Judge: Mark H. Epstein, Case: 19STCV12743, Date: 2023-08-23 Tentative Ruling

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Case Number: 19STCV12743    Hearing Date: August 23, 2023    Dept: I

This is a motion to compel a satisfaction of judgment.  The underlying case was a personal injury case.  Plaintiff sent defendant a settlement offer pursuant to CCP section 998, offering to settle in return for a judgment in plaintiff’s favor of $100,000.  Defendant agreed and the deal was struck.  Defendant timely submitted a check for $100,000 (even before the judgment was entered), but it was made out jointly to plaintiff and various lien-holders who had perfected liens relating to the injury.  Plaintiff’s counsel asked defense counsel to re-issue the check made out only to plaintiff or plaintiff and her counsel and not the lienholders because the check that had been issued could not be cashed without the lienholders’ endorsements.  Defendant refused, at least absent a statement from plaintiff’s counsel that all the liens had been satisfied.  The dispute is this.  Defendant contends that the settlement was that in return for $100,000, defendant would be rid of the case forever.  But if there remain liens outstanding, it is possible that the lienholders will come after defendant to satisfy the liens.  True, defendant could sue plaintiff for indemnity, but according to defendant plaintiff is now a fugitive from justice and will be hard, if not impossible to find, let alone to get any financial contribution.  Plaintiff’s counsel states that the 998 offer said nothing about liens and that the law on liens is the law on liens.  Plaintiff is not asking defendant to waive anything in that regard, but neither will plaintiff add any rights. 

Defendant had earlier brought a motion to enforce the settlement.  The court denied that motion without prejudice because the better way to address the issue is the motion now brought.  Code of Civil Procedure section 724.050 allows a judgment debtor to request a judgment creditor to file a Full Satisfaction of Judgment once the judgment has in fact been paid in full.  If the judgment creditor refuses, then a motion can be brought and, if granted, the judgment creditor will be liable for certain costs and fees. 

No one disputes that defendant has at least attempted to tender the full $100,000 amount to plaintiff, and no one disputes that if the tender was proper the judgment was fully satisfied.  The debate is whether the tender was sufficient given that it was made out to plaintiff, plaintiff’s counsel, and the lienholders jointly, which required the lienholders to endorse the check in order for it to be deposited.  There are two lienholders: UCLA Medical Center and the LAFD. 

Defendant asserts that it had to make out the check jointly to protect itself from suit.  Under the Hospital Lien Act, where a patient has a hospital bill, the hospital can place a lien, which will give the hospital the right to a direct payment by a third party (such as defendant here) to the extent that the third party settles.  The lien can be for up to 50% of the total settlement.  (Mercy Hospital v. Farmers Insurance Group (1997) 15 Cal.4th 518.)  The issue is governed by Civil Code section 3045.1 et seq.  It requires that a third party settling a case pay the amount of the lien to the lienholder, but that the lien cannot be for more than 50% of the proceeds.  If the sum is not paid, then the lienholder has a right of action directly against the settling party.  Of course, the hospital may also sue the plaintiff, and the settling party may presumably sue the plaintiff for indemnity.  But the point is that the hospital has a direct right of action, thereby enhancing its ability to be paid for the services it renders.

The same does not appear to be true of the LAFD.  While there is a lien, it is not clear that the LAFD has the right to bring a direct suit against defendant here if the lien is not satisfied. 

This is a bit of an odd case.  The court well understands defendant’s view—at least as to the hospital.  Defendant is buying peace.  To the extent plaintiff is not willing to sell peace, one would think defendant has nothing that it would want to buy.  Plaintiff, for her part, notes that whatever defendant may have wanted to buy, what it actually bought was only peace from plaintiff.  Plaintiff has a judgment and plaintiff cannot further sue defendant, but plaintiff contends that nothing in the 998 offer or the judgment itself guarantees that defendant won’t be sued by someone else or allows defendant to pay anyone other than plaintiff (and her counsel).  Plaintiff does not here state that she can ignore the lien; only that her recovery ought not be reduced by it insofar as defendant is concerned.

Obviously, the better practice would be for the parties to discuss this ahead of time and agree before the settlement is reached.  Had defendant asked, plaintiff either would have said that she wanted defendant to remain at risk (which would likely have scuttled the agreement) or plaintiff would have agreed to have the check made out jointly to the lienholder or perhaps even for plaintiff’s counsel to guarantee that the lien would paid from the settlement (to the extent of defendant’s risk) or to allow defendant to cut separate checks.  The Rutter Group, in the context of discussing settlements, urges the parties to discuss this before hand and notes the problem with naming multiple parties on the checks.  (Haning, Flahavan, et al., Cal. Practice Guide: Personal Injury (The Rutter Group 2022) ¶¶4:1319-1320.)  And, as the case cited in The Rutter Group notes, if such a requirement (that the lien be paid by plaintiff or plaintiff’s counsel) is not written as a condition precedent, then it is not a condition precedent and the settlement must be paid.  (Karpinski v. Smitty’s Bar, Inc. (2016) 246 Cal.App.4th 456.)  But that case was discussed in the context of the enforcement of a settlement agreement under section 664.6.  This case is different.  Here, there is a judgment and the question is whether the judgment has been satisfied.  Therefore, the real question is akin to what would happen after a judgment is entered against a party following trial: is the judgment debtor entitled to make out the judgment payment not only to the plaintiff but also to those who hold liens.  It is an interesting question, and one to which the court has found no direct answer. 

Which leads to the words of the judgment itself.  The judgment is in Tran’s favor and against defendant in the specified amount.  There are no conditions on the judgment’s face, nor are there rights to add additional payees.  While it would be a good idea to have negotiated for that, the court does not see it as being required by the judgment’s face nor can the court find any case or statute that allows a defendant to add that condition unilaterally.  It might be that, to the extent the lien is perfected and the amount is not in question, that defendant has a right to pay the lien amount and credit the judgment debt, but the court has found no case that so states, and absent such authority, the court is not sure from whence such a right would spring.

That said, though, the court is not opining on whether Tran and Tran’s counsel has an independent duty to satisfy the liens from the amounts given, especially given this record.  It could well be that while defendant cannot condition payment on a formal lien release nor can defendant add payees to the judgment creditor, defendant might have a cause of action if Tran or her counsel fail to satisfy any properly noticed lien.  Of course, the court is not saying that Tran or her counsel would do any such thing.  And creative minds (one would think) would have been able to reach some conclusion in a speedy fashion to protect all parties and ensure that all legal liens are properly satisfied, but apparently that was not done here.

The court must therefore conclude that the motion must be DENIED, although, again, the court has great sympathy for defendant’s position.  If a new check is cut directly to Tran and her counsel, and if the lien is not satisfied therefrom such that the hospital (or the LAFD for that matter) were to come after defendant directly, defendant surely has a cause of action against Tran and potentially more than that.  Further, nothing precludes defense counsel (upon re-issuing the check) from informing the lien-holder in advance that the check would be forthcoming, thereby allowing the lien-holder to bring an appropriate motion against Tran or her counsel to bar any disbursement of the funds pending payment of the lien.  Doing so would ensure that the lien is satisfied and defendant will have no further liability.

To the extent that plaintiff seeks sanctions against defendant, they are DENIED.  Defendant had a more than colorable claim to justify its actions.