Padilla v. LaFrance

ENOCH, Justice,

joined by GAMMAGE, Justice,

dissenting.

Today the Court holds that a settlement agreement is an enforceable Rule 11 agreement despite the fact that it never complied with all requirements of the rule before the existence and terms of the agreement became disputed. But for this Court’s prior opinion in Kennedy v. Hyde, 682 S.W.2d 525 (Tex.1984), I would agree that the settlement agreement in this ease is enforceable as a binding contract between the parties regardless of whether it is ever filed as a Rule 11 agreement. Kennedy , however, engrafted the Rule 11 requirements on the substantive principles of contract law. In my view, Kennedy , unless overruled, compels us to conclude that the settlement agreement in this case is unenforceable because, although the agreement is otherwise enforceable as a binding contract, it did not comport with the requirements of Rule 11 at the time Padilla sought to enforce the agreement. I respectfully dissent.

In Kennedy , the parties reached an oral settlement agreement. The agreement was reduced to writing and signed by all but one defendant, Kennedy. The plaintiffs amended their pleadings to enforce the oral settlement agreement against Kennedy. Kennedy, 682 S.W.2d at 526 . This Court reversed the judgment of the courts below enforcing the oral settlement agreement, holding that the oral settlement agreement was unenforceable under Rule 11 because the agreement was not in writing and signed by Kennedy. Id. at 530 .

I begin by noting that Kennedy represents a significant departure from our Rule 11 jurisprudence and substantive contract law. Prior to Kennedy , this Court never held that to be enforceable as a contract, a settlement agreement must comply with Rule 11. In *463 Williams v. Hollingsworth, 568 S.W.2d 130, 131 (Tex.1978) and Vickrey v. American Youth Camps, Inc., 532 S.W.2d 292 (Tex.1976) (per curiam), this Court purportedly “strongly implied” that settlement agreements were subject to Rule 11. Kennedy, 682 S.W.2d at 528 . The implication, if any, is neither strong nor persuasive. In Williams , the Court only held that a valid consent judgment cannot be rendered by a court when consent of one of the parties is lacking. Williams, 568 S.W.2d at 131 . Because one party was not present or represented by counsel at the time an agreed judgment was rendered, that party had not consented to the agreed judgment. Id. at 132 .

The reliance on Vickrey is even more dubious. In that case, the Court in a per curiam opinion simply recited in its statement of the facts that a settlement was dictated in open court pursuant to Rule 11. Vickrey, 532 S.W.2d at 292 . One party appealed the judgment that had been rendered based on the dictated settlement on the grounds that it did not conform to the settlement that had been reached between the parties. Id. at 292 . The Court reversed the judgment holding that a final judgment based on a settlement agreement must be in “strict or literal compliance” with that agreement. Id. Like the issue in Williams , the issue in Vickrey was whether the trial court had the power to render the judgment it did based on the settlement, not whether a settlement agreement is an otherwise enforceable settlement agreement absent compliance with Rule 11.

By reaching out to render settlement agreements subject to Rule 11, the Court engrafted new requirements onto the substantive law of contracts, thus exceeding the Court’s rule-making authority. Tex.Gov’t Code § 22.004. Section 22.004(a) grants this Court the full authority to make rules for practice and procedure in civil actions, “except that its rules may not abridge, enlarge, or modify the substantive rights of a litigant.” Id. § 22.004(a). Under Kennedy , an oral settlement agreement, although otherwise enforceable at common law, becomes unenforceable unless made in open court, and thus made part of the court record. It is difficult to conceive of a clearer abridgment of the substantive rights of a litigant than to refuse to enforce a valid contract because the parties did not comply with a rule of procedure.

The Court recognized that its holding in Kennedy might abridge the substantive law of contracts, but dismissed this concern by concluding that the Legislature had sanctioned its interpretation of Rule 11 by failing to disapprove of the rule. Kennedy, 682 S.W.2d at 529 . The Legislature’s failure to disapprove of Rule 11, according to the Court, may be viewed as signifying its acquiescence in the Court’s interpretations of Rule ll’s predecessors. While this may be true, it is only true if the Court’s interpretations of Rule ll’s predecessors have subjected otherwise enforceable settlement agreements to Rule 11 and rendered such contracts unenforceable for failure to comply with the rule. None of the Court’s prior interpretations have so held.

Nor is such an interpretation “presaged” by the Court’s earlier interpretations in Birdwell v. Cox, 18 Tex. 535 (1857) or Matthews v. Looney, 132 Tex. 313 , 123 S.W.2d 871 (1939). See Kennedy, 682 S.W.2d at 529 . Birdwell simply involved an agreement to postpone trial until some depositions could be taken. Birdwell, 18 Tex. at 535-36 . In Matthews , the parties in a will contest reached a settlement but before judgment, disputes arose concerning the terms of the settlement between the parties. Matthews, 123 S.W.2d at 871-72 . Although the Court noted that the agreement had not been reduced to writing or rendered of record with the trial court, the Court held that the trial court lacked authority to enter a judgment because the terms were in dispute. Id. at 873. In other words, the parties had not consented to the terms of the settlement at the time they sought a judgment. Matthews simply stands for the correct proposition that a judgment may not be rendered based on a settlement if a party withdraws its consent prior to the judgment. Neither Birdwell nor Matthews justify the Court’s action in Kennedy .

While I believe Kennedy is wrongly decided, it is the law and should either be followed or overruled in this case. My criticism of the Court is that it does neither. Assuming the *464 Court continues to adhere to the holding in Kennedy , Rule 11 requires that three conditions be met before an agreement will be enforceable: (1) a writing, (2) that is signed, (3) and that has been filed with the court. London Market Cos. v. Schattman, 811 S.W.2d 550, 552 (Tex.1991) (per curiam). Once the existence or terms of such an agreement becomes disputed, it is unenforceable unless it comports with all three of these requirements. Id.; Kennedy, 682 S.W.2d at 530 . Accordingly, if a purported agreement is in writing and has been signed, but becomes disputed before it has been filed with the court, the agreement is unenforceable under Rule 11. See Kennedy, 682 S.W.2d at 530 (oral agreement was unenforceable at the moment its existence was disputed in pleadings).

Recognizing that Kennedy hangs like an albatross around its neck, the Court deals with the filing requirement of Rule 11 in such a way as to, in effect, hold that an agreement need only be in writing and signed to be enforceable. According to the Comí;, the parties need not file an agreement with the court except and until one party disputes the existence or terms of the agreement — filing of the document is a mere technicality. Yet the predecessor to Rule 11, Rule 47, was amended in 1877 to specifically require that agreements be filed with the court to be enforceable. 47 Tex. 597 , 625 (1877). In light of this fact, there can be little justification for today’s judicial revision. An amendment to a rule must be presumed to have made some change in existing law and the Court must endeavor to give some effect to the amendment. American Surety Co. v. Axtell Co., 120 Tex. 166 , 36 S.W.2d 715, 719-20 (1931). To the contrary, the Court effectively eliminates the filing requirement from Rule 11.

Moreover, the Court’s construction trivializing the filing requirement arguably defeats the purposes of Rule 11. Rule 11 ensures (1) that agreements of counsel which affect the interest of their clients not be left to the fallibility of human recollection, Wyss v. Bookman, 235 S.W. 567, 569 (Tex.Comm’n App.1921, holding approved); and (2) that agreements themselves not become sources of controversy impeding resolution of suits. Kennedy, 682 S.W.2d at 530 . In addition, Rule 11 also operates to prevent the trial judge from having to place the parties’ attorneys on the stand and determine which one is telling the truth. See Fidelity & Casualty Co. v. McCollum, 656 S.W.2d 527, 529 (Tex.App.—Dallas 1983, writ ref'd n.r.e.). Stated another way, the significance of Rule 11 is to formalize the procedures for entering into agreements concerning a pending lawsuit so that the court can extricate itself from controversies ancillary to the underlying litigation. The filing element, if it has any purpose at all, surely is designed to make the parties focus on an agreement and recognize that not only have the terms of the agreement been memorialized in writing but also that they have the imprimatur of a court record. The filing requirement thus adds to the formality of the process and reduces uncertainty and the likelihood that the agreements will become a source of controversy distracting the court and the parties from the case at hand.

I suspect that the Court reduces the filing requirement to a matter of little consequence because it is absurd to hold that a contract would not be enforceable simply because it has not been filed with the court. Yet if we are going to continue to insist that our substantive contract law be modified by Rule 11, we should at least be consistent in our readings. To be enforced, a settlement agreement must be in writing, signed, and filed at the time either its existence or the terms of the agreement become disputed. Kennedy , if correct, compels us to conclude that the agreement in this case is unenforceable because it became disputed before it complied with the Rule 11 filing requirement. Because the Court chooses not to address Kennedy , it takes the questionable route of trivializing the filing requirement of Rule 11 to the point of nonexistence. If there is value to Rule ll’s requirement that an agreement be on file with the Court, then that value should not be destroyed. If there is no value to the mere filing of an agreement, then the Court should amend Rule 11 to delete the requirement. I dissent.