Opinion
No. 05-05-01090-CV
Opinion Filed August 1, 2006.
On Appeal from the County Court at Law No. 1, Dallas County, Texas, Trial Court Cause No. cc-02-08956-A.
Affirm.
Before Justices FITZGERALD, FRANCIS, and LANG-MIERS.
MEMORANDUM OPINION
Sunbelt Services, Inc. appeals the judgment for $9984, plus interest, attorney's fees, and costs, rendered against it in favor of Grove Temporary Service, Inc. following a jury trial. Sunbelt brings three issues asserting: (1) the award of $9984 was based on a liquidated damages provision that was an unenforceable penalty; (2) the trial court disregarded the jury's finding that Grove's actual damages were $0; and (3) the trial court erred in failing to enter findings of fact and conclusions of law as requested by Sunbelt. We affirm the trial court's judgment.
BACKGROUND
Grove is an employment agency providing employees for temporary and permanent placements. Grove's president testified that for permanent placements, Grove's fee is the standard in the industry-one percent per thousand dollars of annual salary of the employee, up to a maximum of thirty percent. For temporary positions, Grove charges the client an hourly fee for the employee's services. If a client decides to permanently hire the temporary employee, then Grove also charges its standard employee-placement fee; however, if the temporary employee had worked for the client for 520 hours before being hired permanently by the client, Grove does not charge the employee-placement fee.
For example, if the permanently placed employee earned an annual salary of $10,000, Grove would charge 10 percent of the employee's salary as its employee-placement fee. If the employee was paid $20,000, then the fee would be 20 percent of that amount. If the employee was paid $30,000 or more, the fee would not exceed 30 percent.
Sunbelt contacted Grove requesting a temporary employee for four to six weeks. Grove referred Nanine Young to work for Sunbelt. Sunbelt signed a contract stating it would be billed for Young's services at a rate of $22.40 per hour. The contract also stated that if Sunbelt permanently hired Young within one year of her referral to Sunbelt, then Sunbelt would be liable for the usual employee-placement fee unless Young had worked 520 hours for Sunbelt as a temporary employee.
Young worked at Sunbelt's premises for 126 hours over about four weeks, until Sunbelt no longer required her services. Grove then assigned Young to work for other clients. About eight months after her work at Sunbelt, Young was offered a permanent position at Sunbelt at a rate of $16 per hour. Young accepted Sunbelt's offer and went to work for Sunbelt. Grove learned that Young was working for Sunbelt when the client for whom Young had been working complained that Grove had taken her off its assignment to work for Sunbelt. Grove believed Young had gone back to temporary work at Sunbelt and formally reassigned her to working there. When Young failed to turn in time cards to Grove, Grove contacted Young, who said she was now a permanent employee of Sunbelt and was paid directly by Sunbelt. Young told Grove that Sunbelt had told her not to worry about the terms of her employment with Grove because Sunbelt had worked it out with Grove. According to Sunbelt's witnesses, Sunbelt left a message with Grove stating it wanted to hire Young and asked if this would be a problem, but Sunbelt never heard back from Grove. According to Grove's witnesses, no such message was left with Grove.
When Grove learned Sunbelt had permanently hired Young during the year following her referral to Sunbelt, Grove sent Sunbelt an invoice for the employee-placement fee of $9984. Sunbelt refused to pay the fee. Sunbelt offered to pay the difference between 520 hours of revenue from Young's services and the salary Grove paid Young, but Grove rejected the offer and insisted on payment of its placement fee according to the contract. When Sunbelt failed to pay the fee, Grove sued Sunbelt for breach of contract. Sunbelt asserted the placement fee was a liquidated damages provision and an unenforceable penalty.
Grove calculated Young's annual salary with Sunbelt by multiplying her $16 per hour salary by 40 hours per week and fifty-two weeks per year, which equals $33,280. Grove calculated the fee pursuant to the contract as 30 percent of $33,280, which is $9984.
At trial, the jury found Sunbelt had breached the contract. On damages, the jury found the agreed fee due Grove from Sunbelt's hiring Young was $9984. The jury also found Grove failed to prove any amount as the difference between the revenue it would receive from 520 hours of Young's services and the salary it would pay her, and the jury found Grove proved no amount as lost profits.
After the trial court rendered judgment, Sunbelt requested findings of fact and conclusions of law on whether the placement fee was a penalty "and the jury's finding of no actual damages incurred by Grove." The trial court did not file findings of fact and conclusions of law.
LIQUIDATED DAMAGES
In its first issue, Sunbelt asserts, the trial court "erred in not determining that the liquidated damages provision was an unenforceable penalty and therefore, Grove could not recover the liquidated damages amount."
Contract construction is a matter of law. Elliott-Williams Co. v. Diaz, 9 S.W.3d 801, 803 (Tex. 1999). A court's primary concern is to ascertain and give effect to the parties' intentions as expressed in the instrument. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994). "If a contract is worded so that it can be given a certain or definite legal meaning, then it is not ambiguous, and the court will construe the contract as a matter of law." COC Servs., Ltd. v. CompUSA, Inc., 150 S.W.3d 654, 666 (Tex.App.-Dallas 2004, pet. denied) (quoting Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 732 (Tex. 1981)). If the contract's language is subject to two or more reasonable interpretations, it is ambiguous. Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). "Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered." Id.
Sunbelt's argument depends upon its assumption that the placement fee specified in the contract is a liquidated damages provision. Accordingly, we must determine whether the placement fee is compensation for the service of providing an employee for permanent hire or is a liquidated damages provision.
The contract between Grove and Sunbelt for a temporary employee stated,
Should you decide to hire a Grove temporary employee on a permanent basis within one year from the date of referral, the temporary would remain on Grove's payroll for a total of 520 hours. After completing the 520 hours, the Grove temporary will be released to you with no additional fee. If you would like the Grove temporary employee to become your permanent employee prior to completing 520 hours, you will be billed 1% per $1,000 of the annual gross salary up to 30%. The same fee applies should your company move our temporary to any other company or temporary agency's payroll.
While working for Grove at Sunbelt, Young filled out time cards signed by her supervisor at Sunbelt, which were turned in to Grove and which Grove used as the basis for billing Sunbelt and paying Young. The following language was pre-printed on the time cards:
We understand that Grove Temporary Service, Inc. is made possible only by a substantial investment in advertising for testing and training a large staff of personnel. Therefore, in consideration for this service being made available to us, we agree that, in the event the above employee is employed by us prior to completing 520 hours, we will pay 1% per thousand of their annual gross salary, to a maximum of 30%, in liquidated damages for the replacement costs of like personnel.
Before determining whether any liquidated damages were a penalty, we must first determine whether the $9984 Grove charged Sunbelt was liquidated damages or was the agreed compensation. "The term 'liquidated damages' ordinarily refers to an acceptable measure of damages that parties stipulate in advance will be assessed in the event of a contract breach." Flores v. Millenium Interests, Ltd., 185 S.W.3d 427, 431 (Tex. 2005); see also Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005) ("[l]iquidated damages clauses fix in advance the compensation to a party accruing from the failure to perform specified contractual obligations"). Thus, the contract's fee for Sunbelt's hiring Young within one year or 520 employment hours of Grove's referral of her to Sunbelt is not liquidated damages unless it was agreed it would be assessed for a breach of contract. In the contract, Sunbelt never agreed not to permanently hire Young within one year or 520 employment hours. Instead, it agreed to pay a particular fee if it did so. The providing of permanent employees for a fee was one aspect of Grove's business as an employment agency, so Sunbelt's hiring Young was consistent with Grove's business and not a breach of contract.
Sunbelt relies on the language in the time cards describing the fee as "liquidated damages." Contracting parties' use of the words "liquidated damages" does not control the courts' interpretation of the contractual provision described as "liquidated damages." Instead, the courts look to the substance of the contract's terms to determine if the provision constitutes "liquidated damages." See Valence Operating Co., 164 S.W.3d at 664 ("Whether a contract term is a liquidated damages provision is a question of law for the court to decide."); Arthur's Garage, Inc. v. Racal-Chubb Sec. Sys., Inc., 997 S.W.2d 803, 810 (Tex.App.-Dallas 1999, no pet.) (contractual provision labeled "liquidated damages" was limitation of liability provision and not liquidated damages provision). Therefore, regardless of the time cards' description of the fee as "liquidated damages," we conclude the contract can be given a definite legal meaning, that the fee is compensation for referring an employee Sunbelt chose to permanently hire and not liquidated damages for breach of contract.
That the fee is compensation and not liquidated damages for breach of contract is also shown by the testimony of the Sunbelt employee who signed the contract with Grove:
Q. You say y'all never used a personnel agency to obtain a permanent employee?
A. Nor for our office.
Q. Y'all hired Nanine Young through Grove Temporary Services, Inc., didn't you?
A. We used her as a temp through them, yes.
Q. Yeah. That's how y'all met her?
A. That's how we met her, yes.
Q. If it hadn't of been for Grove sending her out as a candidate for employment, you would not have met?
A. Probably not.
Q. Okay. So Nanine Young came through an employment agency?
A. Uh-huh, yes.
Q. And you had signed the contract on behalf of Sunbelt, didn't you?
A. Yes.
Q. And you knew that if y'all accepted the services of a Grove Temporary employee as a permanent employee that Grove expected to be paid?
A. That fees would be incurred, yes.
Construing the contract as a matter of law, we conclude the fee in the contract for Sunbelt's permanently hiring a Grove temporary employee within one year or 520 employment hours was agreed compensation, not a liquidated damages provision. Because the fee was not a liquidated damages provision, the trial court did not err in rejecting Sunbelt's arguments that the fee was liquidated damages constituting an unenforceable penalty. We overrule appellant's first issue.
DAMAGES
In its second issue, Sunbelt asserts the trial court "erred in disregarding the jury's verdict that Grove's actual contract damages amount was zero and therefore, Grove cannot prevail on its breach of contract claim, as it failed to secure a damage finding."
In Question No. 1, the jury found Sunbelt "fail[ed] to comply with the agreement with Grove Temporary Services, Inc." Question No. 2 asked the jury to determine damages:
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Grove Temporary Service, Inc. for its damages, if any, that resulted from such failure to comply?
Consider the elements listed below and none other. Consider each element separately. Do not include damages for one element in any other element. Do not include interest on any amount of damages you may find.
Answer in dollars and cents for damages, if any.
a. The amount of the agreed fee due from Sunbelt to Grove upon Sunbelt's hire of Grove's temporary employee Nanine Young on a permanent basis.
Answer: $9,984.00
b. The difference between the agreed fee to be paid for 520 hours of temporary services and the cost Grove would have incurred in providing 520 hours of temporary services.
Answer: $0
c. Lost profits that were a natural, probable and foreseeable consequence of Sunbelt's failure to comply.
Answer: $0
According to Sunbelt, these answers show the jury awarded Grove no actual damages. We disagree. The jury found Sunbelt breached the contract by failing to pay the placement fee it had agreed to pay and that Grove's actual contract damages from that breach was the amount of the agreed fee, $9984. We overrule Sunbelt's second issue.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In its third issue, Sunbelt contends the trial court erred by not entering findings of fact and conclusions of law as requested. Sunbelt requests that we abate the appeal and order the trial court to file findings of fact and conclusions of law. Although this was a jury trial, Sunbelt asserts" the issue of the liquidated damages provision being valid or an unenforceable penalty is to be determined by the Trial Court." Sunbelt argues that because the issue is to be determined by the trial court, it is entitled to findings of fact and conclusions of law on the issue.
As discussed above, the employee-placement fee was, as a matter of law, compensation and not liquidated damages. Therefore, the basis for Sunbelt's argument, that the fee was liquidated damages, is erroneous. Accordingly, no fact finding was necessary to the disposition of the appeal, and abatement is not necessary. See $217,590.00 in U.S. Currency v. State, 54 S.W.3d 918, 921 (Tex.App.-Corpus Christi 2001, no pet.) (abatement necessary when findings and conclusions are necessary to disposition of appeal). We overrule Sunbelt's third issue.
We affirm the trial court's judgment.