Richard G. Gay
Nathan P. Cochran
Law Office of Richard G. Gay
Berkeley Springs, West Virginia
Attorneys for the Appellants
William Richard McCune, Jr.
Michelle D. Baldwin
Law Office of William Richard McCune
Martinsburg, West Virginia
Attorneys for the Appellees,
H. William Newbraugh; Newbraugh
Development Company, Inc., and
Newbraugh's Lumber & Building Supply, Inc.
Roger Schlossberg
Schlossberg & Associates
Hagerstown, Maryland
Attorney for the Appellee,
Dan Ryan Builders, Inc.
JUSTICE ALBRIGHT delivered the Opinion of the Court.
1. This Court employs an abuse of discretion standard
when reviewing a circuit court order enforcing a settlement agreement reached
as a result of court-ordered mediation.
2. In providing for the enforceability of settlement
agreements that are reached and signed by the parties in a court-ordered mediation
conference, West Virginia Trial Court Rule 25.14 does not provide the exclusive
means for the enforcement of such settlement agreements.
3. A settlement agreement reached during, or
as the result of court-ordered mediation, which does not fully comply with
West Virginia Trial Court Rule 25.14, may be enforced by the circuit court
where (1) the parties to the mediation reached an agreement; (2) a memorandum
of that agreement was prepared by the mediator, or at his direction, incident
to the agreement; (3) the circuit court finds, after a properly noticed hearing,
that the agreement was reached by the parties free of coercion, mistake, or
other unlawful conduct; and (4) the circuit court makes findings of fact and
conclusions of law sufficient to enable appellate review of an order enforcing
the agreement.
4. “'A meeting of the minds of the parties is a
sine qua non of all contracts.' Point 1, syllabus, Martin v. Ewing,
112 W.Va. 332, 164 S.E. 859 [1932].” Syl. Pt. 1, Wheeling Downs Racing
Ass'n v. West Virginia Sportservice, Inc., 157 W.Va. 93, 199 S.E.2d 308
(1973).
5. “The law favors and encourages the resolution of controversies by contracts of compromise and settlement rather than by litigation; and it is the policy of the law to uphold and enforce such contracts if they are fairly made and are not in contravention of some law or public policy.” Syl. Pt. 1, Sanders v. Roselawn Mem'l Gardens, Inc., 152 W.Va. 91, 159 S.E.2d 784 (1968).
Albright, Justice:
Mr. and Mrs. Riner appeal from the March 16, 2001,
order of the Circuit Court of Berkeley, denying their motion to alter or amend
the judgment entered on February 13, 2001, that pertains to enforcement of
a settlement agreement that was reached as a result of a court-ordered mediation.
While the Riners signed the Mediation Settlement Agreement, which was prepared
by mediator Patrick Henry,
(See footnote 1) the Appellees did not sign
that document. The Appellees' counsel prepared and submitted a separate document
to the Riners for signature, which was entitled “Settlement Agreement
and Release.” In its order of February 13, 2001, the trial court directed
the Riners to sign the settlement document prepared by the Appellees' counsel.
Upon our review of this matter, we conclude that the trial court committed
error by requiring the Riners to sign an agreement that differed in substance
from the agreement reached as the result of the mediation conference. Accordingly,
we reverse and remand this matter for trial, barring further and successful
settlement results.
On August 14, 2000, the parties participated in
an unsuccessful court-ordered mediation conference. Due to the continuing
efforts of the mediator and the parties, however, an agreement was reached
via the telephone on August 31, 2000. The mediator reduced that agreement
to writing and both he and the Riners signed the Mediation Settlement Agreement
on September 5, 2000. Although the two-page agreement was immediately transmitted
to the Appellees, they chose not to sign that document. The Appellees' counsel
prepared a lengthier document that restated certain provisions of the Mediation
Settlement Agreement, included other provisions not specifically addressed
at the mediation conference, and provided for the mutual release of both existing
and future claims related to the Harlan Run venture.
When the Riners refused to sign the separate document
prepared by the Appellees_the “Settlement Agreement and Release”_the
Appellees filed a motion to enforce the settlement agreement.
(See footnote 2)
Two hearings were held on the issue of whether the settlement agreement
could be enforced at which testimony was offered by former counsel for the
Riners,
(See footnote 3) the Appellees' counsel, Mr. Riner, and
the mediator. By order dated February 13, 2000, the circuit court ruled that
it could “find no substantive area of disagreement or misunderstanding
that was not resolved by the [mediation settlement] Agreement, which appears
to the Court to be a valid, fair and enforceable settlement agreement.”
The lower court, in granting the Appellees' motion to enforce the settlement
agreement, ordered that the Riners were to execute the “Settlement Agreement
and Release” prepared by the Appellees, and further directed that the
parties were to be bound by the terms of such document.
The Riners sought relief from the lower court, but
by order entered on March 16, 2001, the circuit court denied their motion
to alter or amend the February 13, 2001, judgment. It is from that decision
that the Riners now appeal.
[W]hen this Court undertakes the appellate review of
a circuit court's order enforcing a settlement agreement, an abuse of discretion
standard of review is employed. See Syl. pt. 7, in part, Smith v.
Monongahela Power Co., 189 W.Va. 237, 429 S.E.2d 643 (1993) (“The determination
of whether a settlement has been made in good faith rests in the sound discretion
of the trial court....”). The reason for this deferential standard is that
“'[b]oth law and equity favor repose of litigious matters. Compromise by
parties of their differences is favored by all courts. When a matter has thus
been put at rest, it should not be disturbed except for grave cause.'”
Sanders v. Roselawn Mem'l Gardens, 152 W.Va. 91, 104, 159 S.E.2d 784,
792-93 (1968) (quoting Janney v. Virginian Ry. Co., 119 W.Va. 249, 252,
193 S.E. 187, 188 (1937)).
205 W.Va. at 527, 519 S.E.2d at 630.
This Court employs an abuse of discretion standard
when reviewing a circuit court order enforcing a settlement agreement reached
as a result of court-ordered mediation. Accordingly, we proceed to determine
whether the lower court abused its discretion in granting the Appellees' motion
to enforce the settlement agreement.
The Riners, in this Court's opinion, read Trial
Court Rule 25.14 far too narrowly. Contrary to their contention, we do not
believe that Rule 25.14 was intended to prevent the enforcement of settlement
agreements reached through mediation that have not been reduced to writing
and signed by all the parties. Instead, the Rule extends to the parties to
a settlement agreement reached and signed
(See footnote 4) following court-ordered mediation
the availability of remedies routinely available for the enforcement of contracts
without the correspondent duty of demonstrating the elements of a valid contract.
The Rule does not, however, state, or even suggest, that only those settlement
agreements that have been reduced to writing following court-ordered mediation
and signed by all the parties are subject to enforcement. Thus, in providing
for the enforceability of settlement agreements that are reached and signed
in a court-ordered mediation conference, West Virginia Trial Court Rule 25.14
does not provide the exclusive means for the enforcement of such settlement
agreements. See also U.S. ex rel. McDermitt, Inc. v. Centex-Simpson
Constr. Co., 34 F.Supp.2d 397, 399 (N.D. W.Va. 1999) (recognizing that
“settlement agreement made in open court . . . is a valid, enforceable agreement and need not be reduced
to writing”), aff'd, 203 F.3d 824 (4th Cir. 2000);
see generally 15A Am.Jur.2d Compromise and Settlement §
16 at 737 (2000) (recognizing that “no particular form of agreement and
no writing is ordinarily essential to a valid compromise”).
In those instances where a settlement agreement
was reached but not signed by the parties, the agreement may still be enforced
provided the parties produce sufficient evidence concerning the attainment
of an agreement and the mutually agreed upon terms of the agreement. See
Few v. Hammack Enters., Inc., 511 S.E.2d 665, 669-70 (N.C. App. 1999)
(recognizing that trial court can determine enforceability of settlement agreement
where one party refuses to sign Mediation Settlement Agreement by hearing
evidence regarding the agreement and its terms). Accordingly, we hold
that a settlement agreement reached during, or as the result of court-ordered
mediation,
(See footnote 5) which does not fully comply with West Virginia
Trial Court Rule 25.14, may be enforced by the circuit court where (1) the
parties to the mediation reached an agreement; (2) a memorandum of that agreement
was prepared by the mediator, or at his direction, incident to the agreement;
(3) the circuit court finds, after a properly noticed hearing, that the agreement
was reached by the parties free of coercion, mistake, or other unlawful conduct;
and (4) the circuit court makes findings of fact and conclusions of law sufficient to enable appellate review of an order enforcing
the agreement.
Turning to the issue of whether an agreement was
reached between the parties, we look to the four-paragraph summary
(See footnote 6)
of the Mediation Settlement Agreement set forth by the lower court in
its February 13, 2001, order:
1 1. The Defendants [Appellees]
convey to the Plaintiffs [Riners] all interests in an account held by the
Court through the Successor Trustee . . . with full rights for the Plaintiff
to pursue an accounting of said fund, with the understanding the Plaintiffs
will indemnify the Defendants from any liability or loss arising from said
accounting.
2 2. The Defendants shall
pay the Plaintiffs the further sum of $79,000.00.
3 3. The Defendants shall
pay all costs of mediation and copying expenses.
4 4. Plaintiff's [sic] counsel
shall prepare the court Orders necessary to carry out the terms of the agreement
. . . while counsel for the Defendants shall prepare all necessary releases
for the benefit of their respective clients.
Whereas the Mediation Settlement Agreement was a short, two-page document,
the “Settlement Agreement and Release” prepared by the Appellees
for the Riners to sign was a fifteen-page document comprised of eight pages
of text and seven signatory pages.
In refusing to sign the “Settlement Agreement and Release,” the Riners offered two reasons: (1) delay; and (2) terms differing from those agreed upon and set forth in the Mediation Settlement Agreement. As to the issue of delay, Mr. Riner testified below that the holdup in transmitting the $79,000 settlement payment played a part in his decision not to sign the “Settlement Agreement and Release.” Apparently, the month interval between the mediator's preparation of the Mediation Settlement Agreement and the Appellees' preparation and transmittal of the “Settlement Agreement and Release” was longer than Mr. Riner had anticipated the settlement process would take to complete. In its recounting of the testimony regarding the settlement process and fallout, the trial court observed: “[A]ll the Court can conclude is that the Plaintiffs wanted the monies owed them under the Agreement to be paid immediately and when there was the delay of the releases the Plaintiffs revived all the animus that had animated their previous relationship with the Defendants.” As to the issue of timeliness in the performance of the Mediation Settlement Agreement, we note that the agreement itself did not contain any time requirement for performance. As a matter of practice, however, we note that specification of a date by which performance of a settlement agreement is to take place is clearly preferable to permitting the breakdown of an agreement on grounds of untimely performance. (See footnote 7)
According to the Riners, the “Settlement Agreement
and Release” prepared by the Appellees contains three paragraphs discussing
items that were not a part of the Mediation Settlement Agreement and which were
never specifically discussed during the course of the mediation. Those three
paragraphs are numbered 5, 6, and 7, and provide that:
5. It is understood and agreed
that no further claims will be made for an accounting of Harlan Run, LLC and
that Newbraugh Development Company, the manager of Harlan Run, LLC, will proceed
at its own expense to the orderly dissolution of Harlan Run, LLC, and shall
further be entitled to any proceeds from said dissolution to the exclusion of
any claims by the Riners, including any claims involving real estate or sums
of money which claims, if any, are specifically assigned by the Releasors to
Newbraugh Development Company. To the extent that proceeds from sales of Harlan
Run properties are distributed pursuant to this Release, each party receiving
any such proceeds shall be responsible for his own tax liabilities from each
such distribution.
6. It is understood and agreed
that both the expense of the dissolution of Harlan Run and any benefits which
accrue from that dissolution are hereby assigned by the Releasors to Newbraugh
Development Company.
7. It is understood and agreed
that by virtue of this Settlement Agreement that no further claims can or shall
be made by the Releasees, by the Releasors or by Harlan Run, LLC with regard
to the conveyance of property from the Riners to Harlan Run, LLC; the formation
of Harlan Run, LLC; the formation and carrying out of the operating agreement
of Harlan Run, LLC; the execution and carrying out of the real estate option
agreement dated June 4, 1997; the entering into and carrying out of the development agreement dated April 16, 1997; the sale
of the property in question to Clifford A. Riner and its subsequent assignments
to Dan Ryan Buildings, Inc. and to Newbraugh-Ryan, LLC, and the conduct of
business between the Releasees with regard to Harlan Run under any circumstances
and for any reason.
In response to the Riners' argument that these three
paragraphs address matters that were not discussed at the mediation conference
or included in the Mediation Settlement Agreement, the Appellees maintain
that these matters were impliedly included in the settlement agreement as
the purpose of settlement was to fully resolve the underlying litigation.
In proof of this point, the Appellees subpoenaed the mediator and the trial
court questioned him as to the extent of the agreement:
THE COURT: There obviously
has been a release prepared beyond the date of the settlement agreement in
the case. The parties are alleging, primarily the Plaintiffs . . ., that certain
terms within that settlement agreement and releases go beyond the pale, go
beyond the original agreement that was dated the 5th day of September
of 2000, and either embrace new material or work a greater or different settlement
than envisioned in your September 5th document, you're aware of
that?
THE WITNESS: I am aware of
that.
THE COURT: You are unaware
of any particulars as to what alleged maybe [sic] larger ambit of the proposed
settlement agreement release that was prepared by the Defendants?
THE WITNESS: I am guessing because
I know what the nature of the lawsuit was, essentially involved dissolution
of a business entity existing between the Newbraughs and the Riners. Because
of that I anticipated there was going to be probably a pretty substantial release
that both sides were going to want to make sure that neither one of them could
throw rocks at them in the future.
Relying heavily on the mediator's rock throwing
allusion, the Appellees contend that this testimony supports their position
that the settlement agreement was to be an all-inclusive type of agreement
that would prevent any further litigation concerning the Harlan Run venture.
The trial court, in making its ruling, obviously relied upon the mediator's
testimony:
In testimony given before
the Court, the mediator[,] Mr. Henry[,] stated that this simple and straight-forward
agreement was meant by the parties to totally resolve their relationship and
the lawsuits pending between them, and to make sure that neither was in a
position to “throw rocks” at the other afterwards. In other words,
to insure a clean break.
While the trial court's questioning of the mediator
ensued due to his presence having been secured by subpoena, we question the
wisdom of permitting the mediator to testify in the fashion allowed in this
case. To the mediator's credit, he informed the trial court prior to his testimony
that the trial court rules prohibit him from subsequently testifying for trial purposes. See W.Va.T.C.R. 25.12 (stating
that “mediator may not be subpoenaed or called to testify or otherwise
be subject to process requiring disclosure of confidential information in
any proceeding relating to or arising out of the dispute mediated”).
He did acknowledge, however, that a mediator can be called to testify to the
generalized issue of whether an agreement has been reached.
(See footnote 8) While it does not appear
that the mediator disclosed any confidential information through his testimony,
and neither party has raised such a claim, the trial court's questioning of
the mediator went beyond the basic issue of whether in fact an agreement was
reached and identifying the terms of that agreement. The trial court clearly
questioned the mediator on the ultimate issue of whether the “Settlement
Agreement and Release” should be enforced despite the inclusion of terms
that were not in the Mediation Settlement Agreement. While we do not approve
of the trial court's entire line of questioning of the mediator, we do not
find a violation of TCR 25.12 due to the non- disclosure by the mediator of
confidential information discussed during the mediation process.
Returning to the issue of whether paragraph numbers
5, 6, and 7 contain terms to which the parties did not agree , we are mindful
of the fact that “'[a] meeting of the minds of the parties is a sine
qua non of all contracts.'” Syl. Pt. 1, Wheeling Downs Racing Ass'n
v. West Virginia Sportservice, Inc., 157 W.Va. 93, 199 S.E.2d 308 (1973)
(quoting Syl. Pt. 1, Martin v. Ewing, 112 W.Va. 332, 164 S.E. 859 (1932)).
We stated further in O'Connor v. GCC Beverages, Inc., 182 W.Va. 689,
391 S.E.2d 379 (1990): “It is well-understood that '[s]ince a compromise
and settlement is contractual in nature, a definite meeting of the minds of
the parties is essential to a valid compromise, since a settlement cannot be
predicated on equivocal actions of the parties.' 15A C.J.S. Compromise &
Settlement § 7(1) (1967).” 182 W.Va. at 691, 391 S.E.2d at 381.
While there may have been a meeting of the minds
by the parties as to the terms reflected in the four paragraphs of the Mediation
Settlement Agreement, there was not a meeting of the minds with regard to
the terms that are specified in paragraph numbers 5, 6, and 7 of the “Settlement
Agreement and Release.” Absent this critical and necessary contractual
element, we cannot require the Riners to sign a document that contains terms
that were not part of the original agreement. Accordingly, we find that the
lower court committed error in directing the Riners to sign the “Settlement
Agreement and Release” and further, in ruling that they were to be bound
by the terms of such agreement.
The Appellees' analogy of the case at bar to the situation
present in McDermitt is inapposite. In McDermitt, the plaintiff
refused to sign the settlement agreement prepared by defense counsel based on
the inclusion of a confidentiality clause and standardized release language.
Although the appellate court did strike the confidentiality clause, the remainder
of the agreement was enforced based on the fact that there was “no evidence
of any dispute as to the existence of an agreement, material terms of the agreement,
or authority of counsel to enter the agreement. . . .” 34 F.Supp.2d at
401. Unlike McDermitt, where the release provisions were viewed as ancillary,
this case presents a clear dispute as to “material terms of the agreement.”
Id. For the Appellees to suggest that paragraphs 5, 6, and 7 represent
nothing more than standardized release language is specious, as those paragraphs
clearly address additional substantive terms and not mere procedural fine points.
Equally unconvincing is the Appellees' suggestion
that public policy dictates that the agreement their counsel prepared must
be enforced. Citing the proposition that “[t]he law favors and encourages
the resolution of controversies by contracts of compromise and settlement
rather than by litigation,” the Appellees suggest that the Riners must
be made to “follow through” on the bargain reached in this case
lest the proverbial floodgates of litigation be permanently opened. Syl. Pt.
1, in part, Sanders v. Roselawn Mem'l Gardens, Inc., 152 W.Va. 91,
159 S.E.2d 784 (1968). In citing Sanders, the Appellees appear not
to appreciate the significance of the second-part of syllabus one, which recognizes
that “it is the policy of the law to uphold and enforce such contracts
[of compromise] if they are fairly made and are not in contravention of some
law or public policy.” Id. at 91, 159 S.E.2d at 785, syl. pt.
1, in part. In making their argument predicated on public policy the Appellees
clearly overlook the compelling policy argument raised by the Riners concerning
the effect on the court-ordered mediation process, as a whole, were this Court
to compel them to be bound by a settlement agreement that contains terms addressing
substantive matters beyond the four corners of the agreement reached as a
result of the mediation process.
While the result may not be quite as dire as the
Riners suggest in arguing that an “in terrorem” effect will surround
the mediation process if we affirm the trial court, we do recognize that the
mediation process will only work where the parties are ensured that the process
is fair to both sides and where the attainment of settlement is viewed as
non- compulsory. See W.Va. T.C.R. 25.11 (stating that “[n]o party
may be compelled by these rules, the court, or the mediator to settle a case
involuntarily or against the party's own judgment or interest”). Upon
the facts of this case, public policy clearly does not compel the enforcement
of the “Settlement Agreement and Release,” given that document's
inclusion of terms that differ in substance from those set forth in the Mediation
Settlement Agreement.
Based on the foregoing, the decision of the Circuit
Court of Berkeley County is hereby reversed and this matter is remanded for
further proceedings.