Teitelbaum Holdings, Ltd. v. Gold, 48 N.Y.2d 51 (1979)
A settlement agreement does not automatically terminate a lawsuit unless there is an express stipulation of discontinuance or entry of judgment; absent such termination, the court retains supervisory power and may enforce the settlement by motion.
Summary
Teitelbaum Holdings sued Gold for breach of contract. The parties reached a settlement, dictated into the record, with payments to be made, and a stipulation of discontinuance upon full payment. A dispute arose over a setoff provision, and Gold ceased payments. Teitelbaum moved for judgment based on the settlement’s acceleration clause. Special Term granted the motion, but the Appellate Division reversed, stating a plenary action was necessary. The Court of Appeals reversed, holding that unless the original action has been unequivocally terminated by express stipulation or entry of judgement, the court retains authority to enforce settlements via motion practice. This promotes efficiency and conserves judicial resources.
Facts
Teitelbaum Holdings, Ltd. sued David Gold and 73-74 Straw Corp. for breach of contract and fraud related to the purchase of an apartment building. After a jury was impaneled, the parties settled in open court. Gold agreed to pay Teitelbaum in installments. Upon full payment, the parties were to execute a stipulation of discontinuance. The settlement agreement included a clause allowing Gold a limited right to set off unpaid installments against amounts due to him as a third mortgagee of the building. A dispute arose over the setoff provision, and Gold stopped making payments. Teitelbaum served a notice of default and moved for judgment based on the settlement’s acceleration clause.
Procedural History
The Supreme Court, Special Term, granted Teitelbaum’s motion for judgment. The Appellate Division reversed, holding that a plenary action was required to enforce the settlement. Teitelbaum appealed to the New York Court of Appeals.
Issue(s)
Whether a settlement agreement entered into during a lawsuit terminates the action, thus requiring a plenary action to enforce the settlement, or whether the court retains supervisory power to enforce the settlement by motion.
Holding
No, because a settlement agreement does not terminate an action unless there has been an express stipulation of discontinuance or entry of judgment. Absent such termination, the court retains its supervisory power over the action and may lend aid to a party who had moved for enforcement of the settlement.
Court’s Reasoning
The Court of Appeals recognized the trial court’s broad supervisory power over pending actions. It acknowledged the general rule that parties may seek relief from a stipulation either by motion in the underlying action or by a plenary action. The court addressed the exception established in Yonkers Fur Dressing Co. v. Royal Ins. Co., which required a plenary suit where the stipulation related to a terminated action. However, the court found that the Yonkers rule should not apply where parties have not unequivocally terminated their lawsuit.
The court reasoned that the presumption should be that an action is not automatically terminated by a settlement agreement. This presumption can only be overcome by an express, unconditional stipulation of discontinuance or entry of judgment. The court noted that numerous post-judgment remedies are available by motion, and there is no basis to differentiate motions enforcing stipulations. Extending motion practice to settlement enforcement promotes efficiency and conserves judicial resources.
In this case, the parties had not executed a stipulation of discontinuance, and the agreement contemplated discontinuance only after full payment. Therefore, enforcement by motion was appropriate. The court also affirmed Special Term’s interpretation of the settlement agreement, finding no ambiguity in the setoff provision. Extrinsic evidence is not considered when the intent of the parties can be gleaned from the face of the instrument. The court stated, “Interpretation of an unambiguous contract provision is a function for the court, and matters extrinsic to the agreement may not be considered when the intent of the parties can be gleaned from the face of the instrument”.