Title: Continental West Condominium Unit Owners Assn. v. Howard E. Ferguson, Inc.

State: ohio

Issuer: Ohio Supreme Court

Document:

Continental West Condominium Unit Owners Assn., Appellant, v. Howard E. 
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Ferguson, Inc.; Airko, Inc., Appellee. 
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[Cite as Continental West Condominium Unit Owners Assn. v. Howard E. 
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Ferguson, Inc. (1996), ____ Ohio St.3d. _____.] 
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Civil procedure -- Contracts -- Settlement agreements -- Obligee need 
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not accept the performance, but need only conclude the 
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litigation, when. 
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--- 
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Unless the language employed in the agreed judgment incorporating a 
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settlement specifically requires the obligee to accept the obligor’s 
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performance, the obligee need not accept the performance, but need only 
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conclude the litigation. 
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--- 
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(No. 94-1618 -- Submitted November 7, 1995 -- Decided February 14, 1996.) 
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Appeal from the Court of Appeals for Cuyahoga County, No. 66330. 
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Continental 
West 
Condominium 
Unit 
Owners 
Association 
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(“Continental”), appellant, sued Airko, Inc. (“Airko”), appellee, and others 
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alleging construction and materials defects in the installation of a new garage 
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roof at the Continental West Condominium complex.  On the day of trial, the 
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parties signed a settlement agreement and all claims were dismissed with 
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prejudice.  The agreement provided that Airko would install a new roof for 
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$73,000. 
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Shortly thereafter, Continental informed Airko that it had hired another 
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company to complete the work on the garage roof and released Airko from its 
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duties under the settlement agreement by filing a notice of satisfaction of 
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judgment. 
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Airko moved the trial court to enforce the agreed judgment, seeking to 
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install the roof for the amount agreed upon and arguing that it had spent 
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considerable time and money in examining and planning the repair of the roof 
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and pricing roofing materials.  The trial court denied Airko’s motion to enforce 
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and Airko appealed.  Concluding that the trial court abused its discretion in 
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failing to enforce the settlement agreement, the appellate court reversed and 
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remanded the cause to the trial court for a determination of Airko’s damages 
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caused by Continental’s purported breach of the settlement agreement. 
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The cause is now before this court pursuant to an allowance of a 
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discretionary appeal. 
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_____________________ 
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Robert J. Valerian and Lisa M. Savarino, for appellant. 
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 Randall M. Perla and Scott D. White, for appellee. 
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_____________________ 
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Cook, J.  This court must decide whether a party to a settlement 
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agreement who becomes obligated thereby to perform, can insist that the 
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obligee accept such performance despite the filing of a satisfaction of 
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judgment.  We hold that unless the language employed in the agreed judgment 
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incorporating a settlement specifically requires the obligee to accept the 
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obligor’s performance, the obligee need not accept the performance, but need 
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only conclude the litigation. 
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I 
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Initially, we address the standard of review to be applied to rulings on a 
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motion to enforce a settlement agreement.  The court of appeals applied an 
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abuse of discretion standard.  However, because the issue is a question of 
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contract law, Ohio appellate courts must determine whether the trial court’s 
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order is based on an erroneous standard or a misconstruction of the law.  The 
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standard of review is whether or not the trial court erred.  See Mack v. Polson 
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Rubber Co. (1984), 14 Ohio St.3d 34, 14 OBR 335, 470 N.E.2d 902, and 
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Spercel v. Sterling Industries (1972), 31 Ohio St.2d 36, 60 O.O.2d 20, 285 
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N.E.2d 324.  Accordingly, the question before us is whether the trial court 
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erred as a matter of law in dismissing the motion to enforce the settlement 
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agreement.  
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II 
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It is axiomatic that a settlement agreement is a contract designed to 
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terminate a claim by preventing or ending litigation and that such agreements 
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are valid and enforceable by either party.   Spercel v. Sterling Industries (1972), 
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31 Ohio St.2d 36, 38, 60 O.O.2d 20, 21, 285 N.E.2d 324, 325; see, also, 15 
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Ohio Jurisprudence 3d (1979) 511, 516, Compromise, Accord, and Release, 
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Sections 1 and 3; and Bolen v. Young (1982), 8 Ohio App.3d 36, 8 OBR 39, 
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455 N.E.2d 1316.  Further, settlement agreements are highly favored in the law.  
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State ex rel. Wright v. Weyandt (1977), 50 Ohio St.2d 194, 4 O.O.3d 383, 363 
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N.E.2d 1387; Spercel, 31 Ohio St.2d at 38, 60 O.O.2d at 21, 285 N.E.2d at 325.   
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With these policies in mind, we look to the terms of the settlement 
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agreement to decide whether Continental agreed, as part of the settlement, to 
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engage Airko to replace the roof.  The agreement states, in pertinent part, that 
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“[d]efendant, Airko, Inc., will for the sum of $73,000 provide a new roof for 
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the large garage on the premises of Continental West Condominium * * *.” 
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This language obligated Airko to perform, but did not obligate Continental to 
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accept such performance.  Because the agreement incorporated into the 
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judgment signed by the judge and the parties was designed to establish the 
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terms by which the litigation would conclude, Continental’s only obligation 
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was to end the litigation under the terms of the settlement agreement.  
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Continental fulfilled this obligation by filing the satisfaction of the judgment. 
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The agreed judgment was not a separate contract for services between Airko 
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and Continental, but instead was the means for Airko to remedy Continental’s 
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complaint against it. 
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The satisfaction of judgment relieved Airko of its duty to repair the roof.  
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Thus, there was nothing for Airko to enforce and, accordingly, the motion to 
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enforce the settlement agreement was correctly denied by the trial court. 
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For the foregoing reasons, the decision of the court of appeals is 
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reversed, and the judgment of the trial court denying the motion to enforce the 
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agreed judgment is reinstated. 
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Judgment reversed. 
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MOYER, C.J., DOUGLAS, WRIGHT, F.E. SWEENEY and PFEIFER, JJ., concur. 
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RESNICK, J., dissents. 
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ALICE ROBIE RESNICK, J., dissenting.  The majority acknowledges that a 
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settlement agreement is valid and enforceable by either party.  (Emphasis 
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added.)  Spercel v. Sterling Industries (1972), 31 Ohio St.2d 36, 38, 60 O.O.2d 
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20, 21, 285 N.E.2d 324, 325.  See Mack v. Poulson Rubber Co. (1984), 14 
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Ohio St.3d 34, 36, 14 OBR 335, 337, 470 N.E.2d 902, 904 (settlement 
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agreement “constitutes a binding contract”).  Despite conceding the general 
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validity of settlement agreements as binding contracts, the majority finds that 
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this settlement is not enforceable by one of the signing parties.  Because the 
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majority opinion allows Continental to repudiate a provision of the settlement 
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that should be binding, and because the majority does so in a way that is 
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inconsistent with prior decisions of this court on the binding nature of 
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settlement agreements, I dissent. 
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While the majority pays lip service to the principle that settlement 
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agreements are highly favored, its opinion does nothing to further settlements, 
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seeming instead to impose special conditions on such agreements inconsistent 
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with basic contract law.  Yet, in line with Spercel and Mack, settlement 
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agreements should be treated as no more than, and no less than, contracts. 
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The fundamental flaw in the opinion is that the majority appears to 
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consider the “satisfaction of judgment” filed by Continental in the trial court to 
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be an important occurrence.  Continental, throughout its brief, consistently 
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refers to itself as a “judgment creditor” and to Airko as a “judgment debtor,” 
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and claims it “had the option to choose to enforce or not enforce a judgment in 
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its favor.”  However, the settlement agreement terminated the underlying 
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litigation.  It is true that the trial court did adopt the settlement agreement as a 
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judgment through a journal entry and so retained jurisdiction to enforce the 
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terms of the settlement.  However, Continental obtained no judgment in its 
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favor, and therefore never acquired any status as a judgment creditor.  
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Consequently, Continental’s attempt to file a “satisfaction of judgment” was 
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ineffectual to accomplish anything.  Continental certainly did not “release” 
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Airko from its duties under the settlement agreement, since only Airko could 
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release itself from its own agreed-to duties.  The real question is what the 
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duties of each party actually were.  Thus, when the majority’s statement of the 
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issue places importance on Continental’s filing of a satisfaction of judgment, 
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the majority fails to recognize that the “satisfaction” was a virtual nullity.  
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Furthermore, the majority’s closing statement in its syllabus that the obligee 
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“need only conclude the litigation” is ineffectual because the settlement 
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reached by the parties already concluded the litigation.  The question is, what 
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are the settlement’s terms? 
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With the settlement, the parties entered into a contractual relationship.  
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This agreement must be viewed as a contract between equals, and is 
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enforceable by either party upon its terms.  Thus, the only real question to be 
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answered in resolving the issue herein involves the proper reading to be given 
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to the terms of the agreement.  The majority seems to accept Continental’s 
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claim that the agreement did not obligate Continental in any way.  However, 
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the literal wording of the agreement belies Continental’s argument. 
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The most relevant paragraph of the settlement agreement, paragraph five, 
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provides that “[d]efendant, Airko, Inc., will for the sum of $73,000 provide a 
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new roof for the large garage on the premises of Continental West 
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Condominium, such price to include the removal and disposal of the existing 
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defective roof and all labor and materials for a replacement single-membrane 
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roof, including a ten-year manufacturer’s combined labor and material 
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warranty.  It is expressly understood by Plaintiff, Continental West 
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Condominium Unit Owners Association, that Defendant Airko, Inc. will not 
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either impliedly or expressly warrant materials used in the replacement of the 
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aforementioned roof.” 
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Continental claims paragraph five was merely a “standing offer” to 
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replace the roof.  Continental argues the $73,000 was a guaranteed price 
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quotation that Continental had the option of accepting or rejecting as it saw fit.  
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However, it is apparent from the wording that both parties when they signed 
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this agreement contemplated that Airko would “provide a new roof” and that 
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Continental would accept it and pay Airko $73,000.  The parties even went so 
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far as to specify conditions for the replacement roof, and the warranties to 
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cover it.  Obviously, the provision that Airko would supply the roof was a 
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material term of the settlement agreement.  It defies common sense to require 
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that the settlement agreement’s enforceability by Airko depends upon the 
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employment of language specifying in precise wording that “Continental agrees 
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to accept Airko’s performance.”  The very phrasing of the agreement makes 
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evident that the parties obviously intended that acceptance of the roof by 
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Continental, and the accompanying payment of $73,000 to Airko was a term of 
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the settlement agreement.  As Continental states in its merit brief filed in this 
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court, “it [Continental] was at least assured by the terms of the Agreed Journal 
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Entry that it would be able to pay for a new roof in full with the proceeds of 
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settlement received from the other Defendants.”1  Clearly, those proceeds were 
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to go to Airko. 
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Both parties, at the time of the signing of the agreement, provided 
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consideration to support it.  Continental, of course, gave up the opportunity to 
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prevail in its lawsuit, and agreed to pay Airko $73,000 for installation of the 
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roof.  Airko also provided consideration, giving up its own opportunity for 
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vindication in litigation in which it vigorously contested liability, and agreed to 
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provide the roof in return for the $73,000.  Consequently, a contract was 
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formed, and both parties were mutually bound to honor it.  Just because 
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Continental decided later that it had not really gotten terms as favorable as it 
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believed earlier did not entitle it to ignore its obligation.  The impression given 
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by the majority opinion that one of the parties to a contract, Continental, could 
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unilaterally decide which terms to honor and which terms to ignore by filing a 
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“satisfaction of judgment” flies in the face of basic contract law.  I agree with 
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the court of appeals that a valid contract existed and that Continental breached 
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the contract by unilaterally repudiating a material term.  The trial court erred by 
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failing to enforce the settlement agreement’s terms. 
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This court’s decision in Mack v. Polson Rubber Co., supra, is 
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particularly valid to resolution of the issue here.  Mack was also an appeal from 
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a trial court’s ruling on a motion to enforce a settlement agreement.  This court 
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affirmed the trial court’s grant of the motion, and made the following analysis 
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of the Spercel case: 
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“[U]nder Spercel, supra, the trial court does possess the authority to 
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enforce a settlement agreement voluntarily entered into by the parties to a 
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lawsuit since such an agreement constitutes a binding contract.  In Spercel, 
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supra, a party to a settlement agreement refused to comply with its terms and 
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filed a petition to vacate the agreement.  This court refused to allow the 
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unilateral rescission of the settlement agreement solely on the basis that the 
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party seeking rescission had changed his mind and become dissatisfied with the 
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agreement.  As we noted in Spercel, supra, at 40 [60 O.O.2d at 22-23, 285 
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N.E.2d at 327]: 
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“‘To permit a party to unilaterally repudiate a settlement agreement 
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would render the entire settlement proceedings a nullity, even though, as we 
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have already determined, the agreement is of binding force.’”  Mack v. Polson 
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Rubber Co., 14 Ohio St.3d at 36, 14 OBR at 337, 470 N.E.2d at 903-904. 
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Just as in Spercel and in Mack, Continental attempts to repudiate the 
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terms of a binding settlement agreement.2  Today’s holding by the majority 
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strikes a severe blow to the useful and important process of settlement 
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agreements in this state, and is contrary to basic contract law. 
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FOOTNOTES: 
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1  Paragraph one of the settlement agreement required defendant Dennis Fedor, 
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executor of the estate of Howard E. Ferguson, to pay Continental $76,500. 
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Paragraph four of the settlement agreement required defendant HMH 
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Restoration Co., Inc. to pay Continental $6,000. 
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2  However, the determination that the trial court erred does not necessarily 
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resolve this case.  When Airko appealed the trial court’s decision to deny the 
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motion to enforce the settlement, Airko did not obtain a stay of the trial court’s 
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order, and no bond was posted.  Continental contends that it was justified in 
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acting in reliance upon a valid, unstayed trial court judgment when it had 
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another contractor replace the roof.  Continental essentially claims the appeal 
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became moot when Airko failed to obtain a stay and to post bond.  Although 
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the majority does not reach this issue, I believe it is the pivotal issue upon 
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which the case should turn, given my conclusion that the trial court erred in 
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failing to enforce the settlement. 
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