Gray1 CPB, LLC vs. SCC Acquisitions, Inc
Gray1 CPB, LLC vs. SCC Acquisitions, Inc., ___ CA3d___, 2014 Westlaw 1388697 (California State Court Court of Appeals 2014): A California appellate court has held that once a judgment creditor has accepted a cashier’s check from a judgment debtor, the creditor no longer has the right to collect post-judgment attorneys’ fees.
Comment: Take the money!! A judgment creditor should ALWAYS accept full payment of the judgment, if the judgment debtor sends it to judgment creditor. Lucky (and rare) judgment creditor who gets paid judgment, without struggling to collect the judgment. Unless the attorneys fees claim is a very large claim, in comparison to the judgment amount, the creditor holding the judgment is almost certainly better off to accept the cashiers check paying the full amount of the judgment, even though doing so cuts off the right to, thereafter, make a claim for attorneys fees incurred by the judgment creditor, post judgment, trying to collect the judgment. Creditors should remember that a judgment is just a piece of paper with a number on it, and that doing things to seek to collect a judgment (defending judgment on appeal, if there is an appeal, applying for writ of execution, applying for wage garnishment, obtaining and recording an abstract of judgment in the county recorder’s office (to create judgment lien on the judgment debtor’s property), moving to do execution sale of debtor’s real property, after obtaining judgment lien on the real property, are all expensive to do, and may result in driving the debtor to file bankruptcy, where the judgment may be dischargeable, or if secured by a judgment lien, may be undersecured and subject to lienstripping, and even if it is a judgment is for something (e.g., fraud judgment) that would be nondischargeable in bankruptcy, per 11 USC 523(a)(2), (4), or (6), the creditor will have to bring and win a “nondischargeability” adversary proceeding, in the bankruptcy, to keep the judgment from being discharged, which takes more time, and costs more of the creditor’s money to do.
Facts: After many years of bitter litigation, a creditor obtained a large judgment against a debtor. The judgment creditor incurred millions of dollars in attorneys’ fees in attempting to enforce that judgment. Unexpectedly, the debtor’s counsel tendered a cashier’s check for the entire face amount of the judgment plus interest, not including the post-judgment attorneys’ fees. The judgment creditor’s counsel accepted the check but did not cash it. When the judgment creditor filed a motion for post-judgment costs, the trial court denied the motion, ruling that the judgment had been satisfied by the cashier’s check.
Reasoning: The appellate court affirmed. The creditor claimed that the judgment had not really been satisfied, since the post-judgment fees had not been covered by the cashier’s check. The court disagreed, holding that the applicable statutes clearly provided that the acceptance of the cashier’s check had satisfied the judgment, which (at that time) did not include an award of fees.
The creditor complained that this result was prejudicial, since the debtor’s surprise tender of the cashier’s check had deprived the creditor of its chance to obtain a fee award. The court disagreed:
The rule we announce today does no disservice to judgment creditors who have incurred postjudgment costs they wish to add to the judgment . . . . [I]f they have not yet filed a motion for postjudgment costs at the time the judgment debtor tenders a cashier’s check in full payment of the outstanding judgment, they are free to reject the payment and to file a motion for postjudgment costs.
The court recognized that the creditor’s argument “is not without sympathetic appeal” because the expensive collection was caused by the debtor’s “slippery efforts to evade paying the judgment . . . .” But the court held that the creditor could have made interim motions for fees: “[The creditor] could have made a motion or motions for postjudgment costs, including attorney fees, prior to defendants fully satisfying the judgment nearly two years after entry of the judgment.”
The first paragraph of the court’s opinion vividly describes the creditor’s dilemma:
You cross continents and spend years trying to collect a judgment for your client. Late one Friday afternoon, the debtor’s lawyer walks into your office and hands you a cashier’s check for almost $13 million, covering the entire judgment and all accumulated interest. Do you accept the check or say, "no thank you, I need to make a motion for attorney fees first?" Put another way, is a bird in the hand worth two in the bush?
In the real world, who would ever turn down a check for $13 million? And yet the Enforcement of Judgments Act, as currently written, essentially forces the creditor to do exactly that. As the Court notes, the only other alternative is to file repetitive interim motions for fees during the collection process, which is costly not only to the creditor but also to the judicial system. Worse yet, when the debtor finally tenders the money, there will almost always be additional fees and costs that have not been picked up in one of those interim motions.
The court reached the correct result under the statutes as they are currently written. But the heart of the problem is that the judgment is deemed to be “fully satisfied” for all purposes as soon as the cashier’s check is accepted, thus cutting off the creditor’s ability to obtain an additional fee award under that judgment. Perhaps the Legislature could amend the statute to cover the precise problem identified by the court in this case: although the tender of the check would be deemed to satisfy the judgment (thus cutting off the accrual of post-judgment interest), the judgment creditor would still have the right to make a final motion for post-judgment fees and costs.
Portion of this analysis appeared in the California State Bar Insolvency Committee e-newsletter