Second District, Division Four So Holds in Interesting Settlement Stipulation Default Dispute.
In past posts, we have explored some cases that hold the absence of a fees clause in a settlement stipulation prevents a creditor from obtaining a fee recovery after the debtor defaults. See our October 29, 2008 post on Stansbury and Execute Sports. However, as the next case demonstrates, general principles in this area are hard to elucidate, because the specific structure of a settlement may dictate a different result. That is exactly what occurred in USA Aisiqi Shoes, Inc. v. Huang, Case No. B204798 (2d Dist., Div. 4 Nov. 12, 2008) (unpublished).
Huang involved a settlement agreement reached between an Employer and Employee by which Employee agreed to pay Employer a specified amount and execute a third trust deed on his residence as security for the monetary obligation. After Employee defaulted under the settlement (which did not have a fees clause or specify that the trust deed would contain such a provision), the trial court entered a stipulated judgment, including an award of $16,250 in attorney’s fees against Employee, and had a court-appointed elisor execute a trust deed on Employee’s behalf (which trust deed did contain a fees clause). While a nonjudicial foreclosure was proceeding, Employee paid off the settlement except for the attorney’s fees award. Employee then quitclaimed the residence to his wife. Employer then moved for an award of fees in the amount of $41,616 for having to enforce the settlement agreement, with the trial court awarding fees of $40,326 against Employee. Employee properly appealed the postjudgment fee award, but lost upon review by the Second District when it affirmed the fee award in Employer’s favor.
Justice Willhite, on behalf of a 3-0 panel, did acknowledge that the settlement agreement was silent as to whether the trust deed would contain an attorney’s fees clause. However, he resorted to custom and practice in resolving the issue: "By agreeing to secure his monetary obligation to [Employer] by executing a deed of trust, [Employee] implicitly agreed to be contractually bound to pay attorney fees in ‘any action or proceeding purporting to affect the security [of the deed of trust] or the rights or powers of Beneficiary’" under the trust deed fee clause. (Slip Opn., at p. 7.) Beyond that, Employee’s failure to contest the award of initial fees in the first settlement enforcement proceeding waived his right to challenge the inclusion of a fees provision in the trust deed.
In summarizing why the result was sound, the appellate panel observed: "Unlike the typical situation involving a deed of trust which contains an attorney fee provision and a nonjudicial foreclosure results, the matter now before us is unique in that it involves a settlement agreement by which the parties agreed to execution of a deed of trust as security for the monetary obligation created by the settlement. The obligation to pay attorney fees arose out of the contract, i.e., the deed of trust, but not in the context of nonjudicial foreclosure proceedings. Rather, it occurred as an outgrowth of the stipulated judgment, and was based upon the trial court’s continuing jurisdiction to enforce the settlement agreement." (Slip Opn., at p. 9.)
BLOG OBSERVATION—We were very intrigued over the use of "elisor." So, we consulted the web, which indicates that it goes back to English law practice where the court appointed a person to execute the duties of a sheriff when the sheriff was disqualified on account of conflicts of interest or prejudice. In modern practice, it seems that this means a person appointed by the court to execute an act if the person ordered to perform the act refuses to do so. Co-contributor Marc Alexander recently had a case in Orange County Superior Court where a defendant, much like the one in Huang, was ordered to execute, as part of a settlement on the court record, certain reconveyances under penalty of having the clerk or an elisor execute for the recalcitrant defendant.