Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County. Los Angeles County Super. Ct. No. BC299990 Rolf M. Treu, Judge
Dennis A. Winston for Defendant and Appellant.
Rus, Miliband & Smith, Ronald Rus, Randall A. Smith, M. Peter Crinella for Plaintiffs and Respondents.
ARMSTRONG, Acting P. J.
Ralph Navarro appeals the trial court's order denying his motion for restitution of $325,000 which respondents received in connection with a judgment they were awarded against Navarro, which was subsequently reversed on appeal. The trial court ruled that the parties' agreement with respect to the $325,000 payment precluded a restitution award. We affirm that ruling. The trial court also denied Navarro prejudgment interest on the sums respondent received upon levy of Navarro's bank account. We conclude that Navarro was entitled to interest at the statutory rate on those sums, and so reverse the order and remand the matter for calculation of the interest due Navarro.
FACTUAL AND PROCEDURAL BACKGROUND
Lyman Gardens Apartments, LLC and Darryl Wong sued their former attorney, appellant Navarro, and his law firm, Coudert Brothers, for legal malpractice in connection with respondents' sale of an apartment building. Respondents prevailed in a jury trial, and were awarded $1,060,000 in compensatory damages against Navarro.
Respondents also obtained a judgment against Coudert Brothers, which in addition to the award of $1,060,000 in compensatory damages included a $1,500,000 award of punitive damages. After entry of that judgment, Coudert Brothers filed for bankruptcy and dissolved.
Navarro appealed the judgment. While the appeal was pending, respondents took steps to execute on the judgment, including levying on Navarro's bank account and obtaining an order authorizing the sale of a house Navarro owned jointly with his wife in Laguna Beach. As respondents prepared to levy against the Laguna Beach house, the parties agreed, in August 2007, to the following arrangement in lieu of that sale: Navarro's father-in-law, Irving V. Augur, on behalf of a family trust, paid respondents $325,000 in return for respondents' assignment to the trust of $325,000 of the judgment pursuant to a "Partial Assignment of Judgment;" that document recited that the judgment was then on appeal and that the assignment was "without recourse in the event the Judgment Debtor is successful in any manner on appeal or otherwise;" respondents agreed not to proceed against Navarro's Laguna Beach house; Navarro acknowledged the terms of the assignment. Separately, Navarro delivered to the family trust his promissory note in the principal amount of $325,000, which note he repaid within approximately two months by liquidating tax-deferred retirement accounts, which transactions caused him to incur taxes and penalties.
After this court reversed the $1,060,000 judgment against Navarro in October 2008, Navarro moved the trial court for restitution of the $325,000 respondents received for the partial assignment, plus the $20,133.30 taken from Navarro's bank account, together with prejudgment interest on both amounts. The trial court denied Navarro's motion for restitution of the $325,000, ruling that Navarro was a party to the assignment arrangement, which provided that respondents were entitled to the $325,000 regardless of the outcome of the appeal. The trial court also denied Navarro's request for prejudgment interest on the $20,133.30 taken from his bank account, but ordered restitution of the principal amount plus any interest that amount would have earned had it remained in Navarro's account. Navarro timely appealed those two rulings.
DISCUSSION
Navarro's entitlement to restitution of the $325,000 payment
We review the trial court's ruling on Navarro's motion for restitution for an abuse of discretion. (Schubert v. Bates (1947) 30 Cal.2d 785, 791; Rogers v. Bill & Vince's, Inc. (1963) 219 Cal.App.2d 322, 324-325.) That ruling will not be disturbed on appeal absent a manifest abuse of discretion. (Rogers v. Bill & Vince's, Inc., supra, 219 Cal.App.2d at p. 325.) It is appellant's burden to demonstrate that the court's "discretion was so abused that it resulted in a manifest miscarriage of justice." (Wm. R. Clarke Corp. v. Safeco Ins. Co. of America (2000) 78 Cal.App.4th 355, 359.)
Code of Civil Procedure section 908 provides in pertinent part: "When the judgment or order is reversed or modified, the reviewing court may direct that the parties be returned so far as possible to the positions they occupied before the enforcement of or execution on the judgment or order. In doing so, the reviewing court may order restitution on reasonable terms and conditions of all property and rights lost by the erroneous judgment or order, so far as such restitution is consistent with rights of third parties and may direct the entry of a money judgment sufficient to compensate for property rights not restored." Thus, as a general rule, when a judgment is reversed on appeal, the appellant is entitled to restitution of all things lost by reason of the judgment. (Levy v. Drew (1935) 4 Cal.2d 456, 459.) "Indeed, it is said that the respondent who collected upon the judgment immediately becomes a trustee for his opponent with respect thereto." (Rogers v. Bill & Vince's, Inc., supra, 219 Cal.App.2d at pp. 324-325.)
Navarro maintains that respondents collected $325,000 as a result of the judgment; thus, pursuant to the foregoing cases, he is entitled to recoup that amount in restitution. Respondents answer that they did not collect on the judgment, but assigned their rights to a portion of the judgment to a third party. Respondents have the better argument.
As respondents point out, California courts have adopted the approach taken in the Restatement of Restitution, section 74. (Schubert v. Bates, supra, 30 Cal.2d at p. 791; Holmes v. Williams (1954) 127 Cal.App.2d 377, 379.) That section provides: "A person who has conferred a benefit upon another in compliance with a judgment, or whose property has been taken thereunder, is entitled to restitution if the judgment is reversed or set aside, unless... the parties contract that payment is to be final...." The trial court determined that the parties contracted that the $325,000 payment was to be final. That finding is supported by substantial evidence: Navarro executed the assignment, confirming his consent to the assignment and his agreement "to the accuracy and validity of the amounts referenced in, and the terms of, this assignment." This language makes clear that Navarro agreed, at the time the assignment was executed, that the $325,000 payment to respondents was final, and the parties' contract superseded any restitution rights with respect to this payment which Navarro might otherwise have by reason of a reversal of the judgment.
Navarro contends that denying him restitution of Augur's $325,000 payment to respondents is inequitable. That argument supposes that it is inequitable to enforce the parties' contract. However, Navarro does not contend that the contract was unconscionable, or without consideration, or otherwise unenforceable. The parties were free to negotiate the terms upon which respondents would forego their right to sell Navarro's assets in satisfaction of the judgment, as the Restatement clearly contemplates. Thus, Navarro is left to argue that he was not a party to the contract and did not agree to its terms. As noted above, however, there was substantial evidence for the trial court's contrary finding.
Navarro's entitlement to prejudgment interest
In his motion for restitution, Navarro sought, and the trial court awarded, return of the $20,133 that respondents levied from his bank account. Navarro argued below that he was entitled to prejudgment interest at the rate of 10 percent per annum pursuant to Civil Code section 3287 and Code of Civil Procedure section 685.010, subdivision (a). Respondents countered, "To the extent the Court intends to exercise its discretion to award any interest on the $20,133 levied from his bank account, any interest award thereon should be based on prevailing bank account rates since the date of the levy to award Navarro what he would have earned on those funds had they remained on deposit in the bank." The trial court adopted respondents' position: "Since the issue is one of damages, and since the funds were levied from an account which presumably paid interest, the Court rules that the interest rate in effect at the time of levy is that which will control." Navarro challenges that ruling on appeal.
Civil Code section 3287 provides: "Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt." Thus, "'[t]he general rule with respect to allowance of interest, when there is no contract to pay interest, is that the law awards interest upon money from the time it becomes due and payable, if such time is certain and the sum is certain or can be made certain by calculation.'" (Roodenburg v. Pavestone Co., L.P. (2009) 171 Cal.App.4th 185, 191, emphasis deleted, quoting Schmidt v. Waterford Winery, Limited (1960) 177 Cal.App.2d 28, 34.)
Here, respondents received the $20,133 by means of a lawful levy of Navarro's bank account in partial satisfaction of a judgment. When that judgment was reversed on appeal, respondents no longer had a valid claim to the funds; rather the sum was due and payable to Navarro. Thus, this court's reversal of the judgment entered in favor of respondents marks the date that Navarro was vested with the right to recover a sum certain, and therefore "is entitled also to recover interest thereon from that day." Seven percent is the pre-judgment interest rate applicable to claims not founded in contract. (Cal. Const., art. XV, § 1; Pro Value Properties, Inc. v. Quality Loan Service Corp. (2009) 170 Cal.App.4th 579, 582.) Consequently, Navarro is entitled to an award of prejudgment interest at the rate of seven percent per annum on the restitution award from the date of our opinion reversing the judgment to the date of the court's restitution order.
DISPOSITION
The matter is remanded to the trial court to calculate the amount of prejudgment interest due Navarro as set forth in this opinion. In all other respects, the judgment is affirmed. The parties are to bear their own costs on appeal.
We concur: KRIEGLER, J. WEISMAN, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.