Texas Supreme Court Rules on Enforceability of Mediated Settlement Agreement

In Milner v. Milner, No. 10-0776 _S.W.3d __ (Tex. March 9, 2012) Vicki and Jack Milner signed a Mediated Settlement Agreement (“MSA”) after Vicki filed for divorce. In this MSA, Jack agreed to transfer to Vicki all of his beneficial interest (subject to existing liabilities) in a partnership and a limited liability company (the “Partnerships”) that were formed during the parties’ marriage.

The MSA contained two exhibits entitled “Required Consent to Transfer of Record Title and Beneficial Ownership Interests” followed by the name of the respective business and had signature lines for all of the owners. The owners signed as required by their partnership agreement. Joey Milner (Jack’s brother) signed the exhibits four days after Jack and Vicki executed the MSA. Four days after that, however, Joey sold his interest in both Partnerships to Michael Hill. Hill never signed the exhibits to the MSA, thereby preventing Vicki from obtaining the consent required for her to become a limited partner.

Jack filed with the trial court his draft of an Agreed Decree of Divorce. Vicki objected to the proposed decree, arguing that it did not comply with the MSA and moved to withdraw her consent to the MSA. The district court denied Vicki’s motion and entered judgment dividing property pursuant to the MSA. Vicki appealed.

The Fort Worth Court of Appeals reversed based on a determination that there was no meeting of minds regarding Jack’s interests in the Partnerships that he transferred to Vicki, and remanded to District Court for new property division.

The issue before the Texas Supreme Court is whether the Court of Appeals erred in setting aside the underlying MSA which the trial court purported to follow in its divorce decree. The Texas Supreme Court held that (1) the MSA pursuant to which Jack agreed to transfer his interest in the Partnerships to Vicki, subject to the partnership agreement, was binding and irrevocable, because it satisfied statutory formalities governing same, and it was signed by both husband and wife and their counsel; and (2) the MSA was ambiguous, thereby creating question of fact regarding parties’ intent for mediator, not the district court, to decide.

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