Cadle Co. v. Castle

• Decision Date: 24 October 1995
• Docket Number: No. 05-94-00816-CV,05-94-00816-CV
• Parties: The CADLE COMPANY, Appellant, v. Frank CASTLE and Bank One, Texas, N.A., Appellees.
• Court: Texas Court of Appeals

Page 627

913 S.W.2d 627

The CADLE COMPANY, Appellant, v. Frank CASTLE and Bank One, Texas, N.A., Appellees.

No. 05-94-00816-CV.

Court of Appeals of Texas Dallas.

Oct. 24, 1995.

Michael L. Jones, Henry, Meier & Jones, L.L.P., Dallas, for appellant.

Richard Illmer, Foster Reese, III, Cowles & Thompson, Dallas, for appellees.

Before the Court En Banc.

OPINION

OVARD, Justice.

The Cadle Company (Cadle) appeals a judgment rendered on a written settlement agreement reached in an alternative dispute resolution procedure. In four points of error, Cadle contends the trial court erred in rendering judgment because the judgment: (1) is not supported by the pleadings; (2) is not supported by the evidence; (3) constitutes an improper consent judgment; and (4) does not conform to the written settlement agreement. For the following reasons, we reverse the trial court's judgment and remand the cause to the trial court for further proceedings consistent with this opinion.

FACTUAL AND PROCEDURAL HISTORY

Frank Castle (Castle) executed a note payable to Deposit Insurance Bridge Bank. The promissory note was later transferred to Bank One, Texas, N.A. (Bank One). Castle subsequently defaulted on the note, and Bank One sued. In the fall of 1993, Cadle purchased the note from Bank One and filed a motion to realign the parties, substituting itself as plaintiff. Bank One remained a party to the suit as a result of a counterclaim filed by Cadle.

The trial judge ordered the parties to mediation pursuant to chapter 154 of the Texas Civil Practice and Remedies Code. See generally TEX.CIV.PRAC. & REM.CODE ANN. §§ 154.001-154.073 (Vernon Supp.1995). On February 5, 1994, the parties attended a mediation conference and entered into a written settlement agreement. Under the terms of the agreement, Cadle would receive $2,500 from Castle and $12,500 from Bank One. However, the agreement was "subject to" approval by Bank One senior management personnel.

Four days later, Castle filed a "Motion to Enforce Settlement Agreement" with the court. Castle attached a copy of the written settlement agreement to the motion. In his motion, Castle contended, that although the agreement had been finalized and signed at the mediation conference, Cadle had subsequently withdrawn its consent to the written settlement agreement. Castle claimed the agreement was enforceable under section 154.071 of the civil practice and remedies code. See TEX.CIV.PRAC. & REM.CODE ANN. § 154.071 (Vernon Supp.1995).

On February 11, 1994, Cadle filed a "Notice of Withdrawal of Consent to Settlement Agreement" with the court. Cadle also filed a response to Castle's motion to enforce, contending that enforcement of the written settlement agreement would be improper.

On February 14, 1994, the trial judge conducted a hearing on Castle's motion to enforce. Without hearing evidence, the trial judge concluded that the terms of the written settlement agreement should be "incorporated" into a final judgment. The judgment provided, in part, that:

the parties, having been referred to mediation by Order of this Court, did appear ... and reach the written agreement disposing of this cause ... the terms of that agreement are enforceable under TEX.CIV.PRAC. & REM.CODE ANN. § 154.071 (Supp.1994) and are hereby incorporated in this Final Decree disposing of this case.

The terms of the judgment provide for monetary payments by Castle and Bank One that are different from the terms of the written settlement agreement. After a motion for new trial was overruled April 29, 1994, Cadle filed this appeal.

LACK OF PLEADINGS TO SUPPORT THE JUDGMENT

In its first point of error, Cadle challenges the propriety of the trial court entering a judgment based solely on a "Motion to Enforce Settlement Agreement" when no underlying breach of contract claim had been raised in a petition or counterclaim. Because Castle failed to properly plead breach of the written settlement agreement, Cadle contends any judgment entered under such circumstances is improper. Castle, however, argues that such a procedure is authorized under section 154.071 of the civil practice and remedies code.

Section 154.071 provides:

(a) If the parties reach a settlement and execute a written agreement disposing of the dispute, the agreement is enforceable in the same manner as any other written contract.

(b) The court in its discretion may incorporate the terms of the agreement in the court's final decree disposing of the case.

(c) A settlement agreement does not affect an outstanding court order unless the terms of the agreement are incorporated into a subsequent decree.

TEX.CIV.PRAC. & REM.CODE ANN. § 154.071 (Vernon Supp.1995).

Section 154.071(a)

Under section 154.071(a), either party to a written settlement agreement may seek to enforce the agreement under general contract law. The law regarding enforcement of contracts is well established in Texas. A cause of action for breach of contract consists of the contract itself, which is the primary right of the plaintiff, and its breach by an act or omission of the defendant. G.P. Enters., Inc. v. Adkins, 543 S.W.2d 913, 915 (Tex.Civ.App.--Texarkana 1976, no writ); 14 TEX.JUR.3D Contracts § 308 (1981). A petition in an action based on a contract must contain a short statement of the cause of action sufficient to give fair notice of the claim involved, including an allegation of a contractual relationship between the parties, and the substance of the contract which supports the pleader's right to recover. Air & Pump Co. v. Almaquer, 609 S.W.2d 309, 313 (Tex.Civ.App.--Corpus Christi 1980, no writ); 14 TEX.JUR.3D Contracts § 338 (1981). In response, a defendant may file a general denial which puts at issue all matters not required to be denied under oath or affirmatively pleaded. TEX.R.CIV.P. 92; 14 Tex.Jur.3d Contracts § 345 (1981). Many defenses to a breach of contract suit, including lack of capacity, denial of execution, lack of consideration, and usury, must be made by verified denial. TEX.R.CIV.P. 93. Further, the affirmative defenses of accord and satisfaction, duress, failure of consideration, fraud, illegality, statute of frauds, and other matters in avoidance must be affirmatively pleaded. TEX.R.CIV.P. 94.

A party to a breach of contract suit is entitled to pretrial discovery. See generally TEX.R.CIV.P. 166b, 167, 168, 169, 200, 208. A party is entitled to summary judgment in a breach of contract suit when no material fact issues exist and the movant establishes its right to judgment as a matter of law. TEX.R.CIV.P. 166a; Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 494-95 (Tex.1991). If, however, a trial on the merits is necessary, a party to a breach of contract suit is entitled to a jury trial on disputed issues of fact. Trinity Universal Ins. Co. v. Ponsford Bros., 423 S.W.2d 571, 575 (Tex.1968). To prevail at trial, the plaintiff must prove: (1) a contract existed between the parties; (2) the contract created duties; (3) the defendant breached a material duty under the contract; and (4) the plaintiff sustained damages. Snyder v. Eanes Indep. Sch. Dist., 860 S.W.2d 692, 695 (Tex.App.--Austin 1993, writ denied). Judgment is then entered based on the pleadings, evidence, and findings of the judge or jury. TEX.R.CIV.P. 301.

This is the traditional method of enforcing contracts contemplated by section 154.071(a) and relied upon by this Court in Stevens v. Snyder, 874 S.W.2d 241 (Tex.App.--Dallas 1994, writ denied); see TEX.CIV.PRAC. & REM. CODE ANN. § 154.071(a) (Vernon Supp.1995). This was not the enforcement procedure relied upon by the trial judge in this case.

Section 154.071(b)

The trial judge in this case relied on section 154.071(b) to "incorporate" the terms of the written settlement agreement into a final judgment. Thus, the issue in this case is the meaning and effect of section 154.071(b) of the civil practice and remedies code.

In construing a statute, we look to and follow the intent of the legislature. Citizens Bank v. First State Bank, 580 S.W.2d 344, 347 (Tex.1979); Minton v. Frank, 545 S.W.2d 442, 445 (Tex.1976). We determine legislative intent by looking at the language of the statute. Jones v. Del Andersen & Assocs., 539 S.W.2d 348, 350 (Tex.1976). In determining the meaning of statutory language, we read the statute as a whole and give consideration to the entire act, its nature and object, and the consequences that would follow from a particular construction. Sayre v. Mullins, 681 S.W.2d 25, 27 (Tex.1984).

Section 154.071(b) gives a trial judge the discretion to incorporate specific terms of a written settlement agreement in the trial court's final judgment. Castle and the dissent argue that section 154.071(b) creates a "summary" procedure giving the trial judge the authority to enter a judgment on the merits of the cause of action, over the objection of one or more parties, without a trial, without an evidentiary hearing, and without any underlying petition or counterclaim asserting a breach of contract claim.

In considering the plain language of section 154.071(b), we do not find support for the argument that the legislature intended to create a "summary" proceeding for enforcement of written settlement agreements. ¹ Further, we believe there is another, more reasonable, explanation for the adoption of section 154.071(b). ADR works because parties are able to explore resolutions to conflicts that simply do not fit within the traditional framework of the litigation system. Frequently, these terms are essential parts of a written settlement agreement but have no place in a final judgment. A trial judge should have discretion to tailor a judgment that fits the desires of the parties to an ADR procedure. ² These considerations strongly suggest that section 154.071(b) was intended to give a trial judge the discretion to either include, or exclude, terms of the written settlement agreement when entering judgment. See Calvert v. Texas...