Fees, Form, and Substance

MSY Trading Inc. v. Seleen Automotive, Inc. No G057093 (D4d3 Jun 26, 2020)
 
Oversimplifying a little here, but the salient facts basically are: Plaintiffs won a breach of contract claim, which included an award of contractual attorneys’ fees. Original Defendant failed to pay. Plaintiffs then filed a separate collections suit against CEO, claiming that he was the alter ego of Original Defendant and thus liable on the judgment.

CEO prevailed on the alter ego issue. He then sought fees under the underlying contract and Civil Code § 1717. There’s no question he would have been entitled to those fees on an estoppel theory were he a prevailing defendant in the underlying contract action. Viz., if you sue a non-signatory enforce a contract, you are bound to the fee clause in that contract if you lose. But Plaintiffs argue that since this is a collections case, not an action on the contract, CEO can’t get fees, because Code of Civil Procedure § 685.040 makes fee recovery in a collections case a one-way right inuring only to the creditor. 

The Court of Appeal rejects that proposition. As the Court explains, there are three different ways to pop an alter ego with a judgment: Sue him in the original suit, add him to the judgement after the fact with a motion for leave to amend under Code of Civil Procedure § 187, or file a new lawsuit. These have procedural differences, but substantively, they are all the same. That being the case, the same logic that binds a plaintiff who tries to make an alter ego liable under a contract to the fee provision in it, applies when the other two procedures are used. So CEO was entitled to recover his fees in the alter ego case.

Affirmed.