Eagle Fire and Water Restoration, Inc. v. City of Dinuba ( 2024 )

Filed 5/30/24
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
EAGLE FIRE AND WATER RESTORATION,
INC., F086052
Plaintiff, Cross-defendant and Appellant, (Super. Ct. No. VCU285656)
v.
OPINION
CITY OF DINUBA,
Defendant, Cross-complainant and
Respondent.
APPEAL from a judgment of the Superior Court of Tulare County. Bret D.
Hillman, Judge.
Law Office of Kathleen P. Clack and Kathleen P. Clack for Plaintiff, Cross-
defendant and Appellant.
Coleman & Horowitt, David J. Weiland and Jennifer T. Poochigian for Defendant,
Cross-complainant and Respondent.
-ooOoo-
* Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is
certified for publication with the exception of part III. of the Discussion.
This litigation arises out of a construction project involving appellant Eagle Fire
and Water Restoration, Inc. (Eagle) and respondent City of Dinuba (the City). Eagle and
the City reached an oral settlement on the record, but a dispute over the scope of the
claims settled arose before the City dismissed its cross-complaint against Eagle. To
resolve that dispute, the City filed a motion under Code of Civil Procedure section 664.61
to enforce the settlement agreement. The trial court granted the motion and filed a
judgment dismissing both Eagle’s complaint and the City’s cross-complaint with
prejudice.
Eagle appealed, contending that (1) the trial court could not enforce the purported
settlement because the court did not properly retain jurisdiction under section 664.6 over
the complaint and defendant Jason Watts (Watts) after Eagle voluntarily dismissed its
complaint; (2) the purported settlement agreement failed due to uncertainty; (3) the court
made improper factual determinations in the absence of jurisdiction; and (4) the court
misinterpreted the settlement agreement when it found claims not pleaded in Eagle’s
complaint were released.
We conclude the trial court had subject matter jurisdiction and personal
jurisdiction over Eagle and the City when it enforced the settlement because the City’s
cross-complaint had not been dismissed and, therefore, this case was “pending litigation”
for purposes of section 664.6, subdivision (a)’s first sentence. As a result, the
subdivision’s second sentence addressing the retention of jurisdiction did not apply to the
facts of this case. Also, the court did not need personal jurisdiction over Watts because
the judgment did not require Watts to do anything. With respect to the existence and
scope of an enforceable settlement agreement, substantial evidence supports the trial
court’s findings that an oral settlement agreement was formed and that the agreement
1 Subsequent undesignated statutory references are to the Code of Civil Procedure.
2.
resolved all claims arising from the construction project, whether or not included in the
parties’ pleadings.
We therefore affirm the order granting the motion and the judgment enforcing
settlement.
FACTS AND PROCEEDINGS
Eagle was the lowest bidder on a project to reroof the City’s police station and
courthouse building. The value of the contract was approximately $500,000. Before
completion of the project, a rainstorm caused significant water and flooding damage to
the interior of the building. The City incurred over $330,000 in clean up and repair costs.
The City believed Eagle was responsible for the water and flooding damage and withheld
approximately $319,000 from Eagle as an offset. This litigation ensued.
In January 2021, Eagle filed a complaint in the Tulare County Superior Court
against the City and its engineer Watts, which the court assigned case No. VCU285656
(Case VCU285656). Eagle’s third amended complaint, its operative pleading, alleged
causes of action for breach of the construction contract against the City, negligence
against the City and Watts, and negligent misrepresentation against Watts. The City filed
a cross-complaint against Eagle, alleging Eagle did not perform the job in a workmanlike
manner, failed to adequately cover the roof with protective sheeting, failed to ensure the
roof drains were not clogged, and failed to procure proper insurance coverage. Watts also
filed a cross-complaint against Eagle, alleging causes of action for breach of contract and
indemnity.
In July 2022, the trial court granted Watts’s motion for summary judgment on
Eagle’s claims against him. Eagle filed a timely appeal (the Watts Appeal), which this
court assigned case No. F084685 and stayed pending a decision in this matter. Watts
voluntarily dismissed his cross-complaint against Eagle without prejudice on
November 4, 2022.
3.
On November 14, 2022, the City and Eagle appeared before the trial court for
motions in limine and trial (November Hearing). In the course of the hearing, but before
trial had commenced, Eagle’s counsel moved unsuccessfully for a mistrial. She then
informed the court that she would be immediately filing a request to dismiss the
complaint without prejudice. After City’s counsel stated they would be proceeding with
the cross-complaint, the court recessed for lunch. Eagle’s dismissal was filed during the
lunch break. After the break, the parties informed the court that they had reached a
settlement. The terms of the settlement were placed on the record and acknowledged by
the attorneys, Eagle and the City. Eagle was represented by its president, Jack Elechyan,
and the City was represented by its assistant city manager. The court ended the hearing
by setting a case management conference in late January 2023, which gave the City
enough time to have its council approve the settlement and then file a notice of settlement
or dismissal.
On January 24, 2023, the City filed a notice of settlement stating the City “has
approved the case settlement which was placed on the record in court on November 14,
2022.” The same day, Eagle filed an objection and notice of nonsettlement asserting that
the statement of the settlement agreement should be “changed to reflect only the basic
enforceable concepts of mutual dismissals with prejudice.”
At the January 26, 2023 case management conference, the parties’ disagreement
over the terms of the settlement was discussed. Eagle’s counsel asserted that the
transcript of the November Hearing did not include everything said and that, although her
client agreed to certain things, “we thought we were agreeing to something a little bit
different than as it came out in the transcript.” The trial court ended the conference by
recognizing a disagreement existed, stating there was nothing before it on which it could
rule, and informing the parties an order to show cause would issue if the action was not
dismissed within 120 days.
4.
In February 2023, the City filed a motion to enforce settlement pursuant to section
664.6. Eagle opposed the motion.
On March 21, 2023, the trial court heard argument on the motion and took it under
submission. Later that day, the court filed a seven-page document titled “RULING ON
DEFENDANT’S MOTION TO ENFORCE SETTLEMENT” that contained the court’s
findings of fact and legal analysis, its order granting the City’s motion, and the judgment
entered pursuant to the terms of the settlement. For convenience, we refer to this
combination of a statement of decision, order, and judgment as the “March Order.” The
court’s finding regarding the formation and scope of the settlement agreement along with
the terms of the judgment enforcing that agreement are set forth later in this opinion.
(See pt. II.B.2., post.)
Eagle filed a timely appeal to challenge the existence and enforceability of the
purported settlement. In November 2023, the City filed a motion asserting Eagle’s appeal
was frivolous and requesting its dismissal and monetary sanctions.
DISCUSSION
I. JURISDICTION TO ENFORCE A SETTLEMENT UNDER SECTION 664.6
A. Section 664.6
Section 664.6, subdivision (a) provides: “If parties to pending litigation stipulate,
in a writing signed by the parties outside of 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 provides an expedited procedure for enforcing the parties’
settlement agreement and, as a result, a party need not resort to less efficient procedures,
such as filing a new lawsuit for specific enforcement of the settlement contract.
5.
(Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809 (Weddington); see
Gorman v. Holte (1985) 164 Cal.App.3d 984, 989 [ways to enforce an oral settlement
agreement].) Among other things, “[s]ection 664.6 generally allows a court to enter
judgment pursuant to a settlement agreement despite the dismissal of the complaint,
which ordinarily deprives the court of continuing jurisdiction.” (Howeth v. Coffelt (2017)
18 Cal.App.5th 126, 134.)
B. Retention of Jurisdiction Not Required in This Case
We begin with Eagle’s contention that a section 664.6 motion could not be used to
enforce the settlement agreement because there was no express retention of jurisdiction.
Eagle bases this contention on (1) the fact that it dismissed its complaint before the
settlement agreement was put on the record at the November Hearing and (2) the absence
of an explicit statement by the parties or the court that jurisdiction to enforce the
agreement was retained pursuant to section 664.6. The City contends a retention of
jurisdiction was unnecessary because its cross-complaint was pending and, thus, the trial
court had jurisdiction over the parties and subject matter of the litigation at both the
November Hearing and the March 21 hearing.
The parties’ contentions present questions of law about the interpretation and
application of section 664.6 to facts that are not in dispute—namely, the pleadings that
were pending or had been dismissed when (1) the settlement was placed on the record at
the November Hearing and (2) the March Order was filed. In other words, the relevant
procedural history is not disputed, only the legal effect of those proceedings on the
court’s jurisdiction. The questions of law about the interpretation and application of
section 664.6 are subject to independent review. (Machado v. Myers (2019) 39
Cal.App.5th 779, 791 (Machado); Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1253.)
Due to “ ‘ “its summary nature, strict compliance with the requirements of section 664.6
6.
is prerequisite to invoking the power of the court to impose a settlement agreement.” ’ ”
(Critzer, supra, at p. 1256.)
Before independently analyzing the questions of law presented, we set forth the
trial court’s conclusions about its jurisdiction to enforce the settlement. The court found
Eagle and the City “stipulated orally before this Court, while the litigation was pending
(and appears to be still pending) for settlement of this case on terms that included mutual
dismissals with prejudice and a waiver of all appeal rights.” The court determined the
oral stipulation was made while it maintained jurisdiction over the matter and the parties
despite Eagle’s filing a dismissal without prejudice because there was a pending cross-
complaint. Thus, the court concluded it did not need to expressly retain jurisdiction to
enforce the oral settlement “as jurisdiction was never lost.” We agree.
1. Textual Analysis
The legal question about the trial court’s jurisdiction can be framed in multiple
ways. One way is based on the text of the first sentence of section 664.6, subdivision (a).
Another way refers to text in the second sentence and the reasons the Legislature added
that sentence to the statute.
As relevant here, the first sentence of section 664.6, subdivision (a) authorizes
superior courts, upon a motion, to “enter judgment pursuant to the terms of the
settlement,” provided that the “parties to pending litigation stipulate . . . orally before the
court, for settlement of the case, or part thereof.” (Italics added.) Thus, the legal
question presented by the parties’ contentions can be phrased as whether Case
VCU285656 was “pending litigation” when the parties orally agreed to a settlement on
the record before the court at the November Hearing and when the court entered the
judgment contained in the March Order. If the litigation was pending, then the first
sentence’s plain language empowered the court to enter judgment pursuant to an
otherwise enforceable oral settlement agreement. (§ 664.6, subd. (a).)
7.
The second sentence of section 664.6, subdivision (a) states: “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.” Accordingly, the legal question
before us also can be phrased as whether the second sentence of section 664.6,
subdivision (a) required the parties to specifically agree to the trial court retaining
jurisdiction before that court would have the authority to place the parties’ oral settlement
on the record at the November Hearing and to enforce the settlement agreement in March
2023.
The second sentence does not state when it applies and when it does not apply.
Consequently, we consider the Legislature’s reasons for adding that sentence to the
statute in 1993. (See Stats. 1993, ch. 768, § 1, p. 4260; see Nolan v. City of Anaheim
(2004) 33 Cal.4th 335, 340 [when interpreting an ambiguous statute, a court may
consider “the ostensible objects to be achieved, the evils to be remedied, [and] the
legislative history”].) In Wackeen v. Malis (2002) 97 Cal.App.4th 429 (Wackeen), the
court explained the sentence was the Legislature’s solution to a problem arising in
situations where the trial court lost jurisdiction over a case before all the terms of a
settlement agreement were performed. (Wackeen, supra, at p. 439.) Under the earlier
version of section 664.6, when the action was dismissed pursuant to a settlement, the
court lost its jurisdiction and thus its ability to enforce a settlement agreement pursuant to
a section 664.6 motion. (Wackeen, supra, at p. 439.) Based on the explanation in
Wackeen and general principles defining a court’s jurisdiction, we infer that the request to
retain jurisdiction mentioned in the second sentence of section 664.6, subdivision (a) is
necessary only when the motion to enforce the settlement is filed after the trial court has
lost jurisdiction. We will not interpret the statute to require an express retention of
jurisdiction in situations where the court’s jurisdiction has yet to be terminated because
such a requirement would be redundant. (See Kleffman v. Vonage Holdings Corp. (2010)
49 Cal.4th 334, 345 [courts avoid statutory interpretations that render provisions
8.
unnecessary or redundant]; V Lions Farming, LLC v. County of Kern (2024) 100
Cal.App.5th 412, 433 [interpretations creating a redundancy are disfavored].)
Applying our interpretation of section 664.6, subdivision (a) to the facts, we
conclude Case VCU285656 was “pending litigation” at the time of both the November
Hearing and the entry of the March Order. Case VCU285656 remained pending because
the City’s cross-complaint had not been dismissed. As a result, the trial court correctly
determined its jurisdiction over the subject matter of that case and the parties had not
been extinguished and there was no need to expressly retain jurisdiction. In sum, the first
sentence of section 664.6, subdivision (a) authorized the court to enter the judgment
contained in the March Order and the second sentence did not apply under the
circumstances.
2. Eagle’s Dismissal
Next, we explain in more detail why our legal conclusion that Case VCU285656
was “pending litigation” for purposes of section 664.6, subdivision (a) withstands Eagle’s
jurisdictional arguments that are based on its voluntary dismissal without prejudice
during the lunch recess at the November Hearing. We acknowledge that the dismissal
terminated the litigation on Eagle’s complaint. (See S. B. Beach Properties v. Berti
(2006) 39 Cal.4th 374, 380; cf. Sanabria v. Embrey (2001) 92 Cal.App.4th 422, 425
(Sanabria).) However, to the extent Eagle suggests that the voluntary dismissal of the
complaint deprived the trial court of jurisdiction over Case VCU285656 in its entirety, we
disagree.
“No dismissal of an action may be made or entered . . . where affirmative relief
has been sought by the cross-complaint of a defendant . . . .” (§ 581, subd. (i), italics
added.) As applied to the facts of this appeal, the statutory term “an action” means Case
VCU285656 in its entirety. The dismissal of the complaint “does not affect the
independent existence of the cross-complaint” (Bertero v. National General Corp. (1974)
9.
13 Cal.3d 43, 52), and “the cross-complaint may stand on its own” (Electronic Equipment
Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 846).
We conclude the independent nature of the cross-complaint meant the court
continued to maintain jurisdiction over the action and over Eagle. (See Sanabria, supra,92 Cal.App.4th at p. 425.) Stated in terms of subject matter and personal jurisdiction, the
pending cross-complaint gave the court subject matter jurisdiction over the disputes
arising from the roofing project and Eagle’s appearance as a cross-defendant gave the
court personal jurisdiction over it. Consequently, the present circumstances are
distinguishable from cases where a plaintiff’s voluntary dismissal disposed of all pending
claims and thus ended the trial court’s “jurisdiction to enter further orders in the
dismissed action.” (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 784; see
Paniagua v. Orange County Fire Authority (2007) 149 Cal.App.4th 83, 89.) As a result,
Eagle’s arguments about the jurisdictional effect of its voluntary dismissal without
prejudice must be rejected. That voluntary dismissal affected Eagle’s complaint only, did
not resolve the City’s cross-complaint, and could not resolve the entire “action.” (§ 581,
subd. (i); see Bertero v. National General Corp., supra, 13 Cal.3d at p. 52.)
Returning to section 664.6’s text, the trial court’s authority (i.e., its jurisdiction) to
enter a judgment dismissing Eagle’s complaint with prejudice is plainly set forth in
subdivision (a)’s first sentence. To complete our analysis of the jurisdictional issue, we
assume for purposes of argument that our interpretation of section 664.6 conflicts with
the statutes governing dismissals generally. To the extent that such a conflict exists, we
conclude the more specific provision in section 664.6, subdivision (a) defining the court’s
authority takes precedence over the general statutes governing the court’s postdismissal
authority. (See State Dept. of Public Health v. Superior Court (2015) 60 Cal.4th 940,
960; see also § 1859 [“when a general and particular provision are inconsistent, the latter
is paramount to the former”].)
10.
3. Jurisdiction Over Watts
Eagle notes that Watts dismissed his cross-complaint against it before the
November Hearing and appears to argue that because the parties and Watts did not agree
to the trial court retaining jurisdiction over Watts in accordance with section 664.6, the
court lacked jurisdiction over Watts and, thus, could not order Eagle to drop the Watts
Appeal. We conclude jurisdiction over Watts was not necessary.
First, as discussed above, the trial court had subject matter jurisdiction over
disputes arising from the roofing project through the City’s pending cross-complaint.
Watts was involved in that project and, thus, the claims against him arose from that
project. Therefore, Eagle’s argument about jurisdiction over Watts fails to the extent it
implies the court lacked subject matter jurisdiction to enter a judgment requiring Eagle to
dismiss the Watts Appeal.
Second, to the extent Eagle contends the trial court lacked personal jurisdiction
over Watts and the absence of personal jurisdiction over Watts somehow precluded Eagle
from being bound by its agreement to dismiss the Watts Appeal, we reject that contention.
The judgment entered did not direct Watts to perform any act or refrain from acting.
Also, it did not purport to deprive him of any rights. Thus, personal jurisdiction over
Watts was not necessary for the court to have the authority to enforce Eagle’s covenant to
dismiss its appeal against Watts.2
To summarize, we reject all Eagle’s arguments about the lack of jurisdiction
because Case VCU285656 was still pending and, despite Eagle’s voluntary dismissal of
its complaint, that pending action provided the trial court with subject matter and
2 Our rejection of Eagle’s argument about jurisdiction over Watts does not resolve
whether the provision in the settlement agreement requiring Eagle to dismiss the Watts
Appeal is an enforceable obligation. That issue, which implicates the parties’ freedom of
contract and requires an application of the rules of law governing the formation and
enforceability of contractual provisions, is addressed below in part II.D.3.
11.
personal jurisdiction over Eagle and the City when the settlement was placed on the
record and when the court entered a judgment enforcing the settlement.3
II. EXISTENCE AND TERMS OF THE SETTLEMENT
Having resolved the jurisdictional questions, we consider the issues relating to
whether an enforceable settlement agreement was formed and, if so, what were its
terms—that is, what was the scope of the settlement. Because the agreement and its
terms were part of an oral stipulation made before the court, we provide a brief historical
overview of how section 664.6 has dealt with the enforcement of oral settlement
agreements. When section 664.6 was first enacted in 1981, it referred to oral stipulations
“before the court.” (Stats. 1981, ch. 904, § 2, p. 3437.) In 1993, the Legislature amended
the statute to refer to stipulations made “orally on the record before the court.” (Stats.
1993, ch. 768, §1, p. 4260; see Levy v. Superior Court (1995) 10 Cal.4th 578, 580, fn. 1
(Levy).) In 1994, the Legislature reversed course and deleted the phrase “on the record.”
(Stats. 1994, ch. 587, § 7; see Levy, supra, at p. 580, fn. 1.) Consequently, for the last 30
years, trial courts have been empowered to enforce oral settlements made before them
even where there is no reporter’s transcript of the oral proceedings.
A. The Reporter’s Transcript
Here, we have a reporter’s transcript of the November Hearing and that transcript
is evidence of the trial court’s, the parties’ and the attorneys’ oral statements. Those oral
statements are relevant to the formation and terms of any settlement contract.
Eagle has raised issues about the reporter’s transcript. In the trial court, Eagle
argued the transcript did not contain everything said at the November Hearing. On
3 We have addressed the court’s jurisdiction at both points in time because of the
arguments presented by the parties. We do not imply that a trial court with jurisdiction—
either continuing or retained—when the judgment enforcing the settlement is entered,
also must have had subject matter jurisdiction and personal jurisdiction over every party
to the settlement agreement when the oral stipulation was made.
12.
appeal, Eagles states it “consistently and repeatedly objected to use of the reporter’s
transcript as the basis of a settlement agreement because dispositive terms were missing,
which if they had been typed into the transcript, would have given meaning to [Eagle’s]
and [its] counsel’s intent and understanding of settlement terms.” Based on the claimed
omissions, Eagle contends the settlement agreement is uncertain and unenforceable.
Eagle also asserts the trial court could have ordered a review of the reporter’s transcript
for accuracy based on the audio tape of the hearing, but did not. This assertion suggests
the court had a sua sponte duty to initiate procedures to correct purported omissions or
errors in the transcript.
The City contends the record, including the transcript, unequivocally documents
the understanding of the parties and their counsel of the settlement agreement.
Alternatively, the City contends Eagle is barred from challenging the transcript because
Eagle did not contest the transcript’s accuracy by offering a declaration of its principal
(he attended the November Hearing) setting forth the claimed errors and omissions, and
Eagle did not invoke the established procedures for correcting the record.
The transcript was prepared by a certified shorthand reporter who attended the
November Hearing. She certified that (1) the contents of the 47-page transcript of that
hearing were taken down in stenographic shorthand writing and thereafter transcribed
into typewriting and (2) the resulting “transcript constitutes a full, true, and correct
transcript of said proceedings.” Pursuant to section 273, subdivision (a), the certified
reporter’s transcript “is prima facie evidence of that . . . proceeding.”
Prima facie evidence is not conclusive evidence and, therefore, the presumption
created by section 273, subdivision (a) may be rebutted. (See Evid. Code, § 601
[presumptions are “either conclusive or rebuttable”].) Consequently, it is possible under
California law to demonstrate a certified reporter’s transcript contains errors or omissions
and have them corrected. When the reporter’s transcript in question is part of an
appellate record, the procedure for correcting errors is set forth in California Rules of
13.
Court, rule 8.155(c). Specifically, a reviewing court, on its own motion or a party’s
motion, “may order the correction or certification of any part of the record” or “may
order the superior court to settle disputes about omissions or errors in the record.” (Cal.
Rules of Court, rule 8.155(c)(1), (2).)
A practice guide addresses the timing of a party’s motion to correct errors in the
record by stating:
“No express time limit for requesting a record correction is prescribed by
the Rules of Court. As a practical matter, however, the request should be
filed as soon as possible to avoid any potential waiver of issues or estoppel
to obtain correction later on. [See McLaughlin v. Walnut Properties, Inc.
(2004) 119 [Cal.App.]4th 293, 299, . . . fn. 6 (on appeal challenging
summary adjudication order, appellants took no steps to correct record after
it failed to include requested minute order granting summary
adjudication)—‘we could deem the issue waived’].” (Eisenberg et al., Cal.
Practice Guide: Civil Appeals and Writs (The Rutter Group 2023) ¶ 4:281,
pp. 4-70 to 4-71.)
Here, Eagle made no attempt, by motion or otherwise, to correct the claimed
omissions in the reporter’s transcript of the November Hearing. As a result, the City
relied on the transcript included in the appellate record to complete its respondent’s brief.
This reliance was reasonable because of the presumption set forth in section 273,
subdivision (a). We reject Eagle’s suggestion that the trial court is at fault for the claimed
omissions because Eagle has cited no statute, case law, or secondary authority stating or
implying that superior courts have a sua sponte obligation to correct a purported error or
omission in a reporter’s transcript.
Under these circumstances, we conclude Eagle is estopped from arguing the
transcript omitted things said at the November Hearing. As the appellant, Eagle has the
burden of providing an adequate record. (Jameson v. Desta (2018) 5 Cal.5th 594, 609.)
In view of this burden, Eagle should have addressed the purported omission in the
reporter’s transcript by taking steps in the trial court to correct the transcript or by filing a
motion under California Rules of Court, rule 8.155(c) with this court. (See generally
14.
Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184–185, fn. 1 [unfair to
allow the appellant to take advantage of an error on appeal when it could have been
corrected].) Consequently, it would be inequitable to allow Eagle to forgo those remedial
steps and then assert omissions in the reporter’s transcript provide a basis for reversing
the trial court’s order and judgment.
B. Additional Background
1. The November Hearing
During the morning session of the November Hearing, Eagle’s counsel informed
the court that Eagle would be dismissing its complaint without prejudice, and the City’s
lawyer stated that it would be proceeding to trial on its cross-complaint. When the parties
returned from the lunch recess, they informed the trial court that they had reached a
settlement. The City’s lawyer explained that the settlement was subject to approval by
the City council and requested that the court continue the matter for council approval.
After the court agreed to the continuance, the City’s lawyer explained that “basically, all
parties have agreed to dismiss all claims against each other with prejudice, and we’ve
agreed to . . . waive any rights to further appeals in regard to this matter.” Eagle’s
counsel then stated each side was to bear their own costs, and the City’s lawyer agreed.
The court then summarized: “So everybody’s dismissing their complaints, their cross-
complaints, their appeals, everybody’s bearing their own costs and fees?” The City’s
lawyer agreed with the court. The court then asked the parties’ representatives if they
understood that there would be no trial and no right to appeal and asked if they
understood that the settlement agreement would be a binding agreement enforceable by
the court. Addressing Eagle’s representative, the court framed the latter question as
follows: “And do you understand by settling here and dismissing your complaint that it
will be a binding agreement enforceable by the Court and that neither side may pursue
the other?” The parties’ representatives both responded affirmatively to the court’s
15.
questions. However, a question then arose about whether the settlement would require
Eagle to dismiss the Watts Appeal. The court took a recess for the parties to discuss the
issue.
After the break, the City’s lawyer informed the trial court that the parties were
adding another term so that the settlement would be “dismissal with prejudice of all
claims, [the City] against [Eagle] and [Eagle] against [the City] . . . , and it also includes a
dismissal by [Eagle] of any appeals against Jason Watts.” Eagle’s counsel then said, “Of
this lawsuit, yes.” The court asked Eagle’s representative if he understood the additional
term, and he responded, “Yes, sir.” The City’s lawyer then interrupted the court and the
following exchange occurred:
“[THE CITY’S COUNSEL]: And, I’m sorry, she said of this
lawsuit. It’s related to any events that arised [sic] out of this incident.
“[EAGLE’S COUNSEL]: No.
“[THE CITY’S COUNSEL]: Oh, absolutely.
“[EAGLE’S COUNSEL]: No. You never said that before. We’re
dismissing this lawsuit with prejudice, and you’re dismissing that lawsuit
with prejudice.
“[THE CITY’S COUNSEL]: It’s anything that arose out of --
“THE COURT: If it’s dismissed --
“[THE CITY’S COUNSEL]: -- it’s the subject.
“THE COURT: It can’t be brought back.
“[EAGLE’S COUNSEL]: I can’t bring it back.
“[EAGLE’S REPRESENTATIVE]: Yes. Yes.
“THE COURT: The dismissals are all with prejudice on each side,
and everyone is dismissing their appeals. I mean, if --
“[THE CITY’S COUNSEL]: Thank you.
16.
“[EAGLE’S COUNSEL]: Thank you.
“[EAGLE’S REPRESENTATIVE]: Yes. Thank you, Your Honor.
“THE COURT: Okay. Then I will go ahead and accept the
settlement comprised by the freely and voluntarily entered into by all
parties with the assistance of Coun[se]l.”
The trial court subsequently stated that a minute order would issue stating that
there was a settlement for “dismissal of all claims, all appeals, the suit with prejudice --
the countersuit with prejudice . . . this is pending Council approval . . . .” No objections
were made to the proposed minute order. The hearing concluded with the court setting a
status conference in January 2023.
2. The March Order
The trial judge who presided over the November Hearing also conducted the
hearing on the City’s motion to enforce settlement. The discussion in the March Order
shows the trial court relied heavily on the reporter’s transcript of the November Hearing
in finding a settlement had occurred. In the March Order, the court described the terms
and conditions of the settlement, stating:
“On the one hand, [Eagle], having dismissed its operative complaint
as to the City without prejudice, would dismiss its case with prejudice
against the City and waive any right of appeal as against the City and Watts,
as well as waive any recovery of fees and costs. Plaintiff’s principal
expressly, freely and voluntarily agreed to each of these terms. This
included the discussion of whether the settlement included barring future
claims that ‘arise out of’ the underlying incident in this case and agreement
thereto by [Eagle’s representative].
“On the other hand, pending City Council approval, the City agreed
to dismiss its cross-complaint against [Eagle] with prejudice, waive its right
to appeal, and waive recovery of its fees and costs, via its assistant city
manager.”
Based on these findings about the existence and terms of the settlement agreement,
the trial court “grant[ed] the motion and enter[ed] judgment pursuant to the terms of the
settlement as follows”:
17.
“a. Plaintiff[] [Eagle’s] operative complaint is dismissed with prejudice
as to Defendant City of Dinuba;
“b. Plaintiff waives recovery [of] costs and attorneys’ fees incurred in
this action;
“c. Plaintiff waives the right to appeal any matter in this case as to any
Defendant;
“d. Defendant City of Dinuba’s cross-complaint against Plaintiff is
dismissed with prejudice;
“e. Defendant City of Dinuba waives recovery [of] costs and attorneys’
fees incurred in this action; and
“f. Defendant City of Dinuba waives the right to appeal any matter in
this case.
“g. All pending appeals on each side are to be dismissed.”
C. Legal Principles Governing Section 664.6 Motions
When addressing a section 664.6 motion, the trial court must determine whether
the parties entered into an enforceable settlement. (Osumi v. Sutton (2007) 151
Cal.App.4th 1355, 1360 (Osumi).) Phrased another way, “the court must determine
whether the settlement agreement is valid and binding.” (Estate of Jones (2022) 82
Cal.App.5th 948, 952.) This inquiry is governed by the legal principles applicable to the
formation of contracts generally. (Gorman v. Holte, supra, 164 Cal.App.3d at p. 988; see
Ryan v. Garcia (1994) 27 Cal.App.4th 1006, 1009 [“Generally, oral settlement
agreements may be enforced in the same way oral contracts are enforced.”].)
1. Contract Formation
Under California law, the basic requirements for an enforceable contract are
(1) parties capable of contracting, (2) the consent of those parties, (3) a lawful object, and
(4) adequate consideration. (Civ. Code, § 1550.) The consent of the parties to a contract
must be free, mutual, and communicated by each to the other. (Civ. Code, §§ 1565,
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1581.) The existence of mutual consent is a question of fact. (Martinez v. BaronHR, Inc.
(2020) 51 Cal.App.5th 962, 966.)
Generally, mutual consent exists when “the parties all agree upon the same thing
in the same sense.” (Civ. Code, § 1580; see Sellers v. JustAnswer LLC (2021) 73
Cal.App.5th 444, 460.) Mutual consent is determined through an objective standard that
examines the reasonable meaning of the parties’ words and acts; it is not determined
through silent unexpressed intentions. (Reigelsperger v. Siller (2007) 40 Cal.4th 574,
579; Sellers, supra, at p. 460; see Civ. Code, § 1636 [interpreting contract to give effect
to mutual intention of the parties].)
The concept of mutual consent can be characterized as embracing a range of
specific issues, including whether the parties consented to all material settlement terms
and whether those terms “were reasonably well defined and certain.” (Estate of Jones,
supra, 82 Cal.App.5th at p. 952; see Hines v. Lukes (2008) 167 Cal.App.4th 1174, 1182
[settlement is enforceable only if the parties agreed to all material settlement terms].)
Whether a term is material—that is, essential to the existence of an enforceable
agreement—“depends on its relative importance to the parties and whether its absence
would make enforcing the remainder of the contract unfair to either party.” (Copeland v.
Baskin Robbins U.S.A. (2002) 96 Cal.App.4th 1251, 1256, fn. 3.)
Whether the terms of the agreement are reasonably certain depends on whether
“the terms ‘provide a basis for determining the existence of a breach and for giving an
appropriate remedy.’ ” (Alexander v. Codemasters Group Limited (2002) 104
Cal.App.4th 129, 141 (Codemasters); see ibid. [formation of a contract requires
certainty]; see also Civ. Code, § 1598 [where object of a contract is “so vaguely
expressed as to be wholly unascertainable, the entire contract is void”]; 1 Witkin,
Summary of Cal. Law (11th ed. 2017) Contracts, § 137, pp. 177–178 [requirement of
certainty].) Applying this contractual certainty requirement has been described as
involving two inquiries: “ ‘[F]irst, did the parties intend to contract and second, is there a
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reasonably certain basis for giving an appropriate remedy.’ ” (Codemasters, supra, at
p. 141.) We note that, for purposes of contract law, certainty is not the same as
unambiguous. The test for whether a term is ambiguous is whether it is reasonably
susceptible to more than one interpretation. (See Joseph v. City of Atwater (2022) 74
Cal.App.5th 974, 982 [“threshold question when interpreting a written contract is whether
the text is ambiguous—that is, reasonably susceptible to more than one interpretation”].)
An ambiguity in an agreement is resolved through interpretation and the resulting
meaning enforced. (See Scheenstra v. California Dairies, Inc. (2013) 213 Cal.App.4th
370, 389–390 [steps taken by trial court to identify and resolve contractual ambiguity].)
In short, ambiguous agreements are enforceable and uncertain agreements are not.
2. Trial Court’s Role
When determining whether a valid settlement contract was formed, the trial court
acts as the trier of fact. (Osumi, supra, 151 Cal.App.4th at p. 1360; Fiore v. Alvord
(1985) 182 Cal.App.3d 561, 565.) In that capacity, the trial judge may receive evidence
such as oral testimony and declarations, consult his memory if he heard the settlement,
determine disputed facts, apply governing law, and enter the terms of a settlement
agreement as a judgment. (Machado, supra, 39 Cal.App.5th at p. 790; Osumi, supra, at
p. 1360.) However, section 664.6 does not authorize judges to create the material terms
of a settlement because creating new terms is different from deciding what terms the
parties actually agreed upon. (Machado, supra, 39 Cal.App.5th at p. 790.)
In In re Marriage of Assemi (1994) 7 Cal.4th 896 (Assemi), the Supreme Court
addressed the trial court’s role by stating: “Past cases have established that, in ruling
upon a section 664.6 motion for entry of judgment enforcing a settlement agreement, and
in determining whether the parties entered into a binding settlement of all or part of a
case, a trial court should consider whether (1) the material terms of the settlement were
explicitly defined, (2) the supervising judicial officer questioned the parties regarding
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their understanding of those terms, and (3) the parties expressly acknowledged their
understanding of and agreement to be bound by those terms.” (Id. at p. 911.)
The litigants’ (as opposed to their attorneys’) knowledge and express consent to an
oral settlement is required because settlement is a serious step. (Levy, supra, 10 Cal.4th
at p. 583; Johnson v. Department of Corrections (1995) 38 Cal.App.4th 1700, 1705–1706
[the plaintiff never voiced his acceptance of terms of oral settlement].) “The litigants’
direct participation tends to ensure that the settlement is the result of their mature
reflection and deliberate assent. This protects the parties against hasty and improvident
settlement agreements by impressing upon them the seriousness and finality of the
decision to settle, and minimizes the possibility of conflicting interpretations of the
settlement. [Citations.] It also protects parties from impairment of their substantial rights
without their knowledge and consent.” (Levy, supra, at p. 585, fn. omitted, italics added.)
We italicized the word “minimizes” because it indicates that section 664.6’s requirements
do not eliminate the possibility of disputes over the interpretation of a settlement
agreement. “[W]hen issues relating to the binding nature or terms of the settlement are in
dispute,” section 664.6 empowers the trial court “to resolve these disputed issues and
ultimately determine whether the parties reached a binding mutual accord as to the
material terms.” (Assemi, supra, 7 Cal.4th at p. 905.)
3. Standard of Review
The fundamental principles of appellate practice provide context for our
determination of the standard of review applicable to specific determinations made by the
trial court in reaching its decision. Appellate courts presume the trial court’s judgment or
order is correct and indulge all intendments and presumptions to support the judgment or
order on matters as to which the record is silent. (Denham v. Superior Court (1970) 2
Cal.3d 557, 564 (Denham); Fladeboe v. American Isuzu Motors Inc. (2007) 150
Cal.App.4th 42, 58 (Fladeboe).) A logical implication of the presumption of correctness
21.
is that the appellant bears the burden of affirmatively demonstrating error. (Denham,
supra, at p. 564; Fladeboe, supra, at p. 58.)
A trial court’s determination of whether the parties entered into a binding
settlement for all or part of a case is reviewed for “whether the court’s ruling is supported
by substantial evidence.” (Assemi, supra, 7 Cal.4th at p. 911; see Critzer v. Enos, supra,187 Cal.App.4th at p. 1253.) This standard of review usually applies to a determination
of whether an oral contract exists. (See Carmel Development Co., Inc. v. Anderson
(2020) 48 Cal.App.5th 492, 518.) Thus, a trial court’s factual findings concerning
whether a settlement agreement explicitly defined the material terms, and whether the
parties expressly acknowledged their understanding of and agreement to be bound by
those material terms, are reviewed for substantial evidence. (Assemi, supra, 7 Cal.4th at
p. 911.) Determinations other than factual findings “are reviewed de novo for errors of
law.” (Weddington, supra, 60 Cal.App.4th at p. 815.)
The substantial evidence standard is a deferential standard of review.
(Boermeester v. Carry (2024) 100 Cal.App.5th 383, 394.) It requires appellate courts to
view the entire record, resolve all evidentiary conflicts, and draw all reasonable
inferences in support of a trial court’s finding that an enforceable settlement exists and in
support of the trial court’s order enforcing the settlement. (See Lee v. Amazon.com, Inc.
(2022) 76 Cal.App.5th 200, 222 (Lee); J.B.B. Investment Partners, Ltd. v. Fair (2014)
232 Cal.App.4th 974, 984; Osumi, supra, 151 Cal.App.4th at p. 1360.) “Substantial
evidence,” however, is not the same as “any evidence”; evidence is substantial if it is
legally ponderable and thus, reasonable, credible, and of solid value. (Daugherty v. City
and County of San Francisco (2018) 24 Cal.App.5th 928, 945; Kuhn v. Department of
General Services (1994) 22 Cal.App.4th 1627, 1633.) Furthermore, circumstantial
evidence may be substantial evidence sufficient to support a finding of fact when the
inferences drawn from that evidence are logical and reasonable. (Daugherty, supra, at
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p. 945.) Conversely, inferences based on speculation or conjecture do not meet the
substantial evidence standard. (Ibid.)
D. Analysis of Trial Court’s Determinations
1. Contentions of the Parties
Eagle argues that the parties never agreed to the terms of the settlement; it is
unclear what the City’s council actually approved; the record shows the parties struggled
over the precise terms of the settlement; and the uncertainty as to the scope of the
settlement was never resolved. In particular, Eagle contends the trial court incorrectly
found that Eagle agreed to dismiss “all claims,” including claims not pleaded, despite
Eagle’s statements at the hearing distinguishing between dismissing “all claims” and
dismissing only the claims in the complaint.
The City contends that Eagle has not demonstrated error because the record shows
(1) the parties reached a settlement, (2) the settlement terms were clear, and (3) Eagle’s
representative unequivocally agreed to all of the terms, including that all claims, not
merely the pleaded state law claims, would be dismissed. The City argues the change of
heart or confusion by Eagle’s counsel does not undermine Eagle’s representative’s
consent to the settlement terms. Thus, the City concludes that the trial court correctly
found the existence and terms of the settlement and correctly enforced those terms.
2. Application of the Standard of Review
The trial court found the parties entered into a binding and valid settlement
agreement with terms providing for the dismissal of the complaint and cross-complaint
with prejudice, the waiver of the right to appeal any matter in the case, the dismissal of
all pending appeals (i.e., the Watts Appeal), and the waiver of the right to recover costs
and attorney fees. There is no real dispute between the parties that these findings by the
trial court are supported by substantial evidence. Consequently, a detailed analysis of the
evidence supporting these findings is not necessary.
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The trial court also found the settlement terms barred all claims that arose out of
the incident that formed the basis of the complaint and cross-complaint. The parties
dispute whether this finding about the scope of the settlement is supported by substantial
evidence.
Our initial inquiry asks whether this settlement term was material to the settlement
agreement. A settlement covering all claims arising out of the incident would end all
potential liability of both parties and give them peace in the disputes related to the
roofing project. The statements made by the City’s lawyer on the record constitute
substantial evidence supporting the trial court’s implied finding that the broad settlement
term was a material term because the City’s goal was a final resolution of all disputes
arising from the roofing project, including claims not pleaded and the Watts Appeal. (See
Westlands Water Dist. v. All Persons Interested (2023) 95 Cal.App.5th 98, 127
[explaining that an essential or material term is one that is significant to the parties].)
This implied finding is supported further by Eagle’s representative’s affirmative answer
to the court’s question whether he understood that the settlement “will be a binding
agreement enforceable by the Court and that neither side may pursue the other.” (Italics
added.) The phrase “pursue the other” indicates an intent to release all potential theories
of recovery between the parties, not an intent to end the pursuit of only pleaded claims.
In short, the City wanted peace—that is, an end to the war, not a limited truce.
Having determined the evidence supports the trial court’s implied finding that the
term was material, we next consider whether there was mutual assent to the term—that is,
whether they agreed the settlement would encompass “all claims,” and “all claims” meant
all pending and “future claims that ‘arise out of’ the underlying incident.” If there was no
mutual assent to this material term, the other terms agreed upon would not form a binding
and enforceable settlement agreement. (See Cheema v. L.S. Trucking, Inc. (2019) 39
Cal.App.5th 1142, 1149; Weddington, supra, 60 Cal.App.4th at p. 797.)
24.
The record reflects that the City’s lawyer initially described the settlement, without
objection, as all parties having “agreed to dismiss all claims against each other with
prejudice, and . . . to waive any rights to further appeals in regard to this matter.” When
the attorneys recognized that they had not explicitly addressed the Watts Appeal, a recess
was taken. After the recess, the City’s lawyer repeated his earlier description and added
that the settlement “includes a dismissal by [Eagle] of any appeals against Jason Watts.”
Eagle’s counsel reacted to the second “all claims” description by attempting to limit “all
claims” to the claims “[o]f this lawsuit.” The City’s lawyer expressly disagreed with the
limitation “of this lawsuit” and stated that the dismissal was “related to any events that
arised [sic] out of this incident.” Eagle’s counsel and the City’s lawyer briefly argued
over the scope of the dismissal. Thus, the issue presented is whether this disagreement
was replaced with an agreement as to the scope of the settlement.
While the City’s lawyer was speaking, the record shows that the court interrupted,
and crosstalk ensued. If the crosstalk between the City’s lawyer and the court is
eliminated, the statement by the City’s lawyer would read: “It’s anything that arose out
of . . . [¶] . . . [¶] . . . it’s the subject.” By again using the term “arose out of,” the City’s
lawyer was plainly explaining the dismissal was for any claim that arose out of the
incident that formed the basis of the complaint and cross-complaint.
From an alternate perspective, eliminating the crosstalk would make the trial
court’s statement read: “If it’s dismissed . . . [¶] . . . [¶] . . . [i]t can’t be brought back.”
Eagle’s counsel then said, “I can’t bring it back,” and Eagle’s representative said, “Yes.
Yes,” which appears to agree with the court’s description. We recognize that it is
possible, on the cold record, to interpret Eagle’s counsel’s statement as a question about
whether unpleaded claims could be brought back to court and Eagle’s representative’s
yeses as supporting counsel’s question and indicating that he too was unsure about the
status of unpleaded claims he was seeking an answer. The trial judge, who observed the
demeanor of counsel and Eagle’s representative and heard their intonation, did not
25.
interpret the statements that way. Instead of treating their responses as a question
needing to be resolved, the court followed the representative’s affirmative replies by
stating: “The dismissals are all with prejudice on each side, and everyone is dismissing
their appeals.” The attorneys for each side and Eagle’s representative then thanked the
court, which indicates they too thought the issue had been resolved. The court then
accepted the settlement and, later stated the minute order would reflect a “dismissal of all
claims, all appeals, the suit with prejudice -- the countersuit with prejudice.”
Significantly, no party objected or sought further clarification with the court regarding
“all claims.”
When the trial court considered the City’s motion to enforce the settlement in
March 2023, the court had to interpret the foregoing exchange and relied on the reporter’s
transcript of the November Hearing. The court’s March Order correctly stated the law
prohibited it from creating material terms and required it to decide what terms the parties
agreed upon. The court interpreted the exchange at the November Hearing, which
included Eagle’s representative’s statement of “Yes. Yes” as Eagle’s agreement that the
dismissals would cover all claims arising out of the incident. We conclude substantial
evidence supports the court’s interpretation.
The trial court’s interpretation is consistent with the City’s prior description of a
dismissal of “all claims,” as well as the court’s description of the intended minute order,
which was to reflect both a “dismissal of all claims” and a dismissal of the suit and
“countersuit” with prejudice. Identifying a dismissal of “all claims” as well as a
dismissal of the suit and countersuit indicates that the settlement would resolve not only
the filed complaint and cross-complaint—that is, the suit and countersuit—but also “all
claims” arising out of the incident. This settlement term makes sense because it fully
disposed of the pending claims and precluded further claims between Eagle and the City
involving the roofing project.
26.
When the trial court interjected itself, as the City’s lawyer was again explaining
that the dismissal was for all claims arising out of the incident, that part of the transcript
is reasonably read as indicating that the court was attempting to explain that the claims
arising out of the incident could no longer be brought to court, to which Eagle’s
representative responded affirmatively. To the extent the crosstalk set forth in the
reporter’s transcript is ambiguous, we infer the judge resolved any ambiguity by relying
on his own memory of the November 2022 Hearing when he found that the term “all
claims” was discussed, that Eagle’s representative agreed “all claims” arising out of the
incident were included, and that such claims could not be “brought back” in court. This
inference is supported by the fact that the judge who issued the March Order was the
judge who presided over the November 2022 Hearing and, as such, he was permitted to
rely on his memory of the hearing when evaluating the motion to enforce the settlement.
(Osumi, supra, 151 Cal.App.4th at p. 1360.) The applicable rules of appellate procedure
require us to draw this inference because the March Order did not state, one way or the
other, whether the judge relied on his memory and, when faced with silence, appellate
courts must draw inferences favorable to the judgment. (Denham, supra, 2 Cal.3d at
p. 564; Fladeboe, supra, 150 Cal.App.4th at p. 58.) Thus, we infer the trial court’s
resolution of the question of fact about Eagle’s consent to the broad settlement term was
based in part upon its recollection of the discussion of the settlement and its observations
of Eagle’s representative’s demeanor and intonation when he said, “Yes. Yes.” That
recollection, when combined with the reporter’s transcript, constitutes substantial
evidence.
Next, we consider Eagle’s argument regarding the lack of clarity about what
settlement terms the City council actually approved. This argument is not developed with
citations to relevant legal authority or reasoned argument. (See Cal. Rules of Court, rule
8.204(a)(1)(B).) For example, Eagle has not referred to the principles that determine
when a municipality has ratified an employee’s actions. (See generally Rakestraw v.
27.
Rodrigues (1972) 8 Cal.3d 67, 73 [ratification defined].) More specifically, Eagle has not
shown the City’s adoption of the assistant city manager’s approval of the settlement
agreement requires each term of the agreement to be stated with specificity in the
council’s motion or resolution manifesting the intent to ratify the agreement. As a result,
the point is inadequately developed and thus, forfeited. (See In re Tobacco Cases II
(2015) 240 Cal.App.4th 779, 808; Cahill v. San Diego Gas & Electric Co. (2011)
194 Cal.App.4th 939, 956.) Stated more directly, Eagle has not affirmatively
demonstrated the trial court erred in accepting the City council’s approval of the
settlement. (See Denham, supra, 2 Cal.3d at p. 564 [the appellant bears the burden of
affirmatively demonstrating error].) Also, on a related issue, we conclude the assistant
city manager’s agreement to the terms of the settlement strictly complies with the
requirement that a party (as opposed to the party’s counsel) approve the settlement
“before the court.” (§ 664.6, subd. (a).)
To summarize, under the deferential substantial evidence standard of review (Lee,
supra, 76 Cal.App.5th at p. 222), we conclude the evidence adequately supports (1) the
court’s finding that an enforceable settlement contract existed and (2) the court’s specific
finding that Eagle assented to a dismissal of all claims arising out of the incident that
formed the basis of its complaint. Eagle has not demonstrated these findings are
erroneous due to a lack of evidentiary support or otherwise.
3. Legality of Eagle Agreeing To Dismiss the Watts Appeal
Eagle’s claims against Watts were adjudicated in favor of Watts through a
summary judgment motion, and Watts’s cross-complaint against Eagle was resolved
through his section 581 request for voluntary dismissal without prejudice. The settlement
and judgment enforcing settlement did not purport to exercise any authority over Watts,
such as compelling him to perform an act or prohibiting him from taking an action.
28.
Instead, the settlement and judgment simply required Eagle to dismiss the Watts Appeal
and, thus, attempted to confer a litigation benefit on Watts, a nonparty to the agreement.
Civil Code section 1559 provides: “A contract, made expressly for the benefit of a
third person, may be enforced by him at any time before the parties thereto rescind it.” It
logically follows that California contract law allows parties to form a contract with a
provision that benefits a third party and, furthermore, also allows a party to that contract
to enforce a provision benefiting a third party.
To be enforceable, a contract provision must have a “lawful object.” (Civ. Code,
§ 1550; see 1 Witkin, Summary of Cal. Law, supra, §§ 421–422, pp. 446–447 [illegal
object and partial illegality].) Accordingly, we consider whether Eagle has demonstrated
the provision requiring it to dismiss the Watts Appeal has an unlawful object. In this
context, lawful means not conflicting with an express statute or public policy. (1 Witkin,
Summary of Cal. Law, supra, § 421, p. 446.) Eagle has cited no statute and has identified
no public policy that conflicts with its dismissal of the Watts Appeal. Indeed, because
California has a strong public policy favoring the voluntary settlement of disputes
(Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 793), public policy supports the
enforcement of a contractual provision in which the contracting parties agree that one of
the parties will dismiss an appeal against a third person. Considering that Watts was the
City’s engineer on the roofing project and public entities have an obligation to defend and
indemnify their employees (Gov. Code, §§ 825, 825.2), we detect nothing improper about
the City’s negotiating a dismissal of Eagle’s appeal against Watts. Consequently, the term
in the settlement agreement requiring Eagle to dismiss the Watts Appeal is enforceable.
III. MOTION TO DISMISS AND REQUEST FOR SANCTIONS*
The City contends Eagle should be sanctioned for filing a frivolous appeal. An
appeal is frivolous “when any reasonable attorney would agree that the appeal is totally
* See footnote page 1, ante.
29.
and completely without merit.” (Barrera v. Apple American Group LLC (2023) 95
Cal.App.5th 63, 96.) Although we have rejected Eagle’s arguments and will affirm the
judgment entered to enforce the settlement, those arguments cannot be characterized as
totally and completely without merit. In particular, the wording of section 664.6,
subdivision (a) is not a model of clarity in describing how the two sentences relate to one
another. Although the first sentence clearly states it applies when the litigation is
pending, the second sentence does not explicitly inform readers that the requirements for
the retention of jurisdiction apply only when the litigation is no longer pending. The
interpretation set forth in part I.B.1. of this opinion recognizes the limited scope of the
retention-of-jurisdiction provision based on inferences drawn from “the ostensible objects
to be achieved” (Nolan v. City of Anaheim, supra, 33 Cal.4th at p. 340) by the amendment
that added the second sentence. (See Wackeen, supra, 97 Cal.App.4th at p. 439.) An
objectively reasonable attorney would recognize contrary inferences could be drawn even
though they did not ultimately carry the day. Therefore, we deny the City’s motion to
dismiss and request for sanctions.
DISPOSITION
The March 21, 2023 order granting the motion to enforce settlement and judgment
is affirmed. The City is awarded its costs on appeal.
FRANSON, J.
WE CONCUR:
LEVY, Acting P. J.
SMITH, J.
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