Unaware that the law prohibited the creation of a professional association between doctors and non-doctors, the plaintiff, Andrew Small (a medical doctor) formed a joint practice with the Parker brothers (two chiropractors). The association operated for several years, but ended in 2003. After the relationship ended, Small sought to establish that he should have been paid more under the the entity’s articles or association, so he brought suit. The Court of Appeals, however, rejected Small’s claim because, under Texas law, it is illegal for a doctor to jointly own a professional association with non-doctors. Accordingly, the Court voided the contract on the ground that “a contract to do a thing which cannot be performed without violation of the law is void.”
Category Archives: Contract
The parties entered an operating agreement, which contained a forum selection clause that required them to submit to jurisdiction in Oregon. CKH initiated litigation related to the operating agreement in Texas. The trial court granted appellees motion to dismiss on venue finding that CHK agreed to venue in Oregon, and CKH appealed.
The Court of Appeals affirmed for three reasons. First, the Court found that appellees did not waive the court’s jurisdiction to rule on its motion to dismiss based on a forum selection clause simply because the trial court denied their special appearance. Second, the Court held that whether CKH’s claims are subject to arbitration is irrelevant to the forum selection clause. The operating agreement requires parties to submit to jurisdiction in Oregon “provided such claim is not required to be arbitrated.” CKH initiated a lawsuit rather than filing arbitration; the Court found such “action” to be controlled by the forum selection clause. Further, the parties agreed to arbitration in Oregon, which makes it clear that the parties envisioned all claims–whether brought before a court or an arbitration panel–be filed in Oregon. Third, the Court held that a non-signatory was entitled to rely on and enforce the forum selection clause because the claims against the non-signatory are substantially interdependent on the claims against the signatory.
Several landowners entered into an easement agreement with the City of Celina so the City could build a sewer to a local high school. Among other things, the City agreed to replace the top soil along the easement after the sewer was installed. When the original top soil was not replaced, the landowners sued for inverse condemnation. The Court of Appeals found that the agreement’s top soil provision was not intended to act as a condition subsequent. Because the takings claim was based on the landowners assertion that breach of a condition subsequent voided the easement, the Court found that the trial court erred in denying the City’s plea to the jurisdiction.
In 2008, Metroplex entered a mail processing agreement with Donnelley’s predecessor in interest Browne & Co under which Metroplex would sort mail for Browne’s Dallas facility customers. In 2009, Metroplex ceased its operations, and Browne filed suit against Metroplex seeking the return of money it had on deposit. The jury found in favor of Browne, and Metroplex appealed. The Court of Appeals affirmed the jury’s finding of breach of contract against Metroplex and its award of attorney’s fees. The Court, however, found no evidence to support piercing Metroplex’s corporate veil to hold its president personally liable. Accordingly, the Court reversed the trial court’s judgment to the extent it orders recovery against the president individually, and affirmed the trial court’s judgment in all other respects.
Jeffrey Bay sued Regions Bank for breaching an escrow agreement. According to Bay, Regions was to serve as escrow agent for his $500,000 investment and was only to carry out the investment if it received an opinion from counsel affirming that the described investment was either registered securities or exempt from registration. Regions argued that it did receive such a letter prior to releasing the funds, but the Court of Appeals held that the only letter it did receive describing the securities at issue did not provide the opinion required by the escrow agreement. Instead, the letter merely stated that the offering was “designed” to be exempt from securities registration. The Court thus held that Bay had offered sufficient evidence to show Regions breached the escrow agreement.
Majestic Cast, Inc. entered into a contract with ProCon Paving to serve as a subcontractor on the construction of a Montessori school. Citing numerous complaints, Majestic Cast terminated the contract and filed suit against “Majed Khalef d/b/a ProCon Paving and Construction, Inc.” for theft, conversion, breach of contract, and fraud. Majestic Cast’s posited that Khalaf was using ProCon’s corporate form as an empty shell to avoid liability, and that he should therefore be held personally liable as an alter ego of ProCon. The trial court granted traditional and no-evidence motions for summary judgment, and Majestic Cast appealed. The Court of Appeals reversed as to the claims for theft, conversion and fraud. Whereas Majestic Case had pleaded those tort claims against Khalaf individually, Khalaf had sought summary judgment only by arguing that Majestic Cast could not pierce the veil to hold him liable on ProCon’s contract. Because a corporate agent can be held liable for his own fraudulent or tortious acts even while acting within the scope of the agency, Khalaf was not entitled to summary judgment on the tort claims. As to Majestic Cast’s breach of contract claim, however, the Court held that there was no evidence to raise a fact issue on any theory for disregarding the corporate fiction in order to make Khalaf individually liable for breach of the Majestic Cast-ProCon contract. Thus, summary judgment was affirmed only as to the contract claim, with the tort claims remanded for further proceedings.
Majestic Cast, Inc. v. Khalaf, No. 05-12-00112-CV
Pursuant to a contract with Chapman Custom Homes, Duncan Plumbing installed the plumbing in a house Chapman was building in Frisco, Texas. But a year-and-a-half later, those pipes sprung a leak and damaged the house. The Court of Appeals, however, found that Chapman could not recover for negligence because the economic loss rule bars such a tort claim where a contract governs the parties’ relationship. The Court rejected Chapman’s argument that the economic loss rule only bars recovery for damages to the “plumbing system itself” (while its damages based on injuries to the entire home), because “the only duty [Chapman] alleged Dallas Plumbing breached was its contractual duty.”
The trial court granted summary judgment for approximately $30,000 in unpaid invoices under an “account stated” theory, as well as roughly $15,000 in attorneys fees. Pegasus Transportation Group v. CSX Transportation, No. 05-12-00465-CV (August 14, 2013, mem. op.) The Court of Appeals affirmed, reminding that “account stated” can allow recovery without an express contract when the parties have “a standard course of dealing . . . after the expiration of that written agreement.” The Court also gave no weight to a controverting affidavit on attorneys fees, noting that it “does not address what was described by [plaintiff’s] lawyer as the work that was done, what is customarily charged in similar cases, why the time expended was excessive to accomplish the work provided, or that the work performed was unnecessary.” (citing Cammack the Cook, LLC v. Eastburn, 296 S.W.3d 884, 895 (Tex. App.–Texarkana 2009, pet. denied)).
Except perhaps for emotional distress, lost profits continue to be one of the most difficult measures of damages to sustain on appeal. In this instance, Timothy Barton and two other individuals formed a corporation, JMJ Development, to develop resort properties in the Riviera Maya of Mexico. The company entered into non-binding letters of intent with both property owners and the owners of the W Hotel and St. Regis Hotel brands. Before those deals were completed, however, Barton formed a new corporation, JMJ Hospitality, and the record included evidence that he instructed the landowners to deal with the new company instead of JMJ Development. The jilted business associates sued for breach of fiduciary duty, breach of their shareholder agreement, tortious interference, and conspiracy. The jury returned a verdict of $7 million for past lost profits on the fiduciary duty claim and $3 million in future lost profits on the breach of contract claim.
The Court of Appeals reversed and rendered, concluding that there was insufficient evidence the original company ever had the ability to develop the properties in the first place. Although they had multiple letters of intent, the evidence showed those letters had expired of their own terms, and there had never been any binding contracts for the purchase or development of the properties. The meant there was no causation for the lost profits claimed by Barton’s former business owners. The plaintiffs also failed to account for subsequent events — namely, the economic recession that started after Barton formed his new company — and that failure rendered their lost profits model speculative and not reasonably certain. The plaintiffs also confused projected items of income as profits, without properly accounting for associated expenses. Without any reliable, non-speculative evidence of the plaintiffs’ lost damages, the Court of Appeals reversed the jury’s verdict and the trial court’s judgment.
Barton v. Resort Dev. Latin Am., Inc., No 05-11-00769-CV
We’ll start off yesterday’s flurry of opinions with CTMI, LLC v. Fischer, which reiterates the familiar principle that agreements to agree don’t actually bind the parties to reach an agreement. In this instance, the parties entered into an asset purchase agreement that contained an earn-out provision. The earn-out provided that the parties would have to “mutually agree” on the percentage of completion of projects that were in progress as of December 31, 2010. The trial court ruled that provision was enforceable, but the Court of Appeals disagreed. Without the “mutually agreed” percentages required to calculate the earn-out, there was no formula that could be applied to calculate what was owed, rendering the earn-out unenforceable as a matter of law.
CTMI, LLC v. Fischer, No. 05-11-00970-CV
Since 1994, the City of Dallas has been in litigation with its police, firefighters, and rescue officers. The question at hand is whether a referendum and ordinance passed in 1979 amounted to a one-time salary adjustment, as the city contends, or a perpetual entitlement in all future salary adjustments. More than a decade after the lawsuits started, the city suddenly remembered that it had governmental immunity, and filed pleas to the jurisdiction on that basis. In 2011, the Texas Supreme Court held that the officers could not pursue a declaratory judgment on their interpretation of the ordinance because the only potential relief from such a declaration would be an award of money damages. City of Dallas v. Albert, 354 S.W.3d 368 (Tex. 2011). In the meantime, however, the legislature had enacted a new, retroactive statute that waived local governments’ immunity from suit for certain breach of contract claims. See Tex. Local Gov’t Code § 271.151 et seq. The case was therefore remanded to the trial court to consider whether there was jurisdiction to hear the officers’ breach of contract claims. The trial court denied the city’s renewed pleas to the jurisdiction, ruling that the contract claims fell within the new statutory waiver of immunity. On interlocutory appeal, the Court of Appeals agreed.
The analysis is somewhat lengthy, but its core relies on City of Houston v. Williams, 353 S.W.3d 128 (Tex. 2006) for the proposition that city ordinances can create a unilateral contract between the city and its employees that is within the scope of the legislature’s waiver of governmental immunity. Finding all of the elements of such a contract contained within the 1979 ordinance, the Court of Appeals concluded that it was a unilateral contract between the city and the officers. However, on the key question of whose interpretation of the ordinance would prevail, the court deferred to one of its previous rulings in the case, holding that the ordinance was ambiguous and its interpretation was therefore a question of fact to be determined at trial. The court also held there was no jurisdiction on the remaining declaratory judgment claims, concluding that the Albert decision had already established the city was entitled to governmental immunity from such claims.
City of Dallas v. Arredondo, No. 05-12-00963-CV
Okunfulure hired Ortiz to build a masonry wall along the front of his house. Ortiz sued Okunfulure, claiming he was not fully paid according to the parties’ oral agreement. Okunfulure counterclaimed, alleging Ortiz’s performance was deficient. The trial court found in favor of Ortiz and dismissed Okunfulure’s counterclaim with prejudice. Okunfulure appealed, and the court of appeals affirmed the trial court’s judgment. The parties disagreed on the amount Ortiz was to be paid, but the court of appeals held that a reasonable fact finder could have believed Ortiz’s testimony that Okunfulure failed to pay him $1250. The parties also gave conflicting testimony on whether Ortiz advised Okunfulure to build a foundation below the masonry wall to prevent deterioration, but the court of appeals again concluded that a reasonable fact finder could have believed Ortiz warned Okunfulure about the foundation. Thus, the court of appeals held that the evidence was legally sufficient to support the trial court’s judgment.
Okunfulure v. Ortiz, No. 05-12-01045
In a breach of contract case, a group of defendants appealed from the district court’s grant of summary judgment in favor of the plaintiff. The defendants argued that the plaintiff lacked standing to sue them because there was no evidence it had privity of contract with any of the defendants. The court of appeals rejected that argument, holding that the defendants were actually challenging the capacity of the plaintiff to sue or be sued. The plaintiff had standing to sue on the contract because it pleaded and proved it was “formerly known as” the party named in the agreement. As to the challenge to the plaintiff’s capacity, the court held that the defendants had been untimely in making that challenge, as the verified denial of capacity required by Rule 93 was only filed the morning of the summary judgment hearing — not 7 days before as required by Rule 63. The trial court’s summary judgment order indicated that it had not considered the amended pleading, stating that it had considered the “pleadings timely filed,” not all of the pleadings in the case. Nor was the issue of capacity tried by consent as part of the summary judgment proceeding, since the response to the summary judgment motion raised no issue of the plaintiff’s capacity to bring suit. Likewise, the court of appeals rejected the claim of one of the individual defendants that he could not be personally liable on the contract because he had signed it as CEO of the defendant corporation. Because the defendant had not timely filed a verified denial of his capacity to be sued individually, that issue was also waived. As a result, the trial court’s judgment was afffirmed.
John C. Flood of DC, Inc. v. SuperMedia, LLC, No. 05-12-00307-CV
General Capital Group, a German investment firm, claimed that it entered into an oral deal with AT&T in January 2009 to broker the purchase of T-Mobile for a 2% commission on what was to be a $39 billion deal. In May 2009, GC held another meeting with AT&T, during which AT&T indicated it was not interested in pursuing the transaction at that time. After two years with no communication between GC and AT&T, the latter announced that it intended to acquire T-Mobile. GC approached AT&T, which denied that it had any deal with GC.
GC filed suit for breach of contract. During the pendency of the suit, AT&T announced that it was not longer going to pursue the T-Mobile deal due to opposition by the Justice Department. With no sale on which to base its claim for a massive commission, GC changed its theory to to fraud, seeking recovery of $30 million for the “reasonable value of its services.” The trial court granted summary judgment, and the court of appeals affirmed. GC could not recover for fraud because even if AT&T had agreed to a 2% success fee, GC could not show harm because there hadn’t ever been any success for such a fee to be based on. Likewise, GC could not recover for quantum meruit because it has no expectation of being paid unless there was a successful acquisition.
General Capital Group v. AT&T, No. 05-12-00446-CV
Cambridge and Jain entered into an option program agreement. Cambridge later determined the investment programs managed by Jain were not economically feasible and told Jain it intended to terminate them. Jain demanded Cambridge pay certain fees allegedly due him, Cambridge refused, and Jain filed suit for breach of contract. The matter was arbitrated before a Financial Industry Regulatory Authority (FINRA) panel of arbitrators. The panel entered an award in favor of Jain, which the trial court confirmed. Cambridge appealed the judicial confirmation of the award. The court of appeals rejected Jain’s argument that Cambridge waived judicial review of the arbitration award by agreeing to arbitrate pursuant to FINRA rules. However, the court of appeals affirmed the trial court’s judgment because it found that the arbitrators did not exceed their powers by relying on impermissible matters outside the broad scope of the arbitration agreement.
Cambridge Legacy Group v. Jain, No. 05-12-00991-CV
Sullivan purchased a commercial cleaning franchise from Jani-King. The parties ended up in two disputes that were resolved through a single settlement agreement in 2004. The settlement agreement required Sullivan to “immediately and permanently cease operation” of his competing business, and Jani-King to offer Sullivan a certain amount of accounts within the next 12 months. The franchise agreement remained in full force and effect. In 2005, Jani-King sued Sullivan for breach of the franchise and settlement agreements, alleging that Sullivan continued to operate his competing business and failed to pay Jani-King royalty and advertising fees in compliance with the franchise agreement. The jury found in favor of Jani-King and Sullivan appealed.
Among other issues, Sullivan challenged the factual sufficiency of the jury’s findings. The court of appeals found that Sullivan’s factual sufficiency complaints were not preserved for review because Sullivan failed to file a motion for new trial. The court rejected Sullivan’s claim that his motion to disregard the jury’s findings or for judgment notwithstanding the verdict sufficed as a motion for new trial because those motions did not ask the trial court to vacate the judgment and order a new trial. The court of appeals also found that Jani-King’s failure to provide Sullivan with accounts was excused by Sullivan’s prior breach of the settlement agreement through his failure to immediately cease operation of his competing business. The court of appeals affirmed the trial court’s judgment.
Sullivan v. Jani-King of NY, Inc., No. 05-11-01546-CV
Court Reinstates Arbitrator’s Award of Equitable Extension for Violation of Covenant Not to Compete
July 5, 2013Nationsbuilders Insurances Services sued two of its former employees and their new employer, Houston International Insurance Group, for violating the employees’ covenants not to compete. The case was resolved with a settlement agreement in which the defendants agreed they would not compete with Nationsbuilders for one year by “soliciting, selling, quoting, binding, rating, or producing” certain specialized types of insurance. They also agreed they would not own or be employed by any entity that “conducts or plans to conduct” a competing business. The defendants did not quote or sell any such insurance during the restricted period, but they actively planned to do so by sending out marketing materials, preparing regulator filings, drafting forms, negotiating with re-insurers, and developing agent and customer lists. Nationsbuilders filed a demand for arbitration under the settlement agreement, and the arbitrator ruled that the defendants’ conduct entitled Nationsbuilders to a one-year equitable extension of the noncompete period. The defendants filed suit to vacate the arbitration ruling, and the trial court ruled that the arbitrator had “exceeded his powers” or “so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.”
The court of appeals reversed. Indulging all reasonable presumptions in favor or the arbitration award, and granting great deference to the arbitrator’s decision, the court determined that the equitable extension of the noncompete period was within the arbitrator’s “broad discretion in fashioning an appropriate remedy.” The settlement agreement had required the defendants to refrain from either conducting or planning a competing business for one year, and their actions had deprived Nationsbuilders of that bargained-for entitlement. Extending the noncompete for another year was rationally based on that contractual provision. The court of appeals also rejected the defendants’ claim that the arbitrator’s decision was moot. The court distinguished cases holding that requests for specific performance become moot after the expiration of the restricted period, noting that the remedy in this case was for an extension of the restricted period, not just its enforcement. Finally, the court of appeals rejected the defendants’ argument that the arbitration award was too badly drafted to enable them to understand how they were to comply with it. The line drawn by the arbitrator between “passive contemplation” of competition (which would not be material) and “head start” planning (which would violate the agreement) was clear enough that the defendants could reasonably understand what they were and were not permitted to do during the extended restricted period.
Surprisingly, the court of appeals relegated one obvious issue to a footnote at the end of the opinion. The extended restricted period had expired during the course of the appeal. Although the expiration of the noncompete may have rendered the appeal moot or the opinion advisory, the parties did not address how the expiration affected the case, and the court of appeals chose not to address the matter itself. That may be an issue for the trial court, as the court of appeals remanded the case for consideration of additional grounds for vacating the arbitration award that had not been ruled upon previously.
Nationsbuilders Ins. Servs., Inc. v. Houston Int’l Ins. Group, Ltd., No 05-12-01103-CV
Several years ago, the court of appeals affirmed most of a judgment against Spin Doctor Golf, but reversed the trial court’s grant of summary judgment sustaining Paymentech, L.P.’s statute of limitations defense. Spin Doctor Golf, Inc. v. Paymentech, L.P., 296 S.W.3d 354, 363 (Tex. App.-Dallas 2009, pet. denied). On remand, the trial court denied Spin Doctor’s motion to modify the scheduling order to permit it to designate expert witnesses. The court denied that motion, and granted Paymentech’s traditional and no-evidence motions for summary judgment.
Spin Doctor had sought to designate five experts prior to the first summary judgment ruling and appeal, but that designation came months after the deadline under the scheduling order then in effect, and the trial court determined Spin Doctor had not shown good cause for the late designation of the experts. On remand, the trial court again rejected Spin Doctor’s request to designate experts. The court of appeals sustained that ruling, concluding that (1) there was a valid scheduling order in effect and Spin Doctor had blown well past it, (2) Spin Doctor’s need for a lost profits expert did not establish good cause for missing the deadline, (3) Paymentech’s failure to produce certain documents did not explain why Spin Doctor was prevented from timely designating the experts, and (4) the trial court could have reasonably determined that Paymentech would be unfairly surprised by the experts’ testimony because the record did not disclose any proffered report from those experts, leaving Paymentech to take discovery in the dark. The court of appeals also affirmed the summary judgment ruling, holding that the affidavit of Spin Doctor’s president had been properly stricken the first time through the trial court, and that its lost profits analysis was conclusory in any event. With no evidence of damages, the judgment against Spin Doctor was affirmed.
Spin Doctor Golf, Inc. v. Paymentech, L.P., No 05-11-0104-CV
In 2006, Dr. Tran bought medical equipment on eBay for $14,580 using his Citibank credit card. When the equipment arrived, Dr. Tran found that it was missing a key component so he contacted Citibank to dispute the purchase. In response, Citibank issued two chargebacks: one in October 2006 for $4,580 (which the seller accepted) and one in November 2006 for the remaining $10,000 (which the seller did not accept). Among other things, Tran sued Citibank for breach of an oral agreement to “timely” issue the credit card chargebacks together. The Court of Appeals found that Tran had not put forward any evidence showing that Citibank agreed to issue the chargebacks “by a certain date, within a certain time frame, or at the same time.” Thus, the Court held that the oral contract alleged by Dr. Tran failed for indefiniteness.
In a commercial dispute concerning a furniture liquidation sale, the trial court awarded appellees damages for breach of contract and fraud, and attorney’s fees, but reduced the jury’s attorney’s fee award by nearly $425,000. Among other issues, appellants challenge the trial court’s $100,000 judgment against Lavercombe based on fraud, and appellees challenge the trial court’s reduction of attorney’s fees.
The court of appeals reversed the trial court’s judgment with respect to the fraud claim. The court found no evidence in the record showing that Lavercombe made a material misrepresentation as to the quantity and availability of upholstery products with an intent to deceive and with no intention of performing as represented. The court of appeals also reinstated the jury’s higher award of attorney’s fees because there was more than a scintilla of evidence in the record supporting the jury’s award. In all other respects, the court of appeals affirmed the trial court’s judgment.
Broyhill Furniture Indus. v. Murphy, No. 05-11-01545-CV
Citibank sued Albert Evans to collect approximately $10,000 in credit card debt. Evans appealed from the trial court’s grant of summary judgment for the bank, and the court of appeals affirmed. Among other things, Evans argued that he had never agreed to, or even seen, Citibank’s credit card agreement, that Citibank’s credit card statements were erroneous, and that the account statements were never delivered to him. However, the trial court struck those portions of Evans’ summary judgment affidavit as conclusory. The court of appeals held that the trial court had not abused its discretion in that evidentiary ruling, noting that Evans’ denials of the documents were not accompanied by any underlying facts or documentation that supported his denial. Without that affidavit testimony, Evans had no other evidence showing that he had not agreed to the amounts owed as shown by Citibank’s credit card statements, making summary judgment appropriate on the bank’s account stated claim.
Evans v. Citibank (S.D.), N.A., No. 05-11-01107
After their fathers’ death, Brenda Levitz and Thomas Sutton sued each other over the distribution of his estate. They settled this dispute during a mediation, but 4 months later Levitz moved to set aside the settlement. Levitz argued that sleep deprivation combined with medications and fibromyalgia made it so that she didn’t have the requisite capacity to enter into the settlement during the mediation. Sutton moved to compel a medical evaluation of his sister, and amended his petition to include a claim for breach of the settlement agreement, seeking, among other things, specific performance. After a bench trial, the trial judge found that Levitz had had the requisite capacity the day she signed the settlement agreement and granted Sutton’s motion to for specific performance. Levitz moved for a new trial, which the court denied.
On appeal, the Court found that the trial judge could not grant specific performance as a remedy because specific performance is a remedy for a breach of contract claim only. In granting this remedy, the trial court only decided whether a binding contract existed between the brother and sister, it did not address whether Levitz had breached the agreement. Because a breach of contract claim requires proof of a valid contract, performance or tendered performance, breach and damages, “a determination that an agreement is enforceable . . . does not equate to a determination that a party is entitled to specific performance.” The Court of Appeals therefore reversed the trial court’s judgment and remanded the case for further proceedings.
AmeriPlan Corporation’s customers pay a monthly membership fee in order to access a network of healthcare professionals who have agreed to provide discounted medical services. Anderson worked as an independent contractor for AmeriPlan, and recruited its customers, healthcare professionals, and other independent contractors. AmeriPlan’s business model is based on multilevel direct marketing, and Anderson was compensated through commissions and bonuses. After AmeriPlan terminated his employment, Anderson sued AmeriPlan claiming that he was promised “lifetime residual income,” but did not receive any commissions or bonuses after his termination. The trial court rendered judgment for Anderson, and AmeriPlan appealed.
The issue on appeal was whether the evidence was legally sufficient to support the jury’s finding that AmeriPlan breached Anderson’s written sales contract. AmeriPlan argued that the contract unambiguously required it to pay commissions and bonuses only during the continuation of the contract. Anderson alleged that the jury was entitled to consider AmeriPlan’s promise of “lifetime vested benefits” contained in AmeriPlan’s marketing materials in deciding whether AmeriPlan breached the written contract. The court of appeals concluded that the parol evidence rule barred the jury from considering the statements made in AmeriPlan’s marketing materials because the alleged promises were not a collateral consistent agreement. The court also found that the fraud exception to the parol evidence rule was inapplicable because Anderson was not the defendant, and was not seeking to avoid the contract. Because the jury was precluded from giving weight to AmeriPlan’s alleged promises, the court of appeals held that the evidence was legally insufficient to support Anderson’s breach of contract claim. The court reversed and remanded to the trial court for consideration of the jury’s alternative liability and damages findings.
AmeriPlan Corp. v. Anderson, No. 05-11-00628-CV
Defendant Lafayette Escadrill Inc. lost on summary judgment for its breach of contract claim of wrongful termination against its former contract counterparty, CCU. The Court of Appeals upheld the trial court’s decision on res judicata grounds because Lafayette previously had the opportunity to raise the wrongful termination as a counterclaim in a prior litigation (which it also lost) in which CCU sued Lafayette for breach of contract. According to the Court, the wrongful termination counterclaim should have been raised in the earlier suit because it was “fully mature” as soon as CCU terminated the contract in accordance with the contract’s provisions.
In the mid-1990s, Hydroscience Technologies, Inc. (“HTI”) sold shares of its preferred stock to Hydroscienc, Inc. (“HSI”). HTI alleges that in 2001, in order to settle an unrelated dispute between Whitehall Corporation (HSI’s parent corporation) and itself, Whitehall orally agreed during a mediation session to transfer the HTI shares held by HSI back to HTI. But the parties never reduced this agreement to writing and HSI never transferred the original stock certificate back to HTI. The parties didn’t raise the question of HSI’s stock ownership again until 2010, when HSI, as purported shareholder, requested to inspect the books and records of HTI. When HTI refused, HSI filed a lawsuit seeking a declaratory judgment that HSI remained an HTI shareholder. After the trial court granted HSI’s motions for summary judgment, HTI appealed.
The Court of Appeals addressed a number of issues in its opinion. Most relevant, however, was its holding that while delivery of a stock certificate was not required to show a transfer of stock, the fact that HSI still possessed the certificate establishes its ownership unless HTI can present evidence of the stock transfer agreement the parties purportedly came to during the 2001 mediation. But the Court found that HTI could not demonstrate that intent because, under Texas law, HTI is prohibited from using as evidence statements of the parties during a mediation session. It explained that “to allow HTI to used alleged discussions from the mediation regarding the stock would undermine the very purpose of confidentiality in the mediation process. Parties must not be allowed to use evidence from mediation to dispute terms of a settlement agreement, particularly years later, as is the case here.” According to the Court, to hold otherwise would chill the overall purpose of mediation. Thus, because the final 2001 settlement agreement did not show the stock transfer agreement, and because HTI could not show that the parties had orally agreed to make such a transfer, the Court upheld the trial court’s ruling.
Hydroscience Technologies, Inc. v. Hydroscience, Inc.
Charles Wunderlick and Martha Wilson ended their marriage in 1990 with a written agreement that required Wunderlick to pay Wilson alimony of $1000 per month indefinitely. The payments were to end on the occurrence of certain contingencies, one of which was Wunderlick’s compensation being substantially reduced without “good cause” at the lumber company he owned and operated. In late 2008, the company responded to the recession by laying off employees and cutting the officers’ salaries to $1 annually. Wunderlick eventually stopped paying the monthly alimony payments, and Wilson sued for breach of contract. The trial court granted summary judgment for Wilson, and Wunderlick appealed.
The issue on appeal was whether Wunderlick had submitted summary judgment evidence showing that the company had reduced his compensation without “good cause,” a term which was not defined in the contract. For his part, Wunderlick argued that “good cause” should be interpreted in the employment context, which would require the employee to have done something wrong to justify termination or demotion. Wilson argued that the divorce agreement was not an employment contract, and “good cause” should therefore be given its ordinary meaning of “good reason” — and Wunderlick had admitted that the recession gave the company “good reason” to cut his salary. The court of appeals concluded that both constructions were reasonable, that the contract was therefore ambiguous, and a genuine issue of material fact existed as to the parties’ intent. The court of appeals therefore reversed the summary judgment and remanded to the district court for further proceedings.
Wunderlick v. Wilson, No. 05-11-01597-CV
The court affirmed the trial court’s judgment declaring Wilhoite’s quitclaim deed void and awarding Sims damages and attorney’s fees. The parties are sisters that each inherited a half interest in their grandfather’s house. In 2007, Sims signed a quitclaim deed transferring the interest in the property to Wilhoite for no consideration. Sims testified they agreed that after the house was sold, they would share the money from the sale equally; Wilhoite testified that Sims gifted her interest. Sims performed repairs on the house in 2008 and moved into the house in 2010 and performed maintenance. Sims testified that Wilhoite agreed to put those costs towards Sims’s interest in the house. In 2011, Wilhoite attempted to evict Sims for unpaid rent. Sims filed suit in district court seeking a declaratory judgment that the quitclaim deed was voidable and claims for statutory fraud and breach of contract. The jury found that Sims did not gift the property, that Wilhoite committed statutory fraud, and that Wilhoite breached her agreement to reimburse Sims for one-half of her repair and maintenance expenses.
The court first held that Wilhoite did not have adverse possession of the house by mere color of title through the quitclaim deed, and therefore the court was correct in refusing to apply a three-year limitations period. Second, neither agreement – to share in the proceeds from sale or reimburse for expenses – were contracts for the sale of real estate, so both were outside of the statue of frauds. Next, the court held that the declaratory judgment was proper, despite Sims’ failure to pursue a trespass to try title action, because the it merely canceled the deed and made no determination of title to the property. Finally, Sims’ counsel’s statement that her son was “protecting us in Afghanistan” was not an incurable argument. Thus, the court affirmed.
The court affirmed a denial of the Dallas County Hospital District’s plea to the jurisdiction requesting dismissal of a breach of contract claim on the basis of governmental immunity, but reversed the decision with regards to a quantum meruit claim. The District entered into a written lease and purchase contract with Hospira for certain medical equipment and supplies. Several months after the end of the lease term, Hospira invoiced the District for the remaining amounts due under the lease. After unsuccessful attempts to recover the shortfall, Hospira sued the District asserting that immunity from suit had been waived by section 271.152 of the local government code. The District argued that its immunity from suit had not been waived under section 271.152 because it was not a local government entity as defined in section 271.151. The trial court denied the District’s plea to the jurisdiction, and the District filed an interlocutory appeal.
On appeal, the court noted that section 271.152 waives governmental immunity from suit for breach of contract claims against local governmental entities, defined as “a political subdivision of this state, other than a county or a unit of state government” and including a “special-purpose district.” The District contended that it is excluded from this definition because it is a “unit of state government” pursuant to the government code, but that code specifically excludes special purpose districts from the definition. Thus, the District could not assert immunity from the breach of contract claim. The court also held, however, that section 271.152 did not waive immunity from suit for Hopsira’s alternative claim based on quantum meruit. The statute expressly applied only to breach of contract.
Dallas County Hospital District v. Hospira Worldwide, Inc., No. 05-12-00902-CV
When Emily Hairston was a high school sophomore, the women’s soccer coach at Southern Methodist University, Brent Erwin, sought to recruit her to play on SMU’s team when she graduated. In May 2007, Erwin verbally offered Hairston a “100%” scholarship if she came to play at SMU. Over the next few years, Hairston and the coach communicated about the SMU soccer program, and Erwin even encouraged Hairston to try to graduate early from high school, which Hairston did. Hairston enrolled at SMU in early 2009, and joined the women’s soccer team. In February 2009, Hairston was told that she needed to pay $25,000 in tuition for that semester. Surprised, Hairston spoke with Erwin, who informed her that she did not, in fact, have an athletic scholarship. After some further discussion, Erwin and her father sued SMU and Erwin for, among other things, breach of contract. The trial court dismissed the case in SMU’s favor on summary judgment.
On appeal, the Court found that the statute of frauds barred Hairston’s breach of contract claim in at least two ways. First, to the extent Hairston claimed the scholarship was for all four years of her college career at SMU, the oral agreement could not be performed within a year of acceptance and, thus, had to be in writing under the statute of frauds. Alternatively, the Court noted that Hairston purported to accept the offer in May 2007, when she was a sophomore in high school. Because she could not have realistically enrolled in SMU within a year of her sophomore year of high school, the statute of frauds required the contract to be in writing. As a result, the Court affirmed the trial court’s decision.
Elizabeth Rebeles thought she was in a common law marriage with Paul Leighton, and with good reason — they had been living together since 1984, purchased property and filed tax returns as husband and wife, and started a business together. But after Rebeles filed for divorce in 2006, she discovered that there was no documentation of her divorce from her previous husband, meaning that she could not prove she had ever been validly married to Leighton. The parties nonsuited the divorce case, and Rebeles filed a new suit in which she claimed the parties had formed a general partnership during the time they were together.
The jury found that the parties had indeed formed a partnership back in 1984 and that an event requiring wind-up had occurred in 2006. In accordance with that finding, the trial court wound-up the business and divided the partnership assets. The court of appeals affirmed that aspect of the case, rejecting Leighton’s contention that Rebeles had released her interest in the partnership through a document she had signed to relinquish “all past, present, and future interest in Paul’s Pit Sand and Gravel, and in Hutchins Sand & Gravel and any dealings by Paul M. Leighton.” That release made no reference to the partnership itself, and both parties testified that they had not intended it to release any claim to other property owned by the partnership. To the court of appeals, those facts supported the jury’s finding that Rebeles had not released her interest in the partnership itself. However, the court of appeals also reinstated a $31,000 verdict in favor of Leighton, based on his claim that Rebeles had breached a post-breakup oral contract for her separately owned company to perform billing and clerical services for one of their jointly owned gravel pits. Even though the oral contract related to the partnership business, there was sufficient evidence to show that the parties were representing their independent interests at the time it was made, and not as agents of the partnership itself. Accordingly, the breach of contract finding could still be harmonized with the general partnership finding, and the court of appeals rendered judgment in favor of Leighton.
Leighton v. Rebeles, No. 05-11-01519-CV
The district court granted summary judgment in favor of the defendants in a dispute over the termination of a Gold’s Gym franchise. The defendants were listed as personal guarantors of the franchise agreements, but part of their defense was the claim that the signatures on the guaranties were forged. The court of appeals reversed summary judgment on that issue, concluding that the conflicting opinions of the two sides’ handwriting experts created a fact issue that would need to be tried. However, the court of appeals rejected Gold’s Gym’s contention that the defendants had ratified the agreements even if they were forged, concluding (1) that the defendants were never listed as parties to the franchise agreement, and therefore they could not have ratified it through their actions on behalf of their company that was the actual franchisee, and (2) that Gold’s Gym had not produced any summary judgment evidence showing that the defendants ratified the guaranties where they had consistently refused to pay Gold’s demands on the basis that the signatures had been forged.
Gold’s Gym Franchising, LLC v. Brewer, No. 05-11-00699-CV
The Court affirmed a summary judgment in favor of Frost Bank on counterclaims related to a loan default. TAM failed to pay off a loan it received from Frost by the maturity date stated in the written loan agreement. Frost setoff part of the amount due with money from TAM’s operating account and sued for the remainder. TAM counterclaimed, alleging that Frost had orally extended the maturity date in a meeting with TAM’s representative and that Frost’s wrongful setoff caused TAM significant damage. Frost moved for, and TAM failed to challenge, traditional summary judgment on its breach of contract claims, which the court granted based primarily on the written loan agreement. It then granted no-evidence summary judgments dismissing TAM’s counterclaims related to the alleged oral extension. TAM appealed, challenging the trial court’s judgment on TAM’s counterclaims for breach of contract, promissory estoppel, negligent misrepresentation, fraud, conversion, and wrongful setoff.
On appeal, the court held that because TAM did not challenge the traditional summary judgment on Frost’s breach of contract claim, the trial court’s judgment as to the enforceability of the written agreement between TAM and Frost was binding. Thus, TAM’s corresponding counterclaims for breach of contract, negligent misrepresentation, and fraud, which were based on the alleged oral extension, failed due to the written agreement’s enforceability. The court agreed that there was no evidence that TAM relied on the alleged oral extension in its decision to deposit more money into the operating account, so TAM’s promissory estoppel claim also failed. And because TAM’s conversion and wrongful setoff claims required that TAM be entitled to possession of the funds in the operating account, and thus relied on the success of at least one of TAM’s other failed counterclaims, those claims likewise failed.
Trevino & Associates Mechanical v. Frost National Bank, No. 05-11-00650-CV
The court affirmed a summary judgment in favor of Citibank in a suit to recover a credit card debt. Citibank sued Aymett, alleging breach of contract and account stated, and moved for summary judgment. Citibank supported its motion with account statements and excerpts from Aymett’s deposition, in which Aymett admitted using the credit card and making payments for some time and agreed that he has no dispute as to the amount claimed to be due and owing on the account. The trial court granted summary judgment and Aymett appealed.
On appeal, Aymett complained that Citibank did not present a copy of a written contract and that there was no evidence he actually received any of the account statements mailed to him. The court held that a claim for account stated does not require a written contract, but only an agreement to pay an amount owed. Additionally, the summary judgment evidence demonstrated that Citibank mailed, to the same address for Aymett each time, monthly statements and that Aymett responded to the statements by making regular monthly payments until he finally stopped paying. Finally, the trial court did not err in granting summary judgment on an implied contract just because Citibank claimed an express contract based upon the same transaction, as there was no determination that Citibank was entitled to recover on both an express and an implied contract.
Phytel, Inc. brought an interlocutory appeal after the district court denied its motion to compel arbitration of its former CEO’s claim that his noncompete agreement was unenforceable. The arbitration clause was contained in the CEO’s termination agreement, which also reaffirmed the noncompete provision in his original employment agreement. However, a subsequent agreement for the repurchase of the CEO’s stock did not contain a separate arbitration clause, although it reaffirmed the terms and conditions of the earlier termination agreement and modified the noncompete provision. The court of appeals concluded that the reincorporation of the prior contact necessarily encompassed the dispute resolution provisions of that agreement, and further held that the arbitration requirement applied to the validity of the noncompete because its subject matter related to all three of the parties’ agreements. The court rejected the CEO’s contention that a merger clause in the third contract worked to exclude the arbitration provision of the second contract because the incorporation of the second agreement by reference resulted in it becoming an inherent part of the subsequent document. Finally, the court of appeals also rejected the claim that Phytel had waived its right to invoke arbitration, holding that waiting two months after the lawsuit was filed and exchanging one set of discovery and initial disclosures did not substantially invoke the judicial process to the prejudice of the CEO. The court of appeals therefore reversed and rendered the trial court’s denial of the motion to compel arbitration.
Phytel, Inc. v. Snyder, No. 05-12-00607-CV
Summary Judgment Ruling Upheld Based on Cracks in the Expert Witness’ Evidentiary Foundation
March 20, 2013In 2004, the Byers family hired Jered Custom Homes (“JCM”) to build their home. Since Brad Byers worked for an engineering firm, he had his own company design the foundation. To protect itself, JCM included a provision in its contract with the Byerses that Brad Byers and his firm would be entirely responsible for the design and sufficiency of the foundation and that the Byerses would be responsible for all necessary soil and subsoil tests. Two years later, the Byerses sold their home to appellant, Kay Yost. Shortly after moving in, however, Yost noticed that the locks installed in the doors no longer fit. Yost hired a series of inspectors, and ultimately concluded that the house’s foundation had suffered cracking caused by issues with its design with an estimated cost of repair of $524,563. Yost sued JCM for damages associated with the house, but JCM moved for a no evidence summary judgment and the court granted it, ordering that Yost take nothing.
On appeal, the Court agreed with the trial judge’s decision. Yost argued that the affidavits of her two experts provided sufficient evidence to survive summary judgment. But the Court of Appeals found that nothing in the expert reports presented any evidence that JCM itself was negligent in constructing the house’s foundation in accordance with the design prepared by Byers’ employer. Indeed, although Yost’s expert report stated that it is customary practice in the home construction industry for a geotechnical report to be obtained and reviewed, “he does not state who should review it or utilize its information.” Nevertheless, the Court reversed the trial judge’s decision on Yost’s claim for breach of the implied warranty of habitability because Yost’s failure to produce documents evidencing that the how was not uninhabitable did not constitute a judicial admission.
In July 2008, the Dean Group entered into a standard listing agreement agreement to sell Metal Systems, Inc, including the real estate owned by Metal Systems. TDG sued Metal Systems in May 2010 for breach of contract and quantum meruit, and the trial court dismissed these claims on summary judgment. TDG appealed. On appeal, Metal argued that the contract claim failed because TDG could present no evidence of a valid, enforceable contract on the ground that the listing agreement included real estate and TDG presented no evidence that it held the real estate licenses required by the Texas Real Estate License Act. The Court agreed, finding that TDG did not “allege, prove, or create a fact issue that it was a real estate license holder at the time the Agreement was signed.” It therefore upheld the trial court’s dismissal.
This breach of contract case arises out of an inverse condemnation action filed by Continental Foods against the state of Texas. In that action, Continental alleged that the state had acquired property for a highway expansion and did not compensate it for its loss of value under its lease with Rossmore Enterprises. The Court of Appeals ruled that the lease’s language stated that the lease terminated upon condemnation, leaving Continental with no compensable interest to protect. Continental then sued Rossmore arguing that its landlord had breached the lease in two ways: (1) by not requiring the state to proceed with the condemnation in a Special Commissioner’s hearing so Continental could receive compensation and (2) by not tendering to Continental its share of the condemnation proceeds. Rossmore moved for summary judgment on the ground that the doctrine of collateral estoppel barred Continental’s claim because its right to condemnation had already been decided. The Court of Appeals disagreed, holding that “[n]othing in our prior opinion determined the parties’ obligation under the Master Lease before condemnation.” Accordingly, Continental’s claim was not barred by collateral estoppel.
Creation Construction sued Charlie Patel and EZN News Nibbles Necessities for breach of contract after they failed to pay for the construction of a convenience store in NorthPark Mall. After a bench trial, the court entered judgment in favor of Creation for approximately $42,000 in damages and $71,000 in attorney fees. On appeal, Patel argued that he could not be personally liable on the construction contract because he has signed it in his capacity as an agent of EZN. Unfortunately, the contract did not actually say what capacity Patel was signing in, nor had he raised that claim before the trial court. Accordingly, the court of appeals affirmed the trial court’s finding of liability against Patel. However, the court also reversed on Creation’s cross-appeal, which argued that the trial court had erred by failing to award prejudgment interest, and the case was remanded for consideration of the interest to be added on to the judgment.
Patel v. Creative Construction, Inc., No. 05-11-00759-CV
In 2003, insurance broker Brett Woods signed an “Employment, Confidentiality, and Non-Compete Agreement” with U.S. Risk Insurance Group, Inc. USRIG is a holding company that owns companies engaged in the insurance business, including U.S. Risk, Inc. But USRIG does not conduct any insurance business on its own behalf, and the non-compete agreement was solely between Woods and USRIG. Woods resigned in 2009 and went to work for a competitor, which prompted USRIG to file suit for breach of the non-compete. Woods prevailed on cross-motions for summary judgment, and the court of appeals affirmed.
The court first held that the only summary judgment evidence in the record supported Woods’ claim that he had resigned for “good reason,” which only triggered a non-solicitation requirement rather than the full non-compete. The court went on to hold that the non-compete was overbroad in any event, as it prevented Woods from competing with USRIG in any aspect of its business, regardless of whether Woods had worked in that business while employed with the company. Finally, the court of appeals held that Woods could not be liable for soliciting any of USRIG’s customers, since it didn’t actually have any. The court declined to construe the contract to include the subsidiary that was actually engaged in the insurance business, nor would it recognize the subsidiary as a third-party beneficiary (despite a clause providing that the contract inured to the benefit of USRIG’s “subsidiaries, affiliates, successors, and assigns”). On the latter point, the court expressly noted that even if the sub were a third-party beneficiary, it still could not receive greater rights than were bargained for between the original parties to the contract, and the contract only prevented Woods from competing with the holding company, not its subsidiaries.
U.S. Risk Insurance Group, Inc. v. Woods, No. 05-11-00558-CV
Almost nine years ago, the 68th District Court granted judgment notwithstanding the verdict against plaintiff Basic Capital Management and several related entities, wiping out a jury verdict in their favor for tens of millions of dollars in lost profits. The underlying dispute involved the failure of Dynex to fund an alleged $160 million loan commitment for Basic’s “Single-Asset, Bankruptcy Remote Entities” to make real estate investments. In 2008, the Dallas Court of Appeals affirmed that ruling, holding that the SABRE entities were not intended, third-party beneficiaries of the loan agreement, and that the lost profits from the contemplated real estate transactions were not foreseeable. In 2011, the Texas Supreme Court reversed that decision and remanded the case for consideration of Dynex’s argument that the damages were not supported by legally sufficient evidence. Now, in 2013, the court of appeals has held that, with one exception, there was legally sufficient evidence to support the jury’s original award of damages. The court went through a detailed analysis of the testimony of Basic’s damages expert, concluding that his testimony was sufficient to sustain the jury’s award of damages for the lost real estate investments Basic had envisioned. However, the court of appeals sustained the trial court’s grant of JNOV as to one item of damages — $252,577 awarded by the jury for “lost opportunity” on an investment that Basic had actually completed.
The saga of Basic v. Dynex is not over yet. In addition to the possibility of further appeal to the Supreme Court, the court of appeals also remanded to the district court for further consideration of Basic’s claim for attorney fees, as well as pre- and post-judgment interest. We’ll keep you posted if the case results in any further opinions on appeal.
Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc., No. 05-04-01358-CV
The court affirmed a judgment in favor of AT&T against an attorney for breaches of a 2008 and a 2009 agreement for Yellow Pages advertising. Thornton entered into the agreements with AT&T but only made partial payments on the 2008 contract and none on the 2009 one. The trial court entered judgment in favor of AT&T after a half-day bench trial. On appeal, Thornton challenged the legal sufficiency of the evidence of a valid contract, breach, and any award based on quantum meruit. The court held that AT&T’s evidence at trial, including four contract documents with Thornton’s signature and evidence that Thornton began making partial payments according to the 2008 contract, was sufficient to support the finding of a contract. Further, the evidence showing that AT&T produced advertisements of Thornton’s law practice as stated in the contracts, and the Thornton no making payments according to those contracts was sufficient to show support the finding of breach and damages. Thus, the judgment was upheld.
Thornton v. AT&T Advertising, No. 05-11-00767-CV
Texas Pallet Operations, LP rented commercial property form Ostrovitz & Gwinn, LLC (“O&G”). As required by the lease, Texas Pallet obtained property insurance from First Specialty Insurance Company. In 2006, a fire damaged the property and O&G sought payment from First Specialty for the loss. But First Specialty refused because, it argued, O&G was not a party to the insurance contract. O&G sued, and the trial court dismissed the case on summary judgment.
On appeal, O&G’s primary argument was that dismissal was unwarranted because it had standing to enforce the insurance contract as a third-party beneficiary. Specifically, O&G contended that the “Loss Payable Provisions” of the policy identified O&G by name as a “Loss Payee,” thus solidifying its status as a third-party beneficiary. The Court disagreed. Assessing the policy’s express language, the Court found that “the policy does not clearly and fully demonstrate an intention by [Texas Pallate] and First Specialty to contract for the direct benefit of [O&G].” It then proceeded to rejected the other issues raised by O&G and affirm the trial court’s decision.
Ostrovitz and Gwinn, LLC v. First Specialty Insurance Co., No. 05-11-00143-CV
The court of appeals has affirmed a judgment in excess of $350,000 for breach of a commercial lease agreement. VSC, LLC entered into the lease as the tenant, while its manager Gary White was the guarantor. Both parties were sued by the landlord, Mike Harrison, after a sublessor stopped paying rent to Harrison. On appeal, VSC and White challenged the trial judge’s findings against their affirmative defenses, including repudiation, modification, ratification, and waiver. The court of appeals held that there was adequate evidence supporting the trial court’s rejection of each of those defenses. The court further held that White could not challenge his status as a guarantor of the lease agreement because he had failed to file a verified denial after he was sued in the capacity of a guarantor. Even without that defect, however, the court still found ample evidence to support the conclusion that White’s personal guaranty applied to the lease agreement.
White v. Harrison, No. 05-10-01611-CV
RTKL, an architecture firm, worked for Woodmont Investment Co., a real estate developer. In a prior case, Woodmont sued RTKL, seeking a declaratory judgment that it did not owe RKTL its remaining fees because the services agreement between the parties was invalid. That case settled for $700,000, with $140,000 to be paid to RTKL up front and the rest to be paid to it in monthly installments of $10,000. As the parties negotiated the settlement, it was determined that the entity paying the settlement would be Woodmont TCI Group XIII, LP (“XIII”), another Woodmont-related entity that developed one of the properties for which RTKL provided services. Several months after the settlement agreement was signed, however, XIII filed for bankruptcy.
When RTKL realized the XIII had no cash to pay the settlement it sued TCI (XIII’s parent) for fraud and breach of the settlement agreement. TCI moved for summary judgment on the breach of contract claim, which the trial court granted, and the jury found in TCI’s favor on the fraud claim. RTKL appealed the denial of summary judgment. The Court of Appeals examined the language of the release entered into as part of the settlement and found that TCI, as XIII’s parent, fell within its terms. It then found that the release included the claim related to the settlement agreement. Accordingly, the court affirmed the trial court’s summary judgment decision.
RTKL Associates v. Transcontinental Realty Investors, Inc., No. 05-11-00786-CV
The court affirmed the trial court’s judgment in this commercial real estate lawsuit. Jarvis provided a loan through its loan servicer, NAC, to CAS for the purchase of an apartment complex. The loan documentation identified NAC as the “servicer” and the lender as Jarvis “c/o” NAC. CAS made monthly loan payments directly to NAC, who then disbursed them to Jarvis. CAS later sold the property to K&E through Stewart Title. Stewart Title paid the loan payoff amount directly to NAC for payment to Jarvis, as NAC had done for two other loan payoff transactions to Jarvis in the past. But in this case, NAC did not provide the funds to Jarvis and instead purported to continue making CAS’s monthly payments without notifying Jarvis of the sale. When NAC stopped making those payments, evidently due to insolvency, Jarvis learned of the property sale and sought to foreclose on the property.
K&E filed a declaratory action asserting that the loan was paid off and seeking to prevent foreclosure. Jarvis filed a third-party petition against CAS, Stewart Title asserting negligence and breach of contract claims against Stewart Title for making the loan payment to NAC instead of directly to Jarvis. Jarvis also sought a declaration that the loan was not discharged and sought to quiet title. At trial, Jarvis moved to exclude evidence of the other loans serviced by NAC in which NAC received the payoff amount and disbursed it to Jarvis, which was denied. Based on this evidence, the trial court found that Jarvis and NAC established a procedure where NAC received payoff funds and disbursed them to Jarvis and that NAC had actual and apparent authority to accept the payoff amount here. It entered judgment for K&E, declaring that the loan was fully paid, enjoining Jarvis from attempting to foreclose on the party, and awarding K&E attorney’s fees. The court also granted K&E and Stewart Title summary judgment on Jarvis’s negligence and breach of contract claims and severed out Jarvis’s claims against CAS.
On appeal, Jarvis argued that the trial court erred by denying its motion to exclude because the loan documents dictated the relationship between the parties, and thus the parol evidence rule precluded the evidence of Jarvis and NAC’s other course of dealings. The court held that the loan documents indicated that NAC had authority to act for Jarvis, but the scope of that authority was unclear. Thus, parol evidence showing the scope of NAC’s authority to accept loan payoff amounts and not contradicting the terms of the documents was not barred. Additionally, the evidence was sufficient to show that NAC had implied actual authority to accept the loan payoff. This holding also disposed of Jarvis’s claims against Stewart Title, whose transfer of funds to NAC constituted payment to Jarvis rather than a breach of any duty to Jarvis, and Jarvis’s declaratory action because its lien and deed of trust on the property was discharged. Finally, K&E’s attorney’s fees recovery was warranted because the UDJA permits a declaratory action brought to invalidate a real estate note, as well as any lien securing the note.
Jarvis v. K&E RE One, LLC, et al., 05-11-00341-CV
Regency Gas Services owns a natural gas processing facility in the Hugoton Basin. One of the byproducts of natural gas is crude helium. In 1996, Regency entered into a 12-year contract with Keyes Helium Co., which owned a helium processing facility in Oklahoma. Under the agreement, Keyes agreed to purchase all of the crude helium produced by Regency’s facility. But in 2003, Regency found out that one of its biggest customers was unlikely to renew its contracts, which would deprive Regency of the volumes of natural gas needed to make helium production possible. As a result, Regency decided to shut down its plant and move its processing to a nearby facility owned by another company. Keyes sued for breach of contract, contending that Regency had not acted in good faith when it decided to eliminate its production of crude helium. The jury returned a verdict in favor of Regency.
On appeal, Keyes claimed jury charge error in the trial court’s definition of “good faith” under the UCC. Keyes contended that the trial court should have limited its instruction to the one found in the U.C.C., which simply states that good faith means “honesty in fact and the observance of reasonable commercial standards standards in the trade.” The trial court had expanded on that definition by adding the phrase “including whether Regency had a legitimate business reason for eliminating its output under the Contract, as opposed to a desire to avoid the contract.” The court of appeals rejected that argument, concluding that the additional language could not have caused the rendition of an improper verdict because Keyes had failed to submit any evidence that Regency’s decision to shut down its plant had been made in bad faith. The court of appeals also affirmed the trial court’s grant of a directed verdict against Keyes on its claim that the UCC prevented Regency from reducing its output below the estimates stated in the contract, ruling that section 2-306(1) of the UCC did not such reductions if they were made in good faith.
Keyes Helium Co. v. Regency Gas Services, LP, No. 05-10-00929-CV
Green Mountain Oil and Gas Corporation sought to “flip” its oil leases by assigning them to EOG Resources at a higher price than it had paid for them. After it had signed the assignment, however, EOG discovered that the lease assignments created an additional overriding royalty that reduced the mineral estate amount. Because the leases included a draft–and because each draft provided that if the draft was not paid within 20 banking days, the bank was to return it to the payee and all further obligations of the parties would terminate–EOG decided to decline payment of each of the drafts and terminate the contract. Green Mountain sued, seeking enforcement of the assignment. The Court of Appeals, however, found that, under the terms of the draft, “EOG had an absolute right not to pay the draft.” Accordingly, it did not breach the contract when it declined the draft regardless of whether EOG’s agent had established good title.
Green Meadow Oil & Gas Corp. v. EOG Resources, Inc., No. 05-11-00291-CV
The court of appeals has issued an opinion that serves as a useful primer on the statute of frauds. The appellant, Michael Kalmus, sue to recover for unpaid commissions after his employment was terminated. The appellee, Financial Necessities Network, defended the case with the statute of frauds, claiming that the oral agreement alleged by Kalmyus was essentially an agreement for lifetime employment that could not be enforced in the absence of a signed writing. The court of appeals reversed and remanded, holding that the evidence showed the agreement was terminable at will, and therefore could have been concluded within a year’s time. In the course of announcing that decision, the opinion collects and recites much of the black-letter law regarding the statute of frauds, making it a useful source of future citations on the topic.
Kalmus v. Oliver, No. 05-11-00486-CV
The court affirmed a judgment in a construction contract dispute between two subcontractors. The general contractor of a shopping center project, Mycon, subcontracted with Bulldog to fabricate the steel and erect the steel-reinforced concrete panels around the center’s trash dumpsters. Bulldog subcontracted Top Flight to erect the panels. Top flight testified that Mycon directed the concrete pouring to take place well outside of the range that Top Flight had instructed. Top Flight then requested a $7,500 change order from Bulldog for the extra erection cost, which Mycon refused. Under pressure from Mycon, Bulldog eventually installed the panels themselves, without notifying Top Flight, and then invoiced and eventually sued Top Flight for the cost of installation. Top Flight counterclaimed for the 10% retainage amount left on the contract. Finding that Bulldog did not notify Top Flight to complete installation of the panels breached the subcontract by preventing Top Flight’s performance, the trial court rendered judgment for Top Flight for its retainage, interest, and attorney’s fees.
On appeal, Bulldog did not challenge the trial court’s finding that Top Flight was never notified to complete the installation of the dumpster panels despite the extra cost, and without allowing Top Flight an opportunity to perform, Bulldog undertook to install the dumpster panels using its own employees. The court held the fact that Bulldog prevented Top Flight from performing under the contract, which supported the conclusion that Top Flight did not breach the contract and that Bulldog did.
Bulldog Ironworks, LLC v. Top Flight Steel, Inc., 05-10-01360-CV
In an opinion affirming a breach-of-contract case between two subcontractors, the court of appeals reiterated an important appellate principle: unchallenged findings of fact is binding against the appellant. In this case, Bulldog Ironworks failed to challenge the trial court’s finding that the prevailing party, Top Flight, was never notified by Bulldog or the general contractor that it needed to complete its portion of the project before Bulldog completed the task with its own employees. Without such notice, the court of appeals concluded that Bulldog had prevented Top Flight from performing, thereby breaching Bulldog’s own contractual obligations.
Bulldog Ironworks, LLC v. Top Flight Steel, Inc., No. 05-10-01360-CV
The court affirmed a judgment in favor of a hauling company on its breach of contract claim against subcontractors on a city construction project. The parties disputed whether a contract was formed to haul dirt and concrete debris from the project for $40 an hour or for $40 a load, and both presented competing evidence and witnesses that testified to their contended contractual rate. After a bench trial, the trial court found that Mejia offered to use his trucks and drivers to haul dirt and concrete debris from the project on behalf of appellants for $40 an hour, that Mejia communicated that offer to De Los Santos, and that De Los Santos accepted the offer. It then rendered judgment in favor of Mejia for $11,794 plus attorney’s fees.
On appeal, Appellants challenged the legal sufficiency of the evidence supporting the trial court’s judgment, and the central challenge was to the evidence supporting the finding that the parties formed a contract at the hourly rate. Appellants also argued that the conflict in the evidence about whether they would pay $40 a load or $40 an hour made the contract ambiguous. The court held that the dispute did not present an issue of contract ambiguity but instead an issue of fact about the actual terms of the contract. Because the evidence was sufficient to support both $40 a load and $40 an hour, the resolution of the conflict turned on the credibility and demeanor of the witnesses – a finding that an appellate court will not disturb.
As AutoGas Systems saw that its future prospects looked bleak, one of its executives, John Cullen (its president and COO), circulated to certain employees a severance plan, which included incentives for employees to remain with the company as it wound up its affairs. Dana Kelman was one of the employees who received the severance plan. When his time with AutoGas ended, he sued to obtain the funds he was due under the agreement. The only problem was that AutoGas’s CEO and Chairman, G. Randolph Nicholson, denied that Cullen ever had authority to enter into those severance agreements on behalf of the company. Kelman moved for summary judgement, insisting that he conclusively established that Cullen’s authority to enter into the severance plan stemmed from his position as president and member of the board. The trial court agreed and awarded Kelman $93,000 in damages.
The Court of Appeals reversed and remanded. It found that, although a senior executive like Cullen had authority to bind the company on routine matters arising in the ordinary course of business, the parties advanced conflicting evidence on whether the purported severance agreement qualified as a “routine matter.” The Court went further, however, and rejected as a matter of law that “a severance agreement developed in anticipation of the winding up of the corporation’s business and resulting in payments substantially higher than the employee’s annual salary of $70,000 is a routine matter.” The Court also rejected Kelman’s claim that Cullen had apparent authority to bind the company to the severance plan because the parties has presented conflicting evidence of that authority.
A developer in Wylie purchased two adjoining tracts of land. In 2004, he decided to sell one of the properties to Capital One. However, the city decided that both properties would have to be developed as one site, with a single access site on the Capitol One property. The parties therefore entered into a cross-easement agreement, requiring Capital One to pave the internal drives that would link the access site to both of the properties. However, Capital One finished its construction and obtained a certificate of occupancy without ever constructing the new approach. The developer ended up building the driveway himself, and sued Capital One to pay for its cost. After a bench trial, the trial court awarded the developer awarding approximately $22,000 in damages and another $100,000 for attorney fees.
The court of appeals reversed. According to the appellate court, the cross-easement agreement required the parties to “keep and maintain” the driveway, but not to actually construct it. The court also rejected the developer’s argument that Capital One had breached the agreement by failing to comply with a government regulation by not constructing the driveway, because there was no evidence the city had ever ordered Capital One to construct it. The court also rejected the developer’s quantum meruit argument for failing to attack all grounds asserted in the bank’s summary judgment motion, and remanded to the district court for a determination of the bank’s attorney fees as the prevailing party under their contract.
Capital One, N.A. v. Haddock, No. 05-10-01028-CV
The court reversed a judgment awarding an law firm lost profits in an action against a litigation services company. Elrod, a litigation law firm, hired A-Legal to perform support services related to E-Discovery. Two days later, Elrod pulled the job when A-Legal doubled the price it previously quoted. Both parties sued each other for breach of contract. Elrod claimed damages from lost revenue and lost business opportunities due to the time its attorney’s and staff lost dealing with A-Legal’s breach. Elrod presented evidence of lost revenue, which it valued at $20,000, but the only specific evidence relating to a worker’s time lost dealing with the breach came from one attorney, Nassar. Nassar testified that her hourly rate is $325 and that she spent about eighty hours in total “dealing with the situation.” Elrod made no attempt to establish what expenses would have been attributable to Nassar’s billable hours or whether the firm lost any specific business or billing during that time. The trial court entered a judgment awarding $20,000 lost profits plus attorney’s fees.
On appeal, the court noted that the only calculation that can be made from Elrod’s evidence is potential gross revenue brought in by Nassar, not net profits, because Elrod presented no evidence to show any expenses related to that revenue or that she actually billed less time because of the breach than she would have otherwise. Thus, the evidence was legally insufficient to show lost profits, the only measure of damages presented, and the court reversed and rendered a take nothing judgment.
A-Delta Overnight Legal Reproduction Services Corp. v. David W. Elrod, PLLC, No. 05-11-00708-CV
The court affirmed the trial court’s summary judgment dismissing a plaintiff’s claims against his former employer for breach of the employment contract. Twin Lakes Golf Course hired Holloway to move from Illinois and serve as its head pro for three years. After further negotiations in July 2008, Twin Lakes and Holloway orally agreed to an employment term lasting one year with an agreement to extend for another three years based on his performance. Holloway started working on August 5, 2008, and soon after Twin Lakes presented a written contract, dated July 23, containing the terms of the agreement. Holloway signed the document but Twin Lakes never did. Holloway was fired eight weeks later and he sued for breach of contract and fraudulent inducement. The trial court granted summary judgment in favor of Twin Lakes.
On appeal, the court determined that the agreement was not enforceable because, as an agreement that could not be performed within one year, it fell within the statute of frauds. The court noted that the contract was negotiated in July 2008 and the document that Holloway signed was dated July 23. Thus, the agreement was made in July 2008 and performance was to end in August 2009 – over one year. Additionally, Holloway’s employment was to last from August 5, 2008 to August 5, 2009 – one year and one day. The court also held that Holloway’s affidavit testimony stating that the agreement could be performed within one year was conclusory. Finally, his partial performance did not remove the agreement from the statute of frauds because he was compensated. Thus, the agreement was unenforceable and Holloway’s claims failed as a matter of law.
Holloway v. Dekkers and Twin Lakes Golf Course, Inc., 05-10-01132-CV
In 2005, Parkwood Creek Owner’s Association sued Aharon Chen for Chen’s failure to complete the repair work Parkwood had hired him to complete, as well as for Chen’s failure to repair the defective work that he did complete. This suit settled in March 2008, with the parties entering into a Rule 11 Agreement whereby Chen agreed to make specified monthly payments to Parkwood and to remedy some of his previous shoddy work. Several months later, Parkwood moved to enforced the Rule 11 Agreement, claiming that Chen had failed both to deliver the stipulated materials and to deliver them at the specified time. After an bench trial, the court found for Parkwood and entered judgment against Chen for $30,000 (the agreed-to liquidated damages amount) and for $7,500 in attorney’s fees.
On appeal, Chen argued, among other things, that he substantially performed the contract and that Parkwood itself committed a prior material breach by not giving Chen a list of materials. The Court of Appeals rejected Chen’s arguments, holding that the evidence was sufficient to establish a breach of the Rule 11 Agreement. The Court found that Chen did not, in fact, provide the right materials, and that he refused to show up to inspections. It further found that Chen had met with Parkwood representatives and determined the precise materials needed for repair. The Court thus sustained the trial court’s decision and upheld the liquidated damages provision.
Aharon Chen v. Parkwood Creek Owner’s Association, Inc., No. 05-10-015511
The court affirmed a take-nothing summary judgment on fraud and promissory estoppel claims arising out of the purchase of land. Mavex purchased property, which was subject to subject to a easement, for the construction of a condominium complex. The parties to the easement amended it to allow for the condominium and the use of an adjacent parking deck subject to approval of the construction plans. Metzler, one of the easement holders, later refused to approve the condominium plans due to a dispute over the correct allocation of parking spaces for the exclusive use of the condominium tower as Mavex’s plans specified. Mavex sued Metzler and its predecessors-in-interest. Mavex alleged that before and after they entered into the purchase agreement for the property, the defendants assured Mavex that the plans were acceptable and that they relied on this approval of the condominium plans. The trial court granted summary judgment against Mavex.
On appeal, the court held that Mavex presented no evidence to support their promissory estoppel and fraud claims because Mavex’s affidavit evidence merely provided conclusory allegations that the appellees made assurances Mavex relied on, but did not identify with any specificity when the statements were made nor what actions appellants took in reliance on them. The court further held that, at any rate, the alleged statements were insufficient to support Mavex’s claims, and affirmed the summary judgment.
Mavex Management Corporation v. Hines Dallas Hotel Limited Partnership, et al, 05-09-01281-CV
Memorandum opinions don’t usually run as long as 12 pages, but that’s how much space it took to sort out a dispute between a property owner and the contractor he hired to do some paving work on the property. The contractor seemingly abandoned the unfinished project — which was supposed to have taken 7-10 days — after two months, and left behind his rented bulldozer. The property owner eventually terminated the parties’ contract, but refused to hand over the bulldozer. The bulldozer subsequently disappeared from the property, with the landowner claiming it had been stolen (a claim the trial court deemed “not credible”).
The trial court found the property owner liable for conversion of the bulldozer, and the court of appeals affirmed. The court held that the trial testimony adequately supported the findings that (1) the lessor was the proper owner of the vehicle, (2) the landowner had exercised dominion and control over it, (3) the property owner had not acted in good faith in refusing to return the bulldozer, and (4) the alleged superseding cause of the bulldozer’s mysterious disappearance was irrelevant because the alleged theft occurred after the landowner had refused to return it to the rightful owner. The court of appeals also held that even though the trial court erred by allowing two undisclosed witnesses to testify at trial, that error was harmless because their testimony was cumulative of what other witnesses had also testified. Finally, the court reversed the trial court’s refusal to grant judgment in favor of the property owner on his breach of contract claim, holding that the evidence supported the breach of contract claim as a matter of law. Accordingly, the court of appeals remanded the case to the trial court for a determination of the landowner’s damages and the possible recovery of attorney fees.
Miller v. Carter., No. 05-11-00193-CV
This landlord-tenant dispute involved Tenet Health Systems and Live Oak, a group of doctors, as tenants. Live Oak entered into a lease with Tenet for a five year period, expiring on June 30, 2006. Live Oak claimed that, before the lease expired, Tenent successfully encouraged them to relocate to a new space in Frisco, Texas, with the promise that Tenet would find someone to take over the lease. However, sometime after Live Oak abandoned the original lease and stopped making payments, Tenet demanded unpaid rent for that lease.
The Court of Appeals first found that the doctors who signed the lease were personally liable for unpaid rent under the lease agreement, because “[t]he objective intent of the parties, as expressed in the unambiguous language of the lease, was that those persons comprising Live Oak . . . would be jointly and severally responsible for Live Oak’s obligations under the lease.”
On a separate issue, Live Oak also argued that they had raised sufficient facts for their defenses of mitigation and estoppel to survive summary judgment because they had submitted an affidavit asserting that (1) Tenet had a willing tenant to take over the lease, but purposefully waited until the term expired before letting this new tenant take over and (2) Tenet had made promises to induce them to move to Frisco. The Court of Appeals rejected this argument, holding that conclusory statements in an affidavit not based on personal knowledge cannot present sufficient evidence to survive summary judgment.
In dissent, Justice Lang-Miers disputed the holding that the doctors should be individually liable under the lease because the lease’s terms were ambiguous and the landlord could not show that its interpretation of the contract should control.
Live Oak v. Tenent Healthsystem Hospitals Dallas, Inc., No 05-11-00342 (majority)
Live Oak v. Tenent Healthsystem Hospitals Dallas, Inc., No. 05-11-00342 (dissent)
The court reversed the dismissal of a claim against an engineering consultant in an opinion dealing with the “certificate of merit” requirement in section 150.002 of the Texas Civil Practice and Remedies Code. Though there was no written contract between JJW and Strand, JJW originally asserted claims against Strand for breach of contract and negligence arising from a cracked foundation Strand designed. JJW later dropped its negligence claims and asserted only the contract action against Strand in its third amended petition, claiming that it entered an oral or implied contract with Strand to perform a “pre-pour” inspection of the foundation. JJW alleged that Strand breached this contract by failing to measure the depth of the concrete slab. Strand moved to dismiss the action because JJW failed to file a certificate of merit with its petition. JJW responded that the applicable 2005 version of section 150.002 does not apply to a claim for breach of contract. The trial court dismissed the claim.
On appeal, the court first held that it would consider the live pleadings at the time of the trial court’s ruling on the motion to dismiss to determine whether and how section 150.002 applied to the plaintiff’s claims. Examining the third amended petition, the court agreed with the majority of the Texas courts of appeals and held that the 2005 version of section 150.002 requires a certificate for negligence claims only and not for non-negligence claims. In doing so, the court rejected the approach recently taken by an en banc panel of the Austin court of appeals. The court noted, however, that it still must determine whether JJW’s contract claim was truly based on Strand’s alleged contractual obligations to JJW or was merely a negligence claim recast as breach of contract.
To determine the nature of the claim, the court looked to the source of the duty owed and the nature of the remedy sought. The court held that because JJW alleged that Strand had an express or implied contractual obligation to measure the depth of the slab – independent from its duty to exercise a professional degree of care, skill, and competence in performing the pre-pour inspection – the duty arose from the contract. The court also held that the remedy – consequential damages for the diminution in value of the residence and the loss of use and other damages due to necessary repairs – was based in contract because those damages are “consequences of the alleged failure to perform a pre-pour inspection.” Thus, the court concluded that the nature of the claim was, indeed, contractual.
JJW Development, LLC v. Ramer Concrete, Inc. and Strand Systems Engineering, Inc., 05-10-01359-CV
This lawsuit arose from the sale of a 42,000 acre West Texas ranch. In 2007, JP Morgan, the trustee holding the ranch, entered into a contract with AKB Hendrick Limited Partnership, granting AKB ten months to raise money to purchase the ranch during which JP Morgan would not market, solicit or accept any “back up” offers to purchase the ranch. AKB would deposit $250,000 in escrow, from which fees would be deducted as time passed. Despite this contract, Hamilton, a member of AKB, subsequently approached Kenneth Musgrave about purchasing the ranch. Musgrave and Hamilton entered into an agreement whereby AKB permitted Musgrave to seek to purchase the ranch if AKB were paid $1M upon Musgrave’s successful purchase.
AKB then informed JP Morgan that it was terminating their agreement. Negotiations continued between Musgrave and JP Morgan. The parties agreed to a sale in April 2008, but in August 2008, before closing, Musgrave terminated the agreement. AKB sued Musgrave (and various Musgrave entites) for fraud, breach of contract, and several other counts. The trial court granted summary judgment in favor of Musgrave, and AKB appealed.
On the fraud count, the Court of Appeals found that AKB was not justified in relying on certain representations made by Musgrave because, when the representations were made, the two were involved in a commercial transaction and “the representation took place in an adversarial context.” The Court also dismissed fraud claims stemming from Musgrave’s statement that “he could help out with certain fees if those became an issue.” According to the Court, promises of future performance are only actionable misstatements if the promise was made with no intention to perform, and AKB did not present evidence establishing such intent. The also Court found that Musgrave did not breach its contract with AKB because Musgrave never successfully purchased the Ranch.
Delcom Group, LP thought that it was the winning bidder for a project to install “Digital Classroom integration solutions with technology components including installation and service at multiple school facilities” in the Dallas Independent School District. But when DISD dumped Delcom and went with the second-place bidder instead, Delcom sued both the school district and the competing bidder. The trial court granted a temporary restraining order to prevent DISD and the competitor from using Delcom’s trade secrets, but ultimately denied a temporary injunction and granted the school district’s plea to the jurisdiction. On interlocutory appeal from that ruling, the court of appeals affirmed. Despite a chain of documents that Delcom pointed to as forming the contract, the court held that the contractor could not sue DISD for breach because the parties had never settled on the essential terms of a contract. Among other problems, Delcom had actually submitted two different bids, one for $79 million and the other for $62 million — and DISD had never stated which bid it intended to accept. Because the parties had not agreed on the essential terms of a contract, there could be no waiver of governmental immunity under section 271.152 of the Local Government Code. The court likewise rejected Delcom’s takings claim, because there could be no taking when Delcom had given its alleged trade secrets to the school district voluntarily. Finally, the panel affirmed the trial court’s denial of the temporary injunction, holding that Delcom had not established any imminent and irreparable injury through use of its trade secrets, nor had it shown it could not be compensated with money damages if any actual misappropriation were to occur.
Delcom Group, LP v. Dallas Independent School District, No. 05-11-01259-CV
The court of appeals has issued an opinion affirming an insurer’s obligation to cover the costs of defense. In an underlying lawsuit, two homeowners sued their builder for negligent construction of the home. The builder had been insured by several companies over the years, including Great American and Audobon. Great American initially agreed with the other insurers that it would cover one-third of the defense costs, but it pulled out of that deal when it was revealed that the damage to the house had occurred before its policy went into effect. Audobon then sued Great American. The trial court granted summary judgment in favor of Audobon, and the court of appeals affirmed.
On appeal, Great American argued that it had no duty to defend the underlying case because discovery had established that the homwoners’ claim did not arise during its policy period. The court of appeals rejected that argument because the duty to defend is invoked by the plaintiff’s pleading, not the underlying facts. In this case, the homeowners’ petition alleged only that the injury had occurred at some unspecified date in the past, which could have included the period when Great American’s policy was in effect. Thus, under the “eight corners” of the pleading and the insurance policy, Great American was obligated to cover the costs of defending the claim.
Great American Lloyd’s Ins. Co. v. Audobon Ins. Co., No. 05-11-00021-CV
In a memorandum opinion the court reversed as insufficient a summary judgment award to a neighborhood association against a delinquent property owner. Gashaye’s property is subject to a covenant to pay assessments to Candlewood, which Gashaye failed to do. Candlewood sought foreclosure of the lien securing Gashaye’s obligation and attorney’s fees, presenting evidence proving $1545 in unpaid assessments and late fees and $2500 in attorney’s fees. The trial court awarded Candlewood $50. The court reversed, holding that the award of $50 under these circumstances was so contrary to the overwhelming weight of the evidence that it was clearly wrong and unjust. The court noted that attorney’s fees are recoverable on a breach of a homeowner’s association covenant, but remanded for the determination of a proper damages and attorney’s fees award.
Candlewood Creek Neighborhood Association, Inc.v. Gashaye, No. 05-11-00380-CV
In Farmers Insurance Exchange v. Greene, Appellee-Greene maintained a homeowner’s insurance policy with Famers Insurance Exchange (“FIE”). Among other things, the Policy contained a vacancy provision which suspended coverage for any damage to the dwelling that occurred 60 days after the dwelling becomes vacant. As luck would have it, Greene moved out of the covered residence 4 months before a fire destroyed it. Greene notified FIE of the damage, but FIE denied her claim based on the vacancy provision. She sued and the trial court granted summary judgment in Greene’s favor, finding that her violaiton of the vacancy clause did not contribute to the loss, and thus did not prevent her from recovering under the Policy.
The Court of Appeals reversed, holding that the vacancy clause was clear and unambiguous in that it suspends coverage sixty days after the residence becomes vacant. It also noted that “the vacancy clause functions as an exclusion; it excepts a specific condition (vacancy) from coverage.” Further, the Court found that Section 862.054 of the Insurance Code—which provides that an insured’s breach of a provision or condition in a policy does not constitute a defense to a suit for loss unless the violation contributed to the destruction of the property—was inapplicable. The vacancy of the home increased the risk of insuring it, and the Court felt that, under such circumstances, “we are loathe to engraft by judicial fiat additional terms requiring FIE to assume liability for a risk the Policy specifically excluded.
by Chris Patton
Citibank sued a credit card account holder for breach of contract and account stated to collect the balance due on a cardholder’s credit card account. In the trial court, Citibank moved for summary judgment, which the trial court granted in its favor. On appeal, the defendant challenged the trial court’s decision on a number of grounds. However, because the defendant, who was proceeding pro se, repeatedly cited to exhibits and other evidence that were not in the record, the court refused to address the issues related to breach of contract raised by the defendant. The court also refused to address the issues related to account stated claim. Because Citibank moved for summary judgment on the alternative grounds of breach of contract and account stated, and because the trial court did not specify the grounds on which summary judgment was granted, the court found that it need not resolve the issues related to the suit on account claim. Because “even if we resolved it in [Defendant’s] favor our decision would not change the outcome of this appeal.”
Burruss v. Citibank, No. 05-10-01376-CV
The court reversed and rendered judgment in a breach of contract action related to a letter of intent (“LOI”) to acquire the stock of a corporation. Corilant and FFSS executed an LOI for Corilant’s acquisition of FFSS’s stock. The LOI provided for future “Definitive Agreements” memorializing the precise terms and conditions of the sale. FFSS scuttled the deal before executing the Definitive Agreements. Corilant sued for breach of the LOI and a jury awarded it $1.8 million.
On appeal, the court held that the LOI was not an enforceable contract because the essential terms of two of its provisions were uncertain. First, the LOI provided for structured earn-out payments to Corilant but failed to sufficiently characterize the payments. The evidence showed the parties’ lack of mutual understanding with respect to this provision. Second, the LOI provided that FFSS’s Chairman would continue to be involved in management of the company but failed to specify the terms of his employment. This provision also specifically contemplated a future management agreement, which was actually drafted but never executed. Finally, the court rejected Corilant’s argument that enforceability of uncertain terms is a factual determination. In doing so it distinguished an earlier case in which parties disputed whether an LOI was intended to be the final expression of a contract, which neither Corilant nor FFSS argued.
Fiduciary Financial Services of The Southwest v. Corilant Financial, No. 05-10-00471-CV
The court issued a significant ruling related to the remedy for shareholder oppression, holding that the equitable relief of a “fair value” buy-out was not precluded by a provision in an Agreement mandating a “book value” buy-out. Joubran, the sole shareholder of a cardiac perfusion company, hired Hughes, sold him 10% of the corporation’s outstanding shares, and entered into an Agreement requiring Joubran to purchase Hughes’s stock at book value upon the severance of his employment. Years later a dispute arose, Hughes was terminated, and Hughes sued Joubran for shareholder oppression. The trial court held that that Joubran engaged in shareholder oppression and awarded Hughes what the jury found to be the fair value of his shares in the company.
On appeal, Joubran argued that the trial court should have calculated the value of the shares based on their book value as required in the Agreement because a party to a contract generally cannot recover equitable relief inconsistent with that contract. But the court held that the trial court had the equitable power to order a buy-out at fair value because the book value of Hughes’s shares was reduced by Joubran’s oppressive conduct and, additionally, Hughes was not suing for breach of contract. This holding squares with the court’s recent decision in Ritchie v. Rupe that the “enterprise value” method for determining stock’s fair value, i.e. determining the pro rata value of each share without any discount based on the stock’s minority status or marketability, is appropriate in shareholder oppression suits when the oppressive conduct of the majority forces a minority shareholder to relinquish his ownership position. 339 S.W.3d 275, 289 (Tex. App.—Dallas 2011, pet. filed)
As a secondary issue, the court addressed whether a shareholder that exercises dominating control over a corporation owes a formal fiduciary duty to the minority shareholders. In its verdict, the jury found that no informal fiduciary duty existed between the shareholders, but nonetheless found that Joubran breached a fiduciary duty to Hughes and awarded Hughes almost $2 million in actual and exemplary damages. The trial court declined to render judgment in favor of Hughes, who argued on appeal that the trial court should have disregarded the first jury finding because, under the circumstances, Joubran owed Hughes a formal fiduciary duty. The court disagreed, citing numerous Texas cases to the contrary and noting that the Texas Supreme Court expressly declined to recognize such a duty in Willis v. Donnelly, 199 S.W.3d 262, 276 (Tex. 2006).
Cardiac Perfusion Services, Inc. v. Hughes, No. 05-10-00286-CV
The court reversed a no-summary judgment against the employees of a lawn service company. The employees alleged that the lawn service issued them worthless paychecks for two months. The employer filed a no-evidence motion for summary judgment that neither referred to the facts alleged nor specified in what way the evidence failed to support the claims. The employees responded, attaching affidavit evidence and wage statements. The employers objected to the evidence as hearsay, but the court ruled that objection was waived because they failed to obtain a ruling from the trial court on their objection. The court also held that the affidavits and wage statements were sufficient evidence to defeat summary judgment because they indicated at least an implied employment contract that the employer breached, damaging the employees.
Gaspar, et al., v. Lawnpro Inc., No. 05-11-00861-CV
The court today issued an opinion in a products liability indemnification case arising out of a helicopter crash in North Carolina. The company that operated the helicopter sued the manufacturer of a defective gearbox after the operator settled with the estate of the deceased pilot for $2.5 million. The gearbox maker had agreed to indemnify the operator for all losses, claims, and expenses arising out of any defective work. The jury found that the negligence of both parties had been a proximate cause of the accident, but the trial court set aside that finding with respect to the gearbox manufacturer and rendered a take-nothing judgment on the operator’s indemnification claim. The court of appeals affirmed, holding that there was sufficient evidence that the operator’s negligence caused the helicopter to crash. The court then accepted the manufacturer’s argument that the express negligence doctrine barred the operator’s indemnity claim because the indemnity agreement failed to state that it would require the manufacturer to indemnify against the operator’s own negligence. Even though the manufacturer’s own negligence had been found to be a proximate cause of the crash, the operator could not recover against the manufacturer because the parties did not contract for proportionate indemnity.
American Eurocopter Corp. v. CJ Systems Aviation Group, No. 05-10-00342-CV
The court of appeals has issued a memorandum opinion reinstating an arbitration award. The case turned on the application of a “dollar-for-dollar credit” provided for in the parties’ written agreement. The arbitration panel concluded that the credit only applied to certain cases brought by the defendant’s law firm, resulting in an award of $551,000 in damages on the defendant’s counterclaim. After the plaintiff/counter-defendant filed suit to challenge the arbitration award, the trial court apparently accepted a different interpretation of the contract and lowered the amount of the award. The court of appeals reversed and reinstated the arbitration award, holding that there was no “evident material miscalculation of figures” and that the award was supported by the parties’ evidence.
Petroff v. Shrager, Spivey & Sachs, No. 05-10-00159.
In a construction contract case, the court has reversed summary judgment in favor of an electrician subcontractor against a retail property leaseholder. The subcontractor alleged that he had performed 80% of the work at the property when the general contractor’s check bounced, and the subcontractor sued the property leaseholder for the difference. The district court granted summary judgment in favor of the subcontractor. The court of appeals reversed and remanded, holding that (1) a fact issue existed as to the proper amount of retainage the leaseholder was to retain and (2) the court erroneously awarded the subcontractor certain amounts under the Texas “Fund Trapping” statute that the leasehold had paid to replacement contractors.
Jewelry Manufacturer’s Exchange, Inc. v. Tafoya, No. 05-11-00065-CV
