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A STATUTORY OFFER TO COMPROMISE THAT DOES NOT CONTAIN AN INDICATION OF HOW TO ACCEPT IS INVALID
Puerta v. Torres
(Cal. App. Ct. 2011)
In Antonio Puerta v. Ana Berta Torres (“Puerta”), the California Court of Appeals ruled that a statutory offer to compromise that contained only the terms of the offer itself and its expiration date was invalid. For such an offer to be valid, the plain language of the statue requires that the offer indicate how it can be accepted.
Factual Background
Plaintiff Antonio Puerta sued Anna Berta Torres, claiming that Torres backed into his car while attempting to enter a gas station driveway. After a one-day trial, the court found in favor of Torres.
Because Torres made a pre-trial Code of Civil Procedure section 998 Offer to Compromise (hereinafter referred to as a “998 Offer”), Torres, as the prevailing party, was awarded costs incurred, including expert witness fees.
Puerta appealed the trial court’s award of costs, arguing that Torres’ 998 Offer was invalid because it did not include a provision that allowed him to accept the offer by signing a statement of acceptance, as called for in Code of Civil Procedure section 998.
The Appellate Court’s Holding
On appeal, the appellate Court agreed with Puerta, finding that Torres’ 998 Offer was invalid because it failed to comply with the plain language of Code of Civil Procedure section 998.
Section 998, as amended in 2006, states in pertinent part that any party may serve a written offer “to allow judgment to be taken or an award to be entered. . . . The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.” (Id., emphasis added.) Torres’ offer contained no provision regarding acceptance, instead only stating that the offer would remain open for 30 days.
In reaching its decision, the Court discussed the two competing dynamics of Section 998: encouraging settlement on the one hand while also complying with the most fundamental principles of statutory construction on the other hand. As to the former, the Court looked at Berg v. Darden (2004) 120 Cal.App.4th 721 (“Berg”).
In Berg, the plaintiff faxed a 998 Offer to defendant, offering to settle the case for $225,000. The 998 Offer did not state whether plaintiff sought to have judgment entered against defendant; sought an award in plaintiff’s favor; or proposed to dismiss the action with prejudice. While noting that plaintiff’s 998 Offer could have been more formal and stated with more precision, Berg held that “an otherwise clear section 998 offer is not rendered invalid simply because it does not track precisely the language of the statute.” (Id. at 728.)
In Puerta, the Court found the competing interest concerning statutory construction more persuasive than encouraging settlement, stating that “‘[i]f the language is clear and unambiguous, the plain meaning governs.’”
The Court, in distinguishing its decision from Berg, reasoned that because the statute’s language states that the offer “shall” include a “provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted,” the requirement is mandatory. The Court further distinguished its decision from Berg by stating that “[a]pplying the statute as written does not defeat its purpose.” Rather, Section 998’s language “seeks to eliminate uncertainty by removing the possibility that an oral acceptance might be valid.”
In concluding, the Court noted that while there is room for interpretation as to how an appropriate statement of acceptance might be phrased in the offer, the plain language of the statute sets forth two mandatory requirements for a valid 998 Offer: the offer shall be written and it shall contain a provision stating that the recipient can accept the offer “by signing a statement that the offer is accepted.”
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Frank T. Sabaitis
Brad A. Byszewski
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