Colmenar v. Colmenar

Filed 9/28/06 Colmenar v. Colmenar CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

Appeal from a judgment of the Superior Court of Los Angeles County, William G. Willett, Judge. Affirmed.

Garrett Skelly for Plaintiffs and Respondents.

Rhandall Colmenar, Alaine Colmenar and Jasmine Colmenar, in pro. per., for Defendants and Appellants.

INTRODUCTION

The action below was originally resolved by a settlement requiring defendants Rhandall Colmenar, Alaine Colmenar, Jasmine Colmenar, and Jad Manor (defendants) to make annual installment payments to plaintiffs Adonnis and Rosario Colmenar (plaintiffs). Defendants defaulted on an installment payment, causing an increase in, and an acceleration of, the debt. Based on the default, plaintiffs moved the trial court for an order entering a judgment pursuant to the default procedures in the settlement agreement. Defendants responded with, inter alia, a motion asserting an offset against any amounts allegedly in default, based on a separate judgment that they had obtained against plaintiff Adonnis Colmenar and an uninvolved third party. The trial court granted plaintiffs’ motion for entry of judgment and denied defendants’ motion asserting an offset.

On appeal, defendants contend that the trial court erred when it granted the motion for entry of judgment because the required notice of default did not comply with the terms of the settlement agreement and, therefore, did not trigger the agreement’s default procedures. Defendants further contend that the trial court erred in denying their motion asserting an offset because the outstanding judgment against plaintiff Adonnis Colmenar was more than sufficient to negate any alleged default under the settlement agreement, thereby precluding entry of judgment.

Plaintiffs contend that the appeal is frivolous, and request $20,000 in sanctions against defendants for filing and pursuing it. They did not, however, file a separate motion with declarations in support of their request.

We hold that plaintiffs complied with the notice of default provision in the settlement agreement, as modified by defendants, and that in any event, defendants received actual notice of the default sufficient to trigger the default procedures under the agreement. We further hold that defendants’ attempt to offset the amount in default was untimely, and did not cure the default or prevent the increase in, and acceleration of, the debt. We therefore affirm the judgment. Plaintiffs’ request for sanctions is not properly before us because it was not made by the requisite motion or supported by declarations.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Settlement Agreement and Defendants’ Default

On April 10, 2001, the parties entered into a settlement agreement, and recited it on the record before the trial court pursuant to Code of Civil Procedure section 664.6 (section 664.6).[1] Pursuant to the agreement, defendants were required to pay plaintiffs a total of $50,000, with $20,000 due on May 9, 2001, and $5000 annual installment payments due the first of each year thereafter for six years. If an installment payment was not made on time, and the default was not cured within 10 days of service of a written notice of default on defendants’ attorney of record, the debt increased to $75,000, less amounts previously paid, and became due and payable immediately. The agreement further provided that, if defendant failed to cure the default within the allotted time, plaintiffs were entitled to apply to the trial court for an order entering judgment pursuant to section 664.6. The parties also agreed that the trial court would retain jurisdiction to enforce the terms of the settlement.

Defendants made the initial $20,000 payment, and the $5000 installment payments for 2002, 2003, and 2004, for a total of $35,000. But they failed to make the $5000 annual installment payment due January 1, 2005.

In a letter to plaintiffs’ counsel sent approximately a year before the default, defendants’ attorney of record advised that he would no longer accept on behalf of defendants service of notices of default under the settlement agreement, and that plaintiffs were to serve any such notices directly on defendants. On January 3, 2005, plaintiffs’ attorney served the required notice of default directly on defendants, in apparent reliance upon the earlier letter from their attorney. Defendants subsequently admitted receiving the notice.

B. The Motion for Entry of Judgment and the Offset Motion

On February 8, 2005, plaintiffs filed their motion for entry of judgment. Defendants’ opposed that motion, and filed their own motion for an order compelling “Partial Acknowledgement of Satisfaction of Installment Judgment/Settlement” (offset motion) on March 2, 2005. Defendants contended that the motion for entry of judgment should be denied because plaintiffs’ notice of default was defective, and therefore did not trigger a default upon which a judgment could be entered. Specifically, defendants contended that a default under the settlement agreement could only be triggered by a written notice of default served on defendants’ attorney of record, and that plaintiffs failed to serve defendants’ attorney. Defendants also argued that their offset motion should be granted because a separate judgment in the amount of $12,286 against plaintiff Adonnis Colmenar[2] operated as an automatic offset against the $5000 installment payment that was allegedly in default. They asserted that the offset negated any alleged default under the agreement, and prevented entry of judgment against them.

On May 31, 2005, the trial court heard argument on both motions, and took them under submission. That same day, the trial court entered a minute order granting the motion for entry of judgment and denying the offset motion. The minute order noted that “this ruling does not preclude defendants from requesting a partial satisfaction of judgment” based on the separate judgment against plaintiff Adonnis Colmenar. That same day, the trial court entered a judgment in favor of plaintiffs in the amount of $40,000.

C. The Inadequacies in and the Augmentation of the Record

On appeal, defendants renew their contentions concerning the notice of default and their right to an offset. Both of those theories depend, in whole or in part, on an interpretation of certain provisions of the settlement agreement that was put on the record pursuant to section 664.6. But defendants did not designate the reporter’s transcript of the April 10, 2001, hearing at which the settlement was put on the record or include a copy of it in their appendix. Moreover, although they are challenging on appeal the trial court’s ruling on plaintiffs’ motion for entry of judgment, defendants did not include that motion, or any of the supporting papers, in their appendix. Finally, defendants’ included in their appendix only the first page of the trial court’s three-page minute order granting plaintiffs’ motion for entry of judgment and denying defendants’ offset motion, and only the first page of the two-page judgment based on that order.

Based on the deficiencies in the record, we requested letter briefs from the parties addressing whether those omissions warranted dismissal of the appeal. Plaintiffs filed a letter brief arguing that the appeal should be dismissed based on the deficiencies. Defendants did not file a letter brief in response to our request.

To address this issue, and resolve this appeal on the merits if possible, we ordered and obtained the entire file maintained by the trial court in connection with this action. We have now augmented the record on our own motion pursuant to California Rules of Court, rule 12(a), to include plaintiffs’ February 8, 2005, motion for entry of judgment with exhibits (including a copy of the reporter’s transcript for the April 10, 2001, hearing), the trial court’s May 31, 2005, minute order, and the June 8, 2005, abstract of judgment.

DISCUSSION

A. Standard of Review

Defendants’ two issues on appeal involve the proper interpretation of the settlement agreement as stated on the record before the trial court, and the legal effect, if any, of the alleged offset on the parties’ respective rights and obligations under that agreement. “An appellate court appropriately conducts a de novo review of a trial court’s interpretation of the language of a contract (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 866 [44 Cal. Rptr. 767, 402 P.2d 839] [in construing terms of contract, the reviewing court ‘must make an independent determination of the meaning’]; see also 9 Witkin, Cal. Procedure (3d. ed. 1985) Appeal, § 295, and cases cited therein). An appellate court obviously also makes its own judgments about the nature of the law.” (Postal Instant Press, Inc. v. Sealy (1996) 43 Cal.App.4th 1704, 1708.)

B. The Notice of Default Complied with the Settlement Agreement, As Modified by Defendants, and In Any Event, Defendants Had Actual Notice of the Default

Defendants argue that the settlement agreement, as read into the record, required plaintiffs to serve the notice of default on defendants’ attorney of record. Therefore, according to defendants, service directly on them was ineffective to trigger a default or the running of the 10 day cure period provided in the agreement. That argument, however, ignores the January 27, 2003, letter from defendants’ attorney which effectively modified the notice provision in the settlement agreement, and instructed plaintiffs to serve any notices of default directly on defendants. That letter could not be clearer, and defendants present no evidence or argument suggesting that their attorney was not authorized to send it, or that they ever attempted to retract or correct it.

Instead, defendants argue that the attorney who represented them during the settlement was still technically their attorney of record at the time plaintiffs served the notice of default, because no substitution of attorney had been filed with the trial court. According to defendants, Code of Civil Procedure sections 284 and 285[3] required plaintiffs’ attorney to continue to recognize defendants’ attorney as counsel of record until such time as he formally substituted out of the action, notwithstanding the January 27, 2003, letter to the contrary. But the issue is not whether the January 27, 2003, letter effectively relieved defendants’ counsel of his legal and ethical obligations as their counsel of record. The issue is whether that letter effectively modified the notification requirements in the settlement agreement.

Assuming, arguendo, that the transcript of the oral proceedings that memorialized the settlement constitutes an agreement in writing, it could have been effectively modified by a subsequent writing. (Civ. Code, § 1698; Marani v. Jackson (1986) 183 Cal.App.3d 695, 704.) Although defendants do not directly address this issue, they suggest that the notice requirements in the settlement agreement became mandatory at the April 10, 2001, hearing, and could never be subsequently modified. The transcript of the proceedings, however, does not support such an interpretation, and the express, unqualified language of the January 27, 2003, letter supports the conclusion that defendants intended to effect a modification of the notice requirements. Moreover, defendant’s actions constitute conduct from which a modification can be implied. (See Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020, 1038.)

Even assuming the January 27, 2003, letter from defendants’ counsel was not an effective contract modification, it would nevertheless give rise to an estoppel that would preclude defendants from arguing that service of notice directly on them was impermissible under the agreement. (Sutherland v. Barclays American/Mortgage Corp. (1997) 53 Cal.App.4th. 299, 312-313.) It is clear that plaintiffs relied to their detriment on the representations of defendants’ counsel in that letter, such that it would be inequitable to allow defendants to contend that service directly on them was invalid.

In addition, defendants admitted at the May 31, 2005, hearing that they had received actual notice of the default. Yet they continue to maintain that notice is only effective if it is served on their attorney of record, as originally stated in the settlement agreement. Even as originally stated, however, the purpose of the notice provision was to ensure that defendants were aware of the default and to provide them with an opportunity to cure it within 10 days. Because actual notice fulfilled both of those purposes, it substantially complied with the agreement’s requirements. (See Roscoe Moss Co. v. Jenkins (1942) 55 Cal.App.2d 369, 377 [substantial compliance with a contract term satisfies that obligation]; Bavin & Burch Co. v. Bard (1927) 81 Cal.App. 722, 729 [what constitutes substantial compliance is a question of fact that must be determined in each case].)

C. The Trial Court Did Not Err in Denying the Offset Motion Defendants argue that the separate judgment against plaintiff Adonnis Colmenar operated as an automatic offset against the $5000 payment that was in default. According to defendants, the existence of the right to offset negated any asserted default, and prevented the increase in, and acceleration of, the debt.

Assuming, arguendo, that defendants were entitled to the offset on which they rely, it would not have the effect on the default that they contend. The agreement provides a 10 day grace period within which defendants were entitled to cure the default. But there is no evidence, and defendants do not argue, that they attempted to exercise their offset right during the grace period in an effort to cure the default. To the contrary, the record shows that plaintiffs served the notice of default on January 3, 2005, and that they served their notice of an ex parte application for an order entering judgment based on the default on January 28, 2005. Defendants did not file their offset motion until March 2, 2005.

Thus, the issue is not whether defendants had a legal right to offset the separate judgment against the obligation created under the settlement agreement. The issue is whether, assuming defendants had such an offset right, they elected to exercise it in a timely manner, thereby curing the default and preventing the increase in, and the acceleration of, the debt. (See Margott v. Gem Properties, Inc. 34 Cal.App.3d 849, 855 [offset is a right of the judgment debtor who can elect to exercise or to refrain from exercising it].)

The record is clear that defendants did not exercise timely their offset right. Upon the expiration of the 10 day grace period, the debt under the terms of the settlement agreement increased from $50,000 to $75,000, less the $35,000 previously paid, and became immediately due and payable. At that point, under the express terms of the settlement agreement, plaintiffs had the right to apply to the trial court for a judgment in the amount of $40,000 pursuant to section 664.6, which they did. By the time defendants elected to exercise their offset right, the debt had already increased and accelerated pursuant to the express terms of the settlement agreement. Therefore, plaintiffs were entitled to the $40,000 judgment that the trial court entered in their favor, notwithstanding any asserted offset right that defendants may have had. As the trial court noted, any such offset right would still be available as an alleged partial satisfaction of the $40,000 judgment, but it did not prevent entry of that judgment pursuant to the terms of the settlement agreement in the first instance.

D. Plaintiffs’ Cannot Request Sanctions Based on the Filing of a Frivolous Appeal in Their Respondents’ Brief

In their respondents’ brief, plaintiffs contend that defendants’ appeal is completely devoid of merit, and was filed solely for purposes of delay. They request an award of sanctions against defendants in the amount of $20,000. But plaintiffs have not filed a separate motion or supporting declarations as required by California Rules of Court, rule 26(e). We therefore cannot address plaintiffs’ request. (In re Marriage of Petropoulos

(2001) 91 Cal.App.4th 161, 180; Leko v. Cornerstone Bldg. Inspection Service (2001) 86 Cal.App.4th 1109, 1124.)

DISPOSITION

The judgment of the trial court is affirmed. Plaintiffs are awarded their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

MOSK, J.

We concur:

ARMSTRONG, ACTING P. J.

KRIEGLER, J.

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Analysis and review provided by Escondido Property line Lawyers.

[1] Section 664.6 provides: “If the 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.”

[2] The judgment for costs of suit was entered on July 30, 2002, after a bench trial in case number YC040424 against plaintiffs Adonnis Colmenar and Ruth Del Gado, and in favor of defendants Jad Manor, Inc., Rhandall Colmenar, Alaine Colmenar, Nila Colmenar, and Jasmine Colmenar.

[3] Code of Civil Procedure section 284 provides in pertinent part: “The attorney in an action or special proceeding may be changed at any time before or after judgment or final determination, as follows: 1. Upon the consent of both client and attorney, filed with the clerk, or entered upon the minutes; . . .” Section 285 provides: “When an attorney is changed, as provided in the last section, written notice of the change and of the substitution of a new attorney, or of the appearance of the party in person, must be given to the adverse party. Until then he must recognize the former attorney.”