Opinion
G051621
02-01-2017
LIFE VESSEL ADVANCED WELLNESS CORPORATION, Plaintiff and Respondent, v. LIFE VESSEL CORPORATION et al., Defendants and Appellants. JAMES BRAKKE, Plaintiff and Respondent, v. BARRY MCNEW et al., Defendants and Appellants.
John L. Dodd & Associates, John L. Dodd, Kylie G. Starr, Benjamin Ekenes; and David Stroud for Defendants and Appellants. Law Offices of Clinton L. Hubbard and Clinton L. Hubbard for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2010-00401764) OPINION (Super. Ct. No. 30-2010-00426683) Appeal from a judgment of the Superior Court of Orange County, Gregory H. Lewis, Judge. Affirmed. John L. Dodd & Associates, John L. Dodd, Kylie G. Starr, Benjamin Ekenes; and David Stroud for Defendants and Appellants. Law Offices of Clinton L. Hubbard and Clinton L. Hubbard for Plaintiffs and Respondents.
* * *
INTRODUCTION
Defendants Life Vessel Corporation and its owner and president, Barry McNew (collectively referred to as defendants), appeal from the judgment entered after plaintiffs Life Vessel Advanced Wellness Corporation (Life Vessel Advanced) and James Brakke successfully applied ex parte for a stipulated judgment to be entered against defendants after they defaulted on their obligations under the parties' settlement agreement. Defendants argue such relief should have been sought through a noticed motion. They also argue that even if the judgment had been properly entered against them, the judgment should not have included $675,000 in extension fees which the parties had agreed to as part of their settlement agreement.
We affirm. The parties agreed that in the event defendants defaulted on their obligations under the settlement agreement, judgment may be entered against them on an ex parte basis. Life Vessel Advanced and Brakke gave defendants several extensions of time to make payments under the settlement agreement in consideration for defendants' agreement to pay extension fees. The parties' extension agreements expressly amended the settlement agreement upon which the stipulation for judgment was based and therefore effectively amended the stipulated judgment to incorporate the amount of the extension fees.
BACKGROUND
I.
LIFE VESSEL ADVANCED FILES A COMPLAINT AGAINST DEFENDANTS
In August 2010, Life Vessel Advanced filed a complaint against defendants, asserting claims for breach of an asset purchase agreement, breach of a license agreement, specific performance of a license agreement, two counts of fraud, and unjust enrichment. The complaint alleged that in October 2008, Life Vessel Advanced entered into a written asset purchase agreement by which Life Vessel Corporation agreed to sell to Life Vessel Advanced its patents, technology, and the distribution, manufacturing, and licensing rights relating to a product known as "Life Vessel" in exchange for $10 million. Pursuant to the terms of the asset purchase agreement, Life Vessel Advanced paid a refundable deposit in the amount of $500,000 to Life Vessel Corporation. McNew, the owner of Life Vessel Corporation, stated to Life Vessel Advanced that the deposit was fully refundable in the event the parties did not finalize Life Vessel Advanced's purchase of Life Vessel Corporation's assets.
The parties' written settlement agreement, discussed post, describes the Life Vessel product as "the non-invasive health and well[-]being apparatus that uses frequency, vibration, sound and light to induce mental and physical relaxation" which is the subject of numerous United States patents. --------
In April 2009, Life Vessel Advanced had entered into a license agreement with defendants whereby defendants licensed the "use and license" of Life Vessel assets in exchange for $1 million. "In entering into the License Agreement, the parties intended to transfer to [Life Vessel Advanced] the Life Vessel Assets for use by [Life Vessel Advanced] in California in lieu of the provisions in the Asset Purchase Agreement." The parties amended the license agreement in August 2009, thereby "set[ting] forth the consideration received by Life Vessel [Corporation] which was credited towards the purchase price under the License Agreement, with a remaining $100,000 balance owed by [Life Vessel Advanced] to Life Vessel [Corporation] under the License Agreement to be paid $50,000 upon execution of the License Agreement, and the final payment of $50,000 within 60 days."
In June 2009, Life Vessel Advanced advised defendants that it did not intend to purchase certain assets and demanded return of the $500,000 deposit it had paid, offset by the $50,000 Life Vessel Advanced owed under the license agreement. Despite repeated demands, defendants failed and refused to return the $450,000 adjusted deposit amount to Life Vessel Advanced.
The complaint further alleged that Life Vessel Advanced performed all of the terms and conditions of the license agreement, as amended by the parties, including payment of all consideration it owed to defendants in the amount of $1 million.
II.
BRAKKE FILES A COMPLAINT AGAINST DEFENDANTS; LIFE VESSEL
ADVANCED'S ACTION IS CONSOLIDATED WITH BRAKKE'S ACTION.
In November 2010, Brakke filed a complaint against defendants, asserting claims for breach of contract, judicial foreclosure, specific performance and appointment of a receiver, the imposition of an injunction, and the imposition of a constructive trust. Brakke's complaint alleged that on July 29, 2008, Brakke and McNew entered into a written settlement agreement, in accordance with which McNew executed and delivered an "All-Inclusive Secured Promissory note" requiring McNew to pay Brakke the sum of $1,145,000 in principal with accrued interest at a rate of 8 percent per annum on or before July 15, 2009. The complaint further alleged: "In the Settlement Agreement and Note, McNew agreed to provide certain collateral for the obligations set forth in the Note" and "McNew executed and delivered the UCC-1 as an officer and owner of Life Vessel [Corporation]." Brakke's complaint also alleged that McNew had failed and refused to pay the amount on the note by the due date, despite Brakke's demand to McNew for payment.
In March 2011, the trial court ordered Life Vessel Advanced's action against defendants consolidated with Brakke's action against defendants (collectively, the consolidated actions).
III.
MCNEW'S REQUEST TO CONTINUE THE TRIAL DATE IN THE CONSOLIDATED
ACTIONS IS DENIED; THE PARTIES SETTLE THE CONSOLIDATED ACTIONS.
On October 26, 2011, McNew, then acting in propria persona, applied ex parte on behalf of himself and Life Vessel Corporation to continue the trial date of October 27, 2011. At the ex parte hearing on October 27, the trial court advised McNew that he could only represent himself and not Life Vessel Corporation. The court denied the ex parte application.
After a settlement conference, the parties settled the consolidated actions and an oral settlement was stated on the record. The oral settlement included that "[d]efendants shall pay the plaintiffs the sum of $1,595,000, which consists of the face amount of the promissory note in favor of Brakke of $1,145,000, and the deposit owed to plaintiff, Life Vessel [Advanced], by defendants in the amount of $450,000. [¶] These payments shall be . . . secured by a stipulation for entry of judgment by default and that stipulation shall provide for the following payment schedule . . . ." The settlement further provided, in part, that "[i]n the event of a default under the terms of the stipulated judgment, plaintiff shall be entitled to enter judgment against defendants, jointly and severally, for the full amount owed on the note and the $450,000 deposit, together with accrued prejudgment interest and attorney's fees of approximately $60,000." The trial court provided the parties 30 days to prepare a "full settlement agreement."
IV.
THE PARTIES EXECUTE THE SETTLEMENT AGREEMENT, PURSUANT TO
WHICH THE CONSOLIDATED ACTIONS ARE DISMISSED WITH PREJUDICE,
AND ALSO EXECUTE THE STIPULATION FOR JUDGMENT.
Life Vessel Advanced and Brakke entered into a written settlement agreement with defendants, dated February 14, 2012 (the settlement agreement). The settlement agreement states that defendants jointly and severally "shall pay the sum of $1,595,000 to Plaintiffs Brakke and [Life Vessel Advanced] (the 'Settlement Payment') in three (3) minimum installments as follows: (a) $500,000 on or before November 1, 2012; (b) $500,000 on or before November 1, 2013; and (c) $595,000 on or before November 1, 2014 (the 'Payment Period')." Section 2 of the settlement agreement, entitled "Stipulation for Judgment" (underscoring omitted), provides: "The performance of the terms and conditions of this Agreement shall be secured by the 'Stipulation for Judgment' attached hereto as Exhibit '1' which is incorporated herein. The Stipulation for Judgment shall not be entered or become effective unless and until the Defendants default under the terms and conditions of this Agreement."
The settlement agreement defines "an event of 'Default'" as including "[t]he failure of either Plaintiffs or Defendants to perform the terms and conditions required under this Agreement." The settlement agreement states: "In the event of a default in payment by McNew and/or Life Vessel [Corporation] of the Settlement Payment under this Agreement, all unpaid amounts due under the Settlement Payment shall be immediately due and payable. Plaintiffs may waive acceleration of the amounts due."
The settlement agreement further provides: "Upon informing the Court of the execution of this Settlement Agreement, the case will be dismissed with prejudice, and the Court shall continue to have jurisdiction to enforce the terms of this Agreement." It also requires that any modifications to the settlement agreement be in writing and signed by the parties.
On February 16, 2012, in accordance with the terms of the settlement agreement, Life Vessel Advanced and Brakke requested dismissal of the consolidated actions with prejudice; dismissal was entered accordingly.
The stipulation for judgment, incorporated by reference into the settlement agreement, states that Life Vessel Advanced, Brakke, and defendants agreed that "[j]udgment may be entered in favor of Plaintiff and against Defendants in the sum of $1,595,000 (the 'Judgment') pursuant to the terms of this Stipulation and the Settlement Agreement between Plaintiffs and Defendants executed concurrently herewith" and entry of judgment is stayed, provided defendants do not default under the terms of the settlement agreement. The stipulation for judgment provides: "In the event of a default under the terms of the Settlement Agreement, the full amount of the Judgment together with prejudgment interest at the legal rate of 9% per annum on the unpaid amount of the Judgment from and after July 15, 2009, and attorneys' fees of $60,000, less any amounts paid prior to the default, shall be immediately accelerated and shall become due and payable. Judgment shall be entered forthwith upon the filing of this Stipulation with a Declaration Re Default by Plaintiffs or Plaintiffs' counsel."
The stipulation for judgment further provides: "If Judgment is entered upon the Stipulation for Entry of Judgment as provided herein, Defendants waive notice of entry of the Judgment and any rights they may have for requesting or having a new trial or any rights that they may have to request or to have an appeal from the entry of the Judgment." It also states: "Judgment may be entered in accordance with this Stipulation by a Judge or Commissioner of the Court upon the application by Plaintiffs, without a noticed motion."
V.
LIFE VESSEL ADVANCED AND BRAKKE APPLY EX PARTE FOR AN ORDER SETTING
ASIDE THE DISMISSAL OF THE CONSOLIDATED ACTIONS AND ENTERING
JUDGMENT AGAINST DEFENDANTS PURSUANT TO THE STIPULATION FOR
JUDGMENT AGREED TO IN THE SETTLEMENT AGREEMENT.
Life Vessel Advanced and Brakke applied ex parte for an order setting aside the dismissal of the consolidated actions and entering judgment based upon defendants' default of their obligations under the settlement agreement. The ex parte application was supported by the declaration of Attorney Clinton L. Hubbard which stated in part: "On November 1, 2012, Defendants paid to Plaintiffs the initial payment of $500,000 as required under the Settlement Agreement and Stipulation for Judgment. As regards the next payment of $500,000 due November 1, 2013, Defendants requested and Plaintiffs agreed to numerous extensions of time to make the payment. After also failing to make the last payment of $595,000 due the following year on November 1, 2014, Defendants continued to request and Plaintiffs granted additional extensions for payment. In consideration for a total of fourteen (14) extensions over the past fifteen (15) months, Defendants offered and Plaintiffs agreed to extension fees which now total $675,000." Hubbard's declaration further stated: "On December 8, 2014, Plaintiffs and Defendants entered into the last of the extension agreements (the 'Final Extension Agreement') . . . . As of the date of the Final Extension Agreement, Defendants had failed to pay the $1,770,000 due Plaintiffs as stated in the Final Extension Agreement, consisting of the $500,000 due on November 1, 2013, the $595,000 due on November 1, 2014, and payment of the $675,000 of extension fees agreed to between Plaintiffs and Defendants in the numerous extension agreements during the period of December 16, 2013 to the Final Extension Agreement dated December 8, 2014. [¶] . . . The Final Extension Agreement granted an extension to December 31, 2014, for Defendants to pay the $1,770,000 due Plaintiffs, and Defendants have failed and refused to pay any amount to Plaintiffs as required under the Stipulation for Judgment as amended by the Final Extension Agreement."
Life Vessel Advanced and Brakke sought judgment entered in their favor and against defendants in the total amount of $2,330,960, comprised of the principal amount of $1,095,000, interest on the unpaid principal amount at 9 percent per annum from July 15, 2009 to January 15, 2014, extension fees in the amount of $675,000, and attorney fees in the amount of $60,000.
VI.
JUDGMENT IS ENTERED AGAINST DEFENDANTS; DEFENDANTS APPEAL.
In January 2015, judgment was entered against defendants, stating in part:
"IT IS HEREBY ORDERED that the prior dismissal of this action after settlement between the parties is set aside nunc pro tunc, and
"IT IS HEREBY ORDERED that Plaintiffs Life Vessel Advanced Wellness Corporation, a Nevada Corporation[,] and James Brakke, an individual, shall have judgment against Defendants Barry McNew, an individual, and Life Vessel Corporation, a Delaware Corporation, jointly and severally, in the amount of $2,330,960 consisting of:
| "1. | Principal Amount | - | $1,095,000 |
| "2. | Interest at 9% per annumon the unpaid Principal Amountfrom 7/15/09 through 1/15/15 | - | 500,960 |
| "3. | Extension Fees | - | 675,000 |
| "4. | Attorney Fees | - | 60,000 |
|---|---|---|---|
| "$2,330,960" |
Defendants appealed from the January 2015 judgment and moved to proceed on their appeal by way of a settled statement pursuant to California Rules of Court, rule 8.137 because no court reporter was present at the ex parte hearing to set aside the dismissal and enter judgment against them.
VII.
THE AGREED STATEMENT OF PROCEEDING AT HEARING
The trial court granted defendants' motion to proceed with their appeal by way of a settled statement. Defendants' "Agreed Statement of Proceeding at Hearing" was filed in this court. The agreed statement stated, inter alia, that at the hearing, defendants' counsel asked for a continuance and expressed defendants' opposition to the ex parte application "due to equitable concerns." Defendants' counsel argued: "The motion should be heard on a regular notice because the ex parte notice which was served a little over 24 hours before the hearing did not provide sufficient time for Defendants to oppose it due to the fact that Mr. Burk who received notice of the hearing in Washington D.C. is not present in California and is not licensed in California to practice law; that Mr. McNew as a resident of the State of Kansas where he received notice of the hearing had no time or ability to retain counsel to appear at this hearing; that Mr. Reedy, local counsel . . . [,] recently died."
Defendants' counsel stated there was insufficient time to prepare and submit written opposition to the ex parte application, thereby depriving defendants of due process. He argued "equitable concerns" constitute grounds for denial of the ex parte application, "consisting of the fact[s] that Plaintiff had intentionally interfered with Defendants' ability to pay the amount(s) due under the terms of the Settlement Agreement in this case; that Plaintiff had committed fraud and misrepresentation in dealing with Defendants' customers which interfered with Defendants' ability to consummate sales with those customers; that Plaintiff had committed trade disparagement and interference with business relations of Defendants further interfering with Defendants' ability to pay the amounts due to Plaintiff."
Counsel for Life Vessel Advanced and Brakke stated that defendants had defaulted 14 times on deadlines that had been set pursuant to extensions granted to them over the previous 15 months on payment due dates set forth in the settlement agreement. He argued the settlement agreement provided that the judgment could be entered without notice. Counsel also argued that defendants' "unsupported allegations" of equitable concerns had never been raised over the prior 15-month period and, in any event, were not a defense to the breach of payment obligations of the settlement agreement and stipulation for judgment.
DISCUSSION
I.
ENTERING JUDGMENT PURSUANT TO THE STIPULATED JUDGMENT AND
THE SETTLEMENT AGREEMENT ON AN EX PARTE BASIS DID NOT
VIOLATE DEFENDANTS' DUE PROCESS RIGHTS.
Defendants argue, "the order setting aside the dismissal and entry of judgment upon default against [defendants] must be reversed because it violated their due process rights." (Capitalization & boldface omitted.) Defendants' argument is without merit.
Here, the parties agreed to a stipulated judgment as part of the settlement agreement of the consolidated actions and agreed the trial court would retain jurisdiction over the parties to enforce the terms of the settlement agreement in accordance with section 664.6 of the Code of Civil Procedure. That statute provides: "If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement." (Code Civ. Proc., § 664.6.)
In Needelman v. DeWolf Realty Co., Inc. (2015) 239 Cal.App.4th 750, 763 (Needelman), Jeffrey A. Needelman, a tenant in an unlawful detainer action, asserted a similar argument to the one raised by defendants in the instant case, arguing, "the stipulated judgment violated his due process rights because it permitted the lessors to obtain a judgment against him under specific conditions after giving him only 24 hours' notice." The appellate court stated: "'"The fundamental requisite of due process of law is the opportunity to be heard." [Citation.] The hearing must be "at a meaningful time and in a meaningful manner." [Citation.] In the present context these principles require that a recipient have timely and adequate notice . . . ."' [Citation.] This means a litigant must be given '[t]he opportunity to present reasons, either in person or in writing, why proposed action should not be taken . . . .' [Citation.]" (Ibid.)
The appellate court further stated, "[h]ere, the provision in the stipulation did not deprive Needelman of due process. The stipulation required that he be given 24 hours' notice of an ex parte motion for a judgment pursuant to stipulation. Indeed, on May 14, 2012, the lessors notified Needelman orally and in writing of their intent to submit an ex parte application for a judgment pursuant to stipulation, and they filed such an application two days later on May 16. Needelman complains that he was unable to attend the hearing but he had agreed to his receiving shortened notice. . . . Needelman thus had notice and an opportunity to oppose the application; the stipulated judgment did not violate his due process rights." (Needelman, supra, 239 Cal.App.4th at pp. 763-764.)
The appellate court rejected Needelman's argument "that Code of Civil Procedure section 664.6 requires a noticed motion as opposed to an ex parte motion." (Needelman, supra, 239 Cal.App.4th at p. 764.) The court stated, "Needelman's reliance on Code of Civil Procedure section 664.6 is misguided. The lessors did not bring a motion under this section, but sought judgment as specifically provided for in the settlement agreement. Here, paragraph No. 5 of the settlement agreement specifically permitted, upon 24 hours' notice, an ex parte application for a judgment pursuant to the terms of the stipulation. Furthermore, section 664.6 of the Code of Civil Procedure does not on its face require a noticed motion. The words 'upon motion' generally mean a request of a party." (Ibid.)
Here, the parties entered into a stipulated judgment, under section 664.6 of the Code of Civil Procedure, which was incorporated into the settlement agreement. The settlement agreement requires that the "performance of the terms and conditions of this Agreement shall be secured by the 'Stipulation for Judgment.'" (Italics added.) The stipulation for judgment specifically provides that in the event of default, the full amount of the judgment still owing, combined with interest and attorney fees, "shall be immediately accelerated and shall become due and payable" and "[j]udgment shall be entered forthwith upon the filing of this Stipulation with a Declaration Re Default by Plaintiffs or Plaintiff's counsel." (Italics added.) The stipulation for judgment further states: "Judgment may be entered in accordance with this Stipulation by a Judge or Commissioner of the Court upon application by Plaintiffs, without a noticed motion." (Italics added.)
Defendants do not argue that Hubbard's declaration establishing defendants' default in making payments according to the terms of the settlement agreement was insufficient; defendants do not disclaim their default status. Therefore, Life Vessel Advanced and Brakke were entitled to entry of judgment for, inter alia, unpaid amounts under the settlement agreement.
Defendants expressly agreed that judgment pursuant to the stipulation for judgment may be sought without a noticed motion. The record shows defendants were provided notice of the ex parte hearing and they do not argue that notice was insufficient under the applicable standards for ex parte applications.
The trial court therefore did not err by granting plaintiffs' ex parte application to vacate the dismissal of the consolidated actions, and to enter judgment against defendants pursuant to the settlement agreement's stipulation for judgment.
II.
THE TRIAL COURT DID NOT ERR BY INCLUDING $675,000 IN
EXTENSION FEES IN THE JUDGMENT.
Defendants argue, "the trial court erred in awarding the $675,000 in extension fees because it was not included in the terms of the stipulated judgment." (Capitalization & boldface omitted.) We apply ordinary contract principles in interpreting the stipulated judgment and, in the absence of extrinsic evidence, we may interpret it as a matter of law. (Needelman, supra, 239 Cal.App.4th at p. 758.)
At least 15 times, Life Vessel Advanced and Brakke entered into written agreements with defendants to extend the timeframe within which defendants were required to make payments under the settlement agreement. In consideration for those extensions, defendants agreed to pay Life Vessel Advanced and Brakke extension fees in the total amount of $675,000. The parties' written extension agreements provided that the extension agreements constituted amendments to the settlement agreement. The settlement agreement incorporated the stipulation for judgment and provided for written and signed modifications of that agreement.
Taking the documents comprising the settlement agreement as a whole (Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 1173), we conclude the parties, in entering the extension agreements to amend the settlement agreement, intended to include the extension fees in the amount that Life Vessel Advanced and Brakke could recover through the stipulation for judgment. Although the extension agreements did not specifically refer to the stipulation for judgment, as noted, the stipulation for judgment was incorporated into the settlement agreement and was the vehicle for enforcing the terms of settlement in an expeditious manner.
Nothing in the record suggests the parties had any intent to require Life Vessel Advanced and Brakke to initiate a new lawsuit to pursue the recovery of the extension fees in the event of defendants' default. Although it would have been better if the parties had expressly stated that the extension agreements and related fees constituted modifications of the stipulation for judgment itself, in addition to the settlement agreement, we conclude that the parties intended to include extension fees in the stipulation for judgment by amending the settlement agreement itself.
DISPOSITION
The judgment is affirmed. Respondents shall recover costs on appeal.
FYBEL, J. WE CONCUR: MOORE, ACTING P. J. IKOLA, J.