Environmental Abatement, Inc. v. Astrum R.E. Corp.

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

FILED

ENVIRONMENTAL )

ABATEMENT, INC., ) February 29, 2000

) Cecil Crowson, Jr.

Plaintiff and ) AppealAppellate Court Clerk

No.

Counter Defendant/Appellee, ) M1998-00871-COA-R3-CV

v. )

)

ASTRUM R. E. CORPORATION, ) Rutherford County Chancery

) No. 97CV-807

Defendant and )

Counter Plaintiff/Appellee )

)

vs. )

)

ASTRUM R.E. CORPORATION, )

)

Third Party Plaintiff/Appellee, )

)

vs. )

)

MAHAN ROOFING AND SHEET )

METAL COMPANY, INC., )

)

Third Party Defendant and )

Cross Plaintiff/Appellant, )

)

vs. )

)

ENVIRONMENTAL )

ABATEMENT, INC., )

)

Cross Defendant/Appellee. )

COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE CHANCERY COURT

FOR RUTHERFORD COUNTY

THE HONORABLE ROBERT CORLEW PRESIDING

JOHN R. RUCKER, JR.

14 PUBLIC SQUARE NORTH

MURFREESBORO, TENNESSEE 37130

PHILIP N. ELBERT

NEAL & HARWELL, PLC

2000 FIRST UNION TOWER

150 FOURTH AVENUE NORTH

NASHVILLE, TENNESSEE 37219-1713

ATTORNEYS FOR PLAINTIFF/COUNTER DEFENDANT/APPELLEE

ROBERT M. HOLLAND, JR.

G. BRIAN JACKSON

TRABUE, STURDIVANT & DEWITT

511 UNION STREET

2500 NASHVILLE CITY CENTER

NASHVILLE, TENNESSEE 37219

ATTORNEYS FOR THIRD-PARTY PLAINTIFF/APPELLEE

SEAN ANTONE HUNT, ESQ.

SPICER, FLYNN & RUDSTROM, PLLC

424 CHURCH STREET, SUITE 1350

NASHVILLE, TENNESSEE 37219-2305

ATTORNEY FOR THIRD PARTY DEFENDANT/

COUNTER PLAINTIFF/APPELLANT

REVERSED AND REMANDED

PATRICIA J. COTTRELL, JUDGE

CONCUR:

CANTRELL, J.

KOCH, J.

OPINION

This case raises the issue of whether a chancellor designated to serve

as a “settlement judge” under local rules of court can enter a consent decree with

the knowledge that one of the parties has withdrawn its consent to an oral

agreement reached at a “judicial settlement conference” but not reduced to a

writing, transcribed or otherwise entered on the record at the time of the oral

agreement. We answer that question in the negative and reverse.

The parties were engaged in litigation arising out of a construction

project. Astrum R. E. Corporation ("Astrum") owned a factory in Rutherford

County. Astrum entered into an agreement with a general contractor, Mahan

Roofing and Sheet Metal Company, Inc. ("Mahan"), to replace the roof on its

factory. Mahan engaged a sub-contractor, Environmental Abatement Inc.

("EAI"), to remove hazardous material from the roof. While removing the

hazardous materials, EAI's workers damaged the side walls of Astrum’s building.

Astrum responded by withholding payment to Mahan. EAI filed a mechanics’

and materialmen’s lien on Astrum's property.

EAI then filed a lawsuit to enforce these liens pursuant to Tenn. Code

Ann. § 66-11-115. Astrum filed a counterclaim against EAI for damages to the

factory, and a third party complaint against the general contractor, Mahan.

Mahan filed a cross complaint against EAI.

A court-ordered and judicial officer-mediated settlement conference

was held pursuant to the local rules of court. After approximately five hours of

negotiation during which the settlement judge1 acted as mediator, a verbal

agreement was reached. No court reporter was present at the mediation. At the

close of the mediation, the settlement judge restated and confirmed the

settlement’s terms. Then he directed EAI’s counsel to prepare the consent

decree.

1

This case involves the actions of two separate judges who are designated the “trial judge”

and the “settlement judge” in the local rule discussed later herein. To simplify our discussion

of the procedural history of this case, we will use those designations.

3

Early the following morning Mahan notified all parties that it was

withdrawing its consent to the agreement. Nonetheless, EAI prepared and

circulated to all counsel a proposed order reflecting the agreement. Mahan

notified the other parties that it would not sign the order and had withdrawn its

consent. Astrum submitted the proposed consent decree to the settlement judge

with Mahan's letter indicating its withdrawal of consent. Days later, fully aware

of Mahan’s withdrawn consent, the settlement judge entered the Order of

Compromise and Settlement prepared by counsel for EAI. This order was not

signed by any representative of Mahan.

Thereafter, Mahan filed a motion to set aside the decree, asserting that

it no longer assented to the terms of the proposed settlement at the time of entry

of the order and also asserting that the order did not accurately reflect the oral

agreement reached at the conclusion of the settlement conference. The trial judge

denied this motion. Mahan renewed this motion before the settlement judge who

presided over the mediation, and it was again denied. Mahan then brought this

appeal, claiming that the trial court erred in entering a consent decree when the

court was aware that one of the parties had withdrawn its consent.

Our review of this case must begin with the acknowledgment that the

oral settlement agreement announced at the conclusion of the mediation is not

part of the record on appeal. No court reporter was present and no

contemporaneously prepared written document formalized the agreement. No

entry in the court’s record reflecting the conference or the agreement has been

presented to us. No statement of the evidence was provided to memorialize the

unrecorded settlement conference.2 See Tenn. R. App. P. 24(c). This lack of

formality, of course, is due to the fact that the proceeding was a settlement

conference, a fact that has other consequences on our decision.

I.

The procedure followed below plays an important part in our

2

In view of the confidentiality provisions of Tenn.R.Sup.Ct. 31, the omission of evidence

on the merits of the lawsuit is probably mandated.

4

determination and, therefore, must be set out in some detail. This case was

filed in the Chancery Court of Rutherford County. Under a local rule,3 “when

a case is filed, the clerk shall assign a judge (other than the designated trial

judge) for purposes of settlement.” The designated trial judge herein

conducted a status conference and entered an order, which, among other

things, referred the matter to the settlement judge to “conduct a settlement

conference.” Additionally, the settlement judge entered an order at about the

same time setting the case for settlement conference. That order stated, “The

role of the undersigned is to preside over settlement discussions totally and

completely separate and apart from the trial aspects of the case.”

The Order of Compromise and Settlement was signed and entered by

the settlement judge. In pertinent part it recited that “all matters and

controversy by and between the parties hereto have been compromised and

settled under the terms of provisions set forth above.” It then directed all

parties to fulfill and comply with the provisions and terms of the Settlement

Agreement.4

Mahan’s Motion to Set Aside Order of Compromise and Settlement

was heard by the trial judge. The motion stated that Mahan had withdrawn

its consent to the agreement prior to the entry of the Order. The motion and

the oppositions thereto were accompanied by various affidavits from the

lawyers involved in the settlement conference. In denying the motion, the

trial judge found there was not sufficient basis to set aside the order entered

by the settlement judge.

Mahan renewed its Motion to Set Aside the Order of Compromise

and Settlement, wherein it reiterated that all counsel, prior to the drafting of

the order and entry of the order were advised that Mahan had withdrawn its

3

Local Rules of the Circuit and Chancery Courts of Rutherford and Cannon Counties, Rule

13.

4

It also stated that upon completion of the settlement terms, a Satisfaction of Judgment and

Release would be entered by the court (not specifying which judge) together with an order

releasing the lien on the property.

5

consent to the compromise and that this withdrawal of consent was conveyed

to the court. For reasons not apparent in the record, the renewed Motion to

Set Aside Order of Compromise and Settlement filed by Mahan was then

heard by the settlement judge. In the order entered by the settlement judge

denying the Renewed Motion to Set Aside, the settlement judge made certain

findings. Included among those were:

After conducting settlement negotiations involving all of

the parties both collectively and individually, all parties

through their representatives and attorneys indicated their

agreement to the terms of the settlement negotiated with

the assistance of [the settlement judge].

...

The Court then assembled together in open court5 the

representatives of the parties and their attorneys for the

purpose of reviewing the provisions of the settlement. The

terms of the settlement were stated and re-stated in the

presence of all parties and their attorneys. Every person

present fully understood the gravity of the issues and the

complexity of the issues before the Court. All counsel and

party representatives understood the terms of the

settlement and expressed their assent to the terms.

...

After announcing the terms of the settlement in open court

and obtaining the assent of all party representatives and

attorneys, the settlement was a firm settlement which was

accepted by the Court at that time.

The Order concluded by denying the Motion to Set Aside and

further stating,“the settlement reached by the parties on January 29, 1998, was

understood, ratified and approved by all of the parties. The settlement

reached on January 29, 1998, was complete and final and compromised all

issues between the parties.” The Order continued by stating “that the

5

In the hearing on the renewed Motion to Set Aside, for which a transcript is available, the

settlement judge stated, “I’ll acknowledge to you that at one point years ago when we first

started doing these settlement conferences that I did an extra step, which I did not do in this

case. When we first started doing the settlement conferences, after we went through steps,

which we did in this settlement conference in this case, I took a two-minute recess and took the

opportunity to put the robe on and sit behind the bench and restate the agreement. I asked

counsel and parties to state their consent. We did not do that in this case . . . I had the feeling

that the parties felt that somehow there was some show of power or show of authority, I

suppose to the aspect of the Court putting on the robe, sitting behind the bench, and going over

again what had already been done. I haven’t done that for a number of years. I did it initially

to make absolutely sure that we had a formal agreement, which I announced in the courtroom.

It was from that standpoint in open court that all parties were present, counsel was present, that

there was a complete statement of the agreement that was reached.”

6

settlement reached by all of the parties on January 29, 1998, was announced

in open Court and was accepted by the parties. Pursuant to T.R.C.P. 316 and

Rule 13 of the Local Rules of Practice, the settlement became binding on the

parties on January 29, 1998.”

No order appears in the record before us indicating that the case was

ever transferred to the settlement judge for disposition or that the settlement

judge was otherwise (e.g., by agreed order of the parties) given authority to

dispose of the case or to enter orders in a case that was not assigned to him for

adjudication. Rather, the procedure followed herein is based upon a local rule

adopted by the trial courts of Rutherford and Cannon Counties entitled

“Negotiations and Settlements in Civil Cases.” In pertinent part, that rule

provides:

When a case is filed, the clerk shall assign a judge (other

than the designated trial judge) for purposes of settlement

in accordance with Rule 3.01 herein. It shall be the duty of

the settlement judge to attempt to facilitate a settlement of

the issues before the Court. The order for settlement

conference may be entered by the settlement judge on his

own initiative or upon informal written request (an

informal letter is sufficient) from both counsel or either of

them, or upon request of the trial judge. The settlement

judge shall have the authority to conduct a settlement

conference in the manner in which he finds appropriate,

including but not limited to non-binding mediation,

binding mediation, mini-trial, case evaluation, or summary

jury trial. When such conference results in a settlement

of the issues, the settlement judge shall then formally

convene the Court at which time the settlement will be

formally announced, and if approved, will then be

binding on the parties. The Order of Compromise and

Settlement shall then be prepared for the signature of

the settlement judge.

Rule 13, Local Rules of the Circuit and Chancery Courts of Rutherford and

Cannon Counties (emphasis added).

II.

The beginning point for our analysis of the issues presented by this

procedurally complicated situation is Harbour v. Brown for Ulrich, 732

S.W.2d 598, 599 (Tenn. 1987), wherein our Supreme Court considered

6

The parties agree that this reference to Tenn. R. Civ. P. 31 was inadvertent, and the

accurate reference is to Rule 31 of the Rules of the Tennessee Supreme Court.

7

whether “a trial judge can enter a valid Order of Compromise and Dismissal

after being informed by one of the parties that consent to the compromise has

been withdrawn” and held that the trial court could not. See Harbour, 732

S.W.2d at 599.

In Harbour, the parties announced to the court that they had reached

a settlement agreement, but its terms were not recited to the court. See id.

The parties then informed the court that they would submit a consent order at

a later date. Before entry of the order, the court was informed that one of the

parties had withdrawn its consent to settle. The court, however, proceeded to

enter an order dismissing the case with prejudice. See id.

The Supreme Court reversed and held:

The resolution of disputes by agreement of the parties is to

be encouraged. But a valid consent judgment cannot be

entered by a court when one party withdraws his

consent and this fact is communicated to the court prior

to entry of the judgment.

Id. (emphasis added).

The Court adopted the language of Burnaman v. Heaton, 150 Tex.

333, 338, 240 S.W.2d 288, 291 (1951), which stated:

A valid consent judgment cannot be rendered by a court

when the consent of one of the parties thereto is wanting.

It is not sufficient that to support the judgment that a

party’s consent thereto may at one time have been given;

consent must exist at the very moment the court

undertakes to make the agreement the judgment of the

court.

Id. (emphasis added).

In further explaining its reasoning, the Supreme Court stated:

The reason for the rule is that a consent judgment does not

represent the reasoned decision of the court but is merely

the agreement of the parties, made a matter of record by

the court. Van Donselaar v. Van Donselaar, 249 Iowa 504,

87 N.W.2d 311 (1958). And, until entered by the court,

the matter being the question of an agreement between the

parties, either party may repudiate the agreement because

of an actual or supposed defense to the agreement. This is

not to say that the compromise agreement may not be a

binding contract, subject to being enforced as other

contracts, but only that the court may not enter

judgment based on the compromise agreement, when it

has notice that one of the parties is no longer

consenting to the agreement for whatever reason.

8

Id. at 599-600. (emphasis added).

The phrases “until entered by the court,” “enter judgment,” and

“make the agreement the judgment of the court” as used in Harbour, must be

interpreted by reference to the well-settled rule that “[a] court speaks only

through its written judgments, duly entered upon its minutes. Therefore, no

oral pronouncement is of any effect unless and until made a part of a written

judgment duly entered.” Sparkle Laundry & Cleaners, Inc. v. Kelton, 595

S.W.2d 88, 93 (Tenn. Ct. App. 1979); see Massachusetts Mut. Life Ins. Co. v.

Taylor Implement & Vehicle Co., 138 Tenn. 28, 36, 195 S.W. 762, 765

(1917).

Tenn. R. Civ. P. 58 echoes these principles. It provides:

Entry of a judgment or an order of final disposition is

effective when a judgment containing one of the following

is marked on the face by the clerk as filed for entry:

(1) the signatures of the judge and all parties or counsel, or

(2) the signatures of the judge and one party or counsel

with a certificate of counsel that a copy of the proposed

order has been served on all other parties or counsel, or

(3) the signature of the judge and a certificate of the clerk

that a copy has been served on all other parties or counsel.

This Rule clearly provides that all judgments are effective when

they are entered (unless the court orders otherwise) and the filing of the

signed judgment with the clerk of court constitutes the entry. See

Christopher v. Spooner, 640 S.W.2d 833 (Tenn. Ct. App. 1982).

On the basis of the above authorities, it would appear that the issue

in this case is easily resolved since the Order of Compromise and Settlement

herein was entered by the settlement judge after he was informed that one of

the parties no longer consented. However, the cases interpreting Harbour and

the sources relied upon in Harbour must be examined in light of the factual

distinctions between Harbour and the case at hand.

III.

In Harbour, the Supreme Court quoted Corpus Juris Secundum for

9

the general rule that:

The power of the court to render a judgment by consent is

dependent on the existence of the consent of the parties at

the time the agreement received the sanction of the court

or is rendered and promulgated as a judgment.

Harbour, 732 S.W.2d at 599 (quoting 49 C.J.S. Judgments § 174 (b).

(emphasis added)).

To the extent that the “or” in the above-quoted section can be read

to imply that consent of the parties at the time of entry of the judgment is not

required if the parties’ agreement previously existed “at the time the

agreement received the sanction of the court,” meaning the time the court

approved the agreement, that phrase must be interpreted by reference to other

sections of the treatise. Additional relevant sections provide:

Consent to judgment must be made by or on behalf

of the parties in open court or by documentary evidence

of legal sufficiency. If the agreement is made in open

court, it may be made orally; otherwise it should be in

writing and should be signed and filed.

49 C.J.S. Judgments § 184 (1997).

The agreement of the parties has also been held to obviate

the necessity for a hearing [for proof on the underlying

issues in the lawsuit] except for the purpose of

determining the fact or validity of the agreement and

ordering judgment accordingly.

Id. at §183.

A judgment by consent of the parties is a judgment the

provisions and terms of which are settled and agreed to by

the parties to the action in which it is entered by the

consent and sanction of the court;

***

Consent to entry of judgment implies that the terms and

conditions have been agreed on and consent thereto given

in open court or by stipulation. The court has no power to

supply terms, provisions, or essential details not

previously agreed to by the parties.

Id. at § 182.

It is within the jurisdiction of the court to determine the

fact and the sufficiency of such consent. A party’s consent

to a judgment is shown by the fact that he causes the

judgment to be entered up; but consent cannot be shown

by oral statements to the judge out of court . . .

10

Id. at §184.

Thus, in the context of the treatise relied upon by the Supreme Court

in its Harbour decision, even if a settlement agreement can be enforced

through later entry of a consent order if the agreement had consent of all

parties at the time it was approved by the court, the parties’ prior oral

agreement must have been made “in open court” or in a “hearing” wherein

the fact and the terms of the agreement were determined. The terms of the

agreement must also be reflected in the record. Oral statements to a judge in

any other context are not sufficient.

The Iowa Supreme Court has clarified its ruling in Van Donselaar,

another source relied on by our Supreme Court in Harbour. In a later case,

the Iowa Supreme Court disapproved the view that Van Donselaar suggested

that consent may be withdrawn as a matter of right at any time prior to actual

entry of judgment. See In the Matter of Property Seized On Or About

November 14-15, 1989, 501 N.W.2d 482, 485 (Iowa 1993). In that case, the

parties had entered into a stipulation regarding the forfeiture of a portion of

seized property. The stipulation had been read into the record of a hearing in

open court, explained by the judge, and agreed to by counsel for the parties.

One party later moved to rescind the stipulation. Thus, the issue in Matter of

Property Seized was whether the defendant should be allowed to rescind his

earlier stipulation. The Supreme Court of Iowa concluded that the trial court

properly held the defendant to “the terms of the agreement that his counsel

approved on the record in the court proceeding.” Id.

IV.

This court, in interpreting Harbour, has sometimes drawn a

determinative distinction on the basis of whether the terms of the settlement

which preceded the entry of an order of settlement were announced to the

court on the record or whether just the existence of an agreement was

announced.

In REM Enterprises, Ltd. v. Frye, 937 S.W.2d 920 (Tenn. Ct. App.

11

1996), the parties, in a dispute over an option to purchase land, ultimately

entered into a settlement agreement which was read in open court and made

part of the technical record. The parties acknowledged their agreement to the

chancellor. The agreement stipulated that if Frye did not purchase the

property by a specified date, REM was entitled to reduce the agreement to

judgment immediately. On the specified date, Frye informed REM that his

bank required a corporate resolution for good title and until this was

provided, he considered REM in breach. REM did not provide the resolution

or appear at the scheduled closing. Instead, on the next day, REM requested

that the court enter judgment pursuant to the prior oral settlement agreement,

notwithstanding Frye’s withdrawal of his consent to the terms of the

agreement. The trial court entered judgment pursuant to the terms of the oral

settlement agreement. The issue actually before the Frye court was the

validity of the judgment entered against the defendant in accordance with the

terms of the previous oral settlement agreement never reduced to an order.

In Frye, this court upheld the trial court’s decision to enter

judgment. It distinguished Harbour, finding:

In Harbour the settlement had not been read in court and

had not been made part of the technical record. The terms

of the agreement in this case were read in open court to the

Chancellor who personally asked each of the parties if

they consented to the settlement.

Frye, 237 S.W.2d at 922.

In Callison v. Callison, Obion Equity No. 1, 1988 WL 10050 at * 2

(Tenn. Ct. App. Sept. 29, 1988), this court affirmed a trial court’s refusal to

allow a husband to repudiate an oral property agreement. In that divorce

case, the wife testified to the terms of the agreement at trial, the terms were

not disputed, and it was announced that the agreement would be reduced to

writing in the final judgment, which the parties had the opportunity to read

and approve. See Callison, 1988 WL 10050 at *1. Before entry of the

12

decree, the husband sought to repudiate the agreement.7 Id. The trial court

held a hearing and subsequently entered a divorce decree essentially

reflecting the property settlement the parties had initially agreed upon. In

affirming, this court distinguished Harbour because the Callison court “heard

the terms of the agreement and it was sanctioned by the court.” Id. at * 2.

In both of these cases distinguishing Harbour, the detailed terms of

the agreement were presented in open court and on the record, the trial court’s

acceptance of the agreement was also made in open court and on the record,

and a record or transcript existed, independent of the order later entered,

which documented the fact and terms of the agreement.

V.

These interpretations of Harbour by this court are consistent with

our interpretation of the language in Harbour that “the power of the court to

render a judgment by consent is dependent on the existence of the consent of

the parties at the time the agreement received the sanction of the court . . .”

Harbour, 732 S.W.2d at 599 (emphasis added). They are also consistent with

the Iowa Supreme Court’s modification of Van Donselaar and with other

provisions of the treatise from which the quoted language is taken.

In essence, they recognize, in furtherance of other well-settled

principles, an exception to Harbour’s often-quoted general rule. That

exception, when applicable, would allow the entry of a consent order of

compromise and settlement which merely documents an earlier agreement

even where consent does not exist at the time of entry of the written order.

Stated differently, there are situations where a party will not be allowed to

withdraw its consent to an oral agreement prior to entry of a judgment based

7

The husband’s real objection was not that he had not consented to the settlement

agreement, but that he had not gotten the property he was entitled to under the agreement.

13

on that agreement.8 At the least, this exception applies to agreements made in

open court, on the record, where the detailed terms of the agreement are

presented to the court, accepted by the court, and preserved by transcript or

other acceptable record of the court proceedings.

There is no novelty in holding parties bound by representations

made in formal judicial proceedings. For example, oral stipulations made in

open court and accepted by the court are valid and will be enforced. See

Bearman v. Camatsos, 215 Tenn. 231, 235-36, 385 S.W.2d 91, 93 (Tenn.

1964); Town of Surgoinsville v. Sandidge, 866 S.W.2d 553, 555 (Tenn. Ct.

App. 1993); see also Tenn. R. Civ. P. 39.01. This rule applies to stipulations

regarding issues as well as stipulations of fact. See In the Matter of Property

Seized On Or About November 14-15, 1989, 501 N.W.2d at 485. As a

general rule, a stipulation made in the presence of a judge, but not in open

court, must be reduced to writing to be effective. See 83 C.J.S. Stipulations

§4 (2) at 6.

A compromise and settlement agreement is merely a contract

between parties to litigation and, as such, issues of enforceability of a

settlement agreement are governed by contract law. See Sweeten v. Trade

Envelopes, 938 S.W.2d 383, 385 (Tenn. 1996). The Supreme Court

recognized this distinction in Harbour, stating, “This is not to say that the

compromise agreement may not be a binding contract, subject to being

enforced as other contracts, but only that the court may not enter judgment

based on the compromise agreement, when it has notice that one of the parties

is no longer consenting to the agreement for whatever reason.” Harbour, 732

S.W.2d at 599-600.9

8

One obvious exception is the situation where the court’s authority to enter judgment is

limited by a requirement of a written agreement of the parties, e.g., a final order granting

divorce on the grounds of irreconcilable differences. See Elrod v. Elrod, No. 03A01-9108-GS-

260, 1991 WL 238263 at *1 (Tenn. Ct. App. Nov. 18, 1991) (no Tenn. R. App. P. 11

application filed).

9

Those authorities regarding settlements where court approval is required, by statute or

otherwise, are not applicable to the issue in this case. In those situations, a court’s

responsibility in approving a settlement includes review of the substance of the settlement, not

just the fact of an agreement. See, e.g., Tenn. Code Ann. § 50-6-206 (court approval of

14

Where, however, the parties or the court seek to give a contractual

arrangement between the parties the authority and remedies provided by a

court’s judgment, considerations other than, or additional to, the

enforceability of the prior oral agreement come into play. Our Supreme Court

has described the nature of a settlement agreement brought to the court for

entry, finding “a consent judgment does not represent the reasoned decision

of the court but is merely the agreement of the parties, made a matter of

record by the court.” Harbour, 732 S.W.2d at 599. Thus, it is logical to

conclude that an agreement must exist at the time the agreement is made a

matter of record - whether that be by entry of consent judgment or by

stipulation or agreement made in open court and on the record.

From all of the above, we conclude that Tennessee is one of those

jurisdictions where:

the terms of the settlement should be stated to the court

and taken down by the reporter or otherwise reduced to

writing so as to prevent a dispute as to what are the terms

of the settlement, and that an oral stipulation for

compromise and settlement made in open court in the

presence of the parties and preserved in the record of the

court is as binding as a written agreement.

15A C.J.S. Compromise and Settlement § 17 at 214-215 (citations omitted).

In the matter before us, Mahan does not dispute that an agreement

existed at the close of the judicial settlement conference herein, but asserts

that it withdrew its consent the next morning and before the consent order

was presented to the settlement judge. Therefore, our task is to determine

whether Mahan’s agreement at the close of the settlement conference is the

type which should preclude Mahan from later withdrawal of assent. The

appropriate inquiry is whether the agreement was made in open court, on the

record, and its terms were duly recorded.

VI.

As explained in the detailed procedural history set out earlier, the

workers’ compensation settlements); Tenn Code Ann. § 34-11-121 (court approval of

settlements involving a minor or disabled person). Court approval of a settlement is generally

not required, and parties routinely settle litigation without court involvement.

15

settlement judge in this case relied upon Local Rule 13 and upon Rule 31 of

the Tennessee Supreme Court in the procedure he followed. In the order

denying the renewed Motion to Set Aside and during the hearing on the

motion, the settlement judge made reference to Rule 31. The order is based

upon Rule 31, by its own terms. In the hearing, the settlement judge

commented, “the Court recognizes that in all fairness, as far as settlements

and disputes are concerned since the Supreme Court’s rule dealing with this

issue, that it’s a new day from some of the prior case law.” This comment

was in response to arguments of counsel based on Harbour and its progeny.

Having been specifically relied on by the settlement judge, Rule 31 must be

examined.

The Supreme Court of Tennessee, in the exercise of its

responsibility to supervise the administration of justice in our courts, has

adopted procedures “to expedite the efforts of the courts to secure the just,

speedy, and inexpensive determination of disputes,” which procedures have

been promulgated as Rule 31 of the Rules of the Supreme Court.

Rule 31authorizes trial courts, by order of reference, to order parties

to an eligible civil action to participate in a judicial settlement conference,

mediation, or case evaluation. Such referral may be made by motion of the

court and does not require consent of the parties. The record herein includes

an order by the trial judge referring the case to the settlement judge for a

settlement conference.

Rule 31 defines “judicial settlement conference” as a mediation

conducted by a judicial officer other than the judge before whom the case will

be tried. Tenn. R. Sup. Ct. 31 § 2(d). A mediation is “an informal process in

which a neutral person, called a mediator, conducts discussions among the

disputing parties designed to enable them to reach a mutually acceptable

agreement among themselves on all or any part of the issues in dispute.” Id.

at § 2(c). A judicial officer who acts as a mediator in a judicial settlement

conference is, for purposes of that conference and for purposes of alternative

16

dispute resolution, a “dispute resolution neutral.” Tenn. R. Sup. Ct. 31 § 2(i).

A dispute resolution neutral, including a judge acting in that

capacity, has no authority to dispose of a case or to enter an order disposing

of a case. The neutral’s powers include only the filing of a report indicating

whether the case was completely settled or partially settled. Tenn. R. Sup. Ct.

31 § 8. Therefore Rule 31 did not vest the settlement judge herein, in his role

as mediator, with authority to enter an order disposing of the case. Further,

although Local Rule 13 by its explicit terms allows entry of a settlement order

by the settlement judge, a local rule cannot vest the settlement judge acting as

a dispute resolution neutral with authority contradictory to Tenn. R. Sup. Ct.

31. As we have previously stated, we find no other order in the record giving

the settlement judge authority to adjudicate or dispose of this case. Since all

the parties herein did not sign the consent order, we also cannot find that the

parties consented to entry by the settlement judge. Thus, the settlement judge

herein had no authority to enter an order disposing of the case.

Further, the nature of and requirements for a judicial settlement

conference held pursuant to Rule 31 compel the conclusion that such a

conference is not a formal proceeding, is not held in open court, and is not to

be conducted on the record. The settlement judge’s finding herein that the

oral agreement was made in open court referred to the discussion of the terms

of the agreement with all counsel and parties present at the conclusion of the

mediation. We are not of the opinion, however, that that unrecorded

discussion met the formality requirements implied in the phrases “in open

court” and “on the record.” Furthermore, since the agreement was made in

the presence of the dispute resolution neutral (the settlement judge) and not in

the presence of a judge with authority to dispose of the case, the agreement

cannot be said to have taken place in “open court.”

The term “open court” means, in this context, “a court which has

been formally convened and declared open for the transaction of its proper

judicial business.” Black’s Law Dictionary 983 (5th ed. 1979). “Record”

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means “the aggregate of the various judicial steps taken on the trial below, in

so far as they were taken, presented, or allowed in the formal and proper

manner necessary to put them upon the record of the court” or

a written memorial of all the acts and proceedings in an

action or suit, in a court of record. The official and

authentic history of the cause, consisting in entries of each

successive step in the proceedings, chronicling the various

acts of the parties and of the court, couched in the formal

language established by usage, terminating with the

judgment rendered in the cause, and intended to remain as

a perpetual and unimpeachable memorial of the

proceedings and judgment.

Black’s Law Dictionary 1438 (rev. 4th ed. 1968) (citing State v. Brewer, 19

Ala. App.291, 97 So. 160, 161 (1923)).

We find that Mahan’s consent to the oral agreement reached at the

mediated judicial settlement conference was subject to withdrawal because it

was not made “on the record” or “in open court.” 10

VII.

We have found that the settlement judge herein was without

authority, as a dispute resolution neutral under Tenn. R. Sup. Ct. 31, to enter

the Order of Compromise and Settlement disposing of this case. In addition,

because we have found that Mahan could withdraw its assent to the previous

oral agreement, we also find that the settlement judge was without authority

to enter the Order on the basis of Harbour. Accordingly, the Order of

Compromise and Settlement is vacated. The orders by both the settlement

judge and the trial judge denying the motions to set aside are reversed. The

trial judge herein is aware that the parties no longer consent to the previous

oral agreement and, therefore, is without authority to enter the consent order

we have now vacated. Therefore, the case remains unsettled.

Accordingly, we reverse the decision of the trial court. This case is

remanded for proceedings consistent with this opinion. Costs of this appeal

shall be taxed to the Appellees for which execution may issue.

10

Our holding renders moot Mahan’s claim that the Order does not accurately reflect the

terms of the prior oral agreement. However, we note that the issues raised by this claim

highlight the importance of a record of the details or terms of an oral agreement. The trial

judge herein, faced with that claim, had no objective basis upon which to decide the issue. The

only evidence of the terms of the agreement is found in the Order of Compromise and

Settlement, which was prepared by counsel for one party and entered over objection of the

another party. Where there is no record of the terms of the agreement and a dispute exists as

to the terms, a court has no basis for entry of an order imposing one version of the terms as a

consent order.

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_____________________________

PATRICIA J. COTTRELL, JUDGE

CONCUR:

________________________________________

BEN H. CANTRELL,

PRESIDING JUDGE, (M.S)

________________________________________

WILLIAM C. KOCH, JR., JUDGE

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