Background
National Merchants Association (NMA), a payment-processing company led by CEO Heather Petersen, borrowed more than $5 million from MUFG Union Bank, N.A. in March 2018 through three loans that Petersen and her trust personally guaranteed. Within months the bank concluded that NMA's financials showed numerous defaults, some predating the loan documents, and that loan proceeds had been diverted to Petersen's other entities. In March 2019 the bank sued for approximately $3.6 million, alleging breach of contract, fraud, negligent misrepresentation, judicial foreclosure, and fraudulent transfer, with the related entities named on an alter-ego theory. In June 2019 the trial court appointed Howard Grobstein as receiver over NMA's personal property; the defendants never appealed that appointment order.
In April 2020, after months of negotiations with counsel involved at every step, the parties signed a Settlement Agreement and Conditional Mutual Release. The defendants agreed to pay $3.5 million by August 24, 2021, in exchange for the bank waiving the remaining loan balances, and they stipulated that a default would allow immediate entry of a joint-and-several judgment on every cause of action. The defendants paid only about $1.34 million in sporadic installments, and the bank also received a $517,717 bankruptcy distribution. After years of failed resolution efforts, the bank moved in June 2024 to vacate the dismissal and enforce the agreement under Code of Civil Procedure section 664.6. The trial court entered the stipulated judgment on December 6, 2024, and later denied the defendants' motion to set it aside as untimely and unsupported.
The Court’s Holding
The Court of Appeal first held that the challenge to the receiver's appointment was jurisdictionally time-barred. An order appointing a receiver is immediately appealable under section 904.1, subdivision (a)(7), and the defendants waited more than 180 days after the June 2019 appointment to attack it. The court rejected their reliance on Meinhardt v. City of Sunnyvale, explaining that unlike an administrative-mandate ruling that requires a later formal judgment, a receiver appointment fully resolves the matter at once. A conflict-of-interest argument raised for the first time in the reply brief was doubly forfeited.
On the merits, the court upheld the denial of section 473 relief, finding no abuse of discretion where the defendants were represented by counsel, conducted due diligence before settling, expressly warranted they relied on no outside representations, and waited nearly five years to claim the agreement was procured by mistake. It also affirmed the finding that the settlement was neither procedurally nor substantively unconscionable: it was negotiated over six months by sophisticated, counseled parties and gave the defendants a chance to pay far less than the full loan debt. The court further held the $759,506.01 attorney-fee award proper because the agreement allowed fees to be proven by declaration or memorandum of costs without a noticed motion or evidentiary hearing.
The court agreed with the defendants on one point: the judgment improperly awarded the identical $2,761,784.55 damages figure on each of seven contract and tort causes of action arising from the same failure to repay the loans. While dual liability on contract and tort theories is permitted, dual recovery is not. The court ordered the judgment modified nunc pro tunc to add a paragraph stating the bank may collect no more than $2,761,784.55 total on the first through seventh causes of action combined, and otherwise affirmed, awarding the bank its costs on appeal.
Key Takeaways
- An order appointing a receiver is immediately appealable in California, and waiting to challenge it until an appeal from a later judgment forfeits the issue entirely.
- Parties who settle with counsel, conduct due diligence, and sign non-reliance warranties face steep odds in later vacating the agreement under section 473, especially after a nearly five-year delay.
- A settlement that lets defaulting borrowers pay substantially less than they owe is unlikely to be found substantively unconscionable, even if its payment terms are demanding.
- Contracting parties can validly agree that attorney fees will be proven by declaration or memorandum of costs, eliminating the need for a noticed fee motion.
- A plaintiff may plead and win on overlapping contract and tort theories, but the judgment must make clear it can collect its compensatory damages only once.
Why It Matters
The opinion is a practical reminder that stipulated judgments entered to enforce settlements under section 664.6 are durable: appellate attacks on collateral matters like receiver appointments must be timely, and claims of mistake or unconscionability will fail where the settling parties were sophisticated, counseled, and slow to complain. It also illustrates the limits of the California Supreme Court's Meinhardt rule, confirming that immediately appealable orders start the appeal clock on their own.
The court's damages correction underscores a common drafting pitfall in stipulated judgments that award the same sum on multiple causes of action. Even when all parties agree only one recovery is intended, the judgment itself must say so, and appellate courts will direct a nunc pro tunc amendment to prevent overcompensation.
Read the full opinion (PDF) · Court docket