Fourth District, Division Three Rules the Offer in Uncertain in an Unpublished Opinion.
One of the practice treatises used by many California practitioners has a sample Code of Civil Procedure section 998 offer, which is a cost-shifting mechanism designed to encourage settlement and to penalize a party who fails to accept a reasonable settlement offer from an opponent. (For a review of past posts on this subject, see our “Cases: Section 998” link.) The practice treatise includes language by which a party allows judgment to be taken in a sum certain coupled with the pro-judgment party’s agreement to “a dismissal with prejudice of all of [his or her] claims from the Plaintiff’s Complaint.” Despite being in a practice guide, this language was found uncertain by the Fourth District, Division Three in Nelson v. Pickford Real Estate, Inc., Case No. G036366 (4th Dist., Div. 3 June 15, 2007) (unpublished).
In Nelson, San Juan Capistrano residential house purchasers sued the sellers, sellers’ brokers (Pickford Real Estate parties), and the purchasers’ own independent home inspector under various nondisclosure/breach of fiduciary duty theories, arising from water and mold damages suffered by the Nelsons shortly after their purchase of the house. Following an 11-day jury trial, Nelsons prevailed against the sellers (a jury verdict overturned on a new trial motion and ultimately reversed altogether in a subsequent binding arbitration award in sellers’ favor). Nelsons did not prevail against the brokers or home inspectors at trial. The brokers had made a 998 offer to settle for $15,001, but the offer included the “offer to judgment and dismissal” language discussed above. The trial court awarded brokers costs in the amount of $38,592.27, a determination reversed on appeal.
The Fourth District, Division Three, in a 3-0 opinion authored by Presiding Justice Sills, found that the offer was uncertain by asking the responding party (buyers) to do two inconsistent things—allow entry of judgment or dismiss their claims. Because 998 offers are to be strictly construed in favor of the responding party (Garcia v. Hyster Co., 28 Cal.App.4th 72, 732-733 (1994)), “the offers required the simultaneous performance of contradictory acts—the entry of judgment and dismissal—which have very different practical consequences. A judgment entered against a party may suggest culpability to credit reporters and future employers, whereas a dismissal has significantly different overtones. The Nelsons may have surmised that the offer was meant to be one to accept judgment for $15,001, but should they be legally charged with the knowledge that the language about a dismissal was a mere mistake? Was it their burden to point out the mistake to the defendants? We think not.” (Slip Opn., a pp. 10-11.)
Brokers principally relied on Zamora v. Clayborn Contracting Group, Inc., 28 Cal.4th 249, 253 (2002), where the state supreme court held that inadvertent language referencing a dismissal with prejudice—where a plaintiff mistakenly offered judgment against himself rather than judgment against the defendants—did not invalidate the offer on uncertainty grounds. The Nelson court distinguished Zamora from its facts, finding that the inclusion of the “judgment/dismissal” language was not a mere “typo.” (Query—Would the result have been the same had brokers indicated counsel relied on a much-used practice treatise? Also, did buyers not really know that judgment was being offered? Probably not, because the uncertainty still penalizes the offering parties.)
This case does illustrate that 998 offers must be very clear and not tainted with any ambiguity. Otherwise, higher courts may reverse for lack of certainty. It also teaches that care needs to be given in using practice treatise forms, even though most of the forms are actually extremely useful and correct in structure/content.
BLOG OBSERVATION—Mike Hensley, one of the contributors to this blog, represented sellers in the court action, obtaining a “reversal” at a subsequent arbitration discussed in our May 22, 2008 post. He had the pleasure of trying the case with two professional and “Defense Team” co-counsel, Jim Fraser (who practices in Santa Ana) and Suzanne Smigliani (who practices in San Diego). The case was Ms. Smigliani’s first jury trial, and she obtained a defense verdict for her clients. Mr. Fraser also obtained a win for his home inspector client. Mike sends his greetings to both of you.
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