Opinion
G030957.
10-28-2003
PETER J. SUKIN, Individually and as Trustee, etc., Plaintiff and Respondent, v. RODNEY C. MILES et al., Defendants and Appellants.
Rodney C. Miles, in pro. per., for Defendants and Appellants. William L. Schanz Law Corporation and William L. Schanz for Plaintiff and Respondent.
Introduction
Under Code of Civil Procedure section 664.6 (section 664.6), the trial court may enforce a settlement agreement if the parties to the agreement either personally signed it or orally agreed to it on the record in court. May a party who did not personally sign a stipulation or orally agree to the terms of the stipulation on the record enforce it under section 664.6 as a settlement agreement against a party who did personally sign it? The answer is no. Where, as here, the trial court orders entry of judgment under section 664.6, based on a settlement agreement signed by the party against whom enforcement is sought, but not signed or orally agreed to on the record by the party seeking to enforce the agreement, the judgment must be reversed. As we explain below, the party seeking enforcement of the settlement agreement still has alternative courses of action open to it.
Facts
Peter J. Sukin, individually and as trustee of the Peter J. Sukin M.D., Inc. Money Purchase Pension Plan (Sukin), sued Rodney C. Miles, Professional Business Planning and Research, Inc. (Professional Business Planning), and Worlds Most Difficult Miniature Golf Course, LLC, for breach of several promissory notes. On the day of trial, the court was advised the case settled. Miles and William Schanz, counsel for Sukin, appeared; Sukin himself was not present in court and made no statement on the record.
Miles and Attorney Schanz presented a written stipulation regarding settlement, which set forth the material terms of the settlement between Sukin, on the one hand, and Miles and Professional Business Planning, on the other. The stipulation was signed by Attorney Schanz on behalf of Sukin, and by Miles as the attorney for defendants. (Miles later confirmed he was also signing in his individual capacity and in his role as the owner and a member of the board of directors of Professional Business Planning.) Sukin never personally signed the stipulation.
A judgment pursuant to the stipulation, also signed by Miles and Attorney Schanz, was submitted to the court. The court stayed the case pending conclusion of the settlement.
The stipulation provided Miles and Professional Business Planning would pay Sukin the sum of $186,764, plus interest at 8 percent, in installment payments. The stipulation further provided if Miles and Professional Business Planning failed to make any payment when due, Sukin could file the judgment pursuant to the stipulation.
Miles and Professional Business Planning failed to make any of the installment payments. Sukin applied ex parte for entry of judgment; the trial court denied the application without prejudice. Sukin then moved for entry of judgment pursuant to section 664.6. The court granted the motion and entered judgment against Miles only. Miles timely appealed.
DISCUSSION
We review de novo the courts order granting the motion for entry of judgment based on section 664.6. (Elyaoudayan v. Hoffman (2003) 104 Cal.App.4th 1421, 1428.)
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."
In Levy v. Superior Court (1995) 10 Cal.4th 578, 583, our Supreme Court resolved a split of authority among the Courts of Appeal and held the term "party" as used in section 664.6 means "the specific person or entity by or against whom legal proceedings are brought." Therefore, a letter containing settlement terms countersigned by a partys attorney, but not by the party himself, was not subject to enforcement as a settlement agreement under section 664.6. (Levy v. Superior Court, supra, at p. 586.) "[S]ection 664.6 . . . created a summary, expedited procedure to enforce settlement agreements when certain requirements that decrease the likelihood of misunderstandings are met. Thus the statute requires the `parties to stipulate in writing or orally before the court that they have settled the case. The litigants direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent. This protects the parties against hasty and improvident settlement agreements by impressing upon them the seriousness and finality of the decision to settle, and minimizes the possibility of conflicting interpretations of the settlement. [Citations.] It also protects parties from impairment of their substantial rights without their knowledge and consent." (Id. at p. 585, fn. omitted.)
Sukin argues that because Miles signed the stipulation, it may be enforced against him, although Sukin did not sign it. Sukin is wrong as a matter of law. In Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 303, a letter from the defendants counsel to Harriss counsel set forth the terms of a negotiated settlement agreement between Harris and the defendants. Two of the individual defendants signed the letter; the other two individual defendants and Harris did not sign it. (Ibid.) Harris moved to enforce the letter as a settlement agreement under section 664.6 when the defendants failed to finalize a formal, written settlement agreement. (Harris v. Rudin, Richman & Appel, supra, 74 Cal.App.4th at p. 303.)
The appellate court affirmed the trial courts denial of Harriss motion because the terms of section 664.6 had not been strictly complied with. "In seeking to enforce the Letter as a settlement agreement under section 664.6, Harris acknowledges neither he nor defendants Richman or Berkowitz signed the Letter. Nevertheless, he argues the statutes requirement of a `writing signed by the parties does not expressly require all the parties in the action to sign the settlement agreement. He likens section 664.6 to the statute of frauds requiring only the `part[ies] to be charged to sign the writing. [Citation.] [& para;] We reject Harriss statutory interpretation. . . . [¶] Applying [the] principles of statutory construction to section 664.6, we note the section expressly requires the writing to be signed by the `parties. Unlike Civil Code section 1624, the plain language of section 664.6 does not limit its signature requirement to the `party to be charged. Clearly, the Legislature knew how to so limit the statute as it did in the statute of frauds. Yet it did not do so in section 664.6. We cannot go beyond the plain meaning of the language used to ascribe a meaning to the statute not indicated by its plain language. [Citation.] [¶] We read the statutes requirement of a writing `signed by the parties to require the signatures of the parties seeking to enforce the agreement under section 664.6 and against whom the agreement is sought to be enforced. . . . [¶] . . . `A procedure in which a settlement is evidenced by one writing signed by both sides minimizes the possibility of . . . dispute[s] and legitimizes the summary nature of the section 664.6 procedure. [Citation.] [¶] . . . We simply hold the sections requirement of a `writing signed by the parties must be read to apply to all parties bringing the section 664.6 motion and against whom the motion is directed. In this case, Harris did not sign the letter. Accordingly, the statutory prerequisites were not satisfied in this case." (Harris v. Rudin, Richman & Appel, supra, 74 Cal.App.4th at pp. 304-306.)
A party seeking to enforce a settlement agreement through the procedure established by section 664.6 must strictly comply with its requirements. (Sully-Miller Contracting Co. v. Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30, 37.) One of those requirements is that all the parties to the settlement agreement have either signed the writing constituting the settlement or orally agreed to its terms on the record in court. It is undisputed Sukin did neither. Sukin cannot enforce the stipulation as a settlement agreement under section 664.6 against Miles. (Harris v. Rudin, Richman & Appel, supra, 74 Cal.App.4th at p. 306.) The judgment therefore must be reversed.
Sukin argues that even if he did not comply with section 664.6, Miles should nevertheless be estopped from arguing against enforcement of the settlement agreement under the statute because he (Miles) signed the agreement. But "[t]he cases following Levy [v. Superior Court, supra, 10 Cal.4th 578] have recognized no exceptions to the rule that litigants themselves must sign a settlement for it to be enforceable under section 664.6 ." (Gauss v. GAF Corp. (2002) 103 Cal.App.4th 1110, 1119.) If we were to accept Sukins argument and permit estoppel to avoid compliance with the requirements of section 664.6, it would be unprecedented, contrary to the statute, and inconsistent with the Supreme Courts decision and reasoning in Levy v. Superior Court, supra, 10 Cal.4th 578.
At oral argument, Sukins counsel also argued strict adherence to the requirements of section 664.6 would result in undue prejudice to Sukin. But, to use the statutory motion under section 664.6 to enforce a settlement agreement, the moving party must comply with the statutes express requirements. Sukin did not do so. As this division noted in Smith v. Golden Eagle Ins. Co. (1999) 69 Cal.App.4th 1371, Sukin retains the right to enforce the settlement agreement against Miles under various legal theories and procedures. Although the procedures Sukin may use may not be as streamlined as a section 664.6 motion, these additional or different procedures are necessary because of the demonstrable failure to comply with section 664.6.
What are Sukins options if he wishes to pursue enforcement of the settlement agreement? A roadmap: Sukin may proceed with his case against Miles for breach of the promissory notes; he may file a complaint for breach of the settlement agreement; or he may do both and elect his remedy at a later time. (Smith v. Golden Eagle Ins. Co., supra, 69 Cal.App.4th at p. 1375.) By moving for entry of judgment pursuant to section 664.6, Sukin neither elected a remedy nor barred his claim by virtue of the doctrine of collateral estoppel. (Smith v. Golden Eagle Ins. Co., supra, at pp. 1374-1376.) Pursuit by Sukin of the options listed above ultimately will not create any inconsistency or result in any unfairness to Miles. (Ibid.)
Sukins counsel also contended at oral argument that Sukin cannot realistically return to the trial court and litigate his case because other parties have been dismissed from the case or are in bankruptcy. But the record on appeal does not include any evidence of the dismissal of, or bankruptcies filed by, any other defendants, and we cannot base our decision on Sukins unsupported claims. Indeed, Sukin represented quite to the contrary to the trial court; he stated disposition of "other agreements and/or pending disputes between the parties is immaterial," and that "[n]owhere was this stipulated judgment conditioned upon any other agreement between the parties."
DISPOSITION
The judgment is reversed. The matter is remanded to the trial court. In view of the record on appeal, and the fact the parties filed a stipulated request to dismiss the appeal, which we denied, neither party shall recover costs on appeal.
I CONCUR: OLEARY, J. --------------- Notes: Based on statements in Sukins letter brief, it appears some of the parties at some point in time signed a settlement agreement. But this settlement agreement was not before the trial court and is not included in the record on appeal. It is unknown who signed the settlement agreement or what its terms are, or what dispute was settled thereby.
Sills, P. J., Concurring.
I reluctantly concur in the result, which is required by Levy v. Superior Court (1995) 10 Cal.4th 578. While Levy was a case where the litigant to be charged had not personally signed the agreement (and therefore the case might technically be distinguished from this one where the litigant doing the charging had not signed the agreement), the logical import of the majority opinion is that "parties" as used in section 664.6 of the Code of Civil Procedure must be judicially construed to mean "the litigants personally" in all contexts, regardless of whether enforcer or enforcee is the non-signatory. The Levy court made no effort to allow the possibility of any such distinction. Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299 merely applies what is inherent in Levy.
That said, this case is real world confirmation that Justice Werdegar was right in her dissent in Levy. Reading "parties" in section 664.6 of the Code of Civil Procedure to mean "the litigants personally" necessarily brings a triad of judicially dysfunctional results:
(1) It wastes judicial resources. (Levy, supra, 10 Cal.4th at p. 586 (dis. opn. of Werdegar, J.).) Here, my colleagues feel compelled to offer Sukin three alternatives to the "streamlined" procedure of a section 664.6 motion: no settlement (proceeding with the case), suing for breach of the settlement agreement, or both of the above and dropping one later. The court in Harris was similarly minded. Hewing to the narrow definition of "parties" required by Levy, it took pains to show that the non-signing litigant who sought enforcement could still sue on an oral breach of contract theory. (See Harris, supra, 74 Cal.App.4th at pp. 306-309.)
So what have we accomplished here? Delay. Extra legal expense. The unnecessary diversion of a courtroom and a judges time to litigate an unquestionably enforceable contract — after all, few contracts are as well documented in their formation process as judicially supervised settlements of lawsuits. There is nothing in our result which advances justice in terms of the relationship between the parties. The stark fact remains that Miles agreed to make certain payments, and signed a paper saying he would do so.
So what is going on? Mere debtor delay, an old litigation game played by deadbeats. For what it is worth, I would hold that any defense on the part of Miles or Professional Business Planning to any future actions by Sukin to win by breach of contract what the stipulation has already given him is ipso facto frivolous, worthy of sanctions no less onerous than Sukins legal costs and lost interest. After all, seldom do we get such a graphic object lesson in what are unquestionably delaying tactics. (See Code Civ. Proc., § 128.5.)
(2) In broader policy terms, todays result illustrates that Levy increases (as economists would say) the "costs" of settling. (See Levy, supra, 10 Cal.4th at p. 593 ["If counsel cannot rely among themselves on their own signatures, the process is unduly encumbered . . . ."] (dis. opn. of Werdegar, J.).)
Consider the problem from the practical point of view, particularly in regards to cases where it appears that the defendant is going to end up owing the plaintiff some money: It is the day of trial, and there is a proverbial settlement on the courthouse steps. How energetic must counsel be to make sure it sticks? If the Levy dissent were the rule, plaintiffs counsel could feel relatively confident about taking the case off calendar while the formal paperwork was prepared and circulated. The trial court could go on to other things, and the parties could go about their business in normal time.
By contrast, under the Levy rule, counsel dare not give sleep to their eyes nor slumber to their eyelids until the final, finished written stipulation has been prepared, circulated, and signed. That means considerable overtime work and use of messengers. Make no mistake about it, time is now of the essence. Under the Levy rule, counsel cannot even rely on a telephone call from the other attorney to the effect that the adversary litigant has signed the formal agreement. Prudence under the Levy rule requires that the attorney must have the document in his or her hot hands before any action can be taken to ease the imminency of the trial.
Of course, if the court does not allow the case to trail and requires it go off calendar, then, under Levy, at the very least a court hearing will be required with all parties present in which the material terms of the settlement are laboriously stated. Any haggling over words and their nuances must now take place in open court, in what will essentially be a transcribed settlement negotiation. And, since the reporters transcript must now function as the final formalized agreement, it must be read back until every last word and phrase has been assented to by the litigants personally. Thus what might have been a few moments of a trial courts time to take care of a routine settlement may now take as much time as a short trial.
(3) And, finally, there is the absolutely pernicious opportunity for gamesmanship which the Levy rule encourages. (See Levy, supra, 10 Cal.4th at p. 593 [noting the increased "potential for gamesmanship"] (dis. opn. of Werdegar, J.).) The case before us is a perfect example. It is obviously that Miles is just stalling for time, hoping to, at the very least, renegotiate a better deal when Sukin goes after him down one of the avenues which my colleagues today point out is available. And if that happens and they settle again, Sukins counsel is going to have to birddog that settlement with a vengeance.
On a broader scale, think of the ways unscrupulous parties and counsel can now set traps for trusting adversaries: Dont have your client immediately available for signature if a formal document is prepared. Tell the clerk of the court that the parties have settled and the case can now be legitimately taken off calendar and hope your adversary isnt present at the time or doesnt notice that the trial date has now been lost. Tell your adversary that any settlement is too complex to put on the record, but he or she can rely on you to prepare a formal settlement, bury in the settlement some obscure but unacceptable term, and then claim that it is your adversarys fault that the deal has fallen apart. All the while your client has postponed the day of reckoning and inflicted increased transaction costs on the opposing litigant.
All these are bad faith and delaying tactics, of course, but lets face it: There is an unfortunately too large number of counsel out there who will say they "owe it" to their (deadbeat) clients to use them.
Did the Levy majority really intend to change the rule to "settlor beware?" I think not. The rhetoric of the opinion suggests that the court was concerned with the problem of "hasty and improvident settlement agreements" and simply wanted to read section 664.6 to avoid that problem. (See Levy, supra, 10 Cal.4th at p. 585.) But that can be accomplished by other means than an inflexible rule that parties under section 664.6 must always include the litigants personally. (For example, if a litigant disavows a settlement in a hearing on a section 664.6 motion and it appears that the settlement is indeed the result of some deliberate overreaching by the adversary party or attorney, there is no reason that appropriate sanctions could not be leveled against that party or attorney. The policy goal of the Levy decision would be served without the unfortunate side effects.)
I would respectfully suggest that our high court revisit the Levy rule, with an eye toward fine tuning it to avoid the dysfunctions it creates. Meanwhile, Justice Werdegar can tell her colleagues, "I told you so."