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Wilson3/19/1999
CERTIFIED FOR PARTIAL PUBLICATION
Wilson, McCall & Daoro, a certified public accounting partnership, and Robert R. Daoro (hereafter collectively Wilson) appeal a summary judgment in favor of American Qualified Plans, Inc. (AQP) in Wilson's cross-action for indemnity. AQP appeals a summary judgment in favor of Wilson in AQP's cross-action for indemnity, contending the court erred in determining AQP was not entitled to attorney fees under Code of Civil Procedure section 1021.6. AQP also appeals a subsequent order denying its motion for attorney fees under section 1038.
Background
In February 1994 Ben A. Trainer (Trainer) filed a professional negligence action against Wilson and the law firm of Stanton & Ballsun and one of its partners, Kathryn A. Ballsun (hereafter collectively Stanton), alleging they failed to advise him that California tax law did not conform with federal tax law regarding the sale of stock to an employee stock ownership plan (ESOP). As a result, Trainer's gain from the sale of his stock to the ESOP was fully taxable under California law, and he was assessed state taxes and interest in excess of $458,000. Trainer and Stanton are not parties to this appeal.
Stanton and Wilson filed separate cross-complaints for indemnity and declaratory relief against each other and AQP, a consulting firm which consults with companies concerning ESOP's and administers such plans. The Stanton and Wilson cross-complaints alleged that if they (i.e., Wilson in one instance or Stanton in the other) were found liable, such liability resulted from AQP's failure to properly advise Trainer of the state tax consequences of selling his stock to the ESOP.
AQP responded in part by cross-complaining against Wilson and Stanton for indemnity and seeking attorney fees under section 1021.6, alleging that Wilson rejected AQP's tender of the defense of Stanton's cross-complaint and Stanton rejected AQP's tender of the defense of Wilson's cross-complaint.
AQP then moved for summary judgment on both the Stanton and Wilson cross-complaints on the ground that it had no duty to Trainer and therefore no liability on the Wilson and Stanton cross-complaints. AQP did not seek attorney fees or costs in that motion.
The court granted AQP's summary judgment motion against Wilson and Stanton after determining there were no triable issues of fact as to the following: (1) there was no contractual relationship between Trainer and AQP; (2) AQP was neither retained by, nor gave Trainer any tax, legal or financial advice about the ramifications of his stock sale to the ESOP; (3) Trainer did not seek any such advice from AQP; (4) Trainer did not rely on AQP in determining to sell stock to the ESOP; (5) no information from AQP affected Trainer's decision to sell stock to the ESOP; and (6) AQP made no misrepresentation to Trainer or his company, Med-Tech West, Inc. (Med-Tech).
AQP then settled its cross-complaint against Stanton. Pursuant to the settlement agreement Stanton agreed to pay AQP $30,000 against $126,000 AQP alleged it had incurred in attorney fees. The court found the settlement amount to be in good faith (ยง 877.6), but expressly refrained from approving any characterization of the settlement funds as payment for fees incurred by AQP pursuant to section 1021.6.
Thereafter, Wilson moved for summary judgment on AQP's cross-complaint on the grounds that AQP was not entitled to attorney fees under section 1021.6 because it never paid a judgment or settlement nor was obligated to do so, and AQP never brought or defended an action against a third party. The court granted Wilson's motion for summary judgment, reasoning t
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