Atser, L.L.C., Atser Corporation, and Atser, L.P. v. John Risher ( 2004 )

Affirmed and Memorandum Opinion filed November 24, 2004

Affirmed and Memorandum Opinion filed November 24, 2004.

In The

Fourteenth Court of Appeals

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NO. 14-03-01108-CV

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ATSER, L.L.C., ATSER CORPORATION, AND ATSER, L.P., Appellant

V.

JOHN RISHER, Appellee

On Appeal from the 157th District Court

Harris County, Texas

Trial Court Cause No. 00-17330

M E M O R A N D U M  O P I N I O N

Appellants, Atser, L.L.C., Atser Corporation, and Atser, L.P., bring this appeal from a jury verdict awarding appellee John Risher incentive compensation and attorneys= fees.  In four issues, appellants contend that the trial court erred by finding the employment contract between appellants and appellee to be ambiguous; by allowing the jury to decide a question of contractual obligation as a matter of fact; by imposing a contractual obligation on appellants that exceeded those allegedly laid out in the contract; and by awarding appellee=s attorneys an amount greater than what appellant claims would have been awarded under the fee arrangement between appellee and his attorneys.  Because all dispositive issues are clearly settled in law, we issue this memorandum opinion. See Tex. R. App. P. 47.4.  We affirm.

Background

In late 1998, appellee entered negotiations with appellants concerning his potential employment as appellants= Vice President of Construction Services. Included in the negotiations were discussions regarding appellee=s incentive pay; that is, appellee would be paid a base salary and then would be able to earn additional compensation as a result of his achieving certain goals. Appellants were successful in hiring appellee away from his former employer; he began work for them in January of 1999. 

At the end of 1999, a dispute arose between appellants and appellee regarding the amount of his incentive compensation.  Due to the parties= failure to reach an agreement concerning the incentive compensation, appellants terminated appellee=s employment in January of 2000. Appellants sued, claiming breach of contract and requesting, inter alia, the incentive compensation for 1999. At trial, the jury found that appellants had failed to comply with the employment agreement, awarding appellee $80,256^[1] in damages and $29,302.40 in attorneys= fees.^[2]  Appellants then brought this appeal; at issue is whether the contract as written is ambiguous and whether the trial court awarded excessive attorneys= fees.

Contract Ambiguity

In three interrelated issues, appellants argue that the contract unambiguously capped incentive pay and that trial court erred in concluding that the contract was ambiguous.  Furthermore, appellants argue that since the contract was not ambiguous, the fact issue of whether appellants violated the agreement should not have been submitted to the jury, and the court therefore improperly awarded damages in excess of the $36,000 cap on incentive pay (i.e., appellee could receive no more than $36,000 from appellants).  We disagree.

We construe contracts according to the rules governing contract interpretation. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983).  Whether an ambiguity exists in a contract is a matter of law.  Tex. Farm Bureau Mutual Ins. Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex. 2004).  A contract is ambiguous if it is susceptible to two or more reasonable interpretations. Id.  If a contract is ambiguous, its interpretation is a fact question for the jury. Coker, 650 S.W.2d at 394.

In this case, the agreement regarding appellee=s incentive pay, specifically, the section entitled AExceeding [Construction Manager] Division New Sales Contracts Goal in FY1999 and FY2000,@ gives rise to two different but reasonable interpretations.  At the top of the agreement, under the heading AI. Components of Pay 1999,@ is a chart, ATotal Targeted Compensation,@ that lists appellee=s ABase Salary@ as $90,000 and his ATarget Incentive@ as $36,000.  The chart also breaks down the percentage of the total each amount represents. 

Total Targeted Compensation	$126,000
Base Salary	$90,000
Target Incentive	$36,000
Pay Mix	71% Base, 29% Incentive

Directly under this chart is the following sentence: AYour actual salary and incentive pay will depend upon your individual performance against targets.@  Directly under this sentence, under the heading AII. Incentive Pay,@ is a second chart, listing the ways in which appellee would be able to earn incentive pay.  One of these is AExceeding CM Division New Sales Contracts Goal in FY1999 and FY2000@ and provides that if appellee were to meet his new contracts goal, he would receive A1.5% of CM Division New Signed Contracts in Excess of Goal.@  Each of the three ways in which incentive pay can be earned is given an amount that represents a APercentage of Target Incentive@; exceeding the new contracts goal accounts for 50% of ATarget Incentive,@ or $18,000 in the chart.  The final row in the chart shows the percentages totaling to 100% and the dollar amounts totaling to $36,000. 

Components of Incentive Pay	% of Target Incentive	YR 1999 Targeted Earnings @ 100% Quota	YR 1999 Amount	YR 2000 Targeted Earnings @ 100% Quota	Payment Frequency
A. Meeting CM Division Gross Margins of 39%, Net Sales and Staff Development Goals on Initial Seven Projects (Exhibit I, II, III)	20%	$7,200	$7,200	0.62% of CM Division GP	Annual
B. Meeting CM Division New Signed Contracts Goal in FY99 Totaling $1,000,000, FY 2000 Total $1,500,000	30%	1.08% of CM Division New Signed Contracts	$10,800	1.08% of CM Division New Signed Contracts	Semi-Annually
C. Exceeding CM Division New Sales Contracts Goal in FY 1999 and FY2000	50%	1.5% of CM Division New Signed Contracts in Excess of Goal	$18,000	1.5% of CM Division New Signed Contracts in Excess of Goal	Semi-Annually
Total Target Incentive Earnings	100%		$36,000

Under this chart is the following: AAchievement toward each of these goals will be tracked separately. Achieving all of the above objectives will allow you to earn the targeted compensation.@

The dispute centers on the third method of receiving incentive pay. Appellee performed well at his job, meeting and, according to him, exceeding his stated goals.  Appellants claim that the agreement caps incentive pay, since, among other things, it uses specified dollar amounts for each component in the second table; uses the term ATotal Target Incentive Earnings@; and totals the percentages of target incentives at 100%.  Appellee, on the other hand, urges that the term Atarget@ should be construed only as a goal and not as a cap or maximum.  Had appellants intended the term Atarget@ to mean Acap,@ appellee contends, they couldCand shouldChave used the term in the contract.  Appellee also points to parol evidence of 1) negotiations, during which appellee rejected an initial draft in which incentive pay was capped at $36,000 since Ait did not pay him enough,@ and 2) the circumstances under which appellee was lured away by appellants from his former employer.  In other words, appellee reasons that had incentives been capped at $36,000, he would have been making less money at his new job with appellants, and that this interpretation would defy the logic of leaving a stable, better-paying job.

The agreement is therefore susceptible to two different interpretations, both of which we find to be reasonable.  As a result, the contract is ambiguous; the trial court was therefore correct in ruling it as such and submitting the issue to the jury. Appellants= first three issues are overruled.

Attorneys= Fees

In their fourth and final issue, appellants claim that, were the jury award to be reduced, the trial court=s award of attorneys= fees would be improper in that it would exceed what appellee=s attorneys would have received under their contingent fee agreement.  Since we have overruled appellants= first three issues and thus have allowed the damages award to stand, we need not reach appellants= fourth issue.  Accordingly, appellants= fourth issue is overruled.

We affirm the judgment of the trial court.

/s/        Adele Hedges

Chief Justice

Judgment rendered and Memorandum Opinion filed November 24, 2004.

Panel consists of Chief Justice Hedges and Justices Fowler and Seymore.

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^[1]  Included in this amount was $7,000 appellants conceded before trial that they owed to appellee.

^[2]  The jury also awarded appellee $15,000 in attorneys= fees for an appeal to the Court of Appeals and $5000 each for two possible appeals to the Texas Supreme Court.