RSUI Indem. Co. v. Bacon

• Decision Date: 30 September 2011
• Docket Number: No. S–10–1020.,S–10–1020.
• Citation: 282 Neb. 436,810 N.W.2d 666
• Parties: RSUI INDEMNITY COMPANY and Liberty Mutual Insurance Group, as subrogees of Kiewit Construction Company, appellees, v. Ronald “Tim” BACON et al., appellants.
• Court: Nebraska Supreme Court

282 Neb. 436

810 N.W.2d 666

RSUI INDEMNITY COMPANY and Liberty Mutual Insurance Group, as subrogees of Kiewit Construction Company, appellees,

v.Ronald “Tim” BACON et al., appellants.

No. S–10–1020.

Supreme Court of Nebraska.

Sept. 30, 2011.

Syllabus by the Court

1. Summary Judgment: Appeal and Error. In reviewing a summary judgment, the court views the evidence in the light most favorable to the party against whom the judgment was granted and gives that party the benefit of all reasonable inferences deducible from the evidence.

2. Prejudgment Interest: Appeal and Error. Whether prejudgment interest should be awarded is reviewed de novo on appeal.

3. Contracts: Principal and Agent: Liability. An agent for a disclosed principal is not liable on a contract in the absence of some other agreement to the contrary or other circumstances showing that the agent has expressly or impliedly incurred or intended to incur personal responsibility.

4. Contracts. When the terms of a contract are clear, a court may not resort to rules of construction, and the terms are to be accorded their plain and ordinary meaning as an ordinary or reasonable person would understand them.

5. Contracts: Parties. The implied covenant of good faith and fair dealing exists in every contract and requires that none of the parties to the contract do anything which will injure the right of another party to receive the benefit of the contract.

6. Contracts: Parties. The nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contract by the justifiable expectations of the parties. Where one party acts arbitrarily, capriciously, or unreasonably, that conduct exceeds the justifiable expectations of the second party.

7. Contracts: Parties. A violation of the covenant of good faith and fair dealing occurs only when a party violates, nullifies, or significantly impairs any benefit of the contract.

8. Contracts: Parties. The question of a party's good faith in the performance of a contract is a question of fact.

9. Prejudgment Interest. Prejudgment interest accrues on the unpaid balance of a liquidated claim from the date the cause of action arose until the entry of judgment.

10. Prejudgment Interest. A claim is liquidated when there is no reasonable controversy as to the plaintiff's right to recover and the amount of such recovery; there must be no dispute as to the amount due and to the plaintiff's right to recover.

James E. Harris and Britany S. Shotkoski, of Harris Kuhn Law Firm, L.L.P., Omaha, for appellants.

Matthew D. Hammes and Michelle D. Epstein, of Locher, Pavelka, Dostal, Braddy & Hammes, L.L.C., Omaha, for appellees.

HEAVICAN, C.J., CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER–LERMAN, JJ.

STEPHAN, J.

This is an appeal from an order granting summary judgment in a breach of contract action. The primary issue is whether an attorney and/or a law firm is liable on a contract negotiated on behalf of a client when the contract provides that both the client and the attorney “agree to and will pay” a certain sum of money and the attorney signs the contract under the legend “Agreed to in Form & Substance.” We conclude that neither the attorney nor the firm is liable but otherwise affirm the order granting summary judgment.

I. FACTS

Ronald “Tim” Bacon was injured on July 28, 2003, while working at a construction site. Kiewit Construction Company (Kiewit) was the general contractor on the site, and Bacon was employed by subcontractor Davis Erection. Ridgetop Holdings, Inc. (Ridgetop), is the parent company of Davis Erection.

Liberty Mutual Insurance Group (Liberty Mutual) insured Kiewit under a commercial liability policy. Liberty Mutual also insured Davis Erection under a workers' compensation policy. The two policies bore separate policy numbers and had separate named insureds. RSUI Indemnity Company (RSUI) insured Kiewit under a separate liability policy.

After his accident, Bacon filed a lawsuit in the district court for Douglas County against Kiewit, Liberty Mutual, Davis Erection, and Ridgetop. Harris Kuhn Law Firm, LLP (Harris Kuhn), and attorneys James E. Harris and Britany Shotkoski of that firm represented Bacon in the lawsuit. Prior to trial, Kiewit and Bacon entered into a settlement in which Kiewit agreed to pay Bacon a specified sum in full and final settlement of his claims in exchange for a release. The settlement agreement provided in relevant part:

[I]n the event BACON obtains a settlement with Ridgetop ... or judgment against RIDGETOP, BACON and his attorneys, ... Harris and ... Shotkowski [sic], agree to and will pay to KIEWIT and/or its insurer(s) a sum of money up to a total sum of Seven Hundred Fifty Thousand and 00/100 ($750,000.00) from any such settlement with RIDGETOP or final judgment against RIDGETOP, by paying to KIEWIT 50% (1/2) of the first Five Hundred Thousand and 00/100 ($500,000.00) obtained by BACON in settlement with RIDGETOP or final judgment against RIDGETOP and 25% (1/4) of any monies obtained in excess of Five Hundred Thousand and 00/100 ($500,000.00) obtained by BACON in settlement with RIDGETOP or final judgment against RIDGETOP, up to the total reimbursable amount of Seven Hundred Fifty Thousand and 00/100 ($750,000.00). BACON further agrees that any payment owed by BACON to KIEWIT pursuant to the terms of this paragraph will be made by BACON in cash or its equivalent as soon as possible, and not to exceed seven (7) days, after receipt of good funds from RIDGETOP, unless such time is extended by agreement of the parties.

In a section entitled “Worker's Compensation,” the settlement agreement stated that Liberty Mutual had advised the parties that it “did not believe” it would be asserting an interest in any settlement proceeds obtained by Bacon from either Kiewit or Ridgetop. Although the agreement contemplated the receipt of written verification from Liberty Mutual to this effect, it was executed prior to this occurring and it appears from the record that no written verification ever occurred. The settlement agreement further provided that “notwithstanding” Liberty Mutual's advisement and anticipated written verification, Bacon agreed to defend and indemnify Kiewit “with respect to any claim or suit which is or may be made by Liberty Mutual ... as the workers' compensation insurer for Davis Erection.”

The settlement agreement contained the notarized signatures of Bacon and a Kiewit representative. Harris signed the agreement under the legend “Agreed to in Form & Substance,” and Kiewit's attorney did likewise. The attorneys' signatures were not notarized.

On August 23, 2007, RSUI issued a draft payable to Bacon and his attorneys at Harris Kuhn. On August 29, Liberty Mutual issued a draft which was also payable to Bacon and Harris Kuhn. These payments were made by the insurers on behalf of Kiewit pursuant to the settlement agreement. The payments were deposited into Harris Kuhn's trust account.

Bacon, represented by Harris and Harris Kuhn, then began settlement negotiations with Ridgetop. The negotiations became complicated when Liberty Mutual claimed an interest in any amount Bacon received from Ridgetop. Liberty Mutual eventually conceded that it had no subrogation right to any amount obtained by Bacon from Ridgetop, but insisted that it was entitled to a statutory credit against its future workers' compensation benefit payments to Bacon based on any amount Bacon obtained from Ridgetop. ¹ Bacon ultimately settled with Ridgetop and received $1.25 million. At the time Bacon obtained the money from Ridgetop, the validity of Liberty Mutual's claim for a future statutory credit had not been resolved.

RSUI and Liberty Mutual filed this breach of contract action after Bacon received the proceeds of the Ridgetop settlement but refused to make payment to them under the terms of the Kiewit settlement agreement. The district court granted summary judgment in favor of RSUI and Liberty Mutual and found Bacon, Harris, and Harris Kuhn liable in the amount of $437,500 plus prejudgment interest. Bacon, Harris, and Harris Kuhn filed this timely appeal.

II. ASSIGNMENTS OF ERROR

Bacon, Harris, and Harris Kuhn assign, restated and consolidated, that the district court erred in (1) finding that Harris and Harris Kuhn were personally liable on the settlement agreement, (2) granting summary judgment in favor of RSUI and Liberty Mutual, (3) requiring Bacon to indemnify Liberty Mutual against its own intentional acts, (4) calculating the amount owed under the settlement agreement, and (5) finding that the amount owed under the settlement agreement was a liquidated amount and awarding prejudgment interest.

III. STANDARD OF REVIEW

In reviewing a summary judgment, the court views the evidence in the light most favorable to the party against whom the judgment was granted and gives that party the benefit of all reasonable inferences deducible from the evidence.²

Whether prejudgment interest should be awarded is reviewed de novo on appeal.³

IV. ANALYSIS

1. Harris and Harris Kuhn Have No Personal Liability

The district court found that RSUI and Liberty Mutual were entitled to summary judgment and that they could recover from Bacon, Harris, or Harris Kuhn. Harris and Harris Kuhn argue that even if the Kiewit settlement agreement was breached as a matter of law, they cannot be personally liable for the amounts due, because they acted solely as Bacon's agent. They rely on the general rule that an agent, acting for a disclosed principal, is not liable for the principal's contract.⁴

While that is the general rule, an agent can become personally liable if “the agent purports to bind himself or herself, or has otherwise bound himself or herself, to performance of the contract.” ⁵ Stated another way, an agent for a disclosed principal is not liable on the contract “ ‘in the absence of some other agreement to the contrary or other circumstances showing that the agent has expressly...