Opinion
No. 59654-3-I.
January 14, 2008.
Appeal from a judgment of the Superior Court for King County, No. 04-2-19113-1, Richard A. Jones, J., entered March 1, 2007.
Affirmed by unpublished opinion per Grosse, J., concurred in by Ellington and Dwyer, JJ.
Full and timely payment of all monies due under a settlement agreement satisfies a party's settlement obligations and cures any immaterial breaches. Here, 180Solutions, Inc. satisfied its settlement obligations to Gourley by making timely payments of all monies owing under the basic terms of the parties' settlement agreement. The fact that 180Solutions breached a supplemental settlement agreement's terms is immaterial given that Gourley was paid in full. We affirm.
FACTS
Charles Gourley and three other individuals (Gourley) are former employees of the Internet start-up company, 180Solutions, Inc., now known as Zango after its merger with Hotbar.com, Inc. In 2004, Gourley sued 180Solutions and its two principal founding owners alleging, inter alia, breach of contract, violation of various securities laws, and fraud, all relating to stock option employment contracts. Two weeks prior to trial, Gourley and 180Solutions executed a settlement agreement pursuant to CR 2A.
Under the agreement, 180Solutions agreed to make an initial payment of $4 million to Gourley on or before March 6, 2006. A balance payment of $1 million was then due on or before October 1, 2006. Prior to October 1, 2006, 180Solutions could elect to pay $1.2 million over four installments that included $200,000 in fixed interest with the last payment due July 2006.
The parties subsequently executed additional settlement agreement documents as expressly contemplated in the CR 2A Settlement Agreement. After several weeks of negotiations, 180Solutions executed a Promissory Note for $1.2, million, a Stock Pledge, the parties signed Mutual Releases, and two sets of stipulated judgments were executed by each of the 180Solutions' individual defendants. The first set of stipulated judgments secured the initial payment ($4 million) and the second set was for the balance payment, in the amount of $1.2 million each. Gourley could enter the stipulated judgments ex parte should 180Solutions default. The Stock Pledge, the Promissory Note, and Stipulated Judgments provided different forms of security pending Gourley's receiving full and timely payment of all monies owed it under the settlement agreement. If 180Solutions defaulted, it would then owe $1.2 million, due immediately upon Gourley's election to accelerate the balance payment and the $200,000 (characterized as a fixed interest sum).
Though expressly drafted pursuant to the CR 2A Settlement Agreement, the supplemental settlement documents contain provisions or additional terms not found in that initial agreement, though none of their terms are in direct conflict. Of particular interest here, the Stock Pledge enumerates certain "Events of Default" other than the failure to make a timely payment (the only type of default expressly contemplated by the CR 2A Settlement Agreement). In pertinent part, the Stock Pledge defines an Event of Default as:
(a) any failure by Pledgor to pay when due any sum in total or installment of a sum or principal or interest or fee payable under this Stock Pledge or the Note, which failure is not cured within the time specified in this Stock Pledge or the Note; (b) any failure by Pledgor to perform any obligation to be performed under this Stock Pledge or the Note . . .; (c) any of Pledgor shall admit their inability to pay its debts as they mature or shall make an assignment for the benefit of it or any of its creditors; . . . (f) Issuer . . . (iv) approves a merger or consolidation with any other Person in a transaction in which Issuer is not the surviving entity, or (v) takes or permits any other action that would cause a material decrease in the value of the Collateral.
The Promissory Note incorporates by reference these Events of Default as enumerated in the Stock Pledge.
180Solutions made timely payment of the initial $4 million. The $1 million balance was also, ultimately, timely paid. Gourley contends, however, that it is entitled to an additional $200,000, the parties' agreed fixed interest amount on the balance payment in the case of default by 180Solutions.
Gourley asserts that 180Solutions defaulted prior to the October 1 deadline by causing several Events of Default to occur, including a devaluation of the common stock it pledged as security for the balance payment. For purposes of this appeal, we assume that there was indeed a devaluation of the common stock and that it constituted such a default.
On September 27, 2006, Gourley entered the second set of Stipulated Judgments against 180Solutions for $1.2 million ex parte, four days before the October 1, 2006 balance payment deadline. 180Solutions then made two payments to Gourley totaling $1 million by the October deadline. After October 1, Gourley continued to assert that 180Solutions owed it an additional $200,000, plus interest, as a result of their default or breach.
On October 9, 2006, the trial court vacated the Stipulated Judgments against 180Solutions. Further, on February 28, 2007 the trial court found that 180Solutions had "fully and completely complied with their settlement payment obligations in accordance with the parties' CR 2A Settlement Agreement" foreclosing any attempt by Gourley to collect the additional $200,000 through a separate action on the Promissory Note. Gourley appeals.
ANALYSIS
Settlement agreements are contracts and as such are governed by the general principles of contract law. In order to determine whether 180Solutions satisfied its settlement obligations, we must first inquire into the legal effect of the agreement. Washington follows an objective manifestation test for contracts and "[w]here the terms of a contract are plain and unambiguous, the intention of the parties shall be ascertained for the language employed." Here, the terms of the parties' settlement agreement are found in multiple documents, executed at different times.
Saben v. Skagit County, 136 Wn. App. 869, 876, 152 P.3d 1034 (2006).
Schauerman v. Haag, 68 Wn.2d 868, 873, 416 P.2d 88 (1966).
Gourley contends the CR 2A Settlement Agreement is "merely a precursor" to the "more formal" subsequently executed settlement documents that are separate and superseding. However, the plain language of both the initial CR 2A Settlement Agreement and the subsequently executed settlement documents do not support Gourley's contention.
At most, the subsequently executed settlement documents are more specific than the CR 2A Settlement Agreement and as such may serve to provide additional terms but they are neither separate nor superseding contracts. The CR 2A Settlement Agreement states, "the parties intend this Agreement to be a binding settlement under Morris v. Maks, 69 Wn. App. 865 (1993) and CR 2A prior to the signing of any other additional documents contemplated under this Agreement as set forth below." The next sentence provides, "[d]espite contemplating further documents under this Agreement, the parties intend to avoid further dispute and to give certainty and finality to the settlement expressed herein." It is difficult to reconcile how "contemplating further documents under this Agreement" could reasonably be understood as referring to documents actually meant to replace, wholly or in part, the CR 2A Settlement Agreement which is intended to give "certainty and finality to the settlement."
To read these later executed settlement documents as standing alone or without reference to the initial CR 2A Settlement Agreement would not only make some of them nonsensical, but would contradict their explicit language as well. In fact, every single one of the supplemental settlement agreement documents that Gourley cites as controlling or superseding contain language indicating that each was executed pursuant to the CR 2A Settlement Agreement.
The CR 2A Settlement Agreement provides the basic framework of the settlement agreement, and it is only pursuant to this document that all of the other settlement documents were executed and can properly be understood. Its terms are clear and may be summarized briefly as 180Solutions agrees to pay Gourley $5 million if paid by full by October 1, 2006, but before that date 180Solutions may elect to pay the final balance in installments including the $200,000 fixed interest, ending in July 2006. 180Solutions paid the Gourley the entire $5 million by October 1, 2006.
These subsequently executed settlement documents are not superseding settlement documents but rather supplemental documents executed pursuant to the terms of the CR 2A Settlement Agreement. Timely payment of the balance due under that agreement extinguishes any legal rights arising from the language of supplemental documents executed solely to provide security pending timely payment or an alternative means of collecting the balance owed plus fixed interest in the event of a default by 180Solutions.
180Solutions' default was immaterial and cured when it made timely payment of the $1 million balance by the October deadline, four days after Gourley entered the Stipulated Judgments ex parte. Gourley has simply received their bargained for benefit of the settlement agreement. The trial court is affirmed.
The CR 2A Settlement Agreement, the Promissory Note, and the Stock Pledge all contain similarly worded clauses awarding reasonable attorney fees and costs to the prevailing party in any dispute arising from the parties' settlement agreement. We affirm the trial court's award of attorney fees and costs and award attorney fees and costs on appeal to 180Solutions pursuant to RAP 18.1(a).
WE CONCUR: