Sprengel v. Mohr CA4/2

• Court: California Court of Appeal
• Decided: March 3, 2016
• Docket: E063539
• Status: Unpublished

Opinion

Filed 3/3/16 Sprengel v. Mohr CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

JEAN E. SPRENGEL, M.D.,

Plaintiff and Appellant, E063539

v. (Super.Ct.No. CIVDS1110934)

LANETTE S. MOHR, OPINION

Defendant and Respondent.

APPEAL from the Superior Court of San Bernardino County. Donald R. Alvarez,

Judge. Affirmed.

Reid & Hellyer and Michael G. Kerbs for Plaintiff and Appellant.

Rosenberg Mendlin & Rosen, Joyce S. Mendlin, Roger M. Rosen and Janelle

Menges for Defendant and Respondent.

1 I

INTRODUCTION

Plaintiff and appellant Jean E. Sprengel, M.D. (Sprengel), and her cousin,

defendant and respondent Lanette S. Mohr (Mohr) formerly were partners in a publishing

venture, Purposeful Press, LLC (Purposeful Press), a California limited liability

company. The company marketed an informational booklet, authored by Sprengel, for

patients undergoing chemotherapy treatment. Sprengel appeals from the trial court’s

ruling on her motion to enforce a stipulated settlement and judgment. (Code Civ. Proc.,

§§ 664.6 and 904.1, subd. (a)(2).)1

The three issues on appeal involve the parties’ disputes about: 1) who is

responsible for paying for preparation of an amended 2013 income tax return; 2) a

payment of $2,152.32, which Sprengel claims is owed her, and 3) any remaining book

inventory. Sprengel argues the trial court committed legal error because it misinterpreted

the settlement agreement. Sprengel also contends the trial court’s ruling that Mohr did

not breach two of the provisions in the settlement agreement was not supported by

substantial evidence. Lastly, Sprengel maintains the trial court erred in awarding

attorney’s fees to Mohr.

Although Sprengel argues that two standards of review—independent review and

substantial evidence review—apply in this appeal, we agree with Mohr that the standard

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

2 of review is substantial evidence. Nevertheless, even conducting an independent review,

we agree with the trial court’s findings and rulings. We affirm the trial court’s order and

its award of attorney’s fees to Mohr.

II

FACTUAL AND PROCEDURAL BACKGOUND

A. The Underlying Dispute

Sprengel is a physician. After Sprengel’s sister was diagnosed with breast cancer,

Sprengel wrote a pamphlet explaining what a patient should expect when undergoing

chemotherapy. In August 2008, Sprengel and Mohr made equal capital contributions of

$5,000 to form Purposeful Press to publish and market a version of Sprengel’s pamphlet

as a book entitled “Chemo-Companion.” The book was published by Emerald City

Graphics and sold to the Merck pharmaceutical company for distribution to patients.

In September 2011, Sprengel filed the underlying complaint for involuntary

dissolution, breach of fiduciary duty, and related causes of action. Sprengel also filed a

federal copyright action in which Mohr ultimately prevailed.

B. The Proceedings under Corporations Code section 173512

Mohr filed a motion under Corporations Code section 17351 to allow her to

purchase Sprengel’s interest in Purposeful Press. In August 2013, the court issued a

2Effective January 1, 2016, Corporations Code section 17351 has been replaced by Corporations Code section 17707.03.

3 ruling finding the total value of the business to be $586,630 and ordering Mohr to pay

Sprengel $298,715.

Sprengel filed an appeal from the valuation order. During an appellate mediation

conducted on March 12, 2014, Sprengel and Mohr executed a settlement agreement,

including both typed provisions and handwritten interlineations and providing for

dissolution of the company.

The parties agreed Mohr would receive $40,000, which was on deposit with the

court, and Sprengel would receive $136,000 from the Purposeful Press bank account and

other funds held in a trust account. Section 6.6 of the settlement agreement provides:

“Sums above the $206,000 will be divided equally between the parties.” Section 6.7

provides: “All Chemo-Companion books will [go or be delivered] to Jean Sprengel at

her expense. Mohr will so instruct Emerald City Graphics.” Section 6.3 of the

agreement provides: “Mohr will be responsible for having the Purposeful Press, LLC

2014 tax return prepared including payment for preparation and the amendment of prior

year’s returns to accurately reflect actual distributions and to remove the indemnity

claim. The amended returns shall be submitted to Jean Sprengel for review and approval

before filing.” The final settlement also omitted a typed provision, section 6.8, making

Mohr responsible for payment of preparing the amended tax returns: “If the tax returns

for prior years have to be amended, Mohr will be responsible for their preparation,

including payment for preparation.”

4 C. Postsettlement Proceedings

In March and April 2014, Sprengel and Mohr’s lawyers had a number of written

exchanges about the dissolution of Purposeful Press, including completing its income tax

returns, making payments to Sprengel, and returning the book inventory to Sprengel. On

April 22, 2014, Sprengel’s lawyer sent a final letter, setting an April deadline for Mohr to

pay Sprengel one-half of the amount from the Purposeful Press bank account, return

2,086 books to Sprengel, prepare the tax returns, and execute the documents for

dissolution.

On May 8, 2014, Sprengel filed a motion for enforcement of the settlement

agreement, requesting that Mohr be ordered to sign the dissolution documents for

Purposeful Press, to pay Sprengel half of the amount remaining in the Purposeful Press

bank account, to return all book inventory to Sprengel, and to file amended tax returns.

Because judgment had not yet been entered pursuant to the settlement, the trial court

asked the parties to submit proposed judgments to confirm the settlement agreement.

Both parties filed proposed judgments. On October 9, 2014, the trial court entered its

judgment pursuant to the written settlement agreement.

In September and October 2014, the parties’ lawyers again exchanged

correspondence arguing about the book inventory, the 2013 tax return, and whether

Sprengel was owed $2,152.32. On November 12, 2014, Sprengel filed a second motion

to enforce the settlement.

5 On the issue of the tax returns, Sprengel contended the language should be

interpreted to make Mohr responsible for both tax returns. The trial court determined that

Mohr had breached the settlement agreement by failing to have an amended 2103 tax

return prepared. However, the court found that the cost for preparing and filing the

amended 2013 tax return was not Mohr’s sole responsibility. The court interpreted

section 6.3 to mean Mohr was responsible for paying for preparation of the 2014 tax

return but not the amended 2013 tax return. The court found that Sprengel’s calculation

of the number of missing books was based on speculation and Mohr had not breached the

settlement agreement on this point. The court also found there was no money remaining

for distribution to Sprengel.

Lastly, on the issue of attorneys fees, the trial court found that, overall, Mohr had

prevailed on more issues than Sprengel and the trial court awarded Mohr attorney’s fees

of $2,425. The trial court denied Sprengel’s motion for consideration.

III

GENERAL PRINCIPLES AND STANDARD OF REVIEW ON APPEAL

A central issue on appeal is whether to apply an independent or substantial

evidence standard of review. The standard of review is substantial evidence except for

legal error. The section 664.6 procedure empowers the judge hearing the motion to

enforce a stipulated judgment to determine if disputed factual issues have arisen

regarding the settlement agreement. It even permits the court “to entertain challenges to

the actual terms of the stipulation, that is, whether there actually was a settlement” and to

6 interpret the terms and conditions to settlement. (Fiore v. Alvord (1985) 182 Cal.App.3d

561, 565; Richardson v. Richardson (1986) 180 Cal.App.3d 91, 97; Corkland v. Boscoe

(1984) 156 Cal.App.3d 989, 992.) “The trial court’s factual findings on a motion to

enforce a settlement pursuant to section 664.6 ‘are subject to limited appellate review and

will not be disturbed if supported by substantial evidence.’ (Williams v. Saunders (1997)

55 Cal.App.4th 1158.) [¶] ‘Although a judge hearing a section 664.6 motion may

receive evidence, determine disputed facts, and enter the terms of a settlement agreement

as a judgment [citations], nothing in section 664.6 authorizes a judge to create the

material terms of a settlement, as opposed to deciding what terms the parties themselves

have previously agreed upon.’ (Weddington Productions, Inc. v. Flick [(1998)] 60

Cal.App.4th [793,] 810, original italics.) . . . Consistent with the venerable substantial

evidence standard of review, and with our policy favoring settlements, we resolve all

evidentiary conflicts and draw all reasonable inferences to support the trial court’s

finding that these parties entered into an enforceable settlement agreement and its order

enforcing that agreement.” (Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1360.)

Sprengel contends the trial court’s finding was not supported by substantial

evidence that Mohr did not breach the settlement. However, Sprengel argues the court

misinterpreted the settlement agreement and committed legal error, subject to

independent review, in its rulings concerning the 2013 tax return and the book inventory.

In our view, this is not a case of legal error for which independent review applies.

Sprengel incorrectly cites Hines v. Lukes (2008) 167 Cal.App.4th 1174, 1185, in which

7 the appellate court determined the trial court erred by omitting material terms of the

settlement. Hines applied a substantial evidence standard of review, not an independent

standard of review. (Id. at p. 1182.) Furthermore, the trial court here made factual

determinations about the meaning of the settlement without omitting (or adding) any

terms as did the trial court in Hines. Where the trial court focuses primarily on whether

the parties had a meeting of the minds regarding the terms of the settlement, it is a factual

question subject to limited review and will not be disturbed if supported by substantial

evidence. (J.B.B. Investment Partners, Ltd. v. Fair (2014) 232 Cal.App.4th 974, 984,

citing Williams v. Saunders, supra, 55 Cal.App.4th at p. 1162.) Nevertheless, even if we

apply an independent standard of review, we agree with the trial court as we discuss

below.

IV

TAX PREPARATION EXPENSE

As already mentioned, the parties changed the original typed settlement agreement

to eliminate a provision that specifically made Mohr responsible for preparation of the

amended return. Nevertheless, Sprengel asserts that, based on section 6.3 of the

settlement agreement, Mohr was responsible for paying for the tax preparation expenses

for both 2013 and 2014.

In its ruling on the settlement agreement, the trial court commented on the

legibility of the settlement agreement: “The Court did its best on what the handwritten

portions state.” The trial court then quoted exactly the language of the settlement

8 agreement but inserted the bracketed commas: “Mohr will be responsible for having

Purposeful Press 2014 tax returns prepared[,] including payment for preparation[,] and

amendment of prior year [returns] to accurately reflect actual distributions . . . .”

Sprengel argues the trial court changed the meaning of the agreement by inserting the

commas. We disagree.

In a supporting declaration, Sprengel stated: “At the mediation, there was a

discussion regarding the preparation of both amended tax returns and ongoing tax returns.

At that time, I offered to use my own accountant to prepare all tax returns and pay that

expense personally. However, Mohr chose instead to use an accountant of her choosing

for the tax returns and agreed to personally pay for the preparation of the tax returns.”

Mohr argues both parties were responsible for payment of the 2013 expenses.

Because we must resolve all evidentiary conflicts and draw all reasonable

inferences to support the trial court’s finding, we may conclude the trial court rejected

Sprengel’s declaration as proof of the meaning of the settlement term. Even without the

inserted commas, based on the substantial evidence standard of review, it was entirely

reasonable for the trial court to decide that “including payment for preparation” referred

to the 2014 tax return and not to the amended returns. (Osumi v. Sutton, supra, 151

Cal.App.4th at p. 1360.)

We reach the same conclusion based on our independent review. The trial court

made a factual determination that the subject sentence is composed of two components:

“Mohr will be responsible for having Purposeful Press 2014 tax returns prepared

9 including payment for preparation,” followed by “and amendment of prior year

[returns].” The trial court’s interpretation was bolstered by the parties’ omission of the

term expressly making Mohr responsible for payment for preparation of the amended

return. Since that term was omitted, the parties apparently meant to have joint

responsibility for the cost of the 2013 return although Mohr would pay for the cost of the

2014 return. Therefore, based also on our independent review, we uphold the trial court’s

determination that both parties were responsible for the preparation costs of the 2013 tax

return.

Furthermore, Sprengel argues the court’s ruling about tax preparation costs

affected its calculation that no money was owed to Sprengel. Specifically, the trial court

determined that Sprengel was entitled to 50 percent of at least $1,647.08, even after

additional expenses were paid out of Purposeful Press’s bank account. The trial court

ruled that Mohr was not obligated to pay all the cost of the preparation of the 2013 tax

return. As a result, the court found that the use of Purposeful Press funds to pay that

expense was proper and there were no funds remaining to be paid to Sprengel. Because

the court did not err in this respect, Sprengel cannot claim any amount is due to her or

that Mohr breached the settlement agreement by not paying her.

V

BOOK INVENTORY

The trial court also decided against Sprengel on the issue of the return of the book

inventory. Sprengel argues that Mohr had failed to return a substantial number of books,

10 as required by section 6.7 of the settlement agreement. The inventory list attached to

Sprengel’s declaration contained information regarding the total number of books that

were printed; the total number of books that were sent to Mohr; the number of books that

had been sent to Sprengel; and the total number of 1,948 unaccounted books. The same

information is summarized in the body of the declaration, except the total number of

missing books is listed as 2086. In opposition, Mohr submitted her declaration attesting

that she returned all books in her possession to Sprengel as required by the settlement

agreement.

In the trial court’s ruling on the motion, the court mentioned the actual accounting

(Exhibit D) was not attached to the motion and: “[Sprengel’s] evidence is conjecture on

her part with no support of where she comes up with the various figures for the books

printed, and books sent to Mohr. . . . Furthermore, it is unclear in the accounting

provided by Sprengel if she is including any of the books Emerald City was instructed to

return to her. All Sprengel has is her belief that more books are out there that she is

entitled to. Yet her belief is not proof that Mohr violated §6.7 of the Settlement

Agreement. Therefore, Sprengel fails in her burden of establishing Mohr in breach

of failing to provide all Chemo-Companion books and/or establishing that she is

entitled to an accounting/explanation under the Settlement Agreement provisions.”

Sprengel argues the trial court committed legal error because it did not consider

Exhibit D, the accounting attached to her declaration. The premise of Sprengel’s

contention is wholly unsupported by the appellate record. The clerk’s transcript showed

11 the exhibit was attached as part of Sprengel’s motion and the same information was

contained in the body of the motion. Furthermore, the same information and accounting

were submitted to the court several times. Later, during the reconsideration motion, the

court clarified that it had considered all the exhibits when it ruled on the motion to

enforce the settlement. We conclude no legal error occurred to justify our independent

review. However, we must resolve all evidentiary conflicts and draw all reasonable

inferences in support of the trial court’s finding on the issue of the return of the book

inventory. We hold substantial evidence supported the trial court’s finding about the

book inventory.

VI

ATTORNEY’S FEES

The settlement agreement provided that the prevailing party on a motion brought

under section 664.6 was entitled to an award of reasonable attorney’s fees and costs. The

trial court’s determination on the issue of which party prevailed on a motion for

attorney’s fees is controlled by an abuse of discretion standard of review. (Jackson v.

Homeowners Assn. Monte Vista Estates-East (2001) 93 Cal.App.4th 773, 789.)

As noted, the trial court determined that “Mohr obtained the greater relief” on

some of the issues raised by Sprengel and as a result thereof, Mohr was the prevailing

party on the motion. In Hsu v. Abbara (1995) 9 Cal.4th 863, 877, the court held that “in

determining litigation success, courts should respect substance rather than form, and to

this extent should be guided by ‘equitable considerations.’ For example, a party who is

12 denied direct relief on a claim may nonetheless be found to be a prevailing party if it is

clear that the party has otherwise achieved its main litigation objective.” The court

determines the prevailing party only when the contract claims have been finally resolved

and only by a comparison of the extent to which each party has succeeded and failed to

succeed in its contentions. (Id. at p. 876.)

Here, Sprengel initiated the proceedings (1) to dissolve Purposeful Press, (2) to

determine tax preparation costs, (3) to return books to Sprengel, and (4) to pay funds to

Sprengel. Sprengel contends her motion was successful, particularly based upon the

entry of judgment for purposes of enforcing the settlement agreement. Sprengel submits

that the trial court abused its discretion in awarding attorney’s fees to Mohr.

Mohr argues the trial court found she did not breach the settlement agreement for

any of the three reasons asserted by Sprengel. We agree that Mohr obtained the greater

relief and Sprengel cannot be said to have achieved her main litigation objective, entitling

her to an award of attorney’s fees. Therefore, it was not an abuse of discretion to award

fees to Mohr.

VII

DISPOSITION

Based on substantial evidence supporting the trial court’s factual rulings, and our

independent review where appropriate, we hold the trial court did not err or abuse its

discretion. We affirm the trial court’s ruling in every respect.

In the interests of justice, we order the parties to bear their own costs on appeal.

13 NOT TO BE PUBLISHED IN OFFICIAL REPORTS CODRINGTON J. We concur:

HOLLENHORST Acting P. J.

McKINSTER J.