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University General Hospital L.P. v. Siemens Medical Solutions USA Inc.

Court of Appeals of Texas, First District

May 9, 2017

UNIVERSITY GENERAL HOSPITAL, L.P.; UNIVERSITY HOSPITAL SYSTEMS, LLP; CHARO BARNETTE, IN HER CAPACITY AS INDEPENDENT EXECUTOR OF THE ESTATE OF GUY BARNETTE; AND JOHN E. UDEH, Appellants
v.
SIEMENS MEDICAL SOLUTIONS USA, INC., Appellee

         On Appeal from the 215th District Court Harris County, Texas Trial Court Case No. 2013-18863

          Panel consists of Justices Massengale, Brown, and Huddle.

          MEMORANDUM OPINION

          Michael Massengale Justice.

         This appeal arises from a dispute over a breach of a settlement agreement. Applying the terms of the settlement, we affirm the judgment to the extent it enforced the liability of University General Hospital, L.P. and University Hospital Systems, LLP, which agreed to be jointly and severally liable for a sum of $5, 500, 000. We reverse to the extent the judgment imposed liability against Barnette and Udeh, who were expressly excused from their obligations as individual guarantors, and we render a take-nothing judgment in their favor. In light of our holdings, we remand for further proceedings relating to the recovery of reasonable and necessary attorney's fees.

         Background

         This lawsuit arises out of the failed settlement of a prior suit. In 2010, Siemens Medical Solutions USA, Inc. filed suit against University General Hospital, L.P. and University Hospital Systems, LLP, alleging that they breached several contracts under which Siemens provided medical equipment, information-technology services, and maintenance. Siemens also sued Guy Barnette, John E. Udeh, and Moien R. Butt as guarantors. The parties entered into a settlement agreement to resolve that lawsuit.

         In their settlement agreement, the parties made several commitments to one another. University General agreed to pay Siemens $4, 850, 000. University General was obligated to pay $1, 000, 000 the day that Siemens signed the settlement papers, and the remainder was to be paid in 20 monthly installments. The parties agreed to dismiss the 2010 lawsuit with prejudice upon University General's initial $1, 000, 000 payment. University General and Siemens further agreed to execute a new health-services agreement and several addenda to existing equipment leases.

         Under the settlement agreement, so long as University General satisfied its obligations, none of the other defendants were required to pay any portion of the $4, 850, 000 settlement amount. However, all of the defendants were obligated to sign an "Agreed Judgment" that Siemens would hold until University General had made all of the installment payments. Execution of this Agreed Judgment extinguished the liability of Barnette, Udeh, and Butt as guarantors of the original contracts which gave rise to the dispute. However, if University General failed to make the required payments or it otherwise breached the agreement and failed to cure its default after written notice, Siemens was entitled to seek entry of the Agreed Judgment.

         Under the terms of the Agreed Judgment, University General and University Hospital would be jointly and severally liable for $5, 500, 000 in damages, subject to a dollar-for-dollar credit for any payments already made by University General. In addition, Barnette, Udeh, and Butt each would be severally but not jointly liable for $866, 667 of the $5, 500, 000 owed by University General and University Hospital. Barnette, Udeh, and Butt would be entitled to a credit of 12 cents on the dollar for any payments already made by University General.

         University General paid Siemens the initial $1, 000, 000 required under the agreement in mid-October 2011. When University General's first installment payment came due on October 31, it failed to pay. On November 2, Siemens notified University General and the other parties to the settlement agreement that it intended to file and enforce the Agreed Judgment. Nevertheless, in accord with the settlement agreement's terms regarding the effect of the initial $1, 000, 000 payment, the parties filed an agreed motion to dismiss the 2010 lawsuit with prejudice on November 4. The trial court dismissed the suit that same day. University General made belated payments of $50, 000 and $150, 000 during November, but it again failed to make its installment payment at the end of the month. It failed to make its next installment payment at the end of December as well. Siemens made additional demands for payment in December 2011 and January 2012; in these notices it restated its intention to file and enforce the Agreed Judgment.

         In January 2012, Siemens filed the Agreed Judgment under the same cause number as the 2010 lawsuit and sought its entry and enforcement. In February 2012, 91 days after dismissing the suit, the trial court signed and entered the Agreed Judgment. University General and the other defendants appealed from the Agreed Judgment to this court. While that appeal was pending, Butt settled with Siemens for $722, 667 and was dismissed from the suit. This court subsequently vacated the Agreed Judgment, holding that it was "void" because it had been entered by the trial court after its plenary power expired. See Univ. Gen. Hosp. v. Siemens Med. Solutions USA, No. 01-12-00174-CV, 2013 WL 772951, at *2-3 (Tex. App.- Houston [1st Dist.] Feb. 28, 2013, no pet.) (mem. op.). The court, however, noted that Siemens was "not left without a remedy-it can file suit to enforce the settlement agreement." Id. at *3.

         Siemens then brought this suit against University General and the other appellants. In its petition, Siemens once again sought entry of the Agreed Judgment. It also alleged breach of the settlement agreement and requested a declaratory judgment of its rights under the settlement agreement, including a declaration that it had a right to seek entry of the Agreed Judgment. Siemens eventually moved for summary judgment, contending that University General and the other appellants were liable for breach of the settlement agreement and that the proper remedy was entry of a judgment consistent with the terms of the Agreed Judgment. The trial court entered a partial summary judgment finding University General liable to Siemens for breach of contract and awarding damages. The remainder of Siemens's claims, including its request for attorney's fees, were set for trial.

         After a bench trial, the trial court entered a final judgment, which superseded the partial summary judgment, in favor of Siemens for breach of the settlement agreement. The trial court found that University General and University Hospital were jointly and severally liable for $3, 577, 333, which the trial court calculated by subtracting the $1, 200, 000 already paid by University General and the $722, 667 paid by Butt from the $5, 500, 000 in liability imposed by the Agreed Judgment. The trial court further found Barnette and Udeh liable for $722, 667 each. Consistent with the terms of the Agreed Judgment, their personal liability comprised a portion of the $3, 577, 333 award, rather than being in addition to it, and it was calculated by applying the 12-cents-per-dollar credit to the $866, 667 in individual liability stated in the Agreed Judgment. In addition, the trial court awarded Siemens $180, 155.66 for attorney's fees incurred after University General's breach of the settlement agreement until the filing of the present lawsuit, $271, 153.19 in attorney's fees incurred during this suit through summary judgment, and $244, 970.03 in attorney's fees incurred after the summary judgment.

         The trial court entered findings of fact and conclusions of law. It concluded that University General and the other appellants agreed to the terms of the Agreed Judgment in the event of a breach of the settlement agreement, and it therefore based its award of damages on the Agreed Judgment's terms. It further concluded that Siemens was entitled ...


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