Tentative Ruling

Judge Colleen Sterne
Department 5 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION
Nicole Nagel, et al. v. Tracy A. Westen, et al.
Case No: 15CV01178
Hearing Date: Mon Oct 21, 2019 9:30

Nature of Proceedings: Motions re Attorney Fees

Nicole Nagel, et al., v. Tracy A. Westen, et al., #15CV01178, Judge Sterne

Hearing Date: October 21, 2019

Matters:

Motion for Award of Attorneys’ Fees to the Prevailing Party (Defendants Westen Family Group and Derek Westen)

Motion for Attorneys’ Fees (Defendant Peter Westen)

Motion for Attorneys’ Fees (Defendants Tracy Westen and Linda Lawson)

Attorneys:

For Plaintiffs: Paul J. Laurin, et al. (Barnes & Thornburg – Los Angeles); Jeffrey B. Valle, et al (Valle Makoff, LLP – Los Angeles)

For Defendants Tracy Westen and Linda Lawson: Ian M. Guthrie (Schley, Look & Guthrie)

For Defendants Westen Family Group and Derek Westen: Scott B. Campbell, et al. (Rogers, Sheffield & Campbell)

For Defendant Peter Westen: R. Chris Kroes, et al. (McCarthy & Kroes)

Tentative Ruling:

1. The court denies Westen Family Group, LLC, and Derek Westen’s Motion for Award of Attorneys’ Fees to the Prevailing Party.

2. The court denies defendant Peter Westen’s Motion for Attorneys’ Fees.

3. The court denies Tracy Westen and Linda Lawson’s Motion for Attorneys’ Fees.

Background: This action arose out of a dispute over defects in a home in Los Angeles that plaintiffs Nicole Nagel and ESY Investments, LLC, purchased from defendants Tracy Westen and Linda Lawson (“Westen and Lawson”) in June 2011. The parties arbitrated the dispute and, on August 5, 2013, plaintiffs were awarded $4.595 million in damages, contractual attorney fees and costs. On February 21, 2014, the Superior Court of Los Angeles County confirmed the award.

Plaintiffs brought his action against defendants Westen and Lawson; Westen Family Group, LLC; Derek Westen, individually and as trustee of the Westen Family Trust; and Peter K. Westen, individually and as trustee of the Westen 2010 Trust, for recovery of fraudulent transfers, conspiracy to commit fraudulent transfers, and aiding and abetting fraudulent transfers. After years of litigation, the court entered an order dismissing the entire action on July 9, 2019. On August 19 and September 23, 2019, the court heard motions to strike or tax defendants’ memoranda of costs. Now before the court are defendants’ motions for attorneys’ fees.

Motion for Attorneys’ Fees of Defendants Westen Family Group, LLC, and Derek Westen, individually and as trustee of the Westen Family Trust (collectively “WFG”):

WFG seeks attorneys’ fees totaling $3,242,485 pursuant to CCP § 685.040. Plaintiff Nagel opposes the motion.

1. Note on Pleadings: CRC 2.109 provides that the page numbering of papers filed in trial court “must begin with the first page and use only Arabic numerals (e.g., 1, 2, 3).” CRC 3.1110(c) provides the same for motion papers. Both parties violate this rule by not counting the first page and by either numbering tables with Roman numerals or leaving those pages unnumbered. This made it difficult for the court to locate pages in the electronically filed pleading that correspond to the pages listed in the table of contents. CRC 2.109 and 3.110(c) have been in effect since January 1, 2017. Not only must responsible counsel familiarize themselves with and follow applicable court rules, they should heed prior admonishments of this court in this case. See, e.g., the court’s July 18, 2018 order denying motion for summary judgment and/or summary adjudication. Perhaps these experienced lawyers should delegate pleading formatting to the more tech-savvy individuals at their firms.

2. Entitlement to Attorneys’ Fees Under CCP § 685.040:

CCP § 685.040 is part of the Enforcement of Judgments Law (“EJL”), Title 9 of Part 2 of the Code of Civil Procedure (CCP §§ 680.010, et seq.). It reads:

The judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment. Attorney’s fees incurred in enforcing a judgment are not included in costs collectible under this title unless otherwise provided by law. Attorney’s fees incurred in enforcing a judgment are included as costs collectible under this title if the underlying judgment includes an award of attorney’s fees to the judgment creditor pursuant to subparagraph (A) of paragraph (10) of subdivision (a) of Section 1033.5.

The parties agree that the first sentence unambiguously provides costs only to judgment creditors. [Motion 2:22-23; Opposition 2:17-20] They differ as to the application of the remaining portion of the statute. WFG contends that the second and third sentences provide for attorney fees that are reciprocal and not limited to judgment creditors. Nagel contends that the second and third sentences of the statute explain in what circumstances attorneys’ fees incurred by the judgment creditor can be included as recoverable costs. The parties agree that this is a case of first impression.

“If the language contains no ambiguity, we presume the Legislature meant what it said, and the plain meaning of the statute governs. If, however, the statutory language is susceptible of more than one reasonable construction, we can look to legislative history in aid of ascertaining legislative intent.” People v. Robles, 23 Cal.4th 1106, 1111 (2000) [citations omitted].

WFG contends that the second and third sentences refer to attorney’s fees separate from the costs that a court must award a judgment creditor under the first sentence. WFG notes that the second and third sentences refer to when attorneys’ fees are collectible as costs “under this title” and not “under this section.” But WFG identifies no other EJL section under which attorney fees could be collectible costs. That is because there is none. WFG cites only a Law Revision Commission comment to CCP § 685.070 saying that CCP § 685.150 “defines costs broadly to include all types of expenditures in the collection process.” But neither CCP § 685.070 nor § 685.150 authorize recovery of costs by a party other than the judgment creditor.

WFG contends that the court should not read “judgment creditor” into the second and third sentences of the statute because it is a “settled axiom that when the drafters of a statute have employed a term in one place and omitted it in another, it should not be inferred where it has been excluded.” People v. Woodhead, 43 Cal.3d 1002, 1010 (1987). But the common operative term in all three sentences is “costs.” Under the EJL, collectible costs are those that a judgment creditor is entitled to in enforcing a judgment.

WFG argues that the third sentence of § 685.040 “says that attorneys’ fees are recoverable ‘pursuant to subparagraph (A) of paragraph (10) of subdivision (a) of Section 1033.5.’” [Reply 4:17-18] That is a misreading of the statute. Attorney fees are collectible costs based on the character of the underlying judgment, which must include an award of attorney’s fees to the judgment creditor pursuant to CCP § 1033.5(a)(10)(A).

The statute is clear and unambiguous. Any reference to attorney fees being collectible as costs under the EJL necessarily refers to the reasonable and necessary costs of enforcing a judgment that a judgment creditor is entitled to under § 685.040. WFG is not a judgment creditor.

The court’s finding that the statute is unambiguous is supported by the language of other statutes WFG offers in support of its argument. Civil Code § 1717(a) contains an express reciprocity provision: “the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” Civil Code § 5975(c) expressly provides: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” These are examples of the Legislature providing for attorney fees to a prevailing party.

Civil Code § 3318 reads: “The detriment caused by the breach of a warranty of an agent’s authority, is deemed to be the amount which could have been recovered and collected from his principal if the warranty had been complied with, and the reasonable expenses of legal proceedings taken, in good faith, to enforce the act of the agent against his principal.” Fees are only recoverable by a person asserting breach of warranty of an agent’s authority, not a party defending such an action. “It is impossible to place [agents defending a breach of warranty of authority action] in the class of litigants entitled to legal fees under this statute.” Covenant Mutual Ins. Co. v. Young, 179 Cal.App.3d 318, 322 (1986).

When the Legislature drafts a statute providing for recovery by a prevailing party, it says that. When it provides for fees to one party, it says that. Here, the collectible costs, which include attorney fees, are costs recoverable by a judgment creditor, not a prevailing party, not a judgment debtor, and not a third party sued by the judgment creditor.

In Cardinale v. Miller, 222 Cal.App.4th 1020 (2014), the First District Court of Appeal held that § 685.040 permitted a trial court to award attorney fees to a judgment creditor who obtained a judgment against defendants for conspiring to engage in fraudulent transfers to avoid enforcement of the judgment creditor’s judgment against the judgment debtor. Id. at 1025-1026. The court held that the statute does not authorize recovery of fees only from a judgment debtor. The statute “imposes just ‘two requirements before a motion for an award of postjudgment attorney fees may be awarded as costs: (1) the fees must have been incurred to “enforce” a judgment; and (2) the underlying judgment had to include an award for attorney fees pursuant to [CCP § 1033.5(a)(10)(A)]….’” Id. at 1025 [citation omitted].

This authority does not support reading the statute to permit a defendant in a Uniform Fraudulent Transfer Act to recover fees under § 685.040, which only permits an award of attorney fees as part of a judgment creditor’s reasonable and necessary costs of enforcing a judgment. Importantly, costs incurred in the defense of a UFTA action do not satisfy the first of § 685.040’s two requirements, i.e., fees incurred to enforce a judgment. To provide that a prevailing party in a UFTA action is entitled to fees under 685.040 would graft an attorney fee authorization onto the UFTA, which is something the Legislature has not done. Id. at 1025.

Having determined that § 685.040 clearly and unambiguously authorizes costs, including attorney fees, to a judgment creditor, it is unnecessary to address WFG’s discussion of legislative history and public policy. These arguments may present reasons for the Legislature to change the statute. But they are not reasons to ignore the plain language of the statute.

3. Order: For the foregoing reasons, the court denies Westen Family Group, LLC, and Derek Westen’s Motion for Award of Attorneys’ Fees to the Prevailing Party.

Defendant Peter Westen’s Motion for Attorneys’ Fees:

Defendant Peter Westen (“Peter”) moves for an award of attorney fees totaling $924,656.05 and joins in WFG’s motion. Nagel opposes the motion.

The court first notes that the memorandum in support of the motion exceeds 10 pages and does not include a table of contents or table of authorities in violation of CRC 3.1113(f).

Peter incorporates the arguments of WFG, which the court has addressed above. Peter also argues that the term “enforcing” includes defending against enforcement, as it does in a number of statutes, and, therefore attorneys’ fees must be awarded to whichever party prevails. He refers to Civil Code §§ 5975(c) and 8558. Those statutes provide that “[i]n an action to enforce” payment of the claim stated in a bonded stop payment notice (§ 8858) and governing documents of a common interest development (§ 5975(c)), the prevailing party is entitled to reasonable attorney’s fees. But the use of the term “enforce” describes the type of action. It doesn’t mean that a defendant in the action is doing the enforcing. CCP § 685.040, on the other hand, provides that a judgment creditor is entitled to costs of enforcing a judgment.

The court denies defendant Peter Westen’s Motion for Attorneys’ Fees.

Defendants Tracy Westen and Linda Lawson’s Motion for Attorneys’ Fees:

Defendants Tracy Westen and Linda Lawson (“Westen and Lawson”) move for an award of fees in the amount of $490,940.39. Nagel opposes the motion. (Nagel’s pleading again runs afoul of CRC 2.109 and 3.1110(c).)

Westen and Lawson incorporate and adopt WFG’s arguments regarding CCP § 685.040, which the court has addressed above.

Westen and Lawson also argue that the Purchase and Sale Agreement under which Nagel was awarded fees in the underlying judgment authorizes fees to them in this action. The agreement provides for an award of attorney fees to the prevailing party in “any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement.” They contend the UFTA action arises out of the agreement.

In Chelios v. Kaye, 219 Cal.App.3d 75 (1990), the court held that post-judgment attorney fees were not recoverable under § 685.040 based on the attorney fee provision in the contract on which the plaintiffs obtained their judgment because “all of the prior contractual rights are merged into and extinguished by the monetary judgment, and thereafter the prevailing party has only those rights as are set forth in the judgment itself.” Id. at 80.

In response to the Chelios decision, the Legislature amended § 685.040, adding the third sentence to include attorney fees in collectible costs under that statute if attorney fees were included in the underlying judgment pursuant to CCP § 1033.5(a)(10)(A), which provides for inclusion of attorney fees in costs pursuant to contract, statute, or law. “The amendment did not abrogate Chelios’s holding that contractual rights merge into the judgment.” Gray1 CPB, LLC v. SCC Acquisitions, Inc., 233 Cal.App.4th 882, 890 (2015). “[T]he ‘judgment extinguishes all further contractual rights, including the contractual attorney fees clause.’ As a consequence, attorneys’ fees incurred to enforce such a judgment can only be recovered if there is express statutory authorization, such as is provided by section 685.040.” Cardinale v. Miller, supra, 222 Cal.App.4th at 1026.

Therefore, the right to fees in post-judgment matters is limited to the entitlement to fees as part of collectible costs under § 685.040. As discussed above, only a judgment creditor is entitled to those costs. The court denies Tracy Westen and Linda Lawson’s Motion for Attorneys’ Fees.