Collections III: Enforcing the Collar

Horvath v. Hess, No. D063124 (D4d1 April 10, 2014)

The parties here stipulated to a collared arbitration where the plaintiff wouldn’t recover less than a floor and the defendant wouldn’t pay more than a ceiling. But the arbitrator—who was not informed about the collar under the terms of the parties’ agreement—awarded almost four times the ceiling to the plaintiff. Plaintiff filed a motion with the superior court to confirm the full award. Defendant filed its own motion to correct the award based on the stipulation. But defendant's motion was filed beyond the 100-day limit for motions to correct under Code of Civil Procedure §§ 1288 and 1288.2. The trial court granted the motion to confirm and denied the defendant’s motion to correct as untimely.

Unwilling to be so easily rebuffed, defendant paid off the ceiling amount and demanded that plaintiff acknowledge full satisfaction of the judgment. When plaintiff declined, defendant filed a motion under § 725.050 for acknowledgement, which was denied. The issue presented is whether the defendant was able to raise the issue of the stipulated collar in the context of its motion for acknowledgement of satisfaction of judgment.

The court holds it could. It treats the issue as a matter of contract interpretation. The parties agreed that the plaintiff would accept the the cap or the arbitrator’s award, whichever was less, so long as the award exceeded the floor. Under that language, and particularly given that the parties agreed not to tell the arbitrator about the collar, it didn’t matter what award was ultimately confirmed. Plaintiff had agreed that she would accept the cap as full satisfaction even if the confirmed award was higher.

Further, because plaintiff refused to accept the cap amount and file an acknowledgement of satisfaction, defendant was forced to file a motion under § 724.050 to have the court recognize the judgment as having been fully satisfied. The court holds that was procedurally proper, because § “724.050 provides the method for a judgment debtor to enforce a judgment creditor’s agreement to accept less than the full amount of the judgment and obtain an acknowledgment of satisfaction of judgment after tendering or paying that agreed-on lesser amount.” The court thus reverses and orders the trial court to grant the § 724.050 motion on remand. And because § 724.080 permits the prevailing party on a motion for acknowledgment to recover its attorneys’ fees, the trial court was also order to also award the defendants their fees incurred for bringing the motion.

Reversed and remanded.