Jane L. Norris and Kerry Norris v. Barry Dean Moltz, Individually and Cecil Atkission Ford, Inc., Individually--Appeal from 216th Judicial District Court of Kendall County

No. 04-99-00225-CV
Jane L. NORRIS and Kerry Norris,
Appellants
v.
Barry Dean MOLTZ,
Appellee
From the 216th Judicial District Court, Kendall County, Texas
Trial Court No. 97-024
Honorable Stephen B. Ables, Judge Presiding

Opinion by: Tom Rickhoff, Justice

Sitting: Phil Hardberger, Chief Justice

Tom Rickhoff, Justice

Alma L. L pez, Justice

Delivered and Filed: December 1, 1999

REVERSED AND REMANDED

Jane L. and Kerry Norris appeal a summary judgment granted in favor of Barry Dean Moltz. We conclude that Moltz failed to conclusively establish his affirmative defenses of release, ratification, waiver, and quasi-estoppel. Accordingly, we reverse the summary judgment.

Procedural Background

The Norrises sued Moltz for damages arising out of a car accident. The parties entered into a settlement agreement and release, under which Moltz would pay the Norrises $15,000 in exchange for a release of liability. In accordance with the parties' agreement, the trial court rendered a take-nothing judgment against the Norrises.

The Norrises subsequently filed a "Motion to Set Aside Full and Final Release and Indemnity Agreement and Settlement Agreement and Take Nothing Judgment and Motion for New Trial." They asserted that their decision to settle the suit for $15,000 was based on the mistaken belief that Moltz had only $20,000 of insurance coverage. After the take-nothing judgment was rendered, they learned that Moltz had an additional $100,000 of coverage. The Norrises therefore requested the trial court to set aside the release on the ground of mutual mistake, fraud, or misrepresentation, and to grant a new trial. They also stated in their motion that they were ready, willing, and able to immediately return the $15,000 tendered to them pursuant to the settlement. After conducting an evidentiary hearing, the trial court issued a written order on October 30, 1998, granting the Norrises' motion because "there was a mutual mistake by the parties as to the amount of liability insurance coverage available."

The following February, Moltz filed a motion for summary judgment. He asserted that the Norrises had not returned the $15,000 that had been tendered to them pursuant to the settlement agreement and release. Moltz argued that he was entitled to summary judgment based on the release. He asserted that the trial court's October 30th order set aside only the take-nothing judgment, and did not set aside the release. Alternatively, if the October 30th order did set aside the release, Moltz requested the trial court to reconsider the order. He also argued that the Norrises' failure to return the funds prevented them from relying on their defenses to the release under the theories of ratification, waiver, and quasi-estoppel. Moltz relied on the following summary judgment evidence: copies of the settlement agreement, release, and motion to set aside; a copy of a $15,000 check, showing that it had been cashed by the Norrises and their attorney; a copy of a November 5, 1998 letter from Moltz's attorney to the Norrises' attorney, requesting the return of the "settlement draft"; and a copy of a November 24, 1998 letter from the Norrises' attorney to Moltz's attorney, stating:

The settlement draft was cashed prior to us discovering the problem which led to the Granting of our New Trial in this case. Therefore, we cannot return to you what we do not have and what we no longer had when this discrepancy came to light.

The Norrises filed a response to the motion for summary judgment, contending that the motion should be denied because there were disputed questions of fact regarding Moltz's affirmative defenses, because the court had set aside the settlement agreement and release, and because the Norrises had returned the funds to Moltz. Attached to the response was a copy of a $15,000 check from the Norrises' attorney to Moltz's insurer. The check was signed on the same day the summary judgment response was signed. The Norrises later filed a supplemental response, stating that Moltz had refused to accept the $15,000 check. Attached to the supplemental response was a letter from Moltz's attorney, stating that Moltz was returning the $15,000 check because it was "too late for them to give back the money now."

Standard of Review

We review a summary judgment de novo. See Sasser v. Dantex Oil & Gas, Inc., 906 S.W.2d 599, 602 (Tex. App.--San Antonio 1995, writ denied). We will uphold a summary judgment only if the summary judgment record establishes that there is no genuine issue of material fact, and that the movant is entitled to judgment as a matter of law on a ground set forth in the motion. See Tex. R. Civ. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). In determining whether a material fact issue exists, "we must accept as true evidence in favor of the nonmovant, indulging every reasonable inference and resolving all doubts in the nonmovant's favor." Cathey, 900 S.W.2d at 341; see also Nixon, 830 S.W.2d at 548-49. When a defendant moves for summary judgment on the basis of an affirmative defense, the defendant must conclusively prove all essential elements of that defense. See Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972). Because Moltz asserted four affirmative defenses in his motion for summary judgment, we will uphold the summary judgment if he conclusively established any of those defenses. See Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex. 1996).

Analysis

Release is the first affirmative defense relied on by Moltz. The Norrises argue that the release cannot support the summary judgment because the October 30 order set aside the release on the ground of mutual mistake. Moltz counters that the October 30 order did not set aside the release, but rather set aside only the take-nothing judgment. Alternatively, Moltz argues that even if the order did set aside the release, the trial court implicitly reversed that ruling when it granted the motion for summary judgment. We find it unnecessary to resolve this dispute. Assuming, for purposes of this appeal, that the trial court did not set aside the release on the ground of mutual mistake, there is at least a question of fact regarding mutual mistake.

Pursuant to the doctrine of mutual mistake, when parties to an agreement have contracted under a misconception or ignorance of a material fact, the agreement may be avoided. See Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990). A release is a contract and is subject to avoidance on the ground of mutual mistake just like any other contract. See id.

Moltz included the Norrises' verified motion to set aside and its exhibits as part of his summary judgment proof. One of the exhibits to the motion to set aside was Moltz's response to an interrogatory, stating that he had insurance coverage in the amount of $20,000 per person. The motion to set aside stated that the Norrises relied on this interrogatory response in deciding to settle the case for $15,000. Correspondence from one of Moltz's attorneys to the Norrises' attorney was also attached to the motion to set aside. In this correspondence, the attorney asserted that he learned of the additional $100,000 in coverage after the case settled, but that the Norrises' attorney knew about the additional coverage before the case settled. The Norrises' attorney refuted the assertion that she knew about the additional coverage in an affidavit attached to the motion to set aside. This summary judgment evidence raises a fact issue regarding whether the settlement and release resulted from a mutual mistake regarding the amount of insurance coverage.

Moltz next argues that even if there is a fact issue regarding mutual mistake at the time the release was signed, the Norrises' failure to return the settlement funds after they discovered the mistake entitles Moltz to summary judgment on the grounds of ratification, waiver, and quasi-estoppel. We conclude that Moltz failed to conclusively establish these affirmative defenses. Ratification occurs when a person who knows all the material facts confirms or adopts a prior act that did not then legally bind him and which he could have repudiated. See K.B. v. N.B., 811 S.W.2d 634, 638 (Tex. App.--San Antonio 1991, writ denied). The elements of ratification are: 1) approval by act, word, or conduct; 2) with full knowledge of the facts of the earlier act; and 3) with the intention of giving validity to the earlier act. See id. Moltz relies on the proposition that "[t]he intent to give validity to the former transaction may be inferred [when] a party retains the benefits of an invalid contract with full knowledge of the facts that make the contract voidable." Motel Enters., Inc. v. Nobani, 784 S.W.2d 545, 547 (Tex. App.--Houston [1st Dist.] 1990, no writ) (emphasis added). Although a jury might infer that the Norrises' failure to return the $15,000 demonstrated an intent to ratify the release, this failure does not establish ratification as a matter of law, considering the circumstances. Upon learning of the additional coverage, the Norrises unequivocally repudiated the release and secured a new trial. Counsel's letter explaining why the money was not being returned states that the money was distributed before the additional insurance coverage was discovered. Viewing this evidence and the inferences therefrom in the light most favorable to the Norrises, it is possible that the Norrises failed to return the money because they were unable to do so, not because they were satisfied with the settlement. Therefore, Moltz has not conclusively established that the Norrises ratified the release.

Waiver is the intentional relinquishment of a known right, or intentional conduct inconsistent with claiming that right. See Vessels v. Anschutz Corp., 823 S.W.2d 762, 765 (Tex. App.--Texarkana 1992, writ denied). The elements of waiver are: 1) an existing right; 2) a knowledge of its existence; and 3) an actual intention to relinquish it, which intent may be inferred from conduct. See id. Considering the explanation given for not returning the funds in counsel's letter, the Norrises' other actions indicating their desire to avoid the release, and their eventual tender of the $15,000 to Moltz, Moltz has not conclusively established that the Norrises intended to relinquish their right to avoid the release.

Quasi-estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken by him. See id. The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one in which he acquiesced, or of which he accepted a benefit. See id. at 765-66. Drawing the inferences from counsel's letter in the light most favorable to the Norrises and considering the Norrises' eventual tender of the $15,000, their failure to return the $15,000 sooner was not necessarily inconsistent with avoiding the release. Therefore, Moltz has not conclusively established the affirmative defense of quasi-estoppel.

Conclusion

Moltz failed to conclusively establish his affirmative defenses of release, ratification, waiver, and quasi-estoppel. We therefore reverse the summary judgment and remand this cause for further proceedings.

Tom Rickhoff, Justice

DO NOT PUBLISH