Opinion ID: 2051745
Heading Depth: 2
Heading Rank: 1

Heading: Vacating the Stipulation

Text: Before the hearing began, the parties stipulated that McBurney held a 25 percent ownership interest in the law firm. But before the panel began to receive evidence on the value of his stock, McBurney learned that the law firm had represented otherwise on its most recent tax returns. Indeed, the evidence presented to the panel showed that from 1987 to 1993 the law firm consistently stated on its tax returns that McBurney held a one-third ownership interest in the firm. McBurney had stipulated to the 25 percent figure because, at that time, the only evidence of his stock ownership that he knew about consisted of a copy of his share certificate for twenty-five shares and an affidavit from John McBurney, Jr., the law firm's founder, stating that the purpose of forming MLS was to benefit his four children, each of whom at one time or another had practiced law at the firm. McBurney and the panel, however, eventually learned that MLS never issued 25 shares of its 100 authorized shares to one of the four children (Mark), who had long ceased practicing at the firm when McBurney withdrew in 1993. Consequently, at McBurney's request, the panel relieved the parties from the erroneous stipulation and ultimately found that McBurney, as the law firm itself had admitted in its tax returns, truly owned one-third of the shares in the firm. A stipulation of fact suc h as the one the panel vacated in this case is not conclusively binding upon the parties, nor is it otherwise irrevocable. As long ago as 1894, this Court recognized that fact-finding tribunals, in their discretion, can set aside stipulations of fact under the proper circumstances. See Wilbur v. Wilbur, 18 R.I. 654, 656, 30 A. 455, 456 (1894) (holding that a party could have moved before the trial to set it [the stipulation] aside as having been made through mistake, we think that on proof of the mistake the court might properly have granted the motion). Moreover, numerous other jurisdictions have held that courts may set aside stipulations of fact because of a mistake, or upon a showing that other equitable circumstances warrant such relief in the interests of justice. Indeed, the general rule is that courts and other fact-finding tribunals have broad discretion in determining whether to hold a party to a stipulation, and may set aside a stipulation where enforcement would not be conducive to justice. 73 Am.Jur.2d Stipulations § 12 (2001). For example, the Supreme Judicial Court of Maine has held that [a] stipulation should be adhered to unless it becomes apparent that it may inflict a manifest injustice upon one of the contracting parties or where it becomes evident that `the agreement was made under a clear mistake.' M.P. Associates v. Liberty, 771 A.2d 1040, 1049 (Me.2001) (quoting T I Federal Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir.1995)). See also Sparaco v. Tenney, 175 Conn. 436, 399 A.2d 1261 (1978) (holding that courts may set aside stipulations if they are the product of fraud, duress, or mistake), and Henry F. Michell Co. v. Fitzgerald, 353 Mass. 318, 231 N.E.2d 373 (1967) (holding that courts may set aside stipulations if not conducive to justice). A party, however, may not simply unilaterally withdraw from the stipulation or refuse to abide by its terms. The appropriate course of action is for the party to move the fact-finding tribunal to release it from the stipulation, citing the equitable grounds for doing so. Sinicropi v. Milone, 915 F.2d 66, 69 (2d Cir.1990); [6] see also 73 Am.Jur.2d Stipulations § 12. Thus, it is settled that fact-finding tribunals, such as the panel of attorneys we appointed per Rule 10(g) to value McBurney's shares in the MLS law firm, possess the inherent authority to release a party from a factual stipulation. But what criteria should they apply to determine whether to vacate the stipulation? I would adopt the test used for relieving a party from admissions under Rule 36 of the Superior Court Rules of Civil Procedure. Stipulations, like admissions, facilitate the orderly resolution of disputes by relieving the parties of the burden of proving issues that are undisputed. Generally, courts will treat stipulations and admissions as binding; otherwise, they would no longer serve as a tool to streamline litigation. Cardi Corp. v. State, 524 A.2d 1092 (R.I.1987). This Court, however, has held that admissions are not irrevocable and that an admission may be withdrawn if the admitting litigant acted diligently; if adherence to the admission must cause a suppression of the truth; and if the withdrawal can be made without prejudice to the [opposing] party    . Id. at 1095 (quoting General Electric Co. v. Paul Forsell & Sons, Inc., 121 R.I. 19, 23, 394 A.2d 1101, 1103 (1978)). I believe that nisi prius tribunals, such as the panel in this case, should apply this same test when faced with a request to grant relief from a stipulation. [7] Here, the parties entered into a stipulation of fact before the panel's hearing began, agreeing that McBurney was a 25 percent owner of the corporation, rather than a one-third owner. But when, after examining the law firm's tax returns, McBurney's attorney discovered, before the panel began to receive evidence, that this stipulation was incorrect as a factual matter (the law firm's tax returns from 1987 to 1993 showed him to be a one-third owner), he took appropriate action by moving the panel to release his client from the stipulation on the grounds of a mistake of fact. McBurney's counsel presented the panel with information about why he had erred in mistakenly stipulating that McBurney owned only 25 percent of the corporation, rather than the full one-third he in fact owned as shown in the law firm's tax returns. Moreover, the panel's decision to release McBurney from the erroneous stipulation did not unduly prejudice MLS because it too had relied for many years on its own tax returns showing the lawyer to be a one-third owner of the law firm. The motion for relief occurred before the panel had begun to receive any evidence. No delay resulted, no continuance was sought, and no prejudice to MLS was argued. MLS did not have to retain additional experts or take further discovery. Although it did not articulate its rationale, the panel apparently accepted these circumstances as sufficient to support its decision to set aside the stipulation. As I have noted above, the purpose of this Court's review on certiorari is not to determine whether the panel was correct in its discretionary determinations; nor can we reverse a discretionary ruling just because we might have decided these factual questions differently. Rather, our review is restricted to an examination of the record to determine whether any competent evidence supports the decision and whether the decision maker made any errors of law in that ruling, and whether the decision was patently `arbitrary, discriminatory, or unfair.' Asadoorian v. Warwick School Committee, 691 A.2d 573, 577 (R.I.1997) (citing and quoting D'Ambra v. North Providence School Committee, 601 A.2d 1370, 1374, 1375 (R.I.1992)). Because I believe that the record contains competent evidence to support the panel's decision to relieve McBurney from the erroneous stipulation concerning his percentage of ownership in the MLS law firm, I would have affirmed the panel's discretionary ruling that vacated this stipulation, gave effect to the ownership share that the law firm itself had admitted was correct, and thereby elevated substance and truth over form and fallacy.