Defendant’s challenge to a settlement agreement clause providing for liquidated damages if defendant defaulted on its payment obligations required a fact-dependent determination from the trial judge, so it could not be raised for the first time on appeal. In settling a prior lawsuit, defendant agreed to pay $500,000 over time to plaintiff but also execute an $850,000 judgment which plaintiff could record if defendant defaulted. Defendant defaulted. Plaintiff moved for entry of the $850,000 judgment. Defendant raised other objections but not that the $850,000 was an unenforceable penalty under Civ. Code 1670. On appeal, he raised that issue for the first time. The judgment was affirmed. The liquidated damages/penalty issue is a fact-dependent determination which must be made by the trial judge in the first instance and is subject to substantial evidence review on appeal, not de novo review unless the facts are undisputed. Here, since defendant did not raise the issue in the trial court, he could not raise it for the first time on appeal. Furthermore, under Civ. Code 1670(b), the party asserting the invalidity of the liquidated damages clause bears the burden of proof on that issue, and by not raising the issue below, defendant could not have satisfied that burden.
California Court of Appeal, Sixth District (Walsh, J., sitting by assignment); May 12, 2017; 2017 WL 1967796