Aaron Morris' Business Law Alert : Orange County Business Litigation Lawyer & Attorney : Morris & Stone Law Firm : Santa Ana, Tustin, Irvine, Newport Beach, Southern California, CA

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C.C.P. § 685.040¹ provides that when a judgment includes an award of attorney fees pursuant to a contract, then the "[a]ttorney’s fees incurred in enforcing [the] judgment are included as costs collectible." While most would assume that "enforcing" include measures taken to collect on the judgment, on October 28, 2008 the Third Division of the Fourth Appellate District of the California Court’s of Appeal elaborated on just how broadly the term "enforcing" is to be construed.²

Globalist v. Reda³ involved a failed settlement agreement stemming from a separate action,⁴ negotiated by the parties to the underlying action as well as by the defendants in the separate action. Albert Reda and Internet Business’s International, Inc., ("IBI") recognized that the amount they owed under the terms of the failed settlement ($75,000.00) was far more favorable than the amount due under the final judgment from the underlying case ($444,600.00), and accordingly initiated enforcement proceedings.⁵ After successfully defending the settlement enforcement action, Globalist requested the inclusion of the attorney fees incurred in that defense as fees incurred in enforcing the final judgment pursuant to C.C.P. § 685.040.⁶ The trial court denied this request on the grounds that the fees were incurred in a "different" action, however the Appellate Court found otherwise.⁷

"Neither section 685.040, nor the Enforcement of Judgments Law of which it is a part, ascribe any special meaning to the word "enforcing."⁸ "The plain meaning of the word necessarily suggests ‘enforcing a judgment’ would include defending the validity of the judgment against challenge in a separately filed attack."⁹

The Court went onto note that the sole purpose of Reda’s and IBI’s settlement enforcement action was to "significantly decrease their unsatisfied judgment debtor obligations in this action . . . [and had] Globalist not defended against the specific performance action, it would have lost substantial rights under the judgment in this case."¹⁰

Considering it was ultimately held that Globalist’s attorney fees incurred in defending the settlement enforcement action were fees incurred in "enforcing" the underlying judgment, Globalist serves as a lighthouse for all judgment debtors considering wading the waters of avoidance: tread carefully. Indeed, as the court in Jaffe v. Pacelli¹¹ made clear, even filing bankruptcy may not help. 

1.  California Code of Civil Procedure § 685.040.
2.  Globalist v. Reda, 2008 DJDAR 16325 (4^th Dist. 2008).
3.  Id.
4.  Id. at 16325-26.
5.  Id. at 16326 & 16328.
6.  Id. at 16326.
7.  Id. at 16326-27.
8.  Id. at 16327. 
9.  Id.
10.Id. at 16328.