Greentree Financial Group, Inc. v. Execute Sports, Inc.

Introduction

Plaintiff sued defendant for breach of contract, seeking a sum certain. Before trial, the parties agreed to settle the case for less than half the amount sought by the complaint, with defendant making installment payments. The terms of the settlement agreement provided that if defendant failed to make a payment, plaintiff could file a stipulation for entry of judgment, with the amount of the judgment being the entire amount sought in the complaint, as well as prejudgment interest, attorney fees, and costs. Defendant failed to make the first payment, and the trial court entered judgment pursuant to the terms of the parties’ stipulation for entry of judgment.

Under consistent authority, the judgment constitutes an unenforceable penalty because it bears no reasonable relationship to the range of actual damages the parties could have anticipated would flow from a breach of their settlement agreement. We publish this opinion to reaffirm that the rule set forth in Sybron Corp. v. Clark Hosp. Supply Corp. (1978) 76 Cal.App.3d 896 [ 143 Cal.Rptr. 306 ] (Sybron) continues to apply after the intervening amendment to Civil Code section 1671. We reverse and remand with…