Judge Christian R. Gullon, Case Number: 22PSCV00806, Date: 2025-03-10 Tentative Ruling

Judge: Christian R. Gullon, Case: 22PSCV00806, Date: 2025-03-10 Tentative Ruling

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MOTION TO ENFORCE SETTLEMENT AND REQUEST TO ENTER A JUDGMENT AND REQUEST FOR SANCTIONS is GRANTED IN PART; the court ENTERS judgment pursuant to the 998 offer/settlement but the court DENIES the second form of relief to enforce that judgment because (i) the motion is procedurally defective and/or (ii) Defendant has not breached the 998 offer/settlement since time is not of the essence and a third-party is causing the delay.

On August 2, 2022, Plaintiffs JUAN HERNANDEZ and SEBASTIAN HERNANDEZ filed suit against Defendant KIA AMERICA, INC. for SBA violations arising from their 2017 purchase of a 2014 Kia Cadenza.

On November 23, 2022, the court sustained Plaintiffs’ demurrer to Defendant’s answer.

On September 18, 2024, the parties filed an ‘ORDER BY STIPULATION REGARDING PLAINTIFFS’ ATTORNEY’S FEES, COSTS AND EXPENSES’ which states that the parties the parties “reached an agreement that Defendant KIA America, Inc. shall pay Plaintiffs the sum of $30,000.00 for attorney fees, costs and expenses…Defendant KIA America, Inc. shall pay to Plaintiffs the total sum of $30,000.00 within 45 days of the date this stipulation is mutually executed. No interest shall accrue if paid on or before the due date, otherwise interest shall run from the date of execution of this stipulation.” The stipulation was signed on 9/17/24.

Plaintiff brings forth the motion pursuant to Code of Civil Procedure sections 664.6 and 998. Section 664.6 provides in relevant part that “the court, upon motion, may enter judgment pursuant to the terms of the settlement.” Under the statute, the court “retains jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.” As for CCP section 998, that governs offers by a party to compromise. In relevant part, “[i]f the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly.” (Code of Civ. Proc., § 998, subd. (d).)

At the outset, there is a fundamental problem with the motion that is raised in opposition and not otherwise addressed in the reply: this motion is premature. (Opp. p. 4.) Because no judgment has yet been entered (hence Plaintiffs’ request to enter judgment), Plaintiffs have nothing to enforce pursuant to Section 664.6. It is the “judgment entered pursuant to [Section 998] [that] shall be deemed to be a compromise settlement." (Opp. p. 4, quoting Milicevich v. Sacramento Medical Center (1984) 155 Cal.App.3d 997, 1004.) With that, Plaintiffs are essentially improperly seeking two forms of relief–entry of judgment and enforcement of judgment–in one motion. (See Rutter Group, California Practice Guide: Civil Procedure Before Trial ¶9:24.3 (2024) [practice for combining motions].)

Setting aside the procedural problem, the court turns to the basis of the motion. According to the motion, on August 26, 2024, Plaintiffs served a 998 Offer for $44,700.00 in exchange for surrender of the subject vehicle plus attorney fees, costs and expenses by motion. (Cutler Decl. ¶3, Ex. A). Defendant signed, accepted, and returned the offer on September 5, 2024, and the parties thereby settled the case (“the Settlement”). The relevant terms of the 998 offer are as follows:

2. Plaintiffs shall also be entitled to post-judgment interest, if any, at the rate of 10% per annum starting from 60 days after KA receives all documents necessary to process the vehicle surrender, if Defendant does not perform timely as set forth below in Paragraph 3. 3. Plaintiffs will surrender the subject vehicle to Defendant, or to a mutually agreed-upon authorized KIA AMERICA, INC. dealership, on a mutually agreeable date no later than 60 calendar days after Defendant’s counsel has executed this Statutory Offer, unless circumstances caused by Plaintiffs result in delay. Defendant shall send payment of Settlement Funds via overnight mail to Plaintiffs’ counsel of Knight Law Group within 24 hours of the surrender of the subject vehicle. (Cutler Decl., Ex. A, pp. 6-7 of 23 of PDF, emphasis added.)

Sixty days from acceptance–September 5, 2024, would be November 5, 2024. Additionally, on September 11, 2024, and September 23, 2024, Plaintiffs’ counsel sent Defendant’s counsel (Lehrman Law Group LLP) a copy of the title, the registration, the preferred surrender. (Cutler Decl., ¶6, Ex. B.) Yet, according to Plaintiff, Defendant has not performed, has not accepted surrender of the Subject Vehicle, and has not provided a date certain for surrender or payment. (Cutler Decl., ¶5.)

In opposition, Defendant explains that it ordered the settlement check on 9/17/24 (Haroutunian Decl., ¶7) and that Defense Counsel received the settlement check on or about 11/15/24 (Ibid), but that the hold up is due to a delay by Morely, a third-party company with whom Defendant contracts to service “surrenders” of Kia vehicles that Defendant agrees to repurchase. (Haroutunian Decl., ¶5.) Effectively, Morely handles the surrender, not Defendant. And the process of surrender may take time as Morley and Defendant work together to coordinate the surrender with a third-party Kia dealership who has the space available in its service bay to inspect the Vehicle upon surrender and manage the surrender process. Scheduling a dealership to host the surrender can take a considerable amount of time, due to availability at participating dealerships. (Opp. p. 3.)^{^[1]} With that, Defendant argues they have not breached any agreement “because the Offer contains no strict ‘time is of the essence’ provision on the surrender process….” (Opp. p. 4:17-18.)

Here, the court agrees with Defendant that as a matter of contract interpretation, Defendant is not in breach of the Settlement. (Opp. p. 4, citing Ward v. Superior Court (1973) 35 Cal.App.3d 67, 69 [acceptance of 998 governed by contract law]; Milicevich, supra, 155 Cal.App.3d at p. 1004, fn. 9 [judgment entered pursuant to a section 998 settlement is regarded as a contract between the parties and “must be construed as any other contract.”].) And with contracts, generally, a “time is of the essence” provision signals that a failure to perform within the time specified is a material breach of the contract. (Magic Carpet Ride LLC v. Rugger Investment Group, L.L.C. (2019) 41 Cal.App.5th 357, 366 (Magic Carpet), citing Gold Min. & Water Co. v. Swinerton (1943) 23 Cal.2d 19, 27; U.S. Hertz, Inc. v. Niobrara Farms (1974) 41 Cal.App.3d 68, 78.) However, as noted by Defendant, “[t]he traditional rule has been tempered so that including a time is of the essence provision in a contract does not always make untimely performance a breach.” (Opp. p. 5, citing Magic Carpet, supra, 41 Cal.App.5th at p. 367.) Thus, absent a time is of the essence provision and considering that the Offer requires the parties to work together on the scheduling of the surrender (e.g., references to ‘mutually agreeable’ date and dealership), there is no showing of bad faith as Plaintiffs argue. (Motion p. 4:2-3.)

All in all, the court is unpersuaded by Plaintiff that “Defendant has not bothered to perform or pay” (Motion p. 4:5-7) such that any delay or conduct is “unconscionable.” (Motion p. 4:13.) For that reason, as the motion was not reasonably incurred, sanctions are denied. (Plus, as noted in opposition and not otherwise addressed in reply, Plaintiffs’ requests for sanctions under section 128.5 is procedurally defective because under subdivision (f)(1)(A), sanctions must be sought by a separate motion—it cannot be requested inside another motion.)

As for interest, Plaintiffs seek sanctions pursuant to CCP section 685.010, subdivision (a) and Goodstein v. Bank of San Pedro (1994) 27 Cal.App.4th 899. They seek 10% simple interest per annum at a rate of $12.25 per day from November 5, 2024 until the date of the hearing, with an additional $12.25 until the date that Defendant accepts surrender and tenders payment. (Motion p. 4:21-28.)

Here, as noted in opposition, Section 685.010 only requires interest when a “money judgment remain[s] unsatisfied.” (emphasis added.) As no judgement has yet been entered, Section 685.010 is inapplicable. Plaintiff’s reliance upon Goodstein is equally unavailing as the case did not concern applying interest to a settlement and involved a party’s breach of a lease that included an express “time is of the essence clause.” (Opp. p. 6.) Plaintiffs’ reply fails to address either point.

Based on the foregoing, the motion is granted in part in that the motion to ENTER a judgment pursuant to the 998 offer is granted, but the second form of relief to enforce that judgment is denied on the grounds that (i) the motion is procedurally defective and/or (ii) Defendant has not breached the 998 offer/settlement.

^{^[1]} And according to Defendant, counsel for Plaintiffs filed numerous Motions to Enforce Settlement at the end of 2024 in other matters apparently observing that KA’s surrenders had been severely impacted. (Opp. p. 5:18-20.) In Reply, Plaintiffs seem to acknowledge some knowledge of the delay problems as they maintain that any delay is “likely because Defendant is not paying Morley enough money to have the capacity to perform Defendant’s obligations in a timely manner.” (Reply p. 1:18-17, emphasis added.). This suggests that there may be a high volume of the surrendering of vehicles (i.e., hence need for more capacity) creating delays that Plaintiffs are aware of.