Court Opinion

ID: 4690492
Source: CourtListenerOpinion
Date Created: 2021-05-26 21:04:49.102052+00
Date Added: 2024-06-11T08:05:00.529875
License: Public Domain

Filed 4/30/21; Certified for Publication 5/26/21 (order attached)

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

    ANTONIO ARRIAGARAZO et al.,                                            C090980

                   Cross-complainants and Appellants,               (Super. Ct. No. 161863)

          v.

    BMW OF NORTH AMERICA, LLC, et al.,

                   Cross-defendants and Respondents.

         Cross-complainants and appellants Antonio Arriagarazo and Alicia Rodriguez de
Arriaga (appellants) accepted an offer to compromise their wrongful death suit against
cross-defendants and respondents BMW of North America and Bayerische Motoren
Werke AG (BMW) pursuant to Code of Civil Procedure section 998,1 agreeing to sign a
general release in exchange for monetary payment. Judgment was entered on the

1        Undesignated statutory references are to the Code of Civil Procedure.

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compromise, however the trial court subsequently vacated the judgment as void on the
ground that BMW’s section 998 offer purportedly did not contemplate entry of judgment.
Appellants contend the trial court erred in vacating judgment. We agree with appellants
and will reverse the trial court’s order.
                   FACTUAL AND PROCEDURAL BACKGROUND
       In January 2014, appellants’ son was injured in a car accident. He died in March
2016, and appellants filed this wrongful death action via cross-complaint against BMW
in September 2016.
       On April 3, 2019, BMW served appellants with an offer to compromise pursuant
to section 998. In exchange for $15,000 as “settlement of all claims and causes of action
being litigated in this action against [BMW],” appellants would “execute a general
release of all claims and causes of action against [BMW], with each side to bear their
own costs and attorney fees.” The offer did not otherwise specify how the case was to be
finally resolved, nor did it include a draft of the proposed general release. Appellants had
30 days in which to accept the offer.
       On April 10, 2019, counsel for appellants signed and returned an executed copy of
the section 998 offer acceptance form. The same day, appellants filed a notice of
settlement indicating a request for dismissal would be filed within 45 days after the
settlement. Later that day, counsel for BMW acknowledged receipt and promised to
provide a draft general release “shortly.”
       On April 17, 2019, counsel for BMW e-mailed appellants’ counsel a proposed
release2 and informed appellants that BMW “routinely require[ ] a basic confidentiality
clause” that would be included in the release. Counsel for appellants asked why the
settlement agreement was necessary, given that it was not part of the section 998

2      The record does not include any attachment to this e-mail.

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agreement and that a judgment was to be filed. BMW’s counsel replied that in its section
998 offers, “we don’t provide for entry of a judgment, instead we provide for settlement
and execution of a release exactly for this reason.” Appellants’ counsel responded that a
simple release would be fine, given that no confidentiality was contemplated or agreed
upon.
        On May 6, 2019, BMW’s counsel sent appellants’ counsel a copy of the proposed
release. Under its terms, appellants would agree to release BMW from any claim or
cause of action, whether known or unknown, arising from the January 2014 car accident.
Appellants also would provide a general release pursuant to Civil Code section 1542.
The agreement included confidentiality and indemnity clauses. Finally, appellants would
file a request for dismissal with prejudice within five days of receiving the settlement
proceeds. BMW’s counsel informed appellants that BMW was “insisting” on the
confidentiality clause.
        Appellants refused to sign the document prepared by BMW. Instead, on May 21,
2019, appellants signed and sent a different general release to BMW’s counsel, one that
did not include confidentiality or indemnity clauses. It also specified that, because the
release arose from the acceptance of a section 998 offer, a written judgment for the
court’s signature would be filed. BMW’s counsel responded, “Thank you!” and offered
to send a check promptly once payee information was received.
        Appellants’ counsel then sent to BMW’s counsel a proposed stipulated judgment
reflecting $15,000 in damages. The judgment stated it was pursuant to the accepted
section 998 offer to compromise. BMW’s counsel replied via e-mail that it was not
stipulating to entry of a judgment since the section 998 offer “provides for a settlement
and release, not entry of judgment.” The stipulated judgment was entered by the trial
court on May 28, 2019.
        On May 29, 2019, BMW’s counsel learned during a court appearance that the
judgment had been submitted to the court (but was unaware that it had been entered by

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the trial court a day before). She e-mailed appellants’ counsel expressing “dismay” that
appellants’ counsel had done so despite her expressed opposition. A legal secretary for
appellants’ counsel responded that, to the best of her knowledge, the judgment had not
yet been signed by the court or filed.
       On June 3, 2019, BMW submitted a written objection to entry of the judgment.
BMW’s counsel still assumed the judgment had not been entered because she had not
received any notice from the court.
       On September 25, 2019, BMW’s counsel learned during a case management
conference that judgment had in fact been entered by the court on May 28, 2019. The
trial court acknowledged that it had not provided notice of the entry of judgment, and that
the judgment had only recently been placed on the docket. The court deemed September
25 to be the date that BMW received notice of entry of the judgment.
       On September 26, 2019, BMW’s counsel proposed a resolution whereby the
judgment would be vacated by stipulation and a request for dismissal would be filed
instead, in exchange for execution of a settlement agreement and release without a
confidentiality clause. Appellants’ counsel did not respond to this offer.
       On October 10, 2019, BMW moved to vacate the judgment pursuant to section
437, subdivisions (a)(1) and (d), and section 663. BMW argued appellants submitted an
erroneous proposed judgment to the court, over BMW’s objection. According to BMW,
it never stipulated to entry of judgment. BMW requested the court to resolve the matter
as provided in the section 998 offer, which BMW argued meant a settlement payment in
exchange for a release and a filed request for dismissal. BMW stated it would not require
a confidentiality clause in the release.
       Appellants objected, arguing the judgment accurately reflected the parties’ intent
as expressed in the section 998 offer. Appellants also noted they had provided BMW
with a copy of the proposed judgment a week before it was entered. In addition,
appellants argued that section 998 contemplated and called for entry of judgment, and

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there was no mistake, fraud, misunderstanding, or other ground that would require the
court to vacate the judgment.
       After a hearing,3 the trial court vacated the judgment pursuant to section 473,
subdivision (d). Specifically, the court found the judgment was void because it was not
contemplated by the terms of the settlement offer. Appellants timely appealed.
                                       DISCUSSION
       Appellants argue the trial court erred in vacating the judgment and abused its
discretion in interpreting the section 998 offer as requiring appellants to dismiss their
case against BMW as part of the bargain. Appellants note that the offer neither called for
a judgment nor a dismissal, and that section 998, subdivision (b) results in a judgment
unless otherwise specified in the offer. Given the offer’s silence about how the case was
to be concluded, appellants argue the contract must be interpreted as including the
statutory default of judgment. Appellants argue BMW had the burden of drafting the
offer with sufficient precision and cannot later unilaterally add terms and conditions.
       BMW contends the trial court properly vacated the judgment because the parties
never stipulated to enter judgment under the section 998 offer. Citing Berg v. Darden
(2004) 120 Cal.App.4th 721 (Berg), American Airlines, Inc. v. Sheppard, Mullin, Richter
& Hampton (2002) 96 Cal.App.4th 1017 (American Airlines), and Goodstein v. Bank of
San Pedro (1994) 27 Cal.App.4th 899 (Goodstein), BMW notes there is no requirement
that a section 998 offer result in judgment. Without citing any authority, BMW argues
the offer’s general release requirement conveyed its intention to resolve the matter by
way of a dismissal since a release is “normally followed by a request for dismissal.” In
the alternative, BMW argues that it “immediately clarified” any uncertainty regarding the

3      The record does not contain a transcript of the hearing.

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disposition of the litigation in its correspondence with appellants “shortly after the
settlement was reached.”4
       We agree with appellants.
       We review for abuse of discretion a trial court’s decision to grant a section 473
motion and vacate a judgment entered pursuant to a section 998 compromise. (See
Pazderka v. Caballeros Dimas Alang, Inc. (1998) 62 Cal.App.4th 658, 669; see also
Uriarte v. United States Pipe & Foundry Co. (1996) 51 Cal.App.4th 780, 787.)
       Under section 998, a party to a civil 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).) The
offer must include “the terms and conditions of the judgment or award.” (Ibid.) Once the
offer is accepted, “the offer with proof of acceptance shall be filed and the clerk or the
judge shall enter judgment accordingly.”5 (§ 998, subd. (b)(1).)
       Because the section 998 process is contractual, we apply well-established contract
law principles to section 998 offers and acceptances, unless there is a conflict with
section 998 or applying such principles defeat its purpose. (T.M. Cobb Co. v. Superior
Court (1984) 36 Cal.3d 273, 279-280.) In interpreting a contract, the mutual intention of
the parties at the time the contract was formed governs. (Civ. Code, § 1636; Moss Dev.
Co. v. Geary (1974) 41 Cal.App.3d 1, 9.) We ascertain that intention solely from the
words used, but we also consider the circumstances under which the contract was made

4      To the extent BMW argues the trial court had alternative bases to vacate the
judgment under section 473, subdivision (a)(1), and section 663, we note that the trial
court stated its ruling was solely based on section 473, subdivision (d). We will limit our
review accordingly.
5     When a plaintiff does not accept the offer and fails to obtain a more favorable
judgment at trial, then the plaintiff cannot recover postoffer costs and must pay the
defendant’s postoffer costs. (§ 998, subd. (c)(1).)

                                              6
and the matter to which it relates. (Civ. Code, §§ 1639, 1647; Moss Dev. Co., supra, at p.
9.) We consider the contract as a whole and give the words their usual and ordinary
meaning, unless the words are given a special meaning or used in a technical sense. (Civ.
Code, §§ 1641, 1644; Moss Dev. Co., at p. 9.) Courts must refrain from altering or
rewriting a contract, and they must not “add a term to a contract about which the
agreement is silent.” (Moss Dev. Co., at p. 9.)
       As our Supreme Court has explained, “[a]lthough the acceptance of a section 998
offer leads to the entry of a judgment (§ 998, subd. (b)(1)), a section 998 offer may also
require the plaintiff to dismiss the action as a condition of settlement.” (DeSaulles v.
Community Hospital of Monterey Peninsula (2016) 62 Cal.4th 1140, 1155, italics added.)
For example, in both American Airlines and Goodstein, the court declined to invalidate a
section 998 offer that called for dismissal with prejudice, rather than judgment against the
defendant. (American Airlines, supra, 96 Cal.App.4th at pp. 1054-1056; Goodstein,
supra, 27 Cal.App.4th at pp. 905-906.) The plaintiffs in both cases had argued section
998 requires an offer to include the option of a judgment. (American Airlines, at p. 1054;
Goodstein, at p. 905.) The courts disagreed, reasoning that section 998 only requires that
the compromise results in a final disposition of the underlying litigation, and a dismissal
is the legal equivalent of a judgment in the plaintiff’s favor. (American Airlines, at pp.
1055-1056; Goodstein, at pp. 906-907.)
       However, unlike American Airlines and Goodstein, the section 998 offer here
never specified that appellants would be required to execute a dismissal in exchange for
the $15,000 settlement. Although the offer did require appellants to sign a general
release, BMW cites no authority that would require us to treat “general release” as a
technical term that would indicate that appellants would have been required to execute a
dismissal rather than allow judgment to be entered. Indeed, as demonstrated by the
different general releases drafted by the parties, a general release does not necessarily
require dismissal of the underlying lawsuit.

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       As explained in Berg, where a section 998 offer sets out certain settlement terms
but fails to specify whether acceptance would result in judgment, an award, or dismissal,
“the offer, by virtue of default to the statutory language, is simply intended as one to
‘allow judgment to be taken’ in exchange for the specified amount of funds.” (Berg,
supra, 120 Cal.App.4th at p. 728.) As the Berg court explained, under section 998, entry
of judgment is “the expected and standard procedural result unless specific terms and
conditions stated in the offer provide otherwise.” (Id. at p. 730.)
       As the drafter, BMW had the duty to make clear in its section 998 offer any
intention to stray from the usual path under section 998 of entry of judgment. (See Taing
v. Johnson Scaffolding Co. (1992) 9 Cal.App.4th 579, 585 [the offeror bears the burden
of assuring the offer is drafted with sufficient precision to permit the recipient to
meaningfully evaluate it and make a reasoned decision whether to accept it].) If BMW
had wished to deviate from the standard procedural result of section 998, it could have
proposed a general release coupled with a dismissal or otherwise stated clearly in the
offer that dismissal was required. As courts have explained, “[t]he true, subjective, but
unexpressed intent of a party is immaterial and irrelevant.” (Vaillette v. Fireman’s Fund
Ins. Co. (1993) 18 Cal.App.4th 680, 690 [finding a party had no right to recover attorney
fees when he failed to reserve this right in the agreement].)
       Given that appellants unconditionally accepted the section 998 offer as written, we
are not persuaded that BMW’s e-mailed “clarifications” should alter the result.6 (See
Ignacio v. Caracciolo (2016) 2 Cal.App.5th 81, 86 [a section 998 offer “must be strictly
construed in favor of the party sought to be bound by it”]; Pazderka v. Caballeros Dimas

6      At oral argument, counsel for BMW emphasized that BMW, in an e-mail, objected
to entry of a stipulated judgment. This fact is of no legal consequence. Because BMW
did not require appellants to dismiss the action as a condition of settlement in its section
998 offer, we default to the text of the statute, which contemplates entry of judgment.

                                              8
Alang, Inc., supra, 62 Cal.App.4th at pp. 671-672 [reversing trial court’s order to set
aside a judgment where counsel had mistakenly failed to include attorney fees and costs
in the section 998 offer to compromise]; see also Poster v. Southern Cal. Rapid Transit
Dist. (1990) 52 Cal.3d 266, 272 [favoring “bright line” rule in interpreting section 998].)
       In finding that the section 998 offer did not contemplate judgment, the trial court
abused its discretion and modified the offer’s terms. We therefore will reverse the trial
court’s order.
                                      DISPOSITION
       The order vacating judgment is reversed. Appellants are awarded their costs on
appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

                                                        KRAUSE                , J.

We concur:

      DUARTE                , Acting P. J.

      HOCH                  , J.

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Filed 5/26/21
                             CERTIFIED FOR PUBLICATION

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

 ANTONIO ARRIAGARAZO et al.,                                          C090980

                  Cross-complainants and Appellants,           (Super. Ct. No. 161863)

          v.                                                   ORDER CERTIFYING
                                                                 OPINION FOR
 BMW OF NORTH AMERICA, LLC, et al.,                              PUBLICATION

                  Cross-defendants and Respondents.

THE COURT:

        The opinion in the above-entitled matter filed on April 30, 2021, was not certified
for publication in the Official Reports. For good cause it now appears that the opinion
should be published in the Official Reports, and it is so ordered.

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                                EDITORIAL LISTING

     APPEAL from an order vacating judgment of the Superior Court of Butte County,
Tamara L. Mosbarger, Judge. Affirmed.

      John Kevin Crowley for Cross-complainants and Appellants.

      The Ryan Law Group, Timothy J. Ryan, and Rebekka Martorano for Cross-
defendants and Respondents.

BY THE COURT:

     DUARTE              , Acting P. J.

     HOCH                , J.

     KRAUSE              , J.

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