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Judgment for Full Amount of Debt Wasn’t Unenforceable Penalty, C.A. Declares
Fact That Creditor Agreed to Settle for Far Smaller Sum, Provided Payment Was Made, Did Not Invalidate Judgment, Yegan Says
By a MetNews Staff Writer
A man who owed $251,200.13 after defaulting on his obligations under a lease, and entered into a settlement agreement under which he would pay only $30,000, in installments—but with a judgment in the full amount of his debt to be entered if he did not pay—has failed to persuade the Court of Appeal for this district that a judgment for the full amount is void because it constitutes a penalty.
The debtor, Ray Imani, invoked Civil Code §1671 which provides that “a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.”
Imani maintained that the agreement reached in 2015 under which judgment would be entered for $251,200.13 if he did not pay $30,000 was unreasonable because the $251,200.13 figure was akin to liquidated damages and that predetermined amount bore no relationship to the $30,000 debt.
Yegan’s Opinion
Rejecting that reasoning, Justice Kenneth Yegan said:
“We reject appellant’s theory. The amount of damages was not ‘predetermined’ in 2015. It was the actual amount of damages then due and owing. That appellant was able to settle for a fraction of what was owed should not be used against respondent. Had appellant agreed to pay half of what was owed, $125,000, he would undoubtedly claim that there was a 50% ‘penalty.’ Respondent’s ‘more than reasonable’ settlement terms should not be used against it to show ‘liquidated damages’ or a ‘penalty.’ “
The opinion affirms an order by Ventura Superior Court Judge Matthew P. Guasco denying Imani’s motion to vacate the judgment obtained by Creditors Adjustment Bureau, Inc.
Yegan Quotes Yegan
Yegan—who has a penchant from quoting past opinions he authored—began yesterday’s opinion by saying:
“Over twenty five years ago, we stated the unremarkable: ‘The purpose of the law of contracts is to protect the reasonable expectations of the parties....There is...a price to be paid for breach of contract.’ ”
That quote was from his Nov. 20, 1995 opinion in Ben-Zvi v. Edmar Co.
In yesterday’s opinion, he continued:
“Here, we protect the reasonable expectations of the parties. And there is still a price to be paid for breach of contract.”
The case is Creditors Adjustment Bureau v. Imani, 2022 S.O.S. 3506.
Putting forth arguments on behalf of Imani was Westwood attorney Shahin Motalleb. Representing the judgment creditor were Kenneth J. Freed and David E. Weeks of the Sherman Oaks Law Offices of Kenneth J. Freed.
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