A contentious legal battle over attorney fees has taken a new turn as the California Court of Appeal reverses a lower court's decision, shedding light on the complexities of contractual obligations and trust law. On June 18, 2024, plaintiffs Kathryn Crooymans and David King filed an appeal in the California 2nd Appellate District Court against Eric L. Foumberg, who was acting as a trustee.
The case revolves around the plaintiffs' efforts to enforce a judgment against their late father's tax planning attorney, Bruce Givner. The plaintiffs had previously won an arbitration claim against Givner for legal malpractice related to ineffective estate planning that resulted in substantial estate taxes. The arbitration awarded them over $1.7 million in attorney fees and costs under their engagement agreement with Givner. However, despite obtaining a favorable judgment totaling $2,571,595.23 on April 6, 2020, this amount remained largely unpaid by July 2, 2021.
In an attempt to satisfy this judgment, Crooymans and King sued Foumberg in his capacity as trustee for two Qualified Personal Residence Trusts (QPRTs) created by Givner and his wife. They alleged that Foumberg had improperly transferred title to the residence held by these trusts back to the Givners in violation of federal regulations and QPRT instruments. This led them to seek declaratory relief to revoke the QPRTs and add them as judgment debtors under Code of Civil Procedure section 187.
Foumberg challenged these claims through demurrer, arguing that the probate court had exclusive jurisdiction over trust matters and that the plaintiffs lacked standing. The trial court agreed with Foumberg’s arguments and dismissed the case without leave to amend but allowed time for plaintiffs to file petitions in probate court.
Following this dismissal, Foumberg sought attorney fees under Civil Code section 1717 based on a mutuality principle since he argued he was effectively sued "on a contract" due to alter ego allegations linking him to Givner's original engagement agreement with Crooymans and King. The trial court granted this motion awarding him $70,635 in attorney fees.
However, upon appeal, the Court of Appeal found that neither of the claims involved enforcing the engagement agreement directly but rather sought enforcement of an already merged judgment from Crooymans I. They emphasized that once a judgment is rendered on a contract claim, all contractual rights merge into it extinguishing any further obligations or rights under that contract including attorney fee clauses.
The appellate court and Justices Segal, Martinez and Feuer concluded that because plaintiffs’ claims did not involve or seek enforcement under their engagement agreement with Givner but were rather focused on enforcing an existing judgment using reverse veil piercing principles against QPRTs controlled by Foumberg; section 1717’s reciprocity principles did not apply here either for contractual or tort claims like legal malpractice which were at issue originally against Givner.
Thus reversing previous orders awarding attorney fees favoring Foumberg directing lower courts instead deny such motions entirely while also granting cost entitlements towards appellants Crooymans & King within this ongoing litigation saga involving intricate facets surrounding trust law vis-a-vis contractual dispute contexts across Californian judicial landscapes today!
Attorneys representing parties include Frank W Nemecek Daniel L Reback Claudia L Stone from Nemecek & Cole for Plaintiffs/Appellants alongside Daniel B Spitzer Law Offices defending Respondent/Defendant respectively before Honorable Judge H Jay Ford III presiding under Case ID B325110 initially lodged via Los Angeles County Superior Court docket number 21SMCV01157 earlier proceedings therein...