Aristech Chem. Corp. v. Carboline Co.

• Decision Date: 10 February 1993
• Docket Number: No. 92CA2055,92CA2055
• Citation: 86 Ohio App.3d 251,620 N.E.2d 258
• Parties: ARISTECH CHEMICAL CORPORATION v. CARBOLINE COMPANY, Appellant; Sun Company, Inc., et al., Appellees.
• Court: Ohio Court of Appeals

Page 251

86 Ohio App.3d 251

620 N.E.2d 258

ARISTECH CHEMICAL CORPORATION v. CARBOLINE COMPANY, Appellant; Sun Company, Inc., et al., Appellees.

No. 92CA2055.

Court of Appeals of Ohio, Fourth District, Scioto County.

Decided Feb. 10, 1993.

Blumenfeld, Kaplan, Sandweiss, Marx, Ponfil & Kaskowitz, P.C., Theodore D. Ponfil and David E. Martin; McCurdy, Johnson, Ruggiero, McKenzie & Bender and Daniel P. Ruggiero, Portsmouth, for appellant.

Lane, Alton & Horst, Gregory D. Rankin and Franklin E. Eck, Jr., Columbus, for appellee Martin Painting & Coating Co.

Benjamin, Yocum & Heather, Timothy P. Heather and Anthony J. Iaciofano, Cincinnati, for appellee R.E. Thoman, Inc.

Charles L. Cooper, Ironton, for appellee J.L. Manta, Inc.

Reed, Smith, Shaw & McClay, Douglas Y. Christian and Kelley A. Grady, Philadelphia, PA; Klein, Smith & Klein and Thomas L. Klein, Ironton, for appellee Sun Co. Inc. HARSHA, Judge.

Appellant, Carboline Company ("Carboline"), appeals from the judgment of the Scioto County Court of Common Pleas which ordered enforcement of an oral settlement agreement allegedly reached by the parties. We affirm.

Aristech Chemical Corporation ("Aristech") sued various defendants concerning allegedly defective fireproofing which had been applied to its buildings. Named in the suit were Carboline, the manufacturer; Sun Company, Inc. ("Sun"), the corporate successor of Carboline; J.L. Manta, Martin Painting and Coating Company, and R.E. Thoman, Inc., the applicators; and Pullman Kellogg, a division of Pullman, Inc., the engineering firm which recommended the product. The matter proceeded to trial, and after conclusion of the evidence, but before a verdict had been returned, the parties advised the trial court that they had reached a settlement. The following day, the court conducted an informal hearing to conclude the matter, but several factual disputes arose. After the court entered its judgment enforcing "the agreement," Carboline appealed.

Appellant assigns the following as its sole assignment of error:

"The trial court erred in entering its Judgment Entry enforcing a settlement agreement as it failed to conduct an evidentiary hearing to resolve factual issues with respect to the terms of the settlement agreement as between Appellant-Defendant Carboline Company and Appellees-Defendants J.L. Manta, Inc., Martin Painting & Coating Company, R.E. Thoman, Inc. and Sun Company, Inc. and as there was no competent evidence establishing the terms of the settlement agreement as found by the trial court with respect to these parties."

Initially, we consider the appropriate standard of review for courts reviewing the propriety of a trial court's enforcement of a settlement agreement. Appellee Sun contends that reviewing courts are limited to determining whether the trial court abused its discretion. However, the two cases cited in support of this proposition, Chem. Solvents, Inc. v. Lamotite, Inc. (Dec. 10, 1987), Cuyahoga App.No. 52754, unreported, 1987 WL 27556, and Willis Appliance & Television, Inc. v. Soc. Natl. Bank (Oct. 6, 1983), Cuyahoga App.No. 46681, unreported, 1983 WL 2636, do not involve settlement agreements or the alleged failure to hold evidentiary hearings. As aptly noted by appellant in its reply brief, the abuse of discretion standard should not be used where the error involved is a question of law:

" * * * The abuse of discretion standard should be used when the trial court makes discretionary decisions * * *. However, where a trial court's order is based on an erroneous standard or a misconstruction of the law, it is not appropriate for a reviewing court to use an abuse of discretion standard. In determining a pure question of law, an appellate court may properly substitute its judgment for that of the trial court, since an important function of appellate courts is to resolve disputed propositions of law." Castlebrook, Ltd. v. Dayton Properties Limited Partnership (1992), 78 Ohio App.3d 340, 604 N.E.2d 808.

In two cases cited and discussed by all parties to this appeal, Mack v. Polson Rubber Co. (1984), 14 Ohio St.3d 34, 14 OBR 335, 470 N.E.2d 902, and Spercel v. Sterling Industries (1972), 31 Ohio St.2d 36, 60 O.O.2d 20, 285 N.E.2d 324, the Supreme Court of Ohio did not apply an abuse of discretion standard in reviewing trial court orders enforcing and vacating settlement agreements. Accordingly, we are persuaded that the issues raised in this appeal should be considered in the context of whether the trial court committed an error of law in failing to hold an evidentiary hearing prior to granting the motion to enforce the settlement agreement.

The court conducted a record hearing without swearing witnesses or admitting stipulations. By and large, the "hearing" consisted of arguments of and statements by counsel who had participated in the settlement negotiations. No one raised an objection to this procedure. The degree of the court's actual participation in the preceding negotiations is unclear, but it is clear from the record that the terms of the purported agreement were not memorialized, i.e., reduced to writing or read into the record. It appears that when the defendants later added their respective contributions, they were $50,000 short of the total $3,600,000 offered to and accepted by Aristech. At the hearing, none of the parties disputed that Aristech was entitled to the $3,600,000, but they disagreed upon how to allocate the $50,000 shortfall among themselves.

Carboline denied that it had agreed to make up the shortfall. It also wanted to preserve its right to seek indemnification from Sun in an action pending in Pennsylvania for its payment in this case. After conducting the "hearing" and upon motion of the applicators and other defendants, the court entered judgment prorating the amount each defendant was to contribute toward the $50,000 shortfall and dismissing with prejudice Carboline's cross-claim for indemnification.

The Tenth District Court of Appeals aptly summarized the law in this area in Bolen v. Young (1982), 8 Ohio App.3d 36, 37-38, 8 OBR 39, 40-41, 455 N.E.2d 1316, 1318:

"The general rule is that, where the parties to an action voluntarily enter into a settlement agreement in the presence of the trial court, the agreement is a binding contract and may be enforced. Spercel v. Sterling Industries (1972), 31 Ohio St.2d 36 [60 O.O.2d 20, 285 N.E.2d 324].

"Where the settlement agreement is arrived at by the parties in open court and preserved by being read into the record or being reduced to writing and filed, then the trial judge may, sua sponte, approve a journal entry which accurately reflects the terms of the agreement, adopting the agreement as his judgment. Holland v. Holland (1970), 25 Ohio App.2d 98, [54 O.O.2d 175, 266 N.E.2d 580]. Where an agreement is purportedly arrived at in the presence of the trial judge and approved by the parties but its terms are not memorialized on the record and one of the parties later disputes the terms of the agreement by refusing to approve an entry journalizing the agreement, the trial judge may not adopt the terms of the agreement as he recalls and understands them in the form of a judgment entry. Instead, the party disputing the agreement is entitled to an evidentiary hearing before another judge (see Code of Judicial Conduct, Canon 3 C[b] )--in which the trial judge may be called as a witness to testify as to his recollection and understanding of the terms of the agreement--and, if the court concludes that the parties entered into a binding contract, the settlement may be enforced. See Spercel v. Sterling Industries, supra. If the settlement agreement is extrajudicial in the sense that the trial judge is advised that the parties have agreed to a settlement, but he is not advised of the terms of the agreement, then the settlement agreement can be enforced only if the parties are found to have entered into a binding contract. Relief may be sought through the filing of an independent action sounding in breach of contract, or it may be sought in the same action through a supplemental pleading filed pursuant to Civ.R. 15(E), setting out the alleged agreement and breach."

Other Ohio courts have similarly held that an evidentiary hearing is required when a factual dispute concerning the existence or the terms of a settlement agreement is at issue. See Palmer v. Kaiser Found. Health (1991), 64 Ohio App.3d 140, 142, 580 N.E.2d 849, 850, citing Mack, supra; Irwin & Flickinger v. Bruce L. Christy Co., L.P.A. (1989), 61 Ohio App.3d 131, 135, 572 N.E.2d 201, 203. In the case at bar, appellant's attorneys disputed the terms of the purported settlement...