United States District Court, W.D. North Carolina, Charlotte Division
VERONIQUE K. PONGO, and FRANCISCO AVOKI, Plaintiffs,
QBE FIRST INSURANCE AGENCY, INC., DOES I-XX, Defendants.
ROBERT J. CONRAD, Jr., District Judge.
THESE MATTERS COME before the Court on several motions by Plaintiffs, including: to amend their complaint (Doc. 8), to preserve evidence (Doc. 9), and to revoke the mediated settlement agreement between the parties. (Doc. 19). Of these motions, Defendants responded in opposition to the motion to amend the complaint and to revoke the mediated settlement. (Docs. 10; 20). Additionally, Defendants moved this Court for oral arguments on the issue of whether to enforce the settlement agreement. (Doc. 21).
These matters are ripe for review.
Plaintiffs Avoki and Pongo purchased a multi home insurance policy from Defendant QBE Insurance to cover Plaintiffs' property (the Property) in Charlotte, North Carolina. (Doc. 1-1). The policy was issued on June 11, 2012. (Id.). At the time, Plaintiff Pongo was the owner of the Property with a mortgage held by Bank of America. (Doc. 20-1). Bank of America obtained a Lender Placed Policy (LPP) from Defendants QBE First for its interest in the Property. (Id.). The LPP listed Bank of America as the "named insured mortgagee" and Pongo as "an additional named insured." (Id.).
In July 2013, Plaintiffs filed suit in North Carolina state court for breach of contract, unfair and deceptive trade practices, and bad faith. (Doc. 1-1). Defendants removed the case on August 21, 2013. (Doc. 1). On November 22, 2013, the case was reassigned to this Court. Prior to reassignment in this Court, Plaintiffs brought a motion to amend their complaint to add QBE Holding, Bank of America, Safeguard Properties and Town Realty for "violation of federal RICO act" and "tortious spoliation of evidence." (Doc. 9). Plaintiffs also moved this Court to issue an order enjoining Defendants from repairing or altering the property and requiring Defendants to preserve all relevant documents. (Doc. 10).
During 2013, the Property went through foreclosure proceedings. Although unrelated to this lawsuit, the nature and degree of the parties' respective knowledge of the status of these proceedings relates directly to the issue of whether to recognize and enforce a settlement agreement. At some point, Bank of America sold its mortgage to the Bank of New York Mellon who initiated foreclosure proceedings in North Carolina State Court. On June 27, 2013, the Superior Court of Mecklenburg Country entered an order allowing Bank of New York Mellon to proceed with a foreclosure sale of the property. (Doc. 20-4 ¶1). On July 5, 2013, Plaintiffs filed a Notice of Appeal which was dismissed by the court on October 30, 2013. (Id. at 2-3).
The parties participated in a court ordered mediated settlement conference on December 18, 2013 where attorney W. Thad Adams, III served as mediator. The parties came to an agreement at the conference whereby Defendants agreed to pay $21, 500.00 directly to Mrs. Pongo. In addition, Defendants agreed to make a payment of $16, 396.68 to Plaintiffs contingent upon repairs being done to the property. (Doc. 20-5 ¶6, 8). In the case that Plaintiffs were unable to make such repairs, the funds would be paid to the lender. (Id.).
Defendants also informed Plaintiffs that, pursuant to the LLP, they intended to make two claim payments to the lender totaling $27, 179.14 and that these payments were independent of, and not affected by, the settlement negotiations. (Id. ¶¶4-5, 7, 9). The parties also discussed the foreclosure of the property during which the Plaintiffs expressed their intent to redeem the property. The mediator informed Plaintiffs that the settlement agreement in no way depended upon whether the foreclosure had or had not taken place. (Id. ¶ 14). Both parties signed the agreement which recited that it represented a full satisfaction of claims in this case. (Doc. 20-6). Under the agreement, the parties agreed to file a Stipulated Dismissal with Prejudice of all claims within fourteen (14) days of receipt of the check for $21, 500 from Defendants to Ms. Pongo. (Id.).
On December 31, 2013, Counsel for the Defendants sent to Plaintiffs a draft final agreement entitled "Release of All Claims And Settlement Agreement" (Final settlement agreement). (Doc. 20-9 at 4-12). Included with the draft was a letter stating that Defendants would tender a check in the amount of $21, 500 upon receipt of the singed final settlement agreement. Plaintiffs however, did not sign this agreement. (Id. at 2-3). In fact, five days earlier, on December 26, 2013, they filed a motion to revoke the settlement agreement under the grounds that the agreement was the product of a bilateral mistake. (Doc. 19).
District courts have inherent authority, derived from their equity power, to enforce settlement agreements. Hensley v. Alcon Labs. , 277 F.3d 535, 540 (4th Cir. 2002). In order to enforce such an agreement, the court must find that a complete settlement has been reached and be able to determine the terms and conditions of that settlement. Id . at 540-41. If there is a factual dispute over the existence of an agreement, over the authority of attorneys to enter into the agreement, or over the agreement's terms, the district court may not enforce a settlement agreement summarily. Id . at 541 (emphasis in original) (footnote omitted). Instead, the district court must hold a plenary evidentiary hearing to resolve the dispute. Id . (quoting Millner v. Norfolk & W. Ry. Co. , 643 F.2d 1005, 1009 (4th Cir. 1981).
A. Settlement Agreement
Plaintiffs argue that the agreement is void due to a mutual mistake of fact about whether Plaintiff, at the time of the agreement, possessed the legal right to redeem the Property and make repairs. Were Plaintiff able to redeem such property and make repairs, she would be entitled to some or all of $16, 396.68 under the agreement. Were Plaintiff not able to redeem the property (and therefore, not able to make repairs), she would have no right to the funds under the agreement.
1. Whether Agreement Was Conditional
The settlement conference took place in North Carolina whose general principles of contract law apply. Chappell v. Roth , 548 S.E.2d 499, 500 ( N.C. 2001). "It is a well-settled principle of contract law that a valid contract exists only where there has been a meeting of the minds as to all essential terms of the ...