Kline v. O'Quinn

• Citation: 874 S.W.2d 776
• Decision Date: 24 March 1994
• Docket Number: No. A14-93-00187-CV,A14-93-00187-CV
• Parties: Donna C. KLINE, Appellant, v. John M. O'QUINN, Thomas J. Pearson, and Bank One, Texas, N.A., Appellees. (14th Dist.)
• Court: Court of Appeals of Texas

Page 776

874 S.W.2d 776

Donna C. KLINE, Appellant, v. John M. O'QUINN, Thomas J. Pearson, and Bank One, Texas, N.A., Appellees.

No. A14-93-00187-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

March 24, 1994.

Supplemental Opinion Modifying

Judgment but Otherwise Denying

Rehearing May 12, 1994.

Norman Riedmueller, Michael A. Pullara, Houston, for appellant.

J. Clark Martin, Steven R. Borgman, Cheryl E. Irvin, Houston, for appellees.

Before MURPHY, ELLIS and SMITH, ^* JJ.

MAJORITY OPINION

JACKSON B. SMITH, Jr., Justice (Retired).

This is an appeal from a judgment modifying an arbitration award which was rendered in favor of appellant, Donna Kline, and against John O'Quinn and Thomas Pearson. The judgment modified the arbitration award by deleting punitive damages assessed against appellee, O'Quinn and ordered that Kline take nothing in a trial against appellee, Bank One (successor-in-interest to MBank, N.A.). Although his name appears on the appeal bond, Pearson did not file a brief or raise points of error.

This dispute between attorneys arose out of a contract for contingent attorney's fees. On March 30, 1988, Kline and Pearson entered into an agreement with O'Quinn whereby O'Quinn agreed to pay expenses and assist on certain toxic tort and personal injury cases in return for a share of the attorney's fees ("the first attorneys' agreement"). Pursuant to their agreement, O'Quinn advanced substantial sums of money to Kline and Pearson. After signing the first attorneys' agreement, Kline and O'Quinn became aware that Bank One was a creditor of Pearson and that the bank claimed an interest in Pearson's share of attorney's fees in cases covered by the attorneys' agreement. As a result, Kline, Pearson and O'Quinn executed a second agreement ("the second attorneys' agreement").

Both agreements detailed a fee-sharing arrangement and contained a binding arbitration clause. In addition, the second attorneys' agreement acknowledged the existence of Bank One's interest and allocated to the bank a portion of Pearson's share of fees in cases covered by the agreement. The agreement also provided that a portion of Pearson's fees would be used to repay O'Quinn for money he advanced to Kline and Pearson. The agreement further provided for repayment of a Pearson debt to Kline. Finally, the agreement contained several provisions to protect the fee interests of Kline and O'Quinn. Among those provisions, was a condition that all settlement monies recovered in the cases covered by the agreement would be deposited in O'Quinn's client trust account for accounting and distribution.

Kline, Pearson, and O'Quinn then executed an agreement with Bank One ("the bank agreement"), which for the most part restated the provisions set out in the second attorneys' agreement, but did not contain an arbitration provision. Thereafter, recoveries, either by settlement or by judgment, were received by both O'Quinn and Pearson on cases covered by the second attorneys' agreement. However, Kline was paid only a portion of her share of fees or not paid at all.

On March 8, 1991, Kline filed suit against O'Quinn and Pearson, alleging breach of contract, breach of fiduciary duty, and breach of a duty of good faith and fair dealing because of their failure to pay her certain contingent attorney's fees. Kline's original petition specifically invoked the arbitration provision of the second attorneys' agreement and prayed "that the court order arbitration of the disputes between Plaintiff and Defendants O'Quinn and Pearson." Bank One was named as a defendant, but no wrongdoing was alleged against the bank as it was not a party to the second attorneys' agreement. O'Quinn then filed a plea in abatement with the court to stay the proceedings pending arbitration. The court took no action on O'Quinn's motion.

Pursuant to the second attorneys' agreement, Kline filed a demand for arbitration with the American Arbitration Association (AAA). Kline also submitted a copy of her original petition to the AAA. The parties proceeded to arbitration in May 1992, and on June 22, 1992, the three-member arbitration panel found in favor of Kline and ordered both O'Quinn and Pearson to pay damages. ¹ O'Quinn subsequently filed with the AAA, a "motion to partially modify and vacate arbitration." The arbitration panel affirmed its prior rulings and denied O'Quinn's motion on September 3, 1992. O'Quinn then filed a "motion to vacate, or alternatively, modify and correct arbitration award" in the trial court. That motion, like the earlier motion to the AAA, requested deletion of the $50,000.00 punitive damages award assessed against O'Quinn by the arbitrators.

Shortly thereafter, Kline filed an "application for decree," seeking confirmation of the arbitration award in its entirety. She also filed a first amended original petition, seeking confirmation of the award and alleging, for the first time, causes of action against Bank One. That pleading also sought attorney's fees. Kline later amended her petition in the trial court to include a claim for punitive damages against O'Quinn in the event that the arbitration award was not confirmed in its entirety. O'Quinn also filed a motion opposing Kline's application for decree and a "motion for judgment," both of which sought to confirm the arbitration award, less punitive damages.

The pleadings and documents in the record show that the trial court held several hearings to resolve issues raised by O'Quinn's motion to vacate or modify. A record of what transpired at all those hearings is not before this court. However, notwithstanding the lack of a complete record, an examination of the pleadings and documents and a review of the record of the pre-trial hearing in the Bank One case, reflect the totality of the trial court's rulings. The trial court ruled that the arbitrators had exceeded their authority by awarding punitive damages and by ordering payment of the award within thirty days after the award was signed. The court also ruled that Kline could not recover attorney's fees. The court further ruled that it would confirm the arbitration award, less punitive damages against O'Quinn, but refused Kline's request to litigate that issue or the issue of attorney's fees. The trial court then ruled that it would not enter judgment confirming the arbitration award as modified until the conclusion of the trial against Bank One.

The Bank One trial began on December 21, 1992. During the pre-trial hearing, the court ruled that because of its prior rulings, there were no issues to be litigated against O'Quinn; therefore, counsel for O'Quinn was not permitted to participate in the Bank One trial. After Kline rested, Bank One moved for a directed verdict and after hearing argument, the trial court granted the motion. The trial court's final judgment confirmed the arbitrators' award except for the punitive damages against O'Quinn, denied Kline's request for attorney's fees, and ordered that Kline take nothing from Bank One. Kline appeals from that final judgment raising three points of error. O'Quinn has since paid the compensatory damages of the final judgment and has filed a motion to dismiss this appeal.

Initially, we address O'Quinn's motion to dismiss. Exhibits attached to that motion reflect O'Quinn's payment and Kline's acceptance of compensatory damages plus interest pursuant to the trial court's final judgment. O'Quinn contends that Kline's acceptance of this payment satisfied the judgment and makes this appeal moot. O'Quinn's contention is without merit.

The general rule is that a party who accepts the benefits of a judgment is estopped from challenging the judgment by appeal. Twin City Fire Ins. Co. v. Jones, 834 S.W.2d 114, 115 (Tex.App.--Houston [1st Dist.] 1992, writ denied) (citing Carle v. Carle, 149 Tex. 469, 234 S.W.2d 1002, 1004 (1951)). There are two narrow exceptions to this rule. Twin City, 834 S.W.2d at 115; River and Beach Land Corp. v. O'Donnell, 632 S.W.2d 885, 888 (Tex.App.--Corpus Christi 1982, no writ). First, a party is not estopped from appealing if a reversal of the judgment could not possibly effect that party's right to the benefit accepted under the judgment. Id. (citing Carle, 234 S.W.2d at 1004); River and Beach, 632 S.W.2d at 888. Second, a party is not estopped from appealing if the economic circumstances are such that the party's acceptance of the benefits was not voluntary. Twin City, 834 S.W.2d at 115; River and Beach, 632 S.W.2d at 888. This case falls within the first exception.

The compensatory damages paid by O'Quinn and accepted by Kline were never the subject of this appeal. By her appeal, Kline only seeks "further" recovery of the punitive damages deleted from the arbitration award and attorney's fees in confirming the award. Thus, reversal of the judgment would merely allow Kline to recover a sum of money in addition to compensatory damages already accepted by her and would have no effect on those benefits she has secured under the judgment. See Baptist Memorial Hosp. Sys. v. Bashara, 685 S.W.2d 352, 353-54 (Tex.App.--San Antonio 1984), aff'd, 685 S.W.2d 307 (Tex.1985) (held that hospital's acceptance of lien payment reduced by amount of attorney's fees of attorney representing injured client did not bar hospital from seeking higher lien payment on appeal). O'Quinn's motion to dismiss is denied.

In her first point of error, Kline contends "the trial court erred by rejecting rather confirming the arbitration award of exemplary damages against O'Quinn."

The trial court's judgment setting aside the award of punitive damages against O'Quinn states that "... such award fail[ed] to conform either to the parties' arbitration agreement or the relief sought ..." and that "... the arbitrators exceeded the scope of their authority in attempting to award punitive damages." That "arbitrators exceeded their powers" is a statutory ground for vacating an award. TEX.CIV.STAT.ANN. art. 237, § A(...