Case Name: Beltran, et al. v. Bank of America, N.A.
Case No.: 16-CV-294889

Defendant Bank of America, N.A. (“Defendant”) demurs to the complaint (“Complaint”) filed by plaintiffs Michelle Beltran and Richard Beltran (collectively, “Plaintiffs”).

This is an action for breach of contract and common counts. Per the allegations of the judicial form complaint, after Plaintiffs fully satisfied any and all debt obligations owed to Defendant, following a written settlement agreement in a quiet title/wrongful foreclosure lawsuit between the parties, Defendant received property tax refunds totaling $22,041.21 from the Santa Clara Tax Collector pursuant to Plaintiffs’ property tax appeals. Plaintiffs allege that they are entitled to these amounts pursuant to the settlement agreement but that Defendant has refused to turn them over upon demand, thereby breaching the agreement.

On May 9, 2016, Plaintiffs filed the Complaint asserting claims for (1) breach of contract, (2) common counts- money had and received, and (3) intentional tort. On July 1, 2016, Defendant filed the instant demurrer to the breach of contract cause of action on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)

Defendant’s request for judicial notice is GRANTED. (Evid. Code, § 452, subd. (d).)

As an initial matter, Defendant’s characterization of Plaintiff’s Complaint as only asserting a “single” cause of action for breach of contract is inaccurate. In addition to the breach of contract claim, Plaintiff also asserts a common count for money had and received and an untitled intentional tort that appears to be a claim for unjust enrichment. Thus, Defendant’s demurrer is directed at only one of three causes of action asserted by Plaintiff in the Complaint and therefore even if successful would not dispose of Plaintiffs’ entire action.

In demurring to the breach of contract cause of action, Defendant makes a variety of arguments. First, Defendant contends that Plaintiff fails to state a claim for breach of contract because nowhere in the settlement agreement executed between the parties in the prior action (the “Settlement Agreement”) does it agree to return any tax refund monies to Plaintiff and thus Plaintiffs have not pleaded an actionable breach. Additionally, Defendants insist that no damages have been pleaded because Plaintiff admits in the Complaint that Defendant initially paid the property taxes.

Under California law, a cause of action for breach of contract requires that a plaintiff plead and prove the following elements: (1) the existence of a contract; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) damages to the plaintiff as a result of the breach. (CDF Firefighters v. Maldonado, et al. (2008) 158 Cal.App.4th 1226, 1239.) As articulated above, Plaintiff alleges that Defendant breached the Settlement Agreement by failing to return tax refunds from the County of Santa Clara. Per the allegations, those amounts were paid “per the loan Plaintiffs had with Defendant and were part of the Obligation settled, paid and satisfied by Plaintiffs per the Settlement Agreement.” (Complaint, p. 3 at BC-6.) However, there is no language in the Settlement Agreement that supports these allegations. That is, there is no provision in the agreement which provides that Defendant, who initially paid the property taxes on the subject property (see Complaint, p. 3 at BC-6), was to return any refunded tax amounts to Plaintiffs, or any other language which establishes that the $325,000 amount Plaintiffs agreed to pay Defendant to settle the actions between them included those amounts paid to satisfy the tax obligations on the property that had been paid by Defendant. Consequently, Plaintiffs have not pleaded an actual breach of the agreement and thus not stated a claim for breach of contract. Additionally, without such language in the Settlement Agreement, Defendant’s contention that Plaintiffs have not pleaded damages is well-taken because absent an entitlement to the tax refund amounts, Plaintiffs have not been damaged by Defendant’s retention of those monies.

Defendant next argues that no claim for breach of contract can be stated because the Settlement Agreement, by its own express terms, includes a Statutory General Release, i.e., waiver of Civil Code section 1542, of all claims, known or unknown at the time the agreement was executed.

Civil Code section 1542 protects individuals from inadvertently waiving unknown rights, specifically providing that:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Parties may waiver the protection of the foregoing code section if they understand and consciously agree to such waiver, and there is no ambiguity or evidence of fraud, undue influence or mistake. (Jefferson v. California Dept. of Youth Authority (2002) 28 Cal.4th 299, 307.) Interpretation of a release or settlement agreement is governed by the same principles applicable to any other contractual agreement. (General Motors Corp. v. Superior Court (1993) 12 Cal.App.4th 435, 439.) In determining the scope of particular release, the court’s “objective in construction of the language used in the contract is to determine and to effectuate the intention of the parties.” (Winet v. Prince (1992) 4 Cal.App.4th 1159, 1166.)

Here, the Statutory General Release in the Settlement Agreement reads as follows:

Except as set forth herein, the Parties specifically waive and relinquish all rights and benefits afforded by Section 1542 of the California Civil Code, which provides as follows:

“A general release does not extend to claims which the Creditor does not know or suspect to exist in his/her favor at the time of executing the Release, which if known by him/her must have materially affected his/her settlement with the Debtor.”

The Parties’ waiver of all rights and benefits afforded by Section 1542 is done with their understanding and acknowledgement of the significance of such a special waiver of section 1542. Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release and discharge of each and all the Releases as to the Released Matters, the Parties expressly acknowledge that this Agreement is intended to include in its effect (without limitation) all claims that the Parties know or suspect to exist in their favor concerning the Released Matters, as well as all claims that the Parties do not know or suspect to exist in their favor related to the Released Matters at the time the Parties execute this Agreement, which contemplates the extinguishment of any such claims. This waiver also applies to any other relevant re-codification or similar laws implemented hereafter substantially covering the subject matter of Section 1542.

(Settlement Agreement, Section K.)

Defendant insists that the foregoing language operates to release all future claims against it, including those for which Plaintiffs did not know or suspect. This assertion, however, ignores the qualification that the waiver applies to all claims the parties know/do not know and suspect/do not suspect to exist “at the time the parties execute [the Settlement Agreement].” Additionally, as Plaintiffs note in their opposition, in the section preceding the Statutory General Release entitled “Mutual Releases,” the parties agreed to release one another “from and against any and all past and present claims, counterclaims, actions, defenses, affirmative defenses, suits, rights, causes of action, lawsuits ….” (Settlement Agreement, Section I [emphasis added].) Thus, neither the releases nor the waiver state that future claims are released or waived, and Plaintiffs’ claim against Defendant (to the extent that it is legally viable) did not exist when the Settlement Agreement was executed because the County had yet to send a tax refund to Defendant. Accordingly, Defendant’s argument regarding waiver is not well-taken.

Defendant next argues that the Court lacks jurisdiction to enforce the Settlement Agreement pursuant to Code of Civil Procedure section 664.6 (“Section 664.6”). This code section was enacted to provide a summary procedure for specifically enforcing a settlement agreement without the need for a new lawsuit (see Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809) and provides that:

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.

According to Defendant, the instant action is based solely on the Settlement Agreement reached in the prior action between the parties and thus is essentially a motion to enforce settlement under the guise of a new civil action. Citing to Viejo Bancorp., Inc. v. Wood (1989) 217 Cal.App.3d 200, 208, Defendant asserts that a motion to enforce a settlement agreement cannot be made in a separate action pursuant to the terms of that agreement and, without moving to set aside judgment in the prior case, the Court lacks subject matter jurisdiction.

In Viejo Bancorp, Inc., the court considered whether a motion to enforce a settlement agreement under Section 664.6 could be made in an action other than the action in which the settlement was made and determined that it could not. However, this holding does not operate to bar Plaintiffs’ breach of contract claim because the instant action is distinguishable from Viejo Bancorp., Inc. in several ways. First, Plaintiffs have not actually filed a motion to enforce the Settlement Agreement as the plaintiff did in Viejo. Second, Viejo was decided before the Legislature amended Section 664.6 to add the language that “[i]f 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.” Here, per the language of the Settlement Agreement, the Court did retain such jurisdiction. (See Settlement Agreement, Section T.) Further, the preceding case in Viejo had been dismissed by the parties prior to when the second action and motion to enforce the settlement agreement executed in the first had been filed. There was no such dismissal in the prior action between the parties here. Consequently, for all of these reasons, the Court finds that Defendant’s assertion that it lacks jurisdiction to enforce the Settlement Agreement is without merit.

Lastly, Defendant argues that Plaintiffs’ breach of contract claim is barred by the doctrines of res judicata and collateral estoppel because an adjudication on the merits was made in the prior action between these same parties on the same issues. According to Defendant, Plaintiffs’ motion to enforce settlement in the first action was denied and therefore they should be estopped from bringing a new action to enforce the Settlement Agreement here.

Collateral estoppel bars a party to an action, or one in privity, from subsequently relitigating issues actually litigated and finally decided against it in an earlier action. (United States Golf Assn. v. Arroyo Software Corp. (1999) 69 Cal.App.4th 607, 615.) Here, this doctrine does not operate to bar Plaintiffs’ breach of contract claim because the motion to enforce the Settlement Agreement filed in the first action was stricken on procedural grounds, specifically because it was made by disqualified counsel. (See Defendant’s Request for Judicial Notice, Exhibit A.) Thus, the matter was not actually litigated and finally decided. Further, even if it was, there is no indication that the issue of entitlement to tax refund amounts was at issue in that motion specifically or otherwise in the prior action. If anything is left to conjecture as to what was necessarily litigated and decided in a prior proceeding, then collateral estoppel cannot be applied. (Eichler Homes, Inc. v. Anderson (1970) 9 Cal.App.3d 224, 234.)

Based on the foregoing, Defendant’s demurrer to the first cause of action for breach of contract on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.