MORE DIRECT RESPONSE v. CALLAHAN (1992)

FACTUAL AND PROCEDURAL BACKGROUND

In March 1990 plaintiffs filed a complaint for breach of contract and declaratory relief to enforce their settlement agreement with defendants, and defendants cross-complained a few months later.   In the fall of 1991 the trial court summarily adjudicated the declaratory relief and specific performance causes of action in the first amended complaint and the causes of action in the cross-complaint in plaintiffs' favor, and further determined defendants breached the contract.

In April 1992 judgment was entered declaring, among other things, plaintiffs the “prevailing” parties and awarding them total costs of $136,503.56, including $120,000 in attorney's fees under Civil Code section 1717.   Two weeks later, defendants appealed the judgment.

In July 1992 defendants received notice that plaintiffs had filed a notice of judgment lien on personal property.   They also received an application for earnings withholding order, an earnings withholding order, a writ of execution and a notice of levy.

 Defendants moved to have all enforcement orders quashed and further efforts at enforcement enjoined.   After the trial court denied them relief based on Chamberlin v. Dale's R.V. Rentals, Inc. (1986) 188 Cal.App.3d 356, 232 Cal.Rptr. 785, we issued an immediate stay.   We now grant the petition.¹

DISCUSSION

 Unless otherwise excepted, the perfecting of an appeal automatically stays enforcement of the judgment.  (Code Civ.Proc.2, § 916, subd. (a).) ³  Although one such exception is a money judgment which requires an undertaking if enforcement is to be stayed (§ 917.1, subd. (a)),⁴ it has long been settled that, where a judgment is for costs alone and awards no damages, no bond is required.  (Whitaker v. Title Ins. Etc. Co. (1918) 179 Cal. 111, 113–114, 175 P. 460;  McCallion v. Hibernia etc. Society (1893) 98 Cal. 442, 445–446, 33 P. 329.)   The reason for the rule is costs are routine in every case, and requiring a bond would in effect negate the automatic stay.  (Ibid.)

 The issue here is whether a judgment for attorney's fees and costs that awards no damages is a judgment entirely for costs and entitled to a stay without the necessity of a bond.   For the reasons set forth below, we find that it is.

 The Chamberlin Case

In Chamberlin v. Dale's R.V. Rentals, Inc., supra, 188 Cal.App.3d 356, 232 Cal.Rptr. 785, after recovering $13,500 in compensatory damages and $41,500 in punitive damages, plaintiff was awarded another $15,307.47 in costs that included $13,450.50 in attorney's fees under Civil Code section 1717.   The limited question before this court was whether the attorney's fee award had to be added to the damages for purposes of determining the amount of the bond on appeal.   Answering the question in the affirmative, we differentiated attorney's fees from routine costs which have never required bonding, explaining:

“We conclude the attorney fee award to Chamberlin under Civil Code section 1717 is not the type of cost award contemplated by the early cases as constituting an exclusion from the money judgment bonding requirement of former section 942 or current section 917.1.   Unlike the costs involved in the early cases, such attorney fees are in the nature of a directly litigated issue rather than merely incidental to the judgment․  Because attorney fees are awarded as costs only in certain limited cases, our holding is consistent with the intent of the early cases to avoid construing the statutory money judgment bond requirement as mandating a bond in almost every conceivable case.”  (Chamberlin v. Dale's R.V. Rentals, Inc., supra, 188 Cal.App.3d at pp. 361–362, 232 Cal.Rptr. 785.)

However, Chamberlin is clearly distinguishable on its facts.   Here, we are not concerned with whether an attorney's fee award must be added to a judgment—a money judgment which in and of itself requires bonding to stay enforcement—as we were in Chamberlin.   Nor need we be now the Legislature has spoken.  (§ 917.1, subd. (d).)  To the contrary, we consider whether an attorney's fee award standing unaccompanied by a money judgment requires bonding.

 Legislation

Chamberlin involved a lawsuit initiated in 1983 that predated changes to section 917.1 (“the bonding statute”) and sections 1032 et seq. (“the cost statutes”).   The case was decided in 1986 at a time when, among other things, the controlling bonding statute was silent on the issue of costs.   Effective 1987, however, an amendment to section 917.1 mandated adding “costs”—defined to include attorney's fees—to the money judgment for purposes of calculating the amount of the bond.  (§ 917.1, subd. (d).)

The legislative concern behind the amendment was a change in the times and corresponding increase in litigation costs.   As the report of the Senate Rules Committee's Office of Senate Floor Analysis noted:

“The Conference of Delegates of the California State Bar points out that it ‘has long been the law in California that costs need not be included in the undertaking which had to be filed to stay a judgment or order for money or which directs the payment of money.’   In Whitaker v. Title Ins. and Trust Co. (1918) 179 Cal. 111, [175 P. 460], the court found that the undertaking need only cover the amount adjudged to be due the prevailing party on the claim involved in the action and for which the recovery was awarded, and not the ‘incidental recovery of costs of the action.’

“The Conference of Delegates suggests that the rule of not including costs in the undertaking was developed at a time when litigation costs were comparatively minor (e.g., the costs in the Whitaker case were $72.75).   It is argued that, in the years since the rule was adopted, recoverable litigation costs have substantially increased and, in many cases, are no longer a minor part of the prevailing party's recovery.   Thus, the rule may result in ‘a significant portion of the judgment or order’ remaining unsecured, and the successful appellee unprotected pending the appeal.”  (Sen. Rules Com., Analysis of Sen. Bill No. 1221 (1985–1986 Reg.Sess.) as amended July 9, 1986, pp. 1–2.)

The bonding statute that was passed did not distinguish costs from attorney's fees.   It simply provided:

“Costs awarded by the trial court under Chapter 6 (commencing with Section 1021) of Title 14 shall be included in the amount of the judgment or order for the purpose of applying subdivisions (a) and (b) [which concern the necessity for and amount of an undertaking].”  (§ 917.1, subd. (d).)

Likewise, back in 1986, sections 1032 et seq. did not define attorney's fees as allowable costs.   But effective 1987, the cost statutes underwent a major overhaul so that “[p]articular items allowable or not allowable as costs are now specified.”  (7 Witkin, Cal.Procedure (1992 Supp.) Judgment, § 84, p. 112.)

Among other changes, a new section was added specifically including attorney's fees authorized by statute as costs under section 1032.  (Former § 1033.5, subd. (a)(10), added by Stats.1986, ch. 377, § 13, p. 1580.)   The new legislation also declared:

“When any statute of this state refers to the award of ‘costs and attorney's fees,’ attorney's fees are an item and component of the costs to be awarded and are within the ambit of paragraph (10) of subdivision (a).”  (Former § 1033.5, subd. (c)(5), added by Stats.1986, ch. 377, § 13, p. 1580.)

The procedure for obtaining costs became subject to Judicial Council Rule.   (§ 1034;  7 Witkin, op. cit. supra, at p. 112.)

Effective 1991, the cost statutes again were amended.   This time, in addition to attorney's fees authorized by statute, the Legislature expressly brought attorney's fees authorized by contract within the definition of allowable costs.  (§ 1033.5, subd. (a)(10)(A).)   The legislation further provided:

“․ Attorney's fees awarded pursuant to Section 1717 of the Civil Code are allowable costs under Section 1032 as authorized by subparagraph (A) of paragraph (10) of subdivision (a).”  (§ 1033.5, subd. (c)(5).)

Moreover, the new legislation specifically required that attorney's fee awards be determined by noticed motion.  (§ 1033.5, subd. (c)(5).)   As the Legislature put it:

“The Legislature finds and declares that there is great uncertainty as to the procedure to be followed in awarding attorney's fees where entitlement thereto is provided by contract to the prevailing party.   It is the intent of the Legislature in enacting this act to confirm that these attorney's fees are costs which are to be awarded only upon noticed motion, except where the parties stipulate otherwise or judgment is entered by default․”  (Stats.1990, ch. 804, § 2, No. 10, West's Cal.Legis.Service, p. 3105, emphasis added.) 5

Case Law

Only two cases have directly ruled on the issue of bonding attorney's fees awarded exclusively under Civil Code section 1717 when there is no companion money judgment.   They are Nielsen v. Stumbos (1990) 226 Cal.App.3d 301, 276 Cal.Rptr. 272, and Pecsok v. Black (1992) 7 Cal.App.4th 456, 9 Cal.Rptr.2d 12.

In Nielsen, the Third Appellate District held a judgment for costs that included a Civil Code section 1717 attorney's fee award was nevertheless a judgment for costs alone and entitled to the benefit of a stay without bonding.   In the court's view, the thrust of Civil Code section 1717 with its repeated and explicit use of the word “costs” required such a result.   (Nielsen v. Stumbos, supra, 226 Cal.App.3d at p. 304, 276 Cal.Rptr. 272.)   The court also found added support in amendments to section 1033.5 effective January 1991, which were said to show a legislative intent to “reaffirm” existing law that attorney's fees are costs.  (Nielsen v. Stumbos, supra, 226 Cal.App.3d at p. 305, 276 Cal.Rptr. 272.)

In Pecsok, the Second District Court of Appeal, Division Three, held attorney's fees awarded under Civil Code section 1717, as well as expert fees pursuant to a contractual provision for recovery of litigation expenses, were costs which did not require bonding.   In coming to this conclusion, the court applied Nielsen, recognizing the result was justified if not compelled by the statutory language.  (Pecsok v. Black, supra, 7 Cal.App.4th at p. 462, 9 Cal.Rptr.2d 12.)   The court went on, however, to say that it found no authority or reason for distinguishing between the routine and nonroutine costs.  (Id. at pp. 461–462.)

We note that in a new case, Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 12 Cal.Rptr.2d 696, 838 P.2d 218, our Supreme Court held an award of expert fees under section 998, subdivision (c) is not automatically stayed without bonding.   Revitalizing the distinction between routine and nonroutine costs first raised in the Chamberlin case,⁶ the court determined expert fees were nonroutine in at least two key respects.   For one thing, in contrast to “routine costs under section 1032, subdivision (b) [which] are awarded only to prevailing parties,” a defendant may lose the case but still recover all costs including expert fees pursuant to section 998, subdivision (c).  (Bank of San Pedro v. Superior Court, supra, 3 Cal.4th at p. 803, 12 Cal.Rptr.2d 696, 838 P.2d 218, emphasis in original.)   Moreover, section 1032, subdivision (b) costs are awarded as a “matter of right” whereas, even when a defendant is entitled to his other costs under section 998, subdivision (c), expert fees are always purely discretionary.  (Id. at p. 803, 12 Cal.Rptr.2d 696, 838 P.2d 218.)   The court concluded these differences distinguished section 998 expert fees from routine costs and this result comported with the legislative intent.  (Ibid.)

Attorney's Fees Are Costs

In the same way that the court focused its sights in Bank of San Pedro, we are concerned with statutory issues and our mandate is to reach a result consistent with the Legislature's intent.   The difference is we are dealing with an attorney's fee award under a contract, contractual attorney's fees are expressly allowed as costs under section 1032 and, as the Supreme Court aptly pointed out, prevailing parties recover costs under section 1032 as a “matter of right.”  (Bank of San Pedro, supra, 3 Cal.4th at p. 803, 12 Cal.Rptr.2d 696, 838 P.2d 218.)   In accord with Nielsen and Pecsok and our interpretation of intervening legislative changes since 1986, we conclude the judgment here is entitled to the benefit of an automatic stay without bonding.

We recognize legislative “mind reading” is seldom a simple matter, but it becomes a good deal easier after the lawmakers have repeatedly spoken with clarity.   Effective 1987, for the first time, the Legislature defined attorney's fees authorized by statute as allowable costs under section 1032, and declared them to be “an item and component of the costs” in any statute that refers to the award of “costs and attorney's fees.”  (Former § 1033.5, subds. (a)(10) & (c)(5), both added by Stats.1986, ch. 377, § 13, p. 1580.)   Effective 1991, the Legislature went to the trouble of adding not only attorney's fees authorized by contract but also attorney's fees awarded under Civil Code section 1717 to the definition of allowable costs.  (§§ 1033.5, subd. (a)(10)(A), 1033.5, subd. (c)(5).)   By further “confirm[ing] that these attorney's fees are costs which are to be awarded only upon noticed motion” (Stats.1990, ch. 804, § 2, No. 10 West's Cal.Legis.Service, p. 3105), the Legislature designated that the awards be treated in the same manner as deposition charges, exhibit expenses and other items on the memorandum of costs that are the price of doing business in the litigation arena.

There is, of course, an argument that attorney's fees often are sizable like damages and should be similarly secured to protect successful respondents pending appeal.   Unlike damages, however, attorney's fees do not go to a jury ⁷ and, in the legislative scheme of things, they are no more “litigated” than any other cost;  and, in contrast to the situation in Bank of San Pedro, there is no formal discovery undertaken relating to attorney's fee awards.⁸  At the same time, while costs may have been modest in years past, they too have become sizable, yet they remain exempt from bonding unless accompanied by a money judgment.  (See Sen.Rules Com.Analysis of Sen.Bill No. 1221 (1985–1986 Reg.Sess.) as amended July 9, 1986, pp. 1–2;  § 917.1, subd. (d).)

Finally, we note that the amendment to the bonding statute treats costs and attorney's fees as one and the same.   Section 917.1, subdivision (d) talks in terms of costs awarded by the trial court commencing with section 1021, and section 1021 governs attorney's fees by agreement.   Where the Legislature has combined attorney's fees with all other costs for purposes of section 917.1 bonding, there is little practical justification for severing attorney's fees from other costs for purposes of a section 916 stay.

In the final analysis, the Legislature has unmistakably and repeatedly included attorney's fee awards within the category of routine costs awarded as a “matter of right” under section 1032, subdivision (b) over the past five years.   While this may provide small comfort to plaintiffs who prevailed below, it is for the Legislature, and not the courts, to determine that a statutory change is warranted.

Since defendants have a right to a stay under section 916, subdivision (a), they are entitled to a writ of supersedeas.  (Estate of Dabney (1951) 37 Cal.2d 402, 408, 232 P.2d 481;  Pecsok v. Black, supra, 7 Cal.App.4th at p. 462, fn. 9, 9 Cal.Rptr.2d 12;  Nielsen v. Stumbos, supra, 226 Cal.App.3d at pp. 303, 306, 276 Cal.Rptr. 272.)   Let a writ of supersedeas issue directing the trial court to quash all orders of enforcement and staying enforcement of the judgment for attorney's fees and costs.   Each party to bear their own costs.

I concur with the result reached by the majority as it is consistent with, if not compelled by, statutory changes and recent cases indicating—upon the perfecting of an appeal—enforcement of a judgment for costs only, including attorney's fees, is automatically stayed without an undertaking.  (Code Civ.Proc., § 916, subd. (a).)  However, as it is equally clear that a stay of a money judgment—although coupled with an award of substantial costs including attorney's fees—requires an undertaking (Code Civ.Proc., § 917.1, subds. (a), (d);  cf. Chamberlin v. Dale's R.V. Rentals, Inc. (1986) 188 Cal.App.3d 356, 232 Cal.Rptr. 785), the bright line test applied by the majority seems “anomalous, if not unfair.”  (Pescok v. Black (1992) 7 Cal.App.4th 456, 462, fn. 8, 9 Cal.Rptr.2d 12.)   Our statutorily compelled holding is the more anomalous in light of the Supreme Court's recent holding that a judgment for costs consisting of expert witness fees is not automatically stayed and requires an undertaking.  (Bank of San Pedro v. Superior Court (Oct. 25, 1992, S022569) 3 Cal.4th 797, 12 Cal.Rptr.2d 696, 838 P.2d 218.)   I agree with the suggestion in Pescok the Legislature should revisit this issue.   (Pescok v. Black, supra, 7 Cal.App.4th at p. 462, fn. 8, 9 Cal.Rptr.2d 12.)

FOOTNOTES

1.   The parties recently notified the court that they entered into a settlement and are dismissing the petition.   As the court noted in Okuda v. Superior Court (1983) 144 Cal.App.3d 135, 137, fn. 1, 192 Cal.Rptr. 388:  “Such dismissal is not automatic.  ‘If an action involves a matter of continuing public interest and the issue is likely to recur, a court may exercise an inherent discretion to resolve that issue, even though an event occurring during its pendency would normally render the matter moot.’  [Citations]” Given that the issue is one of continuing interest and likely to recur, the parties have not conditioned settlement on the court's dismissing the petition and indeed defendants are proceeding on an aspect of the appeal, we believe resolution of the issue is proper.

FN2. All statutory references are to the Code of Civil Procedure unless otherwise specified..  FN2. All statutory references are to the Code of Civil Procedure unless otherwise specified.

3.   Section 916, subdivision (a) provides in pertinent part:  “Except as provided in Sections 917.1 to 917.9 ․ the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order, but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order.”

4.   Section 917.1, subdivision (a) provides in pertinent part:  “The perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for money or directs the payment of money ․ unless an undertaking is given.”

5.   The apparent intent of the Legislature was to avoid the result in Simpson v. Smith (1989) 214 Cal.App.3d Supp. 7, 10–11, 263 Cal.Rptr. 110, holding that 1987 changes to Civil Code section 1717 invalidated the requirement of a noticed motion for attorney's fees.  (22 Pac.L.J., 434–435 (1990).)

6.   In Bank of San Pedro v. Superior Court, supra, 3 Cal.4th at p. 802, 12 Cal.Rptr.2d 696, 838 P.2d 218, the court disapproved of Pecsok to the limited extent that that case rejected the distinction between routine and nonroutine costs.

7.   There are few cases apart from bad faith actions against insurance carriers where attorney's fees claimed in the same action are recoverable as damages.  (Brandt v. Superior Court (1985) 37 Cal.3d 813, 817, 210 Cal.Rptr. 211, 693 P.2d 796.)

8.   Formal discovery poses problems in connection with a motion for attorney's fees given the attorney-client and work-product privileges.   Since the motion must be filed within a specified time while often the proceedings including appeal continue on, it is not surprising to find precious few details about particular services in support of the motion.

WORK, Associate Justice.

HUFFMAN, J., concurs.