The National Grange of the Order of Patrons of Husbandry v. California State Grange

Filing 235

ORDER signed by Senior Judge William B. Shubb on 4/17/2018 GRANTING the 226 Motion to Reopen Post-Judgment Proceedings; The Satisfaction of Judgment is hereby PARTIALLY VACATED to the extent of $93,707.78 upon the condition that plaintiff take the necessary steps to return the aforementioned dollar amount to the account from which it should not have been taken. Within 30 days, Defendant must pay plaintiff the additional sanctions in the amount of $9,000. (Fabillaran, J)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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THE NATIONAL GRANGE OF THE
ORDER OF PATRONS OF
HUSBANDRY,

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Plaintiff,

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v.

CIV. NO. 2:14-676 WBS DB

ORDER RE: MOTION TO RE-OPEN POST
JUDGMENT PROCEEDINGS

CALIFORNIA GUILD, formerly
doing business as “California
State Grange,”

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Defendant.

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Presently before the court is The National Grange of

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the Order of Patrons of Husbandry’s (“National Grange”) Motion to

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Re-Open Post-Judgment Proceedings.

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I.

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(Docket No. 226).

Factual and Procedural History
On April 20, 2016, this court found that defendant

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California Guild had willfully violated a prior permanent

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injunction granted by this court in September 2015.

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2016 Order (Docket No. 138).)

(Apr. 20,

Accordingly, the court ordered

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defendant to pay plaintiff attorney’s fees incurred in

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enforcement of the injunction.

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court specifically directed defendant to pay $144,715.70 to

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plaintiff.

(Id.)

On September 12, 2016, the

(Sept. 12, 2016 Order (Docket No. 154).)

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Defendant failed to pay the designated amount at the

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correct time, and instead filed a declaration signed by Robert

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McFarland, the president of the California Guild, asserting that

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defendant was unable to pay the award.

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McFarland (“McFarland Decl.”) (Docket No. 155).)

(Decl. of Robert
In his

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declaration, McFarland acknowledged that “the Guild is a

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nonprofit organization with limited funds and sources of income,

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most of which are already subject to the preliminary injunction

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and/or Court orders issued in Sacramento County Superior Court

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Case No. 34-2012-0013439.”

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that “[t]he preliminary injunction enjoins the Guild from

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selling, assigning, transferring, pledging, hypothecating, or

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encumbering [National] Grange assets possessed or controlled as

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of April 5, 2013 including certain real property and assets in

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the [Morgan Stanley] accounts possessed or controlled by

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Defendants beyond the normal business expenses of the

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organization.”

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(Id.)

McFarland further explained

(Id.)

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Plaintiff then brought a motion in this court, asking

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that the court assign it the right to collect “all payments due

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or to become due to defendant” from its local chapters to satisfy

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the court’s fees order.

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(Pl.’s Mot. for Assignment Order (Docket

On October 20, 2015, Judge David Brown of the
Sacramento County Superior Court issued a preliminary injunction
to “preclude the defendant Unchartered State Grange from wasting
Grange assets until the case is finally adjudicated.”
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No. 178).)

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assignment order on March 9, 2017.

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24, 2017, defendant provided plaintiff with a cashier’s check of

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$145,466.82, signed by defendant’s attorney Mark Ellis (“Ellis”)

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and his law firm, the Ellis Law Group LLP (“Ellis Law Group”).

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The court granted plaintiff’s application for an
(Docket No. 189).

On March

On March 17, 2017, plaintiff submitted a memorandum of

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costs for attorney fees and other expenses incurred in

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enforcement of the original award.

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2017, the court recognized defendant’s payment of $145,466.82,

(Docket No. 193.)

On May 18,

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and also ordered that defendant pay an additional $93,707.78 in

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costs and fees.

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Ellis appeared in court with McFarland and presented the court

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with three checks drawn on his firm’s client trust account,

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payable to plaintiff, amounting to $93,707.78, in purported

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satisfaction of all remaining costs and fees claimed by

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plaintiff.

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of these funds, plaintiff filed an Acknowledgement of Full

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Satisfaction of Judgment on June 27, 2017.

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II.

(Docket No. 218.)

On June 9, 2017, attorney

Trusting Ellis’ statements regarding the legitimacy

(Docket No. 224.)

Vacate Satisfaction of Judgment

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Plaintiff alleges that defendant’s attorney used

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a client trust account to conceal the source of funds used

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for the payment of attorney fees owed to plaintiff, and

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argues that the court should therefore vacate the

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Satisfaction of Judgment.

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argues that the Satisfaction of Judgment should be vacated

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because of fraud, plaintiff also argues that such relief is

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warranted, with or without evidence of fraud, on the ground

Although plaintiff primarily

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that the attorney fee award has not actually been paid and

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thus the Satisfaction of Judgment was entered by mistake.

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Pursuant to California law, “a satisfaction of judgment

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which has been filed and entered may be set aside by appropriate

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proceedings and for proper cause.”

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Dandini, 98 Cal. App. 2d 617, 622, (1st Dist. 1950).

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undue influence and mistake are the generally recognized grounds

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for vacating a satisfaction of judgment.”

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“[i]t is settled that where a satisfaction of judgment has been

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erroneously entered, it may be cancelled . . . upon motion made

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in the original action.”

Kinnison v. Guar. Liquidating Corp., 18

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Cal. 2d 256, 265 (1941).

Specifically, the Ninth Circuit has

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concluded that a satisfaction of judgment may be vacated if the

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defendant has not in fact paid the full amount of the fee award.

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Jimenez v. Franklin, 680 F.3d 1096 (9th Cir. 2012)(reversing

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district court order that granted satisfactions after defendants

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paid less than full amount of fee award).

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Remillard Brick Co. v.

(Id.)

“Fraud,

Additionally,

Here, the uncontroverted evidence indicates that

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defendant’s partial payment of plaintiff’s attorney fee award in

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the amount of $93,707.78 came from funds that defendant had been

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enjoined from accessing.

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discovered, through discovery in a related case, that the three

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checks for $93,707.78 written on Ellis Law Group’s client trust

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account were identical to payments paid to the Ellis Law Group

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from a restricted Morgan Stanley account belonging to defendant.

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Relatedly, on March 21, 2018, the Sacramento County Superior

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Court ruled that defendant had “willfully violated this Court’s

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injunction order, which specifically precluded the Guild from

On December 27, 2017, plaintiff

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expending funds in an account at Morgan Stanley.”

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for Judicial Notice, Ex. 1 (Judge Brown Mar. 21, 2018 Order)

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(Docket No. 228-1).)

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that “the Guild has expended tens of thousands of dollars on

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attorneys’ fees in favor of a CSG affiliate in an unrelated

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case.”

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of dollars” refer precisely to the $93,707.78 at issue here.

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(Id.)

(Pl.’s Req.

The Superior Court Order further explained

The court recognizes that these “tens of thousands

Therefore, with regard to the $93,707.78 payment, it
clearly appears that plaintiff entered its Satisfaction of

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Judgment by mistake.

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funds it used to pay plaintiff came from defendant, when in

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reality the money came from a fund that defendant had been

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enjoined from accessing pursuant to the state court injunction.

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Had plaintiff known the true source of the money, it would not

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have entered an Acknowledgement of Full Satisfaction of Judgment.

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(Docket No. 224.)

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entered in error.

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Defendant convinced plaintiff that the

Thus, the Satisfaction of Judgment was clearly

It also appears that the remaining $145,466.82 may

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have been paid using money that defendant should not have

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accessed as well.

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sufficiently clear to make that determination.

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a matter best resolved in another case before a different court.

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Therefore, unless and until determined otherwise, this court will

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consider the $145,466.82 a partial satisfaction of the judgment.

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See, e.g., Jhaveri v. Teitelbaum, 176 Cal. App. 4th 740, 749 (2d

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Dist. 2009) (explaining that trial court has discretion to “apply

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a credit in partial satisfaction of the judgment”).

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III. Sanctions

However, the record before this court is not

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This seems to be

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Plaintiff requests imposition of sanctions against

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defendant for its attempt to satisfy this court’s judgment with

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funds fraudulently obtained in violation of a state court

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injunction.

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range of improper conduct, even conduct that occurred outside of

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the courtroom.

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(9th Cir. 2003); Chambers v. NASCO, 501 U.S. 32, 57 (1991).

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Courts have inherent authority to sanction a broad

See Knupfer v. Lindblade, 322 F.3d 1178, 1196

The court agrees with plaintiff and concludes that
defendant attempted to deceive plaintiff by paying the judgment

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using misappropriated funds.

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explanation for why it used those funds from the Morgan Stanley

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account.

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attempted to argue that Judge Brown’s Order discussing “tens of

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thousands of dollars on attorneys’ fees” referred to a different

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payment.

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was disproven.

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Defendant offers no plausible

At the hearing on April 16, 2018, defendant’s attorney

However, upon inspection of the Order, this explanation

The evidence indicates that the $93,707.78 was,

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indisputably, removed from a restricted Morgan Stanley account,

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with no credible reason for doing so.

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concludes that plaintiff is entitled to sanctions in the amount

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of $9,000, which less than 10% of the amount of money which

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defendant attempted to cheat plaintiff out of.

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are imposed in part to indemnify plaintiff for its attorney fees

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in making this Motion.

Accordingly, the court

These sanctions

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IT IS THEREFORE ORDERED that plaintiff’s Motion to Re-

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Open Post-Judgment Proceedings (Docket No. 226) be, and the same

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hereby is, GRANTED.

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partially vacated to the extent of $93,707.78 upon the condition

The Satisfaction of Judgment is hereby

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that plaintiff take the necessary steps to return the $93,707.78

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to the account from which it should not have been taken.

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Defendant has thirty days from the date this Order is signed to

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pay plaintiff the additional sanctions in the amount of $9,000

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imposed in this Order.

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Dated:

April 17, 2018

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