Rocket Dogs K-9 Aquatics & Wellness Center v. Derheim

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
MAY 30, 2023
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2023 ND 103Rocket Dogs K-9 Aquatics & Wellness Center, LLC, Plaintiff and Appellant
v.
Derheim, Inc., a North Dakota corporation
d/b/a My Aquatic Services and Troy Derheim,
an individual, Defendants and Appellees
No. 20220246
Appeal from the District Court of Cass County, East Central Judicial District,
the Honorable Stephannie N. Stiel, Judge.
AFFIRMED.
Opinion of the Court by Bahr, Justice.
Joshua A. Swanson (argued), Bailey J. Voge (appeared), and MacKenzie L.
Hertz (on brief), Fargo, ND, for plaintiff and appellant.
Brandt M. Doerr, Fargo, ND, for defendants and appellees.
Rocket Dogs K-9 Aquatics & Wellness Center v. Derheim
No. 20220246
Bahr, Justice.
[¶1] Rocket Dogs K-9 Aquatics & Wellness Center, LLC (“Rocket Dogs”)
appeals from a judgment dismissing its action against Derheim, Inc., dba My
Aquatic Services, and Troy Derheim (“Derheim”), with prejudice. We conclude
the district court did not err in granting Derheim’s motion to enforce
settlement and in deciding questions of fact, rather than submitting the issue
to a jury, on whether Rocket Dogs authorized its previous counsel to settle its
claims. The court’s findings the parties entered into a binding and enforceable
settlement agreement are not clearly erroneous, and the court did not abuse
its discretion in enforcing the agreement. We affirm.
I
[¶2] Rocket Dogs is a North Dakota company that operated an indoor dog
waterpark offering physical therapy and open swim for dogs. Julie Saatoff is
the sole owner of Rocket Dogs. In 2019, Rocket Dogs contracted with Derheim
to construct an aquatics system for its indoor waterpark. In August 2021,
Rocket Dogs commenced this action against Derheim asserting claims related
to Derheim’s construction of the aquatics system for Rocket Dogs. Derheim
answered and counterclaimed for recovery of unpaid balances due and owing.
[¶3] In May 2022, Derheim moved the district court to enforce a settlement
of the case. Rocket Dogs opposed the motion. After a June 2022 hearing, the
court determined material fact issues existed and set an evidentiary hearing
on the motion. The parties filed supplemental briefing in support of and
opposing the motion. In August 2022, the district court held an evidentiary
hearing on Derheim’s motion to enforce settlement.
[¶4] After the August 2022 evidentiary hearing, the district court granted the
motion to enforce settlement, incorporating findings the court made on the
record at the hearing. The court found the essential terms of the settlement
agreement were for a “mutual release and walk-away and dismissal of the
lawsuit” (“The mutual dismissal with no money exchanged and dismissal.”);
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clear and convincing evidence showed Rocket Dogs’ former attorney had
express authority to settle the case; and the settlement was fairly made, final
and conclusive, and based on good consideration. A judgment was entered
dismissing the action with prejudice.
II
[¶5] Rocket Dogs argues the district court erred in granting Derheim’s motion
seeking to enforce the alleged settlement agreement.
[¶6] “A settlement agreement is a contract between parties, and thus contract
law applies.” Ryberg v. Landsiedel, 2021 ND 56, ¶ 13, 956 N.W.2d 749 (quoting
Lund v. Swanson, 2021 ND 38, ¶ 9, 956 N.W.2d 354); see also Kuperus v.
Willson, 2006 ND 12, ¶ 11, 709 N.W.2d 726. “In North Dakota, the law looks
with favor upon compromise and settlement of controversies between parties,
and where the settlement is fairly entered into, it should be considered as
disposing of all disputed matters which were contemplated by the parties at
the time of the settlement.” Kuperus, at ¶ 10 (quoting Vandal v. Peavey Co.,
523 N.W.2d 266, 268 (N.D. 1994)); see also Thomas C. Roel Assoc., Inc. v.
Henrikson, 295 N.W.2d 136, 137 (N.D. 1980) (district court has “authority to
enter judgment in accordance with the terms of a compromise agreement”).
[¶7] “When a settlement is fairly made before trial, it ‘takes on the character
of a contract between the parties and is final and conclusive, and based on good
consideration.’” Kuperus, 2006 ND 12, ¶ 10 (quoting Bohlman v. Big River Oil
Co., 124 N.W.2d 835, 837 (N.D. 1963)). “A settlement will not be set aside
absent a showing of fraud, duress, undue influence, or any other grounds for
rescinding a contract.” Id.[¶8] “[A]n attorney may not compromise a client’s claims in the absence of
express authority[,] and . . . an attorney may not waive a client’s substantial
rights without the client’s consent.” Ryberg, 2021 ND 56, ¶ 14; see also Midwest
Fed. Sav. Bank v. Dickinson Econo-Storage, 450 N.W.2d 418, 421 (N.D. 1990).
Whether an attorney has been given express authority to settle a claim
normally presents a question of fact. Ryberg, at ¶ 14; Midwest Fed., at 420. The
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existence of an oral contract and the extent of its terms are also questions of
fact:
Courts will not enforce a contract which is vague, indefinite, or
uncertain, nor will they make a new contract for the parties. An
oral contract can be enforced only when the parties have agreed on
its essential terms. An agreement which is so uncertain and
incomplete as to any of its essential terms that it cannot be carried
into effect without new and additional stipulations between the
parties is not enforceable. Indefiniteness as to any essential
element of the agreement may prevent the creation of an
enforceable contract. An agreement to agree in the future which is
not sufficiently definite to enable a court to give it an exact
meaning is not an enforceable obligation.
Ryberg, at ¶ 15 (quoting Tarver v. Tarver, 2019 ND 189, ¶ 9, 931 N.W.2d 187(cleaned up)) (emphasis added).
[¶9] The district court’s findings of fact are reviewed under the clearly
erroneous standard. Great Plains Royalty Corp. v. Earl Schwartz Co., 2022 ND
156, ¶ 13, 978 N.W.2d 715. A finding of fact is clearly erroneous if it is induced
by an erroneous view of the law, if there is no evidence to support it, or if, after
reviewing all of the evidence, this Court is convinced a mistake has been made.
Id. Conclusions of law are fully reviewable. Id.[¶10] Here, in granting Derheim’s motion to enforce settlement, the district
court held a full evidentiary hearing on the motion and received testimony and
exhibits into evidence. The court made specific findings of fact and conclusions
of law on the record, holding Rocket Dogs’ former attorney had express
authority to settle the case and the parties agreed to settle the case on the
essential terms.
III
[¶11] Rocket Dogs argues the district court erred in granting Derheim’s motion
to enforce settlement because there were factual issues regarding whether the
parties entered into a binding and enforceable settlement agreement. Rocket
Dogs argues this Court should apply the standards of N.D.R.Civ.P. 56 to
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motions to enforce settlement made within a case. Rocket Dogs contends the
district court should have denied Derheim’s motion because genuine issues of
material fact precluded granting the motion.
[¶12] Generally, “[s]ettlement agreements are valid and enforceable by either
party either at law or in equity.” 15A C.J.S. Compromise & Settlement § 77
(April 2023 Update) (footnotes omitted).
The trial court may take one of three possible avenues to decide a
motion to enforce a settlement agreement: (1) hold an evidentiary
hearing on the motion to determine disputed facts and then enter
judgment after taking evidence to prove the agreement and any
defenses that the nonmoving party may proffer, (2) dispose of the
motion on the pleadings, or (3) treat the motion as akin to one for
summary judgment.
Id. (footnotes omitted). Additionally, in Estate of Holland v. Metropolitan
Property & Casualty Insurance Company, 279 P.3d 80, 86 (Idaho 2012), the
court discussed what it considered the “better practice”:
A settlement agreement “supersedes and extinguishes all
pre-existing claims the parties intended to settle.” Vanderford Co.,
Inc. v. Knudson, 150 Idaho 664, 670, 249 P.3d 857, 863 (2011). “A
party to a lawsuit in which a settlement agreement is subsequently
reached need not initiate a new civil lawsuit to enforce the
settlement agreement.” Id. Although the better practice is to
amend the pleadings to a cause of action based upon the settlement
agreement, a party seeking to enforce the agreement can also do
so by motion in the existing lawsuit before it is dismissed. Id. “A
motion for the enforcement of a settlement agreement is treated as
a motion for summary judgment when no evidentiary hearing has
been conducted.” Id. at 671, 249 P.3d at 864.
[¶13] Courts have further explained summary enforcement is not appropriate
and an evidentiary hearing is required when the parties dispute the existence
of a settlement agreement:
Ordinarily, a district court can enforce a settlement
agreement through summary proceedings. See Autera v. Robinson,
419 F.2d 1197, 1200 (D.C. Cir. 1969); Adams v. Johns-Manville
4
Corporation, et al., 876 F.2d 702, 707 (9th Cir. 1989); Callie v. Near,
829 F.2d 888, 890 (9th Cir. 1987); Mid-South Towing Co. v. Har-
Win, Inc., 733 F.2d 386, 389 (5th Cir. 1984); Aro Corp. v. Allied
Witan Co., 531 F.2d 1368, 1372 (6th Cir.), cert. denied, 429 U.S.
862, 97 S.Ct. 165, 50 L.Ed.2d 140 (1976). However, the district
court’s power to summarily enforce an agreement only extends to
complete settlement agreements whose existence is not disputed.
Ozyagcilar v. Davis, 701 F.2d 306, 308 (4th Cir. 1983); see also
Gardiner v. A.H. Robins Co., 747 F.2d 1180, 1189 (8th Cir. 1984).
Where the parties dispute the existence of the agreement, an
evidentiary hearing is required. Autera, 419 F.2d at 1203; see also
Callie, 829 F.2d at 889 (citing Russell v. Puget Sound Tug & Barge
Co., 737 F.2d 1510, 1511 (9th Cir. 1984) (holding that the district
court abused its discretion by not conducting an evidentiary
hearing to determine whether a settlement agreement existed);
Gatz, et. al. v. Southwest Bank of Omaha, et al., 836 F.2d 1089,
1095 (8th Cir. 1988) (stating that a district court must hold an
evidentiary hearing when there is a substantial factual dispute
concerning the existence of a settlement agreement). The district
court must have the opportunity to make credibility
determinations and the parties should be afforded the benefit of
cross-examination so that factual issues may be adequately
explored. Autera, 419 F.2d at 1202; Gatz v. Southwest Bank of
Omaha, 836 F.2d 1089, 1094 (8th Cir. 1987); Ford v. Citizens and
Southern National Bank, 928 F.2d 1118, 1120 (11th Cir. 1991);
Adams v. Johns-Manville Corporation, 876 F.2d 702, 707 (9th Cir.
1989).
Quijano v. Eagle Maint. Servs., Inc., 952 F. Supp. 1, 3-4 (D.D.C. 1997).
[¶14] In this case, the district court held a full evidentiary hearing to decide
the disputed issues of fact. On the basis of the evidence presented, the court
made specific findings of fact and conclusions of law on Rocket Dogs’ former
attorney’s express authority and on the essential terms of the parties’
agreement. The court determined the credibility and weighed evidence in
reaching its factual findings.
[¶15] Because the district court did not summarily enforce the settlement
agreement, but rather held an evidentiary hearing and made factual findings
on disputed facts regarding the agreement, summary judgment standards did
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not apply. Under these circumstances, the court did not err in conducting the
evidentiary hearing and deciding fact issues regarding the entry into and
existence of the parties’ binding and enforceable settlement agreement.
IV
[¶16] Rocket Dogs argues the district court erred as a matter of law in holding
the court, rather than a jury, would decide questions of fact on whether it
expressly authorized its previous counsel to settle its claims and whether it
was manifestly clear the parties entered into a binding and enforceable
settlement agreement.
[¶17] Article I, section 13, of the North Dakota Constitution preserves the right
to a jury trial in all cases in which it was a right at common law. Murphy v.
Murphy, 1999 ND 118, ¶ 10, 595 N.W.2d 571; Gen. Elec. Credit Corp. v.
Richman, 338 N.W.2d 814, 817 (N.D. 1983). “Whether a party is entitled to a
jury trial depends on whether the case is an action at law or a claim in equity.”
Murphy, at ¶ 10 (quoting Barker v. Ness, 1998 ND 223, ¶ 6, 587 N.W.2d 183).
“There is no absolute constitutional right to a jury trial in an equitable
proceeding absent an express statutory provision.” Id.[¶18] Rocket Dogs argues the existence of a contract between Rocket Dogs and
Derheim and whether they intended the proposed settlement agreement to be
complete, final, and binding were questions of fact for a jury. Rocket Dogs
contends, before Derheim would be entitled to specific performance of the
purported settlement agreement, a jury would first need to determine whether
there was a complete, final, and binding agreement and, further, that there
was no compelling reason to carve out an exception for settlement agreements.
See Schumacher v. Schumacher, 469 N.W.2d 793, 799 (N.D. 1991) (addressing
issues and claims inextricably intermingled, and stating “[a] trial court cannot
deprive a litigant of the right to a jury trial by resolving an equitable claim
before the jury hears a legal claim raising common issues”). We disagree.
[¶19] Under N.D.C.C. § 32-04-07, a district court may compel specific
performance of an obligation. “Historically, specific performance has been an
equitable remedy and no jury trial is available on such claims.” Nw. Bell Tel.
6
Co. v. Cowger, 303 N.W.2d 791, 794 (N.D. 1981). Courts have held a motion to
enforce a settlement agreement “essentially is an action to specifically enforce
a contract.” Adams v. Johns-Manville Corp., 876 F.2d 702, 709 (9th Cir. 1989);
see also Quijano, 952 F. Supp. at 3. “This is so even if the party resisting specific
enforcement disputes the formation of the contract.” Adams, at 709-10
(emphasis added). “Purely equitable claims, even those involving factual
disputes, are matters to be resolved by the court rather than a jury.” Quijano,
at 3.
[¶20] A motion to enforce a settlement agreement is akin to an action to enforce
a contract, and a request for specific performance without a claim for damages
is equitable and tried to the court. See Murphy, 1999 ND 118, ¶ 10; Sargent
Cnty. Bank v. Wentworth, 500 N.W.2d 862, 873 (N.D. 1993); see also Farm
Credit Bank of St. Paul v. Rub, 481 N.W.2d 451, 458 (N.D. 1992) (stating even
when a counterclaim seeks monetary damages, “[a] party is not entitled to a
jury trial on a damage claim that is incidental to and dependent upon a
primary claim for which a jury trial is not allowed”).
[¶21] Moreover, this Court previously discussed the procedure for resolving
legal and equitable claims in the same case:
It is the general rule that legal issues entitling a party to a jury
trial should be tried to the jury prior to the disposition of the
equitable issues triable to the court. Whenever the issues are so
interrelated that a decision in the nonjury portion might affect the
decision of the jury portion, the jury portion is to be tried first,
since otherwise the party entitled to the jury trial would be
deprived of part or all of his right to a jury trial.
Erickson v. Brown, 2008 ND 57, ¶ 43, 747 N.W.2d 34 (quoting Landers v. Goetz,
264 N.W.2d 459, 463 (N.D. 1978)) (emphasis added); see also Ask, Inc. v.
Wegerle, 286 N.W.2d 290, 295-96 (N.D. 1979).
[¶22] Here, Derheim’s motion seeking to enforce the settlement agreement is
not so interrelated with Rocket Dogs’ underlying damage claims so as to
require a jury trial before the evidentiary hearing on the motion. This is so
even though Rocket Dogs disputes formation of the settlement agreement.
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Adams, 876 F.2d at 709-10. Derheim’s motion seeks an equitable remedy in
specific performance based on the conduct of the parties and the attorneys in
resolving the case. As such, Rocket Dogs is not entitled to a jury trial on what
is properly deemed an equitable proceeding.
[¶23] We conclude the district court did not err in conducting an evidentiary
hearing on the motion to enforce the settlement agreement without a jury.
V
[¶24] Rocket Dogs’ remaining issues challenge the district court’s specific
findings of fact.
[¶25] Rocket Dogs argues the district court erred in finding it was manifestly
clear it gave express authority to its previous counsel to settle its claims and
the weight of the evidence does not support the court’s erroneous finding
Rocket Dogs’ attorney had express authority to bind Rocket Dogs to the
settlement agreement. Rocket Dogs further argues the weight of the evidence
does not support the court’s finding Rocket Dogs did not disavow the purported
settlement agreement and the court erred in holding there was a final,
enforceable settlement agreement between the parties.
[¶26] Here, the district court specifically found the essential terms of the
settlement agreement were for mutual release and walk-away and dismissal
of the lawsuit; clear and convincing evidence showed Rocket Dogs’ previous
attorney had express authority to settle the case; and the settlement was fairly
made, final and conclusive, and based on good consideration. While there is
conflicting evidence in the record, the court made its findings on the disputed
issues after weighing the testimony and exhibits presented at the evidentiary
hearing.
[¶27] Evidence in the record supports the district court’s findings, and this
Court will not reweigh the evidence under the clearly erroneous standard of
review. As we have explained:
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Under the clearly erroneous standard of review, we do not reassess
the witnesses’ credibility or reweigh conflicting evidence. The
district court has the advantage of judging the credibility of
witnesses by hearing and observing them and of weighing the
evidence as it is introduced, rather than from a cold record. A
district court’s choice between two permissible views of the
evidence is not clearly erroneous. Nor do we substitute our
judgment for a district court’s decision merely because we might
have reached a different result.
Hoverson v. Hoverson, 2015 ND 38, ¶ 6, 859 N.W.2d 390 (cleaned up); see also
Stanhope v. Phillips-Stanhope, 2008 ND 61, ¶ 10, 747 N.W.2d 79 (“The district
court has the advantage of judging the credibility of witnesses by hearing and
observing them and of weighing the evidence as it is introduced, rather than
from a cold record. When two parties present conflicting testimony on material
issues of fact, as in the instant case, we will not redetermine the trial court’s
findings based upon that testimony.” (cleaned up)); In re T.J.K., 1999 ND 152,
¶ 17, 598 N.W.2d 781 (“We have stated, however, that where conflicting
testimony is presented, our ability to examine a cold record is a poor substitute
for the fact finder’s opportunity to observe the demeanor of the witnesses.”).
[¶28] We conclude the district court’s findings are not clearly erroneous. We
further conclude the court did not abuse its discretion in enforcing the parties’
settlement agreement. See Callie v. Near, 829 F.2d 888, 890 (9th Cir. 1987)
(holding district court abused its discretion by not conducting an evidentiary
hearing on the validity and scope of the settlement agreement); Dale Expl.,
LLC v. Hiepler, 2018 ND 271, ¶ 9, 920 N.W.2d 750 (specific performance rests
in the sound discretion of the district court and will not be reversed on appeal
absent an abuse of discretion).
VI
[¶29] We have considered the parties’ remaining arguments and deem them
either without merit or unnecessary to our decision. The judgment of dismissal
is affirmed.
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[¶30] Jon J. Jensen, C.J.
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
Douglas A. Bahr
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