Krechuniak v. Noorzoy
11 Cal. App. 5th 713
| Cal. Ct. App. | 2017Background
- Siblings (Aisha Krechuniak "Sister" and Zia Noorzoy "Brother") settled litigation over failed development of Pebble Beach property via a written "Memorandum of Settlement" at mediation.
- The memorandum provided Brother would pay $600,000 (structured payments including 10% of commissions) and that a stipulated judgment of $850,000 would be executed and held unless there was a payment default.
- Sister moved to enforce the settlement under CCP § 664.6; the trial court granted the motion and entered judgment for $850,000.
- On appeal Brother argued for the first time that the $850,000 stipulated judgment included a $250,000 liquidated-damages penalty that is unenforceable under Civil Code § 1671.
- In the trial court Brother had conceded the memorandum was valid and binding and never litigated § 1671 unreasonableness or presented evidence about the parties’ negotiations or anticipated damages.
- The Court of Appeal affirmed, holding Brother forfeited the new liquidated-damages challenge and explaining when appellate review of liquidated-damages clauses is factual versus purely legal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the stipulated-judgment amount includes an unenforceable liquidated-damages penalty under Civ. Code § 1671(b) | Sister: settlement valid; stipulated judgment intended as motivation and compensatory, not penalty | Brother: $850,000 includes a $250,000 unlawful penalty and is unenforceable under § 1671 | Brother forfeited the argument by not raising § 1671 unreasonableness below; appeal denied |
| Standard of review for validity of liquidated-damages clause | Sister: where facts disputed, defer to trial court factfinding | Brother: de novo review because facts are undisputed | Court: de novo only when facts are undisputed and lead to one reasonable conclusion; otherwise appellate deference to trial court factual findings |
| Whether recitals labeling the sum as "not a penalty" control | Sister: recitals reflect parties' intent and surrounding circumstances | Brother: recitals insufficient if clause is penalty in substance | Court: recitals are not conclusive; intent must be inferred from entire agreement and circumstances |
| Whether appellant can change theory on appeal to argue liquidated-damages invalidity | Sister: change of theory is forfeited where new theory raises contested factual issues not litigated below | Brother: legal issue on undisputed facts may be raised on appeal | Court: Panopulos/Caplan rule applies — new theory raising factual controversies forfeited; Brother precluded |
Key Cases Cited
- Ridgley v. Topa Thrift & Loan Assn., 17 Cal.4th 970 (Cal. 1998) (explains § 1671 framework and that a clause may be penalty or valid liquidated damages)
- Better Food Markets v. American Dist. Tel. Co., 40 Cal.2d 179 (Cal. 1953) (liquidated-damages inquiry places court in parties' position at contract formation; factual question often involved)
- Caplan v. Schroeder, 56 Cal.2d 515 (Cal. 1961) (party may not raise liquidated-damages theory on appeal when it was not presented at trial)
- Beasley v. Wells Fargo Bank, 235 Cal.App.3d 1383 (Cal. Ct. App. 1991) (discusses judge-vs-jury and the factual nature of validity determinations; appellate deference to trial factfinding)
- Purcell v. Schweitzer, 224 Cal.App.4th 969 (Cal. Ct. App. 2014) (reiterates de novo review only when facts undisputed)