Opinion
NOT TO BE PUBLISHED
Sonoma County Super. Ct. No. SCV243206
McGuiness, P. J.
Asa Robey (appellant) appeals from the trial court’s post judgment order denying his motion to strike Ford Motor Company and W.C. Sanderson Ford’s (respondents) costs and limiting his award of attorney fees and costs to those incurred before respondents served their offer to compromise under Code of Civil Procedure section 998 (998 offer). He contends: (1) the 998 offer was invalid; and (2) there was no substantial evidence supporting the “trial court’s findings that... [the] 998 offer was properly served and received.” We conclude the 998 offer was valid and there was substantial evidence supporting the finding that the 998 offer was served. However, we remand the matter with instructions to the trial court to determine in the first instance whether the 998 offer was received.
All further statutory references are to the Code of Civil Procedure unless otherwise stated.
Factual and Procedural Background
On July 14, 2008, appellant filed a complaint against respondents after purchasing an allegedly defective vehicle that was manufactured, distributed or sold by respondents. On June 30, 2009, after a jury trial, the jury made the following findings as to appellant’s cause of action for breach of express warranty: (1) appellant purchased a new vehicle that was manufactured or distributed by respondent Ford Motor Company (Ford); (2) the vehicle came with a written warranty; (3) the vehicle had a defect covered by the warranty that substantially impaired its use, value, or safety to a reasonable buyer in appellant’s situation; (4) Ford or its authorized repair facility failed to repair the vehicle to match the written warranty within 30 days; (5) Ford failed to promptly replace or repurchase the vehicle; and (6) Ford “willfully” failed to repurchase or replace the vehicle. The jury found that appellant’s damages totaled $58,314.31 and that he had driven the vehicle for 30, 000 miles before he brought it in for repair of a substantially impairing defect.
The jury found as to appellant’s cause of action for breach of implied warranty that: (1) appellant purchased a vehicle that was manufactured, distributed, or sold by respondents; (2) at the time of purchase, respondents were in the business of manufacturing, distributing, or selling vehicles; (3) the vehicle was not of the same quality as those generally acceptable in the trade; (4) the vehicle was not fit for the ordinary purposes for which such vehicles were used; and (5) appellant was not entitled to restitution under this cause of action. On July 6, 2009, judgment was entered in favor of appellant and against respondents in the amount of $58,314.31, “less a mileage offset of... $14,578.58” for the 30, 000 miles appellant had driven the vehicle, “for a total Judgment for breach of express warranty in the amount of... $43,735.73....”
Respondents pointed out below—and appellant does not disagree—that the $43,735.73 was for “repurchase” damages, i.e., that respondents would “repurchase” the vehicle (appellant would return it to them) in exchange for a payment of $43,735.73.
Respondents thereafter filed a memorandum of costs seeking $4,914.72 pursuant to a 998 offer in which they had offered appellant “the sum of $65,001 by way of compromise, and in full and final satisfaction of any and all claims raised regarding the subject vehicle in the pending action, including attorney fees and costs reasonably and necessarily incurred in the commencement and prosecution of this action, as of the date of this offer.” In exchange for the $65,001, respondents had sought an agreement from appellant to “presently: [¶] 1) return possession of the vehicle, which is the subject of this action to FORD, with free and clear title, and in good operating condition—normal wear and tear only excepted; [¶] 2) release any and all claims alleged in the subject action against both Defendants; [and] [¶] 3) execute a dismissal, with prejudice, of the subject action.” Appellant filed a motion to strike the memorandum of costs and also filed a motion seeking $82,704 in attorney fees and $14,973.34 in costs as the prevailing party. On December 29, 2009, the trial court ordered: “Plaintiff Robey’s Motion for Attorney Fees and Costs is granted to the extent the Court finds the amount of $17,390.00... to have been reasonably incurred... prior to Defendant Ford’s... 998 offer (which... offer the Court finds was not exceeded by Plaintiff Robey’s judgment following jury verdict, given reduction of the jury’s verdict by the Court for the statutory mileage offset found by the jury); therefore, such amount of $17,390.00 is awarded to Plaintiff Robey for attorney fees and costs; [¶] Plaintiff Robey’s Motion to Strike the Costs Claim of Defendant Ford is denied, and the Court finds Defendant Ford entitled to recover from Plaintiff Robey the sum of $4,050.92... in statutory costs which the Court finds reasonably incurred since issuance of Defendant Ford’s... 998 offer, which... was not exceeded by Plaintiff Robey at trial... therefore, such amount of $4,050.92 is awarded to Defendant Ford for costs.” Appellant filed a timely notice of appeal.
Discussion
1. Validity of 998 Offer
a. General principles
As a general rule, a prevailing party in a civil action is entitled to recover its costs from its opponent. (§ 1032.) However, section 998 establishes a procedure for shifting costs if the prevailing party obtains a judgment less favorable than a pretrial settlement offer made by the other party. (Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 798 (Barella).) In that situation, the prevailing party is precluded from recovering its postoffer costs and must pay its opponent’s postoffer costs, including expert witness fees, if awarded in the court’s discretion. (Ibid., citing § 998, subd. (c)(1).) The purpose of the cost-shifting statute is to encourage the settlement of litigation without trial, by punishing the party who fails to accept a reasonable settlement offer from its opponent. (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 152.)
Where the offeror obtains a judgment more favorable than its offer, the judgment constitutes prima facie evidence showing the offer was reasonable and the burden lies with the offeree to show that the offer was not in fact reasonable. (Carver v. Chevron v. U.S.A., Inc., supra, 97 Cal.App.4th at p. 152.) However, in seeking to enforce an offer pursuant to section 998, the offering party bears the burden of demonstrating that the offer was otherwise valid. (Barella, supra, 84 Cal.App.4th at p. 799.) An offer will be strictly construed in favor of the party against whom it would operate under section 998 and although the inclusion of nonmonetary terms and conditions therein does not necessarily render an offer invalid, the offer must be unconditional to be enforceable. (Barella, supra, 84 Cal.App.4th at p. 799.)
b. Appellant’s contention
Appellant contends the 998 offer was invalid because it was a “lump sum” offer that did not specify how much of the $65,001 was attributable to damages and how much was attributable to attorney fees. The United States Supreme Court rejected a similar argument in Marek v. Chesny (1985) 473 U.S. 1, 6-7 (Marek). There, the defendants served an offer to compromise under Federal Rule of Civil Procedure Rule 68 (Rule 68) and the plaintiff received a verdict that was less than the offer. (Id. at pp. 3-4.) The plaintiff argued the offer was invalid because it “lumped” his damages with costs, making it impossible for him to determine what part was for damages, and what part was for attorney fees, and to assess whether it would be wise to accept the offer. (Id. at p. 5.) The Supreme Court rejected the argument, holding: “At the time an offer is made, the plaintiff knows the amount in damages caused by the challenged conduct. The plaintiff also knows, or can ascertain, the costs then accrued. A reasonable determination whether to accept the offer can be made by simply adding these two figures and comparing the sum to the amount offered. [The plaintiff] is troubled that a plaintiff will not know whether the offer on the substantive claim would be exceeded at trial, but this is so whenever an offer of settlement is made. In any event, requiring itemization of damages separate from costs would not in any way help plaintiffs know in advance whether the judgment at trial will exceed a defendant’s offer.” (Id. at p. 7.) The Court noted, “This construction of the Rule best furthers the objective of the Rule, which is to encourage settlements. If defendants are not allowed to make lump-sum offers that would, if accepted, represent their total liability, they would understandably be reluctant to make settlement offers.” (Id. at pp. 6-7.)
Although Marek involved an offer to compromise made pursuant to a federal rule, the Court’s reasoning is instructive in this case. Rule 68 allows a defendant to serve an offer to compromise and provides that “[i]f the judgment that the offerree finally obtains is not more favorable than the unaccepted offer, the offerree must pay the costs incurred after the offer was made.” “Both the procedure and purpose of [Rule 68] are strikingly similar to California Code of Civil Procedure section 998.” (Laxague v. Fireman’s Fund Ins. Co. (1990) 220 Cal.App.3d 530, 535.) Here, appellant, like the plaintiff in Marek, knew what his damages were. Further, he and his attorney had entered into a “representation agreement” that was “based on an hourly rate, payment of which [wa]s contingent on prevailing in the case.” The attorney kept a record that showed, by date, the amount of time spent on the case, the type of work that was performed, and the fee that was charged. Thus, appellant also had the ability to ascertain how much he had incurred in attorney fees on any given date, and could have simply added that number to his damages to evaluate the reasonableness of the 998 offer.
Appellant asserts that where, as here, an attorney fees award to the prevailing plaintiff is statutorily mandated, plaintiffs cannot fairly evaluate the reasonableness of lump sum 998 offers because the court might apply a fee “multiplier” to increase the fees or might reduce them depending on such factors as the novelty or difficulty of the issues or the attorney’s skills in presenting them. He argues that this uncertainty creates an “illegal and unethical” conflict of interest between the attorney and the client because it requires them to “determine the value of the respective amounts of their interests through adverse negotiation.”
The Song-Beverly Consumer Warranty Act, Civ. Code, § 1790, et seq., under which appellant brought this action, provides in part that a buyer who prevails in his action “shall be allowed... to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorney’s fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer....” (Civ. Code, § 1794, subd. (d).)
Appellant cites no relevant authority in support of his argument, and we find it unpersuasive, especially in this case where appellant and his attorney had a fee agreement pursuant to which they had agreed to an hourly rate of pay for the services provided. Even if appellant did not know exactly how much the court would ultimately award him in attorney fees if the case proceeded to trial and he prevailed, he was able to ascertain, at any given time, the amount of attorney fees he actually owed. This information gave him a solid basis for evaluating the 998 offer, and there was no need for him to engage in “adverse negotiation” with his attorney in order to determine whether the offer was reasonable.
Appellant alternatively argues that a lump sum 998 offer is invalid because an attorney has an ownership interest in statutorily mandated fees and should therefore be treated as a separate party to the action. It is settled that 998 offers made to multiple parties are generally invalid unless they are expressly apportioned among the parties and are not conditioned on acceptance by all of them. (See, e.g., Weinberg v. Safeco Ins. Co. of America (2004) 114 Cal.App.4th 1075, 1086 [“ ‘an offer to two or more parties, which is contingent upon all parties’ acceptance, is not a valid offer under [998]’ ”]; Meissner v. Paulson (1989) 212 Cal.App.3d 785, 791 [“as a matter of law only an offer made to a single plaintiff, without need for allocation or acceptance by other plaintiffs, qualifies as a valid offer under section 998”].)
As emphasized, however, these cases involve lump sum offers made to multiple parties, not to a party and his attorney. Section 998, subdivision (b), provides that “any party may serve an offer... upon any other party to the action....” (Italics added.) In the absence of an indication of some other meaning, we give the word “party” its plain and commonsense meaning (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735), i.e., “one... that constitutes the plaintiff or the defendant in a lawsuit: litigant” (Webster New International Dictionary (1970), definition 2(b)(1)), or “a person or group taking one side of a question, dispute, or contest” (Merriam-Webster On-line Dictionary, definition 1). Appellant, not his attorney, was the “party” in the case who received the 998 offer and had the authority to accept or reject it. We decline to extend the rule invalidating 998 offers made to multiple parties to 998 offers made to a party and his attorney.
None of the cases on which appellant relies involves lump sum offers made to a party and his attorney.
Finally, appellant asserts, without much argument or citation to authority, that the 998 offer was invalid “on its terms” because of the various conditions it placed. Most notably, he takes issue with the portion of the offer requiring him to return the vehicle to respondents “with free and clear title, and in good operating condition—normal wear and tear only excepted.” He states it was impossible to meet these conditions because he did not have “tens of thousands of dollars to pay off the loan and clear the title. Furthermore, the vehicle was a lemon—how could [he] have guaranteed that it was in ‘good operating condition’ when [he was] embroiled in litigation that asserted that the vehicle was not in good operating condition, and should be returned?”
Appellant’s remaining challenges to the validity of the 998 offer are patently lacking in merit. For example, he complains that the offer was “illusory, incapable of valuation, and uncertain” because it required him to “ ‘release any and all claims alleged in the subject action against both Defendants, ’ ” but did not include “the terms of this release.” Appellant’s speculation that “the terms of this release” may have included substantive provisions imposing additional obligations upon him other than what was stated in the offer does not convince us that the 998 offer was invalid.
A 998 offer is governed by the legal principles applicable to contracts generally, (T.M. Cobb Co. v. Superior Court (1984) 36 Cal.3d 273, 278), and among these is a principle that requires us to interpret contracts in a manner that is reasonable and does not lead to absurd results (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1269). With this principle in mind, we will not interpret the 998 offer in a way that would lead to the absurd result of requiring appellant to fix a “lemon” when his entire action is based on the claim that the vehicle could not be fixed. Further, we conclude that the condition of returning the vehicle “with free and clear title” is reasonably interpreted to mean that respondents were offering to pay $65,001 in full and final satisfaction of appellant’s claims against them, not that they would pay him $65,001 in addition to paying off any of his outstanding loans on the vehicle.
Respondents may, in the future, wish to avoid this issue by specifying that their offer to compromise contemplates that settlement monies would be used to pay off any outstanding loans on the vehicle, and that the vehicle would be returned in good condition subject to normal wear and tear and the defect complained of in the action.
2. Service and receipt of the 998 offer
a. Background
Appellant’s attorney, Mark Romano, submitted a declaration in opposition to respondents’ memorandum of costs, stating he first learned of the “purported” 998 offer when he “saw a reference to it in [respondents’] trial documents and heard [respondents’] attorney mention it at the trial call conference.” After learning of the offer, Romano requested a copy of it “several times.” “Ford’s attorney promised to fax” a copy on June 19, 2009, but did not do so until 8:40 p.m. on June 22, 2009, the day before trial. Romano “conducted an exhaustive review of all documents received by mail, fax, and email in this case and reconfirmed that no such offer was ever received prior to June 22, 2009.” He sent a letter to respondents challenging the authenticity of the offer and stating, “Perhaps, you are mistaken here too in your belief that the offer was actually served. In light of the foregoing, I trust you will not attempt to rely on the purported... 998 offer in any further proceedings.” Respondents did not respond to the letter and Romano therefore “assumed” they “would not rely on the purported offer.”
Romano further declared that respondents’ attorney had served 998 offers in January and February 2009 in four other cases in which they were also opposing counsel. Romano instructed his assistant, Joselito Ferrer, to request extensions from respondents’ attorney “in all of the cases with [respondents’] office in which [there were] outstanding [998 offers].” Ferrer sent Romano an email stating he had spoken to respondents’ attorney’s assistant, who promised to inquire whether extensions would be granted in “the [four cases].” Romano declared he “would have requested an extension” in appellant’s case, “[h]ad [he] received a [998] offer in this case, ” “as [he] did with all the other then pending [998] offers.” According to Romano, there was another incident in this case in which respondents’ attorney “asserted that he had served answers to [appellant’s] supplemental interrogatories, ” but “[e]ventually... admitted that he did not have a proof of service for [respondents’] purported answers to the supplemental interrogatories....” Romano attached copies of the 998 offers served in the four other cases, including a case involving plaintiff David Sousa, in which a 998 offer was served on February 5, 2009. Also attached was a copy of the 998 offer from the instant case, which showed he received it by fax on June 22, 2009, along with a proof of service indicating the offer had been served by mail on February 2, 2009. The proof of service listed the correct case name—“Asa Robey v. Ford Motor Company”—but incorrectly stated, “Attorneys for Plaintiff: [¶] David Sousa, ” rather than “Attorneys for Plaintiff: [¶] Asa Robey.”
Ferrer submitted a declaration stating it was “part of [his] job duties to process incoming mail and facsimile transmissions for the firm.” The firm’s policy and practice was to scan and save an electronic copy of all incoming mail and to place the hard copy in the case file folder. He stated, “If Mr. Tully [respondents’ counsel] had mailed or faxed a [998 offer] in this matter, I would have received it, scanned and saved an electronic copy of it, and placed the hard copy in the file folder for the above-captioned case.” Ferrer declared he had “thoroughly reviewed the file folder” for the case as well as the firm’s electronic records and had not found any 998 offer served on or around February 2, 2009. Ferrer declared that when Romano asked him to obtain extensions for all of the 998 offers respondents’ attorney had served, he reviewed all of his case files, including appellant’s file, and found 998 offers in only four cases, and not in appellant’s case. He declared, “Had I found a [998] offer in this case, I would have requested an extension in this case too.”
At a hearing on November 19, 2009, Romano reiterated the points he had made in his declaration. He also added that respondents’ attorney “typically” asks about 998 offers when he deposes plaintiffs, yet did not ask appellant about a 998 offer at appellant’s deposition. He stated this and other evidence “consistent[ly]” showed that a 998 offer was not served or received in the case. Respondents’ attorney stated, “The original [998 offer] was sent. I prepared it and I sent it.” He pointed out that he had declared under oath and had sworn under penalty of perjury that he had sent the offer. He explained why the proof of service attached to the 998 offer listed the incorrect name of David Sousa, stating, “When I went down to who it was sent to, I’d taken it from another case, and it was from the Sousa case. But you read across the top. It clearly says, ‘Robey.’ And it says in the body, ‘998 offer’ and ‘Robey.’ ” The trial court found, “And on the central issue, I simply find that the evidence presented on behalf of Mr. Robey is insufficient to rebut the presumption that the 998 [offer] duly placed in the mail was sent.”
b. Substantial evidence
(1) Service
Appellant contends there was no substantial evidence supporting the “trial court’s findings that... [the] 998 offer was properly served and received.” As to the issue of service, appellant notes the 998 offer served in this case was different from those respondents served around the same time in four other cases. He states, “Had defense counsel actually sent the offer on February 2, 2009, it would have been in the same form as the other section 998 offers they regularly send.” Appellant also suggests respondents’ attorney was not credible because he stated on a prior occasion that he had served a document, only to later admit he had not done so. Appellant also takes issue with respondents’ attorney’s explanation as to why the proof of service listed the incorrect name of David Sousa. He asks, “How could defense counsel, on February 2, 2009 [the date the 998 offer in this case was purportedly served], copy a proof of service that was created on February 5, 2009 [the date David Sousa’s 998 offer was served]?” Finally, appellant stated at the November 19, 2009, hearing that respondents’ attorney, who “typically” asks plaintiffs about 998 offers when he deposes them, did not ask appellant about a 998 offer at his deposition.
At oral argument, counsel for respondents stated that one possible explanation was that the proof of service in the David Sousa case was prepared before February 2, 2009, but not sent until February 5, 2009.
While some of this evidence may suggest the 998 offer was not served, the record also shows that respondents’ attorney signed a proof of service under penalty of perjury stating he served the 998 offer on appellant’s attorney by mail on February 2, 2009. In opposition to appellant’s fee motion, respondents’ counsel again declared, under penalty of perjury, that he made a written “ ‘repurchase’ offer of $65,001, inclusive of attorney fees and costs” to appellant pursuant to section 998. At the November 19, 2009, hearing, he stated to the court that he served the original 998 offer by mail. The trial court reviewed all of the evidence presented, questioned the attorneys, and presumably made any credibility determinations it needed to make before finding the 998 offer had been sent. Viewing the record “in the light most favorable to [respondents] and giving [them] the benefit of every reasonable inference, and resolving all conflicts in [their] favor, ” (In re Marriage of Mix (1975) 14 Cal.3d 604, 614), we conclude there was substantial evidence supporting the trial court’s finding that the 998 offer was served.
(2) Receipt
As to the receipt issue, however, we must remand the matter for the trial court to determine in the first instance whether the 998 offer was received. (See Kazensky v. City of Merced (1998) 65 Cal.App.4th 44, 53 [we may reverse if the trial court fails to make a necessary factual determination].) As noted, the court stated only that “the evidence presented” was “insufficient to rebut the presumption that the 998 [offer] duly placed in the mail was sent.” (Italics added.) Although the court may have misspoken when it stated “sent” rather than “received, ” we decline to make that assumption in light of a record that can support a conclusion that the court decided the issue of service only, and not receipt. For example, when Romano was pointing out the differences between the 998 offer in this case and the 998 offers made in other cases, the court asked, “Why does it mean he didn’t send it? Because it’s different than the other three? I’m missing that. I mean, your argument here is that he actually didn’t send it to you.” (Italics added.) As respondents’ attorney began to speak, the court stated, “The important issue is whether you sent this 998.” When respondents’ attorney confirmed he had served the 998 offer, the court had no further questions for either party.
At oral argument, counsel for respondents in essence argued that a finding of receipt is unnecessary because section 998 requires only that an offer be served, not received. We disagree. Section 998, subdivision (b), provides that any party may “serve” an offer, and subdivision (c)(1), refers to an offer “made” by a defendant. Although section 998 does not explicitly require that the offer be received, we will not interpret the statute to require a party against whom a 998 offer is made to be bound by an offer it could not have accepted because it never received it and was unaware of it. (See In re Marriage of Campbell (2006) 136 Cal.App.4th 502, 506 [“we apply reason and practicality, and interpret the statute in accord with common sense and justice, and to avoid an absurd result”].)
In any event, even assuming the trial court meant to say the 998 offer was “received” rather than “sent, ” we conclude that remand is necessary because it is not clear the court applied the correct legal principles. (See Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 436 [where the trial court decides the case by employing an incorrect legal analysis, reversal is required regardless of whether substantial evidence supports the judgment].) Evidence Code section 641 provides that a “letter correctly addressed and properly mailed is presumed to have been received in the ordinary course of mail.” However, “[t]he effect of a presumption affecting the burden of producing evidence is to require the trier of fact to assume the existence of the presumed fact unless and until evidence is introduced which would support a finding of its nonexistence, in which case the trier of fact shall determine the existence or nonexistence of the presumed fact from the evidence and without regard to the presumption.” (Evid. Code, § 604, italics added.) Thus, “[t]he presumption [of receipt] disappears where... it is met with contradictory evidence....” (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 421; see also Bear Creek Master Assn. v. Edwards (2005) 130 Cal.App.4th 1470, 1486.) “ ‘[I]f the adverse party denies receipt, the presumption is gone from the case. The trier of fact must then weigh the denial of receipt against the inference of receipt arising from proof of mailing and decide whether or not the letter was received.’ ” (Craig v. Brown & Root, Inc., supra, 84 Cal.App.4th at p. 422, quoting Slater v. Kehoe (1974) 38 Cal.App.3d 819, 832, fn. 12.)
We cannot determine from the record whether the trial court was aware the presumption of receipt disappeared once appellant presented evidence to the contrary. Here, as noted, Romano declared under oath that he was not aware of the 998 offer until shortly before trial. He requested a copy of the offer and sent a letter to respondents suggesting they were “mistaken here too”—as they were on another occasion—that they had “actually served the offer.” Romano’s assistant submitted a declaration under oath in which he explained his firm’s “policy and practice” of scanning and saving all documents received by mail and declared there was no record of a 998 offer having been received in appellant’s case. Romano and his assistant declared they had asked respondents for extensions in “all” cases in which they had served 998 offers and that they would have asked for an extension in appellant’s case had they known one had been served. There was no evidence the parties discussed the 998 offer at any time between February 2, 2009, and trial. We cannot determine from the record whether the trial court discredited all of the above evidence for proper reasons, e.g., based on an implied finding that Romano and his assistant were not credible, or whether it did so based on a mistaken belief that it was required to apply the presumption of receipt even after appellant denied receipt and presented contradictory evidence. We therefore remand the matter for the trial court to determine, in light of the principles set forth in this opinion, whether the 998 offer was received.
Disposition
The matter is remanded with instructions to the trial court to determine whether the 998 offer was received. The parties shall pay their own costs on appeal.
We concur: Pollak, J., Siggins, J.