Gen. M v. John Stergiou & Main Marine Repair & Indus. Cleaning Co.

• Decision Date: 28 July 2014
• Docket Number: No. 01–11–00460–CV.,01–11–00460–CV.
• Citation: 438 S.W.3d 737
• Parties: GENERAL METAL FABRICATING CORPORATION, GMF Leasing Inc., and Arnold Curry, Appellants v. John STERGIOU and Main Marine Repair and Industrial Cleaning Co., Appellees.
• Court: Texas Court of Appeals

438 S.W.3d 737

GENERAL METAL FABRICATING CORPORATION, GMF Leasing Inc., and Arnold Curry, Appellants

v.John STERGIOU and Main Marine Repair and Industrial Cleaning Co., Appellees.

No. 01–11–00460–CV.

Court of Appeals of Texas, Houston (1st Dist.).

May 29, 2014.

Dissenting Opinion by Justice Sharp July 28, 2014.

Paul Simon, Shane McClelland, Simon Herbert McClelland & Stiles LLP, Houston, TX, Craig Enoch, Enoch Kever PLLC, Austin, TX, for Appellant.

Tanya N. Garrison, Weycer, Kaplan, Pulaski & Zuber, PC, Andrew M. Caplan, Houston, TX, for Appellee.

Panel consists of Justices JENNINGS, SHARP, and BROWN.

OPINION ON REHEARING¹

HARVEY BROWN, Justice.

This is an agreed interlocutory appeal ² of two summary judgment orders: one concluding that a Rule 11 agreement executed by appellants/cross-appellees—Arnold Curry, General Metal Fabricating Corporation, and GMF Leasing, Inc. (collectively, the GMF Companies)—and appellees/cross-appellants—John Stergiou and Main Marine Repair and Industrial Cleaning Company (collectively, Stergiou)—was an enforceable settlement agreement and the other finding that the Rule 11 agreement did not confer the right to prepay future payments owed thereunder. Stergiou appealed the first order on the issue of enforceability, and the GMF Companies appealed the second order on the issue of prepayment. We affirm both summary judgment orders.

Background

Stergiou and the GMF Companies have been embroiled in litigation over the ownership of certain shares of the GMF Companies' stock for more than a decade. This case has been tried, appealed, reversed and remanded, and tried again. See Stergiou v. Gen. Metal Fabricating Corp., 123 S.W.3d 1 (Tex.App.-Houston [1st Dist.] 2003, pet. denied); see also Gen. Metal Fabricating, Inc. v. Stergiou, No. 010800921CV, 2009 WL 3673112, at *1 (Tex.App.-Houston [1st Dist.] Nov. 5, 2009, no pet.) (mem. op.).

While the jury deliberated during the second trial, Stergiou announced to the trial court that the parties had reached an “agreement which has been written down and signed by counsel.” Not content to rely solely on the written settlement agreement, however, Stergiou's counsel asked to put the settlement terms on the record, thereby invoking the protection of Rule 11 of the Rules of Civil Procedure for agreements “made in open court and entered of record.” Tex.R. Civ. P. 11. The trial court agreed but first instructed the parties—who were sitting in the courtroom when the settlement agreement was announced—to “listen intently while these terms are dictated into the record because I will swear you in and I will confirm that you are seeking my approval of this proposal.” After Stergiou's counsel read the Rule 11 agreement on the record, the trial court inquired of counsel for each party whether the terms reflected “the totality” of their agreement. Both counsel replied that it did. The trial court then reminded each party that they were under oath and asked whether they had consulted with counsel regarding the terms and “implication” of the “proposed settlement,” understood it, approved it, and “request[ed] the court to enter and approve” it. To each question, the parties answered affirmatively. Neither party indicated that the agreement was contingent upon the execution of other documents nor requested that the trial court delay acceptance of the agreement or verdict until other documents could be drafted and executed. The trial court announced that, “based upon the understanding of counsel as dictated into the record, based upon the request of the respective parties to this proceeding,” it approved the settlement.

The specific details of the Rule 11 agreement were contingent upon the jury's answers. If the jury found in favor of the GMF Companies, Stergiou would assign all of the stock at issue to Curry and the parties would execute a mutual release of all claims. If the jury found in Stergiou's favor, however, the GMF Companies would pay Stergiou $300,000 for the return of the stock. Payment would be in the form of a promissory note, with a $20,000 down payment being due “on or before May 3, 2006” and, on the first day of each month, “[c]ommencing on June 1, 2006,” an “installment of $4,000.00 of principal and interest [would be] due and payable until the Note ha[d] been paid in full.”

The note would be “secured by a first lien Deed of Trust and Security Agreement covering all furniture, fixtures, equipment, receivables (from the ordinary course of business), inventory, and real property owned by the GMF Companies known [as] (the White Buildings and the empty lot) (excluding the four lots the ‘Blue Building’ resides upon and the ‘Blue Building’) of General Metal Fabrication, Inc. and GMF Leasing, Inc.” The parties agreed “to execute all documents necessary to effectuate [their] agreement including all financing statements and deed(s) of trust” and to file a joint notice of non-suit with prejudice within ten days of the trial court's acceptance of the jury's verdict.

The jury returned a verdict for Stergiou. Although drafts of the additional documents contemplated by the Rule 11 agreement (i.e., the promissory note, the deeds of trust, the security agreements, and the financing statements) were circulated between them, the GMF Companies and Stergiou did not agree on the specific terms to be included in those documents. The agreed deadline for dismissing the case pursuant to the settlement was twice extended to allow the parties additional time to agree on the additional documents, but the additional documents were never consummated. The GMF Companies eventually tendered to Stergiou an executed motion to dismiss the lawsuit, one cashier's check in the amount of $20,000 for the down payment required by their settlement, and a second cashier's check for the remaining $280,000 owed. Stergiou rejected the tender and moved for entry of judgment on the jury's verdict.

After the trial court entered judgment on the verdict, the parties continued to dispute the terms and effect of the Rule 11 agreement. They sought to resolve their dispute by competing summary judgment motions. The first set of summary judgment motions concerned the enforceability of the Rule 11 agreement. The GMF Companies contended the Rule 11 agreement was an enforceable contract; Stergiou contended it was not. The second set of summary judgment motions addressed the issue of prepayment. The GMF Companies asked the trial court to find that Curry could pay the entire amount owed under the Rule 11 agreement at once; Stergiou asked the trial court to require Curry to make monthly installment payments. After the trial court determined that the Rule 11 agreement was enforceable but did not permit prepayment of the full amount owed, the parties agreed to this interlocutory appeal to resolve the controlling questions of law.

Both the trial court's order permitting this interlocutory appeal and the parties' joint notice of appeal raise two issues: (1) whether the Rule 11 agreement is an enforceable agreement and (2) whether Curry has the right to prepay his debt under the Rule 11 agreement.

Standard of Review

Our review of a summary judgment is de novo. See Tex. Mun. Power Agency v. Pub. Util. Comm'n of Tex., 253 S.W.3d 184, 192 (Tex.2007); City of Galveston v. Tex. Gen. Land Office, 196 S.W.3d 218, 221 (Tex.App.-Houston [1st Dist.] 2006, pet. denied). Under the traditional summary judgment standard, the movant must show that no genuine issue of material fact exists and judgment should be rendered as a matter of law. Tex.R. Civ. P. 166a(c); City of Galveston, 196 S.W.3d at 221. We view all evidence in a light favorable to the nonmovant and indulge every reasonable inference in the nonmovant's favor. City of Galveston, 196 S.W.3d at 221. When both parties move for summary judgment and the trial court grants one motion and denies the other, we consider both motions, their evidence, and their issues, and we may render the judgment that the trial court should have rendered. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex.2009); City of Galveston, 196 S.W.3d at 221.

Enforceability of the Rule 11 Agreement

In his sole issue on appeal, Stergiou challenges the trial court's determination that the Rule 11 agreement was enforceable. He asserts three reasons why the trial court erred: (1) he and the GMF Companies never achieved anything more than an “agreement to agree,” (2) the trial court could not order compliance with the agreement because its terms are too indefinite, and (3) the agreement does not satisfy the statute of frauds.³ Finding these reasons unpersuasive, we hold that the Rule 11 agreement was enforceable and the trial court did not err in rendering summary judgment against Stergiou on this issue.

1. The Rule 11 agreement is not a mere agreement to agree

The Rule 11 agreement required the parties to execute additional documents: a promissory note, deed of trust, security agreement, and any necessary financing statements. Stergiou argues in his first sub-issue that, because the Rule 11 agreement does not supply any information as to the specific terms of those documents (e.g., information with respect to any right or obligation to inspect, insure, maintain, or repair the collateral, the notice and cure periods in the event of default, and any right of or prohibition against prepayment), it fails for lack of essential terms and is nothing more than an unenforceable “agreement to agree” as a matter of law. In the alternative, Stergiou asserts that there is a fact issue as to whether the execution of the additional documents was a condition precedent to the formation of a binding Rule 11 agreement.

The GMF Companies respond that the Rule 11 agreement is enforceable because, at its core, the agreement is a settlement containing all terms necessary to resolve the gravamen of the parties' dispute, and the parties unequivocally indicated their intent to be bound by...