Opinion
A166242
03-28-2024
BTHHM BERKELEY, LLC, et al., Plaintiffs and Respondents, v. Stewart JOHNSTON, Defendant, Cross-complainant and Appellant; Holda Novelo et al., Cross-defendants and Respondents.
Counsel for Defendant, Cross-complainant and Appellant Stewart Johnston: Stephen F. Lopez Counsel for Plaintiffs and Respondents BTHHM Berkeley, LLC, PNB Berkeley, LLC, Michael Family 2004 Living Trust, Bianca Blesching, and Scot Hawkins: Allen Matkins Leck Gamble Mallory & Natsis, Marissa ?. Dennis Counsel for Cross-defendants and Respondents Holda M. Novelo and Landmark Real Estate Management: Hinshaw & Culbertson, Gary E. Devlin
Trial Court: Alameda County Superior Court, Trial Judge: Honorable Patrick R. McKinney (Alameda County Super. Ct. No. RG17862130)
Counsel for Defendant, Cross-complainant and Appellant Stewart Johnston: Stephen F. Lopez
Counsel for Plaintiffs and Respondents BTHHM Berkeley, LLC, PNB Berkeley, LLC, Michael Family 2004 Living Trust, Bianca Blesching, and Scot Hawkins: Allen Matkins Leck Gamble Mallory & Natsis, Marissa ?. Dennis
Counsel for Cross-defendants and Respondents Holda M. Novelo and Landmark Real Estate Management: Hinshaw & Culbertson, Gary E. Devlin
GOLDMAN, J.
Stewart Johnston appeals from the trial court’s order in favor of BTHHM Berkeley, LLC, PNG Berkeley, LLC, Michail Family 2004 Living Trust, Bianca Blesching, Scot Hawkins (collectively, BTHHM), and Holda Novelo and Landmark Real Estate Management, Inc. (collectively, Landmark), enforcing a settlement term sheet and entering judgment against him pursuant to Code of Civil Procedure section 664.6 (section 664.6). Johnston argues that the term sheet was not an enforceable settlement agreement because it omits material terms. Even if it is enforceable, he argues, a provision in the term sheet requiring him to pay $250,000 in liquidated damages for late payment is unlawful, and the trial court’s award of prejudgment interest on the settlement amount was unauthorized.
We reverse the trial court’s award of prejudgment interest but otherwise affirm.
BACKGROUND
Landmark and the predecessors of BTHHM entered into a letter of intent to lease real property owned by Johnston. Landmark was Johnston’s property manager. According to the letter of intent and its amendments, BTHHM would pay rent to Johnston to hold the property vacant while BTHHM applied to the City of Berkeley for a permit to operate a cannabis dispensary. The letter of intent provided that, once the city granted the permit, Johnston would turn the property over to BTHHM to operate the dispensary. In return, BTHHM would pay Johnston double the rent required to hold the property vacant. Johnston held the property vacant for 20 months during which time BTHHM paid, and Johnston accepted, rent according to the provisions of the letter of intent and its amendments. But when the city approved the permit, Johnston refused to deliver possession of the property to BTHHM.
BTHHM sued Johnston, asserting breach of contract and related claims, and seeking "at least" $1,545,000 in damages. Johnston filed a cross-complaint against Landmark, alleging that it lacked authority to bind him to the contract with BTHHM, and that Landmark knew Johnston would never agree to lease his real property to a cannabis dispensary. In October 2021, the parties attended an all-day tele-mediation, the product of which was a two-page term sheet titled "Settlement Texin Sheet Agreement," which provided, in relevant part:
"[The parties] enter into this Settlement Term Sheet ("Agreement") as of October 27, 2021 and agree as follows….
"1. Dismissal of Entire Action with Prejudice: Defendant will dismiss his Cross-Complaint with prejudice upon Cross-Defendant’s payment of its share of the settlement amount. Plaintiffs will dismiss their Complaint with prejudice upon full payment of the settlement amount of $2,200,000 to Plaintiffs.
"2. Settlement Payment: … .
a. Settlement Payment by Defendant: Defendant shall pay Plaintiffs the total amount of $1,600,000 as follows:
i. $200,000 within (30) days of this agreement;
ii. $700,000 by January 15, 2022 at 5:00 p.m. Pacific time; and
iii. $700,000 by April 15, 2022 at 5:00 p.m. Pacific time.
b. Settlement Payment by Cross-Defendant: Cross-Defendant shall pay Plaintiffs the total amount of $600,000 within thirty (30) days of receipt … of a completed W-9….
"3. Stipulation for Entry of Judgment/Liquidated Damages: Defendant shall execute and deliver to Plaintiffs a Stipulation of Entry of Judgment in favor of Plaintiffs and against Defendant. If Defendant fails to make any of the payments referenced in Paragraph 2(a) above, then … Plaintiffs shall have the right to immediately file the Stipulation for Entry of Judgment in the Action in the amount of the unpaid balance owed by Defendant plus $250,000, and have Judgment entered in accordance therewith.
"4. Code of Civil Procedure § 664.6: Parties agree the Agreement is admissible and enforceable in court pursuant to CCP § 664.6. The parties agree that this is a good faith settlement between adverse parties ….
[¶] … [¶]
"6. Plaintiffs’ Release of Claims To Property: Plaintiffs agree to release any and all rights under the subject Letter of Intent and its amendments, including their right of first refusal on the property [at issue], upon Defendant’s full payment of $1,600,000.
"7. Mutual Releases: All Parties shall fully release each other from all claims he/she/it had or may have against each other, except as to any continuing obligations under this Agreement….
[¶] … [¶]
"11. Further Documentation: Parties agree to execute a final settlement agreement, which includes a mutually agreeable form for the Stipulation for Entry of Judgment.
"12. Judge Warren’s Availability: Judge Warren is available to further assist the parties as necessary …. "
All parties signed the term sheet.
In the ensuing days, the parties discussed execution of the settlement, including drafting a formal settlement agreement pursuant to paragraph 11. During these discussions, Johnston’s attorney informed the other parties that Johnston wished to withdraw his agreement to the settlement. Johnston later explained that he "was exhausted, confused, and feeling ill" at the end of the day of mediation, and that when his attorneys presented him with the term sheet, he signed it without understanding the meaning of the reference to section 664.6 or that it was intended as a final settlement. The day after the mediation, Johnston stated, he instructed his attorney "to immediately rescind and cancel whatever [he] signed," and roughly a month later Johnston’s attorney confirmed that Johnston would not sign the formal settlement agreement.
BTHHM and Landmark moved to enforce the term sheet pursuant to section 664.6. The court granted the motions, finding that the term sheet was an enforceable agreement within the meaning of section 664.6, that its terms were clear and definite, and that Johnston’s "self-serving" declaration was not credible insofar as he attested that he did not understand the term sheet was meant to be a binding agreement.
Johnston did not pay BTHHM or dismiss his cross-complaint against Landmark as required by the enforcement orders. Landmark did, however, pay BTHHM $600,000.
BTHHM filed a motion for entry of judgment, which Landmark joined. Along with enforcement of the term sheet, BTHHM requested prejudgment interest on the amounts owed by Johnston. Johnston opposed the motion and filed an ex parte application as well as supplemental briefing and supplemental declarations, but did not in his filings oppose the request for prejudgment interest. After hearing, the court granted the motion, awarded prejudgment interest to BTHHM, entered judgment against Johnston, and dismissed his cross-complaint with prejudice.
DISCUSSION
See Footnote *, ante.
IV. Prejudgment Interest
[1] Johnston argues that the trial court lacked authority to award BTHHM prejudgment interest on the settlement amounts because the parties never so agreed. BTHHM responda that Johnston failed to oppose its request for prejudgment interest before the trial court, and that even if the issue were not forfeited, the court had authority to award prejudgment interest pursuant to Civil Code section 3287 once the right to recover damages had vested and the damages amount was certain. (Civ. Code § 3287, subd. (a).)
[2] Johnston did not challenge the award of prejudgment interest until oral argument on the motion for entry of judgment. At that point, he challenged only the amount of prejudgment interest, not the court’s authority to award such interest. Although we agree that Johnston likely forfeited his challenge to the award, we nevertheless address the issue because it implicates the trial court’s jurisdiction. (People v. Lara (2010) 48 Cal.4th 216, 225, 106 Cal.Rptr.3d 208, 226 P.3d 322.)
[3] Section 664.6 authorizes the trial court to enter a judgment reflecting the terms of the parties’ settlement agreement—nothing more, and nothing less. " ‘Although a judge hearing a section 664.6 motion may receive evidence, determine disputed facts and enter the terms of a settlement agreement as a judgment [citations], nothing in section 664.6 authorizes a judge to create the material terms of a settlement, as opposed to deciding what terms the parties themselves have previously agreed upon.’ " (Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1360, 60 Cal. Rptr.3d 693.)
[4] Prejudgment interest is not a cost, but an element of damages. (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 830, 76 Cal.Rptr.2d 743.) Here, the parties reached an agreement about what amount of money would adequately compensate BTHHM for the harm it suffered to warrant BTHHM’s release of claims. That agreement included a liquidated damages provision that would become operative if Johnston failed to make timely payment. By awarding prejudgment interest to compensate BTHHM for damages it suffered by virtue of Johnston’s failure to pay, the court entered a judgment that differed materially from the terms of the parties’ agreement, and to that extent it was unauthorized. (See Jones v. World Life Research Institute (1976) 60 Cal.App.3d 836, 839–840, 848, 131 Cal.Rptr. 674; Greentree Financial Group, Inc. v. Execute Sports, Inc. (2008) 163 Cal.App.4th 495, 502, 78 Cal.Rptr.3d 24 [reversing award of prejudgment interest not provided for in section 664.6 agreement].) We disagree that Civil Code section 3287 authorizes an award of prejudgment interest on a judgment entered pursuant to section 664.6 where, as here, the parties have reached their own agreement about what compensation is owed for damages that would otherwise be addressed by an award of prejudgment interest.
The parties disagree as to whether the award of prejudgment interest may be severed from the judgment, leaving the remainder intact. We conclude that the portion of the judgment providing for prejudgment interest may be stricken without otherwise invalidating the judgment. (Jones v. World Life Research Institute, supra, 60 Cal.App.3d at p. 848, 131 Cal. Rptr. 674.)
DISPOSITION
The judgment is reversed in part and affirmed in part. The matter is remanded to the trial court with directions to reduce the judgment against Johnston by $55,671.52, the total value of the prejudgment interest awarded to BTHHM. The parties shall bear their respective costs on appeal.
WE CONCUR:
BROWN, P. J.
STREETER, J.