78 Cal. App. 4th 355 | Cal. Ct. App. | 2000
A judgment debtor with an equitable right to an offset calculated the amount due under the judgment by subtracting the offset from the principal amount of the judgment, then using the remainder to calculate postjudgment interest due as of the date of payment. The judgment creditor objected, contending the postjudgment interest should have been calculated before the judgment debtor credited itself with the offset. The trial court agreed with the judgment creditor and so do we.
Facts
In 1990, a property owner retained a general contractor (Keller Construction Company, Ltd.) to rehabilitate an old building. Keller obtained a payment bond from Safeco Insurance Company of America, and in early 1991 subcontracted the electric work to Wm. R. Clarke Corporation. Clarke obtained a payment bond from California Bonding and Insurance Company (CBIC), then purchased $208,000 worth of materials from three suppliers.
Mechanic’s liens were recorded and lawsuits were filed, including this action by Clarke against Safeco to recover on Keller’s payment bond. On August 2, 1993, a judgment was entered in favor of Clarke in the principal amount of $837,000 (including prejudgment interest, with interest to continue to accrue at the rate of 10 percent per annum). On August 12, Safeco appealed and posted an appeal bond (issued by General Insurance Company of America in the amount of $1.2 million). A few months later, the suppliers assigned to Keller their right to collect the amounts they were owed by Clarke. In November, Keller filed a separate lawsuit against Clarke’s surety to recover on Clarke’s payment bond.
In 1997, Clarke’s judgment against Safeco was affirmed. (Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal.4th 882 [64 Cal.Rptr.2d 578, 938 P.2d 372].) On October 9, 1997, Safeco paid $892,000 to Clarke, an amount arrived at by first subtracting $208,000 (the amount owed to the suppliers) from the principal amount of the judgment ($837,000), then calculating the
In April 1998, Clarke filed a motion for judgment on the appeal bond, claiming that a balance of $94,000 in unpaid interest remained due under the judgment. (Code Civ. Proc., § 996.440.)
Discussion
Safeco contends the offset was properly deducted before the interest due on the judgment was calculated and that, as a matter of law, the trial court erred. We disagree.
A.
Implicit in Safeco’s contention is its assumption that the trial court decided an issue of law. That is not so. The right to a setoff is not absolute
B.
To stay enforcement of the judgment pending its appeal, Safeco filed an appeal bond. (§ 917.1.) Since the judgment was affirmed, Safeco was obligated to pay the amount due within 30 days after the Supreme Court filed its remittitur. Upon Safeco’s failure to satisfy the judgment in its entirety within the permitted time, Clarke (as the beneficiary of the bond) was entitled to enforce liability on the bond either (1) in a new action against both Safeco and its surety or (2) by a motion in the existing action. (§§ 996.410, subd. (a), 996.430, subd. (a), 996.440; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 1999) ^ 7:234, p. 7-44.) Clarke selected the motion option and explained in its moving papers that Safeco had improperly applied the $208,000 offset to the principal amount of the judgment, thereby reducing by $94,000 the amount of the postjudgment interest due to Clarke. As a result, contended Clarke, Safeco’s October 1997 payment constituted a “partial satisfaction” of the judgment— with Safeco applying its offset in a manner that was inconsistent with section 695.220.
By doing what Safeco did, explained Clarke, Safeco got a much greater benefit (at Clarke’s expense) than justified by the payment Safeco or Keller
The trial court agreed with Clarke, explaining that there was no admissible evidence to suggest “there was any enforceable election to offset [the $208,000] at the time the judgment was entered, which was August . . . 1993. [0]ne can’t really have it both ways and hold out the prospect of collection by Safeco [by way of Keller’s suit against Clarke’s surety] and yet say that there is an existing offset. Secondly, the right to claim the amounts as offset was not adjudicated until [February 1998] in the bankruptcy court. And so as I understand the chronology, those amounts could not have been claimed as offset until that ruling by the court. ftf] And third[,] under [section] 685.030, subsection (c), Safeco did not partially satisfy the judgment until after October 9, 1997, when it gave up the right to collect on its offsets [by setting off the $208,000 against the amount owed to Clarke].” (See Offer v. Superior Court (1924) 194 Cal. 114, 117 [228 P. 11] [a surety who pays the debt must “ ‘actively assert his equitable right thereto’ ” in order to gain a right of subrogation].)
Safeco has made no effort at all to suggest how, on the facts of this case, the trial court’s decision could possibly constitute an abuse of discretion. Instead, Safeco harps on (and on and on) about Clarke’s “failure” to dispute the existence of Safeco’s abstract right to offset the suppliers’ claims, ignoring the fact that the existence of the right was not, and is not now the issue. The issues are (1) whether the manner in which Safeco exercised its right was equitable, and (2) whether the trial court’s conclusion that it was not constitutes an abuse of discretion. For the reasons explained above, we agree with the trial court that the manner in which Safeco exercised its right to an offset was not equitable. It follows that we find no abuse of discretion by the trial court.
Disposition
The judgment is affirmed. Clarke is awarded its costs of appeal.
Ortega, Acting P. J., and Masterson, J., concurred.
A petition for a rehearing was denied March 7, 2000, and the petition of defendants and respondents for review by the Supreme Court was denied May 10, 2000.
For convenience, we have rounded off the figures in the text. The figures in the footnotes, post, are as stated by the parties. We have not checked their arithmetic.
In a letter from Safeco’s lawyer to Clarke’s lawyer, the calculation was spelled out this way:
Principal Judgment $698,631.00
Costs Awarded $ 883.00
Pre-Judgment Interest $137,785.56
Offset ($208,610.00)
Total Judgment $628,689.56
Interest Per Year at 10% $ 62,868.96
Interest Per Day $ 172.24
Total Accrued Post-Judgment Interest $261,465.76
TOTAL VALUE OF JUDGMENT $890,155.32
All section references are to the Code of Civil Procedure.
Subsequent references to Safeco include General Insurance.
In an exhibit to its moving papers, Clarke’s calculation was spelled out this way:
Judgment (Principal, Interest and Costs) $ 837,299.56
Interest Per Year at 10% $ 83,729.96
Interest Per Day $_229.40
TOTAL AMOUNT OF JUDGMENT ON 10/9/97 $1,187,589.05
*360 Payment Received 10/9/97 ($891,877.72)
Unpaid Principal (Payment allocated first to accrued interest and costs) $295,711.33
Offset ($208,600.00)
Unpaid Principal After Offset $ 87,111.33
Costs on Appeal $ 2,854.02
Unpaid Principal After Partial Satisfaction $ 89,965.35
Interest Per Year at 10% $ 8,996.54
Interest Per Day $ 24.65
Accrued Interest to Date of Motion $ 4,757.45
UNPAID JUDGMENT ON DATE OF MOTION $ 94,722.80
We summarily reject Safeco’s contention that the bankruptcy court “recognized the right of Safeco, as Keller’s surety, to offset the [suppliers’] claims . . . .” The evidence does not support that conclusion. The bankruptcy court considered the offset in February 1998-— months after Safeco had allocated the offset to the principal amount of Clarke’s judgment—