Kracksmith v. Hernandez
Filed 12/6/12 Kracksmith v. Hernandez CA2/3
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
>
KRACKSMITH, INC., Plaintiff and Appellant, v. KEVIN HERNANDEZ, Defendant and Respondent. | B235045 (Los Angeles County Super. Ct. Nos. BC379353, BC384027) |
APPEAL from an order of the Superior Court of
County, Maureen Duffy-Lewis, Judge. Affirmed.
Glen Broemer for Plaintiff and
Appellant.
Law Offices of Martin F. Goldman and Martin F.
Goldman for Defendant and Respondent.
_________________________
While the jury was deliberating, the
trial court entered into the record an oral settlement
agreement. As part of the oral
settlement, “all parties†agreed to dismiss all actions pending before the
court with prejudice. Following
dismissal, plaintiff and appellant Kracksmith, Inc., doing business as American
Business Fund (Kracksmith), filed a motion for new trial and to set aside the
settlement agreement pursuant to Code of Civil Procedure section 473,
subdivision (b) (section 473(b))
name="_ftnref1" title="">[1]
on the ground that Boschal Lee (Lee), the only plaintiff to assent to the
settlement agreement, did not have settlement authority to dismiss Kracksmith’s
complaint. Kracksmith appeals from the
order denying the motion. We conclude
the trial court lacked jurisdiction to hear the motion for new trial and did
not abuse its discretion in denying section 473(b) relief. Accordingly, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Both Kracksmith and respondent Kevin
Hernandez recite facts without citation to the record and rely on evidence that
was not presented to the court in ruling on the motion. Our review is limited to the record before
the trial court. (See
(1996) 14 Cal.4th 434, 444, fn. 3.)
Kracksmith has the burden of providing an adequate record and showing
prejudicial error. (Aguilar v. Avis Rent A Car System, Inc. (1999) 21 Cal.4th 121,
132.) Absent an adequate record to
demonstrate error, we presume the judgment or order is supported by the
evidence. (Laabs v. City of Victorville (2008)
163 Cal.App.4th 1242, 1271.)
Despite the state of the record on appeal, we
present the following factual background before addressing Kracksmith’s claims
of error.
1.
Kracksmith filed a verified complaint against
Louis Verdad, Inc. (Verdad), Louis Verdad, and Hernandez alleging
common counts to recover funds advanced to Verdad pursuant to a factoring
agreement. The claim against Hernandez
was allegedly based upon a guaranty agreement in which he acted as guarantor of
the underlying agreement. Kracksmith and
Lee then brought a separate action against Hernandez alleging fraud.
cross-complaint alleging fraud against Kracksmith and Lee.
The case proceeded to a jury trial.
2.
Inconsistent
Verdicts
The jury reached a verdict in favor of
Kracksmith on its claims for money had and received, account stated, open book
account, and money paid, awarding Kracksmith $277,006 in damages. The jury found in favor of Hernandez on
Kracksmith’s claims against him for breach of contract and fraud.
At issue here is the jury’s special verdict on Hernandez’s
fraud claims alleged against Kracksmith and Lee. The jury found no fraud but inconsistently
answered “yes†to special verdict questions asking the following: “Did Boschal Boz Lee engage in the conduct
with malice, oppression or fraudâ€; and “[w]as the conduct constituting malice,
oppression or fraud committed by one or more officers, directors or managing
agents of Kracksmith Inc. on behalf of Kracksmith Inc.?â€
The court informed the jury that there were
inconsistencies with the special verdicts and asked the jury to continue to
deliberate. After further deliberation,
the jury’s findings again indicated no underlying fraud on the part of
Kracksmith or Lee, but a finding of fraud to support punitive damages.
The court did not dismiss the jury and attempted
to resolve the inconsistent special verdicts.
The court told the jury that if it did not find any underlying fraud, it
should not answer the punitive damages verdict forms. After receiving this clarification and
returning to deliberate, the jury asked the court two questions concerning
damages.
The jury again notified the court that it had
reached a verdict. But the verdict was
sealed and never read because the parties entered into a settlement
agreement.
3.
Oral
Settlement Agreement
As
stated in open court, “all parties to the proceeding agree to dismiss all
actions now pending and release all claims with prejudice mutually.†After a discussion that the settlement would
bind only the parties to the litigation, including Hernandez, Lee, and
Kracksmith or American Business Fund, Hernandez and Lee agreed to the
settlement in open court. Pursuant to
section 664.6, Hernandez and Lee asked the court to retain jurisdiction to
enforce the settlement agreement.
name="_ftnref3" title="">[3] Thereafter, the court dismissed the
action.
4.
Settlement Agreement
Kracksmith filed a motion for a new trial, which
also sought “to set aside [the] settlement agreement†pursuant to section
473(b). The new trial motion listed
eight grounds under section 657 arising from the trial court’s efforts to
clarify the special verdict forms and to ask the jury to continue
deliberations. The motion also sought to
set aside the settlement agreement on the grounds that Lee had no settlement
authority, and the settlement was obtained through undue influence.
Kracksmith’s chairman, Allan Lee,
submitted a declaration stating that “Boschal Lee does not have any authority
to make decisions, represent Kracksmith Inc., or bind Kracksmith, Inc. to any
agreements without written consent from Kracksmith, Inc.’s Board of
Directors.†Kracksmith and its board of
directors did not give Lee express written authority to enter into the
settlement agreement.
Kracksmith contended that because of
the trial court’s request that the jury continue its deliberation, Lee was
forced to settle or risk a “career-ending verdict, rendered under conditions
where the judge had exhibited unfairness and appeared to be pressuring the
jury, and where the jury clearly did not understand the law.â€
Hernandez’s response to this motion is not
included in the record. During argument,
Hernandez’s counsel reminded the court that Lee verified the complaint as an
officer of Kracksmith, and the factoring agreement was signed by Lee as a
“managing director†of Kracksmith.
Additionally, counsel informed the court that Lee had obtained a
fictitious business name statement as president of Kracksmith, Inc.
company representative was present during the trial, and Hernandez and the
court understood that Lee’s presence at trial was also on behalf of
Kracksmith.
Following the hearing, the trial court denied
the motion. The trial court stated that
“during the course of this trial, all indications were that Boschal Lee
represented Kracksmith†and “[t]hose representations were made to the
court.â€
Kracksmith timely filed a
the motion for a new trial and to vacate the settlement agreement under
section 473(b).
name="_ftnref5" title="">[5]
DISCUSSION
1.
Appellate
Jurisdiction
Hernandez contends the appeal must be dismissed
because Kracksmith has appealed from a nonappealable voluntary dismissal and a
nonappealable motion for new trial. Kracksmith counters that this court has
appellate jurisdiction because the summary procedure in section 664.6 to
enforce a settlement agreement is an appealable order.
As a preliminary matter, we do not have
jurisdiction to hear the appeal of a section 664.6 motion because
Kracksmith did not bring that motion. We
cannot characterize the trial court’s ruling on the motion as one to enforce
the settlement agreement because, by its own terms, section 664.6 only grants the
court authority to enforce the settlement agreement. “Section 664.6 says nothing about vacating
judgments.†(Basinger v. Rogers & Wells (1990) 220 Cal.App.3d 16,
23.)
a.
Motion
for New Trial is Reviewable from the Underlying Judgment
An order denying a motion for new trial is not
separately appealable but is reviewable on appeal from the underlying
judgment. (Walker v. Los Angeles County Metropolitan Transportation Authority
(2005) 35 Cal.4th 15, 19-20.)
Hernandez is correct that a voluntary dismissal
under section 581, subdivision (b) (1) is not a final judgment, as no judgment
is necessary for dismissal. (See
(2002) 96 Cal.App.4th 1357, 1364-1366.)
A voluntary dismissal is a ministerial act, not a judicial act, and not
appealable. (Id. at p. 1365.)
Here, however, we have a dismissal by the court
entered pursuant to a settlement agreement that constitutes a final
judgment. The record contains a minute
order dismissing the action with the judge’s stamped signature appearing before
the statement “It is so ordered.†In
166 Cal.App.4th 1225, the court recognized that this practice of the Los
Angeles Superior Court complied with section 581d, requiring that “ ‘[a]ll
dismissals ordered by the court shall be in the form of a written order signed
by the court and filed in the action and those orders when so filed shall
constitute judgments and be effective for all purposes.’ †(Brehm
v. 21st Century Ins. Co., supra,
at p. 1234, fn. 5; see Powell v.
County of Orange (2011) 197 Cal.App.4th 1573, 1577-1579 [the court relied
on Brehm, to conclude that an
unsigned minute order dismissing the action does not comply with section
581d].)
b.
Denial
of the Section 473(b) is an Appealable Order
The denial of the section 473(b) motion to
vacate the dismissal entered pursuant to the settlement agreement is a special
order made after final judgment and is appealable under section 904.1,
subdivision (a)(2). (
(2007) 148 Cal.App.4th 1262, 1265-1266.)
2.
The
Trial Court Lacked Jurisdiction to Hear the Motion for New Trial
Kracksmith
contends that the trial court erred in denying its
of its brief to argue the trial court’s errors related to the special verdict
forms. We need not address these
arguments because we decide the issue on jurisdictional grounds.
Once the court entered the dismissal of the
entire action, it lacked subject matter jurisdiction to hear a motion for new
trial. (See Hagan Engineering, Inc. v. Mills (2003) 115 Cal.App.4th 1004,
1007-1010; Wackeen v. Malis (2002) 97
Cal.App.4th 429, 433, 437-441.)
Although Kracksmith contends that Lee lacked
authority to agree to dismiss the action, if the action had not been dismissed
pursuant to the settlement agreement, we would have an entirely different
case. Kracksmith may or may not have
filed a motion for new trial, and we can only speculate on the judgment. No judgment was entered following the jury’s
verdict and there remained issues left in the trial court for
consideration. For the same reason, we
reject Kracksmith’s argument that appears to be brought under section 663 to
vacate the judgment and enter a judgment awarding damages based upon the jury’s
initial verdict.
3.
The
Trial Court Did Not Abuse its Discretion in Denying Section 473(b) Relief to
Vacate the Voluntary Dismissal Entered Following Settlement of this Action
Kracksmith’s motion for statutory relief under
section 473 argued that Lee did not have settlement authority, and the
settlement agreement was obtained by undue influence because Lee could not risk
a potential career-ending fraud verdict.
We review the ruling on the motion for an abuse of discretion. (Zamora
v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249, 257-258.)
The discretionary relief provision of section
473(b) provides: “The court may, upon
any terms as may be just, relieve a party or his or her legal representative
from a judgment, dismissal, order, or other proceeding taken against him or her
through his or her mistake, inadvertence, surprise, or excusable neglect.†This provision applies to voluntary
dismissals. (Zamora v. Clayborn Contracting Group, Inc., supra, 28 Cal.4th at p. 254.)
In order to qualify for discretionary relief under section 473, the
moving party must show a proper ground for relief within the applicable time
limits. (Huh v. Wang (2007) 158 Cal.App.4th 1406, 1419.) Diligence is not an issue here, thus our
focus is on whether there was a proper ground for relief.
The term “surprise†as used in section 473(b)
means some condition or situation in which a party is unexpectedly placed to
his or her injury, without any default or negligence of his or her own, and
“which ordinary prudence could not have guarded against.†(Hearn
v. Howard (2009) 177 Cal.App.4th 1193, 1206.) Mistake of counsel does not justify relief
under section 473(b) if the trial court finds the mistake was the result of
professional incompetence, general ignorance of the law, or unjustifiable
negligence in discovering the law. (
1206.) Inadvertence or excusable neglect
justifying relief is defined as an error that might have been made by a
reasonably prudent person under the same or similar circumstances. (Zamora
v. Clayborn Contracting Group, Inc., supra,
28 Cal.4th at p. 258.) The
inadvertence contemplated by the statute is not in the abstract. “ ‘It is the duty of every party
desiring to resist an action or to participate in a judicial proceeding to take
timely and adequate steps to retain counsel or to act in his own person to
avoid an undesirable judgment. Unless in
arranging for his defense he shows that he has exercised such reasonable diligence
as a man of ordinary prudence usually bestows upon important business his
motion for relief under section 473 will be denied. [Citation.]
Courts neither act as guardians for incompetent parties nor for those
who are grossly careless of their own affairs. . . . The only occasion for the application of
section 473 is where a party is unexpectedly placed in a situation to his
injury without fault or negligence of his own and against which ordinary
prudence could not have guarded.’
[Citation.]†(
1206.)
Kracksmith cannot obtain relief under section
473(b) by pointing to trial court errors.
It is the party’s burden seeking relief under section 473(b) to
demonstrate “ ‘that due to some mistake,
either of fact or of law, of himself or of his counsel, or through
which may properly be considered excusable, the judgment or order from which he
seeks relief should be reversed.’
[Citation.]†(
Cal.App.4th 1401, 1410.)
Kracksmith did not specify the grounds for
relief under section 473(b). We
characterize its arguments as seeking relief on the grounds of surprise or
mistake, as Kracksmith’s evidence in support of the 473(b) motion does not
admit its own fault or negligence. Undue
influence is not one of the grounds for relief in section 473(b).
a.
No
Relief Based on “Surpriseâ€
Kracksmith’s claim of surprise, as supported by
the declaration filed by its chairman, appears to be Lee’s unauthorized
settlement of the company’s lawsuit.
But, to obtain relief Kracksmith also had to show that the unauthorized
settlement was obtained without any negligence on its part “against which
ordinary prudence could not have guarded.â€
(Hearn v. Howard,
was lacking. Kracksmith and Lee were
plaintiffs in this action and also had to defend against Hernandez’s fraud
claims. They also were represented by
the same counsel at trial, and Lee was present throughout the proceedings. In this situation, ordinary prudence would
suggest that Kracksmith would have communicated at some point to its counsel or
to the court (through its counsel) that Lee was not its authorized
representative. On this record, the
trial court did not abuse its discretion in denying relief on this ground.
b.
No
Relief Based on “Mistakeâ€
Kracksmith’s claim of mistake must be based on
its counsel’s belief that Lee had settlement authority because the record is
clear that its counsel did not enter into the settlement agreement on
Kracksmith’s behalf.
name="_ftnref7" title="">[7]
record, however, is devoid of facts, and Kracksmith cites none, to show that
its counsel mistakenly believed Lee had settlement authority.
Lee’s declaration states that he was not
authorized to enter into the settlement agreement on Kracksmith’s behalf, but
Lee does not state he told counsel he lacked settlement authority. Kracksmith’s counsel does not suggest in his
declaration that there was any confusion as to whether Lee had settlement
authority. Kracksmith’s counsel stated
that because Lee could not risk a finding of fraud “Kracksmith and Lee opted to
settle the entire case with mutual releases of all claims with Hernandez and
for the mutual dismissals of their legal actions with prejudice. Kracksmith expressly gave up its jury award
of $277,006 against Hernandez.â€
name="_ftnref8" title="">[8]
Kracksmith disavows that Lee acted as its agent
when he executed the settlement agreement.
Relying on Gauss v. GAF Corp.
(2002) 103 Cal.App.4th 1110, Kracksmith argues a settlement agreement is not enforceable
under section 664.6 unless it is agreed to by an authorized corporate
representative. (Gauss v. GAF Corp., supra,
at pp. 1118-1122; see also Provost v.
Regents of University of California (2011) 201 Cal.App.4th 1289,
1295-1298.) Kracksmith maintains that
ostensible authority is not sufficient to satisfy the section 664.6
party-litigant requirement.
name="_ftnref9" title="">[9] The rule that Kracksmith relies on is
triggered when the parties seek to enforce a settlement agreement by employing
the statutory mechanism in section 664.6.
(Levy v. Superior Court (1995)
10 Cal.4th 578, 581-585; Critzer v. Enos
(2010) 187 Cal.App.4th 1242, 1253-1258.)
Because of its summary nature, strict compliance with the requirements
of section 664.6 is a prerequisite to invoking the power of the court to
enforce a settlement agreement. (
previously stated, no section 664.6 motion to enforce the settlement agreement
was ever before the court.
We do not consider other grounds to set aside
the settlement agreement or to attack the judgment that have not been fully
briefed and are not stated in section 473.
The trial court did not abuse its discretion in denying the motion
seeking section 473(b) relief.
DISPOSITION
The order denying the motion for new
trial and to vacate the dismissal entered by the court following settlement of
this action is affirmed. No party is
awarded costs on appeal.
ALDRICH,
J.
We concur:
KLEIN,
P. J.
CROSKEY, J.
Procedure.
aspects of this case, but this is not critical to our analysis.
