Benteler Automotive Corporation v. Wellington Industries, Inc.:
This case stresses the importance of a well-crafted settlement agreement. More than 95% of all lawsuits filed never go to trial, they’re usually dismissed or settled out of court. Of course, a settlement is not always the perfect resolution, but an even worse resolution is when the settlement agreement itself leads to litigation.
Such was the case in Benteler Automotive Corporation v. Wellington Industries, Inc. After a year of litigation the attorneys made the fatal flaw of submitting to the court a preliminary settlement agreement that had been marked up with comments from attorneys for both sides. When it came time to prepare the final settlement agreement, the parties disputed the terms as they were intended with the handwritten lines and notes on the preliminary agreement; as a result, litigation continued for another 2 years!
There is no need to go into the substance of the preliminary settlement agreement or what the dispute was over. The real issue here is simply never prepare a document that is simply “an agreement to later agree on more specific terms.” When settling a matter, get the definitive agreement, make sure it is fully negotiated, the terms are clearly written out, and make sure it is signed. Only at that time should you submit it to the court for entry.
Hajji v. Esho:
The other recent interesting case is Hajji v. Esho. Hajji had defaulted on his home mortgage and the bank was foreclosing on property with a value of over $500,000. Hajji wanted Esho to purchase the property for $130,000 and then retransfer it back to Hajji (in violation of foreclosure laws).
After Esho bought the property, he refused to turn the property over to Hajji, and Hajji sued based on their oral agreement (contracts related to real estate should always be in writing and never oral). However, Hajji still argued that when Esho purchased the property, he held it “in constructive trust” for Hajj’s benefit.
When someone makes a constructive trust argument, they are essentially stating it would be unfair for the person to retain ownership or use of the property; it should be considered as if he was holding the property for the benefit of someone else, in this case Hajji. However, in order to make this argument, the person must have “clean hands.” That is, they cannot have done anything wrong in their position as the plaintiff. This is the problem with Hajji’s argument. He did not have clean hands because he was trying to illegally regain title to the real estate that had been foreclosed.
Equitable remedies like the constructive trust claim, can be a very powerful tool to correct a blatantly unfair result. However, make sure you have not done anything wrong if you are going to pursue this remedy. This case reinforces the need for you to have “clean hands” when trying to enforce a contract.
If you are thinking of entering into an agreement or have any questions about contracts or settlement agreements give me a call at 248-455-6500 or email me at [email protected]