Robert POPE, as guardian and personal representative of Chandler Pope, a minor, Plaintiff-Appellant, v. THE GAP, INC., a Delaware corporation, d/b/a Gap Kids, Defendant-Appellee.
No. 17529.
Court of Appeals of New Mexico.
June 18, 1998.
1998-NMCA-103 | 961 P.2d 1283
Luis G. Stelzner, Craig T. Erickson, Sheehan, Sheehan & Stelzner, P.A., Albuquerque, for Appellee.
OPINION
FLORES, Judge.
{1} In this appeal, we examine the meaning of an offer of judgment under
I. FACTUAL AND PROCEDURAL BACKGROUND
{2} The underlying dispute is a product liability action in which Pope, as guardian and personal representative of his infant daughter, Chandler Pope, alleges that his daughter‘s legs were permanently scarred by a pair of “Baby Gap” socks purchased from The Gap. The complaint was filed June 10, 1994. Discovery in the case was extensive and protracted until settlement negotiations began in March 1996.
{3} On March 18, 1996, The Gap served on Pope an offer of judgment under
Pursuant to
Rule 1-068 of the New Mexico Rules of civil Procedure , Defendant The Gap, Inc., offers to allow judgment to be taken against it in this action in the sum of ELEVEN THOUSAND FIVE HUNDRED FIFTY DOLLARS ($11,550.00) which includes costs accrued to date. This offer of judgment is made for the purposes specified inRule 1-068 , and is not to be construed either as an admission that Defendant is liable in this action or that the Plaintiff has suffered any damages.
No proposed form of judgment accompanied the offer. However, the language of the offer, including the disclaimer in the last sentence, essentially tracked the language in the standard form of offer of judgment provided in 3 Moore‘s Manual-Federal Forms, Form No. 11:545 (1997) [hereinafter Moore‘s]. That form of offer is commonly used by defendants in connection with making offers of judgment under
Please take notice that the plaintiff accepts the offer of judgment served by defendant on March 18, 1996, allowing plaintiff to take judgment in this action for [] $11,550 [], which amount includes costs accrued up to the making of said offer.
The acceptance was silent regarding the issue of The Gap‘s liability, but also tracked the language in the standard form of acceptance under the offer of judgment rule. See id., Form No. 11:546. The proposed form of judgment also made no mention of The Gap‘s liability, stating in the decretal clause only “that judgment is entered against the defendant and that plaintiff [will] recover from the defendant the amount of ... [] $11,550 [] on his claims.” Like the offer of judgment and acceptance, the proposed form of judgment was consistent with the Moore‘s form and contained no language either admitting or denying liability. See id., Form No. 11:547.
{4} By accepting the offer of judgment, Pope rejected a separate offer of settlement by The Gap for $12,500, which, in addition to the higher dollar amount, included the condition that the parties enter into a confidentiality agreement. This offer apparently was not made pursuant to
{5} The Gap refused to approve the form of judgment proposed by Pope because it omitted language that the judgment was not to be construed as an admission of liability by The Gap or that Pope had suffered any damages. The Gap proposed its own form of judgment which included the disclaimer, and which Pope rejected.
{6} On May 1, 1996, the trial court held a presentment hearing. After hearing argument from counsel, the trial court entered The Gap‘s form of judgment, with the language expressly disclaiming liability. Pope appeals the judgment.
II. DISCUSSION
{7} Pope contends that the trial court erred in entering The Gap‘s form of judgment because it fails to reflect the agreement of the parties. Pope argues that based on the plain language of the offer and acceptance, the use of form language in the offer and acceptance, and the operation of
{8} We first examine whether the form of judgment entered by the trial court accurately reflects the agreement of the parties. Concluding that it does not and that The Gap is contractually bound by the form of judgment submitted by Pope, we next consider whether Pope‘s form of judgment, which is silent on the issue of liability, amounts to a determination or admission of liability that can be used against The Gap in other litigation. We hold that it does not.
A. Did the Parties Agree to the Form of Judgment Entered by the Trial Court?
1. Standard of Review; Application of Contract Principles.
{9} In this case, the parties do not dispute the facts; rather, their arguments center on the application of the law to the facts. This is an issue we review de novo. See Medina v. Sunstate Realty, Inc., 119 N.M. 136, 138, 889 P.2d 171, 173 (1995); C.R. Anthony Co. v. Loretto Mall Partners, 112 N.M. 504, 510, 817 P.2d 238, 244 (1991); Sinclair Oil Corp. v. Scherer, 7 F.3d 191, 193 (10th Cir.1993).
{10} In construing
2. Mutual Assent.
{11} For an offer and acceptance to create a binding contract, there must be an objective manifestation of mutual assent by
{12} In the case before us, Pope and The Gap had different understandings of the meaning of the offer of judgment. Pope understood the offer of judgment to mean that, upon acceptance of the offer, a judgment would be entered against The Gap allowing Pope to recover $11,550 on his claims against The Gap, without any language negating The Gap‘s liability or Pope‘s damages. The Gap, however, understood the offer to mean that, upon acceptance, a judgment would be entered against The Gap for the specified amount, along with the express condition that The Gap was not admitting any liability or damages.
{13} Mutual assent is based on objective evidence, not the private, undisclosed thoughts of the parties. See Trujillo, 88 N.M. at 281, 540 P.2d at 211; see also Gutierrez v. Sundancer Indian Jewelry, Inc., 117 N.M. 41, 52-53, 868 P.2d 1266, 1277-78 (Ct.App.1993) (Hartz, J., dissenting). In other words, what is operative is the objective manifestations of mutual assent by the parties, not their secret intentions. See id. The Restatement (Second) of Contracts explains the effect of misunderstandings on contracts. Where the parties attach materially different meanings to the words in the offer, mutual assent is absent if neither party knows or has reason to know the meaning attached by the other, or each party knows or has reason to know the meaning attached by the other. Restatement (Second) of Contracts § 20(1)(1981). On the other hand,
[t]he manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
(b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.
Id. § 20(2).
{14} In light of the above principles, we conclude that The Gap was contractually bound to Pope‘s form of judgment, despite the different meanings ascribed by the parties to the offer. This is because The Gap knew or had reason to know the meaning of the offer of judgment attached by Pope, and Pope did not know or have reason to know the meaning of the offer attached by The Gap. Because The Gap‘s offer of judgment was made in the standard form of offer of judgment, providing that only the offer was not to be construed as an admission of liability or damages, see Moore‘s, Form No. 11:545, The Gap knew or had reason to know that Pope‘s acceptance of the offer would be with the understanding that the judgment would also be in the standard form of judgment under the offer-of-judgment rule. See id., Form Nos. 11:546, 11:547. The standard forms of acceptance and judgment state simply that judgment is to be entered against the offeror in the amount set forth in the judgment, with no language expressly admitting or denying liability. See id. The language in Pope‘s acceptance and proposed form of judgment essentially tracked this form language. Therefore, we conclude that, by tendering its acceptance and proposed form of judgment, Pope assented to the terms of The Gap‘s offer of judgment in the manner invited by the offer. See Orcutt v. S & L Paint Contractors, Ltd., 109 N.M. 796, 798, 791 P.2d 71, 73 (Ct.App.1990) (stating that an “[a]cceptance of an offer is a manifestation of assent to the terms [thereof made by] the offeree in a manner invited or required by the offer“). The Gap‘s subjective but unexpressed intention that the judgment itself was to include language disclaiming liability is immaterial. See Trujillo, 88 N.M. at 281, 540 P.2d at 211.
{16} As a result, we conclude that The Gap should be bound by Pope‘s form of judgment, without any language expressly admitting or denying liability. As previously noted, the Restatement (Second) of Contracts provides that the meaning attached by one party is operative when “that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.” Restatement (Second) of Contracts § 20(2)(b) (1981); see also Restatement (Second) of Contracts § 201(2)(b) (1981) (similarly providing whose meaning prevails when parties have attached different meanings to a promise, agreement or a term thereof). As discussed above, here, The Gap knew or had reason to know that Pope understood the disclaimer to apply only to the act of making the offer, and Pope did not know or have reason to know that The Gap intended the disclaimer to be expressly included in the final judgment entered against The Gap. Therefore, we reverse the judgment entered by the trial court and remand with directions to enter the form of judgment proposed by Pope.
B. Does a Rule 1-068 Judgment Constitute a Determination or Admission of Liability?
{17} Having determined that Pope‘s form of judgment prevails, we next address whether Pope‘s form of judgment, which is silent regarding liability, may constitute a determination or admission of liability that can be used against The Gap in other proceedings. We conclude that it may not.
{18} Pope contends that a judgment under
{20} However, neither
{21}
{22} Thus, in essence, a
{23} Whether a
{25} However, the approach in Card and similar cases has been strongly criticized by modern legal commentators who argue that collateral estoppel rules do not require that a consent judgment bind a party to facts which were originally in issue in an action that was settled. See Jay N. Varon, Promoting Settlements and Limiting Litigation Costs By Means of the Offer of Judgment: Some Suggestions for Using and Revising Rule 68, 33 Am.U.L.Rev. 813, 840-41 (1984) (criticizing result in Card); Fleming James, Jr., Consent Judgments as Collateral Estoppel, 108 U.Pa.L.Rev. 173 (1959). They reason that because a judgment can be given collateral estoppel effect only as to issues actually and necessarily litigated, and in the case of a consent judgment, the parties do not actually litigate the matters put in issue but have settled the case, one of the prerequisites for collateral estoppel is unsatisfied, and thus a consent judgment should not bar the relitigation of those issues in a subsequent action. Varon, supra; James, Jr., supra; see also Restatement (Second) of Judgments § 27 (1982) (requirements of collateral estoppel).
{26} Thus, more recently, most courts that have addressed the issue appear to have adopted the view that a consent judgment, including a
{27} New Mexico law is consistent with this view. In refusing to recognize settlements and consent judgments as the basis for issue preclusion in State ex rel. Martinez v. Kerr-McGee Corp., 120 N.M. 118, 898 P.2d 1256 (Ct.App.1995), this Court observed that “consent judgments are not normally considered fertile ground for issue preclusion” because a consent judgment is achieved by negotiation and settlement, rather than by a “full-blown, contested adjudication of all issues.” Id. at 122, 898 P.2d at 1260. We also noted that it would be “unfair to presume prior determination of an issue from the mere fact of settlement when the contrary may more likely be true.” Id. Thus, this Court has previously expressed its disfavor of relying on consent judgments for collateral estoppel purposes, given the absence of the requisite litigation and necessary judicial determination of the issues covered by the judgment. See id. at 123, 898 P.2d at 1261. Our federal courts have adopted a similar view on the scope and effect of consent judgments in the bankruptcy context. See In re Young, 91 F.3d 1367, 1376 (10th Cir.1996) (holding that consent judgment in state court has no preclusive effect in subsequent bankruptcy proceeding where no such intent was expressed in terms of judgment); In re N.M. Properties, Inc., 18 B.R. 936, 941 (Bkrtcy.D.N.M.1982) (stating that “[a] stipulated judgment is not a judicial determination, but is a contract between the parties entering into said stipulation“) (citations omitted). Therefore, applying consent judgment principles to this case, we hold that such a
{28} For similar reasons, a tacit
{29} In addition, we find offers of judgment to be similar to offers to compromise which generally are inadmissible to prove the liability of a party on a claim or its amount. See
{30} Further, a judgment that is entered following the acceptance of an offer of judgment does not constitute an admission of liability. See Ershig Sheet Metal, Inc. v. Gen. Ins. Co. of Am., 62 Wash.2d 402, 383 P.2d 291, 294 (1963) (stating that a fully agreed-upon compromise is not an admission of liability where there is “no reason to distinguish between an offer to compromise and a completed compromise in determining whether proffered evidence is admissible on the basis that it is an admission of liability“); cf.
{31} We note that one exception to the rule that a consent judgment is not to be given preclusive effect is where the parties have entered into an agreement manifesting an intention to be collaterally bound by the
{32} Our holdings today are consistent with the primary purpose of
III. CONCLUSION
{33} In sum, we conclude that (1) The Gap is contractually bound to the form of
{34} IT IS SO ORDERED.
HARTZ, C.J., concurs.
APODACA, J., concurring in part, dissenting in part.
APODACA, Judge, concurring in part and dissenting in part.
{35} I concur in the majority‘s determination under subsection II(A) of the opinion reversing the trial court‘s entry of the form of judgment proposed by The Gap. I respectfully dissent, however, from the majority‘s conclusion under subsection II(B) that a
{36} My dissent is premised on the fact that a determination of this issue is unnecessary to the precise issue that is now before this Court in this appeal. See Skaggs v. Conoco, Inc., 1998-NMCA-061 ¶ 19, 125 N.M. 97, 957 P.2d 526 (holding that courts will not decide unnecessary issues). For that reason, I conclude that the majority‘s discussion under subsection II(B) is dicta, even though the parties requested the Court to decide the issue.
{37} In his brief in chief, Pope argues that the form of judgment should not contain language limiting The Gap‘s liability. Pope‘s brief in chief also alludes to a
{38} The trial court entered The Gap‘s form of judgment that contained language expressly disclaiming liability. Our opinion reverses that judgment and requires entry of Pope‘s proposed form of judgment that is silent on The Gap‘s liability. Before entry of Pope‘s form of judgment, I do not believe that we can determine its effect on liability. The parties have not had the opportunity to implement the judgment without the limiting language. Pope has not yet attempted to use the judgment in another proceeding as an adjudication or admission of liability. Such