A Stipulation is a Binding Contract

[EDRM Editor’s Note: The opinions and positions are those of Michael Berman.]

“A stipulation has all the binding force of a contract.”  Waterworks Restoration Baltimore, LLC v. Shine Home Improvements, Inc., 2024 WL 4198164, at *1 (Apls. Ct. Md. Sept. 16, 2024) (unreported) (citation and quotations omitted).

Parties stipulate “to save the time of the court, the expense and difficulty of producing witnesses, and for other good reasons,” and therefore “they are bound by that stipulation.”  Id.

In Waterworks, there were two lawsuits involving Waterworks and Shine.  In the first lawsuit, they agreed to a stipulation.  It was placed on the record in open court.  “In total, the parties stipulated that Waterworks owed Shine a total of $68,467 for its portico work,” subject to an offset of $11,735.  Id. at *2 (emphasis added). This left $56,732 as the stipulated amount due to Shine for the portico work.

“The trial then proceeded on claims regarding Shine’s roof work…, with the parties confirming that the stipulation had resolved the dispute over the portico work.”  Id. (emphasis added).  The damages claimed for the roof were $63,004 and a judgment was entered in that amount. Id. at *3.

In summary, the parties had stipulated that Waterworks owed $56,732 for the portico; set that aside; tried the roof claim; and, a judgment was entered on the roof claim for $63,004.

Waterworks paid $63,004 for the roof.  However, it “did not pay the stipulated $56,732” for the portico.  Id. at *3.  Shine sued to enforce the stipulation.

The Appellate Court explained: “The second lawsuit, which is the one that generated this appeal, was Shine’s attempt to enforce a stipulation Shine and Waterworks had reached in the first lawsuit.” 

Shine moved for summary judgment.  Waterworks admitted that the stipulation was a contract, but argued that it had merged into the judgment.  Summary judgment was denied without explanation.

Shine renewed its motion “arguing that the [portico] stipulation remained as a separate, enforceable agreement after the entry of the $63,004 [roof]  judgment.”  Shine distinguished the rule of merger by arguing that the stipulation was a separate agreement.  This time, Shine’s motion was granted.

On appeal, “[h]aving previously acknowledged that the stipulation here rises to the level of a contract, Waterworks now contends otherwise.”

The Appellate Court wrote: “By definition, a stipulation is an agreement between counsel akin to a contract…. As such, a stipulation carries all the binding force of a contract, and may be set aside only for reasons that would justify setting aside a contract.”  Id. at *5 (emphasis added; citations and quotations omitted).

Reviewing the facts, the Court wrote that “in full context, the stipulation unambiguously demonstrated that the parties intended to form a binding settlement agreement, i.e., one requiring Waterworks to pay $56,732 for Shine’s portico work.”  Id. at *6.  One such fact was Waterworks confirmation of the stipulation on the record in the second lawsuit.

The Appellate Court also held that the portico stipulation remained enforceable after entry of the final judgment on the roof claim. Id. at *7.  While typically a final judgment extinguishes the claims arising out of the litigated transaction, the Appellate Court held that here the parties had agreed – or stipulated – to split the claims. Id. Because the stipulation addressed claims relating to the portico and the parties agreed to try solely claims relating to the roof work, the stipulated claims were split.  Id. at *8.

“Because the stipulation in the first lawsuit constituted a binding settlement agreement for Shine’s portico work and remained enforceable after the entry of the $63,004 [roof] judgment there, the circuit court did not err in granting summary judgment in favor of Shine in the second lawsuit.”  Id. at *9.

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