Opinion
A150511 A150561
05-30-2018
STEVEN HERBERT, Plaintiff and Respondent, v. KATHLEEN NEEDHAM, Defendant and Appellant. KATHLEEN NEEDHAM, Plaintiff and Appellant, v. VANGUARD PROPERTIES, INC., et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco County Super. Ct. No. CGC14538574) (San Francisco County Super. Ct. No. CGC15547672)
Kathleen Needham (Kathleen) appeals from two judgments enforcing a settlement agreement that resolved litigation arising out of the sale of her real property. (Code Civ. Proc., § 664.6). We affirm. We also conclude respondents are entitled to reasonable attorney fees incurred on appeal, in an amount to be determined by the trial court.
We consolidated the appeals for argument and decision. Undesignated statutory references are to the Code of Civil Procedure. We refer to Kathleen by her first name for clarity, intending no disrespect. The trial court sealed the settlement agreement; we describe it general terms.
FACTUAL AND PROCEDURAL BACKGROUND
The Property Sale and Subsequent Litigation
Kathleen was born in 1940. She owns a two-unit building in San Francisco (the property). Kathleen resides in one unit and rents the other unit. In July 2013, Steven Herbert offered to buy the property for $1.25 million. Kathleen countered with an offer to sell the property for $1.395 million. Herbert accepted the counter offer and both parties signed a property sale agreement. Real estate agent Shelley Trew of Vanguard Properties, Inc. was the agent for Herbert and Kathleen pursuant to a dual agency agreement. In late July 2013, Herbert deposited money into an escrow account as required by the sale agreement, but Kathleen refused to close escrow.
In 2014, Herbert filed a complaint against Kathleen for breach of contract and specific performance, and to compel arbitration pursuant to the sale agreement, Herbert v. Needham et al., (Super. Ct. San Francisco County, No. CGC-14-538574) (Herbert action). Kathleen answered the complaint in propria persona. In July 2014, the court ordered the parties to arbitrate. The arbitration was delayed, however, so Kathleen could hire an attorney. In January 2016—18 months after the court ordered the parties to arbitrate—Yosef Peretz became Kathleen's counsel of record.
The arbitration was delayed for the additional reason that Kathleen filed a lawsuit against Trew and Vanguard Properties, Inc. (collectively, Trew), Needham v. Vanguard Properties, Inc., et al., (Super. Ct. San Francisco County, No. CGC-15-547672) (Vanguard action). Peretz represented Kathleen in the Vanguard action. The gist of the complaint was Trew pressured Kathleen into selling the property for below market value and failed to disclose a prior business relationship with Herbert. In addition, the complaint alleged Kathleen's mental abilities are diminished, which is "obvious to anyone who speaks to or interacts with her" and that she is "mentally compromised."
Mediation and Motions to Enforce the Settlement Agreement
In May 2016, the parties mediated the Herbert and Vanguard actions with a retired judge. Peretz represented Kathleen. At the conclusion of the one-day mediation, the parties and their attorneys signed a Stipulation for Settlement (settlement agreement), which (1) contemplated the parties would enter into a long-form settlement agreement and general release; (2) reserved trial court jurisdiction pursuant to section 664.6; and (3) authorized the prevailing party in any enforcement action to recover reasonable attorney fees and costs of enforcement. Counsel for Kathleen drafted a long-form settlement agreement, which counsel for all parties approved. Kathleen, however, refused to sign it.
On July 18, 2016, Herbert filed a motion to enforce the settlement agreement, arguing he and Kathleen "entered into a written stipulation for settlement at the conclusion of a mediation" and Kathleen "personally signed" it. Two days later, Peretz substituted out as Kathleen's attorney, and she began representing herself. On July 29, Trew filed a similar motion, arguing the settlement agreement was the "result of an arms-length negotiation between all parties (and their counsel) . . . with the assistance" of a retired judge. Trew claimed the settlement agreement contained all material terms, accurately reflected the parties' agreement, and was signed by the parties and counsel. The court set a combined hearing on both motions for August 26.
Kathleen's Continuance Requests and Late-filed Supplemental Opposition
On August 15, 2016, Kathleen filed a request in propria persona to continue the hearing until September 30. She stated: "I have reviewed the mediation document and it is not in my best interest. I refuse to sign it and have fired the lawyer who attended the mediation with me. [¶] I am requesting a continuance of one month so that I am able to hire a new lawyer who will help me keep my home." Attached to the request was a two-page letter written by Kathleen stating she was "refusing" to sign the settlement agreement "created in mediation" and that she did "not want to move or evict [her] tenants. . . . I live here and this is my home. I built this house in 1981 with my brothers. I am 76 years old, diabetic, unable to walk, and have a major heart condition." Kathleen stated that in the three years since signing the property sale agreement, her health had "further declined," that she took "many medications," and was "under the close care of multiple doctors."
Kathleen described the mediation: "Peretz filed paperwork for me and went with me to a mediation in May 2016. We spent 10 hours in a meeting. I thought I would see a judge and tell my story. Instead close to 7pm Peretz advised me to sign a handwritten document. I was exhausted and foggy by then. I am diabetic and was not feeling well after so many hours but I believed he was acting in my best interest. [¶] I then spent the weekend after the mediation in the emergency room." She continued: "When I was served with the long form of the mediation document and read it, I see that it is against my best interest and I will not sign it. . . . [¶] . . . I am refusing to sell the home."
The court continued the hearing until September 22, 2016 and set a September 12 deadline for Kathleen "to obtain new counsel and/or file supplemental opposition" to the motions. At the September 22 hearing, Kathleen's attorney moved to continue the hearing and for "another continuance to file supplemental opposition." The court continued the hearing again—to September 26—and set a deadline of September 23 for the filing of a supplemental opposition. Kathleen's attorney did not file a supplemental opposition by the deadline. Instead, Kathleen's attorney filed the supplemental opposition on the day of the hearing.
The supplemental opposition urged the court to deny the motions because Kathleen's "mental and legal capacity to consent to sale of her personal residence were at issue." According to Kathleen's counsel, the Vanguard action gave the parties sufficient notice that Kathleen's "capacity to consent to the Settlement Agreement . . . was at least questionable." Counsel also asked the court to deny the motions to allow the completion of "necessary medical evaluations to ascertain [Kathleen's] mental capacity to make legal decisions such as the sale of her personal residence." The supplemental opposition noted Kathleen had assigned a power of attorney on July 8, 2016. Finally, the supplemental opposition attached a letter from Aissatou Haman, M.D., stating: "I . . . am the primary care physician for Ms. Kathleen Needham . . . [who] has been undergoing evaluations for her forgetfulness; these include an evaluation by a Neurologist to help determine her mental capacity to make decisions."
Hearing and Order Granting the Motions
At the September 26, 2016 hearing, the court noted "[t]hese are not new cases" and that it had already continued the matter twice. The court characterized Kathleen as "unhappy because now she could get more money" and suggested she was seeking to delay the sale of the property. In addition, the court observed, "I would think that the mediator in this instance would have gone down that path if there was a thought regarding the competency . . . My own evaluation based on . . . having heard Ms. Needham represent herself a couple of weeks ago, she was very competent. She knew the story. [¶] . . . I've done probably hundreds of these kinds of issues regarding competence . . . and there seemed to be very little doubt."
Herbert and Trew objected to the letter from Kathleen's doctor, arguing it lacked foundation and was "not under penalty of perjury. It's inadmissible hearsay." Herbert argued Kathleen "presented no evidence . . . as to her competence now and certainly no evidence as to her competence" in July 2013, "when the original purchase agreement was made, . . . and then in May 2016 when the mediation and the settlement was made. [¶] There's just no evidence." Trew made a similar argument, and noted Kathleen's entry into a power of attorney in July 2016 demonstrated her competence. The court sustained the objection to the letter.
In the Herbert action, the court denied Kathleen's continuance request and granted the motion to enforce the settlement agreement. As relevant here, the judgment for Herbert ordered Kathleen to comply with the settlement agreement, "and take all steps necessary to close escrow on, transfer ownership of, and deliver vacant the property . . . within 90 days." In the Vanguard action, the court denied Kathleen's request for a continuance and granted the motion to enforce the settlement agreement. As relevant here, the judgment for Trew ordered Kathleen to comply with the terms of the settlement agreement.
DISCUSSION
I.
No Error in Denying Kathleen's Request for a Third Continuance
" ' " 'Generally, power to determine when a continuance should be granted is within the discretion of the court, and there is no right to a continuance as a matter of law.' " ' " (Mahoney v. Southland Mental Health Associates Medical Group (1990) 223 Cal.App.3d 167, 170 (Mahoney).) Continuances should " ' "be granted sparingly, nay grudgingly, and then only on a proper and adequate showing of good cause." ' " (In re Marriage of Hoffmeister (1984) 161 Cal.App.3d 1163, 1169 (Hoffmeister).) "Reviewing courts must uphold a trial court's choice not to grant a continuance unless the court has abused its discretion in so doing." (In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 823 (Falcone).) " ' "The burden is on the party complaining to establish an abuse of discretion, and unless a clear case of abuse is shown and unless there has been a miscarriage of justice a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power." '" (Mahoney, at p. 170.)
Kathleen has not demonstrated the denial of her third request for a continuance of an indefinite duration was an abuse of discretion. (Falcone, supra, 164 Cal.App.4th at p. 823; Forthmann v. Boyer (2002) 97 Cal.App.4th 977, 984-985.) The motions to enforce the settlement agreement were filed in July, and the court had continued the hearing twice—for more than 60 days—at Kathleen's request. Kathleen had ample time before the September 26 hearing to hire an attorney and marshal the necessary evidence to support her claims. Kathleen, however, apparently waited until the last minute to hire an attorney, who then waited until the day of the hearing to seek a third continuance. This was "unfair to the other side." (Falcone, at p. 823.) We have no difficulty concluding Kathleen failed to demonstrate good cause for another continuance; her disagreement with the court's ruling does not establish an abuse of discretion, nor that the court's refusal to continue the hearing for a third time was "arbitrary" or "irrational."
Kathleen's reliance on Hoffmeister, supra, 161 Cal.App.3d 1163 is unavailing. The Hoffmeister court noted "[g]ood cause for a continuance may be established where a party has been surprised by unexpected testimony and requires a postponement to enable him to meet it." (Id. at p. 1169.) Here, Herbert and Trew were not advancing new claims, nor surprising Kathleen with "unexpected testimony" at "virtually the last moment." (Id. at pp. 1168, 1170.) The motions to enforce the settlement had been pending, unchanged; the court's refusal to continue the hearing a third time did not deny Kathleen a fair hearing—the court considered Kathleen's request, filed in propria persona, and her attorney's late-filed supplemental opposition, and listened to argument from her attorney. Hoffmeister is distinguishable. The court was well within its discretion to deny Kathleen's third continuance request.
Even assuming the court erred by declining to continue the hearing, Kathleen cannot establish " 'a miscarriage of justice.' " (Mahoney, supra, 223 Cal.App.3d at p. 170.) Kathleen argues another continuance was necessary to allow her to obtain expert testimony on her "mental impairments and lack of competency." She points to neurological testing completed in February 2017, which she claims confirms she has symptoms " 'suggestive of a neurogenerative disease, such as Alzheimer's disease.' " Putting aside obvious foundational issues with the results of the neurological testing, and with our consideration of evidence not before the trial court, the neurologist's summary conclusion that Kathleen has symptoms "suggestive of a neurogenerative disease" does not establish Kathleen's legal mental capacity in July 2013, when she entered the property sale agreement, nor in May 2016, when she signed the settlement agreement.
II.
No Error in Granting Motions to Enforce Settlement Agreement
"Section 664.6 was enacted to provide a summary procedure for specifically enforcing a settlement contract without the need for a new lawsuit." (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809.) "A settlement agreement is a contract, and the legal principles which apply to contracts generally apply to settlement contracts." (Id. at p. 810.) "It is for the trial court to determine in the first instance whether the parties have entered into an enforceable settlement. [Citation.] In making that determination, 'the trial court acts as the trier of fact, determining whether the parties entered into a valid and binding settlement. [Citation.] . . . The trial court's factual findings on a motion to enforce a settlement pursuant to section 664.6 'are subject to limited appellate review and will not be disturbed if supported by substantial evidence.' " (Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1360.)
Kathleen claims the court erred by enforcing the settlement agreement because she presented "convincing evidence" she "was not mentally competent." "[T]he determination of a person's mental capacity is fact specific, and the level of required mental capacity changes depending on the issue at hand. . . . [M]ental capacity can be measured on a sliding scale, . . . on the high end of the scale is the mental capacity required to enter contracts." (In re Marriage of Greenway (2013) 217 Cal.App.4th 628, 639 (Greenway).) We focus our discussion on Civil Code Section 39, which provides "specific guidelines for determining the capacity to contract." (Greenway, at p. 642.) Under that statute, a "contract of a person of unsound mind, but not entirely without understanding, made before the incapacity of the person has been judicially determined, is subject to rescission." (Civ. Code, § 39, subd. (a).)
The test for rescission under Civil Code section 39 is whether "the party was mentally competent to deal with the subject before [her] with a full understanding of [her] rights," (Stratton v. Grant (1956) 139 Cal.App.2d 814, 817), i.e. whether she "understood the nature, purpose and effect of what [she] did." (Smalley v. Baker (1968) 262 Cal.App.2d 824, 832, overruled on other grounds in Weiner v. Fleischman (1991) 54 Cal.3d 476, 485.) Kathleen argues she presented "compelling evidence" that she "did not understand the effect" of signing the settlement agreement. We review a trial court's conclusions on "incapacity and unsoundness of mind" under Civil Code section 39 for substantial evidence. (Gosnell v. Lloyd (1932) 215 Cal. 244, 255; see also Greenway, supra, 217 Cal.App.4th at p. 645.)
Substantial evidence supports the trial court's conclusion that Kathleen possessed the requisite mental capacity to enter the settlement agreement, i.e. that she understood the purpose and effect entering into that agreement. In ruling on the motions to enforce the settlement agreement, the court considered the circumstances of the mediation held before a retired officer of the court, where Kathleen was represented by counsel. The court also observed Kathleen's physical condition, demeanor, and mental acuity firsthand, when she appeared before the court in propria persona. It also reviewed the request for a continuance Kathleen filed in propria persona, where she clearly articulated it was not in her "best interest" to sign the long form settlement agreement. Kathleen's continuance request creates an inference she was able to understand the settlement agreement and evaluate the consequences of signing it. (See In re Marriage of Assemi (1994) 7 Cal.4th 896, 911-912.) Finally, the court reviewed the supplemental opposition filed by Kathleen's attorney, which did not argue Kathleen lacked the mental capacity to enter into the settlement agreement. Instead, it stated Kathleen's "capacity to consent was . . . questionable" and was "at issue." Together, this evidence amply supports the court's conclusion that Kathleen possessed the mental capacity to enter into the settlement agreement.
Kathleen "devotes a large portion of her opening brief discussing evidence she claims supports the conclusion" she lacked the requisite mental capacity. "But we do not reweigh the evidence." (Greenway, supra, 217 Cal.App.4th at p. 649.) We consider the evidence in the light most favorable to the prevailing parties, giving them "the benefit of every reasonable inference from the evidence tending to establish the correctness of the trial court's decision, and resolving conflicts in support of [that] decision." (Estate of Beard (1999) 71 Cal.App.4th 753, 779.) Applying this standard of review, we have no difficulty determining substantial evidence supports the court's capacity determination.
Kathleen does not challenge the trial court's exclusion of Dr. Haman's letter. She acknowledges the record before the trial court contained "no medical evidence of any kind on the issue of her mental impairments and lack of competency." In any event, Dr. Haman's letter has little bearing on Kathleen's mental competence—it simply states Kathleen was being evaluated for "forgetfulness" and that a neurologist would "determine her mental capacity to make decisions."
To the extent it was admissible, Kathleen's letter does not undermine our conclusion. In her letter, Kathleen had no trouble explaining her reasoning for changing her mind, and for refusing to sign the long form settlement agreement. Kathleen's letter also referred to various physical ailments—diabetes, a heart condition, and the inability to walk—and referenced her medications. She also stated she was "not feeling well" and was "exhausted and foggy" when the mediation ended. These general descriptions of Kathleen's physical condition do not establish she did not understand the nature, purpose and effect of entering into the settlement agreement. Even if we assume for the sake of argument Kathleen suffered from a measure of mental incapacity when she entered into the settlement agreement, that fact did not necessarily "extinguish [her] ability to participate in contractual relationships and transactions." (Das v. Bank of America, N.A. (2010) 186 Cal.App.4th 727, 743.) "One may be incompetent to some extent and yet have sufficient mentality to comprehend the nature and effect of a transaction and therefore execute a valid contract." (Hellman Commercial T. & S. Bk. v. Alden (1929) 206 Cal. 592, 603.) Finally, we reject Kathleen's claim that the court should have declined to enforce the settlement agreement because her former attorney pressured her to sign it. (See Chan v. Lund (2010) 188 Cal.App.4th 1159, 1178-1179.)
III.
Respondents are Entitled to Reasonable Attorney Fees Incurred on Appeal
Herbert and Trew request attorney fees on appeal pursuant to the settlement agreement, which provides the prevailing party of any enforcement motion shall be entitled to reasonable attorneys' fees and costs of enforcement. "[W]here a written contract expressly provides for the award of attorney fees, the prevailing party in an action under or relating to the contract is entitled to recover its fees, whether incurred at trial or on appeal." (Starpoint Properties, LLC v. Namvar (2011) 201 Cal.App.4th 1101, 1111.) Because we affirm the judgments, Herbert and Trew are the prevailing parties under the settlement agreement. As a result, they are entitled to reasonable attorney fees " 'for services . . . on appeal.' " (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 547.) " 'Although this court has the power to fix attorney fees on appeal, the better practice is to have the trial court determine such fees.' " (Center for Biological Diversity v. County of San Bernardino (2010) 185 Cal.App.4th 866, 901.)
DISPOSITION
The judgments are affirmed. Respondents are awarded costs on appeal. (Cal. Rules of Court, rule 8.278.) Respondents are entitled to reasonable attorney fees on appeal. The matter is remanded for the trial court to determine the amount of such fees.
/s/_________
Jones, P. J. We concur: /s/_________
Simons, J. /s/_________
Needham, J.