Gaggero v. Knapp. Petersen & Clarke CA2/8 ( 2014 )

Filed 11/7/14 Gaggero v. Knapp. Petersen & Clarke CA2/8
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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
STEPHEN M. GAGGERO et al., B243062
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC286925)
v.
KNAPP, PETERSEN & CLARKE et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court for the County of Los Angeles.
Robert L. Hess, Judge. Affirmed.
Westlake Law Group and David Blake Chatfield for Plaintiff and Appellant
Stephen M. Gaggero.
Law Offices of Edward A. Hoffman and Edward A. Hoffman for Appellants
Pacific Coast Management, Inc.; 511 OFW LP; Gingerbread Court LP; Malibu Broad
Beach LP; Marina Glencoe LP; Blu House LLC; Boardwalk Sunset LLC; and Joseph
Praske, as Trustee of the Aquasante Foundation, the Arenzano Trust and the Giganin
Trust.
Miller, Randall A. Miller and Steven S. Wang for Defendants and Respondents.
__________________________
SUMMARY
Plaintiff Stephen Gaggero and 10 additional judgment debtors appeal from an
order granting a motion for postjudgment enforcement costs and accrued interest filed by
defendants Knapp, Petersen & Clarke and several of its principals, and denying plaintiff’s
motion to tax costs. This order was incorporated in a third amended judgment in favor of
defendants.
Plaintiff contends the trial court erroneously awarded fees and costs that were not
recoverable because they allegedly were not related to enforcement of the judgment.
Additional judgment debtors make similar arguments, and in addition contend that the
third amended judgment violated their due process rights and violated a stay order; that
there is insufficient evidence to support large portions of the award; and that defendants
are estopped from claiming interest and enforcement costs against them.
We affirm the orders.
FACTS
In May 2010, we affirmed a judgment against plaintiff in a malpractice lawsuit he
brought against defendants. The judgment included an attorney fee award of more than
$1.2 million. (Gaggero v. Knapp, Petersen & Clarke (May 6, 2010, B207567) [nonpub.
opn.] (Gaggero I or the malpractice case).) In two unpublished opinions filed today, we
have affirmed an order granting defendants’ motion to add seven entities and the trustee
of three trusts as additional judgment debtors to the judgment (Gaggero v. Knapp,
Petersen & Clarke (Nov. 7, 2014, B241675) (Gaggero II or the alter ego case)), and we
have affirmed later orders appointing a receiver and assigning financial rights of
additional judgment debtors to defendants. (Gaggero v. Knapp, Petersen & Clarke
(Nov. 7, 2014, B245114) (Gaggero III).)
This appeal challenges the postjudgment enforcement costs and accrued interest
awarded to defendants in the third amended judgment entered on August 6, 2012. That
judgment added $87,722.25 in postjudgment enforcement costs and $569,569.96 in
accrued postjudgment interest to the principal balance of $1,520,943.30 from the
previous judgment. The procedural chronology is this:
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On May 19, 2008, the trial court entered the judgment against plaintiff.
On May 6, 2010, we affirmed the judgment.
On December 28, 2010, the judgment was amended to include attorney fees and
costs on appeal and postjudgment interest.
On April 10, 2012, after unsuccessful efforts to enforce the judgment against
plaintiff, defendants moved to add additional judgment debtors to the judgment.
On May 15, 2012, defendants filed the motion for postjudgment enforcement costs
and accrued interest that is at issue in this appeal.
On May 29, 2012, the trial court found additional judgment debtors were
plaintiff’s alter egos and added them to the judgment.
On May 31, 2012, plaintiff moved to tax the postjudgment enforcement costs.
On June 29, 2012, plaintiff filed his opposition to the motion for postjudgment
enforcement costs.
On July 6, 2012, defendants filed a reply in support of their motion for
postjudgment enforcement costs, serving it on plaintiff and additional judgment debtors.
On July 13, 2012, the trial court granted defendants’ motion for enforcement costs
and interest in the amount sought, and denied plaintiff’s motion to tax costs.
On August 3, 2012, plaintiff’s attorney filed a notice of appeal from the July 13,
2012 order on behalf of plaintiff and additional judgment debtors.
On August 6, 2012, the trial court entered the third amended judgment
incorporating the postjudgment enforcement costs and accrued interest. On the same day,
in response to a supersedeas petition additional judgment debtors filed in the alter ego
case, this court issued a stay of proceedings in the trial court to enforce the judgment
against additional judgment debtors. The stay was lifted on August 30, 2012.
Additional relevant facts will appear in our discussion of the legal issues, and
other details of the litigation also appear in Gaggero II and Gaggero III, filed
simultaneously with this opinion. For our purposes here, it suffices to say that plaintiff
apparently is loath to pay his creditors, and long ago devised an “estate plan” under
which he transferred his personal assets, then amounting to some $35 or $40 million, to
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limited partnerships and limited liability companies, and then transferred his ownership
of those entities to several trusts, with estate lawyer Joseph Praske as trustee. In
Gaggero II, we affirmed the trial court’s conclusion that Mr. Praske was plaintiff’s
“rubber stamp” and the entities in plaintiff’s estate plan – Mr. Praske as trustee of the
three trusts and seven other entities that comprised the trust assets – were plaintiff’s alter
egos and liable for the judgment against him. Now he and they object to the award of
postjudgment enforcement costs defendants incurred in efforts to satisfy the judgment.
DISCUSSION
A judgment creditor “is entitled to the reasonable and necessary costs of enforcing
a judgment.” (Code Civ. Proc., § 685.040.) (All statutory citations are to the Code of
Civil Procedure.) Attorney fees incurred in enforcing a judgment are included in
collectible costs if the underlying judgment included an award of attorney fees as costs
(ibid.), as was the case here.
Under section 685.070, a judgment creditor may claim, by filing a memorandum
of costs, specified statutory fees and costs; costs incurred in connection with enforcement
proceedings that have been approved by the judge or referee conducting the proceeding;
and the attorney fees allowed by section 685.040. (§ 685.070, subds. (a) & (b).)
Section 685.080 allows the judgment creditor to claim costs authorized by section
685.040 by noticed motion. (§ 685.080, subd. (a).) The costs claimed under section
685.080 “may include, but are not limited to, costs that may be claimed under Section
685.070 and costs incurred but not approved by the court or referee” in other enforcement
proceedings. (Ibid.) “The court shall make an order allowing or disallowing the costs to
the extent justified under the circumstances of the case.” (§ 685.080, subd. (c).)
“The usual standard of review for an award of attorney fees is abuse of discretion.
[Citation.] But whether the trial court had the authority to award attorney fees is a legal
issue which we review de novo.” (Globalist Internet Technologies, Inc. v. Reda (2008)
167 Cal. App. 4th 1267, 1273; see Chinese Yellow Pages Co. v. Chinese Overseas
Marketing Service Corp. (2008) 170 Cal. App. 4th 868, 886 [questions as to whether fees
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and costs incurred to enforce a judgment were “reasonable and necessary in whole or in
part” are left “in the good hands of the trial court”].)
Defendants filed both a memorandum of costs and a noticed motion, seeking
$87,722.25 for judgment enforcement efforts since December 2010, consisting of
$86,247.70 in attorney fees and $1,474.55 in costs. A declaration from their counsel
described the postjudgment discovery defendants conducted in their attempts to enforce
the judgment; plaintiff’s failure to cooperate in responding to discovery; counsel’s “time
consuming and arduous” task of obtaining information on the structure of plaintiff’s
“estate plan” and its associated entities; the compilation of evidence to support its motion
to add alter ego entities to the judgment; and so on. Counsel’s invoices for fees incurred
in the judgment collection efforts and other documents were included with defendants’
motion.
We conclude the trial court did not err in finding the fees and costs awarded were
“reasonable and necessary costs” of enforcing the judgment, and none of the claims to the
contrary has merit.
1. Contentions that Costs Were Not Incurred to Enforce the Judgment
Plaintiff contends that only $28,103 of the $86,247.70 in attorney fees were
incurred enforcing the judgment against him, and the rest of the award cannot stand.
First, he asserts that he cannot be made to pay fees connected with defendants’
alter ego motion, “because they were not incurred to enforce the judgment against him.”
He cites no authority that supports his contention and, in light of our conclusion in
Gaggero II that he and additional judgment debtors are alter egos and that he controlled
them to serve his own ends, the claim is plainly without merit. Plaintiff’s further claim
that defendants’ alter ego motions were not “reasonable and necessary” cannot withstand
scrutiny; plaintiff testified at his debtor exam that he has never had the resources to pay
the judgment against him. Additional judgment debtors’ similar claim, that defendants’
alter ego motion was an effort “to change the judgment, not to enforce it,” is equally
specious. The motion was plainly an effort to collect the unpaid judgment, and the costs
of bringing it are recoverable under section 685.040. (Cf. Cardinale v. Miller (2014) 222
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Cal. App. 4th 1020, 1025, 1026 [an award of fees as costs against third parties who
conspired to help a judgment debtor evade efforts to enforce a judgment was authorized
under section 685.040].)
Second, plaintiff contends that attorney fees for activities such as preparing status
reports to defendants and their insurance carriers “had nothing to do with enforcing the
judgment” and cannot be recovered. He cites no authority for this proposition, legal or
practical, and we reject it. Such activities are a necessary aspect of the attorney services
performed to enforce the judgment.
Third, plaintiff contends several entries on the legal bills were for work on other
cases. He cites several pages of defendants’ invoices that contain entries referring to the
“Sulpher Mountain” and “Bungee” cases (apparently referring to such entries as “Assess
additional information about underlying Sulphur Mountain case for revisions to report”).
But plaintiff makes no showing that any of these entries (which he does not specifically
quote) were for work on those other cases; the “information,” for all we know, was
pertinent to this case. And, since plaintiff says he brought these entries to the trial court’s
attention, we must assume the trial court concluded the work was pertinent to this case.
Plaintiff offers no basis for this court to conclude otherwise.
Fourth, plaintiff contends the fee award included “hundreds of dollars” for seeking
an award of fees and costs related to plaintiff’s appeal from the original judgment in the
malpractice case. His first record citation is mistaken, and he does not identify the
objectionable entry or entries in his other record citation, or tell us the exact amount to
which he objects. Plaintiff cites no relevant authority, simply stating that “[d]efending
the propriety of a judgment is not the same thing as enforcing it.” In view of plaintiff’s
lack of specificity and the lack of cited authority for plaintiff’s proposition, we can find
no error in the inclusion of these fees in the award.
Fifth, plaintiff contends the trial court should not have awarded “thousands of
dollars in fees for dozens of billing entries” related to plaintiff’s appeal from a trial court
order compelling him to respond to postjudgment discovery. This was an appeal plaintiff
filed from an October 5, 2011 order granting defendants’ motion to compel and imposing
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monetary sanctions of $2,000 on plaintiff and his counsel. On October 3, 2012, this court
dismissed that appeal (case No. B236834) on the court’s own motion as having been
taken from a nonappealable order. Plaintiff contends defendants’ fees for work opposing
that appeal are not recoverable as costs of enforcement, because appellate attorney fees
“must be claimed after an appeal has been resolved,” and his appeal of the order was still
pending when the trial court awarded the fees as costs of enforcement on July 13, 2012.
Again, plaintiff does not specify the precise amount of the fees to which he objects or
identify specific time entries, and cites no authority for the proposition that such fees can
never be recovered under section 685.040. They were clearly incurred in opposing
plaintiff’s continued resistance to payment of the judgment. Under the circumstances, we
have no difficulty concluding that defendants may recover, as costs of enforcement, fees
related to work opposing the appeal of a postjudgment discovery order that was not
appealable in the first place.
Sixth, plaintiff asserts the trial court erred by awarding fees based on billing
entries that were “heavily redacted.” (Defendants made the redactions to prevent plaintiff
from learning their enforcement strategy.) Plaintiff says “there was no way to tell what
they were for.” We have examined the redacted entries, and do not share plaintiff’s
difficulty in telling whether the entries were connected to the present case. And we do
not doubt that the trial court, being intimately familiar with the case, could review those
entries and determine they reflected fees for work that was reasonable and necessary for
enforcement of the judgment. Plaintiff has shown no abuse of discretion.
Finally, plaintiff objects to $137.40 in costs as nonrecoverable: $84 in filing fees
(a $44 filing fee for the alter ego motion, and a $40 filing fee for an ex parte application
to correct a minute order), and $53.40 for “unexplained photocopying charges.” Plaintiff
gives no explanation for why the filing fees should not be recovered. The trial court
allowed them, and we are presented with no reason to disagree.
That leaves $53.40 in photocopying costs. Plaintiff says these costs are not
recoverable, citing Ripley v. Pappadopoulos (1994) 23 Cal. App. 4th 1616, 1628, and says,
without explanation, that they were not related to enforcement of the judgment. Ripley
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said that photocopying costs (like expert witness costs) “are expressly disallowed as costs
unless expressly permitted by law” under section 1033.5. (Ripley, at pp. 1627-1628,
citing § 1033.5, subd. (b)(3) [“photocopying charges, except for exhibits” are “not
allowable as costs, except when expressly authorized by law”]; but see the much-
criticized Bussey v. Affleck (1990) 225 Cal. App. 3d 1162, 1165, 1167 [permitting recovery
of counsel’s out-of-pocket costs where the parties have contracted for payment of fees
and costs]; see also § 685.080, subd. (c) [“[t]he court shall make an order allowing or
disallowing the costs [claimed for enforcing a judgment] to the extent justified under the
circumstances of the case”].) In this case, for all we know (plaintiff has provided no
transcript of the hearing), the photocopying costs were for exhibits of some sort. Given
the de minimis nature of this cost – $53.40 – we decline to consider further whether there
was any error by the trial court.
2. Other Claims by Additional Judgment Debtors
In addition to echoing plaintiff’s contentions, additional judgment debtors offer
several other reasons for reversing the trial court’s rulings.
They contend the trial court should not have awarded the $1,474.55 in costs
defendants sought. They claim there was no breakdown of the costs in the costs
memorandum to show the amounts of various statutory costs, and contend other costs
were not described sufficiently to determine whether they were “reasonable and
necessary.” But all this information appears in the evidence accompanying defendants’
noticed motion, filed simultaneously with the costs memorandum. All costs were
specifically listed in defendants’ invoices, and documentation of the costs was attached to
the invoices. We see no reason why the trial court should not have found the
documentation satisfactory, and the costs claimed reasonable and necessary.
In the same vein, additional judgment debtors claim the attorney fees should be
reduced by $20,550, for work performed by six individuals, because “there is no
declaration stating that any of them are attorneys.” This is a frivolous claim. The claim
refers, for example, to time entries for Kamran Khajavi-Nouri, who the record shows
appeared in court for defendants on October 5, 2011, as well as to time entries for other
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lawyers described in the billing as “partner” or “counsel,” some of whom had billing
rates higher than the associate who did most of the work. And, the associate’s
declaration states that, in addition to her, “several other Miller LLP attorneys worked on
judgment enforcement efforts since December 2010.” The trial court was in a good
position to know whether these fees were appropriate.
Additional judgment debtors also make several procedural claims.
First, they say that the third amended judgment they challenge in this appeal
violated their due process rights, because defendants did not serve them with the fee
motion and memorandum of costs. (They also complain that the motion sought no relief
against them, so even if they had been served, the papers “would have failed to put them
on notice that their rights were at stake or that they had reason to attend the July 13
hearing [on the postjudgment enforcement costs].”) These complaints are meritless.
There was no due process violation. As the chronology of events shows (see p. 3,
ante), defendants filed their motion for postjudgment enforcement costs and accrued
interest two weeks before the hearing on their alter ego motion. At that time, there was
no reason to serve additional judgment debtors because they were not yet additional
judgment debtors. After they were added to the judgment on May 29, defendants served
them with (1) their June 29, 2012 opposition to plaintiff’s motion to tax costs, and (2)
their July 6, 2012 reply in support of their motion for postjudgment enforcement costs.
(We note that, although the trial court added them to the judgment on May 29, 2012,
plaintiff did not serve additional judgment debtors with his May 31, 2012 motion to tax
costs, or his July 6, 2012 reply to defendants’ opposition, or his June 29, 2012 opposition
to the motion for postjudgment enforcement costs, which reveals the farce behind this
particular argument.) The assertion that additional judgment debtors had no notice of or
opportunity to be heard at the July 13, 2012 hearing, and “no notice their interests would
be at stake” at that hearing, is simply untrue. They had been added to the judgment, and
they had actual notice of the July 13 hearing through defendants’ service of their
opposition and reply papers. And if this were not enough, additional judgment debtors
ignore the fact that they were found to be alter egos of plaintiff, who controlled trustee
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Praske and the rest of the additional judgment debtors to serve plaintiff’s ends, a
conclusion we have affirmed today in Gaggero II. As a practical matter, there can be no
doubt additional judgment debtors were fully apprised of all developments in this
litigation.
Next, additional judgment debtors contend the third amended judgment, entered
on August 6, 2012, is “void” because it was entered on the same day as this court’s stay
order, which “trump[s]” the trial court’s amended judgment. This is another frivolous
contention. As additional judgment debtors acknowledge, trial courts retain jurisdiction
to amend judgments to add fees and costs while an appellate stay is in place.
Finally, additional judgment debtors contend that defendants are estopped to claim
accrued interest and enforcement costs against them, because defendants should have
added them to the judgment years ago, rather than waiting until 2012. As we have found
in Gaggero II, there is no basis for their claim of improper delay in adding them to the
judgment. Their claim in this appeal that we should nevertheless “at least hold that the
delay barred [defendants’] claim for interest and for the costs of enforcing the judgment
in the interim” – because if they had been named in the original May 19, 2008 judgment,
“they could have paid it before any significant amount of interest had accrued” – is
patently groundless.
3. A Final Note on Motions Filed During this Appeal
In their respondents’ brief, defendants point out that neither plaintiff nor additional
judgment debtors provided a reporter’s transcript of the July 13, 2012 hearing at which
the trial court decided the motions at issue in this appeal. Defendants argue this failure
resulted in an inadequate record on appeal, precluding additional judgment debtors from
claiming the trial court abused its discretion in determining the costs were reasonable and
necessary, and from claiming there was insufficient evidence to support the award.
Defendants also argue, in response to additional judgment debtors’ claim they had no
notice of the July 13 hearing, that the record was inadequate to show that additional
judgment debtors were not actually represented by counsel for plaintiff (David Chatfield)
at that hearing.
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We have not considered the merits of these arguments in resolving this appeal.
Defendants’ arguments did, however, precipitate both a request from additional judgment
debtors to file an oversized reply brief and a blizzard of further motions from additional
judgment debtors. These were (1) a motion to correct the record on appeal (to show that
the transcript of the alter ego hearing on May 29, 2012, erroneously showed that
plaintiff’s counsel, Mr. Chatfield, said “I represent the trustee,” when in fact the speaker
was David Esquibias, counsel for additional judgment debtors); (2) a motion to augment
the record on appeal (to prove that Mr. Esquibias was their counsel for all purposes
before and after the July 13 hearing); and (3) a motion to take evidence so they can
attempt to prove that plaintiff’s failure to provide a reporter’s transcript was really
defendants’ fault (by “denying them notice of the July 13 hearing”).
We deny all these motions. Additional judgment debtors are correct when they
say it was really Mr. Esquibias who said that he represented the trustee, but all of the ink
spilled on this and the other points is entirely unnecessary to our disposition of the
appeal. We understand that Mr. Esquibias represented the additional judgment debtors,
and our resolution of the appeal does not depend on whether he was or was not at the July
13 hearing, or on whether plaintiff’s counsel did or did not also represent additional
judgment debtors at that hearing. As we have already concluded, additional judgment
debtors had actual notice of the hearing, and their failure to attend may not be laid at
defendants’ door.
As for the absence of a transcript of the hearing, little need be said. In their reply
briefs, plaintiff and additional judgment debtors all say their appeal raises no questions
requiring a transcript. In any event, it was plaintiff’s responsibility to procure a reporter,
if he wished to have a transcript on appeal, and, as we have concluded in Gaggero II,
plaintiff has controlled this litigation from its inception. To the extent, if at all, the
absence of a transcript has prevented plaintiff or additional judgment debtors from
showing that the trial court was wrong on any point – and they say it has not – that
absence was plaintiff’s own doing. And it is settled that an order of the trial court is
presumed correct: “ ‘All intendments and presumptions are indulged to support it on
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matters as to which the record is silent, and error must be affirmatively shown.’
[Citation.]” (Denham v. Superior Court (1970) 2 Cal. 3d 557, 564.) None was shown
here.
DISPOSITION
The order is affirmed. Defendants shall recover their costs on appeal.
GRIMES, J.
We concur:
RUBIN, Acting P.J.
FLIER, J.
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