2009-00054045-CU-BC

Tri-Tool Inc vs. Copeland Properties Three LP

Nature of Proceeding: Motion to Strike Improper Request for Attorneys’ Fees

Filed By: Brubacher, Marshall

Defendants Neal Bricker, M.D. and Lilian Franklin’s (collectively “Defendants”) motion
to strike the request for attorneys’ fees as to them from Plaintiff’s third amended
complaint (“TAC”) is ruled upon as follows.

This case, which commenced in 2009, arises from Plaintiff Tri Tool Inc.’s purchase of a
commercial property from Defendant Copeland Properties Three, L.P. (“CP3”). The
purchase touched upon a complex series of transactions encompassing loans and
assignments between and among CP3-affiliated entities.

The crux of Tri Tool’s case is that CP3 failed to pay on a $200,000 promissory note
(“Straight Note”), payment on which was conditioned upon CP3’s failure timely to
remove an encumbrance on the property Tri Tool acquired. Tri Tool alleges that CP3
failed to remove the encumbrance, it failed to pay on the note, and guarantors Charles
Copeland (“C. Copeland”) and Donald E. Copeland failed to pay as well. Tri Tool
alleges that the Moving Defendants were limited partners in CP3 and that they, among
others, played a role in CP3’s failures by facilitating the wrongful transfer of funds that
could have been used to pay on the note.

In November 2010, this court granted Tri Tool’s motion for summary judgment against
CP3. However, Tri Tool has not reduced the order to a judgment.

Plaintiff seeks attorneys’ fees pursuant to the following causes of action: (1) Return of
Distributions [Corp. Code §15666, now §§15905.08, 15905.09], and (2) Violation of the
Uniform Fraudulent Transfer Act, Constructive Trust. Defendants move to strike Plaintiff’s request for attorneys’ fees on the grounds that it
has not alleged a contract or statute pursuant to which it is entitled to attorneys’ fees
against them.

Plaintiff concedes that it does not have a contract with Defendants for attorneys’ fees.
It further concedes that the Corporations Code and the UFTA does not expressly
provide for attorneys’ fees. Rather, Plaintiff argues that because its contract with CP3
included an attorneys’ fees provision, it is entitled to reasonable attorneys’ fees
incurred in collecting the debt owed to it by CP3 pursuant to the order granting
Plaintiff’s motion for summary judgment. (CCP §685.040.)

CCP §685.040 (“Section 685.040”) provides “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.” (CCP §685.040 [emphasis
added].)

In a recent First District Court of Appeal case, Cardinale v. Miller (January 8, 2014)
th
222 Cal.App.4 2010, the court found that Section 685.040 supported an award of fees
as costs against a party who conspired to help a judgment debtor evade efforts to
enforce a judgment that included a contractual fee award. The court disagreed with
appellants (nonparties to the underlying judgment) that Section 685.040 authorized the
recovery of fees only from the original debtor. The court explained that the Legislature
“did not so restrict the provision’s scope, rather the statute by its terms is broad
enough to encompass fees expended to enforce a judgment against third parties who
conspired with the judgment debtor to evade enforcement.” (Id. at 1026.) The court
also found that it was not critical that appellants were not parties to the contractual fee
provision. The court explained, “the award of postjudgment attorney fees [pursuant to
Section 685.040] is not based on the survival of the contract, but is instead based on
the award of attorney fees and costs in the trial judgment. This is in accord with the
extinction by merger analysis providing that postjudgment rights are governed by the
rights in the judgment and not by any rights arising from the contract.” (Id.)

Given Cardinale, the Court agrees with Plaintiff that it may be entitled to attorneys’ fees
from Defendants. However, Plaintiffs’ allegations do not rise to the level of Cardinale
(i.e. that Defendants conspired with CP3 to evade enforcement of judgment) or allege
that Defendants engaged in the wrongful conduct. Accordingly, the motion to strike is
GRANTED with leave to amend.

Plaintiff may file and serve a fourth amended complaint (“4AC”) by no later than June
16, 2014, Response to be filed and served within 10 days thereafter, 15 days if the
4AC is served by mail. (Although not required by any statute or rule of court, Plaintiff is
requested to attach a copy of the instant minute order to the 4AC to facilitate the filing
of the pleading.)

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.