Case Number: BC506375 Hearing Date: June 06, 2014 Dept: 46

Posted 6-5-2014 at 3:15 p.m.

Case Number: BC506375
COMMISSION ADVANCE LLC VS JOSHUA R SIEGEL ET AL
Filing Date: 04/19/2013

06/06/2014 at 08:32 am in department 46 at 111 North Hill Street, Los Angeles, CA 90012

I. Motion for Attorney’s Fees

The moving parties, Capital Source, Inc., Capital Source Bank, Thomas Yaeger and John W. Dixon are collectively referred to herein as ‘Capital Source’ or ‘Defendants.’

Capital Source’s Requests for Judicial Notice as to the request for dismissal filed on 10/16/13 (Exhibit A), the complaint filed on 04/19/13(Exhibit B) and the memorandum of costs filed on 11/07/13 (Exhibit 3) are GRANTED to the extent that the court can take judicial notice of their existence and filing dates.

1. Motion for Attorney’s Fees pursuant to CCP §§1032, 1033.5 and 1021 (attorneys’ fees of $108,989.50 – including $8,116.50 for the preparation of this motion and reply) is DENIED. Defendants are not entitled to attorney’s fees under Civil Code 1717 because Capital Source is not a prevailing party, the two causes of action that to which Capital Source was named as a party were for fraud and related violation of B&P Code 17200 which are tort claims, Capital Source was voluntarily dismissed, and the Secured Promissory Note and the Loan Purchase and Sale agreement upon which the request for fees is based do not apply to Capital Source. CCP § 1033.5 contains a list of “allowable cost” items that may be recovered as costs; subsection (10) permits attorney’s fees only when authorized by contract, statute or law. None applies here.

2. Capital Source cannot recover attorney’s fees because it is not a prevailing party since it was voluntarily dismissed from the case. Civil Code §1717(a) states that attorney’s fees are recoverable in an action on a contract where the party is determined to be the prevailing party. However (as here), Civil Code §1717(b)(2) states that where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section…” (emphasis added). There is no exception for partial voluntary dismissals. Ford Motor Credit Co. v. Hunsberger (2008) 163 C.A.4th 1526, 1532 [the dismissal of an “action” does not require dismissal of the entire action, but only as against a particular defendant.] Furthermore, “Civil Code section 1717 cannot be circumvented by seeking fees under the general cost provisions of the Code of Civil Procedure (Code Civ.Proc., §§ 1032-1033.5) or under section 1021 of the Code of Civil Procedure. (Santisas v. Goodin [(1998)] 17 C.4th [599,] at pp. 606-607 & fn. 4; id. at pp. 623-624 (conc. opn. of Mosk, J.).).” Exxess Electronixx v. Heger Realty Corp. (1998) 64 C.A.4th 698, 707.

3. Capital Source cannot recover attorney’s fees because the attorney’s fees are not recoverable in this tort action. “’[S]ection 1717 does not apply to tort claims; it determines which party, if any, is entitled to attorney[ ] fees on a contract claim only. [Citations.] As to tort claims, the question of whether to award attorney[ ] fees turns on the language of the contractual attorney[ ] fee provision, i.e., whether the party seeking fees has ‘prevailed’ within the meaning of the provision and whether the type of claim is within the scope of the provision. [Citation.] This distinction between contract and tort claims flows from the fact that a tort claim is not “on a contract” and is therefore outside the ambit of section 1717. [Citations.]” (Exxess, supra, 64 C.A.4th at p. 708, original italics; see also Santisas, supra, 17 C.4th at p. 615; Gil [v. Mansano (2004)] 121 C.A.4th [739,] at pp. 742-743; Xuereb [v. Marcus & Millichap, Inc. (1992)] 3 C.A.4th [1338,] at p. 1342). The exception to the rule is that a party may recover attorney fees on a tort claim where an attorney fee provision is broad enough to cover tort claims and expressly identifies that party as a party entitled to its benefits. (Moallem [v. Coldwell Banker Com. Group, Inc. (1994)] 25 C.A.4th [1827,] at pp. 1830-1832);” Brown Bark III, L.P. v. Haver (2013)
219 C.A.4th 809, 827-828. Defendants do not qualify for this exception as stated in Section 4C below.

4. Capital Source cannot recover attorney’s fees because the provisions of Civil Code §1717 do not apply to Capital Source. The moving parties are not a signatory to either the Secured Promissory Note (hereinafter, the “Note”) or the Loan Purchase and Sale Agreement (hereinafter, the “PSA”). Defendants are also not, contrary to their assertion, third party beneficiaries to same.

A. A third party may qualify as a beneficiary under a contract where the contracting parties must have intended to benefit that third party and such intent appears on the terms of the contract…’” Johnson v. Superior Court (2000) 80 C.A.4th 1050, 1064. “The party claiming to be a third-party beneficiary bears the burden of proving that the contracting parties actually promised the performance which the third-party beneficiary seeks. This remains largely a question of interpreting the written contract. (Garcia v. Truck Ins. Exchange (1984) 36 C.3d 426, 436).” Sessions Payroll Management, Inc. v. Noble Const. Co., Inc. (2000) 84 C.A.4th 671, 680. “’A third party should not be permitted to enforce covenants made not for his benefit, but rather for others. He is not a contracting party; his right to performance is predicated on the contracting parties’ intent to benefit him. [Citations.] As to any provision made not for his benefit but for the benefit of the contracting parties or for other third parties, he becomes an intermeddler. Permitting a third party to enforce a covenant made solely to benefit others would lead to the anomaly of granting him a bonus after his receiving all intended benefit.’ (Murphy v. Allstate Ins. Co. (1976) 17 C.3d 937, 944).” Id.

B. Defendants did not carry their burden to prove that they qualify as third party beneficiaries of the PSA or the Note so as to recover attorney’s fees. The claim that “the reserve account of $1,620,000 was established for the sole benefit of CapitalSource.” (Motion, p. 7, l. 4-6 [emphasis theirs])is contradicted by the language in the agreements. The Note was executed by Stone Canyon and a third party named Advent Finance Group. Section 7 therein provides that Stone Canyon “covenants to use the proceeds of the loan evidenced by this Note in connection with certain transactions contemplated in connection with the financing and issuance of life insurance policies…” It also agreed to ensure that all commissions from the life insurance proceeds would be deposited in a restricted bank account to ensure that Plaintiff would be paid. These provisions do not support the unproven conclusion that any portion of the Note was clearly intended from the terms of the contract to benefit any of them. Additionally, and of equal importance, Plaintiff alleges that only Defendants Stone Canyon and Siegel breached this contract, not Defendants.

C. The terms of the alleged attorney’s fee provisions do not apply to Defendants. None of the defendants are referenced in the PSA (i.e., in which Plaintiff purchased the Note from Advent Finance Group). Further, the PSA, contains an attorney’s fees provision that permits the prevailing party to obtain attorney’s fees in a proceeding “between the parties to enforce or interpret any of the terms of this Agreement…” [emphasis added.] The allegations of fraud and violation of B&P Code §17200 against defendants do not constitute a dispute between the parties to the PSA. “Civil Code section 1717, subdivision (a), makes clear that a tort claim does not ‘enforce’ a contract. That statute expressly refers to, and therefore governs, ‘attorney’s fees … which are incurred to enforce th[e] contract.’ Because section 1717 does not encompass tort claims (Santisas v. Goodin, supra, 17 C.4th at pp. 615, 617, 619; Reynolds Metals Co. v. Alperson [(1979)] 25 C.3d [124,] at p. 129), it follows that tort claims do not ‘enforce’ a contract.” Exxess, supra, 64 C.A.4th at 709. “As our Supreme Court has indicated, where a lease authorizes an award of attorneys’ fees in an action to ’”’enforce any … provision … of this [contract],’”’ tort claims are not covered. (Santisas v. Goodin, supra, 17 C.4th at p. 622, fn. 9). Other decisions are in accord. (See, e.g., McKenzie v. Kaiser-Aetna (1976) 55 C.A.3d 84, 89 [‘… an action for negligent misrepresentation is not an action to enforce the provisions of a contract’]; DeMirjian v. Ideal Heating Corp. (1949) 91 C.A.2d 905, 909-910 [lease authorizing award of attorneys’ fees in an action ‘”to enforce Lessor’s rights hereunder”’ does not include tort claims]; Xuereb [supra,] 3 C.A.4th [at] 1342-1343 [attorneys’ fees not permitted on tort claims under contractual provision authorizing fees in an action to interpret or enforce the contract].).” Id.

D. Defendants were named in the 5th and 6th Causes of Action for fraud and violation of B&P Code § 17200, respectively, only; the prayer for relief does not seek attorney’s fees for either of these Causes of Action. Additionally, as Plaintiff points out, the fact that Plaintiff made alter ego allegations does not mean that Defendants were named as an alter ego in a specific cause of action.

II. Motion to Tax Costs

The motion is MOOT in part (i.e., as to the issue of attorney’s fees), based upon the ruling made in Motion #1

However, the motion is otherwise GRANTED. CCP §1033.5 does not allow for Defendants’ copying costs under the circumstances presented here. Said costs are not “[m]odels and blowups of exhibits and photocopies of exhibits…reasonably helpful to aid the trier of fact.” Therefore the memorandum of costs is taxed in the sum of $5,267.40.