Judge: Serena R. Murillo, Case: BC699976, Date: 2023-03-20 Tentative Ruling

Case Number: BC699976    Hearing Date: March 20, 2023    Dept: 29

TENTATIVE

Plaintiffs’ motion to enforce settlement is DENIED without prejudice. Both parties’ request for sanctions is DENIED.

Legal Standard

Code of Civil Procedure section 664.6 provides:

“(a) [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. 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.

(b) For purposes of this section, a writing is signed by a party if it is signed by any of the following:

(1) The party.
(2) An attorney who represents the party.
(3) If the party is an insurer, an agent who is authorized in writing by the insurer to sign on the insurer's behalf.”

Strict compliance with the statutory requirements is necessary before a court can enforce a settlement agreement under this statute.  (Sully-Miller Contracting Co. v. Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30, 37.) 

Section 664.6 procedure empowers the judge hearing the motion to determine disputed factual issues that have arisen regarding the settlement agreement.  It even permits the court “to entertain challenges to the actual terms of the stipulation”, that is, whether there “actually was” a settlement.  (Fiore v. Alvord (1985) 182 Cal.App.3d 561, 566 [holding statute's express authorization for trial courts to determine if a settlement occurred is “implicit authorization” for trial court to determine settlement's terms and conditions].)  In ruling on the motion, a court may receive oral testimony, or may determine the motion upon declarations alone.  (Corkland v. Boscoe (1984) 156 Cal.App.3d 989, 994.)  For example, where the settlement agreement is ambiguous, the court is required to consider extrinsic evidence of the parties' intent.  (Steller v. Sears, Roebuck & Co. (2010) 189 Cal.App.4th 175, 183.) 

If the settlement leaves material terms wanting, or confusing, the settlement cannot be enforced through the section 664.6 summary proceeding and must be addressed in a separate civil action.  (Compare Terry v. Conlan (2005) 131 Cal.App.4th 1445 [finding parties never agreed to the means that were material to the settlement, including what role an independent manager was to play regarding management of a trust property, and whether the trust should be qualified as a QTIP, thereby indicating that there was no meeting of the minds as to the material terms] with Osumi v. Sutton (2007) 151 Cal.App.4th 1355 [holding trial court’s decision to extend closing date for vendor’s agreement to repurchase house did not create a material term and was within court’s power because the closing date had passed by the time the motions came on for hearing and a new closing date was necessary to grant the relief sought by both parties].) 

Discussion

Plaintiffs move to enforce the settlement agreement between Plaintiffs and Defendant LACMTA for $2,750,000, arguing that Defendant has failed to perform its obligation under the agreement.

Defendant argues in opposition that there was an agreed condition precedent requiring approval of Defendant’s Claims Board and Board of Directors prior to the payment of the amount under the settlement agreement. Defendant claims the condition precedent has not been satisfied.

“A condition precedent is an act which must be performed or an uncertain event which must happen before the promisor's duty of performance arises. (Civil Code, §§ 1434, 1436; Rest., Contracts, § 250.) Express conditions are stated in the contract and are determined by the intention of the parties as disclosed by the agreement. (Schwab v. Bridge, 27 Cal.App. 204, 207, 149.) Provisions of a contract will not be construed as conditions precedent in the absence of language plainly requiring such construction. (Larson v. Thoresen, 116 Cal.App.2d 790, 794.) 

In the repurchase agreement in the instant case defendant expressly made his promise to purchase the real property conditional upon occurrence of two events—default of the loan and acquisition by plaintiffs of the real property by foreclosure. The words used in the agreement were in the event [of] default and acquisition of the real property; then, in such event [defendant promised to repurchase]. These are clearly words of condition. There can be no doubt that the parties intended that defendant's duty of performance would arise only in the event the loan became in default and plaintiffs acquired the properties. These were clear conditions precedent.” (Sosin v. Richardson (1962) 210 Cal.App.2d 258, 264.)

If the duties of each party are independent, the language cannot be construed as a condition precedent.  

“Moreover, the provisions of a contract will not be construed as conditions precedent in the absence of language plainly requiring such construction. (See San Diego Construction Company v. Mannix, 175 Cal. 548, 556; Lucy v. Davis, 163 Cal. 611, 614; Antonelle v. Kennedy and Shaw Lumber Company, 140 Cal. 309, 315.) There is no such compulsion in the wording of the contract in issue. A more reasonable and just interpretation of the writing is that the duties of cooperating and paying expenses are independent. Under such construction, the mere fact of appellants' payment of $504.63 more than the sum contributed by respondents does not disprove the latter's substantial performance of their obligation to pay.” (Larson v. Thoresen (1953) 116 Cal.App.2d 790, 794.)

The provision at issue here provides:

That PLAINTIFFS understand and agree that payment by DEFENDANTS of the amount stated in paragraph 3(a) hereof will not be made until approved by the Los Angeles County Metropolitan Transportation Authority's Claims Board and the Los Angeles County Metropolitan Transportation Authority's Board of Directors. This release shall not be binding upon PLAINTIFFS or DEFENDANTS if the Settlement is not approved by the Claims Board and the Board of Directors. PLAINTIFFS are thus advised and agree that the proposed settlement is subject to the Los Angeles County Metropolitan Transportation Authority' settlement process and requires consideration by the DEFENDANTS' Claims Board and Board of Directors.

(Conroy Decl., Exh. 1, pg. 7.)

The Court finds that the contract plainly provides for conditions precedent. Defendant expressly made its promise to pay conditional upon occurrence of two events – approval by the Claims Board and approval by the Board of Directors. Neither of which has yet to occur.

However, Plaintiff argues that the release was fully and mutually executed nearly half a year ago, on October 11, 2022, and Plaintiff’s counsel has inquired about the approval by Defendant’s board six separate times since, and that defense counsel has merely stated he would look into it, but has not provided any updates.

In opposition, Defendant argues that there is an administrative procedure that must be followed for settlements in the amount of $2,750,000, such as this one. There are multiple steps that must occur before the Board of Directors consider the matter. (Thomas Decl., ¶ 3.) First, the MTA's Claims Specialist writes a formal written memorandum that then is reviewed by the MTA's Risk Manager. Once the memorandum is finalized by risk management, it is transmitted to the MTA's County Counsel for review, input, and finalization. Once County Counsel has finalized the recommendation for settlement it is transmitted to the MTA's Claims Board for action. Once the MTA's Claims Board takes action to approve, the written Claims Board memorandum is transmitted to the Board of Directors for action. (Id., ¶ 4.) In essence, Defendant argues that the administrative process takes time and occurs within the confines of other litigation also being considered by the Claims Board and MTA Board of Directors along with other business both boards deal with at their meetings.

On February 1, 2023, defense counsel contacted the Claims Specialist to seek a status of the settlement process. Defense counsel has since been informed that the MTA was unable to agendize the settlement with the Claims Board for approval in March. There is no MTA Board of Directors meeting in April. Defendant states that all efforts will be made to agendize the settlement with the Claims Board at its meeting on April 10, 2023, and the Board of Directors on May 25, 2023. (Id., ¶ 15.)

In reply, Plaintiff argues that in the absence of a specified time for performance (as here), the law dictates that a condition precedent must be performed in a reasonable time, or at least reasonable efforts to perform within such time must be made. (Code of Civil Procedure § 1657.) In such instances, reasonable diligence and good faith are required, and the court has the duty to hear evidence and fix a “reasonable time” for performance. (Pitzer v. Wedel (1946) 73 Cal.App.2d 86, 91.) Where no time is specified, a condition precedent must be performed within reasonable time, and performance of covenant cannot be delayed indefinitely. (City of Stockton v. Stockton Plaza Corp. (1968) 261 Cal.App.2d 639, 644.) In determining “reasonable time,” courts should consider the situation of the parties, the nature of the transaction, and the particular facts of the case. (Stark v. Shaw (195) 155 Cal.App.2d 171, 177.)

Here, Defendant has described its multi-step administrative process required for approval of large settlements and expects the Boards to hear this matter in April and May of this year. This shows that reasonable efforts to perform are underway and, considering Defendant’s multi-step administrative process, the five months that have passed since formalizing the agreement is reasonable. Therefore, at this time, Plaintiff’s motion to enforce the settlement agreement must be denied as the conditions precedent in the contract have yet to occur in a reasonable time. However, the denial is without prejudice.

Attorney Fees

Civil Code, section 1717, subdivision (a) provides in relevant part: 

In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs. 

(Civ. Code, § 1717, subd. (a).)   

Both parties request attorney fees under paragraph 19 of the agreement. Paragraph 19 states: “In the event that any Party to this Release of All Claims and Settlement Agreement brings any action or proceeding to enforce the terms and conditions of this Agreement, the prevailing party thereto shall be entitled to recover their reasonable attorney's fees and costs in conjunction with that action or proceeding subject to a duly noticed motion and approval by the Court.”

(Conway Decl., Exh. 1, pg. 8.)

However, rather than bring any action or proceeding to enforce the agreement, Plaintiff chose to file a motion to enforce the settlement agreement in an already existing action or proceeding.  The parties’ settlement agreement does not provide for attorney’s fees and costs under such circumstances. Thus, Defendant’s request for sanctions is denied.

Conclusion

Accordingly, Plaintiffs’ motion to enforce settlement is DENIED without prejudice. Both parties’ request for sanctions is DENIED.

Moving party is ordered to give notice.