McGovern Escrow Services v. Artap CA1/4

Filed 3/26/25 McGovern Escrow Services v. Artap CA1/4 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

McGOVERN ESCROW SERVICES, INC., Cross-complainant, Cross- defendant and Respondent, v. MICHELLE ARTAP et al., A169309 Cross-defendants, Cross- (Sonoma County Super. Ct. No. complainants and Appellants. SCV-261461)

Michelle Artap and U.S. Property Management, LLC (appellants) challenge the trial court’s award of attorney fees and costs to respondent McGovern Escrow Services, Inc. (McGovern) from interpleaded funds, arguing that the award improperly includes attorney fees incurred in defending against appellants’ breach of fiduciary duty claim. Appellants contend that neither Code of Civil Procedure1 section 386.6, nor the parties’ escrow agreement, authorizes the award of those attorney fees. We affirm.

1 All further statutory references are to the Code of Civil Procedure.

1

BACKGROUND This dispute arises from appellants’ sale of a Wingstop franchise store. McGovern acted as the escrow officer for the sale. Before the close of escrow, a dispute arose between appellants and the buyer regarding the disclosure of information related to the franchise’s operation, and the buyer filed a complaint against appellants for, among other claims, breach of contract and recission. The buyer named McGovern as a defendant. McGovern filed a cross-complaint in interpleader, alleging that, prior to the buyer’s lawsuit, appellants had demanded that McGovern pay a final California tax bill from the net proceeds in escrow, and the buyer instructed McGovern not to pay the bill and return any refund due to the buyer. McGovern interpleaded the escrow funds with the trial court. Appellants subsequently filed a cross-complaint against McGovern alleging breach of fiduciary duty. The litigation proceeded to a trial between McGovern and appellants after the court dismissed the buyer’s complaint when the buyer failed to appear for trial. On July 31, 2023, the day before the start of trial, McGovern filed a motion seeking discharge from liability (§§ 386, 386.5, 386.6) and an award of its attorney fees and costs under section 386.6 and/or the parties’ escrow agreement. In its motion, McGovern anticipated that appellants would object to payment of all attorney fees incurred by McGovern, but McGovern argued that all such fees were recoverable. In support of the motion, McGovern’s attorney submitted a declaration stating that the amounts sought were “incurred by McGovern in its prosecution and defense of the interpleader in this action.” McGovern sought total attorney fees and costs of $159,345.32 ($146,087.50 in attorney fees and $13,257.82 in costs) and submitted its attorneys’ invoices.