Filed 4/30/20 Pasadena Redevelopment Co. LP v. Kinney CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION EIGHT

PASADENA REDEVELOPMENT COMPANY LP,

Plaintiff, Cross-defendant, and Appellant,

v.

SUSAN KINNEY et al.,

Defendants, Cross-complainants, and Respondents.

B295261

(Los Angeles County

Super. Ct. No. BC562912)

APPEAL from an order of the Superior Court of Los Angeles County, Elizabeth Allen White, Judge. Affirmed.

Russ, August & Kabat, Matthew A. Rips, Nathan D. Meyer and Shani Williams for Plaintiff, Cross-defendant and Appellant.

Law Offices of James A. Gallo and James A. Gallo for Defendants, Cross-complainants and Respondents.

* * * * * * * * * *

The owners of three parcels in a commercial development in Pasadena had disputes over the covenants, codes and restrictions (CC&R’s) governing their properties. The trial court ordered the parties to a mandatory settlement conference, and they reached an agreement which called for the drafting of new CC&R’s. After more than a year of negotiations, the parties could not agree on the CC&R’s. Plaintiff filed a motion to enforce the settlement pursuant to Code of Civil Procedure section 664.6. The trial court denied the motion on the grounds the stipulated settlement was too uncertain to enforce, and plaintiff appeals. We affirm.

BACKGROUND

Plaintiff Pasadena Redevelopment Company, LP owns parcels 1 and 3 of a commercial development in Pasadena. Plaintiff sold parcel 2 to the individual defendants, Susan and George Kinney, who later transferred it to defendant 1222 North Fair Oaks, LLC, which they control. The properties are governed by CC&R’s which provide reciprocal easements for access and prohibit obstructions that impede traffic in the common areas. Plaintiff leases buildings on parcels 1 and 3 to a gym and other businesses. Defendants operate a print shop on parcel 2. There is no direct access or parking for the businesses on parcel 1. The easements established under the CC&R’s provide access to parcel 1 from parcel 2, and permit guests visiting the businesses on parcel 1 to park on parcels 2 and 3.

In 2012, a dispute arose among the parties. Defendants asserted the CC&R’s had expired, and began parking a bus along

their properly line, which obstructed access to parcel 1. They also stated their intent to erect a fence separating their parcel from plaintiff’s parcels, and threatened to disconnect the electrical and water utilities serving the common areas along the property line. Defendants claimed plaintiff’s lease of space on its parcels to two gyms, a trade school and a commercial bakery were prohibited uses because the development was required to be used as a “commercial-industrial business park.”

After the trial court summarily adjudicated that the CC&R’s would not expire until June 15, 2025, the parties agreed to participate in a mandatory settlement conference. They reached an agreement on March 21, 2016. On May 23, 2016, they filed with the court a written settlement agreement pursuant to Code of Civil Procedure section 664.6. The trial court dismissed the case, retaining jurisdiction to enforce the settlement agreement under section 664.6.

The agreement provided the properties would “roughly conform to 3/20/16 CC&Rs, subject to modifications” discussed at the mandatory settlement conference. The settlement agreement did not identify the “3/20/16 CC&Rs” to which the parties had agreed when they settled the case on March 21. Instead, the agreement listed 20 modifications, described in short, abbreviated phrases.

For example, the agreement provided that “Parcels 1 + 3 shall be self-parked at least per code, with parking per code”; “Parcel 2 shall be self-parked at least per code, with parking per code, even if expanded”; the CC&R’s could only be terminated for “egregious breach”; and “commercial standard rules and regs” would apply. The agreement was conditioned upon the parties’ subsequent consent to “[l]ong form CC&Rs to be prepared and agreed upon,” “[l]ender approval, city approval as needed,” and confirmation that “parcel 3 can add enough spaces lawfully to park 1+3 at 3/1,000.”

Over two years later, on August 21, 2018, plaintiff moved to enforce the settlement agreement. Plaintiff asked the court to order the LLC defendant to sign CC&R’s with the terms to which the parties agreed at the settlement conference, and included a proposed draft for execution. According to plaintiff, the parties had extensively negotiated after the mandatory settlement conference, and had essentially finalized the CC&R’s by April 2017. However, defendants insisted on including provisions in the CC&R’s that were outside the scope of the stipulation for settlement, including limiting parcel 1’s use to purposes requiring three or less parking spaces; defining “egregious breach” for termination of the CC&R’s; adding additional prohibited uses for the properties; and adding a cost shifting provision for government compliance.

Attached to plaintiff’s motion was a declaration of counsel, Matthew Rips; the stipulation for settlement; the March 20, 2016 draft CC&R’s referenced in the settlement agreement; a redlined version of an April 2017 draft of the CC&R’s (drafted by defendant), redlining the objectionable provisions plaintiff argued were inconsistent with the settlement agreement; and other documents.

The declaration of Mr. Rips stated CC&R’s are highly technical documents that call for careful drafting, so “it was not possible for the parties to draft their compromises on the spot. Instead, the parties agreed to perform that drafting after the fact.” Also, “[t]he parties . . . agreed that the various exhibits to the CC&Rs would be prepared, including the site plan and rules and regulations for use.” Because of the “collegial and cooperative relationship” between counsel, they were confident they could “jointly . . . document the final CC&Rs without controversy.”

On March 28, 2016, after the settlement agreement was signed, counsel for defendants circulated a revised draft of the CC&R’s that did not include the objectionable terms. (We do not know what was included in this draft. It was not attached to the motion.) The following week, plaintiff responded with “primarily technical revisions.” (These revisions were not identified or detailed in the motion or its exhibits.) According to Mr. Rips, the offending provisions started to appear in drafts proposed by defendants on April 11, 2016, and in subsequent drafts. (None of these drafts is appended to the motion, except for the April 2017 redlined draft.)

Mr. Rips testified that at the settlement conference, plaintiff refused defendants’ request that parcel 1 be limited to uses requiring no more than three parking spaces. Instead, the parties agreed “that Parcels 1 and 3 would be self-parked. ‘Self-parked’ is a term of art that means that the number of parking spaces on Parcels 1 and 3, together, be greater than or equal to the number of parking spaces required by law for operation of the businesses on Parcels 1 and 3.” He also testified the parties never discussed use limitations at the settlement conference, but defendants later sought to add use restrictions. At the settlement conference, plaintiff agreed to use the term “egregious breach” as a basis for termination of the CC&R’s. Later, defendants sought to define “egregious breach.” The parties were unable to come to an agreement regarding an acceptable definition.

According to Mr. Rips, the parties eventually reached an impasse. Defendants retained new counsel in August 2017, but new counsel could not break the impasse.

Defendants opposed the motion, arguing the agreement was not enforceable against the LLC, because only one defendant, Susan Kinney, signed the agreement, and she did not sign in her capacity as a member of the LLC. Defendants also argued the agreement was too uncertain to be enforced, leaving many issues to be resolved, and was merely an “agreement to agree.”

The trial court denied the motion, concluding that Susan Kinney signed the agreement in her individual capacity, and therefore, the agreement was not enforceable against the LLC. The court also found the settlement agreement was uncertain as to the number of parking spaces for each parcel, the meaning of “egregious breach,” and the extent of prohibited uses of the property, but stated its view that the agreement could be enforced in a separate action for breach of contract. This timely appeal followed.

DISCUSSION

Code of Civil Procedure section 664.6 provides that “[i]f 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.” Section 664.6 gives the trial court authority to enforce settlement agreements through a summary procedure, without the need to file a new lawsuit. (In re Marriage of Assemi (1994) 7 Cal.4th 896, 905, 911; Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809 (Weddington).)

Ordinary principles of contract interpretation apply to settlement agreements under Code of Civil Procedure section 664.6. (See Weddington, supra, 60 Cal.App.4th at p. 797.) The trial court must give effect to the mutual intention of the parties as it existed at the time the contract was executed. (Civ. Code, § 1636.) The parties’ mutual intent is interpreted according to objective, rather than subjective, criteria, such as the plain language of the agreement. (Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1126; Weddington, at p. 811.)

“Although a judge hearing a [Code of Civil Procedure] section 664.6 motion may receive evidence, determine disputed facts, and enter the terms of a settlement agreement as a judgment [citations], nothing in section 664.6 authorizes a judge to create the material terms of a settlement, as opposed to deciding what terms the parties themselves have previously agreed upon.” (Weddington, supra, 60 Cal.App.4th at p. 810; see also Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1360.)

“A settlement agreement, like any other contract, is unenforceable if the parties fail to agree on a material term or if a material term is not reasonably certain.” (Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, 1622.) For this reason, a contract that “leaves an essential element for future agreement of the parties” is ordinarily unenforceable. (Okun v. Morton (1988) 203 Cal.App.3d 805, 817.)

We review the trial court’s factual findings for substantial evidence, and its legal conclusions de novo. (Osumi v. Sutton, supra, 151 Cal.App.4th at p. 1360; Weddington, supra, 60 Cal.App.4th at p. 815.)

The settlement agreement in this case states the parties would prepare and agree upon the CC&R’s on some future date. The Rips declaration states the parties made multiple compromises over the course of their negotiations in the year after the mandatory settlement conference, indicating the settlement agreement evolved from what was agreed upon at the settlement conference.

The Rips declaration does not clearly state what the parties agreed upon at the settlement conference, and mostly declares what the parties did not agree upon. The draft of the CC&R’s which plaintiff sought to enforce differs materially from the March 20, 2016 draft the parties relied upon during their settlement negotiations. For example, the “rules and regulations” section of the March 2016 draft CC&R’s was blank, and the settlement agreement only referred to “commercial standard rules and regs,” without further clarification. However, the draft plaintiff sought to enforce includes extensive rules and regulations, discussing how the properties are to be maintained, and the use of common areas.

The settlement agreement provides the CC&R’s may be terminated for “egregious breach,” and does not include a definition of this term. The Rips declaration states that “given the nature of the term, it ultimately would be up to the equitable powers of a judge to determine whether a given set of circumstances were of a nature so bad that termination was justified.” However, we do not understand the declaration to state the parties agreed that the term would remain undefined. And, in fact, the declaration admits that plaintiff and defendants attempted to reach an agreement on an acceptable definition, and were unable to do so.

It is clear from the terms of the settlement agreement, and the parties’ subsequent actions, that numerous material terms of the contract were left to future negotiations. We agree with the trial court’s conclusion that the agreement was too uncertain to be enforced pursuant to Code of Civil Procedure section 664.6. We express no opinion about whether plaintiff may maintain a breach of contract action against defendants. (See, e.g., Okun v. Morton, supra, 203 Cal.App.3d at p. 817.) We therefore find it unnecessary to discuss plaintiff’s claim that the trial court erred in finding the signature of Ms. Kinney on the settlement agreement did not bind the LLC defendant.

DISPOSITION

The order is affirmed. Respondents are awarded their costs on appeal.

GRIMES, J.

WE CONCUR:

BIGELOW, P. J.

STRATTON, J.