Court Opinion

ID: 36981
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:47:22+00
Date Added: 2024-06-11T17:15:32.265794
License: Public Domain

United States Court of Appeals
                                                                                                  Fifth Circuit
                                                                                                 F I L E D
                          IN THE UNITED STATES COURT OF APPEALS
                                                                                                November 10, 2004
                                       FOR THE FIFTH CIRCUIT
                                                                                              Charles R. Fulbruge III
                                                                                                      Clerk
                                       ________________________

                                             No. 04-20013
                                       ________________________

                                LORI PENTON, Individually and as next
                                friend of CHRISTIAN ALLEN GARCIA;
                                 EVAN DANIEL PENTON; MORGAN
                                           ALEXIS PENTON

                                             Plaintiffs-Appellees,

                                                     -vs-

                                 AMERICAN BANKERS INSURANCE
                                     COMPANY OF FLORIDA

                                            Defendant-Appellant.

                              Appeal from the United States District Court
                                  for the Southern District of Texas
                                            (4:03-CV-705)

Before WIENER and PRADO, Circuit Judges, and LITTLE*, District Judge.

LITTLE, District Judge:**

                           I. FACTUAL AND PROCEDURAL HISTORY

       Undisputed facts prompted the parties to file cross motions for summary judgment. For the

           *
               District Judge of the Western District of Louisiana, sitting by designation.
           **
            Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined that this opinion should not
   be published and is not precedent except under the limited circumstances set forth in 5TH CIRCUIT
   RULE 47.5.4.
reasons that follow, we affirm the summary judgment decision in favor of the plaintiffs.

       Various plaintiffs (“Appellees”), including Lori Penton, brought suit for personal injuries

against multiple defendants including a group of defendants referred to in the briefs as the Oakwood

defendants (“Oakwood”) and Appellant, American Bankers Insurance Company of Florida

(“American Bankers”). Suit was brought in the Texas State District Court for Harris County, Texas.

Oakwood’s counsel was Mike Morris, while American Bankers was represented by Brad Irelan.

Even though each of the co-defendants had separate attorneys, all settlement negotiations were

conducted by Morris, who held himself out as having authority to negotiate for Oakwood and

American Bankers. Appellees and Morris negotiated a settlement agreement in which Appellees

agreed to release all claims against Oakwood and American Bankers in exchange for $150,000.00

and court costs up to $7,500.00.

       The agreement between the parties was memorialized in a writing pursuant to TEX. R. CIV.

P. 11, which requires that all agreements between parties or attorneys in a suit be contained in a

written agreement. The settlement agreement was signed by Appellees’ counsel and by Morris.

Appellees’ counsel, Morris, and Irelan went before the state court and announced that they had

settled the case and executed an appropriate written agreement as required by TEX. R. CIV. P. 11.

       Sometime after the agreement had been announced, Oakwood filed for bankruptcy. Appellees

then communicated with American Bankers and demanded payment of the settlement amount.

American Bankers refused to pay the entire settlement sum, contending that it was only responsible

for payment of $27,500.00, inclusive of court costs. American Bankers tendered this amount to

Appellees, but it was refused. Subsequently, American Bankers filed a state court pleading seeking

recognition that its responsibility for payment of the settlement was limited to $27,500. It submitted

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pleadings to the state court which provided in part:

       Plaintiffs have set tled their claim against all Defendants, including the bankrupt
       Defendants. A rule 11 agreement between Plaintiffs and the Defendants has been filed
       in this case. Bankruptcy of the Oakwood entities does not vitiate the settlement . .
       . . American Bankers and the bankrupt entities are entitled to enforce the Rule 11
       agreement.

       Appellees brought suit in the United States District Court for the Southern District of Texas

for breach of contract, arguing that American Bankers was jointly liable for the entire settlement

amount. American Bankers argued that it had never agreed to joint liability, and that it had an

agreement with Oakwood that it would only pay $27,500.00. Both parties moved for summary

judgment; the district court granted summary judgment in favor of Appellees.

                                         II. DISCUSSION

       District court orders granting summary judgment are reviewed by this court de novo. Skotak

v. Tenneco Resins, Inc., 953 F.2d 909, 912 (5th Cir. 1992). A court’s grant of summary judgment

should be affirmed if there is “no genuine issue as to any material fact and . . . the moving party is

entitled to a judgment as a matter of law.” Id. (citing FED. R. CIV. P. 56). In the case we now

consider, American Bankers challenges two of the conclusions upon which the district based its

summary judgment decision:

       1.      The district court found that the settlement agreement was enforceable against
               American Bankers because it had ratified that agreement.

       2.      The district court found that the settlement agreement was unambiguous and that,
               therefore, parol evidence was inadmissible to vary or explain that agreement.

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A.              Ratification of the Settlement Agreement

        American Bankers argues that because neither it nor its attorney signed the settlement

agreement, it cannot be bound by that agreement. American Bankers spends a significant amount of

time in its brief arguing that settlement agreements are required to be in writing by TEX. R. CIV. P. 11.

Appellant overlooks, however, the gist of the district court’s ruling, which was that whether or not

Morris had authority to sign the agreement on behalf of American Bankers, if American Bankers later

ratified the settlement agreement, then American Bankers did in effect sign the agreement, or is at least

estopped from arguing that it did not sign.

        Under Texas law, “ratification may occur when a principal, though he had no knowledge

originally of the unauthorized act of his agent, retains the benefits of the transaction after acquiring

full knowledge.” Land Title Co. of Dallas, Inc. v. F.M. Stigler, Inc., 609 S.W.2d 754, 756 (Tex.

1980). American Bankers asserts that the district court’s finding that it ratified the agreement was

incorrect for two reasons.

        First, American Bankers argues there was no basis for the district court’s finding that it ratified

the settlement agreement with full knowledge of its terms. American Bankers argues that there is no

proof that it had knowledge of the terms of the settlement agreem ent at the time the parties to the

litigation announced to the court that a settlement had been reached. The announcement of the

agreement and the signing of that agreement occurred on the same day, and the record does not

describe the sequence of these events. Therefore, American Bankers opines, the district court had no

basis upon which to conclude that it had ratified that agreement.

        There is, however, uncontroverted evidence that American Bankers did have full knowledge

of the terms of the settlement agreement at the time that it wrote in its state court pleading that it had

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“settled its claims with Defendants . . . and was entitled to enforce the Rule 11 agreement.” American

Bankers contends that it did not have full knowledge of the settlement agreement at this time because

it did not fully understand the consequence of the agreement, i.e., it was not aware that the contract

would be construed as making it jointly liable for the entire settlement amount. American Bankers,

however, was aware of the terms of the agreement and failed to comprehend the implications of those

terms. Its failure to understand the implications of those terms did not, however, prevent it from

ratifying the agreement with the requisite knowledge: the knowledge that Morris had made a

settlement agreement on its behalf. See Land Title, 609 S.W.2d at 757. Therefore, the court holds

as a matter of law that American Bankers had sufficient knowledge of the settlement agreement at the

time that it sought enforcement of that agreement in state court.

       The second argument that American Bankers presents against the applicability of the doctrine

of ratification is that it cannot be deemed to have ratified the settlement agreement because it has not

been benefitted by it. American Bankers argues that it has not been released from liability because the

state court proceeding has been stayed pending resolution of the Rule 11 agreement dispute.

American Bankers ignores the fact that it is the one preventing the state court from entering judgment

and thereby releasing it from liability. It is not, however, necessary to address the tortured logic on

which American Bankers’ argument rests. Even if the case has not yet been dismissed, American

Bankers has received a legally binding promise from the Appellees; this is a sufficient benefit.

       The court holds that American Bankers, with the requisite knowledge, ratified the settlement

agreement in its pleadings to the state court. Therefore, American Bankers is bound by the terms of

the settlement agreement and it is enforceable against them.

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        B.      Settlement Agreement Ambiguity

        American Bankers argues that the district court erred in finding that the settlement agreement

was unambiguous and that, therefore, parol evidence was inadmissible. The settlement agreement

ratified by American Bankers reads in pertinent part:

         In consideration of payment of $150,000.00 and plaintiffs’ taxable court costs not to
         exceed $7,500.00, plaintiffs agree to release any and all claims and causes of action
         asserted or that could be asserted in the above captioned lawsuit against the Oakwood
         Defendants and the American Banker Defendants for alleged damages . . . .

American Bankers alleges that this language is ambiguous as concerns joint liability, and that it should

be able to introduce parol evidence tending to support its preferred interpretation of the language.

        The district court found that because the terms of the settlement agreement could be given a

definite meaning, it was not ambiguous. If an agreement is silent on a particular topic or its language

is subject to more than one reasonable interpretation, it is not ambiguous, unless the terms of the

agreement cannot be given a definite meaning by the application of rules of construction. Med.

Towers, Ltd. v. St. Luke’s Episcopal Hosp., 750 S.W.2d 820, 822 (Tex. App. – Houston 1988); Nat’l

Union Fire Ins. Co. of Pittsburgh v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995). In this case,

although the settlement agreement is silent on the issue of joint liability, there is Texas case law

dictating that joint promisors are deemed to be jointly liable for the entire agreed to obligation, unless

the agreement contains contrary language.

        [W]here a binding agreement of a number of parties with one another is to the effect
        that each will bear his proportionate part of a burden resting on the shoulders of one
        or more of them, a joint and several obligation, as between themselves, necessarily
        arises. For the necessary effect of such an agreement is to bind the parties to one
        another for the performance of the several promises of all.

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Miller v. Bush, 24 S.W.2d 23, 25 (Tex. 1930).1 This language has been interpreted as creating a

presumption in favor of joint liability that can be rebutted only by separate language in the document

at issue. See Guynn v. Corpus Christi Bank & Trust, 620 S.W.2d 188, 190 (Tex. App. – Corpus

Christi 1981).

        There is no language in the settlement agreement that tends to rebut the presumption of joint

liability. Therefore, under Texas law, the silence of the settlement agreement should be interpreted

as creating joint liability. It is not ambiguous and it would have been improper for the court to have

considered American Banker’s proffered parol evidence.

                                            III. Conclusion

        For the foregoing reasons, the court holds that the conclusions upon which the district court

based its grant of summary judgment were warranted, and we AFFIRM the district court’s judgment.

1

“Where two or more make a joint promise, each is liable to the promisee for the whole debt or
liability. This is true in a joint obligation as well as in a joint and several obligation. In either case,
each obligor who is bound at all is legally liable in solido for the whole undertaking.”
Baum v. McAfee, 125 S.W. 984, 987 (Tex.Civ.App. 1910)(internal quotations omitted).

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