Opinion
E063868
09-07-2017
TERRY R. MATHIS, Plaintiff and Appellant, v. PACIFIC MORTGAGE EXCHANGE, INC. et al., Defendants and Respondents.
Terry R. Mathis, Plaintiff and Appellant in pro. per. Law Offices of Paul D. Bojic and Paul D. Bojic for 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. RIC10007417) OPINION APPEAL from the Superior Court of Riverside County. John D. Molloy, Judge. Reversed and remanded with directions. Terry R. Mathis, Plaintiff and Appellant in pro. per. Law Offices of Paul D. Bojic and Paul D. Bojic for Defendants and Respondents.
When this case was on the eve of trial, the plaintiffs — including plaintiff Terry R. Mathis — entered into a settlement agreement with defendants Pacific Mortgage Exchange, Inc. (PME), PME Mortgage Fund, Inc. (PMEMF), and Gregory Schick (collectively defendants). It called for defendants to sell certain real property to Mathis and his wife for one million dollars, with escrow to close within 120 days. The escrow opened, but various problems prevented it from closing on time.
According to Mathis, these problems breached defendants' express representations and warranties; moreover, defendants knew about the problems and expected them to occur, but he did not, so that defendants' failure to disclose them was fraud.
Mathis filed a motion to enforce the settlement agreement under Code of Civil Procedure section 664.6 (section 664.6), essentially asking the trial court to grant equitable relief modifying the escrow terms. The trial court denied the relief sought; it ruled that it had no jurisdiction to modify the settlement agreement.
We recognize that, when a trial court rules on a motion to enforce a settlement agreement under section 664.6, it is not authorized to create material terms for the parties; it is limited to deciding what terms the parties themselves have previously agreed upon. Nevertheless, in an ordinary contract action, a trial court can grant reformation, rescission, and other equitable relief without being accused of rewriting the contract. Similar relief is also available under section 664.6.
Accordingly, we will reverse. We leave it up to the trial court on remand to determine, in the first instance, whether Mathis has proven that he is entitled to the relief he seeks.
I
FACTUAL AND PROCEDURAL BACKGROUND
In October 2009, defendants nonjudicially foreclosed on a recreational vehicle park (the property) in Aguanga. Mathis owned the property indirectly, through a limited liability company. He was in the process of developing it; among other things, he had obtained a conditional use permit (CUP) for it.
In April 2010, Mathis and others filed this action against defendants and others, seeking, among other relief, to set aside the foreclosure. The case was set for trial on May 22, 2014. On that date, however, the parties entered into a settlement agreement. The terms of the settlement agreement were recited orally, on the record, in open court.
Wagon Wheel, LLC (Wagon Wheel), Metrovilla Corporation (Metrovilla), and Kim M. Mathis were also named plaintiffs. In 2011, however, Wagon Wheel and Metrovilla assigned their claims to Mathis for purposes of collection.
Wagon Wheel, Metrovilla, and Kim Mathis joined in Mathis's notice of appeal. However, they did not pay a filing fee. We therefore dismissed the appeal as to them, leaving Mathis (who had obtained a fee waiver) as the only appellant. None of the parties have argued that this appeal cannot proceed without the participation of Wagon Wheel, Metrovilla, or Kim Mathis.
John Joseph Gage and Keiko Gage, as trustees of the Gage Family Trust, dated February 25, 2006 (Gages), Clifford Pastor, and Chicago Title Company (Chicago Title) were also named defendants.
The Gages and Pastor were dismissed before the settlement agreement was entered into; they are not parties to this appeal.
Chicago Title was a party to the settlement agreement. The superior court clerk served Mathis's notice of appeal on counsel for Chicago Title (see Cal. Rules of Court, rule 8.100(e)(1)), but Chicago Title has not appeared in this appeal. None of the parties have argued that this appeal cannot proceed without the participation of Chicago Title.
The settlement agreement provided that defendants would sell the property to the Mathises for one million dollars. Escrow was to close within 120 days. The Mathises were to receive marketable title. Defendants represented that "the conditional use permit to use this property as an R.V. park is still in existence as of today's date." The settlement agreement further provided: "This Court will retain jurisdiction under C.C.P. section 664.6."
The parties later agreed to raise the price to $1.1 million in exchange for a 30-day extension of the escrow.
Pursuant to the settlement agreement, the trial court entered the following judgment of dismissal: "Entire [a]ction [d]ismissed with prejudice. The court will retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement (CCP 664.6)."
Escrow was opened. However, it ran into several problems.
First, in January 2014, new rules implementing the Dodd-Frank Act had gone into effect. As a result, according to Mathis, the transaction was subject to stricter underwriting standards. Mathis claims that defendants, given the nature of their business, were necessarily aware of these new rules, though he was not.
The Dodd-Frank Wall Street Reform and Consumer Protection Act. (Pub.L. No. 111-203 (July 21, 2010) 124 Stat. 1376.)
Second, the escrow agent advised Mathis that, under California law, because he was essentially reacquiring property that had been nonjudicially foreclosed, any junior liens that had been wiped out by the foreclosure would reattach. (See Barberi v. Rothchild (1936) 7 Cal.2d 537, 538-540; but see Code Civ. Proc., § 729.080, subd. (e).)
Mathis characterizes both of these problems as an absence of "marketable title," and thus as a breach of the settlement agreement. Defendants dispute this characterization.
Mathis proposed to solve both problems by having defendants transfer the property to his designee (a limited liability corporation) before escrow closed; supposedly only then could he use it as collateral for the necessary financing. Defendants, however, were understandably reluctant to transfer title before close of escrow.
A third problem was that supposedly the county told Mathis that the CUP for the property was "inactive." He characterizes this as a breach of defendants' representation in the settlement agreement that there was an existing CUP. In September 2014, the county reinstated the CUP. However, it still had an "issue" with water use under the CUP.
According to Mathis, due to the delay caused (at least in part) by defendants' misrepresentation that a CUP was already in effect, he did not have enough time to resolve the water use issue before escrow was due to close. According to defendants, however, a CUP was in effect at all times; what Mathis was really seeking was a new, expanded CUP. Alternatively, defendants take the position that a CUP went into effect before escrow closed, and this satisfied their responsibility.
In February 2015, the Mathises filed a motion to enforce the settlement agreement under section 664.6. In it, they asked the trial court to "enforce the intent of the settlement" by ordering that (1) the property be transferred to their designee and (2) the escrow be extended. Alternatively, they asked the trial court to reform the settlement agreement or to set aside the settlement agreement entirely and to reinstate the underlying action. They argued that they were entitled to relief based on fraud, mistake of fact, and breach of the covenant of good faith and fair dealing.
It is not clear whether the motion was brought by all of the plaintiffs or by the Mathises alone. Because only Mathis is an appellant (see fn. 1, ante), we need not resolve this question.
Section 664.6 provides: "If 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. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement."
Defendants filed an opposition to the motion, in which they argued, among other things, that "the court's jurisdiction is limited to enforcing the agreement, not altering it." (Capitalization altered.)
In April 2015, after hearing argument, the trial court denied the motion. It commented:
"If you're asking to enter judgment, and what I mean by that is to enter judgment in terms of the May 22nd, 2014 settlement agreement under Code of Civil Procedure Section 664.6, the motion can be granted. But only as to the terms set forth by the parties under the . . . settlement agreement . . . .
"In terms of a request to reform, this court cannot do this. This court does not have the authority to reform — to reform the agreement or to enforce — force the other party to reform the agreement.
"And this court sees no basis for setting aside the agreement."
In August 2015, the trial court entered a judgment "based on the terms of the settlement."
Mathis filed a timely notice of appeal.
II
OUR APPELLATE JURISDICTION
In the midst of a different argument, defendants briefly assert: "Generally, an appeal may not be taken following a voluntary dismissal. [Citation.] Code of Civil Procedure § 904.1(a)(2) allows an appeal from an order made after an appealable judgment, but does not provide for appeal of an order made after voluntary dismissal." (Underscore omitted.)
Ordinarily, we would not need to address such a throwaway remark. (Orange County Water District v. Alcoa Global Fasteners, Inc. (2017) 12 Cal.App.5th 252, 360.) However, we are "dutybound" to consider issues that go to our jurisdiction — even on our own motion, if necessary. (Olson v. Cory (1983) 35 Cal.3d 390, 398.)
Defendants' assertion is artfully worded. It may be literally true that an order entered after the voluntary dismissal of an action is not appealable as an order after judgment under Code of Civil Procedure section 904 .1, subdivision (a)(2). (See H.D. Arnaiz, Ltd. v. County of San Joaquin (2002) 96 Cal.App.4th 1357, 1364-1366.) However, that does not mean it is not appealable at all; it may be appealable under some other subdivision of Code of Civil Procedure section 904.1.
Viejo Bancorp, Inc. v. Wood (1989) 217 Cal.App.3d 200 illustrates this principle. In Viejo, the parties to an action entered into a settlement agreement. (Id. at pp. 203-204.) Pursuant to that agreement, the action was dismissed with prejudice. Later, one of the parties (Bank) filed a new action against another one of the parties (Wood), alleging that Wood had breached the settlement agreement. In the new action, Bank filed a motion to enforce the settlement agreement under section 664.6. The trial court granted the motion; it found that Wood had breached the settlement agreement, and it entered judgment accordingly. The judgment provided that it "'shall be deemed to relate back' to the old action." (Viejo, supra, at p. 204.) However, it did not "finally conclude the new action." (Id. at p. 205.)
The appellate court nevertheless held that the judgment was appealable. It explained: "[I]t is clear the trial court intended to effect a final judgment in the old action. Since the intended substance and effect of the judgment is to finally dispose of the old action, the judgment is appealable under Code of Civil Procedure section 904.1, subdivision (a)." (Viejo Bancorp, Inc. v. Wood, supra, 217 Cal.App.3d at p. 205.)
Here, because there was no new or second action, Viejo applies a fortiori. As in Viejo, it is clear that the trial court intended to effect a final judgment. Moreover, the substance and effect of its order denying the motion under section 664.6, together with its judgment enforcing the settlement, was to finally dispose of the action.
We therefore conclude that we have appellate jurisdiction.
III
THE TRIAL COURT'S JURISDICTION
Mathis asserts that "the [trial] court declined to exercise jurisdiction over the subject matter of the Parties' pretrial settlement under CCP section 664.6 . . . ." He contends (at some length) that this was error.
We do not agree that that is what the trial court did. Rather, it ruled that it had jurisdiction to enforce the settlement agreement, but it lacked jurisdiction to reform the settlement agreement — and that Mathis was seeking reformation.
In their respondent's brief, however, defendants pick up the scent of Mathis's red herring and run off after it. Thus, they argue that, as a result of the earlier dismissal, the trial court had no jurisdiction whatsoever.
As a general rule, after a properly requested voluntary dismissal, the trial court loses jurisdiction to enter further orders in the dismissed action. (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 784.) However, there are exceptions to this rule. For example, the trial court can still award costs and attorney fees. (See Bank of America, N.A. v. Mitchell (2012) 204 Cal.App.4th 1199, 1209.)
Section 664.6 contains another exception. It specifically provides that: "If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement." This has been "construe[d] . . . to mean . . . that even though a settlement may call for a case to be dismissed, . . . the court may nevertheless retain jurisdiction to enforce the terms of the settlement, until such time as all of its terms have been performed by the parties." (Wackeen v. Malis (2002) 97 Cal.App.4th 429, 439.)
Here, the settlement agreement provided that the trial court was to retain jurisdiction. Moreover, when the trial court dismissed the action, it expressly retained jurisdiction for this purpose. Thus, the trial court had jurisdiction to the full extent permitted by section 664.6.
IV
THE AVAILABILITY OF EQUITABLE REMEDIES
UNDER CODE OF CIVIL PROCEDURE SECTION 664.6
Mathis contends that the trial court erred by ruling that it could not grant equitable remedies in a motion under section 664.6.
"Code of Civil Procedure section 664.6 provides a summary procedure to enforce a settlement agreement by entering judgment pursuant to the terms of the settlement. [Citation.]" (Hines v. Lukes (2008) 167 Cal.App.4th 1174, 1182.)
"'"[T]he statutory procedure for enforcing settlement agreements under section 664.6 is not exclusive. It is merely an expeditious, valid alternative statutorily created. [Citation.] Settlement agreements may also be enforced by motion for summary judgment, by a separate suit in equity or by amendment of the pleadings to raise the settlement as an affirmative defense." [Citations.]' [Citation.]" (In re Marriage of Woolsey (2013) 220 Cal.App.4th 881, 898.)
"The Legislature created this procedure to benefit not only parties but also the justice system, relieving it of the burden of more time-consuming and expensive processes." (Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289, 1298.)
"The trial court's factual findings on a motion to enforce a settlement under . . . section 664.6 'are subject to limited appellate review and will not be disturbed if supported by substantial evidence.' [Citation.] In instances involving questions of law, including the construction and application of the statute, the trial court's decision is not entitled to deference and will be subject to independent review. [Citation.] For example, where the principal claim of error 'raises a question of law concerning the construction and application of section 664.6[,] . . . it requires independent appellate review. [Citations.]' [Citation.]" (Chan v. Lund (2010) 188 Cal.App.4th 1159, 1166.)
As mentioned, section 664.6 allows the trial court to "retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement." (Italics added.) The trial court construed this to mean that it could enforce the settlement terms as written, but it could not grant equitable relief, such as reformation, that would effectively change the settlement terms.
While this was not an unreasonable reading of the statutory language, it was incorrect under established case law. On a motion to enforce a settlement under section 664.6, a trial court has jurisdiction "to provide any appropriate equitable remedy." (Lofton v. Wells Fargo Home Mortgage (2014) 230 Cal.App.4th 1050, 1061-1062.)
In Lofton, a class action had been filed against an employer, alleging that it had miscategorized certain employees as exempt. Meanwhile, a group of attorneys (ILG) filed individual actions on behalf of 600 of the employees, making the same allegation against the same employer. (Lofton v. Wells Fargo Home Mortgage, supra, 230 Cal.App.4th at p. 1055.) The parties entered into separate agreements to settle the class action for $19 million and the individual actions for $6 million. It was "contemplated" that the individual plaintiffs who were clients of ILG would opt out of the class. (Id. at p. 1056.) However, this was not made a term of the settlement, and ultimately the individual plaintiffs did not opt out. (Id. at pp. 1056-1057.) The trial court approved the class action settlement and, pursuant to section 664.6, it retained jurisdiction to enforce the settlement. (Id. at p. 1057.)
ILG then had the individual plaintiffs submit claims for a share of the class action settlement proceeds. (Lofton v. Wells Fargo Home Mortgage, supra, 230 Cal.App.4th at p. 1057.) It proposed to keep approximately $5.5 million of the $6 million as attorney fees. One of the individual plaintiffs objected. (Id. at p. 1058.) On the objector's motion, the trial court issued a temporary restraining order (TRO) requiring ILG to deposit the $5.5 million into court. (Id. at pp. 1059-1060.)
On appeal, ILG argued that "the trial court lacked jurisdiction to issue the TRO because the court's reservation of jurisdiction under section 664.6 only authorized enforcement of the terms of the settlement agreement." (Lofton v. Wells Fargo Home Mortgage, supra, 230 Cal.App.4th at p. 1061.) The appellate court disagreed. It held: "[T]he court's retention of general jurisdiction under section 664.6 includes the court's equitable authority. [Citations.] This equitable authority 'is not restricted to setting aside the former judgment; to the contrary, the court has power to provide any appropriate equitable remedy . . . .' [Citation.]" (Id. at pp. 1061-1062.)
Osumi v. Sutton (2007) 151 Cal.App.4th 1355 is also instructive and has points of similarity to our case. There, the buyer of a house sued the seller, alleging construction defects. (Id. at p. 1357.) The parties entered into a settlement agreement, which called for the seller to buy back the house for $937,500, with a closing date of not later than January 31, 2006. The trial court retained jurisdiction to enforce the settlement. As a result of disputes over the terms of the sale, the escrow did not close on time. The parties filed cross-motions to enforce the settlement agreement. The trial court resolved the disputes over the terms and ordered a new closing date of April 10, 2006. (Id. at pp. 1358-1359.)
On appeal, the buyer argued, among other things, that the trial court lacked the authority under section 664.6 to alter the settlement agreement by setting a new closing date. (Osumi v. Sutton, supra, 151 Cal.App.4th at p. 1359.) The appellate court held otherwise. It explained that, in their cross-motions, both sides were essentially requesting specific performance of the settlement agreement. (Id. at p. 1361.) "Of course, by the time the motions came on for hearing, the closing date had passed. To grant the relief sought by both parties, the trial court had to impose a new closing date." (Ibid.)
Here, the relief that Mathis was seeking was two-fold. First, he wanted the trial court to order the property transferred to his designee before close of escrow. Second, he wanted the trial court to extend the escrow closing date so he would have enough time to resolve the title issue as well as the water issue and to obtain financing.
The extension of time was clearly the type of relief that the trial court could grant, under Osumi. The order transferring the property to Mathis's designee before close of escrow seems like the type of equitable relief that the trial court could grant in an ordinary contract action based on fraud, mistake of fact, or similar doctrines. (Civ. Code, §§ 3399-3402.) Indeed, when granting specific performance, "[i]f the basic elements of the contract are clear, subordinate details of performance may be determined by the decree of the court." (13 Witkin, Summary of Cal. Law. (10th ed. 2005) Equity § 44.) Thus, even if the settlement agreement did not expressly address the issue, it was up to the trial court to decide whether it implicitly required defendants to transfer title before close of escrow because that was reasonably necessary to get financing.
We conclude that a trial court does have jurisdiction under section 664.6 to grant these kinds of relief in an appropriate case. Note that we are not saying that Mathis was, in fact, entitled to such relief. We leave this up to the trial court to determine on remand. (See part V, post.)
V
MATHIS'S ENTITLEMENT TO THE RELIEF SOUGHT
Mathis contends that he introduced evidence of fraud, mistake of fact, and/or breach of the settlement agreement, and hence he was entitled to reformation, rescission, or similar relief.
The trial court never reached these issues, because it ruled that it did not have jurisdiction to grant equitable relief. We likewise decline to reach them, because they turn on issues of fact rather than on questions of law. For example, Mathis claims that, after entering into the settlement, he discovered that the CUP for the property was no longer in effect, and therefore defendants' representation was false. Defendants claim, however, that their representation was true, and that Mathis was really seeking a revised and expanded CUP.
In part IV, ante, we held that the trial court had jurisdiction to grant equitable relief. We leave it up to the trial court on remand to determine whether equitable relief is warranted and, in the course of so doing, to determine, as necessary, any and all issues of breach of the settlement agreement, mistake of fact, fraud, and so on. Our opinion should not be read as expressing any view on such matters.
VI
THE TIMELINESS OF MATHIS'S ALTERNATIVE REQUEST
TO SET ASIDE THE DISMISSAL
While Mathis primarily asked the trial court to grant equitable relief under section 664.6, he also asked it, in the alternative, to set aside the dismissal so that he could continue to litigate his original causes of action against defendants. In opposition, defendants argued that the latter request was, in substance, a motion to set aside the dismissal based on mistake or excusable neglect, and therefore it was untimely under the six-month deadline for such motions. (Code Civ. Proc., § 473, subd. (b).)
The trial court ruled that it "s[aw] no basis for setting aside the agreement." It did not expressly rule on whether the request to set aside was timely.
Mathis contends that his request to set aside the dismissal was, in fact, timely. Because the trial court never actually ruled that it was untimely — and because we are remanding with directions to reconsider whether Mathis was entitled to equitable relief — we do not decide this contention.
VII
DISPOSITION
The April 2015 order denying the motion to enforce the settlement agreement is reversed; the August 2015 judgment is also reversed. The trial court is directed to rehear and redetermine the motion to enforce the settlement agreement (including the requests in that motion for alternative relief). Because relevant circumstances may have changed while this appeal was pending, the trial court is further directed to set a briefing and hearing schedule that will give both sides an opportunity to file supplemental memoranda and supplemental evidence. Mathis is awarded costs on appeal against defendants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
RAMIREZ
P. J. We concur: MILLER
J. SLOUGH
J.