Opinion
G031118.
10-8-2003
KWP FINANCIAL I, Plaintiff and Respondent, v. M. CRAIG CASSING, Defendant and Appellant.
Law Offices of Randall S. Waier and Randall S. Waier for Defendant and Appellant. Hagan & Associates and Cara J. Hagan for Plaintiff and Respondent.
Judgment debtor M. Craig Cassing (Cassing) appeals from a post-judgment award of attorney fees with respect to fees incurred in nondischargeability proceedings in bankruptcy court. He claims the trial court had no jurisdiction to hear the motion for attorney fees since the motion was based on an attorney fees clause in a postjudgment settlement agreement. He also argues no fees were properly awarded because the issue of a default under the settlement agreement had not been adjudicated.
It is unnecessary for us to decide these issues. We must affirm the trial court ruling if it is correct on any ground. Here, the judgment contained an award of attorney fees based on a contractual provision in the stipulation for entry of judgment. The judgment creditor was thus entitled, pursuant to Code of Civil Procedure section 685.040, to attorney fees incurred in enforcing the judgment. Cassing sought to have the judgment discharged in bankruptcy, in order to make it unenforceable. The attorney fees the creditor incurred in the nondischargeability proceedings were directly related to the continued enforceability of the judgment. Therefore, they were allowable costs under section 685.040.
I
FACTS
In 1984, Cassing, an attorney, obtained a $50,000 line of credit from Saddleback National Bank, pursuant to a one-year commercial note. In 1992, the Federal Deposit Insurance Corporation (FDIC), as receiver of Saddleback National Bank, filed suit against Cassing for breach of the promissory note. (Federal Deposit Insurance Corporation, as Receiver, etc. v. Cassing (Super. Ct. Orange County, 1995, No. 690130).) In 1993, Cassing and the FDIC entered into a Stipulation for Entry of Judgment pursuant to which the parties agreed to the entry of judgment in favor of the FDIC in the principal sum of $61,137, interest in the amount of $68,075 plus subsequent accruals, and attorney fees and costs. The parties further stipulated that the FDIC would not apply for entry of judgment if Cassing paid a total of only $25,000 pursuant to a specified two-year schedule. However, Cassing defaulted under the stipulation.
In 1995, the FDIC obtained a judgment against Cassing in the amount of $162,064.30. The FDIC then assigned the judgment to KWP Financial I (KWP) and in 1996, the court entered an order substituting KWP as judgment creditor.
Later that year, Cassing and KWP entered into a settlement agreement, by which KWP agreed to accept $105,000 in full satisfaction of the judgment, provided Cassing did not default on the payments due under the settlement agreement. Payments were to be made over a period of about 18 months. In the event of a default, the full judgment amount would be due, less sums received. The settlement agreement also provided that in the event of default, Cassing would take no action to challenge the validity of the judgment in the amount of $162,064.30.
Sometime later, KWP, contending Cassing had breached the settlement agreement, renewed its collection efforts under the judgment. In 1999, KWP obtained a renewed judgment, in the amount of $ 234,392.88.
In 2000, Cassing filed a chapter 7 bankruptcy petition, listing no real property and no bank accounts on his asset schedule. He listed KWP as one of his creditors.[] KWP filed a complaint for denial of the discharge of Cassing. The matter went to trial in 2002 and the bankruptcy court denied Cassing his discharge.
The record does not contain copies of the bankruptcy schedules. However, it does contain a copy of the bankruptcy courts statement of decision, which describes the asset schedule and the proceedings. Also, in his opening brief, Cassing admits that he scheduled KWP as one of his creditors. He is bound by that admission. (Srithong v. Total Investment Co. (1994) 23 Cal.App.4th 721, 725, fn. 2.)
The bankruptcy court concluded that Cassing was not an honest debtor and that he had engaged in a pattern of behavior designed to conceal his assets from his creditors. In a lengthy memorandum of decision, the court outlined the methods by which Cassing had hidden his assets, while enjoying a lifestyle that gave him "the appearance of a relatively affluent individual." The court also observed that Cassing, who had been suspended by the State Bar of California in 1998 for a period of one year for the mishandling of his attorney client trust account, was well familiar with bankruptcy laws. He had purportedly filed more than 500 bankruptcy petitions on behalf of clients. The court, in addition to describing the methods by which Cassing had concealed his assets from his creditors, also stated Cassing had lied under oath and otherwise provided information that was not credible.
KWP then filed a motion for attorney fees and costs in Federal Deposit Insurance Corporation, as Receiver, etc. v. Cassing (Super. Ct. Orange County, 1995, No. 690130). It sought $95,809.50 in attorney fees and $3,740.36 in costs incurred in the adversary proceeding in bankruptcy court. The motion was granted. In July 2002, an amended judgment was entered, ordering that the 1999 renewed judgment in the amount of $234,392.88 was amended to include attorney fees and costs in the amount of $101,049.86, for a total amended judgment in the amount of $335,442.74.
Cassing appeals from the award of attorney fees and costs.
II
DISCUSSION
A. Attorney Fees Based on Settlement Agreement
In its motion for attorney fees, KWP relied on, inter alia, Code of Civil Procedure [sic] section 1717, Code of Civil Procedure section 1033.5, and the attorney fees provision contained in the 1996 settlement agreement between itself and Cassing.[] That attorney fees clause states: "In the event of any action or proceeding to enforce this Agreement, the prevailing party shall be entitled to recover from the other party or parties its costs of suit, including attorneys fees." KWP construed the bankruptcy court litigation as an action to enforce its right to collect under the settlement agreement.
KWP no doubt intended to refer to Civil Code section 1717. Subdivision (a) thereof provides in part: "In any action on a contract, where the contract specifically provides that attorneys fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then 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 attorneys fees in addition to other costs. . . ." Subdivision (b)(1) thereof states in part: "The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. . . ."
Code of Civil Procedure section 1033.5, subdivision (a)(10)(A) provides: "(a) The following items are allowable as costs under Section 1032: [¶] . . . [¶] (10) Attorney fees, when authorized by any of the following: [¶] (A) Contract."
Cassing asserts that the superior court erred in granting the motion, for two reasons. First, he argues the court had no subject matter jurisdiction over KWPs claims for attorney fees under the settlement agreement, inasmuch as there was no action pending on the settlement agreement when the motion was filed and the bankruptcy court litigation did not involve the enforcement of the settlement agreement. Second, Cassing contends the motion for attorney fees improperly sought summary adjudication of the issue of whether he had defaulted under the settlement agreement.
KWP admits that, under current case law, it would not have been entitled to attorney fees in bankruptcy court. It cites In re Hashemi (9th Cir. 1997) 104 F.3d 1122. That case provides that a nondischargeability proceeding in bankruptcy court involves an issue of federal law, and is not an action pertaining to the enforceability of the contract between the debtor and the creditor. Therefore, a creditor may not recover, in bankruptcy court, attorney fees incurred in connection with a nondischargeability action, even when the contract contains a provision entitling the creditor to attorney fees incurred in enforcing its rights thereunder. (Id. at pp. 1126-1127; see also Thrifty Oil Co. v. Bank of America Nat. Trust (9th Cir. 2003) 322 F.3d 1039, 1040-1041 [attorney fees allowable in bankruptcy proceedings only if state law governs the substantive issues and authorizes the fees].)
Because KWP could not obtain an award of attorney fees in bankruptcy court, it sought fees in state court. Whether this court should construe the nondischargeability action as an action to enforce the settlement agreement, and whether the trial court properly ruled on the motion as framed, are issues we need not decide.
B. Attorney Fees Based on Judgment
We requested supplemental briefing on the issue of whether KWP was entitled to attorney fees pursuant to Code of Civil Procedure section 685.040. That statute provides: "The judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment. Attorneys fees incurred in enforcing a judgment are not included in costs collectible under this title unless otherwise provided by law. Attorneys fees incurred in enforcing a judgment are included as costs collectible under this title if the underlying judgment includes an award of attorneys fees to the judgment creditor pursuant to subparagraph (A) of paragraph (10) of subdivision (a) of Section 1033.5 [attorney fees authorized by contract allowable as costs]."
Here, the 1984 commercial note contained the following provision: "The Bank may pay someone else to help collect this note if Borrower does not pay. Borrower also will pay the Bank that amount. This includes the Banks lawyers fees whether or not there is a lawsuit, including any fees on appeal. Borrower also will pay any court costs. The Bank may delay enforcing any of its rights under this note without losing them."
The 1993 Stipulation for Entry of Judgment stated "that the Court shall enter judgment in this action in favor of the FDIC and against Cassing for: [¶] a. Principal sum of $61,137.00; [& para;] b. Interest, in the sum of $68,075.00, accruing at a rate of 14.5% per annum until paid or as of date of entry of judgment; [¶] c. Reasonable attorneys fees; and, [¶] d. Costs of suit." While the parties did not provide this court with a copy of the judgment entered upon the stipulation, this court, on its own motion, takes judicial notice of the judgment filed June 9, 1995 in Federal Deposit Insurance Corporation, as Receiver, etc. v. Cassing (Super. Ct. Orange County, 1995, No. 690130). (Evid. Code, § 452, subd. (d).) That judgment contains an award of attorney fees in the amount of $3,980.63. This award was based on the attorney fee provision contained in the stipulation.
Inasmuch as the judgment contained an attorney fees award based on the contractual provision in the stipulation, the award was made pursuant to Code of Civil Procedure section 1033.5, subdivision (a)(10)(A). That being the case, the judgment satisfied the requirements of Code of Civil Procedure section 685.040 and KWP is entitled to recover reasonable attorney fees and necessary costs incurred in enforcing the judgment.
The bankruptcy court found that Cassing had concealed his assets with the intent of hindering the ability of his creditors, including KWP, the Internal Revenue Service and the Franchise Tax Board, to collect monies owing to them. In a similar vein, all appearances are that Cassing filed the bankruptcy proceedings at least in part to avoid paying the judgment. The nondischargeability proceeding was clearly necessary in order to preserve and protect the enforceability of the judgment. Therefore, KWP is entitled to recover attorney fees and costs incurred in the bankruptcy proceedings.
Cassing disagrees. He contends that "[t]he Legislative Committee Comment to [Code of Civil Procedure] Section 685.040 instructs that the `second sentence of Section 685.040 makes clear that attorneys fees are not collectible under the section." However, he refers to a 1982 Legislative Committee Comment. (16 Cal. Law Revision Com. Rep. (1982) p. 1231, reprinted in Wests Ann. Code Civ. Proc. (1987 ed.) foll. § 685.040, p. 100.) The operative sentence of Code of Civil Procedure section 685.040 was added in 1992. (Assem. Bill No. 2616 (1991-1992 Reg. Sess.) § 3.) Tellingly, Cassing quotes only the first two sentences of section 685.040, carefully omitting the sentence added in 1992, which provides: "Attorneys fees incurred in enforcing a judgment are included as costs collectible under this title if the underlying judgment includes an award of attorneys fees to the judgment creditor pursuant to subparagraph (A) of paragraph (10) of subdivision (a) of Section 1033.5."
Cassing also argues that the settlement agreement with KWP superseded the judgment, so no attorney fees can possibly be collectible under the judgment. He overlooks one glaring point. KWP retained the right to enforce the judgment if Cassing defaulted under the terms of the settlement agreement. In fact, the settlement agreement stated: "Cassing waives and releases all defenses to the validity and enforceability of the Judgment except to the extent of any offset due Cassing for payments made pursuant to this Agreement." KWP obtained a renewed judgment and has made countless filings in the trial court proceedings in an effort to collect upon that judgment. It remains alive.
Finally, Cassing asserts that a motion for attorney fees must be noticed and KWPs motion made no mention of Code of Civil Procedure section 685.040 or the payment of attorney fees pursuant to the judgment. He is right that KWP did not raise section 685.040 as an avenue of recovery. However, Cassing has now had notice and an opportunity to be heard on the matter.
At oral argument, Cassing complained that KWP was late in filing its letter brief on the Code of Civil Procedure section 685.040 issue and that he had not had an opportunity to respond to it. He misread this courts order. This court requested that the parties file letter briefs no later than September 10, 2003 and permitted the parties to file responsive letter briefs no later than September 12, 2003. Cassing filed his letter brief on September 10, 2003. KWP elected not to file an initial letter brief, and chose instead to file only a responsive letter brief, on September 12, 2003. This courts order clearly permitted the filing of a responsive letter brief on that date. Cassing had an opportunity at oral argument to take issue with the content of KWPs responsive letter brief.
We must affirm the trial court ruling if it is correct on any ground. (Schubert v. Reynolds (2002) 95 Cal.App.4th 100, 110.) Accordingly, we affirm the trial court award of attorney fees and costs in this matter.
III
DISPOSITION
The amended judgment is affirmed. KWP shall recover its costs on appeal.
WE CONCUR: FYBEL, J. and IKOLA, J.