Judge: Dennis J. Keough, Case: 2021-01192486, Date: 2023-05-25 Tentative Ruling

Motion for Summary Judgement and/or Adjudication

Defendant Arthur Keller’s Motion for Summary Judgment is DENIED.

Code of Civil Procedure section 437c(p)(2) states,

“A defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff or cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.”

Here, Defendant “move[s] for summary judgment against Plaintiff James Ling (‘Ling’) on his claim for breach of written contract based on release of claims signed by Ling releasing Keller from liability for any alleged breach.” (Notice of Motion, p. i.)

In the complaint, Plaintiff alleges a single cause of action for breach of contract involving a promissory note in which Defendant promised to repay Plaintiff $115,000 plus interest by 12/31/20. (Complaint, ¶¶ 9-11.)

Defendant contends the parties entered a settlement agreement reflected in a Term Sheet attached as Exhibit E to this motion. Defendant states, “Because the provisions of the Term Sheet releasing Keller from any liability and requiring Ling to dismiss the State Court Case are valid and enforceable, summary judgment must be entered in favor of Keller.”

The 10/29/21 Term Sheet, which apparently refers to Defendant Keller as “Plaintiff” and Plaintiff Ling as “Defendant” based on the parties’ postures in a related federal lawsuit, includes the following terms:

·         Keller assigns all rights to 9,384 bottles currently in Holland to Ling and represents that the bottles are under his control to release.

·         Keller to release, transfer, and/or convey the bottles to Ling within 24 hours of the agreement.

·         Keller to initiate transfer of bottles on 10/25/21.

·         Ling to pay $400,000 within 120 days of Ling taking control of bottles.

·         The parties to mutually release all claims including this state court action “[p]rovided the terms and conditions relating to [Keller’s] transfer and assignment of all intellectual property and interest in bottles are timely performed…”

The existence of a settlement agreement is an affirmative defense. (See Ladd v. Warner Bros. Entertainment, Inc. (2010) 184 Cal.App.4th 1298, 1309; Corkland v. Boscoe (1984) 156 Cal.App.3d 989, 993.) Here, although Defendant has not filed an answer asserting affirmative defenses, the Court will consider the merits of the defense because Plaintiff has not demonstrated it would be prejudicial to do so under the circumstances. (Atkins v. St. Cecilia Catholic School (2023) 90 Cal.App.5th 1328.) Here, Plaintiff has had the opportunity to present declarations rebutting the applicability of the affirmative defense.

The declaration of Plaintiff Ling states the following at paragraph 11:

“To avoid further litigation costs and attorney fees, I participated in a mediation with Keller, Nasser, Keller’s girlfriend, and counsel. Keller fraudulently claimed the bottles he had previously stolen from the company were still in Holland and not yet sold. Based on Keller’s fraudulent representations and fabricated documents that he had 10,000 bottles in his possession. . .I signed a ‘Term Sheet’ where Keller promised that he would give me the 10,000 bottles in his possession in consideration for the revenues from the sales of those bottles, or $400,000. However, the bottles were never transferred, as they do not exist! I have never seen or possessed a single bottle. The Term Sheet, which was predicated on the exchange of bottles for cash, was thus based on fraud, lacked consideration, and is completely unenforceable.”

“A settlement agreement is a contract, and the legal principles which apply to contracts generally apply to settlement contracts.” (Canaan Taiwanese Christian Church v. All World Mission Ministries (2012) 211 Cal.App.4th 1115, 1123.) “When a party's failure to perform a contractual obligation constitutes a material breach of the contract, the other party may be discharged from its duty to perform under the contract.” (Brown v. Grimes (2011) 192 Cal.App.4th 265, 277.) “Normally the question of whether a breach of an obligation is a material breach, so as to excuse performance by the other party, is a question of fact.” (Ibid.)

The Term Sheet conditioned the mutual release of all claims on Defendant’s timely transfer of the bottles, which Plaintiff declares were never transferred or received. Based on paragraph 11 of the Ling declaration, Plaintiff has shown there is a triable issue of material fact as to the existence of a binding settlement agreement.