Catamount Slate Products, Inc. v. Sheldon
Annotate this Case
Catamount Slate Products, Inc. v Sheldon (2002-487); 176 Vt. 158;
845 A.2d 324
2003 VT 112
[Filed 19-Dec-2003]
NOTICE: This opinion is subject to motions for reargument under V.R.A.P.
40 as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
order that corrections may be made before this opinion goes to press.
2003 VT 112
No. 2002-487
Catamount Slate Products, Inc. Supreme Court
d/b/a Reed Family Slate Products,
and Fred and Suellen Reed
On Appeal from
v. Rutland Superior Court
Lorene Sheldon, Lee Sheldon and
The Lorene Sheldon Revocable Trust September Term, 2003
William D. Cohen, J.
David Putter, Montpelier, and Stephanie A. Lorentz of Lorentz, Lorentz and
Harnett, Rutland for Plaintiffs-Appellants.
Emily J. Joselson, Kevin E. Brown and Abby C. Moskovitz of Langrock Sperry
& Wool, LLP, Middlebury, for Defendants-Appellees.
PRESENT: Amestoy, C.J., Johnson and Skoglund, JJ., and Allen, C.J. (Ret.),
and Gibson, J. (Ret.), Specially Assigned
¶ 1 SKOGLUND, J. Catamount Slate Products, Inc. and its
principals the Reed family appeal from a Rutland Superior Court ruling
enforcing what appellees characterize as a binding, mediated settlement
agreement. The trial court concluded that, at the end of their September
5, 2000 mediation, the parties had reached a binding settlement agreement.
Because the Reeds lacked the requisite intent to be bound to the settlement
agreement in the absence of a writing, we hold that no binding agreement
was reached. We reverse and remand for further proceedings.
¶ 2 The Reeds own and operate Catamount Slate, a slate quarry and
mill, on 122 acres in Fair Haven, Vermont. The appellees, the Sheldons,
are also Fair Haven property owners and the Reeds' neighbors. Since 1997,
the parties have been litigating the Reeds' right to operate their slate
business and to use the access road leading to the quarry. In 2000, with
several legal actions pending (FN1), the parties agreed to try to resolve
their disputes in a state-funded mediation with retired Judge Arthur O'Dea
serving as mediator.
¶ 3 Prior to the mediation, Judge O'Dea sent each party a
Mediation Agreement outlining the rules governing the mediation. Paragraph
nine of the Mediation Agreement stated that:
i. [a]ll statements, admissions, confessions, acts, or
exchanges . . . are acknowledged by the parties to be offers
in negotiation of settlement and compromise, and as such
inadmissible in evidence, and not binding upon either party
unless reduced to a final agreement of settlement. Any final
agreement of settlement must be in writing and signed by
every party sought to be charged.
The cover letter transmitted with the Agreement asked the parties to sign
and return the Agreement prior to the mediation. All parties received the
Mediation Agreement, but Judge O'Dea apparently failed to collect the
signed mediation forms at the outset of the mediation because he could not
locate them in his files.
¶ 4 The mediation was held on September 5, 2000. Judge O'Dea
began the session by reaffirming the statements made in the Mediation
Agreement. After ten hours, the parties purportedly reached an agreement
on all major issues. Judge O'Dea then orally summarized the terms of the
resolution with the parties and counsel present. The attorneys took notes
on the terms of the agreement with the understanding that they would
prepare the necessary documents for signature in the coming days.
¶ 5 The resolution required the Reeds to pay the Sheldons $250 a
month for the right to use the access road, while the Sheldons agreed to be
coapplicants on Catamount Slate's pending Act 250 permit. Payments were to
commence on October 1, 2000. The parties also agreed to a series of terms
governing the operation of the slate quarry, including, among other things,
hours of operation, number of truck trips permitted on the access road, the
amount and frequency of blasting, and the location of seismic measurements.
These terms were to be memorialized in two distinct documents, a Lease
Agreement and a Settlement Agreement.
¶ 6 On September 7, 2000, two days after the mediation, the
Sheldons' attorney, Emily Joselson, drafted a letter outlining the terms of
the settlement and sent copies to James Leary, the Reeds' attorney, and
Judge O'Dea. Within a week, Leary responded by letter concurring in some
respects and outlining the issues on which the Reeds disagreed with
Joselson's characterization of the settlement.
¶ 7 The parties' actions before the environmental court were in a
holding pattern pending the resolution of the mediation. In response to a
court order to file quarterly status reports, Leary wrote a letter to the
environmental court dated September 28, 2000 stating that "[t]he mediation
was successful and we appear to have achieved a global settlement resolving
all outstanding issues. We presently are in the process of working out the
details of the agreement and preparing the appropriate documents." Leary
went on to say that once the agreements were finalized, "I anticipate that
we will file the appropriate paperwork with the Court to resolve [the
pending cases]."
¶ 8 On October 1, 2000, the Reeds began paying the $250 monthly
lease payments, but, since the settlement agreement was not final, the
parties agreed that the money would go into an escrow account maintained by
the Sheldons' counsel. The check was delivered to the Sheldons' attorney
with a cover memo stating, "This check is forwarded to you with the
understanding that the funds will be disbursed to your clients only after
settlement agreement becomes final. Of course, if the settlement agreement
does not come to fruition, then the funds must be returned to my clients."
The parties continued to exchange letters actively negotiating the
remaining details of the Lease and Settlement Agreements for the better
part of the next five months. Although there were others along the way, by
early 2001 the only remaining issues in dispute were the location of
seismic measurements and the definition of "overblast."
¶ 9 In February 2001, while drafts were still being exchanged,
Christine Stannard, the Reeds' daughter, saw a deed and map in the Fair
Haven Town Clerk's Office which led her to believe that the disputed road
was not owned by the Sheldons, but was a town highway. The Reeds then
refused to proceed any further with negotiating the settlement agreement.
A written settlement agreement was never signed by either party.
¶ 10 The Sheldons responded by filing a motion to enforce the
settlement agreement in the quiet title action pending in the Rutland
Superior Court. The trial court granted the motion, finding that the
attorneys' notes taken at the end of the mediation and the unsigned drafts
of the Lease and Settlement Agreements sufficiently memorialized the
agreement between the parties and thus constituted an enforceable
settlement agreement. The court conceded that, since the Lease Agreement
involved an interest in land, the statute of frauds applied. The court
circumvented the statute's voiding effect, however, by invoking the
judicial admission exception. Under the judicial admission exception, a
court can enforce an otherwise unenforceable oral agreement when the party
against whom enforcement is sought admits the existence of the agreement.
10 R. A. Lord, Williston on Contracts § 27:10, at 69-70 (4th ed. 1999)
(collecting federal and state cases).
¶ 11 Acknowledging that the judicial admission exception has not
been recognized in Vermont, see Chomicky v. Buttolph, 147 Vt. 128, 130, 513 A.2d 1174, 1176 (1986) (holding that "[o]ne may admit the sale of land by a
verbal contract, yet defend an action for specific performance by pleading
the statute") (quoting Couture v. Lowery, 122 Vt. 239, 243, 168 A.2d 295,
298 (1961)), the court found it applicable under the facts of this case.
The statements upon which the court relied came from the testimony of the
Reeds and Leary acknowledging that an agreement had been reached at the
mediation. The court then reasoned that the oral agreement here was a
mediated settlement agreement, the enforcement of which courts should
promote on important public policy grounds. On that basis, the court
concluded that "the policy considerations supporting mediation and
settlement outweigh the policy considerations supporting the statute of
frauds when a party admits in court the existence of a settlement agreement
reached through mediation."
¶ 12 On appeal, the Reeds argue that the statute of frauds
precludes enforcement of their oral agreement because the judicial
admission exception has not been recognized in Vermont and even if it had,
the admission upon which the court relied - testimony taken from parties
regarding their mediation - is inadmissible under V.R.E. 408's protection
against admitting settlement negotiations. They also argue that the court
erred by binding them to an unwritten, unsigned settlement agreement when
the evidence shows that the Reeds did not intend to be bound by anything
other than a signed agreement. Finally, the Reeds assert that they were
erroneously denied the opportunity to present any evidence regarding
whether the Sheldons actually owned the road in dispute.
¶ 13 The Sheldons counter that the court correctly concluded that
the parties entered into a binding settlement agreement at mediation and
that all subsequent negotiations constituted modifications to the original
oral agreement. They also insist that Leary's notes following the
mediation satisfy the statute of frauds because they sufficiently
memorialize the terms of the agreement in writing. Furthermore, they
assert that statements from mediation, while inadmissible to prove
liability or the invalidity of a claim, are admissible to prove the
enforceability of the agreement.
¶ 14 When reviewing the factual findings of a trial court, we view
them in the light most favorable to the prevailing party below,
disregarding the effect of modifying evidence, and we will not set aside
findings unless they are clearly erroneous. Brown v. Whitcomb, 150 Vt.
106, 109, 550 A.2d 1, 3 (1988). The findings will stand if there is any
reasonable and credible evidence to support them. Harlow v. Miller, 147
Vt. 480, 481-82, 520 A.2d 995, 997 (1986). Our review of conclusions of
law, however, is nondeferential and plenary. Thompson v. Dewey's S.
Royalton, Inc., 169 Vt. 274, 276, 733 A.2d 65, 67 (1999).
¶ 15 The question before us is whether the oral agreement reached
at mediation, when combined with the unexecuted documents drafted
subsequently, constituted a binding, enforceable settlement agreement.
Parties are free to enter into a binding contract without memorializing
their agreement in a fully executed document. See Restatement (Second) of
Contracts § 4 (1981). In such an instance, the mere intention or
discussion to commit their agreement to writing will not prevent the
formation of a contract prior to the document's execution. See Bixler v.
Bullard, 172 Vt. 53, 58, 769 A.2d 690, 694 (2001) (citing Teachers Ins. &
Annuity Ass'n of Am. v. Tribune Co., 670 F. Supp. 491, 497 (S.D.N.Y. 1987)
(preliminary agreements cover a broad range from those "which presuppose
that no binding obligations will be placed upon any party until final
contract documents have been signed, to firm binding commitments which,
notwithstanding a need for a more detailed documentation of agreement, can
bind the parties to adhere in good faith to the deal that has been
agreed.").
¶ 16 "On the other hand, if either party communicates an intent
not to be bound until he achieves a fully executed document, no amount of
negotiation or oral agreement to specific terms will result in the
formation of a binding contract." Winston v. Mediafare Entm't Corp., 777 F.2d 78, 80 (2d Cir. 1986). The freedom to determine the exact moment in
which an agreement becomes binding encourages the parties to negotiate as
candidly as possible, secure in the knowledge that they will not be bound
until the execution of what both parties consider to be a final, binding
agreement.
¶ 17 We look to the intent of the parties to determine the moment
of contract formation. Bixler, 172 Vt. at 58, 769 A.2d at 694. Intent to
be bound is a question of fact. Id. "To discern that intent a court must
look to the words and deeds [of the parties] which constitute objective
signs in a given set of circumstances." Id. (alteration in original)
(internal citations omitted). In Winston, the Second Circuit articulated
four factors to aid in determining whether the parties intended to be bound
in the absence of a fully executed document. 777 F.2d at 80-81. The court
suggested that we "consider (1) whether there has been an express
reservation of the right not to be bound in the absence of a writing; (2)
whether there has been partial performance of the contract; (3) whether all
of the terms of the alleged contract have been agreed upon; and (4) whether
the agreement at issue is the type of contract that is usually committed to
writing." Id.; see also Ciaramella v. Reader's Digest Ass'n, 131 F.3d 320,
323 (2d Cir. 1997) (finding negotiated, but unsigned settlement agreement
unenforceable because parties did not intend to be bound until document was
executed). This intent can be shown through oral testimony,
correspondence, or other initial or partially complete writings. Winston,
777 F.2d at 80; see Restatement (Second) of Contracts § 27 comment c
(1981).
¶ 18 The language of the parties' correspondence and other
documentary evidence presented reveals an intent by the mediation
participants not to be bound prior to the execution of a final document.
First, the Mediation Agreement Judge O'Dea sent to the parties prior to the
mediation clearly contemplates that any settlement agreement emanating from
the mediation would be binding only after being put in writing and signed.
Paragraph nine of the Agreement expressly stated that statements made
during mediation would not be "binding upon either party unless reduced to
a final agreement of settlement" and that "[a]ny final agreement of
settlement [would] be in writing and signed by every party sought to be
charged." Further, Judge O'Dea reminded the parties of these ground rules
at the outset of the mediation. The Reeds testified that they relied on
these statements and assumed that, as indicated, they would not be bound
until they signed a written agreement.
¶ 19 Second, the letter Leary sent to the environmental court
three weeks after the mediation stated that the parties "appear" to have
reached a settlement, but that they are "in the process of working out the
details of the agreement and preparing the appropriate documents." This is
further evidence that the Reeds believed they were in the process of
negotiating the final details of the settlement agreements, but did not
consider themselves bound and willing to dismiss their claims until the
"appropriate documents" were executed.
¶ 20 Even more compelling evidence of the Reeds' lack of intent to
be bound in the absence of a writing is the statement in the cover letter
accompanying the Reeds' $250 payments to the Sheldons' attorney saying,
"This check is forwarded to you with the understanding that the funds will
be disbursed to your clients only after settlement agreement becomes final.
Of course, if the settlement agreement does not come to fruition, then the
funds must be returned to my clients." This factor weighs in favor of
finding that the Reeds expressed their right not to be bound until their
agreement was reduced to a final writing and executed.
¶ 21 Because there was no evidence presented of partial
performance of the settlement agreement, we next consider the third factor,
whether there was anything left to negotiate. The trial court initially
stated that the parties reached a complete agreement on all material terms
at the mediation. When addressing disputes over specific terms that
persisted long after the mediation, however, the court conceded that, even
if an agreement was not reached on the location of seismic measurements or
the definition of "overblasts" at the mediation, the agreement was still
enforceable because the Department of Environmental Conservation overseer
could insert these terms into the agreements later. The fact that when
negotiations broke down there were only a few remaining disputed issues or
that DEC could have resolved them during the permitting process does not
lead to the conclusion that the parties were bound at the end of the
mediation. Nor does it show an intent to forgo reliance on the promise
that they would not be bound to any settlement agreement prior to the
execution of a final written document.
¶ 22 As stated by the Second Circuit in Winston, "[T]he actual
drafting of a written instrument will frequently reveal points of
disagreement, ambiguity, or omission which must be worked out prior to
execution. Details that are unnoticed or passed by in oral discussion will
be pinned down when the understanding is reduced to writing." 777 F.2d at
82 (internal quotations and citations omitted). This case is no exception.
A review of the lengthy correspondence in this case makes clear that
several points of disagreement and ambiguity arose during the drafting
process. Beyond the location of seismic measurements and the definition of
"overblast," correspondence indicates that the parties still had not
reached agreement on the term and width of the lease, acceptable decibel
levels and notice provisions for blasts, the definition of "truck trips,"
and whether all claims would be dismissed without prejudice after the
execution of the agreement. Resolution of these issues was clearly
important enough to forestall final execution until the language of the
documents could be agreed upon. In such a case, where the parties intend
to be bound only upon execution of a final document, for the court to
determine that, despite continuing disagreement on substantive terms, the
parties reached a binding, enforceable settlement agreement undermines
their right to enter into the specific settlement agreement for which they
contracted.
¶ 23 The fourth and final factor, whether the agreement at issue
is the type of contract usually put into writing also weighs in the Reeds'
favor. Being a contract for an interest in land, the Lease Agreement is
subject to the statute of frauds and thus generally must be in writing.
See 12 V.S.A. § 181(5). We also look to the complexity of the agreement to
determine whether the parties reasonably could have expected to bind
themselves orally. Ciaramella, 131 F.3d at 326 (finding an eleven-page
settlement agreement containing provisions lasting into perpetuity
sufficiently complex to require reduction to writing); see also Winston,
777 F.2d at 83 (finding same with a four-page settlement agreement
including obligations lasting several years). The Settlement Agreement at
issue contained numerous, very specific terms governing the detailed
operation of the slate quarry and included obligations lasting for at least
several years. These contracts were complex enough to warrant the
expectation of a writing.
¶ 24 Finally, where "the parties are adversaries and the purpose
of the agreement is to forestall litigation, prudence strongly suggests
that their agreement be written in order to make it readily enforceable,
and to avoid still further litigation." Winston, 777 F.2d at 83 . The
relationship between these parties had been caustic and they entered
mediation to attempt to resolve their many pending suits. It is not
unreasonable therefore that the parties would assume this type of agreement
would be in writing.
¶ 25 In conclusion, three of the four factors indicate that the
parties here did not intend to be bound until the execution of a final
written document, and therefore we hold that the parties never entered into
a binding settlement agreement. Our conclusion is supported by the
correspondence, the drafts of the agreements, and the nature of the
agreements themselves. Accordingly, the order enforcing the settlement is
reversed and the case is remanded for further proceedings.
¶ 26 One final note, in their brief appellants encourage us to
hold that a signed writing be required to bind parties to a mediated
settlement even when there is no precondition of an intent not to be bound
until execution of a final written document. We expressly decline to do
so. As we reiterated here, parties to a mediated settlement are free to
enter into a binding oral contract without memorializing their agreement in
a fully executed document, even if they intend to subsequently reduce their
agreement to writing. But, when parties communicate an intent not to be
bound until they have achieved a final executed settlement agreement, oral
agreements and draft provisions created during and after mediation will not
alone constitute the formation of a binding contract.
Reversed and remanded for further proceedings consistent with this
order.
FOR THE COURT:
_______________________________________
Associate Justice
------------------------------------------------------------------------
Footnotes
FN1. The mediated settlement at issue here addressed three of the
four pending actions between these parties. The first was a zoning appeal
and cross-appeal pending before the environmental court involving a permit
allowing the Reeds to build a 3,000-square-foot mill on their property.
The second was a related jurisdictional appeal also before the
environmental board. The third dispute was a declaratory judgment action
in Rutland Superior Court in which the Reeds sought to quiet title to the
portion of the access road that crosses the Sheldons' property.
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