Leiper v. Gallegos

• Decision Date: 23 September 2021
• Docket Number: 2d Civil No. B309986
• Citation: 69 Cal.App.5th 284,284 Cal.Rptr.3d 349
• Parties: Gary D. LEIPER as Trustee, etc., Plaintiff, v. Dennis GALLEGOS, Defendant; John L. Poole, Objector and Appellant; Bank of the West, as Trustee, etc., Objector and Respondent.
• Court: California Court of Appeals Court of Appeals

69 Cal.App.5th 284

284 Cal.Rptr.3d 349

Gary D. LEIPER as Trustee, etc., Plaintiff,

v.Dennis GALLEGOS, Defendant;

John L. Poole, Objector and Appellant;

Bank of the West, as Trustee, etc., Objector and Respondent.

2d Civil No. B309986

Court of Appeal, Second District, Division 6, California.

Filed September 23, 2021

John L. Poole, Napa, in pro. per., for Objector and Appellant.

Musick, Peeler & Garrett and Cheryl A. Orr, Los Angeles, for Objector and Respondent.

YEGAN, J.

John L. Poole appeals from an order denying his motion for attorney fees and costs. Poole, an attorney, represented only himself. His appeal presents the following issue: May an attorney who represents only himself (pro se attorney) recover attorney fees and costs in equity under the common fund theory? This theory is an exception to "the American rule, which provides that each party to a lawsuit must ordinarily pay his own attorney fees." ( Trope v. Katz (1995) 11 Cal.4th 274, 278, 45 Cal.Rptr.2d 241, 902 P.2d 259 ( Trope ).) In Trope , the California Supreme Court held "that an attorney who chooses to litigate in propria persona and therefore does not pay or become liable to pay consideration in exchange for legal representation cannot recover ‘reasonable attorney's fees’ under [Civil Code] section 1717," which applies to contractual awards of attorney fees. ( Id . at p. 292, 45 Cal.Rptr.2d 241, 902 P.2d 259.) The Supreme Court left open the question whether a pro se attorney may recover attorney fees under the nonstatutory common fund theory. ( Ibid . ["we express no opinion regarding the applicability of our reasoning ... in the context of the equitable exceptions [e.g., the common fund theory,] to the American rule"].)

We agree with the trial court as to attorney fees under the common fund theory. But we disagree with the court's ruling as to costs. We hold that an attorney who represents only himself and does not pay or become liable to pay consideration in exchange for legal representation may not recover attorney fees under the equitable common fund doctrine, but may seek recovery of legitimate, reasonable costs excluding attorney fees under that doctrine.

Factual and Procedural Background

This case arises from E.S. Barnard's 1939 lease of oil and gas rights beneath his land (Lot 7). The lessee was a major oil company. The facts are set forth in detail in our prior opinion, Leiper v. Gallegos (2019) 42 Cal.App.5th 394, 398-401, 255 Cal.Rptr.3d 293 ( Leiper ). We briefly summarize them here.

In 1957 E.S. Barnard's company "dissolved and conveyed its interests in Lot 7, including the oil and gas lease, to its shareholders (the Barnards and Pooles ...). In 1977, the [owners] entered into an agency agreement titled ‘Barnard Oil Trust ...’ ... for the distribution of oil and gas royalties." ( Leiper , supra , 42 Cal.App.5th at p. 399, 255 Cal.Rptr.3d 293.)

One of the Barnards defaulted on a tax bill. In 1978 Lot 7 was sold at public auction and was eventually conveyed to Dennis Gallegos. Gallegos claimed he was entitled to a share of the oil and gas royalties. Because of his claim, the oil company suspended distribution of the royalties. Gary Leiper, the trustee of the Barnard Oil Trust, tentatively settled the dispute with Gallegos. The settlement provided that Gallegos would receive 5.714 percent of the royalties. Appellant Poole, a fractional owner of the oil and gas rights, objected to the settlement. Appellant claims that his interest in the royalties is "less than 1%."

Appellant "filed a petition to determine title and royalty rights." ( Leiper , supra , 42 Cal.App.5th at p. 400, 255 Cal.Rptr.3d 293.) The oil company petitioned "to interplead the oil royalties ... and deposited the money with the trial court." ( Ibid . ) According to a document filed in March 2020, the amount of the interpleaded funds was "at least $500,000." The trial court "ordered Leiper to file a petition [to] quiet title and [for] declaratory relief. [Gallegos], in response to [Leiper's] petition, asked the trial court to confirm ... that the 1978 tax deed conveyed both the surface rights and subsurface oil and gas rights." ( Ibid . )

The trial court "expressly ruled that [Gallegos] had no interest in the oil and gas royalties because the tax collector ‘didn't foreclose upon those rights.’ " ( Leiper , supra , 42 Cal.App.5th at p. 401, 255 Cal.Rptr.3d 293.) Gallegos appealed. We upheld the trial court's ruling. We concluded that Gallegos "is the surface owner to Lot 7 but he does not now own an interest in the oil and gas under Lot 7." ( Id . at p. 398, 255 Cal.Rptr.3d 293.)

Appellant moved to recover his reasonable attorney fees and costs. He claimed that he had "conceived the theory upon which the Court of Appeal[ ] ruled in favor of the Barnards." Appellant sought "$50,745 for fees and [$1,572.75] for costs for work successfully defending the trial court judgment on appeal." In addition, he sought "$46,020 for fees and $1,269.29 for costs for work performed in the Superior Court." Relying on the equitable common fund theory, appellant requested that payment be made from the interpleaded oil and gas royalties. During appellate oral argument, appellant asserted that, but for his efforts, Gallegos would have received 5.714 per cent of the royalties.

Some members of the Barnard and Poole families opposed appellant's motion for attorney fees "because he was representing his own interests individually and the money [he requested] would deplete the amount of royalties interpleaded with the Court and available for distribution to family members."¹ One family member emailed the trial court: "In my view, [appellant's] personal interference in this case has been counterproductive." In September 2017 another family member wrote a letter to the court in which she complained, "My grandparents and my father would be distressed and appalled that a single member [appellant] of a large and extended family has tied up Court's time and money in his personal quest."

During appellate oral argument, counsel for respondent Bank of the West (Bank) explained that family members were upset because, as a result of the litigation, the stream of royalty payments to the beneficiaries stopped for "almost five full years." Family members were concerned that the interpleaded funds would be drained by the payment of fees.

The trial court denied appellant's motion for attorney fees and costs. It said: "Here the issue is not if the common fund theory applies; the Court already has applied it to the attorney fee request by Austin Barnard Trust's attorney.² The issue is if [appellant] can be paid ‘attorney fees’ for his self-representation in this matter. [¶] [Appellant] did not ‘employ’ an attorney, did not incur attorney's fees, and there is no attorney/client relationship. [Appellant], who is a California licensed attorney, chose to represent himself in this litigation."³ Because appellant represented himself, the court ruled that he is not entitled to attorney fees under the common fund theory. As to appellant's request for costs excluding attorney fees, the court stated, "The Court denies [appellant's] request for fees, and in doing so, denies assoc[ ]iated costs as well."

Standard of Review

" ‘ " ‘An order granting or denying an award of attorney fees is generally reviewed under an abuse of discretion standard of review; however, the "determination [at issue here] of whether the criteria for an award of attorney fees and costs have been met is a question of law." [Citations.]’ " ’ [Citation.] An issue of law concerning entitlement to attorney fees is reviewed de novo." ( Carpenter & Zuckerman, LLP v. Cohen (2011) 195 Cal.App.4th 373, 378, 124 Cal.Rptr.3d 598.)

The Common Fund Theory

"The Legislature has ... enacted several statutory exceptions to the American rule, and [the California Supreme Court has] relied on [its] ‘inherent equitable authority’ to develop three additional exceptions—the common fund, substantial benefit, and private attorney general theories of recovery."⁴ ( Trope , supra , 11 Cal.4th at p. 279, 45 Cal.Rptr.2d 241, 902 P.2d 259.) Appellant states: "This appeal is an attempt to require the [trial] court to engage in the consideration of whether [appellant's] request [for attorney fees and costs] is reasonable under the common fund doctrine." "Specifically, the issue here concerns a California licensed attorney acting pro se seeking compensation from a common fund. It is pure equity, there are no statutes involved."

"[T]he so-called ‘common fund’ exception to the American rule regarding the award of attorneys fees ..., is grounded in ‘the historic power of equity to permit ... a party preserving or recovering a fund for the benefit of others in addition to himself, to recover his costs, including his attorneys’ fees, from the fund of property itself ....’ " ( Serrano v. Priest (1977) 20 Cal.3d 25, 35, 141 Cal.Rptr. 315, 569 P.2d 1303 ( Serrano ).) "[W]here [a party's] efforts have not effected the creation or preservation of an identifiable ‘fund’ of money out of which they seek to recover their attorneys fees, the ‘common fund’ exception is inapplicable." ( Id . at pp. 37-38, 141 Cal.Rptr. 315, 569 P.2d 1303.)

"The purpose of the doctrine is to allow a party, who has paid for counsel to prosecute a lawsuit that creates [or preserves] a fund from which others will benefit, to require those other beneficiaries to bear their fair share of the litigation costs. [Citation.] In other words, the common fund doctrine permits the plaintiffs’ attorneys to recoup their fees from the fund." ( Northwest Energetic Services, LLC v. California Franchise Tax Bd. (2008) 159 Cal.App.4th 841, 878, 71 Cal.Rptr.3d 642.) "Because the common fund doctrine ‘rest[s] squarely on the principle of avoiding unjust enrichment’ [citations], attorney fees awarded under this doctrine are not assessed directly against the losing party (fee shifting), but come out of the fund established by the litigation, so that the...