Montgomery v. Byrd (Tex.App.- Houston [14th Dist.] Aug. 25, 2009)(Seymore)
(breach of contract and counterclaim, offsetting claims after dissolution of business relationship with
settlement and release; employees brought lawsuit that entailed liability for both parties)
(
directed verdict should have been granted, only attorney's fees issue for the jury to decide)
REVERSED AND REMANDED: Opinion by
Justice Seymore    
Before Chief Justice Hedges, Justices Anderson and Seymore  
14-07-01015-CV  Chester Montgomery v. Richard Byrd   
Appeal from County Civil Court at Law No 4 of Harris County
Trial Court Judge:
Roberta Anne Lloyd
                                                                                                                                        
M E M O R A N D U M  O P I N I O N

Appellant, Chester Montgomery, sued appellee, Richard Byrd, for breach of contract, and Byrd
asserted a counterclaim for breach of contract.  Pursuant to the jury's findings, the trial court signed
a judgment in favor of Byrd.  The trial court subsequently signed an “Order Granting Plaintiff's
Motion to Reconsider Defendant's Motion to Enter Judgment and Plaintiff's Motion for Judgment NOV
and Plaintiff's Motion to Establish the Amount of Supersedeas Bond and Order for Deposit in Lieu of
Bond," modifying the amount of damages awarded in the previously-signed judgment.  In a single
issue encompassing several alternative arguments, Montgomery contends the trial court erred by
denying his motion for directed verdict or the evidence is legally and factually insufficient to support
the jury's verdict.  

We conclude the trial court erred by denying Montgomery's motion for directed verdict.  Accordingly,
we reverse the trial court's judgment, as modified by the subsequent order, and remand with
instructions that the trial court render judgment in favor of Montgomery for $24,103.95, plus
reasonable attorney's fees and pre-judgment and post-judgment interest.[1]

I.  Background

Montgomery owns several machine shops, and Byrd is a machinist.  They have known each other
for many years.  In 1989, Montgomery started a new shop called “USA Precision Machining
Company" (“the company”).  He hired Byrd to operate the company so that Montgomery could
devote his attention to another shop.  Byrd held no ownership interest but received a third of the
company's net profits as compensation.  Byrd held this position for ten years.  He was responsible
for the operation of the company, including hiring employees, negotiating the terms of their
employment, and overseeing payment of their salaries.

In 1999, the parties' relationship soured because Byrd believed he had not been fully compensated
as agreed.  On September 10, 1999, the parties signed a “Full and Final Settlement and Release
Agreement and Confidentiality Agreement” (“the agreement") to resolve the dispute and dissolve
their relationship.  Under the agreement, Montgomery promised to pay Byrd $330,000 through an
initial payment of $70,000 followed by 260 weekly installments of $1,000.  Montgomery
contemporaneously executed a promissory note and security agreement.

Montgomery made all required payments until May 2003, when he ceased doing so although
$60,000 remained due.  At that point, Montgomery contended he did not owe Byrd any more money
for the reason described below.

Article III of the agreement, entitled “Contractual Recitals and Statement of Purpose," includes a
Section D, entitled “Mutual Release."  The first three paragraphs of Section D contain broad
language in which the parties essentially release each other from claims arising out of their dispute.  
Paragraph 4 of Section D (hereinafter “Paragraph D4") then provides as follows:

Anything herein to the contrary notwithstanding, each party to this Agreement shall be responsible
and liable for his pro rata share (i.e., Montgomery, 2/3 and Byrd, 1/3) of any and all costs, expenses
(including attorneys' fees) or damages resulting from the claims, actions, or causes of action or
damages of whatsoever kind or nature of third parties, not specifically released hereunder, arising
out of the conduct of the business known as USA Precision Machining Co. at any time prior to the
date hereof, whenever such claim is made.

When the parties executed the agreement, a former employee, William Marshall, had already sued
the company, claiming he was not properly compensated during his employment.  Although Byrd had
been responsible for hiring and paying Marshall, Montgomery was effectively the only person sued
because he was sole owner of the company.  A jury eventually awarded Marshall damages, plus
interest and attorney's fees.  The Marshall suit was concluded in May 2003 following Montgomery's
unsuccessful appeal to the Texas Supreme Court.  Montgomery paid a total of $212,375.34 with
respect to the Marshall suit, including his own attorney's fees to defend the case.  Relying on
Paragraph D4, Montgomery concluded Byrd was responsible for 1/3 of this amount, which 1/3
portion exceeded the $60,000 still due to Byrd under the agreement.  As Montgomery explained at
trial, at that point, Byrd owed him more money than he owed Byrd.

In addition, after the agreement was executed, Albert Hansen and three others, all former employees
of the company who also claimed they had not been properly compensated, filed suit against
Montgomery and the company.  Montgomery successfully defended the Hansen suit, which was
concluded in mid-2004, but he incurred $39,936.50 in attorney's fees.  At that point, Montgomery
calculated that Byrd owed him $24,103.95, which equaled $84,103.95 (1/3 of the total payments of
$252,311.84 on the Marshall and Hansen suits) minus the $60,000 balance due Byrd under the
agreement. Byrd has refused to reimburse Montgomery for 1/3 of the Marshall and Hansen
payments.

Montgomery sued Byrd for breach of the agreement, seeking the $24,103.95, plus attorney's fees
and interest.[2]  Byrd counterclaimed, also alleging breach of the agreement  and seeking the
$60,000 balance due thereunder, plus attorney's fees and interest.

Trial was to a jury.  After the parties rested, Montgomery orally moved for a directed verdict,
supported by a written brief, but the court denied the motion.  Over Montgomery's objection, the trial
court submitted jury questions regarding both parties' alleged breach.  The jury found that Byrd did
not breach the agreement.  Therefore, pursuant to instructions in the charge, the jury did not
answer questions regarding whether Byrd's breach was excused, Montgomery's damages resulting
from Byrd's breach, and Montgomery's attorney's fees.  The jury also found that Montgomery
breached the agreement, his failure to comply was not excused, Byrd incurred damages of $80,000,
and Byrd's reasonable attorney's fees were $15,000.  Montgomery filed a motion for judgment
notwithstanding the verdict and motion to disregard the jury's answers, which the trial court denied.

On October 25, 2007, the trial court signed a judgment, ruling that Montgomery take nothing and
awarding Byrd $80,000 in damages, $15,000 for attorney's fees, and, pursuant to the parties'
stipulation, conditional attorney's fees of $5,000 and $2,500 in the event of appeals to the Court of
Appeals and Texas Supreme Court, respectively, and pre-judgment and post-judgment interest.  
Montgomery subsequently filed a motion for new trial.  The record indicates the trial court denied the
motion on  December 18, 2007, although the order is not included in the record.  However, on that
same day, the trial court did sign an “Order Granting Plaintiff's Motion to Reconsider Defendant's
Motion to Enter Judgment and Plaintiff's Motion for Judgment NOV and Plaintiff's Motion to Establish
the Amount of Supersedeas Bond and Order for Deposit in Lieu of Bond," modifying the judgment to
award damages of $60,000, instead of $80,000, in accordance with the evidence presented at trial.  
Montgomery appeals from the October 25, 2007 judgment, as modified by the December 18, 2007
order.

II.  Issues and Standard of Review

Montgomery presents one stated issue which encompasses several alternative sub-issues.  His
overarching contention is that he proved as a matter of law the agreement requires Byrd to
reimburse Montgomery for 1/3 of the Marshall and Hansen payments.  As Montgomery asserts, Byrd
did not dispute the evidence showing 1/3 of the Marshall and Hansen payments equaled $84,103.95
or that Byrd refused to pay this amount.  Moreover, Montgomery did not dispute that he owes Byrd
$60,000 under the agreement.  Montgomery argues that, therefore, the trial court erred by denying
his motion for directed verdict and submitting any jury issues because the $60,000 he owes to Byrd
must be offset by $84,103.95, thereby mandating judgment for $24,103.95, plus attorney's fees, in
Montgomery's favor.

In response, Byrd challenges Montgomery's interpretation of the agreement, arguing it imposes no
obligation on Byrd to bear a portion of the Marshall and Hansen payments.  Alternatively, Byrd
suggests we should affirm the judgment based on his affirmative defenses of waiver and failure to
mitigate even if we interpret the agreement in favor of Montgomery.

An appeal from the denial of a motion for directed verdict is in essence a challenge to the legal
sufficiency of the evidence.  Solares v. Solares, 232 S.W.3d 873, 878 (Tex. App.-Dallas 2007, no
pet.).  An appellant presenting a legal-sufficiency challenge on an issue on which he bore the
burden of proof must demonstrate the evidence conclusively established all vital facts to support the
issue.  Id. at 878-79.  In particular, a directed verdict is proper for a plaintiff if the evidence
conclusively proves facts that establish his right to recovery.  Lemaster v. Top Level Printing Ink,
Inc., 136 S.W.3d 745, 747 (Tex. App.-Dallas 2004, no pet.); see Sherman v. Elkowitz, 130 S.W.3d
316, 319 (Tex. App.-Houston [14th Dist.] 2004, no pet.) (recognizing that directed verdict is proper if,
among other circumstances, the evidence conclusively proves a fact that establishes a party's right
to judgment as a matter of law).  Evidence is conclusive “only if reasonable people could not differ in
their conclusions, a matter that depends on the facts of each case."  City of Keller v. Wilson, 168 S.
W.3d 802, 816 (Tex. 2005).  We will credit the favorable evidence if reasonable jurors could and
disregard the contrary evidence unless reasonable jurors could not.  Id. at 827.

As explained below, we conclude the trial court erred by denying Montgomery's motion for directed
verdict because he conclusively proved facts establishing his right to recovery.[3]

III.  Interpretation of Paragraph D4

In construing a contract, our primary goal is to ascertain and give effect to the parties' intent as
expressed in the contract.  Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345
(Tex. 2006).   Contract terms are given their plain, ordinary, and generally accepted meanings
unless the contract itself shows them to be used in a technical or different sense.  Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).  The more specific provisions of a
contract will control over the general.  Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133B34 (Tex.
1994).  Unless the contract is ambiguous, a court will construe it as a matter of law. Am. Mfrs. Mut.
Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003); Coker v. Coker, 650 S.W.2d 391, 393 (Tex.
1983).

At first glance, Paragraph D4 seems to unambiguously require Byrd to reimburse Montgomery for
1/3 of the Marshall and Hansen payments because the evidence established, and Byrd did not
dispute, that the Marshall and Hansen claims arose out of the conduct of USA Precision Machining
Co. which occurred before the agreement was executed.  

Further, it is immaterial some of the claims were asserted after the agreement was executed
because Paragraph D4 includes claims made after that date as long as the conduct occurred before
that date.  Moreover, the Marshall and Hansen claims were not specifically released under any other
part of the agreement.  Finally, it is insignificant the claimants sued only Montgomery/the company
because Paragraph D4 does not limit Byrd's obligation only to causes of action in which he was
named as a party.

Nonetheless, Byrd contends the parties' intent must be determined from the whole agreement,
rather than an isolated provision.  He argues Paragraph D4 does not encompass claims brought by
former employees, such as the Marshall and Hansen claimants, and the whole agreement
demonstrates Montgomery and Byrd intended to release each other relative to such claims.

A.        Inclusion of the Marshall and Hansen Claims In Paragraph D4

In support of his position that Paragraph D4 does not encompass claims of former employees, Byrd
cites several terms at the outset of the agreement.  In particular, Article I is entitled “DEFINITIONS,"
and Article II is entitled, “PARTIES."

Article II lists the “PARTIES " as:

1.         Richard Byrd

2.         Richard Byrd Entities and/or

3.         Richard Byrd Derivative Claimants

4.         Chester Montgomery

5.         Chester Montgomery Entities and/or

6.         Chester Montgomery Derivative Claimants.

Article I contains various definitions including the following:

“Chester Montgomery" shall mean those persons and/or entities (whether now in existence or not),
and which are or were formerly owned or controlled, in whole or in part, directly or indirectly, by
Chester Montgomery, (as defined herein); and their respective entities, employers, employees,
directors, shareholders, officers, assigns, predecessors, successors, attorneys, representatives or
agent of such person and/or entities.

“Chester Montgomery Derivative Claimants" shall mean any person or entity acting by, through, or
under Chester Montgomery (including by reason of marriage or family relationships, any such
person), or any of the Chester Montgomery Entities hereinabove defined.

“Representatives" of a person or entity shall mean and include all of that person's or entity's past or
present principals, agents, servants, employees, attorneys, consultants, experts, partners (both
general and/or limited), equity participants, officers, directors, shareholders, parent companies,
subsidiaries, affiliates, predecessors, successors, assigns, estates, beneficiaries, heirs, devisees,
legatees, trustees, and personal representatives.

(emphasis added).  Article I also includes substantively identical definitions for “Richard Byrd" and
“Richard Byrd Derivative Claimants."

According to Byrd, under these terms, “Chester Montgomery" as a party to the agreement includes
former employees of the company; therefore, former employees cannot be considered “third parties"
under Paragraph D4, which requires Byrd to pay 1/3 of claims asserted by “third parties."

We recognize that, under rules of contract construction, to discern the parties' intent, we ordinarily
examine the entire contract in an effort to harmonize and give effect to all provisions so that none will
be rendered meaningless.  Seagull Energy, 207 S.W.3d at 345;  Schaefer, 124 S.W.3d at 157.  
Further, generally no single provision taken alone will be given controlling effect; rather, all
provisions must be considered with reference to the whole instrument.  Seagull Energy, 207 S.W.3d
at 345.

However, as Montgomery emphasizes, Paragraph D4 begins with the language, “[a]nything herein to
the contrary notwithstanding."  Construing similar language, our court has recognized that, when
parties use the clause “notwithstanding anything to the contrary contained herein" in a paragraph of
their contract, they contemplate the possibility other parts of the contract may conflict with this
paragraph and agree this paragraph must be given effect regardless of any contrary provisions.  
Helmerich & Payne Int'l Drilling Co. v. Swift Energy Co., 180 S.W.3d 635, 643 (Tex. App.-Houston
[14th Dist.] 2005, no pet.); see N.M. Uranium, Inc. v. Moser, 587 S.W.2d 809, 814-15 (Tex. Civ. App.-
Corpus Christi 1979, writ ref'd n.r.e.) (stating that lease provision containing introductory clause
“Any provision herein to the contrary notwithstanding" had priority over conflicting provision).

Montgomery argues that, under their common meanings, “Montgomery" and “Byrd" as used in
Paragraph D4 entail the individuals only, i.e., the two persons who signed the agreement; therefore,
any other provisions defining Chester Montgomery and Richard Byrd more broadly conflict with
Paragraph D4 and must be disregarded.  We agree.

We first note Byrd did not raise at trial the contention he emphasizes on appeal.  In fact, in response
to questioning by Montgomery's attorney, Byrd seemed to admit that third parties as used in
Paragraph D4 describes the Marshall and Hansen claimants.[4]  Regardless, the scope of
Paragraph D4 is a question of law for the court as an issue of contract interpretation.

Further, at trial, Byrd apparently maintained that, despite inclusion of Paragraph D4, he was
released from any claims whatsoever arising out of his and Montgomery's relationship.  At one point
on appeal, Byrd seems to re-urge this position despite primarily suggesting that Paragraph D4
imposes some obligation on Byrd relative to claims of third-parties but former employees are not
encompassed therein.  Clearly, Montgomery and Byrd intended for Byrd to assume an obligation for
payment of some claims or they would not have included Paragraph D4 and provided it was effective
despite any conflicting provisions.  Accordingly, we will determine whether Paragraph D4
encompasses claims of former employees.

On one hand, the definitions at the outset of the agreement are indeed quite broad and indicate that
“PARTIES" includes Montgomery's former employees.  Specifically, the definition of “Chester
Montgomery" includes entities he owned and employees or representatives of those entities.  
Although “employees" of those entities connotes current employees at the time the agreement was
executed, “representatives" seems to include past and present employees.[5]  Moreover, we should
presume these broad definitions were included in the agreement for some purpose.  See Seagull
Energy, 207 S.W.3d at 345.

On the other hand, the numerous persons and entities included within these broad definitions clearly
cannot be parties to the agreement for all purposes because they did not sign it and are not bound
thereby.  Specifically, these broad definitions cannot possibly be applied to Paragraph D4.

Unlike many portions of the agreement which set forth release language, Paragraph D4 imposes an
affirmative obligation on the parties - “Montgomery" and “Byrd" - to pay a portion of third-party
claims.  Under Byrd's reasoning, any of the numerous persons or entities included in the broad
definitions of Montgomery and Byrd would be bound by this affirmative obligation because they are
parties to the agreement.  Obviously, these persons cannot be bound by such an obligation in an
agreement they did not sign. For example, the broad definitions include past or present “experts."  
Montgomery and Byrd cannot have intended that their experts are required under Paragraph D4 to
pay certain claims when they did not sign the agreement.

Therefore, applying the broad definitions of the parties outlined at the outset of the agreement to
Paragraph D4 would lead to an absurd result.  See Ill. Tool Works, Inc. v. Harris, 194 S.W.3d 529,
533 (Tex. App.-Houston [14th Dist.] 2006, no pet.) (stating a court will not construe contract to
produce absurd result).[6]  Instead, the parties for purposes of Paragraph D4 can only mean
Montgomery and Byrd individually.  Consequently, the provisions defining Montgomery and Byrd
more broadly conflict with Paragraph D4 and cannot be applied to that paragraph.  Therefore, the
Marshall and Hansen claimants are third parties for purposes of Paragraph D4.

B.        Other Release Provisions

Byrd further cites several other provisions in Article III of the agreement that allegedly release him
from any responsibility relative to claims of former employees.  Specifically, he relies on Paragraphs
A4 and B2, which provide respectively, in pertinent part:

Chester Montgomery, Chester Montgomery Entities and/or Chester Montgomery Derivative
Claimants jointly and severally warrant and represent that there are no persons and/or entities other
than the persons and entities listed herein which now, or formerly were, owned or controlled (in
whole or in part, either directly or indirectly) by any of them which have, have had, or could have any
actual or potential claim, demand, suit, cause of action, charge, or grievance, of any kind or
character against Richard Byrd, or any of them, and/or any of the Richard Byrd Entities and/or
Richard Byrd

Derivative Claimants.

Chester Montgomery, Chester Montgomery Entities and/or Chester Montgomery Derivative
Claimants jointly and severally warrant and represent that there is no actual or potential claim,
demand, suit, cause of action, charge or grievance, which is not subject to and fully released by the
Settlement Agreement, except for matters as may be expressly excluded in the Settlement
Agreement, held by any person or entity against Richard Byrd, and/or any of the respective Richard
Byrd Entities and/or Richard Byrd Derivative Claimants, whether unfounded or not, that concerns or
relates in any way, directly or indirectly, to the Dispute.

Byrd argues that, reading the above-quoted paragraphs together, Montgomery warranted there are
no actual or potential claims that are not fully released under the agreement.

Byrd also relies on Paragraph D3, which immediately precedes Paragraph D4 and provides:

Chester Montgomery, the Chester Montgomery Entities and/or Chester Montgomery Derivative
Claimants, jointly and severally, do hereby fully and finally RELEASE, ACQUIT, AND FOREVER
DISCHARGE Richard Byrd and the respective Richard Byrd Entities and/or Richard Byrd Derivative
Claimants (and their representatives, as the same are hereinabove defined), and Chester
Montgomery and Chester Montgomery Entities and/or Chester Montgomery Derivative Claimants,
further, jointly and severally, covenant not to assert in any manner against any of such persons or
entities released hereby, any and all actual or potential claims held by Chester Montgomery,
Chester Montgomery Entities and/or Chester Montgomery Derivative Claimants against Richard
Byrd, and/or Richard Byrd Entities and Richard Byrd Derivative Claimants and/or any suits,
demands, causes of action, charges or grievances of any kind or character whatsoever, heretofore
or hereafter accruing for or because of any matter done, omitted or suffered to be done by any such
party hereto prior to and including the date hereof, and in any manner (whether directly or indirectly)
arising from or related to the Dispute. (emphasis in original).  Byrd argues that, under this provision,
Montgomery directly releases Byrd from claims of former employees.

We do not necessarily agree that Paragraphs A4, B2, and D3 entail a release of Byrd with respect to
claims of former employees.  Regardless, even if these provisions do entail such a release, they
conflict with Paragraph D4.  In light of the introductory language in Paragraph D4, it is effective
despite any other conflicting release provisions.[7]  Accordingly, Montgomery proved as a matter of
law that Paragraph D4 requires Byrd to reimburse Montgomery for 1/3 of the Marshall and Hansen
payments.

IV.  Byrd's Affirmative Defenses

Byrd suggests we should affirm the judgment based on his affirmative defenses of waiver and failure
to mitigate even if we interpret the agreement in favor of Montgomery.

A.        Waiver

Byrd pleaded waiver and requested a jury question on this defense, which the trial court refused to
submit.  A judgment “cannot be permitted to stand" when the trial court denies proper submission of
a viable affirmative defense properly requested as part of the charge and timely raised by the
pleadings and evidence.   Exxon Corp. v. Perez, 842 S.W.2d 629, 631 (Tex. 1992); see 4901 Main,
Inc. v. TAS Auto., Inc., 187 S.W.3d 627, 632 (Tex. App.-Houston [14th Dist.] 2006, no pet.).  

However, Byrd does not expressly raise by cross-point, or otherwise challenge on appeal, the trial
court's refusal to submit a question on waiver.  He does not request that we remand for a trial on
waiver if we interpret the agreement in Montgomery's favor.  Rather, Byrd suggests that we
nonetheless affirm the judgment because waiver was conclusively established.  Nevertheless, we
conclude that Byrd did not present evidence of waiver justifying submission of a jury question, much
less conclusively establish this defense.

Waiver is the intentional relinquishment of a known right or intentional conduct inconsistent with
claiming that right.  4901 Main, Inc., 187 S.W.3d at 632.  Byrd argues that Montgomery waived any
right to reimbursement for Byrd's portion of the Marshall and Hansen payments because
Montgomery made the weekly installments owed to Byrd under the agreement for over four years
before offsetting any of Montgomery's Marshall and Hansen payments.

However, Montgomery testified he did not seek reimbursement from Byrd during this period because
“[a]s long as I owe him more money than he owes me, I'm not going to bill him for what he owes me."  
He explained that he quit paying Byrd once the Marshall suit was concluded and he finally tallied all
payments on that suit and determined Byrd owed him more than he owed Byrd.  Montgomery
indicated in his testimony that, during the four-year period, he intended to eventually seek
reimbursement from Byrd for 1/3 of the Marshall and Hansen payments.  Consequently, in light of
Montgomery's subjective explanation, the four-year delay was not evidence he intentionally
relinquished his right to reimbursement or intentionally engaged in conduct inconsistent with claiming
that right. See id.

In fact, at trial, Byrd agreed that, at some time during the four-year period, Montgomery “told me he
was carrying a lot of expenses and he wanted me to help him with them, but I didn't agree to help
with them."  Byrd also admitted Montgomery told him that, once the Hansen suit was concluded, he
would be able to inform Byrd of the exact amount Byrd owed on the expenses.  We recognize Byrd
posited he had no obligation to pay any of the expenses, but this testimony at least negates his
contention that Montgomery intended to waive his right to recovery.       

B.        Mitigation of Damages

Byrd also contends there was sufficient evidence Montgomery failed to mitigate damages.  Byrd
pleaded this defense and requested a jury instruction or question, which the trial court refused.  
Again, Byrd does not challenge the trial court's refusal to submit this defense and request we
reverse for a new trial on the amount of Montgomery's damages even if we interpret the agreement
in Montgomery's favor.  Instead, Byrd apparently maintains this defense was conclusively
established and precluded any recovery from Byrd.  Nevertheless, we conclude Byrd did not present
any evidence on failure to mitigate, much less conclusively establish this defense.

The mitigation-of-damages doctrine requires an injured party, following a breach, to exercise
reasonable care to minimize his damages if it can be done with slight expense and reasonable
effort.  Allen v. Am. Gen. Fin., Inc., 251 S.W.3d 676, 686 (Tex. App.-San Antonio 2007, pet. granted)
(citing Great Am. Ins. Co. v. N. Austin Mun. Util. Dist. No. 1, 908 S.W.2d 415, 426 (Tex. 1995));  
Cotten v. Weatherford Bancshares, Inc., 187 S.W.3d 687, 708 (Tex. App.-Fort Worth 2006, pet.
denied).  Byrd cites Montgomery's testimony that, if he had paid the Marshall judgment when
rendered instead of pursuing appeals, his expenses would have been less and he would have still
owed money to Byrd under the agreement.  We note that Byrd testified he wanted Montgomery to
defend both employee suits because Byrd strongly believed he had committed no wrongdoing.  
Nonetheless, Montgomery incurred all of the Marshall expenses before he demanded
reimbursement from Byrd.  It was Byrd's subsequent refusal to pay a portion of the expenses that
constituted breach of the agreement.  Therefore, Montgomery's decision to appeal the Marshall
judgment did not constitute a failure to mitigate damages resulting from Byrd's breach.

Moreover, Paragraph D4 simply requires Byrd to pay a sum certain -1/3 of the Marshall and Hansen
claims - without any condition based on the manner in which Montgomery defended the claims.  
Consequently, Montgomery's vigorous defense of the separate Marshall suit was not evidence of
failure to mitigate damages in the present case.

V.  Conclusion

Montgomery conclusively established that Byrd was required to pay Montgomery $84,103.95 under
Paragraph D4, Byrd breached the agreement by refusing to do so, and Montgomery owed Byrd
$60,000 under the agreement.  Therefore, the trial court erred by denying Montgomery's request for
a directed verdict because he proved entitlement to judgment for $24,103.95 as a matter of law.  

The only question that should have been submitted to the jury was the amount of Montgomery's
reasonable attorney's fees, which he may recover as prevailing party on a breach-of-contract
action.  See Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8) (Vernon 2008).  This question was
submitted but not answered because a response was conditioned on a finding that Byrd breached
the agreement.  Therefore, further proceedings are necessary to determine the amount of
Montgomery's reasonable attorney's fees.  Accordingly, we sustain Montgomery's sole issue.  We
reverse the trial court's judgment, as modified by its subsequent order, and remand with instructions
that the trial court render judgment in favor of Montgomery for $24,103.95, plus reasonable
attorney's fees and pre-judgment and post-judgment interest.

/s/        
Charles W. Seymore

Justice

Panel consists of Chief Justice Hedges and Justices Anderson and Seymore.

[1]  Because all dispositive issues are settled in law, we issue a memorandum opinion.  See Tex. R.
App. P. 47.4.

[2]  Montgomery also pleaded unjust enrichment, fraud, and negligent misrepresentation, but only
breach of contract was ultimately submitted to the jury.

[3]  Alternatively, Montgomery contends the evidence is legally and factually insufficient to support
the jury's finding that Byrd did not breach the agreement and its failure to answers the questions
concerning Byrd's excuse defense and Montgomery's damages and attorney's fees.  Montgomery
contends these questions should have been answered favorably to him because, under his
interpretation of the agreement, Byrd failed to comply as a matter of law and owed Montgomery
$84,103.95.  Additionally, Montgomery asserts the evidence is legally and factually insufficient to
support all the jury's answers in favor of Byrd  because Byrd had no right to recover damages and
attorney's fees once the $60,000 Montgomery owed Byrd was offset by the $84,103.95.  We agree
the evidence is legally insufficient to support all these answers and failures to answer because a
challenge to denial of a directed verdict is a legal-sufficiency challenge.  However, we resolve the
appeal by concluding the trial court should have granted Montgomery's motion for directed verdict
and not submitted these jury questions in the first place, except for the issue regarding
Montgomery's attorney's fees.

[4]           This exchange occurred as follows:

Q.         And third parties.  Now, that means, not you and not Mr. Montgomery, but parties who are
not parties to this agreement?  Third parties?  Do you understand that?
A.         Yes, Sir.
. . .
Q.         Okay.  I'm just trying to get you to identify by third parties, that would be people like Mr.
Marshall?  Or someone who is not a party to this agreement?

A.         Yes, sir.

[5]  In the clause defining  “Representatives" to include “all of that person's or entity's past or
present principals, agents, servants, employees  . . . ," (emphasis added), it is unclear whether “past
or present" applies only to “principals," as the word immediately following “past or present," or all
persons and entities listed after “past or present," which would include employees.  Because we
conclude former employees were third-parties for purposes of Paragraph D4, we will assume,
without deciding, that they were included in this definition.

[6]  As a further example, as we have mentioned, the agreement requires Montgomery to pay
$330,000 to Byrd in various installments.  All the persons and entities included within the broad
definitions of Montgomery at the outset of the agreement cannot be obligated to pay this sum to
Byrd when they did not sign the agreement.  Although this provision requiring payment is not in
dispute, it does simply illustrate why the broad definition of the parties cannot possibly apply to all
portions of the agreement.

[7]  Arguably, these release provisions relied on by Byrd refer to release of Byrd for only claims
arising out of “the Dispute."  At the outset of the agreement, “the Dispute" is defined as “any
disagreement as to the ownership of the business known as USA Precision Machining Co. and the
assets utilized in carrying out or furtherance of the business," which does not seem to encompass
claims by former employees alleging they were improperly compensated during their tenure with the
company.  In fact, various release provisions  indicate the broad definitions of the parties at the
outset of the agreement were included to ensure that all persons and entities specified therein were
released from any claims related to “the Dispute" between Montgomery or Byrd.  Moreover, the initial
recital in Section D1 of the “Mutual Release" Section seems to confirm this intent:

It is the intent of the parties hereto that Richard Byrd and Chester Montgomery execute the
agreement and by executing this Settlement Agreement shall, with their respective Entities and
Derivative Claimants, by reason of such execution, be entirely free of any and all actual or potential
claims, suits, demands, causes of action, charges or grievances of any kind or character regardless
of the nature or extent of the same, arising out of this Dispute.

However, we need not decide whether Byrd is otherwise released under the cited provisions
because Paragraph D4 supercedes these other provisions.