Filed 1/13/00

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

Plaintiffs/appellants Canal Street, Ltd., and Victor Catanzaro, individually and as general partner, appeal an order of dismissal for failing to bring their action against defendants/respondents Robert A. Sorich, William J. Sorich and Rose E. Sorich to trial within five years. (Code Civ. Proc., § 583.310.) Appellants contend a binding settlement agreement between the parties had concluded the action, rendering the five-year statute moot.

In 1980 appellants purchased a parcel of property in South San Francisco from respondents. In addition to his status as general partner of the purchaser, Catanzaro also acted as respondent’s real estate broker in the transaction. The property contained two underground storage tanks that had been installed and used by respondents and their tenants. In 1989 appellants removed the tanks under the direction of the San Mateo County Health Services Agency (Agency), and during the removal process learned the tanks had leaked and the property was contaminated with petroleum hydrocarbons.

On August 4, 1992, appellants brought an action against respondents for damages appellants incurred in cleaning up the contamination. At the same time they applied to the Underground Storage Tank Cleanup Fund (Fund), administered by the State Water Resources Control Board, for reimbursement of their cleanup costs. When the action commenced appellants were represented by George Benetatos and respondents by Alan Phillips. In July 1994, John Hartford substituted in as counsel for A.W. Sorich, and Alan Phillips continued to represent Rose Sorich. In November 1994 each respondent cross-complained against Catanzaro for indemnification and breach of his duty to represent them fairly as their broker in the sale of the property.

On November 26, 1996, two weeks before the scheduled trial date, the case settled during a judicially mandated settlement conference. As recited for the record by Benetatos, respondents agreed to pay appellants a total of $400,000: "$250,000 shall be paid within 30 days of receipt of final approval of the [Fund], that [it] will not seek reimbursement of remediation costs from any of the settlement proceeds," with a daily penalty of $1,000 if not timely paid. Appellants concurred with Hartford’s specification that "[t]he burden of clearing the settlement with the appropriate authorities [was] a burden to be borne entirely by [appellants]."

Benetatos stated that the remaining $150,000 would be paid within five years or upon A.W. Sorich’s death, whichever occurred first, with an annual interest rate of 10 percent, and secured by a first deed of trust on certain South San Francisco commercial property. There would be a preliminary title report on this property, with the condition of title subject to appellants’ approval. Benetatos agreed with Phillips that if respondents prepaid the $150,000, there would be no prepayment penalty.

Benetatos also recited that the agreement would specifically state that the payment was to compensate appellants for lost income resulting from contamination, loss of profits from inability to develop the property, increased costs due to contamination, and attorney fees, that the parties agreed to dismiss their respective cases with prejudice, that mutual releases under Civil Code section 1542 would apply to the terms of the settlement agreement, and that appellants agreed to indemnify and hold respondents harmless from any future claims by the Fund concerning the property.

The parties agreed that appellants were responsible for a bill of approximately $9,000 that respondents had received from the Agency for overseeing remediation of the property. Observing that there would likely be multiple drafts of the agreement, Phillips requested that appellants begin the drafting process and send respondents the drafts for approval. Appellants agreed.

The court specifically asked the attorneys if it was correct they had "reached a settlement in this case after an all day settlement conference?" They all answered affirmatively. A.W. Sorich and Catanzaro also told the court that they heard and understood the terms of the agreement, were entering it willingly, and understood it to be a final settlement. When Phillips expressed concern that he wanted to be certain "that the record is clear, everyone is in agreement with this settlement and not just the parties present," Benetatos and Catanzaro stated they were authorized to settle on behalf of all plaintiffs. Phillips stated he had authority to settle on behalf of Rose Sorich, "who consents to this settlement in the manner and form provided." The scheduled trial date was vacated.

On December 13, 1996, Benetatos sent a draft of the settlement agreement to the Fund and asked for verification that it would not seek reimbursement from the settlement proceeds. He requested prompt attention because the settlement was contingent on the Fund not seeking reimbursement from the settlement funds.

In February and March 1997, respectively, appellants discharged Benetatos and retained Richard Jacobs as their attorney.

On March 6, 1997, Jacobs sent respondents a proposed settlement agreement. Its payment terms mirrored those articulated on the record at the November 26, 1996, settlement conference, including the Fund approval condition.

On March 11, 1997, the Fund responded to Benetatos that it was inappropriate for it to comment on or approve draft agreements. The Fund, which had reimbursed appellants $107,988 to date, copied the letter to Hartford and Phillips.

Phillips and Jacobs corresponded in the ensuing months on acceptable language for the written settlement agreement. On April 30, 1997, Phillips informed Jacobs that respondents would pay the entire settlement in a lump sum, and that he was holding their $400,000 cashier’s check in anticipation of a full settlement. He asked that the relevant portions of the March 6 draft agreement be changed accordingly.

On June 12, 1997, Jacobs sent Phillips a revised settlement agreement "to reflect all the points we discussed yesterday morning. I am very pleased that we have reached final agreement on the text." The revised agreement states that respondents will pay appellant a lump sum of $400,000 within 10 days after "after exchange of fully executed counterparts of the Agreement." It contains no provisions regarding Fund approval.

On July 1, 1997, A.W. Sorich died.

In August 1997, Jacobs wrote to Phillips asking that respondents execute the settlement agreement. On September 15, 1997, Jacobs, on appellants’ instruction, forwarded to respondents a letter from Catanzaro which stated that appellants’ offer to settle the litigation was withdrawn and settlement discussions terminated, except upon certain conditions, i.e., immediate payment of $400,000 and default payment of $1,000 per day beginning June 11, 1997.

On September 30, 1997, Jacobs withdrew as appellants’ counsel of record.

Between October and December 1997 respondents moved for and then voluntarily dismissed their motions for an order to deposit the $400,000 settlement with the court (Code Civ. Proc., § 572), and for judgment on the settlement (§ 664.6). During the same period appellants wrote respondents several times that they were prepared to reject the settlement and proceed to trial unless the $400,000 sum included interest and daily late penalty charges from June 11, 1997, to date. On November 11, 1997, they retained their present attorneys.

On December 15, 1997, Hartford wrote appellants’ new attorney demanding that appellants satisfy their settlement obligations to pay the $9,000 oversight invoice and obtain final approval from the Fund that it would not seek reimbursement from the settlement proceeds.

On January 7, 1998, respondents moved for dismissal of the action based solely on appellants’ failure to bring the case to trial within five years of its August 4, 1992, commencement. (§ 583.310.) They acknowledged that a settlement was reached at a settlement conference, but argued that since the settlement was not reduced to judgment within the five-year period of section 583.310, the action had to be dismissed. Appellants opposed the motion on the ground the five-year statute was tolled by the settlement.

Appellants then moved under section 664.6 for judgment pursuant to the November 26, 1996, settlement and under section 572 for an order requiring respondents to deposit the $400,000 settlement sum with the court. They argued that the Fund approval provision in the November 26, 1996, settlement was inserted to protect their interests, that the parties agreed to a lump sum payment when the Fund refused approval, that the new payment schedule was agreeable to appellants who had alleviated their concerns with the Fund, that it was agreeable to respondents insofar as they had a cashier’s check issued, and that they (appellants) could waive a condition that was solely for their benefit.

Appellants’ two motions were consolidated for hearing with respondents’ motion to dismiss. The court ruled that the November 26, 1996, settlement was conditioned on appellants obtaining approval of the settlement from the Fund. It further concluded that because the Fund never approved the settlement, no settlement was ever reached. It then dismissed the action. The order of dismissal recites that the action was dismissed on the grounds that no settlement occurred. This, of course, is not a valid ground for dismissal, and we interpret the order, as do the parties, as dismissing for the reasons advanced by respondents—failure to bring the action to trial or have the settlement reduced to judgment within five years.

Appellants contend the dismissal of their action under section 583.310 was erroneous because the five-year dismissal period was tolled by the November 26, 1996, settlement. Respondents rely on Varwig v. Leider (1985) 171 Cal.App.3d 312 (Varwig) which held that an action that is not brought to trial or reduced to judgment within five years of its commencement must be dismissed, even when settlement of the action in a pretrial conference disposed of all issues and the action was taken off calendar.

Varwig is contrary to the other cases that have considered this issue. (See Brown & Bryant, Inc. v. Hartford Accident & Indemnity Co. (1994) 24 Cal.App.4th 247, 255 (Brown & Bryant, Inc); Malouf Bros. v. Dixon (1991) 230 Cal.App.3d 280, 285 (Malouf Bros.); Schiro v. Curci (1990) 220 Cal.App.3d 840, 844-845 (Schiro); Gorman v. Holte (1985) 164 Cal.App.3d 984, 988 (Gorman).) These cases uniformly agree that once there has been a settlement in open court, the court can reasonably assume the matter has been finally disposed of and will not go to trial, even though details of execution may remain; consequently, there is no compelling reason a settlement agreement must be reduced to judgment within five years. As Gorman observed, section 583.310 does not require a case to reach judgment in five years, but merely that trial commence within that period. (Gorman, supra, at p. 988.) Gorman and its progeny also reason that the Varwig view thwarts the policy favoring settlements by discouraging settlement negotiations as the end of the five year period approaches. (See Brown & Bryant, Inc., supra, at pp. 254-255.)

Additionally, since Varwig the five-year statute has been amended to particularly incorporate what had been simply a judicially created exception to the mandatory five-year dismissal. The computation of the five-year period now specifically excludes the time during which bringing the action to trial was impossible, impracticable, or futile. (§ 583.340, subd. (c).) As both Schiro and Brown & Bryant, Inc. conclude, the time during which a settlement agreement is in effect tolls the five-year period, for the reason that attempting to bring an action to trial when all issues have been resolved through settlement would be futile. (Brown & Bryant, Inc., supra, 24 Cal.App.4th at pp. 255-257; Schiro, supra, 220 Cal.App.3d at p. 845.)

The trial court understandably followed Varwig, an opinion from this district, but for the reasons articulated therein, we conclude Brown & Bryant, Inc., Malouf Bros., Schiro, and Gorman enunciate the better rule, and that section 583.310 was tolled following recitation of the November 26, 1996, settlement on the record.

Preliminarily, we note that the record was not entirely clear whether the parties mutually rescinded their settlement and negotiated a new and different settlement, in which case such a settlement could not be enforced by section 664.6. However, at oral argument the parties agreed that the only settlement they agreed upon was that entered into before the court on November 26, 1996.

"If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case . . . , the court, upon motion, may enter judgment pursuant to the terms of the settlement." (§ 664.6.) Section 664.6 is an expedited summary procedure for enforcing a settlement without the necessity of a new action. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809 (Weddington).) It is an appropriate procedure when issues relating to the binding nature or terms of a settlement are in dispute, because the trial court is empowered to resolve these disputed issues and ultimately determine whether the parties reached a binding mutual accord as to the material terms. (In re Marriage of Assemi (1994) 7 Cal.4th 896, 905.)

In ruling on such a motion "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 their understanding of those terms, and (3) the parties expressly acknowledged their understanding of and agreement to be bound by those terms." (In re Marriage of Assemi, supra, 7 Cal. 4th at p. 911.) To determine whether there has been a binding settlement, the court may consider declarations of the parties and their attorneys as well as the transcript of the settlement stipulation. The substantial evidence standard applies to review of a trial court’s determination of whether there has been a binding settlement. (Ibid.)

Settlement agreements are a species of contract and are governed by the same legal principals applicable to contracts generally. (In re Marriage of Hasso (1991) 229 Cal.App.3d 1174, 1180.) An essential element of any contract is mutual consent, which is determined by the objective test of whether a reasonable person would, from the conduct of the parties, conclude there was mutual agreement. (Weddington, supra, 60 Cal.App.4th at p. 811; Hilleary v. Garvin (1987) 193 Cal.App.3d 322, 327.) The contract must evidence a meeting of the minds on the essential terms of the agreement. (Kerner v. Hughes Tool Co. (1976) 56 Cal.App.3d 924, 932-933.) Absent evidence that the parties agreed "upon the same thing in the same sense," there is no mutual consent to the contract, and no contract formation. (Civ. Code, § 1580; Weddington, supra, at p. 811.)

In this case the parties dispute whether they agreed that their settlement would only take effect if the Fund gave final approval that it would not seek reimbursement of remediation costs from the settlement proceeds. The resolution of this dispute depends on which party this condition favors, because when an agreement contains a condition that is solely for the benefit of one party, that party may waive the condition, and "‘that condition of the contract must be considered as having been fulfilled.’ [Citation.]" (Wesley N. Taylor Co. v. Russell (1961) 194 Cal.App.2d 816, 828-829.) To determine which party is the beneficiary of the Fund approval condition, the court must consider all the terms of the settlement agreement and the circumstances surrounding it. (See In re Marriage of Hasso, supra, 229 Cal.App.3d at p. 1180-1181.)

Appellants simultaneously sought damages from respondents and costs from the Fund for expenses related to contamination of their property from underground storage tanks. A property owner whose underground storage tanks have contaminated the property may claim from the Fund all reasonable and necessary costs that have or will be incurred in taking corrective action. (Health & Saf. Code, §§ 25299.54, 25299.57, subd. (b)(1); Cal. Code Regs., tit. 23, § 2812.2, subd. (a).) A claimant is not entitled to double recovery for corrective action costs; when a claimant receives reimbursement for such costs from both the Fund and another source, the Fund is entitled to reimbursement. (Cal. Code Regs., supra, § 2812.2, subd. (b).) "Court approved settlements will be carefully reviewed to assure that any costs awarded are reasonable and eligible." (Cal. Code Regs., supra, § 2812.2, subd. (c).)

Certain indirect costs related to corrective actions, e.g., attorney fees, finance charges and loss of rents are ineligible for reimbursement from the Fund. (Cal. Code Regs., supra, § 2812.2, subd. (d).) Therefore, if the claimant can establish that a third party recovery was for such costs, the claimant would not be obligated to reimburse the Fund for those amounts. This factor would be significant to plaintiffs weighing the advantages of settling their third party actions for less than what they deem to be their total damages from contamination clean-up, i.e., their direct cleanup costs plus their damages.

According to the settlement terms articulated on the record, the approval to be sought from the Fund was that the Fund would not seek reimbursement from the settlement proceeds. Appellants, not respondents, were the recipients of the settlement proceeds, and appellants, not respondents, were reimbursement claimants to the Fund. It was in appellants’ interest to obtain Fund approval, as assurance that the money they received in settlement would be theirs to keep, not subject to repayment to the Fund. As Catanzaro declared in support of appellants’ section 664.6 motion, appellants requested the Fund approval condition because they did not want to settle the case and then have the Fund deduct the settlement amount from amounts reimbursable by the Fund. According to the settlement agreement placed on the record, the dispersal of the proceeds once they were transferred to appellants would have no effect on respondents.

At the hearing on the November 26, 1996, settlement, A.W. Sorich’s attorney’s emphasis that the burden for obtaining Fund approval lay entirely with appellants underscores the fact that approval was crucial to appellants. Respondents, as payors of the settlement proceeds, would have no reason to undertake the additional time and expense of procuring Fund approval that the proceeds, once in appellants’ hands, would be secure from Fund entitlement. Likewise, the absence of any language at the settlement hearing to the effect that respondents would pay the settlement sum only if or conditioned on Fund approval militates against the Fund approval term as a condition favoring respondents. As the terms were recited, respondents simply agreed to pay the settlement sum within 30 days of the Fund’s approval, not subject to the Fund’s approval. To the extent that respondents are now arguing that Fund approval was in their interest because it would provide assurance that the pertinent government agencies would not seek clean-up reimbursement from them, that concern was satisfied by appellants’ agreement to pay the outstanding oversight invoice and to indemnify and hold respondents harmless from future claims by the Fund.

Under the circumstances at the time of the settlement, the only reasonable inference is that the condition of Fund approval was inserted by appellants to give them an option not to consummate the settlement agreement if they failed to obtain approval. Appellants presented no substantial evidence—reasonable, credible, and of solid value (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 51)—to contradict this inference. As such, the condition was appellants’ to waive.

Once appellants waived the Fund approval condition, the next question is whether the record demonstrates that the parties reached a "binding mutual accord" on all remaining material terms (In re Marriage of Assemi, supra, 7 Cal.4th at p. 905), so as to allow the court to enter judgment on a section 664.6 motion.

The transcript of the November 26, 1996, hearing manifests such a binding settlement. The material terms were explicitly defined—the total monetary amount of the settlement, the payment method, the rate of late penalties, the necessity of indemnification and mutual releases, and the obligation for the $9,000 oversight invoice. The court thoroughly interrogated the parties and their attorneys, all of whom specifically agreed the terms were accurately recited and fully understood and that the settlement was final. Based on this transcript, a judgment on the settlement could be entered.

Respondents argue that the court correctly dismissed the action on contract principles, given Catanzaro’s September 15, 1997, letter to respondents that the offer to settle was withdrawn and settlement terminated. The short answer to this contention is that a party to a stipulated settlement may be relieved therefrom only by court order (Roth v. Morton’s Chefs Services, Inc. (1985) 173 Cal.App.3d 380, 385), and no such order was ever entered. Consequently, Catanzaro’s letter does not legally suffice to rescind the settlement.

Respondents also argue that the case was correctly dismissed because appellants did not comply with California Rules of Court, rule 225, which requires a plaintiff to file a request for dismissal of a settled case 45 days after the settlement date. This rule is among the rules governing court management, and its clear purpose is to apprise the court of settlement. The rule is irrelevant to a case like this which settles in open court and where the minutes reflect the trial date has been vacated.

Finally, respondents assert for the first time that the settlement is unenforceable because neither plaintiff Millie Catanzaro nor defendant/respondent Rose Sorich were present at the hearing on the November 26, 1996, settlement, and personally stipulated thereto. Having not raised this issue in the trial court, they are precluded from doing so on appeal. (Estate of Westerman (1968) 68 Cal.2d 267, 279; In re Riva M. (1991) 235 Cal.App.3d 403, 411-412.)

The order of dismissal is reversed. The matter is remanded to the superior court with directions to reconsider appellants’ section 664.6 motion and enter judgment thereon, including in such judgment any interest or penalties which may be due. We do not imply by our decision that appellants are entitled to any interest or penalties, but merely that the interests of judicial economy are best served if those issues are resolved in one proceeding.

HANING, J.

We concur.

JONES, P.J.