The old adage “you can’t have your cake and eat it too” applies not only to everyday life, but is reflected in a time-honored appellate maxim—a party who accepts the benefits of a judgment cannot challenge that judgment on appeal. Reaffirming this principle in Satchmed Plaza Owners v. UWMC Hospital Corp., 2008 DJDAR 16123, the 4th District, Division 3 Court of Appeal proved that harsh consequences can flow from acceding to a Marie Antoinette-like command.
Waiver of Appeal Rights: Express and Implied
Even though a party has a right to appeal an appealable judgment or order, the party can lose that right by affirmatively waiving it — such as satisfying the judgment and thus mooting the appeal — or by engaging in improper conduct, like willfully disobeying court orders or being a vexatious litigant.
But an implied waiver can also surrender the right to appeal if one merely accepts the benefits of a judgment. As Epstein v. DeDomenico, 224 Cal. App. 3d 1243 (1990), noted, “acceptance of even a part of the benefit of a judgment or order will ordinarily preclude an appeal from the portion remaining.” This is because “the right to accept the fruits of the judgment and the right to appeal therefore are wholly inconsistent, and an election to take one is a renunciation of the other.” Trollope v. Jeffries, 55 Cal. App. 3d 816, 822 (1976).
Exceptions to the Implied Waiver Rule
While express waivers or improper conduct that will surrender the right to appeal are often black and white, implied waivers often fall into a much grayer area. This has caused appellate courts over the years to struggle with what kind of “acceptance” of judgment benefits qualify.
Because the right to appeal is an important one, courts have sometimes recognized exceptions to the implied waiver rule, finding the rule too draconian. For starters, as Epstein notes, a party’s acceptance of the fruits of a judgment must be unmistakable, voluntary and unconditional. And acceptance cannot be under “compulsion of risk or forfeiture.” These are equitable exceptions, since they preserve the right to appeal when acceptance of the judgment’s benefits is equivocal or when a party is forced to comply with the judgment on pain of losing a property interest.
Applying the “conditionality” exception, in H.D. Arnaiz, Ltd. v. County of San Joaquin, 96 Cal. App. 4th 1357 (2002), the trial court granted the plaintiff’s motion to vacate a dismissal on condition that the plaintiff pay the defendant a certain sum. The defendant appealed the vacation order but accepted the plaintiff’s tender of the funds, placing them in a trust account pending the appeal’s resolution. The court held the defendant could maintain the appeal because it had wisely retained but not used the money. In other words, the defendant only “had” its “cake” — it never “ate” it.
Compulsion also excuses acceptance of a judgment’s benefits. Compulsion exists when a judgment debtor must comply with a judgment or face losing a property right. Thus, in Lee v. Brown, 18 Cal. 3d 110 (1976), the defendants were unable to post a bond to stay enforcement of a money judgment, so the sheriff sold their home at a foreclosure sale and tendered the amount of the homestead exemption funds to them, which they accepted. The Supreme Court held acceptance of the funds did not destroy the defendants’ right to appeal because, had they not accepted the proceeds, they would have lost monies to which they were statutorily entitled on top of losing their home. In essence, the defendants gained no benefit from the judgment. Rather, by accepting the foreclosure sale proceeds, they merely preserved rights they already had.
Another important exception to the implied waiver rule is practical: a party may accept the judgment’s benefits but appeal the adverse portions if those portions are “severable.” Trollope explains this exception applies “where portions of the judgment appealed from are conceptually severable from those portions accepted,” such that the reversal of one part does not affect the disposition of the other. This exception sometimes provokes semantic maneuvering, and appellants cook up a variety of arguments to fit under it.
Satchmed: Applying the Implied Waiver Rule and Rejecting Its Exceptions
This brings us to Satchmed. That case involved a dispute between the owners of various medical offices, UWMC, and an owners association, Satchmed, which managed some of the medical offices. Satchmed claimed UWMC had violated its right of first refusal by failing to offer Satchmed the right to purchase 22 medical offices UWMC held in fee and another 12 in which UWMC held a leasehold interest.
The trial court ruled that UWMC had to offer Satchmed the owned units but not the leased ones. The court also found neither party prevailed, meaning neither was entitled to attorney fees.
After the court entered judgment, Satchmed accepted UWMC’s offer to purchase the owned units. Satchmed then appealed the portion of the judgment as to the leased units along with the prevailing party determination. The Court of Appeal, however, held that Satchmed’s purchase of the owned units had waived its right to appeal the determination as to the leased units, rejecting Satchmed’s attempt to invoke the compulsion and severability exceptions.
As to the compulsion exception, Satchmed claimed that, if it had not purchased the owned units, it would have lost its purchase right since the units would have been sold to another buyer. Unconvinced, the court noted that the filing of an appeal from the entire judgment would have preserved Satchmed’s purchase right under Code of Civil Procedure Section 916(a), which provides that the filing of a notice of appeal stays trial court proceedings embraced within the appealed judgment.
But what Satchmed wanted, the court said, was to buy the owned units and secure the benefits of the judgment “without risking the possibility that the court could reverse the favorable portion of the judgment.” The “goal of attacking unfavorable portions of a judgment without risking reversal of the favorable portion,” however, did not entitle Satchmed to invoke the compulsion exception. The judgment did not put Satchmed at risk of losing property it already owned or forfeiting monies to which it was statutorily entitled. Satchmed simply had to choose between appealing and pursuing an even greater advantage than the judgment afforded it, on the one hand, and playing it safe and accepting the owned units together with the adverse determination as to the leased units, on the other. It could not do both.
Satchmed also argued the judgment was severable because an appellate decision as to the leased units and the prevailing party determination would not affect the portion of the judgment pertaining to the owned units. The court rejected that argument as well.
Invoking a settled appellate review principle, the court noted it would be required to uphold the judgment if it was correct on any ground. As the court explained, certain of the grounds UWMC advanced in opposing Satchmed’s appeal would not only support the judgment as to the leased units, but could also compel reversal of the portion of the judgment as to the owned units. The only reason a reversal as to the leased units would not affect the portion of the judgment as to the owned units, the court said, was that Satchmed had purchased the owned units. But Satchmed could not establish severability when the judgment was rendered severable only because Satchmed had accepted its benefits.
The court also found Satchmed’s challenge to the trial court’s no-prevailing-party determination did not make the judgment severable because that determination depended on who prevailed on both portions of the judgment—the owned units and the leased units.
Another aspect of the severability argument Satchmed served up also did not sit well. To exercise its right of first refusal as to the leased units, Satchmed needed approval of two-thirds of the owned units’ owners. Because Satchmed had already purchased the owned units, the court reasoned that if it were to reverse the judgment as to the leased units, Satchmed would be considerably closer to gaining the two-thirds majority and devouring the leased units also.
The court concluded that were it to find that the judgment as to the leased units was severable and reversed the judgment as to the leased units, Satchmed would have obtained an advantage it would not have had if it had been successful on an appeal from the entire judgment, that is, an appeal that put at issue the disposition of all the units. Put differently, the shift in voting power represented by Satchmed’s control of the owned units bound the two portions of the judgment to each other, making the judgment un-severable.
If You Want to Eat Your Cake, Think Before Taking a Bite
Satchmed underscores that exceptions to the waiver rule are equitable. And it reaffirms the courts’ disdain for those who try to gain an unfair advantage by accepting the favorable portion of a judgment and appealing the unfavorable portion. Consequently, a party who appeals a mixed results judgment must carefully weigh the risk of waiver posed by accepting the judgment’s benefits. If the judgment can be stayed by filing an appeal, posting a bond, or even creating an escrow account, that may prove the most prudent course. But gobbling up the tasty bits and contesting the unsavory parts can be a recipe for disaster.