Judge: Mark H. Epstein, Case: 23SMCV03173, Date: 2023-11-21 Tentative Ruling

Case Number: 23SMCV03173    Hearing Date: April 2, 2024    Dept: I

This is the second continuation of plaintiff’s request for entry of judgment.  The parties had reached a settlement agreement whereby defendant was to pay certain sums at certain times.  If defendant failed to make the payment, plaintiff could give notice and, if the failure was not timely cured, plaintiff could seek entry of judgment.  At issue is a payment defendant claims to have made for $50,000.  According to plaintiff, when plaintiff attempted to cash the check the bank refused and advised plaintiff to contact defendant.  Plaintiff states that it still does not have the $50,000.  Plaintiff also asserts that after the check was tendered to plaintiff, defendant called and asked that the check not be cashed for a while because there were insufficient funds in the account.  (Plaintiff tried to deposit the check anyway.)  At the prior hearings, defendant stated that in fact the check had cleared and the $50,000 had been taken from its account.  Indeed, at the last hearing, defense counsel said that his client was at the bank and that the bank confirmed that the check had cleared.  Plaintiff continues to maintain that it has not received the money.

The court told defendant that by this hearing defendant needed to have evidence that the check had cleared.  Not just a statement made through counsel that defendant had spoken to someone at the bank.  This is a bank, after all.  There are records of what happened to the money.  The court simply does not find it credible that defendant’s bank took the money and is just keeping it for it self or that plaintiff’s bank took the money but won’t put it in plaintiff’s account.  If defendant can show that in fact the money left his account (timely) and, through no fault of his it just never made it to plaintiff’s bank, the court would be inclined to deny the motion, although if defendant’s bank elected to just keep the money for itself, the court will discuss whether that is plaintiff’s problem or defendant’s problem. 

On Friday, defendant submitted a declaration stating his understanding of what happened in part based on personal knowledge and in part based on his conversation with his bank.  Defendant confirmed that he wrote two checks earlier this month: one for $100,000 and one for $50,000 (the one at issue).  Defendant confirms that after writing and delivering the checks, he called plaintiff and asked that the checks be held due to defendant’s concern that there were insufficient funds.  Plaintiff refused to do so and cashed the checks.  Defendant called the bank and directed that the bank stop payment on both checks.  However, according to defendant, the call to the bank came too late in a sense.  The money had already been taken from his bank account and had either been paid to or was en route to plaintiff’s bank.  As of March 8, 2024, both checks had “cleared” defendant’s bank.  Upon learning that the checks had cleared, defendant states that he tried to reverse the stop payments.  He was successful as to the $100,000 check, but not as to the $50,000 check.  Accordingly, the $100,000 has made it into plaintiff’s account—and plaintiff does not deny that fact.  But the $50,000 never did.  Rather, it is being returned to defendant’s bank and from there to defendant’s account.  Defendant states that he was told by the bank that this process can take up to 20 days.

The court accepts defendant’s statement as true for the sake of argument.  Of course, the portion of the declaration based on personal knowledge is evidence; but the part based on the bank’s procedures and what the bank did is hearsay.  Even so, the court will assume it is correct for these purposes given that the bank will not sign a declaration (and it is under no compulsion to do so).  The problem is that defendant had a duty to pay plaintiff $150,000 by a date certain.  He did not do so.  Rather, he paid the money but asked plaintiff not to cash the checks for a while.  Plaintiff, of course, was under no duty to delay cashing the checks—it is not like they were paid in advance.  Had defendant done nothing at that point, we would not be here.  The checks would have cleared and the payments (as it turns out) would have been made because there was, apparently, sufficient money in the account.  But defendant took affirmative steps to breach the contract: he directed his bank to stop payment on the checks.  He was able to undo that direction as to one check, but not both.  So, the bottom line is that the reason defendant is in default is because defendant put itself there deliberately by stopping payment on one of the checks.

That is in fact a violation of the settlement agreement and the court has no discretion under those circumstances but to grant the application and issue the judgment.  The court would urge plaintiff to re-think this problem.  Perhaps plaintiff could required defendant to make a “security” payment in advance that will be credited against the final payment due (like last month’s rent) so that plaintiff would bear no risk, or at least less risk, going forward.  The fact remains, though, that defendant had a duty to pay by a certain date.  When plaintiff refused to allow defendant to delay, defendant took the affirmative step of issuing a stop payment and, at least for one check, it worked.  The application will be GRANTED, although the court is not thrilled about it.