This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




Clifford J. Graf,



Becky M. Sholes,


Filed June 9, 1998

Reverse and remand

Toussaint, Chief Judge


Foley, Judge

Ramsey County District Court

File No. C89964937

Patrick H. O'Neill, Jr., Patrick H. O'Neill, Jr., Ltd., 1250 World Trade Center, 30 East Seventh Street, St. Paul, MN 55101-4901 (for respondent)

William M. Hart, Richard L. Pemberton, Jr., Meagher & Geer, P.L.L.P., 4200 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402 (for appellant)

Considered and decided by Toussaint, Chief Judge, Foley, Judge,[1] and Mulally, Judge.[2]


TOUSSAINT, Chief Judge

Appellant Becky M. Sholes challenges a district court order denying enforcement of her settlement agreement with respondent Clifford J. Graf. Because Graf did not present any facts to rebut the presumption of the validity of the settlement agreement, we reverse.


The settlement of disputes without litigation is highly favored and the courts will not lightly set such settlements aside. Johnson v. St. Paul Ins. Co., 305 571, 573 (Minn. 1981). A party seeking to have a settlement set aside has the burden of showing sufficient grounds. Id. We apply an abuse of discretion standard to a district court's decision to set aside a settlement. Id.

Sholes argues that the settlement agreement should have been enforced. Sholes contends that Graf does not allege of fraud, mutual mistake of fact or lack of consideration, as is required to nullify the agreement. Instead, Sholes argues that Graf's cause of action, if any, is properly against his attorney who allegedly failed to obtain copies of pertinent medical records and stated that Graf's physician would not testify. Sholes also contends that Graf was represented by counsel at the mediation and testified that he voluntarily signed the agreement based on his attorney's recommendation. Sholes claims, therefore, that absent any misrepresentation by her counsel or agents, the settlement agreement was valid and should have been enforced.

Compromise and settlement of a lawsuit is contractual in nature. Ryan v. Ryan, 292 Minn. 52, 55, 193 295, 297 (1971). Caselaw recognizes mutual mistake, fraud or misrepresentation as a basis to rescind a settlement agreement. Sorenson v. Coast-to-Coast Stores, Inc., 353 666, 669-70 (Minn. App. 1984), review denied (Minn. Nov. 7, 1984).

While mutual mistake of fact is a ground for nullifying a release, unilateral mistake is not unless [the party seeking enforcement] wrongfully concealed facts from the [mistaken party] or induced the mistake in some other way.

Id. at 670 (citing Couillard v. Charles T. Miller Hospital, 253 Minn. 418, 92 96 (1958)). A party's fraudulent conduct must touch and concern a settlement agreement to support rescission. Id.

At the close of the evidentiary hearing, the district court inquired as to why Graf's former counsel had not been called to testify regarding the allegations of misrepresentation. Both parties agreed, however, that Graf's testifying to the facts would be sufficient. At the mediation Graf's former counsel told him that Graf's doctor stated she would not testify at trial. However, Graf later discovered that no medical release authorization was ever sent to his treating physician. After signing the settlement, Graf then contacted his doctor and was informed that she was never asked to testify on his behalf. The doctor further indicated that she would have testified as to Graf's medical record. Based on this information, the district court determined that Sholes's motion to enforce the settlement agreement should be denied.

On this record, we believe the district court's rescission of the settlement agreement, constituted an abuse of discretion. We cannot say that Sholes's counsel or agents participated or induced any of the alleged misrepresentation or fraud. Instead, the record reveals that any fraud or misrepresentation against Graf occurred at the hands of his own attorney. See Sorenson, 353 N.W.2d at 670 (fraud must be based on party's conduct concerning release). Graf testified that prior to the mediation, he had no knowledge that his former counsel had neither obtained medical records from his doctor, nor spoken with her about testifying on his behalf. Graf also testified that he signed the settlement agreement based on the mistaken belief that his doctor would not testify on his behalf. Graf testified, however, that this belief was based on the misinformation he was given by his former counsel. Although Graf found it odd that his doctor would take this position, he testified that he did not feel the need to confirm the information until after he signed the agreement.

We also observe that we are directed to no evidence showing that Sholes' attorney knew of any misrepresentations made to Graf by his former attorney. By his own testimony, Graf stated that he knew that signing the settlement agreement constituted a final settlement of all claims. Graf further testified that he knew he had a right not to accept the settlement agreement during the mediation. Absent evidence to show that Sholes participated in or concealed facts regarding the misrepresentation, the settlement agreement cannot be voided due to Graf's unilateral mistake. See Sorenson, 353 N.W.2d at 670. We conclude, therefore, that the district court's denial of Shole's motion to enforce the settlement agreement constituted an abuse of discretion, and remand to the district court for further proceedings consistent with this opinion.

Reverse and remand.

FOLEY, Judge (dissenting)

Because I conclude that the district court did not abuse its discretion by rescinding the parties' agreement to settle, I respectfully dissent. Since Olson v. Shepard, 165 Minn. 433, 206 N.W. 711 (1926), the equitable remedy of rescission has been available to relieve a contracting party of a unilateral mistake, if the mistaken party "acts promptly and the contract can be rescinded without prejudice to the other party." Id. at 436, 206 N.W. at 711. Accord Gethsemane Lutheran Church v. Zacho, 258 Minn. 438, 445, 104 N.W.2d 645, 649 (1960) (relief from contractual obligations on grounds of unilateral mistake alone granted when enforcement would impose oppressive burden on one seeking rescission, and when rescission would impose no substantial hardship on one seeking enforcement); Southern Minnesota Mun. Power Agency v. City of St. Peter, 433 N.W.2d 463, 471 (Minn. App. 1988) (citing Gethsemane); Speckel by Speckel v. Perkins, 364 N.W.2d 890, 893 (Minn. App. 1985) (citing Olson).

At the mediation on December 31, 1996, Graf agreed to settle his claim based on the erroneous statement of his counsel that his doctor would not testify on Graf's behalf at trial. Within days of signing the agreement, Graf learned that his doctor would testify (and that she never told his counsel that she would not), and immediately took steps to repudiate the agreement, informing his counsel on January 8, 1997 of his intention not to settle. On January 24, 1997, Graf's counsel returned all settlement documents to Shole's counsel and sent a letter stating Graf "does not want to settle and does not want me to continue as his attorney." Within weeks, Graf obtained new counsel, opposed Shole's motion to enforce the agreement with his motion to rescind, and was prepared to proceed to trial as scheduled.

This record supports the district court's equitable rescission of the agreement. Graf was an innocent plaintiff misled by his first counsel. He acted to repudiate the agreement as soon as he learned of the mistake. No prejudice resulted to Sholes because she was in the same position after the order rescinding the agreement as she had been prior to the mediation. Cf. TCF Banking & Sav. v. Loft Homes, 439 N.W.2d 735, 739 (Minn. App. 1989) (when determining parties return to status quo after setting aside mortgage sale, courts consider detrimental reliance and effect on third parties), review denied (Minn. June 21, 1989 and July 12, 1989). Sholes's position had not changed, no money had changed hands, no release was executed, no judgment of dismissal had occurred. Under the rule as set out in Olsen, Graf acted promptly and rescission would not prejudice Sholes. Accordingly, the district court acted within its discretion under principles of equity when it rescinded the agreement. Cf. Speckel, 364 N.W. 2d at 894 (reversing trial court's order compelling performance of settlement agreement where party's attorney offered erroneous settlement amount and holding no valid offer or acceptance). The fact that Graf may have a cause of action against his mediation counsel does not limit the district court's equitable discretion. Cf. TCF, 439 N.W.2d at 740 (equitable remedy of setting aside sale not limited by potential legal action against contracting party's attorney). I would affirm.

[1] Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[2] Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.