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No. 80,996








1. The general rules of construction applicable to the interpretation of written contracts are stated and applied.

2. Under the facts of this case, fault of an employee as used in the underlying referral agreement is interpreted to mean the breach of a legal or contractual duty.

Appeal from Saline District Court; GEORGE R. ROBERTSON, judge. Opinion filed April 30, 1999. Reversed and remanded with directions.

Dan M. McCulley, of Harper, Hornbaker, Altenhofen & Opat, Chartered Lawyers, of Junction City, for appellant.

Larry G. Michel, of Kennedy, Berkley, Yarnevich & Williamson, Chartered, of Salina, for appellee.

Before MARQUARDT, P.J., KNUDSON, J., and DAVID W. KENNEDY, District Judge, assigned.

KNUDSON, J.: Donald D. Jayne appeals from the judgment of the district court concluding that Kennedy & Coe, L.L.C., did not breach its contractual obligation owed to Jayne.

Jayne is the successor in interest to an employment procurement contract entered into between Key Employment Services (Key) and Kennedy & Coe (employer). As a result of Key's efforts, Robert Keck was hired by the employer but never actually went to work for the firm. Jayne contends entitlement to a fee under the contract; the employer contends no fee is owed.

The underlying facts are not in dispute. After Key located and referred Keck to the employer, he was hired. However, within 30 days and before Keck actually started to work, the employer's needs were altered, with no alternative position acceptable to Keck. The employer and Keck mutually agreed to terminate the employment relationship, and Keck was provided with a $10,000 severance package. Thus, the question: Under these circumstances is Key entitled to its referral fee?

The schedule of charges in the referral contract state, in material part:

"1. The charge for our services is earned when an individual referred by us accepts an offer of employment by an employer . . . within one (1) year from date of last referral or discussion of the individual.

. . . .

"4. Our service charge is due and payable when earned. . . .

"5. GUARANTEES: Placements are guaranteed under the following circumstances: 1) Termination is the fault of the employee, 2) The account is paid per the invoice terms, and 3) Strict adherence to this entire agreement.

A. Placements are guaranteed for a one hundred and eighty (180) calendar day period after employment commences. Under the conditions of the guarantee the service charge will be .56% of the original service charge for each calendar day of employment.

B. There is no charge when termination occurs within the first thirty (30) calendar days of employment."

The issues were submitted by a stipulation of facts and documentary evidence. Jayne argued under the written terms of the referral agreement that a commission of $14,850 was earned when Keck accepted the employer's offer of employment. The district court found the mutual dissolution of the employment relationship to be a termination within the meaning of paragraph 5B of the referral agreement and, therefore, no charge was owed. In its order denying Jayne's claim, the district court entered two findings crucial to the issue now on appeal:

"It matters not whether the dissolution of employment was the fault of the candidate or the defendant, it was mutual. Therefore, the candidate participated in the termination. Such is deemed 'fault' by this Court.

"The contract as drafted by the plaintiff specifies that if termination (no caveat is specified) occurs within thirty days then there is no fee to the plaintiff."

On appeal, Jayne contends the above findings are inconsistent with the terms and provisions of the referral agreement and the district court's judgment should be reversed.

Our review is unlimited. See Ekan Properties v. Wilhm, 262 Kan. 495, 503, 939 P.2d 918 (1997); TMG Life Ins. Co. v. Ashner, 21 Kan. App. 2d 234, Syl. ¶ 1, 898 P.2d 1145 (1995).

We begin our analysis by stating general rules of construction applicable when interpreting written contracts. A contract that is plain and unambiguous on its face must be enforced according to its own terms. Wagnon v. Slawson Exploration Co., 255 Kan. 500, 511, 874 P.2d 659 (1994). An ambiguity does not appear until the application of rules of interpretation to the instrument leaves it genuinely uncertain which of two meanings is the proper meaning. City of Manhattan v. Galbraith, 24 Kan. App. 2d 327, 332, 945 P.2d 10 (1997). Where the contract is ambiguous or uncertain, intent of the parties is ascertained by considering all language employed, circumstances existing when the agreement was made, the object sought to be obtained, and other circumstances which tend to clarify the intention of the parties. Universal Motor Fuels, Inc. v. Johnston, 260 Kan. 58, 63, 917 P.2d 877 (1996). If an ambiguity exists, it is construed against the drafter. Weber v. Tillman, 259 Kan. 457, 476, 913 P.2d 84 (1996).

We are unable to accept the district court's interpretation and application of employee fault under paragraph 5 of the referral agreement to include acceptance of a severance package by an employee jilted before reaching the altar. Fault is the breach of a legal or contractual duty. We fail to discern any fault by Keck. The employer made the unilateral decision to terminate Keck. Understandably, the employer offered and Keck accepted a severance package to go quietly into the night. We agree that "fault of the employee" as provided in the referral agreement is unambiguous, but we conclude that the district court's finding that the termination was the fault of Keck is not supported by the evidence.

We also do not agree with the district court's finding that paragraph 5B of the referral agreement precludes recovery by Jayne. Paragraph 5B is structurally subordinate to the general conditions in paragraph 5 and should not be interpreted in isolation. See City of Manhattan v. Galbraith, 24 Kan. App. 2d at 332. We believe the district court erroneously interpreted paragraph 5B as a free-standing provision unrelated to the general conditions in paragraph 5. "Termination" can only be interpreted within the context of the entire paragraph requiring that termination must be the fault of the employee, a condition we have already noted was not met.

Jayne has requested an award of attorney fees and court costs. The referral contract states: "Delinquent accounts are subject to paying finance charges, and all collection charges including reasonable attorney fees and court costs." We conclude Jayne should be granted an allowance of $3,150 for attorney fees incurred on appeal and $149.16 for court costs.

The judgment of the district court is reversed; a money judgment is to be granted to Jayne for $14,850 plus interest at the contract rate of 21% per annum from and after September 6, 1994 until paid; judgment is granted to Jayne for attorney fees and costs incurred on appeal totaling $3,299.16; and this case is remanded to the district court for a determination of attorney fees and costs to be awarded Jayne for prosecution of this action before the district court.

MARQUARDT, J., dissenting: I respectfully dissent from the majority's holding.


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Updated: April 30, 1999.
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