White v. Grinfas

• Citation: 809 F.2d 1157
• Decision Date: 12 February 1987
• Docket Number: No. 86-1263,86-1263
• Parties: Peter N. WHITE, et al., Plaintiffs-Appellees, v. Zvi GRINFAS, Eva Grinfas, Asher Engler and Josephine Engler, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1157

809 F.2d 1157

Peter N. WHITE, et al., Plaintiffs-Appellees, v. Zvi GRINFAS, Eva Grinfas, Asher Engler and Josephine Engler,

Defendants-Appellants.

No. 86-1263.

United States Court of Appeals, Fifth Circuit.

Feb. 12, 1987.

Robert E. Garner, Templeton & Garner, Amarillo, Tex., for defendants-appellants.

Sharon R. Kimball, Whittenburg, Whittenburg & Schachter, Amarillo, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before GOLDBERG, RUBIN and POLITZ, Circuit Judges.

GOLDBERG, Circuit Judge:

Appellants Zvi and Eva Grinfas and Asher and Josephine Engler appeal an adverse jury verdict and judgment on their counterclaims against Peter and Molly White. Appellants' counterclaims asserted that the foundation of an apartment complex, built and sold to them by the Whites, was structurally defective, and that in selling them the defective complex the Whites breached implied warranties and committed fraud. Prior to this action, the parties had entered into an extremely broad Settlement Agreement and Mutual Release (the Agreement) in another action concerning this property. At trial, the jury found that the Whites had not fraudulently induced the Agreement, because the Whites were at the time unaware of the structural defects. Thus, the Agreement barred the counterclaims, and the court entered judgment against the Appellants.

Appellants seek to reverse the judgment on four grounds. First, Appellants argue that the district court erred by refusing to submit a jury question relating to an alleged mutual mistake concerning the scope of the Agreement. Appellants also assert that certain responses to the jury questions are irreconcilable. Third, Appellants claim that the jury responses to certain interrogatories are not supported by substantial evidence. Finally, Appellants posit that a default judgment, entered pursuant to Fed.R.Civ.P. 37, dismissing the counterclaims of two defendants not party to this appeal,

Ina and Gerald Lemberg, should have estopped the Whites from defending against Appellants' counterclaims. Finding no merit to Appellants' contentions, we affirm the judgment of the district court.

I.

In 1979, the Whites sold an apartment complex in Amarillo to the Grinfases, to the Englers, and to the Lembergs. In 1980, Appellants and the Lembergs filed suit in federal district court alleging, inter alia, that the Whites had committed fraud and had breached various warranties by selling the complex with construction defects. In 1981, the parties entered into the Agreement, dismissing the 1980 suit with prejudice.

In 1984, Appellants and the Lembergs defaulted on their obligations under notes securing the apartment complex. The Whites and the legal holder in due course of one of the notes, First Savings and Loan Association of Amarillo (First Savings and Loan), brought suit to recover the unpaid balance and to seek a declaratory judgment that the Appellants and the Lembergs would be liable to the Whites for any amounts that might be recovered against the Whites as a result of the default. Appellants and the Lembergs filed counterclaims, alleging that the foundation of the apartment complex contained latent construction defects, that the Whites fraudulently concealed the defects, and that such defects breached implied warranties.

On October 25, 1985, pursuant to Fed.R.Civ.P. 37(d), the district court entered a default judgment against the Lembergs and dismissed their counterclaims, because of their failure to comply with various discovery orders. On October 29, the court granted partial summary judgment, holding that the Whites and First Savings and Loan had established a right to recovery on the notes as a matter of law. The court ordered that a trial commence on Appellants' counterclaims, and realigned Appellants as plaintiffs. After a three day trial, the jury found that there were defects, but that the Whites were unaware of such defects when the Agreement was executed. Thus, because there could be no fraud, the claims were barred by the Agreement, and the court entered judgment for the Whites and First Savings and Loan.

II.

The twenty-page Agreement settling the 1980 suit unmistakably covers the dispute at issue in this appeal:

[E]ach party to this Settlement Agreement and Mutual Release desire, through this Agreement and the Partial Performance Agreement, to compromise, settle and dismiss all disputes and differences among them, including matters raised in the Plaintiffs' Complaint, First Supplemental Complaint and Second Supplemental Complaint against the Defendants' [sic]; matters raised in the Defendants' Counterclaim against the Plaintiffs[,] matters which could have been raised in either the Plaintiffs' action against the Defendants or the Defendants' Counterclaim against the Plaintiffs, and any other claims of any kind, and fully to release and forever discharge any claims or causes of action of whatsoever nature which may exist among them on account of any event, occurrence, transaction or happening prior to the date of this Settlement Agreement and Mutual Release....

* * *

[T]he Releasors do hereby release, remise and forever discharge all persons on the foregoing list of Releasors [the Whites and these defendants] with the exception of himself or herself, of and from any and all claims including but not limited to, those based on statutory provisions; negligence; common-law fraud or breach of contract; demands, debts, accounts; financial obligations; rights; causes of action; suits at law or in equity; or losses they now have or hereafter claim to have against any and all other Releasors; their individual agents, servants, employees, successors and assigns, whichever is applicable by * * *

reason or matters and things alleged in the Complaint and First and Second Supplemental Complaints filed by the Plaintiffs or the counterclaim filed by the Defendants; by reason of any transaction, contract or business relationship between and among the Releasors; or by reason of any other event, occurrence, transaction or happening prior to the date of this Settlement Agreement and Mutual Release....

It is further acknowledged and agreed by all parties that execution of this Settlement Agreement and Mutual Release is upon advice of their counsel and is full, final and complete, except as otherwise expressly provided herein, regardless of whether all losses and damages from the transactions described herein are now known to exist or shall hereafter arise or be discovered.

Pl.Ex. 11 (emphasis added).

Despite the plain language of the agreement, Appellants assert that the Agreement is without effect because, when the parties executed the document, they were unaware of the particular defects that are the basis of the complaint in this suit. Thus, Appellants contend that the Agreement should be set aside because of "mutual mistake."

This argument defies both common law and common sense. As a matter of Texas law, in the absence of fraud, settlement agreements and releases are a complete bar to any later action based on matters included therein. See, e.g., Nationwide Mut. Ins. Co. v. Toman, 660 S.W.2d 574, 576 (Tex.Civ.App.1983); Tobbon v. State Farm Mut. Automobile Ins. Co., 616 S.W.2d 243, 245 (Tex.Civ.App.1981). Appellants do not appeal the jury's rejection of fraud. Further, the Agreement waives "any and all claims ... or losses ... now ... or hereafter ... by reason of any transaction, contract or business relationship between and among the Releasors." Pl.Ex. 11. The Agreement thus plainly covers the "mistaken" defect that is the foundation of appellants' counterclaims. The failure of the parties to understand the scope of the release when the language is unambiguous, as it is here, does not support a finding of mutual mistake. See, e.g., Champlin Petroleum Co. v. Pruitt, 539 S.W.2d 356, 362 (Tex.Civ.App.1976, writ ref'd n.r.e.); Berry v. Guyer, 482 S.W.2d 719, 720 (Tex.Civ.App.1972, writ ref'd n.r.e.).

Appellants, however, point to the general rule in Texas that a release may be set aside if the parties were mutually mistaken as to the nature (not the extent) of the harm. See, e.g., Allen v. Allen, 717 S.W.2d 311, 313 (Tex.1986); Great American Indemnity Co. v. Blakey, 107 S.W.2d 1002, 1005 (Tex.Civ.App.1937, writ dism'd w.o.j.). Here, however, the parties plainly anticipated the possibility of future, unforeseen claims that might arise from the initial transaction, and expressly waived all such claims. The agreement may not be set aside for mutual mistake simply because the parties made a poor prediction. For nearly a century, the Texas courts have recognized that the parties' lack of prescience when the release expressly waives all present, past and future claims arising out of the transaction is not an adequate predicate for claiming mutual mistake. Quebe v. Gulf C. & S.F. Ry. Co., 81 S.W. 20 (Tex.1904).

Furthermore, were this agreement to be set aside based on mutual mistake--where the agreement facially contemplated the possibility of unforeseen claims--it would have the strange result of making all such agreements to waive potential, future claims unenforceable ab initio. We refuse to reach such a perverse result.

Appellants are highly educated real estate investors. They were represented by counsel when they entered into the Agreement. Indeed, it was their attorney who drafted the language of the Agreement. They may not have expected these defects to arise in the future, but they dealt the hand to themselves. The argument they erected is a house of cards--even were the buildings now on the verge of collapse, the

doctrine of mutual mistake would not serve to shore up the argument's defective and shaky foundation. The foundation collapses under the weight of the unambiguous Agreement, which expressly released all claims, even if then unknown. Thus, as a matter of law the doctrine of mutual mistake cannot in these...