PSM Holding Corp. v. National Farm Financial Corp., No. 15-55026 (9th Cir. 2018)
Annotate this CaseThis case concerned remedies in various appeals arising from claims for breach of contract and fraud. The Ninth Circuit held that the district court's orders on July 26, 2010, and October 8, 2013, affirming defendants' right to recover restitution, were sound; in regard to the December 17, 2014 order, the district court erred in allowing the judgment creditor to recover in restitution in light of Ward v. Sherman, 100 P. 864 (Cal. 1909); the judgment creditor's challenges to the October 8, 2013 order denying the judgment creditor's request for rescission of its quota share reinsurance agreement was rejected; the May 19, 2015 order granting in part and denying in part defendants' motion to recover post-appeal attorneys' fees under California Civil Code 1717 was reversed; and because the judgment creditor's restitution award was reversed, the district court's July 14, 2015 order denying defendants' motion to retax costs was reversed and remanded for reconsideration.
Court Description: Restitution / Rescission. The panel affirmed in part, reversed in part, and dismissed in part the district courts’ judgment and orders concerning remedies in various appeals arising from claims for breach of contract and fraud. The district court held that a judgment creditor, who seized a judgment debtor’s company pursuant to a judgment that was reversed on appeal, could recover in restitution for losses suffered while it was in possession of the seized company. The district court denied the judgment creditor’s request to rescind its quota share reinsurance agreement (“QSA”) with Business Alliance Insurance Company. The panel held that to the extent the district court’s orders of July 26, 2010, and October 8, 2013, affirmed defendants’ right to recover restitution, they were sound. In reviewing the district court’s December 17, 2014 order, the panel held that the district court erred in allowing the judgment creditor to recover in restitution. The panel’s conclusion rested on the California Supreme Court’s decision in Ward v. Sherman, 100 P. 864 (Cal. 1909), wherein the court in an analogous situation, declined to award the judgment creditor an affirmative recovery to offset its losses. The panel’s decision was bolstered by the plain reading of Restatement (First) of Restitution § 74 and Restatement (Third) of Restitution § 18, 4 PSM HOLDING V. NAT’L FARM FINANCIAL which suggested that in similar cases, the right of restitution ran only to the judgment debtor. The panel rejected the judgment creditor’s challenges to the district court’s October 8, 2013 order denying the judgment creditor’s request for rescission of its QSA. Specifically, the panel held that the district court did not err by failing to consider California Civil Code § 1019, which concerns the removal of fixtures from leaseholds. Second, the district court thoroughly analyzed whether the QSA amounted to a necessary expense or, instead, an improvement. Finally, policy considerations did not favor the judgment creditor’s position. The panel reversed the district court’s May 19, 2015 order granting in part and denying in part defendants’ motion to recover post-appeal attorneys’ fees. The panel held that the district court erred in awarding attorneys’ fees under California Civil Code § 1717, while simultaneously concluding that the judgment creditor had fully satisfied the obligations stemming from the operative judgments. The panel dismissed, as moot, defendant’s appeal of the district court’s reduction of the lodestar fee amount. Because the panel reversed the judgment creditor’s restitution award, the panel vacated the district court’s July 14, 2015 order denying defendants’ motion to retax costs and remanded for reconsideration in light of changed circumstances. The panel ordered that in each of the five appeals, each party should bear its own costs on appeal. PSM HOLDING V. NAT’L FARM FINANCIAL 5
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