October 24, 2012 – Eric Gomez v. Brennan Jones-Wilson and City of Albuquerque and Robert Osborn d/b/a Distracted By Decor, No. 31,085

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number:

Filing Date: OCTOBER 24, 2012

NO. 31,085
ERIC GOMEZ,
Plaintiff-A ppellant,

V.
BRENNANJONES-WILSON,
Defendant- Appellee,

and

CITY OF ALBUQUERQUE and

ROBERT OSBORN d/b/a

DISTRACTED BY DECOR,
Defendants.

APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
C. Shannon Bacon, District Judge

Fine Law Firm
Mark Fine

Albuquerque, NM

for Appellant

Dines & Gross, P.C.
Robert A. Corchine
Steven J. Leibel

Albuquerque, NM

for Appellee

OPINION
FRY, Judge.
{1} 	This case involves an alleged pre-litigation oral settlement agreement between
Plaintiff’s attorney and the attorney for Penske Truck Leasing (Penske) and Defendant
Jones-Wilson. 	While both attorneys believed that they had agreed to a settlement
during their phone call, they differed on whether Plaintiff’s attorney had agreed to
settle the claims against both Penske and Jones-Wilson or whether he had agreed only
to settle the claims against Penske. After Plaintiff filed suit and some discovery had
been conducted, Jones-Wilson moved for enforcement of the alleged agreement, and
the district court granted the motion. Because the evidence establishes that Plaintiff
had not given his attorney the authority to settle with Jones-Wilson, we reverse.
BACKGROUND
{2} 	This case arises from a car accident causing injury to Plaintiff, allegedly due to
Jones-Wilson’s negligent operation of a truck that his employer, Defendant Robert
Osborn d/b/a Distracted by Décor, had rented from Penske. The truck was insured by
a liability policy procured through Penske with per-person limits of $25,000, and
Jones-Wilson was covered by this policy.
{3} 	Before filing suit on Plaintiff’s behalf, Plaintiff’s attorney, Thell Thomas,
attempted to negotiate a settlement with Penkse’s claims representative, Jennifer

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McCormick. In March 2009, Thomas sent McCormick a letter detailing his client’s
damages and outlining his legal theories. The letter concluded by offering “to resolve
all ongoing losses from this claim for $437,850[].”
{4} 	McCormick responded in April 2009 with a letter to Thomas “tendering our
limit of $25,000[] in bodily injury.” McCormick’s letter asked Thomas to have his
client sign a release enclosed with the letter. 	The release stated that Plaintiff, in
consideration of $25,000, “release[s] and forever discharge[s] Penske . . ., Old
Republic Insurance Company & Gallagher Bassett Services, Inc., Distracted by
Décor[,] and . . . Jones[-]Wilson” from all claims sustained as a result of the accident.
Three days later, Thomas sent McCormick a letter rejecting her offer and continuing
to extend his initial offer to settle for $437,850.
{5} 	Nearly three months later, on July 10, 2009, attorney Paul Yarbrough faxed
Thomas a letter stating that he represented Penske and that he was “now handling this
matter on their behalf.” 	Yarbrough explained in his letter that McCormick had
“extended the full policy limits available to compensate your client based upon the
liability insurance policy procured by . . . Jones-Wilson.” 	Yarbrough’s letter
responded to Thomas’s legal theories and concluded:
I have been authorized to again offer the $25,000 policy limits to settle
any and all claims against Penske and . . . Jones-Wilson per the terms of
the release [McCormick] previously sent to you. This offer will remain

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open for a period of [thirty] days from today’s date, and then it will be
withdrawn.
It is apparent from this letter that Yarbrough was representing the interests of both
Penske and Jones-Wilson.
{6} 	On July 23, 2009, Thomas sent Yarbrough a letter following up on a phone
conversation between the two attorneys that apparently took place following
Thomas’s receipt of Yarbrough’s July 10 letter. The letter stated:
As we discussed, you were going to determine the amount of insurance
coverage available through Penske for our client[.] You also indicated
that you were going to determine whether the driver of the Penske
vehicle, . . . Jones-Wilson, has his own property and casualty insurance.
{7} 	According to the evidence in the record, the next event that occurred was a
phone conversation between Thomas and Yarbrough on August 11, 2009, which was
thirty-two days from the date of Yarbrough’s letter, two days after the expiration date
the Yarbrough letter placed on its settlement offer. The only evidence in the record
as to the substance of this conversation is found in affidavits later filed by Yarbrough
and Thomas.
{8} 	Yarbrough’s affidavit disclosed the negotiations that had taken place between
McCormick and Thomas prior to Yarbrough’s involvement in the case. Yarbrough
attached to his affidavit McCormick’s letter to Thomas and Thomas’s response, both
of which we have described above. 	The affidavit also described and attached

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Yarbrough’s July 10 letter to Thomas. 	The affidavit then stated, “On August 11,
2009, Mr. Thomas verbally accepted the offer of [$]25,000 in full and final
compromise settlement of [Plaintiff’s] claims against Penske and . . . Jones-Wilson
arising from the November 6, 2008[,] accident.” 	This is all that the affidavit said
about the August 11 conversation. 	The affidavit went on to state that Yarbrough
requested a settlement check and mailed the release to Thomas on August 25, 2009.
The affidavit concluded, “To date, [Plaintiff] has failed to provide his signed release
of claims to my office as agreed to by his counsel.”
{9} 	In contrast, Thomas’s affidavit stated that he had a phone conversation with
Yarbrough on August 11, 2009, “regarding a partial settlement of [Plaintiff’s] claims.”
The affidavit went on to state:
It was my understanding that I agreed to settle all liability against
Penske, for any claims of negligent entrustment against Penske, if any
were revealed through the course of discovery. 	And it was my
understanding that the agreement released Penske as the primary insurer.
It was not my understanding that I was releasing . . . Jones-Wilson, and
his personal auto policy. 	It was a complete surprise to me when the
release arrived and it released . . . Jones-Wilson, because I had never
agreed to release . . . Jones-Wilson. . . . For the reasons stated, it was
never my understanding that these settlement discussions were an
acceptance of . . . Yarbrough’s written offer extended in his July 10,
2009[,] letter. Additionally . . . Yarbrough’s written offer had expired.

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According to Plaintiff’s pleadings, when Thomas received the proposed release from
Yarbrough, he immediately called Yarbrough “and informed him that there was not,
and never had been, an agreement to release . . . Jones-Wilson individually.”
{10} 	In October 2009, Thomas filed suit on Plaintiff’s behalf against Jones-Wilson,
Distracted by Décor, and the City of Albuquerque, alleging that the negligence of each
defendant contributed to cause Plaintiff’s injuries in the November 2008 car accident.
Jones-Wilson, now represented by attorneys other than Yarbrough, answered the
complaint but did not raise any affirmative defenses claiming that Plaintiff’s claims
against him had been settled. 	Indeed, Jones-Wilson initiated discovery by serving
Plaintiff with interrogatories and a request for production.
{11} 	Nearly four months after Plaintiff filed his complaint, Jones-Wilson filed a
motion to enforce an alleged settlement agreement, claiming that Thomas had verbally
accepted the settlement offer made in Yarbrough’s July 10, 2009, letter. Attached to
the motion were Yarbrough’s affidavit and its attachments, as described above.
Plaintiff responded, denying that a settlement agreement had been reached, and he
attached to his response Thomas’s affidavit.
{12} 	Between the filing of Jones-Wilson’s motion and the filing of Plaintiff’s
response, Plaintiff filed a first amended complaint adding Robert Osborn as a
defendant, doing business as Distracted by Décor. Jones-Wilson’s answer to the first

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amended complaint asserted, for the first time, the affirmative defenses of accord and
satisfaction and “a prior settlement agreement entered into between Plaintiff and
Penske.”
{13} 	The district court held a hearing on Jones-Wilson’s motion. The parties did not
present any evidence at the hearing (although defense counsel apparently provided the
court with a copy of the McCormick release referenced in Yarbrough’s July 10 letter),
and they relied exclusively on the exhibits attached to their pleadings. 	At the
conclusion of the hearing, the district court stated that the proposed release and
Yarbrough’s letter “actually spell[ed] out what [were] the terms on the table, and
having accepted in my mind those terms, I believe there’s an enforceable agreement
as between [P]laintiff and Penske and [Jones-Wilson] in this matter.”
{14} 	Plaintiff then filed a motion to reconsider and submitted additional exhibits,
including the affidavit of Plaintiff. In the affidavit, Plaintiff attested that in August
2009, he “decided to accept what [he] understood to be an offer of settlement of
$25,000 for [his] claims against Penske.” He stated,“In authorizing . . . Thomas to
settle my claims against Penske for $25,000, I did not intend to settle my claims
against . . . Jones-Wilson.” He concluded, “I never authorized . . . Thomas to settle
my claims against . . . Jones-Wilson for $25,000.”

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{15} 	The district court held a hearing and considered all of the documentary evidence
that had been presented in connection with the initial motion to enforce the alleged
settlement and with the motion for reconsideration. The court took the matter under
advisement and ultimately denied Plaintiff’s motion for reconsideration. 	Plaintiff
appeals.
DISCUSSION
{16} 	Plaintiff makes five arguments for reversal: (1) Jones-Wilson lacked standing
to enforce the alleged settlement agreement because he was not a party to the
agreement; (2) the alleged agreement was precluded by NMSA 1978, Section 66-5-
210 (1983), which, in Plaintiff’s view, prohibits anything other than a written
settlement agreement between parties involved in a motor vehicle accident; (3) New
Mexico courts should adopt a policy precluding enforcement of any oral settlement
agreement not reduced to writing and signed by both parties; (4) the alleged agreement
was unenforceable because Plaintiff had not authorized Thomas to settle his claims
against Jones-Wilson; and (5) the district court erroneously found mutual assent
without any objective evidence supporting that determination. Because we conclude
that Plaintiff never authorized Thomas to settle the claims against Jones-Wilson, we
need not address Plaintiff’s other arguments.

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Standard of Review
{17} 	The district court made findings of fact in this case based solely on
documentary evidence. “Where an issue to be determined rests upon the interpretation
of documentary evidence, an appellate court is in as good a position as the trial court
to determine the facts and draw its own conclusion.” Maestas v. Martinez, 107 N.M.
91, 93, 752 P.2d 1107, 1109 (Ct. App. 1988). We therefore review the evidence to
determine whether the district court’s findings were correct.
Attorney’s Authority to Settle
{18} 	We begin with New Mexico law addressing the scope of an attorney’s authority
to settle a case on behalf of his or her client. Our Supreme Court discussed the issue
in Augustus v. John Williams & Associates, Inc., where the parties’ attorneys
exchanged settlement offers and then reached an oral settlement agreement at a later
meeting. 	92 N.M. 437, 438, 589 P.2d 1028, 1029 (1979). 	After the attorneys
prepared the settlement documents, the plaintiff’s attorney notified the defendant’s
attorney that his client refused to sign. Id. At the hearing on the defendant’s motion
to enforce the alleged agreement, the plaintiff’s attorney “testified that he had no
authority to enter into a final settlement agreement.” Id. at 439, 589 P.2d at 1030.
{19} 	The district court refused to enforce the alleged agreement, and the Supreme
Court affirmed. Id. at 440-41, 589 P.2d at 1031-32. The Court stated that the party

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seeking enforcement of a settlement agreement “has the burden of establishing assent
by the opposing party.” 	Id. at 439, 589 P.2d at 1030 (internal quotation marks and
citation omitted). While a client may authorize his or her attorney to settle a claim,
“such authority must be clear and unequivocal.” 	Id. (internal quotation marks and
citation omitted). 	“An unauthorized compromise, executed by an attorney, unless
subsequently ratified by his client, is of no effect and may be repudiated or ignored
and treated as a nullity by the client.” 	Id. (internal quotation marks and citation
omitted).
{20} 	Our Supreme Court applied the same principles in Bolles v. Smith, 92 N.M. 524,
591 P.2d 278 (1979), where the issue was “whether the oral settlement agreement
entered into by [the] petitioner’s attorney on [the] petitioner’s behalf can be enforced,
notwithstanding the fact that it was rejected by [the] petitioner prior to its approval by
the court.” Id. at 525, 591 P.2d at 279. The Court reversed the district court’s order
enforcing the settlement agreement entered into by the petitioner’s attorney on two
grounds. Id. First, the Court held that the Release Act, NMSA 1978, Sections 41-1-1
to -2 (1971), applied to prohibit the settlement while the petitioner was under the care
of a physician. 	Bolles, 92 N.M. at 525, 591 P.2d at 279. 	Second, and of more
relevance to the present case, the Court held that there was no enforceable agreement
to settle because the attorney did not have specific authority to settle. Id. at 526, 591

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P.2d at 280. 	The Court stated that “[i]n order for an attorney to bind a client to a
settlement agreement, he must have specific authority to do so, unless there is an
emergency or some overriding reason for enforcing the settlement despite the
attorney’s lack of specific authority.” 	Id.; see Restatement (Third) of The Law
Governing Lawyers § 22(1) (2000) (stating that “the following and comparable
decisions are reserved to the client except when the client has validly authorized the
lawyer to make the particular decision: whether and on what terms to settle a claim”);
Restatement § 22, cmt. c (stating that “[t]his Section forbids a lawyer to make a
settlement without the client’s authorization”).
{21} 	Following Augustus and Bolles, this Court decided Gonzales v. Atnip, 102 N.M.
194, 692 P.2d 1343 (Ct. App. 1984). In contrast to the circumstances in Augustus and
Bolles, it was undisputed in Gonzales that the plaintiff had specifically authorized his
attorney to enter into the settlement agreement. 102 N.M. at 200, 692 P.2d at 1349.
This Court distinguished the facts before it from Bolles and held that “a settlement of
a lawsuit by an attorney with specific authority to settle is binding on the client. Thus,
the settlement in this case is binding on [the plaintiff].” Gonzales, 100 N.M. at 200,
692 P.2d at 1349.
{22} 	The Court in Gonzales also applied a burden of persuasion that initially appears
to be different from that imposed in Augustus. While Augustus stated that the party

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seeking enforcement of an oral settlement agreement “has the burden of establishing
assent by the opposing party,” 92 N.M. at 439, 589 P.2d at 1030 (internal quotation
marks and citation omitted), the Court in Gonzales asserted that “[a] party seeking
relief from . . . a settlement has the burden of persuasion.” 102 N.M. at 195, 692 P.2d
at 1344. 	These holdings can be harmonized. 	Augustus and Bolles teach that an
attorney may not settle a client’s claim without specific authorization from the client
and that if there is an issue as to whether there was authorization, the party seeking
enforcement of an alleged settlement agreement has the burden of establishing
authorization. 	Gonzales holds that in a case where it is undisputed that client
authorization existed, the burden of persuasion is on the party seeking to escape from
the enforceability of an authorized settlement agreement.
{23} 	The circumstances in the present case are most similar to those in Augustus and
Bolles. Indeed, there is nothing in the record disputing Plaintiff’s affidavit attesting
that he had not authorized Thomas to settle his claims against Jones-Wilson. Thus,
Thomas did not have specific authority to assent to any settlement offer made in
connection with the claims against Jones-Wilson, and Plaintiff argues that, as a result,
the alleged agreement between Thomas and Yarbrough “is of no effect and may be
repudiated or ignored and treated as a nullity.” Augustus, 92 N.M. at 439, 589 P.2d
at 1030 (internal quotation marks and citation omitted). 	However, Jones-Wilson

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argues, and the district court held, that Thomas had apparent authority to settle
Plaintiff’s claims against Jones-Wilson.
{24} 	Before considering whether apparent authority existed in this case, we first
address Jones-Wilson’s argument urging us to disregard Plaintiff’s affidavit and the
contention that Thomas lacked specific authority to settle the claims against Jones-
Wilson. While Jones-Wilson’s argument is somewhat unclear, it appears that he is
arguing that Plaintiff waived consideration of Thomas’s lack of authority because he
did not raise the issue until he filed his motion for reconsideration. Although Jones-
Wilson is correct that Plaintiff’s argument regarding the absence of authority to settle
came late in the proceedings, the district court considered Plaintiff’s argument and
affidavit and ruled on the merits. 	“Although a reviewing court generally will not
review a claim of error unless the appellant timely objected below, it will do so when
the trial court addressed the untimely objection on the merits.” Garcia v. Jeantette,
2004-NMCA-004, ¶ 13, 134 N.M. 776, 82 P.3d 947.
Apparent Authority
{25} 	The district court made the following finding on the issue of Thomas’s authority
to settle Plaintiff’s claims against Jones-Wilson:
In the [m]otion for [r]econsideration, Plaintiff includes an affidavit
wherein he states that he did not give his lawyer authority to settle with
Penske under terms that included a release of . . . Jones-Wilson. While
this may be true, this fact was not communicated to Penske’s lawyer. In

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fact, Plaintiff’s lawyer conducted himself in a manner that suggested that
he had full authority to settle with Penske. 	Where a lawyer presents
himself as having apparent authority to settle a case, the opposing party’s
lawyer is entitled to rely upon his apparent authority.
In support of this finding, the court cited several cases from other jurisdictions and
one New Mexico case, Navajo Tribe of Indians v. Hanosh Chevrolet-Buick, Inc., 106
N.M. 705, 749 P.2d 90 (1988).
{26} 	In Navajo Tribe, the parties reached a settlement agreement on the date trial was
scheduled. Id. at 706, 749 P.2d at 91. The agreement was read into the record with
all parties, including a representative of the tribe, approving the terms of the
settlement in open court. 	Id. 	About six months later, the tribe repudiated the
settlement, and the defendants asked the district court to enter a stipulated settlement.
Id. The district court enforced the settlement, and our Supreme Court affirmed. Id.
at 707-08, 749 P.2d at 92-93. The Court stated that “[w]hile an attorney’s authority
to settle must be expressly conferred, it is presumed that an attorney of record who
settles his client’s claim in open court has authority to do so unless rebutted by
affirmative evidence to the contrary.” Id. at 707, 749 P.2d at 92. Because the tribe
presented no testimony from either its attorney or its representative establishing that
the attorney had no authority to settle, the Court concluded that enforcement of the
settlement was proper. Id.

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{27} 	In addition, the Court concluded that even if the attorney did not have express
authority to settle, she had apparent authority. 	The Court stated that “[a]pparent
authority is that authority which a principal holds his agent out as possessing or
permits 	him 	to 	exercise 	or 	to 	represent 	himself 	as 	possessing 	under 	such
circumstances as to estop the principal from denying its existence.” 	Id. (internal
quotation marks and citation omitted). 	In the attorney-client context, therefore, “a
principal must hold out his attorney as possessing authority to act on his behalf
beyond procedural matters.” Id. In Navajo Tribe, the tribe’s representative stated in
open court that he understood the settlement and approved it. Id. at 708, 749 P.2d at
93. 	This acquiescence to the terms of the settlement clothed the attorney with the
apparent authority to settle on the tribe’s behalf. Id.
{28} 	Turning to the district court’s order in the present case, we conclude that the
court misapprehended the concept of apparent authority. The court found that Thomas
“conducted himself in a manner that suggested that he had full authority to settle with
Penske” contrary to the holding in Navajo Tribe, which established that it is the
client’s conduct—not the attorney’s—that gives rise to apparent authority. In Navajo
Tribe, in contrast to the circumstances in the present case, the tribe’s representative
heard the terms of the agreement as they were read into the court record and stated his
approval of those terms.

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{29} 	This view of apparent authority—that it is the client’s conduct that is
critical—is supported by the Restatement (Third) of The Law Governing Lawyers,
which our appellate courts have accepted as a persuasive statement of the law. See
State v. Gonzales, 2005-NMSC-025, ¶ 38, 138 N.M. 271, 119 P.3d 151 (adopting the
Restatement’s statement of an ethical rule applicable to prosecutors); Bassett v.
Sheehan, 2008-NMCA-072, ¶ 9, 144 N.M. 178, 184 P.3d 1072 (relying on the
Restatement for the proposition that a court may decide in the context of a motion for
summary judgment whether a lawyer has breached the duty owed to a client, even
though this is usually a question of fact). Section 27 of the Restatement states:
A lawyer’s act is considered to be that of the client in proceedings
before a tribunal or in dealings with a third person if the tribunal or third
person reasonably assumes that the lawyer is authorized to do the act on
the basis of the client’s (and not the lawyer’s) manifestations of such
authorization.
The Restatement’s comments elaborate on this principle, stating that “authority arising
from the act of retention [of the lawyer] alone does not extend to matters, such as
approving a settlement, reserved for client decision. . . . To create apparent authority
in such matters, the client must do more than simply retain the lawyer[.]” Id. cmt. a.
In addition,
[w]hen a lawyer purports to enter a settlement binding on the client but
lacks authority to do so, the burden of inconvenience resulting if the
client repudiates the settlement is properly left with the opposing party,

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who should know that settlements are normally subject to approval by
the client and who has no manifested contrary indication from the client.
Id. cmt. d.
{30} 	In the case before us, there was no evidence in the record of any conduct or
communication by Plaintiff that was known to Jones-Wilson’s attorney, much less any
conduct or communication suggesting that Plaintiff had clothed Thomas with the
apparent authority to settle with Jones-Wilson for $25,000. 	While there was
considerable evidence regarding Thomas’s conduct, his conduct is not determinative.
Consequently, the district court’s finding that Thomas had the apparent authority to
settle with Jones-Wilson has no evidentiary support.
{31} 	The district court also erroneously placed the burden of persuasion on Plaintiff
to establish that he did not create apparent authority in Thomas to settle with Jones-
Wilson. The district court’s finding suggested that the absence of authority had to be
“communicated” to Jones-Wilson’s attorney and that without such communication,
Thomas’s apparent authority would be presumed. 	As we have already discussed,
when the existence of authority to settle is disputed, the burden falls on the party
seeking enforcement of the alleged settlement agreement. See Augustus, 92 N.M. at
439, 589 P.2d at 1030.
{32} 	Placing the “burden of inconvenience,” Restatement § 27, cmt. d, on Jones-
Wilson under these circumstances is not unreasonable. Oral settlement negotiations

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provide fertile ground for miscommunication or misunderstanding, and it is not
surprising that two parties to a phone call would have different perceptions of the
agreed-upon terms. As a result, it makes sense that the law requires some affirmative
indication from each client that his or her attorneys had the appropriate authority to
settle before a settlement agreement is enforced.
{33} 	In conclusion, we hold that Plaintiff’s unrefuted affidavit established that
Thomas lacked the express authority to settle Plaintiff’s claims against Jones-Wilson.
In claiming that Thomas had the apparent authority to settle those claims, the burden
of persuasion fell on Jones-Wilson to come forward with evidence that Plaintiff, rather
than Thomas, conducted himself in a way that created the appearance that Thomas had
settlement authorization. 	Jones-Wilson failed to present such evidence, and the
alleged settlement agreement is therefore unenforceable.
CONCLUSION
{34} 	For the foregoing reasons, we reverse the district court’s order enforcing the
alleged settlement agreement and remand for proceedings consistent with this
Opinion.
{35} 	IT IS SO ORDERED.
CYNTHIA A. FRY, Judge

WE CONCUR:

JAMES J. WECHSLER, Judge

MICHAEL E. VIGIL, Judge

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