Articles Posted in settlement

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In a recent California case, a homeowner sued their community Homeowner’s Association (“HOA”) for failing to enforce the Conditions, Covenants, and Restrictions (CC&Rs). They also sued other homeowners, who supposedly violated the restrictions.

Apparently the parties had tentatively reached a settlement outside court just before the day of trial, so on the day of trial, the parties appeared in court to put the settlement on the record by reciting it orally in court (As allowed by Code of Civil Procedure §664.6). However, the HOA representative did not appear- their attorney was there to represent them. Later, the homeowners decided they did not like the terms of the settlement, and would not agree to it, so the HOA sued to enforce it.

Section 664.4 states “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, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement.” The question was what the legislature meant when it used the term ‘parties.’ The court noted that in other contexts the term party includes the litigant’s attorney, but settlement is such a serious step that ends the lawsuit, and requires the client’s express consent. It thus restricted the meaning of party to be the actual litigant themselves. As there was no authorized representative of the HOA in court, the settlement was unenforceable.

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California law provides a convenient way for parties in a lawsuit who reach a settlement to allow the court to enforce the settlement agreement, even if the settlement will take years to perform.  Code of Civil Procedure section 664.6 provides that if parties to pending litigation agree in a signed writing to settle the case, the court may, on the motion of a party, enter judgment pursuant to the settlement, and retain jurisdiction to enforce it.

A losing defendant recently found out that the the key words in this code section  are “pending litigation.”  He had a large money judgment against him, and two years later the winning plaintiff was levying his bank account.  The parties entered negotiations for payment of the debt for less then the full amount of the judgment.  Ultimately the creditor continued to go after the money, and the defendant brought a motion under 664.6, claiming they had reached a settlement.

The court denied it, pointing out that the case already had ended in a judgment that was final.   There was no pending lawsuit. The law only allows one final judgment, and the only thing 664.6 allows is entering a judgment.  The court contrasted this situation with post-divorce child support matters- there, the judgment usually provides for “continuing jurisdiction,” meaning that this is not the final judgment.