Court Opinion

ID: 9946552
Source: CourtListenerOpinion
Date Created: 2024-02-29 21:02:15.649265+00
Date Added: 2024-06-11T14:24:53.601397
License: Public Domain

Cite as 2024 Ark. App. 142
                   ARKANSAS COURT OF APPEALS
                                       DIVISION II
                                       No. CV-23-115

                                                Opinion Delivered   February 28, 2024
 ROGER RILEY
                               APPELLANT APPEAL FROM THE PULASKI
                                         COUNTY CIRCUIT COURT,
                                         SEVENTEENTH DIVISION
 V.
                                         [NO. 60CV-20-5701]

 FIRST STATE BANK                         HONORABLE MACKIE M. PIERCE,
                                 APPELLEE JUDGE
                                                AFFIRMED

                                RITA W. GRUBER, Judge

       Roger Riley appeals the October 27, 2022 order of the Pulaski County Circuit Court

denying his motion to enforce an alleged settlement agreement with appellee First State Bank

of Lonoke. Roger raises two points on appeal: (1) the circuit court erred in excluding

evidence of communications demonstrating that there was a settlement; and (2) the circuit

court’s judgment is clearly erroneous and should be reversed. We affirm.

                             I. Factual and Procedural Background

       On October 13, 2020, the bank filed a complaint against Roger and his then wife,

Pamela D. Riley. The bank alleged that on April 11, 2018, the Rileys and their corporation,

Enviro-Air Filtration Industries, Inc., d/b/a Razorback Air Filter, executed a promissory note

in favor of the bank in the amount of $140,000. The bank further alleged that a second

promissory note was executed in the amount of $50,000 on December 5, 2018. The bank—
asserting that both notes have been in default since January 13, 2020—requested a judgment

against the Rileys, jointly and severally, in the amount of $171,636.33 plus interest, costs,

and attorney’s fees.

       On November 3, 2020, Roger filed an answer, a cross-complaint against Pamela, and

a motion for consolidation and contempt. His answer admitted the existence of the notes

and the lack of payments on them. In his cross-complaint, Roger alleged that he and Pamela

were divorced on May 5, 2020, and that their divorce decree contained a property settlement

agreement (PSA). He further alleged that the PSA required Pamela to assume all

responsibility for the notes, indemnify Roger for any liability or obligation owed on the

notes, and take whatever steps necessary to refinance the notes in her name only. Roger

alleged that Pamela was in breach of the PSA and requested that he be awarded damages

against Pamela for any amount assessed against him, either individually or jointly and

severally. The bank responded to Roger’s motion for consolidation and contempt on

November 20, 2020, generally opposing the relief he requested. The record does not reflect

that Pamela answered either the bank’s complaint or Roger’s cross-complaint.

       On August 12, 2022, Roger filed a motion for default judgment against Pamela,

alleging that she had been properly served the cross-complaint and summons and had failed

to file any answer or responsive pleading. On August 18, the bank filed its own motion for

default judgment, also alleging that Pamela had been properly served its complaint and

summons and failed to file an answer or responsive pleading.

                                             2
       A hearing was held on September 6, 2022. The circuit court denied Roger’s motion

to consolidate, granted the bank’s motion for default against Pamela, and reserved ruling on

Roger’s motion for default. Those rulings were memorialized in a September 20, 2022 order.

       On September 23, Roger to enforce the settlement agreement and incorporated brief.

The motion alleged that Roger and the bank had reached a settlement agreement regarding

the bank’s claims against him via the email negotiations of their respective counsels, but the

bank was refusing to honor the agreement. Roger attached several emails to his motion.

       The bank responded on September 27, first arguing that the emails were inadmissible

under Arkansas Rule of Evidence 408. The bank then asserted that Roger had not set forth

the entirety of the email exchanges between their counsel, focusing on an email from Roger’s

counsel that submitted a proposed settlement agreement and release for examination by the

bank’s counsel and requested that the bank’s counsel advise if any changes were requested.

The bank further asserted that there were additional email communications in which the

bank’s counsel had made clear that the bank would not agree to the proposed release because

the release did not include provisions regarding tax liability and failed to address one of the

two notes at issue. Those additional emails were attached to the bank’s response. The bank

argued that because a final release had not been agreed on, no agreement had been reached,

as acknowledged by Roger’s counsel in an email.

       A final hearing was held on September 29, 2022. The emails at issue were admitted

for purposes of the motion to enforce the settlement agreement only and reviewed by the

court. Those emails reflect the following.

                                              3
       On December 8, 2021, Roger’s counsel made an offer of compromise and settlement

to fully resolve the claims against Roger in exchange for $12,500, with a lump sum payment

of $4,000 by December 12, 2021, and the remaining balance of $8,500 in monthly

installments of $1,000. On December 14, the bank’s counsel rejected Roger’s offer of

settlement with a counteroffer: the bank would settle the claims against Roger in exchange

for $24,00, with a lump sum payment of $4,000 by the end of the week, and the balance of

$20,000 payable over a twenty-four-month period at $833.33 per month at no interest. The

offer would expire on Friday, December 17, 2021, at noon. On December 21, Roger’s

counsel asked that the bank’s offer deadline be extended for “another week.”

       On January 14, 2022, the bank’s counsel stated that if there was no interest in settling

the claim, it would ask that the matter be set for trial. On January 18, Roger’s counsel rejected

the bank’s counteroffer with its own counteroffer: full and final settlement of all claims in

exchange for a lump-sum payment of $12,500. Roger’s counsel asked, “[I]f a settlement did

happen with Mr. Riley, . . . [is the bank] going to continue to pursue the claim against Pam?”

       On January 24, the bank’s counsel stated that it was willing to accept Roger’s offer,

provided Roger made the payment before February 1. Roger’s counsel responded that same

day. He accepted the terms, requested that the bank provide him with a “settlement/release,”

and asked how the bank wanted the payment made. He also proposed that the bank draft

an order dismissing Roger with prejudice once the payment was deposited but stated that

Roger would remain a party to the cross-claim against Pamela.

                                               4
        On January 25, the bank’s counsel requested that the settlement payment be made

by cashier’s check payable to “First State Bank, Lonoke, AR.” That same day, Roger’s counsel

emailed a release for the bank’s counsel’s review, stating that if it was acceptable, to please

have the bank sign and return it, but if there were any changes in the release, to “please

advise.” Additionally, Roger’s counsel informed the bank’s counsel that a cashier’s check

should be in Roger’s counsel’s office no later than January 28, 2022.

        On January 26, 2022, Roger’s counsel inquired as to the status of the release, asking

if there were any changes and informing the bank’s counsel that the settlement payment

would be at Roger’s counsel’s office by Friday, January 28, 2022, and could be picked up

then, unless the bank wished to wait until Monday, January 31, 2022, for it to be sent via

mail.

        On February 7, 2022, Roger’s counsel requested a status update on the proposed

settlement, stating that the agreement was for $12,500 in exchange for a full and final

settlement, and Roger would not now agree to any tax liability for the remainder of any

outstanding debt alleged. Roger’s counsel further relayed that if the bank wanted to issue a

1099 because of any loss, it could be issued to Pamela. Roger’s counsel recognized that the

previous release had not addressed the second note, but the omission had been corrected,

and an amended proposed release was attached. Roger’s counsel stated that the signed release

would be required prior to remittance of the settlement payment.

        On February 17, Roger’s counsel asked the bank’s counsel where they were on

settlement and stated that the payment remained in his possession. The bank’s counsel

                                              5
responded that the case would need to be set for trial. That same day, Roger’s counsel sent

a second email to the bank’s counsel setting out his belief that a binding and enforceable

settlement agreement currently existed between their two clients, but that, in “an effort to

avoid litigation and/or bankruptcy,” Roger was “prepared to make a new proposal” that

should in “no way be deemed a waiver of any claim to enforce said agreement should this

‘new’ proposal be rejected.” The following terms were proposed:

       a) Payment by Cashier’s Check in the amount of $12,500.00 within two (2) business
          days following receipt of a fully executed release. Plaintiff shall be responsible for
          providing a courier to take possession of the Cashier’s Check;

       b) Acknowledgment and declaration in the release that Mr. Riley is only indebted to
          First State Bank for one-half of the outstanding principal and interest of the
          loan(s) which form the basis for the lawsuit between the parties pending in
          Lonoke, AR.

       c) Acknowledgment in the release by Mr. Riley that as additional consideration for
          the settlement First State Bank is entitled and shall issue a 1099C to Mr. Riley for
          cancellation of the acknowledged amount of outstanding indebtedness specifically
          referred in Paragraph (b) above.

       d) The total amount of the acknowledged indebtedness as referred to in Paragraph
          (b) above shall be calculated as February 17, 2022.

       e) Acceptance of this proposal by electronic mail shall be binding on all parties and
          shall be enforceable at law and equity.

This offer was good until the following day at noon.

       Having reviewed the emails, the circuit court then ruled that the parties had come

close but never consummated a deal that was enforceable. It denied the motion to enforce

settlement, emphasizing the lack of a signed release. The circuit court’s oral rulings were

memorialized in an October 27, 2022 judgment that reflected Roger’s motion was denied

                                               6
because there was no meeting of the minds. It further reflected that Arkansas Rule of

Evidence 408 provides that no evidence of conduct or statements made in compromised

negotiations is admissible. The judgment stated that the notes required Roger and Pamela

to be jointly and severally liable to the bank in the event of default; the notes were in default;

and the bank was entitled to declare all indebtedness immediately due and payable. The

judgment awarded the bank a total of $226,250.39 on the two notes with postjudgment

interest at a rate of 17 percent per year. Roger and Pamela were also ordered to pay $10,000

in attorney’s fees. In recognition of the indemnification provision of Roger and Pamela’s

PSA, the judgment granted Roger judgment against Pamela for any amounts paid by him to

the bank, including any attorney’s fees and costs, whether paid voluntarily or by way of

execution. This timely appeal followed.

                                     II. Standards of Review

       We review evidentiary errors under an abuse-of-discretion standard, and the circuit

court’s findings will not be disturbed on appeal unless there has been a manifest abuse of

discretion. Potter v. Holmes, 2020 Ark. App. 391, at 7, 609 S.W.3d 422, 427. Moreover, we

will not find an abuse of discretion unless a circuit court acted “improvidently, thoughtlessly,

or without due consideration.” Id.

       The law favors amicable settlement of controversies, and courts have a duty to

encourage rather than discourage compromise as a method of resolving conflicting claims.

Terra Land Servs., Inc. v. McIntyre, 2019 Ark. App. 118, at 12, 572 S.W.3d 424, 432.

Nevertheless, a settlement is contractual in nature, and to be legally valid, it must possess the

                                                7
essential elements of a contract. Id. The essential elements of a contract are (1) competent

parties; (2) subject matter; (3) legal consideration; (4) mutual agreement; and (5) mutual

obligation. Id. A court cannot make the parties’ contract but instead can only construe and

enforce that contract the parties have made. Id. There must be a meeting of the minds to

have a valid contract, using objective indicators: if there is no meeting of the minds, there is

no contract. Id. Whether there is a meeting of the minds is a question of fact. Id.

       On appeal, the circuit court’s findings of fact will not be reversed unless they are

clearly erroneous. Id. at 12–13, 572 S.W.3d at 432. A finding is clearly erroneous when,

although there is evidence to support it, the reviewing court on the entire evidence is left

with a definite and firm conviction that a mistake has been committed. Id. at 12, 572 S.W.3d

at 431. Disputed facts and determinations of the credibility of witnesses are within the

province of the fact-finder. Id., 572 S.W.3d at 431–32.

                                     III. Points on Appeal

       Roger first contends on appeal that the circuit court erred when it ruled that the

emails were inadmissible. He argues that the emails were admissible pursuant to Arkansas

Rule of Evidence 408 as well as several other rules of evidence and doctrines. The bank

responds that the only real issue on appeal is whether the parties, through their respective

counsels, reached a full settlement of the lawsuit. The bank does not take issue with the

admission of the emails for the purpose of showing whether a settlement was reached.

Rather, it argues that in circumstances such as these, where there was no settlement reached,

                                               8
the emails are not admissible at a trial on the merits, which is what the judgment reflected.

In other words, the emails were no longer admissible.

       Arkansas Rule of Evidence 408 provides that “evidence of conduct or statements

made in compromise negotiations” are not admissible for purposes of proving liability. The

rule, however, allows evidence of settlement negotiations to be offered for other purposes,

including whether the parties have agreed to settle. Roberts v. Green Bay Packaging, Inc., 101

Ark. App. 160, 162–63, 272 S.W.3d 125, 128 (2008).

       Here, the issue was whether the parties had agreed to settle. Roger is correct that the

emails were admissible for making that determination. But the Bank is also correct. The

record makes clear that the emails were admitted—solely for the purposes of Roger’s motion—

and were considered by the circuit court prior to its determination that no agreement had

been reached. The emails were ruled inadmissible only after the circuit court had reviewed

them in connection with Roger’s motion. And the record does not reflect that the emails

would have been subsequently admissible for any other purpose. As such, the circuit court

did not abuse its discretion in ruling as it did regarding the admissibility of the emails.

       Roger next contends that the circuit court’s judgment was clearly erroneous and

should be reversed. He argues that a settlement agreement was reached, as proved by the

plain and ordinary language contained in the email exchanges. He further argues that even

if the existence of the settlement was unclear, “parol evidence through Roger’s attorney

showed its existence.” The cases cited by Roger in support of his argument do not support

                                               9
his position; rather, they merely set forth the legal standard for determining whether an

agreement was reached and the applicable standard of review on appeal.

       The bank responds that the emails make clear that no meeting of the minds occurred;

thus, no agreement was reached. The bank relies primarily on McClerkin v. Rogue Construction,

LLC, 2022 Ark. App. 515, Chadick v. Walters, 2022 Ark. App. 423, 654 S.W.3d 837, and

Terra Land Services, Inc., 2019 Ark. App. 118, 572 S.W.3d 424. These cases are apposite and

persuasive.

       In Terra Land Services, the issue was whether the parties reached a full and complete

settlement agreement. There, the circuit court determined that the parties had. 2019 Ark.

App. 118, at 1, 572 S.W.3d at 426. On appeal, we reversed and remanded, holding that the

circuit court erred in granting the appellee’s motion to enforce settlement. Id. at 16, 572

S.W.3d at 433. In doing so, we reviewed the “rapid-fire emails, faxes, and telephone calls

from October 27 to November 7, 2017, between the parties’ separate counsel.” Id. at 6, 572

S.W.3d at 433. We concluded that because additional financial information was still being

requested, no meeting of the minds had occurred. Id. at 14, 572 S.W.3d at 433. We

explained that the issue then became whether appellant’s attorney had the authority to bind

his client. Id. at 15, 572 S.W.3d at 433. We concluded that the attorney did not, emphasizing

the lack of specific authority contained within the record as well as the steadfast refusal by

                                             10
one of the parties to sign any agreement or acknowledgment. 1 Id. at 15–16, 572 S.W.3d at

433.

       The issue in Chaddick—a property-dispute case—was also whether the parties reached

a full and complete settlement agreement of their claims, specifically, whether there was a

meeting of the minds as to all terms of the contract. 2022 Ark. App. 423, 654 S.W.3d 837.

There again, the circuit court determined that the parties had an enforceable agreement,

finding that the parties had agreed that in exchange for a sum certain, property was going to

be purchased but recognizing that there were still some details to be worked out regarding

specific performance. Id. at 4–5, 654 S.W.3d at 839. The circuit court then ordered the

parties to sign a version of the agreement that one of the parties had communicated was

unacceptable due to the inclusion of an unsatisfactory specific-performance provision, with

the circuit court subsequently adding additional terms to the agreement itself. Id. at 9, 654

S.W.3d at 841. We reversed, holding that the circuit court erred in granting the appellee’s

motion to enforce settlement. Id. at 10, 654 S.W.3d at 842. In doing so, we once more

emphasized that because “the parties did not agree on all the terms of the agreement, there

was no meeting of the minds.” Id. at 9–10, 654 S.W.3d at 842 (emphasis added).

       1
        Roger briefly raises the concept that an attorney may bind his client if acting within
the authority granted to the attorney, but he does so initially in the section of his brief
addressing the admissibility of the emails. The only reference to this concept under his
second point on appeal is a single conclusory sentence at the very end of his brief: “The Bank
is bound by the contract its attorney agreed to. Dewitt v. Johnson, 349 Ark. 294, 77 S.W.3d
530 (2002).” This was not raised as a stand-alone issue or argument—either to the circuit
court or this court—and no persuasive arguments are made in that regard.

                                             11
       Last, whether the parties reached a full and complete settlement agreement was at

issue in McClerkin—a case in which the underlying contractual dispute centered on a house

remodel. 2022 Ark. App. 515, at 1. Once more, the circuit court determined that an

enforceable settlement agreement existed. Id. There, the appellant argued that the circuit

court erred because the parties “never reached a mutual agreement as to the language of the

releases to be executed by both parties, which was a material part of the agreement.” Id. at 9.

We agreed, ultimately reversing and remanding. Id. at 14–15. In doing so, we emphasized

that an enforceable contract requires “a meeting of the minds as to all terms, using objective

indicators.” Id. at 10. (emphasis added). We concluded that this had not occurred, noting

the ongoing communications between the parties’ respective attorneys regarding the release

language, the lack of agreement regarding such, as well as the lack of release signatures. Id.

       Here, the emails exchanged make clear that neither party was fully satisfied with any

version of the proposed release. Roger’s counsel clearly contemplated that the Bank may

request revisions to the release, given his express inquiry regarding such. Thus, it should not

have come as a surprise when the Bank did just that with respect to the tax liability and the

issuance of a 1099. Moreover, it was Roger’s counsel who objected in the first instance to

the inclusion of the tax-liability language in the release. The emails reflect that, even assuming

the Bank’s counsel had carte blanche authority to negotiate and agree to any terms he

believed were warranted, there was clearly no agreement between the attorneys, let alone the

parties, regarding tax liability.

                                               12
       The parties did not have a fully fleshed-out agreement, such that it could be enforced

by a court of law. The objective indicators present did not demonstrate a completed deal.

The emails make clear that no meeting of the minds occurred because neither party had

manifested assent to all the particular terms of the release. See Chadick, supra (citing

DaimlerChrysler Corp. v. Smelser, 375 Ark. 216, 289 S.W.3d 466 (2008)). The lack of assent to

all terms is also made clear by the lack of a signature on any release by either party.2 Simply

put, there was still work to be done. Thus, the circuit court did not err in concluding that

the parties had not reached an agreement. Accordingly, we affirm.

       Affirmed.

       GLADWIN and BARRETT, JJ., agree.

       Robert S. Tschiemer, for appellant.

       Stuart Law Firm, P.A., by: J. Michael Stuart, for appellee.

       2
       We recognize that an enforceable oral agreement may be struck under certain
circumstances, but that is not the case here.

                                               13