Two Brothers Trucking v. Modine Manufacturing Company and Renato Zapata & Company

• Court: Court of Appeals of Texas
• Decided: July 23, 2009
• Docket: 13-07-00427-CV
• Status: Published

Opinion

NUMBER 13-07-00427-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

TWO BROTHERS TRUCKING, Appellant,

v.

MODINE MANUFACTURING COMPANY AND RENATO ZAPATA & COMPANY, Appellees.

On appeal from the County Court at Law No. 3 of Cameron County, Texas.

MEMORANDUM OPINION

Before Justices Yañez, Rodriguez, and Benavides Memorandum Opinion by Justice Rodriguez

The County Court at Law No. 3 in Cameron County entered an order in favor of

appellees Modine Manufacturing Company (Modine) and Renato Zapata & Company

(Zapata) enforcing a settlement agreement against appellant Two Brothers Trucking (Two

Brothers) and awarding attorney's fees to Zapata. Two Brothers challenges the

enforcement order and brings four issues on appeal, contending that: (1) the settlement agreement is unenforceable as a matter of law under rule 11 of the Texas Rules of Civil

Procedure; (2) the trial court's findings of fact are unsupported by the evidence and its

conclusions of law are unsupported by the findings; (3) Two Brothers had no notice of

Modine's participation and argument at the hearing on Zapata's motion to enforce

settlement agreement and was, thus, denied due process of law; and (4) there is no legal,

factual, contractual, or equitable basis for the award of attorney's fees to Zapata. We

reverse and remand.

I. BACKGROUND

In 2002, Modine, using Two Brothers as its property transportation broker, shipped

several truckloads of product from Indiana to Mexico.1 As part of its arrangement with

Modine, Two Brothers negotiated a freight rate with Sunline Commercial Carriers, Inc. for

the United States leg of the trips, and Sunline transported the shipments from Indiana to

Laredo, Texas on its trucks.2 As consignee on the bill of lading, Zapata held the products

in Laredo before transportation to their ultimate destination in Mexico.3

On April 11, 2003, Sunline filed suit on a sworn account against Two Brothers for

failure to pay Sunline's invoices. Two Brothers then filed a third-party action against

Modine and Zapata, seeking indemnity and reimbursement for Sunline's claims against

1 The num ber of shipm ents arranged by T wo Brothers for Modine is not clear from the record. However, the exact num ber is irrelevant for purposes of this appeal.

2 Tracom sa, S.A., the trucking com pany that transported the shipm ents from Laredo to Mexico, is not a party to this case.

3 A consignee is a person or business holding another's goods for sale or for delivery to a designated agent. B LAC K ' S L AW D IC TIO NAR Y 258 (8th ed. 2005). A bill of lading is a receipt obtained by the shipper of goods from the carrier (e.g. trucking com pany, railroad, ship, or air freighter) for shipm ent to a particular buyer. It is a contract protecting the shipper by guaranteeing paym ent and satisfies the carrier that the recipient has proof of the right to the goods. Id. at 135-36.

2 Two Brothers. The petition also claimed breach of contract damages in the amount of

$16,593.00 for freight charges advanced to participating motor carriers by Two Brothers;

Two Brothers asserted that Modine was responsible for such transportation charges under

the bill of lading contracts and never compensated Two Brothers for advancing payment

to the carriers.

The trial court ordered all parties–-Sunline (the original plaintiff), Two Brothers (the

original defendant and third-party plaintiff), and Modine and Zapata (the third-party

defendants)–-to mediation. Purportedly, the parties reached an agreement under which

Sunline would release its claims against Two Brothers, Modine, and Zapata in exchange

for payment of $10,000.00, divided as follows: $6,500.00 from Modine; $2,500.00 from

Two Brothers; and $1,000.00 from Zapata. At the end of the mediation, the parties did not

draft a formalized settlement agreement. Modine and Zapata sent checks for their

amounts directly to Sunline.

On April 21, 2006, the trial court issued an order dismissing only the claims of

Sunline against Two Brothers, Modine, and Zapata. Zapata filed its motion to enforce

settlement agreement on February 21, 2007, claiming that Two Brothers had breached the

alleged settlement agreement by failing to dismiss its third-party causes of action against

Modine and Zapata.4 On March 28, 2007, the court held a hearing on Zapata's motion.5

4 On the sam e date, Zapata also filed a m otion for sanctions against Two Brothers. However, Zapata withdrew this m otion at the hearing on the m otion to enforce.

5 Modine was not a party to Zapata's m otion to enforce but appeared at the hearing and adopted Zapata's argum ents in favor of granting the m otion. Two Brothers has challenged Modine's un-noticed appearance at the trial as a denial of its due process. However, because we conclude that Two Brothers' first issue regarding the alleged agreem ent's com pliance with rule 11 is dispositive, we do not reach Two Brothers' due process issue. See T EX . R. A PP . P. 47.1.

3 At the hearing, counsel for Zapata presented and summarized a series of letters

sent between the attorneys for the parties following the mediation. One of the letters was

sent by Sunline's attorney to the attorneys for Two Brothers, Modine, and Zapata. The

remaining two letters were correspondence between the attorneys for Modine and Zapata

only. Counsel for Two Brothers objected to the court's consideration of this

correspondence because neither he nor his client were included in the final two letters and

because there was no correspondence evidencing Two Brothers' assent to the release of

its claims against Modine and Zapata. Counsel for Two Brothers repeatedly argued that

there was no valid, written settlement agreement that the court could enforce with regard

to Two Brothers' third-party claims against Modine and Zapata.

At the conclusion of the hearing, the court granted Zapata's motion to enforce the

settlement agreement and awarded Zapata $2,000.00 in attorney's fees. The court issued

an order on April 10, 2007, enforcing the settlement agreement. The trial court ordered

that (1) monies paid by Modine and Zapata to Sunline constituted full settlement of Two

Brothers' third-party claims, and (2) all third-party claims by Two Brothers against Modine

and Zapata were dismissed with prejudice. This appeal ensued.

II. STANDARD OF REVIEW and APPLICABLE LAW

"[C]ompliance with Rule 11 is a general prerequisite for any judgment enforcing an

agreement touching a pending suit." Kennedy v. Hyde, 682 S.W.2d 525, 529 (Tex. 1984);

see TEX . R. CIV. P. 11. We review whether a court properly applied rule 11 under an abuse

of discretion standard. Breckenridge v. Nationsbank of Tex., N.A., 79 S.W.3d 151, 157

(Tex. App.–Texarkana 2001, pet. denied). A court does not abuse its discretion so long

as it acts according to guiding rules or principles. Id.

4 To enforce a settlement agreement when one party does not consent, the action to

enforce "must be based on proper pleading and proof," and the agreement must comply

with rule 11.6 Padilla v. LaFrance, 907 S.W.2d 454, 462 (Tex. 1995); Alcantar v. Okla. Nat'l

Bank, 47 S.W.3d 815, 819 (Tex. App.–Fort Worth 2001, no pet.). Compliance with rule 11

requires that the agreement is either (1) "in writing, signed and filed with the papers as part

of the record," or (2) "made in open court and entered of record." TEX . R. CIV. P. 11. A

writing is sufficient if it is "'complete within itself in every material detail'" and "'contains all

of the essential elements of the agreement, so that the contract can be ascertained from

the writings without resorting to oral testimony.'" Padilla, 907 S.W.2d at 460 (quoting

Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex. 1978); see also Perales v. Spohn Health

Sys. Corp., No. 13-03-178-CV, 2004 WL 1576739, at *2 (Tex. App.–Corpus Christi July 15,

2004, pet. denied). In other words, the agreement must comply with general contract

principles–-including a valid offer and acceptance–-to comply with rule 11. See Alcantar,

47 S.W.3d at 819; see also Perales, 2004 WL 1576739, at *2. The agreement can be

memorialized in writing through multiple documents. Roeglin v. Daves, 83 S.W.3d 326,

330 (Tex. App.–Austin 2002, pet. denied). "[T]he made-in-open-court exception to Rule

11" requires "a statement into the record of the terms of the agreement" and "the

agreement of the parties (or their counsel) to be bound by it affirmatively stated on the

record." Anderegg v. High Standard, Inc., 825 F.2d 77, 81 (5th Cir. 1987).

6 This court has discussed Padilla at length in Twist v. McAllen National Bank, in which we concluded that an oral m otion m ade in open court was sufficient to m eet the pleading requirem ent under Padilla. 248 S.W .3d 351, 362 (Tex. App.–Corpus Christi 2007, orig. proceeding [m and. denied]). Because Zapata filed a written m otion to enforce settlem ent agreem ent, the facts in this case are distinguishable and, therefore, do not contravene our holding in Twist.

5 III. DISCUSSION

By its first issue, Two Brothers complains that the settlement agreement that is the

subject of Zapata's motion to enforce is unenforceable because it does not comply with

Texas Rule of Civil Procedure 11 and, therefore, that the trial court erred in enforcing the

agreement. We agree.

Here, it is true that, at the hearing, Zapata and Modine presented the trial court with

a series of writings. See Roeglin, 83 S.W.3d at 330. These writings were three letters

summarized aloud to the court by counsel for Zapata. The first letter sent by Sunline's

attorney to the attorneys for Two Brothers, Modine, and Zapata7 stated the following:

Please allow this letter to memorialize my conversation with [counsel for Modine] wherein he confirmed settlement of the above-referenced case (i.e. Sunline v. Two Brothers) as to claims by Sunline Commercial Carriers against Two Brothers, Modine, and Zapata. The claims will be settled in the amount of $10,000.00; $6,500 coming from Modine; $2,500 from Two Brothers; and, $1,000 from Zapata. Payment to be received within 14 days.

Please contact me if anybody is not in agreement with such settlement.

The second summarized letter was sent by Zapata to an attorney for Modine, proposing

that Zapata pay $1,000 to finally resolve the matter and expressing hope that "they"

accept; it is unclear if "they" means Sunline, Two Brothers, or Modine. Regardless, neither

Sunline nor Two Brothers was copied on this correspondence. The third and final letter

that was read aloud was sent by Modine to Zapata and stated that Modine was responding

to Zapata's earlier letter in which Zapata summarized its expenses. Both Zapata and

Modine also introduced the checks they had tendered to Sunline and a cover letter from

Modine's counsel to counsel for Sunline enclosing Modine's check and stating that the

7 A written copy of this letter is also included in the clerk's record as an exhibit to Zapata's m otion for sanctions.

6 check represented Modine's portion of the settlement. These documents were then

formally admitted as exhibits by the court. Zapata and Modine argued to the trial court and

argue now on appeal that the letters and checks proved the existence of a valid settlement

agreement.

To the contrary, whether read together or separately, the writings relied upon by

Zapata and Modine do not evidence a settlement agreement to which all parties consented

and agreed to dismiss the third-party claims. To enforce the purported agreement, Zapata

and Modine were required to show the agreement complied with rule 11. See Padilla, 907

S.W.2d at 460; Alcantar, 47 S.W.3d at 819. The letter from Sunline's counsel to counsel

for the other parties outlined the terms of the supposed agreement but did not, within itself,

indicate that the parties had agreed to dismiss Two Brothers' third-party claims against

Zapata and Modine. Similarly, Zapata's and Modine's checks to Sunline do not prove that

the alleged agreement was intended to dispose of Two Brothers' third-party claims. The

other two letters referenced at the hearing demonstrated nothing more than a discussion

between Zapata, Modine, and their attorneys about the status of the agreement and did

not include Sunline or Two Brothers. See Roeglin, 83 S.W.3d at 331-32 (holding that a

series of documents did not comply with Rule 11 and prove the existence of an

enforceable agreement where none of the letters were signed by the party–-or its

attorney–-against whom the agreement was to be enforced); Prevost v. Ins. Advisors of

Tex., Inc., 46 S.W.3d 289, 293 (Tex. App.–Fort Worth 2001, pet. denied) (denying the

existence of a settlement agreement because, in part, all of the parties had not signed-off

on the agreement). In fact, in one of the letters, Zapata communicates its hope that the

other parties accept. If anything, this sentiment alone establishes an absence of offer and

7 acceptance. See Alcantar, 47 S.W.3d at 819; see also Perales, 2004 WL 1576739, at *2.

In short, the writings urged by Zapata and Modine as proof of a settlement agreement are

not "complete . . . in every detail" and do not contain the "essential elements" of a valid

agreement. See Padilla, 907 S.W.2d at 460.

Neither does the record demonstrate an agreement made in open court, as is

argued by Modine. See TEX . R. CIV. P. 11. At the hearing, counsel for Zapata and Modine

discussed the specific terms of the alleged agreement and speculated about the intent of

the parties to enter the agreement. They also hypothesized that Zapata's and Modine's

payment to Sunline implied an agreement because they were not parties to the original suit

between Two Brothers and Sunline and would have had no other reason to be involved but

to settle the third-party claims. Even assuming this to be a correct supposition, there was,

nonetheless, no agreement made in open court because counsel for Two Brothers

maintained throughout the hearing that Two Brothers did not assent to the agreement to

release its third-party claims. See Anderegg, 825 F.2d at 81. Absent an offer and

acceptance, agreement by all parties, or some other indication that the parties were before

the court to announce their settlement, there could not have been an enforceable

agreement made before the court. See, e.g., Neasbitt v. Warren, 105 S.W.3d 113, 116-17

(Tex. App.–Fort Worth 2003, no pet.) (enforcing an agreement only where the parties

"recited on the record the terms of the agreement" and "consented to the detailed

agreement on the record before the trial court").

We cannot say that the trial court acted with reference to guiding rules and

principles because the writings in the record do not evidence an enforceable agreement

and no agreement was made between the parties in open court. See TEX . R. CIV. P. 11.

8 Therefore, the trial court was without authority to enforce the agreement and abused its

discretion in granting the motion to enforce, dismissing all third-party claims, and awarding

attorney's fees.

We sustain Two Brothers' first issue. Because our conclusion on the first issue

disposes of the appeal, we do not reach Two Brothers' remaining issues. See TEX . R. APP.

P. 47.1.

IV. CONCLUSION

We reverse the judgment of the trial court and remand for further proceedings in

accordance with this opinion.

NELDA V. RODRIGUEZ Justice

Memorandum Opinion delivered and filed this 23rd day of July, 2009.