Continental West Condominium Unit Owners Ass'n v. Howard E. Ferguson, Inc.

[This decision has been published in Ohio Official Reports at 

74 Ohio St.3d 501

.]




   CONTINENTAL WEST CONDOMINIUM UNIT OWNERS ASSN., APPELLANT, v.
              HOWARD E. FERGUSON, INC.; AIRKO, INC., APPELLEE.
   [Cite as Continental West Condominium Unit Owners Assn. v. Howard E.
                           Ferguson, Inc., 

1996-Ohio-158

.]
Civil procedure—Contracts—Settlement agreements—Obligee need not accept the
        performance, but need only conclude the litigation, when.
Unless the language employed in the agreed judgment incorporating a settlement
        specifically requires the obligee to accept the obligor’s performance, the
        obligee need not accept the performance, but need only conclude the
        litigation.
   (No. 94-1618—Submitted November 7, 1995—Decided February 14, 1996.)
       APPEAL from the Court of Appeals for Cuyahoga County, No. 66330.
                                  __________________
        {¶ 1} Continental      West     Condominium         Unit    Owners      Association
(“Continental”), appellant, sued Airko, Inc. (“Airko”), appellee, and others alleging
construction and materials defects in the installation of a new garage roof at the
Continental West Condominium complex. On the day of trial, the parties signed a
settlement agreement and all claims were dismissed with prejudice. The agreement
provided that Airko would install a new roof for $73,000.
        {¶ 2} Shortly thereafter, Continental informed Airko that it had hired
another company to complete the work on the garage roof and released Airko from
its duties under the settlement agreement by filing a notice of satisfaction of
judgment.
        {¶ 3} Airko moved the trial court to enforce the agreed judgment, seeking
to install the roof for the amount agreed upon and arguing that it had spent
considerable time and money in examining and planning the repair of the roof and
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pricing roofing materials. The trial court denied Airko’s motion to enforce and
Airko appealed. Concluding that the trial court abused its discretion in failing to
enforce the settlement agreement, the appellate court reversed and remanded the
cause to the trial court for a determination of Airko’s damages caused by
Continental’s purported breach of the settlement agreement.
       {¶ 4} The cause is now before this court pursuant to an allowance of a
discretionary appeal.
                              __________________
       Robert J. Valerian and Lisa M. Savarino, for appellant.
        Randall M. Perla and Scott D. White, for appellee.
                              __________________
       COOK, J.
       {¶ 5} This court must decide whether a party to a settlement agreement who
becomes obligated thereby to perform, can insist that the obligee accept such
performance despite the filing of a satisfaction of judgment. We hold that unless
the language employed in the agreed judgment incorporating a settlement
specifically requires the obligee to accept the obligor’s performance, the obligee
need not accept the performance, but need only conclude the litigation.
                                         I
       {¶ 6} Initially, we address the standard of review to be applied to rulings on
a motion to enforce a settlement agreement. The court of appeals applied an abuse
of discretion standard. However, because the issue is a question of contract law,
Ohio appellate courts must determine whether the trial court’s order is based on an
erroneous standard or a misconstruction of the law. The standard of review is
whether or not the trial court erred. See Mack v. Polson Rubber Co. (1984), 

14 Ohio St.3d 34

, 14 OBR 335, 

470 N.E.2d 902

, and Spercel v. Sterling Industries
(1972), 

31 Ohio St.2d 36

, 

60 O.O.2d 20

, 

285 N.E.2d 324

. Accordingly, the




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question before us is whether the trial court erred as a matter of law in dismissing
the motion to enforce the settlement agreement.
                                          II
       {¶ 7} It is axiomatic that a settlement agreement is a contract designed to
terminate a claim by preventing or ending litigation and that such agreements are
valid and enforceable by either party. Spercel v. Sterling Industries (1972), 

31 Ohio St.2d 36, 38

, 

60 O.O.2d 20

, 21, 

285 N.E.2d 324, 325

; see, also, 15 Ohio
Jurisprudence 3d (1979) 511, 516, Compromise, Accord, and Release, Sections 1
and 3; and Bolen v. Young (1982), 

8 Ohio App.3d 36

, 8 OBR 39, 

455 N.E.2d 1316

.
Further, settlement agreements are highly favored in the law. State ex rel. Wright
v. Weyandt (1977), 

50 Ohio St.2d 194

, 

4 O.O.3d 383

, 

363 N.E.2d 1387

; Spercel,

31 Ohio St.2d at 38

, 60 O.O.2d at 21, 

285 N.E.2d at 325

.
       {¶ 8} With these policies in mind, we look to the terms of the settlement
agreement to decide whether Continental agreed, as part of the settlement, to
engage Airko to replace the roof. The agreement states, in pertinent part, that
“[d]efendant, Airko, Inc., will for the sum of $73,000 provide a new roof for the
large garage on the premises of Continental West Condominium * * *.”
       {¶ 9} This language obligated Airko to perform, but did not obligate
Continental to accept such performance. Because the agreement incorporated into
the judgment signed by the judge and the parties was designed to establish the terms
by which the litigation would conclude, Continental’s only obligation was to end
the litigation under the terms of the settlement agreement. Continental fulfilled this
obligation by filing the satisfaction of the judgment. The agreed judgment was not
a separate contract for services between Airko and Continental, but instead was the
means for Airko to remedy Continental’s complaint against it.
       {¶ 10} The satisfaction of judgment relieved Airko of its duty to repair the
roof. Thus, there was nothing for Airko to enforce and, accordingly, the motion to
enforce the settlement agreement was correctly denied by the trial court.




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       {¶ 11} For the foregoing reasons, the decision of the court of appeals is
reversed, and the judgment of the trial court denying the motion to enforce the
agreed judgment is reinstated.
                                                                  Judgment reversed.
       MOYER, C.J., DOUGLAS, WRIGHT, F.E. SWEENEY and PFEIFER, JJ., concur.
       RESNICK, J., dissents.
                                 __________________
       ALICE ROBIE RESNICK, J., dissenting.
       {¶ 12} The majority acknowledges that a settlement agreement is valid and
enforceable by either party. (Emphasis added.) Spercel v. Sterling Industries
(1972), 

31 Ohio St.2d 36, 38

, 

60 O.O.2d 20

, 21, 

285 N.E.2d 324, 325

. See Mack
v. Poulson Rubber Co. (1984), 

14 Ohio St.3d 34, 36

, 14 OBR 335, 337, 

470 N.E.2d 902, 904

 (settlement agreement “constitutes a binding contract”).            Despite
conceding the general validity of settlement agreements as binding contracts, the
majority finds that this settlement is not enforceable by one of the signing parties.
Because the majority opinion allows Continental to repudiate a provision of the
settlement that should be binding, and because the majority does so in a way that is
inconsistent with prior decisions of this court on the binding nature of settlement
agreements, I dissent.
       {¶ 13} While the majority pays lip service to the principle that settlement
agreements are highly favored, its opinion does nothing to further settlements,
seeming instead to impose special conditions on such agreements inconsistent with
basic contract law. Yet, in line with Spercel and Mack, settlement agreements
should be treated as no more than, and no less than, contracts.
       {¶ 14} The fundamental flaw in the opinion is that the majority appears to
consider the “satisfaction of judgment” filed by Continental in the trial court to be
an important occurrence. Continental, throughout its brief, consistently refers to
itself as a “judgment creditor” and to Airko as a “judgment debtor,” and claims it




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                                January Term, 1996




“had the option to choose to enforce or not enforce a judgment in its favor.”
However, the settlement agreement terminated the underlying litigation. It is true
that the trial court did adopt the settlement agreement as a judgment through a
journal entry and so retained jurisdiction to enforce the terms of the settlement.
However, Continental obtained no judgment in its favor, and therefore never
acquired any status as a judgment creditor. Consequently, Continental’s attempt to
file a “satisfaction of judgment” was ineffectual to accomplish anything.
Continental certainly did not “release” Airko from its duties under the settlement
agreement, since only Airko could release itself from its own agreed-to duties. The
real question is what the duties of each party actually were. Thus, when the
majority’s statement of the issue places importance on Continental’s filing of a
satisfaction of judgment, the majority fails to recognize that the “satisfaction” was
a virtual nullity. Furthermore, the majority’s closing statement in its syllabus that
the obligee “need only conclude the litigation” is ineffectual because the settlement
reached by the parties already concluded the litigation. The question is, what are
the settlement’s terms?
       {¶ 15} With the settlement, the parties entered into a contractual
relationship. This agreement must be viewed as a contract between equals, and is
enforceable by either party upon its terms. Thus, the only real question to be
answered in resolving the issue herein involves the proper reading to be given to
the terms of the agreement. The majority seems to accept Continental’s claim that
the agreement did not obligate Continental in any way. However, the literal
wording of the agreement belies Continental’s argument.
       {¶ 16} The most relevant paragraph of the settlement agreement, paragraph
five, provides that “[d]efendant, Airko, Inc., will for the sum of $73,000 provide a
new roof for the large garage on the premises of Continental West Condominium,
such price to include the removal and disposal of the existing defective roof and all
labor and materials for a replacement single-membrane roof, including a ten-year




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manufacturer’s combined labor and material warranty. It is expressly understood
by Plaintiff, Continental West Condominium Unit Owners Association, that
Defendant Airko, Inc. will not either impliedly or expressly warrant materials used
in the replacement of the aforementioned roof.”
        {¶ 17} Continental claims paragraph five was merely a “standing offer” to
replace the roof. Continental argues the $73,000 was a guaranteed price quotation
that Continental had the option of accepting or rejecting as it saw fit. However, it
is apparent from the wording that both parties when they signed this agreement
contemplated that Airko would “provide a new roof” and that Continental would
accept it and pay Airko $73,000. The parties even went so far as to specify
conditions for the replacement roof, and the warranties to cover it. Obviously, the
provision that Airko would supply the roof was a material term of the settlement
agreement. It defies common sense to require that the settlement agreement’s
enforceability by Airko depends upon the employment of language specifying in
precise wording that “Continental agrees to accept Airko’s performance.” The very
phrasing of the agreement makes evident that the parties obviously intended that
acceptance of the roof by Continental, and the accompanying payment of $73,000
to Airko was a term of the settlement agreement. As Continental states in its merit
brief filed in this court, “it [Continental] was at least assured by the terms of the
Agreed Journal Entry that it would be able to pay for a new roof in full with the
proceeds of settlement received from the other Defendants.”1                Clearly, those
proceeds were to go to Airko.
        {¶ 18} Both parties, at the time of the signing of the agreement, provided
consideration to support it. Continental, of course, gave up the opportunity to
prevail in its lawsuit, and agreed to pay Airko $73,000 for installation of the roof.


1. Paragraph one of the settlement agreement required defendant Dennis Fedor, executor of the
estate of Howard E. Ferguson, to pay Continental $76,500. Paragraph four of the settlement
agreement required defendant HMH Restoration Co., Inc. to pay Continental $6,000




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                                 January Term, 1996




Airko also provided consideration, giving up its own opportunity for vindication in
litigation in which it vigorously contested liability, and agreed to provide the roof
in return for the $73,000. Consequently, a contract was formed, and both parties
were mutually bound to honor it. Just because Continental decided later that it had
not really gotten terms as favorable as it believed earlier did not entitle it to ignore
its obligation. The impression given by the majority opinion that one of the parties
to a contract, Continental, could unilaterally decide which terms to honor and which
terms to ignore by filing a “satisfaction of judgment” flies in the face of basic
contract law. I agree with the court of appeals that a valid contract existed and that
Continental breached the contract by unilaterally repudiating a material term. The
trial court erred by failing to enforce the settlement agreement’s terms.
        {¶ 19} This court’s decision in Mack v. Polson Rubber Co., supra, is
particularly valid to resolution of the issue here. Mack was also an appeal from a
trial court’s ruling on a motion to enforce a settlement agreement. This court
affirmed the trial court’s grant of the motion, and made the following analysis of
the Spercel case:
        {¶ 20} “[U]nder 

Spercel, supra,

 the trial court does possess the authority to
enforce a settlement agreement voluntarily entered into by the parties to a lawsuit
since such an agreement constitutes a binding contract. In 

Spercel, supra,

 a party
to a settlement agreement refused to comply with its terms and filed a petition to
vacate the agreement. This court refused to allow the unilateral rescission of the
settlement agreement solely on the basis that the party seeking rescission had
changed his mind and become dissatisfied with the agreement. As we noted in

Spercel, supra, at 40

 [60 O.O.2d at 22-23, 

285 N.E.2d at 327

]:
        {¶ 21} “‘To permit a party to unilaterally repudiate a settlement agreement
would render the entire settlement proceedings a nullity, even though, as we have
already determined, the agreement is of binding force.’ ” Mack v. Polson Rubber
Co., 

14 Ohio St.3d at 36

, 14 OBR at 337, 

470 N.E.2d at 903-904

.




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         {¶ 22} Just as in Spercel and in Mack, Continental attempts to repudiate the
terms of a binding settlement agreement.2 Today’s holding by the majority strikes
a severe blow to the useful and important process of settlement agreements in this
state, and is contrary to basic contract law.
                                     __________________




2. However, the determination that the trial court erred does not necessarily resolve this case. When
Airko appealed the trial court’s decision to deny the motion to enforce the settlement, Airko did not
obtain a stay of the trial court’s order, and no bond was posted. Continental contends that it was
justified in acting in reliance upon a valid, unstayed trial court judgment when it had another
contractor replace the roof. Continental essentially claims the appeal became moot when Airko
failed to obtain a stay and to post bond. Although the majority does not reach this issue, I believe
it is the pivotal issue upon which the case should turn, given my conclusion that the trial court erred
in failing to enforce the settlement.




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