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James Ruffalo et al v. Lake of the Pines Association

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Nevada)


September 30, 2011

JAMES RUFFALO ET AL., PLAINTIFFS AND APPELLANTS,
v.
LAKE OF THE PINES ASSOCIATION, INC. ET AL., DEFENDANTS AND RESPONDENTS.

(Super. Ct. No. 72702)

The opinion of the court was delivered by: Robie ,j.

Ruffalo v. Lake of the Pines Assn.

CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

Plaintiffs James and Millie Ruffalo sued their homeowners' association and two of its managers for damage to their property caused by water intrusion from an adjacent golf course. The case settled in mediation, but later the Ruffalos opposed defendants' motion for summary judgment based on the written settlement agreement on the ground the agreement was confidential and therefore inadmissible. The trial court rejected the Ruffalos' claim of confidentiality and granted the motion.

On appeal from the resulting judgment, the Ruffalos contend the trial court erred in overruling their objection to admission of the settlement agreement. They also contend that even if the agreement was admissible, defendants failed to perform their obligations under the agreement, excusing the Ruffalos' performance, including dismissal of the action.

Finding no merit in the Ruffalos' arguments, we will affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The Ruffalos own real property located within Lake of the Pines, an incorporated membership community in Nevada County. Defendant Lake of the Pines Association, Inc. (the association) is the homeowners' association for the community, which owns and operates common and joint use areas within the community. Defendant Bob Boardman is the public works department manager for the association. Defendant Vicki Amadeio is the environmental control department manager for the association.

The Ruffalos commenced this action by filing a complaint against defendants alleging numerous causes of action arising out of damage the Ruffalos' property allegedly sustained as a result of water flowing from association property due to the faulty design, maintenance, and repair of the association's drainage and irrigation system.

In September 2008, the parties participated in mediation before a retired judge. The Ruffalos personally attended the mediation with their attorney. Neither of the individual defendants attended, but defense counsel appeared along with an insurance company claims representative.

The mediation resulted in a written "Mediation Agreement," pursuant to which "[t]he parties agree[d] to terminate th[e] litigation on the following terms:" (1) defendants would pay the Ruffalos $150,000 within 30 days; (2) the Ruffalos would dismiss their case "with prejudice and execute a release prepared by defense counsel"; (3) the parties would bear their own fees and costs; (4) the association would "work with the Ruffalos to make requested repairs to drainage and irrigation at [association] expense"; and (5) defense counsel would request that the association waive certain fees related to repairs on the Ruffalo property. The agreement further provided that it was "enforceable under CCP 664." The agreement was signed only by those present at the mediation.

In November 2008, after various disputes arose with respect to performance of the agreement, the Ruffalos filed a motion to strike the notice of settlement that had (apparently) been filed some time after the mediation and to restore the case to the active list. The trial court granted that motion. Thereafter, defendants obtained leave of court to file an amended answer asserting three additional affirmative defenses, including the defense that further litigation was barred by the written settlement agreement.

Defendants then filed a motion for summary judgment based on the written settlement agreement. The Ruffalos opposed the motion. Their primary argument was that there was virtually no admissible evidence supporting the motion because the written settlement agreement and most of the other evidence was objectionable based on the mediation confidentiality statutes. To that end, the Ruffalos objected "to all defendants' evidence pertaining to the communications, documents and acts pertaining to the mediation." In the alternative, the Ruffalos argued the settlement agreement was not admissible because it was not a final, enforceable contract and, if it was, defendants breached the contract first, thereby excusing the Ruffalos' obligation to perform, including their obligation to dismiss their action.

Concluding "the parties waived mediation confidentiality," the trial court overruled the Ruffalos' objections to the admissibility of the settlement agreement and concluded it constituted a binding contract between the parties. The court further concluded that both sides' "discussions concerning breach of the agreement [we]re immaterial" because "[w]hether or not the parties have breached the agreement is subject to future litigation." Accordingly, the trial court granted the summary judgment motion and entered judgment in favor of defendants. The Ruffalos timely appealed.

DISCUSSION

I

Admissibility Of The Settlement Agreement

The Ruffalos argue the trial court erred in admitting the settlement agreement into evidence in support of the summary judgment motion because the agreement was confidential. We disagree.

"Documents prepared for purposes of mediation are generally inadmissible in civil proceedings. (Evid. Code, § 1119, subd. (b).) However, a signed settlement agreement reached through mediation is exempt from this general rule if it 'provides that it is enforceable or binding or words to that effect.'"*fn1 (Fair v. Bakhtiari (2006) 40 Cal.4th 189, 191-192, quoting Evid. Code, § 1123, subd. (b).)

Here, the settlement agreement specifically provided that it was "enforceable under CCP 664." There appears to be no dispute that "CCP 664" was meant to be a reference to Code of Civil Procedure section 664.6, which "provides that where parties to pending litigation stipulate to settle the case orally in court, or in a writing signed outside of court, judgment may be entered 'pursuant to the terms of the settlement' upon motion of one of the parties." (Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, 1622.) In any event, because the settlement agreement provided that it was "enforceable," that aspect of Evidence Code section 1123 was satisfied here.

But Evidence Code section 1123 is also limited to agreements that are "signed by the settling parties." Here, it is undisputed that neither of the individual defendants signed the settlement agreement; however, it was signed by defense counsel. The question is whether counsel's signature was sufficient to satisfy the signature requirement of Evidence Code section 1123.

A similar question was presented in Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565. There, a written settlement agreement reached through mediation was signed by defense counsel but not the defendants. (Id. at p. 1569.) That agreement provided that it was "'a full and final settlement of all claims'" that was "'enforceable pursuant to the provisions of Code of Civil Procedure [s]section 664.6,'" but it also provided that it was "'exempt from the confidentiality provisions of Evidence Code Section 1152 et seq.'" (Stewart, at pp. 1577, 1578.) (We will refer to this latter provision as the mediation-confidentiality waiver.)

Given that the agreement was signed only by defense counsel and not by the defendants themselves, to determine whether the agreement was admissible the appellate court in Stewart had to "determine whether the requirement in [Evidence Code] section 1123 that the agreement be 'signed by the settling parties' necessarily restricts execution to the parties themselves (as opposed to a more expansive reading that would include the parties or their attorneys)." (Stewart v. Preston Pipeline Inc., supra, 134 Cal.App.4th at p. 1577.) In answering that question, the court first distinguished Levy v. Superior Court (1995) 10 Cal.4th 578, in which the Supreme Court held that a written settlement agreement must be signed by the parties themselves to be enforceable under Code of Civil Procedure section 664.6. (Stewart, at pp. 1579-1580.) The Stewart court explained that, "perhaps most importantly, Levy's holding was based upon the fact that the client's right affected by his attorney's stipulation (i.e., settlement of a dispute) was substantial." (Stewart, at p. 1580.) In contrast, "a stipulation waiving mediation confidentiality is not one that impacts the substantial rights of the party litigant." (Id. at p. 1582.) Based on this conclusion, the Stewart court determined that "the requirement of [Evidence Code] section 1123 that the written settlement agreement be 'signed by the settling parties' does not require that an effective mediation-confidentiality waiver be signed by each of the parties litigant, so long as that written waiver is signed by each of the settling parties or their respective counsel." (Stewart, at p. 1583.)

The Ruffalos correctly observe that "[n]o [mediation-confidentiality] waiver [like the one in Stewart] was contained in the Mediation Agreement" here. That is a distinction without a difference, however, because the agreement here did provide that it was "enforceable." Under Evidence Code section 1123, a written settlement agreement prepared in the course of a mediation is admissible if it is "signed by the settling parties" and (among other things) it provides either "that it is admissible or subject to disclosure" or "that it is enforceable." Because the inclusion of either of these provisions will suffice to waive mediation confidentiality pursuant to the terms of the statute, an agreement signed by an attorney that contains either of these provisions can accomplish that waiver, since the waiver -- by whichever manner it is accomplished -- does not impact the substantial rights of the party on whose behalf the attorney is acting.

This conclusion makes sense, because obviously an agreement that is confidential cannot be enforced. Where an attorney signs a written settlement agreement in mediation on behalf of his or her client, and the agreement expressly provides that it is "enforceable," the attorney has exercised his or her power to stipulate to the admissibility of the agreement in evidence so that the agreement can be enforced in court. Of course, whether the attorney actually had the authority to bind the client to the terms of the settlement is a different question altogether.*fn2 For purposes of the waiver of confidentiality, however, the attorney's signature is sufficient without evidence of specific authority to compromise the client's rights.

For this reason, in addressing the admissibility of the settlement agreement, we need not concern ourselves with the Ruffalos' objections to the evidence defendants offered to show that their attorney was authorized to enter into a settlement agreement on their behalf. To render the written settlement agreement admissible, the attorney does not have to show that he or she had authority to enter into a settlement agreement on behalf of his or her client; that question goes only to whether the agreement is enforceable, not whether it is admissible. To waive confidentiality and make the agreement admissible, the attorney's signature, by itself, is sufficient, because the attorney is always "'authorized by virtue of his employment to bind the client in procedural matters arising during the course of the action.'" (Stewart v. Preston Pipeline Inc., supra, 134 Cal.App.4th at p. 1581, quoting Linsk v. Linsk (1969) 70 Cal.2d 272, 276-277.)

The Ruffalos argue that the enforcement provision in the settlement agreement at issue here "'was added to be specific to a particular statute for speed of resolution and economic reasons, . . . so it could be enforced by a simple motion to the court.'" In their view, the enforcement provision was "a specific term included by [them] for enforceability, not admissibility," and it "should not be rewritten by the court to encompass the broader term of 'admissibility.'"

We have two responses to that argument. First, as the trial court pointed out, although the Ruffalos signed the agreement, they did not file declarations in opposition to the summary judgment motion, and while their attorney did, "he cannot testify as to his clients' intent." Thus, counsel's assertion in his declaration that the Ruffalos "had no intention of breaching mediation confidentiality" is of no moment. Second, even if the Ruffalos had offered their own declarations stating that they did not intend the enforcement provision to waive mediation confidentiality, it would have made no difference because the waiver occurs by force of law -- specifically, Evidence Code section 1123 -- when a written settlement agreement signed in mediation provides that it is "enforceable." As we have noted already, an agreement that is confidential cannot be enforced -- whether by motion under Code of Civil Procedure section 664.6, or by any other means. Thus, the inclusion of an enforcement provision necessarily waives mediation confidentiality, provided the other requirements of Evidence Code section 1123 are met.*fn3

The Ruffalos contend the other requirements of Evidence Code section 1123 were not met here because the "Mediation Agreement" was not a "written settlement agreement" within the meaning of Evidence Code section 1123 that can be enforced as a binding contract. Drawing extensively on Justice Kennard's concurring and dissenting opinion in Fair v. Bakhtiari, supra, 40 Cal.4th at page 189, the Ruffalos contend they "very obviously did not reach a meeting of the minds [with defendants] to create an enforceable settlement agreement or contract" because of the parties' subsequent disputes over the terms of the release required by the agreement (as well as perhaps other aspects of the agreement).

In Fair, the parties signed a document in mediation entitled "Settlement Terms." (Fair v. Bakhtiari, supra, 40 Cal.4th at pp. 200-201.) However, one of the terms -- which required the plaintiff to "convey 'all [his] stock and interests'" -- "was ambiguous, the ambiguity could not be resolved by consideration of the parties' outward manifestations, and later events demonstrated that the parties did not understand the term in the same way." (Id. at p. 203.) In Justice Kennard's view, "[t]his failure to reach a meeting of the minds prevented the formation of a contract" and [a]ccordingly, there was no 'written settlement agreement' within the meaning of Evidence Code section 1123." (Fair, at p. 203.)

Even under Justice Kennard's separate opinion in Fair, the fact that disputes may have arisen between the parties here regarding the terms of the "Mediation Agreement" does not mean there was no agreement. Only if the disputes arose from an agreement that was so ambiguous that its material terms could not be determined objectively would those disputes justify a finding that there was no agreement in the first place. But the Ruffalos have not shown that the "Mediation Agreement" here is that ambiguous.

From what the Ruffalos detail in their brief, the problem here stems primarily from the release provision, which required them to "execute a release prepared by defense counsel." The Ruffalos' attorney apparently wanted the release to be more like a comprehensive "settlement agreement," containing all of the various provisions set forth in the "Mediation Agreement." Reinforcing this fact is their assertion in their brief that, "[d]espite [their] best efforts, they could not get a completed settlement agreement." Thus, it appears to be the fight over the terms of the required release that essentially provides the basis for the Ruffalos' argument that "there was no meeting of the minds and therefore the mediation agreement is not a legally binding settlement agreement."

As the trial court observed, however, "[t]housands and thousands of settlements occur in California every year wherein the parties settle a case and agree to sign a separate release in the future. It is well known to legal practitioners that releases normally contain standard clauses such as waiver of Civil Code Section 1542 and indemnification. It is also well known to legal practitioners that normally a release does not contain all the terms of a written settlement. It is common practice that releases are often drafted and executed separately from written settlement agreements." (Bolding omitted.)

Here, the "Mediation Agreement" provided that the Ruffalos would dismiss their case "with prejudice and execute a release prepared by defense counsel." The agreement did not provide that defense counsel would draft a formal settlement agreement containing all of the terms on which the parties had agreed in mediation. Moreover, defendants "acknowledge that they and their attorney were bound by the covenant of good faith and fair dealing in" preparing the release. Under these circumstances, the release provision is not so hopelessly ambiguous and indeterminable that the "Mediation Agreement" fails entirely as an agreement because of it.

For the foregoing reasons, the "Mediation Agreement," which was signed in the course of mediation by defense counsel and which provided that it was "enforceable," was a written settlement agreement within the meaning of Evidence Code section 1123 that was not subject to mediation confidentiality, and therefore the trial court did not err in overruling the Ruffalos' objection to the admission of that agreement in support of the summary judgment motion.

II

Breach Of The Agreement

The Ruffalos contend that even if the "Mediation Agreement" was admissible, the trial court erred in granting summary judgment in favor of defendants because there was, at the very least, a triable issue of fact as to whether defendants breached the agreement in such a manner as to excuse the Ruffalos from performing their obligations under the agreement, including dismissing their case with prejudice.

The only authority the Ruffalos cite in support of this argument -- other than Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107 for the proposition that the court's role in ruling on a motion for summary judgment is merely to determine whether issues of fact exist -- is Civil Code section 1439, which provides that "[b]efore any party to an obligation can require another party to perform any act under it, he must fulfill all conditions precedent thereto imposed upon himself; and must be able and offer to fulfill all conditions concurrent so imposed upon him on the like fulfillment by the other party, except as provided by the next section." Essentially, the Ruffalos appear to contend that defendants' various obligations under the terms of the settlement agreement were all conditions precedent to the Ruffalos' obligation to dismiss their action with prejudice, and since defendants did not perform their obligations (or at least there is a triable issue of fact as to whether they did), the trial court should not have granted judgment to defendants but should have allowed the Ruffalos to go forward with the litigation.

The Ruffalos' position is without support in the law. "The Supreme Court has explained that a settlement operates as a merger and ban as to all pre-existing claims and those alleged in the lawsuit that have been resolved." (Ebensteiner Co., Inc. v. Chadmar Group (2006) 143 Cal.App.4th 1174, 1179.) The "remedy for the failure to perform the settlement agreement must be based 'exclusively' on that agreement." (Id. at p. 1181.)

Accordingly, the trial court was correct when it stated that "[t]he parties' discussions concerning breach of the [settlement] agreement are immaterial" because "[w]hether or not the parties have breached the agreement is subject to future litigation." As the trial court recognized, the Ruffalos' remedy for defendants' alleged breach of the settlement agreement is to bring a separate action for breach of that agreement; they have no right to continue with the present action.*fn4

DISPOSITION

The judgment is affirmed. Defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

We concur: BLEASE , Acting P. J. HOCH , J.


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