making a dealThis is the question that was likely asked by volunteer board members of a California Homeowner’s Association (“HOA”) to the attorney who had represented the HOA in a case that was “purportedly” settled. In Critzer v. Enos (2010) 187 Cal.App.4th 1242, a homeowner sued their community HOA for failing to adequately enforce the Conditions, Covenants and Restrictions (CC&R’s). In the same action, the homeowner also sued other residents residing within the HOA, contending that each resident had violated (or were continuing to violate) the CC&R’s.

As is often the case in civil actions, a day before the case was set to commence trial, the HOA (through its board members) and the other parties to the lawsuit reached a “tentative” settlement that resolved the entire case. On the date set for trial, the parties were to appear in court to put the settlement on the record by reciting it orally in court before the judge and court reporter (as allowed by Code of Civil Procedure § 664.6). Due to the schedule of the HOA board members, their attorney, along with the other parties appeared in court to read the settlement on the record. The HOA attorney represented to the court that he was fully authorized to act in behalf of the HOA and its individual board members as it related to the settlement of the case. Sometime after the case had been settled, several homeowners decided they did not want to honor the terms of the settlement and refused to comply with its terms. The HOA sued to enforce the settlement.

Code of Civil Procedure section 664.6 states “If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement.” The key question before the reviewing court was the legislative intent of what the word “parties”was meant to include as it related to CCP § 664.6. The court concluded that although in limited situations an attorney may be considered a party, an attorney is not considered a “party” with respect to settling an action in behalf of a client or a HOA. The court held that this action requires the express consent of the party or an authorized HOA board member (i.e., passing a resolution to appoint one board member to act in behalf of HOA). As no authorized representative of the HOA appeared in court, the settlement was unenforceable.

This was a tough pill to swallow for a volunteer HOA board. They likely thought the frustration of litigation was way behind them when their attorney appeared in court, on the HOA’s behalf, to recite the terms of a settlement on the record. All attorneys, whether their practice involves representing HOA’s or not, should learn from the holding in Critzer v. Enos. A deal is only a deal, if it is in writing or read on the record before the court, by a party or an authorized non-attorney representative of a party.