A. J. Tenwood Associates, Inc. v. U.S. Fire Ins. Co.

• Decision Date: 30 May 1980
• Citation: 104 Misc.2d 467,428 N.Y.S.2d 606
• Parties: A. J. TENWOOD ASSOCIATES, INC., a New York Corporation, Plaintiff, v. UNITED STATES FIRE INSURANCE COMPANY, a Foreign Corporation, Defendant.
• Court: New York Supreme Court

Page 606

428 N.Y.S.2d 606

104 Misc.2d 467

A. J. TENWOOD ASSOCIATES, INC., a New York Corporation, Plaintiff, v. UNITED STATES FIRE INSURANCE COMPANY, a Foreign Corporation Defendant.

Supreme Court, Trial Term, New York County, Part XI.

May 30, 1980.

M. Carl Levine, Morgulas & Foreman, New York City, for plaintiff.

Newman & Schlau, New York City, for defendant.

SHANLEY N. EGETH, Judge:

In this action on a performance bond plaintiff moves for enforcement of a stipulation of settlement (see Teitelbaum Holdings, Ltd. v. Gold, 48 N.Y.2d 51, 421 N.Y.S.2d 556, 396 N.E.2d 1029.)

There is no dispute that the parties to this action orally agreed to settle it out of court for $350,000. The settlement was reported to the court by the defendant's attorney, a few days prior to the date scheduled for picking a jury. Settlement documents including an assignment, release and guarantee was forwarded by defendant to plaintiff for execution. They were executed and returned to defendant's counsel in escrow pending delivery to plaintiff of a check in the settlement sum. Plaintiff alleges without contradiction that after the receipt of these documents the defendant's attorney stated that the settlement check had been forwarded. In fact, it had not. Thereafter a principal of the defendant read a newspaper article reporting that plaintiff and its principals had been indicted by a federal grand jury for allegedly taking kickbacks from the contractor whose non-performance precipitated the instant action on the performance bond. Defendant then advised plaintiff that it would not honor the agreement of settlement.

In opposing this motion, the defendant does not dispute that the settlement was agreed to by all parties in accordance with plaintiff's account, or that counsel had authority to make the settlement agreement, but rather argues 1) that it is unenforceable under CPLR 2104; and 2) it is unenforceable because it was induced by fraud in that plaintiff did not advise defendant of the pending grand jury proceeding.

CPLR 2104 provides as follows:

An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered.

Although the Third department has held that settlements discontinuing an action do not come within this section, (Langlois v. Langlois, 5 A.D.2d 75, 169 N.Y.S.2d 170) the First and Second Departments have applied the section to such settlements (See Weinstein-Korn-Miller, New York Civil Practice, par. 2104.03 at pp. 21-31 21-32 and cases therein cited.) It is clear that in the instant case the settlement agreement was not evidenced by a writing subscribed by the defendant or its attorney. It is likewise clear that it was not one "made between counsel in open court". (Matter of Dolgin Eldert Corp., 31 N.Y.2d 1, 10, 334 N.Y.S.2d 833, 286 N.E.2d 228).

Nevertheless, this court concludes that the settlement stipulation must be enforced based upon the unique facts of this case. This is not a situation like that involved in Dolgin Eldert, supra, where there was disagreement between the parties as to the terms of the settlement. Here there is no dispute as to the terms or as to the fact that the parties entered into agreement. As a matter of fact, it was the repudiating defendant's counsel who reported the settlement to the clerk to be entered, as it was, in the court's minute book. This case is more appropriately governed by the rationale of the decision of the First Department in Golden Arrow Films, Inc. v. Standard Club of California, Inc., 38 A.D.2d 813, 328 N.Y.S.2d 901 (1st Dep't 1972). In that case the conference was held before a judge, who made detailed notes of the settlement. The appellate court, while not finding that the "open court" exception to CPLR 2104 applied, held:

"Here, however, there is no dispute that full agreement had been reached, nor is there any dispute as to the terms thereof. A record was made in written notes by the Justice in his chambers. Under the unique facts and circumstances of this case, we hold that there was substantial compliance with CPLR 2104." (38 A.D.2d at 814, 328 N.Y.S.2d at 902).

At bar, the attorney for the repudiating defendant prepared documents which conformed to the oral settlement agreement, and transmitted them to the attorney for the movant under circumstances which clearly justified the recipient's assumption that after their execution and return, an agreement would be formally consummated, and the settlement...