Admission Of Liability For Underlying Claims Or For Damages Alleged Might Have Made A Difference.
Stipulations to enter judgment upon default for an amount that is larger than an agreed-upon settlement payment continue to confound judges, attorneys, and parties. In Vitatech International, Inc. v. Sporn, G053477 (4/3 9/29/17) (Aronson, Bedsworth, Ikola) (unpublished), the trial court entered judgment against defendants for more than $300,000, based upon a stipulation for entry of judgment, after defendants failed to pay the agreed-upon settlement amount of $75,000. Plaintiff Vitatech contended that the $75,000 settlement amount was merely a discount of the agreed-upon liability to encourage prompt and timely payment, and the trial court agreed.
Defendants did well to appeal. The Court of Appeal applied "well-established precedent", including Greentree Financial Group, Inc. v. Execute Sports, Inc., 163 Cal.App.4th 495 (2008), to explain that the stipulated judgment for more than four times the amount Vitatech agreed to accept as full settlement "is an unenforceable penalty because it bears no reasonable relationship to the range of damages the parties could have anticipated would result from Defendants' failure timely to pay the settlement amount."
COMMENTS: My colleague Mike Hensley represented the successful appellant in Greentree. Mike and I are co-contributors to another blawg, California Attorney's Fees.
An interesting aspect of the Vitatech International, Inc. case is whether appellants properly sought to vacate the judgment under section 473(d), which allows for the vacation of void judgments. A judgment can be void when the court lacks fundamental authority over the subject matter, question presented, or party, which does not seem to be the case here. But the Court of Appeal found another example of a void judgment here: viewed as an unreasonable liquidated damages provision, the judgment was "void as against public policy."
Finally, what might have saved the stipulated judgment? The Court of Appeal analyzes other cases in which a stipulated judgment has been found to be valid, and suggests that the stipulated judgment could have survived if the appellants had admitted their liability for the underlying claims or for the damages Vitatech alleged in the complaint. Apparently merely agreeing to stipulate to the amount of damages alleged in the complaint was not the same as expressly admitting liability for those damages.
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