Rees v. Kurpieski

Filed 10/3/06 Rees v. Kurpieski CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 977.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

THIRD APPELLATE DISTRICT

(El Dorado)

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Defendant Daniel Kurpieski appeals in timely manner from the order denying his motion to vacate a judgment against him, which plaintiff Rachel Rees obtained on an ex parte application (after announcing this intention to do so in a letter she sent him) purportedly pursuant to the terms of a settlement between the parties. Defendant contends these extrinsic events deprived him of the opportunity to appear and oppose the entry of judgment. We shall reverse with directions.

Background

In settlement of the underlying action under the provisions of Code of Civil Procedure section 664,^[1] the defendant stipulated to a judgment against him for about $26,000 in damages and costs, admitting that he made negligent misrepresentations in the sale of real property to the plaintiff on which she relied to her detriment. In turn, the plaintiff agreed that she would not enter judgment for at least one year or execute against the defendant’s assets as long as he “fully perform[ed] the terms of this agreement,” which included assigning his rights against his insurer or any third party (other than his wife) and “completely cooperat[ing]” with the plaintiff in any litigation against such parties. Any breach of the latter promise “shall be grounds for the immediate entry of judgment,” but “no judgment shall enter . . . except after 30[-]day demand by Plaintiff to Defendant” by certified mail to his home address. Both the parties and their attorneys executed the written settlement agreement, which the court filed in January 2003. The plaintiff filed a conditional dismissal shortly afterward, “anticipat[ing] . . . that the entire matter will be dismissed on or before January 28, 2006.”

On August 2, 2004, the plaintiff’s attorney asserted his intention to “appear at the court [on August 9] with an ex parte request that the court enter a money judgment” unless defense counsel delivered “the entire file” to him by August 8. He also sent a copy of the August 2 letter via certified mail directly to the defendant on August 18, receiving a return receipt with the defendant’s signature.

The plaintiff applied ex parte for entry of judgment in November 2004. Counsel did not serve the application^[2] on the defendant or otherwise give notice of it. In the supporting declaration, the plaintiff’s attorney stated that the defendant and his attorney had failed to assist in the plaintiff’s effort to pursue an action against the insurer, and had not initiated any communication since August 19. The declaration in support of entry of judgment included copies of the settlement agreement and the August 2 letter. The court filed a judgment on November 4, 2004, but did not send a conformed copy to the plaintiff’s attorney because he had not provided a stamped, self-addressed envelope. The plaintiff’s attorney was therefore unaware of the judgment’s entry until he sent a letter to the settlement judge in June 2005 asking about the status of the judgment. Learning that the judgment had been entered, the plaintiff’s attorney shortly afterward obtained an abstract of judgment and recorded a lien, but “inadvertently omitted to send out notice of entry of judgment.”

The defendant received a notice in July 2005 from the county recorder of an involuntary lien based on the judgment in this matter. He moved in August 2005 to vacate the judgment under section 473 and the court’s equitable power to grant relief from extrinsic fraud.

In his supporting declaration, defense counsel noted that he had tendered defense of this action to his client’s insurer in September 2002, which the insurer declined in November 2002. Defense counsel notified the plaintiff’s attorney of this fact that day. Settlement discussions continued in the meantime until the attorneys reached an agreement on January 7, 2003, that they executed, to which the judge appended a handwritten notation that stated, “This is a judicially supervised settlement & is approved by the court.” The plaintiff’s attorney sent defense counsel a final version of the settlement (which he and the defendant then executed and returned), and a request for copies of the tender letter and the insurer’s response. A couple of weeks later, the plaintiff’s attorney sent a letter requesting “all documentation with regard to the tender of defense and liability in this case to” the insurer, and indicating that a failure to respond could constitute a breach of the settlement. Defense counsel responded that he would act once he had a copy of the settlement agreement with the plaintiff’s signature, because he was concerned that the plaintiff was reneging. In April 2003, the plaintiff’s attorney again demanded copies of “communication with your carrier and the real estate agent,” and again warned he would seek entry of judgment. Defense counsel again asserted that he would respond upon receipt of a conformed copy of the settlement agreement. Defense counsel reiterated his request for a copy of the filed settlement agreement in letters he sent in May and November 2003 (the latter included a copy of the letter from the carrier that declined coverage).

Defense counsel asserted that he did not hear from the plaintiff’s attorney again until August 2, 2004, when the latter sent the letter in which he threatened to apply ex parte for entry of judgment unless defendant “deliver[ed] the entire file to [him]” by August 8. Defense counsel, on return from vacation on August 16, sent a letter questioning the effectiveness of the settlement without the signature of the judge approving it, and indicating a lack of awareness of any other documents that the plaintiff might require. Defense counsel promised to deliver anything that the plaintiff identified. This was the final communication between the parties until defense counsel became aware of the judgment lien in July 2005.

Defense counsel’s declaration also asserted that he had compared the plaintiff’s signature on documents from the sale of the real property with the settlement. In his opinion, they were not the same.

In his opposition declaration, the plaintiff’s attorney stated that while he did not personally observe the plaintiff execute the settlement agreement, he did not have any reason to doubt that her signature was genuine and she never disavowed the agreement. The plaintiff had desired this form of settlement, a judgment with a covenant not to execute it, because the defendant was essentially judgment-proof and she could pursue recovery from his insurer in order to make repairs to the property.

Defense counsel was at his most succinct in stating the theory of his case at the hearing on his motion: “[E]ssentially the gravamen of our complaint here is that a motion was filed to enter judgment based upon an allegation that an agreement was breached. That motion was not served upon us. We had no notice it was filed. We had no opportunity to contest the issue of whether or not it was breached. We believe as a matter of law we were entitled to be served with [the application]. We were entitled to be noticed it was filed. And we were entitled to have an opportunity to respond and dispute whether or not there was a breach of the settlement agreement.” After disputing whether the August 2 letter sufficiently evinced an intent to seek entry of judgment and whether the plaintiff had adequately identified any other material that she might have wanted from defense counsel, defense counsel stated, “[P]erhaps I dwell on the facts too much; as an issue of law we are saying that we are entitled to notice that the request [for entry of judgment] was made . . . . And absent that, basic due process was denied.” He argued that the settlement agreement was not self-enforcing, but required a motion pursuant to section 664.6 to compel compliance, at which the defendant could have litigated whether he was in breach.

In its order denying the defendant’s motion, the trial court stated that the time to seek relief pursuant to section 473 had expired. It did not find facts warranting relief pursuant to the court’s inherent equitable power to vacate a judgment, because in obtaining judgment the plaintiff had complied with the terms of the settlement agreement. It rejected the defendant’s tangential effort to set aside the settlement agreement through the attack on the genuineness of the plaintiff’s signature.^[3]

Discussion

The defendant’s August 2005 motion for relief from the November 2004 judgment pursuant to section 473 was untimely. The six-month limitations period for the statute is jurisdictional and we cannot extend it under any circumstances. (Arambula v. Union Carbide Corp. (2005) 128 Cal.App.4th 333, 344 [“the outside limit of six[ ]months applies inflexibly”].) The defendant is therefore limited to the trial court’s inherent equitable power to vacate a judgment that is void on its face or the result of extrinsic “mistake.”^[4] (Id. at p. 340, fn. 5.)

The legal criteria governing a court’s inherent equitable discretion to grant relief from a judgment include the presence of an “’extrinsic mistake’” that prevented a defendant from litigating a case on its merits (8 Witkin, Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court, § 231, p. 741), the diligence of the defendant in seeking relief after discovering the default and judgment (id., § 239, pp. 753-754), and proof of a meritorious defense that is likely to prevail in a new trial (id., § 237, p. 751). In the course of exercising its discretion to vacate, a trial court must weigh antithetical public policies in both the finality of judgments and in the fair resolution of disputes on their merits (In re Marriage of Baltins (1989) 212 Cal.App.3d 66, 81), keeping in mind that a judgment is a vested property right to be respected except in extraordinary circumstances (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 982; In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1070-1071).

The defendant implies that because the plaintiff had twice in past letters expressed an intent to obtain a judgment, only to do nothing after defense counsel responded to those letters, this reasonably led him to believe the result would be the same after sending the August 18 response to the August 2 demand letter. Even if it were reasonable to conclude that the plaintiff would not act on her expressed intention (but cf. Jackson v. Bank of America (1983) 141 Cal.App.3d 55, 58 [unreasonable to assume that mootness excused duty to answer complaint]), and even if the defendant had been entitled to notice of the application for entry of judgment, these extrinsic matters have relevance only if the defendant were entitled to appear and defend against the entry of judgment.

The plaintiff and the trial court apparently interpret the settlement agreement as permitting the entry of judgment for a breach of the agreement without any notice except the 30-day demand via certified mail, and without opposition. But that is not what the agreement provides. With respect to the procedure to be followed for entry of judgment, all the agreement provides is that a failure to cooperate with the plaintiff’s litigation against the defendant’s insurer “shall be grounds for the immediate entry of judgment pursuant to this stipulation. It is further stipulated that no judgment shall enter against Defendant herein except after 30[-]day demand by Plaintiff to Defendant[,] said demand having been made by certified mail sent to Defendant at his address . . . .”

Ordinarily, in a motion to enforce a settlement pursuant to section 664.6, a trial court is empowered to receive evidence regarding the existence of a settlement and any disputes over its terms in order to resolve disputed questions of fact. (Corkland v. Boscoe (1984) 156 Cal.App.3d 989, 994.)^[5] It is in the nature of an action for breach of contract (Hernandez v. Board of Education (2004) 126 Cal.App.4th 1161, 1176), and provides a streamlined process--cumulative of existing alternatives--for enforcing settlement agreements that come within its criteria (Hernandez, supra, 126 Cal.App.4th at pp. 1175-1176; Kilpatrick v. Beebe (1990) 219 Cal.App.3d 1527, 1529). The court is limited to enforcing the terms to which the parties had agreed at the time of the execution of the settlement; it cannot create new terms. (Hernandez, supra, 126 Cal.App.4th at p. 1176; Gauss v. GAF Corp. (2002) 103 Cal.App.4th 1110, 1123 [extrinsic evidence admissible only to prove contemporaneous terms not reflected in the settlement agreement].)

In a case that the defendant cites, the Supreme Court noted (in the context of one of the alternative methods of enforcing a settlement) that a stipulated judgment can be entered ex parte only where all material terms are included; otherwise the missing terms must be established either through proof or further stipulation. (Rooney v. Vermont Investment Corp. (1973) 10 Cal.3d 351, 368-369.) In Rooney, the stipulation noted that the plaintiff could seek judgment for the defendant’s default on installment payments in the amount of the balance due. (Id. at p. 356.) This left open the determination of the existence of the prerequisites to entry of judgment--the default, the plaintiff’s notice of default, and the amount due--that require a hearing before the court, which cannot be waived by implication and were not waived expressly in the stipulation. (Id. at p. 370.) The facts adduced at the defendant’s motion to vacate the judgment could not cure the absence of proof to support the judgment. (Id. at p. 372.) The Supreme Court therefore reversed the order denying the defendant’s motion to set aside the judgment and directed entry of an order granting it. (Id. at p. 373.) Similarly, S. E. P. Associates, Inc. v. Peto (1975) 49 Cal.App.3d 305 involved a stipulation that the plaintiff should have judgment if a horse were not sold by a certain date. (Id. at p. 307.) “Thus, before entering judgment, the court must satisfy itself that the condition did, in fact, occur, and it is necessary that the court be fully apprised of the circumstances surrounding the occurrence of the condition. This it cannot do without some form of hearing or trial.” (Id. at p. 308.) There not being any express waiver of the right to this hearing on the condition precedent to entry of judgment, the judgment was void. (Ibid.)

Other than take the unpersuasive position that the language of the settlement agreement can be reasonably interpreted as an express waiver of notice and appearance, the plaintiff wanly contends that a motion to enforce a settlement can be ex parte because the statute does not explicitly require a noticed motion. However, Titmas v. Superior Court (2001) 87 Cal.App.4th 738 noted that the Legislature’s use of the term “motion” rather than “ex parte application” generally requires the obligation to provide both notice and a hearing (observing that it did not “subscribe to the obscurantist notion that justice, like wild mushrooms, thrives on manure in the dark”). (Id. at pp. 741, 743.) In light of this principle, adding the adjective “noticed” would simply paint the lily.

Other than the plaintiff’s right to seek “immediate” entry of judgment after a 30-day demand on the defendant (an ambiguous term at best), the present settlement agreement is silent on the procedure the plaintiff will follow in seeking entry of judgment. There is not an express provision for waiver of the hearing to which the defendant would otherwise be entitled at which he could contest the issue of his cooperation with the plaintiff, or even whether he received the requisite 30-day demand (though that issue is not disputed here). In the absence of an express waiver, the plaintiff was not entitled to proceed ex parte to obtain the entry of judgment without notice to the defendant.^[6]

This mistaken interpretation of the agreement on the part of the plaintiff deprived the defendant of the opportunity to appear through no fault on his part and present his arguable opposition to the contention that he failed to cooperate with the plaintiff in suing the insurer. We do not discern any strong equitable interests against overturning a judgment obtained in this manner, and therefore the trial court should have granted the motion to vacate the judgment.

Disposition

The order denying relief is reversed with directions to enter a new order granting the motion to vacate. The defendant shall recover his costs of appeal.

DAVIS , J.

We concur:

SIMS , Acting P.J.

RAYE , J.

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^[1] Undesignated section references are to the Code of Civil Procedure.

^[2] The application itself is not part of the clerk’s transcript; in fact, defendant contends that the declaration was unaccompanied by any other documents.

^[3] At the hearing the court also stated that the absence of the settlement judge’s signature did not prevent enforcement of the settlement agreement. The defendant does not renew either of these arguments on appeal.

^[4] Our decision does not encompass any suggestion of fraud on the part of plaintiff’s counsel as another variant of extrinsic circumstances warranting relief.

^[5] A court did not have this power to resolve factual disputes on motion before the enactment of section 664.6. (Wackeen v. Malis (2002) 97 Cal.App.4th 429, 432, fn. 1.)

^[6] Indeed, under the plaintiff’s interpretation of the settlement agreement, it would amount to a confession of judgment (§§ 1132-1134) because the court would do nothing other than rubber stamp the motion based on the plaintiff’s representations, and there are strict requirements for express advisement and waiver of due process protections in that context that the present document fails to satisfy. (Efstratis v. First Northern Bank (1997) 59 Cal.App.4th 667, 672-673.)