Judge: Salvatore Sirna, Case: KC068926, Date: 2023-01-04 Tentative Ruling

Case Number: KC068926    Hearing Date: January 4, 2023    Dept: G

Defendant Jason Tsao’s Motion for Order to Rescind Settlement Agreement

Respondent: Plaintiff Chunping Cong

Plaintiff Chunping Cong’s Motion to Enforce Settlement

Respondent: Defendant Jason Tsao

TENTATIVE RULING

Defendant Jason Tsao’s Motion for Order to Rescind Settlement Agreement is DENIED.

Plaintiff Chunping Cong’s Motion to Enforce Settlement is GRANTED.

BACKGROUND

This is an action arising from a family business dispute. In 1998, Chunping Cong (Cong) and Mingxiu Cao (Cao), Cong’s husband, came to the United States from China on a temporary visa and founded C & L Marble Products, Inc (C&L). In September 2000, Cong and Cao returned to China and left Jason Tsao (Tsao), Cao’s cousin, in charge of the business. In June 2016, Cong allegedly discovered Tsao was transferring C&L’s assets to Tsao. Cong also claims Tsao changed C&L’s name to “Kingstone Marble, Inc.” and subsequently dissolved the company without Cong’s permission. During this same period, Tsao claimed to loan $1,080,000 to Cao, Cong, and C&L. In May 2016, prior to Cong’s alleged discovery, Tsao allegedly demanded repayment of the loan.

On December 14, 2016, Cong filed a complaint, individually and as a shareholder of C&L, against Tsao and Does 1-20, alleging the following causes of action: (1) fraud, (2) breach of fiduciary duty, (3) conversion, (4) declaratory relief, (5) accounting, (6) unjust enrichment, and (7) constructive trust. On February 20, 2018, Tsao filed a First Amended Cross-Complaint against Cong, Cao, Liren Cao, Bria Lifu Cao, C&L, and Roes 1-10, alleging the following causes of action: (1) money lent, (2) fraudulent transfer (actual fraud), (3) fraudulent transfer (constructive fraud), (4) fraud (promissory fraud), (5) unjust enrichment, (6) accounting, (7) constructive trust, and (8) declaratory relief.

On December 2, 2020, Tsao filed a motion for summary judgment on Cong’s claims. On February 17, 2021, the court denied Tsao’s motion. On April 16, Tsao filed a notice of appeal and on August 17, the Court of Appeal dismissed Tsao’s appeal.

On August 8, 2022, Tsao and Cong each filed the present motions. A hearing is set for January 4, 2023.

ANALYSIS

Tsao seeks an order from the court rescinding the parties’ oral settlement agreement. Cong seeks an order enforcing the settlement agreement. For the following reasons, the court DENIES Tsao’s request and GRANTS Cong’s request.

Code of Civil Procedure section 664.6 provides a summary procedure that enables courts to enforce a settlement agreement by entering a judgment pursuant to the terms of the parties’ settlement. In relevant part, it provides as follows:

“If parties to pending litigation stipulate, in a writing signed by the parties outside of 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. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement. (Code Civ. Proc., § 664.6, subd. (a).)” 

In this case, Tsao does not dispute entering into an oral settlement agreement with Plaintiff before the court on July 1, 2022. (Tsao Decl., ¶ 7.) Instead, Tsao requests recission of the settlement agreement on the grounds of mistake of fact. However, while Tsao cites to Civil Code section 1689 which establishes grounds for recession of contracts, Tsao does not cite any authority that would allow this court to enter an order rescinding a prior settlement agreement. Furthermore, even if the court could rescind the settlement agreement on Tsao’s motion, the court finds Tsao has failed to establish grounds for recission.

A party may rescind a contract “[i]f the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake.” (Civ. Code, § 1689, subd. (b)(1).) A “[m]istake of fact is a mistake, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in . . . [a]n unconscious ignorance or forgetfulness of a fact past or present, material to the contract; or . . . [b]elief in the present existence of a thing material to the contract, which does not exist, or in the past existence of such a thing, which has not existed.” (Civ. Code, § 1577.)

Here, Tsao argues the mistake of fact was Tsao’s belief that an allegedly exculpatory piece of evidence did not exist. One of Tsao’s defenses to Cong’s claims was that Cong had agreed to transfer ownership to Tsao in 2001. (Tsao Decl., ¶ 3.) While Tsao believed there were corporate meeting minutes reflecting this transfer that had been signed by Cong, Tsao was unable to locate them. (Tsao Decl., ¶ 4.) As a result, Tsao claimed settlement seemed to be the only alternative. (Tsao Decl., ¶ 11-12.) After the July 1, 2022, settlement agreement, Tsao located the meeting minutes while cleaning out a storage container at a rental property during the weekend of July 24-25, 2022. (Tsao Decl., ¶ 8-9.) Tsao declared “[h]ad I known that a copy of the signed meeting minutes still existed and was in my possession, I would never have agreed to settle this case on July 1, 2022.” (Tsao Decl., ¶ 12.)

The court finds Tsao has not established mistake because “the kind of mistake which renders a contract voidable does not include ‘mistakes as to matters which the contracting parties had in mind as possibilities and as to the existence of which they took the risk.’” (Guthrie v. Times-Mirror, Co. (1975) 51 Cal.App.3d 879, 885.) In this case, Tsao’s own declaration establishes Tsao was aware such a document had existed but was unable to locate it. (Tsao Decl., ¶ 4, 11-12.) As a result, Tsao’s decision to settle with Cong was made with the knowledge that the document could still exist and assumed the risk that the document could turn up at a later date.

Thus, the court finds Tsao failed to establish proper grounds to rescind the parties’ settlement agreement. Because Tsao’s opposition to Cong’s motion to enforce the settlement agreement is also made on the same grounds, the court finds Tsao’s argue likewise fails.

Accordingly, the court finds the parties’ settlement agreement is enforceable pursuant to Code of Civil Procedure, section 664.6.

Accordingly, Tsao’s motion is DENIED and Cong’s motion is GRANTED.

CONCLUSION

Based on the foregoing, the court DENIES Tsao’s motion to rescind the settlement agreement and GRANTS Cong’s motion to enforce the settlement agreement.