Island Entertainment, Inc. v. Castaneda

882 S.W.2d 2, 43 A.L.R. 5th 855, 1994 Tex. App. LEXIS 742, 1994 WL 11563
CourtCourt of Appeals of Texas
DecidedApril 7, 1994
Docket01-93-00321-CV
StatusPublished
Cited by23 cases

This text of 882 S.W.2d 2 (Island Entertainment, Inc. v. Castaneda) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Island Entertainment, Inc. v. Castaneda, 882 S.W.2d 2, 43 A.L.R. 5th 855, 1994 Tex. App. LEXIS 742, 1994 WL 11563 (Tex. Ct. App. 1994).

Opinions

OPINION

OLIVER-PARROTT, Chief Justice.

Appellants, Island Entertainment, Inc., Island Entertainment Company, Tilman J. Fertitta, and Todd Fertitta, appeal the trial court’s award of sanctions for failure to pay amounts owed pursuant to a settlement agreement within a reasonable time. In two points of error, appellants assert their conduct was not sanctionable as a matter of law, and the trial court abused its discretion because the sanctions were not just or appropriate and did not bear a relationship to the harm caused by them.

The primary question before the court is whether the failure to promptly pay a written settlement agreement made after mediation should be punishable by sanctions. We think not.

Factual and procedural background

Appellants were defendants in a multi-party wrongful death action brought by the parents of a young man killed in an automobile accident. The parties agreed to participate in mediation and on July 15, 1992, entered into a rule 111 settlement agreement. The total amount to be paid by all defendants was $105,000. Appellants’ share of this amount was $10,000. The agreement required that appellants pay $5,000, and that Tilman Fer-titta execute a promissory note for $5,000; appellants also had to pay one-fourth of the appellees’ court costs. The handwritten agreement did not contain a deadline for payment or for execution and delivery of the note.

On August 3, 1992, the plaintiffs’ attorney, Norwood Ruiz, sent a letter to appellants’ attorney, Steven Scheinthal. Ruiz indicated he had received settlement checks from all the defendants except appellants. He asked Scheinthal to send him a check and the promissory note, and stated:

If I do not receive the above referred within seven (7) days of your receipt of this letter, you can tell Mr. Fertitta that his refusal to comply with the settlement agreement voids our agreement, and that I plan to settle with all the other parties as per my agreement and proceed against all of the non-settling parties as soon as possible. I understand your position but please try to understand mine. If your client doesn’t want to abide by our settlement agreement then we will just go from there.

On September 16, 1992, H. Mark Burek, an attorney representing one of the other defendants, also wrote to Scheinthal, asking him to comply with the settlement agreement. Burck’s letter noted, “The remaining parties to this case are anxious to have the final settlement approved by the Court and have a final judgment entered to finally put this matter to rest.”

On September 29,1992, Ruiz filed a motion to enforce agreement and motion for sanctions. On November 9, Scheinthal sent Ruiz a check for $5,000, an executed promissory note, a check for the first three installments due on the note, a check for plaintiffs’ court costs, and a release. He stated in his letter:

You are instructed to hold the settlement funds and Promissory Note in trust pending execution of the Release and return of same to my office and confirmation that you have passed the Motion to Enforce Mediation Agreement and Motion for Sanctions.

Ruiz did not pass the motion. The trial court held a sanctions hearing on November 10. Ruiz testified he had received checks from all the other defendants but could not [4]*4cash the checks “because it presents a lot of troubles if we start giving releases the way there’s so many cross-claims and what have you.” Scheinthal testified regarding the delay in payment. He stated that after the mediation, he left his law firm and was not able to get appellants’ file until October; he also stated that the Fertittas misplaced their copy of the agreement. Todd Fertitta testified he did not have the financial resources to pay the amounts due until November 9.2 Todd, who attended the mediation and signed the agreement on behalf of himself and his brother, equivocated when asked if he represented his brother at the mediation.

The trial court entered a final judgment on December 9 and directed disbursement of $100,000 to the plaintiffs.3 The 'trial court further found that the appellants’ failure “to pay the settlement proceeds pursuant to the Mediation Agreement to Plaintiffs within a reasonable time from the date the Mediation Agreement was signed was a breach of the Mediation agreement_” The court awarded plaintiffs: $2,250 for loss of interest on the settlement proceeds; $2,500 in attorney’s fees; and $10,000 for mental anguish. The trial court also assessed sanctions of $15,000 against appellants and Scheinthal because:

these parties failed to act in good faith and executed an agreement when they knew they would not abide by the agreement; had no authority to enter into the agreement; and did not have the financial ability to pay the amount they agreed to pay under the terms of the Mediation Agreement. Good cause also exists for the imposition of sanctions since, by these parties’ signatures on the Mediation Agreement, they certified to the Plaintiffs their acceptance of the settlement agreement and that they would comply therewith within a reasonable time when, in fact, these parties signed said agreement in bad faith and for the purpose of delay or to otherwise harass said plaintiffs.

The trial court entered a modified final judgment on February 19, 1998, in which it deleted the $10,000 sanction for mental anguish and excluded Scheinthal from the $15,000 sanction award.

Was appellants’ conduct sanctionable?

Appellants assert that a litigant cannot be sanctioned for not paying money owed pursuant to a settlement agreement. They argue that under rule 13 of the Texas Rules of Civil Procedure,4 a trial court must find the document in question is groundless. Appellants assert the mediation agreement is not groundless because plaintiffs could have moved for entry of judgment on the basis of the agreement. Appellants also note that plaintiffs could have maintained their original cause of action against appellants. See Rizk v. Millard, 810 S.W.2d 318, 321 (Tex.App.—Houston [14th Dist.] 1991, orig. proceeding) (repudiation of an unsigned settlement agreement forged in mediation is not subject to discovery sanctions under Tex.R.Civ.P. [5]*5215; options available to party are either filing suit on the agreement or continuing with the original suit); see also Tex.Civ.PRAC. & Rem.Code Ann. § 154.071(a) (Vernon Supp. 1993) (if the parties reach a settlement and execute a written agreement disposing of the dispute, the agreement is enforceable in the same manner as any other written contract).

Although plaintiffs argue that appellants’ conduct constitutes a rule 13 violation, they concede that neither the rules of civil procedure nor the Civil Practice and Remedies Code specifically provides for sanctions in alternative dispute resolution situations. They argue, however, that trial courts must have a “mechanism to prevent abuse after a party to mediation has voluntarily chosen to participate in the mediation.” Appellees rely on Kutch v. Del Mar College, 831 S.W.2d 506 (Tex.App.—Corpus Christi 1992, no writ). In Kutch, the trial court dismissed a lawsuit for failure to timely replead. Id. at 507.

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Cite This Page — Counsel Stack

Bluebook (online)
882 S.W.2d 2, 43 A.L.R. 5th 855, 1994 Tex. App. LEXIS 742, 1994 WL 11563, Counsel Stack Legal Research, https://law.counselstack.com/opinion/island-entertainment-inc-v-castaneda-texapp-1994.