By Glen C. Hansen
The recent decision by the Court of Appeal, Second Appellate District, Division Three in Hines v. Lukes (2008) 167 Cal.App.4th 1174 describes how a judgment entered pursuant to a settlement agreement under Code of Civil Procedure section 664.6 must include all of the material terms of the settlement.
Plaintiff Noel Hines and Defendant Pat Lukes owned and resided on contiguous lots in the City of Los Angeles. Lukes also owned an easement over a portion of the Hines property. The parties disputed the scope of that easement. Hines filed a complaint against Lukes alleging that the easement is “solely for ingress, egress and drainage,” as stated in an easement recorded on May 14, 1979. Hines also alleged that Lukes had exceeded the scope of permissible uses of the easement by “permanently parking vehicles” in the easement area, and by placing trash bins, a dumpster, and waste in the easement area. In a cross-complaint, Lukes alleged that the easement is not only for ingress, egress, and drainage, but also for “general driveway purposes,” as stated in a recorded easement dated February 7, 1980.
In the litigation, the parties participated in a mandatory settlement conference. At the conclusion of the conference, the parties orally, before the court, agreed to a settlement on stated terms. The settlement provided that: 1) Lukes would resurface the portion of the driveway in front of her garage, including the easement area; 2) Hines would resurface the portion of the driveway on his property, excluding the easement area; 3) Lukes’s insurance carriers would pay one-half of the cost of the resurfacing to be done by Hines, not to exceed $4,000; 4) both parties would “use concrete materials” for the resurfacing and would resurface the driveway in “a neutral color”; 5) the work would be done at the same time, but not necessarily by the same contractor; 6) the work would be completed within one year after the date of the oral settlement; 7) Lukes would keep her garbage cans on her own property and not in the easement area; and 8) Lukes would park no more than two vehicles in the driveway in front of her garage, including one of her own and one of a visitor, and neither she nor her visitors would park on the Hines property outside the easement area. The settlement also provided that the court would retain jurisdiction to enforce the terms of the settlement and that the parties would participate in a mediation before applying to the court to enforce the settlement.
Two years later, Hines filed a motion for entry of judgment settlement under section 664.6 based on the settlement orally read into the record. The parties strenuously disagreed as to whether both of the parties were in breach of the terms of the settlement. After giving the parties opportunity to mediate the dispute pursuant to the terms of the settlement, the trial court granted the motion. In the tentative ruling, the trial court quoted some, but not all, of the settlement terms from the reporter’s transcript of the mandatory settlement conference. A minute order granting the motion attached the tentative ruling, but no formal judgment was entered by the trial court. Lukes appealed from that order. The court of appeal reversed.
Initially, the court of appeal amended the trial court’s minute order to include an appealable judgment.
Then, the court of appeal focused on the requirement that a settlement is enforceable only if the parties agreed to all material settlement terms. In the context of a section 664.6 motion, a court must determine whether the parties entered into a valid and binding settlement. To make that determination, the court may consider the parties’ declarations and other evidence in deciding what terms the parties agreed to. If the court determines that the parties entered into an enforceable settlement, it should grant the motion and enter a formal judgment pursuant to the terms of the settlement. (The court of appeal disregarded the hotly disputed issues of whether either one of the parties breached the settlement terms, or whether their nonperformance was excused, because “a party moving for the entry of judgment pursuant to a settlement under Code of Civil Procedure section 664.6 need not establish a breach of contact to support relief under the statute.”)
The court of appeal held that the trial court’s order failed to comply with section 664.6 because it failed to accurately reflect the parties’ agreement. The minute order stated some of the settlement terms, but omitted others. For example, the minute order did not include the terms relating to resurfacing by Hines, the insurers’ payment for that work, the placement of Lukes’s garbage cans, the parking of Lukes’s and her visitors’ vehicles, or the mutual release. Thus, the court of appeal reversed the trial court’s judgment with directions to either: 1) enter a new judgment pursuant to the terms of the settlement, setting forth all of the material terms that have yet to be fully performed (the terms must be stated “clearly and concisely, rather than quote an extended colloquy from the reporter’s transcript”), or 2) if the trial court finds that the parties failed to agree to all material terms, deny the motion for entry of judgment pursuant to a settlement because there is no enforceable settlement.
Thus, the Hines decision demonstrates the importance of clearly setting forth all of the material terms of the settlement in a judgment under Code of Civil Procedure section 664.6. As the court of appeal reasoned, the failure to enter a judgment reflecting all of the material terms of settlement that have yet to be fully performed could defeat the purposes of the settlement and spawn further litigation. The case also illustrates why counsel should make sure that every material term of a settlement is carefully read into the record when the settlement is orally presented to a court at the conclusion of a settlement conference.
Glen Hansen is a senior associate at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.