Mac Beam, Inc. v. Cadovimex USA GJ Trade Co. CA4/3

• Court: California Court of Appeal
• Decided: December 13, 2013
• Docket: G047387
• Status: Unpublished

Opinion

Filed 12/13/13 Mac Beam, Inc. v. Cadovimex USA GJ Trade Co. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

MAC BEAM, INC.,

Defendant and Appellant, G047387

v. (Super. Ct. No. 30-2010-00366982)

CADOVIMEX USA GJ TRADE OPINION CORPORATION,

Plaintiff and Respondent.

Appeal from a judgment of the Superior Court of Orange County, Andrew P. Banks, Judge. Reversed. Phillip J. Sandoval for Defendant and Appellant. Garrett Skelly for Plaintiff and Respondent. Mac Beam, Inc. (Mac Beam) appeals from a judgment entered in favor of

Cadovimex USA GJ Trade Corp. (Cadovimex) pursuant to Code of Civil Procedure 1 section 644.6. The trial court determined Mac Beam breached the terms of its

2012 settlement agreement with Cadovimex, and granted its motion for entry of judgment

against Mac Beam in the amount of $140,000. On appeal, Mac Beam raises five issues challenging the court’s ruling, and we have determined one has merit, rendering the rest

moot. We conclude the trial court lacked subject matter jurisdiction to enter judgment

pursuant to section 664.6. The judgment is reversed.

I

Our record does not contain documents describing the events that transpired

before the parties’ settlement. However, because the parties do not dispute the facts

occurring pre-settlement, we will provide the facts agreed upon in the briefing. In 2005,

Cadovimex contracted with Mac Beam to purchase 10 MB laser machines for $150,000,

for use in the Socialist Republic of Vietnam. Nine units were shipped to Ho Chi Minh City, Vietnam, and one unit remained in Santa Ana, California. Soon thereafter,

Cadovimex complained the nine machines delivered were not licensed for use in Vietnam

and, therefore, were seized by the Ho Chi Minh Police Department. In April 2010,

Cadovimex filed suit against Mac Beam seeking $210,000 in damages.

On January 17, 2012, counsel for the parties informed the trial court they

reached a settlement and wished to have it included on the record. The agreement

required (1) Mac Beam to pay $20,000 to Cadovimex within 30 days, (2) Cadovimex to

return the 10 machines to Mac Beam, and (3) Mac Beam to issue a receipt confirming

delivery and the condition of the units, and within 180 days of taking possession of all 10

1 All further statutory references are to the Code of Civil Procedure, unless otherwise indicated.

2 machines tender two payments of $30,000 to Cadovimex. A “material representation” to

the settlement was that the machines be in 100 percent new condition complete with all accessories and attachments. In essence, Mac Beam was to repurchase the units it

originally sold Cadovimex.

Under the terms of the settlement, if Mac Beam defaulted and did not cure the default within 20 days of receiving written notice, Cadovimex would be entitled to a

$160,000 judgment less credits for payments. On the other hand, if Mac Beam

determined any of the machines did not comply with the conditions specified in the

settlement, Cadovimex would retain possession of all the units relieving Mac Beam of

any payment obligations beyond the first $20,000 payment. The settlement agreement

provided Cadovimex and Mac Beam would dismiss with prejudice all claims contained in

their respective complaint and cross-complaint.

Counsel for both parties obtained consent from their clients for the above

settlement terms in the presence of the trial court. First, Mac Beam’s counsel read aloud all the terms of the settlement agreement. Second, counsel asked each representative of

their corporation, on the record, the following questions: (1) “Have you heard the terms

of the settlement?”; (2) “Do you understand the terms?”; (3) “You understand what

you’re supposed to do?” (4) “Do you agree to the terms of the settlement?” Bia Mac,

chief executive officer for Mac Beam, and Doug Nguyen, president of Cadovimex, both

responded, “Yes” to these questions.

Following this exchange, the trial court confirmed with the attorneys the

settlement agreement provided the underlying complaint and cross-complaint would be

dismissed with prejudice. Counsel agreed and it appears the court’s question prompted counsel for Cadovimex to orally request for the first time that the trial court retain

3 jurisdiction pursuant to section 664.6, to enforce the terms of the settlement. The trial

court then asked, “And that was your understanding . . . ?” Counsel for Mac Beam, responded, “Yes, your honor.” Although the corporate representatives were in

attendance, they did not orally agree on the record (or in writing) to the court’s retention

of jurisdiction. On February 27, 2012, a Mac Beam representative collected the first nine 2 units from the Ho Chi Minh City Police Department. The Mac Beam representative

inspected the units, found they were not in “100 [percent] brand new condition,” and

detailed his findings in a letter to Mac Beam.

On March 6, 2013, Cadovimex provided Mac Beam with a 20-day written

notice of default of the settlement agreement, stating the first nine units were collected

without objection, but Mac Beam had not taken possession of the 10th unit in Santa Ana.

On March 9, 2013, Mac Beam responded by e-mail to the notice of default, stating the

following: (1) the units were non-compliant with the settlement agreement; (2) the 90-day period for the first $30,000 payment would not occur until all 10 units were

received in perfect condition and as that was “impossible in light of the condition of the

first nine units . . . .”; (3) “new arrangement[s] [would] need to be worked out”; and

(4) counsel would set up a time for delivery and inspection of the 10th unit.

On April 16, 2012, Mac Beam sent a notice of rejection to Cadovimex

informing the company Mac Beam would not repurchase the units and arrangements

should be made to retake possession (hereafter, the April 16 e-mail). The following

2 We note documents in the record differ on whether delivery of the Vietnam units occurred on February 26 or February 27. However, resolution of this factual issue is not necessary to decide the appeal. Without deciding the issue, we will use the later date, like the trial court, for purposes of this opinion.

4 week, Cadovimex filed a motion for entry of judgment on the terms of the settlement

agreement pursuant to section 664.6. Mac Beam filed an opposition to the motion. In its opposition, Mac Beam admitted the nine units were delivered on or about February 26,

2012, but the e-mailed notice of rejection was not given to Cadovimex until April 16,

2012. During the June 29, 2012 hearing, the court determined the outcome was

dependent on whether Mac Beam timely rejected the first nine machines. Cadovimex

argued the April 16 e-mail was the first time Mac Beam gave notice of the rejection.

Mac Beam requested a continuance so as to investigate whether evidence of an earlier

rejection existed. The court denied the request and heard argument on the remaining

issues.

The trial court determined five days was a reasonable period of time for

Cadovimex to inspect the machines in Vietnam and accept or reject them, or in the

alternative, to request more time. Cadovimex argued five days time was not reasonable. The court responded that while it determined five days reasonable, and another court

might find 10 days reasonable, however, “going from February 27[] to April 16[] is not a

reasonable time.” As the only evidence of a rejection in the record was the April 16

e-mail, the court determined Mac Beam did not timely reject the machines. In addition,

the court concluded Mac Beam’s failure to take delivery of the 10th unit breached the

settlement agreement.

The court granted Cadovimex’s motion for entry of judgment against Mac

Beam in the amount of $140,000. Mac Beam filed a motion for a new trial, pursuant to

section 657, on grounds of unfair surprise, abuse of discretion, and denial of a fair hearing on the issue of timely rejection, among others.

5 On August 24, 2012, the trial court considered and rejected each argument

raised in the new trial motion, noting all issues were properly developed and addressed at the hearing; the trier of fact weighed all evidence presented to reach its conclusion; and

Mac Beam failed to produce evidence to support its defense that a timely rejection was

made. II

A. Subject Matter Jurisdiction

Mac Beam argues the trial court lacked subject matter jurisdiction to enter

judgment in accordance with the settlement agreement because the litigants did not

personally consent (orally or in writing) to the trial court’s retention of jurisdiction

pursuant to section 664.6. It points out counsel for both corporations agreed on the

record to jurisdiction, but their consent is insufficient to confer jurisdiction. We agree.

“When a court has jurisdiction over the parties and subject matter of a suit,

its jurisdiction continues until a final judgment is entered. [Citation.] When there is a voluntary dismissal of an entire action, the court’s jurisdiction over the parties and the

subject matter terminates.” (Wackeen v. Malis (2002) 97 Cal.App.4th 429, 437

(Wackeen).) Section 664.6, however, provides: “If requested by the parties, the court

may retain jurisdiction over the parties to enforce the settlement until performance in full

of the terms of the settlement.” Thus, “even though a settlement may call for a case to be

dismissed, or the plaintiff may dismiss the suit of its own accord, the court may

nevertheless retain jurisdiction to enforce the terms of the settlement, until such time as

all of its terms have been performed by the parties, if the parties have requested this

specific retention of jurisdiction.” (Wackeen, supra, 97 Cal.App.4th at p. 439, original italics.)

6 The parties’ “request for retention of jurisdiction must conform to the same

three requirements which the Legislature and the courts have deemed necessary for section 664.6 enforcement of the settlement itself: the request must be made (1) during

the pendency of the case, not after the case has been dismissed in its entirety, (2) by the

parties themselves, and (3) either in a writing signed by the parties or orally before the court.” (Wackeen, supra, 97 Cal.App.4th at p. 440.) “Like the stipulated settlement

itself, a request that jurisdiction be retained until the settlement has been fully performed

must be made either in a writing signed by the parties themselves, or orally before the

court by the parties themselves, not by their attorneys of record, their spouses, or other

such agents.” (Ibid.)

“While a written or oral request for retention of jurisdiction may, but need

not be, a part of the settlement agreement itself, that request must be express, not implied

from other language, and it must be clear and unambiguous. A court should not have to

resolve doubts or disputes as to whether an intention to retain jurisdiction is found in the provisions of a writing or an oral statement. These requirements for section 664.6

retention of jurisdiction preclude an assertion . . . that a court should examine other

actions of the parties to determine whether the parties constructively ‘requested’ that

there be retention of jurisdiction to enforce the terms of the settlement.” (Wackeen, 3 supra, 97 Cal.App.4th at p. 440.)

“Requiring these formalities not only promotes judicial economy and the

integrity of the summary enforcement process provided by section 664.6, but also

protects the litigants. No litigant should be placed in the position of relying on

3 This answers Cadovimex’s claim the parties consented to jurisdiction because “failure to object to settlement terms read into the record in one’s presence, is sufficient to demonstrate consent.”

7 representations, from an adversary or an attorney, that certain actions taken (or not

taken), or certain language in a settlement agreement, will suffice for retention of personal and subject matter jurisdiction after a suit is dismissed, only to later discover,

after the settlement agreement is signed and the dismissal has been accomplished, that

someone has raised an issue regarding whether jurisdiction was actually retained. It also protects the reasonable expectation of settling parties that the dismissal of an action will

put an end to the litigation. While . . . the court’s lack of continuing jurisdiction to utilize

section 664.6 does not preclude a party’s enforcement of a settlement agreement by

means of a separate action, matters such as statutes of limitation and the ability to bring

an absent litigant back into court make enforcement of a settlement agreement under

section 664.6 preferable to a separate suit.” (Wackeen, supra, 97 Cal.App.4th at p. 441.)

The settlement between Mac Beam and Cadovimex was made orally in

court by the parties. However, the “parties” did not authorize or request the trial court to

retain jurisdiction to enforce the settlement. Because the action was dismissed in its entirety without the parties requesting retention of jurisdiction, the trial court lacked

jurisdiction to grant Cadovimex’s motion and enter a formal judgment pursuant to the 4 terms of the settlement. Accordingly, we reverse the trial court’s judgment.

B. No Estoppel

Cadovimex takes issue with the fact Mac Beam, on two occasions,

informed the trial court that it retained subject matter jurisdiction to enforce the

4 In light of our determination the trial court lacked jurisdiction to enforce the settlement agreement between Cadovimex and Mac Beam, the remaining issues raised by the parties are moot. (Wilson v. L.A. County Civil Service Com. (1952) 112 Cal.App.2d 450, 453 [when issue loses controversial character it is moot and will not be considered by court].)

8 settlement agreement but now argues the trial court lacked jurisdiction. Cadovimex

states it “would not have agreed to the [d]ismissal with prejudice of the underlying lawsuit had the [t]rial [c]ourt not retained jurisdiction of the [s]ettlement [a]greement.”

We read Cadovimex’s statements to assert, under an estoppel theory, Mac Beam’s prior

representations to the court now prevent it from arguing the court had no jurisdiction. This assertion is incongruous with well-settled law on subject matter jurisdiction.

“[T]he court lost subject matter jurisdiction when the parties filed a

voluntary dismissal of the entire cause.” (Viejo Bancorp, Inc. v. Wood (1989)

217 Cal.App.3d 200, 207 (Viejo Bancorp).) Subject matter jurisdiction must be

determined at the time a court seeks to act. (Hagan Engineering Inc. v. Mills (2003) 115

Cal.App.4th 1004, 1008.) Subject matter jurisdiction is only conferred by constitutional

or statutory law. (Dial 800 v. Fesbinder (2004) 118 Cal.App.4th 32, 42.) Unlike

personal jurisdiction, it cannot be consented to, waived, or subject to estoppel. (Viejo

Bancorp, supra, 217 Cal.App.3d at p. 207.) The law is clear—Mac Beam cannot be estopped from challenging the

court’s subject matter jurisdiction based on its prior statements. (Viejo Bancorp, supra,

217 Cal.App.3d at p. 207.) We are sympathetic to Cadovimex’s argument it would not

have agreed to a dismissal without having an expedient remedy to enforce the settlement

agreement, and we understand why it now feels it was denied the benefit of the bargained

for settlement. However, we note “no one forced [Cadovimex] to agree to a settlement

which provided for dismissal of the old action. As the parties certainly recognized, not

all settlements contemplate a dismissal of the underlying action. [Cadovimex] could

have protected itself from [Mac Beam’s alleged breach of the agreement] by refusing to agree to that provision [or making sure consent to continuing jurisdiction was clearly and

9 unambiguously part of the settlement terms expressly agreed to by the authorized

parties]. . . . No matter how toothless the agreement may seem in retrospect, it is not the province of the trial court to rewrite it and put in the teeth the complaining side now

thinks it should have had. [Citation.]” (Ibid.)

C. No Waiver Cadovimex devotes two sentences to the argument Mac Beam waived its

right to challenge the trial court’s jurisdiction when it “failed to raise the issue . . . at the

time of filing of the [m]otion for [n]ew [t]rial.” Cadovimex provides no authority in

support of this argument. The issue is waived. (Badie v. Bank of America (1998)

67 Cal.App.4th 779, 784-785 [when appellant raises an issue “but fails to support it with

reasoned argument and citations to authority, we treat the point as waived”].) It is well

settled subject matter jurisdiction may be challenged by any party at any time before or

during trial or on appeal. (Great Western Casinos, Inc. v. Morongo Band of Mission

Indians (1999) 74 Cal.App.4th 1407, 1418-1419.) III

In the respondent’s brief, Cadovimex asserts the appeal should be

dismissed in light of evidence Mac Beam’s corporate status was suspended. We

requested supplemental briefing on the issue. In a supplemental letter brief, Mac Beam

demonstrates it took the requisite actions to reinstate its corporate status. On October 28,

2013, we informed the parties of our intent to take judicial notice the California Secretary

of State’s electronic records of corporate status that indicate Mac Beam’s corporate status

is active. Having received no objection, we take judicial notice and reject Cadovimex’s

argument the appeal must be dismissed. (Evid. Code, § 452.)

10 IV

We reverse the judgment. Mac Beam shall recover its costs on appeal.

O’LEARY, P. J.

WE CONCUR:

RYLAARSDAM, J.

THOMPSON, J.