Summary
noting that "it is reasonable to infer any delay in the payment of money amounts to a substantial breach when the party now denying breach earlier acknowledged (in writing) that the delay would constitute an 'incurable' and 'material' breach as the appellants so recognized in the negotiated settlement agreement"
Summary of this case from Irish v. Ghadyan (In re Abulyan)Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. TC020236 Josh M. Fredericks, Judge.
Michael B. Montgomery for Defendants and Appellants.
Lim, Ruger & Kim, Bryan K. Sheldon and George Busu for Plaintiff and Respondent.
WOODS, J.
Appellants, J. Victor Ibarra, Tiffany E. Jakstis and Anais Enterprises, Inc. appeal from the judgment after a bench trial in favor of respondent, Placo Investment, LLC, on its complaint for unlawful detainer alleging a material breach of the terms of the parties’ negotiated settlement agreement. On appeal, Ibarra claims insufficient evidence supported the trial court’s finding of a material breach of the settlement agreement under Code of Civil Procedure section 664.6. Appellants alternatively argue the underlying judgment results in an inequitable forfeiture as stated in Civil Code section 3275. As explained herein, substantial evidence presented at trial supported the judgment in favor of respondent. Consequently, we affirm.
FACTUAL AND PROCEDURAL HISTORY
Respondent is the owner of a shopping center known as Plaza Mexico in Lynwood, California. On September 21, 2004, appellants and respondent entered into a written lease agreement, whereby appellants rented Unit B of the shopping center to operate a restaurant.
Various disputes arose between the parties concerning appellants’ performance under the terms of the lease, which resulted in respondent serving appellants with a “Ten Day Notice to Cure or Quit” on two separate occasions. Ultimately, the parties were unable to reconcile their differences and respondent filed its complaint for unlawful detainer on July 13, 2006. The complaint alleged several breaches of the lease agreement, most notably that appellants tendered a payment of rent by check drawn upon an account containing insufficient funds.
Appellants filed an answer and a separate breach of contract action on October 12, 2006, against respondent claiming respondent breached the lease. Respondent filed a motion for summary judgment on November 3, 2006, which was denied.
On December 18, 2006, the day before the unlawful detainer trial was set to commence, the parties arrived at a negotiated settlement agreement. The settlement agreement allowed appellants a final chance to pay all of the accrued past due rent and to rebuild the premises according to the agreed architectural plans in exchange for respondent’s waiver of its right to commence trial the following day for the unlawful detainer claim.
The settlement agreement specified payment was due within five days of December 18, 2006. Because appellants had a history of delivering checks to respondent that had “bounced,” respondent voiced concerns about payment at the settlement conference and received assurances of timely payment. Respondent also negotiated specific clauses in the settlement agreement to address this concern. In particular, the agreement contained the following clauses regarding a failure to pay rent within the specified time:
“1.B. If Tenant fails to perform in accordance with this Agreement or the Lease in any other material respect, Placo shall be entitled to immediate entry of judgment against Tenant in the UD Action, for possession of the Premises, the amount of $112,339.65, plus interest thereon at the rate of 5% per annum from the Effective Date through entry of judgment, plus all attorney’s fees and costs incurred by Placo in enforcing this Agreement, minus a credit for any partial payments made by Tenant. Placo shall be entitled to obtain such judgment by making a motion in the UD Action for the entry of judgment pursuant to the provisions of this Agreement. The Court shall retain jurisdiction to enforce the terms of this Agreement.”
“3.B. Past Due Rent. Within five days of the Effective Date, Tenant shall pay Placo the sum of $68,219.85 for rent due for the period from June 1, 2006 to December 30, 2006 (‘Past Due Rent’). Failure to pay Past Due Rent in full, by check or instrument honored by the paying bank upon its first presentation within the time specified is agreed by the parties to constitute an incurable material default under this Agreement and the Lease.” (Emphasis added)
As a result of the settlement agreement, at the request of the parties, the court vacated the trial date. Based on the terms of the settlement agreement and intervening holidays, appellants had until December 26, 2006, to tender payment. On December 26, 2006, appellants delivered a check to respondent, which respondent’s bank failed to honor for being drawn on an account containing insufficient funds.
On January 4, 2007, respondent filed an ex parte application for entry of judgment pursuant to Code of Civil Procedure section 664.6. In appellants’ opposition to respondent’s ex parte application for entry of judgment, they conceded breach of the settlement agreement by the default of payment due on December 26, 2006. Nonetheless, appellants argued they were entitled to discretionary relief from forfeiture of the lease pursuant to Civil Code section 3275. The court granted respondent’s motion for entry of judgment, finding that appellants had breached a material negotiated term of the settlement agreement and were not entitled to relief from forfeiture because of their own gross negligence in failing to adequately ensure sufficient funds were in the bank account to issue their rent check.
This timely appeal followed.
DISCUSSION
This appeal presents two issues. First appellants dispute that sufficient evidence was presented at trial to support their material breach of the settlement agreement. Second, in the alternative, they argue the trial court erred in denying them relief from forfeiture under the circumstances because insufficient evidence was presented at trial to support the conclusion they acted with gross negligence.
Before this court appellants also contend the trial court lacked sufficient evidence to support its judgment that appellants committed a material breach of the original lease agreement. However, the original lease is not at issue because the parties negotiated the December 18, 2006, settlement agreement to resolve their disputes under the lease agreement.
This court uses a substantial evidence standard when reviewing a lower court’s factual findings to determine the sufficiency of evidence. (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 874; see also Hughes Tool Company v. Max Hinrichs See Co. (1980) 112 Cal.App.3d 194, 201.) Evidence is substantial if it is reasonable, credible, and of solid value. (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 651.) In reviewing a claim of insufficiency of evidence, the appellate court will look at the whole record and review the evidence, contradicted or uncontradicted, in the light most favorable to the judgment rendered below. (Rivard v. Bd. of Pension Commissioners of the City of Los Angeles (1985) 164 Cal.App.3d 405, 410.) Even if evidence gives rise to conflicting inferences, the appellate court must defer to the trial court’s choice among conflicting reasonable inferences. (Milton v. Perceptual Develop. Corp. (1997) 53 Cal.App.4th 861, 867.) When evaluating the credibility of a witness, the reviewing court is also extremely deferential to the lower court’s determination. A decision will only be reversed on the basis of credibility if the appellant can prove that the evidence is inherently improbable or implausible. (Evje v. City Title Ins. Co. (1953) 120 Cal.App.2d 488, 492.) Ultimately, the test is “whether it is reasonable for a trier of fact to make the ruling in question in light of the record.” (Roddenberry v. Roddenberry, supra, 44 Cal.App.4th 634, 651 citing Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633.)
With these standards in mind, we consider the law governing the matters on appeal.
1. Appellants Materially Breached the Settlement Agreement
Pursuant to Code of Civil Procedure section 664.6, if parties to pending litigation agree in writing, the court may enter judgment pursuant to the terms of the settlement. Moreover, 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.
Here, the lower court acknowledged the parties entered into a binding settlement agreement at the December 18, 2006, settlement conference. The court held that the failure to timely tender rent payment was a material term of the settlement agreement. This finding is supported by substantial evidence in the record, namely the language of the settlement agreement. In the agreement the parties define what constitutes a material or incurable breach. Specifically, in Clause 3.B., the parties have stated: “Failure to pay Past Due Rent in full, by check or instrument honored by the paying bank upon its first presentation within the time specified is agreed by the parties to constitute an incurable material default under this Agreement and the Lease.” (Emphasis added.) Based on this language, the parties agreed that failure to tender timely payment would constitute an “incurable and material” breach. As a result, the trial court’s application of section 664.6 upon respondent’s ex parte application for entry of judgment to enforce the terms of the parties’ settlement agreement finds support in the record.
Evidence of the materiality of the breach is also corroborated by the conduct of the parties. Specifically, respondent waived its right to commence its unlawful detainer action one day before the trial was set. Moreover, the declaration of respondent’s shopping center manager, Jay Im, indicates that the importance of timely payment was repeatedly voiced to appellants and furthermore appellants understood this concern and assured respondent of timely payment. Appellants’ argument that any such breach of the settlement agreement was not substantial or material is thus without merit as evidenced by the parties’ signed agreement and conduct. Accordingly, sufficient evidence exists to support the trial court’s finding of a material breach of the settlement agreement by appellants.
2. Civil Code Section 3275 is Not an Affirmative Defense When the Party Seeking Relief from Forfeiture Was Grossly Negligent.
In seeking relief from forfeiture, appellants rely on the traditional maxim ‘equity abhors a forfeiture.’ Specifically, appellants point to Civil Code section 3275 as an affirmative defense to their breach of the settlement agreement. Section 3275 provides: “Whenever, by the terms of on obligation, a party thereto incurs a forfeiture, or a loss in the nature of a forfeiture, by reason of his failure to comply with its provisions, he may be relieved therefrom, upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty.” (Emphasis added.) Thus, appellants’ contend on appeal the trial court abused its discretion by finding appellants to have been grossly negligent in their failure to tender timely payment as agreed under the settlement agreement.
To support this argument appellants have presented the following evidence. Full performance was offered eight days after their initial attempt. Appellants contend they had no notice of the dishonored settlement check before that time. In fact, according to Ibarra’s sworn declaration, “I never bounced a check off Plaza Mexico until the settlement check was returned.” As to how the settlement check was issued, appellants rely on another declaration by Ibarra where he claims he believed he had sufficient funds in the account when he wrote the settlement check. Appellants present no other evidence to indicate how Ibarra formed this belief or why he would believe it in light of the subsequent events. Appellants further claim they remember no discussion of “insufficient funds” at the settlement conference whatsoever and furthermore that “there would be no reason to have such a discussion.”
In finding appellants to have been grossly negligent, the trial court stated the following in pertinent part: “[W]hether there was gross negligence or negligence, it seems to me that if the defendant in this case had been repeatedly told that it was important that this check not bounce, that and in the past that he had three bounced checks, it seems to me that it might be crossing over into gross negligence not to be sure that your account has money in it.” “I think the agreement clearly indicates that they no longer willing to put up with that kind of behavior. [¶] I’m going to grant the motion. I find this was a material part of the agreement, and that there was gross negligence on the part of Ibarra, et al., in failing to make sure that there was sufficient money in the account.” Appellants’ evidence does not indicate any abuse of discretion by the trial court, especially when contrasted with the settlement agreement appellants negotiated or evidence of the returned checks stamped by the bank for insufficient funds.
As mentioned elsewhere, the declaration of respondent’s shopping center manager, Im, is uncontradicted by appellants. Specifically, the declaration mentions a conversation at the settlement conference between Im and Ibarra where Im warned Ibarra about timely payment and received assurances of payment. Appellants’ claim there would be no reason to have such a discussion strains credulity in light of the fact that in the initial unlawful detainer complaint respondent alleged appellants’ tender of payment by checks drawn upon an account containing insufficient funds. The language of the settlement agreement also underscores the significant consequences of a failure to timely tender payment. The fact appellants do not “remember” any discussion of insufficient funds at the settlement conference is not proof of the fact any such discussion did not occur when appellants own signature on the settlement agreement would indicate otherwise.
Moreover, that full performance was offered eight days or any time after the payment due date is irrelevant to whether appellants were grossly negligent in tendering the rent payment by the payment date. As for Ibarra’s sworn declaration that he had never bounced a check to respondent, this is contradicted by at least two such “bounced” rent checks signed by Ibarra himself on March 31, 2006, and April 1, 2006. Thus, appellants have failed to carry their burden to prove a clear abuse of discretion by the trial court on the issue of gross negligence.
We also note appellants make several arguments in reference to the original lease, such as the lease permits late payments or that a delay in the payment of money is not a substantial breach. These arguments are unpersuasive, because the trial court’s judgment subject to challenge in this appeal was entered pursuant to the settlement agreement terms, not the original lease. Any argument on appeal premised on the terms of the original lease is, at this stage, irrelevant.
It does not appear appellants attempted to set-aside or challenge the terms of the settlement agreement in the lower court.
Moreover, it is reasonable to infer any delay in the payment of money amounts to a substantial breach when the party now denying breach earlier acknowledges (in writing) that the delay would constitute an “incurable” and “material” breach as the appellants so recognized in the negotiated settlement agreement.
Additionally, appellants claim the “first deposit” term is unrealistic, because there are many reasons checks could be returned on first presentation. This argument is irrelevant, because appellants and their lawyer negotiated this term in the settlement agreement. If they desired to negotiate different terms from the “first deposit” terms, then appellants should have done so. Appellants admit there had been a novation to the contract and thus must abide by its terms. Finally, as to appellants’ suggestion they were somehow prejudiced by the enforcement of the settlement agreement, any evidence substantiating this notion is lacking. At most, appellants have presented evidence as to disputes between the parties regarding performance of the architectural plans under the lease. Instead, the evidence indicates it is actually respondent who would be prejudiced by non-enforcement of the settlement agreement given that it waived its right to immediately commence its unlawful detainer trial.
In view of the foregoing, we conclude sufficient evidence supported the judgment.
We also briefly consider the attorney’s fees award in this case. Respondent sought $23,394 and the court awarded $19,374.05. In their opening brief, appellants contended that: “The Court’s determination, which is usually upheld, may be revisited where the applicant has supplied no competent evidence other than his own counsel’s request. While the Court did cut back some of the outrageous claims, and some charges that didn’t apply the remainder is still generous and Placo’s counsel conceded partial error.”
DISPOSITION
The judgment is affirmed. Respondent is entitled to costs on appeal.
We concur: PERLUSS, P.J. ZELON, J.
Based on this language, it appears appellants sought to challenge the sufficiency of evidence for attorney’s fees. However, in appellants’ reply brief, appellants have apparently abandoned the challenge of the attorney’s fees issue by stating, “Respondent did not file an appeal as to the amount of the award, so presumably the amount awarded should stand.” We interpret appellants’ statements in the reply as an abandonment of any challenge to the award of attorney’s fees.