Eagle Industries, Inc. v. Thompson

• Decision Date: 03 August 1995
• Citation: 900 P.2d 475,321 Or. 398
• Parties: EAGLE INDUSTRIES, INC., an Oregon corporation, James Tucker, and Linda Tucker, Respondents on Review, v. Roy B. THOMPSON, Petitioner on Review. CC 9011-07573; CA A74864; SC S41463.
• Court: Oregon Supreme Court

Page 475

900 P.2d 475

321 Or. 398

EAGLE INDUSTRIES, INC., an Oregon corporation, James Tucker and Linda Tucker, Respondents on Review, v. Roy B. THOMPSON, Petitioner on Review.

CC 9011-07573; CA A74864; SC S41463.

Supreme Court of Oregon, In Banc.

Argued and Submitted May 4, 1995.

Decided Aug. 3, 1995.

James N. Westwood, of Miller, Nash, Wiener, Hager & Carlsen, Portland, argued the cause and filed the briefs for petitioner on review.

Kurt L. Maul, of Bayless, Stiner, Rueppell & Lawrence, Portland, argued the cause and filed the brief for respondents on review.

Thomas W. Brown, of Cosgrave, Vergeer & Kester, Portland, filed a brief on behalf of amicus curiae Oregon Ass'n of Defense Counsel.

Cecil B. Strange, Portland, filed a brief on behalf of amicus curiae Oregon Trial Lawyers Ass'n.

FADELEY, Justice.

This case turns on the meaning of a provision in a contract among three parties entered into in July of 1990. The contract settled a previous court case between the Tuckers and Toyoda, after trial and verdict, but before judgment. Thompson had been the Tuckers' lawyer in that earlier court case. He obtained the verdict in their favor. At their request, he negotiated the settlement agreement after verdict. However, even before trial and verdict, a dispute arose between Thompson and the Tuckers over Thompson's fees. That dispute continues today, and is the basis for the present breach of contract action brought by the Tuckers against Thompson.

Although this case is separate from the one in which the verdict was entered, where Thompson represented the Tuckers against Toyoda, background facts from that case are necessary to an understanding of the present breach of contract claim. In the previous case, Toyoda as plaintiff claimed a $340,000 balance due by the Tuckers on the purchase price of a construction machine from Toyoda and sought a court order returning the machine to Toyoda. ¹

The Tuckers hired Thompson to defend them in that action and eventually to bring counterclaims for fraud and for damages for losses suffered because the machine did not perform as represented. The initial fee agreement between lawyer and client was based on a stated hourly rate of charge for the lawyer's time and that of his assistants. That hourly rate was changed and, thereafter, in January of the year of the Toyoda case trial, a written fee agreement was signed. That agreement provided that Thompson would receive a percentage of any punitive damages awarded, in addition to hourly fees. In April, a trial to a jury was completed. Although the jury awarded Toyoda a substantial sum as the unpaid portion of the machine's purchase price, it also awarded the Tuckers on their counterclaims $179,832 in special damages and $1.5 million in punitive damages. After the verdict, but before any judgment was entered, the parties negotiated toward a settlement of the case that would provide Toyoda with an order dismissing the case rather than entry of any judgment against it. During the time of those negotiations, the Tuckers told Thompson of their continuing dissatisfaction with his charges. He proposed and they signed, in May, a new written fee agreement which continued the provision that Thompson would receive a percentage of the punitive damages. Thompson also filed a statutory attorney's lien against both Toyoda and the Tuckers on May 17. ²

On July 16, Toyoda, the Tuckers, and Thompson entered into a "Settlement Agreement," incorporating an escrow agreement, that canceled any debt due on the machine and transferred clear title to it to the Tuckers. The agreement also provided that a stipulated dismissal of the Toyoda case, vacating the verdict, would be ordered. The settlement agreement promised that Toyoda would pay, in various amounts at various times, a total of $1 million plus interest, in separate payments to the Tuckers and to Thompson directly, who was to release his attorney's lien pro rata as paid.

The July settlement agreement recited in a "whereas" clause that

"the parties have resolved and compromised the issues raised in [the case started by Toyoda against the Tuckers] and any and all other claims which the parties may have against each other and desire to set forth such agreement and compromise in writing."

Paragraph 10 of that agreement relates to Thompson's attorney's lien and provides, inter alia, that

"upon final payment to Roy B. Thompson, * * *, at that time any and all obligations due or owing from Toyoda or Eagle or Escrow agent * * * shall be extinguished and terminated."

Both the "Settlement Agreement" and escrow agreement expressly deal with the subject of punitive damages, and the possibility that the state might claim a portion of the punitive damages under ORS 18.540.

The July agreement also contained the provision on which our decision in this case turns. Paragraph 11(c) of the July agreement provides "This Agreement and the Escrow Agreement attached as Exhibit 'A' constitute the entire understanding and agreement between the parties and supersede all prior written and oral communications or understandings and agreements between the parties relating to the subject matter hereof."

Our discussion of the prior Toyoda case is coming to a close. We return to a description of the present case where the Tuckers seek breach of contract damages, in the words of the prayer of their complaint, "for Thompson's excessive charges and billings to" the Tuckers. The Tuckers' claim is alleged under the initial attorney fee contracts and hourly charge agreements. It is important to note that no claim is made by the Tuckers based on the July three-party agreement or on any of the negotiations after verdict leading up to it. Indeed, the Tuckers moved successfully to exclude all evidence of, or about, the July agreement in the present case on the ground that it was not relevant to their claims of breach of earlier contracts. The Tuckers make no claim based on negotiations leading up to the July agreement at all, let alone one which seeks to "alter its terms." Only Thompson and the Tuckers are parties to the present case.

Relying on the paragraph quoted above in the July agreement, Thompson moved for partial summary judgment concerning the Tuckers' breach of contract claim. Thompson's motion for partial summary judgment included the following statements:

"The [July] settlement agreement, including its terms for payment to the defendant, supersedes all prior oral and written agreements between its parties, some of whom are the plaintiffs and the defendant herein. Since the settlement agreement is under its own terms integrated, the prior fee agreements are discharged and of no effect, while the settlement agreement remains in effect."

Thompson's memorandum supporting that motion argued that any prior agreement was "discharged" by the July agreement and that the July "agreement is the only valid and binding agreement between the parties."

The trial court denied the motion. Thereafter, the breach of contract claim was tried to a jury. Evidence of the July agreement was excluded from that trial on the Tuckers' motion. The jury returned a verdict that generally favored the Tuckers and against their former lawyer, Thompson.

Thompson assigns as error the denial of his motion for summary judgment and argues on appeal that there was no question of fact to submit to a jury because, as a matter of law, the July agreement superseded the prior attorney fee contracts, on which alone the jury acted. He argues that the July agreement is a novation, discharging any prior contracts. Thompson also argues that the July agreement was fully integrated and, therefore, under the parol evidence rule, no evidence inconsistent with its terms could be admissible. ³

In rejecting Thompson's novation argument, the Court of Appeals noted that the initial fee agreement was between only two parties and that the July agreement added a third party and, thus, its "subject matter" was not the same. As to the fact that the subject of both agreements includes the amount of attorney fees to be paid Thompson for his representation of the Tuckers in the Toyoda case, the Court of Appeals responded only that "the July agreement inserts the existence of an enforceable attorney lien against [the Tuckers] and Toyoda and payment of amounts in relation to that lien." Eagle Industries, Inc. v. Thompson, 127 Or.App. 595, 601, 873 P.2d 479 (1994).

The Court of Appeals held that: "[t]he July agreement did not supersede the [prior] oral agreement." Ibid. The Court of Appeals supported that conclusion by indicating that the "historical facts" show that the July agreement is but a "distribution" agreement and does not represent any settlement of the attorney fee dispute between the Tuckers and Thompson. Ibid. The Court of Appeals opinion supports that proposition by a further recitation indicating that Toyoda, not the Tuckers, insisted on including Thompson as a party to the July agreement, and that Toyoda did so because of its concern about Thompson's attorney's lien. Id. at 598, 601, 873 P.2d 479.

The Court of Appeals then held that the existence of the July agreement and its provisions did not prevent the admission of evidence at variance with its terms in the breach of contract trial on different, earlier contracts. Id. at 601, 873 P.2d 479. On the same basis, the Court of Appeals held that no error was committed by excluding all evidence of the July agreement, because the breach of contract claim was not based on that agreement. Id. at 602, 873 P.2d 479.

The Court of Appeals next vacated the trial court's order voiding a portion of the escrow agreement and declaring that the Tuckers are owners of the money that was then in the hands of the escrow agent, but designated by the escrow agreement for payment to Thompson. That court's reasons for reversing the trial court included that Toyoda was not a party to the present legal action, out of which the...