Judgment Not Satisfied Unless Payment "Conditioned" on Satisfaction, Published Appellate Decision Holds

Enforcing a judgment is hard enough before appeals and appeal bonds enter the picture. Unfortunately, the published opinion in Wertheim, LLC v. Currency Corp. (D2d1 Oct. 14, 2021) 2021 WL 4785575 (nos. B304655, B310650) now takes that picture even further out of focus. The upshot is that the defendant fully satisfied a judgment, but that was not enough: the plaintiff intended to seek more costs, and the defendant did not "condition" its payment on its constituting full satisfaction of the judgment.

Held: contrary tot Gray1 CPB, LLC v. SCC Acquisitions, Inc. (2015) 233 Cal.App.4th 882, 891, the plaintiff could continue filing motions for more enforcement costs even after the defendant had paid the entire amount of the judgment, interest, and costs then due.

The mountain of difficultes in Wertheim began with a molehill of a verdict, just $38,000, along with an award of attorney fees. That was 2009. The defendant appealed, and posted an appeal bond to stay judgment enforcement. But the defendant lost its appeal.

Fast-forward to 2016. For some reason, the successful plaintiff did not timely enforce the judgment from the appeal bond. Instead, the plaintiff had resumed other judgment-enforcement efforts, and now wanted to recover the attorney fees it had incurred in that mission. But the trial court denied the plaintiff's motion for judgment-enforcement fees as untimely, on the grounds that the appeal bond (though still unpaid) satisfied the judgment.

That ruling was wrong. True, the right to move for judgment-enforcement fees is cut off at the moment the judgment is fully satisfied. (Gray1 CPB, LLC v. SCC Acquisitions, Inc. (2015) 233 Cal.App.4th 882, 891 (Gray1).) (More on Gray1 later.) But posting an appeal bond does not satisfy a judgment. (Wertheim LLC v. Currency Corp. (2019) 35 Cal.App.5th 1124 (Wertheim IV).)

So back in the trial court, the plaintiff did two things: (1) the plaintiff filed a motion for attorney fees for its recent successful appeal in Wertheim IV; and (2) the plaintiff filed a separate action to enforce the judgment against the appeal bond.

A Motion for Judgment-Enforcement Fees Carries a "Necessarily Incurred" Requirement (CCP § 685.040):

The trial court granted the plaintiff's motion for judgment-enforcement fees, awarding the plaintiff over $240,000. But the trial court awarded the fees under Civil Code section 1717. But that was the wrong statute here. Fees that are incurred to enforce a judgment are governed by Code of Civil Procedure section 685.040. Section 685.040 has a requirement which Civil Code section 1717 does not: only fees that were necessarily incurred are recoverable.

So did the plaintiff "necessarily incur" fees by successfully appealing the order denying its prior motion for enforcement fees? No, concluded the Court of Appeal. The motion for fees was unnecessary, and the appeal on the order denying that motion was unnecessary. Why? The plaintiff's enforcement efforts were unnecessary when there was an appeal bond securing the judgment the whole time. Wertheim could have avoided a new lawsuit entirely by filing a timely motion to collect on the appeal bond pursuant to Code of Civil Procedure section 996.440.

Collection on an Appeal Bond by Motion Must Occur Within One Year After the Appeal (CCP § 996.440):

Liability on a bond may be enforced expeditiously on noticed motion filed within a year after any appeal is finally determined, or more laboriously by a separate lawsuit. (Code Civ. Proc., § 996.440.)

Here, the plaintiff waited longer than a year, and so a motion was untimely. Instead, the plaintiff had to file a separate lawsuit to collect on the bond. The plaintiff succeeded, but the bond company had to incur fees in the lawsuit. The court ordered that the bond company may recover its fees out of the bond proceeds (which had been interpleaded with the court). The court also ordered that the bond company's fees should be allocated against the plaintiff, since it was the plaintiff's delay that made this whole separate lawsuit necessary.

When Is a Judgment Fully Satisfied?

One more issue from Wertheim is worth noting. So at long last, the bond funds were released to the plaintiff. The parties agreed the bond funds were "in satisfaction of" the underlying judgment. The defendant made a separate payment to cover interest incurred as of a March 11, 2016 order. This happened in March 2019. So the underlying judgment appears to have been fully satisfied as of this time, according to the defendant.

But then here came the plaintiff six months later with another motion for judgment-enforcement fees of almost $390,000.

To this, the defendant raised Gray1 CPB, LLC v. SCC Acquisitions, Inc. (2015) 233 Cal.App.4th 882, 891, which stands for the sensible proposition that, at some point in judgment-enforcement, all good things must come to an end: once the amount of the judgment has been paid, together with accrued legal interest and any costs that have already been awarded, the judgment is fully satisfied, and no further costs may be claimed.

But the Wertheim court disagreed. "Additional fees were potentially awardable pursuant to Wertheim's March 10, 2016 motion for them, which was revived by Wertheim IV, as well as any motion it might bring for fees incurred after that date." But the "revived" motion appears not to have been granted. And besides, Gray1 is quite clear on this subject:

"When the Enforcement of Judgments Law refers to a judgment having been fully satisfied, it means an outstanding judgment, not what the judgment would be if postjudgment costs were to be added thereto. No other interpretation is possible. If a judgment were not fully satisfied because of the existence of as yet unawarded attorney fees, the phrase before the judgment is fully satisfied would serve no purpose." (Gray1, supra, 233 Cal.App.4th at p. 892.)

And further: "That is a distinction with a difference, for a judgment is satisfied when the total amount of the judgment plus accrued interest has been paid. (§ 695.210; see § 685.090, subd. (a) [costs (including postjudgment attorney fees) do not become part of the judgment until such time as the court files an order allowing the costs].)" (Id. at p. 893.)

Wertheim says it does "not disagree" with Gray1, but its conclusion is difficult to square with Gray1. Wertheim concludes the defendant did not fully satisfy the underlying judgment because the defendant "adduces no evidence suggesting that any tender it made was conditioned on its being considered as full satisfaction of 2009 judgment." But that is not the standard under the Enforcement of Judgments Law or Gray1: "a judgment debtor who pays the judgment creditor in an amount that includes the full measure of the judgment plus accrued interest, has fully satisfied the judgment. (§ 695.210.)" (Gray1, supra, at p. 893.) There is no requirement that the defendant "condition" its payment on the plaintiff's agreement that it fully satisfy the judgment.

Comment: Unfortunately, the published opinion in Wertheim throws the application of Gray1 into confusion. Gray1 unequivocally states that "If a judgment were not fully satisfied because of the existence of as yet unawarded attorney fees, the phrase before the judgment is fully satisfied would serve no purpose." (Gray1, supra, 233 Cal.App.4th at p. 892.) The plaintiff's remedy here was to decline to accept the payment until it had recovered all its claimed costs and fees. The California Supreme Court said this expressly in Conservatorship of McQueen (2014) 59 Cal.4th 602. The Second District Court of Appeal apparently felt this was inadequate. But until the Supreme Court takes up the matter again, Wertheim leaves the law on this point unsettled.

Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. His appellate practice covers all of California's appellate districts and throughout the Ninth Circuit, with appellate attorneys in offices in Orange County and Monterey County. Contact Tim at [email protected] or (714) 641-1232.

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