Wednesday, February 18, 2009
Court Overturns Default Judgment Favoring Beverly Hills Lawyer
By SHERRI M. OKAMOTO, Staff Writer
This district’s Court of Appeal yesterday reversed an award in favor of a Beverly Hills attorney in excess of $1.1 million based on his efforts to enforce a default judgment against his former client due to his failure to give his client notice that he was seeking post-judgment attorney fees.
Div. One directed Los Angeles Superior Court Judge Helen I. Bendix to grant
William Dougherty’s request for relief from the judgment, clarifying that as a matter of law, a judgment debtor is entitled to notice of the judgment creditor’s application for fees after judgment.
Dougherty had hired David S. Karton to represent him in a marital dissolution action in June 1996.
The written retainer agreement provided that if Karton’s monthly bills were not paid in full within thirty days, then he would be subject to simple interest at the rate of ten percent per annum on the unpaid portions of the monies owed. It further stated that the prevailing party in any action to enforce the agreement would be entitled to legal fees and costs.
In March 1999, Karton filed suit against Dougherty in Los Angeles County Superior Court, seeking to recover $65,246.63 in allegedly unpaid fees, plus interest, but his declaration in support of his request for default judgment stated that the total amount of unpaid fees and costs was $79,349.90, plus $2,446.51 in interest, for a combined total of $81,796.41.
The trial court subsequently entered a default judgment in the principal sum of $65,246.63, plus accrued prejudgment interest of $18,224.82, costs of $679.50 and attorney’s fees of $2,525.93, for a total of $86,676.88.
Karton successfully collected $56,000 on the default judgment within two months of its entry, and then pursued further collection efforts against Dougherty in California, Pennsylvania, and Tennessee.
On April 21, 2003, Karton filed an application in the superior court for an award of supplemental attorney’s fees totaling $252,819.29, and the court granted Karton’s unnoticed request, thereby increasing the principal amount of the judgment to $349,340.45, plus interest of $40,575.24.
The attorney again applied to the court for an award of supplemental attorney’s fees, costs, and interest in February 2007 seeking $1,204,298.30. Again, Karton gave no notice to Dougherty, but the court granted Karton’s fee request.
Dougherty later filed a motion for relief from the February 2007 order, based on Code of Civil Procedure Sec. 473—which permits discretionary relief from an order due to mistake, inadvertence, surprise, or excusable neglect—as well as the court’s inherent equitable powers, but Bendix denied his motion.
Writing for the appellate court, Justice Frances Rothschild explained that a judgment creditor may seek to recover attorney fees incurred in enforcing a judgment by either filing a memorandum of costs under Sec. 685.070(b) or a noticed motion under Sec. 685.080(a).
Because Karton had not given any notice of his applications, they were not noticed motions, Rothschild regarded them as memorandums of costs.
However, she noted that Sec. 685.070(b) requires creditors to serve a copy of the memorandum of costs on the judgment debtor, and further provides that if the judgment debtor does not timely file a motion to tax costs, then trial courts are required to allow all of the costs claimed.
Rothschild reasoned that if default judgment debtors are not entitled to notice of a memorandum of costs under Sec. 685.070, then trial courts would always be compelled to grant all of the costs requested in such memoranda, because judgment debtors who are unaware of the proceedings will never have the opportunity to file motions to tax.
“In effect, every default judgment would become a blank check in favor of the judgment creditor,” she suggested. “We cannot believe that the Legislature intended to create such a rule, which would make error and mischief virtually inevitable.”
As Dougherty was entitled to notice of Karton’s fee application as a matter or law, but received no notice until after the application was granted, Rothschild concluded the order granting the application was “precisely the kind of ‘surprise’ to which section 473 was intended to apply,” and that the trial court had abused its discretion in denying relief.
Rothschild also concluded that the default judgment underlying Karton’s fee applications was void on the face of the record and had to be set aside because it awarded relief in excess of what was demanded in the complaint.
She explained that it was mathematically impossible for the daily amount of prejudgment interest which was incorporated in the judgment had been based on the $65,246.63 that Karton had alleged in his complaint, and had been erroneously based on the principal sum of $79,349.90 the attorney had later claimed.
In the unpublished portion of her opinion, Rothschild explained that none of the orders on Dougherty’s motions or other applications to set aside the default judgment operated as a collateral estoppel of the appeal because the doctrine does not apply to previous rulings in the same action.
Presiding Justice Robert M. Mallano and retired Los Angeles Superior Court Judge Stanley M. Weisberg, sitting on assignment, joined Rothschild in her opinion.
Cheryl A. Orr of Musick, Peeler & Garrett represented Dougherty and said her client was “thrilled with the result.”
Henry S. David of Snell & Wilmer represented Karton, and said he “found it very surprising the Court of Appeal has decided that the decisions made by 12 other courts are not entitled to collateral estoppel effect, and that after 10 years of litigation, rulings of court after court are simply being ignored.”
He suggested that yesterday’s ruling “encourages vexations litigation” because it “encourages people to raise the same argument time and time and time again in the hope that some court will disagree with a dozen prior courts and issue a contrary ruling.”
David maintained that “final judgments simply must mean something,” adding that he and his client are “considering our options for further review.”
The case is Karton v. Dougherty, B201663.
Copyright 2009, Metropolitan News Company