Second District So Holds in Published Decision Relating to an Inadmissible Settlement Agreement: Civil Code section 1717 Does Not Trump the Mediation Privilege.
As framed by the Second District, Division Four, the attorney’s fees portion of the case involved a question of first impression—whether attorney’s fees are recoverable under Civil Code section 1717 where the contract providing for such fees had been excluded as inadmissible under division 9, chapter 2 of the Evidence Code, section 1115 et seq. Hope we have you hooked, because the answer will be provided shortly (although our titles unfortunately give the end result away).
The pertinent factual scenario pans out this way. Widow brought a breach of contract action against the executor of her deceased husband’s estate, premised on the theory that a binding written settlement agreement had been reached at a mediation to resolve a prior conservatorship matter while her husband was still alive. The fly in the ointment was that while husband, wife (widow to be), and two of husband’s three children by a prior marriage did sign a settlement agreement at one of the mediation sessions, husband’s son (the third child) never did. (Under the settlement agreement, wife was to get one-third of husband’s assets—over $2.1 million–rather than specific requests contained in a preexisting will and living trust.) Prior to the purported settlement agreement, husband executed updated estate planning documents, by which wife was left husband’s liquor store business, the right to operate the business rent free for two years, and up to $100,000 to pay off the mortgage on her personal residence. However, husband left the remainder of his estate to the children, split equally on a one third basis. No wonder wife was miffed and pursued her breach of contract action.
The contract action went to a bench trial, with the trial court finding that no settlement agreement had been reached at the mediation in the absence of assent from the recalcitrant son. The trial judge rejected (by this time) widow’s testimony that husband had agreed to be separately bound unless everyone consented to the settlement. The lower court concluded there was no binding agreement, the term of the document waiving mediation confidentiality never took effect, and the document was inadmissible in evidence. Winning executor was awarded costs, but denied attorney’s fees. He appealed the fee denial—and lost.
In Rael v. Davis, Case Nos. B197971 & 200217 (2d Dist., Div. 4 Sept. 24, 2008) (certified for publication), Justice Manella—writing for a 3-0 panel of the Second District, Division Four—resolved the first impression issue against executor, affirming the fee denial decision by the lower court.
Executor’s main contention was that because widow would have been entitled to attorney’s fees under her mediation agreement had she prevailed, executor had to be afforded reciprocal rights under Civil Code section 1717’s mutuality principle.
Wrong, said the appellate panel, under these circumstances. In this situation, the mediation agreement was not simply unenforceable—it was inadmissible (a liminal consideration to enforceability) because recalcitrant son never signed it or waived the confidentiality dictate so that it could become admissible. As elegantly put by Justice Manella, “[Evidence Code] section 1123 contains no admissibility exception to permit the application of Civil Code section 1717.” (Slip Opn., at p. 17.) Even if the result seems unfair under mutuality principles, the Legislature is the one to shape those exceptions. (See Foxgate Homeowners’ Assn. v. Bramalea California, Inc., 26 Cal.4th 1, 17 n. 13 (2001).) Executor lost his bid to obtain an award of fees against widow, and the appellate panel provided an interesting decision pitting Civil Code section 1717 against mediation confidentiality provisions. Section 1717 lost this round of the confrontation.