Opinion
NOT TO BE PUBLISHED
Contra Costa County Super. Ct. No. C08-01474.
NEEDHAM, J.
Katherine Staudt appeals from an order denying her motion to enforce a settlement agreement. She contends that, although she failed to comply with the express terms of the agreement, she should be able to enforce her rights under the doctrine of substantial performance and the policy against forfeitures. We will affirm the order.
I. FACTS AND PROCEDURAL HISTORY
Margaret Mary Staudt died testate, leaving appellant Kathleen Staudt (Staudt), Martha S. Ring (Ring), and other children to inherit her estate. Ring was appointed executor of the will and administrator of the estate. Probate proceedings commenced in August 2007.
Staudt filed a creditor’s claim in the probate proceedings for services she purportedly rendered to the decedent in 2003-2007. In June 2008, she also filed a civil action to recover $217,500 for these services in quantum meruit. Meanwhile, Ring filed a petition in the probate proceedings under Probate Code section 850 to recover certain monies from Staudt.
After mediation, Staudt and Ring (individually and as estate administrator) entered into a settlement agreement on April 16, 2009, resolving the claims in both the probate case and the civil action.
A. Settlement Agreement
In substance, the settlement agreement provided that Staudt could purchase the decedent’s house (purportedly worth between $280,000 and $365,000) for $50,000 if Staudt met certain conditions; if those conditions were not met, however, Staudt would instead receive $50,000.
Specifically, paragraph 1 of the settlement agreement provided: “KATHERINE STAUDT shall purchase 71 East Vivian Drive, Pleasant Hill, California for the amount of $280,000, minus a credit of $180,000 []representing her entire share of the decedent’s estate herein, minus $50,000 in exchange for the dismissal of her creditor’s claim. The remaining $50,000 is to be paid by KATHERINE STAUDT to the decedent’s estate on or before June 1, 2009. The following deadlines must be met: [¶] 1. Within 15 days of today’s date KATHERINE STAUDT shall produce a pre-qualified letter from a reputable lender showing their intent to loan her $50,000. [¶] 2. Escrow is to be closed no later than June 1, 2009. [¶] If the above deadlines are not met by KATHERINE STAUDT then KATHERINE STAUDT will be paid $50,000 as full settlement of her creditor’s claim, said payment is to be made to Pedder, Hesseltine, Walker & Toth, LLP’s Attorney-Client Trust Account on or before June 15, 2009.”
The probate court approved the settlement agreement and confirmed that the court would retain jurisdiction under Code of Civil Procedure section 664.6.
B. Staudt Misses the Deadlines
The deadline for Staudt to “produce a pre-qualified letter from a reputable lender showing their intent to loan her $50,000” worked out to be May 1, 2009, which was 15 days from the date of the settlement agreement.
By April 30, 2009, Staudt obtained a letter from Bank of America, dated April 30, referring to “Real Estate Loan Approval/Commitment.” The April 30 letter read: “Congratulations! Your real estate loan has been approved subject to the items listed on the enclosed Conditions Addendum.” The amount of the approved loan was $75,200. Accompanying the letter was a “Buyer Ready Approval Certificate.”
At the hearing on the motion to enforce the settlement agreement, Staudt told the court that she had obtained a “prequalified letter on or around April 20” – 10 days before the deadline – and then got something “better” when she received a “final loan commitment, ” which was later provided to Ring. In a footnote in her reply brief, Staudt states: “Staudt misspoke regarding the April 20 letter. It was merely an acknowledgement of her loan application, and not a pre-qualification letter.” Staudt provides no citation to the record for this assertion. In any event, we need not resolve the dispute over what Staudt obtained from the bank or when she got it. The question is whether Staudt provided to Ring what she was supposed to provide, when she was supposed to provide it, under the terms of the settlement agreement.
At 4:54 p.m. on May 1, 2009, Staudt attempted to send an e-mail to her attorney with the “loan information.” The e-mail was entitled “Bank requirements.” According to Staudt, the e-mail was “documenting how I was taking the necessary steps but that there were some things needed to be clarified for the bank. I also on this date received oral confirmation on my loan. I provided my loan number timely for the record.” There is no evidence that Staudt’s e-mail included or attached the actual pre-qualified letter from the bank, which is what her attorney was supposed to deliver to Ring’s attorney on that date.
At any rate, Staudt’s e-mail to her attorney “failed to go through” and was never received by her attorney. In fact, also at 4:54 p.m., Staudt’s e-mail account received an electronic message from her e-mail service that “Delivery to the following recipients failed. [¶] toth@pedderlaw.com.” Therefore, before 5:00 p.m. on May 1, 2009, Staudt had been notified that her e-mail had not been delivered to her attorney.
At 5:10 p.m. on May 1, 2009, Ring’s counsel telephoned Staudt’s attorney to inquire about the missing documentation. Staudt’s attorney replied that he had not heard from Staudt, and Ring’s counsel stated that the property would be placed on the market.
By May 5, 2009, Staudt “learned of [her] e-mail failure” and resent the e-mail to her attorney. Her attorney “acknowledged” the e-mail “without comment.”
By May 6, 2009, Staudt finally provided the bank’s pre-qualified letter and “Buyer Ready Approval Certificate” to her attorney. On that date – five days after the deadline – Staudt’s attorney faxed to Ring’s counsel the first page of the two-page pre-qualified letter, along with the certificate. Staudt’s attorney provided the second page of the letter on May 7. The Conditions Addendum, however, was never provided.
On May 7, 2009, Ring’s attorney sent a letter to Staudt’s attorney acknowledging receipt of Staudt’s pre-qualified letter but advising that it was received after the deadline and the property was “already in contract.” Ring’s attorney explained that another buyer had been waiting to make an offer and, when Staudt did not comply with the deadline, the offer was made. Ring’s attorney also noted that Staudt’s attorney had not furnished the Conditions Addendum referenced in the pre-qualified letter.
On May 15, 2009, Staudt discharged her attorney and substituted herself in pro. per. in the probate case.
The appellate record does not contain a substitution of attorney form in the probate case. It does contain a substitution of attorney form in the civil action; the form was signed by Staudt on July 17, 2009, and filed with the court on July 24, 2009.
On May 21, 2009, Ring filed a petition in the probate court for an order approving the sale of the property to the third party, who had agreed to purchase the property for $365,000. While the petition was pending, the June 1, 2009, deadline for Staudt to close escrow passed.
On June 5, 2009, Staudt filed an objection to Ring’s petition to sell the property, claiming she had a right to purchase the property under the settlement agreement. At a hearing on June 8, the matter was continued to June 17.
Staudt’s proposed lender (Bank of America) contacted Ring’s attorney on June 5, 2009, inquiring where escrow should be opened on Staudt’s behalf. Ring’s attorney replied that Ring was in escrow with another party. On June 8, Ring’s attorney also received a message from a title company regarding the lender’s request to open an escrow. Ring’s attorney explained the situation to the title company and advised that nothing could be done until the next court hearing.
On or about June 9, 2009, without Staudt’s knowledge, Ring sent a $50,000 check to Staudt’s (former) attorney, pursuant to the terms of the settlement agreement. Written on the check was “settlement re P07-01124, ” referring to the probate case. The record indicates that the check was deposited into the attorney-client trust account of Staudt’s attorney on or about June 15, 2009.
On June 17, 2009, the probate court again continued the hearing on Ring’s motion to approve the property sale to June 25. Unwilling to wait, the third party rescinded its offer to purchase the property. Ring dropped the petition.
Shortly thereafter, Staudt asked Ring’s attorney whether the property would be sold to Staudt, and was told that more time was necessary to make a decision. In early July 2009, Staudt contacted her lender, at which time she learned that Ring’s attorney had told the lender that a court order would be necessary to sell the property to Staudt. On July 13, 2009, Staudt contacted Ring’s attorney to determine if she would stipulate to such an order. Ring’s attorney told her that, because the $50,000 payment had been sent to Staudt’s former attorney, Ring would not sell the property to her. Staudt contacted her former attorney, learned that he had received the payment, and instructed him to return it to Ring.
C. Staudt’s Motion to Enforce the Settlement Agreement
On August 6, 2009, Staudt filed a motion in the civil action to enforce the settlement under Code of Civil Procedure section 664.6. She argued that Ring should be ordered to sell Staudt the property for the price set forth in the settlement agreement, relying primarily on the doctrine of substantial performance and the policy disfavoring forfeiture. Staudt also offered to show the court the Conditions Addendum to the pre-qualified letter for in camera review.
In support of her motion, Staudt submitted a declaration recounting the events and asserting that the property had great sentimental value to her, because her parents had owned the home since before she was born. Staudt also averred that, at the time she entered into the settlement agreement, she believed the property was worth over $300,000 ($20,000 more than the value attributed in the settlement agreement) and the third party had been willing to pay $365,000.
Ring opposed Staudt’s motion, claiming that the doctrine of substantial performance did not apply, and Staudt would suffer no forfeiture because she was entitled to receive a $50,000 payment if she did not purchase the property.
Ring also submitted a declaration, asserting that the settlement agreement had been reached after two mediations at expense to the estate and was intended to resolve the issues in dispute. The deadlines in the settlement agreement were negotiated and, given the real estate market, it was important that Staudt timely obtain the loan, close escrow, and not delay the sale of the property, because the spring selling season was underway, several beneficiaries needed money, and the property might otherwise have to be marketed during the summer, when there would be fewer potential buyers. Ring also noted that, despite Staudt’s interest in buying the property before the settlement, she had not shown the ability to do so.
The court issued the following tentative ruling: “The settlement agreement is not in dispute. That the deadlines were not met for a sale is undisputed. That the agreement provides for a payment of $50,000 to [Staudt] if the deadlines were not met is also undisputed. The agreement is enforceable. [Ring] is to make payment of $50,000 within 7 days from the date hereof, and [Staudt] is to file a dismissal not later [than] 9/11/09 in the event that payment is timely made.”
Staudt contested the tentative ruling, and the matter was heard on September 3, 2009. After hearing Staudt’s argument at length, the court denied her motion and the tentative ruling became the order of the court.
This appeal followed.
II. DISCUSSION
Staudt contends the trial court erred because, under the doctrine of substantial performance and the policy disfavoring forfeitures, she is entitled to purchase the property under the settlement agreement. Ring disagrees with Staudt’s arguments and additionally urges that Staudt waived her right to challenge the trial court’s ruling. We address the waiver question first.
A. Waiver
Ring contends that Staudt waived her challenge to the trial court’s order precluding her from enforcing her right to purchase the property under the settlement agreement, because she accepted the benefits of the settlement by accepting and cashing Ring’s $50,000 check as the alternate settlement payment under the settlement agreement. We disagree.
In the first place, there is no evidence that Staudt accepted and cashed Ring’s $50,000 check. Staudt’s attorney received the check for “settlement re PC07-01124” and deposited it into his attorney-client trust fund on June 15, 2009, about a month after Staudt had purportedly discharged him as her attorney in the probate case (although he apparently continued to represent her in the civil action until around July 23). Staudt insists she did not even know about the payment until mid-July, and as soon as she learned about it she instructed her former attorney to return the money to Ring. Although the record does not indicate whether Staudt’s attorney complied, the fact that the trial court ordered Ring to pay Staudt the $50,000 in September 2009 suggests the attorney did return the funds or, at least, Staudt never received them. Indeed, Staudt declares she had no intention of accepting the payment and avers she has not “personally received, had access to, or spent any of this money.” Staudt did not personally accept or cash Ring’s check, and the evidence is insufficient to conclude that her attorney validly did so on her behalf. (See Blanton v. Womancare, Inc. (1985) 38 Cal.3d 396, 404 [absent express authority from a client, an attorney cannot impair the client’s substantive rights].)
Furthermore, while Ring now claims that the June 15 deposit of the $50,000 check constituted an acceptance of the benefits of the settlement agreement, Ring did not make such a claim in opposing Staudt’s motion to enforce the settlement agreement in the trial court. The fact is, throughout the litigation and this appeal, Staudt has insisted that she was entitled to purchase the property and has not sought the $50,000.
The cases on which Ring relies are distinguishable. In Epstein v. DeDomenico (1990) 224 Cal.App.3d 1243, the court held that the appellants could not challenge the trial court’s enforcement of the settlement agreement, because they had accepted the benefit of the settlement by obtaining an order for the return of their $75,000 security deposit, which was a specific term of the settlement agreement. (Id. at p. 1246.) In so doing, the court noted that “the acceptance must be clear, unmistakable, and unconditional.” (Ibid.) Here, by contrast, Staudt did not actively pursue payment of the $50,000; indeed, once she learned it had been made, she instructed her attorney to return it. By no means did she “clear[ly], unmistakabl[y], and unconditional[ly]” accept the $50,000. (Ibid.)
In Schubert v. Reich (1950) 36 Cal.2d 298, the court noted that the voluntary acceptance of the benefits of a ruling barred an appeal therefrom, despite a later offer to return the benefit. (Id. at p. 299.) Here, however, Staudt did not accept the $50,000 in the first place. Nor did she accept the benefit of the ruling from which she now appeals; to the contrary, she instructed her attorney to return the funds before the ruling. Ring fails to establish a waiver.
B. Failure to Satisfy the Conditions For Purchasing the Property
There is no dispute that, in order for Staudt to be able to purchase the property under the express terms of the settlement agreement, she had to produce to Ring a “pre-qualified letter... showing intent to loan [Staudt] $50,000” by May 1, 2009, and close escrow by June 1, 2009. There is no dispute that Staudt did not meet those deadlines. By the terms of the settlement agreement, therefore, the conditions to Staudt’s right to purchase the property were not met, and she was not entitled to purchase the property.
Staudt does not dispute the meaning of the terms of the settlement agreement. Instead, she contends she can enforce the settlement agreement because she substantially performed the conditions to the purchase, and to hold otherwise would work a forfeiture. We address each contention in turn.
C. Substantial Performance
The doctrine of substantial performance permits a party in appropriate circumstances to obtain the benefit of a bargain, despite some minor deficiency in its performance, in order to avoid injustice. (See Kossler v. Palm Springs Developments, Ltd. (1980) 101 Cal.App.3d 88, 101-102; Harvey v. White (1963) 213 Cal.App.2d 275, 279-280.) The substantial performance is sufficient to trigger the other party’s obligation to perform, albeit with an adjustment for the difference between the substantial performance and the complete performance called for by the contract. (Harvey, supra, at pp. 279-280.)
Staudt argues that she substantially performed her obligation to provide a pre-qualified letter to Ring on May 1, because on May 1 she tried to send an e-mail to her attorney, she finally provided the pre-qualified letter to Ring on May 6, and her delay was not willful and can be compensated by paying Ring five days of interest on the $50,000 she was to pay to buy the house. Her argument is meritless.
1. No Substantial Performance on May 1
One way in which the substantial performance doctrine may apply is when a party’s performance by the deadline is good enough, despite a minor defect. (Harvey, supra, 213 Cal.App.2d at pp. 279-280.)
What Staudt did on May 1, however, did not constitute substantial performance. While she was supposed to provide Ring with a pre-qualified letter by May 1, Staudt did not provide anything to Ring, and did not provide – or even attempt to provide – the pre-qualified letter to her attorney for transmittal to Ring. She merely attempted to send her lawyer an e-mail at 4:54 p.m. to inform him of the pre-qualification and the loan number. Even if this e-mail had not gone astray, there is no indication from the record that the pre-qualified letter would have been delivered to Ring on May 1. Indeed, while Staudt strains to paint this matter as a mishap in which she missed out on buying a house simply because an e-mail did not go through, the fact is that whatever happened to the e-mail is largely immaterial in light of Staudt’s failure to attach or include the pre-qualified letter itself. Staudt provides no authority or argument that providing just a loan number to Ring on May 1 would have been sufficient, particularly where – according to Staudt – she had the pre-qualified letter in hand.
2. Performance on May 6 Was Not Timely
The doctrine of substantial performance may also be applied where a party performs, but misses the deadline for such performance by a short period of time. If the time for the party’s performance was not “of the essence” of the parties’ contract, and the contractual deadline need not be rigidly enforced, the performance may be deemed timely if completed within a reasonable time after the stated deadline. (See Miller & Starr, California Real Estate, Contracts (3d ed. 2002) § 1.161, pp. 681-682.)
Here, however, the time for Staudt’s delivery of the pre-qualified letter and close of escrow are “of the essence” of the settlement agreement. Although the agreement does not explicitly use the words, “time is of the essence, ” other language conveys that intent: the settlement agreement explicitly provides that the conditions to Staudt’s right to purchase the property “must be met” and further specifies that, if the deadlines are not met, Staudt would receive $50,000 and not have a right to purchase the property. The reasonable interpretation of this language is that the time for providing the pre-qualified letter was, in fact, “of the essence” of the parties’ contract. (See Katemis v. Westerlind (1953) 120 Cal.App.2d 537, 543-544 [whether time was of the essence turns on whether such an intention is clear from the language of the agreement, not simply whether the parties used a phrase such as “time is of the essence”].)
An intent to strictly enforce the deadlines in the settlement agreement is also indicated by the extrinsic evidence. Ring explained in her declaration that the time frames were the product of the parties’ negotiation, and the deadlines were critical because of the need to know that Staudt could obtain the loan and close escrow by June 1, 2009, since otherwise the property would have to be marketed during the less advantageous summer months at likely prejudice to the estate’s other beneficiaries. Since both the language of the settlement agreement and the extrinsic evidence compel the conclusion that the deadlines in the settlement agreement were important and to be rigidly enforced, the doctrine of substantial performance cannot validate Staudt’s performance five days after the May 1 deadline.
There is also some question whether Staudt sufficiently performed even by May 6. As Ring points out, although Staudt provided one page of the pre-qualified letter on May 6 and another page on May 7, she did not provide the Conditions Addendum referenced in the letter. Staudt counters that the letter itself was sufficient to show that she was “pre-qualified, ” and she adds that she offered to show the Conditions Addendum to the trial court for in camera review. We need not decide whether Staudt’s performance on May 6 met her obligation to provide a “pre-qualified letter from a reputable lender showing their intent to loan her $50,000, ” because we conclude that, even if it did, she did not substantially perform her obligation because it was untimely.
Staudt’s reliance on Cushing v. Levi (1931) 117 Cal.App. 94 and Katemis, supra, 120 Cal.App.2d 537 is misplaced. In Cushing, it was held that a party substantially performed its obligation to make payment “on or before” a specified date by making the payment five days late, even though the seller had struck a deal to sell the real estate to another party for more money in the interim. (Cushing, at pp. 98, 104-106.) In Katemis, the court held that a party satisfactorily performed its obligation to make payment “prior to” a specified date even though it made the payment two days late. (Katemis, at p. 543.) In both Cushing and Katemis, the court concluded that time was not of the essence for the performance of these obligations. (Cushing, at pp. 99, 104-106; Katemis, at pp. 543-545.) Neither case addressed a situation where, as here, the parties agreed that the performance “must” be made by the specified date because of a specific need for the transaction to close and the seller’s concern over the buyer’s ability to timely obtain the necessary financing.
Furthermore, even if time was not of the essence under the settlement agreement, it would not be equitable to apply the doctrine of substantial performance in this case for another reason: Staudt’s delay in providing the pre-qualified letter was not merely inadvertent. Although Staudt claims the delay arose because her May 1 e-mail was not received by her attorney, it actually arose because she did not send the pre-qualified letter to her attorney for transmittal to Ring’s attorney. Whether or not the e-mail went astray inadvertently, we must conclude that Staudt’s failure to provide the letter until five days after the deadline was willful, there being no explanation in the record for her failure to provide the letter on May 1 or for the delay in providing it until May 6.
We also note the error in Staudt’s contention that she could compensate Ring for her five-day delay in providing the pre-qualified letter, by paying five days of interest on the $50,000. That interest payment might suffice if Staudt was five days late paying the $50,000. But here, Staudt’s failure to comply with the May 1 deadline led Ring to contract with a third party, the third party contract precluded Ring from selling the property to Staudt (even if she wanted to) until the third party backed out, Staudt did not and could not meet the June 1 deadline to close escrow, and Ring and the estate were faced with the very predicament Ring intended to avoid with the deadlines specified in the settlement agreement.
C. Forfeiture
Staudt argues that, even if the time for providing the pre-qualified letter was “of the essence, ” she is entitled to relief under Civil Code section 3275 in order to prevent a forfeiture. (See Williams Plumbing Co. v. Sinsley (1975) 53 Cal.App.3d 1027, 1032-1034; Selby v. Battley (1957) 149 Cal.App.2d 659, 664.) Civil Code section 3275 reads: “Whenever, by terms of an obligation, a party thereto incurs a forfeiture, or a loss in the nature of a forfeiture, by reason of his failure to comply with its provisions, he may be relieved therefrom, upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty.”
Staudt contends that precluding her from purchasing the property constitutes a forfeiture. She argues that a substantial part of the consideration she received under the settlement agreement was the right to obtain a house that held sentimental value to her, at a discount price. She urges that construing the settlement agreement to require her to forfeit this consideration because she was five days late as the result of an “innocent mistake” violates the policy against forfeiture. Her argument is meritless.
First, the record does not establish a forfeiture. While Staudt lost out on the chance to purchase the property at a discount, she obtained the alternative $50,000 for which she bargained.
Second, Staudt fails to establish how she would make full compensation to Ring for her failure to comply with the May 1 and June 1 deadlines. As explained ante, her offer to pay five days’ worth of interest on the $50,000 she would pay for the house might compensate for a five-day delay in paying $50,000, but it would not compensate Ring for the entire consequences of Staudt’s untimely delivery of the pre-qualified letter.
Third, as we have also explained, Staudt’s failure to provide the pre-qualified letter by May 1 was grossly negligent, if not willful. Her attempt to characterize her five-day delay as an “innocent mistake” misstates the record, since she did not even try to transmit the pre-qualified letter to her attorney by May 1 and has shown no legitimate reason for failing to deliver it until May 6.
Fourth, to hold as Staudt requests would work injustice to Ring and the estate. After all, while the purchase of the property was much more favorable to Staudt, giving Staudt $50,000 and selling the property to someone else was much more favorable to the estate. To deprive the estate of this benefit, because Staudt did not do what she was supposed to do under the settlement agreement, would obviously not effect the equity on which Civil Code section 3275 and the policy against forfeiture are based.
Staudt fails to demonstrate reversible error.
III. DISPOSITION
The order is affirmed.
We concur. JONES, P. J. BRUINIERS, J.