OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp.

After respondents renewed a judgment in their favor, the trial court denied a motion by appellant CIBC World Markets Corp. (CIBC) to vacate the renewed judgment. We affirm.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

This is the second time that this case has come before us on appeal. In April 2000, OCM Principal Opportunities Fund, L.P. (OCM), together with Pacholder Value Opportunity Fund, L.P., and Pacholder Heron Limited Partnership (collectively, Pacholder), initiated an action against CIBC, asserting claims that CIBC had engaged in fraud, misrepresentation, and violations of federal and state securities laws. TCW Shared Opportunity Fund II, L.P., TCW Shared Opportunity Fund IIB, L.L.C., TCW Shared Opportunity Fund III, L.P, TCW Leveraged Income Trust, L.P, and TCW Leveraged Income Trust II, L.P. (collectively, TCW), initiated a similar action in May 2001. These actions were later consolidated.

On October 15, 2003, following a jury trial, the trial court entered a judgment that awarded OCM, Pacholder, and TCW, respectively, $13,412,489, $2,440,504, and $16,249,490 in damages. CIBC appealed from the judgment, and OCM and Pacholder cross-appealed from the denial of their request for prejudgment interest under Corporations Code section 25500.

On May 4, 2007, while the appeal and cross-appeals were pending, respondents applied for renewal of the judgment pursuant to the Enforcement of Judgments Law (Code Civ. Proc., § 680.010 et seq.).^[1] The Los Angeles County Superior Court Clerk filed a notice of renewal of judgment on July 19, 2007. CIBC filed a motion to vacate the renewed judgment, which the trial court denied on September 25, 2007. CIBC noticed the appeal before us from the denial.

On December 5, 2007, we issued our opinion in the first appeal and related cross-appeals (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835 [ 68 Cal.Rptr.3d 828 ]).^[2] We affirmed the judgment in favor of respondents, reversed the denial of

DISCUSSION

CIBC contends that the trial court erred in denying its motion to vacate the renewed judgment, which argued that the renewal improperly accorded respondents compound postjudgment interest on the 2003 judgment. We disagree.

A. Renewal of Money Judgments

Under the Enforcement of Judgments Law, a money judgment is enforceable for a 10-year period following the date of entry.^[3] (§ 683.020.) The judgment creditor may renew the judgment by filing an application for renewal with the clerk of the court prior to the end of the 10-year period. (§ 683.120.) The renewal “does not create a new judgment or modify the present judgment,” but merely extends the enforceability of the judgment—in effect, it resets the 10-year enforcement clock. (Jonathan Neil & Associates, Inc. v. Jones (2006) 138 Cal.App.4th 1481 , 1489 [ 42 Cal.Rptr.3d 350 ].) Once a judgment has been renewed, a new application for renewal may not be submitted within five years of the previous renewal. (§ 683.110, subd. (b).) Although entry of the renewed judgment is a ministerial act accomplished by the clerk of the court (Goldman v. Simpson (2008) 160 Cal.App.4th 255 , 262 [ 72 Cal.Rptr.3d 729 ]; § 683.150), the judgment creditor may challenge the renewal by filing a motion to vacate or modify the renewed judgment (§ 683.170, subd. (b)).

CIBC’s contentions target the provisions in the Enforcement of Judgments Law governing the accrual of interest on a renewed judgment. Under section 685.010, “[i]nterest accrues at the rate of 10 percent per annum on the principal amount of a money judgment remaining unsatisfied.” (§ 685.010, subd. (a).) In turn, the term “ ‘[p]rincipal amount of the judgment’ ” is defined as “the total amount of the judgment as entered or as last renewed,” together with costs added to the judgment, with adjustments for partial satisfaction of the sums in question. (§ 680.300.) Upon an application for renewal of the judgment, the clerk of the court is directed to enter the renewal “showing] the amount of the judgment as renewed.” (§ 683.150, subd. (c).) When, as here, the judgment does not require installment payments, “this

B. CIBC’s Contentions

CIBC contends that the trial court (1) improperly construed the renewal provisions to allow the compounding of postjudgment interest upon renewal of the 2003 judgment; (2) permitted respondents to renew the 2003 judgment without establishing a risk to its enforceability; and (3) contravened article XV, section 1 of the California Constitution, which, limits the interest rate on judgments to 10 percent per annum. For the reasons explained below, we reject these contentions.

CIBC’s contentions present questions of first impression regarding the interpretation of the renewal statutes and the California Constitution. Generally, “[i]n construing constitutional and statutory provisions, . . . the intent of the enacting body is the paramount consideration.” (In re Lance W. (1985) 37 Cal.3d 873 , 889 [ 210 Cal.Rptr. 631 , 694 P.2d 744 ].) To determine this intent, we look first to the plain language of the law, read in context. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294 , 301 [ 58 Cal.Rptr.2d 855 , 926 P.2d 1042 ].) Both the legislative history of a statute and the wider historical circumstances of its enactment may also be considered in ascertaining the legislative intent. (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379 , 1386-1387 [ 241 Cal.Rptr. 67 , 743 P.2d 1323 ].)^[4] Because the Legislature enacted the Enforcement of Judgments Law in 1982 upon the California Law Revision Commission’s recommendation (8 Witkin, Cal. Procedure (5th ed. 2008) Enforcement of Judgment, § 18, pp. 53-54), we may also consult the commission’s comments on the relevant statutory provisions (Conservatorship of Wendland (2001) 26 Cal.4th 519 , 530 [ 110 Cal.Rptr.2d 412 , 28 P.3d 151 ]). “Whenever possible, statutes are to be interpreted as consistent with applicable constitutional provisions so as to harmonize both.” (Mendez v. Kurten (1985) 170 Cal.App.3d 481 , 485 [ 215 Cal.Rptr. 924 ].)

CIBC contends that the renewal provisions do not require that postjudgment interest be incorporated into tide total amount of the renewed judgment so as to permit the accrual of interest upon interest. This contention fails in light of the plain language of the pertinent provisions, as well as the extrinsic evidence of legislative intent. Under the provisions, interest accrues on the “principal amount of a money judgment remaining unsatisfied,” which is “the total amount of the judgment as . . . last renewed.” (§§ 685.010, subd. (a), 680.300, italics added.) As the court observed in Westbrook v. Fairchild (1992) 7 Cal.App.4th 889 , 894-895 [ 9 Cal.Rptr.2d 277 ] (Westbrook), the renewal provisions effectuate a compounding of postjudgment interest when a judgment is renewed: Accrued postjudgment interest on the judgment is incorporated into the principal of the renewed judgment, which then bears interest at the legal rate. The Law Revision Commission expressly noted this feature of the renewal procedure: “Renewal has the effect of compounding the interest on the judgment, since interest accrues on the total amount of the judgment as renewed [citations] and the judgment as renewed includes accrued interest on the date of filing the application for renewal [citations].” (Cal. Law Revision Com. com., 17 West’s Ann. Code Civ. Proc. (1987 ed.) foll. § 683.110, p. 76.)^[5]

2. No Requirement for Risk to Enforceability

CIBC contends that the trial court erred in permitting the renewal when there was no danger that the judgment would not be paid. CIBC argues that the judgment was properly bonded pending the outcome of the appeal, and was enforceable until 2013. As explained below, this contention also fails in light of the language of the renewal provisions, and the available extrinsic evidence of legislative intent.

Prior to the 1982 enactment of the Enforcement of Judgments Law, California law provided two methods by which a judgment creditor could extend the enforcement period of a money judgment. Under former section

In addition, the judgment creditor was entitled to commence an independent action on the judgment within the 10-year limitation period defined in section 337.5. (Alonso Inv. Corp. v. Doff, supra, 17 Cal.3d at p. 545; United States Capital Corp. v. Nickelberry (1981) 120 Cal.App.3d 864 , 866 [ 174 Cal.Rptr. 814 ].) If the judgment creditor began an action within this period, “the creditor’s right to recover remained] alive, even though the 10-year period . . . subsequently expire[d].” (Alonso Inv. Corp. v. Doff, supra, 17 Cal.3d at p. 545.)

In enacting the Enforcement of Judgments Law, the Legislature abrogated the first method of extending the period for the enforcement of a judgment, and replaced the method with the renewal procedure described above (see pt. A., ante). The Law Revision Commission explained: “Renewal under this article permits enforcement of a judgment beyond the 10-year period prescribed by Section 683.020. This procedure supersedes the procedure under former Section 685 pursuant to which a judgment could be enforced upon noticed motion after the expiration of 10 years in the discretion of the court upon a showing of the reasons for failure to enforce the judgment during the first 10 years. This article does not require the judgment creditor to demonstrate diligence in enforcing the judgment, but if renewal is not accomplished within 10 years after entry of the judgment, the judgment becomes unenforceable.” (Cal. Law Revision Com. com., 17 West’s Ann. Code Civ. Proc., supra, foll. § 683.110, p. 76, italics added.)

The Legislature otherwise retained the second method of extending the period for enforcing a judgment (§ 683.050),^[6] and linked the method to the provision governing the vacation of a renewed judgment. Subdivision (a) of

In our view, respondents were not obliged, upon renewing the 2003 judgment, to establish that its enforceability was at risk. Nothing in the renewal provisions suggests such a requirement; on the contrary, section 683.130 provides that an application for the renewal of a lump-sum money judgment may be filed “at any time before the expiration of the 10-year period of enforceability.....” (§ 683.130, subd. (a).) As the Law Revision Commission noted, the renewal provisions eliminated the judgment creditor’s obligation under the abrogated procedure to explain the need for an extended enforcement period. Moreover, with exceptions not relevant here, challenges to a renewed judgment are limited to “ground[s] that would be a defense to an action on the judgment.” (§ 683.170, subd. (a).) As an action on a judgment may be brought “at any time” within the 10-year period provided in section 337.5 (United States Capital Corp. v. Nickelberry, supra, 120 Cal.App.3d at p. 866), we conclude that judgments may be renewed at any time within the 10-year period provided in section 683.020.^[7]

3. No Violation of Constitutional Limits on Interest

CIBC contends that the renewal procedure, as applied to the 2003 judgment, contravened article XV, section 1, subdivision (2) of the California Constitution, which limits interest on judgments to 10 percent per annum.^[8] Because the renewal provisions incorporate accrued interest within the principal amount of the renewed judgment and authorize interest at the rate of 10 percent per annum on the principal amount of the renewed judgment, CIBC argues that the provisions accorded respondents interest that exceeds the constitutional limit. We disagree.

The question before us, therefore, is whether article XV, section 1 of the California Constitution “positively and certainly” prohibits the compounding of postjudgment interest on renewed judgments at intervals of five or more years (Methodist Hosp. of Sacramento v. Saylor, supra, 5 Cal.3d at p. 692). California law has long regulated interest on loans and judgments, first by statute, then by initiative measure, and finally by Constitutional amendment. (See Penziner v. West American Finance Co. (1937) 10 Cal.2d 160 , 170-172 [ 74 P.2d 252 ] (Penziner).) In 1918, an initiative measure expressly repealed the early statutes and set forth an uncodified statute (the 1918 Usury Law). (Stats. 1919, p. lxxxiii; Deering’s Uncod. Initiative Measures & Stats. 1919-1 (1973 ed.) p. 35; Penziner, supra, 10 Cal.2d at pp. 170-172.) Sections 1 and 2 of the 1918 Usury Law set the interest rate on loans, forbearances, and judgments at seven percent per annum, but permitted parties to a written contract to agree to a rate not exceeding 12 percent per annum; in addition, section 2 barred parties to a contract from indirectly exceeding the rate of 12 percent per annum through an exchange of “money, goods or things in action, or in any manner whatsoever.” (Stats. 1919, p. lxxxiii.) Section 2 also provided: “[I]n the computation of interest upon any bond, note, or other instrument or agreement, interest shall not be compounded, nor shall the interest thereon be construed to bear interest unless an agreement to that effect is clearly expressed in writing and signed by the party to be charged therewith.” (Stats. 1919, p. lxxxiii.) Section 3 accorded a party who paid interest exceeding the limits in sections 1 and 2 the right to recover “treble the amount of the money so paid or value delivered in violation of said sections.”^[9] (Stats. 1919, p. lxxxiii.)

In June 1976, former section 22 of article XX was amended and reenacted in its current form as section 1 of article XV of the state Constitution. (California Fed. Savings & Loan Assn. v. City of Los Angeles (1995) 11 Cal.4th 342 , 346 [ 45 Cal.Rptr.2d 279 , 902 P.2d 297 ].) Section 1 of article XV sets an annual interest rate of seven percent on loans and forbearances, but allows parties to a written contract to set the interest rate at up to 10 percent, or at the level of the Federal Reserve’s discount rate plus 5 percent, on loans or forbearances involving real property.^[10] In addition, section 1 of article XV—unlike its

We find guidance on the issue before us from our Supreme Court’s decision in Heald v. Friis-Hansen (1959) 52 Cal.2d 834 , 837 [ 345 P.2d 457 ] (Heald), which addressed the limitations on interest regarding loans found in former section 22 of article XX. There, the borrowers executed promissory notes that required annual interest payments at a rate of 10 percent or 12 percent per annum—the notes were ambiguous on this point—and provided that interest, if not paid when due, was to be incorporated into the principal and thereafter bear interest. (Heald, supra, 52 Cal.2d at pp. 835-836.) When the borrowers defaulted on the notes, the creditors demanded the balance due, plus interest on the balance calculated at a rate of 10 percent per annum, compounded annually. (Id. at p. 836.) The trial court determined that the notes imposed a 12 percent interest rate, and thus were facially usurious; in addition, it awarded the borrowers treble interest pursuant to section 3 of the 1918 Usury Law. (Heald, supra, 52 Cal.2d at pp. 836-837.)

In our view, Heald is dispositive of the issue before us. Section 1 of article XV of the state Constitution, like former section 22 of article XX, contains no express prohibition regarding compound interest on loans or judgments; moreover, section 1 of article XV authorizes the Legislature to set the interest rate on judgments up to a maximum of 10 percent per annum, just as its predecessor permitted parties to set the interest rate on loans up to a maximum of 10 percent per annum.^[12] The renewal provisions reset the 10-year enforcement clock while incorporating accrued interest within the principal of the renewed judgment; in this respect, they resemble the promissory notes at issue in Heald, which incorporated unpaid interest into the principal due on an annual basis. In view of Heald, the statutory renewal provisions—-which allow the compounding of interest at intervals of five years or more, far less frequently than the notes in Heald—do not “positively and certainly” offend section 1 of article XV. (Methodist Hosp. of Sacramento v. Saylor, supra, 5 Cal.3d at p. 692.)

CIBC contends that the broad prohibition against compound interest on judgments in Civil Code former section 1920 remains in force, arguing that the prohibition was incorporated in the 1918 Usury Law and not abrogated by the constitutional amendments regarding usury. Again, we disagree. Section 4 of the 1918 Usury Law expressly repealed Civil Code former section 1920 (see fn. 9, ante). Generally, the deletion of an express statutory provision, whether by the Legislature or popular initiative, implies an intent to change the substantive law. (Dix v. Superior Court (1991) 53 Cal.3d 442 , 461 [ 279 Cal.Rptr. 834 , 807 P.2d 1063 ] [Legislature]; People v. Griffin (1988) 46 Cal.3d 1011 , 1031 [ 251 Cal.Rptr. 643 , 761 P.2d 103 ] [initiative].) This doctrine ultimately relies upon the principle of expressio unius est exclusio alterius (Fay v. District Court of Appeal (1927) 200 Cal. 522 , 538 [ 254 P. 896 ]): “ ‘the expression of certain things in a statute necessarily involves exclusion of other things not expressed. . . .’ [Citation.]” (Dyna-Med, Inc. v. Fair Employment & Housing Com., supra, 43 Cal.3d at p. 1391, fn. 13.) Under this principle, the 1918 Usury Law discloses an intent to eliminate the prohibition against compound interest on judgments in Civil Code former section 1920.

The language of the 1918 Usury Law itself supports this conclusion. The new law set interest rates on loans, forbearances, and judgments (§ 1), and expressly barred compound interest on loans and forbearances, unless the parties to the relevant contract agreed to it (§ 2). Notably, although the 1918 Usury Law reinstated the presumptive interest rate of 7 percent per annum on judgments found in Civil Code former section 1920, it omitted judgments from the provisions regulating compound interest, and otherwise imposed no prohibition against compound interest on judgments. The failure

Nothing in the extrinsic evidence before us regarding the voters’ intent in enacting the 1918 Usury Law disturbs our conclusion on this matter. Ordinarily, such evidence does not control over an intent disclosed by the language of the law. (Fay v. District Court of Appeal, supra, 200 Cal. at p. 538; California Country Club Homes Assn. v. City of Los Angeles (1993) 18 Cal.App.4th 1425 , 1439 [ 22 Cal.Rptr.2d 917 ].) The arguments submitted to the voters focused on the merits of imposing new usury regulations on private lenders, and were silent about the compounding of interest on judgments. In view of the language of the initiative expressly repealing prior law, this silence does not establish an intent to preserve the broad prohibition against compound interest on judgments in Civil Code former section 1920. (People v. Griffin, supra, 46 Cal.3d at p. 1031 [in the absence of evidence to the contrary, “the fact that the 1978 initiative deleted the premeditation requirement of the 1977 death penalty law provides an overwhelming inference that the voters intended to eliminate the premeditation requirement”]; McGuire v. Wentworth (1932) 120 Cal.App. 340 , 344 [ 7 P.2d 729 ] [silence in arguments to voters regarding provision of initiative that operated to limit charter cities’ authority over public funds does not support inference voters intended to preserve broad authority accorded under preinitiative law].) In sum, neither the 1918 Usury Law nor section 1, article XV of the California Constitution prohibit the compounding of interest under the renewal provisions of the Enforcement of Judgments Law.^[14]