Opinion
E027745.
7-3-2003
PAUL C. ANDERSON, Plaintiff and Respondent, v. JOHN M. HEBBELN, Defendant and Appellant.
Bloom & Rudibaugh and C. Scott Rudibaugh, for Defendant and Appellant. Peterson, Ross & Klein and Daniel S. Kelin, for Plaintiff and Respondent.
Defendant John M. Hebbeln appeals from a judgment for $ 240,000 in favor of plaintiff Paul C. Anderson, now deceased. Anderson sued Hebbeln alleging that Hebbeln agreed to share any lottery winnings from tickets Hebbeln purchased in exchange for Andersons contribution of one-half the cost of the tickets. The superior court found that the parties entered into a settlement agreement in front of a judge of the superior court for Hebbeln to pay Anderson five annual payments of $ 24,000 and, if any payment were missed, double the amount ($ 240,000). The superior court found that a payment had been missed and entered judgment accordingly. (Code Civ. Proc., § 664.6.)
A personal representative or successor in interest should be substituted by trial court order on the death of a party, and the trial court should consider doing so on remand at some point. (Code Civ. Proc., § 377.31; Cal. Rules of Court, rule 48(a).) However, the substitution is not an impediment to the rendering of this opinion and is merely a nonprejudicial, procedural irregularity in the case of a plaintiff decedent in whose favor a judgment was rendered before death based solely on damages sustained before death. (See Code Civ. Proc., §§ 377.21, 377.34, 669; 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, §§ 238-240, pp. 298-301; Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2002) PP 2:500-2:503, pp. 2-82 to 2-84, and cases cited.)
After appeal, the parties reached a settlement and this court received from them a signed copy of a "SETTLEMENT AGREEMENT." This agreement contains a paragraph stipulating to a reversal of the judgment with directions:
"4.Remand case to Trial Court.That the Court of Appeals [sic] shall remand this matter to the Trial court with instructions to enter an order regarding ownership of the last three payments of the lottery winnings as identified above, including vacating of the judgment. Thereafter, the trial court shall be instructed to place this matter as settled and set an Order to Show Cause RE: Dismissal for November, 2006. In the event that the estate of Paul Anderson is paid as identified above, this case shall be dismissed with prejudice."
An additional only partly legible handwritten sentence was inserted to the apparent effect that once the judgment was vacated "any and all judgment liens relating to said judgment . . . shall be removed by plaintiff and or plaintiffs successor in interest." This provision makes no sense because the vacation of the judgment extinguishes any liens against it even though the claims secured by the liens might survive.
By order filed March 14, 2003, we requested a motion for stipulated reversal addressing the requirements of Code of Procedure section 128, subdivision (a)(8) ("section 128(a)(8)"), and appellant filed the motion with another signed copy of the settlement agreement. The motion responded to the questions we asked in the order of March 14, 2003.
To the settlements stipulation to reverse with directions we apply section 128(a)(8), which provides in relevant part: "An appellate court shall not reverse or vacate a duly entered judgment upon an agreement or stipulation of the parties unless the court finds both of the following: [P] (A) There is no reasonable possibility that the interests of nonparties or the public will be adversely affected by the reversal. [P] (B) The reasons of the parties for requesting reversal outweigh the erosion of public trust that may result from the nullification of a judgment and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement."
1. Public and Nonparty Interests
Regarding the first finding, we must consider how the interests of nonparties or the public might be affected by the settlement. (§ 128(a)(8)(A).)
One aspect of this question is whether the settlement must be reported to any governmental agency or licensing authority. In response to our order, appellant commented that the judgment must of necessity be reported to the California Lottery Commission because Anderson will be receiving a portion of Hebbelns lottery winnings. But no reporting requirement appears to apply in this case. (Contrast Bus. & Prof. Code, § 10177.5;Norman I. Krug Real Estate Investments, Inc. v. Praszker
(1994) 22 Cal.App.4th 1814, 1822-1823 [stipulated reversal of judgment could prevent Real Estate Commissioner investigation of brokers fraud].)
There is no evidence that the proposed resolution of this case would affect adversely the interests of any nonparties or the public. (Compare Union Bank of California v. Braille Inst. of America, Inc. (2001) 92 Cal.App.4th 1324, 1329 [finding "no evidence the settlement will adversely affect the interests of nonparties or the public"].)
While we find the Union Bank opinion admirable in a number of respects, it begs the precise question by answering a different, more easily answered question. The precise question is how is the public interest advanced by the proposed stipulated reversal as opposed to a dismissal of the appeal leaving the judgment intact with the parties filing a satisfaction of judgment or simply relying on the settlement agreement as a contract respecting the judgment. The easier question answered by the opinion in Union Bank is how is the public interest advanced by the settlement of the case, regardless of which way the appeal and judgment are disposed. The issue is not settlement-no one doubts the benefits of settlement. And settlements generally can be implemented without reversing the judgment appealed. The Legislature is only concerned with stipulated reversals, not settlements that leave the judgment on the books.
We find no reasonable possibility exists that the proposed stipulated reversal would adversely affect the interests of nonparties or the public. ( § 128(a)(8)(A).)
2. Reasons for Reversal
As to the second, two-pronged finding weighing the reasons for reversal against the effect on public trust and pretrial settlement ( § 128(a)(8)(B)), we must first identify the parties reasons for preferring stipulated reversal over dismissal.
This court specifically asked the parties why they chose a stipulated reversal rather than a dismissal. Only appellant replied:
"The stipulated reversal has been chosen because the court should retain jurisdiction to carry out the terms of the judgment/settlement. The judgment wont be satisfied until and unless the Plaintiff/Respondent receives the 2005 and 2006 lottery checks that the Defendant/Appellant is entitled to. For these reasons dismissal is not requested until the terms of the settlement are carried out in October or November of 2006." We agree that this is the most expeditious manner to handle this case, because the superior court can dismiss the case if the payments have been made, but if they have not been made, the superior court can then enter judgment in the amount lacking.
Furthermore, the parties did propose that the judgment be vacated (in effect, reversed) with the direction that the action be dismissed with prejudice once the payments had been made, and we infer from the proposed disposition, motion, and supplemental points and authorities three reasons for their proposed disposition. First, the parties believe the reversal should be with the direction to dismiss the underlying action because the completed settlement will have rendered moot not just the appeal, but also the underlying action. Second, the parties disagree about the merits of both the complaint and the judgment appealed, but no longer want to waste money litigating the issues raised by their dispute, which, to their credit, they have now settled. Third, the parties want to avoid characterizing the complaint or the judgment as right or wrong because they still do not agree on the merits, which no longer matter because of the settlement. We must weigh these reasons against the possibilities of public trust erosion and pretrial settlement disincentive. (§ 128(a)(8)(B).)
3. Erosion of Public Trust
Taking first the issue of the erosion of public trust and postponing consideration of the effect on pretrial settlement incentives, public trust is eroded by a stipulated reversal when it appears that through settlement one party has paid off the other to obtain the desired result from the appellate court that the payor desired-the condemnation of the trial courts judgment implied by the reversal. This reflects poorly on both courts implying that the trial court erred and that the appellate courts reversal was groundless. (See Neary v. Regents of University of California (1992) 3 Cal.4th 273, 287, 293-294, 834 P.2d 119 (dis. opn. of Kennard, J.).)
We cite the dissent in Neary for two reasons. First, section 128(a)(8) requires an affirmative showing by the parties and findings by the court eliminating the presumption favoring stipulated reversals established by the majority in Neary v. Regents of University of California, supra, 3 Cal.4th 273, 284-285. Thus, in passing section 128(a)(8) the Legislature has effectively disapproved the majoritys holding in Neary and approved the dissent. (See 9 Witkin, Cal. Procedure (2002 supp.) Appeal, § 784A, pp. 195-196 [Neary presumption in favor of stipulated reversals superseded by Legislature].) Second, and in further support of the proposition that the Legislature approved the dissent, section 128(a)(8) appears to have derived largely from the language and concepts of Justice Kennards dissent in Neary. (3 Cal.4th at pp. 286-295.) In particular, compare the statutes language and approach to the almost identical language (italicized to emphasize the identity) and approach in the following portion of the second paragraph in Justice Kennards section "V. Conclusion": "When parties request that a trial courts judgment be reversed to effectuate settlement, appellate courts should deny the request if there is a reasonable possibility that the interests of nonparties or the public could be adversely affected by reversal. If there is no reasonable possibility of adverse impact on third parties or the public, then the court should weigh the partiesreasons for requesting stipulated reversal against the other institutional concerns I have mentionedthe erosion of public trust likely to result from an appearance that the nullification of a judgment can be purchased, and the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlements." (3 Cal.4th at pp. 294-295.)
To avoid these negative implications, we infer the parties intend the disposition to be neutral with respect to its characterization, which may be best accomplished by directing the superior court to dismiss the action as moot once the terms of the settlement have been performed. This disposition still involves nullifying the trial courts judgment as the joint motion requests, but in a manner more acceptable under section 128(a)(8)(B). The disposition is more acceptable because it clarifies the ground for the disposition as mootness, rather than any error. Mootness is the appropriate ground because the settlement has rendered the petition, and the order granting it, moot. (See, e.g., Lundquist v. Reusser (1994) 7 Cal.4th 1193, 1202, fn. 8, 875 P.2d 1279 [parties settlement pending appeal rendered case moot, but Supreme Court did not dismiss so it could reach issues of continuing public importance]; County of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1005 [settlement "commonly results in mootness"]; see 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 644, p. 673.)
The first part of the disposition, reversal, vacates the judgment for $ 240,000 and restores jurisdiction to the trial court so that it may complete the second part of the disposition-dismissal of the complaint as moot after the two payments have been made. The reversal of the judgment for that purpose does not indicate a ruling by the appellate court on the merits of the judgment, but does avoid any implication that the judgment remains in effect. (Compare Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 134-135, 41 Cal. Rptr. 468, 396 P.2d 924 [reversal with direction to dismiss moot superior court action]; 9 Witkin, Cal. Procedure, supra, Appeal, § 759, pp. 784-785 [unqualified reversal implies new trial].)
We have the authority to reverse with directions to dismiss the action as moot based on the parties joint motion under "the courts traditional and inherent judicial power to do whatever is necessary and appropriate, in the absence of controlling legislation, to ensure the prompt, fair, and orderly administration of justice." (See Neary v. Regents of the University of California, supra, 3 Cal.4th at p. 276.)
We must now weigh the reasons for the stipulated reversal against the possibility of public trust erosion resulting from the disposition. The procedural reversal and direction to dismiss erases the complaint and judgment because of their mootness, avoiding any implication that the trial court erred or that this court would reverse a contested order without justification for the reversal. The parties desire this disposition to avoid the delay and expenditures without characterizing the judgment appealed as correct or incorrect, an issue about which they disagree. We find that the parties reasons outweigh the possibility of the erosion of public trust as lessened by the specification of mootness, not error, as the ground for the disposition. ( § 128(a)(8)(B).)
4. Disincentive for Pretrial Settlement
As the final task required by section 128(a)(8), and subdivision (B) in particular, we must weigh the reasons for stipulating to reverse against "the risk that the availability of stipulated reversal will reduce the incentive for pretrial settlement." The concern is that parties will avoid settling a case before the trial court decides it because the parties know they can appeal and then settle for a stipulated reversal of the disliked ruling. Pretrial settlement is, of course, more economical than settlement on appeal. (See Neary v. Regents of University of California, supra, 3 Cal.4th at pp. 288-291 (dis. opn. of Kennard, J.).)
In this case this factor is not important because the case was adjudicated prior to trial by the granting of the motion to enforce the settlement.
Obviously, this settlement and resulting stipulated reversal have not chilled pretrial settlement. Therefore, we find that the reasons for stipulated reversal outweigh the nonexistent disincentive for pretrial settlement in this case.
We have completed the task set by section 128(a)(8), and find that stipulated reversal is appropriate in this case.
DISPOSITION
Pursuant to the stipulation of the parties, the judgment is reversed. This reversal of the judgment is not a ruling on the judgments merits, but serves only to vacate the judgment and restore jurisdiction to the trial court. The trial court is directed to hold a hearing in or about November 2006 to determine whether the lottery payments due in or about October 2005 and October 2006 have been paid to the estate of respondent Paul Anderson, now deceased, as set forth in the settlement agreement. If so, the trial court is directed to dismiss the action with prejudice as moot. If not, the trial court is directed to enter judgment in the amount remaining unpaid under the settlement agreement. By this direction we do not imply that the action was erroneous or improper but only rendered moot by the implementation of the settlement, and we direct the dismissal for the purpose of making clear that no further trial court proceedings will be required beyond determining whether the settlement has been implemented.
In the interests of justice, the parties shall bear their own costs on appeal (Cal. Rules of Court, rule 26(a)(1)), and the clerk of this court is directed to issue the remittitur on or after 60 days after the date of filing this opinion, unless on or before that date the
parties stipulate to the immediate issuance of the remittitur. (Cal. Rules of Court, rule 26(b), (c).)
We concur: McKinster J., and King J.