Pat Doe v. Rudy A. Lozano , 2022 ME 33 ( 2022 )

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2022 ME 33Docket: Yor-21-150
Argued: January 11, 2022
Decided: June 16, 2022
Panel: STANFILL, C.J., and MEAD, JABAR, HORTON, and CONNORS, JJ.*
PAT DOE1
v.
RUDY A. LOZANO
STANFILL, C.J.
[¶1] Rudy A. Lozano appeals from a judgment of the District Court
(Biddeford, Mulhern, J.) determining that a settlement agreement that the
parties signed constitutes a binding contract and granting Pat Doe’s motion to
enforce the agreement. We clarify the standards courts should use in enforcing
a settlement agreement, vacate the judgment, and remand for further
proceedings.
*Although Justices Gorman and Humphrey participated in the appeal, they retired before this opinion
was certified.
1 Pursuant to federal law, we do not identify the plaintiff in this appeal referencing a protection from
abuse action and limit our description of events and locations to avoid revealing “the identity or
location of the party protected under [a protection] order.” 18 U.S.C.S. § 2265(d)(3) (LEXIS through
Pub. L. No. 117-130).
2
I. BACKGROUND
[¶2] In September 2018, Doe filed a complaint against Lozano for unjust
enrichment and partition of real estate, alleging that she and Lozano had lived
together for over seven years and that she was entitled to reimbursement or
payment for multiple benefits she conferred upon Lozano during that time. In
November 2018, Doe filed with the court a settlement agreement, signed by
both parties, which stated that the parties were previously in a personal and
business relationship and sought to “resolve all issues of real and personal
property, and any other legal rights” arising from that relationship.
[¶3] The settlement agreement included a section regarding property
described as “marital real estate” that provided that Lozano “shall purchase
[Doe’s] interest in the property” and listed payments that Lozano was to make,
with the first payment due no later than November 1, 2018. The settlement
agreement also provided that Lozano “shall be entitled to a walk-through of the
premises to ensure that the property is in a condition similar to that which
existed on his last date of occupancy” and that the “agreement is conditioned
upon the real estate and buildings thereon being in a satisfactory condition as
mutually agreed” by the parties. The settlement agreement stated that the
parties agreed the civil action “shall be settled and agreed upon by submission
3
of this executed document to the court” and that Lozano agreed to “a default
judgment in the full amount remaining that is due and owed” if he failed to
“fulfill any of the commitments agreed upon” in the agreement.2 Doe filed the
settlement agreement with the court on November 6, 2018. The agreement was
never incorporated into a judgment.
[¶4] Several months passed, and on April 22, 2019, Lozano filed an
answer to Doe’s complaint. Doe filed a proposed judgment two days later,
contending that the settlement agreement resolved the issues between the
parties. On August 12, 2019, the court (Moskowitz, J.) entered a pretrial order
stating that the court had the settlement agreement in its file; that Lozano
disagreed with Doe that the settlement agreement was a binding, enforceable,
contract; and that Doe could move for summary judgment on that issue. Doe
moved for summary judgment, and Lozano filed an opposition. Doe then
moved for permission to withdraw her summary judgment motion and to
amend her complaint to add a claim for breach of contract, which the court
(Foster, A.R.J.) granted.
2 Doe had also filed a complaint for protection from abuse in September 2018. The District Court
(Biddeford, Sutton, J.) issued a temporary protection order on behalf of Doe and her two children and
later issued a second temporary protection order. The settlement agreement stated that the
protection from abuse action “shall be dismissed with prejudice,” and the court (Moskowitz, J.)
granted Doe’s motion to dismiss the protection from abuse complaint in November 2018.
4
[¶5] Doe did not amend her complaint in the District Court but filed a
complaint against Lozano in the Superior Court (York County) for breach of
contract and promissory estoppel. The Superior Court (Douglas, J.) stayed that
case pending further action of the District Court.
[¶6] On August 17, 2020, Doe moved to “enforce” the settlement
agreement in the District Court, arguing that Lozano had failed to make any
payments due to Doe under the agreement. Unlike the withdrawn motion for
summary judgment, Doe did not support her motion to enforce with any
affidavits or other material of evidentiary quality. Lozano opposed the motion,
raising the following defenses: that he entered into the agreement under duress
due to the pending protection from abuse action; that he was mentally
incapacitated when he signed the agreement; that Doe fraudulently induced
him to enter into the agreement by concealing the results of an appraisal of the
real property, which concluded that the property was worth considerably less
than Lozano believed; that the agreement was not enforceable because both
parties knew that the description “marital real estate” was a mistake; that he
was not given a chance for a “walk-through of the premises” and the property
was not in a condition similar to the condition it was in on the last date that he
occupied it; and that a condition of the agreement—that the property be in a
5
satisfactory condition—is ambiguous and was not met. Lozano argued that an
evidentiary hearing on the motion to enforce was required as a matter of due
process and that discovery was necessary before a hearing could be held.3
[¶7] Despite Lozano’s request for an evidentiary hearing, the court
(Mulhern, J.) held a nontestimonial hearing on November 24, 2020. Based on
the parties’ arguments and the settlement agreement, on March 24, 2021, the
court entered a judgment granting in part Doe’s motion to enforce. The court
determined that the settlement agreement is an enforceable contract with
sufficiently definite terms and that the agreement’s material terms “are not in
dispute, so no evidentiary hearing needs to be conducted.” The court rejected
Lozano’s argument regarding mutual mistake, stating that it had “not been
presented any facts that indicate that at the time of the signing . . . the parties
were under the mistaken belief that they were married” and that the language
“marital real estate” was “a simple clerical error.” The court found that the
settlement agreement contained “detailed terms and multiple affirmations of
intent”; that the parties used attorneys to negotiate the agreement, affirmed
“their intent to a notary,” and had the agreement notarized; and that the
3 The court (Mulhern, J.) stayed all discovery in the matter, stating that the granting of the motion to
enforce “would conclude the case without the need for further discovery.”
6
notarized agreement was submitted to the court. The court determined that,
as a result, the parties intended to be bound by the agreement.
[¶8] Finally, the court concluded that there were no grounds to void the
settlement agreement. The court determined that Doe had “performed
significant partial performance” under the agreement, that Lozano accepted
that performance and “stayed silent and did not indicate to [Doe] that he would
challenge” the agreement, and that therefore Lozano could not claim the
settlement agreement was void. The court rejected Lozano’s arguments with
respect to the unsatisfactory condition of the property, duress, incompetence,
and fraud because it determined that Lozano waived “any objection to the
condition of the property” when he moved back into the property and accepted
and recorded the quitclaim deed to the property and that he “ratified the
agreement by his subsequent conduct.” The court thus approved the
settlement agreement, determined that Doe was entitled to enforce the
agreement with respect to the amount Lozano owed for the real property, and
entered a judgment of $80,002 for Doe.4
4 The court denied Doe’s request for enforcement of the agreement regarding the value of personal
property because the claim was “not for a definite amount.” The court also denied all outstanding
motions, including Lozano’s motion for relief and sanctions pursuant to M.R. Civ. P. 37, motion for a
protective order regarding discovery, motion in limine, and motion to test the sufficiency of Doe’s
answers to Lozano’s requests for admissions.
7
[¶9] Lozano moved for further findings of fact, which the court denied.
Lozano timely appealed.5
II. DISCUSSION
[¶10] Lozano argues that the court improperly reached conclusions on
questions of fact “without allowing exhibits, taking evidence or otherwise
weighing fact” and that it violated his “due process rights to test the evidence.”6
Doe contends that the court did not need to hold an evidentiary hearing on her
motion to enforce because “there was no genuinely disputed question of
material fact regarding the existence or unambiguous terms” of the settlement
agreement.7
5 On March 11, 2022, Lozano filed a motion requesting that we decide his appeal without referring
to the protection from abuse matter, a motion which Doe opposed. We accepted the motion and
opposition as additional briefing in considering the merits of Lozano’s appeal.
6 We reject Lozano’s argument that Doe is collaterally estopped from pursuing the motion to enforce
because she did not amend her complaint to assert a claim for breach of contract. Lozano has waived
this argument because he did not develop it or offer case law in support of it. See Mehlhorn v. Derby,
2006 ME 110, ¶¶ 9, 11, 905 A.2d 290; Alexander, Maine Appellate Practice § 404 at 316 (5th ed.
2018). Regardless, his argument fails because there was no final judgment with respect to these
issues. See Portland Water Dist. v. Town of Standish, 2008 ME 23, ¶ 9, 940 A.2d 1097.
7 We reject Doe’s argument that Lozano failed to properly raise and develop any issues relating to
his due process argument. Lozano argued, in his opposition to Doe’s motion to enforce, that failing
to hold an evidentiary hearing would violate his due process rights and, during the nontestimonial
hearing, Lozano also raised the court’s need to take evidence. The court specifically contemplated
whether Lozano’s due process rights would be preserved without an evidentiary hearing. There was
thus “a sufficient basis in the record to alert the court” and Doe of this issue. Warren Constr. Grp., LLC
v. Reis, 2016 ME 11, ¶ 9, 130 A.3d 969 (quotation marks omitted); Alexander, Maine Appellate
Practice § 402(a) at 310 (5th ed. 2018).
8
[¶11] We review “de novo whether an individual was afforded
procedural due process.” Mitchell v. Krieckhaus, 2017 ME 70, ¶ 16, 158 A.3d
951 (quotation marks omitted). “The fundamental requirement of due process
is the opportunity to be heard at a meaningful time and in a meaningful
manner.” Id. ¶¶ 16, 20 (quotation marks omitted). Furthermore, “[w]hen
significant rights are at stake, due process requires: notice of the issues, an
opportunity to be heard, the right to introduce evidence and present witnesses,
the right to respond to claims and evidence, and an impartial fact-finder.”
Jusseaume v. Ducatt, 2011 ME 43, ¶ 12, 15 A.3d 714 (quoting GENUJO LOK
Beteiligungs GmbH v. Zorn, 2008 ME 50, ¶ 18, 943 A.2d 573).
[¶12] We have previously “implicitly endorsed motions to enforce as
appropriate vehicles by which parties may bring an alleged settlement
agreement before a trial court,” and we have broadly stated that whether a
court must hold an evidentiary hearing on a motion to enforce is ordinarily
within the court’s discretion. Est. of Snow, 2014 ME 105, ¶ 18, 99 A.3d 278;
see M.R. Civ. P. 7(b)(7). We have not, however, always clearly articulated
standards to determine when an evidentiary hearing may be necessary, nor
have we clearly articulated the court’s power to enforce a settlement
agreement upon such a motion. We do so now.
9
A. Contract Formation
[¶13] A settlement agreement is analyzed as a contract and the existence
of a binding settlement agreement is a question of fact reviewed for clear error.
2301 Cong. Realty, LLC v. Wise Bus. Forms, Inc., 2014 ME 147, ¶ 10, 106 A.3d
1131; Est. of Snow, 2014 ME 105, ¶ 11, 99 A.3d 278. For a binding agreement
to exist, “the parties must have mutually intended to be bound by terms
sufficiently definite to enforce.” 2301 Cong. Realty, LLC, 2014 ME 147, ¶ 10, 106
A.3d 1131 (quotation marks omitted).
[¶14] “[W]here parties read a settlement agreement that contains all the
necessary elements of an agreement into the court record, no further
fact-finding is required.” Est. of Snow, 2014 ME 105, ¶ 19, 99 A.3d 278(summarizing cases); see, e.g., Muther v. Broad Cove Shore Ass’n, 2009 ME 37,
¶¶ 2, 8, 968 A.2d 539 (explaining that the transcript of the judicially assisted
settlement conference “conclusively establishes the existence of a binding
settlement agreement . . . and subsequent disputes that arose while attempting
to reduce the settlement to a stipulated judgment did not affect” the court’s
authority to enforce the agreement). Further, in Estate of Snow, we affirmed a
court’s determination that no evidentiary hearing was necessary where the
parties read the details of a settlement agreement into the record at a
10
deposition. 2014 ME 105, ¶¶ 5-7, 21-22, 99 A.3d 278. Although the parties
later failed to agree on written language reflecting the agreement, they did not
dispute the accuracy or authenticity of the deposition transcript submitted to
the court, which the court properly found reflected an unambiguous binding
settlement agreement. Id. ¶¶ 7, 21; see also 2301 Cong. Realty, LLC, 2014 ME
147, ¶ 10, 106 A.3d 1131.
[¶15] If, however, the parties dispute the existence of an enforceable
settlement reached outside the court’s presence, “findings of fact regarding the
terms of the agreement and the parties’ intent may be required.” Muther, 2009
ME 37, ¶ 6, 968 A.2d 539. For example, in Marie v. Renner we held that an
evidentiary hearing was necessary to determine whether the parties reached a
binding settlement agreement. 2008 ME 73, ¶ 10, 946 A.2d 418. The plaintiff
had sued in that case alleging that the renovation work to the defendant’s
building had caused her to have an allergic reaction and incur medical bills. Id.
¶ 2. Prior to trial, the court was notified that the parties had settled the case,
and the plaintiff filed a motion to enforce, arguing that a binding contract
existed, “namely, in exchange for a release of all claims, [defendant] would
prepare and tender a check,” and that a hearing was unnecessary because the
filings with the court disclosed this agreement. Id. ¶¶ 3, 6.
11
[¶16] The defendant contended that his agreement to settle was
conditioned on the proceeds “being used to pay [plaintiff’s] outstanding
medical bills” and, because the medical provider had written off those bills, the
settlement agreement’s terms were not met. Id. ¶ 3. We determined that the
parties’ filings, including documents signed by only one party and
correspondence between counsel, did not reflect a binding settlement
agreement but instead revealed an ambiguity that went “to the substance of the
agreement” regarding whether “there was a condition precedent to the
agreement as to the use of the proceeds of the check.” Id. ¶¶ 8-9. We therefore
vacated the court’s judgment and remanded the matter for an evidentiary
hearing. Id. ¶ 10; see also White v. Fleet Bank of Me., 2005 ME 72, ¶¶ 3 & n.2, 5,
12-13, 875 A.2d 680 (affirming the enforcement of a settlement agreement
reached during mediation, where the mediation was not recorded due to a tape
recorder malfunction and the court held an evidentiary hearing).
[¶17] While the above cases are instructive, here the parties’ dispute
regarding the settlement agreement is not limited to whether an agreement
was reached outside of the court and what the material terms of that agreement
are. The parties both signed the settlement agreement and Doe filed it with the
court. The agreement on its face appears fully integrated. Under principles of
12
contract law and the parol evidence rule, extrinsic evidence is not admissible to
explain or alter an unambiguous integrated contract. See Handy Boat Serv.,
Inc. v. Pro. Servs., Inc., 1998 ME 134, ¶ 11, 711 A.2d 1306.
[¶18] In this case, however, Lozano contended and argues on appeal that
the agreement is invalid because of the circumstances leading up to the
agreement’s signing. Specifically, he claims that he was under duress due to
Doe’s pending action for protection from abuse and was mentally incapacitated
at the time of signing,8 and that Doe fraudulently induced him to enter the
agreement. These arguments go to the validity of the agreement’s formation,
not to the terms of the agreement.
[¶19] A party asserting the defense of fraudulent inducement may use
parol evidence to show that the other party engaged in fraudulent
representations to induce the party to enter a settlement agreement. See Ferrell
v. Cox, 617 A.2d 1003, 1006 (Me. 1992); Harriman v. Maddocks, 518 A.2d 1027,
1029 (Me. 1986). Such evidence may show that the signed settlement
agreement does not reflect the intent of the parties, Ferrell, 617 A.2d at 1006,
and may vitiate the contract, Harriman, 518 A.2d at 1029.
8Lozano notes that Doe herself asserted in her complaint for protection from abuse that Lozano was
mentally ill and delusional.
13
[¶20] In addition, a contract is voidable if a contracting party does not
have the requisite mental capacity to contract. See Est. of Marquis, 2003 ME 71,
¶ 14, 822 A.2d 1153. The determination of a party’s contractual capacity is
necessarily a question of fact. See id. ¶ 16. Similarly, duress founded upon
wrongful conduct of the other party is a factual question that may also
invalidate a contract. See City of Portland v. Gemini Concerts, Inc., 481 A.2d 180,
182-83 (Me. 1984).
[¶21] As we have previously explained, see Est. of Snow, 2014 ME 105,
¶ 20, 99 A.3d 278, the First Circuit has determined that courts “may not
summarily enforce a purported settlement agreement if there is a genuinely
disputed question of material fact regarding the existence or terms of that
agreement” and must instead “take evidence to resolve the contested issues of
fact,” Malave v. Carney Hosp., 170 F.3d 217, 220, 222 (1st Cir. 1999) (“Summary
enforcement of arm’s-length settlements is a useful device to hold litigants to
their word, but the procedure ought to be reserved for situations in which a
struck bargain is admitted or proved, and the basis for nonperformance is
insubstantial.”). In Malave, the First Circuit held that an evidentiary hearing
was necessary when a party disputed whether its attorney had authorization
to settle the case. Id. at 219, 221-22; see also Lane v. Maine Cent. R.R., 572 A.2d
141084, 1084-85 (Me. 1990). An evidentiary hearing can similarly be necessary
to determine whether a party had the mental capacity to enter into an
agreement. See Marston v. United States, No. 10-10437-GAO, 2012 U.S. Dist.
LEXIS 29140, at *10-12 (D. Mass. Mar. 6, 2012). The same is true as to improper
coercion. See Bandera v. City of Quincy, 344 F.3d 47, 52 (1st Cir. 2003) (stating
that it was unlikely that the matter could be resolved absent an evidentiary
hearing where there were issues of fact, including whether the plaintiff was
“improperly coerced into signing the [settlement] agreement”).
[¶22] We now make clear that if a party raises a factual issue that goes
to the validity of a settlement agreement’s formation, an evidentiary hearing
will ordinarily be necessary on a motion to enforce the settlement, even if the
written agreement otherwise appears to be a fully integrated contract.9
Because issues of fact regarding the formation of the settlement agreement
exist here and no such hearing was held, we must vacate the judgment.
9 We do not suggest that these factual issues, as with any factual issues, cannot be resolved upon a
properly supported motion for summary judgment. Such a motion was filed in this case but then
withdrawn. Summary judgment remains available when there are no genuine issues of material fact.
M.R. Civ. P. 56(c). Similarly, as the First Circuit has noted, “[p]arties are perfectly free to submit issues
for resolution on whatever limited evidence they choose to present.” F.A.C., Inc. v. Cooperativa de
Seguros de Vida de P.R., 449 F.3d 185, 188, 194 (1st Cir. 2006) (determining that the lack of an
evidentiary hearing was not problematic where a party did not properly raise that a hearing was
requested and did not argue “that the failure to hold an evidentiary hearing was error,” and where
the court was familiar with the issues because it had participated in the settlement negotiations).
15
B. Enforcement Remedy
[¶23] In her motion to enforce, Doe sought not only a declaration that
the settlement agreement was valid and entry of judgment thereon, but she also
sought remedies for breach of the substance of the agreement. In response, in
addition to claiming that the contract was void or voidable, Lozano raised other
issues that may be defenses, in whole or in part, to an action for breach of
contract. In this regard, the court again erred by determining factual issues
regarding performance, breach, and remedies without receiving any evidence.
[¶24] On a motion to enforce a settlement agreement, the court may
determine that an agreement is enforceable as a full and final agreement. A
court will ordinarily enforce a settlement agreement by entering a judgment in
accordance with the agreement, whether by dismissing the action or
incorporating the agreement’s terms into a judgment. See, e.g., Muther, 2009
ME 37, ¶ 7, 968 A.2d 539 (stating that a valid settlement agreement is
enforceable “and, upon acceptance by the court, is incorporated as a judgment
of the court”); Toffling v. Toffling, 2008 ME 90, ¶¶ 8-9, 953 A.2d 375 (“[A]n oral
stipulation entered on the record at trial is adequate to support the entry of a
judgment finally disposing of the litigation.” (quotation marks omitted)); White,
2005 ME 72, ¶ 8, 875 A.2d 680 (explaining that once the court determined that
16
the parties had a binding settlement, the court issued an order adopting and
enforcing the settlement’s terms); Page v. Page, 671 A.2d 956, 958 (Me. 1996)
(stating that a “settlement agreement can be summarily enforced by the entry
of a judgment”); Transamerica Com. Fin. Corp. v. Birt, 599 A.2d 65, 65 (Me.
1991).
[¶25] The determination that a settlement agreement was validly
formed with sufficiently definite terms and is entitled to enforcement as a
judgment, however, is separate from a determination of whether a party is in
breach of the settlement agreement and the remedies therefor. In this case, the
court’s judgment was not limited to entry of a judgment based on the
settlement agreement. After determining there was a valid agreement, the
court went on to determine that Doe had “performed significant partial
performance” of the agreement; that Doe had “upheld her obligations under the
contract”; that Lozano had remained silent and did not indicate he would
challenge the agreement; that Lozano had “defaulted” under the agreement;
that Lozano had waived his defenses; that Doe was entitled to a judgment of
17
$80,002; and that Doe was entitled to request attorney’s fees—all without
relying on any competent evidence or other factual record.10
[¶26] As stated above, Doe originally moved for summary judgment
regarding the settlement but then withdrew her motion. She was given
permission to amend her complaint to add a claim for breach of contract but
never did so. She filed a separate Superior Court complaint against Lozano for
breach of contract and promissory estoppel, but that case was stayed pending
further proceedings in the District Court. Any of those procedural mechanisms
would be acceptable ways to resolve her allegations of breach of the settlement
agreement. What could not be done, however, was entry of a judgment against
Lozano on a motion to enforce without any hearing or other factual record.
The entry is:
Judgment vacated. Remanded for further
proceedings consistent with this opinion.
10To be clear, Doe’s motion to enforce was not under oath and did not include or rely on any affidavits
or other filings that might arguably provide a factual basis for the court’s findings.
18
Daniel D. Feldman, Esq. (orally), Law Office of Daniel Feldman, Yarmouth, for
appellant Rudy A. Lozano
Fred W. Bopp III, Esq. (orally), Bopp & Guecia, Yarmouth, for appellee Pat Doe
Biddeford District Court docket number CV-2018-290
FOR CLERK REFERENCE ONLY