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LLC v. Federal Deposit Ins. Corp.

Supreme Court of New Hampshire

January 24, 2012

157 Portsmouth Avenue Residential Development, LLC
v.
Federal Deposit Insurance Corporation as Receiver for Butler Bank & a.

Defendant Federal Deposit Insurance Corporation (FDIC) appeals an order of the trial court denying its motion to enforce settlement agreement. The FDIC argues that the trial court erred in: (1) finding that the mutual release executed by the parties did not bar the claim by the plaintiff, 157 Portsmouth Avenue Residential Development, LLC (Portsmouth Avenue), against the proceeds of Butler Bank's subsequent foreclosure on the Litchfield property; and (2) ruling that Portsmouth Avenue's mechanic's lien survived the parties' settlement. We affirm.

We first set forth the procedural posture of this case. Portsmouth Avenue filed an action in 2008 against Butler Bank, Blossom Court, LLC and Active Adult Community Heritage Park, LLC seeking to recover for work it had performed on condominium projects owned by Blossom Court and Active Adult Community. The writ set forth a claim based on quantum meruit against all defendants. It also set forth a claim sounding in breach of contract against the condominium project owners and a separate breach of contract claim against Butler Bank based upon Butler Bank's agreement that it would make payment for work performed after Portsmouth Avenue became concerned that the condominium owners were unable to pay for the continued work. Portsmouth Avenue also sought and was granted a mechanic's lien on each condominium project in the amount of $125, 000. Portsmouth Avenue settled its claims against Butler Bank in December 2008 for $40, 000. Conflicting interpretations of the release executed by Portsmouth Avenue and Butler Bank as a result of the settlement gave rise to this appeal.

At some point subsequent to the execution of the release, Butler Bank failed and the FDIC assumed its assets and liabilities. The trial court found that although the condominium owners had "long since defaulted on the loans with Butler Bank, the bank did not formally foreclose on the properties until 2010." The properties were then apparently purchased by a third party. The title insurance company for the purchaser noted the mechanic's lien and requested a discharge. Portsmouth Avenue refused to provide the discharge without payment of the $80, 300 amount that it argues survived the earlier execution of the release with Butler Bank.

The FDIC then brought suit to enforce the settlement agreement. The record before us includes the release and supporting documents, including a 2009 stipulation of dismissal, in which Portsmouth Avenue agreed to dismiss its then pending claims against Butler Bank. The release, executed by Butler Bank and Portsmouth Avenue, provided that Portsmouth Avenue discharged defendant Butler Bank from any liability for work performed on the condominium projects. The FDIC argued that the release extinguished the mechanic's liens that Portsmouth Avenue had filed against the owners of the two condominium projects. Portsmouth Avenue argued that it never intended to release the mechanic's liens. Indeed, the release provides: "The Plaintiff and the Defendant both reserve all claims they may have against any third party; this Mutual Release is intended to apply only to the Plaintiff and the Defendant and their claims vis-à-vis each other."

Settlement agreements are contractual in nature and, therefore, generally governed by principles of contract law. Poland v. Twomey, 156 N.H. 412, 414 (2007). The interpretation of a settlement agreement is a question of law that we review de novo. Czumak v. N.H. Div. of Developmental Servs., 155 N.H. 368, 373 (2007).

A valid enforceable settlement requires offer, acceptance, consideration and a meeting of the minds. Id. A meeting of the minds requires that the parties assent to the same contractual terms; that is, they must have the same understanding of the terms of the contract. Durgin v. Pillsbury Lake Water Dist., 153 N.H. 818, 821 (2006). This is analyzed under an objective standard. Syncom Indus. v. Wood, 155 N.H. 73, 82 (2007). When there is a disputed question of fact as to the terms of a contract, it is to be determined by the trier of fact. Id. In this case, the parties offer alternative interpretations of the scope of the word "claim" as used in the previously quoted provision of the settlement agreement.

The trial court found that, under the settlement agreement, Portsmouth Avenue "never intended to release [the condominium owners] from its claim." The court also found that counsel for Butler Bank "believed that the release of any claim of the plaintiff on the property in question was part of the settlement." There is support in the record for both findings. The trial court then found that the "attachment remained as against the [condominium owners] after the settlement with the bank." It appears that the trial court concluded that the settlement agreement between Portsmouth Avenue and Butler Bank remained in effect despite its findings that the parties had conflicting intentions when they executed the agreement. Because the cited language of the settlement agreement is ambiguous and given the trial court's factual findings that are supported by the record, we conclude, under an objective standard, that there was no meeting of the minds. Thus, there was no enforceable agreement.

Based upon the limited record before us, however, we also conclude that the trial court reached the correct result, albeit on mistaken grounds. In its order, the trial court noted that the FDIC did not challenge that the amount of the plaintiff's contested lien was $80, 300.00 (after deducting the $40, 000.00 settlement payment), nor did the FDIC assert that any of the plaintiff's work was defective. Given the absence of a valid settlement, the plaintiff would ordinarily be required to return to the FDIC the $40, 000 settlement payment that it received from Butler Bank. However, that would increase by $40, 000 the amount of the plaintiff's mechanic's lien, bringing the total lien to $120, 300. Rather than requiring a needless back and forth transfer of funds, we affirm the trial court's ruling that, to discharge the lien, "the current owner [of the property] is required to pay the sum of $80, 300.00 to the plaintiff, " which the court noted is being held in escrow. See Echo Consulting Services v. North Conway Bank, 140 N.H. 566, 569 (1995) (affirming trial court's conclusion reached on mistaken grounds where valid alternative reasons existed to support it.).

Affirmed.

HICKS, CONBOY and LYNN, JJ., ...


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