Opinion
David Kyle, Los Angeles, for plaintiff and appellant.
Nouskajian & Cranert, Terrence L. Cranert and Joseph R. Serpico, Los Angeles, for defendants and respondents. L. THAXTON HANSON, Associate Justice.
Appeal from an order enforcing settlement and judgment thereon (Code of Civ.Proc., §§ 998 and 664.6).
FACTUAL AND PROCEDURAL STATEMENT
The basic facts underlying this settlement controversy are uncontroverted by the parties. On May 1, 1984, plaintiff Gregory Poster filed a personal injury action against defendant Southern California Rapid Transit District (hereinafter RTD) and an employee bus driver, Clarence Jones.
Plaintiff, a passenger on an RTD bus on March 17, 1984, was attacked by other passengers. Ultimately thrown from the bus, plaintiff sustained injury, particularly to his legs when the bus ran over them.
Defendant RTD answered the suit on July 17, 1984, and defendant Jones answered on January 11, 1985. The parties conducted discovery thereafter. An at-issue memorandum was duly filed and trial was set for February 2, 1988.
On December 11, 1987, plaintiff served by mail a written offer to compromise pursuant to Code of Civil Procedure section 998, for $150,000. The offer was received by defendants on December 14, 1987. Defendants' counsel commenced negotiations with plaintiff's counsel, proposing payment of $75,000, which plaintiff's counsel refused to accept. On January 6, 1988, the defendants' counsel proposed payment of $120,000; plaintiff's counsel stated that he would discuss this with his client, but communicated no response to defendants' counsel. At no time during these negotiations did plaintiff orally or in writing revoke the statutory offer of $150,000.
According to the declaration filed with the trial court by defendants' counsel Serpico, Serpico spoke to plaintiff's counsel Kyle on the afternoon of January 12, 1988, and told Kyle that the defendants would accept the statutory offer of $150,000; Kyle did not indicate any problem concerning the settlement to Serpico at this time. A letter sent to Kyle on the same date set forth the defendants' acceptance.
On January 14, 1988, the defendants served and filed a "Notice of Acceptance to Compromise Pursuant to CCP 998" with the superior court. On that day, according to the Serpico declaration, a legal secretary in the office of plaintiff's counsel called the office of defendants' counsel concerning some depositions that were scheduled, and advised that office that the plaintiff, Poster, had refused to settle the case for $150,000.
On January 19, 1988, defendants filed the notice of motion for an order enforcing settlement, pursuant to Code of Civil Procedure sections 998 and 664.6, and for judgment pursuant to the terms of the settlement. Plaintiff filed opposition, claiming that the defense payment proposal of $120,000 was a counteroffer which had extinguished the statutory offer made by plaintiff, pursuant to general principles of contract law. Plaintiff did not raise the issue of the timeliness of the defendants' acceptance, although the issue was referred to by the defendants in their moving papers.
After hearing on February 3, 1988, the trial court granted the motion. Judgment for plaintiff in the sum of $150,000 was entered February 22, 1988. Plaintiff filed a timely notice of appeal on March 30, 1988.
While the appeal was pending, plaintiff filed a motion in this court to augment the record, pursuant to California Rules of Court, rule 12(a), to include the at-issue memoranda filed in this case, depositions of two expert witnesses concerning the severity of plaintiff's injuries and the economic loss occasioned by those injuries, and finally, an additional proposal made by defendants after January 14, 1988, when plaintiff advised them $150,000 was not acceptable. The "structured settlement" proposal, set forth on the undated stationary of Ibar Settlement Company, Inc., contemplated a total payout by RTD of $419,400. This court, by order of June 9, 1988, granted the motion to augment to include the at-issue memorandum dated July 26, 1985, but denied the motion as to the rest of the materials.
PLAINTIFF'S CONTENTIONS ON APPEAL
Plaintiff contends here, as he did below, that the settlement procedures described in Code of Civil Procedure section 998 are governed by general principles of contract law. He contends specifically that this settlement controversy is governed by the well-established general rule that when the response to an offer deviates from the offer's terms, the response is deemed a counteroffer and the original offer no longer exists.
Plaintiff argues that since the defense offered $120,000 on January 6, 1988, which was $30,000 less than the statutory offer of $150,000, the offer of $120,000 was a counteroffer and the $150,000 offer ceased to exist; thus the defense "acceptance" of the $150,000 offer on January 12, 1988, could not bind plaintiff, and the case should proceed to trial. Plaintiff also claims that his right to a trial by jury has been wrongfully denied, and that this is reversible error per se.
The trial court disagreed with plaintiff's analysis, pointing out that plaintiff had not revoked the $150,000 offer at any time prior to the defendants' acceptance; the court ruled that after the parties had engaged in "negotiations," the statutory offer had been accepted by the defense, and thus the settlement should be affirmed and judgment entered.
DISCUSSION
I.
Code of Civil Procedure section 998 provides, in subdivision (b), that "Not less than 10 days prior to commencement of trial, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken in accordance with the terms and conditions stated at that time."
Subdivision (b)(1) states that "If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly";
Subdivision (b)(2) states that "If the offer is not accepted prior to trial or within 30 days after it is made, whichever occurs first, it shall be deemed withdrawn, and cannot be given in evidence at trial." (Emphasis added.)
The present statute was enacted in 1971 (Stats.1971, ch. 1679, § 3, pp. 3605-3606) and replaced a previous statute concerning settlement. The intent of the Legislature in enacting this type of legislation has long been identified as that of encouraging the settlement of litigation. (Distefano v. Hall (1968) 263 Cal.App.2d 380, 69 Cal.Rptr. 691; T.M. Cobb Co., Inc. v. Superior Court (1984) 36 Cal.3d 273, 204 Cal.Rptr. 143.)
In Cobb, the California Supreme Court declared that general principles of contract law should govern controversies arising under section 998, but "only where such principles neither conflict with the statute nor defeat its purpose. [Citation.] As recognized in numerous Court of Appeal decisions, the clear purpose of section 998 ... is to encourage the settlement of lawsuits prior to trial. [Citations.]" (Id. at p. 280, 204 Cal.Rptr. 143, .)
Cobb, noting that section 998 did not expressly state whether statutory offers were revocable prior to acceptance, held that a statutory offer made pursuant to section 998 could be revoked by the offeror at any time prior to acceptance by the offeree or the expiration of the 30-day period for acceptance contemplated by the statute. The Cobb court declared that its holding was consistent with the general rule of contract law permitting an offeror to revoke an offer prior to acceptance, and was also the better public policy choice; if statutory offers were deemed irrevocable, it reasoned, fewer such offers would be made and fewer settlements would be effected.
Contending that the defense counteroffer terminated the statutory offer, plaintiff relies on the general holding of Cobb discussed above and on Glende Motor Co. v. Superior Court (1984) 159 Cal.App.3d 389, 396-398, 205 Cal.Rptr. 682, holding that a statutory offer was revoked by a "nonstatutory counter offer" which deviated from the terms of the original statutory offer; Glende based its decision on the general rule of contract law to that effect.
In the case at bench, several proposals made by the defense deviated from the statutory offer, but the trial court chose not to follow Glende, stating that to adopt the position of Glende (and plaintiff herein) would affect every personal injury case where negotiations followed the statutory offer, negotiations which routinely involve the making of counteroffers. The trial court expressed the view that such a ruling would have a negative effect on encouraging settlement. We agree.
Plaintiff is correct that pursuant to contract law principles, an offer is vitiated by a counteroffer which deviates from the terms of the offer. As is explained in 1 Witkin, Summary of Cal.Law (9th ed. 1987) Contracts, § 172, p. 187, "A counteroffer proposing a substituted bargain has the same effect as a rejection in terminating the offeree's power of acceptance, unless the offeror or offeree has manifested a contrary intention. (Rest.2d, Contracts, § 39)."
Cobb makes clear, however, that disputes arising under section 998 must primarily be assessed in terms of how resolving them will best implement the public policy of encouraging settlement, as expressed by the Legislature in enacting the statute. In settlement controversies arising under section 998 as now written the question is always whether an applicable rule of contract law will confer the most benefit toward encouraging settlement. If the public policy concern and the applicable contractual principle conflict, the statutory rule or judicial interpretation of the statute controls.
Thus, in the case at bench, since the statutory objective of encouraging negotiation and settlement outweighs the benefit which would flow from applying the relevant contractual principle, plaintiff's contention must fail. As counsel for the defendants has pointed out, there is another reason not to apply general contract law to section 998 on a nonselective basis. Statutory offers invoke the possibility of the imposition of sanctions in subsequent proceedings. To hold that counteroffers extinguished the initial statutory offer would introduce confusion into those proceedings.
In making its ruling, the trial court also observed that information concerning the severity of plaintiff's injuries must have been known to plaintiff--or should have been known--before the final negotiations with the defense, conducted so close to the trial date. There was no justification for failure promptly to revoke the statutory offer, as Cobb permits, in light of such information.
Our holding, that the trial court correctly rejected application of general contractual principles in the case at bench, does not preclude any plaintiff from promptly revoking a statutory offer made on the basis of insufficient information before acceptance. Our rejection of plaintiff's contention will, however, possibly encourage counsel for litigants to present statutory offers in the first instance with more care, and remain alert to the possibility that revocation may be required upon the development of additional facts derived from current medical reports or other sources.
II.
The remaining issue is that of timeliness. The record discloses that plaintiff mailed the statutory offer on December 11, 1987. In computing the time permitted by the statute, and not counting December 11, the offer was open for 20 days in December, and was orally "accepted" by the defendants on January 12, 1987, the 32d day.
Section 998 does specify that acceptance of the statutory offer must be made within 30 days of the time the offer was made. The defendants concede that the time period in which the acceptance of a statutory offer must be made commences to run when the statutory offer is properly deposited in the mail. Absent any other determinative factors, it appears that the oral "acceptance" of the statutory offer was addressed to an offer which had already been "withdrawn," pursuant to the terms of the statute.
Plaintiff, however, made no argument below or here (by brief) that defendants had not accepted the statutory offer in timely fashion. Ordinarily, appellate courts decline to address issues not properly raised below or on appeal. (9 Witkin, Cal.Procedure (3d ed. 1985) Appeal, §§ 301, 305, 311, pp. 313-322.) The basic rationale for the rule is that it is unfair to the trial judge and to the adverse party to consider issues which should have been litigated in the trial court. In the case at bench, the only reference to timeliness was made below by the defendants, who advised the trial court that Code of Civil Procedure section 1013, subdivision (a) extended their time to accept the statutory offer by five days. In fact, the Cobb court characterized possible extension of the statutory time for acceptance of a statutory offer pursuant to section 998 as an open question. (See T.M. Cobb Co. v. Superior Court (1984) 36 Cal.3d 273, 276, fn. 3, 204 Cal.Rptr. 143.) Neither side referred to the problem of timeliness in their appellate briefs.
The appellate rule precluding our review under such circumstances is subject to modification when justice requires it. While the appeal has been pending, we advised counsel to be prepared to address the timeliness issue at oral argument and submit letter briefs to the court if they so chose.
Defendants have submitted a letter brief, implicitly conceding that the acceptance of the statutory offer was not made within 30 days as prescribed by statute. This implicit concession became an express concession during oral argument in this court. Defendants have urged this court to hold that the time for acceptance of statutory offers pursuant to section 998 may be extended by the five-day period set forth in Code of Civil Procedure section 1013, subdivision (a). We decline to do so.
Section 1013, subdivision (a) concerns service by mail, and has been described as "a procedural statute of general application." (Simpson v. Williams (1987) 192 Cal.App.3d 285, 289, 238 Cal.Rptr. 566.) In Fritts v. County of Kern (1982) 135 Cal.App.3d 303, 308, 185 Cal.Rptr. 212, it was said that the section "was enacted 'to make allowance for the uncertainties of mail delivery by giving recipients of mailed notices or papers longer time to act or exercise their rights.' [Citation.]"
It provides, in pertinent part, that "In case of service by mail, the notice or other paper must be deposited in a post office, mailbox, sub-post office, substation, or mail chute, or other like facility regularly maintained by the United States Postal Service, in a sealed envelope, with postage paid, addressed to the person on whom it is to be served, at his office address as last given by him on any document which he has filed in the cause and served on the party making service by mail; otherwise at his place of residence. The service is complete at the time of the deposit, but any prescribed period of notice and any right or duty to do any act or make any response within any prescribed period or on a date certain after the service of such document served by mail shall be extended five days...." (Emphasis added.) The emphasized language, defendants contend, permitted them to "accept" the statutory offer of section 998 within 35 days of the time it was made rather than within 30 days, and thus acceptance on the 32nd day was timely.
A number of Court of Appeal decisions have discussed the applicability of section 1013, subdivision (a) to situations not only involving the service of notices and motions but to time periods contained in statutes dealing with matters other than general civil procedure. Many have rejected the application of section 1013, subdivision (a) to other statutory time periods. (See, e.g., Fritts v. County of Kern, supra, 135 Cal.App.3d 303, 185 Cal.Rptr. 212; County of Los Angeles v. Surety Ins. Co. (1984) 162 Cal.App.3d 58, 208 Cal.Rptr. 263; Simpson v. Williams, supra, 192 Cal.App.3d 285, 238 Cal.Rptr. 566; Ystrom v. Handel (1988) 205 Cal.App.3d 144, 149, 252 Cal.Rptr. 110.)
In County of Los Angeles v. Surety Ins. Co., supra, 162 Cal.App.3d 58, 64, 208 Cal.Rptr. 263, this court stated that "[t]here is no compelling reason or expression of legislative intent which requires us to harmonize two statutes which, though part of the same general body of statutory law, relate to different subjects and have different objectives. Code of Civil Procedure section 1013 is primarily a general civil procedure section dealing with notice--notice of all kinds, necessary to the conduct of civil litigation in a manner consonant with due process. We note that the exceptions set forth in section 1013 itself, where the five-day extension is not applicable, include a notice of appeal, the timeliness of which is jurisdictional, beyond a doubt, and was recognized as such by the Legislature. Section 1013 was never intended to apply in extending jurisdictional limits, as seems quite clear from the language utilized in the section." While section 998 arguably does not contain a jurisdictional limit, the discussion above still seems apposite here.
Some courts considering the application of section § 1013, subdivision (a) to other statutes have pointed out that if there is a conflict between a general procedural statute and a statute dealing with more specific rights and procedures, the specific statute is regarded as an exception to the general statute. (Simpson v. Williams, supra, 192 Cal.App.3d 285, 289, 238 Cal.Rptr. 566; Ystrom v. Handel, supra, 205 Cal.App.3d 144, 149, 252 Cal.Rptr. 110.)
We determine here that the acceptance of the statutory offer made in the case at bench was not extended by section 1013, subdivision (a), and was not timely. Since there was no valid acceptance of an existing statutory offer, the order enforcing settlement and the judgment entered thereafter cannot be upheld. The judgment is reversed. Each party to bear their own costs on appeal.
SPENCER, P.J., and ORTEGA, J., concur.