Filed 4/30/20 Harthorn v. Davis CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

ALDA HARTHORN,

Plaintiff and Respondent,

v.

LYNN DAVIS,

Defendant and Appellant.

G057583

(Super. Ct. No. 30-2017-00941996)

O P I N I O N

Appeal from an order of the Superior Court of Orange County, Aaron Heisler, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.

The Walker Law Firm, Joseph A. Walker and Stephen M. Lewis for Defendant and Appellant.

James C. Zanias and Kevin G. Rice for Plaintiff and Respondent.

* * *

Defendant and appellant Lynn Davis (defendant) and plaintiff and respondent Alda Harthorn (plaintiff) are beneficiaries of their deceased parents’ trust. Defendant served as the trustee. Plaintiff filed a petition to compel defendant to file an accounting, and to remove and surcharge defendant. During a mandatory settlement conference (MSC) the parties executed a written stipulation (Stipulation) settling the matter and the court entered an order thereon. Subsequently, the court denied defendant’s motion under Code of Civil Procedure section 473, subdivision (b) (section 473(b)) to set aside the Stipulation.

Defendant argues the Stipulation is unenforceable because it did not contain all required terms but was merely an agreement to agree and the order denying her motion was not supported by substantial evidence.

We conclude the Stipulation is enforceable and affirm the order.

FACTS AND PROCEDURAL HISTORY

Plaintiff and defendant are the beneficiaries of The Cianfanelli Family Trust (Trust), created by their parents, both of whom are now deceased. Upon the death of the second trustor, defendant, who was named as the successor trustee, assumed that position in September 2011. Disputes arose between the parties over administration of the Trust, and in 2017 plaintiff filed a petition for an accounting, to surcharge and remove the trustee, and to appoint a successor trustee (Petition).

In the Petition, plaintiff alleged defendant had never prepared an accounting, despite plaintiff’s numerous requests. She also alleged defendant had breached her fiduciary duty by, among other things, failing to distribute Trust assets, commingling Trust assets with defendant’s, and misappropriating Trust assets. Defendant filed a response to the Petition, denying breach of fiduciary duty and alleging she had properly managed the Trust, an accounting was being prepared, and all Trust assets were accounted for. At the same time she filed a first account current.

At the MSC, the parties reached a settlement. The parties and their lawyers signed a handwritten Stipulation, containing an order at the bottom signed by a commissioner. Just above the parties’ signature lines the Stipulation contained preprinted language stating: “We have read the entire stipulation and agreement. We understand it fully and request the court to make our stipulation and agreement the Court’s order. We understand that willful failure to comply with the provisions of this order may be a contempt of court and may be punished by fine and imprisonment. We waive all further notice of this order.”

The Stipulation provided defendant would pay plaintiff $1.5 million, payable $200,000 upon execution of a formal settlement agreement, $550,000 within 60 days thereafter, and $750,000 within two years after the formal settlement agreement was signed, or $700,000 if paid within one year after execution of the formal settlement agreement. All payments were designated as principal.

The parties also agreed the Trust would be terminated forthwith and all real property owned by the Trust would be distributed to defendant. Further, defendant was to indemnify and hold harmless plaintiff from any claims by the Internal Revenue Service or Franchise Tax Board. The parties agreed to execute a release with a waiver of the provisions of Civil Code section 1542. The Petition was dismissed with prejudice and the court retained jurisdiction of the matter under Code of Civil Procedure section 664.6.

Defendant made the first payment one week later.

Two months after the Stipulation was signed, defendant, with new counsel, filed a motion (Set Aside Motion) to set aside the settlement pursuant to section 473(b), based on mistake, inadvertence, surprise, or excusable neglect. She argued in the motion, although did not make this statement in her declaration, the settlement had been negotiated before she arrived at the MSC, and she was “pressured” to sign it. She also argued the settlement was impossible for her to perform because she would not be eligible for a loan on the Trust’s real property. Therefore, she could only pay off plaintiff by obtaining a “hard money” loan, which defendant claimed would financially “crippl[e]” her. Defendant further asserted there was no meeting of the minds because taxes were not defined.

In her declaration in support of the Set Aside Motion, defendant claimed her attorney “bullied” her into entering into the settlement without disclosing necessary facts. She claims he told her there was a recent appraisal of the Trust real property and advised she could “afford the settlement” without explaining how. But she cannot afford it. She never received an appraisal. When defendant contacted “approximately two lenders” she was told she “could not get financing” to pay the settlement. She then contacted her lawyer to “get [her] out of the settlement.”

She further declared that a few days thereafter her lawyer introduced her to someone who could arrange a “hard money” loan to finance the settlement at an interest rate of 9.5 percent. She asserted this was “oppressive” and a financial hardship. She would not have agreed to the terms if she had known about them in advance. She also stated her lawyer had not discussed the potential tax liability and she would not have agreed if she had known.

Plaintiff’s opposition to the Set Aside Motion asserted the Stipulation had been thoroughly negotiated over the course of three hours. It disputed defendant’s claim the settlement had been negotiated before she arrived. Several offers and counteroffers were exchanged. The final counteroffer, made by plaintiff, was presented on the Stipulation form that was ultimately signed. Defendant and her lawyer spent “a significant amount of time” reviewing the counteroffer, after which the temporary judge who conducted the MSC advised plaintiff that defendant had accepted it.

Plaintiff also argued defendant was attempting to add a term to the Stipulation regarding the hard money loan. No loan contingency was included in the Stipulation. Defendant’s first account current showed over $400,000 in cash without taking into consideration another bank account or accounts, one of which was the source of funds for the first payment made under the Stipulation. In addition, defendant had ample assets to obtain a conventional real estate loan if necessary.

In addition, plaintiff argued the tax liability was defendant’s responsibility. She failed to file fiduciary tax returns for at least five years as was her duty as trustee. She also asserted that if defendant had any complaints, they were against her lawyer. Defendant’s response argued plaintiff had not submitted evidence to support her claims.

Plaintiff filed a motion to compel enforcement of the settlement under Code of Civil Procedure section 664.6 (Motion to Enforce). Plaintiff’s lawyer, who had participated in the settlement negotiations, filed a declaration in support. He stated that over the course of the morning, plaintiff had made numerous offers, including a sale of the Trust real property and division of proceeds and a distribution of the real property between the parties. Defendant rejected both of those offers. Based on information plaintiff had received in discovery, there were a minimum of $5.5 million in Trust assets.

The declaration also stated defendant made a counteroffer and plaintiff made several further counteroffers. The last offer, which was in writing, was accepted by defendant.

Plaintiff’s lawyer further declared that, although the court had asked defendant’s attorney to prepare the final settlement and release, after some delay, plaintiff’s lawyer prepared it and sent it to defendant’s attorney, who accepted it. Defendant did not make the second payment due under the Stipulation.

Plaintiff also filed a declaration of the temporary judge who conducted the MSC. The temporary judge stated there was “substantial negotiation” by the parties to reach a settlement. He believed the parties understood and voluntarily agreed to the settlement. He saw both parties and their counsel sign the Stipulation and saw the commissioner sign the order.

Defendant filed an opposition to the Motion to Enforce, arguing plaintiff had failed to controvert arguments made in the Set Aside Motion.

The court denied defendant’s Set Aside Motion. Defendant was not entitled to mandatory relief under section 473(b) because there was no declaration from her attorney describing his inadvertence, negligence, surprise, or mistake.

The court was not persuaded discretionary relief was proper either. According to the evidence, any surprise, inadvertence, neglect, or mistake was based on inaccurate or incomplete advice given by counsel, which is imputed to defendant and not sufficient to trigger the discretionary relief afforded under section 473(b).

The court also rejected defendant’s argument there was no meeting of the minds in formation of the Stipulation. The court relied on defendant’s signature under the preprinted language on the Stipulation, noting she had not claimed her signature was forged or that she had not read the Stipulation. The court stated a person signing a contract is responsible to read and seek information to understand it before signing. There was no evidence to excuse defendant from doing so. The court rejected defendant’s claim of impossibility because the Stipulation did not require a hard money loan.

The court also denied plaintiff’s Motion to Enforce under Code of Civil Procedure section 664.6. That statute empowers a court to enter judgment on a settlement agreement without filing an action to enforce. Here, entry of judgment on the Stipulation would be redundant because the Stipulation is a court order. Following the signatures by the parties and their counsel, and just above the commissioner’s signature, a preprinted sentence stated, “IT IS SO ORDERED.” The denial of the Motion to Enforce was without prejudice to plaintiff’s right to enforce it.

DISCUSSION

1. Standard of Review

We review an order denying discretionary relief under section 473(b) for abuse of discretion. (Minick v. City of Petaluma (2016) 3 Cal.App.5th 15, 24.) We reverse only if the court has exceeded the bounds of reason. (Ibid.) The party challenging the ruling has the burden to show error. (Ibid.)

2. Alleged Deficiencies in the Stipulation

Defendant claims several deficiencies in the Stipulation. It called for a formal settlement agreement to be executed before payments were due and no such agreement was executed. Likewise, the parties did not execute a mutual waiver and release. Finally, she asserts the Stipulation is unclear about who was to make the payments, defendant individually or the Trust. Defendant points out she signed as an individual, not as the trustee. On this basis, she argues, the Stipulation is not enforceable. We disagree.

First, as she acknowledges, defendant did not raise these alleged deficiencies as a basis for the Set Aside Motion. She argued only that she was pressured into signing the Stipulation, the terms were impossible to perform because she could not get a loan on Trust real property, and there was no meeting of the minds because taxes were not defined. Defendant has thus waived her right to raise these alleged deficiencies on appeal. Contrary to defendant’s claim, plaintiff did not have the opportunity to address them in the trial court and the court did not have the opportunity to consider them. A general argument there was no meeting of the minds is not sufficient to raise specific claims about alleged deficiencies in the Stipulation. Allowing defendant to raise new arguments on appeal is generally not permitted because it would be unfair to plaintiff and a burden on the justice system. (Findleton v. Coyote Valley Band of Pomo Indians (2018) 27 Cal.App.5th 565, 569 (Findleton).)

Even if we were to consider the alleged deficiencies on the merits, the argument still fails. Although the Stipulation did refer to a formal settlement agreement, which presumably would include a release and waiver, the record reflects defendant was to prepare it and failed to do so. As a result, plaintiff’s counsel prepared it and it was approved by defendant’s counsel. Thus, plaintiff did everything in her power to comply with the Stipulation. Defendant had a duty of good faith and fair dealing to prepare and sign a formal settlement agreement pursuant to the terms of the Stipulation. (Moore v. Wells Fargo Bank, N.A. (2019) 39 Cal.App.5th 280, 291.) She cannot rely on her own failure to do so to set aside the Stipulation.

More importantly, defendant made the first payment. This belies her claim a formal agreement was needed to finalize the settlement or to set a payment schedule. Defendant understood when payment was due and partially performed under the terms of the Stipulation. And even if a formal settlement agreement was required, defendant’s conduct in making the first payment was a waiver of a formal agreement as a condition for future payments.

Further, the Stipulation set the payment schedule. “[A] contract will be enforced if it is sufficiently definite (and this is a question of law) for the court to ascertain the parties’ obligations and to determine whether those obligations have been performed or breached. [Citations.] Stated otherwise, the contract will be enforced if it is possible to reach a fair and just result even if, in the process, the court is required to fill in some gaps. [Citation.]” (Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th 613, 623.) Here, as stated, the Stipulation was sufficiently definite to determine the parties’ obligations, including defendant’s obligation to pay plaintiff. The schedule for future payments can easily be tied to and based on the date of the first payment.

In addition, even assuming a formal settlement agreement was required, it does not negate the agreement reached in the Stipulation, which contained all of the necessary terms to consummate the settlement. This was not an “agreement to agree” as defendant contends. Nor was execution of a formal settlement agreement, with a payment schedule and waiver and release, a material term for future agreement. The formal settlement agreement was merely a further documentation of the already agreed upon terms.

We reject defendant’s argument a formal settlement agreement was required to set out the terms of the waiver and release. Again, this argument is waived for failure to argue it in the trial court. (Findleton, supra, 27 Cal.App.5th at p. 569.)

Nor are we persuaded by defendant’s contention the Stipulation does not state who is to make the payments, defendant as trustee or defendant individually. Again, defendant waived this argument by failing to make it in the trial court. (Findleton, supra, 27 Cal.App.5th at p. 569.) And, on the merits, as plaintiff points out, the Stipulation called for the Trust to be immediately dissolved and the real property owned by the Trust distributed to defendant. Thus, defendant will no longer be a trustee and is responsible for making payments individually.

We also reject defendant’s contention, again new on appeal, that the Trust should have been a party to the Stipulation. This was also waived for failure to argue it in the trial court. (Findleton, supra, 27 Cal.App.5th at p. 569.)

We are also unpersuaded by defendant’s argument there was no meeting of the minds as to payment of the taxes. She contends that because any potential taxes would be owed by the Trust, the Trust should have signed the Stipulation. But the Stipulation clearly states defendant would indemnify and hold harmless plaintiff from any taxes due. It does not require the Trust to do so.

Likewise that the Stipulation did not cover an issue raised by defendant in her response to the Petition is irrelevant. It is pure speculation to claim that issue would have been resolved in a formal settlement agreement.

In sum, substantial evidence supports the court’s factual findings and defendant has not met her burden to show the court abused its discretion in denying the Set Aside Motion.

DISPOSITION

The order is affirmed. Plaintiff is entitled to costs on appeal.

THOMPSON, J.

WE CONCUR:

MOORE, ACTING P. J.

IKOLA, J.