Andersen v. Corbitt, 88-176

• Decision Date: 27 June 1989
• Docket Number: No. 88-176,88-176
• Citation: 777 P.2d 48
• Parties: Brent ANDERSEN, Appellant (Defendant), v. Ray CORBITT, Appellee (Defendant).
• Court: Wyoming Supreme Court

Page 48

777 P.2d 48

Brent ANDERSEN, Appellant (Defendant), v. Ray CORBITT, Appellee (Defendant).

No. 88-176.

Supreme Court of Wyoming.

June 27, 1989.

Rehearing Denied July 26, 1989.

Harley J. McKinney of Pickett & McKinney, Rock Springs, for appellant.

Robert H. Johnson, Rock Springs, for appellee.

Before THOMAS, URBIGKIT and MACY, JJ., BROWN, J., Retired, and LEIMBACK, District Judge.

URBIGKIT, Justice.

We are provided a settlement agreement negotiated between law firms which did not stay settled resulting in a $20,000 interpleader suit and the involvement of two more law firms to decide who gets the deposited funds. The extreme hostility between the individual litigants is pervasive. Appeal is taken from a summary judgment disposition and we reverse to award the escrowed funds to appellant, Dr. Brent Andersen (Andersen).

The facts are more complex than the agreement which was made for disposition of the money. All of this arises out of problems at the Southwest Counseling Service (SCS) of Rock Springs and its personnel problems.

The actors included Andersen, a clinical psychologist and director of SCS, who came into conflict with appellee, Dr. Ray Corbitt (Corbitt), an experimental psychologist. Litigation started when Corbitt sued Andersen and SCS in federal court for "an abuse of public power in attempting to control competing private practitioners" under 42 U.S.C. § 1983 and common law tort. That suit resulted in a verdict in favor of SCS and against Andersen, assessing a total damage award of $111,843 plus attorneys' fees and expenses of $46,471.11. Appeal was taken from this verdict to the Tenth Circuit Court of Appeals. The insurance carrier for SCS which had represented SCS and Andersen under reservation of right, continued representation after the unfavorable judgment on the same basis without posting any supersedeas bond to deter execution on the judgment entered against its insured, Andersen.

While all of this was going on, SCS terminated Andersen's employment which caused him to institute an action in state court for wrongful discharge. In February 1984, with the appeal pending in federal court on the Corbitt/Andersen suit and immediate trial in Andersen/SCS pending, attorneys Roy Jacobson of the law firm of Vehar, Beppler, Jacobson, Lavery & Rose representing Andersen and Charles E. Graves and Associates representing Corbitt discussed an arrangement to protect Andersen from judgment execution. It is out of those discussions that an arrangement was derived as reflected in a letter dated February 17, 1984 which now provides the basis of continuing litigation after both the other cases have been resolved, claims paid, and funds disbursed.

That letter, under Jacobson's letterhead, was addressed to Graves and stated:

Let this confirm our telephone agreement of this date as to granting a covenant not to execute in favor of Brent Andersen in the Corbitt action:

(a) Brent Andersen will pay the sum of $20,000 to Corbitt and his attorneys from the settlement proceeds of Andersen v. Southwest Counseling Service, et al.; in the event Corbitt v. Andersen, et al. is reversed, Corbitt may retain the $20,000;

(b) Corbitt will grant to Brent Andersen a covenant not to execute against him, personally, including settlement proceeds from Andersen v. Southwest Counseling Service, et al.;

(c) Brent Andersen will partially assign to Corbitt his bad faith claim against the insurance carrier(s) (Lexington/Glacier) in the sum of the outstanding amount of the judgment in Corbitt v. Andersen, et al. (less $20,000) plus accrued interest, plus 10% of any additional monies received from settlement or verdict of any kind--all to be paid to Corbitt only after reasonable costs of litigation are deducted, exclusive of attorney fees;

(d) Brent Andersen will pay the costs of litigation of any bad faith claim on Corbitt; provided however, the law firm of his choice prosecutes the action in a timely manner. It is understood and agreed that a bad faith claim is not ripe until such time as the 10th Circuit Court of Appeals affirms the Corbitt v. Andersen, et al. judgment;

(e) It is understood by you and Corbitt that under the terms of settlement in Andersen v. Southwest Counseling Service, et al., the amount of settlement is confidential and cannot, and has not, been released to you by Brent Andersen or his attorney;

(f) Brent Andersen, or his attorney, shall prosecute the bad faith claim, in their sole reasonable discretion; provided however, there will be no settlement of the claim without the prior written consent of Corbitt and his attorneys. Corbitt and his attorneys may reasonably demand a settlement for all, or part, of their interest in the bad faith claim; provided however, Brent Andersen may choose to continue the bad faith claim by paying Corbitt all, or part, of his interest therein demanded without settling the suit. Brent Andersen and his attorneys shall keep Corbitt and his attorneys advised of the progress of the bad faith claims at all times material. Further, Corbitt agrees to cooperate fully in the prosecution of the bad faith claims (including being a named party to the bad faith claim if deemed necessary) (g) All parties hereto (Brent Andersen and Corbitt) shall execute any and all documents necessary to fully effectuate the terms of this agreement; and

(h) The terms of this agreement are to be kept fully confidential by the parties, and their respective attorneys; provided however, the terms and conditions may be released to the extent necessary to properly prosecute the bad faith claim.

Chuck, if these conditions accurately reflect our agreement, please sign the acknowledgement portion below. [Emphasis in original.]

The letter (Exhibit A) was electronically transmitted from Kemmerer to Cheyenne, signed by Graves and then returned to Kemmerer.

Benefits to be derived by Andersen were obvious including protection from execution levied on any settlement he might make in his wrongful discharge suit against SCS. Also, Corbitt was benefitted by having immediate funds to offset costs of litigation and appeal to the Tenth Circuit Court of Appeals should his judgment be reversed.

The $20,000 was paid and apparently placed in some kind of an interest account under the control of the Graves' firm and the appeal to the Tenth Circuit Court of Appeals proceeded to affirm rendering a decision two years later in March 1986. With affirmed judgment, Jacobson immediately started action pursuant to the obligations of Exhibit A, as he testified, to "kick ass" to secure payment from Lexington/Glacier insurance carriers. For assistance, he employed an attorney with extensive practical experience in insurance bad faith litigation in this jurisdiction. At the same time, Graves, on behalf of Corbitt, the judgment creditor, made an offer of settlement by direct contact with representatives of Lexington/Glacier. The terms included payment in full of the judgment, attorneys' fees, and interest to date without the addition of any appellate attorneys' fees, which services basically had been rendered by counsel hired by the insurance carriers. It came to be, by agreement of all parties, that settlement was made with the insurance carriers which paid the amount demanded by Graves. ¹

Both psychologists became adamant about their rights to the $20,000 and Graves filed an interpleader action to secure a court determination of whom should get the $20,000 plus accrued interest that he held in law firm escrow. After discovery, including depositions of prior counsel, the present proceedings proceeded with new attorneys for both Corbitt and Andersen, resulting in summary judgment granted to Graves for his attorneys' fees incurred in the interpleader action and the balance of funds granted to Corbitt. Andersen now appeals from the award to Corbitt of $18,261.13 ($20,000 less attorneys' fees of $1,738.87) plus accrued escrow fund interest.

The argument of litigants presented a dispute whether the confirming letter, Exhibit A, unambiguously determines that Corbitt should return the money. Andersen contends that Exhibit A is ambiguous, requiring extrinsic evidence for interpretation which prohibits entry of summary judgment. Conversely, Corbitt looks at the same information and finds that Exhibit A is clear and, if not clear, any extrinsic evidence "supports the judgment entered by the trial court."

Factually, Andersen finds the right for his refund when Corbitt was paid in full by the insurance carriers which included the $20,000 which he had prepaid. He contends when Corbitt was paid in full with interest and attorneys' fees, that a "settlement" of the bad faith claim had in fact, or at least in part, occurred. Conversely, Corbitt considers the $20,000 to be consideration for hedging against reversal and insurance carrier nonpayment. Also, Corbitt argues it did not constitute a prepayment on the rendered judgment since in the event that the federal court judgment was reversed, the $20,000 would be the total that Corbitt would have been entitled to receive.

A settlement agreement is a contract which is subject to the same legal principles applicable to construing contracts. Folsom v. Butte County Ass'n of Governments, 32 Cal.3d 668, 186 Cal.Rptr. 589, 652 P.2d 437 (1982); Riley Pleas, Inc. v. State, 88 Wash.2d 933, 568 P.2d 780 (1977); Stottlemyre v. Reed, 35 Wash.App. 169, 665 P.2d 1383 (1983). The mutual intent of the parties at the time of making the agreement must be ascertained and given effect. Washburn v. Washburn, 204 Kan. 160, 460 P.2d 503 (1969); Matter of Estate of Engels, 10 Kan.App.2d 103, 692 P.2d 400 (1984); Matter of Estate of Hollingsworth, 88 Wash.2d 322, 560 P.2d 348 (1977). A settlement agreement must be construed in light of the language used and the circumstances surrounding its creation. Matter of Estate of Engels, 692 P.2d at 404; Riley Pleas, Inc., 568 P.2d at 783; Stottlemyre, 665 P.2d at 1385. If a...