Judge: Michael E. Whitaker, Case: 23SMCV03128, Date: 2024-11-20 Tentative Ruling

Case Number: 23SMCV03128    Hearing Date: November 20, 2024    Dept: 207

TENTATIVE RULING

MOTION

On August 29, 2023, Plaintiff Precise General Contractor, Inc. (“Plaintiff”) filed the operative First Amended Complaint (“FAC”) alleging three causes of action for (1) breach of contract; (2) account stated; and (3) quantum meruit against Defendants Chapter 4 Corp. (“Chapter 4”) and JRM Construction West, LLC (“JRM”) (together, “Defendants”) stemming from a dispute about drywall and carpentry work Plaintiff performed for Defendants.

Default was subsequently entered against JRM on October 27, 2023.

Chapter 4 now moves to enforce the settlement agreement between Plaintiff and JRM.  Plaintiff opposes the motion and Chapter 4 replies.

ANALYSIS

Code of Civil Procedure section 664.6 provides that “[i]f parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or 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.” (Code Civ. Proc., § 664.6.)  In ruling on a motion to enter judgment, the court acts as a trier of fact. The court must determine whether the parties entered into a valid and binding settlement. To do so, the court may receive oral testimony in addition to declarations. (Kohn v. Jaymar-Ruby, Inc. (1994) 23 Cal.App.4th 1530, 1533.)

The issue on a motion to enforce settlement agreement under Code of Civil Procedure section 664.6 is whether the parties entered into a valid and binding settlement agreement. (See Viejo v. Bancorp. (1989) 217 Cal.App.3d 200, 209, fn. 4 [“a court's power to make factual determinations under section 664.6 is generally limited to whether the parties entered into a valid and binding settlement agreement”].)  In other words, the only issue before the court is whether an agreement exists; not whether the agreement has been breached.

Attached as Exhibit A to the Declaration of Christopher Smith is a fully executed settlement agreement between Plaintiff and JRM.  The settlement agreement provides the following terms:

3.1. Within three (3) business days of the Effective Date, JRM will send Precise $102,500 (the “Payment”) via electronic wire transfer in full payment of all claims that were or could have been brought in the Action. Precise is required to provide JRM with appropriate and confirmed bank wiring instructions.

3.2. Within five (5) business days after receipt of the Payment, counsel of record for Precise shall file a Form CIV-110 Request for Dismissal with the Court that requests that JRM be dismissed from the Action with prejudice. Counsel of record for Precise shall thereafter file any additional necessary documents and take any acts necessary to effectuate the setting aside of the Request for Entry of Default and cause the Action against Precise to be dismissed with prejudice as promptly as possible.

3.3. Within five (5) business days after receipt of the Payment, Precise will provide JRM with a signed and executed final lien waiver and release with respect to the Project.

3.4. Each Party will bear its own attorneys’ fees, costs and expenses incurred in connection with the Action and the preparation of this Agreement.

(Ex. A to Smith Decl. at ¶¶ 3.1-3.4.)

            JRM apparently wired the $102,500, but the wire instructions were incorrect, and Plaintiff never received the funds.  (Smith Decl. ¶¶ 4-5; Clark Decl. ¶ 6; Kadella Decl. ¶ 2.)

            Channel 4 seeks to enforce the settlement, requiring Plaintiff to dismiss the action, pursuant to the agreement.  Plaintiff argues that dismissal is not yet warranted because it did not actually receive the settlement funds.

As a threshold matter, Chapter 4 is not a party to the agreement.  With respect to Chapter 4, the Agreement provides only as follows:

1.3. On or around January 13, 2023, Precise completed its work on the Project. At that time, however, Chapter 4 Corporation, a New York corporation (“Chapter 4”), failed to pay JRM for work that JRM performed in connection with the Project. JRM expected to use the payment from Chapter 4 to pay Precise.

1.4. On or about July 12, 2023, Precise filed a Complaint for Breach of Contract, Account Stated (Common Counts), and Quantum Meruit (the “Complaint”) against Chapter 4, JRM, and Does 1 through 20 in Los Angeles County Superior Court Case No. 23SMCV03128 (the “Action”). .

(Ex. A to Smith Decl. at ¶¶ 1.3-1.4.)

In general, “California law permits third party beneficiaries to enforce the terms of a contract made for their benefit.”  (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1021 (hereafter Spinks).)  However, “The circumstance that a literal contract interpretation would result in a benefit to the third party is not enough to entitle that party to demand enforcement. The contracting parties must have intended to confer a benefit on the third party.”  (Id. at p. 1022.)  But “the third person need not be named or identified individually to be an express beneficiary.”  (Id. at p. 2023.)  “A third party may enforce a contract where he shows that he is a member of a class of persons for whose benefit it was made.”  (Ibid.)

“Ultimately, the determination turns on the manifestation of intent to confer a benefit on the third party.”  (Spinks, supra, 171 Cal.App.4th at p. 2023.)  But “there is no requirement that both of the contracting parties must intend to benefit the third party.”  (Ibid.)  It suffices that the promisor understood the promise had such intent at the time of contracting.  (Ibid.)  “Ascertaining intent is a question of ordinary contract interpretation.”  (Ibid.)

“Intent is to be inferred, if possible, solely from the language of the written contract.”  (Spinks, supra, 171 Cal.App.4th at p. 2023.)  However, “[i]n determining the meaning of a written contract allegedly made, in part, for the benefit of a third party, evidence of the circumstances and negotiations of the parties in making the contract is both relevant and admissible.”  (Id. at p. 1024.)

            Here, although Chapter 4 would have incidentally benefited from JRM’s settlement payment, insofar as any amounts Plaintiff sought from Chapter 4 could be offset by the amounts Plaintiff received from JRM, the Court does not find that Chapter 4 was an intended beneficiary of the settlement agreement.  Indeed, although the Complaint seeks $97,887.65 and the settlement agreement provides that JRM will pay Plaintiff $102,500 in exchange for Plaintiff dismissing the action as to JRM, the agreement is silent with respect to dismissing the action as to Chapter 4 upon receipt of the settlement funds.

            Chapter 4 argues it is nonetheless a third party beneficiary because of the release language in paragraph 4:

4.1. Upon the date of execution of this Agreement, with the exception of obligations under this Agreement, each of the Parties, and their predecessors, successors, assigns, owners, members, former or present directors, officers, managers and employees, agents, representatives, subsidiaries, affiliates, insurers, and attorneys, and all persons acting by, through, under, or in concert with them or any of them, irrevocably and unconditionally release and forever discharge each other Party, and their predecessors, successors, assigns, owners, members, former or present directors, officers, managers and employees, agents, representatives, subsidiaries, affiliates, insurers and attorneys, and all persons acting by, through, under, or in concert with them or any of them, from any and all contractual and ex-contractual actions, statutory violations, torts, warranties, express or implied, causes of action, suits, debts, liens, contracts, rights, agreements, obligations, promises, liabilities, claims, demands, damages, controversies, losses, costs and expenses of whatever kind or nature, whenever incurred, whether now known or unknown, suspected or unsuspected, fixed or contingent, arising out of or relating to any matters which are, were or could have been the subject of or are otherwise related to the P.O. and the Action (collectively, the “Claims”), and including, but not limited to, damages, attorneys’ fees, costs and expenses.

(Emphasis added.)

            Taken out of context, this broad language seems to provide that any person or entity that has ever worked “in concert with” either of the parties is released from any and all liability by the other party.  But such a broad provision is not enforceable as to non-signatories to the agreement.

Taken in context, the Court notes that the “Parties” are defined in the agreement as being Precise and JRM only.  Thus, the Court reasonably interprets this provision as applying to the Parties’ agents, in their capacity as agents for the signatory parties.  In particular, the Court notes that the agreement specifically names Chapter 4 in paragraphs 1.3 and 1.4 of the agreement, and if the parties’ intent was to release Chapter 4 from liability, the agreement could have expressly done so, yet it did not.  The Court does not read this general release language as evidencing a specific intent to dismiss claims brought against Chapter 4 or otherwise made for the specific benefit of Chapter 4.

CONCLUSION AND ORDER

            Therefore, the Court finds that there is no settlement agreement as between Plaintiff and Chapter 4, and Chapter 4 lacks standing as a third party beneficiary to enforce the settlement agreement between Plaintiff and JRM.  As such, the Court denies Channel 4’s motion to enforce the settlement agreement. 

Channel 4 shall provide notice of the Court’s order and file the notice with a proof of service forthwith.

DATED:  November 20, 2024                                               ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court