Phil Watkins, P.C. v. the Krist Law Firm, P.C.

Reversed and Remanded and Memorandum Opinion filed August 5, 2003

Reversed and Remanded and Memorandum Opinion filed August 5, 2003.

In The

Fourteenth Court of Appeals

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NO. 14-02-00291-CV

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PHIL WATKINS, P.C., Appellant

V.

THE KRIST LAW FIRM, P.C., Appellee

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On Appeal from the 129th District Court

Harris County, Texas

Trial Court Cause No. 01-36695

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M E M O R A N D U M   O P I N I O N

            This is a breach-of-contract case in which appellant Phil Watkins, P.C. challenges a summary judgment based on the trial court’s determination that a one-page letter agreement between Phil Watkins, P.C. and appellee The Krist Law Firm, P.C. was supported by consideration and is unambiguous.  Although we find the agreement was supported by consideration, we hold that it is ambiguous and so reverse the trial court’s judgment, and remand this case for further proceedings consistent with this opinion. 

                                                                        I.  Factual and Procedural Background

            At issue in this breach-of-contract dispute is the extent, if any, to which Krist can recover attorney’s fees and expenses based on its representation of two former clients subsequently represented by Watkins. Krist represented Kinley Sorrells, Sides, Inc., and other plaintiffs in a lawsuit filed against E.I. DuPont de Nemours & Company, alleging damages to their pecan orchards caused by the Benlate 50 DF® fungicide manufactured by DuPont (hereafter, the “DuPont Suit”).  Krist claims that, while acting on behalf of these clients, it reached a settlement agreement with DuPont under which each plaintiff would receive $200 per affected acre owned by the clients plus an amount to be calculated under a “most-favored-nations provision.”  Krist asserts that, under this most-favored-nations provision, Kinley Sorrells and Sides, Inc. (collectively, the “Clients”) would have received an additional amount equal to the difference, if any, between the $200 paid and the average per acre value paid by DuPont in the highest 25% of pre-verdict settlements that DuPont paid between the date on which the Clients signed their releases and December 31, 2000, in pecan cases in Texas alleging damage from Benlate®.

            Krist claims that the Clients initially consented to this settlement but then discharged Krist without just cause and without Krist relinquishing its right to reimbursement of expenses plus a 40% fee interest in the Clients’ claims. Watkins asserts that the Clients discharged Krist for just cause and that the Clients never consented to any proposed settlement negotiated by Krist. Watkins claims that the Clients assured Watkins they did not owe any obligation to Krist and that Krist had told them to get another lawyer if they did not like the settlement proposed by Krist. In any event, after the Clients approached Watkins about representing them in their claims against DuPont, Watkins asked Krist if the Clients had any financial obligation to Krist.  After communications with Kevin Krist, a lawyer employed by the Krist firm, Watkins received the letter dated November 22, 1999, which forms the entire basis for the contract claim in this case.  The body of this letter reads in its entirety:

            Thank you for your correspondence of October 12, 1999 relative to Kinley Sorrells and the Sides. [sic]  We certainly don’t have any problem with you assuming representation of these parties since they have discharged us.  Nevertheless, they did discharge us in the context of us having reached a settlement agreement with DuPont to which they initially consented.  Our suggestion is as follows: if the cases are resolved by your firm in such a fashion as to allow for a recovery on their behalf when none would have existed under the terms of our proposed agreement, then we will forfeit all of our fees and expenses.  On the other hand, if circumstances are such that our proposed settlement agreement would have resulted in the same or greater recovery than you eventually achieve, then we would insist upon a full fee and reimbursement of expenses.

            Please let me have your thoughts on this as soon as possible as the judge is pressing for substitution of new counsel in order to keep the matter from stagnating on his docket.

            Kevin Krist testified that Phil Watkins expressed agreement to these terms during a telephone conversation.  Furthermore, Phil Watkins later wrote to the Krist firm, “I will not forget the agreement in your letter of November 22, 1999.” Watkins substituted in the DuPont Suit as new counsel for the Clients and arranged for these claims to be litigated in the counties where the respective orchards are located.  Watkins eventually obtained settlements for the Clients in an amount greater than the Clients would have obtained under the settlement proposed by Krist.  When Watkins refused to pay Krist its fees and expenses, Krist sued Watkins and the Clients. 

            Krist alleged a variety of claims against Watkins and the Clients, and all defendants filed motions to transfer venue.  Watkins did not set its venue motion for hearing or obtain a ruling on it.  Meanwhile, Krist moved for partial summary judgment alleging that the one-page letter agreement was unambiguous and that, under its terms, Krist was entitled to recover from Watkins $544,411 plus attorney’s fees.  The trial court granted summary judgment as to liability and damages on Krist’s contract claim but denied the motion as to attorney’s fees. After Krist nonsuited its other claims against Watkins and all its claims against the Clients, and after Krist asked for a final judgment that awarded no attorney’s fees, the trial court signed a final judgment awarding Krist $544,411 plus postjudgment interest.

                                                                                               II.  Issues and Analysis

A.        Did the trial court err by not ruling on the motions to transfer venue before granting summary judgment?

            In part of its ninth issue, Watkins asserts the trial court erred in failing to conduct a hearing on the defendants’ motions to transfer venue before ruling on Krist’s motion for summary judgment.  Watkins objected to the trial court hearing Krist’s motion for summary judgment before ruling on these motions.  However, Watkins has not cited and we have not found any indication in the record that Watkins ever requested that its motion to transfer venue be set for hearing or submission or that this motion was heard or set for submission.  As movant, Watkins had the duty to request a hearing on its motion to transfer, and, by failing in this duty, Watkins waived its motion to transfer venue.  See Tex. R. Civ. P. 87 (1) (“The movant has the duty to request a setting on the motion to transfer”); Grozier v. L-B Sprinkler & Plumbing Repair, 744 S.W.2d 306, 309–12 (Tex. App.—Fort Worth 1988, writ denied) (holding that appellant waived his venue motion by failing to pursue a hearing on it before the trial court granted summary judgment). As to the Clients’ motions to transfer venue, even if Watkins had standing to complain about the trial court’s failure to rule on these motions before ruling on Krist’s motion for summary judgment, this issue would be moot because Krist has nonsuited its claims against the Clients.  Therefore, this court is incapable of ordering the trial court to hear the Clients’ motions on remand because the Clients are no longer parties in this case. Accordingly, we overrule the ninth issue to the extent it complains of the trial court’s failure to rule on the motions to transfer venue.

B.        Was there consideration for the contract?

            In the sixth issue, Watkins asserts the trial court erred in granting summary judgment because there was no consideration for the contract.  Watkins argues there was no detriment to Krist in entering into the agreement, and thus no consideration to support it.  We disagree.  Watkins states that the Clients told him they had no obligation to Krist and that he called Krist to confirm this representation.  The contract resulted from the ensuing communications between Krist and Watkins.  Although Watkins and the Clients contend the Clients owed Krist nothing after they discharged that firm, the language of the agreement itself shows that Krist was still asserting its rights to recover attorney’s fees and expenses out of any settlement the Clients obtained from resolution of the DuPont Suit. By compromising and limiting its rights to seek attorney’s fees, for example, its right to claim a full 40% fee interest in any settlement reached by Watkins on the Clients’ behalf, Krist suffered a detriment, and so the contract was supported by sufficient consideration.  See Northern Nat. Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 607 (Tex. 1998); Leonard v. Texaco, Inc., 422 S.W.2d 160, 165 (Tex. 1967).  Accordingly, we overrule the sixth issue.

C.        Is the contract ambiguous?

            Under its fourth issue, Watkins argues that the contract unambiguously requires Krist to forfeit all of its claims to fees and reimbursement of expenses if, as turned out to be the case, Watkins obtained a better settlement for the Clients than the settlement allegedly proposed by Krist.  Watkins also urges that, if we disagree with this contention, we should find the contract to be ambiguous.  Krist responds by arguing that the contract unambiguously requires Krist to forfeit only its claims to fees in any recovery that the Clients realize in excess of the settlement allegedly proposed by Krist.  Krist also asserts that Watkins has waived its right to assert ambiguity on appeal by agreeing in the trial court that the contract is unambiguous.

            As a preliminary matter, any agreement in the trial court by Watkins and Krist that the contract is unambiguous does not prevent this court from concluding that the contract is ambiguous.  See City of Bunker Hill Village v. Memorial Villages Water Auth., 809 S.W.2d 309, 310–11 (Tex. App.--Houston [14th Dist.] 1991, no writ) (reversing summary judgment because the contracts in question were ambiguous and holding that agreement of parties that a contract is unambiguous does not prevent an appellate court from finding ambiguity under the ordinary rules of contract construction). Therefore, in evaluating the fourth issue, we must first determine if the contract is ambiguous.

            If a written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and it can be construed as a matter of law.  Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565, 574 (Tex.1996). If its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning, taking into consideration circumstances present when the particular writing was executed, then it is ambiguous and its meaning must be resolved by a finder of fact.  See id. In construing a written contract, our primary concern is to ascertain the true intentions of the parties as expressed in the written instrument.  See id.  This court need not embrace strained rules of construction that would avoid ambiguity at all costs.  See id.  If the contract is ambiguous, then the trial court erred in granting summary judgment because the interpretation of an ambiguous contract is a question for the finder of fact.  See Coker v. Coker, 650 S.W.2d 391, 394–95 (Tex. 1983). 

            The contract, addressing the issue of Krist’s rights against any future settlement by the Clients, states:

[I]f the cases are resolved by [Watkins] in such a fashion as to allow for a recovery on [the Clients’] behalf when none would have existed under the terms of [Krist’s] proposed agreement, then [Krist] will forfeit all of [its] fees and expenses.  On the other hand, if circumstances are such that [Krist’s] proposed settlement agreement would have resulted in the same or greater recovery than [Watkins] eventually achieve[s], then [Krist] would insist upon a full fee and reimbursement of expenses.                         

            It is undisputed that the settlement Watkins achieved for the Clients resulted in a recovery for the Clients that was greater than the recovery the Clients would have realized under Krist’s proposed settlement agreement.  Therefore, the second sentence above cannot apply.  Under the circumstances present when the contract was made, the meaning of the first sentence is uncertain and doubtful.  The trial court apparently accepted Krist’s argument that the contract unambiguously forfeits Krist’s fees only to the extent that Watkins’s settlement for the Clients exceeds Krist’s proposed settlement.  This construction is problematic because it conflicts with the ordinary meaning of “[Krist] will forfeit all of [its] fees and expenses.”  On the other hand, it does not seem likely that Krist would agree to forfeit a claim of more than half a million dollars because Watkins achieved a better settlement than the Clients would have received under Krist’s proposed settlement.  Though there is a dispute as to whether the Clients discharged Krist with just cause, even if it were determined that they did, Krist still would have a claim against the Clients based on quantum meruit.  See Rocha v. Ahmad, 676 S.W.2d 149, 156 (Tex. App.—San Antonio 1984, writ dism’d).  It would be unusual for Krist to have agreed to waive its entire claim simply because Watkins achieved a better settlement.  Though we may not rewrite the contract to insert provisions the parties could have included, we must construe the contract from a utilitarian standpoint, bearing in mind the particular business activity sought to be served.  See Lenape Resources Corp., 925 S.W.2d at 574; Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 646 (Tex. 1996). 

            If the first sentence required Krist, under certain circumstances, to completely waive its claim to more than $500,000 in fees and cost reimbursement, then it would be important to know under what circumstances this drastic result would occur.  However, the language of the first sentence is opaque in this regard, stating that it is triggered “if the cases are resolved by [Watkins] in such a fashion as to allow for a recovery on [the Clients’] behalf when none would have existed under the terms of [Krist’s] proposed agreement.” It is undisputed that the “terms of [Krist’s] proposed agreement” included an unconditional  recovery of $200 per affected acre owned by the settling party.  Therefore, there could have been no circumstances under which “[no recovery] would have existed under the terms of [Krist’s] proposed agreement.” 

            Watkins asserts that the first sentence is triggered if Watkins obtains a settlement for more money than the Clients would have received under Krist’s proposed settlement.  Krist asserts that it waived its rights only as to any recovery in excess of what the Clients would have recovered under Krist’s proposed settlement.  We presume that the parties did not intend an impossible condition.  See Page v. Superior Stone Prods., Inc., 412 S.W.2d 660, 663 (Tex. Civ. App.—Austin 1967, writ ref’d n.r.e.).  If we construe the condition in the first sentence to mean “to the extent the Clients recover more than they would have under Krist’s proposed settlement,” then this language, combined with the phrase “full fee and reimbursement of expenses” in the second sentence (emphasis added) might favor Krist’s construction.  On the other hand, if we construe the condition to mean “if the Clients recover more when represented by Watkins than they would have under Krist’s proposed settlement,” then Watkins’s construction might be favored. Given the uncertain and doubtful meaning of the contract, we hold that it is ambiguous.  See Lenape Resources Corp., 925 S.W.2d at 574 (holding contract provision to be ambiguous); Coker, 650 S.W.2d at 393–94 (holding that contract language was unclear and ambiguous); A.W. Wright & Associates, P.C. v. Glover, Anderson, Chandler & Uzick, L.L.P., 993 S.W.2d 466, 470 (Tex. App.—Houston [14th Dist.] 1999, pet. denied) (holding that language in referral contracts between attorneys was uncertain and doubtful and therefore ambiguous);  Gibson v. Bentley, 605 S.W.2d 337, 338–39 (Tex. Civ. App.—Houston [14th Dist.] 1980, writ ref’d n.r.e.) (holding that condition triggering provision for sharing amounts to be recovered in lawsuit was susceptible of two irreconcilable interpretations and was ambiguous).  Accordingly, we sustain the fourth issue to this extent, overrule the remainder of the fourth issue, reverse the trial court’s judgment, and remand this case to the trial court so that the trier of fact may determine the true intent of the parties.  See Coker, 650 S.W.2d at 394–95.

                                                                                                      III.  Conclusion

            Watkins waived its motion to transfer venue by failing to set it for hearing before the trial court’s ruling on Krist’s motion for summary judgment.  The contract, though supported by sufficient consideration, is ambiguous. Therefore, we reverse the trial court’s judgment and remand this case to the trial court so that the trier of fact may determine the true intent of the parties.^[1]

                                                                        /s/        Kem Thompson Frost

                                                                                    Justice

Judgment rendered and Memorandum Opinion filed August 5, 2003.

Panel consists of Justices Yates, Anderson, and Frost.

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            ^[1]  Having ruled on these issues, we need not address Watkins’s other issues as to why the trial court should not have granted summary judgment — its first, second, third, fifth, seventh, eighth, and tenth issues, as well as the part of the ninth issue dealing with Watkins’s motion to continue the summary-judgment hearing.