The opinion
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
September 21, 2010 Session
CATHERINE M. LOVE, as next friend and natural mother of Savannah Love, a
minor child and daughter of Rex Bryan Peterson, deceased, ET. AL.
v.
DORIS LAKINS WOODS
Direct Appeal from the Circuit Court for Blount County
No. L16199 William D. Young, Judge
No. E2009-02385-COA-R3-CV - FILED NOVEMBER 4, 2010
This case arises from the trial court’s denial of Plaintiff/Appellants’ motion to enforce a
settlement agreement. Appellants, the surviving children of decedent, filed a wrongful death
claim against the Appellee herein, the driver of a car involved in the accident that killed
decedent. During negotiations, Appellee/Defendant’s attorney proposed a settlement in the
amount of Appellee’s insurance policy limit, which Appellee’s attorney misstated to be
$100,000, when, in fact, the policy limit was $50,000. The trial court denied Appellants’
motion to enforce the $100,000 settlement finding that the settlement was not enforceable,
as it failed to contain certain material terms of the agreement. We conclude that the trial court
failed to determine whether an agency relationship existed between the Appellee’s attorney
and the insurance company and also whether the insurance company is required to be a party
to this litigation. Vacated and remanded.
Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Circuit Court Vacated and
Remanded
J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which D AVID R. F ARMER, J.,
and H OLLY M. K IRBY, J., joined.
Christopher T. Cain, Knoxville, Tennessee, for the appellants, Catherine M. Love, Rex Bryan
Peterson and Michael Corey Peterson.
Jon M. Cope, Mary Jo Mann, Knoxville, Tennessee, for the appellee, Doris Lankins Woods.
OPINION
On December 1, 2007, Rex Peterson was killed when the motorcycle he was operating
was struck by an automobile driven by the Appellee, Doris Lakins Woods. Mr. Peterson was
survived by three children: Rex Bryan Peterson, an adult; Michael Corey Peterson, an adult;
and Savannah Love, a minor.
On May 2, 2008, Catherine M. Love, as next friend and natural mother of Savannah
Love, Rex Bryan Peterson, and Michael Corey Peterson (together “Plaintiffs,” or
“Appellants”) filed a wrongful death suit against Ms. Woods. The complaint alleged that
Ms. Woods was guilty of common law negligence, and negligence per se in her operation of
the automobile, and that this negligence was the proximate cause of Mr. Peterson’s death.
On June 13, 2008, Ms. Woods filed an answer to the complaint, wherein she denied any
liability, and asserted comparative negligence on the part of Appellants’ decedent, and
another motorcycle driver.
In an Affidavit that was made part of the appellate record, Appellants’ attorney,
Christopher T. Cain, averred, in relevant part, that:
2. In November of 2008, I was informed by Mary Jo Mann
(“Mann”), counsel for the Defendant and Defendant’s insurer
(Tennessee Farmers Mutual Insurance Company (“Farmers”))
that Defendant’s policy limits were $100,000. I was not
provided either the Policy or its Declarations Page.
3. On or about February 8, 2009, Mann, on behalf of Farmers,
offered the $100,000 policy limits in settlement of the captioned
matter, exclusive of the property damage claim. This offer was
accepted and confirmed by the undersigned by letter dated
February 9, 2009.
4. On February 9, 2009, Mann, on behalf of Farmers, wrote “to
confirm, in principal, that we have agreed to settle the Peterson
wrongful death for policy limits of $100,000.” .... This letter
reflects an open copy to Chris Rucker (“Rucker”), an adjuster
for Farmers.
5. On or about March 18, 2009, I was informed (first by
Rucker, then by Mann), that the limits of the Policy were
$50,000, rather than $100,000. I was also told by Mann that
Farmers was not going to pay the $100,000 and would only pay
$50,000. Shortly thereafter, for the first time, I was provided the
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Declarations Page for the Policy, which reflected policy limits
of $50,000.
On March 27, 2009, Appellants filed a motion and memorandum to enforce
settlement, seeking to enforce the alleged settlement in the amount of $100,000. The
February 9, 2009, letter from Mann, which is referenced in paragraph four of Mr. Cain’s
Affidavit, supra, was attached to the motion to enforce settlement. This letter provides, in
pertinent part, as follows:
This letter is to confirm, in principal, that we have agreed to
settle the Peterson wrongful death for policy limits of $100,000.
* * *
As I have mentioned, because Savannah Love is a minor, the
settlement will have to be court approved. I will gladly prepare
the necessary documents once you provide me with the
information as to how the settlement proceeds are to be divided.
Please keep in mind that [] T.C.A. §34-1-101, et seq. requires
the appointment of a guardian and posting of a bond if the
amount paid to the minor exceeds $10,000. Your clients may
want to consider placing, at least, some of the minor’s proceeds
in an annuity which will pay out after Savannah reaches 18 to
avoid this additional administrative procedure. I will gladly
discuss this with you in more detail and Tennessee Farmers
would be able to provide an annuity.
In their motion to enforce settlement, Appellants contend that any mistake as to the
policy limit was unilateral on the part of Appellee’s counsel or insurer. Because Farmers
drafted the policy at issue and at least two of its agents (i.e., Appellee’s attorney and adjuster)
reviewed (or should have reviewed) the matter before offering $100,000 in settlement of
Appellants’ claims, Appellants contend that Farmers / Appellee should bear the mistake and
settlement should be enforced for $100,000. On May 7, 2009, Ms. Woods filed a response
to Appellants’ motion to enforce settlement, wherein she argued, in relevant part, as follows:
After limited discovery, [Ms. Woods’] counsel obtained
authority from Tennessee Farmers Mutual Insurance Company
(“Tennessee Farmers”), [Ms. Woods’] insurer, to offer
the...policy limits to Plaintiffs for a full and complete settlement.
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Shortly thereafter, in late January or February, 2009, [Ms.
Woods’] counsel called Plaintiffs’ counsel and left a voicemail
stating that they were prepared to offer the policy limits, but
mistakenly stated them to be one hundred thousand dollars....
Subsequently, counsel had a telephone conference wherein
plaintiffs’ counsel accepted the policy limits offer and he raised
the issue that his client’s property damage claim was still
unresolved and needed to be addressed.
[Ms. Woods’ attorney] sent a letter to Plaintiffs’ counsel,
dated February 9, 2009, memorializing the conversation
regarding settlement stating specifically “this letter is to confirm
in principle, that we have agreed to settle the Peterson wrongful
death for policy limits of $100,000.” Moreover, the letter itself
detailed several material terms that still needed to be agreed
upon before a final settlement could be reached. These
included: the terms by which the settlement was to be divided
between the three separate Plaintiffs had not been discussed or
agreed upon; the terms of the annuity for Savannah had not even
been discussed, much less finalized; and the terms by which a
legal guardian for Savannah was to be appointed had not been
finalized. Further, neither the letter nor the telephone messages
had finalized, or even discussed, the timetable for the
disbursement of the settlement. Furthermore, and as stated in
the letter, due to a minor being involved, any settlement
agreement must first be approved by the Court before becoming
valid.
Finally, [Ms. Woods’] counsel’s letter clearly established
that the Defendant had no intention to be bound until the
execution of a written formal contract stating, “I will gladly
prepare the necessary documents once you provide me with the
information as to how the settlement proceeds are to be
divided.”
(citations to record omitted) (emphasis in original).
The motion to enforce settlement was heard by the trial court on May 11, 2009. There
is no transcript of this proceeding in the appellate record. On June 16, 2009, the court
entered an order, denying Appellants’ motion to enforce the $100,000 settlement. The trial
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court’s May 28, 2009, memorandum letter is incorporated, by reference, into the June 16 th
order. The court’s memorandum provides, in relevant part, as follows:
On February 8, 2009, Counsel for Tennessee Farmers
Mutual Insurance Company offered to settle the case for the
insurance company’s policy limits, which Counsel for
Tennessee Farmers was informed to be $100,000. Thereafter,
on March 18, 2009, Tennessee Farmers Mutual Insurance
Company advised Counsel for Defendant that the limits were
$50,000.00 rather than $100,000.00. Plaintiffs argue that the
mistake was a mutual mistake and that the Court should enforce
a settlement of $100,000.00.
Defendant argues that the offer tendered on February 9,
2009 was conditioned upon several material terms that still
needed to be agreed upon before a final settlement could be
reached. Counsel for Defendant offered to prepare necessary
documents to complete the settlement when Plaintiffs furnished
the information requested. Prior to this information being
furnished to Counsel for Defendant, Defendant discovered the
policy limits to be only $50,000.00 and informed Plaintiffs’
Counsel of that fact.
The Court has read with great interest the briefs filed by
respective Counsel and has concluded that the “settlement
agreement” is unenforceable inasmuch as it was incomplete as
to several material terms and conditions, the subject of which
was involved in the settlement negotiations when the $50,000.00
policy limits were discovered.
Accordingly, the Court most respectfully overrules
Plaintiffs’ Motion to Enforce Settlement and dismisses same.
On June 15, 2009, Appellants filed a renewed motion and memorandum to enforce
settlement.1 As stated in the renewed motion, the purpose thereof was to:
1
It appears that the Appellants’ renewed motion and memorandum to enforce settlement was filed
one day prior to the entry of the June 16, 2009 order, denying the initial motion to enforce settlement. From
our reading of the record, and from the parties’ statements in their respective appellate briefs, we infer that
(continued...)
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(1) supplement the factual record to address the Court’s
misapprehension that requested information was not provided
prior to Farmers discovering its error as to policy limits; (2)
clarify that Plaintiffs’ position that the mistake as to policy
limits was Defendant’s unilaterally, and, even if it was a “mutual
mistake,” Defendant should bear the burden of the mistake as to
the policy limits; and (3) reiterate that the settlement agreement
was not a “contract to make a contract” and that no material
terms were missing at the time Farmer discovered the mistake.
Attached to the Appellants’ renewed motion were several letters that passed between
Appellants’ counsel and Appellee’s counsel: (1) letter dated February 9, 2009, from
Appellants’ counsel, stating that “[t]his letter will confirm that we have settled the wrongful
death portion of the claim for $100,000.00, your client’s policy limits.” The letter further
states that the settlement check should be made payable jointly to the Appellants and their
attorney, and gives the applicable tax identification number. The letter further indicates that
the property damage claim still needs to be addressed; (2) letter dated February 23, 2009,
from Appellants’ counsel, which letter primarily concerns the property damage portion of the
settlement. Concerning the settlement for the minor child, the February 23, 2009, letter
indicates that Appellants’ attorney has spoken to the child’s mother and that the mother “has
an interest in placing [the child’s] proceeds in an annuity which would pay out after [the
child] reaches the age of 18. In that light, and as you offered, please provide me with the
information on same using proceeds of $20,000.00 to fund the annuity;” and (3) letter dated
March 3, 2009, from Appellee’s counsel, which letter acknowledges receipt of the
information regarding the property damage claim.
On September 10, 2009, Appellee filed a response to Appellants’ renewed motion to
enforce settlement, arguing, in pertinent part, that, “[w]hen the mutual mistake [concerning
the policy limits] came to light [i.e., March 18, 2009], there were specific and material terms
of the settlement that were still pending.” These terms allegedly included: (1) the division
of proceeds among three plaintiffs; (2) establishment or not of a guardianship for the minor;
(3) the preparation of the settlement documents necessary for obtaining court approval; (4)
the terms and conditions of a structured settlement for the minor; (5) the preparation of
documents setting up a structured settlement for the minor, including a qualified Assignment;
1
(...continued)
the premature filing of the renewed motion to enforce settlement arose from the fact that the trial court orally
denied the initial motion from the bench, and then entered a memorandum letter on May 28, 2009. It is not
fatal to Appellants’ renewed motion that it was filed one day prior to the entry of the order on the first
motion; however, we note the discrepancy in the filing dates to avoid any confusion in the Opinion.
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and (6) actually obtaining court approval for the minor’s claim.
The renewed motion to enforce settlement was heard on September 11, 2009.2 At the
end of the hearing, the court denied the motion from the bench. Thereafter, the parties
entered into a joint petition for approval of the minor child’s portion of the settlement. This
petition specifically preserves the Appellants’ right to appeal the trial court’s denial of the
motion to enforce settlement in the amount of $100,000. In relevant part, the joint petition
provides for “full and final settlement and satisfaction” of all claims, in the amount of
$50,000. The petition goes on to outline the proposed disbursement of the settlement funds.
Based upon their agreement, the parties requested that the court approve and ratify the
minor’s portion of the settlement, as required by Tenn. Code Ann. §34-1-101, et seq.
A Final Order was entered on November 12, 2009, which order denies Appellants’
renewed motion to enforce settlement, preserves Appellants’ right to appeal the issue of
denial of the motion to enforce the $100,000 settlement, and adopts the $50,000 settlement
reached by the parties as set out in their joint petition, supra, pending the instant appeal.
Concerning the minor child’s portion of the settlement, the trial court specifically found that
the $50,000 settlement was “fair, reasonable, prudent, and in the [child’s] best interest,
[pursuant to Tenn. Code Ann. § 34-1-101 et seq.]. Having preserved the right to appeal,
Appellants bring the following issue for our review:
Whether the Circuit Court erred in denying Plaintiffs’ Motion
and Renewed Motion to Enforce Settlement Agreement in the
face of an unequivocal settlement offer of $100,000 and
Plaintiffs’ unequivocal acceptance of same?
It is well settled that “[t]he resolution of disputes by agreement of the parties is to be
encouraged.” Harbour v. Brown, 732 S.W.2d 598, 599 (Tenn. 1987). “The purpose of
compromise is to avoid trial of sharply disputed issues and to dispense with wasteful
litigation.” 15A C.J.S. Compromise & Settlement § 1 (2002). It is well established that “[a]
compromise and settlement agreement is merely a contract between the parties to litigation
and, as such, issues of enforceability of a settlement agreement are governed by contract
law.” Envtl. Abatement, Inc. v. Astrum R.E. Corp., 27 S.W.3d 530, 539 (Tenn. Ct. App.
2000); see also Bennecker v. Fickeissen, No. E2004-02129-COA-R3-CV, 2005 WL
3017609 (Tenn. Ct. App. Nov. 10, 2005); O'Mary v. Protech Builders, Inc., No.
E2000-02539-COA-R3-CV, 2001 WL 648924 (Tenn. Ct. App. May 12, 2001); Moxham v.
Crafton, No. M2000-00803-COA-R3-CV, 2001 WL 468669 (Tenn. Ct. App. May 4, 2001).
“[A] consent judgment does not represent the reasoned decision of the court but is merely the
2
There is no transcript of the September 11 hearing in the appellate record.
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agreement of the parties, made a matter of record by the court.” Harbour, 732 S.W.2d at
599-600 (citing Van Donselaar v. Van Donselaar, 249 Iowa 504, 87 N.W.2d 311, 314 (Iowa
1958)). However, “[a] compromise is the law between the parties and a judicially-entered
settlement agreement that becomes part of the stipulation that ends the litigation has the force
and effect of a judicial decree.” 15A C.J.S. Compromise & Settlement § 33 (2002); see also
Moxham, 2001 WL 468669, at *6 (“We note that a settlement agreement signed by all the
parties may be enforceable like other contracts, but it does not become the judgment of the
court until it receives the approval of the trial judge.”). Thus, it is well settled that the courts
of this state retain the inherent power to enforce settlement agreements. See Bennecker, 2005
WL 3017609, at *3.
We note, at the outset, that this appeal arises from the denial of a motion to enforce
a settlement agreement, as opposed to a breach of contract action. As set out in 15A Am. Jur.
2d Compromise and Settlement § 49 (2010):
When a party fails to comply with its obligations under a
settlement agreement, the opposing party may seek in equity to
enforce the terms of the agreement. The decision whether to
enforce a settlement is one committed to the court's discretion.
A party to a settlement seeking to redress a claimed breach, if
the court case already has been dismissed, may bring an
independent action for breach of contract; if the case has not
been dismissed, the party may move for enforcement. A court
has the power to enforce the terms of a settlement agreement if
the agreement either is incorporated into the court's final
judgment or provides expressly for continuing jurisdiction over
disputes arising out of the settlement. Summary enforcement of
a settlement may be permitted by statute, but is inappropriate
when there is a material dispute about the existence of a
settlement agreement.
(footnotes omitted).
In the instant case, there is an initial issue, which must be addressed, sua sponte,
before we can reach Appellants’ stated issue. Specifically, this Court questions whether
Appellee’s attorney, Mary Jo Mann, had the authority to bind Farmers’ to a settlement. This
inquiry also raises the issue of whether all necessary parties were before the trial court.
Agency
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In support of their motion to enforce settlement, Appellants filed the affidavit of their
attorney, Christopher Cain. In his affidavit, Mr. Cain states that he “was informed by Mary
Jo Mann (“Mann”), counsel for Defendant and Defendant’s insurer...that Defendant’s
policy limits were $100,000.” (emphasis added). From this statement, it appears that
Appellants were proceeding under the assumption that Ms. Mann was, in fact, an agent for
Farmers, although they do not specifically state that Ms. Mann has the authority to enter the
settlement. This assumption, however, is disputed by Ms. Mann in her own affidavit, filed
in support of Appellee’s opposition to Appellants’ motion to enforce settlement. Therein,
Ms. Mann states that she “represent[s] Doris Lakin Woods, the defendant, in the above-
captioned matter.” There is no indication by Ms. Mann that she represents Farmers.
Consequently, in order for Ms. Mann to bind Farmers to a settlement, there would have to
be a finding of some agency relationship between Ms. Mann and Farmers. As discussed in
12 Samuel Williston, Treatise on the Law of Contracts § 35:11 (Richard A. Lord ed., 4th ed.
2010):
An agent has power to make contracts which will bind
his principal not only when actually authorized to do so by
express words or inference of fact, but also in cases where the
principal did not intend to confer such authority on the agent
but, nevertheless, held out to the public or to the person with
whom the agent dealt an appearance of authority.
Apparent authority, or ostensible authority, as it is also
termed, is that which, though not actually granted, the principal
permits the agent to exercise, or which he holds him out as
possessing.
Describing the distinction between actual or "real"
authority, either express or implied, on the one hand, and
apparent authority on the other, one court said:
"We recognize the distinction
betw een real and apparent
authority. Real authority exists
when the agent is expressly
authorized by the principal to act or
when the actual authority to act can
be implied from the facts. In
contrast, apparent authority arises
when the principal, through words
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or conduct, leads a third person to
the reasonable belief that the agent
is authorized to act when, in fact,
he is not."
Id. (footnotes omitted).
From the appellate record, we are unable to determine the exact nature of the
relationship (if any) between Ms. Mann and the insurer.3 Although, in her affidavit, Ms.
Mann states that she “obtained settlement authority of policy limits from my client’s liability
insurance carrier, [Farmers],” this fact does not, ipso facto, conclusively establish that Ms.
Mann was acting as Farmers’ agent.
Various relationships can exist between an attorney, an insuror, and an insured. See
Givens v. Mullikin ex rel. Estate of McElwaney, 75 S.W.3d 383 (Tenn. 2002). When an
insurance company hires an attorney to represent its insured (which may or may not be the
situation in the instant appeal), the relationship of the insurer and the attorney is that of
principal to independent contractor. Givens, 75 S.W.3d at 393. While the rule is that a
principal is not generally liable for the tortious actions of an independent contractor, see, e.g.,
Hutchison v. Teeter, 687 S.W.2d 286, 287 (Tenn. 1985); Carr by Carr v. Carr, 726 S.W.2d
932, 933 (Tenn. Ct. App.1986), this rule is subject to many exceptions, and a
principal/independent contractor relationship does not, ipso facto, relieve the insurer of all
liability from the attorney’s acts or omissions. Givens, 75 S.W.3d at 394. For instance,
“when one directs, orders, or knowingly authorizes another to perform an act, then the
principal is liable for the harm proximately caused by those acts.” Id. at 395 (citing White
v. Revco Disc. Drug Ctrs., Inc., 33 S.W.3d 713, 723 (Tenn. 2000); Kinnard v. Rock City
Constr. Co., 39 Tenn. App. 547, 551, 286 S.W.2d 352, 354 (1955)). Moreover, “liability for
the directed or authorized acts of an agent may follow irrespective of whether other separate
agency relationships also exist.” Givens, 75 S.W.3d at 395. However, an insurer may not
be “held vicariously liable for the acts or omissions of its hired attorney based merely upon
the existence of the employment relationship alone.” Id. at 395-96.
In the case at bar, there is some indication that Farmers directed Ms. Mann to act on
its behalf in offering the $100,000 settlement. However, the appellate record does not
provide sufficient evidence from which to conclude the exact nature of Ms. Mann’s
relationship to Farmers regarding this settlement offer. Consequently, the question of Ms.
Mann’s agency must be resolved in order to determine whether Ms. Mann had the authority
3
It is well settled that this Court's review is limited to the appellate record and it is incumbent upon
the appellant to provide a record that is adequate for a meaningful review. Tenn. R. App. P. 24(b).
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to bind Farmers to a settlement. If, upon remand, the trial court determines that an agency
relationship existed, so as to give Ms. Mann either the real or apparent authority to act on
behalf of Farmers, then, and only then, should the court address the questions of the extent
of that agency, whether the agreement was fully formed, and whether a mistake, mutual or
unilateral, should result in Farmers being bound by the purported $100,000 settlement.
Necessary Parties
The trial court must also determine whether Farmers is an indispensable party to this
suit. Appellants’ complaint, filed on May 2, 2008, is filed only against Ms. Woods. More
importantly, the motion to enforce settlement (and the renewed motion), which are the
subject of the instant appeal, are filed only against Ms. Woods. Although Appellants’ motion
specifically states that they are seeking “to enforce the terms of an agreement entered into
by and between Plaintiffs and the Defendant’s insurer, Tennessee Farmers Mutual Insurance
Company (“Farmers”), for the sum of $100,000,” Farmers is not a party to this suit.
Consequently, upon remand, the trial court must also address how Appellants can enforce an
alleged settlement against an unnamed defendant (i.e., Farmers), who is not a party to the
suit.
Tenn. R. Civ. P. 19.01 provides, in relevant part, as follows:
Persons to Be Joined if Feasible. — A person who is subject
to service of process shall be joined as a party if (1) in the
person's absence complete relief cannot be accorded among
those already parties, or (2) the person claims an interest relating
to the subject of the action and is so situated that the disposition
of the action in the person's absence may (i) as a practical matter
impair or impede the person's ability to protect that interest, or
(ii) leave any of the persons already parties subject to a
substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reasons of the claimed interest. If the
person has not been so joined, the court shall order that the
person be made a party. If the person properly should join as a
plaintiff but refuses to do so, he or she may be made a
defendant, or in a proper case, an involuntary plaintiff.
Failure to join Farmers in this suit, however, is not fatal to Appellants’ case, as Tenn.
R. Civ. P. 21 states:
Misjoinder of parties is not ground for dismissal of an action.
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Parties may be dropped or added by order of the court on motion
of any party or of its own initiative at any stage of the action and
on such terms as are just. Any claim against a party may be
severed and proceeded with separately.
For the foregoing reasons, we vacate the order of the trial court, denying enforcement
of the alleged settlement agreement. We remand the matter to the trial court for such further
proceedings as may be necessary in light of this Opinion. Costs of this appeal are assessed
one-half to the Appellants, Catherine M. Love, as next friend and natural mother of Savannah
Love, a minor, Rex Bryan Peterson, Michael Corey Peterson, and their surety, and one-half
to the Appellee, Doris Lakins Woods, for which execution may enter if necessary.
_________________________________
J. STEVEN STAFFORD, JUDGE
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