Consolo v. Menter

[Cite as Consolo v. Menter, 2011-Ohio-6241.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
WILLIAM CONSOLO C.A. No. 25394
Appellant
v. APPEAL FROM JUDGMENT
ENTERED IN THE
RICK MENTER, et al. COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellees CASE No. CV 2007 08 5773
DECISION AND JOURNAL ENTRY
Dated: December 7, 2011
Per Curiam.
{¶1} Appellant, William Consolo, appeals the judgment of the Summit County
Court of Common Pleas. This Court reverses.
I.
{¶2} Consolo and Rick Menter were business partners in a credit card processing
venture. Menter acted as the operating member of the partnership, while Consolo
purchased a membership interest and consulted in the operation of the business.
{¶3} Over time, Consolo became suspicious that Menter was engaging in
fraudulent conduct and appropriating for himself hundreds of thousands of dollars
rightfully payable to Consolo. On August 16, 2007, Consolo filed a complaint in the
Summit County Court of Common Pleas against Menter, EMS Nationwide II, Ltd., and
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the unknown shareholders, members, partners, and the legal and equitable owners of
EMS Nationwide II, Ltd (hereinafter referred to as “Menter”). The complaint included
claims for breach of fiduciary duty, restitution, breach of R.C. 1705.31, conversion,
conspiracy, a shareholders’ derivative action, receiver, civil theft, a request for temporary
restraining order, and a request for injunctive relief. Prior to trial, the parties reached an
agreement in which Consolo agreed to relinquish any ownership interest in the business
and to settle the allegations in exchange for Menter’s agreement to pay Consolo a sum of
money. The agreement was effected through a series of documents, one of which
included an agreed consent judgment entry in which Menter consented to a judgment in
the amount of $500,000.
{¶4} When Menter discontinued making periodic payments to Consolo pursuant
to their agreement, Consolo filed the consent judgment on December 9, 2009. Menter
filed two motions on February 1, 2010, both of which were captioned, “Emergency
Motion to Enforce the Settlement Agreement and for Relief from Judgment Pursuant to
Civ.R. 60(B) with a Request for a Hearing.” The trial court held a hearing on the motions
on February 16, 2010. While the motions were similar in form and content, Menter
asserted at the hearing that one motion was intended to be a motion to enforce the
settlement agreement and vacate the judgment pursuant to Civ.R. 60(B), while the second
was a motion to stay collection on the judgment under Civ.R. 62 while the trial court
ruled on the motion to vacate.
{¶5} In its judgment entry, which was journalized on April 16, 2010, the trial
court made the following findings with respect to the dispute in this case. The problems
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with enforcement of the settlement agreement began when Menter, fearing that Consolo
was breaching the agreement, started unilaterally placing the $5,000 monthly payments
into a separate bank account rather than paying them to Menter according to the terms of
the agreement. Specifically, Menter received information that led him to believe that
Consolo was steering Menter’s business customers to other companies and competing
directly with Menter, actions which he believed breached their agreement.
{¶6} The trial court found that Consolo had never agreed to a non-compete
provision; and that Menter could not substantiate his suspicions to a degree that would
justify his failing to make the $5,000 monthly payments to Consolo. By the end of the
hearing, Menter agreed to turn over to Consolo all of the $5,000 monthly payments that
had been set aside.
{¶7} Consolo considered Menter to be in breach of the terms of their agreement
when Menter stopped making the monthly payments. Consolo therefore filed the consent
judgment entry which had been previously executed by the parties as part of the
settlement in this case. According to the consent judgment, Menter owed Consolo a total
of $500,000. According to a document entitled “Mutual Release and Settlement
Agreement,” $270,000 was the figure the parties agreed that Consolo would accept if
payments were made according to the terms set therein.
{¶8} On April 16, 2010, the trial court issued a judgment entry in which it
granted Menter’s motion to enforce the settlement agreement, found the consent
judgment to be void and unenforceable, vacated the consent journal entry that had been
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filed by Consolo on December 9, 2009, and overruled Menter’s Civ.R. 60(B) motion as
moot.
{¶9} Consolo filed a notice of appeal on May 13, 2010. On appeal, Consolo
raises two assignments of error. We consolidate those assignments of error to facilitate
review.
II.
ASSIGNMENT OF ERROR I
“APPELLEE MENTER’S ESCROWING OF PAYMENTS OWED TO
APPELLANT CONSOLO WAS NOT MERELY ‘NONCOMPLIANT’
BUT ROSE TO THE LEVEL OF A BREACH OF THE SETTLEMENT
AGREEMENT[.]”
ASSIGNMENT OF ERROR II
“THE TOTAL OF $500,000.00 OWED BY APPELLEES UPON THEIR
BREACH OF THE AGREEMENT ARE NOT LIQUIDATED DAMAGES
OR A PENALTY BUT THE AMOUNT OF THE SETTLEMENT
AGREEMENT THAT BECAME DUE AND OWING UPON
APPELLEE’S BREACH[.]”
{¶10} In his first assignment of error, Consolo argues that the trial court erred in
finding that Menter’s decision to stop making the monthly payments did not rise to the
level of a breach of the contract. In his second assignment of error, Consolo argues that
the trial court erred in concluding that the total amount of the signed agreement was
$270,000 and that the $500,000 consent judgment was void and unenforceable. As the
two issues are closely related, we address them together.
Breach of the Settlement Agreement
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{¶11} A settlement agreement is a binding contract between parties which
requires a meeting of the minds as well as an offer and acceptance. Rulli v. Fan Co.
(1997), 79 Ohio St. 3d 374, 376. A settlement agreement is subject to enforcement under
standard contract law. Id. “Generally, a breach of contract occurs when a party
demonstrates the existence of a binding contract or agreement; the nonbreaching party
performed its contractual obligations; the other party failed to fulfill its contractual
obligations without legal excuse; and the nonbreaching party suffered damages as a result
of the breach.” (emphasis omitted.) Textron Fin. Corp. v. Nationwide Mut. Ins. Co.
(1996), 115 Ohio App. 3d 137, 144, citing Garofalo v. Chicago Title Ins. Co. (1995), 104
Ohio App. 3d 95, 108. A plaintiff must prove the elements of a breach of contract by a
preponderance of the evidence. Cooper & Pachell v. Haslage (2001), 142 Ohio App. 3d
704, 707.
{¶12} Consolo argues on appeal that Menter’s decision to set aside the funds for
the monthly payments constituted a clear breach of the contract. Menter counters that the
evidence submitted and accepted by the trial court firmly established that Consolo failed
to meet his burden to prove by a preponderance of the evidence the second and third
elements of a breach of contract. Menter further contends that if there was a breach of
the settlement agreement, it was not material.
{¶13} A review of the hearing transcript reveals that issues arose surrounding
compliance with the signed agreement when Menter grew suspicious that Consolo was
steering his former clients to a competing credit card processing company. In light of
these suspicions, Menter began placing the monthly payments in a separate bank account
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in lieu of tendering payment to Consolo. During the hearing, the trial judge repeatedly
asked Menter to identify language in the agreement that prohibited Consolo from
soliciting former clients. While Menter could not identify any specific language, he
argued that such an understanding was implicit in the agreement. There was competing
testimony at the hearing as to whether Consolo had, in fact, been involved in his former
clients’ decision to leave Menter. The trial court made a specific finding in its judgment
entry that the settlement agreement did not contain a non-compete provision. The trial
court also concluded that Menter could not substantiate his suspicions that Consolo had
breached the agreement. At the conclusion of the hearing, Menter agreed to “release” the
money that had been set aside as “a show of good faith.” Consolo consented to the
release of the money but insisted that Menter now owed the $500,000 agreed upon as
reflected in the consent judgment.
{¶14} In its judgment entry, the trial court concluded that while Menter was
noncompliant with the settlement agreement, his conduct did not rise to the level of a
breach. Specifically, the trial court stated:
“First, the Court finds that the Defendants did not breach the terms of the
settlement agreement when they escrowed the $5000 monthly payments
until they could look into their suspicions about the Plaintiff. The
Defendants’ failure to make the payments was noncompliant with the terms
of the settlement agreement. But, given the totality of the circumstances –
including the Defendants’ escrowing and then returning the funds – the
Court finds the noncompliance does not reach the level of breach that
would excuse the Plaintiff from further performance of his duties under the
settlement agreement.
“The Defendants are, however, liable for paying interest to the Plaintiff, at
the statutory rate, for the period of time that money owed to the Plaintiff
was escrowed and withheld from him.”
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{¶15} A review of the record reveals that Menter’s conduct did constitute a breach
of the payment terms set forth in the Release. The fact that Menter subsequently offered
to release the payments which had been placed in a separate account does not alter the
reality that he had previously ceased to meet his obligations under the terms of the
agreement. Under Ohio law, it is generally presumed that “[t]he intent of the parties to a
contract is presumed to reside in the language they chose to employ in the agreement.”
Kelly v. Medical Life Ins. Co. (1987), 31 Ohio St. 3d 130, paragraph one of the syllabus.
“If the language of [a written agreement] is clear and unambiguous, this Court must
enforce the instrument as written.” Hite v. Leonard Ins. Servs. Agency, Inc. (Aug. 23,
2000), 9th Dist. No. 19838.
{¶16} Here, as set forth in the Release, after making two initial payments totaling
$50,000, Menter was required to tender monthly payments to Consolo. When asked if
Menter stopped making monthly payments due to his suspicion that Consolo was steering
clients to competitors, counsel for Menter stated, “Correct. But instead we escrowed
those payments and we have continued to escrow those [$5,000] payments every
month[.]” At the hearing, a letter was submitted into evidence that Menter’s counsel had
sent to Consolo’s counsel when Menter grew suspicious that Consolo was in breach of
the agreement. In this letter dated September 28, 2009, Menter’s attorney suggested that,
in order to preserve the existing settlement, the monthly payments should be placed “into
escrow” until the issues surrounding a possible breach by Consolo were resolved. A
review of the settlement documents reveals that there was no provision that allowed for
the payments to be withheld, or set aside, in the event of a possible dispute. When asked
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at the hearing if he thought there was language in the agreement which permitted him to
place the monthly payments in escrow, Menter testified, “Not that I can read, no.” There
was no evidence presented that Consolo consented to the monthly payments being set
aside. We also note that a second letter drafted by Menter’s attorney, dated October 16,
2009, indicated that the monthly payments would be suspended until the resolution of the
dispute. Thus, this case does not involve a scenario where Menter merely missed a
number of monthly payments. Instead, Menter made a conscious decision to cease
performance in violation of the Release. This course of action was not merely
“noncompliant.” Given the fact that Consolo was not in breach of any of the terms of the
settlement agreement, Menter, by setting aside the monthly payments, failed to fulfill his
contractual obligations without legal excuse. Thus, Menter’s conduct constituted a
breach of the payment provisions delineated in the Release.
{¶17} Menter argues in the alternative that even if refusing to make the monthly
payments did constitute a breach of the settlement agreement, the judgment of the trial
court should be upheld on the basis that the breach was not material. An appellate court
will not consider an argument raised for the first time on appeal. Gannon v. Klockenga,
9th Dist. No. 22946, 2006-Ohio-2972, at ¶21. As noted above, the trial court in this case
did not conduct an analysis of whether the breach was material. Instead, the trial court
concluded that, based on the totality of the circumstances, Menter’s “noncompliance” did
not constitute a breach of the settlement agreement. At the hearing on this matter, Menter
did not argue that his non-performance was not a material breach. Rather, Menter
maintained that he was under no obligation to perform because Consolo had violated the
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terms of the settlement agreement. While counsel for Menter went so far as to
acknowledge during closing argument that he sensed he would not prevail on his breach
theory if the matter were tried, Menter did not present an alternative argument in regard
to the materiality standard. As Menter did not make this argument before the trial court,
we decline to address it for the first time on appeal. Gannon at ¶21.
Amount of the Settlement
{¶18} The parties offer sharply contrasting views as to the total amount of the
settlement. Consolo argues that the parties agreed that Menter owed him $500,000 as
damages stemming from the allegations raised in the complaint as memorialized in the
consent entry. Consolo asserts that Menter was permitted under the terms of the
agreement to avoid full payment of the amount by making two initial payments totaling
$50,000, and then subsequently making monthly payments of $5,000 per month until
Consolo had received an aggregate sum of $270,000. The consent judgment, according
to Consolo, reflected the total amount of the settlement and was to be filed only if Menter
failed to meet the requirements necessary to avoid payment in full. Menter, on the other
hand, argues that the parties settled the case for a total of $270,000 and that the $500,000
consent judgment constituted an unenforceable penalty.
{¶19} Courts generally presume that the intent of the parties can be found in the
written terms of their contract. Shifrin v. Forest City Ent., Inc. (1992), 64 Ohio St. 3d
635, 638. If a contract is unambiguous, the language of the contract controls and
“[i]ntentions not expressed in the writing are deemed to have no existence and may not
be shown by parole evidence.” Aultman Hosp. Assn. v. Community Mut. Ins. Co. (1989),
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46 Ohio St. 3d 51, 53. If, however, “a contract is ambiguous, parol evidence may be
employed to resolve the ambiguity and ascertain the intention of the parties.” Illinois
Controls, Inc. v. Langham (1994), 70 Ohio St. 3d 512, 521. Terms in a contract are
ambiguous if their meanings cannot be determined from reading the entire contract, or if
they are reasonably susceptible to multiple interpretations. Butler v. Joshi (May 9, 2001),
9th Dist. No. 00CA0058. “The decision as to whether a contract is ambiguous and thus
requires extrinsic evidence to ascertain its meaning is one of law.” Ohio Historical Soc.
v. Gen. Maintenance & Eng. Co. (1989), 65 Ohio App. 3d 139, 146.
{¶20} The February 16, 2010 hearing was primarily devoted to consideration of
whether Menter had breached the agreement or alternatively whether the parties had
agreed to a noncompetition provision. Notwithstanding that primary focus, the actual
amount of the settlement also arose as an issue at the hearing. Consolo argued that he
determined the case had a value of $500,000 and the parties agreed to settle the case for
that amount. Thus, according to Consolo, the Release constituted an agreement to accept
a discounted amount on the condition that the payments were tendered as agreed. Menter
testified that the counsel for each party had negotiated a settlement amount of $270,000
but when he arrived at the courthouse to sign the agreement, he was informed by his
attorney that, “They want to put a penalty on you if you miss a payment that it’s going to
– you’re going to be penalized $500,000[.]” The trial court seemed to indicate that
Menter’s testimony on this point was not credible.
{¶21} While the amount of the settlement did arise as an issue at the hearing, the
vast majority of the testimony at the hearing focused on whether the agreement had been
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breached. In concluding that the consent judgment was an unenforceable penalty, the
trial court appears to have reached its conclusion based solely on the written terms of the
Release. Specifically, the trial court concluded that the parties settled the case for
$270,000, stating:
“[T]he Court finds – applying the tests of Lake[][R]idge Academy v. Carney
(1993), 66 Ohio St. 3d 376 and [Samson] Sales, Inc. v. Honeywell (1984),
12 Ohio St. 3d 27 – that the $230,000 added payment in the [$500,000]
Consent Judgment Entry to be an unenforceable penalty, not a legitimate
liquidated damages amount. The Court therefore finds the Consent
Judgment Entry void and unenforceable, and vacates the December 9, 2009
filing of the Consent [] Entry.
“The Court finds that computing actual damages for failure to make
payments on the consent agreement is a simple matter; and that the
$230,000 penalty is unconscionable.”
{¶22} The trial court relied on the precedent of two Ohio Supreme Court
decisions in reaching its conclusion. In Lake Ridge Academy, the Supreme Court held
that the freedom to contract is limited in situations where stipulated damages would
constitute a penalty. Lake Ridge Academy, 66 Ohio St. 3d at 381. In Samson Sales, the
Supreme Court held that:
“[w]here the parties have agreed on the amount of damages, ascertained by
estimation and adjustment, and have expressed this agreement in clear and
unambiguous terms, the amount so fixed should be treated as liquidated
damages and not as a penalty, if the damages would be (1) uncertain as to
amount and difficult[y] of proof, and if (2) the contract as a whole is not so
manifestly unconscionable, unreasonable, and disproportionate in amount
as to justify the conclusion that it does not express the true intention of the
parties; and if (3) the contract is consistent with the conclusion that it was
the intension of the parties that damages in the amount stated should follow
the breach thereof.” Samson Sales, 12 Ohio St. 3d at 28, quoting Jones v.
Stevens (1925), 112 Ohio St. 43, paragraph two of the syllabus.
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{¶23} We hold that the trial court erred as a matter of law in concluding that the
$500,000 consent judgment constituted an unenforceable penalty. A careful review of the
documents reveals that one could reasonably reach multiple conclusions with respect to
the amount of the settlement. Under the portion of the Release subtitled, “Release and
Covenants by Consolo,” the agreement states, in a pertinent part:
“1.6 Counsel for Consolo shall hold in escrow the Consent Judgment
Entry, a copy of which is attached hereto and incorporated herein as Exhibit
3, and the Promissory Note, a copy of which is attached hereto and
incorporated herein as Exhibit 4, in accordance with the terms and
conditions contained herein. Consolo’s counsel may disburse said
Promissory Note to Consolo and may file said Consent Judgment with the
Summit County Clerk of Courts, if and only if, Menter, EMS I and EMS II
default in payments as required by paragraph 2.2 herein.”
{¶24} The following paragraph, designated as Paragraph 1.7, states that counsel
for Consolo would be required to return the original consent judgment to Menter when
Menter had made all of the monthly payments. While Paragraph 1.6 indicated that
Consolo could file the consent judgment if Menter defaulted on the monthly payments,
there is no language indicating that the amount of the consent judgment represented the
settlement amount.
{¶25} Under the portion of the agreement that outlines the release and covenants
by Menter, the agreement contains the following language:
“2.2 Menter, EMS I and EMS II shall pay the total sum of two hundred
and seventy thousand dollars ($270,000) by making the following payments
to Consolo upon the following conditions:
“(a) Twenty Thousand Dollars ($20,000) upon delivery to Menter’s
counsel of an executed original of this Mutual Release and Settlement
Agreement, Voluntary Dismissal with Prejudice (Exhibit 1) and Agreed
Order of Dismissal (Exhibit 2); and
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“(b) Thirty Thousand Dollars ($30,000) within thirty (30) days after the
event delineated in subparagraph 2.2(a) has occurred; and
“(c) Beginning thirty (30) days after the event delineated in subparagraph
2.2(b) has occurred, and continuing on the same day of each month
thereafter, the sum of Five Thousand Dollars ($5,000) a month, until the
total sum of Two Hundred and Seventy Thousand Dollars ($270,000) as
required by this paragraph 2.2 has been paid to Consolo;
“***
“(h) The obligation to make aggregate payments of two hundred and
seventy thousand dollars ($270,000) to Consolo may be pre-paid at any
time without penalty.
“2.3 As security for the payments required by paragraph 2.2 above,
Menter, EMS I and EMS II shall tender to Consolo’s counsel a Promissory
Note in the amount of $500,000.00, a copy of which is attached hereto as
Exhibit 4. The original of this Promissory Note shall be held in escrow by
Consolo’s counsel and only distributed to Consolo in the event of a default
in a payment required by paragraph 2.2 herein which is not timely cured. If
all of the payments required by paragraph 2.2 herein are made, then
Consolo’s counsel shall return the original executed Promissory Note
(Exhibit 4) to Menter, along with the original executed Acknowledgment of
Payment in Full of Promissory Note (Exhibit 6). In the event of an uncured
default in a payment required by paragraph 2.2 herein, then the original
executed Promissory Note may be distributed by Consolo’s counsel to
Consolo; however, the balance due on said Promissory Note shall be
reduced by the total amount of any payments made under paragraph 2.2
herein.
“2.4 As further security for the payments required by paragraph 2.2
herein, Menter, EMS I and EMS II shall tender to Consolo’s counsel a
Consent Judgment Entry in the amount of $500,000.00, a copy of which is
attached hereto as Exhibit 3. The original executed Consent Judgment
Entry shall be held in escrow by Consolo’s counsel and only filed with the
Summit County Common Pleas Clerk of Courts in the event of a default in
a payment required by paragraph 2.2 herein which is not timely cured. If
all of the payments required by paragraph 2.2 are made, then Consolo’s
counsel shall return the original executed Consent Judgment Entry to
Menter, along with the original executed Satisfaction of Judgment (Exhibit
5). In the event of an uncured default in a payment required by paragraph
2.2 herein, then Consolo’s counsel may file the original Consent Judgment
Entry with the Summit County Common Pleas Court Clerk of Courts;
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however, the balance due on said judgment shall be reduced by the total
amount of any payments made under paragraph 2.2 herein.
“2.5 It is acknowledged and agreed by the parties hereto that the
Promissory Note (Exhibit 4) and the Consent Judgment Entry (Exhibit 3)
represent the same contingent obligation by Menter, EMS I and EMS II to
Consolo; and in the event of an uncured default in a payment required by
paragraph 2.2 herein, the maximum amount that Menter, EMS I and EMS
II could be jointly liable to Consolo for is the sum of $500,000, less the
total of any payments made to Consolo under paragraph 2.2 herein.”
{¶26} Paragraphs 2.3 and 2.4 reference the $500,000 amount in reference to both
the consent decree and the promissory note. This fact could be construed as evidence that
the $500,000 figure represented the parties’ evaluation as to the value of the settlement,
and their decision to provide security as such, much in the nature of a cognovit note.
Conversely the “promissory installment note” that is actually attached as Exhibit 4 to the
Release is for the amount of $270,000, and not the amount of $500,000 as referenced in
Paragraph 2.3 of the Release.
{¶27} The amount of the settlement in this case was not expressed in clear and
unambiguous terms. The parties’ agreement does not contain a provision which
explicitly identifies the amount of the settlement. It is clear that the consent judgment
that could be filed upon Menter’s nonpayment is for the amount of $500,000. It is also
clear, however, that Menter could have satisfied his obligation to Consolo by making
scheduled payments totaling an aggregate sum of $270,000. Unfortunately, the
significance of the $270,000 settlement figure and the $500,000 figure in the consent
judgment is unclear. Further complicating the issue is the fact that the amount of the
promissory note as referenced in Paragraph 2.3 and the actual amount of the promissory
15
note are inconsistent. Thus, unlike the circumstances this Court confronted in Quality
Mold, Inc. v. Committee to Elect Williams, 9th Dist. No. 23749, 2008-Ohio-2821, it is not
clear that the plaintiff settled the case for a certain amount but was willing to accept less
if certain conditions were met. Upon review of the records before us, this Court
concludes that the amount of the parties’ settlement is reasonably susceptible to more
than one interpretation. As the settlement is ambiguous with respect to the amount of the
settlement, the trial court erred as a matter of law in finding that the $500,000 consent
entry was an unenforceable penalty.
{¶28} To the extent that the trial court concluded that Menter did not breach the
terms of the settlement agreement, Consolo’s first assignment of error is sustained. To
the extent that the trial court found as a matter of law that the consent judgment
constituted an unenforceable penalty, it committed legal error and the second assignment
of error is sustained. In light of Menter’s breach, we remand for further proceedings in
regard to the amount of the parties’ settlement. See Saari v. Saari, 9th Dist. No.
08CA009507, 2009-Ohio-4940.
III.
{¶29} Consolo’s first and second assignments of error are sustained. The
judgment of the Summit County Court of Common Pleas is reversed and remanded for
further proceedings consistent with this decision.
Judgment reversed.
and cause remanded.
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There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(E). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellees.
EVE V. BELFANCE
FOR THE COURT
BELFANCE, P. J.
MOORE, J.
CONCUR
CARR, J.
CONCURS IN PART, AND DISSENTS IN PART, SAYING:
{¶30} I concur in the majority opinion with respect to the first assignment of error. I
respectfully dissent in regard to the majority's conclusion that the trial court erred in determining
that the $500,000 consent judgment was an unenforceable penalty.
{¶31} Consolo argues on appeal that it is clear from the language of the agreement that
the parties settled this case for $500,000. Consolo specifically argues that “Section I of the
Settlement Agreement resolved the pending lawsuit.” In making reference to “Section I of the
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Settlement Agreement,” Consolo is referring to Section I of the Mutual Release and Settlement
Agreement. Consolo’s argument is premised on the fact that the parties agreed that a $500,000
consent judgment in favor of Consolo could be filed if Menter failed to meet his monthly
obligations. Consolo emphasizes that the provision in the Mutual Release and Settlement
Agreement which first identifies the $500,000 consent judgment appears prior to any discussion
of a reduced payment arrangement. There is, however, no language in the Mutual Release and
Settlement Agreement which explicitly states that the parties agreed that Consolo should receive
$500,000 as damages stemming from the allegations raised in the complaint. Rather, the
language in Paragraph 2.2 clearly indicates that Menter was required under the agreement to pay
Consolo an aggregate sum of $270,000. Furthermore, there is no provision indicating that the
sum of $270,000 is less than the total amount of the settlement. Paragraph 1.6 states that
Consolo could file the signed consent judgment, which was attached and incorporated into the
Mutual Release and Settlement Agreement, should Menter default under his obligations under
Paragraph 2.2. Other than noting that the consent judgment is attached as an exhibit, Paragraph
1.6 does not even identify the amount of the consent judgment. While Paragraph 2.4 and
Paragraph 2.5 indicate that Menter could be liable for $500,000 should he default on the monthly
payments, there is no language indicating that the $500,000 figure represented the total amount
of the settlement, as opposed to a penalty provision to encourage performance. As I believe the
Mutual Release and Settlement Agreement makes it clear that the parties resolved the dispute for
$270,000, I would affirm the trial court’s determination that the $500,000 consent judgment was
an unenforceable penalty.
APPEARANCES:
WILLIAM T. WHITAKER and ANDREA L. WHITAKER, Attorneys at Law, for Appellant.
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JEFFREY T. WITSCHEY, and ALEX J. RAGON, Attorneys at Law, for Appellee.