 

Judgment Enforcement: Appellate Court Affirms $30,000 Award Of Postjudgment Enforcement Fees To Judgment Debtor, Even Though $157,418 Was Requested

1/2 DCA Does Express Great Frustration With Respect To Both Sides For Acrimonious Litigation Stemming From A $21,000 Judgment.

            Based on blogging for a number of years and reading thousands of California intermediary appellate opinions (published and unpublished), we can safely say that appellate courts, like trial judges, grow weary of litigants who are “repeat customers” for numerous times in the same case where review is sought for discretionary decisions.  Karnazes v. Hartford, Case No. A145672 (1^st Dist., Div. 2 July 31, 2019) (unpublished) is such a situation, although the appellate court also expressed even more frustration as to the litigants’ behavior in a case where the register of action was 148 pages long and evolved from a $21,000 initial judgment.

            The lower court ruled on judgment creditor’s request for postjudgment collection attorney’s fees of $157,418, awarding only $30,000—one fifth of the request.  Judgment debtor appealed, despite the deferential abuse of discretion standard applying to the issue of the reasonableness of the fee award.  (Harman v. City and County of San Francisco, 158 Cal.App.4^th 545, 556 (2007) [“our review of the award is severely constrained”].)  The 1/2 DCA affirmed, but the panel expressed extreme frustration with the behavior of the parties which stretched back a long time over a mere $21,000 original judgment.

            The panel noted that appellant’s “[i]nvective is not a substitute for reasoning” because “her generalized—and generic—arguments do not satisfy the strict standard for abuse of discretion governing fee awards.”  It also chastised appellant for her indiscriminate and unjustified attacks on the integrity of the San Mateo Superior Court.  Then, the focus shifted to Judgment creditor, who was criticized in this opinion for oppressive past judgment collection efforts and filing 204 pages of moving papers for a motion only involving nine-months work—concluding this way, “It is all hard to fathom.”

            Although affirming the fee award, the appellate court directed that the parties had to bear their respective costs on appeal.

Judgment Enforcement: Where Judgment Debtor Resisted Efforts To Allow Payment To Judgment Creditor Despite Court Deposit, Judgment Creditor Entitled To Seek Postjudgment Enforcement Fees And Costs

Although Judgment Interest Ceased, Judgment Creditor Was Entitled To Seek Fees/Costs To Obtain Satisfaction—Any Other Result Would Be Mischievous!

            Wertheim, LLC v. Currency Corporation, Case No. B277633 (2d Dist., Div. 1 June 6, 2019) (published) was a situation where judgment creditor Wertheim obtained a bonded judgment in its favor but encountered a judgment debtor which continuously fought Wertheim’s efforts to obtain payment of the judgment from an appeal bond issuer’s deposit with the court.  However, judgment debtor Currency was able to convince a lower court that Wertheim’s motion for postjudgment enforcement fees was untimely.

            The 2/1 DCA, in a 3-0 opinion authored by Acting Presiding Justice Chaney, reversed and remanded for a merits determination on Wertheim’s motion for fees and costs.  That conclusion was dictated by the fact that the appeal bond issuer’s bond deposit was not a judgment “satisfaction” under CCP § 685.030(d) and other complimentary postjudgment enforcement statutory provisions because Wertheim could never get access to the disputed funds so the judgment could be paid given Currency’s actions in blocking access to the interpled funds.  Although judgment interest did cease, the deposit did not thwart Wertheim’s efforts to obtain postjudgment fees and costs given that Currency fought Wertheim’s ability to obtain access to the interpled funds; otherwise, unintended mischievous results would occur.

            BLOG COMMENT—Co-contributor Mike was one of the appellate counsel on the case, and gives great congratulations to lead appellate counsel Matthew D. Kanin as well as to co-counsel Jay Rahimi.  We also congratulate David Pullman, principal of Wertheim and creator of Pullman Bonds. 

Judgment Enforcement: Lower Court Properly Denied Judgment Debtor’s Motion To Compel Full Satisfaction Acknowledgment From One Of Several Judgment Creditors After Payoff Of Only One Judgment Creditor

However, Judgment Creditor’s Acceptance Of Payoff Check Cut Off Further Postjudgment Fees, Even Though Other Judgment Creditors Were Not Paid Off.

            Roe v. Ma, Case No. A150320 (1st Dist., Div. 3 Jan. 31, 2019) (unpublished) is a situation where a judgment debtor having four judgment creditors under a prior integrated judgment decided to satisfy one judgment creditor with the hopes to get rid of a judgment lien on the debtor’s real estate. She did a full cashier’s check payoff to the one creditor, requesting a full acknowledgment of satisfaction. The creditor refused, only recording a partial satisfaction, and the trial judge refused to compel a broader satisfaction acknowledgment. Creditor then moved to recoup judgment enforcement fees, with the trial judge awarding him a little over half and no costs. Debtor appealed both orders, and creditor cross-appealed from the fee reduction.

            The 1/3 DCA affirmed the denial of the motion to compel satisfaction, but it reversed the fee award and dismissed the cross-appeal.

            The denial of the motion to compel acknowledgment of satisfaction was correct because only a partial satisfaction was required; otherwise, a full satisfaction would have impacted the rights of the unpaid, other judgment creditors because the broader satisfaction recording would have extinguished the entire judgment lien which also benefited the other creditors. However, the fee award went away because creditor’s acceptance of the payoff prevented any further postjudgment fee collection efforts, in line with the reasoning of Gray1 CPB, LLC v. SCC Acquisition, Inc., 233 Cal.App.4^th 882 (2015) [discussed in our January 28, 2015 post]. The appellate court also rejected the contention that the unpaid status of the other judgment creditors meant that judgment debtor was still subject to the one judgment creditor’s post-satisfaction fee request. The reversal of the fee award further mooted the cross-appeal, which was dismissed.

Judgment Enforcement/Partition: Judgment Creditor Failed To File Appeal From Partition Distribution Order So As To Challenge Fees Awarded To Successful Party In Partition Action

Also, Judgment Creditor’s Lien Against Other Tenant In Common Did Not Impact Winning Tenant In Common’s Partition Award.

            The Fourth District, Division 1, in Sikes v. Sikes, Case No. D071576 (4^th Dist., Div. 1 June 27, 2018) (unpublished), dealt with a nasty partition fight between brothers where one brother induced another brother to relocate from the East Coast to San Diego, but denied him the use of one of the residences which was a later subject of dissatisfied brother’s partition action. Dissatisfied brother basically won the partition battle against the other brother, obtaining a much more favorable distribution of proceeds from sale of the properties (including attorney’s fees expended under a common benefit theory). However, lo and behold, a judgment creditor of the losing brother—who had a judgment against the losing brother based on a road rage attack incident--tried to claim priority based on his judgment lien, but the trial court decided that the lien could not attach to winning brother’s successful partition award (attaching only to the losing brother’s award). That determination was affirmed on appeal. However, judgment creditor claimed it was improper for winning brother to obtain common benefit fees, but that challenge failed because creditor did not appeal the partition award so as to have standing to contest the fee ruling.

Judgment Enforcement: Receipt Of Check And Erroneous Execution of Judgment Acknowledgment Meant There Was No Valid Satisfaction of Judgment

Case Just As Importantly Illustrates Importance Of Fees/Costs Exposure—Plaintiff Won Only $1,002, But Was Awarded $121,125 In Fees And $7,842.26 In Costs Under Davis-Stirling Act. 

             Rivera v. 4 Streets Co-Op of Rte. 2, Inc., Case No. B281866 (2d Dist., Div. 2 Apr. 26, 2018) (unpublished) has some post-judgment enforcement lessons, but just as equally illustrates how a statute with fees/costs-shifting features can present liability way beyond just a compensatory jury verdict.

            In this one, plaintiff won a jury verdict of $1,002 against defendant co-op over the co-op board’s election, but the trial judge then awarded plaintiff $121,125 in fees and $7,842.26 in costs under a Davis-Stirling Act statutory provision.  (Yikes!)  Even more interest and post-judgment enforcement fees were added on, and some were paid along the way.  Co-op thought that it had reached a satisfaction of judgment because plaintiff’s sister (who became his successor because plaintiff died after entry of judgment) accepted a check and signed an Acknowledgment of Satisfaction of Judgment.  However, both the trial and appellate courts determined that there had been no satisfaction because (1) nothing showed Natalie cashed versus merely accepting the check, and (2) Natalie’s testimony showed she was confused in signing the Acknowledgment of Satisfaction such that there was no intent to reach a satisfaction under the circumstances. 

Liens For Attorney’s Fees/Judgment Enforcement/Retainer Agreements: Two Unpublished Decisions Discuss These Issues

Attorney’s Liens/Retainer Agreements—Primo Hospitality Group, Inc. v. The Americana At Brand, LLC, Case No. B271188 (2d Dist., Div. 5 Nov. 17, 2017) (Unpublished).

            In this case, which involved some interesting third-party creditor and offset issues of interest to judgment collection attorneys, the appellate court did agree that attorney’s liens do not have to comply with UCC perfection requirements in order to be valid.  It also determined that “gross recovery” under a contingency agreement will be determined by what recovery was effectively gained by a client after considering gains under a complaint and hits under a cross-complaint, with waiver of set-offs not making a difference as far as a recovery to attorneys.

Judgment Enforcement—Grail Semiconductor, Inc. v. Mitsubishi Electric & Electronics USA, Case No. H043762 (6^th Dist. Nov. 17, 2017) (Unpublished).

            This was one shows how judgment creditors with a foreign federal district court judgment need to strictly comply with California judgment enforcement procedures.  What happened here, in brief, was that attorney obtained a substantial award for attorney services against a former client in New York federal court, then liening client’s potential recovery in a case which was ultimately settled and dismissed (but only attached the New York federal court judgment, not registered in California).  The problem for attorneys was that they did not have an effective lien against the case which earlier settled such that moneys were disbursed.   The reason is very technical—they did not register the judgment in California, relying instead on the New York judgment which was ineffective for registration and lien purposes.  Ouch!  The interesting thing about this decision is whether it would have recognized a prior effective registration of the federal judgment in California as being valid without going through other obstacles—although we personally think a different result likely would have occurred if the judgment had been registered in California.  If you are out-of-state California attorneys seeking to enforce a judgment in this state, engage competent California judgment enforcement collection (and, vice versa, for California attorneys in other states).

Equity/Judgment Enforcement/Liens For Attorney Fees: Assignment Of Judgment To Attorney Subject To Offsets As A Matter of Equity

Result No Different Even If Classic Attorney’s Fees Lien Involved.

            Although the facts are too convoluted to discuss in detail, Lalanne v. Armanino, Case No. A147227 (1^st Dist., Div. 5 Aug. 31, 2017) (unpublished) involved a situation where an attorney obtained an assignment of judgment which was held subject to claimed offsets in the form of amounts owed under a prior judgment.  That result stood up on appeal, given that an assignment of judgment takes subject to offsets against the judgment.  However, the appellate court went further, acknowledging that even if a classic attorney’s lien was involved, relative priority of an offset and attorney’s lien is an equitable issue committed to the trial judge’s discretion.  (Crasnick v. Marquez, 248 Cal.App.4^th Supp. 1, 607 (2016).) 

Interest/Postjudgment Enforcement: Interest Accrues On First Entry of Judgment, Even When Costs (Fees Included) Are Included Later

Complicated Interpleader Dispute Still Results In Interest Accrual Result Described Above.

            Wertheim, LLC v. Currency Corp., Case No. B270926 (2d Dist., Div. 5 Aug. 25, 2017) (unpublished) involved a complicated interpleader/postjudgment dispute between various parties, among which was an insurer of an appeal bond in favor of plaintiff Wertheim.  For purposes of this blog, Wertheim won a postjudgment accrual of interest issue that implicates attorney’s fees and costs.  Specifically, the Court of Appeal concluded that interest begins to accrue on an initial judgment amount, even if it is later amended to include significant costs and attorney’s fees.  However, in an interesting twist, the appellate panel concluded interest stopped once the appeal bond surety tendered a rejected check to the superior court during convoluted proceedings, although it did agree that simply obtaining an appeals bond was not the equivalent of a tender or payment of the judgment for purposes of stopping interest accrual.

Judgment Enforcement/Sanctions: $5,000 Sanctions Award Against Judgment Debtor’s Attorney For No Answer Instructions During Judgment Debtor Examination Was Vacated

 

Reason Is That Ground For Sanctions Was Statute Only Applying To Postjudgment Interrogatories And Document Requests, Not J/D Exams.

    A lower court sanctioned a judgment debtor’s attorney to the tune of $5,000 under CCP § 2023.030 for directing a client not to answer certain questions at a judgment debtor examination.  The appellate court, in Smith Bros. Constr. v. T.S. Stone and Title, Inc., Case No. D069212 (4th Dist., Div. 1 Dec. 9, 2016) (unpublished), reversed.  The reason was simple enough:  section 2023.030 does not apply to judgment debtor exams, but only postjudgment interrogatory and document request items.  The wrong ground for the sanction was raised, a ground not allowing for imposition of sanctions.