Debora Fletcher, Robert Jacobsen, Melissa Johnson, Karen Steiner and Nancy Trejo v. Energy Resource Technology GOM, Inc.

• Court: Court of Appeals of Texas
• Decided: August 23, 2012
• Docket: 01-11-00553-CV
• Status: Published

Opinion

Opinion issued August 23, 2012.

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-11-00553-CV ——————————— DEBORAH FLETCHER, ROBERT JACOBSEN, MELISSA JOHNSON, KAREN STEINER, and NANCY TREJO, Appellants V. ENERGY RESOURCE TECHNOLOGY GOM, INC., Appellee

On Appeal from the 127th Judicial District Court Harris County, Texas Trial Court Case No. 2010-21094

MEMORANDUM OPINION

Appellants, Deborah Fletcher, Robert Jacobsen, Melissa Johnson, Karen

Steiner, and Nancy Trejo, challenge the trial court’s rendition of summary judgment in favor of appellee, Energy Resource Technology GOM, Inc. (“ERT”),

in their suit for breach of contract. In two issues, appellants contend that the trial

court erred in granting ERT’s summary-judgment motion and denying their

summary-judgment motion.

We affirm.

Background

In September 2006, ERT, having recently lost several employees after

merging with another company, sent appellants, already employees at ERT, letters

offering them various positions of employment and modifying their compensation.

Stiener had started working at ERT in 2005, and Fletcher, Johnson, Trejo, and

Jacobsen had started working at ERT earlier in 2006. Each letter contained the

following provision:

Long Term Incentive: Subject to approval by the Board of Directors or the Compensation Committee of the Board, on January 1, 2007, you will be awarded $100,000[1] cash. This cash award will vest over a five year period, commencing on January 1, 2008, with 20 percent of the total award vesting and 20 percent vesting each subsequent year until 2012. You will also be eligible for periodic Long Term Incentive Awards as they may be granted in the future at the discretion of the Board of Directors.

1 Although each letter contained the same language, the amount of the employees’ awards differed under the Long Term Incentive provision. Fletcher and Trejo were each to be awarded $100,000, Jacobsen was to be awarded $125,000, and Johnson and Steiner were each to be awarded $250,000. 2 Appellants continued working at ERT through 2007 and received their first

payment under the Long Term Incentive provision on January 1, 2008. Johnson,

Steiner, and Trejo left ERT later in 2008, Fletcher left ERT in 2009, and Jacobsen

left ERT in 2010. ERT did not make any payments under the Long Term Incentive

provision to appellants after they had left the company.

Appellants sued ERT for breach of contract, alleging that ERT had breached

the employment contract by “failing to pay bonuses due and owing.” They then

filed a motion for partial summary judgment, arguing that the Long Term Incentive

provision unambiguously entitled them to “future” payments “regardless of their

employment status.” ERT generally denied appellants’ claims and asserted the

affirmative defense of lack of consideration. ERT then filed its own summary-

judgment motion, asserting that “the offer letters unambiguously require Plaintiffs

to be employed at ERT on the date that the Long[]Term Incentive vests in order to

be entitled to continued payment of the Long[]Term Incentive” and “[t]he offer

letters fail for lack of consideration and are therefore unenforceable.” The trial

court granted ERT’s summary-judgment motion and denied appellants’ motion for

partial summary judgment.

Standard of Review

To prevail on a summary-judgment motion, a movant has the burden of

proving that it is entitled to judgment as a matter of law and there is no genuine

3 issue of material fact. TEX. R. CIV. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339,

341 (Tex. 1995). When deciding whether there is a disputed, material fact issue

precluding summary judgment, evidence favorable to the non-movant will be taken

as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985).

Every reasonable inference must be indulged in favor of the non-movant and any

doubts must be resolved in its favor. Id. at 549.

When both parties move for summary judgment and the trial court grants

one motion and denies the other, the reviewing court should review the summary-

judgment evidence presented by both sides, determine all questions presented, and

render the judgment that the trial court should have rendered. Tex. Workers’

Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 648 (Tex. 2004).

Breach of Contract

In their first issue, appellants argue that the trial court erred in granting

ERT’s summary-judgment motion and denying their summary-judgment motion

because “[t]he employment agreement unambiguously awarded plaintiffs their full

[Long Term Incentive] Benefits on January 1, 2007” and “any ambiguities in the

agreements must be construed against ERT.” In their second issue, appellants

argue that the trial court erred in granting ERT’s summary-judgment motion

because “the employment agreements are enforceable as a matter of law” and

appellants “have raised a genuine issue of material fact.”

4 Our primary concern in construing a written contract is to ascertain the true

intent of the parties as expressed in the instrument. Seagull Energy E & P, Inc. v.

Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006); Valence Operating Co. v.

Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). Usually, the intent of the parties can be

discerned from the instrument itself. ExxonMobil Corp. v. Valence Operating Co.,

174 S.W.3d 303, 312 (Tex. App.—Houston [1st Dist.] 2005, pet. denied). When

an issue regarding the construction of a contract is presented, we must examine and

consider the entire writing in an effort to harmonize and give effect to all the

provisions of the contract so that none will be rendered meaningless. Seagull

Energy E & P, Inc., 207 S.W.3d at 345. Contract terms will be given their plain,

ordinary, and generally accepted meanings unless the contract itself shows them to

be used in a technical or different sense. Dorsett, 164 S.W.3d at 662. A contract is

ambiguous only if its meaning is uncertain or if it is subject to two or more

reasonable interpretations. Seagull Energy E & P, Inc., 207 S.W.3d at 345;

Edascio, L.L.C. v. NextiraOne L.L.C., 264 S.W.3d 786, 796–97 (Tex. App.—

Houston [1st Dist.] 2008, pet. denied). If a written contract is worded in such a

way that it can be given a definite or certain legal meaning, then the contract is not

ambiguous. SAS Inst., Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005). An

ambiguity does not arise simply because the parties advance conflicting

interpretations of the contract. Tex. Farm Bureau Mut. Ins. Co. v. Sturrock, 146

5 S.W.3d 123, 126 (Tex. 2004). When the parties have entered into an unambiguous

contract, the courts will enforce the intention of the parties as written in the

instrument. Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex.

1981). “We construe contracts ‘from a utilitarian standpoint bearing in mind the

particular business activity sought to be served’ and ‘will avoid when possible and

proper a construction which is unreasonable, inequitable, and oppressive.’” Frost

Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (quoting

Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)).

Appellants first argue that “[p]roper application of the rules of construction

to the employment agreements . . . lead to only one reasonable interpretation of the

LTI provisions—that [appellants] were unequivocally awarded their full LTI

benefits on January 1, 2007, regardless of their employment status after that date.”

Appellants assert that the employment letters unambiguously grant the full amount

under the Long Term Incentive provision on January 1, 2007, but “possession of

the LTI (therefore, actual payment) was to occur on an incremental basis, once per

year for the following five years.”

ERT asserts that the employment contracts “unambiguously require

[appellants] to be employed at ERT on the dates when the Long Term incentive

payments vest in order to be entitled to receive incentive payments under the Long

Term Incentive pay provision.” ERT further asserts that appellants’ proposed

6 interpretation “violates contract construction rules,” “is blatantly unreasonable,”

and would “convert[] their long term incentive payments into a short (14 week)

incentive” or “incentives to quit.”

We begin our analysis by consulting the express language of the disputed

provision considered in light of the entire contract. Here, the contract, under the

title, “Long Term Incentive,” provided,

[O]n January 1, 2007 you will be awarded $[____] cash. This cash award will vest over a five year period, commencing on January 1, 2008, with 20 percent of the total award vesting and 20 percent vesting each subsequent year until 2012.

“Vest” is generally defined as “to give (someone) the legal right to . . . property.”

THE NEW OXFORD AMERICAN DICTIONARY 1879 (2001). It means “to confer

ownership (of property) upon a person,” “to invest (a person) with full title to

property,” or “to give (a person) an immediate, fixed right of present or future

enjoyment.” BLACK’S LAW DICTIONARY 445 (9th ed. 2009). “Vesting” is

generally defined as “the conveying to an employee of an unconditional

entitlement to a share in a pension fund.” THE NEW OXFORD AMERICAN

DICTIONARY 1879 (2001) (emphasis added). The plain and ordinary meanings of

“vest” and “vesting” indicate that a benefit “vests” with an employee when the

employee receives “full,” “fixed,” or “unconditional” right to the benefit. Thus, its

7 use implies that, prior to vesting, the benefit is somehow not “full,” “fixed,” or

“unconditional.”2

In construing the provision in light of the entire contract, we note that the

disputed language falls under the title, “Long Term Incentive.” “Incentive” is

defined as “a thing that motivates or encourages one to do something.” THE NEW

OXFORD AMERICAN DICTIONARY 858 (2001). The title “Long Term Incentive”

indicates that the parties intended the award to “encourage” or “motivate” the

employee to remain with ERT “long term,” accomplished by making the award

contingent on the employees’ continued employment at ERT. And this comports

with the plain and ordinary meaning of the word “vesting” as indicating a granting

of “full” and “unconditional” rights to the award. Before “vesting,” the award

would necessarily be conditional or otherwise not “full” or “fixed.” A plain

reading of the contract indicates that the use of the words “vest” and “vesting,”

under a provision entitled, “Long Term Incentive,” was intended to make the

award contingent on the employees’ continued employment at ERT through the

dates the award would vest.

2 We note that this interpretation of the term “vest” comports with case law discussion of the term in the context of property rights. See, e.g., City of Houston v. Guthrie, 332 S.W.3d 578, 597 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (“A right is ‘vested’ when it ‘has some definitive, rather than merely potential existence.’”). 8 Appellants assert that this interpretation “renders the ‘award’ clause

completely meaningless” and “the only reasonable interpretation” of their contracts

is that they “were granted the full amount of the LTI as of January 1, 2007, but

possession did not occur immediately.” “Award” is generally defined as “to give

or order the giving of (something) as an official payment, compensation, or prize to

(someone)” or “an amount of money paid to someone as an official payment,

compensation, or grant.” THE NEW OXFORD AMERICAN DICTIONARY 111 (2001).

However, nothing in the plain and ordinary meaning of “award” indicates that it is

necessarily unconditional. Indeed, as explained above, the fact that the awards

were apparently “unvested” until January 1, 2008 indicates that the awards were

conditional. To adopt appellants’ interpretation, we would have to construe “vest”

to simply mean “to pay,” which is contrary to the plain and ordinary meaning of

“vest” as granting “unconditional” or “full” rights to property.

Appellants’ argument that the contracts’ use of the word “award” granted

them full rights to the payment and the “vesting” of the awards granted them only

the right of possession, without regard to their employment status, also fails to

account for the clearly stated intent that the award act as a “Long Term Incentive.”

Appellants’ interpretation would grant them full rights to the award as long as they

remained employed at ERT from September 15, 2006, the date of the offer letters,

to January 1, 2007, the date of the “award,” a span of only three and one-half

9 months. Construing the contract from a “utilitarian standpoint,” we decline to

adopt this interpretation, which would negate the “particular business activity

being served” of a “Long Term Incentive.” See Frost Nat’l Bank, 165 S.W.3d at

312. Accordingly, we hold that the Long Term Incentive provision in appellants’

contracts necessarily required that they be employed at ERT on the “vesting” dates

to be entitled to their awards.

Finally, appellants attempt to rely on the testimony by deposition of current

ERT employees that ERT’s president “expressly represented to [appellants] that

their LTI Benefits were theirs to keep beginning January 1, 2007” and other letters

to different employees that explicitly required continued employment. However,

having held that the plain language of the contracts necessarily requires that

appellants had to remain at ERT on the dates that their awards vested in order to

collect their Long Term Incentive, we may not consider appellants’ parol evidence

in construing the contract. See, e.g., Edascio, L.L.C., 264 S.W.3d at 797 (“[W]e

may not consider extrinsic evidence to contradict or to vary the meaning of

unambiguous language in a written contract in order to create an ambiguity.”).

We hold that the trial court did not err in granting ERT’s summary-judgment

motion and denying appellants’ summary-judgment motion.

We overrule appellants’ first and second issues.

10 Conclusion

We affirm the judgment of the trial court.

Terry Jennings Justice

Panel consists of Justices Jennings, Massengale, and Huddle.