Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Tuesday, June 7, 2011

Does the Statute of Frauds apply? - Selling of real estate vs. lease contract

STATUTE OF FRAUDS: Contract for sale of real property vs. lease contract While a contract for the sale of real property becomes invalid under the statute of frauds if there is an invalid legal description of the property, see Jones v. Kelley, 614 S.W.2d 95, 99 (Tex. 1981); Republic Nat'l Bank of Dallas v. Stetson, 390 S.W.2d 257, 261 (Tex. 1965); Nguyen v. Yovan, 317 S.W.3d 261, 267 (Tex. App.--Houston [1st Dist.] 2009, pet. filed), a contract for the lease of the property does not necessarily become invalid under the same circumstances. Rather, when a contract for the lease of property is ambiguous, extraneous evidence is admissible to determine the meaning of the contract. See Towers of Tex., Inc. v. J & J Sys., Inc., 834 S.W.2d 1, 2 (Tex. 1992) (trial court did not err in deeming property description in lease ambiguous and considering further evidence to resolve the issue); United Interests, Inc. v. Brewington, Inc., 729 S.W.2d 897, 903 (Tex. App.--Houston [14th Dist.] 1987, writ ref'd n.r.e.) (trial court did not err in determining that certain paragraphs in sublease were ambiguous and then admitting parole evidence to determine parties' intent). SOURCE: Austin Court of Appeals - 03-09-00713-CV - 6/3/11 RELATED LEGAL CONCEPTS: admissibility of parol evidence, extraneous extrinsic evidence, testimony

Monday, June 6, 2011

No enforceable contract when essential terms are missing

DEFINITIVENESS REQUIRED: Breach of contract claim may fail if alleged contract does not include agreement on essential terms Whether an agreement has all the essential terms to be an enforceable agreement is a question of law. See America's Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 625 (Tex. App.-San Antonio 1996, writ denied). Each contract should be considered separately to determine its material terms. See T. O. Stanley Boot Co., 847 S.W.2d at 221 (citing Bridewell v. Pritchett, 562 S.W.2d 956, 958 (Tex. Civ. App.-Fort Worth 1978, writ ref'd n.r.e.)). To be enforceable, a contract must be sufficiently definite in its terms that a court can understand what the promisor undertook. T. O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). The material terms of the contract must be agreed on before a court can enforce it. Id. If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex. App.-San Antonio 1989, no writ). A lack of definiteness in an agreement may concern various elements, including time of performance, price to be paid, work to be done, or service to be done. Gannon v. Baker, 830 S.W.2d 706, 709 (Tex. App.-Houston [1st Dist.] 1992, writ denied); Terrell v. Nelson Puett Mortgage Co., 511 S.W.2d 366, 369 (Tex. Civ. enApp.-Austin 1974, writ ref'd n.r.e.). SOURCE: DKH Homes, LP v. Kilgo, No. 03-10-00656-CV - 5/11/11 (no contract formed, essential terms missing) ("We conclude that the Agreement at issue does not include terms essential to an agreement to construct a house.") RELATED LEGAL TERMS: enforceability of contract, challenge to contract validity, contention that there is no contract, lack of meeting of the minds on essential terms, contractual rights and duties of the parties not sufficiently defined OLDER CASELAW CLIPS ON SUFFICIENCY OF CONTRACTUAL TERMS Mere Agreement to Agree on some terms yet to be specified is not enough It is established law that a writing need not have all the stipulations between the parties to be considered a contract. Osborn v. Moore, 247 S.W.2d 498 (Tex. 1923). Rather, a contract need only have the essential elements. Id. A contract can also exist even though there are terms on which the parties have not agreed and which they expect further negotiation. Scott v. Ingle Bros. Pacific Inc., 489 S.W.2d 554, 555 (Tex. 1972). Nevertheless, when an essential term is left open for future negotiation, there is no binding contract. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). An agreement to make a future agreement is enforceable only if it contains all essential terms. Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000). Thus, to decide whether the agreement is enforceable, the Court must first determine what the material elements of the contract are, and then whether those elements are included in the Letter Agreement. What terms are material may vary depending on the type of contract, subject matter Contracts must be read separately to determine the necessary material terms. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992) (citing Bridewell v. Pritchett, 562 S.W.2d 956, 958 (Tex. Civ. App.Fort Worth 1978)). Material terms are those that the parties would reasonably regard as vitally important elements of their bargain. Potcinske v. McDonald Property Investments, Ltd., 245 S.W.3d 525, 531 (Tex. App.-Houston [1st Dist.] 2007) (citing Neeley v. Bankers Trust Co., 757 F.2d 621, 628 (5th Cir. 1985)). Additionally, a contract must define its essential terms with enough precision to enable the court to determine the obligations of the parties. Central Texas Micrographics v. Leal, 908 S.W.2d 292, 296-297 (Tex. App.-San Antonio 1995) (citing Weitzman v. Steinberg, 638 S.W.2d 171, 175 (Tex. App.-Dallas 1982)). It is well established that the terms of an oral contract must be clear, certain, and definite. Haden Co. v. Riggs, 84 S.W.2d 789, 798 (Tex.Civ.App.—Galveston 1935), affd, 127 Tex. 314, 94 S.W.2d 152 (1936). If an alleged agreement is so indefinite that it is impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. Moore v. Dilworth, 142 Tex. 538, 179 S.W.2d 940, 942 (1944); University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex.App.—San Antonio 1989, no writ). A lack of definiteness in an agreement may concern the time of performance, the price to be paid, the work to be done, the service to be rendered or the property to be transferred. University Nat'l Bank, 773 S.W.2d at 710 With respect to an oral agreement to transfer stock, terms must state the specific quantity of shares and the specific price in order to be considered "clear, certain, and definite." Consolidated Petroleum Indus, v. Jacobs, 648 S.W.2d 363, 366 (Tex.App.— Eastland 1983, writ ref'd n.r.e.). Courts are barred from rewriting a contract for the parties, but if a provision is too vague to be enforced, courts will not enforce it. See John Wood USA, Inc. v. ICO, Inc., 26 S.W.3d 12, 21 (Tex.App.-Houston [1st Dist.] 2000, pet. denied); University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex.App.-San Antonio 1989, no writ) ("If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract.") If an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. Moore v. Dilworth, 142 Tex. 538, 179 S.W.2d 940, 942 (1944); Weitzman v. Steinberg, 638 S.W.2d 171, 175 (Tex.App. —Dallas 1982, no writ). A lack of definiteness in an agreement may concern the time of performance, the price to be paid, the work to be done, the service to be rendered or the property to be transferred. Terrell v. Nelson Puett Mortgage Co., 511 S.W.2d 366, 369 (Tex.Civ.App.—Austin 1974, writ ref'd n.r.e.). There is no authority to ask a jury to supply an essential term in the contract which the parties were unable to complete by mutual agreement. Weitzman, 638 S.W.2d at 175.

Aiding & Abetting Breach of Fiduciary Duty (BoFD)

AIDING AND ABETTING BREACH OF FIDUCIARY DUTY When a defendant knowingly participates in the breach of a fiduciary duty, he becomes a joint tortfeasor and is liable as such. Kastner v. Jenkens & Gilchrist, P.C., 231 S.W.3d 571, 580 (Tex. App.--Dallas 2007, no pet.); see also Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509, 513-14 (Tex. 1942). Knowing participation in actionable conduct A cause of action based on a contribution to a breach of fiduciary duty must involve the defendant's knowing participation in such a breach. Kaster, 231 S.W.3d at 580; Cox Tex. Newspapers, L.P. v. Wootten, 59 S.W.3d 717, 722 (Tex. App.--Austin 2001, pet. denied). A claim that a defendant knowingly participated in a breach of fiduciary duty by a third party necessarily hinges on the existence of a fiduciary duty owed by the third party to the plaintiff. Cox Tex. Newspapers, 59 S.W.3d at 722. In addition to the existence of a fiduciary duty, the plaintiff must show the defendant knew of the fiduciary relationship and was aware of his participation in the third party's breach of its duty. Id. SOURCE: Dallas Court of Appeals - 05-10-00369-CV - 5/26/11

Fraud by non-disclosure: Essential elements

FRAUD BY NONDISCLOSURE The elements of fraud by nondisclosure are: (1) the defendant failed to disclose facts to the plaintiff; (2) the defendant had a duty to disclose those facts; (3) the facts were material; (4) the defendant knew the plaintiff was ignorant of the facts and the plaintiff did not have an equal opportunity to discover the facts; (5) the defendant was deliberately silent when it had a duty to speak; (6) by failing to disclose the facts, the defendant intended to induce the plaintiff to take some action or refrain from acting; (7) the plaintiff relied on the defendant’s nondisclosure; and (8) the plaintiff was injured as a result of acting without that knowledge. Bright v. Addison, 171 S.W.3d 588, 599 (Tex. App.—Dallas 2005, pet. denied). SOURCE: Waco Court of Appeals - 10-10-00354-CV - 5/4/11

Injunctions as a Remedy: What elements must be satisfied?

PERMANENT INJUNCTIONS AS A FORM OF JUDICIAL RELIEF To obtain a permanent injunction, a plaintiff must prove (1) the existence of a wrongful act, (2) the existence of imminent harm, (3) the existence of irreparable injury, and (4) the absence of an adequate remedy at law. Jim Rutherford Investments Inc. v. Terramar Beach Community Ass'n., 25 S.W.3d 845, 849 (Tex. App.—Hous. [14 Dist.] 2000, pet. den’d). SOURCE: Waco Court of Appeals - 10-09-00276-CV - 5/11/11 TEMPORARY VS. PERMANENT INJUNCTIONS: Different rules apply Rule 683 does not apply to permanent injunctions In his final point of error, [ appellant ] argues that the trial court’s order granting permanent injunction is void because it fails to comply with the requirements of Rule 683 of the Texas Rules of Civil Procedure in that it “fails to set forth any reason for its issuance” and “fails to describe in reasonable detail . . . the act or acts sought to be restrained.” Rule 683 states that “[e]very order granting an injunction . . . shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail and not by reference to the complaint or other document, the act or acts sought to be restrained.” Tex. R. Civ. P. 683. The requirements of Rule 683 are mandatory and must be strictly followed. Qwest Commc’ns Corp. v. AT & T Corp., 24 S.W.3d 334, 337 (Tex. 2000) (per curiam); InterFirst Bank San Felipe, N.A. v. Paz Constr. Co., 715 S.W.2d 640, 641 (Tex. 1986) (per curiam); Monsanto Co. v. Davis, 25 S.W.3d 773, 788 (Tex. App.—Waco 2000, pet. dism’d w.o.j.). If an injunction order fails to comply with the requirements of Rule 683, it is void. Qwest Commc’ns Corp., 24 S.W.3d at 337; AutoNation, Inc. v. Hatfield, 186 S.W.3d 576, 581 (Tex. App.—Houston [14th Dist.] 2005, no pet.). However, it is well-established that Rule 683 applies only to temporary or ancillary injunctions and does not apply to permanent injunctions. Vaughn v. Drennon, 202 S.W.3d 308, 321 (Tex. App.—Tyler 2006, no pet.); Qaddura v. Indo-European Foods, Inc., 141 S.W.3d 882, 892 (Tex. App.—Dallas 2004, pet. denied); Shields v. State, 27 S.W.3d 267, 273 (Tex. App.—Austin 2000, no pet.); Spinuzzi v. Town of Corinth, 665 S.W.2d 530, 534 (Tex. App.—Fort Worth 1983, no writ). SOURCE: Texarkana Court of Appeals - No. 06-10-00113-CV - 5/26/11 ("Because the trial court granted a permanent injunction in this case, rather than a temporary injunction, Rule 683 does not apply. Accordingly, we overrule this point of error.")

Elements of False Imprisonment Claim

FALSE IMPRISONMENT – CIVIL CAUSE OF ACTION The essential elements of false imprisonment are: (1) willful detention; (2) without consent; and (3) without authority of law. Wal-Mart Stores, Inc. v. Rodriguez, 92 S.W.3d 502, 506 (Tex. 2002) (quoting Sears, Roebuck & Co. v. Castillo, 693 S.W.2d 374, 375 (Tex. 1985)). ―[I]f the alleged detention was performed with the authority of law, then no false imprisonment occurred. Wal-Mart Stores, Inc. v. Resendez, 962 S.W.2d 539, 540 (Tex. 1998). ―Legal authority or legal justification is met either by the procurement of an arrest warrant or by the showing of existence of probable cause. Wal-Mart Stores, Inc. v. Odem, 929 S.W.2d 513, 519 (Tex. App.—San Antonio 1996, writ denied). SOURCE: Beaumont Court of Appeals - 09-10-00587-CV 5/12/11

Sunday, June 5, 2011

When is covenant not to compete enforceable in Texas?

ENFORCEABILITY OF CONVENANT NOT TO COMPETE (law governing non-competes)

Whether a covenant not to compete is enforceable is a question of law for the court. Fielding, 289 S.W.3d at 848. Likewise, what constitutes sufficient consideration for a contract is generally a question of law, but can be a question of fact. Burges v. Mosley, 304 S.W.3d 623, 629 (Tex. App.-Tyler 2010, no pet.) (question of law); Roark v. Stallworth Oil and Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991) (holding factual questions remained on consideration issue in summary judgment case due to failure to produce conclusive proof).

Covenant-not-to-compete Law 

A covenant not to compete is enforceable if it is (1) ancillary to or part of an otherwise enforceable agreement at the time the agreement is made and (2) reasonable, not imposing a greater restraint than is necessary to protect the goodwill or other business interest of the employer. TEX. BUS. & COM. CODE ANN. § 15.50(a) (Vernon 2011).
 
The first element can be broken down into two inquiries: (1) is there an "otherwise enforceable agreement," and (2) was the covenant not to compete "ancillary to or part of" that agreement at the time the otherwise enforceable agreement was made. Fielding, 289 S.W.3d at 849. With regard to the first inquiry, "otherwise enforceable agreements" can emanate from at-will employment so long as the consideration for any promise is not illusory. Id. As to the second inquiry, for a covenant not to compete to be "ancillary to or part of" an otherwise enforceable agreement, the employer must establish both "(1) that the consideration given by the employer in the otherwise enforceable agreement [gives] rise to the employer's interest in restraining the employee from competing; and (2) that the covenant [was] designed to enforce the employee's consideration or return promise in the otherwise enforceable agreement." Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 649 (Tex. 2006).

Business goodwill and confidential or proprietary information are examples of interests that can be, in appropriate circumstances, worthy of protection by a covenant not to compete. Id. However, for a covenant not to compete to be enforceable, the agreement must be designed to enforce the return promises made by the employee. Id. Prior to Sheshunoff, there was confusion about whether the employer's promise to provide confidential and proprietary information could create a unilateral contract upon actual performance of that promise by the employer. Sheshunoff answered that question in the affirmative. See id. at 651. In Fielding, the Texas Supreme Court clarified its holding in Sheshunoff as follows: In Sheshunoff, an employee signed an at-will employment agreement containing a covenant not to compete. In the agreement, the employer promised to provide the employee access to confidential information and the employee promised not to disclose such information. The employer then gave the employee access to confidential information throughout his employment. We followed and confirmed our analysis in Light, with the exception of Light's footnote six.

We concluded that under section 15.50, a covenant not to compete is not invalid simply because the otherwise enforceable agreement to which the covenant is ancillary is not enforceable at the time the agreement is made. Rather, the covenant not to compete need only be "ancillary to or part of" the agreement at the time the agreement is made. Thus, the requirement that there be an "otherwise enforceable agreement" can be satisfied by the employer actually performing its illusory promise to provide an employee with confidential information. Fielding, 289 S.W.3d at 849-50 (internal citations omitted). However, for a covenant not to compete to be enforceable, it must still be supported by consideration. Powerhouse Prods., Inc. v. Scott, 260 S.W.3d 693, 696 (Tex. App.-Dallas 2008, no pet.) (citing Sheshunoff, 209 S.W.3d at 651). Past consideration is insufficient. Id. at 697 (citing Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 463 (Tex. App.-Austin 2004, pet. denied)).

"The covenant cannot be a stand-alone promise from the employee lacking any new consideration from the employer." Id. (quoting Sheshunoff, 209 S.W.3d at 651). In Powerhouse Productions, Eric Scott went to work for Howard Gibson, Jr., in 1993. When he began his employment, he signed a seven year employment agreement containing a covenant not to compete. Id. at 694. In 1996 or 1997, Gibson incorporated and formed Powerhouse Productions, Inc., but did not require Scott to sign a new employment agreement. Id. Although the original agreement expired in 2000, Scott remained employed with Powerhouse, and the parties operated under the prior agreement. Id. In 2004, Scott entered into a new agreement with Powerhouse whereby Scott agreed not to compete with Powerhouse for a five-year period should they sever their employment relationship. Scott and Powerhouse ended their relationship later that same year. Id. Scott went to work for a competitor, and Powerhouse sued him to enforce the 2004 covenant not to compete. The trial court and the Dallas Court of Appeals rejected Powerhouse's argument that confidential information and training provided to Scott before 2004 could serve as consideration for the 2004 covenant not to compete. Id. at 697-98. In doing so, the court reasoned that "past consideration is not competent consideration for contract formation." Id. at 697. 
 
SOURCE: Tyler Court of Appeals - 12-09-00204-CV – 4/29/11 RELATED TERMS, PHRASES: consideration as essential element of valid contract, illusory promise, enforceability of contract, covenant

Saturday, June 4, 2011

What is specific performance? When can it be granted as a remedy in a contract dispute?

   
WHAT KIND OF REMEDY IS SPECIFIC PERFORMANCE?

Specific performance is an equitable remedy that may be awarded upon a showing of breach of contract. Blue Moon Venture, L.L.C. v. Horvitz, No. 14-09-00459-CV, 2010 WL 4013533, at *1 (Tex. App.-Houston [14th Dist.] Oct. 14, 2010, no pet.) (mem. op.) (citing Stafford v. S. Vanity Magazine, Inc., 231 S.W.3d 530, 535 (Tex. App.-Dallas 2007, pet. denied)).

ELEMENTS OF CLAIM FOR SPECIFIC PERFORMANCE AS REMEDY
 
A party seeking specific performance must plead and prove (1) compliance with the contract including tender of performance unless excused by the defendant's breach or repudiation and (2) it was ready, willing, and able to perform at relevant times. Id. (citing DiGiuseppe v. Lawler, 269 S.W.3d 588, 593-94, 601 (Tex. 2008)). Whether to award specific performance is a matter committed to the trial court's discretion. Chapman v. Olbrich, 217 S.W.3d 482, 491 (Tex. App.-Houston [14th Dist.] 2006, no pet.) (citing Bell v. Rudd, 144 Tex. 491, 191 S.W.2d 841, 843 (1946); Roundville Partners, L.L.C. v. Jones, 118 S.W.3d 73, 79 (Tex. App.-Austin 2003, pet. denied)). A trial court abuses its discretion when it acts in an arbitrary or unreasonable manner or, stated differently, without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). Further, a clear failure by the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). 

SOURCE: Houston Court of Appeals - 14-08-00329-CV - 5/26/11

CASELAW CLIPS ON SPECIFIC PERFORMANCE AS EQUITABLE REMEDY IN BREACH OF CONTRACT CASES FROM OTHER COURTS OF APPEALS
 
Specific performance is an equitable remedy that may be awarded upon a showing of breach of contract. Kress v. Soules, 152 Tex. 595, 597, 261 S.W.2d 703, 704 (1953); Living Christ Church, Inc. v. Jones, 734 S.W.2d 417, 419 (Tex.App.-Dallas 1987, writ denied).

Not a cause of action in its own right

Specific performance is not a separate cause of action, but rather it is an equitable remedy used as a substitute for monetary damages when such damages would not be adequate. See Scott v. Sebree, 986 S.W.2d 364, 368 (Tex. App.-Austin 1999, pet. denied).
 
Grant of remedy discretionary 
 
Specific performance is an equitable remedy committed to the trial court's discretion. Bell v. Rudd, 144 Tex. 491, 191 S.W.2d 841, 843 (1946); Roundville Partners, L.L.C. v. Jones, 118 S.W.3d 73, 79 (Tex. App.-Austin 2003, pet. denied); Scott, 986 S.W.2d at 368 (Tex.App.-Austin 1999, pet. denied). A party seeking specific performance must demonstrate that they have performed, or tendered performance, of their obligations under the contract. Am. Apparel Prods., Inc. v. Brabs, Inc., 880 S.W.2d 267, 269 (Tex.App.-Houston [14th Dist.] 1994, no writ).
 
Not if there is an adequate remedy, such as monetary damages
 
A contract will not be specifically enforced if there is an adequate remedy at law. Id. However, specific performance may be awarded when the personal property has a "special, peculiar, or unique value or character." Madariaga v. Morris, 639 S.W.2d 709, 711 (Tex.App.-Tyler 1982, writ ref'd n.r.e.). Further, when a closely-held corporation's stock has no ascertainable value, the party may seek specific performance to enforce a stock purchase agreement. Miga v. Jensen, 96 S.W.3d 207, 217 (Tex.2002) (citing Bendalin v. Delgado, 406 S.W.2d 897, 900 (Tex. 1966) (plaintiff could seek specific performance to enforce stock purchase agreement 536*536 where corporation was closely held and stock had no market value)). The doctrine of unclean hands operates as a bar to the equitable relief of specific performance. Lazy M Ranch, Ltd. v. TXI Operations LP, 978 S.W.2d 678, 683 (Tex.App.-Austin 1998, pet. denied).
 
SOURCE: Dallas Court of Appeals - 05-06-00545-CV - 8/14/07 - 231 S.W.3d 530 (2007)
 
Specific performance is an equitable remedy that may be awarded upon a showing of breach of contract. Stafford v. S. Vanity Magazine, Inc., 231 S.W.3d 530, 535 (Tex.App.-Dallas 2007, pet. denied) (citing Kress v. Soules, 152 Tex. 595, 261 S.W.2d 703, 704 (1953)). The essential elements of a breach of contract claim are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach. Valero Mktg. & Supply Co. v. Kalama Int'l, 51 S.W.3d 345, 351 (Tex.App.-Houston [1st Dist.] 2001, no pet.). A party seeking specific performance must show that he is ready, willing, and able to perform the contract. Stafford, 231 S.W.3d at 535 (citing Am. Apparel Prods., Inc. v. Brabs, Inc., 880 S.W.2d 267, 269 (Tex.App.-Houston [14th Dist.] 1994, no writ)); Chessher v. McNabb, 619 S.W.2d 420, 421 (Tex.Civ. App.-Houston [14th Dist.] 1981, no writ). However, when the other party clearly refuses to perform his part of a contract, the party who seeks specific performance need not tender performance before bringing suit. 17090 Parkway, Ltd. v. McDavid, 80 S.W.3d 252, 256 (Tex.App.-Dallas 2002, pet. denied). Even when tender of performance is excused, a party must plead and prove he is ready, willing, and able to perform. Id.; Chessher, 619 S.W.2d at 421; Hendershot v. Amarillo Nat'l Bank, 476 S.W.2d 919, 920 (Tex.Civ. App.-Amarillo 1972, no writ). When a party seeks to prove it is ready, willing, and able to perform under the terms of a contract, but is unable to prove it has a firm commitment for financing, that party is not entitled to specific performance of the contract. Hendershot, 476 S.W.2d at 921.

SOURCE: Houston Court of Appeals - 01-07-00080-CV - 9/4/8 - 274 S.W.3d 140 (2008)

A contract is subject to specific performance if it contains the essential terms of a contract, expressed with such certainty and clarity that it may be understood without recourse to parol evidence. Johnson v. Snell, 504 S.W.2d 397, 398 (Tex.1973); Rus-Ann Dev., Inc. v. ECGC, Inc., 222 S.W.3d 921, 927-28 (Tex.App.-Tyler 2007, no pet.) (holding that lack of closing date in option contract did not preclude enforcement by specific performance). Specific performance is an equitable remedy that may be awarded at the trial court's discretion upon a showing of breach of contract. Kress v. Soules, 152 Tex. 595, 261 S.W.2d 703, 704 (1953); Bell v. Rudd, 144 Tex. 491, 191 S.W.2d 841, 843 (1946); Stafford v. S. Vanity Magazine, Inc., 231 S.W.3d 530, 535 (Tex.App.-Dallas 2007, pet. denied). Specific performance is not a separate cause of action, but rather it is an equitable remedy used as a substitute for monetary damages when such damages would not be adequate. Stafford, 231 S.W.3d at 535; Scott v. Sebree, 986 S.W.2d 364, 368 (Tex.App.-Austin 1999, pet. denied).

SOURCE: Fort Worth Court of Appeals - 02-07-443-CV - 9/11/08 - 266 S.W.3d 559 (2008)


Lack of Consideration vs. Failure of Consideration in Contract Law


FAILURE OF CONSIDERATION AFTER CONTRACT FORMATION vs. LACK OF CONSIDERATION AB INITIO (from the beginning)

Failure of consideration occurs when, due to a supervening cause after an agreement is reached, the promised performance fails. (2) See City of The Colony v. North Tex. Mun. Water Dist., 272 S.W.3d 699, 733 (Tex. App.--Fort Worth 2008, pet. dism'd); U.S. Bank, N.A. v. Prestige Ford Garland Ltd. P'ship, 170 S.W.3d 272, 279 (Tex. App.--Dallas 2005, no pet.). In other words, failure of consideration occurs because of subsequent events. See The Colony, 272 S.W.3d at 733. For example, one party's failure to perform its obligations under the agreement may result in the other party's failure to receive the consideration set forth in the agreement. See id.; U.S. Bank, 170 S.W.3d at 279. To establish the affirmative defense of failure of consideration, the defendant must offer summary-judgment proof establishing: (1) the consideration for the property at the inception of the agreement; and (2) that the consideration later failed. See, e.g., National Bank of Commerce v. Williams, 84 S.W.2d 691, 692 (Tex. 1935). 2. It is a general rule in Texas that a party must show that he has complied with his obligations under the contract to be entitled to specific performance. DiGiuseppe v. Lawler, 269 S.W.3d 588, 594 (Tex. 2008). Thus, a plaintiff seeking specific performance, as a general rule, must actually tender performance as a prerequisite to obtaining specific performance. Id. SOURCE: Austin Court of Appeals - 03-09-00713-CV - 6/3/11
 
RELATED CASELAW CLIPS FROM OTHER COURTS OF APPEALS: 

Lack of Consideration 

Consideration is a fundamental element of every valid contract. Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 408 (Tex. 1997). Consideration is a present exchange bargained for in return for a promise and consists of benefits and detriments to the contracting parties. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex.1991). The detriments must induce the parties to make the promises, and the promises must induce the parties to incur the detriments. Id. Lack of consideration occurs when the contract, at its inception, does not impose obligations on both parties. Michol O'Connor, O'CONNOR'S TEXAS CAUSES OF ACTION 86 (2009). The contract lacking consideration lacks mutuality of obligation and is unenforceable. Fed. Sign, 951 S.W.2d at 409. Lack of consideration is an affirmative defense. Doncaster v. Hernaiz, 161 S.W.3d 594, 603 (Tex.App.-San Antonio 2005, no pet.). The existence of a written contract, however, presumes consideration for its execution. Id. Therefore, the party alleging lack of consideration has the burden of proof to rebut this presumption. Id.; see also Edlund v. Bounds, 842 S.W.2d 719, 724 (Tex.App.-Dallas 1992, writ denied) (op. on reh'g) ("A sworn plea of no consideration placed the burden of proof on Edlund to show there was none."). Only a party without the burden of proof at trial may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense. See TEX.R. CIV. P. 166a(i).

Failure of Consideration 

Failure of consideration, an affirmative defense, occurs when, because of some supervening cause after a contract is formed, the promised performance fails. See TEX.R. CIV. P. 94; U.S. Bank, N.A. v. Prestige Ford Garland Ltd. P'ship, 170 S.W.3d 272, 279 (Tex.App.-Dallas 2005, no pet.). Above, we explained that there is a "lack of consideration" where a purported contract lacks mutuality of obligation. Thus, there is a clear distinction between "lack of consideration" and "failure of consideration." Although the issue of consideration is to be determined as a matter of law, the recital of consideration in a written instrument is not conclusive, and the nature of the real consideration may be shown by parol evidence. Lakeway Co. v. Leon Howard, Inc., 578 S.W.2d 163, 166 (Tex.Civ.App.-Tyler), writ ref'd n.r.e., 585 S.W.2d 660 (Tex.1979) (per curiam).

SOURCE: Burges v. Mosley, 304 S.W.3d 623, 628 (Tex. App.-Tyler 2010, no pet.)

Failure of consideration occurs when, due to a supervening cause after an agreement is reached, the promised performance fails. City of The Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699, 733 (Tex. App.-Fort Worth 2008, pet. dism'd); U.S. Bank, N.A. v. Prestige Ford Garland Ltd. P'ship, 170 S.W.3d 272, 279 (Tex. App.-Dallas 2005, no pet.). In other words, failure of consideration occurs because of subsequent events. See City of The Colony, 272 S.W.3d at 733; U.S. Bank, N.A., 170 S.W.3d at 279. For example, one party's failure to perform its obligations under the agreement may result in the other party's failure to receive the consideration set forth in the agreement. See City of The Colony, 272 S.W.3d at 733; U.S. Bank, N.A., 170 S.W.3d at 279. There is a clear distinction between lack of consideration and failure of consideration. Burges, 304 S.W.3d at 628. In order to show a failure of consideration there should be evidence that a contract had been formed and that the performance of one of the parties failed. Id. In other words, for consideration to fail, it must have been valid at one point and later fail. Johnson v. Bond, 540 S.W.2d 516, 520 (Tex. App.-Fort Worth 1976, writ ref'd n.r.e.). Lack of consideration, on the other hand, means that there was never consideration. Id.

SOURCE: Corpus Christi Court of Appeals - 13-10-245-CV - 10/21/10

No Consideration as part of the contract to begin with 

Lack of consideration occurs when the contract, at its inception, does not impose obligations upon both parties. Burges v. Mosley, 304 S.W.3d 623, 628 (Tex. App.-Tyler 2010, no pet.). The existence of a written contract presumes consideration for its execution. Id.

Failure of consideration after the contract is entered into A failure of consideration occurs when the plaintiff fails to perform a condition precedent to the defendant's duty to perform. See Nat'l Bank of Commerce v. Williams, 125 Tex. 619, 84 S.W.2d 691, 692 (1935). The doctrine assumes the contract is already in existence. Consideration consists of either a benefit to the promisor or a detriment to the promisee. See Tamez v. Southwestern Motor Transp., Inc., 155 S.W.3d 564, 571 (Tex. App.-San Antonio 2004, no pet.).

SOURCE: El Paso Court of Appeals - 08-07-00090-CV – 2/10/10 - 323 S.W.3d 203 (2010)

Friday, June 3, 2011

At-will tenancy and holdover tenants – What is the meaning of these legal terms in landlord-tenant law?

HOLDOVER TENANCY DEFINED: What makes a person who rents property a holdover tenant? A tenant who continues to occupy the premises after expiration of a lease is a holdover tenant. Gym-N-I Playgrounds, Inc. v. Snider, 220 S.W.3d 905, 908 (Tex. 2007). We look at the lease itself to determine whether the terms of the lease continue in the event of a holdover tenancy. Bockelmann v. Marynick, 788 S.W.2d 569, 571-72 (Tex. 1990). A holdover tenant is presumed to be bound by covenants that were binding on him during the term of the lease. Barragan v. Munoz, 525 S.W.2d 559, 561 (Tex. Civ. App.--El Paso 1975, no writ). Even when the lease does not contain a holdover provision, if the tenant remains in possession and rent continues to be accepted by the landlord, the terms of the expired lease are presumed to continue unless there is an agreement to the contrary. Id. at 562; see also Carrasco v. Stewart, 224 S.W.3d 363, 368 (Tex. App.--El Paso 2006, no pet.). TENANT AT WILL VS. TENANT AT SUFFERANCE: What is the difference? When no new lease is formed and a tenant continues in possession of land covered by a prior lease, that tenant is either a tenant at will or a tenant at sufferance. See Bockelmann, 788 S.W.2d at 571; ICM Mortgage Corp. v. Jacob, 902 S.W.2d 527, 530 (Tex. App.--El Paso 1994, writ denied). A tenant at will is one who is in lawful possession of premises by permission of the owner or landlord and for no fixed duration. See Fandey v. Lee, 880 S.W.2d 164, 169 (Tex. App.--El Paso 1994, writ denied); Virani v. Syal, 836 S.W.2d 749, 751-52 (Tex. App.--Houston [1st Dist.] 1992, writ denied); Black's Law Dictionary 1604 (9th ed. 2009). A tenant at sufferance is a person who has been in lawful possession of property but who wrongfully remains as a holdover after his right to possession has expired. See ICM Mortgage, 902 S.W.2d at 530; Black's Law Dictionary 1604 (9th ed. 2009). "A tenant at will, in contrast to a tenant at sufferance, possesses the property with the owner's consent." ICM Mortgage, 902 S.W.2d at 530. TENANCY AT WILL ANALOGOUS TO EMPLOYMENT AT WILL: Terminable by either party [lessor or lessee] A tenancy at will is terminable at the will of either party upon fair notice. See ICM Mortgage, 902 S.W.2d at 530; Black's Law Dictionary 1604 (9th ed. 2009). LEASE DEFINED A "lease" for real property is an agreement by which a person owning property grants to another the right to use and occupy the property for a specified period of time in exchange for a periodic payment of a stipulated price, which is usually referred to as rent. Franklin v. Jackson, 847 S.W.2d 306, 308 (Tex. App.--El Paso 1992, writ denied); Black's Law Dictionary 970 (9th ed. 2009). SOURCE: Austin Court of Appeals - 03-09-00713-CV – 6/3/11 (Agreement required periodic payments in the form of monthly payments from [ party ] to [ party ] in the amount of $989.44. The term of the Agreement was thirty-six months. In the Agreement, the parties referred to [ party ] as the "Lessor" and [ party ] as the "Lessee." Thus, the Agreement met all the elements of a lease. See Franklin, 847 S.W.2d at 308; Black's Law Dictionary 970 (9th ed. 2009)). RELATED LEGAL TERMS: landlord-tenant, residential / commercial lease, rent, eviction, right to possession, forcible entry and detainer

Not every relationship involving trust entails fiduciary duty

CONFIDENTIAL RELATIONSHIP OF TRUST: Does it give rise to fiduciary duty? Fiduciary duties arise as a matter of law in certain formal relationships, such as attorney-client or trustee relationships. See Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005) (per curiam); Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 593-94 (Tex. 1992). In addition, an informal fiduciary duty may arise from a moral, social, domestic, or purely personal relationship of trust and confidence. Associated Indem. Corp. v. Cat Contracting Co., 964 S.W.2d 276, 287-88 (Tex. 1998). However, "not every relationship involving a high degree of trust and confidence rises to the stature of a fiduciary relationship." Meyer, 167 S.W.3d at 330 (quoting Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 176-77 (Tex. 1997)). The existence of a confidential relationship giving rise to an informal fiduciary duty is ordinarily a question of fact, but it becomes a question of law when there is no evidence of such a relationship. Crim Truck & Tractor, 823 S.W.2d at 594. The existence of fiduciary relationship must be based on "actual facts of the relationship between the persons," rather than subjective beliefs. Trostle v. Trostle, 77 S.W.3d 908, 914 (Tex. App.--Amarillo 2002, no pet.) SOURCE: Austin Court of Appeals - 03-09-00452-CV - 6/3/11

Thursday, June 2, 2011

Inverse Condemnation and Takings Claims

INVERSE CONDEMNATION Generally, “„[i]nverse condemnation‟ occurs when property is taken, damaged, or destroyed for public use without process or without proper condemnation proceedings, and the property owner attempts to recover compensation.” Patel v. City of Everman, 179 S.W.3d 1, 7 (Tex. App.—Tyler 2004, pet. denied) (Patel I). “A city is not required to make compensation for losses occasioned by the proper and reasonable exercise of its police power.” City of College Station v. Turtle Rock Corp., 680 S.W.2d 802, 804 (Tex. 1984). Whether the exercise of a police power is proper or whether it constitutes a compensable taking is a question of law and not of fact. Id. A municipality may, by ordinance, require the demolition of a dilapidated building that is a hazard to the public‟s health, safety, and welfare. See Tex. Loc. Gov‟t Code Ann. § 214.001(a)(1) (West Supp. 2010). Generally, when a city has determined that a building constitutes a public nuisance, the city‟s administrative determination may be challenged by a judicial review for substantial evidence. See Patel v. City of Everman, No. 2-07-303-CV, 2009 WL 885916, *6 (Tex. App.—Fort Worth Apr. 2, 2009, pet. filed) (mem. op.) FEDERAL FIFTH AMENDMENT TAKINGS CLAIM [ Property owner ] also challenges the trial court‟s dismissal of her federal “takings” claim. See U.S. Const. amends. V, XIV. Generally, the Fifth Amendment‟s Just Compensation Clause grants to a landowner the right to seek compensation for land taken by the State. U.S. Const. amend. V (“[N]or shall private property be taken for public use, without just compensation.”). Nevertheless, not every State action in taking property violates the Just Compensation Clause. “[I]f a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just compensation.” Williamson Cnty. Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 195, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985) (In a zoning case, landowner‟s federal taking and due process claims were not ripe because the landowner had not sought a variance). Compensation is generally not required when the State takes property to protect the public safety and health. The United States Supreme Court has stated: “The power which the states have of prohibiting such use by individuals of their property, as will be prejudicial to the health, the morals, or the safety of the public, is not, and, consistently with the existence and safety of organized society, cannot be, burdened with the condition that the state must compensate such individual owners for pecuniary losses they may sustain, by reason of their not being permitted, by a noxious use of their property, to inflict injury upon the community.” Mugler v. Kansas, 123 U.S. 623, 669, 8 S.Ct. 273, 31 L.Ed. 205 (U.S. 1887). “The government may not be required to compensate an owner for property which it has already lawfully acquired under the exercise of governmental authority other than the power of eminent domain.” Bennis v. Michigan, 516 U.S. 442, 452, 116 S.Ct. 994, 134 L.Ed.2d 68 (1996) “Courts have consistently held that a State need not provide compensation when it diminishes or destroys the value of property by stopping illegal activity or abating a public nuisance.” Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 492 n.22, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987). SOURCE: Beaumont Court of Appeals - 09-10-00192-CV - 6/2/11 (City engaged in a valid exercise of its police power to abate a nuisance that existed on landowner's property. See Tex. Loc. Gov‟t Code Ann. § 214.0012.)

Friday, May 27, 2011

When is a liquidated damages clause valid and enforceable?

  
WHAT IS A LIQUIDATED DAMAGES PROVISION IN A CONTRACT?
 
A valid liquidated damages clause estimates in advance the just compensation a party will accrue if the other party to the contract fails to perform. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005). “Whether a contractual provision is an enforceable liquidated damages provision or an unenforceable penalty is a question of law[.]” Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991).
 
ENFORCEABILITY OF CONTRACTUAL LIQUIDATED DAMAGES PROVISION
 
In determining whether a liquidated damages clause is enforceable, courts examine (1) whether the harm caused by the prospective breach of the contract is incapable or difficult of estimation and (2) whether the amount of liquidated damages called for is a reasonable forecast of just compensation. Id. If either element is lacking, the liquidated damages clause is unenforceable. Arthur’s Garage, Inc. v. Racal-Chubb Sec. Sys., Inc., 997 S.W.2d 803, 810 (Tex. App.—Dallas 1999, no pet.).
  
Evidence regarding the difficulty of estimating damages and whether the amount of liquidated damages is a reasonable forecast of just compensation, must be viewed as of the time the contract was executed. Baker v. Int’l Record Syndicate, Inc., 812 S.W.2d 53, 55 (Tex. App.—Dallas 1991, no writ) (op. on reh’g); see also Oetting v. Flake Unif. & Linen Serv., Inc., 553 S.W.2d 793, 796 (Tex. App.—Fort Worth 1977, no writ). “If the liquidated damages are proven to be disproportionate to the actual damages, the liquidated damages can be declared a penalty and recovery limited to actual damages.” TXU Portfolio Mgmt. Co., L.P. v. FPL Energy, LLC, 328 S.W.3d 580, 589 (Tex. App.—Dallas 2010, pet. filed) (citing Baker, 812 S.W.2d at 55).
  
The burden of proving a penalty defense is on the party challenging the liquidated damages clause. Baker, 812 S.W.2d at 55; see also Urban Television Network Corp. v. Creditor Liquidity Solutions, L.P., 277 S.W.3d 917, 919 (Tex. App.—Dallas 2009, no pet.). Generally, the party asserting this defense must prove the amount of the other party’s actual damages, if any, to show that the liquidated damages set forth in the agreement were not an approximation of actual loss. Baker, 812 S.W.2d at 55; TXU Portfolio, 328 S.W.3d at 589. SOURCE: Beaumont Court of Appeals - 09-10-00361-CV - 5/19/11 (Thus, the liquidated damages provision for the payment of $20,000 was not a reasonable forecast of just compensation for any allowable damages resulting from [ PARTY'S ] breach of the agreement. We hold the liquidated damages clause is unenforceable.)
 
RELATED CASELAW CLIPS:
 
We enforce a liquidated damages clause if (1) the harm caused by the breach is incapable or difficult of estimation, and (2) the amount of liquidated damages is a reasonable forecast of just compensation. See Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991). An assertion that a liquidated damages provision constitutes an unenforceable penalty is an affirmative defense, and the party asserting penalty bears the burden of proof. See Urban Television Network Corp. v. Liquidity Solutions, 277 S.W.3d 917, 919 (Tex. App.-Dallas 2009, no pet.); Fluid Concepts, Inc. v. DA Apts., LP, 159 S.W.3d 226, 231 (Tex. App.-Dallas 2005, no pet.). Generally, that party must prove the amount of actual damages, if any, to demonstrate that "the actual loss was not an approximation of the stipulated sum." Baker v. Int'l Record Syndicate, Inc., 812 S.W.2d 53, 55 (Tex. App.-Dallas 1991, no writ). If the amount stipulated in the liquidated damages clause is "shown to be disproportionate to actual damages," we should declare that the clause is a penalty and limit recovery to actual damages. Johnson Eng'rs, Inc. v. Tri-Water Supply Corp., 582 S.W.2d 555, 557 (Tex. Civ. App.-Texarkana 1979, no writ); see also TEX. BUS. & COM. CODE ANN. § 2.718(a) (Vernon 2009) ("A term fixing unreasonably large liquidated damages is void as a penalty.").
 
Whether a liquidated damages clause is an unenforceable penalty is a question of law for the court, but sometimes factual issues must be resolved before the court can decide the legal question. See Phillips, 820 S.W. 2d at 788. For example, in Phillips, the Texas Supreme Court observed that "to show that a liquidated damages provision is unreasonable because the actual damages incurred were much less than the amount contracted for, a defendant may be required to prove what the actual damages were." Id. SOURCE: Houston Court of Appeals - 01-09-00155-CV - 10/21/10 Whether a liquidated damages provision is an enforceable contractual provision or an unenforceable penalty is a question of law. Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991). To find a liquidated damages provision enforceable, a court must find that (1) the harm caused by the breach is incapable or difficult of estimation, and (2) the amount of liquidated damages called for is a reasonable forecast of just compensation. Phillips, 820 S.W.2d at 788 (quoting Rio Grande Valley Sugar Growers, Inc. v. Campesi, 592 S.W.2d 340, 342 n.2 (Tex. 1979)). The difficulty of estimation of harm must have existed at the time the contract was executed. See Murphy v. Cintas Corp., 923 S.W.2d 663, 666 (Tex. App.-Tyler 1996, writ denied).

SOURCE: Austin Court of Appeals - 03-09-00063-CV - 6/11/10

A valid liquidated damage provision estimates in advance the just compensation to a party accruing from the failure to perform certain contractual obligations. See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex.2005); Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952). In general, the issue of whether a contractual provision is an enforceable liquidated damage clause or an unenforceable penalty is a question of law for the court. See Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex.1991). In making this determination, we examine whether the harm caused by the prospective breach of the contract is incapable or difficult of estimation and whether the amount of liquidated damages is a reasonable forecast of just compensation. Id.; Baker v. Int'l Record Syndicate, Inc., 812 S.W.2d 53, 55 (Tex.App.-Dallas 1991, no writ). The evidence concerning the difficulty of estimation and the reasonableness of the damages forecast must be viewed as of the time the contract was executed. Baker, 812 S.W.2d at 55. The party asserting that the provision is an unenforceable penalty has the burden of proof. See Fluid Concepts, Inc. v. DA Apartments Ltd., P'ship, 159 S.W.3d 226, 230-31 (Tex.App.-Dallas 2005, no pet.). Where, as here, the parties have filed cross-motions for summary judgment, we may reverse and render the judgment that the trial court should have rendered. See CU Lloyd's of Tex. v. Feldman, 977 S.W.2d 568, 568 (Tex. 1998) (per curiam).
 
SOURCE: Dallas Court of Appeals - 05-08-01584-CV 7/27/10

Due Diligence in Service Requirement when suit filed at end of limitations period

Is a claim filed before expiration of the statute of limitations time-barred if citation is not served until after the limitations period has ended? A person must bring suit for personal injury no later than two years after the day the cause of action accrues. Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a) (West Supp. 3 2010). “If a party files its petition within the limitations period, service outside the limitations period may still be valid if the plaintiff exercises diligence in procuring service on the defendant.” Ashley v. Hawkins, 293 S.W.3d 175, 179 (Tex. 2009). When a defendant affirmatively pleads the defense of limitations and shows that service was untimely, the burden shifts to the plaintiff to prove diligence. Id. The relevant question is “whether the plaintiff acted as an ordinarily prudent person would have acted under the same or similar circumstances and was diligent up until the time the defendant was served.” Proulx v. Wells, 235 S.W.3d 213, 216 (Tex. 2007). “Although a fact question, a plaintiff‟s explanation may demonstrate a lack of diligence as a matter of law, „when one or more lapses between service efforts are unexplained or patently unreasonable.‟” Ashley, 293 S.W.3d at 179 (quoting Proulx, 235 S.W.3d at 216). The plaintiff bears the burden of presenting evidence regarding the efforts made to serve the defendant, and explaining every lapse in effort or period of delay. Proulx, 235 S.W.3d at 216. SOURCE: Beaumont Court of Appeals - 09-11-00076-CV - 5/26/11

Use of fraud to get someone to sign contract is actionable

TEXAS LAW RECOGNIZES DUTY NOT TO USE FRAUD TO PROCURE ASSENT TO CONTRACT Under Texas law, a party to a contract has “a duty to abstain from inducing another to enter into a contract through the use of fraudulent misrepresentations.” Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998). ELEMENTS OF FRAUD At common law, fraud is generally considered to have occurred when (a) “a party makes a material misrepresentation,” (b) “the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as a positive assertion,” (c) “the misrepresentation is made with the intention that it should be acted on by the other party,” and (d) “the other party relies on the misrepresentation and thereby suffers injury.” Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges: Business, Consumer, Insurance & Employment PJC 105.2 (2010). Also see --> fraudulent inducement of contract as distinct cause of action Rescission is an equitable remedy available in cases of fraud. See Bank One, Tex., N.A. v. Stewart, 967 S.W.2d 419, 455 (Tex. App.—Houston [14th Dist.] 1998, pet. denied). SOURCE: Beaumont Court of Appeals - 09-10-00364-CV - 5/26/11

Thursday, May 26, 2011

Interpreting the fine print: Is the contractual language clear or ambiguous?

How do Texas courts deal with the contention that a contract is ambiguous? 

Whether a contract is ambiguous is a question of law. Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). If the contract is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and a court should construe the contract as a matter of law. SAS Institute, Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005); ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997). [ The court construes ] an unambiguous contract according to the plain meaning of its express wording. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. 1985). Unambiguous contracts are enforced as written. Heritage Resources, Inc., 939 S.W.2d at 121.
 
WHAT MAKES A CONTRACT AMBIGUOUS?

 “A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation.” Id. However, a contract is ambiguous when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Nevarez v. Ehrlich, 296 S.W.3d 738, 742 (Tex.App.--El Paso 2009, no pet.). Not every difference in the interpretation of a contract amounts to an ambiguity. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994). Mere disagreement over the meaning of a provision in the contract does not make the terms ambiguous. Richardson Lifestyle Association v. Houston, 853 S.W.2d 796, 800 (Tex.App.--Dallas 1993, writ denied).

Likewise, uncertainty or lack of clarity in the language chosen by the parties is insufficient to render a contract ambiguous. Preston Ridge Fin. Servs. Corp. v. Tyler, 796 S.W.2d 772, 777 (Tex.App.--Dallas 1990, writ denied). Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983).
 
When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. Id. We determine whether a contract is ambiguous by looking at the contract as a whole in light of the circumstances present when the parties entered the contract. Universal Health Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003). If a contract is determined to be ambiguous, then a court may consider extraneous evidence to ascertain the true meaning of the instrument. Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995).
 
TWO CATEGORIES OF CONTRACT AMBIGUITY

An ambiguity may be either patent or latent. Id. A patent ambiguity is evident on the face of the contract. Id. A latent ambiguity arises when a contract that is unambiguous on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral matter. Id. When a contract contains an ambiguity, either patent or latent, the interpretation of the instrument becomes a fact issue. Coker, 650 S.W.2d at 394; Quality Infusion Care, Inc. v. Health Care Service Corp., 224 S.W.3d 369, 379 (Tex.App.--Houston [1st Dist.] 2006, no pet.). The trier of fact [ jury or judge in bench trial ] must resolve the ambiguity by determining the true intent of the parties. Coker, 650 S.W.2d at 394-95.
 
SOURCE: El Paso Court of Appeals - 08-08-00343-CV - 4/20/11

No attorney's fees on fraud claim

Can a plaintiff be awarded attorney's fees when he or she obtains a judgment for fraud? Attorneys’ fees are not recoverable for prosecuting a fraud or negligent-misrepresentation claim. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d at 304 (citing New Amsterdam Cas. Co. v. Tex. Indus., 414 S.W.2d 914, 915 (Tex. 1967)); see also Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (West 2008) (setting forth claims for which attorneys’ fees are recoverable). SOURCE: Houston Court of Appeals (Beaumont caselaw b/c of transfer) - 14-08-00329-CV - 5/26/11

Texas DJA: When is declaratory judgment an appropriate remedy?

CLAIM FOR DECLARATORY JUDGMENT UNDER THE TEXAS VERSION OF THE UNIFORM DECLARATORY JUDGMENTS ACT (UDJA, Texas DJA, TDJA)

Under what circumstances is it available?

A declaratory judgment is appropriate only if a justiciable controversy exists concerning the rights and status of the parties and the controversy will be resolved by the declaration sought. Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995) (citing Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993)). “To constitute a justiciable controversy, there must exist a real and substantial controversy involving genuine conflict of tangible interests and not merely a theoretical dispute.” Id. If declaratory relief will not terminate a controversy between parties and would be irrelevant at the time judgment is rendered, a declaratory judgment will amount to no more than an advisory opinion, which the trial court lacks power to provide. Kenneth Leventhal & Co. v. Reeves, 978 S.W.2d 253, 259 (Tex. App.—Houston [14th Dist.] 1998, no pet.).

SOURCE: Houston Court of Appeals (Beaumont caselaw b/c of transfer) - 14-08-00329-CV - 5/26/11

Attorney's Fees in Breach-of-Contract Action

Texas follows "the American Rule" Attorneys’ fees are not recoverable in Texas unless allowed by statute or the parties’ contract. Chapa, 212 S.W.3d at 310–11; Dallas Cent. Appraisal Dist. v. Seven Inv. Co., 835 S.W.2d 75, 77 (Tex. 1992). ATTORNEY'S FEES UNDER CHAPTER 38 OF THE CPRC: Prevailing plaintiffs only A party “may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for . . . an oral or written contract.” Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8). Our court has held that a “valid claim” under this statute is not limited to an action for monetary damages and may include an action for specific performance. See Rasmusson v. LBC PetroUnited, Inc., 124 S.W.3d 283, 287 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (citing Jones v. Kelley, 614 S.W.2d 95, 96, 100–01 (Tex. 1981)). No fees for successful defense of BoC claim under Chapter 38 [but that may change as a result of latest installment of legislative "tort" reform;---> Loser pays bill] Section 38.001(8) does not authorize recovery of attorneys’ fees for successfully defending a contract claim. See Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8); Thottumkal v. McDougal, 251 S.W.3d 715, 719 (Tex. App.—Houston [14th Dist.] 2008, pet. denied). Prevailing defendant may recover fees if contractually authorized However, the above-quoted contractual provision entitling a “prevailing party” to recover attorneys’ fees does not distinguish between successful prosecution and successful defense of a claim. Therefore, we may uphold the trial court’s determination that [ litigant ] is entitled to some fees because it successfully defended [ opposing party's ] breach-of-contract counterclaim. SOURCE: Houston Court of Appeals (Beaumont caselaw b/c of transfer) - 14-08-00329-CV - 5/26/11 ATTORNEYS FEES UNDER THE DJA: The Texas Declaratory Judgment Act ("the ACT') [TDJA aka DJA] provides, “In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney’s fees as are equitable and just.” Tex. Civ. Prac. & Rem. Ann. § 37.009 (West 2008). “The [Act] entrusts attorney fee awards to the trial court’s sound discretion, subject to the requirements that any fees awarded be reasonable and necessary, which are matters of fact, and to the additional requirements that fees be equitable and just, which are matters of law.” Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). SOURCE: Houston Court of Appeals (Beaumont caselaw b/c of transfer) - 14-08-00329-CV - 5/26/11

What kind of remedy is specific performance?

SPECIFIC PERFORMANCE & CONTRACT CLAIMS Specific performance is an equitable remedy that may be awarded upon a showing of breach of contract. Blue Moon Venture, L.L.C. v. Horvitz, No. 14-09-00459-CV, 2010 WL 4013533, at *1 (Tex. App.—Houston [14th Dist.] Oct. 14, 2010, no pet.) (mem. op.) (citing Stafford v. S. Vanity Magazine, Inc., 231 S.W.3d 530, 535 (Tex. App.—Dallas 2007, pet. denied)). Elements of claim for specific performance A party seeking specific performance must plead and prove (1) compliance with the contract including tender of performance unless excused by the defendant’s breach or repudiation and (2) it was ready, willing, and able to perform at relevant times. Id. (citing DiGiuseppe v. Lawler, 269 S.W.3d 588, 593–94, 601 (Tex. 2008)). When do Texas courts award specific performance? Whether to award specific performance is a matter committed to the trial court’s discretion. Chapman v. Olbrich, 217 S.W.3d 482, 491 (Tex. App.—Houston [14th Dist.] 2006, no pet.) (citing Bell v. Rudd, 144 Tex. 491, 191 S.W.2d 841, 843 (1946); Roundville Partners, L.L.C. v. Jones, 118 S.W.3d 73, 79 (Tex. App.—Austin 2003, pet. denied)). A trial court abuses its discretion when it acts in an arbitrary or unreasonable manner or, stated differently, without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). Further, a clear failure by the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). SOURCE: Houston Court of Appeals (case transferred from Beaumont) - 14-08-00329-CV - 5/26/11

Wednesday, May 25, 2011

Can informal relationship involving confidence and trust give rise to fiduciary duty?

BREACH OF FIDUCIARY DUTY: INFORMAL VS. FORMAL FIDUCIARY RELATIONSHIPS Fiduciary duties may arise from certain formal relationships that are considered to be fiduciary as a matter of law or from informal, “confidential” relationships. Id. at 275. To recover on a claim for breach of fiduciary duty, one of the elements that must be established is the existence of a fiduciary or confidential relationship. Id. The existence of such a relationship is ordinarily a question of fact, but it becomes a question of law when there is no evidence on the issue. Id. Texas courts are reluctant to recognize informal fiduciary relationships. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997); Jones v. Thompson, ___ S.W.3d ___, ___, 2010 WL 3157145, at *8 (Tex.App.--El Paso Aug. 11, 2010, pet. denied). Accordingly, not every relationship that involves a high degree of trust and confidence will give rise to a fiduciary duty. Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005). Because subjective trust is insufficient to create a fiduciary relationship, the mere fact that one party trusts another does not transform a business arrangement into a fiduciary relationship. Id. at 331. The trust must be “justifiable.” Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1963). When “one person is accustomed to being guided by the judgment or advice of another or is justified in believing one will act in the best interest of another because of a family relationship, a confidential relationship may arise.” Trostle v. Trostle, 77 S.W.3d 908, 914 (Tex.App.--Amarillo 2002, no pet.). The existence of a confidential relationship depends on the “actualities” of the particular relationship. Thigpen, 363 S.W.2d at 253. The confidential relationship must exist prior to, and apart from, the transaction that forms the basis of the lawsuit. Meyer, 167 S.W.3d at 331; Hamblet v. Coveney, 714 S.W.2d 126, 129 (Tex.App.--Houston [1st Dist.] 1986, writ ref’d n.r.e.). One party’s lack of fluency in English does not create a confidential relationship. Salinas v. Beaudrie, 960 S.W.2d 314, 320 (Tex.App.--Corpus Christi 1997, no pet.). Nor do uncles and nephews necessarily have a confidential relationship. See Tex. Bank & Trust Co. v. Moore, 595 S.W.2d 502, 508 (Tex. 1980). And subjective trust will not suffice unless the trust was justified. See Meyer, 167 S.W.3d at 331. Compare Flanary v. Mills, 150 S.W.3d 785, 794 (Tex.App.--Austin 2004, pet. denied)(evidence sufficient where parties had uncle/nephew relationship, but they were more like brothers, one party worked for the other and had always “looked up” to him, and they had previously been business partners), and Dominguez v. Brackey Enters., Inc., 756 S.W.2d 788, 791 (Tex.App.--El Paso 1988, writ denied)(evidence sufficient where parties had a longstanding business and personal association and one party was accustomed to being guided by the other’s advice in legal and accounting matters), and Hamblet, 714 S.W.2d at 129 (evidence sufficient where two parties had aunt/niece relationship, they and their families had a close relationship spanning years, and one party counseled the other for years), with Thigpen, 363 S.W.2d at 249, 252-53 (evidence insufficient where parties were close friends who saw each other frequently and one party personally guaranteed a loan for the others and gave them business advice), and Trostle, 77 S.W.3d at 914 (evidence insufficient where parties had stepmother/stepson relationship, but they were not particularly close). SOURCE: El Paso Court of Appeals - 08-09-00084-CV - 4/29/11

Moving for summary judgment based on SoL: Who has the burden of proof of accrual?

Accrual of Claim Date - an element of proof in MSJ based on the applicable statute of limitations as an affirmative defense “A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense.” KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). “Thus, the defendant must (1) conclusively prove when the cause of action accrued, and (2) negate the discovery rule, if it applies and has been pleaded or otherwise raised, by proving as a matter of law that there is no genuine issue of material fact about when the plaintiff discovered, or in the exercise of reasonable diligence should have discovered the nature of its injury.” Id. If the movant establishes that the statute of limitations bars the action, the respondent must then adduce summary judgment proof raising a fact issue in avoidance of the statute of limitations. Id. Generally, when a cause of action accrues is a question of law. Provident, 128 S.W.3d at 221. “[A] cause of action accrues and the statute of limitations begins to run when facts come into existence that authorize a party to seek a judicial remedy.” Id. “In most cases, a cause of action accrues when a wrongful act causes a legal injury, regardless of when the plaintiff learns of that injury or if all resulting damages have yet to occur.” Id. However, two exceptions may defer accrual of a claim: the discovery rule and the doctrine of fraudulent concealment. The discovery rule is “a very limited exception to statutes of limitations” and applies “only when the nature of the plaintiff’s injury is both inherently undiscoverable and objectively verifiable.” Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex. 2001). “[W]hen the discovery rule applies, accrual is tolled until a claimant discovers or in the exercise of reasonable diligence should have discovered the injury and that it was likely caused by the wrongful acts of another.” Childs v. Haussecker, 974 S.W.2d 31, 40 (Tex. 1998) (emphasis added). Similarly, the doctrine of fraudulent concealment defers accrual of a cause of action because “a person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run.” S.V. v. R.V., 933 S.W.2d 1, 6 (Tex. 1996). Under the discovery rule, once a plaintiff discovers or in the exercise of reasonable diligence should have discovered the injury and that it was likely caused by the wrongful acts of another, “limitations commences, even if the plaintiff does not know the exact identity of the wrongdoer.” Childs, 974 S.W.2d at 40; see also Exxon Corp. v. Emerald Oil & Gas Co., No. 05-1076, 2011 WL 1226100, at *8 (Tex. Apr. 1, 2011) (“Once a claimant learns of a wrongful injury, the statute of limitations begins to run even if the claimant does not yet know ‘the specific cause of the injury; the party responsible for it; the full extent of it; or the chances of avoiding it.’”) (quoting PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd., 146 S.W.3d 79, 93 (Tex. 2004)) (emphasis added). That is, the plaintiff must be aware that his injury was caused by someone’s wrongful act, but need not necessarily know who performed the wrongful act. The discovery rule is written into the statute of limitations for misappropriation of trade secrets. See Tex. Civ. Prac. & Rem. Code Ann. § 16.010(a) (West 2002) (“A person must bring suit for misappropriation of trade secrets not later than three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.”). SOURCE: San Antonio Court of Appeals - 04-10-00243-CV - 5/25/11 ADDITIONAL CASELAW SNIPPETS: When the defendant bases a summary judgment motion on the statute of limitations, he must conclusively prove each element of that affirmative defense as a matter of law. KPMG Peat Marwick v. Harrison County Housing Finance Corp., 988 S.W.2d 746, 748 (Tex. 1999); Shah, 67 S.W.3d at 842. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 121 (Tex. 1996). A plaintiff suffers a “legal injury” when facts come into play which would authorize him to seek a judicial remedy. Apex Towing Co. v. Tolin, 41 S.W.3d 118, 120 (Tex. 2001). Once a claimant learns of a wrongful injury, the statute of limitations begins to run even if the claimant does not yet know “the specific cause of the injury; the party responsible for it; the full extent of it; or the chances of avoiding it.” PPG Industries, Inc. v. JMB/Houston Centers. Partners Ltd. Partnership, 146 S.W.3d 79, 93-94 (Tex. 2004); Velsicol Chemical Corp. v. Winograd, 956 S.W.2d 529, 531 (Tex. 1997).

How and when does the discovery rule provide relief against affirmative defense of limitations?

  
Discovery rule defers accrual of claim when it applies, triggering the running of the SoL at the point of discovery

“As a general rule, a cause of action accrues and the statute of limitations begins to run when facts come into existence that authorize a party to seek a judicial remedy.” Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003). The discovery rule operates to defer accrual of a claim until the plaintiffs knew or, in the exercise of reasonable diligence, should have known of the wrongful act causing their injury. Salinas v. Gary Pools, Inc., 31 S.W.3d 333, 336 (Tex.App.--San Antonio 2000, no pet.).
 
The discovery rule always applies to DTPA claims. Id.; see also Tex.Bus.&Com.Code Ann. § 17.565 (stating that DTPA suits must be filed “within two years after the date on which the false, misleading, or deceptive act or practice occurred or within two years after the consumer discovered or in the exercise of reasonable diligence should have discovered the occurrence of the false, misleading, or deceptive act or practice.”). Beyond that, the discovery rule is “a very limited exception to statutes of limitations” and applies only when the plaintiffs’ injury is inherently undiscoverable and objectively verifiable. Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 734 (Tex. 2001).
 
 “An injury is inherently undiscoverable if it is, by its nature, unlikely to be discovered within the prescribed limitations period despite due diligence.” Id. at 734-35. “Inherently undiscoverable” does not mean that particular plaintiffs did not discover their particular injuries within the limitations period. Id. at 735. The issue is whether the injury is of a type that generally is discoverable in the exercise of reasonable diligence. Id. “Knowledge of facts, conditions, or circumstances that would cause a reasonable person to make inquiry . . . is equivalent to knowledge of the cause of action for limitation purposes.” Southwest Olshan Found. Repair Co., LLC v. Gonzales, ___ S.W.3d ___, ___, 2011 WL 149870, at *4 (Tex.App.--San Antonio Jan. 19, 2011, no pet.h.).
   
When plaintiffs plead the discovery rule, a defendant who moves for summary judgment on the affirmative defense of limitations must prove as a matter of law that there is no genuine issue of material fact about when the plaintiffs should have discovered their injury in the exercise of reasonable diligence. See KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999); Salinas, 31 S.W.3d at 336. If the defendant conclusively establishes that the statute of limitations bars the plaintiffs’ claims, the plaintiffs must then submit summary judgment proof raising a fact issue in avoidance of the statute of limitations. See KPMG Peat Marwick, 988 S.W.2d at 748; Salinas, 31 S.W.3d at 336. 
 
SOURCE: El Paso Court of Appeals - 08-09-00116-CV - 4/27/11

Fraudulent Inducement claim requires proof of additional element

FRAUD RELATING TO A ENTRY INTO CONTRACT

In a fraudulent inducement claim, the elements of fraud must be established as they relate to an agreement between the parties. Esty v. Beal Bank S.S.B., 298 S.W.3d 280, 303 (Tex.App.--Dallas 2009, no pet.). The elements of fraud are (1) a material false representation, (2) that was made with knowledge or recklessness as to its falsity, (3) with the intent to induce reliance, and (4) that the other party “actually and justifiably relied upon,” causing him injury. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001); Wil-Roye Inv. Co. II v. Wash. Mut. Bank, FA, 142 S.W.3d 393, 411 (Tex.App.--El Paso 2004, no pet.).

RELIANCE ON REPRESENTATION: Was it reasonable, justifiable? 

Whether reliance is justifiable depends on the nature of the contract and the parties’ relationship. Coastal Bank SSB v. Chase Bank of Tex., N.A., 135 S.W.3d 840, 843 (Tex.App.--Houston [1st Dist.] 2004, no pet.). A party must generally exercise ordinary care for the protection of his own interests and is charged with knowledge of all facts that would have been discovered by a reasonably prudent and similarly situated person. Thigpen, 363 S.W.2d at 251; Wil-Roye, 142 S.W.3d at 411. Since he failed to raise a fact issue regarding the existence of a fiduciary duty, Garcia’s avowed subjective trust in Vera is insufficient to show that his reliance was justifiable. See Thigpen, 363 S.W.2d at 253; see also DRC Parts & Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex.App.--Houston [14th Dist.] 2003, pet. denied)(“[R]eliance upon an oral representation that is directly contradicted by the express, unambiguous terms of a written agreement between the parties is not justified as a matter of law.”).

 SOURCE: El Paso Court of Appeals - 08-09-00084-CV - 4/29/11

Distinguishing different types of fraud claims in Texas

COMMON-LAW FRAUD, FRAUD IN THE INDUCEMENT, STATUTORY FRAUD 

Common Law Fraud Claim To bring a claim for common law fraud, a plaintiff must show the following: (1) a material misrepresentation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001) (orig. proceeding).
 
Fraud in the Inducement Cause of Action To bring a claim for fraud in the inducement, a plaintiff must show the elements of fraud, see Balogh v. Ramos, 978 S.W.2d 696, 701 (Tex. App.—Corpus Christi 1998, pet. denied), and must show that she has been fraudulently induced to enter into a binding agreement. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001) (“Without a binding agreement, there is no detrimental reliance, and thus no fraudulent inducement claim. That is, when a party has not incurred a contractual obligation, it has not been induced to do anything.”).

Statutory Fraud [real estate transaction] To bring a claim for statutory fraud, [ Plaintiff ] must show the following: (1) the transaction involved real estate; (2) [ Defendant ]. made a false representation of a material fact or made a false promise to do an act to [ Defrauded Party ], or benefited by not disclosing that a third party’s representation or promise was false; (3) the false representation was made for the purpose of inducing [ Defrauded Party ] [ Name ] to enter into a contract; (4) [ Defrauded Party ] relied on the false representation or promise in entering into the contract; and (5) the reliance caused [ Defrauded Party ] injury. See Tex. Bus. & Com. Code Ann. § 27.01 (West 2009) (titled “Fraud in Real Estate and Stock Transactions”); Fletcher v. Edwards, 26 S.W.3d 66, 77 (Tex. App.—Waco 2000, pet. denied) (“A plaintiff establishes a statutory fraudulent inducement claim under section 27.01 of the Business and Commerce Code by showing: a false representation of a material fact; made to induce a person to enter a contract; and relied on by that person in entering the contract.”). The statutory cause of action differs from the common law only in that to recover actual damages, it does not require proof that the defendant made a material false representation knowing it to be false or made it recklessly as a positive assertion without any knowledge of its truth. Fletcher, 26 S.W.3d at 77.

 SOURCE: San Antonio Court of Appeals - 04-10-00616-CV - 5/11/11

CPRC Chapter 10 Sanctions: When can they be imposed?

Sanctions Under Chapter 10 of the Texas Civil Practice and Remedies Code Tex. Civ. Prac. & Rem. Code Ann. § 10.001. The trial court found that the petition was signed for an improper purpose and that its implicit assertion that the lawsuit was timely filed under the applicable statutes of limitations was frivolous because it was not warranted by existing law, had no basis in fact, or was unlikely to have any basis in fact. Although Rule 13 requires a party to have filed a groundless pleading brought in bad faith or a groundless pleading for harassment, sanctions under Chapter 10 can be awarded if the suit was filed for an improper purpose, even if the suit was not frivolous. Save Our Springs Alliance, Inc., 198 S.W.3d at 321. Compare Tex. R. Civ. P. 13 with Tex. Civ. Prac. & Rem. Code Ann. § 10.001. We construe the phrase “improper purpose” as the equivalent of “bad faith” under Rule 13. See Tex. R. Civ. P. 13; Save Our Springs Alliance, Inc., 198 S.W.3d at 321. For the reasons stated earlier in this opinion, there is no evidence of an improper purpose. Under Section 10.001, the signer of a pleading certifies that each claim and allegation is based on the signatory’s best knowledge, information, and belief, formed after reasonable inquiry. Low, 221 S.W.3d at 615. Each allegation and factual contention in a pleading must have, or be likely to have, evidentiary support after a reasonable investigation. Id. In Low, the Texas Supreme Court found sanctions were justified when the petition claimed physicians prescribed the drug Propulsid to White. White’s attorney was in possession of White’s medical records before he filed the lawsuit; those records did not indicate that the physicians prescribed or administered the drug to White. Id. at 616. Further, both physicians filed affidavits swearing that they did not in any way provide Propulsid to White. Id. at 617. The evidence, therefore, supported the trial court’s conclusion that the allegations against the physicians were without evidentiary support. Chapter 10 provides that: The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the signatory that to the signatory’s best knowledge, information, and belief, formed after reasonable inquiry: (1) the pleading or motion is not being presented for any improper purpose, including to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) each claim, defense, or other legal contention in the pleading or motion is warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) each allegation or other factual contention in the pleading or motion has evidentiary support or, for a specifically identified allegation or factual contention, is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) each denial in the pleading or motion of a factual contention is warranted on the evidence or, for a specifically identified denial, is reasonably based on a lack of information or belief. SOURCE: Texarkana Court of Appeals - 06-10-00080-CV - 4/1/11

Sanctions Claim under Rule 13 and CPRC

CLAIM FOR FRIVOLOUS SUIT SANCTIONS UNDER RULE 13 AND CPRC

SANCTIONS UNDER TRCP 13 

Rule 13 authorizes the imposition of sanctions against an attorney, a represented party, or both, who filed a pleading that is either: (1) groundless and brought in bad faith; or (2) groundless and brought to harass. Tex. R. Civ. P. 13; see also Rudisell v. Paquette, 89 S.W.3d 233, 236 (Tex. App.—Corpus Christi 2002, no pet.). The rule defines “groundless” as having “no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.” Tex. R. Civ. P. 13.

Sanctions may only be imposed for good cause under Rule 13, the particulars of which must be stated in the order. Tex. R. Civ. P. 13; Rudisell, 89 S.W.3d at 237. To impose sanctions under Rule 13 of the Texas Rules of Civil Procedure, the proponent of sanctions must establish that the suit was groundless and brought (1) in bad faith or (2) for purposes of harassment. Tex. R. Civ. P. 13.

A pleading is groundless when it has no basis in law or in fact. Tex. R. Civ. P. 13. The burden is on the party moving for sanctions to overcome the presumption that the pleading was filed in good faith. GTE Commc’ns Sys. Corp. v. Tanner, 856 S.W.2d 725, 731 (Tex. 1993). A groundless pleading is not sanctionable unless it is also brought in bad faith or for the purpose of harassment. Id. Bad faith does not exist when a party exercises bad judgment or negligence. Rather, bad faith means “the conscious doing of a wrong for dishonest, discriminatory, or malicious purposes.” Campos, 879 S.W.2d at 71; Mattly v. Spiegel, Inc., 19 S.W.3d 890, 896 (Tex. App.—Houston [14th Dist.] 2000, no pet.). In deciding whether a pleading was filed in bad faith or for the purpose of harassment, the trial court must measure a litigant’s conduct at the time the relevant pleading was signed. Texas-Ohio Gas, Inc. v. Mecom, 28 S.W.3d 129, 139 (Tex. App.—Texarkana 2000, no pet.). Rule 13 generally requires that the trial court hold an evidentiary hearing to make a determination about the motives and credibility of the person signing the petition. R.M. Dudley Constr. Co. v. Dawson, 258 S.W.3d 694 (Tex. App.—Waco 2008, pet. denied); see, e.g., Low, 221 S.W.3d at 613, 617 (referring to trial court’s evidentiary hearing on motion for Chapter 10 sanctions).

Rule 13 requires sanctions based on the acts or omissions of the represented party or counsel, and not merely on the legal merit of the pleading. Parker v. Walton, 233 S.W.3d 535, 539 (Tex. App.—Houston [14th Dist.] 2007, no pet.). This is true because improper motive is an essential element of bad faith. Elkins, 103 S.W.3d at 669; Alejandro v. Bell, 84 S.W.3d 383, 393 (Tex. App.––Corpus Christi 2002, no writ) (no evidence presented at sanctions hearing from which the trial court could determine lawsuit filed in bad faith).

SANCTIONS UNDER CHAPTER 10 OF THE CPRC 

Similarly, to award sanctions under Chapter 10, it must be shown that: (1) the pleading or motion was brought for an improper purpose; (2) there were no grounds for the legal arguments advanced; or (3) the factual allegations or denials lacked evidentiary support. See Tex. Civ. Prac. & Rem. Code Ann. § 10.001 (Vernon 2002); Low, 221 S.W.3d at 614; Armstrong v. Collin County Bail Bond Bd., 233 S.W.3d 57, 62 (Tex. App.—Dallas 2007, no pet.).

Chapter 10 specifies that one of the aims for imposition of sanctions for the filing of frivolous or groundless pleadings is to “deter repetition of the conduct or comparable conduct by others similarly situated.” Tex. Civ. Prac. & Rem. Code Ann. § 10.004(b) (Vernon 2002). We construe the phrase “improper purpose” as the equivalent of “bad faith” under Rule 13. See Tex. R. Civ. P. 13; cf. Save Our Springs Alliance, Inc. v. Lazy Nine Mun. Util. Dist. ex rel. Bd. of Directors, 198 S.W.3d 300, 321 (Tex. App.—Texarkana 2006, pet. denied) (“nonfrivolous” requirement is same as “good faith” requirement); Elwell v. Mayfield, No. 10-04-00322-CV, 2005 WL 1907126, at *5 (Tex. App.—Waco Aug. 10, 2005, pet. denied) (mem. op.) (same). An order imposing a sanction under Chapter 10 “shall describe . . . the conduct the court has determined violated Section 10.001 and explain the basis for the sanction imposed.” Tex. Civ. Prac. & Rem. Code Ann. § 10.005 (Vernon 2002).

In determining whether sanctions are appropriate, the trial court must examine the facts available to the litigant and the circumstances existing when the litigant filed the pleading. Robson v. Gilbreath, 267 S.W.3d 401, 405 (Tex. App.—Austin 2008, pet. denied); Alejandro v. Robstown Indep. Sch. Dist., 131 S.W.3d 663, 669 (Tex. App.—Corpus Christi 2004, no pet.). Courts should presume parties and their counsel file all papers in good faith, and the party seeking sanctions must overcome that presumption. See Tex. R. Civ. P. 13; GTE Commc’ns Sys. Corp. v. Tanner, 856 S.W.2d 725, 731 (Tex. 1993). The party seeking sanctions has the burden of showing its right to relief. Tanner, 856 S.W.2d at 731; Elkins v. Stotts-Brown, 103 S.W.3d 664, 668 (Tex. App.—Dallas 2003, no pet.).

SOURCE: Texarkana Court of Appeals -6-10-00080-CV - 4/1/11

CPRC CHAPTER 10 SANCTIONS 

Chapter 10 provides that: The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the signatory that to the signatory’s best knowledge, information, and belief, formed after reasonable inquiry: (1) the pleading or motion is not being presented for any improper purpose, including to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) each claim, defense, or other legal contention in the pleading or motion is warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) each allegation or other factual contention in the pleading or motion has evidentiary support or, for a specifically identified allegation or factual contention, is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) each denial in the pleading or motion of a factual contention is warranted on the evidence or, for a specifically identified denial, is reasonably based on a lack of information or belief. 

SOURCE: Texarkana Court of Appeals 06-10-00080-CV - 4/1/11


Tuesday, May 24, 2011

Statute of Frauds (one-year performace timeframe)


STATUTE OF FRAUDS AS TO AGREEMENTS THAT CANNOT BE PERFORMED WITHIN ONE-YEAR 

The statute of frauds, set forth in Section 26.01 of the Texas Business and Commerce Code, provides that to be enforceable, a promise or agreement which cannot be performed within one year from the date of making the agreement must be in writing and signed by the person to be charged with the promise. Tex. Bus. & Com. Code Ann. § 26.01(b)(6); Niday v. Niday, 643 S.W.2d 919, 920 (Tex. 1982). Whether a contract falls within the statute of frauds is a question of law. Beverick v. Koch Power Co., 186 S.W.3d 145, 149 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
 
A contract that could possibly be performed within a year, however improbable performance within one year may be, does not fall within the statute of frauds. Niday, 643 S.W.2d at 920 (stating that if an agreement, either by its terms or by the nature of the required acts, cannot be performed within one year, it falls within the statute of frauds and must be in writing). The fact that the entire performance within one year is not required or expected will not bring an agreement within the statute. Id. The statute of frauds does not apply if performance could conceivably be completed within one year of the agreement’s making. Miller v. Riata Cadillac Co., 517 S.W.2d 773, 776 (Tex. 1974) (contract to pay employee bonus after approximately one year could theoretically be performed before year expired); Young v. Fontenot, 888 S.W.2d 238, 241 (Tex. App.—El Paso 1994, writ denied) (agreement to transfer stocks at unspecified date in future was performable within one year and therefore not within statute). The duration of the agreement here was one which coincided with the duration of [ party's ] membership in the Club. This could be for a lifetime or some other indefinite duration. Agreements to last during the lifetime of one of the parties do not require a signed writing because the party on whose life the duration of the contract is measured could die within a year of the agreement’s making. Young v. Ward, 917 S.W.2d 506, 510 (Tex. App.—Waco 1996, no pet.). Likewise, agreements requiring performance of indefinite duration are generally not within the statute because such agreements could conceivably be performed within a year of their making. Bratcher v. Dozier, 162 Tex. 319, 346 S.W.2d 795, 796 (1961). 
 
The Texas Supreme Court has also held that where an agreement cannot be completed within one year, either by its terms or by the nature of the required acts, that agreement falls within the statute and must be in writing. Niday, 643 S.W.2d at 920. That is, where an oral contract omits the performance term, duration may properly be implied from extrinsic evidence. If that evidence conclusively proves that the contract cannot be completed within one year, the contract violates the statute of frauds as a matter of law. Id. There is no evidence here, extrinsic or otherwise, which conclusively proves the contract could not be completed within one year. It is, in fact, possible that the contract could be performed in one year in the circumstance the share and lake house were sold within that time. [ Party ] points out that the restriction was in place for over two years at the time of trial. The objective determination of whether the contract could be performed within one year does not permit consideration of this factor. See Keystone Int’l, Inc. v. Ingham, 593 S.W.2d 354, 357 (Tex. Civ. App.—Texarkana 1979, no writ). “Texas courts . . . have generally held that, in the absence of a known date when performance will be completed, the statute of frauds does not apply if performance could conceivably be completed within one year of the agreement’s making.” Young, 917 S.W.2d at 509

 SOURCE: Texarkana Court of Appeal - 06-10-00047-CV - 4/26/11

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