Lopez v. Munoz

• Decision Date: 24 August 2000
• Docket Number: No. 98-0994,98-0994
• Citation: 22 S.W.3d 857
• Parties: (Tex. 2000) Leonel Lopez, Sr., Zulema M. Lopez, and Leonel Lopez, Jr., individually and on behalf of the Estate of Eloy Lopez, deceased, Petitioners v. Munoz, Hockema & Reed, L.L.P. and Albert A. Munoz, II, David A. Hockema and Roger H. Reed, individually and d/b/a Munoz, Hockema & Reed, Respondents
• Court: Texas Supreme Court

Page 857

22 S.W.3d 857 (Tex. 2000)

Leonel Lopez, Sr., Zulema M. Lopez, and Leonel Lopez, Jr., individually and on behalf of the Estate of Eloy Lopez, deceased, Petitioners v. Munoz, Hockema & Reed, L.L.P. and Albert A. Munoz, II, David A. Hockema and Roger H. Reed, individually and d/b/a Munoz, Hockema & Reed, Respondents

No. 98-0994

IN THE SUPREME COURT OF TEXAS

Argued October 20, 1999

Decided June 8, 2000

Rehearing Overruled August 24, 2000.

On Petition for Review from the Court of Appeals for the Fourth District of Texas

[Copyrighted Material Omitted] Justice O'Neill delivered the opinion of the Court, joined by Justice Hecht, Justice Enoch, Justice Owen, Justice Baker, Justice Abbott, and Justice Hankinson, and by Chief Justice Phillips and Justice Gonzales as to Parts I and IV.

The contingent fee contract that underlies this dispute allowed the plaintiffs' law firm to charge an additional five percent fee in the event the case was "appealed to a higher court." We must decide whether the law firm breached the contract by charging its client the additional fee when the defendant, to preserve its right to appeal, filed a cash deposit in lieu of a cost bond with the trial court shortly before settlement documents were signed. We hold that the case was "appealed to a higher court" when the defendant initiated the appellate process by filing a cash deposit in lieu of a cost bond; therefore, the law firm did not breach the contract by charging the additional fee. This holding also disposes of the clients' breach of fiduciary duty claim because that claim is based entirely upon the alleged contract breach. However, because the trial court's judgment improperly disposed of the clients' fraud, negligence, and DTPA claims, we remand them to the trial court for further proceedings.

I Background

The Munoz, Hockema & Reed (MHR) law firm represented the Lopez family in a wrongful-death suit against Westinghouse Electric Corporation. Their contingent fee contract assigned forty percent of any recovery to MHR, and forty-five percent if the case "is appealed to a higher court."¹ After the jury returned a verdict against Westinghouse in excess of twenty-five million dollars, the parties began settlement negotiations. While the negotiations were ongoing, the trial court rendered judgment on the verdict, and the deadline for perfecting an appeal was October 29, 1991.

By mid-October, Westinghouse had tentatively agreed to a settlement.² To preserve its right to appeal should the settlement fall through, Westinghouse, on October 18, 1991, filed a cash deposit in lieu of a cost bond with the trial court. MHR and the Lopezes met on October 21 to discuss the settlement and MHR's fees. The Lopezes' estate and tax attorneys, their family attorney and an accountant attended this meeting. MHR explained to the Lopezes that its fee would be forty-five percent of the recovery, or $6,750,000, and no one voiced an objection. The settlement was ultimately signed on October 30, 1991. Among other documents, the Lopez family members signed a settlement statement reflecting MHR's forty-five percent fee percentage. The funds were distributed according to the settlement statement, and Westinghouse took no further action on its appeal.

About three years later, MHR received a letter requesting that the firm refund the additional five percent fee to the Lopez family. When MHR refused, the Lopezes sued, alleging breach of contract, breach of fiduciary duty, fraud, negligence, and DTPA violations. The Lopezes sought forfeiture of the entire fee. The Lopezes moved for summary judgment on the breach of fiduciary duty and contract claims and moved to sever the other claims. MHR filed a cross-motion for summary judgment alleging that the doctrines of accord and satisfaction and "acceptance of benefits" defeated the Lopezes' claims and that limitations barred their breach of fiduciary duty claim. MHR also claimed that the summary judgment evidence showed no contract breach as a matter of law.

The trial court denied the Lopezes' summary judgment and severance motions, and granted MHR's motion for summary judgment except as to limitations. The court of appeals reversed. See 980 S.W.2d 738, 744. The appeals court held that MHR breached the fee agreement by charging the forty-five percent appeal rate, and that the contract breach was also a breach of fiduciary duty. See id. at 742-43. The court reasoned that "appealed to a higher court" means something more than initiating the appellate process by filing a cash deposit in lieu of a cost bond. See id at 742. The appeals court further held that MHR's affirmative defenses did not defeat the Lopezes' recovery, and reversed and rendered a $750,000 judgment for the Lopezes, representing five percent of the settlement. See id. at 742. The court of appeals remanded the case to the trial court for consideration of the Lopezes' claim for attorneys' fees. One justice, concurring and dissenting, agreed with the majority that MHR had breached its fiduciary duty but concluded that the appropriate remedy was forfeiture of MHR's entire fee. See id. at 744-45 (Duncan, J., concurring and dissenting).

The Lopezes petitioned this Court for review, arguing that the court of appeals should have ordered MHR to remit the entire fee and not just the five percent overcharge. MHR cross-petitioned arguing that, as a matter of law, it did not breach its contract with, or fiduciary duty to, the Lopezes.

II Breach of Contract

We first consider the breach of contract claim. The Lopezes argue that the phrase "appealed to a higher court" is ambiguous and should be construed against its drafter, MHR. See Gonzalez v. Mission American Ins. Co., 795 S.W.2d 734, 737 (Tex. 1990). They also argue that, because of the fiduciary nature of the relationship, any contract between an attorney and a client must be construed in a reasonable and equitable manner. Cf. Keck, Mahin & Cate v. Insurance Co. of N. Am., S.W.3d ; Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1964). The Lopezes contend that the contract provision at issue is subject to only one reasonable and ethical meaning, although their expression of that meaning is less than clear. While these general rules of construction apply when we construe ambiguous contracts or contracts that are reasonably susceptible to more than one interpretation, we hold that the contract language at issue is unambiguous and that MHR did not breach the contract. See Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996) (stating that an unambiguous contract will be enforced as written).

Whether a contract is ambiguous is a question of law for the court to decide. See R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980). In construing contracts, we must ascertain and give effect to the parties' intentions as expressed in the document. See id. A contract is not ambiguous if it can be given a certain or definite legal meaning or interpretation. See Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996); Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex. 1996). Ambiguity does not arise simply because the parties advance conflicting interpretations of the contract; rather, for an ambiguity to exist, both interpretations must be reasonable. See Columbia Gas, 940 S.W.2d at 589; National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). Because here the contract language can be given a definite legal meaning, and it is not reasonably susceptible to more than one meaning, it is unambiguous.

By filing a cash deposit in lieu of a cost bond, Westinghouse "perfected" an appeal under the appellate procedure rules in effect when the underlying case settled. Tex. R. App. P. 40(a)(1), 707 S.W.2d (Tex. Cases) LI (Tex. 1986, amended 1997).³ The appellate rule further provided that, absent a supersedeas bond, a cash deposit does not suspend the judgment and execution may issue "as if no appeal . . . had been taken." Tex. R. App. P. 40(a)(5), 707 S.W.2d (Tex. Cases) LII (Tex. 1986, amended 1997). Thus, the rule's plain language indicates an appeal was "taken" and the appellate court's jurisdiction was invoked when Westinghouse made its cash deposit. See Burns v. Miller, Hiersche, Martens & Hayward, P.C., 909 S.W.2d 505, 506 (Tex. 1995)(per curiam); Ammex Warehouse Co. v. Archer, 381 S.W.2d 478, 482 (Tex. 1964).

The Lopezes contend, and the court of appeals agreed, that "appealed to a higher court" means something more than initiating the appellate process. See 980 S.W.2d at 742. Although not stating what that "something more" might be, the court of appeals held that "appealed to a higher court" anticipates "a meaningful review of the appellate record and a careful consideration of the arguments presented in the appeal." 980 S.W.2d at 742. The problem with this approach, however, is that it expands the actual contract language and makes it difficult, if not impossible, to determine with any certainty when a case has been "appealed."

The appellate process involves many steps, such as transmitting the trial court record, preparing and responding to the briefs, and presenting oral argument. See Tex. R. App. P. 54(a), 74, 75, 707 S.W.2d (Tex. Cases) XVIII, LXXIV-LXXVIII (Tex. 1986, amended 1997). The rules require the court of appeals to write an opinion addressing all issues raised and necessary to the appeal's disposition. See Tex. R. App. P. 90(a), 707 S.W.2d (Tex. Cases) LXXXV (Tex. 1986, amended 1997). After the opinion issues, the parties may file motions for rehearing, which the court must then consider and decide. See Tex. R. App. P. 100, 707 S.W.2d (Tex. Cases) LXXXVI-LXXXVII (Tex. 1986, amended 1997). At what point "meaningful review" occurs during this ongoing process is not readily discernible. We believe the Lopezes' interpretation of the contract language is too broad and therefore unworkable....