Nacco, Inc. v. Dove Creek Limited Partnership and Dove Creek General, Inc. ( 2001 )

Willie Thornton v. State of Texas

  IN THE

TENTH COURT OF APPEALS

No. 10-00-079-CV

     NACCO, INC.,

                                                                         Appellant

     v.

     DOVE CREEK LIMITED PARTNERSHIP

     AND DOVE CREEK GENERAL, INC.

                                                                         Appellees

From the 192nd District Court

Dallas County, Texas

Trial Court # 98-06534

O P I N I O N

      This is an appeal from a judgment and sanctions order entered in a bench trial involving an alleged breach of a settlement agreement. Appellant Nacco, Inc. [“Nacco”] contends in five issues that: (issues 1-2) the trial court abused its discretion in sanctioning Nacco under Rule 13; (issue 3) the trial court erred in denying Nacco’s motion for judgment, where it was conclusively established that Dove Creek’s breach-of-settlement agreement claim was barred by Rule 11; (issue 4) the trial court lacked jurisdiction to consider this case; and (issue 5) the evidence was insufficient to support the trial court’s award of $2,500 in attorney’s fees. We will reverse both the sanctions order and trial court’s judgment.

      In order to place Nacco’s issues in context, a review of the pertinent facts is necessary.

      Nacco is a Dallas corporation involved in the building-construction business. Dove Creek General, Inc., is a Texas Corporation. Its general partner, Dove Creek Ltd., is a Texas limited partnership that owns a Dallas apartment complex, the Brookview Apartments. Because their claims (and the claims filed against them by Nacco) are identical, both Dove Creek entities will be jointly referred to in this opinion as “Dove Creek.” Nacco filed suit against Dove Creek in cause number 92-02666 in the 160^th Judicial District Court of Dallas County, seeking payment for construction services performed by Nacco at the Brookview Apartments. On June 16, 1997, Nacco obtained a default judgment against Dove Creek, for which Nacco was awarded $14,750 in actual damages, prejudgment interest of $737 and attorney’s fees in the amount of $2,500.

      The default judgment was signed June 16, 1997. Both parties agree there was a verbal settlement agreement reached around this same time, but they dispute the exact terms of the agreement and the record is unclear as to whether the agreement was reached in May or June of 1997. In the fall of 1998, Nacco filed suit in the 192^nd District Court of Dallas County alleging that Dove Creek had failed to pay the total amount due under two settlement agreements: the first, the verbal agreement it alleges was made in 1997; the second, a verbal agreement Nacco alleges was reached in January of 1999. Dove Creek counterclaimed, seeking reimbursement for an amount it contends it had overpaid under the 1997 agreement. Recognizing that Rule 11 requires settlement agreements in pending suits be either reduced to writing and filed with the court, or made in open court and entered of record, Dove Creek moved for sanctions under Rule 13 on the ground the 1999 settlement agreement did not comply with Rule 11. Dove Creek’s specific argument was that, since the suit in the instant case was “pending” in the 192^nd District Court during all of 1999, any settlement agreement occurring during that year had to be made part of the 192^nd District Court’s record in order to be enforced. The trial court found in favor of Dove Creek, struck Nacco’s claim involving the alleged 1999 verbal agreement, and ordered Nacco to pay Dove Creek $2,580 in attorney’s fees. Nacco thereafter nonsuited its remaining claim for relief involving the alleged 1997 verbal settlement agreement.

      At trial, Nacco moved for judgment on the ground that Dove Creek’s counterclaim for breach of the alleged 1997 verbal settlement was barred for the same reason Nacco’s claimed breach of the 1999 verbal settlement was barred–the settlement agreement was not reduced to writing nor entered in open court, in violation of Rule 11. The trial court entered written findings of fact and conclusions of law. One of the conclusions of law was that the 1997 verbal settlement agreement was not barred by Rule 11. This appeal followed.

Jurisdiction

      We begin with Nacco’s contention that the 192^nd District Court lacked jurisdiction to decide whether the judgment of the 160^th District Court had been satisfied. Nacco alleges that, because the settlement agreement could have been filed with the 160^th District Court, had the parties so chosen, their failure to do so barred suit in the 192^nd District Court. In response, Dove Creek argues that the verbal agreement did not occur until August 1997, some two months after the default judgment was taken against it on June 16, 1997, and that for that reason, the agreement was not subject to Rule 11's written filing requirement.

      Nacco argues that our sister court of appeals’ decision in Antonini v. Harris Co. Appraisal Dist., 999 S.W.2d 608 (Tex. App.—Houston [14^th Dist.] 1999, no writ), “strongly suggests” that a trial court lacks jurisdiction to enforce a settlement agreement that could have been, but was not, filed in a prior cause of action. In Antonini, a taxpayer brought a breach-of-contract action against a county tax appraisal district and a county appraisal review board in the 152^nd District Court in Harris County in a 1993 case, alleging that the those entities had breached a settlement agreement in an appraisal dispute litigated in 1989 in an earlier case. Id. at 609-10. The 1989 case had been dismissed for want of prosecution and contained no record of a settlement agreement. Id. The court of appeals ruled the alleged settlement agreement was not enforceable in the 1993 case because the agreement was made while the 1989 case was pending, but was not filed with that court, in violation of Rule 11. Id. at 613. The court noted that the appellant there could have filed a motion to reinstate the 1989 case after it was dismissed for want of prosecution, but did not do so. Id. Significantly, however, the grounds for the reviewing court’s rejection of the appellant’s argument, was not that the district court in the 1993 case lacked jurisdiction to hear the case, but was instead that the district court correctly entered a take nothing judgment against the plaintiff under the doctrine of res judicata. Id. at 614-615. Nacco is therefore wrong in interpreting Antonini as holding that the “second” court lacks jurisdiction; however, Antonini clearly does stand for the proposition that the filing of a second case may be barred by res judicata. Id. Antonini squares well with the supreme court’s holding in Mantas v. Fifth Court of Appeals, 925 S.W.2d 656 (Tex. 1996). There the court ruled that where a settlement agreement dispute arises while the trial court has jurisdiction over the underlying action, a claim to enforce the settlement agreement should, if possible, be asserted in that court under the original cause number. Id. at 658-59. But where the dispute arises after the trial court has lost jurisdiction (in Mantas, the dispute arose while the case was already on appeal), the party seeking enforcement of an agreement must file a separate breach of contract cause of action. Id. This rule necessarily requires that the trial court in the second cause exercise jurisdiction to determine whether the claim should have been asserted under the original cause of action. We therefore hold the district court in the instant case had the requisite jurisdiction to consider Dove Creek’s counterclaim and accordingly, overrule appellant’s fourth issue.

The Sanctions Order

      We next address whether the trial court’s sanction order contains the necessary particularized findings required of such orders. Rule 13 of the Texas Rules of Civil Procedure provides, “No sanctions under this rule may be imposed for good cause, the particulars of which must be stated in the sanction order.” Tex. R. Civ. P. 13. Trial courts are not at liberty to ignore the clear and unambiguous language of this rule and the failure of a trial court to make particularized findings of good cause for sanctions constitutes an abuse of discretion. See Barnum v. Munson, 998 S.W.2d 284, 287 (Tex. App.—Dallas 1999, pet. denied); see also Thomas v. Thomas, 917 S.W.2d 425, 432 (Tex. App.—Waco 1996, no writ). The sanctions order entered by the trial court in the instant case contains no particularized findings. For that reason we hold the sanctions order and the $2,580 attorney’s fees assessed against Nacco therein constituted an abuse of discretion. Nacco’s first issue is sustained. Given our disposition of the sanctions order, we need not address Nacco’s contention that the filing for which it was sanctioned was not groundless.

Dove Creek’s Counterclaim

      Nacco contends that Dove Creek’s counterclaim, which alleges overpayment under the verbal settlement agreement, is barred by Rule 11 for the same reason Nacco’s original claim was barred–the agreement was never reduced to writing nor filed with the trial court. Dove Creek responds that, unlike Nacco’s alleged settlement agreement, the verbal settlement agreement forming the basis of its counterclaim was not reached until after the original trial court lost jurisdiction, and therefore is not controlled by Rule 11. We disagree. The final judgment in question was entered in cause number 97-02666 on June 16, 1997. Dove Creek alleged in its counterclaim pleadings that the verbal settlement agreement was made, “On or before the entry of the [f]inal judgment,” and that, “pursuant to the Agreement, beginning in May of 1997 and continuing through May 1998 [Dove Creek] paid [Nacco] on a regular monthly basis the sum of $1,500. . . .” Clearly, Dove Creek’s position in the court below was that the verbal agreement it sought to enforce was reached prior to entry of the judgment in cause number 97-02666. The evidence adduced at trial supports those dates, and nothing in the trial court’s findings of fact supports a contrary theory. One of the findings of fact entered by the trial court in the instant case was that “on or about July 15, 1997 [the parties] agreed that [Dove Creek] would continue making $1500 per month until the final judgment was paid in full.” However, by July of 1997, Dove Creek had been making regular monthly payments under what it admitted in its pleadings was “the Agreement” made prior to entry of the trial court’s judgment. To be enforceable, Rule 11 required this settlement agreement to be in writing or entered in open court. In apparent recognition of this dilemma, Dove Creek, on appeal, abandons its position in the trial court and contends that “the agreement did not occur until at the earliest after the July 1^st 1997 receipt of the faxed final judgment.”(emphasis added).

      Dove Creek’s argument on appeal that the verbal settlement agreement did not occur prior to judgment is based on the testimony of Richard Wagner, an employee of Dove Creek, who testified that because Dove Creek was experiencing “cash flow difficulties” in 1997, he reached an agreement with Nacco’s lawyer in “May or June 1997" in which Dove Creek agreed to begin making $1,500 payments to Nacco and allow Nacco to take a default judgment against Dove Creek, against which the payments would be credited. Wagner testified that he received a copy of the final judgment by fax on July 1^st, 1997:

[Wagner:] I believe I received it [the copy of the final judgment] on June or July 1^st from [Nacco lawyer] Timothy J. Leahy’s office. He faxed it to me as proof that he had obtained a judgment.

Q. And subsequent to receiving that document did you have any conversations with Mr. Leahy?

A. Yes. I – I had made – at that point I had made three payments but I had not furnished any financial information and I wanted to make sure that he was going to continue accepting the three payments or the future $1500 payments and not bug me or harass me about the financial information, since I had made the three payments. And he agreed at that time that he wouldn’t pursue the financial information.

Q. All right. Notwithstanding – not only did he agree to that, was there any other agreements reached in this conversation after the July 1^st, 1997 [sic: June 16, 1997] final judgment that was sent to you?

A. He agreed to continue to accept the $1500 until this final judgment was paid in full.

      We hold that Wagner’s July 1997 phone call to Nacco’s lawyer, the purpose of which was to confirm that Dove Creek could continue to make payments under the settlement agreement without fear of being “bugged” for its failure to provide financial statements Dove Creek previously agreed to give Nacco, did not constitute a “new” agreement allowing circumvention of Rule 11's requirement that the settlement agreement be filed with the court “touching any suit pending.” To hold otherwise would allow a debtor to circumvent Rule 11 by: making an agreement with the creditor while the suit was pending, not filing the agreement with the court, and later, simply phoning the creditor after the trial court lost jurisdiction to inquire as to whether it should continue making payments under the agreement. We also reiterate that Dove Creek’s own pleadings reveal that its cause of action against Nacco arose from an alleged overpayment to Nacco under a verbal settlement agreement made “on or before” entry of the June 16, 1997 in cause number 97-02666 in the 160^th District Court. Because the settlement agreement between Nacco and Dove Creek was made in May or June of 1997, at a time when the case was still pending in the 160^th District Court, the parties failure to comply with Rule 11 bars both from enforcing the settlement agreement under a breach of contract cause of action. Nacco’s third issue is sustained.

      Given our conclusion that Dove Creek’s breach of settlement agreement claim is barred by Rule 11, we need not address Nacco’s contention that the trial court erred in its calculation of the attorney’s fees awarded Dove Creek. The trial court’s May 7, 1999 sanctions order is reversed and rendered. The trial court’s October 12, 1999 judgment is reversed and rendered.

DAVID L. RICHARDS

                                                                       Justice

Before Chief Justice Davis,

          Justice Vance, and

          Justice Richards (Sitting by Assignment)

Reversed and Rendered

Opinion delivered and filed August 8, 2001

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