Case Number: EC062084    Hearing Date: August 01, 2014    Dept: A

Miceli v Art-Wave International

MOTION FOR ATTORNEY’S FEES
MOTION TO AMEND JUDGMENT

Calendar: 10
Case No: EC062084
Date: 8/1/14

MP: Plaintiff, Vicki Miceli
RP: Defendant, Art-Wave International, Inc.

RELIEF REQUESTED:
1. Award of $110,450 in attorney’s fees.
2. Order amending judgment to add Art-Wave, LLC as a judgment debtor

DISCUSSION:
This case arises from the Plaintiff’s claim that the Defendant is unlawfully detaining the Plaintiff’s commercial property because it has withheld possession of the premises after the term of the lease has ended. The case was resolved by a jury verdict and judgment in favor of the Plaintiff and against the Defendants. The judgment was entered on June 18, 2014.

This hearing concerns the Plaintiff’s motion for attorney’s fees and the Plaintiff’s motion to amend the judgment to add a judgment debtor.

1. Motion for Attorney’s Fees
The Plaintiff argues that she is entitled to attorney’s fees because she is the prevailing party on a claim based on a contract that provides for the prevailing party to recover attorney’s fees.
Civil Code section 1717 states that a party may recover attorney’s fees when the party prevails in an action based on a contract that provides for the prevailing party to recover attorney’s fees. California courts construe the term “on a contract” in section 1717 liberally. Turner v. Schultz (2009) 175 Cal.App.4th 974, 979. The phrase “action on a contract” includes not only a traditional action for damages for breach of a contract containing an attorney fees clause, but also any other action that “involves” a contract under which one of the parties would be entitled to recover attorney fees if it prevails in the action. Eden Township Healthcare Dist. v. Eden Medical Center (2013) 220 Cal. App. 4th 418, 426-427. In determining whether an action is ‘on the contract’ under section 1717, the proper focus is not on the nature of the remedy, but on the basis of the cause of action. Id.
Accordingly, an action or cause of action is “on a contract” for purposes of section 1717 if

1) the action or cause of action ‘involves’ an agreement, in the sense that the action or cause of action arises out of, is based upon, or relates to an agreement by seeking to define or interpret its terms or to determine or enforce a party’s rights or duties under the agreement; and
2) the agreement contains an attorney fees clause.
Eden Township, 220 Cal.App.4th at 427.

A review of the Plaintiff’s First Amended Complaint reveals that it is an action to recover possession of premises leased to the Defendant under a written lease. A copy of the written lease is attached to the First Amended Complaint as exhibit A. Section 31 provides that the prevailing party on an action involving the premises is entitled to reasonable attorney’s fees.
The Plaintiff prevailed on the action when she obtained a judgment in her favor. The action involves the written lease, as defined under Civil Code section 1717, because it arises from the parties’ rights and duties under the agreement.
Therefore, the Plaintiff is entitled to recover attorney’s fees because the Plaintiff’s action is based on the lease agreement and the lease agreement includes a term awarding attorney’s fees to a prevailing party.

Under Civil Code section 1717, the Court determines the reasonable amount of attorney’s fees to award. The Plaintiff requests $110,450 based on over 200 hours of attorney time billed at $450 per hour. The Court will reduce this amount because it is not reasonable to incur $110,450 on this unlawful detainer action.
The Plaintiff’s attorney, Robert Weiss, states in his declaration that he has been practicing law for thirty years, with his focus primarily on civil litigation. In addition, Mr. Weiss has represented clients in Federal Court. This indicates that Mr. Weiss has the knowledge and experience to handle skillfully an unlawful detainer case involving commercial property.

First, a review of the Court file reveals that this case did not involve any substantial amount of law and motion, e.g., the Defendant filed a demurrer that was taken off calendar when the Plaintiff filed a First Amended Complaint, an ex parte application to advance the demurrer, a demurrer to the First Amended Complaint, and an ex parte application regarding discovery.
Second, this is an unlawful detainer action arising from the breach of a written obligation to pay rent. These actions do not involve any complex legal issues that require a substantial amount of legal research. A review of this case reveals that it includes standard issues regarding a default based on the nonpayment of rent. Although the Defendant filed a petition for bankruptcy, this was resolved through a motion to lift the automatic stay. The bankruptcy issues do not justify $110,000 in attorney’s fees for an unlawful detainer action based on the breach of the obligation to pay rent.
Third, a review of the billing records attached to the motion in exhibit B reveals excessive amounts of time spend on ordinary legal tasks, e.g., $20,000 to prepare for a hearing on the demurrer in an unlawful detainer case and an ex parte regarding discovery.

A reasonable amount of attorney’s fees to award for this case without the bankruptcy issue would be $31,500. This is based on 70 hours billed at the reasonable rate of $450 per hour to prepare the case, draft the pleadings, consult the clients, perform legal research, draft motions and opposition papers, appear at hearings, and appear at trial.
A reasonable amount of attorney’s fees to incur for the bankruptcy issue is $9,000 for 20 hours billed at $450 per hour to review the notices, consult with the bankruptcy trustee, perform legal research, draft the motions, and appear at hearings.

Accordingly, the amount of reasonable attorney’s fees to award for the fees incurred to litigate this case is $40,500 ($31,500 for the litigation and $9,000 for the pending motion).

2. Motion to Amend Judgment
The Plaintiff seeks an order amending the judgment to add Art-Wave, LLC, as a judgment debtor on the ground that it is an alter ego of Art-Wave International, Inc.

CCP section 187 grants the Court the power to use all means to carry its jurisdiction into effect. This includes the power to amend a judgment to add additional judgment debtors. McClellan v. Northridge Park Townhome Owners Association (2001) 89 Cal. App. 4th 746, 752 (permitting a plaintiff to add the individual who was the alter ego of a judgment debtor corporation). This is an equitable procedure based on the theory that the Court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant. Id. This procedure permits the Court to make the judgment “speak the truth” as to the true names of the defendant. Jack Farenbaugh & Son v. Belmont Construction (1987) 194 Cal. App. 3d 1023, 1029.
The authority granted by CCP section 187 to amend a judgment to add a defendant and impose liability on the new defendant without trial, requires both of the following:

1) the new party was an alter ego of the old party; and
2) the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns.
Triplett v. Farmers Ins. Exchange (1994) 24 Cal. App. 4th 1415, 1421.

a. Alter Ego
The commercial real property at issue in this case is located at 1001 S. Victory Boulevard, Burbank, CA. The Plaintiff provides facts from the deposition of Shaul Havivy and the sublease for Art-Wave LLC to demonstrate that Art-Wave LLC is an alter ego of Art-Wave International, Inc. The deposition transcript is in exhibit B to the motion and a copy of the sublease is in exhibit C.
Mr. Havivy testified in his deposition that he and his brother are the only shareholders in Art-Wave International, Inc. and that they are the only members of Art-Wave LLC (exhibit B, 16:18 to 17:11; 38:16-21). Further, Shaul Havivy testified that the business address for both business entities is 1001 S. Victory Boulevard (exhibit B, 41:25-42:3). Further, the sublease for Art Wave LLC that Shaul Havivy and his brother, Amram Havivy, used to provide a legal basis for Art-Wave LLC to be on the premises stated that Art-Wave LLC was doing the same business as Art-Wave International, Inc., i.e., art showroom, warehouse, painting, frames, mirrors, and sculptures (exhibit B, 43:2 to 16); see copy of sublease in exhibit C).
These facts demonstrate that Art-Wave LLC was organized and operated by the two individuals, Shaul Havivy and Amram Havivy, who also organized and operated Art-Wave International. Further, these facts demonstrate that Art-Wave LLC was continuing to do the same business as Art-Wave International, Inc. on the same premises. This evidence is sufficient to support a finding that Art-Wave LLC is the alter ego and successor entity to the judgment debtor, Art-Wave International, Inc. because there is a unity of interest between the two business entities and because it would be unjust to permit Art-Wave International, Inc. to escape liability through a shell entity.
In its opposition, Art-Wave LLC argues that it cannot be an alter ego because the jury found that it was a trespasser on the property. However, the jury’s finding that Art-Wave LLC had no right to possession and was a trespasser does not contradict or prevent a finding that Art-Wave LLC is an alter ego of Art-Wave International, Inc.
The alter ego doctrine is used to hold the persons controlling the business entity liable for the acts of the business entity when the persons are using the business entity to accomplish some wrongful or unequitable purpose. Sonora Diamond Corp. v. Superior Court (2000) 83 Cal. App. 4th 523, 538. Courts liberally apply the alter ego doctrine when the equities and justice of the situation call for it rather than restricting it to technical requirements of pleading and procedure. First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal. App. 2d 910, 915. It is essential principally that a showing be made that there is a unity of interest and that permitting the fiction of corporate separate existence is unjust. Id.
Here, the finding that Art-Wave LLC was a trespasser on the property does not bar the Court from finding that Shaul Havivy, Amram Havivy, or Art-Wave International, Inc. were using Art-Wave LLC for the inequitable purpose of avoiding liability for the breach of the lease agreement. As discussed above, Shaul Havivy admitted that the two business entities were organized and managed by himself and his brother and that they had done the same business at the same location. This indicates that there was a unity of interest, i.e., Shaul Havivy and Amram Havivy were using both entities to conduct the same business at the same location. It would be unjust to permit the fiction of a separate existence for Art-Wave LLC because it would allow Shaul Havivy, Amram Havivy, and Art-Wave International Inc. to avoid paying rent for the premises.
The opposition papers also argue that these two business entities are legally distinct entities “according to the secretary of state for the State of California”. The opposition papers include copies of the business entity details on the Secretary of State’s website.
However, the fact that Shaul Havivy and Amram Havivy completed papers and filed it with the Secretary of State does not establish that the two business entities are separate and distinct. The opposition papers offer no other evidence to demonstrate that there was no unity of interest. Instead, as discussed above, the two business entities were organized and managed by the same two individuals and the two business entities were doing the same business at the same location.
Accordingly, there are grounds to find that Art-Wave LLC is an alter ego of Art-Wave International Inc.

b. Control of Litigation
The evidence identified above indicates that the same two individuals, Shaul Havivy and Amram Havivi, organized and operated both Art-Wave LLC and Art-Wave International, Inc. Since Shaul Havivy and his brother controlled the litigation against Art-Wave International, Inc., the members of Art-Wave LLC were in control of the litigation.
Accordingly, there are grounds to find that Art-Wave LLC had control of the litigation.

Therefore, the Court will grant the Plaintiff’s motion to amend the judgment to add Art-Wave LLC because there is sufficient evidence to demonstrate that Art-Wave LLC is an alter ego of Art-Wave International Inc. and that Art Wave LLC, through its members Shaul Havivy and Amram Havivy, had control of the litigation against Art-Wave International, Inc.

RULINGS:
1. GRANT motion for attorney’s fees and award reasonable attorney’s fees to the Plaintiff in the sum of $40,500.00.
2. GRANT motion to amend judgment and add Art-Wave LLC as a judgment debtor.