DEBTORS’ PAYMENT OF JUDGMENT IN FULL BY CASHIER’S CHECK CUTS OFF CREDITOR’S RECOVERY OF POST-JUDGMENT ATTORNEY’S FEES 

This case highlights the necessity of creditors to act diligently post-judgment to file their motions for accrued fees as soon as possible in order to avoid cutting off their claims upon the debtor’s payment of the judgment in full. Accepting but not cashing a check that fulfills the judgment will not keep their claim open.

In Gray1CPB, LLC v. SCC Acquisitions, Inc. (2014) 225 Cal.App.4th 410, the Court considered whether the debtors’ payment of a judgment in full by cashier’s check cuts off the creditor’s right to move for attorney’s fees previously incurred in collection efforts. 

In August, 2010, Gray1 obtained a judgment against the debtors in excess of $9.1 million plus interest as a result of the debtors’ failure to make good on their guaranties of a loan made to a limited liability company.  The written guaranties provided for an award of attorney’s fees. 

In June, 2012, the debtors delivered a cashier’s check to Gray1 in the amount of $12.9 million which covered the amount of the judgment plus accumulated interest.  Gray1 did not immediately cash the check.  Rather, twelve days after receiving the cashier’s check, Gray1 filed a motion for post-judgment costs, including attorneys’ fees in attempting to enforce the judgment, and thereafter cashed the check.  Pursuant to Code of Civil Procedure §685.080, a party may seek reasonable attorney fees as costs in efforts to enforce its judgment.  However, any motion for such costs must be timely made before the underlying judgment has been fully satisfied and within two years of the fees being incurred. 

In its fees motion, Gray1 alleged that in the two years following the judgment, it had incurred more than $3.1 million in attorney’s fees in efforts to collect on its judgment. Gray1 contended that 1) the amount paid by the debtors was not in full satisfaction of the judgment because Gray1 was entitled to costs (including attorney’s fees) incurred in attempting to enforce the judgment, and 2) its motion was timely because Gray1 had not yet cashed the check until after it filed its fees motion.  The debtors opposed the fees motion asserting that 1) the attorney’s fees awarded by the Court are not part of the judgment, 2) the judgment was fully satisfied when the cashier’s check was delivered to Gray1 and accepted in June, 2012, and 3) Gray1’s motion was untimely because the motion was not made before the underlying judgment had been fully satisfied.

The Court agreed with the debtors that the attorney’s fees not awarded by the Court are not part of the judgment, and debtors’ payment by cashier’s check of the entire judgment and accumulated interest cut off Gray1’s right to move for attorney’s fees previously incurred.