Monday, April 19, 2010
C.A.: Attorney Cannot Recover Payment to Save House
Justices Say Deal Pending Malpractice Award Appeal Superseded Restitution
By STEVEN M. ELLIS, Staff Writer
An attorney who successfully challenged a $1 million malpractice award against him cannot get back the $325,000 his family paid former clients not to execute against his house while the appeal was pending, this district’s Court of Appeal ruled Friday.
Div. Five in an unpublished opinion said Los Angeles attorney Ralph Navarro’s agreement exchanging the money for a right to the same amount in the judgment “without recourse” to the appeal’s outcome superseded any right to restitution.
Navarro, currently of Backus Bland Navarro & Weber, was part of the now-defunct firm of Coudert Brothers when former clients Lyman Gardens Apartments LLC and Darryl Wong sued Navarro and the firm for malpractice in connection with the sale of an apartment building.
A jury awarded Lyman Gardens and Wong just over $1 million in compensatory damages against Navarro and the firm, as well as a $1.5 million punitive damages award against the firm, which later filed for bankruptcy and dissolved.
Navarro appealed, but Lyman Gardens and Wong sought to execute the judgment. They levied against Navarro’s bank account and obtained an order authorizing the sale of a house in Laguna Beach he owned jointly with his wife.
The parties agreed in August 2007 that, in lieu of the sale or further proceedings against the house, Navarro’s father-in-law would pay Lyman Gardens and Wong $325,000 from a family trust in return for an assignment of rights to that amount in the judgment under a “Partial Assignment of Judgment.”
The document, which Navarro signed, 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.“
Navarro liquidated tax-deferred retirement amounts to repay a $325,000 promissory note he signed to the family trust, and then sought restitution of the amount—plus $20,000 taken from his bank account—under Code of Civil Procedure Sec. 908 after prevailing on appeal in October 2008.
Los Angeles Superior Court Judge Rolf M. Treu, however, denied restitution of the $325,000, and declined to award prejudgment interest on the amount taken from Navarro’s bank account. Instead, Treu ordered restitution of the $20,000, plus any interest it would have earned had it remained in Navarro’s account.
Navarro appealed, and the Court of Appeal, in an opinion by Justice Orville A. Armstrong, said Treu erred in calculating the interest. Armstrong wrote that Navarro was vested with a right to receive a sum certain on the date the judgment was reversed on appeal, and entitled to interest from that point forward.
But Armstrong agreed with Lyman Gardens and Wong that Navarro was not entitled to restitution under the state law generally allowing appellants who successfully challenge a judgment to recover all things lost by reason of the judgment.
“Respondents answer that they did not collect on the judgment, but assigned their rights to a portion of the judgment to a third party,” he wrote. “Respondents have the better argument.”
Acknowledging that California courts have adopted the approach taken in the Restatement of Restitution, Sec.74, which provides that restitution is not available if “the parties contract that payment is to be final,” Armstrong said substantial evidence supported Treu’s finding that the parties contracted for the $325,000 payment to be final.
“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,’ ” the justice explained. “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.”
Justice Sandy R. Kriegler and Los Angeles Superior Court Judge William R. Weisman, sitting by assignment, joined Armstrong in his opinion.
The case is Lyman Gardens Apartments, LLC v. Navarro, B217814.
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