Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

Need a little legal ammo? Search for caselaw on legal theories and defenses here:

Tuesday, August 9, 2011

It was not possible to perform the contract ... is that a viable defense?

Impossibility of Performance as a defense: Will it fly in a court of law?

Subjective or objective impossibility? ... That is the question  

There are two general types of impossibility: (1) objective, and (2) subjective. Walston v. Anglo-Dutch Petroleum (Tenge) L.L.C., No. 14-07-00959-CV, 2009 WL 2176320, at *6 n.2 (Tex. App.—Houston [14th Dist.] July 23, 2009, no pet.) (mem. op.); Janak v. FDIC, 586 S.W.2d 902, 906–07 (Tex. Civ. App.—Houston [1st Dist.] 1979, no writ).

Objective impossibility relates solely to the nature of the promise. See Janak, 586 S.W.2d at 906–07. Something is objectively impossible if “the thing cannot be done,” such as an inability “to perform the promise to settle [a] claim by entering an agreed judgment in the lawsuit which had been dismissed” prior to the completion of the agreement. See Grayson v. Grayson Armature Large Motor Div., Inc., No. 14-09-00748-CV, 2010 WL 2361432, at *5 (Tex. App.—Houston [14th Dist.] June 15, 2010, pet. denied) (mem. op.).

Subjective impossibility is due wholly to the inability of the individual promisor. See id. Something is subjectively impossible if “I cannot do it,” such as when a promisor’s financial inability to pay makes it impossible for the promisor to perform. See id.

Objective impossibility can serve as a defense in a breach of contract suit. Janak, 586 S.W.2d at 906–07. However, a party cannot escape contract liability by claiming subjective impossibility; subjective impossibility neither prevents the formation of the contract nor discharges a duty created by a contract. See Grayson, 2010 WL 2361432, at *5; Walston, 2009 WL 2176320, at *6 n.2; Janak, 586 S.W.2d at 906–07.

SOURCE: Fort Worth Court of Appeals - 02-10-00296-CV - 8/4/11

Because the parties do not dispute (1) that the Note and Security Agreement exist and are valid, (2) that Steven executed the Note in Michele’s favor for $460,000, (3) that Michele is the Note’s owner and holder, and (4) that Steven did not meet his obligation when the Note matured, we conclude that Michele has met her burden under rule 166a(c). Thus, unless Steven raised a fact issue supporting his affirmative defenses sufficient to defeat Michele’s motion for summary judgment, the trial court did not err by granting summary judgment as a matter of law for Michele. See Brownlee, 665 S.W.2d at 112; Anglo-Dutch Petroleum Int’l, Inc., 193 S.W.3d at 95.

Steven first argues that the trial court erred by granting summary judgment because reading the contemporaneously executed Note and Security Agreement together, as required by business and commerce code section 3.117, shows that he relied on his ability to sell the stock to meet the terms of the Note. He further argues that because he could not sell the Cano stock referenced in both the Note and the Security Agreement, he should have been relieved of his obligation under the Note. But Steven fails to point to, and we fail to find, any language in the Security Agreement that contradicts the Note or shows that the parties agreed that the Note’s obligation would be satisfied solely from the sale of Steven’s Cano stock. See Tex. Bus. & Comm. Code Ann. § 3.117 cmt. 1; see also Brownlee, 665 S.W.2d at 112 (holding that defendant’s asserting legal conclusion that original agreement “was modified” was insufficient to defeat plaintiff’s summary judgment motion). We also find nothing extraordinary in the language of the Note or the Security Agreement to show anything other than that the parties agreed that Steven’s Cano stock would serve as collateral for the underlying obligation in the same manner that collateral generally serves to secure the performance of an outstanding obligation. In fact, the Security Agreement provides that Steven had “the right at any time to substitute certificates of deposit” in place of the Cano stock as security for the Note, thus, the terms of the instrument itself directly contradict Steven’s assertion that the parties intended that only his Cano stock be used to satisfy his obligation under the Note. We, therefore conclude that Steven failed to raise a fact issue relative to his section 3.117 defense sufficient to defeat Michele’s motion for summary judgment.

Steven next argues that the trial court erred by failing to excuse his performance because it was impossible for him to sell his Cano stock. Steven relies on Centex Corp. v. Dalton, 840 S.W.2d 952 (Tex. 1992), to support his argument. However, in Centex, the supreme court found that a cease-and-desist order issued by a regulatory agency endowed with appropriate legal authority made it illegal for Centex to perform (to pay Dalton) under the agreement. Id. at 954. Here, the stock-sale moratorium Steven claims made his performance impossible did not make payment to Michele illegal; rather it simply temporarily impacted Steven’s ability to sell the stock[4]—an asset that he could have used, but was not required to use, to satisfy his obligation. See Huffines v. Swor Sand & Gravel Co., Inc., 750 S.W.2d 38, 40 (Tex. App.—Fort Worth 1988, no writ) (“Texas courts have held contractual obligations cannot be avoided simply because the obligor’s performance has become more economically burdensome than anticipated.”). And, because we conclude above that the Cano stock was not the exclusive method for Steven to satisfy his obligation, and because Steven did not raise any other argument to show that his performance under the Note was impossible, his claim of subjective impossibility does not excuse his performance under the Note, and he has failed to raise a fact issue supporting his affirmative defense of impossibility. See Grayson, 2010 WL 2361432, at *5–6; Walston, 2009 WL 2176320, at *6 n.2; Janak, 586 S.W.2d at 906–07.
Accordingly, because he failed to raise a fact issue on each element of his affirmative defenses sufficient to defeat Michele’s motion for summary judgment, we overrule Steven’s sole issue.

SOURCE: Fort Worth Court of Appeals - 02-10-00296-CV - 8/4/11

No comments:

Post a Comment