Morris v. Maks

• Decision Date: 26 April 1993
• Docket Number: No. 29220-0-I,29220-0-I
• Citation: 69 Wn.App. 865,850 P.2d 1357
• Parties: Evan MORRIS, Respondent, v. Thomas R. MAKS, individually and as General Partner of TRM Wood Products Co., Oreg. Ltd., Maks, Inc., an Oregon corporation, and TRM Wood Products Co. Oreg. Ltd., an Oregon limited partnership, Appellants. Division 1
• Court: Washington Court of Appeals

Page 865

69 Wn.App. 865

850 P.2d 1357

Evan MORRIS, Respondent, v. Thomas R. MAKS, individually and as General Partner of TRM Wood Products Co., Oreg. Ltd., Maks, Inc., an Oregon corporation, and TRM Wood Products Co. Oreg. Ltd., an Oregon limited partnership, Appellants.

No. 29220-0-I.

Court of Appeals of Washington,

Division 1.

April 26, 1993.

Publication Ordered May 17, 1993.

Dennis J. Dunphy, Phillip S. Miller, Ferguson and Burdell, Seattle, and James C. Chaney, Jacqua & Wheatley, Eugene, OR, for appellants.

James S. Irby and Karr Tuttle Campbell, Seattle, for respondent.

BAKER, Judge.

In this case we are asked to decide whether the trial court erred in enforcing a settlement agreement under CR 2A and RCW 2.44.010. We hold that the trial court did not abuse its discretion in enforcing the settlement agreement and therefore affirm.

FACTS

Evan Morris is a partner in the limited partnership TRM, a lumber yard. In February 1990 Morris sued the general partner of TRM, Thomas Maks, claiming Maks breached his fiduciary duty as a general partner.

In June and July 1991, the parties discussed settling the case. On July 18 Maks' attorney, Phillip Miller (Miller), phoned Morris' attorney, James Irby (Irby), to confirm the details of a settlement agreement that was under consideration. During that conversation, the attorneys discussed approximately seven major points concerning the settlement. According to Irby, Miller told him that the settlement agreement was acceptable to Maks subject to approval by Maks' tax advisor.

Miller contacted Irby the following day and indicated that the tax consequences of the settlement agreement were acceptable to Maks. According to Irby, he asked Miller to confirm that they had a settlement agreement and reviewed each of the points with Miller. Miller "agreed that [they] had a settlement agreement and confirmed each of the points." Irby then prepared a confirmation letter dated July 19, 1991.

By letter dated July 25, 1991, Miller responded to Irby's July 19 confirmation letter and stated in part, "[e]xcept as specifically set forth below, your letter accurately reflects the terms of the agreed settlement. I view the items listed below as clarifying or supplemental points rather than conflicts with your letter."

On August 7, 1991, after a different tax accountant advised Maks that the settlement as structured would have extremely detrimental tax consequences for Maks, Miller informed Irby that his client was terminating the settlement negotiations. The trial court subsequently entered an order enforcing settlement according to the terms set forth in the July 19 and July 25 letters.

I

In Washington a trial court's authority to compel enforcement of a settlement agreement is governed by Civil Rule (CR) 2A and RCW 2.44.010. CR 2A provides as follows:

No agreement or consent between parties or attorneys in respect to the proceedings in a cause, the purport of which is disputed, will be regarded by the court unless the same shall have been made and assented to in open court on the record, or entered in the minutes, or unless the evidence thereof shall be in writing and subscribed by the attorneys denying the same.

RCW 2.44.010 similarly provides:

An attorney and counselor has authority:

(1) To bind his client in any of the proceedings in an action or special proceeding by his agreement duly made, or entered upon the minutes of the court; but the court shall disregard all agreements and stipulations in relation to the conduct of, or any of the proceedings in, an action or special proceeding unless such agreement or stipulation be made in open court, or in presence of the clerk, and entered in the minutes by him, or signed by the party against whom the same is alleged, or his attorney[.]

We review the trial court's decision to enforce a settlement agreement pursuant to CR 2A and RCW 2.44.010 under the abuse of discretion standard. Callie v. Near, 829 F.2d 888, 890 (9th Cir.1987). An abuse of discretion occurs when a decision of the trial court is manifestly unreasonable or based on untenable grounds or reasons. Holbrook v. Weyerhaeuser Co., 118 Wash.2d 306, 315, 822 P.2d 271 (1992).

Settlement agreements are governed by general principles of contract law. Stottlemyre v. Reed, 35 Wash.App 169, 171, 665 P.2d 1383, review denied, 100 Wash.2d 1015 (1983). In determining whether informal writings such as letters are sufficient to establish a contract even though the parties contemplate signing a more formal written agreement, Washington courts consider whether (1) the subject matter has been agreed upon, (2) the terms are all stated in the informal writings, and (3) the parties intended a binding agreement prior to the time of the signing and delivery of a formal contract. Loewi v. Long, 76 Wash. 480, 484, 136 P. 673 (1913).

In Bryant v. Palmer Coking Coal Co., 67 Wash.App. 176, 834 P.2d 662 (1992), review denied, 120 Wash.2d 1027, 847 P.2d 480 (1993), we recently considered whether a settlement agreement negotiated by the parties was enforceable under CR 2A and RCW 2.44.010. In that case, the alleged agreement was not stipulated on the record in open court, nor was there a writing signed by the party to be bound. We held that in light of the underlying purpose of CR 2A and RCW 2.44.010, which is to avoid disputes regarding the existence and terms of settlement agreements, the settlement agreement was unenforceable because the procedures set forth in CR 2A and RCW 2.44.010 were not followed.

In this case, the settlement agreement is set forth in writings exchanged by the parties, including a letter signed by the party to be bound. However, Maks argues that the trial court erred in enforcing the settlement agreement according to the terms set forth in the letters, because the letters did not contain all the material terms of the settlement, and because he did not intend to be bound by any writing short of a formal written settlement agreement.

Material Terms. Maks first argues that the July 19 and 25 letters do not constitute a binding settlement agreement because they do not address material terms to the agreement, such as warranties, outstanding liabilities, and the form of the lease agreement.

We disagree. The July 25 letter from Miller to Irby stated that the July 19 letter accurately reflected the terms of the agreed settlement. The July 19 letter ¹ addresses the issue of liabilities by providing that Morris will assume all TRM liabilities and Maks will assume all Maks Wood Products liabilities. The letter likewise contains a provision regarding termination of the lease agreement which is in all material respects the same as the lease provisions in the subsequent drafts of the settlement agreement. Thus, while the drafts of the settlement agreement dated after July 25 are more detailed than the July 19 letter, the subsequent refinements of the parties' respective liabilities and the lease agreement did not materially alter the agreement. ²

Intent of the Parties to be Bound. Maks next argues that the July 19 and July 25 letters do not constitute a binding agreement because he did not intend to be bound by any document other than a "definitive" or "final" settlement agreement. However, the evidence supports the trial court's conclusion that the parties reached a settlement agreement and intended to be bound according to the terms outlined in the July 19 and 25 letters.

First, the July 19 letter expressly states, "[t]his will confirm your assurance to me that Tom Maks has agreed to this settlement and I have confirmed Evan Morris' approval." Second, the July 25 letter written by Maks' attorney stated that the July 19 letter accurately reflected the terms of the agreed...