Feldsott & Lee v. Jones CA2/8

Filed 9/6/16 Feldsott & Lee v. Jones CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
FELDSOTT & LEE, B262710
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC553853)
v.
DONNA LYNN JONES,
Defendant and Appellant.
APPEAL from the judgment of the Superior Court of Los Angeles County. Mel
Recana, Judge. Affirmed.
Law Office of Mark B. Plummer and Mark B. Plummer for Defendant and
Appellant.
Feldsott & Lee, Martin Lee and Stanley Feldsott for Plaintiff and Respondent.
**********
Defendant and appellant Donna Lynn Jones (Jones) appeals from the January 13,
2015 judgment of dismissal discharging plaintiff and respondent Feldsott & Lee, a Law
Corporation, (Feldsott) from the underlying interpleader action and awarding $9,655 in
statutory attorney fees and costs pursuant to Code of Civil Procedure section 386.6.
We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In November 2012, Jones hired Feldsott to represent her in connection with an
arbitration against her homeowner’s association in which she contested various special
assessments imposed against two units she owned in a condominium complex. Jones and
Feldsott executed a written retainer agreement. The agreement provided that Jones
would be responsible for paying all costs, as well as a $6,000 retainer. The fee provision
further provided that “[a]ny attorneys fees recovered in excess of those charged to
CLIENT by ATTORNEY shall belong to ATTORNEY as additional compensation for
services rendered.” Paragraph 6 of the agreement granted Feldsott a lien on any
recovery.
Shortly thereafter, Jones referred another homeowner, Christine Frau, to Feldsott
to join her as a coplaintiff. Jones believed that if Frau was added as a coplaintiff, Frau
would execute a separate retainer with Feldsott requiring her to share in the fees and costs
of the arbitration. Feldsott never disclosed or discussed any potential conflict of interest
issues with Jones that might arise from the joint representation.
Frau authorized Feldsott in writing to represent her, and she was added as a
coplaintiff to the action against the homeowner’s association. The record does not
contain a separate retainer agreement between Feldsott and Frau. Frau paid Jones $3,000
to cover half of the retainer Jones had already paid to Feldsott.
In October 2013, the arbitration was resolved in favor of Jones and Frau. Feldsott,
on behalf of both Jones and Frau, submitted a petition for attorney fees and a
memorandum of costs to the arbitrator. The petition sought attorney fees in the amount
of $68,040 pursuant to the terms of the homeowner’s association’s CC&R’s and Civil
Code section 1354. The memorandum of costs identified arbitration costs of $12,358.52.
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Before the arbitrator ruled on the fee request, the parties agreed to settle the
amount of attorney fees and costs for a combined payment by the homeowner’s
association of $50,000 and execution of a stipulation and release. The two-page release
identifies Jones and Frau as the petitioners who, in consideration of payment of $50,000
by the association to the “Feldsott & Lee Client Trust Account,” would withdraw their
pending petition for fees and costs and release the association from any further claim for
fees and costs related to the arbitration. The agreement is signed by Jones, Frau, and a
representative of the association, and also approved as to form by Feldsott and the
association’s attorney.
The $50,000 settlement amount included the full amount of requested arbitration
costs ($12,358.52) and a compromised amount of the requested attorney fees
($37,641.48).
Upon receipt of the $50,000 check, Feldsott placed $16,637.50 into its client trust
account. Feldsott took the remainder as attorney fees in accordance with the terms of the
retainer agreement with Jones. The $16,637.50 held in trust represented the following
fees and costs: $6,000 as reimbursement for the retainer paid at the outset of the
representation, plus the $12,358.52 in arbitration costs, less $1,721.02 in costs that
Feldsott had advanced during the course of the arbitration.
Jones advised Feldsott that she expected the entire $16,637.50 be released to her,
and refused Feldsott’s request that Frau’s consent be obtained for such a distribution.
Feldsott was unable to reach an agreement with Jones and Frau as to the proper
distribution of the funds. Feldsott therefore filed a complaint for interpleader in Orange
County Superior Court. The complaint alleged the disputed amount of $16,637.50, that
Jones and Frau were the two claimants to the disputed funds, and that Feldsott disclaimed
any interest in the amount. Feldsott deposited $16,637.50 with the clerk of the court.
Feldsott attempted to minimize the costs associated with service of the complaint
by requesting Jones and Frau to voluntarily accept service of process by mail. Frau
accepted service, admitted the allegations of the interpleader complaint, and claimed an
interest in $3,000 of the disputed funds.
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Jones, who is also an attorney, refused to accept service. Feldsott made repeated
efforts over four months to serve Jones with the complaint, including with the assistance
of an investigator. After service was finally effectuated, Jones brought a motion to quash
service which was denied, as well as a motion to transfer the action to Los Angeles
Superior Court which was granted. Jones eventually answered the interpleader complaint
and filed a cross-complaint against Feldsott alleging legal malpractice, breach of
fiduciary duty, and conversion.
In response, Feldsott prepared a demurrer and motion to strike the cross-complaint
as improper in the interpleader action, and served it on Jones along with a letter advising
that if the cross-complaint was not withdrawn, Feldsott would move for sanctions
pursuant to Code of Civil Procedure section 128.7. Jones dismissed her cross-complaint
without prejudice. Jones then filed a separate action restating her claims against Feldsott,
which action is apparently still pending in Orange County Superior Court.
Feldsott filed a motion to be discharged from the interpleader action. The motion
requested an award of statutory fees and costs pursuant to Code of Civil Procedure
section 386.6. Jones opposed the motion for discharge, arguing, among other things, that
the remedy of interpleader was not proper and that Feldsott had breached various duties
to her and was not entitled to any fees. Jones argued she had incurred costs of
$25,807.50, including several thousand dollars in expert fees, and that Feldsott failed to
consult with her during the settlement negotiations about the amount of costs she had
incurred and for which she was due reimbursement. She also argued that interpleader
was improper because Feldsott had not interpled all of the disputed funds, but had
wrongfully withheld and paid itself monies to which it was not entitled because of the
breaches of duty it had committed against her during the representation. Jones argued
that the dispute over the larger sum of money precluded a finding that Feldsott was a
truly disinterested party entitled to the remedy of interpleader.
Feldsott argued that Jones’s contention she was owed additional monies did not
defeat the remedy of interpleader as to the $16,637.50 in which Feldsott had no interest.
Feldsott also argued that Jones’s claim of additional costs owing was invalid because the
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expert consultant fees were incurred by Jones on her own in connection with a
construction defect action she was considering against the homeowner’s association, and
were not part of the costs related to the arbitration over the special assessments.
Prior to the hearing on Feldsott’s motion to dismiss, Frau disclaimed her interest in
any of the interpled funds.
The trial court granted Feldsott’s motion. The first paragraph of the order reads as
follows: “The motion is GRANTED. Plaintiff is dismissed. Plaintiff is entitled to its
costs and attorney’s fees in the amount of $9655. The balance is to be distributed to
defendant Jones.” Jones moved for reconsideration, which was denied.
This appeal followed. Instead of designating a clerk’s and/or reporter’s transcript,
Jones demanded the preparation of a settled statement. Efforts to agree on a settled
statement in the trial court were unsuccessful. Jones eventually prepared an appendix,
and Feldsott designated additional documents in a respondent’s appendix. Many of the
documents in Jones’s appendix, including discovery documents from Jones’s pending
malpractice action against Feldsott, are irrelevant and improper and have been
disregarded.
Feldsott filed a request for judicial notice and a motion for sanctions in this court.
Jones filed opposition to the motion for sanctions.
DISCUSSION
1. The Order Discharging Feldsott From the Interpleader Action and Awarding
Attorney Fees and Costs Is Appealable.
Feldsott contends Jones’s appeal is limited to challenging the propriety of the
judgment of dismissal in Feldsott’s favor, and does not include the trial court’s award of
statutory fees and costs. We disagree. Jones’s notice of appeal identified that it is from
the judgment of dismissal dated January 13, 2015. The order of discharge granting
Feldsott’s motion was signed by the court and is effective as a judgment of dismissal
pursuant to Code of Civil Procedure section 581d. The order also awarded attorney fees
and costs to Feldsott as the prevailing party on the motion pursuant to section 386.6. The
fee order was not a separate order issued subsequent to the judgment of dismissal, but
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was part and parcel of the January 13, 2015 order identified in Jones’s notice of appeal.
The order of discharge and award of attorney fees and costs is appealable. (Southern
California Gas Co. v. Flannery (2014) 232 Cal. App. 4th 477, 490 (Southern California
Gas); accord, Sweeney v. McClaran (1976) 58 Cal. App. 3d 824, 827-828.)
2. The Interpleader Action Was Proper.
Code of Civil Procedure section 386, subdivision (b) provides, in relevant part that
“[a]ny person, firm, corporation, association or other entity against whom double or
multiple claims are made, or may be made, by two or more persons which are such that
they may give rise to double or multiple liability, may bring an action against the
claimants to compel them to interplead and litigate their several claims.” The enactment
of section 386 broadened the scope of the interpleader remedy, eliminating many of the
limitations imposed by the common law. (City of Morgan Hill v. Brown (1999) 71
Cal. App. 4th 1114, 1122-1123 (City of Morgan Hill).)
“ ‘Interpleader is an equitable proceeding by which an obligor who is a mere
stakeholder may compel conflicting claimants to money or property to interplead and
litigate the claims among themselves instead of separately against the obligor. . . .’
[Citation.]” (Southern California Gas, supra, 232 Cal.App.4th at p. 486.) “The true test
of suitability for interpleader is the stakeholder’s disavowal of interest in the property
sought to be interpleaded, coupled with the perceived ability of the court to resolve the
entire controversy as to entitlement to that property without need for the stakeholder to be
a party to the suit.” (Pac. Loan Management Corp. v. Superior Court (1987) 196
Cal. App. 3d 1485, 1489-1490.) The right to pursue interpleader as a remedy is premised
on an individual or entity being “ ‘threatened with double vexation in respect to one
liability.’ [Citation.]” (City of Morgan Hill, supra, 71 Cal.App.4th at p. 1122.)
“In an interpleader action, the court initially determines the right of the plaintiff to
interplead the funds; if that right is sustained, an interlocutory decree is entered which
requires the defendants to interplead and litigate their claims to the funds. Upon an
admission of liability and deposit of monies with the court, the plaintiff then may be
discharged from liability and dismissed from the interpleader action.” (Dial 800 v.
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Fesbinder (2004) 118 Cal. App. 4th 32, 42-43.) “Thus, the interpleader proceeding is
traditionally viewed as two lawsuits in one. The first dispute is between the stakeholder
and the claimants to determine the right to interplead the funds. The second dispute to be
resolved is who is to receive the interpleaded funds.” (Id. at p. 43.)
We review the superior court’s legal conclusions de novo and its findings of fact
for substantial evidence. (See generally, Haworth v. Superior Court (2010) 50 Cal. 4th
372, 384.)
Jones’s primary basis for arguing that the court erred in allowing Feldsott to
proceed with the interpleader is her contention that Feldsott was not a disinterested
stakeholder because it did not interplead all of the disputed funds. Jones argues that she
was entitled to reimbursement of more costs from the $50,000 settlement and that
Feldsott was not entitled to any fees at all because of its breach of various duties to her
during the representation. These are the same claims on which Jones based her cross-
complaint against Feldsott that she dismissed and her separate civil action which she is
still pursuing.
A defendant in an interpleader action may not enlarge the issues by the filing of a
cross-complaint against the plaintiff seeking affirmative relief. (Conner v. Bank of
Bakersfield (1917) 174 Cal. 400, 403; 4 Witkin, Cal. Procedure (5th ed. 2008) Pleadings,
§ 249, p. 328 [a defendant in interpleader “cannot, by cross-complaint, change the
character of the action by setting up a new and distinct claim against the plaintiff. That
claim must be asserted in a separate action.”].)
Jones has a remedy for the alleged torts she asserts against Feldsott. She is
pursuing that remedy by way of a separate civil action. However, she has not shown any
basis for a denial of the remedy of interpleader as to the $16,637.50 in disputed funds
disclaimed and deposited by Feldsott. None of her arguments demonstrate that Feldsott
was not a disinterested stakeholder as to the $16,637.50 in funds deposited with the court
as to which both Jones and Frau claimed an interest.
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3. The Award of Fees and Costs to Feldsott Was Proper.
The court awarded Feldsott statutory fees and costs related to the filing of the
interpleader complaint in the amount of $9,655. “A party to an action who follows the
procedure set forth in [Code of Civil Procedure] Section 386 . . . may insert in his motion,
petition, complaint, or cross complaint a request for allowance of his costs and reasonable
attorney fees incurred in such action. In ordering the discharge of such party, the court
may, in its discretion, award such party his costs and reasonable attorney fees from the
amount in dispute which has been deposited with the court.” (§ 386.6, subd. (a).)
Further, the statute provides that “[a] party shall not be denied the attorney fees
authorized by subdivision (a) for the reason that he is himself an attorney, appeared in pro
se, and performed his own legal services.” (Id., subd. (b).)
In order to obtain an award of fees and costs under Code of Civil Procedure
section 386.6, an interpleader plaintiff must comply with the statutory requirements,
including “disavowing any interest in the amount being interpleaded, depositing that
amount with the court, and seeking and obtaining a discharge from liability.” (Southern
California Gas, supra, 232 Cal.App.4th at p. 490.)
Here, Feldsott complied with the statutory requirements. By statute, Feldsott was
entitled to seek an award of fees and costs associated with bringing the interpleader
action to be paid from the funds on deposit. (Code Civ. Proc., § 386.6.)
Jones argues the law is well established that an attorney who has committed
ethical violations, including disregarding conflicts of interest that infect the entire
attorney-client relationship, is not entitled to any fees, even on a quantum meruit basis.
Therefore, she posits that any award in any amount was improper. But the issue of
whether Feldsott committed malpractice or is guilty of any ethical violations as Jones
claims was not before the trial court.
The record before the trial court amply supports an award of statutory fees and
costs. Jones did not present evidence challenging the reasonableness of the fees and costs
sought. And, the amount ultimately awarded to Feldsott was dictated in large part by
Jones’s own litigation tactics that increased the fees and costs Feldsott incurred, including
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her refusal to accept service of process, moving to quash service, moving to transfer the
action to Los Angeles, and filing an improper cross-complaint in response to which
Feldsott had to prepare a demurrer. Jones has failed to affirmatively demonstrate that the
amount of fees and costs awarded by the trial court pursuant to Code of Civil Procedure
section 386.6 amounted to an abuse of discretion.
4. Other Requests
Feldsott filed a motion requesting sanctions, contending Jones’s appeal was
frivolous. Feldsott also asked us to take judicial notice of documents we find to be
irrelevant. We deny both requests.
DISPOSITION
The superior court’s January 13, 2015 judgment of dismissal and award of
attorney fees and costs in favor of plaintiff and respondent Feldsott & Lee is affirmed.
Feldsott & Lee is entitled to costs of appeal.
GRIMES, J.
WE CONCUR:
BIGELOW, P. J.
RUBIN, J.
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