CALIFORNIA ATTORNEY'S FEES

Arbitration/Judgment Enforcement: Parties’ “High/Low” Pre-Arbitration Agreement Enforced Where Losing Party Honored Arrangement And Was Erroneously Denied Benefit of Judgment Satisfaction Acknowledgment Procedure

 

Losing Party Played It Well All Along the Way.

     Looks like the appellate courts have been facing a lot of post-judgment enforcement fee issues lately, as recent posts have demonstrated. Here is another one to add to the list.

     Horath v. Hess, Case Nos. D063124/D063709 (4^th Dist., Div. 1 Apr. 10, 2014) (published) involved a winning arbitration claimant/plaintiff who sought to enforce a $366,527.22 arbitration award. The problem was that, before the arbitration, both sides had reached a “high/low” arrangement—not to be disclosed to the arbitrator—by which claimant would accept the lower of the arbitration award or $100,000 (but with claimant in any event obtaining not less than $44,000 even if the arbitration award was lower). Claimant agreed to accept the $100,000 (if the award was greater) plus allowable costs in satisfaction of any later confirmed judgment, even a larger judgment amount was confirmed based on the actual arbitration award. Claimant did move to confirm the $366,527.22 award, with respondent/defendant moving to force a judgment satisfaction acknowledgment given he did tender the $100,000 plus costs to claimant. Claimant argued that respondent should have moved to correct or vacate the award, with the lower court apparently agreeing by entering the full award amount, denying the judgment satisfaction motion, and awarding $5,000 in fees against respondent for bringing the satisfaction motion.

     On appeal, respondent/defendant got a clean sweep reversal.

     The “high/low” stipulation was unambiguous and should have been enforced with no necessity for a motion to correct/vacate the award. In fact, the arrangement benefited everyone: claimant got at least $44,000 in any event; respondent capped his exposure at $100,000 plus costs; and respondent obviously agreed not to contest the judgment by making the $100,000 plus costs tender. This meant the CCP § 724.050 judgment satisfaction acknowledgment motion was the correct way to go. The lower court should have granted it, so it was remanded for reconsideration—meaning it likely will be granted. That also resulted in a reversal of the $5,000 fee award to claimant under the judgment satisfaction acknowledgment fee-shifting provision (CCP § 724.080) as well as a remand to see if respondent was entitled to fees for likely gaining a judgment satisfaction. Reversal of fortune, needless to say.

      For more on the arbitration deadline problem in the case, check the April 13, 2014 post on California Mediation and Arbitration.

Judgment Enforcement: Judgment Creditor’s Acceptance Of A Cashier’s Check Constituted A Judgment Satisfaction Notwithstanding Filing Of Motion For Substantial Postjudgment Enforcement Fees

 

Commercial Code Section on Cashier’s Check Tender Went Hand in Hand With Judgment Enforcement Provisions.

      You knew this one would be fun given the first paragraph in Gray1 CPB, LLC v. SCC Acquisitions, Inc., Case No. G047429 (4^th Dist., Div. 3 Apr. 9, 2014) (published): “You cross continents and spend years trying to collect a judgment for your client. Late one Friday afternoon, the debtor’s lawyer walks into your office and hands you a cashier’s check for almost $13 million, covering the entire judgment and all accumulated interest. Do you accept the check or say, ‘no thank you, I need to make a motion for attorney fees first?’ Put another way, is a bird in the hand worth two in the bush?” 

     The particular conundrum faced by the judgment creditor in this case arose from these facts: Judgment creditor had spent more than $3 million in fees to seek collection upon a $9.1 million judgment; two years after the judgment was entered based on guaranties containing fee clauses, defendants paid the amount of the outstanding judgment and accrued interest with a cashier’s check for a little shy of $13 million, but it did not include the postjudgment fees incurred by judgment creditor. Judgment creditor field a motion for postjudgment fees and then deposited the cashier’s check, which was honored. Judgment debtor had tendered the check with a demand for satisfaction of judgment, which carries a penalty and some fee exposure if not honored properly or without proper excuse. The lower court denied judgment creditor’s fee motion, finding that the motion was made “before the judgment is satisfied in full” as required by Code of Civil Procedure section 685.080(a).) However, it did deny the judgment debtor’s request for penalties/fees after finding that judgment creditor’s failure to file a timely satisfaction of judgment was not without just cause.

     Both parties appealed, but neither changed the result.

     Here, to judgment creditor’s chagrin, the judgment was satisfied—making the postjudgment fee motion untimely—when judgment creditor accepted the cashier’s check even though depositing for honor later, the UCC equivalent of accepting cash. (Comm. Code, § 3310.) What judgment creditor could have done was reject the cashier’s check before judgment debtor actually tendered cash and then file a postjudgment fee motion. “In fact, for purposes of filing a timely motion for postjudgment costs, postjudgment creditors who are provided a cashier’s check may be in a better situation than those who are paid in cash. A judgment creditor must accept cash, but may reject a cashier’s check and instead file a motion for postjudgment costs, including attorney fees.” (Slip Opn., p. 13.)

     The defense appeal lacked merit, because the judgment creditor did file a partial judgment satisfaction acknowledgment. However, given that the state of the law was such that even the appellate court published its decision in this matter, it could not be said that the trial court erred in determining that judgment creditor had some cause for not filing a complete satisfaction at the time.

     Justice Moore authored the decision on the behalf of a 3-0 panel, using the same writing flair that we see from Justice Bedsworth (who just so happened to be on the panel).

Judgment Enforcement: Prior Unpublished Rosen Case Now Published

 

     In a March 22, 2014 post, we discussed Rosen v. LegacyQuest, a case holding that certain post-judgment enforcement fees can be collected from sureties. We can now report that this decision was certified for publication on April 8, 2014.

Intellectual Property/Judgment Enforcement: Mandatory Fee Entitlement Statutes Garnered Fee Recovery For Prevailing Judgment Creditor In Misappropriation Of Likeness Case

 

CCP § 685.040 Post-Enforcement Judgment Fees Are Allowable for Statutory and Contractual Fee Claims.

     Appealing party was probably upset that she got hit with attorney’s fees under three mandatory fee-shifting statutes after prevailing, on the whole, and obtaining a $403,872.99 payment in satisfaction of judgment from defendant after obtaining some damages from a misappropriation of likeness suit relating to her services as an infomercial actress. Defendant/judgment creditor later moved and obtained fees under these statutes: (1) Civil Code section 3344(a), mandatory for prevailing party in a likeness misappropriation case; (3) Code of Civil Procedure section 724.080, prevailing party in action/proceeding to obtain a satisfaction of judgment; and (3) Code of Civil Procedure section 685.040, a judgment creditor for fees in enforcing a judgment.

     Appealing party did not get any more “satisfaction” on appeal in Matusek v. Benn, Case No. B247621 (2d Dist., Div. 3 Mar. 26, 2014) (unpublished).

     The real post-worthy version involves ground (3) on post-judgment enforcement. Appealing party argued that this was not a contractually-based award, but the appellate court utilized Berti v. Santa Barbara Beach Properties, 145 Cal.App.4^th 70, 76-77 (2006) to find that the “provided otherwise by law” language in section 685.040 did encompass statutory fee entitlement claims for post-judgment creditors—all to the credit of the responding party on appeal.

     BLOG OBSERVATION—Actually, the result on the post-judgment enforcement issue matched very closely the conclusion of the First District, Division 1 in Rosen v. LegacyQuest, an unpublished March 21, 2014 decision discussed in our March 22, 2014 post.

Judgment Enforcement: Judgment Creditor Gets Another Chance—Denial Of Fees Against Judgment Debtors’ Sureties Reversed On Appeal

 

Sureties’ “Contractual Only” Argument Did Not Cut It On Appeal.

     Okay, our followers, this one deals with judgment enforcement. If you are interested, stay tuned—because these are indeed arcane-oriented issues. If you are not, either watch some March Madness or still read just so you maybe put something away for later use in a matter.

     Rosen v. LegacyQuest, Case No. A136985 (1^st Dist., Div. 1 Mar. 21, 2014) (unpublished) involved, as the appellate court described it, “the morass of litigation between the parties that has now spanned nearly a decade.” Judgment creditor obtained a $434,743.36 judgment against judgment debtors, which eventually was backed up by judgment debtors’ sureties later getting hit with a motion by which an augmented judgment including postjudgment interest of $592,558.74 was entered against sureties. Sureties lost an attempt to vacate the judgment and obtain a new trial both in the lower and appellate courts. Then, judgment creditor moved for postjudgment enforcement attorney’s fees and costs against the sureties. The lower court denied the fees motion, but did grant some postjudgment costs to judgment creditor, prompting an appeal by judgment creditor from the fee denial ruling.

     Judgment creditor did well in appealing.

     Judgment creditor sought fees under CCP § 685.040, which generally allows postjudgment enforcement fees and costs to a judgment creditor. However, the statute is crafted in a way where there are two sentences—one very general and another geared toward contractual actions, but with the lower court deciding that no fees could be awarded against sureties because the underlying basis (a surety statute, CCP § 996.480(a)(2)) was statutory rather than contractual in basis. The appellate court found that the sureties and lower court misread section 685.040’s scope.

     Unlike the third sentence of this provision, the second sentence applied to non-contract cases, or fees authorized by statute—falling into the “otherwise provided by law” language in the second sentence of section 685.040. (Berti v. Santa Barbara Beach Properties (2006) 145 Cal.App.4^th 70, 77; accord Ketchum v. Moses, 24 Cal.4^th 1122, 1141, 1141 n. 6 (2001).) So, judgment creditor was entitled to fee recovery against sureties based on the statutory surety fee predicate.

     So, what about fees on appeal? The appellate court decided that fees on appeal in statutory fee provisions, including the surety provision (CCP § 996.480; Grade-Way Constr. Co. v. Golden Eagle Ins. Co., 13 Cal.App.4^th 826, 837-838 (1993)), allowed for an award of fees that judgment creditor reasonably expended on appeal against sureties.

Judgment Enforcement: Trial Court Properly Required SLAPP Winning Litigant To File Noticed Motion To Justify Increased Costs Rather Than Simply Filing An Uncontested Post-Judgment Costs Memorandum

 

Judgment Creditor Seeking 15 Times Increase In Fee Judgment From $21,000 to Over $300,000 Should Have to Justify Requested Increase Through Judicially-Scrutinized Notice of Motion for Fees.

     Although we are a little surprised that this decision was not published, Karnazes v. Hartford, Case No. A136400 (1^st Dist., Div. 2 Feb. 10, 2014) (unpublished) is an interesting decision in the post-judgment enforcement area where a judgment creditor tried to resist having judicial scrutiny of a fee judgment that swelled from a little over $21,000 to more than $300,000 in an ensuing third-one month period.

     Here is the backdrop for this as described by the appellate court: “At all relevant time, Elizabeth Karnazes and John Hartford were attorneys, and for a considerable number of years appear to have practiced together. Their parting of the ways was in no sense amicable. The courts became their battleground, and the judges of San Mateo County the most unwilling observers of their repeated campaigns of scorched earth litigation tactics. This appeal deals with the aftermath of one of those many actions.”

     Defendant Hartford won a SLAPP motion and was awarded fees/costs of $21,143.37. Then, within 31 months afterwards, he filed two Memoranda of Costs After Judgment seeking to increase the $21,143.37 award to $307,667.12. However, the lower court requested that Mr. Hartford file a requested fee motion for these additional amounts pursuant to CCP § 685.080. Mr. Hartford appealed, concluding he was entitled to obtain these additional costs through the simple cost memoranda filing procedure of CCP § 685.070(b), with it only optional that he file a noticed motion under section 685.080 (something he declined to do).

     The lower court’s ruling was affirmed on appeal. Like the trial judge, the appellate court was concerned that a judgment creditor could “merely wave through” a burgeoning claim for fees/costs through a clerk-filed cost memorandum procedure rather than have judicial scrutiny of additional fees, given that SLAPP fees must be causally related to SLAPP activities and must be reasonable in nature also.

     Although noting that the costs memoranda procedure might be acceptable for contractual fee awards, it found that section 685.070(b) did not apply to the statutory SLAPP fee award. (The reviewing court seemed to be disturbed by the fact that an un-reviewed costs memo procedure could pass muster for contractual fees.) The appellate court then provided an eloquent discussion of a trial judge’s “gatekeeping” function—in discovery, evidentiary, and reasonable fee adjudicatory areas. It found nothing wrong with the lower court’s reasoning in requiring a judgment creditor to justify an additional fee request of this nature, especially so given the 15 times increase being requested. “We certainly cannot say [the lower court] abused his discretion in giving himself the opportunity to consider whether $307,667.12 was both reasonable and necessary to enforcing collection of a judgment for $21,143.14.” (Slip Opn., p. 12.)

Judgment Enforcement: Parties Who Were Not Original Debtor And Who Were Not In Contractual Privity With Judgment Creditor Still Liable For Post-Judgment Collection Fees For Conspiring With Original Debtor To Evade Enforcement of Judgment

 

CCP § 685.040 Sufficiently Broad to Cover Conspiring Parties Who Were Not Original Judgment Debtor and Who Were Not Parties to the Contract Having a Fees Clause Carrying Through to the Judgment.

     Judgment creditor went through a lot of litigation to finally obtain a judgment against parties neither originally the original debtor nor in contractual privity with judgment creditor on the agreements with contractual fee clauses. Creditor obtained a $2.17 million compensatory award, $900,000 punitive award (aggregately against certain defendants), and a $293,937.50 attorney’s fees award.

     Some defendants appealed the fee award that was based on California Code of Civil Procedure section 685.040, which allows post-judgment recovery of attorney’s fees to enforce a judgment “if the underlying judgment includes an award of attorney’s fees to the judgment creditor [if there is a contract allowing fees to be awarded as costs].” They made two principal arguments, namely, they could not be chargeable with fees because they were not the original judgment debtors under the judgment and they were not parties to the contracts with the fee clauses.

     The appellate court disagreed in Cardinale v. Miller, Case Nos. 132011/A133065 (1^st Dist., Div. 3 Jan. 8, 2014) (partially published; fee discussion published). It found that nonparties to the original judgment or original contracts conspiring to help the judgment debtor to evade a judgment can be subject to fees under section 685.040, with the language not just restricted to original debtors and with the survival of the contract from where the fees were awarded not being necessary (but only the existence of the fees and costs in the underlying judgment being the necessary predicate).

Judgment Enforcement: Appellate Court Approves Stipulated Reversal of Fee Award Based On Subsequent Law

 

     The appellate court in Driscoll v. Granite Rock Co., Case No. H038272 (6th Dist. June 18, 2013) (unpublished) granted a stipulated reversal of a fee award judgment after the state supreme court’s decision in Kirby v. Immoos Fire Protection Services, 53 Cal.4th 1244 (2012) conclusively resolved the issues adversely to the fee claimant. Based on that, the reviewing court found the stipulated reversal would promote judicial economy, providing a clue to what litigants should do when intervening law dictates a different result on fee issues.

Appealability/Judgment Enforcement: Because Underlying Judgment Was Not Based On Contract Or Other Statutory Bases Granting Fee Recovery, Postjudgment Fee Award Based On Simple Wording Of Judgment Did Not Confer Authority For Fee Grant

 

CCP § 685.040 Was Dispositive.

     County of Alameda v. Ottovich, Case No. A133891 (1st Dist., Div. 3 June 17, 2013) (unpublished) is a reminder that postjudgment enforcement fee recoveries have to meet the requirements of CCP § 685.040, with the simple recitations in a judgment not providing the necessary predicate for fee entitlement.

     In this one, way back in 2005, County obtained an encroachment default judgment against appellant, with the judgment providing that County could seek fees and costs in obtaining compliance under the judgment. However, there was no contract or statutory basis for the award. Years later, County moved for a permanent injunction, won the injunction, and was awarded $59,052.90 in attorney’s fees for enforcing the judgment under CCP § 685.040.

     Fee recovery reversed by the appellate court.

     First of all, appellant’s failure to appeal the June 2005 judgment (which did not fix fees at the time) was not fatal because a later appeal from the fee “fixing” award suffices. (PR Burke Corp. v. Victor Valley Wastewater Reclamation Authority, 98 Cal.App.4th 1047, 1054-1055 (2002); City of Santa Paula v. Narula, 114 Cal.App.4th 485, 492 (2003).)

     Section 685.040 requires a contractual or statutory basis for postjudgment enforcement fee recovery, separate and apart from a judgment recital that does not necessarily follow fee entitlement legal requirements. In this situation, the judgment itself did not meet section 685.040’s “fees authorized by law” requirement because there was no contract or statutory basis supporting fee recovery, with the Legislature eliminating equitable bases for prejudgment enforcement fee recoveries. (Tanner v. Tanner, 57 Cal.App.4th 419, 422-423 (1997) [4th Dist., Div. 3].)

Deadlines/Judgment Enforcement: Financial Elder Abuse Victor Precluded From Seeking Postjudgment Enforcement Fees Where Judgment Had Already Been Satisfied

 

Mandate of CCP § 685.080 Is Clear.

     In Conservatorship of McQueen, Case No. A134337 (1st Dist., Div. 4 Feb. 2, 2013) (unpublished), a conservator for an elder recovered a financial elder abuse judgment against an attorney, who subsequently paid the judgment in full, including interest. Conservator then moved for $57,681.90 in attorney’s fees and costs incurred for defending the judgment on appeal and bringing a fraudulent transfer lawsuit. The trial court granted the motion in substantial part over appellant attorney’s objection. awarding $56,974.50 in fees incurred on appeal and in connection with related collection efforts.

      Fee award reversed.

     The basis was simple: Code of Civil Procedure section 685.080 requires that such motions be brought before the judgment is satisfied in full, something not done here and a specific statutory section that trumped other generalized deadlines. Also, this segued in with the policy to encourage a judgment debtor to satisfy the judgment with solace, something that would not result if the debtor--thinking peace was bought-- happened to be confronted with further roundelays of postjudgment fee/costs motions. (Carnes v. Zamani, 488 F.3d 1057, 1061 (9th Cir. 2007); Lucky United Properties Investment, Inc. v. Lee, 185 Cal.App.4th 125, 144 (2010).)

Judgment Enforcement: Judgment Debtor’s Motion To Tax Costs Correctly Granted

 

Satisfaction of Judgment Already Having Been Filed Was Big Reason for Affirmance.

     In Shankar v. Chu, Case No. B231701 (2d Dist., Div. 1 May 18, 2012) (unpublished), judgment creditor filed an acknowledgment of satisfaction of judgment and later filed a memorandum of costs after judgment. The trial court refused to set aside the satisfaction of judgment and granted judgment debtor’s motion to tax the judgment creditor’s costs memorandum, prompting an appeal.

     The trial court did not err.

     First of all, judgment debtor’s CCP § 473 motion to allow him to set aside the satisfaction of judgment was improper because he cited no authority indicating the filing of satisfaction of judgment was “a judgment, dismissal, order, or other proceeding taken against him.” Also, the costs memorandum was not timely because it had to be done before a judgment is fully satisfied under CCP § 685.070(b).

Judgment Enforcement Two-Fer: Improperly Issued Writ Of Execution Before Entry Of Fee Award Had To Be First Challenged In Trial Court Quash Proceeding First And Attorney’s Fees Judgment Paid By One Group Of Defendants Extinguished Judgment For Offse

 

Rivas v. Altawood, Inc., Case No. E049597 (4th Dist., Div. 2 Apr. 18, 2012) (unpublished).

     In this one, while the matter was on appeal, the trial court vacated an attorney’s fees award. However, a mix up occurred and a subsequent writ of execution was issued based on the fees award. The appellate court easily found the writ was improperly issued (after all, there was no necessary fee award predicate), but found that appellant’s remedy was to move to quash the writ of execution in the trial court. If that had been done and appellant appealed from a denial of a quash request, that order could have been reviewed.

Matusek v. Benn, Case No. B229234 (2d Dist, Div. 3 Apr. 18, 2012) (unpublished).

     The second in our series involved a situation where plaintiff and one defendant group got “dueling” fee awards, with plaintiff prevailing on some claims and the defense non-suiting on one claim (the claims all having fee entitlement bases). The twist in this one was that one group of defendants satisfied the adverse judgment, including the award of fees and costs. Plaintiff argued that the non-satisfying defendant had to have her fee/costs judgment “offset” against that defendant’s fee/costs judgment. Not so, said the appellate panel. The reason was that the prior defendants’ satisfaction of plaintiff’s fees/costs award effectively extinguished that award because there can only be one satisfaction for an injury--meaning no offset was available. (McCall v. Four Star Music Co., 51 Cal.App.4th 1394, 1398 (1996).)

Judgment Enforcement: Acknowledge Satisfaction Of Judgment And Then Appeal Underlying Judgment Error--Or Suffer The Fate Of Owing Attorney’s Fees For Losing Appeal After Not Satisfying Judgment

 

Fate Is In Your Hands, Oh Judgment Creditor Appealing Judgment Offset Order Under CCP § 473--Acknowledge Satisfaction or Risk Fees.

     The First District, Division 1 in Zocca v. Zocca, Case No. A130701 (1st Dist., Div. 1 Mar. 6, 2012) (unpublished)--think this is a family rite/fight, and you are right, being the latest appeal arising from more than 25 years of litigation between two brothers and one of the brother’s wives--teaches a great object lesson to a judgment creditor believing that an offset order against a judgment was incorrect. Acknowledge satisfaction of the judgment and then appeal; don’t stay cantankerous, refuse to acknowledge satisfaction of (erroneous, you think) judgment, and be subjected to statutory attorney’s fees for failing to acknowledge a satisfaction of judgment after losing the appeal. (CCP § 724.080 has a mandatory fee-shifting provision requiring an award of fees to a prevailing party winning the appeal of an acknowledgment of satisfaction order, one way or the other.)

     In this one, one of the brothers won an appeal affirming a lower court motion requiring the other brother to execute and deliver a satisfaction of judgment based on a prior offset order. Winning brother on appeal sought an award of attorney’s fees under section 724.080 of $44,152.50, but was awarded $32,000 instead. Losing brother appealed the fee order.

Judgment Enforcement: Notice Of Lien Encompassing Prior Fee Judgment To Law Firm Enforcement Order Had To Be Reversed

 

Lower Court Needed to Enter Final Judgment Under CCP § 708.470, But Appellate Court Preserved Priority Status Quo While This Was Being Accomplished.

     Well-known Orange County law firm in Grabowski v. Rutan & Tucker, Case No. G044438 (4th Dist., Div. 3 Feb. 24, 2012) (unpublished) obtained a judgment against client for legal fees. Five years later, law firm learned that client would get a large settlement from resolution of a family dispute. Law firm files a notice of judgment lien in the family dispute action to claim its stake to the settlement proceeds. After the lower court ordered the parties to prepare a final judgment in the case (which apparently was never accomplished), the law firm filed a motion for order for satisfaction of judgment lien under CCP § 708.40. The trial court granted the motion, but the appellate court reversed with caveats.

     Presiding Justice O’Leary (she was confirmed as P.J. on February 10, 2012--the first female P.J. of the 4/3 court), in a 3-0 opinion, did a nice job of explaining the notice of lien judgment creditor scheme, which indeed is creditor friendly but with due process protections for debtor and other competing creditors. However, you gotta have a final judgment in the pending action before the lien can be satisfied. Get a final judgment, the appellate court said, and everything will be okay for lien satisfaction. In the interim, the appellate court reiterated that law firm’s lien retained its priority as of the date of its initial filing in the family dispute action.

Equity/Judgment Enforcement: Appellate Court Discusses Fee Recovery From Injunction Bonds And Mandatory Nature Of Fees For Judgment Creditors’ Failures To Acknowledge Satisfactions Of Judgments

 

Unpublished Decision Takes on Issues in Post-Judgment Phase of Case.

     Although really an abuse of discretion/substantial evidence case on appeal, Terzian-Feliz v. Ajamian, Case No. A128900 (1st Dist., Div. 4 Feb. 21, 2012) (unpublished) does discuss several important principles relating to injunction bonds and post-judgment enforcement procedures.

     First, recoverable attorney’s fees are “costs” that can be recovered under an injunction bond, including enforcement through a motion in the original action. (Code Civ. Proc., § 996.440(a).) This enforcement procedure is summary in nature, but allows the trial court to adjudge credibility based upon declarations/affidavits--in stark contrast to summary judgment motions where factual determinations are taboo.

     Second, attorney’s fees incurred to successfully defend the entire underlying action--which means that the preliminary injunction was defeated--are recoverable in entirety subject to fee reasonableness limitations. (Russell v. United Pacific Ins. Co., 214 Cal.App.2d 78, 85-86 (1963).)

     Third, a trial court has discretion to increase the injunction bond upon proof that more fees have been expended to defend the case as compared to the amount of the previously posted bond. This can be done through a motion supported by a defense declaration, subject to the lower court’s credibility determinations as to the testimony. Any opposition to an increase request proceeds based on declarations/affidavits also. (Code Civ. Proc., § 996.010(b)-(d).)

     Fourth, enforcement of the injunction bond has to await entry of a final judgment in the underlying action. (§ 996.440(b).)

     Fifth, a judgment creditor’s failure to acknowledge a satisfaction of judgment does allow the judgment debtor to move to compel such acknowledgment, with judgment creditor not being able to condition the acknowledgment on paying amounts in excess of the particular judgment involved--meaning that the judgment creditor may need to obtain a separate judgment to recover injunction bond and appellate costs in many cases. When a judgment debtor prevails on such a motion to compel acknowledgment of judgment satisfaction, the trial court must award reasonable fees. (Code Civ. Proc., § 724.080; Lucky United Properties Investment, Inc. v. Lee, 185 Cal.App.4th 125, 140 (2010) [discussed in our May 29, 2010 post].)

Judgment Enforcement: Appellate Court Affirms 40% Reduction of Fees Incurred On Remand Of Prior Appeal Allowing Recovery Of Bankruptcy Judgment Enforcement Efforts

 

$274,495 Request Properly Pared Down to $164,697.

     Pacelli v. Jaffe, Case No. B213228 (2d Dist., Div. 3 Jan. 9, 2012) (unpublished) is the culmination of a lot of fights involving post-judgment enforcement proceedings. After the appellate court remanded to allow the judgment creditor to recover for post-judgment enforcement efforts in the bankruptcy court under Code of Civil Procedure section 685.040, the lower court only awarded judgment creditor $164,697 out of a requested $274,495--almost a 40% reduction. The appellate court found no abuse of discretion in the reduction, and also chastised the appellants for making “counterproductive” attacks on the deciding judge’s character.

Judgment Enforcement: Costs And Attorney’s Fees Properly Allowed To Attorney Firm Judgment Creditor In Renewing Judgments Against Former Clients

 

Judgment Debtors’ Failure to Timely File Motions to Costs Was Expensive--Resulting in Affirmance of Renewal Costs/Fee of Almost $750,000

     As the “latest chapter of a 10-year saga,” judgment debtors (former clients) appealed a lower court’s grant of fees/costs to judgment creditor law firm in a total of sum of about $750,000 under postjudgment renewal statutes (Code of Civil Procedure sections 685.040 and 685.040). The problem here was that judgment debtors failed to file a motion to tax the requested costs within the 10 day deadline after the costs memoranda were served on judgment debtors. Judgment debtors appealed, but lost.

     The infirmity was that the 10-day deadline under section 685.070(c) is clear in nature and has no exceptions to it. (Lucky United Properties Investment, Inc. v. Lee, 185 Cal.App.4th 125, 146 (2010).)

     However, judgment debtors creatively argued that the costs could be challenged through a section 683.170 motion to vacate the renewed judgment. Although finding a “dearth of published cases construing section 683.170 and none deal with the issue currently before us,” the appellate court took solace in sister state judgment law, finding that none of the common defenses of sister state judgments fit within the section 683.170 challenge being advanced by judgment debtors. Besides, if judgment debtors were permitted to challenge costs under section 683.170 after forfeiting their right to do so under section 685.070(d), “section 685.070’s procedure for challenging costs would become meaningless.” (Slip Opn., p. 14.)

     Code of Civil Procedure section 473’s relief from forfeiture provisions did not aid judgment debtors, because the delay in seeking the relief appeared to be a tactical decision more than a mistake caused by inadvertence or excusable neglect.

     The decision affirming the renewed judgment fees/costs award is Keenan v. Webb & Carey, APC, Case No. D057430 (4th Dist., Div. 1 Aug. 16, 2011) (unpublished).

Judgment Enforcement: Attorney’s Fees Not Authorized For Prevailing In Independent Creditor’s Suit

Reversal of Fortune, With Appellate Court Reversing $1,492,643.71 Fees Award.

     In an interesting dispute over moneys contractually owed for home video distribution of the Steven Seagal movie “The Patriot,”

a judgment creditor won an independent creditor’s suit under Code of Civil Procedure section 708.210 et seq., with the lower court also awarding $1,492,643.71 in attorney’s fees to judgment creditor pursuant to section 701.020(c).

     The Second District, Division 1, in a 3-0 unanimous decision on the fees issue, reversed in Ilshin Investment Co., Ltd. v. Buena Vista Home Entertainment, Inc., Case No. B208839 (2d Dist., Div. 1 May 13, 2011) (certified for partial publication; fees award discussion published).

     Justice Chaney, writing for the reviewing court, found that no fees are authorized for recovery under the independent creditor’s suit scheme. The discretionary fee-shifting provision relied on by the trial court--section 701.020(c)--concerns procedures for enforcement of judgments by writs of execution, rather than use of the independent creditor’s suit procedure.

     Big reversal of fortune on the fee front for judgment creditor in this one.

Judgment Enforcement/Minors: Defense Costs From Minor Dismissing Case Should Not Be Imposed Against Guardian Ad Litem

Court of Appeal Issued Mandate Quashing Judgment Debtor Exam Proceeding Against Guardian.

     In Beasley v. Superior Court, Case No. D057308 (4th Dist., Div. 1 Dec. 10, 2010) (unpublished), a minor, through a grandmother who was appointed as guardian ad litem, had costs assessed against her in a case after it was voluntarily dismissed. The defense then sought to take a judgment debtor examination of guardian, personally, in order to see if there were assets to satisfy the $12,120.60 costs award.

     The Court of Appeal issued mandate, finding that the judgment debtor exam should be quashed. Reason? Guardian ad litem only serves in a representative capacity, and should not be liable for costs unless guardian was guilty of mismanagement or fraud--circumstances not even remotely in play.

Judgment Enforcement: Denial Of Fee Recovery For Post-Judgment Efforts, Including Fraudulent Conveyance Action Producing Return Of Property, Reversed And Remanded

Fourth District, Division 2 Finds No “Prevailing Party” Standard Applies in Post-Judgment Collection Efforts With Respect to Fee Recovery.

     In this category, we have examined several decisions dealing with statutes that allow for fee recovery, if certain conditions are met (with a judgment having to provide for fee recovery), under Code of Civil Procedure sections 685.040 and 685.080. Section 685.040 simply provides “[t]he judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment” including attorney’s fees “if the underlying judgment includes an award of attorney’s fees to the judgment creditor” pursuant to contract, statute or law, having no “prevailing party” language. The next unpublished decision, coming out of the Fourth District, Division 2, dealt with post-judgment collection efforts arising out of a prior anti-SLAPP win.

     Cochran v. City of Murrieta, Case No. E050649 (4th Dist., Div. 2 Nov. 30, 2010 unpublished) concerned a defendant who won anti-SLAPP fee recovery against certain plaintiffs, with defendant bringing a separate fraudulent conveyance action by which she obtained reconveyance of a piece of property from one losing plaintiff to plaintiff’s minor daughter (to provide a college fund, losing plaintiff said at a judgment debtor exam). Defendant then moved to recover additional attorney’s fees of $23,790, some in the pending case for post-judgment collection efforts and some incurred in the fraudulent conveyance action. The lower denied the requests for fees, basically expressly doubt that there was authority to award fees.  An appeal followed.

Judgment Enforcement: CCP § 685.040 Post-Judgment Enforcement Fees Not Applicable For Win in Priority Contest Between Two Judgment Creditors

Second District, Division 8 Finds Globalist Distinguishable in Priority Battle.

     In Globalist Internet Technologies v. Reda, 167 Cal.App.4th 1267 (2008), the Court of Appeal found that Code of Civil Procedure section 685.040 allowed attorney’s fees recovery to a judgment creditor in efforts pursuing collection of the judgment against judgment debtor. The next case involved a clash between judgment creditors, with the lower court refusing to award $72,807.79 in postjudgment costs (consisting mainly of $61,853.50 in fees) against the judgment debtor for judgment creditor’s successful litigation of the priority issue against another judgment creditor when it was clear that the judgment debtor had insufficient assets to satisfy both judgments. Winning judgment creditor appealed the denial of fees, arguing that Globalist should be extended to encompass priority disputes with respect to assessing section 685.040 fees against judgment debtor.

     Acting Presiding Justice Rubin, writing for a 3-0 panel of the Second District, Division 8, found that the lower court properly refused to extend Globalist to a priority battle between two judgment creditors. “Section 685.040 ensures that a recalcitrant judgment debtor does not reduce a creditor’s judgment to a hollow victory by forcing the creditor to eat up a judgment’s value with attorney fees trying to enforce the judgment. Extending section 685.040 to permit recovery of fees from the debtor for acts by third parties over whom the debtor has no control will not advance that purpose. Indeed, [winning judgment creditor’s] proposal risks imposing open-ended liability on judgment debtors such as respondents for events, such as [losing judgment creditor’s] intervention against [winning judgment creditor], beyond a judgment debtor’s control.”

     The decision is Slates v. Gorabi, Case No. B217067 (2d Dist., Div. 8 Nov. 5, 2010) (certified for publication).

Judgment Merger Of Fees Clause: Does Not Bar Fees Arising From Events Occurring After Entry of First Judgment

 

Second District, Division 6 Applies Exception to the General Rule.

     Generally, a judgment for damages under a contract replaces a defendant’s duty to perform the contract, which extinguishes any fee clause upon entry of judgment (except for postjudgment recovery of fees as specified under the CRC). (Jaffe v. Pacelli, 165 Cal.App.4^th 927, 934.) However, in Sudman v. Young, Case No. B217157 (2d Dist., Div. 6 June 22, 2010) (unpublished), the appellate court reminded us of an important exception: the merger is not a bar where a subsequent claim for fees is based on a different cause of action or facts occurring after entry of a prior judgment. (Allied Fire Protection v. Diede Construction, Inc., 127 Cal.App.4^th 150, 155 (2005).) The exception did apply in the facts before the panel, which led to affirmance of a $33,092.21 fee award in favor of the winning plaintiffs.

Interest on Attorney’s Fees Award: Interest Runs From Date of Fee Award, Not Earlier

Fourth District, Division 3 Agrees With Trial Court—“This Is An Easy One.”

     It is not that often that an appellate court agrees with a trial court’s assessment that “this is an easy one.” Well, you have that end result in the next case we review.

     In Golden Rain Foundation v. Lyon, Case No. G042358 (4^th Dist., Div. 3 May 20, 2010) (unpublished), defendant won an attorney’s fees award of $105,000 under the Davis-Stirling Act and private attorney general statute (out of more than $250,000 in requested fees). However, losing plaintiff got in a beef with defendant about when it had to pay interest on the fee award. Plaintiff paid interest on the fee award accruing from the date of the fee award, whereas defendant insisted upon an additional payment of interest running from the date of the underlying merits judgment. Finding this an “easy one,” the trial court found that plaintiff owed nothing more, with interest only accruing from the date of the fee award.

     Defendant appealed. The appellate court liked with the trial court’s analysis.

     Justice Ikola, writing on behalf of a 3-0 panel, agreed that the fee award was not certain until the trial court ruled on the motion. Hence, interest did not run until the date of the fee award. This result occurred both under Civil Code section 3287(a) (prejudgment interest liquidated statute) and Code of Civil Procedure section 685.020(a) (interest accrues on a separate judgment, with the fee award being a separate judgment).

     Easy as pie, the Court of Appeal ruled in affirming the case involving denial of more interest to the winning defendant on a “paid” fee award.

Judgment Enforcement: 10% Postjudgment Interest Runs From Date of Earlier Judgment, Even When Costs and Fee Awards Occurred Down The Line

 

Court of Appeal Construes Judgment By Its Terms and Per CCP § 685.020(a).

     So, here is one for all of you judgment enforcement addicts. (Are there such things? Some, we likely believe.)

     Commercial tenant did pretty well in a convoluted lease modification and rent renewal dispute, beating the claims of landlord as well as being awarded costs of $52,768.84 (the full monty) and fees of $1,798,105 (out of a requested $2.5 million).

     Losing landlord was less enthused, appealing in Pacific Pejiu Wu Restaurant Partners v. Haramis, Case Nos. A123117, A123918, & A124430 (1^st Dist., Div. 5 Apr. 2, 2010) (unpublished).

Judgment Enforcement: Judgment Debtor Entitled To Fees And Statutory Penalty Where Faxed Demand For Satisfaction Acknowledgment Was Received

Fourth District, Division 3 Found Fee Recovery Justified Even Though Satisfaction Demand Not Delivered Per Statute.

     Code of Civil Procedure section 724.050 provides the exclusive procedure for compelling an acknowledgment of satisfaction of judgment, requiring the party demanding the acknowledgment to deliver its demand with certain warnings either personally or by U.S. mail. A statutory penalty (section 724.050(e)) and mandatory attorney’s fees to the prevailing party (section 724.080) can be awarded in satisfaction demand disputes.

     So, what happens if the judgment debtor delivers the satisfaction demand by fax and it is actually received? Is the failure to strictly comply with statutory delivery requirements fatal to receiving the penalty and fees?

     No, said the Fourth District, Division 3 in Western Ethanol Co. v. Midwest Renewable Energy, Case No. G041841 (4^th Dist., Div. 3 Feb. 24, 2010) (unpublished), a 3-0 decision authored by Justice Bedsworth.

     The appellate court found that judgment creditor had actually received the satisfaction demand such that the fax delivery (versus personal or U.S. mail delivery) was not prejudicial in nature. There could be no confusion because section 724.050(c) provides that the 15-day deadline for satisfaction demand compliance runs from “actual receipt of the demand,” and judgment creditor did not deny that it received the demand. The Court of Appeal affirmed a lower court’s award of $7,400 in fees and $350 in penalties to the judgment debtor requesting the satisfaction acknowledgment (and all this over satisfaction of a principal judgment of $45,165.39).

     The decision also has a nice discussion of “accord and satisfaction” principles in the context of a potential future appeal and retention of an uncashed check by the judgment creditor for an unreasonable length of time.

     BLOG FAVORITE QUOTE—In discussing one of appellant’s technical arguments on appeal and an objection to the form (rather than substance) of respondent’s compliance, Justice Bedsworth summarized the challenge this way: “In effect, [appellant] is asserting [respondent] failed to say “Mother may I.’”

Post-Arbitration Fees and Judgment Enforcement: Court Of Appeal Considers Some Interesting Fee Award Appellate Challenges In These Two Areas

 

Sixth District Likes Trial Court’s Rulings Across the Board on Fee Issues.

     In Exatron, Inc. DiFrancesco, Case No. H033094 (6^th Dist. Dec. 9, 2009) (unpublished), plaintiff’s prior attorney’s fees and costs award from a contractual arbitration against defendant were affirmed in a prior appellate decision. Nine months later, plaintiff filed for supplemental fees and expenses of $105,919 to confirm the arbitration award, enforce the judgment, and defend the appeal. Ultimately, the trial court determined that plaintiff was only entitled to recover $42,195 in attorney’s fees incurred in enforcing the judgment (the confirmed arbitration award), denying in the process plaintiff’s Code of Civil Procedure section 473 mandatory and discretionary motions to allow the other supplemental fees and expenses.

     Both sides appealed; both sides lost.

Enforcement of Judgments: Judgment Debtors Beating Judgment Creditor Claims In Interpleader Entitled To Awards Of Costs As Prevailing Party

 

Judgment Creditor Also Not Entitled to Prevailing Party Fees Under Judgment Enforcement Statute Even Though No Net Monetary Recovery Gained Under the Statute.

     Here is a fairly arcane decision for you practitioners that are judgment enforcement specialists, affirming an award of costs to judgment debtors and denying judgment creditor’s appeal that he was entitled to fee because no net monetary recovery was awarded under a specific judgment enforcement statute with prevailing party language.

     Commonwealth Land Title Co. v. Zocca, Case Nos. A120397 & A122294 (1^st Dist., Div. 1 Oct. 15, 2009) (unpublished) involved a longstanding feud been one brother against another brother and sister-in-law arising out of a $11,800 judgment obtained by bro 1 (judgment creditor) against bro 2/sis-in-law (judgment debtors). Because lots of interest had accrued on the judgment and the judgment debtors wanted to refinance a house, a title company filed an interpleader action to determine everyone’s rights and get itself out of the fracas. That was not the end of things, because judgment debtors filed a tort action based on their view that judgment creditor was demanding an excessive payoff amount in return for release of his judgment lien on the house. Eventually, judgment debtors obtained a summary adjudication ruling that the judgment lien had expired (because it was time barred). The tort claim was dismissed, was appealed, and was reversed and sent back with directions to see if judgment debtors could proceed with a statutory claim under Code of Civil Procedure section 724.070, which allows a judgment debtor to collect actual damages or $250 (whichever is greater) for an intentional excessive payoff demand by a judgment creditor. Following yet another appeal, a jury returned a verdict finding an intentionally excessive payoff by judgment creditor but also found judgment debtors did not suffer any damages. The trial court determined that (1) judgment debtors were entitled to the interpled funds based on the expiration of the judgment lien; (2) judgment debtors were each entitled to the minimum $250 statutory damage award under section 724.070, but no net damages were awardable because of offsetting amounts owed to judgment creditor under the expired judgment; (3) judgment debtors were the prevailing parties for a routine costs award; and (4) no one prevailed for purposes of fees under CCP section 724.080 (which allows fees to a prevailing party in an intentional excessive payoff case).

     If you are already significantly confused (although we are not), judgment debtors were apparently okay with the result but not judgment creditor—who appealed many, many rulings (including the prevailing party costs and fees issues).

Family Law/Foreign Judgment Enforcement: British “Maintenance” Award Of Attorney’s Fees Was “Support” Award That Could Not Be Enforced Under Uniform Foreign Money-Judgments Recognition Act

Third District Reverses Trial Court Recognition of Fee Award from Britain.

     In the next one, Brits might think that we pesky U.S. rebels just have it in for them. Not quite, it simply was a technical interpretation of what awards can and cannot be enforced under the Uniform Foreign Money-Judgments Recognition Act, Civil Code sections 1713 et seq., which governs enforcement of foreign judgments in California (and most U.S.) courts.

     In re Marriage of Lyustiger, Case No. C057861 (3d Dist. Sept. 29, 2008) (certified for publication) decided that a British “maintenance” award of 50,000 pounds for wife’s attorney’s fees was a “support” award that could not be enforced under the Uniform Act. (See Civ. Code, former sec. 1713.1(2), pre-2007 amendments, because the subject action was commenced in 2006.) The award of attorney’s fees, under the British award, was broad enough to be encompassed within the “support” prohibition. The trial court did enforce the British award in Yolo County Superior Court, a determination which was reversed by the Third District. [NOTE—2005 amendments to the Uniform Act, which were not applicable, do not seem to alter the “support” exception to enforcement.]

Judgments: Court Of Appeal Affirms Refusal To Enforce Judgment Against Attorney Where Attorney Legitimately Performed Services And Was Paid Fees Before Imposition of Constructive Trust Against Client’s Property

Third District Finds No Basis to Make Attorney Liable for Judgment Against Client.

     In Monier-Kilgore v. Flores, Case No. C054502 (3d Dist. June 30, 2009) (unpublished), an attorney was paid about $532,000 in fees after helping his clients collect insurance proceeds from two recalcitrant insurers (receiving his contingency portion) and defending clients against plaintiffs’ action (on an hourly basis). Attorney was paid by July 2006, and plaintiffs later obtained entry of a damages/constructive trust judgment against attorney’s clients. Plaintiffs then attempted to enforce the judgment against attorney, a request denied by both the trial and appellate courts.

Judgment Enforcement: Judgment Creditor Could Not Gain Fee Recovery Against Subsequent Fraudulent Transferee Who Was A Party to Original Judgment

Judgment Creditor’s Use of Clerk Default Fee Schedule Did Not Give Basis to Deny Fee Award, But Other Bases Did.

     Under our category “Judgment Enforcement,” we previously have discussed the operation of Code of Civil Procedure section 685.040, which provides that attorney’s fees incurred in enforcing a judgment are recoverable as an element of costs if the judgment included a fee award to the judgment creditor. This provision was again involved in the next unpublished opinion that we examine.

     Resnik v. Roberts, Case No. D050656 (4^th Dist., Div. 1 June 24, 2009 ) (unpublished) involved a situation where judgment creditor with a default judgment tried to enforce it against an alleged fraudulent transferee of assets from the original judgment debtor. Judgment creditor prevailed and also sought to recover $261,948 in attorney’s fees incurred in the second action because the original judgment had a fees clause against judgment debtor. The trial court denied the fee request, principally on the ground that judgment creditor sought fees under local court rules for clerk default prove-ups rather than pursuant to an independent court default prove-up. Judgment creditor was miffed, appealing the fee denial ruling.

Enforcement of Costs/Fee Awards: Trial Court Still Has Discretion To Order An Undertaking For Postjudgment Costs/Fee Order Even Where Defendants Paid Off Prior Damages Judgment

First District, Division 1 Grants Writ of Mandate Because Trial Court Failed to Exercise Any Discretion on Undertaking for Substantial Cost/Fees Order.

     This post is somewhat complimentary to our June 12, 2009 post on Tracy v. Tracy, where a reversal and remand was required because a trial court failed to actually exercise its discretion based on a legal misreading of a judgment. Here, a similar situation arose in a post-judgment undertaking motion, where an aggrieved plaintiff filed a writ of mandate to remedy a perceived lower court error. Plaintiff was right to do so.

     W. Wong Construction Co., Inc. v. Superior Court, Case No. A124013 (1^st Dist., Div. 1 June 11, 2009) (unpublished) concerned a business plaintiff which won a $131,338.57 damages judgment, which they appealed but paid off. Later, the trial court awarded plaintiff costs in the amount of $28,672.56 and attorney’s fees in the amount of $370,955.20, determinations separately appealed. (BLOG OBSERVATION—Defendants prudently separately appealed the subsequent costs/fee order, a practice we have recommended many times in our category “Appealability.” The appellate panel did indicate that no separate appeal was necessary in this situation because the damages judgment did indicate that plaintiff was the prevailing party for costs and fees, which means the appeal of the first damages order subsumed the later order under Grant v. List & Lathrop, 2 Cal.App.4^th 993, 998 (1992) and later cases such as Amwest Surety Ins. Co. v. Patriot Homes, Inc., 135 Cal.App.4^th 82, 84 (2005). However, the Court of Appeal did agree with us, observing “[t]he normal practice, however, is to appeal both the judgment and the subsequent award” and citing in support Torres v. City of San Diego, 154 Cal.App.4^th 214, 222 (2007).)

Post-Judgment Enforcement Undertakings: No Attorney’s Fee Entitlement In Governing California Statute

Second District, Division 6 Considers Scope of CCP Section 720.260.

     Code of Civil Procedure section 720.260(c) allows a creditor with a competing claim to prevent release of funds to a secured party or lienholder claiming priority by posting an undertaking in favor of secured party/lienholder to “[i]ndemnify the secured party or lienholder against any loss, liability, damages, costs, and attorney’s fees, incurred by reason of the enforcement proceedings.” The next case explored whether this meant that the winning lienholder also obtains entitlement to fees in the subsequent action on the undertaking in which lienholder prevailed.

Post-Judgment Enforcement: Supplemental Costs Memorandum Seeking Fees Must Be Served Upon Judgment Debtor

Second District, Division 1 Reverses Supplemental Fee Award Based Upon Lack of Notice.

     Under Code of Civil Procedure section 685.040, a judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment. Recoverable costs include attorney’s fees incurred in enforcing a judgment, where the original judgment includes a fee award pursuant to a contractual fees provision. The judgment creditor can seek recovery of those enforcement fees by filing either a costs memorandum under section 685.070(b) or a noticed motion under section 685.080(a). Judgment creditor (an attorney) doggedly pursued judgment debtor (ex-client) for supplemental fees on a default judgment for a 4-year enforcement period by filing an application for supplemental fees (deemed to be the equivalent of a costs memorandum) without notice to the judgment debtor. The simple question for the Court of Appeal: was the application valid without notice to the debtor?

Mixed Result In Decade Long Litigation: Substantial Attorney’s Fees Award Goes “Poof” When Plaintiff Should Have Been Given Leave To Amend, But Plaintiff Denied Post-Judgment Enforcement Fees

Second District, Division 7 Publishes Decision in Decade Long Battle Arising From Credit Impairment Allegations.

     Although too long to recite in detail (43 pages in length), Sanai v. Saltz, Case Nos. B198217 & B202787 (2d Dist., Div. 7 Jan. 26, 2009) (certified for publication) chronicles a donnybrook between a former in pro per renter (a transactional lawyer who learned litigation along the way), credit-reporting service, and landlord over a credit reporting dispute arising out of claimed unpaid rent under $5,000. (Yes, you heard that right.) The case demonstrates the “poof” principle and reinforces that a judgment must award fees in order for the judgment creditor to obtain post-enforcement attorney’s fees by statute.

      Click it up; here are the facts.

Judgment Enforcement: Contractual Fees Clause Not Trumped By Bankruptcy

Second District Remands For Fee Determination in Split Opinion.

     Under our category “Judgment Enforcement,” we have discussed prior cases construing Code of Civil Procedure section 685.040, which allows a judgment creditor to recover reasonable and necessary attorney’s fees incurred in “enforcing” a judgment if the underlying judgment includes an award of fees to the judgment creditor. The Second District, as 2008 drew to an end, has now considered this anew in a familiar setting—bankruptcy proceedings that intertwine with state court litigation—but with a divergence in opinion as to the proper result.

Enforcement Of Foreign Judgment Awarding Attorney’s Fees Against Plaintiff’s Attorney Upheld By Second District, Division Eight

Substantial Judgment Awarding Fees Found to be Nonpenal in Nature and Nonrepugnant to State Policy.

     This post examines an appeal raising challenges to substantial fee awards against a litigant’s attorney (a nonparty) by the Gibraltar Supreme Court, akin to a California superior court, under English law. After the Los Angeles County Superior Court entered a California judgment of $3,159,758.50 based on the Gibraltar judgments, attorney appealed, arguing that each judgment was either a penalty or repugnant to California state policy so as to not be deserving of enforcement under the Uniform Foreign Money-Judgments Recognition Act (UFMJRA), a prior version of Code of Civil Procedure section 1713 et seq. existing before 2007 amendments.

     The Gibraltar judgment, as converted to a California judgment, was upheld on a comity basis in Java Oil Ltd. v. Sullivan, Case No. B195862 (2d Dist., Div. 8 Dec. 2, 2008) (certified for partial publication).

     Aggrieved attorney got to this point by assisting a Mr. Laycock in bringing an action against two defendants for an alleged construction injury that was ultimately dismissed after the Gibraltar court found evidence the claims were fraudulent in nature. Defendants then brought actions against attorney, with the Gibraltar court finding he was complicit with Laycock in the fraudulent litigation. Eventually, two judgments were entered against attorney by the Registrar: the first for 621,958.75 pounds, representing the costs defendant incurred in defending against Laycock’s claims, and the second for 1,154,025 pounds, consisting of the fees/costs incurred in defendants’ prosecution of their claims against attorney personally. Prior to the hearing on the claims against attorney, he tried to seek Chapter 13 bankruptcy protection, but the bankruptcy judge found it to be bad faith filing after attorney failed to list income and the substantial claims pending in Gibraltar. The Los Angeles County Superior Court entered judgment against attorney for $3,159,758.50, giving complete comity to the Gibraltar awards.

     Attorney’s primary challenges on appeal—that the Gibraltar judgments were tantamount to penalties or were repugnant to California public policy—did not prevail.

Penalty Challenge

     Even though a penalty judgment is excluded from UFMJRA enforceability, the Court of Appeal found that it had to be penal in purpose, with cases and the Restatement of the Law, The Foreign Relations Law of the United States consistently finding that a fee award was not penal. The fee award implicated no penal law of Gibraltar, and no payment of money was ordered to a governmental entity. The fee award was not a penalty. (Accord, Erbe Elektromedizin GMBH v. Canady, 545 F.Supp.2d 491, 496 (W.D.Pa. 2008).)

Public Policy Repugnancy

     This argument pivoted around the premise that the Gibraltar awards—anchored in English law—violated the American Rule on attorney’s fees award where each side bears its own fees in the absence of a countervailing contract or statute. The appellate court did not find persuasive that the English Rule, where the loser must pay the winner’s attorney’s fees, is totally repugnant to a different policy that is not antithetical to some basic American moralist prohibition (especially given the findings by the Gibraltar court about fraudulent activity). With respect to the defense fees awarded against the attorney, this was found akin to attorney’s fees routinely awarded as damages in malicious prosecution cases. (See Bertero v. National General Corp., 13 Cal.3d 43, 59 (1974).) The fee award against attorney based on the defendants’ expenses in prosecuting their fraud action in Gibraltar were not repugnant to California policy given the determinations that attorney was complicit in the fraudulent litigation and had actually helped prepare false documents. Furthermore, there was case law establishing that a subsequent fee award after a prior judgment under English law should be given comity, even where United States law was different in the same context. (See Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 441-443 (3d Cir. 1971).)

     BLOG OBSERVATION—This case has an interesting discussion of the different philosophical underpinnings for the English versus American Rule for attorney’s fees awards. The American Rule is based on the democratic ideal that all citizens should have unfettered access to the courts, idealism obviously not shared by our counterparts in Great Britain. (See Mihalik v. Pro Arts, Inc., 851 F.2d 790, 793-794 (6^th 1988).)

Judgment Creditor Fee Awards: You Must Have A Fee Award In the Underlying Judgment To Collect Further Fees Under CCP Section 685.404

First District, Division Five Implicitly Agrees With Second District’s Globalist Decision.

     In our post of October 28, 2008, we reviewed the Fourth District, Division Three’s decision in Globalist Internet Technologies, Inc. v. Reda, 167 Cal.App.4^th 1267 (2008), where the appellate court ruled that fees incurred in the defense of a related settlement enforcement proceedings were recoverable under Code of Civil Procedure section 685.040—a statute allowing a judgment creditor to recover “[a]ttorney’s fees incurred in enforcing a judgment” but only if “the underlying judgment includes an award of attorney’s fees to the judgment creditor ….” In Globalist, the underlying judgment did include an award of fees, so that one of the necessary prerequisites of section 685.040 was met for purposes of awarding substantial fees incurred in the related proceedings.

     However, a different situation was presented in a recent unpublished First District, Division Five decision. Lien v. Lucky United Properties Investments, Inc., Case Nos. A118698 & A120068 (1^st Dist., Div. 5 Nov. 26, 2008) (unpublished) involved a trial court order awarding fees to obtain a prior judgment, an order which was reversed on appeal by the First District. Thus, at the time of review of the orders at issue in the recent unpublished decision, there was no fee award in the underlying judgment such that the lower court did not err in declining to award fees. (Cf. Imperial Bank v. Pim Electric, Inc., 33 Cal.App.4^th 540, 558 (1995).)

     BLOG UNDERVIEW—For another recent case involving section 685.040, see Jaffe v. Pacelli, 165 Cal.App.4^th 927 (2008), discussed in Globalist and in our August 2, 2008 post.

CCP Section 685.040: Fees Are Awardable In Separate Action Successfully Defended By Judgment Creditor To Avoid Reduction of Original Judgment By A Five-Sixths Margin

Fourth District, Division Three Relies on Jaffe v. Pacelli In Reversing Denial of Fee Award to Judgment Creditor.

     In our August 2, 2008 post, we reviewed the Second District’s decision in Jaffe v. Pacelli, 165 Cal.App.4^th 927 (2008), which dealt with application of Code of Civil Procedure section 685.040. That provision specifies that when a judgment awards attorney’s fees pursuant to a contract, the postjudgment attorney’s fees incurred by the judgment creditor in “enforcing” the judgment are included as recoverable costs. Jaffe determined that section 685.040 allowed a judgment creditor to recover fees expended in successfully prosecuting a bankruptcy adversary proceeding that ultimately resulted in getting the bankruptcy petition dismissed. The Second District reasoned that the bankruptcy would have discharged the judgment in entirety had the judgment creditor not prevailed, such that the forum in which qualifying fees were expended was not the determinative factor. (Id. at 934, 936, 938.)

     Justice O’Leary, of our local Fourth District, Division Three, recently authored an opinion on behalf of our local appellate court in a matter than confronted Jaffe, albeit in the context of a separate state court action by which judgment debtor sought to enforce a handwritten mediation stipulation that would have reduced judgment creditor’s judgment by 5/6ths of what was owed. Her opinion interpreted section 685.040 much like the Second District did in Jaffe, which she found “on point” in the cause before the 4/3 panel.

     Globalist Internet Technologies, Inc. v. Reda, Case No. G039795 (4^th Dist., Div. 3 Oct. 28, 2008) (certified for publication) involved a convoluted set of facts which we will try to parse to their essentials.

     Judgment creditor obtained a compensatory judgment against several judgment debtors, as well as attorney’s fees of $88,972 (as authorized by contract) that were included in the judgment. While appeals of the judgment and a related malicious prosecution anti-SLAPP motion were pending, plaintiff filed a separate Los Angeles Superior Court action against one of the judgment debtor’s business associates. The litigants engaged in global mediation, a process that resulted in a handwritten stipulation for settlement outlining the terms of a global resolution. However, “because the devil is in the details,” negotiations over a final settlement agreement broke down and no final agreement was ever signed. Judgment debtors then went for broke, filing several proceedings to enforce the handwritten settlement stipulation, including a separate settlement enforcement action in Orange County Superior Court (OCSC). Judgment debtors were no fools, because the handwritten stipulation—if effective—would have resolved the matter for one-sixth of what was owed under the original judgment (if certain other performance terms were satisfied). The parties stipulated that the global mediator could arbitrate the separate settlement OCSC action, resulting in a determination that the handwritten stipulation was not an enforceable settlement agreement—a ruling confirmed by the superior court and affirmed by the Fourth District, Division Three upon review in a related earlier appeal.

     Judgment creditor then filed a costs memorandum seeking $134,032.67 in attorney’s fees under section 685.040, $107,561 of which were incurred in defending against the separate settlement OCSC enforcement action. Impacted judgment debtors moved to tax costs, with the trial court agreeing that the costs in defending the separate action were not incurred in enforcing the original judgment.

     Judgment creditor appealed and won; our local Santa Ana appellate court reversed the fee denial order and remanded for a fee determination in judgment creditor’s favor.

     Because the case involved an interpretation about the breadth of section 685.040, the review standard was de novo.

     From a “bottom line” viewpoint, Justice O’Leary determined that it was incorrect to conclude that section 685.040 did not allow recovery of attorney’s fees incurred in a different action, especially given that Jaffe made it clear that this was not the case. The appellate panel also found corroboration in a literal construction of the statute: “The plain meaning of the word [‘enforcing’ in section 685.040] necessarily suggests ‘enforcing a judgment’ would include defending the validity of the judgment against challenge in a separately filed attack.” (Slip Opn., at p. 8.)

     Also, the equities favored the result reached in Globalist Internet. “As in Jaffe, [judgment creditor’s] right to recover attorney fees does not depend on the nature of the action or the forum in which the expenses were incurred …. By the time [the separate OCSC settlement enforcement action] was filed, [judgment debtors] owed [judgment creditor] over $444,600 (not including accrued interest) on this judgment. Their action sought specific performance of an alleged settlement of the judgment for $75,000 or about one-sixth of what was owed. Had [judgment creditor] not defended against the specific performance action, it would have lost substantial rights under the judgment in this case. Accordingly, the attorney fees it incurred in defense of the companion action were incurred in enforcing the judgment.” (Slip Opn., at pp. 10-11.)

     The Court of Appeal remanded to the trial court for purposes of fixing an appropriate fee award to judgment creditor, including consideration of whether judgment creditor was entitled to all fees incurred in the defense of the separate OCSC settlement enforcement action. Beyond that, judgment creditor was awarded costs on appeal, another potential source of fee recovery once the remittitur issues in this appellate case.

Sixth District Decides That Judgment Creditor Is Entitled to Enforce Subsequent Attorney's Fees/Cost Order Through A Writ of Execution Even Though Creditor Satisfied Underlying Judgment During Pendency Of Fees/Costs Motion

Any Other Result Would "Undermine the Intent" of the Judgment Enforcement Statutes.

            In a case that most law professors would love (replete with convoluted facts), the Sixth District faced an appeal by a judgment creditor arising from a 2000 judgment in judgment creditor's favor that included an attorney's fees award of $22,566.92.  No matter how this tale ends, judgment debtor is going to pay a lot more than the initial fee award, again giving reinforcement to our Mission Statement about fees being the tail that wags the litigation dog (with apologies to Mike Hensley's Labrador retriever Riffle).

Judgment debtor failed to satisfy the judgment such that post-judgment fees and costs kept mounting.  Skirmishes and appeals ensued over amounts that judgment creditor sought to add to the 2000 judgment.  By July 2005, judgment creditors obtained a writ of execution in the amount of $82,848.31, with more costs memoranda and motions to tax costs being filed by the two sides.  In January 2006, judgment creditor filed an attorney's fees motion in which she sought $70,152.63 in the supporting memorandum and her attorney requested $70,156.63 in his supporting declaration.  Before the motion could be heard, judgment debtor had refinanced a house and satisfied the outstanding writ of execution by paying the sheriff a total of $87,326.29—undisputably satisfying the judgment, but not dealing with the outstanding fee request.  The trial court subsequently granted the attorney's fees request, but specified no amount, although later augmenting the 2000 judgment by $70,156.63.  Later, in June 2006, judgment creditor sought another $22,170 in fees from February 2006 to June 2006.  However, judgment creditor failed to clearly create a record of what happened on this request.  Meanwhile, in April 2007, the Sixth District ruled in one of the many appeals that the 2000 judgment had been satisfied such that the 2006 fee augmentation could not be added to that judgment, although expressing no opinion on the results of the trial court decision to award $70,156.63 in fees to judgment creditor.  In August 2007, judgment creditor filed a motion to clarify the state of affairs—claiming the $70,156.63 in fees (through February 2006), $22,170 in more fees (for February 2006 to June 2006), and $59,087.68 in yet more fees (for post-judgment efforts between June 2006 through March 2007).  After a rash of more opposition and reply paperwork, the trial court ultimately denied the August 2007 motion brought by judgment creditor and refused to issue a writ of execution, finding the April 2007 appellate opinion foreclosed adding more fees to the satisfied 2000 judgment.  Judgment creditor appealed.

The Sixth District, in Anderson v. Kellogg, Case No. H032462 (6^th Dist. Aug. 28, 2008) (unpublished)—written on behalf of a 3-0 panel by Justice Bamattre-Manoukian—reversed and remanded after sifting through the Enforcement of Judgments Law, Code of Civil Procedure sections 680.010 through 724.260, to focus on the germane provisions.  Here is a distillation of the results of the appellate court's decision:

·      The Sixth District's April 2007 prior decision was not meant to preclude ultimate enforcement of subsequent post-judgment enforcement efforts occurring after satisfaction of the 2000 judgment, including the March 2006 attorney's fees order;

·      The March 2006 award of attorney's fees could be enforced through a writ of execution as long as the monetary amount can be definitely ascertained (see sections 680.230, 680.270, 699.510(a), 699.520(e); Newland v. Superior Court, 40 Cal.App.4^th 608, 615 (1995); Alioto Fish Co. v. Alioto, 27 Cal.App.4^th 1669, 1687 (1994));

·      The March 2006 fee order could be executed upon despite the prior satisfaction of the 2000 judgment; "[t]o conclude otherwise would allow a judgment debtor to resist full payment of judgment for a period of time and force the judgment creditor to bear the costs of enforcement so long as the judgment is satisfied before disposition of the judgment creditor's pending motion for enforcement costs.  This result would undermine the intent of the statutes to reimburse the judgment creditor for costs necessarily incurred in enforcing the judgment, where the costs are neither excessive nor untimely claimed" (Slip Opn., at p. 18);

·      A remand was necessary for judgment creditor to prove that she had a definitely ascertainable sum of money owed for fees that should be the subject of a writ of execution;

·      Judgment creditor failed to create an adequate record—including an unsigned order—to demonstrate error in denying enforcement of costs between February to June 2006;

·      A judgment creditor claiming costs and fees in enforcing a judgment must file a noticed motion for same not later than two years after the costs have been incurred and before satisfaction of judgment in full (section 685.080(a)), such that judgment creditor on remand was limited to showing whether she had a definitely ascertainable amount to support issuance of a writ of execution to enforce the March 2006 fee order of $70,156.63.  Judgment creditor's post-June 2006 efforts were doomed because they were untimely requests that related to the 2000 judgment—she could not "relate back" to capture untimely post-judgment collection efforts.

Here, the bottom line is that judgment debtor paid $65,000 more already for a fee request ignored years back, and may face another $70,000-plus in exposure on remand.  However, Anderson is a good case in establishing that a judgment creditor usually will not be derailed in pursuing collection of pending fee requests through a last-minute judgment satisfaction.