Judge: Mark C. Kim, Case: 21LBCV00061, Date: 2022-10-27 Tentative Ruling
Case Number: 21LBCV00061 Hearing Date: October 27, 2022 Dept: S27
Plaintiff, Morning Angel Home
Care, Inc. filed this action against Defendants, Country Villa Belmont Heights
Healthcare Center and Belmont Heights Healthcare Center, LLC for breach of
contract, account stated, quantum meruit, and unfair competition. Plaintiff alleges it entered into two
contracts with Defendants pursuant to which Plaintiff was to provide personnel
to Defendants for their nursing home; the two contracts had different payment
periods and payment rates, but were substantially similar, and contained
attorneys’ fees and costs provisions.
Plaintiff alleges Defendants breached both contract. Plaintiff alleges Defendants breached
Contract One and owe $8248 plus late fees, costs, and attorneys’ fees. Plaintiff alleges Defendants breached
Contract Two and owe $86,610 plus late fees, costs, and attorneys’ fees.
On 2/09/22, Plaintiff filed a
Notice of Settlement of Entire Case.
a.
Parties’ Positions
Plaintiff contends Defendants agreed to settle the action
for $50,000 but have failed to timely make the agreed-upon payments, such that
the Court should enter Judgment in Plaintiff’s favor.
Defendants, in opposition to the motion, contend the
parties exchanged communications concerning what invoices were paid and what
invoices were due. The parties agreed
upon which invoices had been paid and which invoices had not been paid, and
ultimately agreed to settle the remaining claims for $50,000. Defendants contend that, after the parties
agreed to settle and before Defendants paid the settlement amount, Defendants
discovered a $60,242 payment had been made on 5/06/21, of which $49,542 applied
to various invoices that form the basis of this action, and which the parties
had not discussed during settlement negotiations. Defendants contend they paid Plaintiff the
remaining $458 due and owing, and there is no amount remaining due per the
parties’ settlement agreement.
Defendants contend the motion must be denied per UCC §3311 and,
alternatively, due to mutual mistake.
Finally, Defendants contend Plaintiff has unclean hands.
Plaintiff, in reply, contends the parties did not agree
to settle based on any itemized understanding of invoices, but instead based on
the sum certain of $50,000. Plaintiff
contends the total amount sought by way of the complaint was in excess of
$100,000 when late fees, attorneys’ fees, and costs are considered, and the
settlement was for $50,000. Plaintiff
contends neither §3311, mutual mistake, nor unclean hands applies to the facts
of the case.
b.
Initial Note re: Evidence
Plaintiff did not file evidentiary objections with its
reply papers. It does, however, contend
the only evidence submitted with the opposition is hearsay. The Court, therefore, will briefly discuss
the evidence submitted with the opposition papers prior to considering the
parties’ substantive arguments.
Defendants support their opposition with the Declaration
of Counsel, Elizabeth Tucker. Tucker
explains the parties’ settlement discussions, which included providing
detailing invoices and payments. Tucker
contends the parties, during these discussions, agreed upon which invoices were
outstanding, which payments had been made, and what amounts remained due. This included Defense Counsel providing a
spreadsheet with all invoices and payments and Plaintiff not making any changes
or corrections to the spreadsheet.
Thereafter, the parties settled, but before Defendants
made payment, they discovered the check that forms the basis of the current
dispute. Because of the discovery,
Defendants paid $458 and included an email explaining all of the foregoing and
concluding, “Accordingly, the $458 is all that remains for full satisfaction of
the $50,000 settlement amount reached.”
The Court finds the evidence is not hearsay, and is based
on Defense Counsel’s personal knowledge of the communications between
Defendants and Plaintiff. While
Defendants could have provided a declaration from their PMK or accountant
concerning discovery of the missing check, what really matters is that the
check exists and was not part of the spreadsheet the parties used to negotiate
their settlement. The Court has
therefore considered the evidence submitted with the opposition in ruling on
the motion.
c.
§3311
California Commercial Code §3311 provides,
in pertinent part:
(a) If a person against whom a claim is
asserted proves that (1) that person in good faith tendered an instrument to
the claimant as full satisfaction of the claim, (2) the amount of the claim was
unliquidated or subject to a bona fide dispute, and (3) the claimant obtained
payment of the instrument, the following subdivisions apply.
(b) Unless subdivision (c) applies, the
claim is discharged if the person against whom the claim is asserted proves
that the instrument or an accompanying written communication contained a
conspicuous statement to the effect that the instrument was tendered as full
satisfaction of the claim.
(c) Subject to subdivision (d), a claim is
not discharged under subdivision (b) if either of the following applies:
(1) The claimant, if an organization,
proves that (A) within a reasonable time before the tender, the claimant sent a
conspicuous statement to the person against whom the claim is asserted that
communications concerning disputed debts, including an instrument tendered as
full satisfaction of a debt, are to be sent to a designated person, office, or
place, and (B) the instrument or accompanying communication was not received by
that designated person, office, or place.
(2) The claimant, whether or not an
organization, proves that within 90 days after payment of the instrument, the
claimant tendered repayment of the amount of the instrument to the person
against whom the claim is asserted. This paragraph does not apply if the
claimant is an organization that sent a statement complying with subparagraph
(A) of paragraph (1).
(d) A claim is discharged if the person
against whom the claim is asserted proves that within a reasonable time before
collection of the instrument was initiated, the claimant, or an agent of the
claimant having direct responsibility with respect to the disputed obligation,
knew that the instrument was tendered in full satisfaction of the claim.
The Court finds §3311 applies. There was a bona fide dispute concerning the
amount due. This dispute was created by
the discovery, after settlement, of a large payment that was not discussed by
the parties or included in their agreed-upon spreadsheet concerning payments
already made. Defendants tendered the
settlement with a clear and unequivocal statement that it was for the total
amount due and owing. Plaintiff cashed
and check, and has not repaid the amount within 90 days after cashing it.
d. Mutual Mistake
of Fact
The Court also finds the settlement was
based on a mutual mistake of fact. The
parties agreed on the invoices and payments at issue, and included those in a
spreadsheet. They did not, however,
include a very large payment in that spreadsheet. Defendants subsequently discovered the large
payment and communicated about it to Plaintiff.
While Defendants, if they had been diligent, could and should have
discovered their own payment prior to settlement, it is clear that Plaintiff
also could have discovered and disclosed the payment prior to settlement. By failing to do so, Plaintiff created a
situation where the parties relied on one set of numbers when the real set of
numbers was not known.
e. Unclean Hands
There is no evidence before the Court that
Plaintiff knew of the subject payment during the settlement negotiations. The Court will therefore not come to the
harsh conclusion that Plaintiff has unclean hands.
f.
Resolution
The difficult issue before the Court is how to resolve this motion. It is clear the motion to enforce settlement
must be denied. The parties’ settlement
was based on a mutual mistake of fact, and therefore cannot stand. Defendants appear to want the Court to issue
an order finding that their recent payment is an accord and satisfaction, such
that nothing more is due and owing.
Notably, there is no motion by Defendants for affirmative relief on
calendar today, only a motion to enforce settlement, which is denied.
Because there are equitable considerations at issue, the
Court is inclined to find merely that the parties’ settlement must be vacated
and to reinstate the case. The Court is
hopeful the parties, with the knowledge of the new payment, can negotiate a new
and fair settlement that takes the additional payment into account.
The motion to enforce settlement is denied. The OSC re: dismissal is discharged. The Court sets a Case Management Conference,
OSC re: status of settlement discussions, and Trial Setting Conference (in the
event it becomes necessary) in three months, on Friday, 1/27/23 at 8:30 a.m. in
Department S27.
Plaintiff is ordered to give notice.