Paul R. Ponfil Trust v. Charmoli Holdings, LLC, Appeal No. 2018AP1321

• Decision Date: 18 September 2019
• Docket Number: Appeal No. 2018AP1321
• Citation: 2019 WI App 56,389 Wis.2d 88,935 N.W.2d 308
• Parties: PAUL R. PONFIL TRUST, Plaintiff-Respondent, v. CHARMOLI HOLDINGS, LLC, Defendant-Appellant, ABC Company, Defendant.
• Court: Wisconsin Court of Appeals

389 Wis.2d 88

935 N.W.2d 308

2019 WI App 56

PAUL R. PONFIL TRUST, Plaintiff-Respondent,^†

v. CHARMOLI HOLDINGS, LLC, Defendant-Appellant,ABC Company, Defendant.

Appeal No. 2018AP1321

Court of Appeals of Wisconsin.

Submitted on Briefs: June 4, 2019

Opinion Filed: September 18, 2019

On behalf of the defendant-appellant, the cause was submitted on the briefs of Patrick G. McBride of O’Neil, Cannon, Hollman, DeJong & Laing S.C., Milwaukee and Robert A. Carroll of Carroll Law Office, S.C., Cedarburg.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Jacques C. Condon, Thiensville.

Before Neubauer, C.J., Reilly, P.J., and Gundrum, J.

NEUBAUER, C.J.

¶1 This case addresses the enforceability of a purported settlement agreement entered into by the parties at the end of mediation, in which the parties agreed to sign a separate "substantive agreement" that would address "such things" as liability and indemnity in "usual form." The circuit court found that the agreement was binding, while acknowledging that the additional terms remained to be agreed upon. The settlement agreement is unenforceable as it lacks agreement on material terms. We reverse and remand.

BACKGROUND

¶2 Charmoli Holdings, LLC (Charmoli), and the Paul R. Ponfil Trust (the Trust) jointly own property with a quarry, which an affiliated entity previously operated, in Cedarburg, Wisconsin. The Trust filed this action in November 2016. During a mediation session on February 6, 2018, the parties prepared and signed a handwritten one-page document captioned "Mediation Settlement Agreement" (the Agreement).

¶3 The opening line of the Agreement states: "This Case Is Settled In Full As Follows:" The parties then set forth five paragraphs of terms, including (1) Charmoli’s payment of $500,000 to the Trust within thirty days, (2) the Trust’s quitclaim of its interest in one forty-acre parcel to Charmoli, (3) Charmoli’s quitclaim in another forty-acre parcel to the Trust, and (4) dismissal of the lawsuit upon the payment and conveyances. In the fifth paragraph (Paragraph 5) the parties "agree[d] to sign a separate substantive agreement covering such things as liability & indemnity in usual form."

¶4 The Trust provided a first draft of an agreement to address Paragraph 5. The draft provided as follows:

This Agreement is intended to incorporate the Mediation Agreement, identify the terms of resolution, and to allow for the resolution and satisfaction of any and all claims between them and do so to the extent such claims were asserted within or outside the Lawsuit, as described below, subject to the rights and obligations that survive this agreement.

¶5 The Trust’s draft agreement provided a lengthy and involved indemnity/hold harmless provision, which noted that the property at issue is "the subject of operations that include but are not limited to the deposit of materials from outside sources, with such deposits commonly referred to as fill," which activities have been taking place "for an extended time period" and "are expected to continue in the future." The draft addressed the scope as to persons and entities, past and future activities, claims related to the fill materials, and detailed the scope of the indemnity and hold harmless agreement. It addressed a mutual release. The draft addressed affiliated entities, including R&R Excavating and Bulldozing and the R&R Liquidating Trust. The draft also included an integration clause, proposing to supersede all prior agreements, including the Agreement.

¶6 Charmoli responded with its own version. Charmoli revised the scope and substance of the indemnity, with an environmental indemnity clause, hold harmless provision, financial limitations as to indemnity, aggregate liability, claims procedures, a cooperation clause, and the control and defense of indemnity claims. The scope of the environmental issues was addressed with multiple definitions, such as definitions of "Clean-up," "Contaminants," "Environmental Laws," "Low Hazard Exemption," "Regulatory Actions," as were the scope of "Indemnitees," "Indemnitors," and "Third Party Claims."

¶7 The Trust responded with another draft, which now provided that the "Mediation Agreement and this Agreement represent the entire agreement between the Parties."

¶8 Ultimately, despite many communications between the parties, no agreement was reached on "such things as liability & indemnity in usual form."

¶9 The Trust filed a motion seeking to compel enforcement of the Agreement under WIS. STAT. § 807.05 (2017-18).¹ The Trust asked the circuit court to draft a release and indemnification in "usual form," requesting the court to "adopt the construction which will result in a reasonable, fair and just contract as opposed to one that is unusual and extraordinary."

¶10 Ultimately, the Trust changed its position, clarifying that it was not asking "the [circuit] court to be a scrivener or rewrite the settlement." Instead, the Trust stated that the scope of "liability & indemnity in usual form" "can be addressed and enforced in the future, if an issue [arises]," but could not hold up enforcement now.

¶11 The circuit court granted the Trust’s enforcement motion, finding that the parties entered into a binding agreement and concluding that the case has been settled in full. However, the court declined to identify the terms of Paragraph 5 that were to be agreed upon, stating that it would be advisable for the parties to return to mediation to work out the terms.

¶12 Charmoli appeals.

DISCUSSSION

I. Standard of Review

¶13 Whether a settlement agreement is binding and enforceable is a question of law we review de novo.

Waite v. Easton-White Creek Lions, Inc. , 2006 WI App 19, ¶5, 289 Wis. 2d 100, 709 N.W.2d 88 (2005) ; see also American Nat'l Prop. & Cas. Co. v. Nersesian , 2004 WI App 215, ¶¶14-22, 277 Wis. 2d 430, 689 N.W.2d 922 (independently reviewing whether parties entered into binding settlement agreement).

II. The Incomplete Mediation Agreement Is Not an Enforceable Settlement Agreement Under WIS. STAT. § 807.05.

General principles regarding settlement agreements.

¶14 Settlement agreements entered into while litigation is pending are governed by WIS. STAT. § 807.05. The statute provides in part:

No agreement ... between the parties ... in respect to the proceedings in an action ... shall be binding unless ... made in writing and subscribed by the party to be bound thereby or the party’s attorney.

¶15 As relevant here, WIS. STAT. § 807.05 does not modify basic contract law. Kocinski v. Home Ins. Co. , 154 Wis. 2d 56, 68, 452 N.W.2d 360 (1990) (citing Logemann v. Logemann , 245 Wis. 515, 517, 15 N.W.2d 800 (1944) ). Instead, when a party attempts to enforce a valid settlement agreement reached in the course of an action, it adds certain requirements described in the statute. Kocinski , 154 Wis. 2d at 67, 452 N.W.2d 360. The statute is an exception to the general rule that oral contracts are binding. Id.

¶16 In construing a settlement agreement, we apply contract-construction principles.

State v. Peppertree Resort Villas, Inc. , 2002 WI App 207, ¶13, 257 Wis. 2d 421, 651 N.W.2d 345. "Because a settlement agreement is a contract by nature, a valid settlement agreement requires an offer, an acceptance and consideration all resulting from" mutual assent. American Nat'l , 277 Wis. 2d 430, ¶16, 689 N.W.2d 922.

¶17 Here, the written Agreement was signed by the parties. The issue is whether there is an enforceable "agreement" under contract law given that the terms of Paragraph 5 remained to be agreed upon. There is not.

¶18 A contract must be definite and certain as to its material terms and requirements to be enforceable. Ehlinger v. Hauser , 2010 WI 54, ¶57, 325 Wis. 2d 287, 785 N.W.2d 328 (a contract must be definite as to the parties' basic commitments and obligations); Management Comput. Servs., Inc. v. Hawkins , Ash, Baptie & Co. , 206 Wis. 2d 158, 178, 557 N.W.2d 67 (1996). Accordingly, vagueness or indefiniteness concerning a material term prevents the creation of an enforceable contract. Management Comput. , 206 Wis. 2d at 178, 557 N.W.2d 67 ; Waite , 289 Wis. 2d 100, ¶7 n.4, 709 N.W.2d 88 (an exchange of letters can constitute a binding settlement agreement under WIS. STAT. § 807.05, "provided all material terms are in writing and are clearly accepted in a writing subscribed by the party to be bound or that party’s attorney").

¶19 Agreements to agree are unenforceable when there is no agreement as to material terms. See Dunlop v. Laitsch , 16 Wis. 2d 36, 42, 113 N.W.2d 551 (1962) ; see also American Nat'l , 277 Wis. 2d 430, ¶19, 689 N.W.2d 922 ("Where ... it is part of the understanding between the parties that preliminary writings are to be followed by a formal contract containing additional material provisions and signed by the parties, no binding or completed contract will be found."); United States v. Orr Constr. Co. , 560 F.2d 765, 769 (7th Cir. 1977) (it must be possible to determine the terms of an agreement to agree independent of a party’s mere wish, will or desire, either by virtue of the agreement itself or by commercial practice or other usage or custom).

There was no mutual assent on the terms of the settlement agreement regarding liability and indemnity.

¶20 Here, the parties agreed to sign a "separate substantive agreement" covering the terms of Paragraph 5. Both the circuit court and the Trust recognize that the terms regarding liability and indemnity are (1) material and (2) remain to be worked out.

¶21 The parties themselves identified, with a five-paragraph agreement, these terms as material. The willingness to settle the lawsuit, to transfer property, and to pay a substantial amount of money are also undoubtedly impacted by the scope of liability and indemnity, as the parties' inclusion of these terms underscores. The Trust does not argue that the terms of the "separate substantive agreement" are immaterial or that these terms should be disregarded. It is...