Wayne W. Lewoczko and Andrea Fahrenthold v. Karen Kay Crews and April Sound Property Owners' Association Inc. ( 2020 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-18-00432-CV
__________________
WAYNE W. LEWOCZKO AND ANDREA FAHRENTHOLD, Appellants
V.
KAREN KAY CREWS AND APRIL SOUND PROPERTY OWNERS’
ASSOCIATION INC., Appellees
__________________________________________________________________
On Appeal from the 284th District Court
Montgomery County, Texas
Trial Cause No. 18-02-01524-CV
__________________________________________________________________
MEMORANDUM OPINION
Appellants Wayne W. Lewoczko and Andrea Fahrenthold appeal the trial
court’s judgment based on a mediated settlement agreement. In one issue, Appellants
argue the trial court erred in rendering judgment on the settlement agreement
because Appellants revoked their agreement after Appellee April Sound Property
Owners’ Association, Inc. (ASPOA) breached the agreement. For the reasons
explained below, we reverse and remand.
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Background
In 2018, Appellee Karen Kay Crews filed her First Amended Original Petition
for Declaratory Judgment, Application and Affidavit for Temporary Restraining
Order and Temporary Injunction against ASPOA, Lewoczko, Fahrenthold, and
Georgette Whatley (collectively “Defendants”). 1 Crews, a homeowner in the April
Sound subdivision, alleged that ASPOA had unlawfully allowed the other
Defendants to submit an invalid petition calling for a special meeting to remove six
trustees of ASPOA. According to Crews, the petition was invalid because it “was
proffered by proxy, in clear violation of the requirements of ASPOA rules,” and
“[t]he suspect proxies violate Texas law.” Crews alleged that, because ASPOA
allowed the invalid petition to have legal effects, “Plaintiff’s property rights and
property interests as a member and property owner are now in jeopardy because all
Defendants are pursuing an ultra vires method to conduct a special meeting to
consider the removal of qualified and legally elected board members of ASPOA.”
Plaintiff requested that the trial court enter a declaratory judgment that: (1) petitions
calling for special meetings cannot be called by proxy and must be called by a
petition as set forth in the By-Laws and the Additional Dedicatory Instrument for
ASPOA; (2) petitions must comport with the requirements of the Additional
1Whatley is not a party to this appeal, and we discuss her herein only as
necessary to our disposition.
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Dedicatory Instrument for ASPOA; and (3) proxies submitted to ASPOA must be
valid pursuant to section 22.160 of the Business Organizations Code in that the proxy
must not be altered, must be executed by the member or the member’s attorney-in-
fact, and must accurately represent the date of execution.
Lewoczko, Fahrenthold, and Whatley (“the Homeowner Defendants”) filed
their Answer and Original Cross-Claim for Declaratory Relief, and ASPOA filed its
Answer, Response to Plaintiff’s First Amended Original Petition for Declaratory
Judgment, Plea to the Jurisdiction and Motion to Dismiss. The Homeowner
Defendants filed their Second Amended Original Cross-Claim for Declaratory
Relief and Petition for Permanent Injunctive Relief, asking the trial court to, among
other things, enter a declaration with respect to ASPOA homeowners’ rights to vote
by proxy to remove and elect ASPOA trustees.
The parties attended mediation and entered into a Mediated Settlement
Agreement. On April 25, 2018, the parties filed their Rule 11 Regarding Settlement
notifying the trial court that the matter was settled at mediation. On May 25, 2018,
ASPOA filed its Motion for Entry of Judgment and Motion to Dismiss, notifying the
trial court that the parties had settled the matter in mediation and requesting the trial
court to dismiss all claims and enter judgment in accordance with the settlement
agreement.
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Four days later, the Homeowner Defendants filed their Objections and
Response to ASPOA’s Motion for Entry of Judgment and Motion to Dismiss. They
argued that ASPOA had filed a motion asking the trial court to enter a partial agreed
judgment between Plaintiff Crews and the Homeowner Defendants that did not
include ASPOA that was without the Homeowner Defendants’ consent, and that it
would improperly dismiss with prejudice the Homeowner Defendants’ counter or
cross-claims against ASPOA. The Homeowner Defendants argued that “[t]he parties
continue to perform certain obligations under their settlement agreement[,] and it
would be premature to dismiss this case until all such matters are completed.”
According to the Homeowner Defendants, “the Motion for Entry is misleading and
omits material developments in this matter in the weeks since the parties’ April 18,
2018 mediation.” The Homeowner Defendants argued that after they submitted a
draft document “Agreed Final Judgment for Permanent Injunction” on April 23,
2018, their counsel sent an email to opposing counsel in May 2018 stating that the
Homeowner Defendants did not consent to the filing of the document until “such
time as the Master’s duties are completed.” According to the Homeowner
Defendants, their counsel sent an email May 16, 2018 stating that “[o]nce all
business under the agreed order is accomplished the parties can resume completion
of the Mediated Settlement Agreement and file the pleading.” The Homeowner
Defendants explained that on May 15, 2018, the trial court entered an Agreed Order
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Appointing Master in Chancery, requiring the parties and the Master to perform
certain tasks relating to the 2018 ASPOA annual meeting. The Homeowner
Defendants argued that the 2018 ASPOA annual meeting began May 19, 2018, and
at the time the Homeowner Defendants filed their response to the Motion for Entry
on May 29, 2018, ASPOA still had not performed the tasks required by the Agreed
Order Appointing Master in Chancery. According to the Homeowner Defendants,
they were “entitled to find out whether [ASPOA would] perform all acts required of
it under both the Order and the parties’ settlement agreement before dismissing with
prejudice their causes of action against [ASPOA].” The Homeowner Defendants
requested an oral hearing, requested that the trial court retain the matter on the docket
and continue the current June 1, 2018 entry setting, and requested that the deadline
for entry of judgment and dismissal of claims be reset in no less than thirty days so
that the parties could ensure all obligations under the settlement agreement and the
trial court’s Agreed Order Appointing Master in Chancery had been completed.
ASPOA filed a Reply, arguing that the Homeowner Defendants’ allegations
that ASPOA had not completed its review of the ballots and proxies from its 2018
annual meeting were irrelevant to the issues in the lawsuit, all matters relevant to the
lawsuit had been settled, and any “[p]otential” claims among the parties were “not
grounds to keep a lawsuit active.” On October 3, 2018, Whatley filed her Motion to
Enforce Settlement Agreement by Entry of Final Judgment. On October 5, 2018,
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Lewoczko and Fahrenthold filed their Third Amended Original Cross-Claim for
Declaratory Relief and Petition for Permanent Injunctive Relief, requesting a
declaratory judgment and asserting a claim for breach of contract alleging ASPOA
materially breached the settlement agreement in the manner it conducted its annual
homeowners’ meeting. According to Lewoczko and Fahrenthold, ASPOA breached
the settlement agreement by failing or refusing to allow all members of ASPOA to
cast votes by proxy in the May 2018 election, by failing to send out the specific
information required by the settlement agreement regarding the use of proxies, and
by imposing rules regarding mailing proxies in direct contravention of the settlement
agreement. Lewoczko and Fahrenthold asserted that the proxies were not
authenticated at the meeting even after being validated by the Master and ASPOA
“engaged in an authentication campaign that lasted over 2 weeks.” Lewoczko and
Fahrenthold filed a Response to Whatley’s Motion to Enforce Settlement
Agreement. Lewoczko and Fahrenthold argued that they did not object to Crews,
ASPOA, and Whatley entering into whatever agreed judgments they choose but that
Lewoczko and Fahrenthold did not consent to the entry of the agreed judgment and
dismissal of their cross-claims without their consent, that Lewoczko and Fahrenthold
revoked their consent at the time of rendition because ASPOA materially breached
the settlement agreement, and that Lewoczko and Fahrenthold intended to litigate
their claims against ASPOA for breaching the settlement agreement. ASPOA filed
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a Joinder of Defendant Georgette Whatley’s Motion to Enforce Settlement
Agreement.
The trial court held a hearing on Whatley’s Motion to Enforce Settlement
Agreement by Entry of Final Judgment and ASPOA’s Joinder to Defendants’
Motion. On October 24, 2018, the trial court signed a Final Judgment ordering that,
based on the mediated settlement filed on October 3, 2018, the parties agreed to the
injunctive relief, the parties were prohibited from using proxies for petitions and for
a call for a special meeting of ASPOA, the parties were prohibited from using any
proxies that are not fully executed by a member of the ASPOA or a member’s
attorney-in-fact, and that all claims brought by Lewoczko, Fahrenthold, and Whatley
were dismissed with prejudice. Lewoczko and Fahrenthold filed their request for
findings of facts and conclusions of law and their notice of appeal. ASPOA filed its
Opposition to Fahrenthold’s and Lewoczko’s request for findings of fact and
conclusions of law, and Fahrenthold and Lewoczko filed their Notice of Past-Due
Findings of Fact and Conclusions of Law. No findings of fact or conclusions of law
were filed by the trial court.
Issue on Appeal
On appeal, Appellants argue that the trial court erred in rendering judgment
based on the settlement agreement when Appellants revoked their consent to the
agreement and asserted cross-claims because ASPOA breached the agreement prior
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to the trial court’s judgment. According to Appellants, they repeatedly objected to
the entry of an agreed judgment and notified the trial court that Appellants did not
consent to the agreed judgment because Appellee breached the settlement
agreement, and Appellants asserted that they were excused from performance under
the settlement agreement, including the requirement that they dismiss the cross
actions, as a result of ASPOA’s breach. Appellants further argue that, even assuming
there was no withdrawal of consent, the only method for enforcing a settlement
agreement is summary judgment or trial.
Appellees argue that ASPOA did not breach the settlement agreement, that
the settlement agreement is an enforceable contract, Appellants did not notify
Appellees that they were revoking consent to the settlement agreement until after the
entry of the judgment, that Appellants were not entitled to bring their Third
Amended Cross-Claim after the parties had resolved all issues and settled all claims
in the lawsuit, that Appellants did not withdraw their consent to the settlement
agreement but instead no longer consented to the entry of an agreed judgment and
then asserted a breach-of-settlement-agreement claim against ASPOA, and that
Appellants’ cross-claims do not relate to the lawsuit and are not barred from being
asserted in a new lawsuit. Appellees also argue that because Appellants did not
effectively withdraw their consent to the settlement agreement before the entry of
judgment, the trial court was not required to hear any evidence as to the
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enforceability of the settlement agreement or decide the issue as to the enforceability
of the agreement. Appellees argue in the alternative that, even if Appellants
withdrew their consent before judgment was rendered, ASPOA has submitted proper
pleading and proof in support of its claim for enforcement of the agreement.
According to Appellees, because Appellants had notice that Appellee was asserting
a breach of contract claim against Appellants for withdrawing consent and
Appellants presented no proof in opposition to entry of judgment, the trial court did
not err in entering judgment in accordance with the settlement agreement because
there was no issue of fact.
Standard of Review and Applicable Law
A trial court’s decision whether a settlement agreement should be enforced as
an agreed judgment or must be the subject of a contract action requiring additional
pleadings and proof is subject to the abuse of discretion standard of
review. See Mantas v. Fifth Ct. of App., 925 S.W.2d 656, 659 (Tex. 1996); Staley v.
Herblin, 188 S.W.3d 334, 336 (Tex. App.—Dallas 2006, pet. denied). A trial court
abuses its discretion if it renders a decision that is so arbitrary and unreasonable as
to amount to a clear and prejudicial error of law. In re Ford Motor Co., 165 S.W.3d
315, 317 (Tex. 2005) (per curiam); Walker v. Packer, 827 S.W.2d 833, 839 (Tex.
1990). The appellant bears the burden to establish error in the trial court’s
judgment. Englander Co., Inc. v. Kennedy, 428 S.W.2d 806, 807 (Tex. 1968) (per
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curiam); Baylor Coll. of Med. v. Camberg, 247 S.W.3d 342, 346 (Tex. App.—
Houston [14th Dist.] 2008, pet. denied).
A party may revoke its consent to a settlement agreement at any time before
judgment is rendered on the agreement. Quintero v. Jim Walter Homes, Inc., 654
S.W.2d 442, 444 (Tex. 1983). A judgment rendered after one of the parties revokes
its consent is void. S & A Rest. Corp. v. Leal, 892 S.W.2d 855, 857 (Tex. 1995)
(citing Samples Exterminators v. Samples, 640 S.W.2d 873, 875 (Tex. 1982)); see
also Burnaman v. Heaton, 240 S.W.2d 288, 291 (Tex. 1951) (court cannot render a
valid consent judgment unless, at the time of rendition, all parties consent to the
agreement underlying the judgment).
Analysis
The trial court indicated at the hearing on the motion to enforce that it was not
entering an agreed or a consented judgment, and the parties here agree that the trial
court’s entry of judgment could not have been an agreed judgment and was a
judgment to enforce the settlement agreement as an enforceable contract. As such,
we believe the rationale in the case of Davis v. Wickham, 917 S.W.2d 414, 416-17
(Tex. App.—Houston [14th Dist.] 1996, no writ), relying on the Texas Supreme
Court’s opinion in Padilla, is applicable here:
If the parties reach a settlement through alternative dispute
resolution procedures and execute a written agreement disposing of the
dispute, the agreement is enforceable in the same manner as any other
written contract. Tex. Civ. Prac. & Rem. Code Ann. § 154.071(a)[].
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Under that section, “a party may enforce the agreement without the
other party’s consent under contract law.” Stevens v. Snyder, 874
S.W.2d 241, 243 (Tex. App.—Dallas 1994, writ denied). . . .
....
In Padilla v. LaFrance, 907 S.W.2d 454, 461-62 (Tex. 1995), the
supreme court stated:
Although a court cannot render a valid agreed
judgment absent consent at the time it is rendered, this
does not preclude the court, after proper notice and
hearing, from enforcing a settlement agreement
complying with Rule 11 even though one side no longer
consents to the settlement. The judgment in the latter case
is not an agreed judgment, but rather is a judgment
enforcing a binding contract. . . .
An action to enforce a settlement agreement, where
consent is withdrawn, must be based on proper pleading
and proof.
Because a mediated settlement agreement is enforceable under
contract law, the same procedures used to enforce and enter judgment
on other contracts should apply to mediated settlement agreements.
When the legislature enacted the alternative dispute resolution statute,
it did not order the courts to follow a special procedure applicable only
to mediated settlement agreements. It said only that a mediated
settlement agreement is enforceable as any other contract. Martin v.
Black, 909 S.W.2d 192, 195 (Tex. App.—Houston [14th Dist.] 1995,
writ [denied]).
The only methods existing under the rules of civil procedure to
enforce a contract and obtain a judgment are: (1) summary judgment
proceedings, if no fact issue exists; and (2) trial, jury or non-jury, if a
fact issue exists. See Tex. R. Civ. P. 166a, 262-270, 295. A trial court
may enter a judgment on a mediated settlement agreement where one
of the parties contests his intent to be bound only by following one of
these vehicles set out in the rules of civil procedure. Martin[], 909
S.W.2d at 196.
See also In re BBX Operating, LLC, No. 09-17-00079-CV, 2017 Tex. App. LEXIS
3526, at *3 (Tex. App.—Beaumont Apr. 20, 2017, orig. proceeding) (mem. op.)
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(trial court abused its discretion by enforcing a settlement agreement involuntarily
without a bench trial or jury trial or by summary judgment).
Appellees argue that Padilla is distinguishable because in the instant case
Appellants did not withdraw their consent to the settlement but asserted a breach-of-
settlement agreement while opposing enforcement of a portion of the agreement. We
find this argument unpersuasive. Here, the non-jury hearing by the trial court was
solely for the purpose of determining the merits of the motion to enforce the
settlement agreement as a final judgment, and it did not seek to enforce a settlement
agreement based on a motion for summary judgment or proper pleading and proof
at trial. See Padilla, 907 S.W.2d at 462. Appellees had not filed motions for summary
judgment against Appellants. The parties disputed whether Appellants were excused
from performance under the settlement agreement because of ASPOA’s breach, and
at the time of the hearing, the Appellants had pending counterclaims against ASPOA
for breach of contract. “Due process requires a full hearing before a court having
jurisdiction, the opportunity to introduce evidence at a meaningful time and in a
meaningful manner, and the right to judicial findings based on the evidence.” In re
Park Mem’l Condo Ass’n, Inc., 322 S.W.3d 447, 450 (Tex. App.—Houston [14th
Dist.] 2010, orig. proceeding). The trial court entered a judgment based on the
parties’ mediated settlement and dismissed all claims, including Appellants’ cross-
claims against ASPOA, with prejudice. Because the trial court did not employ one
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of the authorized methods under the Texas Rules of Procedure to enforce the contract
and obtain a judgment—a trial or by summary judgment—the trial court erred and
abused its discretion. See Padilla, 907 S.W.2d at 461-62; Davis, 917 S.W.2d at 416-
17; see also In re BBX Operating, 2017 Tex. App. LEXIS 3526, at *3. We sustain
Appellants’ issue. We reverse the trial court’s judgment and remand the case to the
trial court for further proceedings consistent with this opinion.2
REVERSED AND REMANDED.
_________________________
LEANNE JOHNSON
Justice
Submitted on May 21, 2020
Opinion Delivered November 5, 2020
Before Kreger, Horton and Johnson, JJ.
2 Because our analysis resolves the issue on appeal, we need not discuss the
parties’ other arguments. See Tex. R. App. P. 47.1.
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