Karton v. Ari Design & Constr., Inc.

• Decision Date: 09 March 2021
• Docket Number: B298003
• Citation: 61 Cal.App.5th 734,276 Cal.Rptr.3d 46
• Court: California Court of Appeals Court of Appeals
• Parties: David S. KARTON et al., Plaintiffs and Appellants, v. ARI DESIGN & CONSTRUCTION, INC., et al., Defendants and Respondents.

61 Cal.App.5th 734

276 Cal.Rptr.3d 46

David S. KARTON et al., Plaintiffs and Appellants,

v.ARI DESIGN & CONSTRUCTION, INC., et al., Defendants and Respondents.

B298003

Court of Appeal, Second District, Division 8, California.

Filed March 9, 2021

As Modified on Denial of Rehearing March 29, 2021

Law Offices of Joe R. Abramson, Joe R. Abramson ; Law Offices of David S. Karton and David S. Karton, Beverly Hills, for Plaintiffs and Appellants.

Ilan Messika, Jonathan Guttman and Shahar Toledano, in pro. per., for Defendants and Respondents.

Hausman & Sosa, Carlos E. Sosa and Larry D. Stratton, Woodland Hills, for Defendant and Respondent Wesco Insurance Company.

WILEY, J.

Trial judges deciding motions for attorney fees properly may consider whether the attorney seeking the fee has become personally embroiled and has, therefore, over-litigated the case. Similarly, judges permissibly may consider whether an attorney's incivility in litigation has affected the litigation costs.

Here, the trial judge found attorney David Karton's fee motion triggered these concerns. Karton had a dispute with his home remodeling contractor: defendant and appellee Ari Design and Construction, Inc. At one point, their difference amounted to only $22,096: Karton said Ari owed him $35,096, while Ari contended it owed $13,000.

Karton sued Ari and won a judgment for $133,792.11 plus postjudgment interest. Karton then sought attorney fees of $271,530, which were later increased to $287,640 in the trial court and now to $292,140 in this court. The trial court awarded $90,000 in attorney fees. We affirm this award against Karton's argument that $90,000 is not enough.

On a different issue, the trial judge ruled the Kartons had no basis to collect the $90,000 award from an insurance company called Wesco that had posted a surety bond for Ari. The liability of the surety is commensurate with the liability of its principal. In this case, by statute, Ari must pay the attorney fees as a matter of costs. So too must Wesco. We reverse and remand for the trial court to amend the judgment to make surety Wesco liable for the $90,000 fee award as an item of costs.

I

Plaintiffs and appellants David and Cheryl Karton engaged Ari for $163,650 of construction work on their home. After months of work, a dispute arose and the Kartons told Ari to stop work in late 2015. At this point, the Kartons claimed Ari owed them $35,096. Ari admitted to a debt but claimed it was only $13,000. The difference was $22,096.

In February 2016, the Kartons sued Ari, which is a business entity. The Kartons also sued three people connected with Ari—Shahar Toledano, Jonathan Guttman, and Ilan Messika—as well as Ari's surety: Wesco Insurance Company, which had posted a $12,500 construction bond for Ari. The Kartons alleged five counts: breach of contract (against all but Wesco), money had and received (against all but Wesco), violation of Business and Professions Code section 7031 (to recover compensation paid to an unlicensed contractor, against all but Wesco), license bond (against only Wesco), and unfair competition (against all but Wesco).

The court held a three-and-a-half day bench trial in November 2017. The Kartons called seven witnesses. The defense called no independent witnesses.

The court issued a 20-page tentative statement of decision it later adopted as its final ruling. We excerpt the findings.

Ari began work on the Kartons’ home in June 2015 and continued daily through November 2015. During these months, Ari usually had between two and four people working on the site. In November 2015, David Karton began to suspect there was a problem with Ari's workers’ compensation insurance. The Kartons ordered Ari to suspend work when they ascertained Ari was not properly licensed or insured.

The Kartons had paid Ari $92,651 to that point but had overpaid: Ari had not yet done that amount of work. Karton and Ari agreed the Kartons had overpaid but disagreed about by how much. Karton said Ari owed $35,096; Ari said it owed only $13,000. The court found the Kartons were right: they had paid Ari $92,651, but the contract value of Ari's work to that point was only $57,555: the Kartons thus had overpaid by $35,096.

This overpayment of $35,096, however, was not the measure of damages; rather, the Kartons were entitled to the entire amount they paid Ari: $92,651, plus prejudgment interest. This was despite the fact Ari's workers had performed $57,555 worth of construction work for the Kartons. No witness impugned the quality of Ari's work.

This $92,651 award was under section 7031, subdivision (b), of the Business and Professions Code, which entitles those using an unlicensed contractor to all compensation they paid the unlicensed contractor, even if they knew the contractor was unlicensed. This statute requires an unlicensed contractor to return all compensation it received, without reductions or offsets for the value of materials or services it provided. This statute can create a windfall for those hiring an unlicensed contractor that has done quality work. Courts may not resort to equitable considerations when applying this statute, however, for the law aims to create a harsh penalty to induce contractors to maintain proper licensure. ( Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21, 30–31, 152 Cal.Rptr.3d 199.)

To this $92,651 award against Ari, the court added an additional $10,000 penalty under Code of Civil Procedure section 1029.8. This section 1029.8 provides for treble damages and attorney fees against "[a]ny unlicensed person" whose work injures another person. This statute caps the permissible treble damages award at $10,000. (Id. , subds. (a) & (c).) This treble damage provision, albeit capped, is an additional noncompensatory damage provision that created a further windfall for the Kartons. Together with its attorney fee allowance, this statutory damage multiplier creates a supplemental incentive to maintain proper licensure. The incentive is potent to the point of having penal attributes. ( Rony v. Costa (2012) 210 Cal.App.4th 746, 757, 148 Cal.Rptr.3d 642.)

The trial court also awarded the Kartons storage fees of $2,850.

The damage award was against Ari and not against Messika, Guttman, and Toledano. The court found these three people were not Ari's alter egos.

The court awarded the Kartons $12,500 against Ari's surety Wesco on the fourth cause of action concerning the construction bond.

Although the court found Ari lacked its contractor's license and did not obtain proper insurance, the court did not find Ari's work to be defective or of poor quality.

The court entered an amended judgment on October 24, 2018, and retained jurisdiction to decide attorney fees.

The trial court later held two hearings on the issue of attorney fees. The judge who had handled the case to that point had been reassigned; a new judge heard the Kartons’ attorney fee motion.

The first fee hearing was on January 25, 2019. Lawyer Shani Kochav appeared for all defendants. Lawyers Joe Abramson and David Karton appeared for the Kartons; Karton said his appearance was "limited scope representing myself and my wife." Karton argued first and did most of the speaking for the Kartons.

Before this hearing, the court issued a tentative ruling. This ruling noted the Kartons were requesting $271,530 in attorney fees, $52,021 in discovery sanctions, and $203,646 for proving matters at trial that had been denied in discovery. This tentative ruling also noted the amended judgment made fees recoverable only against Ari and not against the individual people who were defendants. The court determined $450 an hour was a reasonable rate for Abramson and that the issues in the case were "not particularly complex." The court observed the Kartons’ motion lacked a breakdown of hours spent by counsel beyond a "bare-bones declaration" that merely asserted a total of 603.4 hours and an estimate of percentages devoted to different tasks. The tentative ruling concluded the Kartons provided insufficient evidence for the court to assess whether the requested fees were reasonable. The court proposed to continue the hearing to allow the Kartons to supply the missing evidence to justify their request.

At the hearing, Karton asked for 30 days to file supplemental papers. The court granted this request. The court set a 10-page limit on the filing. Karton said, "I assume that's the text" and not the exhibits, and the court said yes.

In February 2019, the Kartons filed 11 pages of text and over 400 pages of supplemental briefing. In this filing, the Kartons "updated" their demand by adding $16,110 to their fee request. Without explicitly saying so, the Kartons suggested their initial billing figures were incorrect.

The second hearing was on March 25, 2019. Karton was the sole attorney representing the Kartons; Abramson did not appear. Karton and the court agreed the Trope case barred recovery for the time Karton himself had spent on the case. (See Trope v. Katz (1995) 11 Cal.4th 274, 292, 45 Cal.Rptr.2d 241, 902 P.2d 259 [attorney litigants may not recover attorney fees as compensation for effort they spend litigating matters on their own behalf].)

Karton said the trial court's damage award against Ari was $102,000.

The court noted Karton's original request was for about $270,000 in attorney fees but the request lacked evidence "as to the number of hours spent or the tasks performed by whom, et cetera ...."

The court expressed surprise Karton now had increased that request "beyond what had previously been requested."

The trial court commented on the Kartons’ lack of civility in their briefing. "The briefing filed by [the Kartons’] counsel was replete with attacks on defense counsel such as that defense counsel filed ‘knowingly false claims of witness tampering,’ ‘her comments were frivolous,’ something was ‘typical of the improper tactics employed by defendants and their counsel’. [¶] It was really offensive to me, the attacks made in this case."

The trial court...