Filed 8/10/20 Thai v. Lao CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

TIMOTHY THAI,

Plaintiff and Respondent,

v.

DANNY LAO et al.,

Defendants and Appellants.

B295250

(Los Angeles County

Super. Ct. No. BC637260)

APPEAL from a judgment of the Superior Court of Los Angeles County, William Fahey, Judge. Dismissed.

Lo & Lo, Kelvin J. Lo and Mikhail Liberzon for Defendants and Appellants.

Callahan, Thompson, Sherman & Caudill, Robert W. Thompson and Charles S. Russell for Plaintiff and Respondent.

___________________________________

Timothy Thai was a partner in a car dealership with Danny Lao, Myth the Legend, Inc., and Route 66 Motors, Inc. (collectively Lao). When Thai sought to leave the partnership, a dispute arose concerning the value of his parting share. After contentious litigation in which the court levied evidentiary and other sanctions against Lao, the parties entered into a settlement agreement in which they agreed to (1) submit documentation to an outside accounting expert, who would assess the value of Thai’s share in the partnership, (2) seek the court’s intervention ex parte should they be unable to agree on documentation to be submitted, and (3) waive appeal on any judgment entered on the expert’s assessment. Pursuant to this procedure, when a dispute arose about what documentation should be sent to the expert, Thai moved ex parte for an order excluding some of Lao’s proposed documents, which the court granted. The expert returned an accounting favoring Thai, which the court accepted.

Notwithstanding the waiver, Lao appeals from the judgment entered on the expert’s accounting, contending it was skewed by incomplete documentation. We conclude that the accounting and judgment were both obtained pursuant to a settlement agreement in which Lao waived the right to appeal. Accordingly, we dismiss the appeal.

BACKGROUND

Thai and Lao formed a car dealership partnership in 2010. In 2013, Thai notified Lao that he wished to withdraw from the partnership, and when the parties could not agree on how much he was owed, filed the instant lawsuit, alleging causes of action for breach of contract, fraud, and common counts, and seeking damages and declaratory relief.

Lao failed to respond to discovery requests, oppose motions to compel (which were granted and monetary sanctions ordered), attend a status conference, or engage in mediation, and in August 2017 the court ordered his answer stricken and default entered. The court denied Lao’s subsequent motion to set aside the default, finding, “There comes a point in a case where the continued conduct of a party or counsel can no longer be excused or justified. Where defendants and their counsel have been given opportunity after opportunity to comply with their discovery obligations and fail to do so, and where the imposition of monetary sanctions has had no effect, the Court has no other option than terminating sanctions.”

Thai later filed an amended complaint, permitting Lao to revive his answer. In the operative second amended complaint, Thai alleged the value of his partnership share should be assessed by taking into account his capital contributions, disbursements, profits and losses attributable to his share, and the difference between the book value and fair market value of partnership assets.

Lao cross-complained, alleging that the amount owed Thai was offset by certain deductions.

Thai propounded discovery seeking, as pertinent here, Lao’s bill of particulars, including the accounts upon which his cross-complaint was based. Lao failed to respond, necessitating more motions to compel, which Lao failed to oppose, and more monetary sanctions. On June 18, 2018, the court granted Thai’s unopposed motion to exclude any defense bill of particulars, as none had been produced during discovery.

However, at a mandatory settlement conference a week later the parties agreed to settle the case by submitting documentation to an outside expert for an accounting. The settlement agreement provided that by July 31, 2018, the parties would submit to the expert financial and accounting records that had been produced during discovery. The agreement provided that “[s]hould the parties be unable to agree to the records to be submitted to the expert, either or both parties may apply to the Court ex parte for a determination of the relevant records.”

The agreement further provided that the expert’s report would be completed by October 15, 2018, and the parties would have until October 30, 2018, to file up to 10 pages of objections. Finally, the agreement stated that the “decision of the Court on the expert’s report will be final and is non-appealable.”

After the parties failed to agree on an expert accountant, the trial court selected John Altstadt from two names they provided.

On July 31, after the parties were unable to agree on what documentation to send to Altstadt, Thai applied ex parte to the trial court to exclude any documents that Lao had not produced during the litigation, arguing “[d]efendants should not profit from their repeated and intentional discovery abuses.” Thai further argued that Lao intended to submit to Altstadt documents lacking foundation and/or authentication.

Lao failed to appear at the ex parte hearing, and the trial court granted Thai’s application and ordered that 18 categories of documents, including Lao’s car inventory, be excluded.

The order excluding Lao’s documentation was prepared by Thai’s counsel and signed by the court. It provided five justifications for the exclusions, all but the last of which applied to every category of documents. The court found the excluded documents: (1) had not been produced in discovery; (2) had been excluded as part of an earlier evidentiary sanction; (3) lacked authentication; (4) lacked foundation; and (5) as to three of the 18 categories of documents, were irrelevant.

On August 3, 2018, Lao applied ex parte to augment his documentation, which the court denied.

On October 15, 2018, Altstadt issued a report detailing his methods and the documents and information he had reviewed, and concluding that Lao owed Thai $728,996.68.

Lao objected to the report on the ground that it was based on incomplete documentation, and proffered a report generated by his own expert based on documents the court had excluded. The court overruled the objection, approved Altstadt’s report, and entered judgment in Thai’s favor in the amount of $728,996.68.

Lao appealed. After briefing was complete, we invited the parties to file supplemental briefs discussing (1) why the trial court’s evidentiary sanctions survived settlement, (2) whether its July 31, 2018 order restricting Lao’s documentation contravened the settlement agreement, and (3) what other basis existed for restricting Lao’s production.

DISCUSSION

Lao basically contends that Altstadt’s accounting was skewed as a result of his relying upon incomplete documentation. Thai requests that we dismiss Lao’s appeal on the ground that the settlement agreement contained a waiver of the right to appeal. In reply, Lao argues the judgment was obtained in contravention of the agreement, which in any event was void due to fraud in the inducement and mistake of fact. We must therefore determine first whether the agreement is void, and second whether the judgment contravened the agreement.

A. The Settlement Agreement is Not Void

Lao argues the settlement agreement has been voided both by Thai’s fraudulent conduct in entering into it and Lao’s mistake of fact. The argument is without merit.

It is “the strong public policy of this state to encourage . . . voluntary settlement of litigation.” (Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1359.) “A settlement agreement is a contract, and the legal principles which apply to contracts generally apply to settlement contracts.” (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 810 (Weddington Productions).) “An essential element of any contract is ‘consent.’ [Citations.] The ‘consent’ must be ‘mutual.’ [Citations.] ‘Consent is not mutual[] unless the parties all agree upon the same thing in the same sense.’ ” (Id. at p. 811.)

When the consent of a party to a contract was induced by fraud, the contract is voidable. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415 (Rosenthal).) “ ‘In order to escape from its obligations the aggrieved party must rescind.’ ” (Ibid.) Similarly, “[a] party may rescind a contract if his or her consent was given by mistake.” (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 278 (Donovan); see also Civ. Code, § 1689, subd. (b)(1).)

Here, even if Lao’s consent to the settlement agreement was obtained by fraud or mistake, the settlement agreement would be merely voidable, not void. “A void contract is without legal effect. [Citation.] ‘It binds no one and is a mere nullity.’ [Citation.] ‘Such a contract has no existence whatever. It has no legal entity for any purpose and neither action nor inaction of a party to it can validate it.’ ” (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 929 (Yvanova).) “A voidable transaction, in contrast, ‘is one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance.’ [Citation.] It may be declared void but is not void in itself. [Citation.] Despite its defects, a voidable transaction, unlike a void one, is subject to ratification by the parties.” (Id. at p. 930.)

To escape his obligations under the settlement agreement Lao was required to “manifest[ his] election to do so” (Yvanova, supra, 62 Cal.4th at p. 930), i.e., to rescind the agreement (Rosenthal, supra, 14 Cal.4th at p. 415; Donovan, supra, 26 Cal.4th at p. 278). “Rescission is accomplished by giving notice to the other party to the agreement and restoring or offering to restore everything of value received.” (Little v. Pullman (2013) 219 Cal.App.4th 558, 566; see also Civ. Code, § 1691.) “Without rescission, and restoration of benefits received, a party may not avoid . . . a contract . . . .” (Larsen v. Johannes (1970) 7 Cal.App.3d 491, 503.)

Here, nothing in the record suggests, and Lao does not claim, that the settlement agreement has been rescinded. Therefore, it remains in effect.

B. The Judgment Does Not Contravene the Settlement Agreement

Lao argues that even if the settlement agreement remains operative, the judgment contravened the agreement because Thai’s July 31, 2018 ex parte motion violated the requirements set forth in the California Rules of Court that the moving party make a showing of irreparable harm or immediate danger (rule 3.1202(c)) and give proper notice (rule 3.1204(b)(2)). The argument is without merit.

Although it is true that the rules of court require an ex parte applicant to “make an affirmative factual showing . . . of irreparable harm, immediate danger, or any other statutory basis for granting relief ex parte,” an opponent’s right to this showing, like any right, may be waived. Here, the settlement agreement provided that “[s]hould the parties be unable to agree to the records to be submitted to the expert, either or both parties may apply to the Court ex parte for a determination of the relevant records.” By entering into the agreement, Lao waived his right to a showing of irreparable harm or immediate danger, requiring instead only a showing of disagreement on the records to be submitted to Altstadt.

In a similar vein, Lao argues the ex parte ruling that excluded his documents from production to Alstadt effectively constituted a discovery sanction, and so construed, violated his right to a noticed motion. (See Sole Energy Co. v. Hodges (2005) 128 Cal.App.4th 199, 208 [“[d]iscovery sanctions may not be ordered ex parte”].) But the settlement agreement empowered the trial court to determine what records would be produced to Alstadt, which logically included the possibility that no records would be produced. By agreeing to this measure, Lao waived his right to a noticed motion concerning that production.

Lao asserts without argument that Thai gave improper notice of the ex parte motion, but admits Thai’s counsel gave Lao’s counsel notice by telephone, which is all that was required. (E.g., City of Santa Monica v. Gonzalez (2008) 43 Cal.4th 905, 915, fn. 2 [telephonic notice proper].)

C. Lao Waived the Right to Appeal

“It is well-settled that a party may expressly waive its right to appeal subject to only a few conditions: 1. The attorney must have the authority to waive a party’s right to appeal. 2. The waiver must be express and not implied. 3. The waiver must not have been improperly coerced by the trial judge.” (McConnell v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1985) 176 Cal.App.3d 480, 488.) Here, the parties all signed the settlement agreement waiving their appellate rights, and Lao makes no assertion that the trial court coerced the settlement.

Because the settlement agreement remained operative, and because the judgment comported with it, the waiver provision contained in the agreement precludes our consideration of Lao’s arguments on the merits.

DISPOSITION

The appeal is dismissed. Respondent is to recover his costs on appeal.

NOT TO BE PUBLISHED

CHANEY, J.

We concur:

BENDIX, Acting P. J.

SINANIAN, J.*