Judge: Michael E. Whitaker, Case: 19SMCV01867, Date: 2023-09-26 Tentative Ruling

Case Number: 19SMCV01867    Hearing Date: September 26, 2023    Dept: 207

TENTATIVE RULING

BACKGROUND

            Plaintiff Villa Erripa, LLC (“Plaintiff”, filed an unlawful detainer complaint against Defendants Walter Adrian (Defendant Adrian), Pamela Estelle Rumph (Defendant Rumph), and DOES 1 through 10, on October 21, 2019.  Defendants Adrian and Rumph were married until Defendant Adrian’s death on August 16, 2022.  (See Rumph Decl. attached to March 22, 2023 Opposition to Motion for Judgment, ¶ 8.)

            At the unlawful detainer trial on January 21, 2020, the Court was apprised that Defendants had vacated the property as of January 20, 2020, so the Court converted the action to an ordinary civil action, pursuant to Civil Code section 1952.3, to recover the back-owed rent, and set an initial case management conference.  (See January 22, 2020 Notice of Ruling.)

On August 21, 2020, the Court consolidated this case with Case No. 20SMCV00015, also filed by Plaintiff Villa Erripa, LLC against Defendants Adrian and Rumph, pertaining to a promissory note that preceded the unlawful detainer.

            On November 8, 2021, the parties filed a Notice of Conditional Settlement and Joint Request for an Order Dismissing the Action with a Reservation of Jurisdiction to Vacate the Dismissal as Needed to Enforce the Settlement, which the Court granted.

            On February 16, 2023, Plaintiff moved to vacate the dismissal and to enter judgment against Defendants on the basis that Defendants had breached the settlement agreement, and had stipulated to a judgment in the event of their breach.  The settlement agreement, attached as Exhibit A to the Declaration of Victoire Poumadere, provided that Defendants were to pay a total of $30,200 by paying $2,000 up front, and thereafter making monthly payments of $600 over the following 47 months.  Upon paying the initial $30,200, Defendants would submit themselves to an examination to determine their financial condition, and potentially pay additional sums, depending on the status of Defendants’ financial condition.

            The settlement agreement further provided that in the event any of the payments were not timely made, Plaintiff was to provide notice and 10 days to cure.  In the event Defendants did not cure the untimely payment within 10 days, of in the event Defendants were late on three payments in any twelve month period (regardless of whether those late payments were ultimately cured), Defendants would be in breach of the agreement, and stipulate to a joint and several judgment against them in the amount of $181,928.60, representing a principal sum of $150,000 for both consolidated actions, $1,534.85 in costs, and $30,393.75 in attorneys’ fees, “plus interest thereon at the rate of 10% per annum from November 1, 2021, pursuant to California Code of Civil Procedure section 685.010(a).”  (Ex. A to Poumadere Decl.) 

            Plaintiff argued that Defendants had breached the agreement by failing to timely cure the delinquent October 2022 payment and utterly failing to make the November 2022, December 2022, January 2023, and February 2023 payments.  (See Motion to Vacate Dismissal at pp. 18-28 and Poumadore Decl. ¶¶ 14-15 and Ex. D thereto.)  As such, Plaintiff sought a judgment in the amount of $204,140.75, representing the $181,928.60 enumerated in the stipulated judgment, plus 10% interest from November 1, 2021 through February 16, 2023, in the amount of $24,257.15; plus $4,555 in costs and attorneys’ fees incurred in bringing the motion to vacate dismissal and enter judgment; minus $6,600 in payments Defendants had already made.  (See Motion to Vacate at p. 9:16-28; Poumadere Decl. ¶¶ 18-19; Eccles Decl. ¶¶ 4-7 and Ex. F thereto.)

            In Opposition, Defendant Rumph produced a death certificate, demonstrating that Defendant Adrian died on August 16, 2022.  She also argued that she did not receive notice of the delinquent October payment and timely cured the delinquent November payment.  The Court found that either way, Defendant Rumph breached the settlement agreement as to one payment for the October-November time period.  Defendant Rumph also made various other arguments as to why Plaintiff’s motion should be denied, including that the stipulated judgment amount represented an unenforceable penalty, which the Court ultimately rejected.

            On April 26, 2023, the Court granted Plaintiff’s motion, finding that Defendants had breached the terms of the agreement, and Plaintiff was entitled to a stipulated judgment, pursuant to the terms of the agreement.  The Court deferred entering an order, setting a court date for July 25, 2023, and ordering the parties to file a joint report at least 5 court days prior to the hearing, regarding what the orders the Court should issue regarding the judgment .

            On July 18, 2023, the parties filed a joint report wherein Plaintiff requested a several judgment against Defendant Rumph only, while the case remained open until Defendant Adrian’s estate could be probated, and an estate representative could be appointed, and then added to this lawsuit.  Defendant sought $207,166.11, representing the $181,928.60 stipulated principal amount, plus $31,837.51, representing 10% interest for the 21 months between November 1, 2021 and July 31, 2023, minus the $6,600 in payments already received, and sought an additional amount to be determined for costs and fees incurred in bringing the motion to set aside dismissal.

            In the joint report, Defendant objected “to the imposition of interest prior to entry of judgment in this case, as an unenforceable penalty and in violation of the new amendments to C.C.P. 685.010 capping interest on principal amounts up to $50,000 at 5% for personal debts.”  (Joint Report at p. 4:6-8.)  Defendant also objected to the several judgment against Defendant Rumph only and requested a judgment against “all defendants on this matter relating to a debt owed by both defendants[.]”  (Id. at p. 4:9-11.)

            At the July 25, 2023 hearing, the Court continued the OSC re: What Orders Should Issue and permitted the parties to file and serve supplemental points and authorities, no more than five (5) pages, regarding interest calculation as to Defendant Rumph.  (July 25, 2023 Minute Order.)  The Court also noted that Plaintiff represented to the Court at that hearing that Plaintiff may open a creditor’s claim within a probate matter within a year of Defendant Adrian’s death, or prior to August 16, 2023.  (Ibid.)

            Plaintiff and Defendant Rumph both filed supplemental briefs on September 18, 2023.  Plaintiff’s brief does not address the interest calculation as to Defendant Rumph, but rather reiterates Plaintiff’s position that judgment should be entered severally against Defendant Rumph only, and argues the case should remain open as to Defendant Adrian, “until a determination is made as to whether Plaintiff’s claim against Adrian can or cannot be made or pursued as a matter of fact or law.”  (Plaintiff’s Supplemental Brief at p. 4:5-7.)  Plaintiff also concedes that it has not yet opened a creditor’s claim within a probate matter as to Defendant Adrian.  (Id. at p. 4:21-23.)

            Defendant Rumph’s supplemental brief acknowledges it is within the Court’s discretion to render judgment severally against Defendant Rumph only, but urges the Court to decline to render a severable judgment, on the basis that it “would be a wasteful duplicaion [sic] of judicial assets and could lead to inconsistent rulings on the same set of facts and circumstances which involve the same debt and allegations against co-debtors.”  (Defendant Rumph’s Supplemental Brief at p. 2:17-19.)  Defendant Rumph also urges the court not “to rush to issue separate judgments” before Plaintiff decides whether to open a probate creditor’s claim against Defendant Adrian. (Id. at p. 2:25-27.)

            Defendant Rumph also argues that the pre-judgment interest is overstated because (1) the amount is not “certain” pursuant to Civil Code section 3287 in light of the fact that the parties did not know if or when the breach would occur; (2) Plaintiff is not entitled to prejudgment interest from November 21, 2021 through October 2022, during which time Plaintiff was “receiving the full benefit of the bargain under the Settlement Agreement installment payments” (Id. at p. 3:25-26); (3) to the extent the date for computing damages was contracted, regardless of the uncertainty of the future date of breach, such clause is an unenforceable penalty; and (4) the maximum amount recoverable under the settlement agreement was $80,200, which cannot justify the $181,000 judgment requested.

            Defendant Rumph calculates the interest owed as $16,677, which apparently represents 10% annual interest on the $181,928.60 judgment amount for the 11 months between October 15, 2022 and September 26, 2023, plus any post-judgment interest, subject to the 5% limitations for personal debt under Code of Civil Procedure section 585.010, subdivision (a)(2)(A)(ii).

ANALYSIS

            Several Judgment

            The parties concede it is within the Court’s discretion to issue a several judgment against Defendant Rumph only.  (See Code Civ. Proc., § 579 [In an action against several defendants, the Court may, in its discretion, render judgment against one or more of them, leaving the action to proceed against the others, whenever a several judgment is proper.])  Here, the settlement agreement provides (1) the Premises was leased to the Defendants, jointly and severally; and (2) following payment of the initial $30,200, Defendants were to each appear for an examination of “the Defendants [sic] financial position, jointly and severally[.]”  (See Ex. A to Poumadere Decl. in support of Motion to Vacate Dismissal, ¶¶ 2.a., 4.) 

            The stipulated judgment attached to the settlement agreement, which Defendants also both signed, and which was to be held by Plaintiff and filed only in the event of a breach of the settlement agreement, also provides “that judgment herein shall be entered in favor of Plaintiff and against each of the Defendants, jointly and severally [….]”  (Stipulation for Entry of Judgment, ¶ 1.)

            Defendant Rumph’s arguments that entering judgment against her severally will lead to a duplication of judicial resources and risk inconsistent judgments is unavailing. 

First, the Court notes that Defendant Adrian died on August 16, 2022, but the settlement agreement was not breached until October or November 2022.  Thus, because the breach occurred after Defendant Adrian’s death, Defendant Adrian is differently situated from Defendant Rumph, and there may be no viable claim against Defendant Adrian at all. 

Second, the Court finds that Plaintiff has been dilatory in opening a probate matter to assert a claim against Defendant Adrian’s estate.  At this juncture, it is unclear whether Plaintiff is willing and able to timely bring any such claim against Defendant Adrian’s estate. 

As such, the Court finds that a several judgment against surviving Defendant Rumph alone is appropriate e, and exercises its discretion to enter a several judgment against Defendant Rumph.

Amount of Judgment

The stipulated judgment provides for entry of a judgment in the amount of $181,928.60, representing a principal sum of $150,000 for both consolidated actions, plus $1,534.85 in costs, and $30,393.75 in attorneys’ fees, “plus interest thereon at the rate of 10% per annum from November 1, 2021, pursuant to California Code of Civil Procedure section 685.010(a).”  (Ex. A to Poumadere Decl.) 

With respect to the argument Defendant Rumph raised in the joint report, that a rate of 10% is improper because Code of Civil Procedure section 685.010, subdivision (a)(2) caps interest on principal amounts up to $50,000 at 5% for personal debts, the Court finds this provision inapplicable, because the principal on the personal debt owed in this case is $150,000, which is far greater than $50,000.  Thus, pursuant to Code of Civil Procedure section 685.010, interest accrues at the rate of 10 percent per annum, which is also what the stipulated judgment calls for.

            Defendant Rumph arguments that (i) the stipulated judgment is uncertain as to the amount of interest because of the vagueness regarding whether and when the settlement agreement would be breached, and (ii) the interest should not start to accrue until October 2022 when the breach occurred, are faulty. 

These arguments conflate the breaches of the original agreements (the promissory note and residential lease agreement, damages pursuant to which total $150,000), with breach of the settlement agreement (pursuant to which Plaintiff agreed to accept $30,200, depending on Defendants’ financial condition, in exchange for timely payments.)  As the Court already explained in the April 26, 2023 Minute Order, Plaintiff agreed to accept a large discount on the total amount owed, in exchange for timely payments from Defendants.  If Defendants breached the settlement agreement by failing to timely make or cure payments owed, the remedy is Plaintiff may enter the stipulated judgment for the full amount owed under the promissory note and lease agreement, plus costs, attorneys’ fees, and 10% annual interest accruing from November 1, 2021 (roughly the date the settlement agreement was reached).  The Court also notes that this already represents a discount on the prejudgment interest, which would otherwise accrue from 2019 when Defendants became delinquent on the outstanding debts owed in connection with the promissory note and the residential lease agreement. 

            Thus, the Court finds the 10% interest properly accrues from November 1, 2021 under the terms of the settlement agreement and is easily “capable of being made certain by calculation” under Civil Code section 3287.

            However, Defendant Rumph is partially correct that adjustments should be made with respect to interest accruing between November 1, 2021 and October 2022.  Code of Civil Procedure section 685.020, subdivision (a) provides “interest accrues at the rate of 10 percent per annum on the principal amount of a money judgment remaining unsatisfied.”  (Emphasis  added.)  First, the principal amount is $150,000, not $181,928.60.  Second, no interest should accrue with respect to the $6,600 Defendants have already paid.  Thus, the proper amount of interest is ($150,000 - $6,600) * 10% per year for 23 months[1], or $27,485.00, not the $31,837.51 Plaintiff previously requested (representing 10% annual interest on the full $181,928.60 for 21 months).

            Defendant Rumph’s third and fourth arguments, that the interest clause in the stipulated judgment is an unenforceable penalty, and the maximum amount recoverable pursuant to the settlement agreement of $80,200 cannot justify the $181,000 judgment requested were already considered and rejected by the Court in connection with its April 26, 2023 decision.

            Attorneys’ Fees and Costs

            Although not addressed by Defendant Rumph, the Court notes that the agreement and stipulated judgment allow only for “the principal sum of $150,000, together with costs of the suit involved herein totaling $1,534.85, including Attorney’s Fees in the amount of $30,393.75 (for a total judgment of $181,928.60) plus interest thereon at the rate of 10% per annum from November 1, 2021.  Thus, Plaintiff may not recover attorneys’ fees in excess of $30,393.75, pursuant to the stipulated judgment. 

            With respect to costs, Code of Civil Procedure section 1032, subdivision (b) provides, “Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”  The parties may stipulate to “alternative procedures” with respect to awarding costs, but must follow the rules adopted by the judicial counsel pursuant to Section 1034, which includes what costs are allowable.  (Code Civ. Proc., § 1032, subd. (c).)  Thus, although Plaintiff may have been entitled to recoup other allowable costs as a prevailing party per Section 1032, Plaintiff’s claim for costs as part of the judgment to be entered  is limited to what the parties agreed to under the stipulated judgment which is  $1,534.85.

CONCLUSION AND ORDER

            The Court finds it appropriate to enter an order severally against Defendant Rumph.    

Pursuant to the terms of the settlement agreement and stipulated judgment, Plaintiff is entitled to several judgment against Defendant Rumph in the amount of $202,813.60, representing $181,928.60 in damages provided for in the stipulated judgment (encompassing a principal sum of $150,000, costs in the amount of $1,534.85, and attorneys’ fees in the amount of $30,393.75), plus prejudgment interest in the amount of $27,485.00, minus the $6,600.00 Defendants have already paid. 

Plaintiff must submit a proposed several judgment as to Defendant Rumph only, with terms in conformance with this order, on or before October 10, 2023. 

The case remains open and pending as to Defendant Adrian.

            The Court sets a Status Conference on ______________ at 8:30 A.M. in Department 207 regarding the status of Plaintiff’s claim against Defendant Adrian’s estate. 

            Plaintiff to provide notice of the Court’s ruling and file a proof of service regarding the same. 

DATED:  September 26, 2023                       ___________________________

                                                                  Michael E. Whitaker

                                                                  Judge of the Superior Court