Law Office of Kimball J.P. Sargeant, Kimball J.P. Sargeant for Plaintiffs and Appellants. Greenblatt & Associates, Frederic J. Greenblatt for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. SC089190)
APPEAL from a judgment of the Superior Court of Los Angeles County. Cesar C. Sarmiento, Judge. Affirmed in part and reversed and remanded in part, with directions.
Law Office of Kimball J.P. Sargeant, Kimball J.P. Sargeant for Plaintiffs and Appellants.
Greenblatt & Associates, Frederic J. Greenblatt for Defendants and Respondents.
Plaintiffs appeal from an order granting a motion to enforce a settlement. Plaintiffs expressly agreed to the settlement in the trial court, on the record. Then they had second thoughts. We find their attempts to escape the settlement meritless.
We reverse in part, however, to strike an attorney fees award, because there was no effective agreement allowing for the recovery of fees.
Factual and Procedural Background
In 2003, Thomas Nussbaum and his mother, Evelyn Clayton, filed suit in San Mateo County against Solomon (Shlomy) Weingarten and others, alleging that Weingarten defrauded them in a real estate scheme. Nussbaum and Clayton obtained a default judgment in March 2005 for $1,455,167.22, a total that included punitive damages. Sometime thereafter, the San Mateo court modified the default judgment by reducing the punitive damages award to zero. After the reduction, the aggregate amount of the judgment totaled $455,217.22.
The default judgment against Weingarten was further reduced by payments made pursuant to the judgment by another defendant in the San Mateo action.
Plaintiffs Nussbaum and Clayton initiated the instant action in Los Angeles County in March 2006 in an attempt to collect amounts outstanding from the San Mateo judgment. They alleged that Weingarten had fraudulently transferred various properties he owned in order to evade their collection efforts. The claimed recipients of the transfers included defendants and respondents Gregg Corlyn, Donna Corlyn, and Pacific Panorama, LLC.
Plaintiffs were unable to serve the fraudulent transfer complaint and summons on Weingarten (who lives in Nevada) and other defendants, and in February 2007, the trial court dismissed the unserved defendants. In October 2007, the plaintiffs amended their complaint by naming two additional defendants, Meir Kattan and Kattan Diamonds and Jewelry, both of whom answered the complaint.
The Oral Settlement
Trial was set for April 2009. On the first day of trial, the trial court ruled on motions in limine and granted the defendants' motion to bifurcate the issue of punitive damages. The next day, counsel for the parties advised the court that they were discussing settlement, and asked the court to assist. Later that day, following settlement discussions, the parties told the court that they had settled the case.
The terms of the settlement were recited in open court and on the record. As stated by the parties' attorneys, the Corlyns agreed to deposit into their attorney's trust account $375,000, which amount would be dispersed to plaintiffs' attorney following the signing of a written settlement agreement. The parties agreed to dismissal of the action with prejudice, along with acknowledgment of full satisfaction of the judgment in the prior San Mateo action and dismissal of another pending lawsuit against Weingarten in Nevada. Plaintiffs agreed to full releases of all defendants to the Los Angeles County litigation, and those defendants agreed to full releases of plaintiffs. The releases included waivers of the protections afforded by Civil Code section 1542. The court was to retain jurisdiction to enforce the settlement.
Since Weingarten was not a party to the Los Angeles County litigation, the question was raised of how to include Weingarten within the mutual releases of plaintiffs. Counsel for the Corlyns, Fredric Greenblatt, stated that he was "given authority by Mr. Weingarten's counsel Mark Jeffers" to fully release plaintiffs. The trial court felt that Greenblatt's representation was insufficient to form an effective release, however, and so suggested that plaintiffs' "release as to Mr. Weingarten [be] contingent upon his release" of them. Plaintiff Clayton verbally agreed, with the condition that Weingarten's release be in writing.
After all of these terms were discussed, each party (plaintiffs Nussbaum and Clayton, and defendants Mr. and Mrs. Corlyn, Pacific Panorama, Meir Kattan, and Kattan Diamonds and Jewelry) orally consented to the settlement on the record. The court then stated: "The court will accept the settlement agreement. I will also make a finding that all parties have participated in this settlement conference and have agreed to it after a full understanding of the terms of the settlement as described on the record at this time. The court will retain jurisdiction to enforce the settlement agreement." After further discussion, the court stated: "This is an enforceable settlement on the record under the terms of the [sic] C.C.P. 664." Michael Liberty, plaintiffs' counsel, then requested that the parties agree that the prevailing party would receive attorney fees for any action to enforce the settlement. Greenblatt agreed, but counsel for Kattan did not.
Following the oral settlement, Greenblatt drafted a written settlement agreement and forwarded it to Liberty for comments. Liberty (in consultation with plaintiffs) suggested minor modifications, which were included in the final draft of the written agreement. The written agreement was largely consistent with the terms of the oral settlement. Additionally, it included standard form language typically found in written settlement agreements. It also contained an attorney fees clause like the one requested by Liberty at the hearing. And, importantly, the agreement contained written releases of the plaintiffs by Weingarten. Weingarten signed the agreement, as did all the defendants and all the attorneys, including Liberty. All appeared to be going smoothly.
Then, everything fell off the tracks. First, plaintiffs said they would not sign the agreement until they saw Weingarten's signature. Weingarten's signature was faxed to them. They still refused to sign. Then, plaintiffs fired Liberty and substituted themselves in propria persona. They then claimed that the trial court had "removed" the settlement.
Next, plaintiffs brought an ex parte application to continue the trial date. Defendants opposed the application and brought their own ex parte application to enforce the settlement. The court vacated the trial date and ordered that defendants' motion to enforce the settlement, brought pursuant to Code of Civil Procedure section 664.6, be heard on regular notice.
Plaintiffs opposed the motion to enforce the settlement. This time, they argued the settlement was enforceable, just not as to Weingarten, who was not present when the oral settlement was made on the record. Plaintiffs apparently wanted to take the benefits of the settlement—including the $375,000 and the releases from defendants—and continue pursuing Weingarten in Nevada.
The trial court heard the motion to enforce the settlement on July 21, 2009. The court stated it was granting the motion. It found that the settlement was enforceable and that Weingarten's signature on the written agreement made the settlement enforceable as to him. After plaintiffs continued to argue that the settlement could not include Weingarten because he was not present in court in April 2009 for the oral settlement, the court swore in Weingarten, who was present in the courtroom for the July hearing. Weingarten testified that he signed the written settlement agreement, testified that he understood he had submitted to the jurisdiction of the court, and testified that he was bound by the April settlement.
Following the hearing, the trial court entered an order stating that the motion to enforce the settlement was granted, and ordering plaintiffs to pay $11,143.50 in attorney fees incurred by defendants in seeking enforcement of the settlement. The order further required plaintiffs to execute the written agreement.
On appeal, plaintiffs now contend that there was no settlement, either with Weingarten or anyone else. They make a variety of arguments in support of this assertion, none of which we find convincing.
Plaintiff's appeal does contain at least one valid point, however. Since there never was an effective agreement allowing an award of attorney fees to the party seeking enforcement of the settlement, the trial court erred in ordering plaintiffs to pay defendants' attorney fees. Accordingly, we affirm in part and reverse in part. I. The Settlement Is Effective.
Encouraging voluntary settlement of litigation is "the strong public policy of this state." (Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1359.) Code of Civil Procedure section 664.6 (hereinafter, section 664.6) promotes this policy by providing a summary procedure for enforcement of a settlement agreement, obviating the need to file a new lawsuit. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809.) "It is for the trial court to determine in the first instance whether the parties have entered into an enforceable settlement." (Osumi v. Sutton, supra, 151 Cal.App.4th at p. 1360.) The trial court's factual findings on a motion to enforce a settlement are subject to a substantial evidence standard of review. (Williams v. Saunders (1997) 55 Cal.App.4th 1158, 1162.) We review de novo the application of section 664.6 to undisputed facts. (Williams v. Saunders, at p. 1162.)
Plaintiffs posit a number of theories to bolster their claim that there was no valid settlement agreement. Their first argument is that the April 2009 oral settlement was nothing more than an "agreement to agree." According to plaintiffs, material terms were reserved for the final written agreement, which was never completed. A purported oral settlement agreement is not effective when it expressly provides that it will not be binding unless there is formal execution of a written settlement agreement. (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307; Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 358.) However, if the oral agreement shows "'no more than an intent to further reduce the [agreement] to a more formal one' the failure to follow it with a more formal writing does not negate the existence of the prior contract." (Harris v. Rudin, Richman & Appel, supra, 74 Cal.App.4th at p. 307.) "[I]f the respective parties orally agreed upon all of the terms and conditions of a proposed written agreement with the mutual intention that the oral agreement should thereupon become binding, the mere fact that a formal written agreement to the same effect has not yet been signed does not alter the binding validity of the oral agreement." (Banner Entertainment, Inc. v. Superior Court, supra, 62 Cal.App.4th at p. 358.)
No formal judgment was entered by the trial court. However, since the order finally determined the rights of the parties in the action, we may treat the order as if it included an appealable judgment. (See Hines v. Lukes (2008) 167 Cal.App.4th 1174, 1183.)
It is abundantly clear that the oral agreement read into the record and agreed to by all parties was intended to be, and in fact was, a binding settlement agreement. After the terms of the settlement were stated by the attorneys, all of the litigants were individually asked if they agreed to the settlement, and each responded in the affirmative, without reservation. The court stated that all parties agreed to the settlement with a full understanding of the terms, and "[t]his is an enforceable settlement on the record under the terms of the [sic] C.C.P. 664." Nobody objected to the court's findings.
Furthermore, no material terms were reserved for the written agreement. This was not at all similar to the case cited by plaintiffs, Weddington Productions, Inc. v. Flick, supra, 60 Cal.App.4th at page 815, in which the scope and permitted uses of a sound library license—the material terms of a purported settlement agreement—were never agreed to by the parties. The material terms of the settlement here were the $375,000 payment, the releases, and the dismissals of the various legal proceedings. Each of these terms was stated and agreed to on the record in the oral agreement.
Plaintiffs' other arguments for the unenforceability of the settlement revolve around Weingarten's absence at the April 2009 hearing. In a misreading of the statute, plaintiffs contend that all parties to a settlement must agree to the settlement on the record for it to be enforceable pursuant to section 664.6. This is simply incorrect. Section 664.6 states, in pertinent part, "If parties to pending litigation stipulate . . . 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." (Italics added.) All parties to the litigation orally stipulated to settlement of the case at the April hearing. Weingarten was not party to the case.
The trial court also did not err by finding the settlement applies to Weingarten. A settlement agreement may extend to persons or entities who are not parties to the litigation. (See Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 558-559.) At the April 2009 hearing, plaintiffs demanded, as part of the settlement, that Weingarten provide written releases to them. Weingarten did exactly that. Per the settlement, plaintiffs were therefore required to release Weingarten. The trial court was given authority to retain jurisdiction to enforce the settlement, and it properly exercised its authority in determining that the settlement was effective as to Weingarten and plaintiffs.
Nor did it matter that Weingarten's consent to the settlement was in a different form (written) from the oral settlement. First, as explained, Weingarten was not a party to the litigation. Second, even if the requirements of section 664.6 applied to his approval, they were satisfied. A settlement may be enforced pursuant to section 664.6 "in either of two situations: where the settlement was made orally before the trial court or where it was made in writing outside the presence of the court. Nothing in the statutory language suggests that, in a multiparty action, all parties must agree to the settlement in the same manner. And as long as the parties agree to the same material terms, be it orally or in writing, the purpose of section 664.6 is satisfied." (Elyaoudayan v. Hoffman (2003) 104 Cal.App.4th 1421, 1428.) Weingarten signed the written settlement agreement. It contained the same material terms as the oral agreement.
Unlike the situation in a case relied on by plaintiffs, Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1259, in which the court found that a later written agreement materially differed from an earlier oral stipulation because it changed what civil actions were being released, the written agreement here did not deviate from the oral agreement in such a material manner.
To the extent that the written agreement differed from the oral agreement, it was due to the inclusion of standard form language, not material terms. On appeal, plaintiffs contend that the inclusion of an attorney fees clause in the written agreement was a material change, since the parties did not all agree to such a provision at the April 2009 hearing. Given the circumstances, the inclusion of the attorney fees clause was immaterial. The agreement between plaintiffs and Weingarten to settle their disputes was not at all dependent on the issue. Furthermore, the record clearly reflects that it was plaintiffs, through their counsel, who proposed the attorney fees provision. Moreover, after the draft settlement agreement was circulated, plaintiffs were given the opportunity to revise it or suggest changes. While plaintiffs made a number of changes, they never rejected the attorney fees provision or even suggested that it should not be included in the written agreement. Instead, they just refused to sign the written agreement, without giving any reasonable explanation why. Even when opposing the section 664.6 motion, plaintiffs did not claim that the written agreement materially differed from the oral settlement. Allowing plaintiffs to now dodge their agreement by leveraging a term that they suggested themselves into an issue destroying a valid settlement would imprudently reward duplicitous behavior.
Plaintiffs may have thought they could avoid their obligations by refusing to sign the written agreement. They were mistaken. "Often, in cases where an oral settlement is placed on the record in the trial court, a written agreement will follow. If difficulties or unresolvable conflicts arise in drafting the written agreement, the oral settlement remains binding and enforceable under section 664.6. Having orally agreed to settlement terms before the court, parties may not escape their obligations by refusing to sign a written agreement that conforms to the oral terms." (Elyaoudayan v. Hoffman, supra, 104 Cal.App.4th at p. 1431.)
In any event, in sworn testimony given at the July 2009 hearing, Weingarten acknowledged he consented to jurisdiction of the court and agreed to and was bound by the terms of the April settlement.
In sum, we find that the oral settlement recited at the April 2009 hearing is effective, and that Weingarten is a party to the settlement and is bound by it. Plaintiffs, of course, are likewise fully bound by the settlement, including with respect to Weingarten. The trial court correctly granted the section 664.6 motion. II. The Attorney Fees Award Was in Error.
Although immaterial to the issue of whether there was consent by all parties to the settlement agreement, the effectiveness of the attorney fees provision was material to the issue of whether fees could be awarded. At the July 2009 hearing on defendants' motion to enforce the settlement pursuant to section 664.6, the trial court based its award of $11,143.50 in attorney fees on a finding that the parties agreed to an attorney fees provision at the April 2009 hearing. This finding was incorrect.
At the April hearing, the provision allowing a party to recover attorney fees was not proposed by plaintiffs' counsel until after each party had consented to the settlement. Thus, the parties did not individually consent to the attorney fees provision at the hearing. Furthermore, counsel for two of the parties, Kattan and Kattan Diamonds and Jewelry, explicitly rejected the proposal at the hearing. Therefore, the effective settlement agreement did not contain a provision allowing for the recovery of fees.
The trial court should not have ordered plaintiffs to pay defendants' attorney fees or allowed defendants to deduct the sum of $11,143.50 from the settlement amount payable to plaintiffs. The court's August 4, 2009 order was also in error because it required plaintiffs to execute the written settlement agreement, which contained the attorney fees provision.
The order granting defendants' motion to enforce the settlement agreement is affirmed in part and reversed in part. On remand, the trial court is directed to enter judgment consistent with the terms of the April 2009 oral settlement agreement, which was consented to by plaintiffs, Weingarten, and all other parties to the agreement. The prior award of $11,143.50 in attorney fees is struck. The trial court shall retain jurisdiction to enforce the settlement until performance in full of all of its terms.
The parties are to bear their own costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
DOI TODD, J.