Opinion
F074091
11-15-2018
HUBERT DANIEL, Plaintiff, Cross-defendant and Appellant, v. BP WEST COAST et al., Defendants, Cross-complainants and Respondents.
Michael S. Warda for Plaintiff, Cross-defendant, and Appellant. Miller Nash Graham & Dunn, Phillip Allan Trajan Perez and Amy E. Powell for Defendants, Cross-complainants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 660339)
OPINION
APPEAL from a judgment of the Superior Court of Stanislaus County. William A. Mayhew, Judge. Michael S. Warda for Plaintiff, Cross-defendant, and Appellant. Miller Nash Graham & Dunn, Phillip Allan Trajan Perez and Amy E. Powell for Defendants, Cross-complainants and Respondents.
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INTRODUCTION
Appellant Hubert Daniel appeals the entry of judgment and dismissal of his complaint based on an alleged settlement of pending litigation with respondents BP West Coast Products (BP West Coast) and Atlantic Richfield Company (collectively BP). As he did in the court below, Daniel contends on appeal that he did not authorize the alleged settlement and, further, that there is no final, enforceable agreement between the parties.
As we shall explain, we do not agree that the parties entered a final, binding settlement agreement upon which judgment could be entered and Daniel's complaint dismissed. Accordingly, we reverse and remand for further proceedings consistent with this opinion. Because we reverse on grounds that Daniel did not enter into an enforceable agreement, we do not reach the merits of the trial court's holding that Daniel's attorney had the requisite authority to bind him to a settlement.
FACTUAL BACKGROUND
The parties did not provide this court with a copy of the reporter's transcript from the trial. Accordingly, the facts recited herein are based on exhibits contained in the clerk's transcript and the factual findings as recited in the trial court's decision.
I. Litigation Settlement Discussions
Daniel entered into an agreement to purchase a gas station from BP West Coast. BP West Coast deeded the property to HCD Properties, LLC, a limited liability company of which Daniel was the sole member, subject to environmental deed restrictions and covenants. Daniel operated the gas station for five years before losing it to foreclosure.
Daniel filed a lawsuit against BP. He alleged that BP's failure to remediate environmental concerns with the gas station property prevented him from refinancing or selling it, causing Daniel financial harm.
During the course of the litigation, the parties stipulated to arbitrate the dispute and scheduled arbitration for May 7, 2014. After business hours on May 5, 2014, at 7:54 p.m., BP's attorney, Trajan Perez, sent an e-mail to Daniel's attorney, Michael S. Warda, to inquire whether Daniel had any interest in discussing settlement prior to the arbitration. Perez requested Warda to respond by noon the following day "as the window for discussions closes about that time."
Around 10:30 a.m. the next morning, May 6, 2014, Warda sent a responding e-mail and requested Perez to telephone him. Perez indicated he was on an important call, but would telephone Warda when it was over. Just before noon that same day, Warda sent Perez an e-mail that provided in full: "This will confirm that we have agreed to settle the above-reference[d] matter for $50,000.00 (full and mutual releases to be included [in] a formal settlement agreement)," to which Perez responded, "Confirmed." Perez cancelled the scheduled arbitration, forfeiting nonrefundable arbitration fees, and began to prepare a formal, written settlement agreement.
One week after the e-mail exchange, Warda notified Perez that, while Warda understood that he "had authority to settle the matter to recover costs," Daniel "advise[d] me that either I misunderstood my authority or he misunderstood the authority he was granting" and that Daniel would not agree to the settlement amount. The next day, BP sent Daniel for his review and signature a long-form written settlement agreement. BP argued that the e-mail exchange was a binding, enforceable agreement and requested that Daniel, along with Daniel's wife and HCD Properties, LLC, neither of which were parties to the litigation, sign the proposed, written settlement agreement.
A week after sending the first draft settlement agreement, BP sent a letter, indicating that they had yet to receive any proposed changes or a signed copy of the agreement from Daniel. BP threatened to move to enforce the alleged settlement should Daniel not request changes or sign the proposed written agreement. A month later, on June 23, 2014, BP sent Daniel another letter. It stated that, based on Warda's prior oral comments, BP had removed Daniel's wife and HCD Properties, LLC, from the draft agreement. Daniel never signed either draft of the written settlement agreement.
II. Trial to Enforce Alleged Settlement
After Daniel declined to sign the proposed, formal settlement agreement, the court granted BP's request to file a cross-complaint against Daniel to enforce the alleged settlement. BP's cross-complaint asserted causes of action against Daniel for breach of contract, specific performance and declaratory relief. Because adjudication of BP's cross-complaint in their favor would dispose of the claims in Daniel's complaint, the parties stipulated to conduct a bench trial solely on the cross-complaint and to do so based solely on written briefs, declarations, and documentary evidence.
In the court below, Daniel argued that, as a matter of law, he was not bound by any alleged settlement agreement under principles of agency and, as well, the e-mail exchange was not enforceable. Warda declared that he believed he had been authorized to settle the matter for "costs" and that he accepted BP's settlement amount based on that authority. Whereas Daniel declared that the settlement amount should have been significantly higher based on the authority he had provided Warda, believing that "costs" included a measure of damages. Daniel also explained that the settlement amount was not enough to cover "costs" he incurred in litigation. BP argued that Warda had his client's authority to bind him to a settlement, and Daniel was just upset because he did not like the settlement amount to which his attorney agreed.
III. Trial Court's Decision and Entry of Judgment
The trial court ruled on "[t]he crucial factual and legal issue" regarding whether Warda had authority to settle the case on behalf of Daniel. The trial court found that Warda was authorized to enter into a settlement on Daniel's behalf. Further, the trial court held that any misunderstanding between Daniel and Warda regarding the term "costs" did not invalidate Warda's authority to enter into an enforceable agreement. Although Daniel did not plead or attempt to prove the defense of mistake, the trial court held that the evidence did not support such a defense.
"[T]he Court concludes that Mr. Warda reasonably believed at the time of the negotiations with [BP's] counsel that he could settle the case for $50,000—an amount which he believed would cover the 'costs' [Daniel] had incurred. The unilateral mistake between [Daniel] and his counsel with regard to the definition of 'costs'—i.e. [Daniel's] mistaken belief that the term included some measure of damages as well—does not vitiate the express authority granted to Mr. Warda to settle."
The court then addressed whether the e-mail exchange constituted an enforceable settlement, expressly observing that the e-mail exchange contained unresolved contractual terms, including the terms of the mutual releases, and also referred to a "formal settlement agreement." The court nonetheless determined that the agreement was not contingent upon the parties drafting or approving language of the mutual releases or any other terms of a formal, written agreement. The court emphasized that the reason Daniel repudiated the "agreement" was based on a misunderstanding between Daniel and his counsel regarding the settlement amount. Inasmuch as Daniel first reneged based on the misunderstanding with Warda, and not because he subsequently disputed the scope of the mutual releases as proposed in the draft formal agreement, the court reasoned that the e-mail exchange was not conditioned on any further negotiation of the terms of the mutual releases.
The court held, that "[w]hile the terms of the agreement itself expressly contemplate that [BP] would provide a draft 'full and mutual releases' and [Daniel] would have the ability to propose changes thereto—the parties' agreement to settle the case was not 'contingent' on approval of the language of the 'full and mutual release'. [Citations.] Furthermore, the fact that the parties did not specify the exact terms of the 'full and mutual releases' in the contract does not render the contract unenforceable." Having found the May 6, 2014, e-mail exchange an enforceable agreement, the court held that Daniel violated its terms because, "[d]espite being presented with an acceptable full and mutual release, as contemplated in the settlement agreement reached on May 6, 2014, [Daniel] refused to execute the release and abide by the settlement agreement."
The court acknowledged that its decision purposefully left open questions as to the scope of the mutual releases and the "operative" language of a formal settlement agreement. Notwithstanding that the court found that the e-mail exchange constituted an enforceable settlement agreement, the court ordered the parties to meet and confer to reach agreement on terms, "if they can," and ordered Daniel to execute releases as they related to his claims. If the parties could not reach an agreement as to the terms of the releases and a formal settlement agreement, they were to provide the court their respective alternative drafts and the court would determine the content of the parties' agreement.
On June 15, 2015, the court entered judgment as follows in pertinent part: "Further, the Court ordered counsel for the parties to meet and confer and, if they can, reach agreement on the format of the 'full and mutual releases' agreed to by the parties, as well as the operative language of a written settlement agreement based on the Court's Decision. If counsel cannot reach an agreement regarding these documents, counsel must provide the Court with their proposed alternatives and the Court will then determine the content of the proposed full and mutual releases and written settlement agreement, based on the parties' settlement agreement reached on May 6, 2014." The court awarded BP costs in the amount of $2,167.65 and ordered BP to file an order dismissing Daniel's complaint. The complaint was dismissed and this appeal timely followed.
DISCUSSION
I. Standard of Review
In reviewing a judgment based upon a written statement of decision following a bench trial, we review questions of law de novo. (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981, citing Cuiellette v. City of Los Angeles (2011) 194 Cal.App.4th 757, 765.) We apply a substantial evidence standard of review to the trial court's findings of fact. (Niko v. Foreman (2006) 144 Cal.App.4th 344, 364.) Under this deferential standard of review, findings of fact are liberally construed to support the judgment and we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings. (Thompson v. Asimos, supra, at p. 981, citing Citizens Business Bank v. Gevorgian (2013) 218 Cal.App.4th 602, 613 (Gevorgian).) A single witness's testimony may constitute substantial evidence to support a finding. (Gevorgian, supra, at p. 613.) It is not our role as a reviewing court to reweigh the evidence or to assess witness credibility. (Niko, supra, at p. 365.) "A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness." (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.)
This case presents mixed questions of law and fact. "'Our standard of review on a mixed question of fact and law depends on the type of inquiry involved. "If the pertinent inquiry requires application of experience with human affairs, the question is predominantly factual and its determination is reviewed under the substantial-evidence test. If, by contrast, the inquiry requires a critical consideration, in a factual context, of legal principles and their underlying values, the question is predominantly legal and its determination is reviewed independently. [Citation.]" [Citations.]'" (Gevorgian, supra, 218 Cal.App.4th at p. 614, quoting General Mills, Inc. v. Franchise Tax Bd. (2012) 208 Cal.App.4th 1290, 1302-1303; see Crocker National Bank v. City and County of San Francisco (1989) 49 Cal.3d 881, 888.)
In this case we are called to determine whether the e-mail exchange constituted a legally binding settlement agreement. "'The interpretation of a written instrument, even though it involves what might properly be called questions of fact ... is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect.' [Citation.] An appellate court reviews such instruments independently, 'unless the interpretation turns upon the credibility of extrinsic evidence.'" (PV Little Italy, LLC v. MetroWork Condominium Assn. (2012) 210 Cal.App.4th 132, 144.)
II. Procedure for Enforcing Settlement Agreement
As a preliminary procedural matter, BP argues on appeal that Code of Civil Procedure section 664.6 does not apply to this case. Although Daniel does not expressly urge application of that statute on appeal, he does contend that the e-mail exchange is unenforceable because, among other reasons, he did not sign it nor did he sign any other settlement writing. Section 664.6 provides that "[i]f 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...."
BP argues that, to the extent we construe Daniel's position as requesting that we apply Code of Civil Procedure section 664.6 "as a bright-line rule to enforcement of settlement contracts in all circumstances," we should reject the proposition. We agree. To hold that section 664.6 applies to all proceedings to enforce settlement would be tantamount to holding that only written settlement agreements signed by all parties are enforceable, a proposition that is inconsistent with settled law.
There are several means for enforcing settlement agreements, including the procedure set forth under Code of Civil Procedure section 664.6. "'Section 664.6 was enacted to provide a summary procedure for specifically enforcing a settlement contract without the need for a new lawsuit.'" (Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1252.) But section 664.6 is not the exclusive means of enforcing a settlement agreement; it is simply a summary procedure available when certain prerequisites are satisfied. (Robertson v. Chen (1996) 44 Cal.App.4th 1290, 1293 (Robertson), citing Kilpatrick v. Beebe (1990) 219 Cal.App.3d 1527, 1529 (Kilpatrick) ["section 664.6 ... appears to do nothing more than provide a streamlined method for reducing a stipulated settlement to judgment"].) "Even when the summary procedures of section 664.6 are not available, a settlement agreement might be enforceable by summary judgment, a suit for breach of contract (perhaps prosecuted by means of a supplemental pleading), or a suit in equity." (Robertson, supra, at p. 1293.)
The summary procedure authorized by Code of Civil Procedure section 664.6 is suitable for agreements reduced to writing and signed by all parties, but may not be suitable where the terms of settlement or the parties' assent thereto are in dispute. In those circumstances, the parties may require discovery and a full trial of the facts or, if the material facts are not in dispute, they may require a summary judgment proceeding to determine the effect of applicable law. Consistent with the Robertson and Kilpatrick opinions, section 664.6 applies "[i]f parties to pending litigation stipulate, in a writing signed by the parties ... for settlement of the case ...." (Code Civ. Proc., § 664.6; see Robertson, supra, 44 Cal.App.4th at p. 1293 ["A procedure in which a settlement is evidenced by one writing signed by both sides minimizes the possibility of [disputes and misunderstandings between counsel and respective parties] and legitimizes the summary nature of the section 664.6 procedure."] We decline to expand the statute's reach beyond its terms.
III. Authority of Attorney to Authorize Settlement Agreements
Both at trial and on appeal, Daniel's primary argument was that, as a matter of law, Daniel's attorney lacked authority to agree to a settlement amount of $50,000 on behalf of Daniel. Because we reverse on grounds that the parties did not enter into a final or enforceable agreement, it is not necessary to determine whether Daniel's attorney had the requisite authority to bind him to a settlement.
IV. Enforceability of the Settlement Agreement
The gravamen of Daniel's position is that the e-mail exchange was not a final, binding settlement agreement. Daniel argues that the parties intended to continue settlement discussions and only be legally bound by a formal, written settlement agreement as contemplated in the e-mail exchange.
A. Legal Standards
1. Standards of Interpretation
"[T]he interpretation of a settlement agreement is governed by the same principles applicable to any other contractual agreement." (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165 (Winet).) The California Supreme Court has stated: "The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. (Civ. Code, § 1636.) If contractual language is clear and explicit, it governs. (Civ. Code, § 1638.)" (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264; accord, Horath v. Hess (2014) 225 Cal.App.4th 456, 463-464.) "'The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.' [Citation.] 'When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible ....'" (WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1709; see Horath, supra, at p. 463.)
"[E]vidence of the undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language." (Winet, supra, 4 Cal.App.4th at p. 1166, fn. 3.) "It is the outward expression of the agreement, rather than a party's unexpressed intention, which the court will enforce." (Id. at p. 1166; see Salehi v. Surfside III Condominium Owners Assn. (2011) 200 Cal.App.4th 1146, 1159.)
If a written instrument is ambiguous, parol evidence may be admitted to construe language. (Winet, supra, 4 Cal.App.4th at p. 1165.) "The test of whether parol evidence is admissible to construe an ambiguity is not whether the language appears to the court to be unambiguous, but whether the evidence presented is relevant to prove a meaning to which the language is 'reasonably susceptible.' (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 37.)" (Ibid.) The trial court's ruling on "the threshold determination of ambiguity [in the written instrument] is subject to independent review." (Ibid.) However, courts review the use of extrinsic evidence, the resulting credibility issues and its effect on determining the intent of the parties for substantial evidence. (Stratton v. First Nat. Life Ins. Co. (1989) 210 Cal.App.3d 1071, 1084; Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 359 (Banner Entertainment, Inc.).)
We note that ambiguous language is not necessarily required to allow extrinsic evidence regarding whether the parties intended to enter into a final, enforceable agreement. (See Halldin v. Usher (1958) 49 Cal.2d 749, 752.) "'Parol evidence is always competent to show the nonexistence of the contract.... Evidence is admissible, at least in equity, to show that a writing which apparently constituted a contract was not intended or understood by either party to be binding as such. The oral testimony in such a case does not vary the terms of the writing, but shows that it was never intended to be a contract or to be of binding force between the parties.'" (Ibid., citing P. A. Smith Co. v. Muller (1927) 201 Cal. 219, 222, italics added.)
"'Whether a writing constitutes a final agreement or merely an agreement to make an agreement depends primarily upon the intention of the parties. In the absence of ambiguity this must be determined by a construction of the instrument taken as a whole.'" (Beck v. American Health Group Internat., Inc. (1989) 211 Cal.App.3d 1555, 1562 (Beck).) The language of the purported agreement is the primary and usually the most critical evidence of the parties' intent. However, courts may also examine "the surrounding facts and circumstances of a particular case" to determine "[w]hether it was the parties' mutual intention that their ... agreement to the terms contained in a proposed written agreement should be binding immediately ...." (Banner Entertainment, Inc., supra, 62 Cal.App.4th at p. 358.)
"Contract formation requires mutual consent, which cannot exist unless the parties 'agree upon the same thing in the same sense.'" (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208 (Bustamante), quoting Civ. Code, § 1580; see Civ. Code, §§ 1550, 1565; see also HM DG, Inc. v. Amini (2013) 219 Cal.App.4th 1100, 1109.) The manifestation of mutual assent often is achieved through the process of offer and acceptance. (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141 (Alexander).) Mutual assent 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. (Ibid.; Bustamante, supra, 141 Cal.App.4th at p. 208.)
Generally, mutual assent is a question of fact. (Alexander, supra, 104 Cal.App.4th at p. 141.) "'The existence of mutual consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe.' [Citation.] Outward manifestations thus govern the finding of mutual consent required ... for contract formation. [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." (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811 (Weddington); accord, Bustamante, supra, 141 Cal.App.4th at pp. 208-209.) "'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.'" (Fair v. Bakhtiari (2006) 40 Cal.4th 189, 202 (dis. opn. of Kennard, J.), quoting Bustamante, supra, at p. 208.) But if the material facts are certain or undisputed, the existence of a contract is a question for the court to decide. (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407.)
2. Preliminary Negotiations
For over a century, California courts have recognized that parties may engage in preliminary negotiations prior to mutually assenting to a legally enforceable settlement agreement. "It is a general rule ... that, when it is a part of the understanding between the parties that the terms of their compact are to be reduced to writing and signed by the parties, the assent to its terms must be evidenced in the manner agreed upon, or it does not become a binding or completed contract." (Spinney v. Downing (1895) 108 Cal. 666, 668; see Beck, supra, 211 Cal.App.3d at p. 1562.) "'Preliminary negotiations or an agreement for future negotiations are not the functional equivalent of a valid, subsisting agreement. "A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent." [Citation.]'" (Beck, supra, at p. 1562.)
An agreement to agree is unenforceable under California law. (Bustamante, supra, 141 Cal.App.4th at p. 213 ["'[T]here is no contract where the objective manifestations of intent demonstrate that the parties chose not to bind themselves until a subsequent agreement [was] made.'"].) "[T]he failure to reach a meeting of the minds on all material points prevents the formation of a contract even though the parties have orally agreed upon some of the terms, or have taken some action related to the contract." (Banner Entertainment, Inc., supra, 62 Cal.App.4th at p. 359, first italics added.)
"When the parties orally or in writing agree that the terms of a proposed contract are to be reduced to writing and signed by them before it is to be effective, there is no binding agreement until a written contract is signed. [¶] This rule does not mean that a contract already reduced to writing, and signed, is of no binding force merely because it contemplates a subsequent and more formal instrument.... [¶] Whether it is the intention of the parties that the agreement should be binding at once, or when later reduced to writing, or to a more formal writing, is an issue of fact, and is to be determined by reference to the words the parties used, as well as upon all of the surrounding facts and circumstances." (BAJI No. 10.58; accord, Banner Entertainment, Inc., supra, 62 Cal.App.4th at p. 358.)
B. Analysis
1. The Language of the E-mail Exchange is Susceptible of More Than One Meaning
The e-mail exchange that the court found to constitute an enforceable settlement agreement contains one sentence: "This will confirm that we have agreed to settle the above-reference[d] matter for $50,000.00 (full and mutual releases to be included [in] a formal settlement agreement)." We begin by looking solely at the language contained in the e-mail exchange to determine whether it is reasonably susceptible of more than one meaning.
The first clause of the sentence unambiguously indicates that the parties had reached an agreement as to the monetary amount of the settlement. While the settlement amount is an important, material term, it is not the only material term of a settlement contract. In any event, using the past tense phrase "we have agreed" objectively indicates that the parties had mutually assented, prior to the e-mail exchange, to the specific settlement amount of $50,000.
The parenthetical language in the e-mail exchange regarding the releases and a formal settlement agreement, though, requires further examination. On the one hand, the reference to a formal settlement agreement that would include mutual releases may reasonably be construed as requiring the parties to enter into a more formal and detailed arrangement in the future. Typically, a formal, written settlement agreement contains identification of the parties, recitals, settlement amount, releases, standard provisions about construing and enforcing the settlement terms, other negotiated provisions such as, for example, attorneys' fees and confidentiality (both of which were proposed by BP in the draft written settlement agreement as discussed post), and the parties' signatures. The email exchange contains no detail regarding the scope or content of the mutual releases or the remaining terms of a formal settlement agreement. Given the cursory nature of the e-mail exchange with its reference to a formal settlement agreement, it would be reasonable to conclude that the parties intended to reserve issues for further negotiation as to a final, formal settlement contract.
On the other hand, the parenthetical language in the e-mail exchange might be construed to mean that "full and mutual releases" and the "operative language" of a formal settlement agreement would be reduced to writing as a mere formality. For this interpretation to be viable, the meaning of "full and mutual releases" and the remaining terms of a formal agreement must be patently clear so that their reduction to writing is little more than a mechanical exercise. (See Banner Entertainment, Inc., supra, 62 Cal.App.4th at p. 358; Columbia Pictures Corp. v. DeToth (1948) 87 Cal.App.2d 620, 629.) "[I]f the respective parties orally agreed upon all of the terms and conditions of a proposed written agreement with the mutual intention that the oral agreement should thereupon become binding, the mere fact that a formal written agreement to the same effect has not yet been signed does not alter the binding validity of the oral agreement." (Banner Entertainment, Inc., supra, at p. 358.)
We must therefore determine whether it would be a mere formality or mechanical exercise to prepare a formal, written settlement agreement based upon the language of the e-mail exchange. If it would not be, then it would be unreasonable to construe the e-mail exchange as a final, enforceable settlement agreement.
We begin by examining the reference to "full and mutual releases." The bare phrase "full and mutual releases" does not have a defined meaning and there is no detail in the e-mail exchange regarding the intended scope or content of the releases. The trial court did not find that the term "full and mutual releases" had a commonly understood meaning or that the e-mail exchange evidenced an intent by the parties to agree to any other given meaning.
The term "full" with respect to releases is not definite and does not have a commonly accepted meaning. California law defines a "'general release'" as covering only existing known claims, not "claims that, at the time of the execution, are unknown to the releasor and that would have materially affected the settlement." (Drafting Business Contracts: Principles, Techniques & Forms (Cont.Ed.Bar 2018) § 11.46, p. 11-34, citing Civ. Code, § 1542.) Whereas, "specific releases," as opposed to general releases, include unknown claims within the scope of the release. (Civ. Code, § 1542.) Here, neither the term "general" nor "specific" was used to describe the mutual releases.
We conclude that reducing the releases to writing would require more than a mechanical exercise or mere formality. Consequently, based on its language, the e-mail exchange is not reasonably susceptible of the interpretation that the parties agreed to the meaning of "full and mutual releases" or that the language of the e-mail exchange is otherwise sufficient to evidence a final agreement between the parties as to the releases. The same is true regarding the "operative language" of a formal settlement agreement, including the remaining terms, inasmuch as there is no language at all upon which a formal agreement could be drafted.
2. Extrinsic Evidence Supports That the E-mail Exchange Was Preliminary in Nature
As mentioned, the evidence suggests that the settlement negotiations leading to the e-mail exchange were brief and rushed. Two nights before the scheduled arbitration, after business hours, Perez e-mailed Warda to ascertain if there was interest in discussing a settlement prior to arbitration. It is readily inferable from the circumstances that the parties wished to avoid the commencement of arbitration if a settlement reasonably was on the horizon. Having sent the e-mail at nearly 8:00 p.m., it was not likely that Warda would see or respond to the e-mail until he returned to work the next morning, as was the case. By the time counsel were able to speak, it was nearly 11:00 a.m. the morning before arbitration, allowing little time to thoroughly negotiate all the terms of a settlement, given their deadline of noon.
The evidence leading up to the e-mail exchange indicates the parties were primarily concerned with reaching a tentative agreement in time to cancel the arbitration rather than finalizing the terms of the settlement. That was reflected in Warda's terse confirming e-mail that described little more than the settlement amount and that mutual releases would be drafted. Taken together, the press of time, the brevity of the e-mail exchange, the reference to a formal settlement agreement, and the absence of terms or description as to the mutual releases or other terms of a formal agreement, lead us to conclude that the e-mail exchange was intended to be preliminary in nature.
In addition, the parties' communications after the e-mail exchange about the drafts of the formal settlement agreement indicate that the parties simply had not yet reached agreement as to all of the terms of the settlement. The parties agreed to the settlement amount which, although an important material term, is only one element of settlement. A release of liability is another material term and the parties disagreed regarding the terms of the releases as proposed in the formal, written settlement agreement.
As originally drafted by BP, the releases included additional parties not subject to the litigation, including Daniel's wife and HCD Properties, Inc. Further, the release discharged all claims relating to both the legal action and the property. Daniel contended at the time that the release of claims relating to the property was overbroad because he no longer had any ownership interest in the property. Daniel's attorney raised concerns as to unknown claims relating to the property because of Daniel losing his ownership status, and he objected to the inclusion of parties who were related to the property but were not parties to the underlying litigation. It is not reasonably discernable from the term "full" whether parties related to the property, as opposed to the litigation, were intended to be included or whether the releases were intended to be general or specific, particularly in light of Daniel's nonownership status going forward.
The drafts of the formal agreement also contained additional proposed terms, including terms of confidentiality and an attorneys' fees provision, that were not previously discussed or reflected in the e-mail exchange and which we do not consider standard or boilerplate provisions. That BP proposed these terms to Daniel in its draft formal agreements, and requested proposed changes from Daniel, reasonably gives rise to the inference that BP understood that the content of the formal settlement contract was not settled and was subject to negotiation.
In Weddington, mediation resulted in a one-page memorandum reflecting agreement to certain terms of a settlement, including a cash payment, the transfer of certain property, and a licensing agreement. (Weddington, supra, 60 Cal.App.4th at p. 799.) When disputes surfaced about the meaning of the licensing provision, the parties returned to the mediator, who attempted to impose terms to which one party never agreed. (Id. at pp. 796-797, 804-807.) The Court of Appeal concluded that the parties had never agreed upon the material terms needed for an enforceable license agreement and that the mediator lacked authority to impose material terms to which the parties had never agreed. (Id. at pp. 815-816.)
Likewise, in Terry v. Conlan (2005) 131 Cal.App.4th 1445, the parties disputed the validity of an initial settlement agreement that contained ambiguities as to material terms, including the method of managing trust property. (Id. at p. 1460.) The parties returned to the court to address the disagreement regarding the terms of the settlement. (Id. at p. 1452.) Despite the disagreement, the court entered judgment and determined the meaning of the disputed terms. On appeal, the court reversed the order entering judgment, finding, "like Weddington, the parties left significant ambiguities in ... material terms that demonstrated there was no meeting of the minds." (Id. at pp. 1460, 1464.)
Taking into consideration the e-mail exchange as a whole, as well as evidence of the parties' intent leading up to and after the e-mail exchange, we conclude that the e-mail exchange does not constitute a final, binding settlement agreement. The e-mail exchange does not contain all of the material terms of settlement and is an insufficient basis from which the parties' intent as to all material terms may be discerned. The reference to "full and mutual releases" to be included in a "formal settlement agreement" may only reasonably be construed in the circumstances here as requiring further negotiation and agreement by the parties.
In sum, applying California law, this record does not support the conclusion that the parties mutually intended for the e-mail exchange to be final, and the e-mail exchange is not enforceable as a binding agreement. Although these parties clearly agreed to the settlement amount, "the failure to reach a meeting of the minds on all material points prevents the formation of a contract even though the parties have orally agreed upon some of the terms or have taken some action related to the contract." (Banner Entertainment, Inc., supra, 62 Cal.App.4th at p. 359, first italics added.)
3. The Trial Court's Ruling and Judgment Reflect the Preliminary Nature of the E-mail Exchange
That the e-mail exchange was neither final nor enforceable is reflected in the trial court's ruling. The court expressly "leaves open questions as to the exact content of the 'full and mutual releases'" as well as the "operative language" of a written settlement agreement. The court orders the parties to meet and confer as to terms and reach agreement "if they can." (Italics added.) The court below then orders that the if the parties cannot reach agreement, they must submit their competing proposals and the court "shall then determine the content of the proposed full and mutual releases and written settlement agreement, based on the parties' [e-mail exchange]." (Italics added.) In addition to the fact that leaving open material terms of contract and ordering the parties to attempt to agree "if they can" are not indicia of a final and enforceable agreement, the court may not create or impose terms to which the parties do not agree, as discussed below.
The trial court explained its view that Daniel breached an enforceable promise because "[d]espite being presented with an acceptable full and mutual release, as contemplated in the settlement agreement reached on May 6, 2014, [Daniel] refused to execute the release and abide by the settlement agreement." Preliminarily, we find no evidence in the record to support the conclusion that the draft written releases were "acceptable" to Daniel and, as we have explained, the term "full and mutual releases" does not have a defined or commonly understood meaning. Here, the court's finding of breach is not based on a breach of the terms of a mutual release, it is based on Daniel's declination to enter into a mutual release. As such, the court's finding of breach is based on Daniel's agreement to agree to "full and mutual releases." Under California law, an agreement to agree is unenforceable. (Bustamonte, supra, 141 Cal.App.4th at p. 213.)
In its written decision, the court stated that, although BP's first draft of a formal agreement may have contained parties not mentioned in the e-mail exchange, "these arguments do not undermine the fact that a contract was entered into ...." Reasoning that Daniel only objected to the terms of the mutual releases "after he had already repudiated the agreement" (italics added), and that Daniel's subsequent disagreement with the draft formal settlement agreement "did not form the basis of [Daniel's] repudiation of the contract," the court determined that there were no conditions in the e-mail exchange that required satisfaction for a settlement to be enforceable. It simply does not follow that, because Daniel first asserted lack of authority as grounds for not proceeding toward settlement, he is precluded from subsequently asserting other defenses such as enforceability, including whether the e-mail exchange is ambiguous or conditional or both. Daniel's assertion that his attorney lacked his authority did not waive or otherwise compromise his assertion of other defenses such as the finality and enforceability of the e-mail exchange.
The court entered judgment and dismissed Daniel's complaint prior to resolving the parties' dispute over the terms of the agreement. It is unclear from the record how the court determined that it could issue a final judgment and dismiss the complaint prior to resolving the dispute over contractual terms. "A judgment is the final determination of the rights of the parties (Code Civ. Proc., § 577) '"'when it terminates the litigation between the parties on the merits of the case and leaves nothing to be done but to enforce by execution what has been determined.'"'" (Dana Point Safe Harbor Collective v. Superior Court (2010) 51 Cal.4th 1, 5.)
The court's disposition reflects that the e-mail exchange was not a final agreement. The trial court ordered that, if the parties could not reach an agreement postjudgment, the court would then determine the content of the formal settlement agreement for them, something the trial court may not do. "The trial court may not 'create the material terms of a settlement, as opposed to deciding what terms the parties themselves have previously agreed upon.'" (Bowers v. Raymond J. Lucia Companies, Inc. (2012) 206 Cal.App.4th 724, 732 (Bowers); accord, Weddington, supra, 60 Cal.App.4th at p. 810.) While the settlement of civil cases is encouraged under California law, courts may not force settlement upon the parties when they do not mutually assent to the terms of an agreement. (T. M. Cobb Co. v. Superior Court (1984) 36 Cal.3d 273, 280; Rosenfield v. Vosper (1941) 45 Cal.App.2d 365, 371 ["Although efforts on the part of a trial judge to expedite proceedings and to encourage settlements out of court are ordinarily to be commended, such efforts should never be so directed as to compel either litigant to make a forced settlement."].)
Independently reviewing the record, we find no evidence of communications between the parties as to their positions or understandings as to the mutual releases or other terms of settlement from which the trial court could "determine the content" of the parties' alleged agreement. Consequently, the court would not be in a position to "'decid[e] what terms the parties themselves previously agreed upon'" and would instead have to "'create the material terms of a settlement.'" (Bowers, supra, 206 Cal.App.4th at p. 732.) Because it is impermissible for the court to create terms for the parties, without the parties' postjudgment agreement, the judgment is effectively rendered unenforceable.
DISPOSITION
The judgment is reversed and the order dismissing Daniel's third amended complaint is vacated. The matter is remanded to the trial court for further proceedings consistent with this opinion. Costs on appeal are awarded to Daniel.
/s/_________
MEEHAN, J. WE CONCUR: /s/_________
SMITH, Acting P.J. /s/_________
SNAUFFER, J.