Wood v. California Business Bank
Filed 2/24/12 Wood v. California Business Bank CA2/1
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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
CHARLES R. WOOD,
Plaintiff and Respondent,
v.
CALIFORNIA BUSINESS BANK,
Defendant and Appellant.
B233865
(Los Angeles County
Super. Ct. No. BC445167)
APPEAL from
an judgment of the Superior Court of
County. Rolf M. Treu, Judge. Affirmed.
Pettit Kohn
Ingrassia & Lutz, Thomas S. Ingrassia and Robert J. Hudock for Defendant
and Appellant.
Mahoney & Soll, Paul M. Mahoney
and Richard A Soll for Plaintiff and Respondent.
___________________________________
Plaintiff Charles Wood filed
a complaint for breach of contract
against California Business Bank, his former employer, in which he alleged
defendant failed to pay him severance benefits due under an
defendant’s offer to settle the litigation pursuant to Code of Civil Procedure
section 998 (section 998). Defendant
appeals from the judgment and an order denying its motion to vacate the
judgment, contending plaintiff never accepted its offer, and any settlement was
subject to prior approval by the Federal Deposit Insurance Corporation. We affirm.
BACKGROUND
The material facts are
undisputed. California Business Bank
employed Woods as its president and CEO from 2005 until 2010, when it allegedly
breached the employment agreement by wrongfully terminating his employment and
failing to pay compensation and other benefits promised to him. On September 9, 2010, Woods filed a lawsuit
for breach of contract. On October 29,
2010, defendant offered to settle the litigation pursuant to section 998 for
$50,001 plus reasonable attorney fees and costs.
The section 998 offer provided in full: “Please take notice that Defendant California
Business Bank (‘Defendant’
hereby offers to settle all claims that PlaintiffCharles R. Wood (‘Plaintiff’
has, or may have, against Defendant, includingthose contemplated in the above-captioned action, pursuant to California Code
of Civil Procedure section 998, for the total sum of $50,001, plus (in addition
to) an award of reasonable attorney fees and costs to be determined by the
court. [¶] This offer to compromise does not constitute
an admission of liability by or on behalf of Defendant; all liability is
expressly denied. Furthermore, this
offer is subject to Plaintiff’s execution of an agreement releasing all claims
against Defendant, such agreement must include a waiver of California Civil
Code section 1542, and Plaintiff’s dismissal of his complaint against Defendant
with prejudice. [¶] If this offer is accepted, Plaintiff must
file this offer and a notice of acceptance with the court within 35 days of the
date upon which this offer is mail served, or prior to commencement of trial,
whichever occurs first. If this offer is
not accepted within 35 days, or prior to the commencement of trial, whichever
occurs first, it shall be deemed rejected and withdrawn.” (All caps typeface omitted.)
On November 29, 2010, plaintiff filed an acceptance of
the offer to compromise with the Los Angeles Superior Court. The acceptance provided in pertinent
part: “Notice is hereby given that
pursuant to [section 998], Plaintiff Charles R. Wood accepts the offer made by
Defendant California Business Bank to have judgment taken against Defendant
California Business Bank and in favor of plaintiff Charles R. Wood in the
above-entitled action in accordance with all of the terms and conditions set
forth in the attached offer to compromise.”
(All caps typeface omitted.)
California Business Bank objected to plaintiff’s
acceptance on the ground that it did not conform with the offer, specifically
in that defendant did not agree to have judgment entered against it, but
instead explicitly required that plaintiff dismiss his lawsuit with prejudice.
On February 7, 2011, plaintiff moved for entry of
judgment pursuant to section 998. He
contended that although he accepted defendant’s section 998 offer, defendant
failed to perform under the resulting compromise. Attached to plaintiff’s motion was a proposed
judgment that provided in full as follows:
“It is hereby ordered, adjudged and decreed that Plaintiff Charles R.
Wood shall recover from Defendant California Business Bank the sum of $50,001
in addition to reasonable attorneys’ fees and costs to be determined by the
court. [¶] It is further ordered[ed], adjudged and
decreed that upon receipt of $50,001 plus reasonable attorneys’ fees and costs
determined by the court, Plaintiff Charles R. Wood shall file a dismissal of
his complaint against Defendant California Business Bank with prejudice.” (All caps typeface omitted.) Also attached was a request for dismissal on
a Judicial Council form and a proposed agreement by which plaintiff released
all claims against defendant.
Defendant opposed the motion. It contended that by varying the terms of the
section 998 offer by seeking entry of judgment against defendant rather than
dismissal without prejudice, Wood in effect rejected the settlement offer. Because the section 998 offer had been
rejected, no ground existed on which to enter judgment. Furthermore, judgment could not be entered
because the $50,001 payment had not been approved by the Federal Deposit
Insurance Corporation (FDIC). Such
approval was required by the federal banking law, which prohibits distressed
banks from making severance payments to bank officers without FDIC approval.
The trial court rejected defendant’s arguments,
finding that FDIC approval of the settlement was unnecessary and that
plaintiff, by seeking judgment “in accordance with all the terms and conditions
set forth in the attached offer to compromise,” accepted defendant’s section
998 offer in all respects. The court
signed plaintiff’s proposed judgment with the following addition: “When the dismissal is entered, the judgment
will be deemed vacated.” Judgment was
entered, and the trial court ultimately awarded plaintiff $17,000 in attorney
fees.
Defendant’s motion to vacate the judgment was
summarily denied.
Defendant timely appealed from the judgment and the
order denying its motion to vacate the judgment.
DISCUSSION
California Business Bank
contends the trial court had no power to enter a judgment because (1) the
section 998 offer was never accepted by plaintiff and (2) the settlement
required FDIC approval.
A. Plaintiff Accepted Defendant’s Offer
Section 998 provides that any party to an action “may
serve an offer in writing upon any other party to the action to allow judgment
to be taken or an award to be entered in accordance with the terms and
conditions stated at that time.” (§ 998,
subd. (b).) If a party accepts the
offer, “the offer with proof of acceptance shall be filed and the clerk or the
judge shall enter judgment accordingly.”
(§ 998, subd. (b)(1).)
“A judgment entered pursuant to the acceptance of a
section 998 offer is ‘a stipulated or consent judgment’ that is regarded as a
contract between the parties and ‘must be construed as any other
contract.’ [Citations.] Section 998 permits the parties to determine
the nature of the judgment to be entered and to resolve collateral matters,
including costs. The parties may agree
that judgment will be entered in favor of plaintiff [citation] or that the
action will be dismissed voluntarily [citation].” (Chinn
v. KMR Property Management (2008) 166 Cal.App.4th 175, 184 (
“When a written stipulation sets forth all the terms
of a judgment agreed to by the parties, the filing of the stipulation normally
provides a sufficient basis for entry of the judgment upon the ex parte
application of either party.
[Citation.] But if the stipulation
omits any essential element of a
complete judgment, a judgment cannot be entered until the missing element or
elements are established by proof or by further stipulation. [Citation.]
Similarly, if a material term of the stipulation is ambiguous, judgment
cannot be entered until such ambiguity is appropriately resolved.” (Rooney
v. Vermont Investment Corp. (1973) 10 Cal.3d 351, 368-369.) The court has no power to resolve disputes
concerning the terms of the settlement.
(See Saba v. Crater (1998) 62
Cal.App.4th 150, 153.)
Entry of judgment or dismissal pursuant to a section 998
compromise is a ministerial task that may be performed by the clerk of the
court. (Saba v. Crater, supra,
In the absence of any conflicting extrinsic evidence,
interpretation of a 998 offer is a question of law that we review de novo. (Chinn,
supra, 166 Cal.App.4th at p.
183.) “We apply general principles of
contract law where those principles neither conflict with section 998 nor
defeat its purpose.” (
We construe ambiguities in a 998 offer against the offeror. (Id.
at p. 185; see also Berg v. Darden
(2004) 120 Cal.App.4th 721, 727 [“a section 998 offer is construed strictly in
favor of the party sought to be subjected to its operation”].)
Defendant’s section 998 offer provided that defendant
would pay plaintiff $50,001 plus reasonable attorney fees in exchange for
plaintiff’s execution of a release and dismissal of his complaint. In the letter of acceptance filed by
plaintiff in the superior court, plaintiff characterized the offer as requiring
that judgment be taken against defendant and in favor of plaintiff “in
accordance with all of the terms and conditions set forth in the” offer. Defendant argues plaintiff’s letter did not
constitute proof of acceptance because it changed the terms of the offer, which
did not contemplate that judgment would be entered against defendant. The argument is without merit.
Although in his acceptance plaintiff stated a judgment
would be taken against defendant, this characterization of the disposition had
no legal effect, i.e., it did not change the terms of the offer, because
plaintiff also stated judgment was to be taken “in accordance with all of the
terms and conditions set forth in the attached offer to compromise.” To the extent plaintiff misstated the way in
which the lawsuit would be terminated, defendant invited the misstatement,
which in any event was immaterial.
Defendant expressly made its offer “pursuant to California Code of Civil
Procedure section 998,” which provides that “[i]f the offer is accepted, the
offer with proof of acceptance shall be filed and the clerk or the judge shall
enter judgment accordingly.”
(§ 998, subd. (b)(1).)
Plaintiff followed the procedure set forth in section 998 by filing his
letter of acceptance with the court and seeking that “judgment” be
entered. He also preserved the substance
of the offer by asking that judgment be entered in accordance with the terms
and conditions set forth in the offer.
Any deviation from the offer was immaterial, as
plaintiff’s proposed judgment was phrased in neutral language—stating only that
defendant would pay $50,001—and called for dismissal of the action, which
defendant also sought, and the final judgment stated the judgment itself would
be vacated once dismissal was entered.
The judgment was neutral and temporary, and in no way disfavors or
prejudices defendant. If defendant
wanted no public record of its payment to settle the lawsuit it need not have
made its offer subject to section 998.
We conclude plaintiff accepted defendant’s section 998
offer without material modification and filed proof of acceptance with the
trial court. The court entered judgment
accordingly, as it was required to do under section 998.
B. The Settlement Agreement Was Not Invalid
Defendant contends the settlement agreement was
invalid because it violated federal laws that prohibit banks from making
severance payments to officers without FDIC approval. The argument is without merit.
The FDIC is a federal agency that insures bank
deposits. (12 U.S.C. § 1811.) Congress has granted the FDIC power to
regulate or prohibit certain forms of benefits given by banks to
employees. (12 U.S.C. § 1828(k).) As pertinent here, the FDIC “may prohibit or
limit, by regulation or order, any golden parachute payment or indemnification
payment.” (12 U.S.C. § 1828(k)(1); see
12 C.F.R. 359.2 (2012) [no insured bank may agree to make any golden parachute
payment except under certain circumstances].)
A golden parachute payment is “any payment (or any agreement to make any
payment) in the nature of compensation
. . . [to an] affiliated party pursuant to an obligation . . . that—[¶] (i)
party’s affiliation with the
institution or covered company . . . .”
(12 U.S.C. § 1828(k)(4)(A), italics added; 12 C.F.R. 359.1(f)
(2012).) In banking law, the term
“compensation” means payment for services.
(See Schooner, Refocusing
Regulatory Limitations on Banks’ Compensation Practices (1996) 37 B.C.
L.Rev 861.)
Nothing in this record suggests the $50,001 offered by
defendant constituted payment for services or was contingent on the termination
of plaintiff’s employment. Plaintiff’s
employment was terminated in August 2010, two months before defendant made the
$50,001 offer. The offer was made in
exchange for dismissal of a lawsuit, not as payment for services. It did not constitute a golden parachute
payment, and FDIC approval was not required.
Defendant cites no authority to the contrary, and we
have discovered none. The two
unpublished federal trial court cases upon which defendant relies for the
proposition that FDIC approval is required, Hill
v. Commerce Bancorp, Inc. (D.N.J. 2010) 2010 U.S. Dist. LEXIS 59988 and
2010) 2010 Bankr. LEXIS 4462, are easily distinguishable, as each involved a
demand for severance pay, not an agreement to settle a lawsuit.
The settlement was not prohibited by
DISPOSITION
The judgment is affirmed. Respondent is to recover his costs on appeal.
NOT TO BE PUBLISHED.
CHANEY, J.
We concur:
MALLANO,
P. J.
ROTHSCHILD, J.
