Case Number: TC028694 Hearing Date: May 31, 2018 Dept: A

# 14. Creditors Adjustment Bureau, Inc. v. Herrera Trucking & Transportation, Inc.

Case No.: TC028694

Matter on calendar for: Hearing on Plaintiff’s Motion to Tax Costs and Defendant’s Motion for Attorney Fees

Tentative ruling:

Background

Plaintiff Creditors Adjustment Bureau, Inc. was assigned an account by State Compensation Insurance Fund (“State Fund”) for the collection of premiums due by Defendant Herrera Trucking & Transportation, Inc. Herrera is a trucking company that picks up and transports old appliances. When demand necessitates, Herrera subcontracts with other trucking companies. State Fund audited Herrera on October 20, 2015. Herrera provided the auditor with various information but failed to provide all 1099’s for payments to its subcontractors. This resulted in those payments being included in the audit because Herrera did not provide sufficient evidence that the subcontractors were not employees under its workers’ compensation policy.

State Fund issued an invoice to Herrera for $427,278.67. Herrera disputed the invoice in a July 11, 2016 letter and eventually State Fund’s claim was assigned to CAB. CAB served Herrera with a summons and complaint on February 22, 2017. CAB issued subpoenas to the three subcontractors included in the invoice (On Time Trucking, Bravo Trucking, and AD&P Trucking) to provide evidence of their independent status. Bravo Trucking responded last in what appears to be either October or November 2017. With the information from the subcontractors, State Fund revised its invoice to $8,896.69.

Counsel for CAB called and informed counsel for Herrera of the revised invoice on December 4, 2017. (Mtn. to Tax Costs Exh. 11, p. 2). Based on email correspondence, CAB dismissed the lawsuit without prejudice on March 22, 2018, concluding there was a settlement agreement. On April 6, 2018, Herrera filed a memorandum of cost that forewarned of a following motion for attorney’s fees.

Herrera claims that there was no settlement agreement between the parties and that CAB voluntarily dismissed the suit, therefore making Herrera the prevailing party under § 1032, entitling it to reasonable costs. Herrera argues that it is allowed attorney fees under § 1032 via § 1033.5 because CCP § 128.5 (sanctions) should apply. Herrera lists its reasonable attorney fees at $57,408.00 and asks for an additional $3,700.00 pursuant to this motion for a total of $61,108. Herrera also argues that it is entitled to attorney’s fees under Civil Code § 1717.5 which allows fees for a party against whom a book account claim is sought. And CCP § 2033.420, which refers to failure to admit the proof of a matter.

CAB filed a motion to tax costs and opposes Herrera’s motion for attorney’s fees. CAB disputes Herrera’s various arguments for fees and argues that CAB is the prevailing party under $ 1032 and should be awarded attorney fees. CAB also contends it is Herrera that should be sanctioned under CCP § 128.5.

Additionally, Herrera asks the Court to take judicial notice of three complaints to which CAB is the plaintiff; Kenneth Freed’s declaration in support of CAB’s opposition to Demurrer, filed May 10, 2017; an outline showing the motions filed in the case; and the Court docket.

Standard

CCP § 1032 defines “prevailing party” and states that a prevailing party is entitled to recover costs as a matter of right. Pertinent to the motion before the Court, CCP § 1032(a)(4) states:

· “Prevailing party” includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the “prevailing party” shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed, may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.”

CCP § 1033.5 defines the items allowable as costs under CCP § 1032. Attorney fees are allowed only when authorized by (A) contract, (B) statute, and (C) law. (CCP § 1033.5(a)(10))

There are several other statutes at issue concerning attorney fees.

· CCP § 128.5 is a discretionary statute allowing the Court to award attorney fees against a party for its bad-faith tactics or actions;

· CCP § 2033.420 allows for reasonable attorney’s fees when a party fails to admit the truth of any matter when asked to do so and that matter is thereafter proved by the requesting party. The attorney’s fees under this statute covers only those fees associated with proving the matter (CCP § 2033.420); and

· Civil Code Section 1717.5(a) states, “[i]f there is a written agreement between the parties signed by the person to be charged, the fees provided by this section may not be imposed unless that agreement contains a statement that the prevailing party in any action . . . is entitled to the fees provided by this section.”

Analysis

A. Prevailing Party and Attorney’s Fees under Civil Code § 1717.5

There is a question about whether Herrera signed the contract in dispute, but resolving that issue is not necessary to resolve these motions. The party against whom a book account claim is alleged must be found to have no obligation. (CC § 1717.5(a)) Although Herrera’s obligation was drastically revised downward, it was not found to be zero. Therefore, Herrera is not a prevailing party under CC § 1717.5 and fees under § 1717.5 will not to be imposed.

B. Attorney Fees under CCP § 2033.420

Costs under this statute require that the party requesting its opposition admit the truth of a matter subsequently proves the truth of the matter. Here, Herrera has not shown any costs associated with making such proof nor factually disputes CAB’s contention that CAB obtained such proof from a third party. Herrera is therefore not entitled to fees under CCP § 2033.420.

C. Novation

A novation is “a new obligation which completely extinguishes the original obligation.”

Wells Fargo Bank v. Bank of America 32 Cal.App.4th 424, 435). The revision that was communicated from CAB to Herrera was not a complete extinguishment of the original obligation. The obligation was drastically reduced, but not extinguished. Therefore, the doctrine of novation does not apply.

D. Satisfaction

Civil Code § 1521 states: “[a]n accord is an agreement to accept, in extinction of an obligation, something different from or less than that to which the person agreeing to accept is entitled.” Here there was a unilateral revision to the amount due and Herrera then paid its full obligation. There was no agreement between the parties for Herrera to pay less than CAB claimed was due. The doctrine of accord and satisfaction therefore does not apply.

E. Prevailing Party under § 1032

The Supreme Court in deSaulles v. Community Hosp. of Monterey Peninsula recently analyzed CCP § 1032. (62 Cal.4th 1140). In deSaulles, the Supreme Court held that settlement proceeds fit within the definition of “monetary recovery” under CCP § 1032. (Id. at 1154.) The Supreme Court also found that the plaintiff receiving a monetary recovery in a settlement is a prevailing party and that plaintiff’s subsequent voluntary dismissal pursuant to that settlement did not make defendant a prevailing party under the statute. (Id. at 1152).

The Court in deSaulles noted that “section 1032(a)(4) defines the party with a ‘net monetary recovery’ as the prevailing party. The word ‘recover’ means ‘to gain by legal process’ or ‘to obtain a final legal judgment in one’s favor’” (Id. at 1153). “In the statute, ‘monetary relief’ is synonymous with ‘net monetary relief’ . . . ‘[r]elief,’ like ‘recovery,’ is a broad term that can include money obtained through a settlement.” (Id. at 1153) “Although a plaintiff may voluntarily dismiss before trial because he learns that his action is without merit, obviously other reasons may exist causing him to terminate the action. For example, the defendant may grant plaintiff—short of trial—all or substantially all relief sought . . . .” (Id. at 1154)

Herrera argues that deSaulles applies only to voluntary dismissals pursuant to settlement agreements. CAB argues that it received a net monetary recovery. Understanding that deSaulles prescribes a broad definition to net monetary relief, the Court finds the payment to State Fund, by Herrera, qualifies. Herrera was informed, by CAB, of the revision and asked CAB how to tender payment. Although Herrera did not follow all of CAB’s instructions, CAB did allow for the check to be made out to State Fund. (Opp. Mtn. for Attorney’s Fees Exh. 11—12) Additionally, the amount was recovered by way of the legal process. As Herrera states, “[e]ven that [$8,896.69] is disputed by Herrera but it was paid because further litigation would have been too expensive.” (Mtn. for Attorney Fees, pg 10:20)

As the payment qualifies as a net monetary recovery, plaintiff is a prevailing party under CCP § 1032. As plaintiff voluntarily dismissed the lawsuit, and not to a settlement agreement as discussed under deSaulles, defendant is also a prevailing party under CCP § 1032. As such, this situation is one that is “other than specified” and “the court, in its discretion, may allow costs or not and, if allowed, may apportion costs between the parties on the same or adverse sides pursuant to the rules adopted under Section 1034.” (CCP § 1032(a)(4))

The Court will not allow costs in this action. Each side will bear its own.

Judicial Notice

Herrera requests judicial notice as to various court records including the docket for this case, several complaints, and a declaration filed by CAB’s attorney in this case (Declaration by Kenneth Freed in support of Plaintiff’s Opposition to Demurrer, filed on May 10, 2017).

With respect to the May 8, 2018 request for Judicial notice, the Court take judicial notice as to matter 20, the Court’s own docket in the case. The Court denies matters 1—19 as irrelevant; those matters are redundant to the Court docket. With respect to the requests filed May 23, 2018, the Court takes judicial notice of matters 1—4 (including the declaration), but does not take judicial notice of the truth of all matters stated therein.

Sanctions under CCP § 128.5

The Court does not find the current motions frivolous, or that CAB acted in bad-faith in the underlying proceedings. The Court denies sanctions as to both parties.

Ruling

The Court denies the motion for attorney’s fees and grants the motion to tax costs.