COBB COMPANY INC v. STURM (1983)

Defendant T.M. Cobb Company, Inc. (Cobb) petitioned this court for a peremptory writ of mandate directing respondent superior court to vacate its order granting plaintiffs' motion to strike Cobb's acceptance of an offer to compromise pursuant to Code of Civil Procedure section 998 ¹ and to grant Cobb's motion to enter judgment in favor of plaintiffs and against it in the sum of $10,000.   We initially denied the petition but, on Cobb's application, the Supreme Court granted a hearing and retransferred the matter to this court with directions to issue an alternative writ of mandate.²  We have done so.

The pertinent facts in this case are not in dispute.   A complaint was filed in this action alleging that Cobb and other defendants negligently designed and constructed plaintiffs' family residence.   Cobb was the manufacturer and supplier of approximately 60 sash and glass windows and doors used in the construction of said residence by the general contractor.   After the residence was completed, leaks developed in and around the windows and doors, resulting in the filing of this lawsuit on April 10, 1980.

On July 21, 1982 plaintiffs served by mail an offer to compromise pursuant to section 998 on Cobb.   In a declaration to the trial court the attorney for plaintiffs stated that on or about August 16, 1982 Cobb through its attorney ³ made a counter offer of $7,000 or $8,000 if accepted that day.   The counter offer was rejected.

During the month of August 1982 several depositions were taken which indicated that Cobb's actions were considerably more culpable than plaintiffs realized at the time the offer was made.   Accordingly, on August 20, 1982 a written revocation of the offer was sent to Cobb's attorney.   The revocation was received by Cobb's counsel the following day.   On August 25, 1982, Cobb acknowledged by letter it had received the revocation but that it was accepting the section 998 offer anyway.   On the same day Cobb filed an acceptance of plaintiffs' offer to compromise in superior court.⁴

Plaintiffs filed a motion to strike acceptance of the section 998 offer and on September 22, 1982 the court, relying on Distefano v. Hall (1968) 263 Cal.App.2d 380, 69 Cal.Rptr. 691, issued its minute order granting the motion to strike and denying Cobb's motion for entry of judgment.

The sole issue posed by this writ is whether an offer to compromise given pursuant to section 998 is revocable.   We hold that it is.

Subdivision (b) of section 998 states:  “Not less than 10 days prior to commencement of the trial as defined in subdivision 1 of Section 581, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken in accordance with the terms and conditions stated at that time.   If such offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly.   If such offer is not accepted prior to trial or within 30 days after it is made, whichever occurs first, it shall be deemed withdrawn, and cannot be given in evidence upon the trial.”

 Rules of statutory construction require that the court ascertain the intent of the Legislature so as to effectuate the purpose of the law.   To ascertain such intent the court looks first to the words themselves for the answer.  (Martinez v. Traubner (1982) 32 Cal.3d 755–758, 187 Cal.Rptr. 251, 653 P.2d 1046;  Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230, 110 Cal.Rptr. 144, 514 P.2d 1224.)   Here, the subject statute plainly states that if the compromise offer is not accepted it is deemed withdrawn.   The word “withdrawn” seems inconsistent with the idea of making an irrevocable offer.   We agree with plaintiffs that if the Legislature had intended to make this an irrevocable offer it would have used language indicating either that the offer “may not be withdrawn” or that it would “remain open for 30 days.”   Instead, the language of the statute speaks to the issue of termination by operation of law.

Moreover, “the process of settlement and compromise is a contractual one, and the applicable principles are those relating to contracts in general [citation].”  (Distefano v. Hall, supra, 263 Cal.App.2d 380, 385, 69 Cal.Rptr. 691.)   With reference to contract law Civil Code section 1586 provides that an offer may be revoked at any time before its acceptance is communicated to the offeror, but not afterwards.   In the instant case it is clear that revocation was effective on August 20, 1982 when plaintiffs sent their letter of revocation.  (Civ.Code, § 1587, subd. (1).)  This was five days before Cobb accepted plaintiff's offer to compromise.

 Cobb contends that an offer to compromise made pursuant to section 998 is an irrevocable offer because the statute confers a benefit on the offeror and a detriment on the offeree;  that is, by making an offer pursuant to section 998, an offeror receives something that he would not ordinarily be entitled to—costs in the event of a more favorable result, and the offeree is faced with a detriment—the possibility that the offeree, by not accepting the offer, would be liable to costs that the offeree would not otherwise be responsible for.   Cobb argues that the service of a 998 offer possesses the requisite consideration to constitute an option contract to make the offer to compromise irrevocable.   This argument fails to include an essential element of contract law—that of mutual assent.

 It is well established that an option agreement is a contract distinct from the contract to which the option relates, since it does not bind the optionee to perform or enter into the contract upon the terms specified in the option.  (Lowe v. Massachusetts Mut. Life Ins. Co. (1976) 54 Cal.App.3d 718, 725, 127 Cal.Rptr. 23.)   As with any contract, consent of the parties is essential to the existence of any option agreement.  (Civ.Code, § 1550.)   “The existence of mutual consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe.  [Citation.]  Accordingly, the primary focus in determining the existence of mutual consent is upon the acts of the parties involved.”  (Meyer v. Benko (1976) 55 Cal.App.3d 937, 942–943, 127 Cal.Rptr. 846.)   In the case at bench, there was no such manifestation of consent to an option agreement by either party;  plaintiffs made no indication that the offer was irrevocable and Cobb was totally silent until after the offer to compromise was revoked.

 In view of the fact that there is no language in section 998 making an offer to compromise irrevocable and there was no agreement between the parties to enter into an option agreement, we find that the trial judge correctly granted plaintiffs' motion to strike Cobb's acceptance.

The alternative writ is discharged and the petition for a peremptory writ of mandate is denied.

FOOTNOTES

1.   All code sections refer to the Code of Civil Procedure unless otherwise indicated.

2.   In addition, the Supreme Court stayed all proceedings in respondent court pending determination of the petition.

3.   In their reply to the petition herein plaintiffs now state that their attorney received a telephone call from someone who indicated he was making the counter offer on behalf of Cobb, that the call was not made by Cobb's attorney but by someone from the insurance company who had authority to make the counter offer.

4.   Cobb takes the position that where an offer made pursuant to section 998 is served by mail, the provisions of section 1013 apply and the statutory period within which to accept the offer is 35 days from the date of mailing.   For the purpose of this decision we need not address the issue of whether section 998's 30-day provision for acceptance is extended by virtue of section 1013.

MILLER, Associate Justice.

ROUSE, Acting P.J., and SMITH, J., concur.