Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_10-cv-08259/USCOURTS-azd-3_10-cv-08259-3/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1444 Petition for Removal- Foreclosure

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Jay Kentera and Julie Kentera, husband

and wife, 

Plaintiffs, 

vs.

 

Fremont Investment & Loan, nka Fremont

Reorganizing Corporation, a California

Corporation, et al.,

 Defendants.

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No. CV-10-8259-PCT-SMM

MEMORANDUM OF DECISION 

AND ORDER

Pending before the Court is Defendants’ motion to enforce settlement agreement.

(Doc. 86.) The motion is fully briefed. (Docs. 87, 88, 91.) The parties entered into a

Settlement Agreement (“Agreement”) to resolve litigation in October 2013. Defendants

move to enforce the Agreement contending that Plaintiffs have since failed to abide by the

terms of the Agreement. Plaintiffs claim that the Agreement cannot be enforced as it is void

due to a number of factors, including lack of mutual consent, unilateral mistake, or mutual

mistaken fact. The Court, having considered Defendants’ motion and the briefing submitted

by the parties, will grant Defendants’ motion and enforce the settlement agreement.

Background

The terms of the Agreement require that Plaintiffs dismiss the action before the Court

within five days of receiving the copy of the Agreement signed by the Defendants, that

Plaintiffs pay $370,000 as a discounted payoff on the foreclosed mortgage loan, and that the

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Defendants rescind the foreclosure sale and restore title to the Plaintiffs as it existed prior to

the foreclosure sale, and then record a satisfaction of mortgage. (Doc. 86 at 3; Doc. 86-2 at

6-7.) According to the Agreement, after the Agreement was executed in October 2013

Plaintiffs were to file a stipulation for dismissal with prejudice. (Doc. 86-2 at 7.) Plaintiffs

have not done so.

Plaintiffs claim to have discovered a superior lien in November 2013 while

conducting a preliminary title report. (Doc. 86 at 6.) The beneficiary of the newly

discovered superior lien is a business partner of the Plaintiffs. (Doc. 87-2 at 9, 11; Doc. 86-1

at 2.) Plaintiffs claim not to have known about the superior lien at the time of the

Agreement. (Doc. 88 at 2.) Defendants posit that this is irrelevant, as the condition of the

title was never part of the Agreement.

Standard of Review

The Court has broad power to enforce settlement agreements. See, e.g., Callie v.

Near, 829 F.2d 888, 890 (9th Cir. 1987). However, “where material facts concerning the

existence or terms of an agreement to settle are in dispute, the parties must be allowed to

have an evidentiary hearing.” Id.

A federal court sitting in diversity applies state substantive law. See Hambleton Bros.

Lumber Co. v. Balkin Enterprises, Inc., 397 F.3d 1217, 1227 (9th Cir. 2005). Generally, the

construction and enforcement of settlement agreements are governed by general contract

principles under state law. See Hisel v. Upchurch, 797 F. Supp. 1509, 1517 (D. Ariz. 1992).

Discussion

1. Mutual Consent.

A binding contract requires that the parties mutually agree to its terms. See e.g.,

Carrol v. Lee, 148 Ariz. 10, 13, 712 P.2d 723, 726 (1986). Plaintiffs claim that the

Agreement is void as the parties failed to mutually agree to the same intended meaning.

Specifically, Plaintiffs claim that their negotiations were for property “free and clear of any

lien.” (Doc. 87 at 2.) Defendants argue the terms of the Agreement were for what was

stated, a reduced payoff of the loan that Plaintiffs borrowed from the Defendants. (Doc. 91

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at 2.)

Plaintiffs’ argument falls flat. Plaintiffs fail to point to any evidence suggesting their

subjective intent to join the Agreement contingent upon the property being free of superior

liens. As read, the Agreement is for a discounted payoff of a loan. (Doc. 96-2 at 6.)

Defendants provided no warranty as to title. Nowhere in the email correspondence prior to

Agreement is there any indication of Plaintiffs’ intent that the title be free of superior liens.

Defendants’ first description of the condition of title was not until November 20, 2013 (Doc.

86-2 at 30), and was offered gratuitously to aid Plaintiffs in obtaining a loan to pay off the

reduced loan amount. This correspondence, that Plaintiffs argue is evidence of defense

counsel clarifying the terms of the Agreement (Doc. 87 at 3), was more than one month after

the Agreement was executed, and nearly a month after Plaintiffs were required to file a

motion to dismiss this action with prejudice. (Doc. 87-2 at 24.) The Court will enforce the

Agreement in accordance with the terms that the parties objectively agreed to at the time.

2. Unilateral or Mutual Mistake.

The Agreement will only be void due to unilateral mistake if the mistake was material,

is adverse to the mistaken party, the mistaken party does not bear the risk of mistake, and that

the other party had reason to know of the mistake. See U.S. v. Talley Defense Systems, Inc.,

393 F. Supp.2d 964, 972 (D. Ariz. 2005). Additionally, the Agreement is void due to mutual

mistake if the mistake was to a material element and the party seeking rescission did not bear

the risk of mistake. See Nelson v. Rice, 198 Ariz. 563, 566, 12 P.3d 238, 241 (App. 2000).

The Restatement (Second) of Contracts § 154 clarifies which party carried the burden of the

risk. Id. A party bears the risk when the risk is allocated to it by the agreement. Id. § 154(a).

In addition, a party bears the risk if “he is aware, at the time that the contract is made, that

he has only limited knowledge with respect to the facts to which the mistake relates but treats

his limited knowledge as sufficient.” Id. § 154(b).

Here, the mistake was not material to the Agreement. The Agreement included no

comment about the condition of title, only that the payment constituted a reduced payoff of

the loan. Plaintiffs do not point to any evidence that shows why the condition of title is

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Under the “Changed Circumstances” term, “Borrower agrees that if any facts, claims

or circumstances relating to or with respect to the action of which this Agreement is executed

are at any time later found, suspected, or claimed to be other than or different from the facts,

claims and circumstances now believed by Borrower to be true, that Borrower expressly

accepts and assumes the risk of such possible differences of facts, claims and circumstances

and agrees that the releases set forth herein shall be and remain effective notwithstanding any

such differences in any facts, claims or circumstances.

In addition, Borrower acknowledges the risk and the possibility that other claims not

known may develop or be discovered or consequences or results of claims may develop or

be discovered in the future. Borrower expressly acknowledges the risk that there may be

claims released herein, which he may not know or suspect to exist, whether through

ignorance, oversight, error, negligence, or otherwise, and which, if known would affect his

decision to enter into this Agreement.” (Doc. 86-2 at 8.)

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material to the Agreement. The Court does not find that an additional superior lien on the

title is material to parties’ Agreement to pay off the loan and dismiss the present action.

It is irrelevant if the mistake is adverse to Plaintiffs by making it more difficult to raise

funding because Plaintiffs assumed the risk as stated by the “Changed Circumstances” term

of the Agreement.1

 (Doc. 86-2 at 8.) Even if the “Changed Circumstances” term in the

agreement does not establish that Plaintiff beared the risk, under Restatement (Second) of

Contracts § 154(a), Plaintiff clearly bears the risk as defined in §154(b). Plaintiff entered

into the Agreement knowing he had limited knowledge regarding the condition of title.

Plaintiff bears the risk for entering into the agreement without verifying the condition of title

and presuming there would not be additional interests. For these reasons, Plaintiffs bore the

risk of mistake and the Agreement is not void due to unilateral or mutual mistake. 

Additionally, Plaintiffs allege that Defendants had some sort of knowledge as to the

existence of Plaintiffs’ mistake. (Doc. 87 at 2). Plaintiffs claim that their potential to make

a mistake about the validity of the title should be clear based on their own testimony during

deposition. (Id.)

The Court finds that it is not clear from reviewing Jay Kentera’s deposition what he

thought about the validity of the title, only that he knew an additional party may have an

interest. (Doc. 87-2 at 11.) Stating that there may be an additional interest does not provide

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notice to Defendants about Plaintiffs’ ability to make a mistake when entering into the

Agreement. As already established, Plaintiffs bore the risk for entering into the agreement

without verifying condition of title.

Conclusion

Accordingly, based on the foregoing, 

IT IS HEREBY ORDERED granting Defendants’ motion to enforce the settlement

agreement. (Doc. 86.) 

IT IS FURTHER ORDERED enforcing the terms of the settlement agreement as

follows: Plaintiff shall submit a stipulation to dismiss its claim with prejudice within five

days of this Order, per the terms of the Agreement. (Doc. 86-2 at 7.)

Plaintiffs shall pay to Defendants the $370,000.00 discounted payoff amount agreed

to. (Id.) As the pay-by date set in the Agreement has already passed, Plaintiff shall have

eight days to make this payment from the date of this Order. The eight days the Court

assigns correspond to the eight days allowed in the Agreement between the contract’s

formation on October 17, 2013 and the original pay-by date of October 25, 2013. (Id. at

6,12.)

IT IS FURTHER ORDERED pursuant to LRCiv 54.2 denying without prejudice

Defendants’ request for attorney’s fees as premature. Attorney fee applications must be filed

in accordance with this District’s local rules.

DATED this 25th day of June, 2014.

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