Olam v. Congress Mortg. Co., C95-2806 WDB.

• Decision Date: 15 October 1999
• Docket Number: No. C95-2806 WDB.,C95-2806 WDB.
• Citation: 68 F.Supp.2d 1110
• Court: U.S. District Court — Northern District of California
• Parties: Donna Conlin OLAM, Plaintiff, v. CONGRESS MORTGAGE COMPANY, et al., Defendants.

68 F.Supp.2d 1110

Donna Conlin OLAM, Plaintiff, v.CONGRESS MORTGAGE COMPANY, et al., Defendants.

No. C95-2806 WDB.

United States District Court, N.D. California.

October 15, 1999.

COPYRIGHT MATERIAL OMITTED

Carol Johnson Lundberg, San Francisco, CA, Phyllis Rafler, Oakland, CA, Terrence P. Murphey, Jacqueline C. Hamilton, Castleman Law Firm, Pleasanton, CA, for Plaintiff.

Daniel E. Stea, Law Office of David R. Medlin, Oakland, CA, for DefendantsEquity Holders Servicing Co., Robert S. Gaddis.

David R. Medlin, Medlin & Stea, Oakland, CA, for DefendantsCongress Mortg. Co., Benjamin C. Albritton, Esmond C. Lyons, Esmond C. Transcorp, Richard Lincoln Trust Co.Richard Franz, Robert G. Aptekar, Ke Ling Lee, John Hartmann, William N. Mozena, Patricia Mozena.

AMENDED ORDER AND OPINION RE DEFENDANTS' MOTION TO ENFORCE SETTLEMENT

BRAZIL, United States Magistrate Judge.

INTRODUCTION—MAJOR ISSUES PRESENTED

The court addresses in this opinion several difficult issues about the relationship between a court-sponsored voluntary mediation and subsequent proceedings whose purpose is to determine whether the parties entered an enforceable agreement at the close of the mediation session.

As we explain below, the parties participated in a lengthy mediation that was hosted by this court's ADR Program Counsel — an employee of the court who is both a lawyer and an ADR professional.At the end of the mediation (after midnight), the parties signed a "Memorandum of Understanding"(MOU) that states that it is "intended as a binding document itself...."Contending that the consent she apparently gave was not legally valid, plaintiff has taken the position that the MOU is not enforceable.She has not complied with its terms.Defendants have filed a motion to enforce the MOU as a binding contract.

One of the principal issues with which the court wrestles, below, is whether evidence about what occurred during the mediation proceedings, including testimony from the mediator, may be used to help resolve this dispute.Before we address the merits of these issues, we must decide whose law to apply (state or federal).

Because the pertinent background facts and the procedural setting are of some moment, we discuss them with some care in the first section.Then we turn to choice of law issues.After deciding whose law governs, we address some challenging procedural and substantive questions.Thereafter, we consider the record developed at the evidentiary hearing — to determine what the factual setting is in which we apply the law.With the factual setting defined, we are positioned to explain why we have decided to grant the defendants' motion and to enforce the settlement agreement.

THE PERTINENT FACTUAL AND PROCEDURAL BACKGROUND

The events in the real world out of which the current dispute arises began unfolding in 1992, when Ms. Olam applied for and received a loan from Congress Mortgage in the amount of $187,000.The 1992 loan is secured by two single-family homes located in San Francisco and owned by Ms. Olam.These properties are referred to as the "Athens Property" and the "Naples Property" because they are located on Athens Street and Naples Street, respectively.

Plaintiff states that she never read the 1992 loan documentation and that she simply signed where Congress Mortgage's agent told her to sign.See, Declaration of Donna Conlin Olam in Support of Her Memorandum Opposing Defendants' Motion to Compel Contract Arbitration, filed September 1, 1995.

Ms. Olam contends that she could not afford the monthly payments on the 1992 loan.Eventually she defaulted.Thereafter, Congress Mortgage initiated foreclosure proceedings on both the Athens and Naples Properties.

The purported May 1993 work-out agreement

Defendants allege that on May 21, 1993, plaintiff entered a work-out agreement pursuant to which, among other things, money earmarked for renovating the property was applied to the defaulted loan — in order to bring plaintiff's payments up to date.See, Exhibit D-1, admitted at August 23, 1999 evidentiary hearing.¹Defendants further contend that, at the time she signed the May 1993 agreement, plaintiff was represented by an attorney, Carl Windell, who reviewed both the work-out agreement and the original 1992 loan documentation.Both plaintiff and Mr. Windell's signatures appear on the 1993 agreement.See, Ex. D-1

Plaintiff, in sharp contrast, asserts that Mr. Windell was not her attorney at that time.Instead, she says, Mr. Windell was "hired" by Robert Gaddis of Congress Mortgage to resolve a problem with a contractor and to review the original loan documentation.Plaintiff contends that Mr. Windell did not explain the 1993 workout agreement to her and that she did not understand it at the time she signed.See,August 28, 1998 Deposition of Donna Conlin Olam, filed August 23, 1999at 395-410(hereafter "Olam Depo.").Ms. Olam also alleges that she was under "extreme duress" at the time she signed the 1993 agreement and that she was coerced into signing it.See,Olam Depo., at 395-410;Transcript August 23, 1999 Evidentiary Hearing, WDB TapesNo. 1-3(hereafter "E.H. Transcript").

Plaintiff again defaulted on her loan payments.In late 1993, Congress Mortgage notified plaintiff that it would again begin foreclosure proceedings on the properties.

The purported October 1994"extension" agreement

According to defendants, the second foreclosure notice led to more negotiations between Ms. Olam and Congress Mortgage, negotiations that by October of 1994 had produced yet another written agreement.See, Exhibit D-2.Under its terms, Congress Mortgage would sell the Athens Street property, reduce the outstanding principal on the 1992 loan by the sale amount, and restructure Ms. Olam's remaining debt so that her monthly payments would be smaller.Defendants contend that in entering this agreement Ms. Olam was represented by attorney Paul H. Melbostad.Both Mr. Melbostad and Ms. Olam signed the October 1994 agreement.See, Ex. D-2.

Ms. Olam, however, contends that the October 1994 agreement — like the 1992 original loan documentation and the 1993 workout agreement — cannot be enforced because, among other things, she did not freely consent to it.She claims that at the time she signed the October 1994 agreement she was under economic duress, imposed by the impending foreclosures.See,Olam Depo., at 413-430.Ms. Olam also asserts that she did not read the October 1994 agreement, that Mr. Melbostad did not explain the agreement to her, and that she signed it only because he told her to do so.²See,Olam Depo., at 413-430; E.H. Transcript.At one point plaintiff contended that, due to incapacitating medical conditions, she was incapable of understanding the nature, purpose, and effect of the 1994 agreement.See,Plaintiff's Memorandum of Law Regarding Regulation Z; Plaintiff's Statement Re: Mediation, ..., filed August 24, 1998.However, at her deposition, defense counsel asked plaintiff whether her medical incapacity contributed to the alleged duress she was experiencing at the time she signed the 1994 document — and plaintiff responded that it did not.See,OlamDepo., at 433:1-4.

It appears that defendants gave notice of a proposed sale of the Athens property in November 1994, but that an injunction prevented the sale process from going forward.That injunction was issued by a state court in which people(the Manns) who were trying to buy the Athens property from Ms. Olam had sued Ms. Olam and Congress Mortgage.

This lawsuit begins

On June 23, 1995, Donna Conlin Olam filed in state court the instant lawsuit against Congress Mortgage, its president Robert Gaddis, and Equity Holders Servicing Company.The pleading on which the case eventually proceeded contained state and federal claims, including a claim under the federal Truth in Lending Act ("TILA") and claims for fraud and breach of fiduciary duty.At the time she filed the original complaint Ms. Olam was represented by attorney Carol Johnson Lundberg.On August 3, 1995, defendants removed the case to this court, where it was assigned to District Court Judge Stanley A. Weigel.³See, Order re Court Procedures, filed August, 4, 1995.On August 17, 1995, plaintiff demanded a jury trial.

Prior to plaintiff's jury demand, Congress Mortgage had moved the District Court to compel Ms. Olam to submit her dispute with Congress Mortgage to arbitration pursuant to terms set forth in the 1992 loan agreement.Plaintiff opposed that motion arguing, among other things, that the agreement to arbitrate was procured by fraud.See,Plaintiff's Memorandum in Opposition to Defendants' Motion to Compel Contract Arbitration, filed September, 1, 1995.She contended that she had not read the loan documents when she signed them in 1992(at least in part because she did not have her reading glasses) and that Congress Mortgage had not told her about the arbitration clause.See, Declaration of Donna Conlin Olam in Support of Her Memorandum Opposing Defendants' Motion to Compel Contract Arbitration, filed September 1, 1995.Based on Ms. Olam's factual contentions, Judge Weigel denied the motion to compel arbitration.See, Order, filed November 6, 1995.⁴

Plaintiff and her former counsel reviewed and discussed ADR options

In November 1995, plaintiff and her then-counsel, Carol Lundberg, certified that they had reviewed and discussed available court and private dispute resolution options.See, Certification of Discussion of ADR Options, filed November 16, 1995.

The case is reassigned and plaintiff changes counsel

On June 16, 1997, this case was randomly reassigned to District Judge Vaughn R. Walker.Sometime shortly thereafter, Phyllis Voisenat(then Phyllis Rafter) replaced Carol Lundberg as Ms. Olam's lawyer in this litigation.See, Civil Minute Order, filed August 1, 1997.

At an August 1, 1997, case management conference the parties consented to disposition by a magistrate judge.On August...