## Facts

- Herman J. Smith sold Mansfield State Bank stock to multiple purchasers, including Forrest L. Kennedy and Richard J. Hyde.
- Hyde and other purchasers sued Kennedy and others to recover interest allegedly paid to Smith for defendants’ benefit.
- Kennedy asserted a counterclaim and third-party claims against Smith alleging misrepresentations in the stock sale.
- During scheduled depositions, the parties discussed settlement and drafted and revised settlement documents.
- All parties except Kennedy signed the settlement documents.
- Plaintiffs amended pleadings to allege Kennedy entered an oral settlement agreement despite refusing to sign, seeking damages and/or specific performance.
- Plaintiffs also asserted the alleged oral settlement as defenses to Kennedy’s claims (including accord and satisfaction, novation, waiver, and estoppel).
- Kennedy denied any settlement and asserted noncompliance with Texas Rule of Civil Procedure 11.

## Issues

1. Whether Texas Rule of Civil Procedure 11 bars enforcement, by judgment in the pending lawsuit, of a disputed oral settlement agreement concerning that suit.

## Decision

- The trial court held a separate trial on the alleged oral agreement; a jury found an oral settlement existed, and the court rendered judgment enforcing it against Kennedy.
- The court of appeals affirmed, concluding Rule 11 did not bar enforcement of disputed oral settlement agreements as independent contracts.
- The Supreme Court of Texas reversed and remanded for trial on the underlying claims.
- The Supreme Court held a disputed oral settlement agreement “touching” a pending suit cannot be enforced by judgment in that suit absent Rule 11 compliance.

## Legal Principles

- Texas Rule of Civil Procedure 11 imposes a minimum requirement for enforcing agreements “touching any suit pending” through a judgment in that suit.
- For enforcement in the pending case, the agreement must be (1) in writing, signed, and filed in the case record, or (2) made in open court and entered of record.
- Rule 11 applies broadly to agreements concerning pending suits, not only to agreed judgments.
- Even where Rule 11 is satisfied, a valid consent judgment also requires consent at the time judgment is rendered; Rule 11 compliance is necessary but not sufficient for an agreed judgment.
- A disputed settlement that fails Rule 11 cannot be converted into an enforceable judgment in the pending action; the case must proceed on the merits of the underlying claims.

## Conclusion

The Supreme Court of Texas held that, when a party seeks enforcement in the pending lawsuit, Rule 11 generally requires a written, signed, and filed agreement (or an agreement made in open court and entered of record); because the alleged settlement with Kennedy was disputed and did not satisfy Rule 11, the judgment enforcing it was reversed and the case was remanded for trial on the underlying disputes.


Kennedy v. Hyde, 682 S.W.2d 525 (Tex. 1984)