Opinion
NOT TO BE PUBLISHED
APPEAL from orders of the Superior Court of San Diego County, John S. Meyer, Judge., Super. Ct. No. GIC866818.
McDONALD, J.
Plaintiffs Nicholas J. Jauregui, Mary A. Jauregui and Nicholas Jauregui, M.D., a California corporation (collectively plaintiffs) filed this action against defendant Culture of Life Family Services (COLFS). In response, COLFS moved for an order compelling arbitration and demurred to the complaint, arguing the parties had entered into an enforceable settlement agreement requiring binding arbitration of their disputes. Plaintiffs opposed the motion to compel arbitration, arguing that although the parties had attempted to negotiate a settlement agreement that would have included an arbitration clause, the parties had never reached or entered into a final settlement agreement because they had been unable to agree on its material terms. The trial court denied the motion to compel arbitration, and this appeal followed.
I
FACTUAL BACKGROUND
A. The Dispute
Nicholas Jauregui was the chairman of COLFS's board of directors and chief executive officer from its inception through late 2005, when he resigned. The parties each claim they were owed monies from the other, and they each claimed rights to certain real property assets. Before the present lawsuit was filed, the parties agreed to an April 2006 mediation of their disputes, and selected Judge McCue (a retired federal magistrate) as mediator.
B. The Mediation and Draft of Settlement Agreement
The parties attended a lengthy mediation session before Judge McCue on April 14, 2006. While still at the mediation, COLFS prepared a document entitled "Draft Settlement and General Release Agreement" reflecting COLFS's understanding of the terms of the agreement reached during the mediation and gave the document to Plaintiffs. The broad terms of the draft agreement required Plaintiffs (1) to convey their title to a piece of real property (the Rose Street Property) to COLFS on execution of the finalized agreement, (2) to not practice "any form of family medicine, general medicine or obstetrics" within a 10-mile radius of the Rose Street Property for a period of three years, and (3) to pay certain credit card obligations. The draft agreement required COLFS to pay Plaintiffs $250,000 in two installments. The draft also required the parties not to disparage each other.
Because certain aspects of the draft were unacceptable to Plaintiffs, their counsel made numerous handwritten additions and interlineations to the draft. Some of the handwritten changes were apparently clarifications of agreed-upon terms, while other changes represented additional material terms Plaintiffs wanted to include in the agreement. Plaintiffs' changes included a requirement that the parties agree on a joint public statement concerning COLFS and Nicholas Jauregui, a provision that Plaintiffs would "donate to COLFS their interest in the Rose Street Property at a value to be agreed upon" and requiring COLFS to acknowledge the donation in a manner allowing Plaintiffs to take a tax deduction, and a requirement that COLFS provide Plaintiffs access to certain medical records. Plaintiffs' handwritten changes also modified the language of COLFS's proposed noncompetition clause. Plaintiffs specified, by handwritten interlineation, that the terms represented an "agreement in principle and the parties agree to enter into a definitive settlement agreement enforceable by [McCue]." With these changes, Plaintiffs signed the draft, gave it to Judge McCue, and left the mediation session.
For example, the draft specified Plaintiffs were to "pay all outstanding balance[s]" on two credit cards, and Plaintiffs interlineated that provision to specify that they would only pay for "charges for their personal use."
The interlineated draft was given to COLFS. COLFS's chairman crossed out the "joint statement" provision. He then added his own handwritten interlineation stating, "Any handwritten changes are not accepted in their entirety and will be subject to interpretation by [Judge McCue]." He then signed the draft.
C. The Post-April 14 Events
It appears COLFS provided a copy of the marked-up draft to Plaintiffs' attorney, as signed by COLFS, and COLFS's attorney also sent Plaintiffs' attorney a draft the following Monday stating "[o]bviously, this is not the finalized version of the agreement. I will be working on the final agreement this week." On April 19, Plaintiffs' attorney also sent Judge McCue a " 'working draft' of a proposed form of Settlement Agreement, " noting Plaintiffs had advised him that a number of changes needed to be made to the working draft, and he would send Judge McCue a revised draft reflecting those changes. Plaintiffs' counsel then stated, "Based on [COLFS's] annotations to the draft agreement last Friday [April 14], it appears that the parties are not in agreement on a number of provisions that were handwritten by me . . . prior to [COLFS's] signature on the draft agreement. [Plaintiffs] would like to schedule another mediation session with you to go through the enclosed form of agreement to see if there is actually an agreement between the parties with respect to the matters in dispute."
Concurrently with this draft, Plaintiffs also provided COLFS's counsel with a proposed "Notice to Patients" and the parties, after agreeing to the language to be contained in this notice, sent the notice to patients of COLFS's Hillcrest Clinic on April 24. Although COLFS asserts on appeal that this notice was in fulfillment of the "joint statement" provisions of the agreement, the notice appears to have been required because the parties contemplated Nicholas Jauregui would cease his medical practice at COLFS's facilities, and a necessary adjunct of that disassociation required that his patients be informed that they would need to seek a replacement physician.
On May 2, counsel for the parties met separately with Judge McCue to inform him of the status of the settlement negotiations. After Plaintiffs' counsel left, COLFS counsel submitted a "proposed order" which included a finding that the parties reached an agreement on April 14, and that a newly drafted document attached to the order accurately memorialized the terms agreed on by the parties, and that the parties would be "ordered to comply with all terms of the agreement" contained in the newly drafted document. The newly drafted document contained additional terms not referenced in the signed April 14 draft agreement, and eliminated the provision (inserted by Plaintiffs' counsel) for a joint public statement by the parties.
For example, the draft agreement required COLFS to pay the second $125,000 installment 18 months after the parties executed the settlement; the new agreement provided that amount was not to bear interest. The draft agreement required COLFS to reimburse Plaintiffs for the carrying costs of the property until the refinancing escrow closed; the new agreement provided COLFS would directly pay the mortgage commencing on execution of the agreement. The draft agreement required COLFS to acknowledge (for tax purposes) Plaintiffs were donating an interest in the property to COLFS; the new agreement provided COLFS would not be involved with any tax ramifications of the transfer. Plaintiffs had struck from the draft agreement COLFS's proposed language outlining the noncompetition agreement; the new agreement reinserted the stricken language. The new agreement also (1) inserted a severability clause not contained in the draft agreement, (2) inserted a "do not construe against the drafter" clause not contained in the draft agreement, and (3) inserted a unilaterally drafted nondisparagement clause rather than (as specified in the draft) a nondisparagement agreement mutually agreed on. Finally, the draft specified Judge McCue would be invested with the power to resolve any disputes arising out of or in connection with the agreement; the new agreement provided Judge McCue would have "jurisdiction over this matter for purposes of resolving any disputes that may arise in finalizing the AGREEMENT [and the parties agree to] be bound by the decisions and orders of [Judge McCue] with respect to resolving disputes pertaining to the drafting of this AGREEMENT."
When Plaintiffs' counsel learned of COLFS's proposed "order, " he immediately objected and, on May 4, he wrote Judge McCue outlining the events. He reiterated the reasons why there was no settlement agreement (because the parties had not agreed on the material terms of the agreement), and that Judge McCue's role as mediator did not permit him to add or delete material provisions of the agreement under the guise of overseeing the formal documentation of an agreement. Accordingly, Plaintiffs' counsel informed Judge McCue that, there being no agreement between the parties, there was no consent to his jurisdiction to resolve disputes arising out of the agreement.
COLFS continued to attempt to have Judge McCue enter an "order" that the newly drafted document constitute the parties' agreement. Although Plaintiffs remained willing to attend mediation sessions before Judge McCue to attempt to negotiate an agreement, they continued to object that Judge McCue lacked the power to enter COLFS's requested order.
D. The Settlement Collapses
By the end of May, COLFS had locked Nicholas Jauregui out of the clinic and COLFS was still occupying the Rose Street Property without any resolution of the impasse. Accordingly, Plaintiffs prepared a lease agreement that would require COLFS to pay rent to them until all of the matters had been resolved, and also prepared a complaint that was ultimately filed to initiate the present action.
II
THE PRESENT LITIGATION
Plaintiffs filed the present action, and COLFS responded by filing a motion to compel arbitration. COLFS argued the parties had entered into an enforceable agreement on April 14, and the arbitration clause was therefore binding. Plaintiffs argued there was no agreement reached on April 14, because (1) COLFS rejected the terms proposed by their handwritten interlineations and (2) the document signed by them showed their intent was that the parties would only be bound if they could agree on definitive language at a later date.
COLFS also filed a cross-complaint seeking specific performance of the alleged settlement agreement, and also demurred to the complaint, asserting the alleged settlement agreement barred Plaintiffs' claims. COLFS also argued the court did not have subject matter jurisdiction over the dispute because the matter was subject to arbitration. Although COLFS argues on appeal the trial court erred in overruling its demurrer, the parties appear to agree the ruling on the demurrer is dependent on this court's determination of whether the trial court's ruling on the motion to compel arbitration was correct; if the denial of the motion to compel arbitration is affirmed, the demurrer was properly overruled.
The trial court found the parties had not reached an enforceable agreement containing an arbitration provision because COLFS rejected the terms contained in Plaintiffs' handwritten interlineations. Accordingly, the court denied COLFS's motion to compel arbitration and overruled the demurrer. This appeal followed.
III
STANDARD OF REVIEW
The parties dispute whether we are to employ de novo review of the trial court's finding that there was no enforceable agreement entered into on April 14, or whether we must apply the more deferential standard of review and affirm if substantial evidence supports the finding.
The appropriate standard for reviewing an order granting or denying a motion to compel arbitration depends on the issue presented to the trial court for adjudication. (Robertson v Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425.) When the issue is whether the parties entered into an agreement containing an arbitration clause, the issue presented is a factual issue for the trial court that we must uphold if substantial evidence supports the findings. (Ibid.; see Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 357; Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 421; Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653.) However, when the issue presented below involved solely a question of law, including whether the dispute falls within the terms of an agreed-upon arbitration clause (see, e.g., NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 71-72), the appellate court will review the order de novo.
This matter turned on a disputed factual question involving conflicting evidence, because the parties disputed whether they reached an agreement on April 14 on the material terms to be included in the settlement agreement, and therefore the substantial evidence test applies to our review of the propriety of the trial court's ruling. (See, e.g., Fair v. Bakhtiari (2006) 40 Cal.4th 189, 202-203 [conc. & dis. opn. of Kennard, J.].) Although COLFS cites numerous cases to support its argument in favor of de novo review, we conclude the only potentially relevant cases are based on dicta or derive from a mischaracterization of the appropriate approach. For example, in Marcus & Millichap Real Estate Investment Brokerage Co. v. Hock Investment Co. (1998) 68 Cal.App.4th 83 (Marcus), the court in dicta stated that de novo review was applicable to the issue of whether the parties entered a valid agreement to arbitrate. (Marcus, supra, 68 Cal.App.4th at p. 89.) However, Marcus relied on Mayhew v. Benninghoff (1997) 53 Cal.App.4th 1365 and Patterson v. ITT Consumer Financial Corp. (1993) 14 Cal.App.4th 1659, and those cases ultimately trace their roots to Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861 (Parsons). However, Parsons merely held that a trial court's interpretation of a written instrument is subject to de novo review when there is no extrinsic evidence or the extrinsic evidence is undisputed, but reaffirmed that the deferential standard remains applicable when the extrinsic evidence is in conflict. (Parsons, supra, 62 Cal.2d at pp. 865-866 and fn. 2.) Thus, the line of cases relied on by COLFS involve a misapplication of Parsons, and may be inconsistent with subsequent Supreme Court authority, and we decline to perpetuate those cases.
COLFS cites several cases that correctly applied de novo review to the issue presented (see, e.g., Maggio v. Windward Capital Management Co. (2000) 80 Cal.App.4th 1210; 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199) but those cases are irrelevant because they did not involve a dispute over the foundational issue of the existence of a contract, but instead involved legal issues involving the interpretation of the contract. For example, in Maggio, the issue was the interpretation of the arbitration clause itself (Maggio, at pp. 1212-1215), not whether the parties had entered into a contract containing an arbitration clause. In 24 Hour Fitness, the issue was whether the clause was invalid for unconscionability (24 Hour Fitness, at p. 1212), not whether the parties had entered into a contract containing an arbitration clause.
The statement was dicta because the trial court in Marcus ruled the parties had not entered an agreement to arbitrate, and the appellate court affirmed that ruling. (Marcus, supra, 68 Cal.App.4th at pp. 88-89.) Because there is no suggestion that the holding in Marcus turned on the standard of review selected by the court, its statements as to the correct standard appear to be dicta.
Mayhew stated de novo review was appropriate when the evidence consisted "entirely of written declarations, " relying on Patterson. (Mayhew v. Benninghoff, supra, 53 Cal.App.4th at p. 1369.) Patterson stated de novo review was appropriate when the evidence "is entirely written" (Patterson v. ITT Consumer Financial Corp., supra, 14 Cal.App.4th at p. 1663), relying on Milazo v. Gulf Ins. Co. (1990) 224 Cal.App.3d 1528. Milazo held de novo review was proper when the evidence was "of a written nature only" (Milazo, at p. 1534), citing Coopers & Lybrand v. Superior Court (1989) 212 Cal.App.3d 524. Coopers held de novo review was proper when the issue was the "interpretation of a written contract" (Coopers, at p. 529, citing Parsons, supra, 62 Cal.2d 861.)
The court in Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394 (Rosenthal) evaluated a motion to compel arbitration where the party resisting arbitration claimed the parties never entered into the agreement that contained the arbitration clause (because of fraud in the inception of the signed contract), and the court concluded the foundational issue of the agreement was a factual question for the trial court to resolve. (Id. at pp. 411-414.) The trial court's resolution of such factual questions are not matters reviewed de novo on appeal, and thus Rosenthal appears to undermine the line of cases relied on by COLFS.
IV
ANALYSIS
A. Substantial Evidence Supports the Trial Court's Finding That the Parties Did Not Enter Into an Agreement on April 14
A petition to compel arbitration depends on the existence of a contract and therefore the foundational inquiry is whether the parties have entered into a contract containing an arbitration clause. (Marcus, supra, 68 Cal.App.4th at pp. 88-89.) California contract law applies to determine whether the parties entered into an agreement containing an arbitration clause. (Ibid.)
Contract formation requires mutual consent, which requires that the parties "agree upon the same thing in the same sense." (Civ. Code, §§ 1580, 1550, 1565.) There is no mutual consent, and no contract formation, if both parties did not manifest their assent to the "same thing." (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208.) The requisite mutual consent " 'is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.' [Quoting Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141] [citation]. [¶] Where the existence of a contract is at issue and the evidence is conflicting or admits of more than one inference, it is for the trier of fact to determine whether the contract actually existed." (Bustamante, at p. 208.)
There is substantial evidence to support the trial court's finding the parties did not agree to the same material terms on April 14. The document signed by Plaintiffs had numerous interlineations and handwritten additions, among which were (1) the requirement that the parties would agree on a joint public statement concerning COLFS and Plaintiffs, (2) that Plaintiffs would "donate to [COLFS] their interest in the Rose Street property at a value to be agreed upon" and requiring COLFS to acknowledge the donation in a manner to allow Plaintiffs to take a tax deduction, (3) a requirement that COLFS provide Plaintiffs access to certain medical records, and (4) a modification of COLFS's proposed noncompetition clause. COLFS did not sign the offer as written, but instead signed it only after crossing out one clause (the joint public statement clause) and declaring that Plaintiffs' "handwritten changes are not accepted in their entirety."
Moreover, the parties'subsequent conduct provides additional support for the trial court's finding that they had not reached an agreement to the same material terms on April 14. Less than one week after the purported agreement was reached, Plaintiffs' counsel told Judge McCue that, "Based on [COLFS] annotations to the draft agreement last Friday [April 14], it appears that the parties are not in agreement on a number of provisions that were handwritten by me . . . prior to [COLFS] signature on the draft agreement." Moreover, there was evidence that COLFS did not conduct itself in a manner reflecting that an agreement was reached by the April 14 draft.
For example, one of Plaintiffs' handwritten terms required COLFS to provide them with access to certain medical and business records; COLFS did not immediately begin providing access to such records upon signing the April 14 document, and COLFS did not ever provide such access to them. Additionally, COLFS did not immediately begin tendering payments for the property's carrying costs, as required by Plaintiffs' handwritten condition IX.
Finally, when COLFS prepared a more formalized document purporting to memorialize the terms it claims were mutually agreed to on April 14, COLFS (1) omitted the "joint public statement" clause, (2) changed how the carrying costs for the property would be handled, (3) dropped the requirement of COLFS's acknowledgement of Plaintiffs' "donation, " and (4) reinserted the precise "noncompetition clause" language that Plaintiffs had struck by interlineation.
COLFS's principal argument is that neither its striking of the "joint public statement" clause nor its annotation stating that "[Plaintiffs'] handwritten changes are not accepted in their entirety" prevented formation of the contract as to those terms to which COLFS did agree. However, the courts have consistently held that a purported acceptance of an offer, when accepted only after the offeree materially changes the terms contained in the offer, does not create a contract but is instead a rejection of the offer and constitutes a counter-offer. (See Panagotacos v. Bank of America (1998) 60 Cal.App.4th 851, 855-856; Angus v. London (1949) 92 Cal.App.2d 282, 284-286; Bartone v. Taylor-Benson-Jones Co., Ltd. (1953) 119 Cal.App.2d 79, 81.) Although COLFS correctly notes that "grumbling acceptance" can constitute an acceptance sufficient to form a contract (Panagotacos, at p. 856, fn. 2), we are not persuaded by its argument that COLFS could strike out a material term (the "joint public statement" term) and specify the remaining handwritten clauses were "not accepted in their entirety" but nevertheless assert their acceptance was sufficiently unqualified to constitute a "grumbling acceptance" of the terms outlined in the draft agreement signed by Plaintiffs.
COLFS also appears to argue that Plaintiffs'signatures bound them to the terms contained in the April 14 draft agreement even if COLFS never signified its agreement to those terms. However, the cases relied on by COLFS for this proposition are inapposite. For example, in Wood Bldg. Corp. v. Griffitts (1958) 164 Cal.App.2d 559, 565, the court merely held a contract to sell land satisfied the statute of frauds even though it was signed by only the seller, but there was no contention the buyer had not accepted the seller's offer to sell the land. In Angell v Rowlands (1978) 85 Cal.App.3d 536, the court merely held that a contract can be binding on those who have signed, even though not everyone listed as a contracting party has signed it, unless the evidence shows it was not intended to be binding on anyone until all parties have signed it. (Id. at pp. 541-542.) Angell did not hold the signators are bound by a contract whose terms have been rejected by the offerree. Moreover, to the extent Angell is relevant, there is some evidence the parties understood it would not be binding until COLFS signified its agreement by signing the document, and COLFS did not signify its agreement to the terms specified in the contract signed by Plaintiffs.
COLFS alternatively argues that, at a minimum, the parties did agree any disputes between them would be resolved by arbitration before Judge McCue. COLFS therefore contends that, because the courts in Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967) 388 U.S. 395 and St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 have concluded an arbitration clause may be severed from the contract and enforced regardless of whether the remaining terms of the contract are valid, the motion to compel arbitration should have been granted even if COLFS's signature constituted a rejection of the remaining terms of Plaintiffs' offer. However, COLFS misreads Prima Paint and St Agnes. In Rosenthal, 14 Cal.4th 394, the court extensively analyzed the circumstances under which Prima Paint's severability analysis would or would not apply when the issue was whether fraud would vitiate the consent to the contract and therefore obviate the agreement to arbitrate. Rosenthal explained that Prima Paint requires a court to distinguish two separate fraud theories: fraud in the execution of the agreement and fraud in the inducement of the agreement. In the case of fraud in the execution, because the promisor does not intend to enter into a contract at all, mutual assent is lacking, and there is no contract. In the case of fraud in the inducement, because the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed. (Rosenthal, at p. 415.) Rosenthal, concluding Prima Paint's severability doctrine applied only to the latter type of fraud, explained at pages 415 through 417:
"GWFSC asserts Prima Paint mandates arbitration of any fraud claim, even one going to the execution of the contract, except an 'independent' or 'separate and distinct' challenge to the arbitration clause itself. Statements to that effect appear in some decisions applying Prima Paint. [Citations.] [¶] We do not believe, however, the language or logic of Prima Paint compels such a reading. To the contrary, we conclude claims of fraud in the execution of the entire agreement are not arbitrable under either state or federal law. If the entire contract is void ab initio because of fraud, the parties have not agreed to arbitrate any controversy; under that circumstance, Prima Paint does not require a court to order arbitration. [Citations.]
"The central rationale of the high court's decision in Prima Paint was that arbitration clauses must, under federal law established in the USAA, be viewed as ' "separable" ' from other portions of a contract [citation]; hence, fraud in the inducement relating to other contractual terms does not render the arbitration agreement unenforceable, even when it might justify rescission of the contract as a whole. By entering into the arbitration agreement, the parties established their intent that disputes coming within the agreement's scope be determined by an arbitrator rather than a court; this contractual intent must be respected even with regard to claims of fraud in the inducement of the contract generally.
"Where, however, a party's apparent assent to a written contract is negated by fraud in the inception, there is simply no arbitration agreement to be enforced. As one Court of Appeal recently explained, Prima Paint does not require 'allegations directed specifically and solely at the agreement to arbitrate. Prima Paint, rather, requires some allegation [and, as we held earlier, evidence] from which it may be determined that the parties in fact did not intend to arbitrate the issues set forth in the pleadings. The allegation may be directed solely at the "making" of the agreement to arbitrate or, as recognized by the doctrine of fraud in the inception, it may be directed at the "making" of the contract as a whole.' [Quoting Hayes Children Leasing Co. v. NCR Corp. (1995) 37 Cal.App.4th 775, 784].)
"In the absence of a contrary agreement, parties to a predispute arbitration agreement are presumed to have intended arbitration of controversies, including allegations of fraud in the inducement of the contract generally, that may allow rescission or reformation of the contract or part of it. They cannot, however, have intended arbitration under a contract wholly void for fraud in its execution. We therefore conclude Prima Paint does not preclude the court from deciding claims of fraud in the execution of the entire contract. The same is true of California law under our decision in [Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312] in which we explicitly distinguished cases where the party opposing arbitration ' "denied ever agreeing to anything." ' [Id. at p. 323, fn. 8.]" (Rosenthal, at pp. 415-417.)
Thus, Rosenthal holds the court may sever and enforce the arbitration clause from the remaining contractual provisions only if the evidence showed the parties in fact entered into an agreement that encompassed, as an integral part of the agreement, a subsidiary agreement that disputes over the remaining aspects of the agreement would be resolved by arbitration. However, if the parties have never entered into a contract, whether because of fraud in the execution or because there was no mutual assent to the terms of the agreement, there is no arbitration agreement to be severed and separately enforced under Prima Paint. Accordingly, the fact that Plaintiffs may have manifested assent to an arbitration clause as part of an overall contract does not permit a court to order arbitration when no overall agreement was ever reached.
B. Substantial Evidence Supports the Trial Court's Ruling on COLFS's Ratification Claim
COLFS appears to argue that, even if COLFS's handwritten qualifications accompanying its signature to the April 14 draft are deemed a counteroffer rejecting Plaintiffs' handwritten terms, Plaintiffs'subsequent conduct constituted an acceptance of the terms of the counteroffer under the doctrine of ratification. COLFS asserts that Plaintiffs performed the contract and accepted its benefits, which is sufficient to ratify the agreement contained in the April 14 draft.
COLFS's argument on appeal is somewhat opaque. To the extent COLFS is arguing that Plaintiffs' conduct showed they understood COLFS's signature to accept the terms of all of their April 14 handwritten modifications (other than the tax cooperation clause), COLFS's argument is that there is evidence supporting the conclusion the parties had in fact reached an agreement on April 14. However, the issue is not whether there was evidence that could have supported the conclusion the parties had reached an agreement to the terms contained in the April 14 draft, but is instead whether substantial evidence supports the trial court's contrary conclusion.
COLFS's ratification argument was presented and extensively argued to the trial court below, but the court rejected that claim. Ratification is a question of fact and we will not disturb the trial court's finding on the issue of ratification if there is substantial evidence to support the finding. (See generally Royat v. Roberts (1952) 110 Cal.App.2d 814, 818; Common Wealth Ins. Systems, Inc. v. Kersten (1974) 40 Cal.App.3d 1014, 1026.) There is substantial evidence to support the conclusion that Plaintiffs' conduct was not an acceptance of the terms of COLFS's counteroffer. Although accepting the benefits of a contract can be sufficient to ratify the contract (see, e.g., Thornburg v. Superior Court (2006) 138 Cal.App.4th 43, 54), the trial court could conclude Plaintiffs did not accept any of the benefits owed them under the draft agreement. Moreover, the remaining conduct cited by COLFS to show ratification or performance by Plaintiffs does not undermine the trial court's finding that they did not accept the terms of COLFS's counteroffer.
The only "benefit" identified by COLFS on appeal that Plaintiffs allegedly received was that the parties negotiated and distributed the "joint statement" contemplated by Plaintiffs' handwritten paragraph VII. However, as previously discussed, the trier of fact could conclude that the only "joint statement" was the notice to patients necessary for reasons apart from the settlement (see fn. 2), rather than the joint public statement insisted on by Plaintiffs but stricken by COLFS.
For example, COLFS argues Plaintiffs' counsel, by drafting Plaintiffs' version of the final agreement and reviewing COLFS's version, was thereby performing the agreement. However, these documents are equally susceptible to the interpretation the parties were still negotiating for an agreement, and Plaintiffs' cover letter accompanying its proposed version expressly stated that "it appears that the parties are not in agreement on a number of provisions that were handwritten by me" and requesting another mediation session to determine if an agreement could be reached. This evidence supports the finding the parties' conduct was not performance of an agreement already reached but instead represented further pursuit of negotiations seeking an agreement.
DISPOSITION
The orders are affirmed. Plaintiffs are entitled to costs on appeal.
WE CONCUR: HUFFMAN, Acting P. J., IRION, J.