SCHENKEL & SCHULTZ, INC. v. MIDWEST CONSTRUCTION COMPANY, INC.; SCOTT COUNTY PUBLIC HEALTH CORPORATION, A/K/A SCOTT COUNTY PUBLIC HEALTH IMPROVEMENT CORPORATION; SCOTT COUNTY BOARD OF HEALTH; AND SCOTT COUNTY HEALTH DEPARTMENT
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RENDERED: AUGUST 10, 2007; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2006-CA-000149-MR
SCHENKEL & SCHULTZ, INC.
v.
APPELLANT
APPEAL FROM SCOTT CIRCUIT COURT
HONORABLE ROBERT G. JOHNSON, JUDGE
ACTION NO. 03-CI-00044
MIDWEST CONSTRUCTION COMPANY, INC.;
SCOTT COUNTY PUBLIC HEALTH CORPORATION, A/K/A
SCOTT COUNTY PUBLIC HEALTH IMPROVEMENT
CORPORATION; SCOTT COUNTY BOARD OF HEALTH;
AND SCOTT COUNTY HEALTH DEPARTMENT
APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE: ABRAMSON AND STUMBO, JUDGES; KNOPF,1 SENIOR JUDGE.
STUMBO, JUDGE: This appeal comes from an order enforcing a settlement agreement
between three parties: Schenkel & Schultz (Appellant); Midwest Construction (Appellee,
hereinafter “Midwest”); and various entities of the Scott County Board of Health
(Appellee, hereinafter “Scott County”). In March 1999, Scott County entered into a
1
Senior Judge William L. Knopf sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
contract with Appellant, which is an architecture firm.2 The contract was to design and
oversee construction of the Scott County Health Center. Scott County also hired a
contractor, Midwest.
A dispute over delays and cost overruns during construction resulted in
Midwest bringing an action in Scott Circuit Court. Midwest named both Appellant and
Scott County as defendants. Scott County, in turn, brought a cross-claim action seeking
indemnity from Appellant.
Negotiations began in order to settle this case. In January 2004,
correspondence began being circulated reflecting various settlement negotiations. In a
letter dated January 8, 2004, counsel for Appellant wrote to counsel for Midwest
concerning an offer of settlement. The letter stated that:
defendants . . . have made an offer of settlement of $50,000 as a
joint global offer of settlement of all claims related to all
allegations in plaintiff’s complaint and amended complaint, and
of all claims which could have been brought in said complaints.
Midwest Construction, Inc., its shareholders and officers must
release the defendants . . . and indemnify them, hold them
harmless and agree to defend them from any claims related to
the allegations in the complaint . . . .
On the same day, Appellant’s counsel informed Scott County of
the terms of the proposed settlement, describing it as global and requiring
“mutual releases between and amongst our clients.”
2
Appellant Schenkel & Schultz is the corporate successor of Haworth, Meyer & Boleyn, Inc.,
which was the party named in the contract instrument. During the course of design and
construction of the Scott County Health Center, Haworth became part of Schenkel & Schultz.
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(R. at 165.) Negotiations continued throughout the months of January, February, and
March. Letters and e-mails were exchanged by the parties’ counsels describing the various
negotiations. The only settlement aspect mentioned after the initial letter of January 8,
2004, is the amount of money.
On March 19, 2004, counsel for Midwest sent counsel for Appellant and
Scott County an e-mail which reads in part, “This will confirm Midwest accepted
defendants’ joint offer of $95,000 and that this is a tentative settlement, contingent on
Midwest and Scott County settling their separate dispute about contract balance and
warranty issues which does not involve Schenkel Schultz financially or otherwise.” (R. at
142.) Negotiations between Midwest and Scott County regarding the contract and
warranty issues went on throughout the remainder of 2004 and into 2005.
On February 7, 2005, counsel for Midwest sent a letter to counsel for the
defendants stating that the issues between Midwest and Scott County had been resolved
and requesting that the case be put to rest. Midwest requested payment of the settlement
amount of $95,000. On September 22, 2005, counsel for Appellant wrote counsel for
Midwest a letter stating his understanding that the settlement agreement was for more than
just $95,000. He contended that it was also to be a global settlement which would release
all claims among all the parties. (R. at 214.) Scott County was unwilling to relinquish all
its claims as against Appellant and refused to agree that the settlement was a global
settlement as described by Appellant.
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On September 30, 2005, Midwest filed a Motion to Enforce Settlement
Agreement. In it, Midwest claimed it was entitled to the $95,000 agreed upon and there
was no reason for delay in payment. Both Appellant and Scott County responded to the
motion. Scott County indicated that it was ready and willing to consummate the settlement
and pay Midwest, but would not agree that the settlement contained a global release.
Appellant argued that it was not required to pay unless the agreement was viewed as being
a global release.
On November 30, 2005, the court entered an order granting the motion to
enforce the settlement. In this order, the court held that the March 19, 2004, e-mail was the
settlement document. The court held that the only term to the settlement agreement
between Midwest and Appellant and Scott County was that Midwest was to receive
$95,000 from Appellant and Scott County. The court would not look beyond the four
corners of the e-mail finding the e-mail to be a clear and unambiguous document stating
the only terms of the settlement and citing “Absent an ambiguity . . . the parties’ intentions
must be discerned from the four corners of the instrument without resort to extrinsic
evidence.” Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. App.
2002). This appeal followed.
Appellant’s arguments are that the lower court erred by deciding the motion
to enforce the settlement without an evidentiary hearing, holding that the settlement
agreement was complete as opposed to silent on vital matters, in not construing the
agreement as a whole, and by not giving effect to the intentions of the parties by
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completely disposing of all claims by all parties. When reviewing a lower court’s
interpretation of an oral agreement, the standard of review is de novo. Frear v. P.T.A.
Industries, Inc., 103 S.W.3d 99, 105 (Ky. 2003). After reviewing the record and
specifically the multiple correspondences between the parties, this court agrees that the
Scott Circuit Court erred when construing the March 19 e-mail as a complete settlement
agreement. We therefore reverse the lower court’s decision and remand for further
proceedings.
Appellant contends the lower court should have held an evidentiary hearing
regarding the settlement agreement because “Kentucky courts have noted enforcement of
an alleged settlement agreement by way of summary proceedings is not proper where there
is a dispute.” (Appellant’s Br. at 11)(citing Motorist Mutual Ins. Co. v. Glass, 996 S.W.2d
437, 445 (Ky. 1997)). Appellant equated the motion to enforce the settlement agreement to
a motion for summary judgment. The motion to enforce the settlement agreement was
seeking a final judgment in which the court was to examine the purported settlement
agreement. It was obvious from the onset of this proceeding that the parties were disputing
the terms of the agreement.
The court did err when it held that the March 19, 2004, e-mail was a
complete recitation of the terms of the oral settlement agreement. “‘[S]ettlement
agreements are a type of contract and therefore are governed by contract law,’” Frear at
105 (citing 15 Am. Jur. 2d, Compromise and Settlement §9 (2000)), thus “[w]here a
contract is ambiguous or silent on a vital matter, a court may consider parol and extrinsic
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evidence involving the circumstances surrounding execution of the contract, the subject
matter of the contract, the objects to be accomplished, and the conduct of the parties.”
Cantrell at 385.
Generally, the interpretation of a contract, including
determining whether a contract is ambiguous, is a question of
law for the courts and is subject to de novo review. However,
once a court determines that a contract is ambiguous, areas of
dispute concerning the extrinsic evidence are factual issues and
construction of the contract becomes subject to resolution by
the fact-finder.
Id. (citations omitted). “A contract is ambiguous if a reasonable person would find it
susceptible to different or inconsistent interpretations.” Id. As noted above, the only
settlement term not disputed was that Midwest was to receive $95,000 from the defendants.
However, the e-mail does not state what portion of the $95,000 each defendant has to pay
or what claims the $95,000 is in settlement of, nor does it set forth a time for payment.
Midwest raised multiple claims against multiple defendants. “[W]here there is more than
one claim between the parties, the offer to compromise should make clear which claims are
intended to be compromised.” 15A Am. Jur. 2D, Compromise and Settlement §9 (2007).
The March 19, 2004, e-mail states that there is an agreement to pay Midwest $95,000. The
e-mail is silent on many terms, making it hard for a reasonable person to determine how
the agreement affects the parties, specifically with regard to the defendants.
Because the March 19, 2004, e-mail was ambiguous and silent on vital
matters, Appellant correctly argues that the court should have considered all the
correspondence between the parties when determining the terms of the oral agreement.
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Because the interpretation of a contract, including the issue of ambiguity, is subject to de
novo review, we hold that the lower court erred in its determination that the March 19,
2004, e-mail was a complete and unambiguous memorialization of the settlement
agreement. Since the parties do not agree on the terms included in the agreement and there
is a dispute as to the extrinsic evidence to be considered, we hold that a hearing is
necessary to determine whether an agreement was reached and, if so, what the terms of that
agreement were.
Judgment is reversed and remanded to the Scott Circuit Court to hold a factfinding hearing in accordance with this opinion.
KNOPF, SENIOR JUDGE, CONCURS.
ABRAMSON, JUDGE, CONCURS IN RESULT ONLY.
BRIEFS FOR APPELLANT:
Michael E. Jacobs, Esq.
Hamilton, Ohio
BRIEF FOR APPELLEE,
MIDWEST CONSTRUCTION COMPANY,
INC.:
Buckner Hinkle, Jr.
Cassidy Ruschell Rosenthal
Lexington, Kentucky
BRIEF FOR APPELLEES,
SCOTT COUNTY PUBLIC HEALTH
CORPORATION A/K/A SCOTT COUNTY
PUBLIC HEALTH IMPROVEMENT
CORPORATION; SCOTT COUNTY
BOARD OF HEALTH; AND SCOTT
COUNTY HEALTH DEPARTMENT:
Lynn C. Stidham
Lexington, Kentucky
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