Opinion
A162074
01-24-2022
MICHAEL DEBENEDETTI et al., Plaintiffs and Respondents, v. FRANK DEBENEDETTI, Defendant and Appellant.
NOT TO BE PUBLISHED
Contra Costa County Super. Ct. No. MSC16-01045
POLLAK, P. J.
Defendant Frank DeBenedetti appeals an order denying his motion for attorney fees. He contends the court erred in concluding that he waived any claim to attorney fees in the settlement agreement he entered with plaintiffs Michael and Matthew DeBenedetti.
We agree that the record does not support the court's finding that defendant entered into an enforceable settlement agreement that waived his right to attorney fees. While we conclude that defendant is not entitled to attorney fees under Civil Code section 1717, he may be entitled to fees incurred after the rejection of his offer to settle under Code of Civil Proceduresection 998. Accordingly, we shall reverse the order denying defendant's 1 motion for attorney fees and remand so that the trial court in the first instance may consider his fee application under section 998.
All statutory references are to the Code of Civil Procedure unless otherwise noted.
Background
In May 2016, plaintiffs, as successor cotrustees of their father Frank DeBenedetti Jr.'s trust, filed the present action against their brother, defendant here, alleging that defendant breached a promissory note securing a $157,000 loan made by the trust to defendant. On August 7, 2018, defendant made an offer pursuant to section 998 to settle the action for $99,500 inclusive of all fees, costs and interest. On August 19, 2019 after a mandatory pretrial settlement conference, the parties signed a handwritten agreement purporting to settle the litigation based on the transfer of ownership of real property valued at more than $157,000 from defendant to the trust. The agreement reads in relevant part as follows: "The plaintiffs shall have 45 days to inspect and accept the real property . . . . Upon satisfaction of inspection, defendant will transfer fee simple ownership to plaintiffs. If the inspection proves to be unsatisfactory, at the sole discretion of plaintiffs, the parties agree to reschedule the trial in this matter at the convenience of the court. [¶] In consideration of this settlement agreement, the parties agree[] not to engage each other . . . in any form of civil litigation. . . . This section only applies if the parties agree to settlement. [¶] Parties shall draft a formal settlement agreement incorporating these terms within 10 days of the date of the parties' signatures. All of the standard provisions of a settlement agreement shall be part of this settlement agreement. Plaintiffs' counsel shall do the initial draft for review and comment by defendant's counsel."
One year later, on August 3, 2020, the court issued an order to show cause indicating that the matter would be dismissed unless the parties 2 appeared and contested the dismissal. In response, plaintiffs filed a request for a voluntary dismissal without prejudice. The request was granted and the action was dismissed in August 2020.
After the dismissal, the parties filed competing memoranda of costs and motions to tax, disputing who was the prevailing party in the litigation. Defendant argued that he is the prevailing party under section 998 because plaintiffs ultimately recovered nothing in the litigation. He explained that the formal settlement agreement was never signed and the property was never transferred. In support of his claim he submitted email correspondence between plaintiffs' and defendant's counsel indicating that the specified 45 days ran without signature of a formal settlement agreement or inspection and acceptance of the property. On September 19, 2019, defendant's counsel had sent an email to plaintiffs' counsel indicating that he was attaching the documents necessary for the inspection. The email closes with a request that plaintiffs "advise if we have a settlement." On September 26, counsel for plaintiffs responded, "[W]e do not have an agreement as your client has not provide[d] the documents and access required for the inspection necessary under the agreement. Accordingly, we will seek to have the court put this matter back on the trial calendar." Defendant's attorney also submitted a declaration stating that "[t]he contingent settlement entered into by the parties was never finalized. Given this, title to [the real property] was never transferred to plaintiffs." Defendant also sought attorney fees under Civil Code section 1717 based on the attorney-fee provision in the promissory note that defendant had given the trust.
Plaintiffs argued that they were entitled to costs under Code of Civil Procedure section 1032 as the prevailing party because they had a net recovery on their claims under the terms of the settlement agreement that 3 exceeded defendant's section 998 offer. Plaintiffs acknowledged that the property had not yet been transferred to the trust but explained, "Defendant is required to provide various documents relating to title and additionally there was a tenant in the real property that had to be accounted for. Plaintiffs have been waiting for the transfer of the title and resolution of the issues with the tenant when COVID-19 entered into the picture and for all intents and purposes made the transfer, inspection and eviction of the tenant problematic. It is plaintiffs' understanding that title will be transferred when the real property becomes subject to inspection and the tenant vacates, conditions that are in the control of defendant at the present time." Plaintiffs asserted that their "dismissal of the underlying complaint was made as a matter of course since there was a signed settlement agreement in place and the dismissal was the appropriate course of action."
Following a hearing, the court granted both motions to tax costs. The court adopted as final its tentative ruling which read, "The court notes that the handwritten settlement agreement includes the following language: 'All of the standard provisions of a settlement shall be part of this settlement agreement.' In the court's experience, a waiver of costs is a standard provision of a settlement agreement. Each side therefore agreed to waive costs and the costs sought by each party are improper." The court subsequently denied defendant's motion for attorney fees on the same ground.
Defendant timely filed a notice of appeal from the order denying attorney fees. 4
Defendant's notice of appeal fails to specify by name or date of entry the order he is challenging. The civil case information sheet filed by defendant indicates, however, that he is challenging only the denial of his motion for attorney fees. Accordingly, we do not address the order granting plaintiffs' motion to tax costs.
Discussion
Defendant contends the trial court erred in denying his motion for attorney fees." '" 'The standard of review on issues of attorney's fees and costs is abuse of discretion.'" '" (Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 882.) The abuse of discretion standard, however,"' "is not a unified standard; the deference it calls for varies according to the aspect of a trial court's ruling under review. The trial court's findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious." '" (Cellphone Termination Fee Cases (2009) 180 Cal.App.4th 1110, 1118.)
Here, the trial court concluded that defendant waived his claim for attorney fees under the terms of the handwritten settlement agreement." 'A settlement agreement is a contract, and the legal principles [that] apply to contracts generally apply to settlement contracts.' [Citation.] Its validity is thus 'judged by the same legal principles applicable to contracts generally.'" (Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1585.) The handwritten contract included certain conditions regarding the inspection and transfer of the real property and indicated that a formal settlement agreement, which would include "the standard provisions of a settlement agreement" should be drafted and signed within 10 days. Defendant contends that the handwritten agreement was merely an agreement to make an agreement, the conditions for which were never satisfied so that no binding settlement agreement was ever entered. Plaintiffs assert that the 5 handwritten agreement is a binding settlement agreement which includes a valid waiver of fees and costs.
Whether the parties intended to be bound by the handwritten agreement is" 'determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe.'" (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.) "The parties' outward manifestations must show that the parties all agreed 'upon the same thing in the same sense.' [Citation.] If there is no evidence establishing a manifestation of assent to the 'same thing' by both parties, then there is no mutual consent to contract and no contract formation." (Ibid.)
The agreement gave plaintiffs "45 days to inspect and accept the real property" and provided that if the inspection was not satisfactory to plaintiffs, the parties would "reschedule the trial in this matter at the convenience of the court." The email correspondence submitted by defendant suggests that a disagreement arose almost immediately as to whether the 45 days for inspection and acceptance ran from August 19, when the handwritten agreement was signed, or from the date that all materials necessary for inspection were delivered to plaintiffs. In opposition to the attorney fee motion, plaintiffs argued that under the terms of the handwritten agreement, "Defendant was and is obligated, with the timing of 6 such at the sole discretion of plaintiffs, to transfer real property to plaintiffs to satisfy the acknowledged debt owed by defendant to the trust." (Italics added.) It is undisputed, however, that when plaintiffs filed their request to dismiss the action, the property had not been inspected or accepted and the settlement agreement had not been formalized. The condition that a formal contract be executed is not necessarily determinative of the enforceability of a contract where the terms are certain. (See Blix Street Records, Inc. v. Cassidy (2010) 191 Cal.App.4th 39, 48 ["When parties intend that an agreement be binding, the fact that a more formal agreement must be prepared and executed does not alter the validity of the agreement."]).) Here, however, the condition that plaintiffs "accept the real property" and the dispute as to the production of the necessary documentation indicates that the parties did not intend the handwritten agreement to be an enforceable agreement. Plaintiffs' attorney indicated as much in his correspondence with defendant's attorney when he acknowledged that they could not agree on the terms of a formal agreement, asserted that "we do not have an agreement as your client has not provided the documents and access required for the inspection necessary under the agreement," and that he would be returning to the trial court. The provision of the handwritten agreement that waives future litigation only "if the parties agree to settlement" further reflects the conditional nature of the handwritten agreement. The waiver of fees and costs, if included in the standard provisions of settlement agreements, necessarily was to be effective only "if the parties agree to settlement." Accordingly, there was no waiver that precludes an award of attorney fees if otherwise appropriate. 7
In the trial court, plaintiffs argued, with respect to documents attached to the declaration submitted by defendant, that defendant's counsel "does not state that the documents are true copies of what he alleges them to attest to" and that defendant had not submitted a declaration "establishing the truth of any of the documents attached to the declaration to establish that the authenticity of the attachments." Plaintiffs did not expressly object to the admissibility of the email correspondence and have not argued on appeal that the emails were inadmissible.
Somewhat confusingly, plaintiffs argue, "If in fact there was no settlement agreement as proposed by [defendant], he had every right to seek redress by filing a lawsuit to enforce the settlement agreement. As the trial court found that the settlement agreement itself contained those provision necessary for its enforcement in its ruling on the attorney's fees motion by affirmative[ly] stating that all such provisions of a settlement agreement are in place. [Defendant] failed to do such and cannot now raise these issues in this appeal." To the contrary, if plaintiffs believed the handwritten agreement was enforceable, they could have filed a motion to enforce its provisions.
Turning to the merits, we conclude that defendant's claim for attorney fees under Civil Code section 1717, is barred by subdivision (b)(2), which provides that "[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section." Defendant's arguments to the contrary are not persuasive.
In the trial court, defendant argued that the voluntary dismissal does not preclude an attorney fee award in this case because "the dismissal was improperly entered given that . . . trial had technically commenced." He also argued that the dismissal was not actually voluntary because it was entered following the court's order to show cause and after the statute of limitations on the claim had run. Defendant reasserts these arguments on appeal. Defendant, however, made no attempt to set the dismissal aside in the trial court. Nor did he appeal the entry of the dismissal without prejudice. (See Bob Baker Enterprises, Inc. v. Chrysler Corp. (1994) 30 Cal.App.4th 678, 683, fn. 3 ["When a defendant believes it is entitled to a dismissal with prejudice, an order dismissing a complaint without prejudice is sufficiently adverse to the interests of a defendant to support the defendant's appeal."].) Accordingly, the validity of the judgment of dismissal is not now before us. Defendant's belated request that this court set aside the voluntary dismissal and order the trial court to enter an involuntary dismissal thus is not well taken. Moreover, as plaintiffs note, if the voluntary dismissal was improper, 8 the remedy is not entry of an involuntary dismissal. Rather, the matter would be returned to the trial court for further proceedings. Under such a scenario, defendant would still not be entitled to fees under Civil Code section 1717.
Defendant's argument that he is entitled to attorney fees under section 998 is partially correct. Under section 998, subdivision (c)(1), "[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant's costs from the time of the offer." (Italics added.) A plaintiff's voluntary dismissal of the action without prejudice triggers an award of fees under section 998. (Mon Chong Loong Trading Corp. v Superior Court (2013) 218 Cal.App.4th 87, 93-94.) Where the dismissed action is on a contract that provides for attorney fees, the defendant is entitled to recover postoffer attorney fees and costs irrespective of whether defendant is the prevailing party under Civil Code section 1717. (Scott Co. v Blount, Inc. (1999) 20 Cal.4th 1103, 1114 ["Under section 998, the defendant's entitlement to costs derives not from its status as a prevailing party but from the plaintiff's failure to accept a reasonable settlement offer."].)
In the trial court, defendant sought approximately $45,000 in attorney fees. Defendant made no attempt, however, to differentiate between fees incurred prior to and after his offer was made. Accordingly, the order denying attorney fees must be reversed and on remand, the trial court must determine the amount and reasonableness of the fees incurred after expiration of the section 998 offer. 9
Defendant's request that plaintiffs be ordered to pay his attorney fees from the start of the litigation as a sanction under section 128.7 is denied.
Disposition
The order denying defendant's motion for attorney fees is reversed and the matter remanded for further proceedings consistent with this opinion.
WE CONCUR: BROWN, J. DESAUTELS, J. [*] 10
[*] Judge of the Superior Court of California, County of Alameda, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.