Opinion
H029300
4-30-2007
LARRY GABRIEL, et al., Plaintiffs and Respondents, v. AILING HOUSE PEST CONTROL, INC., Defendant and Appellant.
NOT TO BE PUBLISHED
Defendant Ailing House Pest Control, Inc. (defendant) appeals from a post-judgment order denying its motion for acknowledgment of full satisfaction of a judgment entered pursuant to a settlement offer and acceptance under Code of Civil Procedure section 998. Defendant argues that its payment of part of the judgment should be deemed a full satisfaction because the parties had stipulated to an offset for amounts that had already been paid to plaintiff by another settling party. Plaintiffs argue there was no agreement to offset the amount that was offered under section 998 to settle the case. We agree with plaintiffs, and we therefore affirm the courts order denying defendants motion for full satisfaction of the judgment.
All further unspecified statutory references are to the Code of Civil Procedure.
BACKGROUND
Plaintiffs Larry Gabriel and Delaney Gabriel filed this lawsuit on October 14, 2003, against defendant Ailing House Pest Control, Inc., for breach of contract, negligence and fraud. They alleged that defendant performed a structural and termite inspection of a house they were intending to purchase, and that defendant provided a report regarding the condition of the home. After plaintiffs purchased the property, they discovered extensive dry rot and damage throughout the home. Plaintiffs sought damages of approximately $100,000, plus punitive damages.
On September 29, 2004, plaintiffs served a statutory offer to compromise upon defendant, pursuant to section 998, in the amount of $45,000. On the date set for a jury trial, October 12, 2004, the attorneys convened for pre-trial motions. Among other things, plaintiffs brought an in limine motion to exclude from trial evidence of a settlement reached with the seller of the property, who was not a party in the action, for $17,500. Defendant agreed that this evidence would be excluded from the trial so long as any eventual judgment against defendant would be offset in that amount. The parties so stipulated.
At the conclusion of pre-trial motions and before the jury panel was brought in, defendants attorney informed the court that his client would be accepting plaintiffs section 998 offer. Both the section 998 offer, in the amount of $45,000, and defendants acceptance of the offer, were filed with the court. The court scheduled the matter for November 18, 2004, for receipt of the dismissal.
Correspondence between the attorneys over the following weeks revealed that defendant understood that the $45,000 section 998 settlement offer was to be reduced by the offset of $17,500, while plaintiffs understood that the $17,500 would have been applied as an offset only if a judgment had been obtained after the jury trial. Both sides sent letters to the court explaining their respective positions. At the November 18, 2004 hearing, the parties appeared before a different judge, who set another hearing date before the judge who had accepted the settlement offer and acceptance, and asked the parties to submit written briefs.
On November 29, 2004, defendant filed a motion to enforce the judgment. Defendant asked that the court sign a judgment in the amount of $45,000, and indicated an intention to apply the offset of $17,500 and thus pay plaintiffs $27,500 in full satisfaction of the judgment. Defendant asked the court to enter an order directing plaintiffs to sign an acknowledgment of satisfaction of judgment in the amount of $27,500. Plaintiffs submitted opposition, arguing that the section 998 offer was for the full amount of $45,000, with no conditions or offsets, and that defendant had submitted its acceptance of that amount. Plaintiffs asked that the court either confirm the judgment in the amount of $45,000, or set aside the settlement entirely so that the matter could proceed to trial.
A hearing was held on December 10, 2004, before the court that had accepted the section 998 offer and acceptance. The court indicated it found defendants position "ludicrous." The court explained it was "very clear" that the stipulation regarding the $17,500 offset related only to any judgment obtained after the jury trial, and that there was no stipulation that acceptance of the section 998 offer would include such an offset. The court indicated it would grant a motion to have a judgment entered in the amount of $45,000, and that it would deny the request for full satisfaction of the judgment by payment of $27,500. Defendant asked to be able to brief the matter of satisfaction of the judgment after the judgment for $45,000 was actually entered. The court invited counsel to file briefing on that issue.
The written order following this hearing was filed January 4, 2005, and a judgment in the amount of $45,000 was filed the same date. In its order the court granted the motion to enter judgment, and then denied the motion to declare satisfaction of the judgment in the amount of $27,500. The court explained as follows: "Defendant seeks a determination from this Court that, having accepted Plaintiffs § 998 offer for $45,000, Defendant may then obtain a satisfaction of judgment by paying only $27,500. Defendant argues that he is entitled to offset against the $45,000 settlement a $17,500 settlement previously paid by the seller of the property (who is not a party to this litigation). Defendant in its moving papers requested an order from this Court requiring Plaintiffs to sign an Acknowledgment of Satisfaction of Judgment upon receipt of payment of $27,500. [¶] The § 998 offer which Defendant accepted did not have a provision which allowed Defendant to make such an offset. The terms of the offer were clear and unambiguous." The order then set forth the text of plaintiffs section 998 offer: "`Plaintiffs offer to have a judgment entered in their favor in the sum of $45,000.00 pursuant to Section 998 of the Code of Civil Procedure. Said sum will include plaintiffs costs. "The order continued: "Defendant accepted the offer in open Court, and returned a signed copy of the acceptance to the Court files. When Defendant accepted the offer, Defendant made no mention of any right to an offset. [¶] Defendant has provided no authority which would allow either Defendant or this Court to modify the terms of a clear and unambiguous § 998 offer."
After judgment was entered in the amount of $45,000, defendant tendered payment of $27,500 in full satisfaction of the judgment. Plaintiffs returned a partial satisfaction of judgment to defendant on January 24, 2005. Defendant then served a demand for acknowledgment of satisfaction of the judgment under section 724.050. Plaintiffs did not comply with the demand within the statutory 15-day time and accordingly defendant filed the instant motion, on February 8, 2005, seeking an acknowledgment of full satisfaction of the judgment under section 724.050, subdivision (d). Plaintiffs opposed the motion, contending first that it was an improper motion for reconsideration under section 1008, since it was filed more than ten days from the courts previous order and was supported by no new facts or circumstances. On the merits, plaintiffs argued that both the section 998 offer and the acceptance by defendant were unequivocal and unconditioned on any offset and thus formed an enforceable contract.
This statute provides that a debtor who believes a money judgment has been satisfied "may serve personally or by mail on the judgment creditor a demand in writing that the judgment creditor [either] [¶] (1) File an acknowledgment of satisfaction of judgment with the court [or] [¶] (2) Execute, acknowledge, and deliver an acknowledgment of satisfaction of judgment to the person who made the demand." (§ 724.050, subd. (a).) If the judgment creditor does not comply within 15 days, "the person making the demand may apply to the court on noticed motion for an order requiring the judgment creditor to comply with the demand." (§ 724.050, subd. (d).)
The court heard the motion on April 7, 2005, and denied it on the merits. The court explained that the discussions and stipulation on the day of trial, October 12, 2004 were that the amount paid by the seller, $17,500, "could get deducted from an amount awarded by the jury." However, it was "not a stipulation to that being a credit to a CCP 998 acceptance and judgment entered therein." A written order was filed on May 5, 2005, in which the court further explained: "Defendant claims that statements made during pre-trial in limine motions may be used to reduce the amount of the accepted § 998 offer. Prior to trial, Plaintiffs sought an in limine order preventing admission of amounts paid to plaintiff by a settling joint tortfeasor who was not a party to the litigation. Had this case gone to trial, Defendant argued, and Plaintiffs agreed, that Defendant would have been entitled to an allocation for amounts paid by the seller under the joint tortfeasor theory. Of course, had the case gone to trial, Plaintiffs were seeking damages which were substantially in excess of that for which the case eventually settled. [¶] In any event, the case did not go to trial. There was no jury verdict against which an allocation could have been made. [¶] Instead, the parties agreed to settle the case by payment of $45,000. Having listened to the in limine motions, and having been present in open Court when the Defendant indicated it was accepting the § 998 settlement offer for $45,000, the Court is convinced that the remarks made in the in limine motion were not intended to be a stipulation which would modify the clear and unambiguous terms of the § 998 offer."
Defendant appealed from this order.
ARGUMENT
Appealability and Timeliness
The judgment against defendant based on the settlement agreement in the amount of $45,000 was entered on January 4, 2005. The appeal in this case is from a post-judgment order, namely the order denying defendants motion for acknowledgment of satisfaction of the judgment under section 724.050. A post-judgment order relating to the enforcement of the judgment is an appealable order. (§ 904.1, subd. (a)(2); Olson v. Cory (1983) 35 Cal.3d 390, 400.)
The order was filed on May 5, 2005, but notice of the entry of the order was not served on defendant until July 18, 2005. Defendants notice of appeal, filed August 29, 2005, was therefore timely. (Cal. Rules of Court, rule 8.104(a)(2).)
Plaintiffs argue that defendants motion was simply a motion for reconsideration of the courts first order filed on January 4, 2005, in which the court denied defendants motion to acknowledge satisfaction of the judgment upon the payment of $27,500. Therefore, under California Rules of Court, rule 8.108(d), the notice of appeal following the denial of a motion for reconsideration was not timely. Defendant contends that its second motion was not a motion for reconsideration but was a statutory motion under section 724.050, in response to new circumstances: the judgment for $45,000 was entered; defendant tendered payment; defendant made demand on plaintiffs under section 724.050 for acknowledgment of full satisfaction of judgment; plaintiffs failed to comply within 15 days; and defendant thus brought a noticed motion under section 724.050, subdivision (d) for an order compelling plaintiffs to acknowledge full satisfaction.
We acknowledge that defendants prior motion had cited section 724.050 and had requested acknowledgment of satisfaction of judgment, and that the courts prior order purported to deny that request. However, at that time, no judgment had been entered and the statutory prerequisites for a motion under section 724.050 were not met. Furthermore, the court specifically directed defendant to bring a further noticed motion for full satisfaction once judgment was entered and payment was tendered. The court told counsel "if you want to try to pay $27,500 after you have a judgment for [$45,000] and seek acknowledgment on that basis, then file your briefing paper . . . ." Under the circumstances we will accept the premise that defendants subsequent motion for acknowledgement of satisfaction of the judgment under section 724.050 was a new and separate motion to enforce a judgment and thus was itself appealable. We therefore proceed to the merits.
The Section 998 Offer and Acceptance
Stipulated judgments are regarded as contracts between the parties. We therefore apply general contract principles to the interpretation of a section 998 offer and acceptance. (T.M. Cobb v. Superior Court (1984) 36 Cal.3d 273, 280.) In the interpretation of a contract, "parol evidence is only admissible if the contract terms are ambiguous." (Appleton v. Waessil (1994) 27 Cal.App.4th 551, 554.) When we review the courts construction of a contract in a case where parol evidence is offered, several different standards of review may apply. The threshold issue whether the contract is ambiguous is a question of law and is thus subject to our independent review. (Id. at pp. 554-555; Roden v. Bergen Brunswick Corp. (2003) 107 Cal.App.4th 620, 625.) If parol evidence is offered and is in conflict, we apply the substantial evidence test. (Roden v. Bergen Brunswick Corp., supra, 107 Cal.App.4th at p. 625.) If parol evidence does not conflict, we interpret the contract independently of the trial court. (Ibid.)
A section 998 offer to compromise is "an offer . . . to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time." (§ 998, subd. (b).) Here plaintiffs offer to compromise was addressed to defendant and provided, in its entirety, as follows: "Plaintiffs offer to have a judgment entered in their favor in the sum of $45,000.00 pursuant to Section 998 of the Code of Civil Procedure. [¶] Said sum will include plaintiffs costs." The offer was served on defendant on September 29, 2004, which was, in accordance with section 998, "[n]ot less than 10 days prior to commencement of trial . . . ." (§ 998, subd. (b).) This was well before any discussions took place between the parties about any offset.
On the date trial was to commence, October 12, 2004, defendant accepted the offer with a written acceptance addressed to plaintiffs, providing: "Notice is hereby given that Defendant, Ailing House Pest Control, Inc., accepts the offer made by Plaintiffs to compromise the above-entitled action, each party to bear their own costs." Both the written offer and the written acceptance were submitted to the court and filed on October 12, 2004. On their face, these documents constitute an enforceable agreement for a judgment in favor of plaintiffs in the amount of $45,000.
Although these documents are clear and unambiguous, defendant argues that there was a side agreement to reduce the amount of the judgment by $17,500. With respect to section 998 settlement offers, a court may not add terms to a clear and unambiguous offer. (Roden v. Bergen Brunswig Corp., supra, 107 Cal.App.4th at p. 633.) Once a section 998 offer is accepted, it is basically a ministerial task to enter judgment according to the express terms of the parties agreement. (Bias v. Wright (2002) 103 Cal.App.4th 811, 819.) Neither the offer nor the acceptance here makes any reference to any offset from the agreed upon $45,000 judgment against defendant.
We find that the agreement formed by the section 998 offer and acceptance is unambiguous on its face. Furthermore, it is not " `reasonably susceptible " to the meaning advanced by defendant here, that a $17,500 offset would be deducted from the settlement amount of $45,000. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.) The extrinsic evidence offered by defendant does not reasonably support the interpretation defendant argues for. The stipulation regarding an offset of $17,500 was made during in limine motions in open court and, as the court explained, it was made only with reference to an eventual judgment entered following a jury trial and did not relate to the section 998 offer. The offer to compromise and settle the case with defendant for $45,000 did not include any offset. The court stated: "the parties agreed to settle the case by payment of $45,000. Having listened to the in limine motions, and having been present in open Court when the Defendant indicated it was accepting the § 998 settlement offer for $45,000, the Court is convinced that the remarks made in the in limine motion were not intended to be a stipulation which would modify the clear and unambiguous terms of the § 998 offer."
The record reflects that the discussions regarding in limine motions included no mention whatsoever of the section 998 offer to settle, but rather were directed to the exclusion of evidence of the payment of $17,500 from the jury. Counsel for plaintiffs clearly stated that "the seventeen-five offset gets deducted from any amount that we get awarded by the jury, but the evidence of the seventeen-five shouldnt come into the jury." Counsel for defendant agreed that evidence of the $17,500 would not be admitted in the jury trial. Counsel stated: "I cant see how it — how they would need to know that. With the concession that from whatever judgment might get entered against my client, if its conceded that indeed I get a credit for seventeen-five for right now, I cant see why it is that the jury would need to know about that." The court then moved on to the next in limine motion.
After the lunch break, defendants counsel returned to court and informed the court that defendant was accepting the section 998 offer. No mention of any offset was made at that time. Defendants written acceptance of plaintiffs offer was unconditional. If defendant intended to accept the $45,000 offer subject to an offset of $17,500, we believe it was incumbent upon defendant to include that in a counter offer, which plaintiffs could then either accept or reject. Defendants unconditional acceptance of the $45,000 offer created an enforceable contract in that amount. The record here fully supports the courts interpretation of the contract consistent with its terms.
Defendant argues that although the offer and acceptance were silent as to the offset, defendant was nonetheless free to assert the offset once the judgment had been entered. However, defendant is unable to cite any case authority supporting this position. Defendant argues that cases have held that if a settlement agreement is silent as to costs or attorneys fees, these can be addressed at a separate time. (Bias v. Wright, supra, 103 Cal.App.4th 811; Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256 (Rappenecker); Ritzenthaler v. Fireside Thrift Co. (2001) 93 Cal.App.4th 986; Pazderka v. Caballeros Dimas Alang, Inc. (1998) 62 Cal.App.4th 658.) But the cited cases do not address the circumstances before us.
In Rappenecker, the court held that a written offer and acceptance under section 998 that were silent as to costs did not preclude plaintiffs from recovering their statutory costs in a post-judgment memorandum of costs. Costs are provided to the prevailing party as a matter of law under section 1032, and that statute does not contain any restriction or limitation against awarding costs in compromise settlements. In Lanyi v. Goldblum (1986) 177 Cal.App.3d 181 (Lanyi), the court extended the rule in Rappenecker to attorneys fees, finding that "attorney fees authorized by [Civil Code] section 1717 are available to a party who prevails by a section 998 compromise settlement that is silent as to costs and fees." (Lanyi, supra, 177 Cal.App.3d at p. 187; accord, Pazderka v. Caballeros Dimas Alang, Inc., supra, 62 Cal.App.4th 658.) Ritzenthaler v. Fireside Thrift Co., supra, 93 Cal.App. 4th 986, relied on the rule stated in Lanyi. The court in that case concluded that unless attorneys fees are specifically waived in the section 998 offer and acceptance, attorneys fees can be awarded on a later motion following entry of the judgment.
These cases are distinguishable. Rappenecker, Lanyi, Pazderka and Ritzenthaler involved a statutory right to costs and attorneys fees incidental to the judgment. A compromise and settlement agreement that is silent regarding costs or fees does not foreclose the prevailing party from subsequently asserting the statutory right to costs under section 1032, or attorneys fees under Civil Code section 1717. However, a substantial offset reducing the amount of the judgment itself cannot be considered incidental to the judgment. Thus, a claim that an offset reduces the amount of a section 998 compromise and settlement agreement is not analogous to a claim for statutory costs or attorneys fees. In our view, a claimed offset must be expressly included in the parties settlement agreement.
Bias v. Wright, supra, 103 Cal.App.4th 811, is also not applicable here. In that case, defendant accepted plaintiffs section 998 offer orally, but then faxed a written acceptance that differed from the offer in regard to costs. The court found that the oral acceptance followed by a written acceptance with different terms did not constitute an absolute and unequivocal acceptance of the section 998 offer, and judgment could not be entered thereon. The court further found that, in the face of an offer and acceptance that varied in their terms, the trial court could not adjudicate a factual dispute over the terms of a section 998 settlement agreement. Here, in contrast, there was an absolute and unequivocal acceptance of plaintiffs section 998 offer in writing. There was no ambiguity on the face of the contract, and no adjudication of disputed facts was necessary. Rather, the trial entered judgment on a settlement offer and unconditional acceptance, as provided by the statute. (§ 998, subd. (b)(1).)
DISPOSITION
The post-judgment order denying defendants motion for acknowledgment of satisfaction of the judgment is affirmed.
We Concur:
MIHARA, J.
MCADAMS, J.