Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Los Angeles County, Ct. No. BC368319, William F. Fahey, Judge.
Law Offices of M. Candice Bryner and M. Candice Bryner; Law Office of Matthew R. Seifen and Matthew R. Seifen for Plaintiffs and Appellants.
Dinsmore & Sandelmann and Frank Sandelmann for Defendants and Respondents.
CROSKEY, Acting P. J.
Nelson Lopez and Fernando Moreno (collectively, plaintiffs) sued Debtwave Credit Counseling, Inc. (Debtwave) for monies allegedly owed to them under agency agreements that plaintiffs had entered into with Sterling Debt Management, Inc. (Sterling). Debtwave was an assignee of some of Sterling’s business accounts. Plaintiffs had previously sued Sterling under the same agreements, but the parties settled and the suit was dismissed. Thereafter, plaintiffs filed this action against Debtwave and Debtwave moved for summary judgment on the basis that plaintiffs’ claim against it had been released by the Sterling Settlement Agreement. The trial court granted summary judgment. We will affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Sterling Action
Plaintiffs entered into written agreements with Sterling under which it would refer its customers to Sterling for debt management services (Agency Agreements). Sterling agreed to pay plaintiffs a monthly referral fee for each client referred to Sterling so long as that client was making the payments specified under Sterling’s debt management plan.
On January 1, 2005, Sterling stopped paying referral fees to plaintiffs. As a result, plaintiffs sued Sterling in October of 2005. While that action was pending, Sterling sold many of its debt management plans to Debtwave. Plaintiffs then added Debtwave as a defendant.
On July 31, 2006, plaintiffs entered into a Settlement and Mutual Release Agreement with Sterling (Settlement Agreement). Two sections of the Settlement Agreement are relevant to the present case: Section 2 and Section 9. Section 2, entitled “Settlement of Claims Between the Plaintiffs and [Sterling], ” released “[Sterling] and [its] Affiliated Parties” from all claims arising out of the Agency Agreements. “Affiliated Parties” was not defined to include successors and assigns. However, successors and assigns were discussed in a subsequent section of the agreement. Section 9, entitled “Successors and Assigns, ” provided that “[t]his Agreement and the obligations undertaken herein shall be binding upon and shall inure to the benefit of the successor, or assigns of each of the Parties hereto, including their Affiliated Parties.... ”
As required by the Settlement Agreement, plaintiffs dismissed the action against Sterling with prejudice. Before such dismissal, however, plaintiffs had voluntarily dismissed Debtwave from the Sterling Action without prejudice.
2. The Debtwave Action
On March 22, 2007, plaintiffs sued Debtwave for failure to pay the referral fees due to them under the Agency Agreements. Plaintiffs alleged in their complaint that Debtwave was the successor to the rights and obligations arising out of the Agency Agreements between plaintiffs and Sterling. Plaintiffs also alleged that Debtwave had purchased Sterling’s client list, which included numerous clients referred to Sterling by plaintiffs.
a. Demurrer
Debtwave demurred to the complaint, arguing that, as Sterling’s successor, it was released from all claims related to the Agency Agreements under Section 9 of the Settlement Agreement. Plaintiffs responded that Section 9 of the Settlement Agreement applied only to future successors and assigns, and thus did not apply to Debtwave, who was already known to plaintiffs at the time of the Settlement Agreement. Plaintiffs also argued that the Settlement Agreement did not release Debtwave because, even though plaintiffs were aware of Debtwave’s status as a successor, Debtwave was not specifically named in the agreement. The trial court sustained the demurrer and dismissed the action, holding that Debtwave had been released by the Settlement Agreement.
Plaintiffs appealed the dismissal, arguing that they should have been allowed to introduce extrinsic evidence regarding whether the Settlement Agreement had indeed released the claims against Debtwave. We agreed and reversed the order of dismissal. We held that the trial court should have considered plaintiffs’ extrinsic evidence to determine whether there was an ambiguity in the Settlement Agreement. We also, however, said that Debtwave could raise its argument again by means of a motion for summary judgment, which would enable the trial court to consider plaintiffs’ evidence before interpreting the Settlement Agreement.
b. Motion for Summary Judgment
Upon remand, Debtwave filed a motion for summary judgment, arguing again that plaintiffs had previously released all claims against Debtwave through Section 9 of the Settlement Agreement. Plaintiffs submitted extrinsic evidence, but the trial court sustained objections to much of this evidence. The sole extrinsic evidence that was admitted by the trial court consisted of: (1) statements by plaintiffs and their attorneys saying that they had not intended to release Debtwave; and (2) a purported prior draft of the Settlement Agreement, dated August 1, 2009, that included “successors” in the definition of “Affiliated Parties” in Section 2. The trial court, classifying plaintiffs’ extrinsic evidence as the “uncommunicated state-of-mind of plaintiffs’ attorneys, ” granted the motion for summary judgment on the ground that Section 9 of the Settlement Agreement released Debtwave.
Debtwave also argued that there was no evidence that it had assumed Sterling’s obligation to pay plaintiffs referral fees under the Agency Agreements.
Plaintiffs do not challenge these evidentiary rulings on appeal.
The trial court also granted the motion for summary judgment on the separate and independent ground that plaintiffs failed to introduce any admissible evidence to raise a triable issue of fact regarding whether Debtwave had received any benefits from the Agency Agreements, and thus had assumed Sterling’s obligations under the Agency Agreements.
Judgment was entered accordingly. Plaintiffs filed a timely notice of appeal.
ISSUE ON APPEAL
The critical issue presented is whether plaintiffs’ failure to specifically name Debtwave in the Settlement Agreement, combined with plaintiffs’ claimed intent to not release Debtwave, was enough to establish a triable issue of fact regarding whether Debtwave was intended to be, and was, released by the Settlement Agreement. As we discuss below, we agree with the trial court that plaintiffs’ extrinsic evidence on these points is insufficient to establish a triable issue of fact regarding whether Debtwave was released by the Settlement Agreement. Thus, entry of summary judgment against plaintiffs was proper.
Because this issue is dispositive, we do not reach plaintiffs’ second claim that the trial court should have considered plaintiffs newly-discovered evidence, which would have purportedly raised a triable issue of fact regarding whether Debtwave had assumed the obligation to pay plaintiffs referral fees under the Agency Agreements. (See fn. 3, ante.)
DISCUSSION
1. Standard of Review
“ ‘A defendant is entitled to summary judgment if the record establishes as a matter of law that none of the plaintiff’s asserted causes of action can prevail.’ [Citation.] The pleadings define the issues to be considered on a motion for summary judgment. [Citation.] As to each claim as framed by the complaint, the defendant must present facts to negate an essential element or to establish a defense. Only then will the burden shift to the plaintiff to demonstrate the existence of a triable, material issue of fact. [Citation.]” (Ferrari v. Grand Canyon Dories (1995) 32 Cal.App.4th 248, 252.) “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)
We review orders granting or denying a summary judgment motion de novo. (FSR Brokerage, Inc. v. Superior Court (1995) 35 Cal.App.4th 69, 72; Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 579.) We exercise “an independent assessment of the correctness of the trial court’s ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law.” (Iverson v. Muroc Unified School Dist. (1995) 32 Cal.App.4th 218, 222.)
2. The Settlement Agreement Released Debtwave
Debtwave sought summary judgment on the basis that Section 9 of the Settlement Agreement unambiguously released it as a matter of law. The burden then fell to plaintiffs to introduce evidence sufficient to raise a triable issue of fact that the agreement was ambiguous and could be interpreted to not release Debtwave. To this end, plaintiffs submitted statements that they did not intend to release Debtwave, as well as a prior draft of the agreement showing that the word “successors” was ultimately deleted from the definition of “Affiliated Parties” in Section 2 of the Settlement Agreement. The trial court was then required to determine, as a matter of law, whether the contract was reasonably susceptible to the interpretation that Debtwave was not released given the extrinsic evidence. (See Appleton v. Waessil (1994) 27 Cal.App.4th 551, 554 (Appleton).) The trial court found that the extrinsic evidence was insufficient to establish an ambiguity in the Settlement Agreement.
“Release agreements are governed by the generally applicable law of contracts. [Citations].” (Neverkovec v. Fredericks (1999) 74 Cal.App.4th 337, 348 (Neverkovec).) Because Debtwave was not a contracting party to the Settlement Agreement, any rights Debtwave may have under the agreement are those of a third party beneficiary. (See Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 436; see also Hess v. Ford Motor Co. (2002) 27 Cal.4th 516 (Hess).)
“A third party beneficiary may enforce a contract made for its benefit.” (Hess, supra, 27 Cal.4th at p. 524.) A third party beneficiary need not be “specifically named in the contract, but such a party bears the burden of proving that the promise he seeks to enforce was actually made to him personally or to a class of which he is a member. [Citations.]” Also, “[t]he circumstance that a literal contract interpretation would result in a benefit to the third party is not enough to entitle that party to demand enforcement. The contracting parties must have intended to confer a benefit on the third party. [Citations.]” (Neverkovec, supra, 74 Cal.App.4th at pp.348-349.) “Ascertaining this intent is a question of ordinary contract interpretation. [Citation.]” (Hess, supra, 27 Cal.4th at p. 524.) Contract interpretation is governed by “ ‘objective manifestations, not the subjective intent of any individual involved. [Citations.] The test is “what the outward manifestations of consent would lead a reasonable person to believe.” [Citation.]’ [Citation.]” (Allen v. Smith (2002) 94 Cal.App.4th 1270, 1277.)
Additionally, contract interpretation requires “a preliminary consideration of all credible evidence offered to prove the intention of the parties... so that the court can ‘place itself in the same situation in which the parties found themselves at the time of contracting.’ [Citations.]” (Pacific Gas & Elec. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 39-40.) “If the court decides, after considering this evidence, that the language of a contract, in light of all the circumstances, ‘is fairly susceptible of either one of the two interpretations contended for... ’ [citations], extrinsic evidence relevant to prove either of such meanings is admissible.” (Id. at p. 40.)
Further, “while the contracting parties may testify regarding their actual intent, the sufficiency of such evidence must be determined according to the usual objective standard of contract interpretation. The trier of fact must decide how a reasonable person in the releasing party’s shoes would have believed the other party understood the scope of the release. [Citations.] Thus, testimony by the releasing party regarding who he thought he was releasing, while it may serve to explain the situation, does not determine the legal effect of the release. [Citation.]” (Neverkovec, supra, 74 Cal.App.4th at p. 351.) “The question, then, is not what [plaintiffs] subjectively intended, but what a reasonable person would believe the parties intended.” (Beard v. Goodrich (2003) 110 Cal.App.4th 1031, 1038.)
With these principles in mind, we turn to the terms of the Settlement Agreement in this case and the evidence of the circumstances in which it was signed.
In support of their contention that there is a triable issue of fact regarding whether Debtwave was released by the Settlement Agreement, plaintiffs make a number of arguments, some of which rely on the language of the Settlement Agreement itself, and some of which rely on their extrinsic evidence. Plaintiffs argue that: (1) the language of Section 9 of the Settlement Agreement does not release anyone because it provided that only the obligations of the agreement shall inure to successors; (2) Section 9 did not apply to Debtwave but to future successors only; (3) Section 9 is in conflict with Section 2 of the Settlement Agreement, so Section 2 displaces Section 9; (4) the word “successors” was deleted from the definition of “Affiliated Parties” in Section 2 before the final agreement was signed; (5) plaintiffs were aware of Debtwave at the time of the Settlement Agreement but Debtwave was not specifically named in the agreement; and (6) plaintiffs did not intend to release Debtwave. We address each of these arguments below and conclude that none of these arguments, either singly or together, raise a triable issue of fact.
First, plaintiffs argue that Section 9 did not release any successors because the language of Section 9 provides that the obligations (but not the benefits) of the Settlement Agreement shall inure to successors. In support of this argument, plaintiffs rely on the language of Section 9 that says that “[t]his Agreement and the obligations undertaken herein shall be binding upon and shall inure to the benefit of the successor, or assigns of each of the Parties.” (Emphasis added.) Plaintiffs argue that the italicized language raises a triable issue of fact. We disagree.
The language of Section 9 does not provide, as plaintiffs contend, that the obligations alone shall inure to the successors. Section 9 states that the agreement, and its obligations, “shall inure to the benefit of the successor, or assigns of each of the Parties.” (Emphasis added.) In other words, Section 9 says that the obligations of each side inure to the benefit of the successors and assigns of the other.
Second, plaintiffs argue that Debtwave was not released by Section 9 of the Settlement Agreement because Section 9 applied to future successors only. To support this argument, plaintiffs rely on the fact that they were aware of Debtwave at the time of the Settlement Agreement, but the agreement failed to specifically mention Debtwave. Plaintiffs argue that since they knew who Debtwave was, they would have included Debtwave by name in the Settlement Agreement if they had intended to release Debtwave, and Section 9 was thus meant to apply to unknown future successors. We disagree. The language of Section 9 in no way supports plaintiffs’ contention that only future successors were released. The word “future” does not appear anywhere in the section. The plain language of Section 9 includes all successors. There is no evidence that supports interpreting Section 9 to apply to future successors alone.
Third, plaintiffs argue that even if Section 9 did apply to Debtwave, Section 9 still did not release Debtwave or any other successors. To support this contention, plaintiffs point out that “where two clauses of a contract cannot be reconciled, the first shall be received and the latter rejected.” (Estate of Cox (1970) 8 Cal.App.3d 168, 199.) Then, they argue that Section 9 of the Settlement Agreement is in conflict with Section 2, which released “[Sterling] and [its] Affiliated Parties, ” but did not mention successors and assigns, and thus Section 2 displaces Section 9. We disagree.
Section 2 and Section 9 of the Settlement Agreement are not in conflict. Section 2 releases all claims against “[Sterling] and [its] Affiliated Parties, ” and Section 9 provides that the agreement shall also apply to the parties’ successors and assigns, including Affiliated Parties. There is nothing inconsistent between these clauses, and Section 9 merely broadens the application of the agreement. Section 9 provides that the agreement’s benefits, including release, apply to successors and assigns—even those who are not defined as Affiliated Parties in Section 2. There is no conflict here.
Fourth, plaintiffs argue that Debtwave was not released because the word “successors” was deleted from the definition of “Affiliated Parties” in Section 2 of the Settlement Agreement before the final draft of the agreement was signed. Plaintiffs submitted a prior draft of the Settlement Agreement that included “successors” in the definition of “Affiliated Parties, ” and they argue that this supports the conclusion that a triable issue of fact exists. We disagree.
In the final manifestation of the Settlement Agreement, Section 9 released all claims against Sterling’s successors. It is under this section that Debtwave argued it had been released. The definition of “Affiliated Parties” in Section 2 is unrelated to whether Section 9 included Debtwave, and the removal of the word “successors” from Section 2 does not change the meaning of Section 9. Further, there is no evidence of negotiations or discussions regarding the removal of the word, and there is no evidence that the removal of the word was intended to exclude Debtwave from the Settlement Agreement. Indeed, there is no evidence this earlier draft of the Settlement Agreement was transmitted to Sterling’s counsel at all. The evidence shows only that plaintiffs’ counsel, at some point, considered defining “Affiliated Parties” to include “successors, ” but the final draft of the agreement did not so define the term. Absent any evidence that this change was mutually agreed upon in order to avoid releasing Debtwave, it would be speculative to conclude that this was its purpose. This is particularly so when it is equally, if not more, likely that “successors” was omitted from the definition of “Affiliated Parties” in Section 2 because successors were already specifically addressed in Section 9. We therefore conclude that the removal of the word “successors” from Section 2 did not prevent Debtwave from being released by Section 9.
Also worth noting is the fact that plaintiffs’ prior draft of the Settlement Agreement, the one that includes “successors” in the definition of “Affiliated Parties, ” is curiously dated August 1, 2006, one day after the final Settlement Agreement was apparently signed.
Fifth, plaintiffs argue that, under Hess and Appleton, whenever a third party is known to the settling parties but not specifically named in the agreement, the inference is that the release does not cover such third party. Plaintiffs again rely on the facts that they were aware of Debtwave at the time of the Settlement agreement, but Debtwave was not specifically mentioned in the agreement. Plaintiffs argue that these facts raise a triable issue of fact regarding whether the Settlement Agreement released the claims against Debtwave. We disagree.
Hess and Appleton did not hold that a known third party not mentioned in a release is, by that fact alone, excluded from the release. Instead, in both Hess and Appleton, a triable issue of fact existed because there was extrinsic evidence beyond the undisclosed intention of the parties (such as actual discussions between the settling parties about the plaintiffs’ intentions to sue the third party after the settlement) that showed that the omitted third party was not intended to be included in the release. (See Hess, supra, 27 Cal.4th at p. 528;see also Appleton, supra, 27 Cal.App.4th at pp. 556 557.) Thus, we must turn to plaintiffs’ sixth and final argument that such extrinsic evidence existed.
Sixth, plaintiffs assert that Debtwave was not released by the Settlement Agreement because, as in Hess and Appleton, plaintiffs introduced extrinsic evidence that they did not intend to release Debtwave. In support of this argument, plaintiffs have submitted statements saying that they did not intend to release Debtwave. Plaintiffs argue that the mere intent not to release Debtwave is enough to create a triable issue of fact. We disagree.
Plaintiffs stated that they did not intend to release Debtwave, but there was no evidence that this intention was ever communicated to anybody at the time of the Settlement Agreement. There is no testimony that the intention to not release Debtwave was discussed between the parties, there are no emails or memoranda concerning the issue and it was apparently not part of the negotiations. As the court in Neverkovec said, “[Such] statements, to the extent they merely reveal the declarants’ undisclosed intentions, [are] alone be insufficient to establish a triable issue on the determinative question of how a reasonable person signing the release would have understood the [plaintiffs’] intentions regarding the release of third parties.” (Neverkovec, supra, 74 Cal.App.4th at p. 353.) Absent any communication from plaintiffs that they did not intend to release one specific successor (Debtwave), no reasonable person would understand Section 9 of the Settlement Agreement to not include Debtwave.
Section 9 of the Settlement Agreement provided that the agreement “shall inure to the benefit of the successor, or assigns of each of the Parties hereto.” On its face, Section 9 released all claims against Sterling’s successors, and plaintiffs themselves alleged in their complaint that Debtwave was Sterling’s successor (indeed, plaintiffs’ entire action relies on Debtwave being Sterling’s successor with respect to the Agency Agreements). After signing this agreement and releasing all successors, plaintiffs later stated that they did not intend to release one specific successor: Debtwave. As noted above, this uncommunicated intent is insufficient to raise a triable issue of fact regarding whether Debtwave was released by the Settlement Agreement.
When this case was on appeal in 2008, after it had been dismissed on demurrer by the trial court, we noted at that time in our opinion that while “successors” was not included in the definition of “Affiliated Parties” in Section 2, it was Section 9 that was the provision in question. We said that if plaintiffs could provide sufficient supporting extrinsic evidence, then Section 9 would be reasonably susceptible to the interpretation that is was meant to apply to future successors only and not Debtwave. Plaintiffs have not provided such evidence.
Because our conclusion that the Settlement Agreement released Debtwave is dispositive, we need not reach plaintiffs’ second argument that the trial court should have considered plaintiffs’ new evidence regarding whether Debtwave had assumed the obligation to pay referral fees to plaintiffs under the Agency Agreements.
DISPOSITION
The judgment is affirmed. Debtwave shall recover its costs on appeal.
We Concur: KITCHING, J.ALDRICH, J.
In response to this second ground for granting summary judgment, Plaintiffs filed a motion for reconsideration, arguing that they had obtained evidence which would show that Debtwave had in fact received benefits from the Agency Agreements. This new evidence consisted of spreadsheets which identified payments that Debtwave had received from customers referred by plaintiffs. The trial court denied plaintiffs’ motion for reconsideration on the basis that plaintiffs did not introduce this new evidence until after the trial court gave its oral tentative ruling to grant summary judgment. The trial court also noted that plaintiffs did not file a motion to continue the hearing on the motion for summary judgment pursuant to Code of Civil Procedure § 437c, subdivision (h). Additionally, the trial court denied the motion for reconsideration on the basis that it failed to address the release of Debtwave by the Settlement Agreement, which was a separate and independent ground for granting summary judgment.