Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Santa Clara County Super. Ct. No. CV815164
RUSHING, P.J.
Plaintiffs Bizhan and Yuko Binesh appeal an order entered pursuant to Code of Civil Procedure section 664.6, enforcing a settlement agreement stipulated to in open court. On appeal, plaintiffs claim the trial court erred in ordering the enforcement of the agreement, because both plaintiff Yuko and defendant Gary Rifkand were not present at the court supervised settlement discussions, and did not personally consent to the terms of the settlement, as is required by Code of Civil Procedure section 664.6. Plaintiffs assert that as a result of the parties missing at the stipulation of the settlement, the judgment must be reversed.
Statement of the Facts and Case
Plaintiffs Bizhan and Yuko Binesh were co-borrowers on a loan from defendant Trust Deed Investments, Inc. (TDI) in the amount of $212,500, secured by a deed of trust to real property located in Mountain View, California.
Defendants Phillip Goldstein and Gary Rifkand were principals in TDI. On October 2, 2002, TDI recorded a notice of trustee’s sale to occur on October 29, 2002. TDI sold the property to Goldstein and Rifkand at below fair market value, and a trustee’s deed upon sale was recorded on November 6, 2002.
Plaintiffs filed a complaint against TDI and Goldstein and Rifkand asserting nine causes of action, including breach of agreement, dissuading bidding, breach of trustee’s duty to conduct a fair sale, fraud and deceit, and negligent misrepresentation, among others. Financial Title Company was subsequently added as a defendant to the underlying action but it not a party to the appeal.
A mandatory settlement conference was held on September 28, 2005. The negotiations resulted in a settlement that was stated on the record in court. The only individuals appearing before the court and voir dired about their understanding and agreement to the terms of the settlement were plaintiff Bizhan, and defendants Goldstein and Financial Title Company; defendant Rifkand and plaintiff Yuko were not present and did not appear in court. Bizhan represented to the court that he had the authority to agree to the terms of the settlement on behalf of Yuko. Defendants’ counsel represented that Goldstein was authorized to enter into the agreement on behalf of TDI and Rifkind.
Under the terms of the settlement agreement, defendant Financial Title Company had the obligation to pay plaintiffs the sum of $35,000. Financial Title Company paid this amount to plaintiffs by check that plaintiffs cashed. After cashing the check, plaintiffs dismissed defendant Financial Title Company and did not include them in their appeal challenging the enforceability of the settlement agreement.
As to defendants TDI, Goldstein and Rifkind, under the terms of the agreement, plaintiffs had the right to elect to receive payment in the sum of $57,500 from defendants, or to purchase the subject property for the price of $477,500. In addition, the agreement provided: “[i]f that election [to received $57,500.00] is not made, then Plaintiff’s [sic] only right is to seek the close . . . of the escrow to purchase the property for the stated price. If they are unable to close that escrow within 45 days of today’s date, then they will lose the right. There will be no further extensions. They will not be entitled to recover anything in this action at all. And time is of the essence of this agreement.” The parties also agreed that the action would be dismissed and the lis pendens removed without any payment and without plaintiffs’ purchasing the property after the period of expiration of the right of election.
Subsequent to the agreement being entered on the record in superior court, plaintiffs did not elect to receive the payment of $57,500, and did not close escrow within the agreed upon period of 45 days.
As a result of plaintiffs’ failure to act on the settlement agreement, either to receive payment or purchase the property, on December 21, 2005, defendants moved for an order to enforce the settlement agreement, expunge lis pendens, to dismiss the action and for attorney fees pursuant to Code of Civil Procedure sections 664.6 and 405.38. The motion was based on the oral agreement made on September 28, 2005, and asserted that plaintiffs failed to perform their obligations under the settlement agreement.
All further statutory references are to the Code of Civil Procedure.
At the same time on December 21, 2005, plaintiffs also moved for an order to enforce the settlement pursuant to section 664.6. Plaintiffs sought court intervention to enforce the settlement agreement after the expiration of their right of election.
The two motions were heard in superior court on January 17, 2006, and the court denied plaintiffs’ motion, and granted defendants’ motion, and ordered the matter dismissed. On March 7, 2006, the court confirmed the order dismissing the action, and plaintiffs filed a notice of appeal.
Discussion
On appeal from a judgment entered pursuant to a stipulated settlement, the standard of review is whether the trial court’s determination that the parties entered into a binding agreement is supported by substantial evidence. (Fiore v. Alvord (1985) 182 Cal.App.3d 561, 563; In re Marriage of Assemi (1994) 7 Cal.4th 896, 911.) Statutory interpretation, however, is a question of law. (Murphy v. Padilla (1996) 42 Cal.App.4th 707, 711 (Murphy).) The initial inquiry in any case involving enforcement of a settlement agreement pursuant to section 664.6 is whether the statutory language of 664.6 applies. This question is subject to independent review. (Ibid.; Burckhard v. Del Monte Corp. (1996) 48 Cal.App.4th 1912, 1916 .)
Section 664.6 provides: “If 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.”
Our Supreme Court has held that the term “ ‘parties’ ” in section 664.6 “means the litigants themselves, and does not include their attorneys of record.” (Levy v. Superior Court (1995) 10 Cal.4th 578, 586, fn. omitted (Levy).) Because an enforceable settlement has the effect of terminating the litigation completely, the litigant must personally indicate his or her knowledge and consent to it. (Id. at pp. 583-584.) “The litigants’ direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent. This protects the parties against hasty and improvident settlement agreements by impressing upon them the seriousness and finality of the decision to settle, and minimizes the possibility of conflicting interpretations of the settlement. [Citations.] It also protects parties from impairment of their substantial rights without their knowledge and consent.” (Id. at p. 585.)
Following Levy, which involved a written settlement agreement that was not signed by all the parties, the Court of Appeal in Johnson v. Department of Corrections (1995) 38 Cal.App.4th 1700 (Johnson) held that the Supreme Court’s literal interpretation of the word “parties” in section 664.6 applied to oral as well as to written settlement agreements. The court decided that “ ‘direct party-litigant participation’ ” meant that a party must personally acknowledge the settlement to the court, just as a party must personally sign a written settlement. (Id., at p. 1709.)
In Murphy, supra, 42 Cal.App.4th 707, a panel of this court considered the issue of whether the requirement under section 664.6 of “direct party-litigant participation” was lacking in an oral agreement. Although the appellant had apparently been present at the mediation sessions, the extent of her participation was unclear from the record. This court noted in Murphy that the courts in Johnson and Levy appeared to reject the traditional agency analysis generally applied to the attorney-client relationship and instead interpreted section 664.6 to require the personal agreement of the client in every case. This court concluded that if appellant “did not personally agree” to the oral settlement, this would be an additional ground for reversing the order enforcing the settlement. (Murphy, supra, 41 Cal.App.4th at p. 716.)
A similar case to the present one is Cortez v. Kenneally (1996) 44 Cal.App.4th 523 (Kenneally), which involved a medical malpractice suit against a doctor, his clinic, the medical management company, and the doctor’s wife. A settlement agreement was entered into in open court and later signed by plaintiffs and by the doctor, “on behalf of defendants.” The doctor’s wife did not participate in any settlement discussions, and authorized no one to bind her personally. The trial court nonetheless found that she was bound by the settlement agreement, presuming that because the same attorney represented her, he was authorized to settle in her behalf. The court granted a motion to enforce the settlement under section 664.6.
The Court of Appeal in Kenneally concluded that Levy required that the judgment be reversed. “To be enforceable under section 664.6,” the court stated, “the settlement agreement must have been personally agreed to or signed by the litigant; an agreement entered only by the litigant’s attorney on behalf of the litigant is insufficient.” (Kenneally, supra, 44 Cal.App.4th at pp. 528-529.)
In the case before us, neither plaintiff Yuko nor defendant Rifkind were present at the settlement discussions, or personally represented to the court that they consented to it. We note here that defendant Rifkand does not challenge the validity of the agreement in this appeal. We presume plaintiffs raise this as an issue to assert that because he was also a party to the agreement and was not present, that the agreement is unenforceable under section 664.6.
In Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299 (Harris), the court considered the question of whether section 664.6 required the personal assent of all parties, and concluded that it did. The Harris court stated: “we note [section 664.6] expressly requires the writing to be signed by the ‘parties.’ Unlike [the statute of frauds], the plain language of section 664.6 does not limit its signature requirement to the ‘party to be charged.’ Clearly, the Legislature knew how to so limit the statute as it did in the statute of frauds. Yet it did not do so in section 664.6.” (Id. at p. 305). The Harris court went on to state: We read the statute's requirement of a writing “signed by the parties” to require the signatures of the parties seeking to enforce the agreement under section 664.6 and against whom the agreement is sought to be enforced.” (Ibid.)
Here although Rifkind does not seek to invalidate the settlement agreement in this appeal, he was one of the parties in the case, and he sought enforcement of the agreement in the trial court under section 664.6. However, Rifkind was not present during settlement discussions, and did not demonstrate his personal consent to the settlement to the court. The fact that his partner Goldstein represented to the court that he had authority to settle the matter on behalf of Rifkind does not satisfy the direct party participation required by section 664.6, Levy and its progeny.
In addition, Yukos’s failure to be present during the settlement discussions, and lack of personal assent is also problematic. Yuko’s husband, Bizhan represented to the group at the settlement discussions that he had the authority to agree to the terms on Yuko’s behalf. Under Levy and the other recent cases, however, this is not sufficient. Levy now requires that litigants personally acknowledge their agreement and consent to a stipulated settlement. As this court in Murphy made clear, “ ‘the litigant must personally acknowledge the settlement to the court’ ” in order to satisfy the conditions of section 664.6. (Murphy v. Padilla, supra, 42 Cal.App.4th at pp. 715-716.)
TDI argues that because Rifkind does not dispute this settlement agreement, the fact that he did not personally consent to is it irrelevant for the purpose of appeal. In addition, TDI asserts Yuko ratified the agreement through conduct demonstrating acceptance of the benefits of the agreement and should be estopped from challenging the agreement on appeal.
On first glance, the record does demonstrate that plaintiffs accepted the benefits of the agreement. Most notable is that fact that plaintiffs accepted and cashed a check in the amount of $35,000 from Financial Title Company and dismissed them as parties to the case pursuant to the terms of the settlement agreement. In addition, plaintiffs filed their own motion to enforce the settlement pursuant to section 664.6, albeit requesting more time for performance. Only after plaintiffs’ motion was denied and granted in favor of TDI did plaintiffs claim the agreement was unenforceable because of the lack of Yuko and Rifkind’s personal presence or consent.
It is clear that through this appeal plaintiffs are now seeking to undo what they were previously seeking to enforce. However, as this court noted in Murphy, ratification and estoppel are contractual theories that cannot be applied in a statutory proceeding under section 664.6. (Murphy v. Padilla, supra, 42 Cal.App.4th, at p. 716.)
Auto Equity Sales Inc. v. Superior (1962) 57 Cal.2d 450 dictates the result that the “direct party-litigant participation” required by Levy was lacking and the stipulated settlement cannot be enforced in a section 664.6 proceeding.
Disposition
The judgment is reversed and the matter is remanded to the trial court for further proceedings. Each party will bear its own costs on appeal.
WE CONCUR: PREMO, J., ELIA, J.