IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
EDWARD NOTARIUS and PATRICIA No. 93-11650
EDWARD NOTARIUS and PATRICIA
v. A.P. No. 94-1368
DAVID and MARIANNE NEUFELD,
Memorandum of Decision
The parties to this adversary proceeding were the parties to a prior adversary proceeding in
this court. After a full day of trial, they reached a settlement. Most of the settlement terms were
stated orally on the record, but certain "additional terms" of a confidential nature were in the
form of a handwritten agreement prepared during settlement negotiations and signed by counsel
for both sides. This adversary proceeding is over interpretation of one of those additional terms.
The first adversary proceeding had been over the residence and vineyard which the Neufelds
had sold to Notarius and Schweizer. The Neufelds sought to foreclose due to failure of Notarius
and Schweizer to make payments; the latter alleged that they did not have to pay because the
Neufelds had made misrepresentations to them. As part of the settlement, the Neufelds were
allowed to foreclose and take back the property.
While Notarius and Schweizer had owned the property, they had borrowed money from First
Nationwide Bank secured by a deed of trust to the property. While the Bank claimed that its lien
was superior to that of the Neufelds, the latter had a good claim that the lien was junior and had
been wiped out by their foreclosure. Litigation over the priority of the bank's lien was pending
in state court. One of the "additional terms" in the handwritten agreement was as follows:
[The Neufelds] to pay to [Notarius and Schweizer]
1/2 of any savings to first Nationwide below current
due (i.e. approximately $380,000) this
amount to be paid at time of final payment on prom-
The parties contemplated that a more formal settlement agreement would be prepared and
signed at a later date, and such an agreement was in fact prepared and signed. It contained the
following provision relating to the First Nationwide lien:
[The Neufelds] shall pay to [Notarius and Schweizer]
one-half of any amount of reduction in the present princi-
pal balance of the First Nationwide note made under any
settlement or agreement between [the Neufelds] and First
Nationwide . . .
The Neufelds did not reach any agreement with First Nationwide. They proceeded to trial and
prevailed, obtaining a judgment reducing the First Nationwide lien to zero. Notarius and
Schweizer claim one-half of the reduction pursuant to the settlement agreement. The Neufelds
take the position that a "judgment" is not a "settlement," and accordingly they are under no
obligation to give Notarius and Schweizer anything even though they concede that if they had
settled their lawsuit with First Nationwide Notarius and Schweizer would have been entitled to
After considering all the evidence, the court has no difficulty determining that the term
"settlement" in the formal version of the agreement was intended by both sides to include any
reduction in the First Nationwide lien won by judgment. The court reaches this conclusion for
First, the term originally used by both sides in the handwritten agreement was "savings."
Both sides agreed that there was no subsequent negotiation or discussion. The court therefore
concludes that "savings" is what the parties agreed to, regardless of the words they used in the
Second, the term "settlement" can be defined as encompassing a judgment. See Kissel v.
, 83 F.Supp. 799, 801 (DC 1949)("A suit may be settled either by agreement or by final
determination by a court...").
Third, interpretation of the agreement as urged by the Neufelds would render one of the words
meaningless. The parties used the phrase "reduction . . . made under any settlement or
agreement" to replace the word "savings" in the handwritten version. If the parties had truly
meant to limit reduction to only a negotiated agreement, then that would make the word
"settlement" redundant and unnecessary. While contracts do occasionally contain redundant and
unnecessary words, it is more likely that the parties intended the word "settlement" to encompass
something more than "agreement."
The court of course notes that the Notarius' position is not without merit. The term
"settlement" is in fact used in other places in the agreement in a limited manner (e.g. "Defendants
intend to negotiate a settlement with First Nationwide" at page 4, paragraph 10). If the court did
not have the original handwritten agreement before it, it might be tempted into adopting the
Notarius' interpretation. However, the written version makes it clear that the parties intended that
any reduction of the First Nationwide lien would be split 50-50.
For the reasons stated above, judgment will be rendered in favor of Notarius and Schweizer
in the amount of $188,719.87, plus interest at the legal rate from and after the time the payment
was due under the agreement. They shall also recover their attorneys' fees and costs of suit.
This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a)
and FRBP 7052. Counsel for plaintiffs shall submit an appropriate form of judgment forthwith.
Dated: February 14, 1996 _______________________