Alcantar v. Oklahoma National Bank

• Citation: 47 S.W.3d 815
• Decision Date: 31 May 2001
• Docket Number: No. 2-99-304-CV,2-99-304-CV
• Parties: (Tex.App.-Fort Worth 2001) PATY LOU ALCANTAR, APPELLANT v. OKLAHOMA NATIONAL BANK, APPELLEE
• Court: Texas Court of Appeals

Page 815

47 S.W.3d 815 (Tex.App.-Fort Worth 2001)

PATY LOU ALCANTAR, APPELLANT v. OKLAHOMA NATIONAL BANK, APPELLEE

No. 2-99-304-CV

Court of Appeals of Texas, Fort Worth.

May 31, 2001

FROM THE 90TH DISTRICT COURT OF YOUNG COUNTY

[Copyrighted Material Omitted]

PANEL B: LIVINGSTON, DAUPHINOT, and HOLMAN, JJ.

OPINION

DAUPHINOT, JUSTICE

Introduction and Procedural History

Paty Lou Alcantar appeals from the trial court's enforcement of an alleged oral settlement agreement between Alcantar and Oklahoma National Bank (the Bank). Because we conclude the trial court erred in enforcing the settlement agreement, we reverse the trial court's judgment.

The underlying case began as an interpleader action. Peavy & Peavy, L.L.P. (Peavy), a Texas law firm, represented Alcantar in an unrelated suit involving an automobile collision. That suit settled, and the settlement proceeds were deposited into Peavy's trust account. After the payment of costs and other expenses, $16,393.15 remained in Peavy's trust account for distribution to Alcantar. Before Peavy could disburse these proceeds to Alcantar, the Bank informed Peavy that the Bank had a lien against the $16,393.15 based on a security agreement Alcantar had given the Bank. Alcantar refused to accept a check jointly payable to herself and the Bank, so Peavy filed the interpleader action, named Alcantar and the Bank as defendants, and deposited the $16,393.15 with the trial court clerk. Alcantar and the Bank both answered the interpleader lawsuit, and the parties eventually entered into an agreed judgment discharging Peavy's obligations and dismissing it from the suit.

After Peavy was dismissed, on July 24, 1998, the trial court, the Bank, and Alcantar participated in a telephone conference. During that conference, the Bank and Alcantar informed the court they had reached a settlement as to the interpleaded funds, but the terms of the settlement agreement were not dictated into the record because no court reporter was present. After July 1998, the parties' attempts to memorialize their oral agreement in writing broke down because they could not agree on whether the Bank had provided Alcantar certain documentation that she had requested about what credits the Bank had applied to her indebtedness, or whether the actual amount of the indebtedness itself exceeded the amount of the interpleaded funds. In December 1998, the Bank moved to enforce the oral settlement agreement.

After a hearing on December 11, 1998, the trial court ruled: "The court finds that the proposed settlement agreement does not comply with Rule 11 and that it's not been reduced to writing and entered by the court, nor is there announcement in open court; therefore the [Bank's] motion to enforce the settlement agreement is denied." In a letter brief, the Bank urged the trial court to reconsider its ruling, and, on June 28, 1999, the court granted the Bank's motion to enforce the oral settlement agreement and signed a "Final Judgment and Release." This appeal followed.

Rule 11 Agreement

Alcantar contends the trial court improperly enforced the settlement agreement because the agreement does not comply with the requirements of Rule 11 and is therefore unenforceable. Rule 11 provides:

Unless otherwise provided in these rules, no agreement between attorneys or parties touching any suit pending will be enforced unless it be in writing, signed and filed with the papers as part of the record, or unless it be made in open court and entered of record.¹

This rule was adopted in 1840 and has existed in its current form since 1892.² The purpose of Rule 11 is to prevent parties from misconstruing oral agreements concerning pending suits, which "are very liable to be misconstrued or forgotten, and to beget misunderstandings and controversies."³

Settlement agreements are governed by contract law.⁴ Although a court cannot render a valid agreed judgment absent consent at the time it is rendered, the court may, after notice and a hearing, enforce a settlement agreement that complies with Rule 11, even though one side no longer consents to the settlement.⁵ The result is not an agreed judgment, but a judgment enforcing a binding contract.⁶ However, once consent is withdrawn, an action to enforce a settlement agreement must be based on proper pleading and proof.⁷ Thus, a settlement agreement must comply with Rule 11 to be enforceable.⁸

Rule 11 does not require a writing to be filed in the trial court before the other party withdraws its consent, but the agreement must be entered of record before it is sought to be enforced.⁹ Further, once a party disputes the existence of an oral agreement, it is unenforceable unless it complies with Rule 11.¹⁰

In this case, the Bank asserts the July 1998 oral settlement agreement complies with Rule 11 and is therefore enforceable because it was made in open court, during the parties' telephone conference with the trial court. However, the settlement agreement was "not made in open court in an enforceable manner," because the terms of the agreement were never entered of record.¹¹

Several appellate courts have held oral settlement agreements unenforceable under Rule 11 in circumstances similar to those here. For instance, in Moseley v. EMCO Machine Works Co., the parties to a jury trial announced to the trial court, before the charge was presented to the jury, that they had agreed to a settlement resolving all matters at issue in the case. A general stipulation was dictated to the court reporter, and the court released the jury.¹² Thereafter, Moseley refused to sign the settlement agreement, and his attorney was allowed to withdraw from representing him. EMCO filed a motion to enter judgment, and Moseley's former attorney testified at the motion hearing that the wording contained in the proposed agreed judgment reflected the parties' settlement agreement that was announced to the court at the close of the jury trial.¹³ The trial court rendered a judgment that incorporated the parties' purported agreement, and Moseley appealed.¹⁴ Despite the former attorney's testimony, the El Paso Court of Appeals reversed, holding that the record was devoid of any writing, docket notation, or agreement of record that could be construed as a settlement agreement. Because there was no compliance with Rule 11, the appellate court held the settlement agreement was unenforceable.¹⁵

Likewise, in Matthews, a probate case, the parties appeared in open court on the date of trial and announced that they had agreed on a settlement of the case. The trial court made the following notation on its docket: "Judgment by agreement, probating will fixing lien on property in favor of contestants and interveners, as per decree."¹⁶ Although the parties thought they had mutually agreed on the necessary details, no proposed decree based on the oral settlement agreement had been prepared at the time of the announcement. Thereafter, the parties could not agree on how to treat delinquent taxes against certain property affected by the will or on whether the matter had been taken into consideration when the settlement agreement was made.¹⁷ After a hearing, the trial court rendered an "agreed judgment" to which some of the parties objected.¹⁸ The appellate court reversed the judgment because the alleged agreement on which it was based did not comply with the District Court Rule 47, the predecessor to Rule 11.¹⁹

Both Moseley and Matthews involved agreed judgments, rather than judgments enforcing settlement agreements. Nonetheless, these opinions set forth a basic principle applicable to this case: a settlement agreement is unenforceable unless it complies with Rule 11, regardless of whether the parties have orally announced the terms of their agreement to the trial court.

The Bank relies on Lambda Construction Co. v. Chamberlin Waterproofing & Roofing Systems, Inc.²⁰ to support its contentions that the announcement of the agreement during the July 1998 telephone conference was an announcement in open court and that the terms of the agreement have been "entered of record" via the factual recitations in the trial court's judgment. The Lambda Construction case is a restricted appeal case, however, not a Rule 11 case. The issues in that case were: (1) whether the construction company, which had participated in a telephone conference that resulted in a dispositive order, was precluded from bringing a restricted appeal on the basis that it had participated in the actual trial of the case;²¹ and (2) whether the trial court's recitations in the order were an agreed statement of facts on which judgment could be rendered under Texas Rule of Civil Procedure 263.²² The Austin Court of Appeals concluded that the telephone conference was an actual hearing in open court for restricted appeal purposes and that the factual recitations in the order, which were unchallenged, satisfied Rule 263's requirement of an agreed statement of facts.²³

Here, in contrast, regardless of whether the oral settlement agreement was announced in "open court" during the July 1998 telephone conference, an issue we do not decide in this appeal, the parties disagree sharply about what some of the terms of the July 1998 oral settlement agreement were. Thus, we will not construe the trial court's factual recitations in its judgment as "enter[ing] of record" the terms of the oral agreement.²⁴ Indeed, the Texas Supreme Court has held that the terms of an oral settlement agreement must be entered of record before the agreement can be enforced under Rule 11.²⁵ In this case, the only document entered of record that purports to set out the terms of the parties' oral settlement agreement is the trial court's judgment itself. This judgment was not entered before the Bank sought to enforce the settlement agreement; thus, the Bank cannot rely on it as proof of the settlement agreement's terms. "Agreements of counsel in the course of a judicial proceeding which affect the...