Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Humboldt County Super. Ct. No. DR040124
Judge of the Alameda County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
This appeal concerns the scope of an attorney’s authority to execute a settlement agreement on behalf of his or her client. Appellants Mahmood and Farah Alam and Ok Boon Lee (collectively, appellants) appeal from a judgment entered in favor of respondent Mohammad A. Khan following the trial court’s determination on summary adjudication that a purported settlement agreement signed by appellants’ attorney, but not by appellants, was enforceable against them. For reasons discussed below, we reverse.
FACTUAL AND PROCEDURAL BACKGROUND
The following facts are taken from the record before the trial court when it ruled on Khan’s motion for summary adjudication and entered a final judgment in his favor. (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 65.) We consider all the evidence set forth in the parties’ moving and opposition papers except that to which objections were made and sustained. (Id. at pp. 65-66; Code Civ. Proc., § 437c, subds. (c), (f).)
Khan filed the original complaint in this case against appellants for damages arising out of the sale of a convenience store in Eureka for $530,000. Appellants purchased the convenience store and surrounding property from Mohammad Naeem while Naeem was the subject of bankruptcy proceedings (the property). Khan, a creditor of Naeem’s, objected to the purchase price of the property as below fair market value, and thus brought this lawsuit against appellants to void the sale as a transfer in avoidance of creditors under Civil Code sections 3439 et seq.
Beginning in December 2004, the parties, through their attorneys, negotiated the terms of a possible settlement of this lawsuit. On March 3, 2005, Khan’s attorney, Robert Poyourow, sent appellants’ attorney, Ronnie Rotholtz, a letter proposing to settle the matter for, among other things, payment of $77,500 total, with $5,500 paid at the time of execution of the final settlement documents and $4,000 paid monthly thereafter for 18 months, to be secured by a deed of trust for the property (March 3 letter). The March 3 letter further provided: “Additional settlement documents will need to be drawn, and others exchanged and recorded.” After receiving the letter, Rotholtz informed Poyourow that he would discuss the proposal with his clients, and would advise them to accept it. Rotholtz initially declined, however, to indicate his clients’ approval of the proposal.
The Alams and Lee have since each substituted new counsel. In fact, the record reflects that before the rulings at issue on this appeal, Lee filed a cross-complaint against the Alams, Rotholtz and others seeking indemnity and alleging, among other things, that Rotholtz lacked authority to execute a settlement on her behalf.
On April 4, 2005, Rotholtz executed the March 3 letter on behalf of appellants and faxed a copy to Khan’s attorney, Poyourow. Shortly thereafter, on April 8, Poyourow faxed a letter to the trial court advising that “the parties have settled this action, subject to further documentation,” and requesting that it be removed from the court’s active litigation calendar.
Thereafter, in late April and early May 2005, the parties continued to negotiate certain terms of settlement. In particular, contrary to what was provided for in the March 3 letter, the parties discussed paying the $77,500 settlement amount in monthly payments over a 12-month period rather than over an 18-month period. The parties ultimately agreed to include this modified term in any final settlement agreement. The parties also discussed, but could not reach agreement on, among other things, appellants’ obligations with respect to the original escrow account by which they purchased the property from Naeem.
Ultimately, given ongoing disagreement over appellants’ escrow account obligations and other circumstances, appellants did not execute the March 3 letter. Nor did appellants execute other formal settlement documents that Poyourow later sent to Rotholtz which contained the modified provision allowing for monthly payments over a 12-month period. The matter was thus reinstated by the parties’ stipulation on the trial court’s active litigation calendar.
On July 5, 2005, Khan moved to enforce the March 3 letter as a binding settlement agreement under Code of Civil Procedure section 664.6. The trial court denied the motion on the ground that the letter was not signed by appellants, but by their attorney, Rotholtz. Khan then filed a supplemental complaint in this matter, asserting causes of action for breach of contract and specific performance against appellants, and for breach of warranty against Rotholtz, based on the March 3 letter.
On January 27, 2006, Khan moved for summary adjudication under Code of Civil Procedure section 437c on the causes of action for specific performance and breach of contract. Appellants opposed the motion on the ground that the March 3 letter was unenforceable because they did not execute it and Rotholtz lacked authority to execute it on their behalf. The trial court granted the motion, finding that the March 3 letter was “a binding settlement agreement between the plaintiff and the defendants, that the defendants breached the terms thereof, that the plaintiff is entitled to damages in the amount set forth in the March 3, 2005 letter in the amount of $106,657, and that the plaintiff is entitled to the Court’s declaration that the plaintiff entitled [sic] to a security interest in the defendants’ property to secure that judgment amount, all as set forth in the plaintiff’s Third and Fourth Causes of Action.”
On May 3, 2006, Khan moved for entry of final judgment in his favor, arguing that the trial court’s summary adjudication ruling effectively resolved all remaining claims among the parties. The motion was granted, and judgment was thus entered in Khan’s favor on May 17, 2006. This appeal followed.
DISCUSSION
Appellants contend the trial court erred in granting summary adjudication and then entering judgment in Khan’s favor because triable issues of material fact remain regarding (1) whether Rotholtz, appellants’ attorney, had authority to execute a purported settlement agreement, the March 3 letter, on their behalf; and (2) if not, whether appellants later ratified Rotholtz’s execution of that letter.
“ ‘Since a motion for summary judgment or summary adjudication “involves pure matters of law,” we review a ruling on the motion de novo to determine whether the moving and opposing papers show a triable issue of material fact.’ (Travelers Casualty & Surety Co. v. Superior Court (1998) 63 Cal.App.4th 1440, 1450 [75 Cal.Rptr.2d 54].)” (Maxconn Inc. v. Truck Ins. Exchange (1999) 74 Cal.App.4th 1267, 1272.)
Under Code of Civil Procedure section 437c, subdivision (f), “[a] party may move for summary adjudication as to one or more causes of action within an action . . . if that party contends that the cause of action has no merit or that there is no affirmative defense thereto, or that there is no merit to an affirmative defense as to any cause of action, or both . . . or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1). See also Casey v. Overhead Door Corp. (1999) 74 Cal.App.4th 112, 118, overruled in part on other grounds by Jimenez v. Superior Court (2002) 29 Cal.4th 473, 478.)
In performing a de novo review under this standard, we must view the evidence in a light favorable to appellants as the losing party, liberally construing their evidentiary showing while strictly scrutinizing Khan’s, and resolving any evidentiary doubts or ambiguities in appellants’ favor. (Suidan v. County of San Diego (1999) 72 Cal.App.4th 916, 920.)
Here, the trial court granted summary adjudication in Khan’s favor after concluding no triable issue of material fact existed with respect to the enforceability of the March 3 letter. Specifically, the trial court found as a matter of law that the March 3 letter was a binding settlement agreement enforceable against appellants because their authorized agent, attorney Rotholtz, executed the letter on their behalf. Whether an attorney has authority to bind his or her client through a written agreement is an issue generally governed by the principles of agency. (Blanton v. Womancare, Inc. (1985) 38 Cal.3d 396, 403 [Blanton].) We thus turn to the law of agency to assess the propriety of the trial court’s finding.
Was Rotholtz Authorized to Settle This Case on Appellants’ Behalf?
Under well-established agency principles, “ ‘the client as principal is bound by the acts of the attorney-agent within the scope of his actual authority (express or implied) or his apparent or ostensible authority; or by unauthorized acts ratified by the client.’ [Citations.]” (Blanton, supra, 38 Cal.3d at p. 403.)
Agency is generally a question of fact. (E.g., van’t Rood v. County of Santa Clara (2003) 113 Cal.App.4th 549, 562 [van’t Rood].) However, “ ‘[w]hen the essential facts are not in conflict and the evidence is susceptible to a single inference, the agency determination is a matter of law for the court. [Citation.]’ (Emery v. Visa Internat. Service Assn. (2002) 95 Cal.App.4th 952, 960 [116 Cal.Rptr.2d 25]. See also, e.g., Magnecomp Corp. v. Athene Co. (1989) 209 Cal.App.3d 526, 536 [257 Cal.Rptr. 278].)” (van’t Rood, supra, at p. 562.)
Here, we thus must determine: (1) whether Rotholtz acted within the scope of his authority in executing a purported settlement agreement – the March 3 letter – on appellants’ behalf; and (2) if not, whether appellants subsequently ratified Rotholtz’s unauthorized execution of the March 3 letter.
A. The Scope of Rotholtz’s Authority.
As set forth above, a client may be bound by acts of his or her attorney within the scope of the attorney’s actual authority (express or implied), apparent or ostensible authority. (Blanton, supra, 38 Cal.3d at p. 403.) “Actual authority is such as a principal intentionally confers upon the agent, or intentionally, or by want of ordinary care, allows the agent to believe himself to possess.” (Civ. Code, § 2316.) “Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess.” (Id. at § 2317.) Apparent authority is such as “to do that which attorneys are normally authorized to do in the course of litigation manifested by the client’s act of hiring an attorney.” (Blanton, supra, at p. 404.)
As our California Supreme Court has explained, “ ‘[t]he attorney is authorized by virtue of his employment to bind the client in procedural matters arising during the course of the action . . . . “In retaining counsel for the prosecution or defense of a suit, the right to do many acts in respect to the cause is embraced as ancillary, or incidental to the general authority conferred, and among these is included the authority to enter into stipulations and agreements in all matters of procedure during the progress of the trial.” . . . [Citation.] (Linsk v. Linsk (1969) 70 Cal.2d 272, 276-277 [74 Cal.Rptr. 544, 449 P.2d 760].)’ ” (Blanton, supra, 38 Cal.3d at pp. 403-404.)
Thus, solely by virtue of the attorney-client relationship, an attorney may bind his or her client with respect to certain procedural matters, including, for example, tactical decisions to call or not call a particular witness to testify, or to abandon a non-meritorious defense. (Blanton, supra, 38 Cal.3d at pp. 403-404; Levy v. Superior Court (1995) 10 Cal.4th 578, 584 [Levy].) An attorney may not, however, by virtue of his or her employment, “ ‘impair the client’s substantial rights or the cause of action itself.’ (Linsk v. Linsk, supra, 70 Cal.2d at p. 276.) For example, ‘the law is well settled that an attorney must be specifically authorized to settle and compromise a claim, that merely on the basis of his employment he has no implied or ostensible authority to bind his client to a compromise settlement of pending litigation. [Citations.]’ (Whittier Union High Sch. Dist. v. Superior Court (1977) 66 Cal.App.3d 504, 508 [136 Cal.Rptr. 86]; see also Linsk v. Linsk, supra, 70 Cal.2d at p. 278.)” (Blanton, supra, 38 Cal.3d at p. 404; see also In re Marriage of Helsel (1988) 198 Cal.App.3d 332, 338 [“it is . . . clear the Blanton court was of the view that a lawyer has no apparent authority to compromise and settle a lawsuit without the client’s approval”].)
Applying these principles here, we easily conclude Rotholtz had no authority based merely on his employment as appellants’ attorney to settle this lawsuit on their behalf because, under Blanton, it is beyond dispute that settlement of a claim affects the parties’ substantial rights. (Blanton, supra, 38 Cal.3d at p. 404 [an attorney has “no implied or ostensible authority to bind his client to a compromise settlement of pending litigation” merely on the basis of his employment].) We thus must determine whether Rotholtz had the requisite express authority, as opposed to mere apparent, implied or ostensible authority, to bind appellants to the settlement terms set forth in the March 3 letter. (Ibid. [an attorney must be “specifically authorized to settle and compromise a claim”]; Levy, supra, 10 Cal.4th at p. 583 [“settlement is such a serious step that it requires the client’s knowledge and express consent”].)
Having reviewed the record in a light most favorable to appellants as the non-moving party, we conclude a disputed issue of fact remains regarding whether Rotholtz was expressly authorized to bind appellants to the settlement terms set forth in the March 3 letter. True, that letter, as executed by Rotholtz, provides that the document “accurately summarizes the terms of our settlement,” and that Rotholtz was “authorized to indicate [his] clients’ acceptance of these terms.” Also true, Alam acknowledged in verified discovery responses discussing the amount of the settlement – $77,000 – and the amount of the monthly payments – $5,000 – with Rotholtz. In those same discovery responses, however, Alam denied authorizing Rotholtz to execute the March 3 letter with respect to “collateral issues and conditions, as understood by responding party.” Alam also denied agreeing to settle this action pursuant to the terms provided for in the March 3 letter, explaining that “[c]ollateral items were not agreed-to by responding defendant.” Further, in deposition, Alam testified that he refused to sign the settlement documents that Khan’s attorney, Poyourow, sent to Rotholtz because he disagreed with certain terms provided for in those documents. When asked to which specific terms he objected, Alam testified that the “whole thing was objection,” and that “th[e] entire agreement is wrong, because I didn’t want to deposit at this time money in the trust account in the settlement . . . .”
Alam explained that “collateral and added provisions” are “those provisions in the proposed settlement agreement which go beyond the amount of the settlement ($77K) and the monthly amounts to be paid ($5K).”
In response to several deposition questions regarding whether Rotholtz was authorized to settle the matter on his behalf, Alam, on his attorney’s instruction, declined to answer on grounds of attorney-client privilege.
Similarly, in her verified discovery responses, Lee flatly denied authorizing Rotholtz to execute the March 3 letter on her behalf. Lee recalled discussing settlement in a telephone conversation with Rotholtz and Alam, but claimed that “[n]othing was clear or resolved,” that “[n]o authorization was given to Rotholtz to proceed,” and that she “believed settlement discussions were dropped and heard nothing further from Rotholtz or Alam regarding settlement until Khan’s motion to enforce settlement was filed.”
Khan argues on appeal that Lee’s verified discovery responses, drafted in English, lack the requisite evidentiary foundation because she does not speak English fluently and relies on her nephew and agent, Jay, to speak on her behalf. We do not address this argument on appeal given that Khan failed to secure a ruling on the admissibility of such evidence from the trial court.
Alam in no way contradicted Lee’s statements. Specifically, Alam acknowledged that he and Rotholtz discussed Khan’s settlement offer with Lee and her nephew Jay Kim (who, unlike Lee, spoke English fluently and thus represented her at times in connection with this lawsuit). But Alam nowhere stated that Lee authorized Rotholtz to execute the March 3 letter on her behalf.
Rotholtz, in turn, stated in verified discovery responses that he believed he was authorized to execute the March 3 letter on his clients’ behalf, but correctly acknowledged that “[such alleged] belief does not confirm the alleged authority [as to appellants].” In addition, Rotholtz stated it was understood between him and his clients that the Alams would themselves sign and fax, and that Lee would present in person to sign, the settlement documents. Those events never occurred because, as Rotholtz explained, two issues ultimately made difficult execution of settlement documents under the terms provided for in the March 3 letter. First, Poyourow added language to the March 3 letter, to which appellants objected, imposing certain obligations on appellants with respect to the escrow account by which they originally purchased the property. Second, on or about April 22, 2005, Mohammed Nisar, another creditor of Naeem’s, filed suit against appellants raising essentially the same claims as those raised here. Those new circumstances led appellants to withhold execution of a binding settlement agreement.
In claiming the evidence established as a matter of law Rotholtz’s express authority to bind appellants to the March 3 letter, Khan points to Rotholtz’s statements in discovery that he believed he had such authority. Khan also points to language drafted into the March 3 letter providing that, by executing it, Rotholtz was expressly acknowledging his authority to bind appellants to it. Such evidence, however, does not establish the requisite authority for purposes of summary adjudication. For one, the rule is well-established that “ ‘persons dealing with an assumed agent are bound at their peril to ascertain the extent of the agent’s authority. [Citation.]’ (Lindsay-Field v. Friendly (1995) 36 Cal.App.4th 1728, 1734 [43 Cal.Rptr.2d 71]; see also Ernst v. Searle (1933) 218 Cal. 233, 240 [22 P.2d 715.])” (van’t Rood, supra, 113 Cal.App.4th at p. 573.) And “[a] principal cannot be held when an actual agent acts beyond the scope of his actual or ostensible authority. [Citations.]” (Ibid.) As such, we must consider not just Rotholtz’s belief and actions, we must also consider those of appellants. Here, as set forth above, the record reflects that appellants believed, and indeed acted consistent with their belief that, Rotholtz lacked authority to bind them to the March 3 letter.
Khan also points out that Alam acknowledged agreeing to the amount of settlement ($77,000) and to the amount of the monthly payments ($5,000) set forth in the March 3 letter. Alam “merely” disagreed with various collateral issues and conditions discussed in the parties’ settlement negotiations and set forth in the March 3 letter. Again, however, such evidence does not establish for purposes of summary adjudication that Rotholtz possessed the requisite authority. Specifically, the fact that Alam agreed to certain settlement terms, however significant those terms, does not establish as a matter of law that he expressly authorized Rotholtz to finally compromise and settle this lawsuit by executing the March 3 letter on his behalf. Indeed, it is undisputed that other terms of the parties’ purported settlement agreement were in fact modified after Rotholtz executed the March 3 letter, and that still other terms remained the subject of dispute among the parties. These facts call into question Khan’s claim that such letter was intended to be a final, binding settlement.
As the California Supreme Court has stated in the related context of reviewing a motion to enforce a settlement agreement under Code of Civil Procedure 664.6, “[t]he litigants’ direct participation [in executing a settlement agreement] 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.” (Levy, supra, 10 Cal.4th at p. 585 [emphasis added]; see also Murphy v. Padilla (1996) 42 Cal.App.4th 707, 716 [“[e]mphasizing finality of settlement agreements and the impact on parties’ substantive rights, the courts fashion a rationale for requiring direct party-litigant participation, which does not appear limited to the statutory methods of enforcing settlement agreements”].)
Nor does the fact that appellants engaged in detailed discussions with Rotholtz regarding settlement of the matter establish the requisite authority. “Consultation between [a litigant] and his attorney during the course of negotiations does not constitute the type of direct participation [in reaching a settlement agreement] contemplated by Levy.” (Johnson v. Department of Corrections (1995) 38 Cal.App.4th 1700, 1709.)
Accordingly, for the reasons set forth above, we conclude a triable issue of fact remains regarding whether Rotholtz was authorized to execute the March 3 letter, a purported final settlement agreement, on appellants’ behalf.
B. Ratification.
One issue remains for our determination. As mentioned above, an attorney’s act, even if unauthorized, may become binding on his or her client where the client subsequently ratifies it. (Blanton, supra, 38 Cal.3d at p. 408.) Under “the well-settled rule of agency . . . a principal will be held to have ratified the agent’s actions where he voluntarily accepts the benefits of the unauthorized transaction.” (Murphy v. Padilla, supra, 42 Cal.App.4th at p. 717, quoting Alvarado Community Hosp. v. Superior Court (1985) 173 Cal.App.3d 476, 481.) Ratification, however, “occurs only by a principal, not by an agent.” (Murphy v. Padilla, supra, at p. 717.)
Here, we find no evidence in the record conclusively establishing for purposes of summary adjudication that appellants ratified Rotholtz’s execution of the March 3 letter. Rather, the evidence is again disputed. True, Khan’s attorney sent a letter to the trial court on April 8, 2005, advising that the matter had been “settled . . ., subject to further documentation.” (Emphasis added.) Apparently relying on this letter, the trial court found in ruling on summary adjudication that “[Khan] informed the Court that the matter had settled with the knowledge and permission of the defendants.” But, as set forth above, the “further documentation” upon which Khan’s assurance to the trial court was based was not forthcoming. Moreover, appellants did not sign the April 8 letter, and no evidence has been set forth establishing that they approved or even knew about the letter. Rather, the letter itself shows only that their attorney, Rotholtz, received a copy of it. Alam denied receiving a copy of the letter, and denied knowing whether Rotholtz consented to or objected to it. And Rotholtz, for his part, denied consenting to it. Consistent with such lack of consent, the record reveals that appellants ultimately stipulated to reinstatement of the matter on the trial court’s active litigation calendar.
We need not conclusively resolve the ratification issue for purposes of this appeal. We merely point to this evidence tending to disprove Khan’s ratification claim in concluding that the trial court erred in granting summary adjudication and entering judgment in his favor. Should the trial court find on remand that Rotholtz lacked authority to bind appellants to the March 3 letter, the trial court will then have occasion to decide the ratification issue anew.
DISPOSITION
The judgment is reversed and the matter remanded to the trial court for further proceedings consistent with this opinion. Khan shall bear costs on appeal.
We concur: McGuiness, P. J., Siggins, J.
Khan seeks to augment the record on appeal with the following documents: (1) Lee’s cross-complaint in this matter, (2) the answer to her cross-complaint, and (3) a notice regarding her need for a court interpreter. We treat Khan’s request as one for judicial notice because, while the documents are alleged to have been admitted, filed or lodged with the trial court, they do not appear to be original documents or certified copies of original documents. Khan also seeks judicial notice of a legal brief filed by the Alams and Rotholtz after entry of the judgment on appeal, and of certain excerpts from the Reporter’s transcript of the trial of Lee’s cross-complaint which began July 17, 2006. We conclude none of these documents is necessary or helpful to our determination of the issues before us, and thus deny Khan’s requests. (Evid. Code, § 452.)