McKelvie v. City of Mount Clemens

Decision Date30 July 1991
Docket Number90-1448,Nos. 90-1430,s. 90-1430
Citation1991 WL 139697,940 F.2d 661
PartiesUnpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. Frank McKELVIE, Sharon McKelvie, Plaintiffs-Appellants, Cross-Appellees, v. CITY OF MOUNT CLEMENS, Defendant-Appellee, Florence Cement Company, Defendant-Appellee, Cross-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

Before BOYCE F. MARTIN, Jr. and MILBURN, Circuit Judges, and WELLFORD, Senior Circuit Judge.

WELLFORD, Senior Circuit Judge.

Plaintiff, Frank McKelvie, was involved in a car accident at the intersection of New Street and Pine Street in the City of Mount Clemens, Michigan, early in 1985. Plaintiff's car was struck on the right side by another vehicle and then collided with a pole, and he was seriously injured as a consequence.

McKelvie and his wife, Sharon, along with their three children, instituted a cause of action in Michigan state court against defendant, the City of Mount Clemens in March of 1986. In 1988, the same plaintiffs filed a separate suit arising out of the same accident against defendant, Florence Cement Company. Still later, McKelvie and his wife filed a cause of action in federal court against General Motors and Detroit Edison. 1 An amended complaint, however, in federal court added Mount Clemens and Florence Cement as defendants. Mount Clemens had asserted accord and satisfaction as an affirmative defense, but Florence Cement failed to raise this affirmative defense. Upon plaintiffs' motion, they were permitted to dismiss their actions in state court without prejudice.

Following this state court dismissal, Mount Clemens and Florence Cement moved for summary judgment, arguing that there was no material issue of fact as to whether an accord and satisfaction had been established, and the district court granted the motions of both defendants.

Plaintiffs made a motion for reconsideration. Along with its response to this motion for reconsideration, Florence Cement also moved to amend its answer so as to include accord and satisfaction as an affirmative defense. The district court denied plaintiffs' motion to reconsider, issuing a memorandum opinion stating its reasons for its action. The district court, however, denied Florence Cement's motion to amend without explanation.

Plaintiffs now appeal the grant of summary judgment to both defendants. 2 Florence Cement cross-appeals the court's denial of its motion to amend its answer. We REVERSE.

On May 6, 1988, plaintiffs' attorney in the Michigan state court proceedings, sent to Mount Clemens' counsel a letter indicating that plaintiffs accepted the City's proposed $10,000 settlement offer, stating:

Dear Mr. Ryan:

My clients will accept your offer of $10,000 in settlement. I will get back to you on how the check should be drawn up.

Thank you for your cooperation.

The letter was signed by plaintiffs' then counsel, Rusing.

The City's attorney responded promptly: "This is a total and complete settlement of this matter as against my client, the City of Mount Clemens.... Your clients will indemnify and hold harmless the City of Mount Clemens."

Rusing then sent a letter to counsel for defendant, Florence Cement, including the following language, but indicating interest in such an offer, stating:

At this point, my clients are not sure about the settlment and want to give it some thought before they agree to your settlement offer of $10.000. I have indicated to them the offer, but as of this time, I would suggest that you proceed with this case as if no settlement were derived at.

On May 20, 1988, however, Rusing indicated to Florence Cement that plaintiffs would settle $15,000:

Kindly be advised that I discussed this matter with my clients again and they are agreeable to accepting $15,000 in settlement from your client. In my opinion this is a small amount considering the nature of my clients' injury, which consists of a complete quadriplegia. My clients, however, are aware of the fact that they can receive a much higher verdict, the same amount or nothing at all. They both advise me that they are agreeable to accepting the settlement in the amount of $15,000. If your company is still willing to enter into the settlement, then please let me know. If they are not, then please let me know as well and I will proceed with further discovery and trial preparations. If the case can be settled, then I would appreciate your making a check out for $100.00 payable to Barbara McKelvie, $100.00 payable to Kathleen McKelvie, $100.00 payable to Frank McKelvie, parent of Daniel McKelvie, and $14,700 payable to Frank McKelvie and Sharon McKelvie.

Thank you for your usual courtesy and cooperation.

The Mount Clemens attorney wrote another letter about a week later purporting to confirm the settlement of $10,000 but he allocated $100 of the total to each of the children, and the remaining $9,700 to Frank and Sharon McKelvie. This letter enclosed "the necessary releases."

Frank McKelvie testified that he accepted no offer to settle with either Mount Clemens or Florence Cement. Sharon McKelvie testified that she had received information concerning settlement offers, but she informed Rusing that she would not accept the sums offered.

Rusing's affidavit indicated:

[I] never, at any time, discussed, nor contemplated, nor agreed, on behalf of the plaintiffs to any indemnification of the City of Mt. Clemens nor any other party; and, further, I never discussed, contemplated, nor agreed to the release of "all other persons, firms, employers, corporations, associations or partnerships of and from any and all claims, actions, causes of action, demands, rights, damages, cost, loss of service, expenses and compensation whatsoever."

He also indicated under oath that by way of a telephone conversation with defense counsel, he "expressly and unequivocally revoked and repudiated any and all settlement offers and proposals" before they were consummated. Plaintiffs did not produce this Rusing affidavit, however, until after the grant of summary judgment. It was submitted with plaintiffs' motion for reconsideration.

A. Florence Cement's Cross-Appeal

Plaintiffs argue that Florence Cement waived its affirmative defense of accord and satisfaction because it did not plead the defense in the first responsive pleading, and thus Florence Cement was precluded from seeking summary judgment on that basis. Florence Cement contends that the district court erred when it denied its motion to amend the answer to include accord and satisfaction as a defense.

Amendment of pleadings may and should be granted to conform to the proceedings and raise issues already addressed on the merits. Fed.R.Civ.P. 15(b). When issues not raised by the pleadings are raised by express or implied consent of the parties, the issues may be treated in all respects as if they had been raised in the pleadings. Id. That same Rule provides that amendment may be sought after judgment, but failure to amend does not affect the result. We conclude that the district court should have allowed Florence Cement's amendment, although its failure to do so does not preclude the grant of summary judgment.

The issue of accord and satisfaction was litigated by plaintiffs and defendants before the district court. Plaintiffs impliedly, therefore, consented to the naming of this defense by Florence Cement. The latter's summary judgment motion was specifically based on the claim of accord and satisfaction. This issue was argued before the district court. Plaintiffs opposed the summary judgment on the merits, without ever raising an objection that this issue was not raised by the pleadings of Florence Cement. Plaintiffs therefore are precluded from claiming that we should not consider accord and satisfaction on behalf of both defendants.

B. Mount Clemens

Plaintiffs claim that the question whether there was an accord and satisfaction had been litigated and determined by the state court, precluding the district court from deciding the issue anew. Plaintiffs moved for voluntary dismissal in state court based on plaintiffs' filing of a similar claim in federal court. Plaintiffs now argue that the state court "implicitly" decided whether there had been an accord and satisfaction by granting the motion to dismiss without prejudice. Because both defendants opposed dismissal without prejudice based upon the claim that a settlement had been reached, plaintiffs argue that the state court's court action (dismissal without prejudice) must, by reasonable inference, be based on accord and satisfaction. 3 We disagree.

The state judge did not expressly consider this issue when granting plaintiffs' motion. Indeed the state court judge stated that it should be left to the federal court to decide. Since the state court explicitly declined to rule on this issue, the district court properly considered the issue.

2. Settlement in Michigan without express authority or ratification

Whether an attorney can settle a case without his or her client's express authority is the crux of this case. The district court relied on M.C.R. Sec. 2.507(H) in concluding that the attorney has the right to make a binding settlement. Because the court was convinced that a material issue of fact concerning the attorney's intention to enter the settlement did not exist, it granted summary judgment in favor of defendants. On the other hand, however, if a client must expressly authorize his or her attorney to enter into such an agreement, the giving of such authorization is a genuine issue of material fact and summary judgment was improper.

Michigan Court Rules Sec. 2.507(H) provides:

An agreement or consent between the parties or their attorneys respecting the proceedings in an action, subsequently denied by either...

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