This appeal arises out of a typo. In typing up an offer to compromise pursuant to Code of Civil Procedure section 998
Facts
Pablo Zamora (Zamora), doing business as Creative Engineering and Fabrication, filed suit against Clayborn Contracting Group, Inc. (Clayborn), alleging breach of contract and other related claims. The complaint alleged that Clayborn failed to pay for road signs produced and supplied by Zamora and sought approximately $143,000 in damages plus attorney fees. Clayborn answered and filed a cross-complaint. Although the cross-complaint did not specify the amount of damages sought, Clayborn sent Zamora an invoice for approximately $157,000 before filing the cross-claim.
Less than two months before trial, Zamora’s counsel mailed Clayborn a section 998 offer. Although Zamora apparently intended to offer to settle for a judgment in his favor in the amount of $149,999, the actual offer sent to Clayborn stated: “Plaintiff Pablo Zamora aka Pablo Iniguez dba Creative Engineering and Fabrication hereby offers to have judgment taken against himself andfor defendant Clayborn Contracting Group, Inc. . . . pursuant to Section 998 of the Code of Civil Procedure for the sum of $149,999 . . . .”
Clayborn filed a notice of acceptance of the offer approximately three days after reviewing it. One week later and two days after learning about the mistake in the offer, Zamora’s counsel advised the court of his intention to file a motion to set aside “the judgment based on mistake, inadvertence and excusable neglect.” After obtaining an order shortening the time for hearing the motion, Zamora filed a motion to set aside the section 998 offer or to vacate entry of judgment pursuant to the discretionary relief provision of section 473, subdivision (b).
In support of the motion, Zamora submitted declarations from himself, his counsel, the legal assistant who typed the section 998 offer and other
Zamora’s counsel declared that he, by phone, instructed his legal assistant to prepare a document offering to settle for a judgment against Clayborn in the amount of $149,999 pursuant to section 998. Zamora’s counsel, per office policy, authorized his legal assistant to send the document with his stamped signature even though he had not reviewed it, because he was out of town and time was of the essence. He further stated that, before making this offer, Zamora had never offered to settle the matter for less than $150,000 from Clayborn. His legal assistant largely corroborated his story and claimed that she “mistakenly typed the word ‘against’ as opposed to the phrase ‘in favor of Pablo Zamora.”
Zamora’s counsel also stated that, after accepting the section 998 offer, Clayborn unilaterally cancelled depositions and took pending motions to coordinate this action with other actions and to amend the cross-complaint off calendar without informing Zamora or other interested parties. A declaration from another litigant involved in the coordination motion corroborated these statements.
In opposition, Clayborn submitted declarations claiming that it acted in good faith and believed the offer was correct as written. Clayborn claimed that the proposed amount of the settlement—$149,999—was consistent with the amount stated in its latest invoice to Zamora—approximately $157,000. Claybom’s counsel further stated that he had told Zamora’s counsel that Clayborn would not give Zamora any money and had suffered significant damages due to Zamora’s conduct. Finally, Clayborn identified two tax levies against Zamora for approximately $31,000, as grounds for its failure to question the validity of the offer.
After a hearing, the trial court found that Zamora’s counsel made a ministerial or clerical error and granted the motion to set aside the judgment pursuant to the discretionary relief provision of section 473, subdivision (b). The Court of Appeal affirmed. After ordering the trial court to “enter judgment, nunc pro tunc as of February 17, 2000, pursuant to the section 998 offer filed that date,”
We granted review.
As relevant here, the discretionary relief provision of section 473, subdivision (b) provides that: “The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect.” According to Clayborn, this provision applies only to involuntary judgments or dismissals; therefore, Zamora could not obtain relief from the voluntary judgment entered pursuant to his section 998 settlement under section 473, subdivision (b). We disagree.
Our analysis begins with the statutory language. (Wilcox v. Birtwhistle (1999)
The Legislature first enacted the discretionary relief provision found in section 473, subdivision (b) in 1872, and the language of this provision has not changed appreciably since then. (See Historical Note, 15 West’s Ann. Code Civ. Proc. (1979 ed.) foil. § 473, p. 96 [“As originally enacted in 1872, the section read: ‘The Court. . . may, upon such terms as may be just, and upon payment of costs, relieve a party, or his legal representatives, from a judgment, order, or other proceeding taken against him through his mistake, inadvertence, surprise, or excusable neglect’”].) Since 1872, California courts have consistently applied the discretionary relief provision of section 473 to voluntary judgments or dismissals. For example, as early as 1901, this court affirmed an order setting aside a voluntary dismissal entered pursuant to a settlement agreement. In holding that the trial court had authority to do so under the discretionary relief provision of section 473, this court rejected Clayborn’s very contention and held that a party who “consented to the dismissal to his injury, under a mistake of fact, excusable under the terms of the statute, ... is not barred of relief.” (Palace Hardware Co. v. Smith (1901)
Palace Hardware was not an aberration. California courts have long held that “[e]ven after a voluntary dismissal with prejudice has been filed, the
Indeed, this long-standing interpretation of the discretionary relief provision of section 473 comports with its underlying purpose. (See Wilcox v. Birtwhistle, supra,
In doing so, we reject Clayborn’s contention that the statutory phrase “taken against” limits the discretionary relief provision to involuntary judgments or dismissals. Clayborn’s contention relies heavily on the analysis found in Huens, supra,
First, the Huens majority confined its analysis to the mandatory relief provision of section 473, subdivision (b). Huens therefore has no bearing on our interpretation of the discretionary relief provision. Indeed, the same Court of Appeal has subsequently limited Huens to the mandatory relief context and applied the discretionary relief provision to a voluntary dismissal entered with the consent of the attorney for the party seeking relief. (See State Farm Fire & Casualty Co. v. Pietak (2001)
Second, the construction of the verb “taken” found in Justice Blease’s concurring opinion in Huens is not persuasive. With no citation, Justice Blease contends the verb “taken” as used in the discretionary relief provision “implies that the adverse action must be involuntary.” (Huens, supra,
The recent addition of a mandatory relief provision to section 473 for attorney fault also does not dictate a contrary result. Under this provision, “the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney’s sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney’s mistake, inadvertence, surprise, or neglect.” (§ 473, subd. (b), italics added.) The purpose of this provision “was to alleviate the hardship on parties who lose their day in court due solely to an inexcusable failure to act on the part of their attorneys.” (Huens, supra,
In enacting this exception, the Legislature, however, made no changes to the discretionary relief provision of section 473, and the legislative history indicates no intent to alter the scope of this provision. Indeed, the Legislature has never substantively altered the statutory language at issue here despite the long line of California cases permitting discretionary relief from judgments entered pursuant to a settlement agreement (see ante, at p. 255, fn. 3), even though it has amended section 473 many times. Thus, the Legislature has apparently adopted this long-standing interpretation of the provision. (See People v. Daniels (1969)
Having established that Zamora may avail himself of the discretionary relief provision of section 473, subdivision (b), we now consider whether the trial court properly applied it. “A ruling on a motion for discretionary relief under section 473 shall not be disturbed on appeal absent a clear showing of abuse.” (Pietak, supra,
“A party who seeks relief under section 473 on the basis of mistake or inadvertence of counsel must demonstrate that such mistake, inadvertence, or general neglect was excusable because the negligence of the attorney is imputed to his client and may not be offered by the latter as a basis for relief.” (Generale Bank Nederland v. Eyes of the Beholder Ltd. (1998)
The party seeking relief under section 473 must also be diligent. (See Benjamin, supra, 31 Cal.2d at pp. 527-528.) Thus, an application for relief must be made “within a reasonable time, in no case exceeding six months, after the judgment, dismissal, order, or proceeding was taken.” (§ 473, subd. (b)0
Where the mistake is excusable and the party seeking relief has been diligent, courts have often granted relief pursuant to the discretionary relief provision of section 473 if no prejudice to the opposing party will ensue. (See, e.g., Robinson, supra, 119 Cal.App.2d at pp. 671-673; Fickeisen v. Peebler (1946)
In addition, Zamora was diligent in seeking relief, and Clayborn suffered no apparent prejudice. Finally, the record suggests that Clayborn took unfair advantage of the mistake. We find it hard to believe that Clayborn had no inkling that the section 998 offer was a mistake when the uncontroverted record established that: (1) Zamora’s complaint sought over $140,000 in damages; (2) Zamora had never offered to settle for less than $150,000 from Clayborn prior to making the offer; (3) the section 998 offer proposed to settle the matter for almost the same amount ($149,999) as Claybom’s entire claim for damages (approximately $157,000); and (4) Clayborn knew Zamora was having financial difficulties and had failed to pay approximately $31,000 in tax levies. Claybom’s msh to get approval of the settlement and its abmpt cancellation of depositions and hearings on pending motions with no notice to the parties involved cast further doubt on its claim of innocence. Under these facts, the trial court did not abuse its discretion by granting relief to Zamora pursuant to section 473, subdivision (b).
Contrary to the assertions of Clayborn, both Pazderka v. Caballeros Dimas Along, Inc. (1998)
The observation in Pazderka that courts will not set aside a valid settlement agreement absent “fraud or undue influence” does not compel a different result. (Pazderka, supra,
Finally, in reaching this holding, we do not offend the public policies favoring the private resolution of civil disputes. Although the law favors settlements (Folsom v. Butte County Assn. of Governments (1982)
Our holding also does not circumvent long-standing principles of contract law. Even if, as Clayborn contends, Zamora was limited to the contractual defense of unilateral mistake, ample evidence supports the trial court’s decision. As noted above (see ante, at p. 259), the undisputed facts strongly suggest that Clayborn “had reason to suspect that a mistake had been made” (Donovan v. RRL Corp. (2001)
In any event, we are confident trial courts will exercise this discretionary power to vacate judgments entered pursuant to a settlement agreement both carefully and sparingly. We suspect most, if not all, courts will see through claims of buyer’s remorse or breach of contract. (See, e.g., Basinger, supra,
Disposition
We affirm the judgment of the Court of Appeal.
George, C. J., Kennard, J., Baxter, J., Werdegar, J., Chin, J., and Moreno, J., concurred.
Notes
All further statutory references are to the Code of Civil Procedure.
The trial court had never formally entered judgment in accordance with the accepted offer, as required by section 998, subdivision (b)(1).
(See, e.g., Harth v. Ten Eyck (1941)
Philippine Export & Foreign Loan Guarantee Corp. v. Chuidian (1990)
In recognizing this distinction, we express no opinion as to whether Pazderka or Premium Commercial Services was correctly decided.
