Agora Concepts v. Raynak

 

 

 

 

 

 

 

Filed 10/3/13  Agora Concepts v. Raynak CA2/2

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>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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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 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  This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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

 

SECOND
APPELLATE DISTRICT

 

DIVISION
TWO

 

 
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AGORA CONCEPTS, INC.,               Plaintiff, Cross-defendant and Respondent,               v.   RANDY RAYNAK,               Cross-defendant and Respondent;   ONE COLORADO INVESTMENTS, LLC,               Objector and Appellant.

B243907       (Los Angeles County       Super. Ct. No. BC454498)

 

            APPEAL from
an order of the Superior Court
of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County.  Maureen
Duffy-Lewis, Judge.  Affirmed.

 

            Kendrick,
Jackson & Kearl and Glen R. Segal for Objector and Appellant.

 

            Law Offices
of Cruz & Del Valle and Leonard G. Cruz for Agora Concepts, Inc. and Randy
Raynak, Plaintiffs, Cross-defendants and Respondents.

 

* * * * * *

Objector and appellant One Colorado
Investments LLC appeals from the order approving a settlement that effectively
gave priority to a lien in favor of counsel for plaintiff, cross-defendant and
respondent Agora Concepts, Inc. (Agora) and cross-defendant and respondent
Randy Raynak (Raynak).  We affirm.  The trial court properly exercised its
discretion to conclude the evidence showed that the attorney’s lien was neither
collusive nor in violation of the Rules of Professional Conduct, and therefore
took priority over appellant’s judgment lien.

FACTUAL AND PROCEDURAL BACKGROUND

In December 2007, Agora entered
into a lease agreement with the Century City Mall, LLC (Mall) to lease a
location at the Mall for the purpose of operating a specialty coffee and
chocolate shop doing business as Leonidas (Lease).  Pursuant to a separate agreement, Randy
Raynak and two coinvestors financed the shop. 
Raynak signed the Lease on Agora’s behalf as its “partner” and,
separately, signed a personal guaranty (Guaranty) of all of Agora’s payments,
covenants and other obligations as a tenant under the Lease.

Agora fell behind in its rent; in
November 2008 the Mall served Agora with a five-day notice to pay rent or
surrender the premises, and in December 2008 it filed an unlawful detainer
action against Agora and Raynak, seeking possession of the leased premises.  The Mall obtained a default judgment in
January 2009 which it utilized to evict Agora in March 2009.  Agora and Raynak retained the law firm of
Cruz & Del Valle to represent them. 
Raynak signed a retainer agreement
on his own and Agora’s behalf (2009 Retainer Agreement) that included a clause
providing for an attorney’s lien upon “any cause of action or lawsuit filed
thereon, and on any recovery whether by settlement, arbitration, judgment or
otherwise in this Matter.”  The “Matter”
was identified as the unlawful detainer action. 
Agora moved to set aside the entry of default and default judgment.  The trial court granted the motion in July
2009, and after Agora’s answer was deemed filed, the Mall dismissed the unlawful
detainer action.

Following the dismissal, Raynak’s
coinvestors in Leonidas sued Agora, Raynak and Agora president Mary Nguyen for
damages related to their investment in the shop (Investors lawsuit).  Raynak signed another written retainer
agreement with Cruz & Del Valle, on his own and Agora’s behalf (2010
Retainer Agreement), which again provided for an identical grant of lien in
favor of the attorneys for any recovery in the “Matter,” now described as the
Investors lawsuit.  The 2010 Retainer
Agreement further provided that Cruz & Del Valle were to “provide legal
services reasonably required to represent Clients in the Matter” and added that
such services included “answering the Complaint that was the complaint of the
investor and either cross-complaining or bringing a separate action against
Century City Mall, LLC.”  In January
2011, the parties agreed to dismiss the Investors lawsuit pending the filing of
a wrongful eviction action. 
Consequently, in February 2011, Agora filed a complaint for wrongful
eviction and abuse of process against the Mall (Century lawsuit).  In turn, the Mall cross-complained against
Agora and Raynak, alleging causes of action for breach of contract and breach
of guaranty.

In October 2011, while the Century
lawsuit was pending, appellant obtained a $20,000 stipulated judgment against
Agora in a separate action filed in Pasadena.  On March
28, 2012, appellant filed a notice of lien (Notice of Lien) in the
Century lawsuit.  It served a copy of the
Notice of Lien, as well as a notice of filing notice of lien, on Cruz & Del
Valle and counsel for the Mall.  This was
the first time that Cruz & Del Valle became aware of appellant’s judgment.

On the day set for trial in the
Century lawsuit—May 15, 2012—the
parties settled.  The settlement involved
their mutual releases and dismissals in exchange for the Mall’s payment of
$35,000 to Raynak and Cruz & Del Valle. 
The terms of the settlement that were placed on the record did not
include any mention of the Notice of Lien.

In July 2012, Agora and Raynak
moved for approval of the settlement pursuant to Code of Civil Procedure
section 708.440href="#_ftn1" name="_ftnref1"
title="">^[1] and for a determination of lien
priorities.  They argued that the 2009
Retainer Agreement and the 2010 Retainer Agreement created attorney liens that took
priority over the Notice of Lien.  In
support of the motion, they submitted declarations from Raynak and attorney
Leonard Cruz, invoices, and the 2009 Retainer Agreement and the 2010 Retainer
Agreement under seal.  The evidence
showed that as of June 2012 Agora and Raynak owed Cruz & Del Valle over
$38,000.

Appellant opposed the motion,
arguing that the settlement had been structured to divert settlement proceeds
away from Agora in order to avoid the Notice of Lien.  It further argued that the evidence submitted
in support of the motion was insufficient to demonstrate the existence of a
valid attorney’s lien.  Appellant
submitted a declaration from its own counsel, documents related to the Notice
of Lien, a reporter’s transcript of settlement in the Century lawsuit and
correspondence concerning the Notice of Lien.

At the hearing on the motion, the
trial court admitted into evidence the 2009 Retainer Agreement and the 2010
Retainer Agreement.href="#_ftn2" name="_ftnref2"
title="">^[2]  Following counsel’s arguments, the trial
court took the matter under submission to review the retainer agreements and
thereafter entered a minute order granting the motion.

This appeal followed.

>DISCUSSION

Appellant contends the motion to
approve the settlement should have been denied, asserting that the settlement was
structured so as to give priority to an unenforceable attorney’s lien.  We find no merit to this contention.

I.          Applicable Legal Principles>.

Sections
708.410 through 708.480 govern a judgment creditor’s lien against a judgment
debtor who is a party to a pending action or proceeding.  According to those provisions, “a judgment
creditor may place a lien on the rights of the judgment debtor to receive
money, property or both by way of a settlement or judgment entered in that
action.  (§ 708.410, subd. (a).)”  (Oldham> v.
California Capital Fund, Inc. (2003)
109 Cal.App.4th 421, 429 (Oldham).)  To obtain a judgment lien in a
pending action, “the judgment creditor shall file a notice of lien and an
abstract or certified copy of the judgment creditor’s money judgment in the
pending action or special proceeding.”  (§ 708.410, subd. (b).)  Section 708.440
provides that a pending action by the judgment debtor cannot be dismissed or
settled without written consent of the judgment creditor or court order.  Subdivision (b) of that statute allows a
judgment debtor to apply for approval of a settlement or dismissal, and
authorizes the court to “include such terms and conditions as the court deems
necessary.”  (§ 708.440, subd. (b).)

Acknowledging
that one role of the trial court under the statutory scheme is toname="sp_999_4"> prevent collusive evasion of
a judgment creditor’s lien, the >Oldham court stated “that facts regarding whether a settlement was
structured to evade the lien of the judgment creditor are material to the
approval of a settlement under section 708.440. . . .name="SR;2631"> 
To make an informed and intelligent decision about the settlement, the
superior court should have sufficient information to understand who benefits
from the transfers contemplated by the proposed settlement and how they are
benefited.  In other words, the superior
court must understand the size of the settlement pie, how the pie is sliced,
and who is getting which slice. 
[Citation.]”  (>Oldham, supra, 109 Cal.App.4th at p.
432.)

name="citeas((Cite_as:_2009_WL_3033640,_*3_(Ca">Different from a judgment creditor lien, “[a] lien in favor
of an attorney upon the proceeds of a prospective judgment in favor of his
client for legal services rendered . . . . may be created either
by express contract . . . or it may be implied if the retainer
agreement between the lawyer and his client indicates that the former is to
look to the judgment for payment of his fee [citations].”  (Centenko
v. United California Bank (1982) 30 Cal.3d 528, 531; accord, >Waltrip v. Kimberlin (2008) 164
Cal.App.4th 517, 525 (Waltrip); see
also Civ. Code, § 2881 [lien is created by “contract of the parties” or by
“operation of law”].)  “An attorney’s
contractual lien is created and takes effect when the fee agreement is
executed.”  (Waltrip, supra, at p.
525.)  “Unlike a judgment creditor’s
lien, which is created when the notice of lien is filed (Code Civ. Proc.,
§ 708.410, subd. (b)), an attorney’s lien . . . is created
and the attorney’s security interest is protected even without a notice of
lien.”  (Carroll v. Interstate Brands Corp. (2002) 99 Cal.App.4th 1168,
1172; accord, Waltrip, supra, at p. 525.)name="SDU_3">

Typically, when there are competing liens on the same assets
and the parties’ “‘[i]nterests are equal in equity,’” liens have priority
according to their time of creation.  (>Del Conte Masonry Co. v. Lewis (1971) 16
Cal.App.3d 678, 681; accord, Civ. Code, § 2897; Waltrip, supra, 164 Cal.App.4th at p. 525; Isaac v. City of Los Angeles (1998) 66 Cal.App.4th 586,
600–601.)  “An attorney’s lien on a
judgment for services prevails over later encumbrances.  [Citation.]” 
(Waltrip, supra, at p. 525.)

We
review for an abuse of discretion a trial court’s approval of a settlement
involving conditions related to a judgment lien.  (Casa
Eva I Homeowners Assn. v. Ani Construction & Tile, Inc. (2005) 134
Cal.App.4th 771, 778; Pangborn Plumbing
Corp. v. Carruthers & Skiffington (2002) 97 Cal.App.4th 1039, 1049.)

II.        The Trial Court
Properly Exercised Its Discretion in Approving the Settlement.

            At the hearing on the motion to approve the settlement,
appellant conceded that if Cruz & Del Valle had a valid attorney’s lien, it
would take priority over the Notice of Lien. 
On appeal, appellant contends that the attorney’s lien was invalid
because it was the product of collusion, the 2010 Retainer Agreement did not
cover the fees incurred, and Cruz & Del Valle did not comply with rule
3-300 of the Rules of Professional Conduct. 
We find no merit to these contentions.

            In Oldham, supra, 109
Cal.App.4th at page 427, the judgment creditor objected to a
settlement agreement involving a matter in which it had a judgment lien on the
ground that the terms regarding transfer of real property were uncertain, and
there was a possibility that the uncertainty was created to evade the judgment
lien.  The appellate court explained that
one purpose of the judgment creditor lien statutes is “to prevent the judgment
debtor, with or without the active assistance of other parties to the
settlement agreement, from structuring a settlement so it receives benefits
while evading the lien of the judgment creditor, absent appropriate equitable
considerations.”  (Id. at p.
430.)  Analogizing approval of a
settlement under section 708.440 to the type of evaluation required for a class
action settlement or a good faith settlement under sections 877 and 877.6, the >Oldham court held that the trial court
must consider any facts tending to show that the settlement was structured to
avoid a judgment creditor lien.  (>Oldham, supra, at p. 432.)  It noted that “[t]he particular
facts relevant to evasion of the lien will vary from case to case because of
differences in the property interests involved, variations in the relationships
among the entities involved, and differences in the way transfers of interests
in property are structured.”  (>Ibid.) 
In the absence of facts showing collusion, the trial court has the
discretion to approve the settlement over the objections of the judgment
creditor.  (See
Cal. Law Revision Com. com., 17 West’s Ann. Code Civ. Proc. (2009 ed.) foll. §
708.440, p. 374; see also The Enforcement of Judgments Law (1982) 16 Cal. Law
Revision Com. Rep. (1982) p. 1521 [court may authorize or approve settlement
despite opposition of judgment creditor “when the court concludes that it is in
the best interests of the parties to settle”].)

       Here, while appellant has hypothesized
that the reason the settlement was structured with payment going directly to
Raynak and Cruz & Del Valle was to avoid the Notice of Lien, the evidence
before the trial court suggested otherwise. 
It received evidence of the 2010 Retainer Agreement that expressly
authorized an attorney’s lien over the proceeds of any settlement.  It also received evidence that Cruz & Del
Valle’s fees as of June 2012 exceeded the $35,000 settlement payment.  It was further undisputed that the Notice of
Lien was not filed until March 2012.  Further, Cruz averred that the settlement “was
not an attempt to avoid the lien of judgment creditor One Colorado Investments,
LLC.  My firm did not represent Agora in
its case with One Colorado and the undersigned had no knowledge of that case
until the undersigned was first served with One Colorado’s Notice of Lien.”

       Against
this evidence, appellant argued that the fact the settlement payment did not go
directly to Agora established collusion. 
Where
the evidence is conflicting, it is the trial court’s dutyname="SR;6425"> to weigh that
evidence and make credibility determinations.  (E.g., Catherine
D. v. Dennis B. (1990) 220 Cal.App.3d 922, 931.)  On review, we “‘“must accept as true all
evidence tending to establish the correctness of the [trial court’s findings],
taking into account, as well, all inferences which
might reasonably have been thought by the trial court to lead to the same
conclusion.”’”  (Ibid., citing >Board of Education v. Jack M. (1977) 19
Cal.3d 691, 697.)  As the trial court
considered the evidence in accordance with Oldham,
supra, 109 Cal.App.4th at page 432, we find no abuse of discretion in its
decision to approve the settlement. 
The evidence showed that Cruz & Del Valle had an attorney’s lien
that was prior in time to the Notice of Lien and that the $35,000 settlement
payment was less than the amount owing to the firm.  We are therefore guided by >Waltrip, supra, 164 Cal.App.4th at pages
530 to 531, where the court determined that an attorney’s lien had priority
over a judgment lien where the fee agreement preceded the filing of the
judgment lien by several months. 
(Accord, Centenko v. United
California Bank, supra, 30 Cal.3d at p. 533 [observing that “the filing of
a notice of lien by the attorney is not necessary to protect his security
interest against a creditor who levies on the judgment”]; Haupt v. Charlie’s Kosher Market (1941) 17 Cal.2d 843, 846
[attorney’s lien created by fee agreement given priority over subsequent
attachment].)

       The
trial court likewise properly exercised its discretion to reject appellant’s
challenges to the validity of the attorney’s lien.  Renewing those challenges, appellant first
contends the 2010 Retainer Agreement did not cover any fees incurred in
prosecuting the Century lawsuit because the “Matter” to which it applied was
described as the Investors lawsuit.  But
the 2010 Retainer Agreement provided for additional services beyond those
specified in the 2009 Retainer Agreement, stating that the nature of the legal
services to be provided included “either cross-complaining or bringing a
separate action against Century City Mall, LLC.”  At the hearing, Cruz explained how the 2010
Retainer Agreement specifically contemplated and spelled out that the filing of
a separate action was intended to be encompassed by that agreement.

       Further,
appellant challenges the validity of the 2010 Retainer Agreement on the ground
that Raynak lacked authority to bind Agora. 
Again, however, the evidence was to the contrary.  The 2010 Retainer Agreement was signed
jointly by Raynak and Agora president Nguyen. 
Raynak declared that pursuant to a separate agreement negotiated with
Nguyen, Agora was to act as a reseller for Leonidas chocolates and Raynak and
his coinvestors would otherwise be responsible for all liabilities incurred by
the shop, including the Lease.  To this
end, Raynak signed a personal guaranty of the Lease.  Both Raynak and Cruz averred that Raynak was
individually responsible for payment of attorney fees on behalf of Agora and
himself.  Moreover, Nguyen was present at
the hearing where the trial court tentatively approved the terms of the
settlement; in response to the trial court’s inquiries, she stated that she
understood and agreed to every term and condition of the settlement and had no
questions to ask counsel or Raynak. 
Accordingly, the evidence showed that Raynak had sufficient authority to
enter into the 2010 Retainer Agreement and that Cruz & Del Valle had a
valid lien arising therefrom.href="#_ftn3"
name="_ftnref3" title="">^[3]

            Appellant
also challenges the validity of the Notice of Lien on the ground that Cruz
& Del Valle failed to comply with rule 3-300 of the Rules of Professional
Conduct (rule 3-300).  “The California Supreme Court has held ‘an attorney who secures
payment of hourly fees by acquiring a charging lien against a client’s future
judgment or recovery has acquired an interest that is adverse to the client,
and so must comply with the requirements of rule 3-300.’  (Fletcher
v. Davis (2004) 33 Cal.4th 61, 71 (Fletcher).)name="SR;5109">  Rule 3-300 requires
attorneys who acquire interests adverse to their clients to do so on ‘fair and
reasonable’ terms and, in writing, disclose those terms and advise the clients
they may seek independent counsel.”  (>Plummer v. Day/Eisenberg, LLP (2010) 184
Cal.App.4th 38, 48.)  Appellant argues
that the 2010 Retainer Agreement could not have created a valid attorney’s lien
because it did not contain the advisories required by

rule 3-300.  The trial court found
no authority to support appellant’s position that the “writing” required by rule
3-300 is limited to a fee agreement, nor have we.

In
a declaration, Cruz outlined his compliance with rule 3-300:  “I included attorneys fee liens in retainer
agreements with Agora and Raynak, explained the effect of the liens to them,
conferred both orally and in writing with Agora and Raynak regarding their
right to confer with independent counsel regarding the retainer agreements and
the liens contained therein; and gave both Raynak and Agora an opportunity to
confer with independent legal counsel.  I
asked Agora and Raynak to confirm their consent by signing the retainer
agreements.”  At the hearing on the
motion, Cruz explained that the 2010 Retainer Agreement’s cover letter was the
“writing” to which he referred.  In view
of this evidence, the trial court properly concluded that the attorney’s lien
was not vitiated by noncompliance with rule 3-300.

Finally,
beyond the evidence showing that Cruz & Del Valle had a valid attorney’s
lien that took priority over the Notice of Lien, we note that public policy and
equitable considerations supported approval of the settlement.  (See Oldham,
supra, 109 Cal.App.4th at p. 432 [“Once the superior court knows if the
judgment debtor or an entity closely connected to the judgment debtor is
getting a settlement slice beyond the reach of the judgment creditor’s lien,
the court can then determine if equitable considerations justify the evasion of
the lien, if terms and conditions should be imposed upon the settlement, or if
approval of the settlement should be withheld”].)  As summarized in Waltrip, supra, 164 Cal.App.4th at pages 525 to 526:  name="SDU_5">“Public
policy favors the priority of the attorney lien.  ‘If an attorney’s claim for a lien on the
judgment based on a contract for fees earned prior to and in the action cannot
prevail over the lien of a subsequent judgment creditor, persons with
meritorious claims might well be deprived of legal representation because of
their inability to pay legal fees or to assure that such fees will be paid out
of the sum recovered in the latest lawsuit. 
Such a result would be detrimental not only to prospective litigants,
but to their creditors as well.’ 
[Citation.]  [¶]  Equitable considerations also favor the
attorney lien.  It is a principle of
equity that ‘those whose labor, skills and materials resulted in the creation
of a fund should be entitled to priority in the payment of their claims from
such source.’  [Citation.]
. . . It is the attorney’s labor, skill and materials, and his willingness
to take the risk of no recovery, that results in the judgment or settlement
paid to the debtor.”  (Fn. omitted.)

In sum, we find no basis to disturb the trial court’s
exercise of discretion in approving the settlement under section 708.440.

>DISPOSITION

The order granting the motion for approval of settlement is
affirmed.  Respondents are entitled to
their costs on appeal.

            NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

 

_____________________, J. href="#_ftn4" name="_ftnref4" title="">^*

    FERNS

We concur:

 

 

____________________________,
Acting P. J.

            ASHMANN-GERST

 

____________________________,
J.

            CHAVEZ