Allen v. Fulton

Filed 12/9/09 Allen v. Fulton CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

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Defendant David Fulton appeals from an award of costs and attorney fees to plaintiff Jess L. Allen totaling $217,422 against Fulton and his company, Kart Saver, Inc., jointly and severally. Fulton contends the award of $212,473 in attorney fees was unreasonable because the court failed to: (1) state the reasons for the award; (2) acknowledge the only basis for the award was the personal guarantee which is a contract; (3) distinguish between legal, paralegal and clerical work; (4) issue an award that was proportional and reasonable to the liability sustained; and (5) apportion the award. As we explain, Fulton has failed to carry his burden to show the attorney fee award was unreasonable.

FACTUAL AND PROCEDURAL BACKGROUND

Fulton was the founder, chairman of the board, and 90 percent shareholder of Kart Saver, which developed a locking wheel for shopping carts and a device named K-Check, which alerted store cashiers to items on the lower baskets of shopping carts.

Allen became an investor in and officer of Kart Saver. To fund Kart Saver, Allen and his family trusts entered into multiple contracts with Kart Saver and Fulton having to do with three business agreements. The first were purchase agreements for the sale of four debentures. The second were for accounts factoring agreements, which provided for Allen buying Kart Savers accounts receivables at a discount and Fulton personally guaranteeing Kart Savers obligations to repurchase the accounts receivable. The third were for development financing agreements, which provided for Allen lending $100,000 to Kart Saver for developing K-Check. These agreements contained attorney fee provisions.

Kart Saver and Fulton did not hold up their end of the bargain on the agreements. Specifically, Kart Saver did not pay the principal and accrued interest on the four debentures when they came due. Kart Saver and Allen did not repurchase the accounts receivable even after they collected the sums due on the accounts. And Kart Saver did not make any repayments for Allens loan to Kart Saver of $100,000 for developing K-Check.

Allen sued Kart Saver for breach of the debenture agreements, default of the financing development agreements and judicial foreclosure, and declaratory relief with respect to the development financing agreements. In the same complaint, Allen sued both Kart Saver and Fulton for breach of contract, conversion, and breach of fiduciary duty with respect to the accounts factoring agreements.

Kart Saver and Fulton filed a cross-complaint alleging fraud, breach of contract, breach of an implied covenant of good faith and fair dealing, promissory estoppel, breach of fiduciary duty, and declaratory relief. The contracts on which they sued Allen involved the development financing agreements.

Allen filed a motion for summary judgment. Kart Saver did not oppose the motion, but Fulton did, even on those causes of action that did not name him personally as a defendant.

The court granted summary judgment against Kart Saver and Fulton on their cross-complaint. It granted summary adjudication against Kart Saver on all of the causes of actions against Kart Saver in Allens complaint and against Fulton as to the breach of contract cause of action.

A bench trial followed as to Fultons liability for conversion and breach of fiduciary duty. Allen prevailed.

As to all causes of action, the court entered judgment as follows: $290,131.15 against Kart Saver and $83,590.58 against Kart Saver and Fulton, jointly and severally. The total due Allen, therefore, was $373,721.73.

Allen filed a detailed motion for fees and costs, which included a memorandum of points and authorities, memorandum of fees, and declaration from his attorney. In all, Allen requested $212,473 in attorney fees.

Fulton filed an opposition, arguing the requested attorney fees were unreasonable because the debt that he allegedly guaranteed . . . was less than $50,000 and the personal guarantee contract was the only basis for the attorney fees; the declaration of Allens attorney summarizing his work was riddled with vague and compound itemizations; and the majority of the action was against the corporate defendant. Fulton also contended the court should award attorney fees in a reasonable amount, which he argued was one-half actual damages of $47,339.89 less apportionment for all of the other recovery obtained in the action against Kart Saver, Inc.

Allen filed a reply, arguing that his request for attorney fees was grounded not only in the personal guarantee contract, but also in other contracts and the torts concerning them; Fulton ignored the full judgment against him, which was $83,590.58; and Fultons and Kart Savers litigation tactics largely contributed to the amount of the fees. Allen further argued that apportionment was unnecessary because the facts between all causes of action were intertwined.

After oral argument, the court issued the following written ruling: After considering the motion for fees/costs, the opposition thereto, and all other matters of record, the Court awards to [Allen] and against [Kart Saver and Fulton] jointly and severally attorney fees and costs in the amount of $217,442.00.

Fulton filed a timely notice of appeal from the ruling.

DISCUSSION

I

The Trial Court Was Not Required To

State Its Reasons For The Attorney Fee Award

Fulton contends the attorney fee award was unreasonable because the trial court failed to state its reasons for the award. Specifically, he argues the courts decision simply states that the court awards to plaintiff and against defendants jointly and severally attorneys fees and costs in the amount of $217,442.00 and failed to provide any reasoning to justify [the amount awarded] or establish[] a record to support this award. He is wrong on both the law and facts.

The law does not require the trial court to issue a statement of decision with regard to the fee award. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1140.) Only if a request is made for a statement of decision is the trial court required to provide one. (Ibid.) Here, Fulton does not contend he made any such request, and no such request appears in the record.

In any event, the facts reflect the trial court stated reasons for the award. The order stated the court made the award [a]fter considering the motion for fees/costs, the opposition thereto, and all other matters of record. That motion requested reasonable attorneys fees according to proof. As part of his proof, Allen submitted an eight-page memorandum of costs detailing how he arrived at the $212,473 figure; a memorandum of points and authorities explaining the law entitled him to attorney fees; and a declaration from his attorney containing 32 pages of detailed billing on the case. The court implicitly credited these arguments and calculations by awarding the exact amount requested. On this record, defendants argument fails.

II

The Attorney Fee Award Was Based On More

Than Just The Contractual Guarantee

In a terse argument he reraises from the trial court, defendant contends the award of attorney fees against him could be based only on the contract in which he personally guaranteed Kart Savers obligations to repurchase the accounts receivable, which had an attorney fee provision. Just as he did in the trial court, defendant overlooks other bases for the award.

Allens motion for attorney fees arose out of multiple contracts with attorney fee provisions. These included not only the personal guarantee contract, but also the development financing agreements on which Fulton based his causes of action for fraud and other tort actions against Allen in the cross-complaint. The attorney fee provision in the development financing agreements was broad and encompassed reasonable attorney fees incurred by Allen in connection with this transaction. On this record, Fultons argument fails.

III

Fulton Has Forfeited His Claim The Court Erred In Failing To Distinguish Between Legal, Paralegal, And Clerical Work

Fulton contends the attorney fee award was unreasonable because the court failed to distinguish between legal, paralegal and clerical work. Specifically, he argues Allens counsel appears to have alleged in his Memorandum of Costs that work performed by an unidentified person, SPS, presumably a paralegal, should be compensated at an attorneys hourly rate of pay and also failed to properly itemize his own work according to whether it was clerical or legal in nature.

Allen contends Fulton waived his right to object to time billing entries because [o]ther than the attorney fee amounts attributed to SPS, first raised here, Fulton, below and here, does not point to any specific entries or amounts of attorneys fees, for being unreasonable. We find the issues forfeited.

As to billings of SPS, the issue is forfeited because Fulton did not raise it in the trial court. It is unfair to the trial judge and to the adverse party to take advantage of an alleged error on appeal where it could easily have been corrected at trial. [Citations.] (Childrens Hospital & MedicalCenter v. Bont (2002) 97 Cal.App.4th 740, 776.) Indeed, Allen explains on appeal that SPS is the billing code for attorney Susan Patricia Smith.

As to the failure to distinguish between legal, paralegal, and secretarial work, Fulton simply states the declaration of Allens attorney contains over 15 items that are readily identifiable as clerical tasks, such as filing documents, traveling to court, and inputting revisions and edits. He then includes a citation to 32 pages of clerks transcript containing the declaration of Allens attorney. This is not sufficient to identify error. It is not our job to comb the entire declaration that contains hundreds of time entries to find the 15 that Fulton claims are readily identifiable as nonattorney work to determine whether the court erred in not requiring Allen to distinguish between attorney and nonattorney work.[1] Fultons failure forfeits the issue on appeal.

IV

Fulton Has Not Carried His Burden To Show The Attorney

Fee Award Was Disproportionate To His Liability

Fulton contends the award of attorney fees for over $200,000 was unreasonable because it was disproportionate to his liability (which he claims was approximately $47,000) and because it includes the cost of litigating all of the claims against Kart Saver, Inc. Again, he is wrong on the facts and on the law.

Factually, Fultons argument is incorrect on two points. One, Fulton was found liable not only for the approximately $47,000 in damages for the principal of the debt, but also for over seven years of unpaid interest from the time of his failure to repurchase the accounts receivable. In fact, in his opening brief to this court (the only brief he filed), he never discloses the courts entirejudgment against him that was $83,590.58.

Two, he ignores completely the amount of legal work performed by counsel and why it was necessary. For example, Fulton chose to oppose the motion for summary judgment as to all causes of action (not just the three that named him) and also filed a cross-complaint. In addition, he engaged in other tactics that substantially increased the cost of litigation, such as failing to participate in discovery, which required Allen to bring more than 22 motions to compel him to participate in discovery. On each motion Allen prevailed. Also, in some instances Allen was awarded sanctions. Therefore, Fulton was directly responsible for the increased cost of litigating the case.

Even leaving aside these factual matters, legally Fultons argument fares no better. His position is essentially that the court must look only to the damages excluding interest the

losing party was ordered to pay and base the attorney fees on some fraction of that number. At the trial court, without citation to authority, he claimed that amount was one-half actual damages excluding interest less apportionment for all of the other recovery obtained in the action against Kart Saver, Inc. This, however, is not the law. The trial court has the discretion to award attorney fees after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1096.) Fulton has failed to demonstrate the court abused its discretion in awarding attorney fees here.

V

The Court Did Not Abuse Its Discretion

By Not Apportioning The Attorney Fees

Fulton finally contends the court should have apportioned the attorney fees because he was liable with respect to only two transactions and the claims against Kart Saver were based on numerous and distinct transactions that dominated the entire litigation.

Fultons argument overlooks critical facts common to all causes of action. (See Korech v. Hornwood (1997) 58 Cal.App.4th 1412, 1422 [trial court does not have to apportion fees between causes of action where there are facts common to each].)

While Allen alleged three causes of action against Fulton that arose out of violating the accounts factoring agreements,

Fultons defense intertwined facts of the causes of action. Specifically, as noted, Fulton filed an opposition to Allens summary judgment motion, contesting summary judgment and summary adjudication on all causes of action. In his opposition, Fulton invoked the affirmative defense of Allens unclean hands as to liability on all causes of action and the theory of Allens breach of fiduciary duty to Kart Saver. In his separate statement of undisputed material facts, Fulton provided the details for those defenses and attached his deposition recounting allegations against Fulton that involved not only the account factoring agreements but also the debenture purchase agreements and the development agreements supporting his defense and theory. Fultons own pleadings therefore required the court to analyze all causes of action with respect to the defense of unclean hands and breach of fiduciary duty, which was reflected in the courts detailed order with respect to the summary judgment motion.

On this record, the court did not abuse its discretion in failing to apportion fees.

DISPOSITION

The award of attorney fees and costs is affirmed. Allen shall be awarded his costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).) Allen is also entitled to attorney fees on appeal, based on the multiple contracts with attorney fee provisions, in an amount to be determined by the trial court. (Morcos v. Board of Retirement (1990) 51 Cal.3d 924, 927.)

ROBIE , J.

We concur:

SIMS , Acting P. J.

RAYE , J.

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[1] We also note the issue was only cursorily raised at the trial court when Fulton was objecting to the billing records of Allens attorney contained in his declaration. (5CT 1345:1-4) In arguing the declaration was vague, compound, unintelligible, and lack[ed] foundation, Fulton stated in passing, [f]urthermore, throughout the Declaration, there are instances in which [Allen] is claiming attorneys fees for secretarial tasks, such as scheduling with the Court, filing documents, etc.