Rosenblum v. Jacks or Better of America West Inc., 51392
| Decision Date | 19 January 1988 |
| Docket Number | No. 51392,51392 |
| Citation | 745 S.W.2d 754 |
| Parties | Eleanor ROSENBLUM, Plaintiff-Appellant, v. JACKS OR BETTER OF AMERICA WEST INC., et al., Defendants-Respondents. |
| Court | Missouri Court of Appeals |
Mortimer A. Rosecan, Alan G. Kimbrell, St. Louis, for plaintiff-appellant.
Alan E. Popkin, Pat Lorraine Simons, Clayton, Timothy Francis Noelker, St. Louis, for defendants-respondents.
ROBERT H. DIERKER, Jr., Special Judge.
Appellant Eleanor Rosenblum sued respondents Jacks or Better and its owners (Robert Hannegan, Martin Kosberg, and William Bidwill) on two promissory notes. Jacks or Better pleaded fraud as a defense to Mrs. Rosenblum's claim and counterclaimed for damages by reason of the same fraud. On the eve of trial, the cause was settled, but the settlement later unraveled. A motion to enforce the settlement filed by plaintiff-appellant was denied. Upon the trial, the jury was permitted to consider the plea of fraud as a basis to deny recovery on the notes and also award damages on the counterclaim. The jury did both, awarding Jacks or Better $64,000 on the counterclaim. The trial court accordingly entered judgment in favor of Jacks or Better on Mrs. Rosenblum's claim and also on the counterclaim, and, on motion, awarded substantial attorney's fees to Jacks or Better. We are advised that Mrs. Rosenblum has paid the judgment on the counterclaim ($64,000 plus interest). Nevertheless, she prosecutes this appeal, assigning as error (1) denial of her motion to enforce the settlement, which she contends was not lawfully rescinded by her attorney; (2) the submission to the jury of both the defense of fraud pleaded by Jacks or Better and also the counterclaim based on fraud; and (3) the award of attorney's fees. We affirm the order denying enforcement of the settlement. We reverse the judgment on Mrs. Rosenblum's claim on the promissory notes and remand for entry of judgment in her favor. We reverse and remand the judgment on the counterclaim for a new trial on the issues of damages only. Finally, we reverse the award of attorney's fees.
Mrs. Rosenblum owned and operated a jewelry manufacturing business known as Stange Company. In part through the agency of her husband, an attorney and close friend of the purchasers, she agreed that the assets of the business would be sold to Jacks or Better and its owners, Messrs. Hannegan and Kosberg. The sale was consummated, the assets were transferred, cash and certain notes were given in payment of the purchase price. On November 20, 1980, promissory notes then due were canceled and new notes were given by Jacks or Better and its owners (now including Mr. Bidwill) in their stead. These notes were payable to Mrs. Rosenblum on November 20, 1981. Before they became due, Jacks or Better and its owners discovered, as the jury was later to find, that Mrs. Rosenblum had misrepresented the profitability of Stange by manipulating the value of its inventory so as to grossly exaggerate the earnings of the business. Jacks or Better refused to pay the notes when due. Mrs. Rosenblum then filed suit seeking to recover the principal amount due on the notes, $249,600. Jacks or Better answered and counterclaimed, alleging fraud both as an affirmative defense and as the basis of a claim for damages.
The settlement negotiations in this case proceeded by counsel of the parties. The parties themselves never exchanged a word. Neither attorney inquired of the other the precise limits, if any, placed on him by his client. On the contrary, as befitting able and experienced counsel, each attorney proceeded on the assumption that his opposite number had whatever authority that was necessary to accept or reject a settlement. Several offers by Jacks or Better were summarily rejected by counsel for Mrs. Rosenblum. On one occasion, it appears that Mrs. Rosenblum knew of the rejection; but it does not appear that counsel for Jacks or Better knew or should have known that opposing counsel had consulted with his client before rejecting the offer. It was only when Jacks or Better offered $185,000 to settle the case that counsel for Mrs. Rosenblum indicated that he would not respond immediately, inferring that he would consult with his client before accepting or rejecting the offer. Even after doing so, and reporting that the offer was accepted, counsel for Mrs. Rosenblum proceeded to negotiate other important matters, such as a covenant not to compete on the part of Mrs. Rosenblum, without any appearance of further consultation with or instructions from his client. Thus, the trial court could have found, on this record, that counsel for Jacks or Better reasonably believed that counsel for Mrs. Rosenblum had full authority to negotiate a settlement, reject any proposal the attorney deemed unacceptable, and accept proposals on material issues as he saw fit.
As drafted by counsel for Jacks or Better, the settlement agreement in this case directed that Jacks or Better, upon execution of the settlement, provide a letter of credit to secure payment of the principal settlement sum of $185,000 within thirty days. After the draft agreement was reviewed by Mr. and Mrs. Rosenblum, with some "cosmetic" language changes, it was sent to Mr. Hannegan, who apparently had charge of the litigation for Jacks or Better and its owners. Several days later, on October 12, 1984, counsel for the respective parties conferred by telephone. Counsel for Mrs. Rosenblum was advised that there was a difficulty in providing the letter of credit, and that Mr. Hannegan desired instead to guarantee personally that the $185,000 would be paid within twenty-one days rather than thirty, as called for in the draft. The following exchange transpired:
I [Jacks or Better's counsel] recounted that conversation to Marty [Mrs. Rosenblum's counsel]. I told him that we had problems, that we could not get the letter of credit within seven days, but that I could get the money within 21 days. And I asked him if that would be acceptable.
Q. What did Marty say?
A. He said, "That is not acceptable." And I said--I was kind of nonplussed because--
Q. Why were you nonplussed?
A. Well, because of the way he said it. We had gone through all of this negotiation and all the upset and what have you. And I said, "Well, do you mean the settlement is off?"
And he said, "That's exactly what I mean," as only Marty could say it.
Q. Do you have a distinct recollection of that?
A. Yes. And I was, again, nonplussed. I was at loss for--You know, it was a "a-buh, a-buh," kind of conversation. And I said, And I hung up the phone, and that was the end of the conversation.
I immediately picked up the phone, called Bob Hannegan and said,
Several days later, counsel for Jacks or Better sent a letter to counsel for Mrs. Rosenblum, summarizing their conversation and indicating commencement of trial preparation. In the meantime, Mrs. Rosenblum's counsel reported to her concerning the October 12 conversation. Both Mrs. Rosenblum and her counsel insisted later that counsel had no authority to rescind the settlement, and that he had merely intended to reject what was perceived as a proposed amendment of the completed settlement. However, neither counsel nor Mrs. Rosenblum said or did anything further consistent with a belief that the settlement would go forward. On the contrary, nothing was done to clarify the situation until counsel for Mrs. Rosenblum received the letter written by counsel for Jacks or Better. A day after receiving it, counsel for Mrs. Rosenblum called his opponent and attempted to cast his words in a different light, asserting that there was no intention of rescinding or calling off the settlement. Counsel was advised, however, that Mr. Hannegan considered that the settlement was at an end and that the case would be tried. The cause was eventually tried, with the adverse outcome for Mrs. Rosenblum described ante.
Both parties assured the trial court that this case had been settled, and that the only issue on the motion to enforce the settlement was whether the agreement had been rescinded. Although Jacks or Better argued otherwise in its brief, counsel at oral argument unequivocally renounced the position that the case was not settled and asserted to us that the issue was rescission of the settlement. Thus, the critical question before us is a novel one: can the express, unambiguous repudiation of a settlement by counsel of record be deemed effective to rescind the settlement, binding counsel's client? This issue turns largely on the trial judge's findings, which must be imputed to him in the absence of specific findings. The strictures of Rule 73.01, Mo.R.Civ.P., as glossed by the reported cases, must be observed in resolving the issue, and the trial court's order denying enforcement of the settlement must be affirmed unless unsupported by or plainly contrary to the weight of the evidence, or erroneous in law. E.g., Barton v. Snellson, 735 S.W.2d 160 (Mo.App.1987).
In arguing that the settlement was not effectively rescinded, Mrs. Rosenblum first contends that the words of her counsel in the telephone conversation quoted above are not a plain, unambiguous indication of intent to rescind the settlement agreement. The trial court implicitly found otherwise, and in view of the circumstances we cannot disagree. The words of counsel could hardly be plainer. See, e.g., Tahan v. Garrick, 701 S.W.2d 189, 191 (Mo.App.1985); cf. Transportation Equipment Rentals v. Straudberg, 392 S.W.2d 319 (Mo.1965).
Of more force is Mrs. Rosenblum's argument that no rescission occurred because Jacks or Better had breached the...
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