A Conditional Stipulated Judgment Is Not a "Penalty"

Credit Adjustment Bureau, Inc. v. Imani, No. B316546 (D2d6 Aug. 9, 2022).

Defendant in this case agreed to a 10-year lease of a hair salon space. He defaulted after a couple months. After the Landlord assigned the claim to a Collector, Defendant agreed to a settlement. He would pay $30k over installments, but in the event of a default, he stipulated to the immediate entry of a judgment for the total of Landlord’s mitigated damages—$251,200.13. Defendant proceeded to immediately default on the settlement. So Collector had the judgment entered. Defendant moved to vacate the judgment as invalid, which was denied.

Defendant claims on appeal that the judgment is unenforceable because it is a penalty unrelated to actual damages and thus a voidable liquidated damages provision under Civil Code § 1671. But it’s not. Defendant agreed in a signed stipulation effectuating the settlement that $251,200.13 was the Landlord’s actual damages. Defendant can’t walk away from that admission once it became operative. 

Affirmed.

$29k Is a Lot of Rent for 15 Minutes

Graylee v. Castro, No. G057901 (D4d3 Aug. 4, 2020)

To settle an unlawful detainer case, Landlord and Tenants stipulated on the record that Landlord was entitled to a $28,970 judgment, but it could only be entered if tenant failed to vacate by 3:00 p.m. on October 31. Tenants surrendered their key at 1:15 p.m., but told Landlord they weren’t going to hit the 3 p.m. deadline. Tenants asked for an extension, which was denied. Tenants ultimately vacated at some point between 3:15 p.m. and 10:30 a.m the following day.

Landlord moved to enter the judgment, which the trial court ultimately did. But the Court of Appeal reverses, holding that the judgment was an unenforceable penalty under Civil Code § 1671(b). Liquidated damages are permissible, but only if they are a reasonable estimate of the harm caused by a breach. In measuring the reasonableness, the court looks to the stipulation, not the underlying lease. Here, Tenants missed the deadline by somewhere between an hour and a day. $28,970 was not a reasonable estimate of the harm caused by that delay.

Reversed.