Principles of statutory construction

When can extrinsic information be considered in construing a statute? 

The meaning of a statute is a legal question, which we review de novo to ascertain and give effect to the legislature's intent. Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009). When possible, we discern legislative intent from the plain meaning of the words chosen. Id. This general rule applies unless enforcing the plain language of the statute as written would produce absurd results. Id. Therefore, our practice when construing a statute is to recognize that "the words [the legislature] chooses should be the surest guide to legislative intent." Id. (quoting Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 866 (Tex. 1999)). Only when those words are ambiguous do we resort to rules of construction or extrinsic aids. Id.

SOURCE: HOUSTON COURT OF APPEALS No. 14-15-00180-CV. - 2/11/2016

Westfield Lake and Mill Creek undisputedly held legal title at the time they filed timely applications for continuation of the exemptions establishing that they were qualifying CHDOs. Accordingly, we conclude as a matter of law that under the plain language of the statute, Westfield Lake and Mill Creek were "owners" for purposes of section 11.182.

Our holding is consistent with the supreme court's acknowledgement that the legislature wanted to encourage the development and ownership of low-income housing by CHDOs and to give CHDOs the flexibility to structure their transactions in accordance with "the realities of the commercial housing industry." See AHF-Arbors at Huntsville I, LLC v. Walker Cnty. Appraisal Dist., 410 S.W.3d 831, 837, 839 (Tex. 2012). Although the court recognized that tax exemption statutes generally are construed strictly, that does not require us to ignore the purpose of the exemptions. See id. at 837. According to the legislative history evidence submitted by the Appraisal District, the purpose of the statute was to preserve the CHDO tax exemption for "properties that might change ownership due to foreclosure." Our construction of the statute is consistent with this purpose.

We reverse the judgment of the trial court and render judgment that Westfield Lake and Mill Creek are entitled to a continuation of the ad valorem tax exemptions under section 11.182. See Tex. Tax Code § 11.182(k).

SOURCE: HOUSTON COURT OF APPEALS No. 14-15-00180-CV. - 2/11/2016

This issue involves statutory construction, which we review de novo. See CHCA Woman's Hosp., L.P. v. Lidji, 403 S.W.3d 228, 231 (Tex. 2013). In construing statutes, our primary objective is to give effect to the legislature's intent. Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010) (citing Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009)). We rely on the plain meaning of the text as expressing legislative intent unless a different meaning is supplied by legislative definition or is apparent from the context or the plain meaning leads to absurd results. Id. (citing City of Rockwall v. Hughes, 246 S.W.3d 621, 625-26 (Tex. 2008)). We presume that the legislature selected language in a statute with care and that every word or phrase was used with a purpose in mind. Id. (citing In re Caballero, 272 S.W.3d 595, 599 (Tex. 2008); Chastain v. Koonce, 700 S.W.2d 579, 582 (Tex. 1985)). We read statutes as a whole and interpret statutes to give effect to "every sentence, clause, and word of a statute so that no part thereof [will] be rendered superfluous." City of San Antonio v. City of Boerne, 111 S.W.3d 22, 29 (Tex. 2003)(quoting Spence v. Fenchler, 180 S.W. 597, 601 (1915)).

In addition to the general principles that guide our construction of the tax code, statutory tax exemptions are disfavored and are strictly construed against the taxpayer and in favor of the taxing authority. N. Alamo Water Supply Corp. v. Willacy Cty. Appraisal Dist.,804 S.W.2d 894, 899 (Tex. 1991). The burden of proof for showing the exemption applies lies with the claimant. See id. An exemption must affirmatively appear in the statute, and all doubts are resolved in favor of the taxing authority. See Bullock v. Nat'l Bancshares Corp., 584 S.W.2d 268, 272 (Tex. 1979).

[,,,]

Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d 238, 256 (Tex. 2008)(stating that courts must not interpret a statute in a manner that renders any part of the statute meaningless or superfluous); Cont'l Cas. Ins. Co. v. Functional Restoration Assocs., 19 S.W.3d 393, 402 (Tex. 2000) (noting that courts give effect to all of a statute's words and, if possible, do not treat any statutory language as mere surplusage); see also Tex. Gov't Code Ann. § 311.021(2) (West 2013) (presuming that legislature intended entire statute to be effective).

SOURCE: FORT WORTH COURT OF APPEALS - No. 02-14-00188-CV. - 2/14/2016 

Res Judicata Cases

EFFECT OF RES JUDICATA WHEN PROPERLY ASSERTED AS AFFIRMATIVE DEFENSE 

Res judicata bars claims that were brought, or could have been brought, in an earlier lawsuit that resulted in a final judgment on the merits. Igal v. Brightstar Info. Tech. Grp., Inc., 250 S.W.3d 78, 86 (Tex. 2008). To prevail on the defense, a party must show that (1) in a previous action, a court of competent jurisdiction rendered a final determination on the merits of a claim, (2) the parties in the earlier action are identical to, or in privity with, the present parties, and (3) the pending claim (a) is identical to the prior claim or (b) arises out of the same subject matter as the prior claim and could have been litigated in the previous action. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). 

SOURCE:HOUSTON COURT OF APPEALS -  No. 01-12-01114-CV. - 7/11/2013

RES JUDICATA AS TO COUNTERCLAIMS - PRIVITY 

Res judicata prevents the relitigation of a finally-adjudicated claim and related matters that should have been litigated in a prior suit. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). Under Texas' transactional approach to res judicata, a defendant must bring as a counterclaim any claim arising out of the transaction or occurrence that is the subject matter of the opposing party's suit. State & County Mut. Fire Ins. Co. v. Miller, 52 S.W.3d 693, 696 (Tex. 2001); Barr, 837 S.W.2d at 630. It requires proof of three elements: (1) a prior final judgment on the merits by a court of competent jurisdiction, (2) identity of parties or those in privity with them, and (3) a second action based on the same claims as were raised or could have been raised in the first action. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996).

"People can be in privity in at least three ways: (1) they can control an action even if they are not parties to it; (2) their interests can be represented by a party to the action; or (3) they can be successors in interest, deriving their claims through a party to the prior action." Id. at 652-53. Privity does not exist when persons are interested in the same question, but requires an identity of interest in the legal right actually litigated. Tex. Real Estate Comm'n v. Nagle, 767 S.W.2d 691, 694 (Tex. 1989); Pyles v. Young, No. 06-07-00066-CV, 2007 WL 4462738 (Tex. App.-Texarkana Dec. 21, 2007, no pet.) (mem. op.).

SOURCE: TEXARCANA COURT OF APPEALS - No. 06-13-00033-CV. - 9/5/2014B

Contract for Deed vs. Conveyance of Real Property

A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full.

The probate court's order expressly granted Edward's one-half community interest in the property to "his rightful heirs," and Connie does not dispute that Don and Esther are his rightful heirs. At the time of Edward's death, however, Connie and Edward did not have an ownership interest in the property because Mary Rose—as the seller of the property under a contract for deed—retained title to the property. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Sluder v. Ogden, No. 03-10-00280-CV, 2011 Tex. App. LEXIS 267, at *10 (Tex. App.-Austin Jan. 13, 2011, pet. denied) (mem. op.) (noting that "contract for deed merely establishes conditions precedent to a title's transfer" (citing Graves v. Diehl, 958 S.W.2d 468, 470-71 (Tex. App.-Houston [14th Dist.] 1997, no pet.)).

The evidence established that Connie and Edward had not fully performed under the terms of the contract for deed at the time of Edward's death. Under an executory contract to convey land, such as a contract for deed, the buyer does not acquire title but an "equitable right to make payments on the property and to receive a deed and legal title when [the buyer] complete[s] the payments." See Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.) (citing Johnson v. Wood, 157 S.W.2d 146, 148 (Tex. 1941) and Texas Am. Bank/Levelland v. Resendez, 706 S.W.2d 343, 345 (Tex. App.-Amarillo 1986, no writ)); see also Southern Vanguard Ins. Co. v. Silberstein, No. 14-09-00472-CV, 2010 Tex. App. LEXIS 6202, at *9-12 (Tex. App.-Houston [14th Dist.] Aug. 3, 2010, no pet.) (mem. op.) (concluding that purchaser did not obtain equitable title when entered into contract for deed and explaining differences between contract for deed and mortgage).

SOURCE: AUSTIN COURT OF APPEALS - No. 03-12-00146-CV. - 8/26/2014 

ALL PAYMENTS MUST BE MADE OR CONTRACT MAY BE CANCELLED

A contract for deed is an executory contract constituting an agreement by a seller to deliver a deed to property once certain conditions have been met. See Graves v. Diehl, 958 S.W.2d 468, 470 (Tex. App.-Houston [14th Dist.] 1997, no pet.). Until the executory contract is fully performed, the owner retains legal title to the property, but holds that title subject to the purchaser's equitable right to complete the contract, i.e., to make payments and receive a deed once payments are completed. See Gaona v. Gonzalez, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.); Graves, 958 S.W.2d at 471. The seller is not obligated to deliver legal title to the property until the purchaser pays the purchase price in full. See Salinas v. Beaudrie, 960 S.W.2d 314, 319 (Tex. App.-Corpus Christi 1997, no pet.). Under a contract for deed, the purchase price is usually paid in installments over a course of years. Id. In the present case, there was undisputed evidence that Ware did not make the payments required by the December 15, 2005 document she contends is a contract for deed. According to that document, Ware was to make eighty monthly payments of $500 to pay the $40,000 purchase price. Assuming her first payment was made in November 2005, Ware was required to pay $500 per month until June 2012. It is undisputed that Ware stopped making payments in the fall of 2008 and made no further payments required by the December 15, 2005 document.^[6] Thus, even though Ware was not obligated to make the payments set forth in the contract for deed, Ware's failure to make those payments meant that title to the Property remained with the seller. See Graves, 958 S.W.2d at 471 (purchaser's equitable right does not ripen into equitable title to property until he has fully performed under the contract, i.e., paid the full purchase price). The trial court was therefore correct in its conclusion that the Estate owned the Property. We overrule Ware's sixth appellate issue.^[7]

SOURCE: HOUSTON COURT OF APPEALS - No. 03-14-00083-CV. - 12/22/2015 

RIGHT TO POSSESSION UNDER CONTRACT FOR DEED VS. OWNERSHIP (TITLE) 

A contract for deed is a form of real-property conveyance in which the purchaser obtains an immediate right to possession, but the seller retains legal title and has no obligation to transfer it unless and until the purchaser finishes paying the full purchase price (and, often, interest, fees, or other related obligations), which is typically done in installments over several years. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("[E]xecutory contracts [are] also known as contracts for deed. 

A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Reeder v. Curry, 294 S.W.3d 851, 856 (Tex. App.-Dallas 2009, pet. denied) ("In an executory contract for the sale of land, such as the contract for deed in this case, the superior title remains with the seller until the purchaser fulfills its part of the contract" and "[i]f the purchaser defaults under the contract, the seller is entitled to possession of the property."); Ward v. Malone, 115 S.W.3d 267, 270-71 (Tex. App.-Corpus Christi 2003, pet. denied) (stating that a "contract for deed is an agreement by a seller to deliver a deed to property once certain conditions have been met and that it entitled the buyer to immediate possession, that the seller retains title until the purchase price is fully paid, and that the price is typically paid in installments over several years). 

A contract for deed differs from a conventional contract for sale of realty, in which the seller and purchaser mutually agree to complete payment and title transfer on a date certain (the "closing date"). See Flores, 185 S.W.3d at 429. Unlike a contract for deed, under which the buyer has an equitable right, but not obligation, to complete the purchase, Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.), the buyer under a typical real-estate contract is contractually obligated to complete the purchase and may be liable for breach upon failure to pay the seller. Carroll v. Wied, 572 S.W.2d 93, 95 (Tex. Civ. App.-Corpus Christi 1978, no writ)("In a contract of sale, one party is obligated to sell and the other to purchase.").

Based on the foregoing case law and the facts in this case, we disagree with Tran's assertion that the underlying contract is an executory contract. Specifically, the record reflects that Luu signed and conveyed a warranty deed on the day of closing with no vestige of title to the property, even though Tran is still making payments on the note. See, e.g., Brown v. De La Cruz, 156 S.W.3d 560, 566 (Tex. 2004) ("Since 1995, the Texas Property Code has required that sellers by executory contract (or `contract for deed') of certain residential property in Texas must record and transfer a deed within thirty days of final payment."). Indeed, there is no evidence in the record demonstrating that Luu withheld transfer of title or refused to sign the deed subject to Tran completing all installment payments associated with the purchase of the property.

SOURCE: WACO COURT OF APPEALS - No. 10-13-00308-CV. - 4/10/2014 

Mediation privilege bars testimony about what was said or happened in mediation

STATUTORY MEDIATION PRIVILEGE 

Section 154.053(c) of the Texas Civil Practice and Remedies Code provides that "Unless the parties agree otherwise, all matters . . . during the settlement process are confidential and may never be disclosed to anyone, including the appointing court." TEX. CIV. PRAC. & REM. CODE ANN. § 154.053(c) (West 2011); see also § 154.073(a)-(b) (West 2011) (explaining communications and any records made during mediation are confidential and may not be used as evidence in a judicial proceeding). 

"A cloak of confidentiality surrounds mediation, and the cloak should be breached only sparingly." Allison v. Fire Ins. Exch., 98 S.W.3d 227, 260 (Tex. App.-Austin 2002, pet. granted, judgm't vacated w.r.m.). 

SOURCE: DALLAS COURT OF APPEALS - No. 05-11-01536-CV. - 5/7/2013

We begin by determining whether HSI was required to obtain a written ruling on its objection asserting the mediation privilege. Generally, a summary judgment ruling on evidence must be reduced to writing, signed by the trial court, and entered of record. S & I Mgmt., Inc. v. Sungju Choi, 331 S.W.3d 849, 855 (Tex. App.-Dallas 2011, no pet.). However, there is a distinction between summary judgment evidence that is a defect in form and a defect in substance. A defect is substantive if the evidence is incompetent, and it is formal if the evidence is competent but inadmissible. Coleman v. Woolf, 129 S.W.3d 744, 748 (Tex. App.-Fort Worth 2004, no pet.); Mathis v. Bocell, 982 S.W.2d 52, 60 (Tex. App.-Houston [1st Dist.] 1998, no pet.). Formal defects may be waived by failure to object, and if waived, the evidence is considered. Mathis, 982 S.W.2d at 52. Substantive defects are never waived because the evidence is incompetent and cannot be considered under any circumstances. Id.

The parties have not cited to any case law holding that the failure to obtain a ruling on an objection pertaining to the mediation privilege is a substantive defect. However, section 154.053(c) of the Texas Civil Practice and Remedies Code provides that "Unless the parties agree otherwise, all matters . . . during the settlement process are confidential and may never be disclosed to anyone, including the appointing court." TEX. CIV. PRAC. & REM. CODE ANN. § 154.053(c) (West 2011); see also § 154.073(a)-(b) (West 2011) (explaining communications and any records made during mediation are confidential and may not be used as evidence in a judicial proceeding). Because these statutes indicate such privileged information cannot be disclosed or considered, it therefore follows it is a substantive defect that cannot be waived by failing to obtain a ruling from the trial court. See, e.g., St. Luke's Episcopal Hosp. v. Garcia, 928 S.W.2d 307, 310 (Tex. App.-Houston [14th Dist.] 1996, orig. proceeding) (noting relator's primary objections to discovery "are substantive objections relating to privilege"). Accordingly, we shall address HSI's argument that the mediation privilege bars consideration of the evidence submitted by HTI to raise a fact issue as to ownership.

Section 154.073 of the Texas Civil Practice and Remedies Code provides the following regarding "Confidentiality of Certain Records and Communications" involved in alternative dispute resolution:

(a) Except as provided by Subsections (c), (d), (e), and (f), a communication relating to the subject matter of any civil or criminal dispute made by a participant in an alternative dispute resolution procedure, whether before or after the institution of formal judicial proceedings, is confidential, is not subject to disclosure, and may not be used as evidence against the participant in any judicial or administrative proceeding.

(b) Any record made at an alternative dispute resolution procedure is confidential, and the participants or the third party facilitating the procedure may not be required to testify in any proceedings relating to or arising out of the matter in dispute or be subject to process requiring disclosure of confidential information or data relating to or arising out of the matter in dispute.

(c) An oral communication or written material used in or made a part of an alternative dispute resolution procedure is admissible or discoverable if it is admissible or discoverable independent of the procedure.

TEX. CIV. PRAC. & REM. CODE ANN. § 154.073(a)-(c) (West 2011).

Further, "[u]nless the parties agree otherwise, all matters, including the conduct and demeanor of the parties and their counsel during the settlement process, are confidential and may never be disclosed to anyone, including the appointing court." Id. § 154.053(c).

Both parties cite to two different cases from this Court to support their position as to why the mediation privilege should or should not apply to these facts. HTI relies on Avary v. Bank of America, N.A., 72 S.W.3d 779 (Tex. App.-Dallas 2002, pet. denied) and HSI relies on In re Empire Pipeline Corporation, 323 S.W.3d 308 (Tex. App.-Dallas 2010, orig. proceeding).

We begin our discussion with Avary. In that case, Avary, as guardian of the estates of minors, brought suit against the fiduciary bank based on the bank's actions during the mediation of an underlying wrongful death suit. Avary, 72 S.W.3d at 785. Specifically, Avary alleged the bank's rejection of a $450,000 settlement offer and the acceptance of a much smaller allocation was a breach of the bank's fiduciary duty as executor of the estate. Id. As part of discovery, Avary sought to obtain information from the mediation, most of which the trial court denied. The trial court granted the bank's summary judgment because Avary presented no evidence of breach of fiduciary duty, negligence, or conspiracy to defraud, as each cause of action arose "out of confidential and inadmissible statements purportedly made at Mediation." Id. at 786.

We noted "[t]here is no question that confidentiality of communications is an important part of the statutory scheme of alternative dispute resolution" and that "proponents of mediation stress that confidentiality is critical to the success of the process." Id. at 798. We concluded the mediation privilege did not apply because Avary sought to prove a "new and independent tort" that allegedly occurred between her and her fiduciary during mediation. Id. at 798. She was not trying to discover evidence to obtain additional funds or establish any further liability against the parties that had peaceably resolved the underlying dispute. Thus, the information she sought through discovery would not disturb the underlying settlement agreement. Id. at 800. "It is one thing to order discovery from a party alleged to have committed a tort during the mediation process; it is another to reach across the mediation table to parties who have settled the claims against them." Id. at 801. We ultimately held that

[O]n "the facts before us, . . . [w]e conclude only that where a claim is based upon a new and independent tort committed in the course of the mediation proceedings, and that tort encompasses a duty to disclose, section 154.073 does not bar discovery of the claim where the trial judge finds in light of the "facts, circumstances, and context," disclosure is warranted.

Id. at 803.

HSI relies on In re Empire Pipeline Corporation to support its position that HTI's attempts to use evidence from the mediation is barred. In Empire Pipeline, the underlying cause of action involved a breach of contract relating to oil and gas exploration, which the parties settled through mediation. Id. at 309. Two months after the agreement, Gunter sought to vacate the agreement; however, the trial court entered the settlement agreement and dismissed his claims. Id. Gunter later filed a declaratory judgment action asserting Empire Pipeline was not complying with the settlement agreement. Id.

As part of the declaratory judgment action, Gunter sought discovery of documents related to the prior mediation. Id. at 310. Gunter described the scope of his discovery in a motion to compel. "Plaintiff is not seeking the work product of counsel, nor his trial strategy, but rather information going to the very heart of the issue: was an agreement actually reached at the mediation, and if so, what were its terms?" Id. The trial court granted, in part, and denied, in part, the motion to compel. Id.

Empire Pipeline sought mandamus relief arguing the documents and testimony ordered by the trial court were, among other things, protected by the ADR privilege. Gunter responded the mediation privilege was not absolute and did not apply to his circumstances. Id. at 311. He further contended that "Avary provides a roadmap for resolution of the issues presented."

We disagreed and distinguished the facts from Avary. We noted the discovery in that case involved information to support a new and independent tort, "the pursuit of which would not disturb the settlement reached at the mediation proceeding." Id. at 313 (citing Avary, 72 S.W.3d at 800)). Gunter's attempt to discover evidence from mediation went to the heart of his lawsuit, which was seeking a declaration regarding the terms of the mediated settlement agreement. He was not seeking evidence to support a new and independent tort that occurred outside of mediation discussions, but rather, wanted to reach across the mediation table and potentially disturb the prior settlement reached between the parties. We concluded all such discovery was barred by Texas Civil Practice & Remedies Code sections 154.073(a) and (b).

Based on the present facts, we conclude the Empire Pipeline reasoning applies. In attempting to use evidence from the mediation, HTI is trying to determine what the parties agreed to in regards to the preferred stock. This is exactly what we have previously held is not allowed. See Empire Pipeline Corp., 323 S.W.3d at 314. While HTI argues Empire Pipeline "only addresses the narrow issue of whether a party can discover another party's communications in mediation in order to avoid enforcement of the settlement agreement in a suit between the same parties to enforce the settlement," we do not interpret its holding so narrowly.

This is not a situation similar to Avary where HTI is trying to use evidence from mediation to support a new and independent tort. Rather, HTI is trying to obtain evidence to potentially change the settlement agreement. We agree with HTI that the word "change" does not appear in reference to the settlement agreement in Empire Pipeline. Rather, the holding discusses a party's attempt to avoid enforcement of a settlement agreement but as previously stated, we refuse to construe the application of the mediation privilege so narrowly.

"A cloak of confidentiality surrounds mediation, and the cloak should be breached only sparingly." Allison v. Fire Ins. Exch., 98 S.W.3d 227, 260 (Tex. App.-Austin 2002, pet. granted, judgm't vacated w.r.m.). Under these facts, to allow HTI to use alleged discussions from the mediation regarding the stock would undermine the very purpose of confidentiality in the mediation process. Parties must not be allowed to use evidence from mediation to dispute terms of a settlement agreement, particularly years later, as is the case here. To do so would chill the overall purpose of mediation, which is to allow parties to come to the table knowing they can speak freely about their dispute and have confidence what they say will be confidential. To conclude otherwise defeats section 154.073 and section 154.053(c) of the Texas Civil Practice and Remedies Code. Accordingly, HTI may not rely on evidence from the 2001 mediation to create a fact issue as to ownership of the stock because such information is protected by the mediation privilege.

In addition to the mediation privilege, HSI also asserts the parol evidence rule bars use of any evidence presented by HTI to contradict the consent judgment and Memorandum of Settlement. HTI responds the Memorandum of Settlement is an ambiguous, incomplete document; therefore, the parol evidence rule does not apply. However, HSI responds HTI cannot collaterally attack the consent judgment. We agree with HSI.

We begin by discussing the law as applied to consent or agreed judgments. An agreed judgment must be interpreted as if it were a contract between the parties, and the interpretation of the judgment is governed by the laws relating to contracts. Miller v. Miller, 700 S.W.2d 941, 951 (Tex. App.-Dallas 1985, writ ref'd n.r.e.) (on rehearing). In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. Id. If the intention expressed on the face of the contract is doubtful, resort may be had to parol evidence of the situation and the surroundings of the parties to resolve the doubt. Id.

The parol evidence rule functions to make the instrument sued on the sole repository of the legal transaction. Lawrence Gen. Corp. v. Anchor Post Prod. of Tex., Inc., No. 05-95-01771-CV, 1997 WL 78913 at *2 (Tex. App.-Dallas Feb. 26, 1997, no writ) (not designated for publication). In other words, the terms of the transaction must be derived from the writing alone. Where the instrument sued on is a professedly partial or incomplete agreement, however, the rule excluding parol evidence does not apply. Id.; see also Garner v. Redeaux, 678 S.W.2d 124, 128 (Tex. App.-Houston [14th Dist.] 1984, writ ref'd n.r.e.). An instrument is incomplete when it refers to terms or understandings not embraced in its provisions. Lawrence Gen. Corp., 1997 WL 78913 at *2.

It is undisputed the Memorandum of Settlement entered into between HTI and Whitehall after the 2001 mediation makes no mention of HSI's 818,182 shares of preferred stock, much less any agreement to transfer the stock back to HTI. However, part of the Memorandum of Settlement attached to the consent judgment states "The parties will more fully memorialize the provisions of their agreement in further instruments to be prepared by counsel." Thus, on its face, the document is incomplete because it refers to potential terms and conditions not embraced within its four corners. See id. (finding a letter of intent incomplete when it specifically stated terms and conditions of the transaction were undetermined). Accordingly, HTI's parol evidence that is not protected by the mediation privilege could be admissible to create a fact issue.^[3] However, under these facts, we conclude it is not.

To establish a fact issue as to the underlying settlement agreement, we would have to allow HTI to attack the final consent judgment. This we cannot allow. A collateral attack is "an attempt to avoid the binding force of a judgment in a proceeding not instituted for the purpose of correcting, modifying, or vacating the judgment, but in order to obtain some specific relief which the judgment currently stands as a bar." Browning v. Prostok, 165 S.W.3d 336, 346 (Tex. 2005). While HTI vehemently argues it is not trying to avoid the force of the underlying judgment against Whitehall and it is not asserting any new, subsequent claims against Whitehall that would affect the underlying judgment, we do not agree. If this court were to conclude a fact issue existed and remanded the issue of stock ownership back to the trial court, the end result would be HTI offering evidence to change the underlying 2001 settlement agreement, which has already been entered as a final judgment of the court and representing the final agreement between the parties. See Liberty Mut. Fire Ins. Co. v. Crane, 898 S.W.2d 944, 948 (Tex. App.-Beaumont 1995, no writ) (noting a settlement agreement incorporated into an agreed judgment "has the same degree of finality and binding force as one rendered by a court at the conclusion of adversary proceedings").

The proper vehicle for challenging the consent judgment was through a bill of review. "[A] bill of review is the exclusive remedy since the time for an appeal from the consent judgment has expired." Middleton v. Murff, 689 S.W.2d 212, 213 (Tex. 1985); In re A.L.H.C., 49 S.W.3d 911, 917 (Tex. App.-Dallas 2001, pet. denied). HTI has never filed a bill of review and any such pleading would now be untimely, as the residual four-year statute of limitations applies. See Caldwell v. Barnes, 975 S.W.2d 535, 538 (Tex. 1998)(citing TEX. CIV. PRAC. & REM. CODE ANN. § 16.051 (West 2008)).

SOURCE: DALLAS COURT OF APPEALS - No. 05-11-01536-CV. - 5/7/2013

Fraud and Fraud by Nondisclosure

In order to recover on an action for fraud, a party must prove that: (1) a material representation was made; (2) the representation was false; (3) when the speaker made the representation, he knew it was false or made it recklessly without knowledge of the truth as a positive assertion; (4) the speaker made it with the intention that it should be acted upon by the party; (5) the party acted in reliance upon it; and (6) the party thereby suffered injury. Soluntioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 385 (Tex. App.-Houston [14th Dist.] 2007, no pet.).

Fraud by nondisclosure is a subcategory of fraud. Id. Failure to disclose information is actionable only when there is a duty to disclose. Id. The duty to disclose may arise: (1) when the parties have a confidential or fiduciary relationship; (2) when one party voluntarily discloses information; (3) when one party makes a representation which gives rise to the duty to disclose new information that the party is aware makes the earlier representation misleading or untrue; or (4) when one party makes a partial disclosure and conveys a false impression, which gives rise to the duty to speak. Id. Whether such a duty exists is a question of law. Bradford v. Vento, 48 S.W.3d 749, 755 (Tex. 2001).

In regard to Lombana's assertion that she had a "special relationship" with AIG that required disclosure of any additional requirements for reinstatement of the Policy, we note that an informal fiduciary relationship, which may arise from "a moral, social, domestic or purely personal relationship of trust and confidence," is generally called a "confidential relationship." Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998). A confidential relationship exists in cases in which "`influence has been acquired and abused, in which confidence has been reposed and betrayed.'" Id. (quoting Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992)). However, an insurer generally does not have a fiduciary relationship giving rise to a duty to an insured. See Rice v. Metro. Life Ins. Co., 324 S.W.3d 660, 678-79 (Tex. App.-Fort Worth 2010, no pet.). Here, Lombana has presented no evidence that she had a confidential or fiduciary relationship with AIG.

Likewise, Lombana presented no evidence that the AIG call representative made a material misrepresentation during the January 22, 2009 telephone conversation with her with knowledge of its falsity, or that the AIG call representative made a misrepresentation with the intent that Lombana rely on it.

Accordingly, we hold that the trial court did not err in granting AIG summary judgment on Lombana's claim for fraud and fraudulent nondisclosure.

SOURCE: HOUSTON COURT OF APPEALS - No. 01-12-00168-CV. - 2/27/2014

In her eleventh issue, Lombana argues that the trial court erred in granting AIG summary judgment on her claim that AIG committed fraud or fraud by nondisclosure because she presented evidence that AIG had "voluntarily disclosed" some information about reinstatement of the Policy to her, but failed to disclose additional requirements. She asserts that the parties had a "special relationship," requiring disclosure of "any additional requirements [AIG] would impose to reinstate" the Policy, and AIG had a duty to disclose "the whole truth concerning what it would require to reinstate the Policy." In its summary-judgment motion, AIG argued that Lombana's claim for fraud and fraud by nondisclosure failed as a matter of law due to a lack of justiciable reliance and because she provided no evidence of a material misrepresentation, made with knowledge of its falsity or without knowledge of the truth upon which AIG intended that she rely.

Equitable Promissory Estoppel theory barred by contract

ELEMENTS OF PROMISSORY ESTOPPEL CLAIM 

The elements of a claim for promissory estoppel are: (1) a promise; (2) foreseeability of reliance on the promise by the promisor; and (3) substantial detrimental reliance by the promisee. Leach v. Conoco, Inc., 892 S.W.2d 954, 959 n. 2 (Tex. App.-Houston [1st Dist.] 1995, writ dism'd w.o.j.). Although promissory estoppel is normally pleaded as a defense, it may be asserted by a plaintiff, as here, as an affirmative ground for relief. Fertic v. Spencer, 247 S.W.3d 242, 250 (Tex. App.-El Paso 2007, pet. denied). If a valid contract exists covering the alleged promise, a plaintiff cannot recover under promissory estoppel. See id.; Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 226 (Tex. 2002) (the doctrine of promissory estoppel presumes that no contract exists); Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000) (allowing for no recovery under a quasi-contract or unjust enrichment theory where a valid express contract covers the disputed subject matter). Here, because a contract governed the terms under which AIG would pay insurance proceeds to the Investment Trust following Dr. Lombana's death, promissory estoppel does not apply.

"Waiver by custom and estoppel are the same concept." MacIntire, 27 S.W.3d at 89 (quoting Blanton v. John Hancock Mut. Life Ins. Co., 345 F. Supp. 168, 170 (N.D. Tex. 1971), aff'd per curium, 463 F.2d 421 (5th Cir. 1972)). "Waiver is the intentional relinquishment of a right actually known, or intentional conduct inconsistent with claiming that right." Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773, 778 (Tex. 2008). The elements of waiver are: (1) an existing right, benefit, or advantage held by a party; (2) the party's actual knowledge of its existence; and (3) the party's actual intent to relinquish the right held or intentional conduct that is inconsistent with the right. Id.

Lombana further asserts that she presented "sufficient evidence of an agreement to waive requirements to reinstate other than the payments of the premium" and she entered into an "agreement" with AIG on January 22, 2009 in which she was "reassured . . . that the Policy was still in force, and had no requirements other than payment of the reinstatement premium." In support of her position, Lombana relies on Equitable Life Assurance Society v. Ellis, 147 S.W. 1152 (Tex. 1912). She argues that she should not be held to any additional reinstatement requirements because the parties' "past dealing," along with the January 22, 2009 "agreement," eliminated any other requirements for reinstatement. Lombana asserts that to hold otherwise would be to "attach a condition that the proposal itself did not impose." See Ellis, 147 S.W. at 1157.

In Ellis, after the expiration of the grace period for the policy in question, the insured was involved in active and continuous back-and-forth written negotiations regarding the payment of premiums, changing the premium due dates, and discussing a loan using the policy as security so that the insured could pay the premiums. 147 S.W. at 1155-56. These negotiations were conducted by "a general officer of the company," the "superintendent of its extension and loan department" through the cashier of a local office, who had the requisite authority to so negotiate. Id. at 1153, 1155-56. The court concluded that the fact that the insurer was willing to offer the insured a loan on the policy showed that the insurer believed that the policy possessed value, noting "[i]t is unbelievable that this company would have been offering to make a loan and take as security for it something that it recognized and held to be defunct and void and incapable of possessing any value." Id. at 1156. By acting as if the policy had value, the insurer showed that it "desired to be understood as willing to forego its right of forfeiture and continue the policies in force as security for its loan and as protection upon Ellis' life." Id. at 1157. In other words, the insurer acted as if the policy had "continued validity," and its negotiations with the insured evidenced a waiver of conditions of reinstatement that were contained in the policy itself. Id.

Lombana asserts that AIG waived termination of the Policy, even after the death of Dr. Lombana, noting that in Ellis the insurer had made an offer to the insured to reinstate the policy in question and the offer was still open at the time of his death. Id. at 1158 ("As the question of waiver is to be determined by the company's conduct and not by any failure by Ellis to act in the premises . . . that the transaction was not so completed by Ellis did not relieve its act of its force as an affirmative evidence of waiver, or at least as tending to establish it."). Lombana argues that because AIG never rescinded or withdrew the AIG call representative's January 22, 2009 "agreement" to reinstate the Policy, it was "still operative, despite [Dr. Lombana's] death, for a reasonable period." And she asserts that she raised a fact question as to whether she responded to AIG's waiver of additional requirements in a reasonable fashion based on AIG's failure to update the contact information, AIG's failure to forward the reinstatement forms to the Wirt Road address and fax, and the fact that she was dealing with Dr. Lombana's final illness and death.

Here, however, the express terms of the Policy prohibit the type of "agreement" that Lombana asserts the AIG call representative made with her on January 22, 2009. The Policy expressly states that it "may not be changed, nor any of [AIG's] rights or requirements be waived, except in writing by one of our authorized officers." (Emphasis added.)

Moreover, AIG took no further action after it sent notification of termination of the Policy on June 27, 2008. There were no written communications with Dr. Lombana or with Lombana as trustee for the Investment Trust demonstrating that AIG believed that the Policy had "continued validity" or value. The summary-judgment evidence shows that when Lombana telephoned the AIG call center on January 22, 2009, she was told that she had to "reinstate" the Policy because it had lapsed seven months earlier on April 28, 2008. Lombana presented no evidence that AIG negotiated with her or treated the Policy as if it was still in force after Dr. Lombana had died.

Regardless, AIG could not have waived termination of the Policy after the death of its insured. See MacIntire, 27 S.W.3d at 90. Because the lapsed Policy had terminated when Dr. Lombana died, there was no contract to reinstate. See id.

Lombana further argues that the performance of the condition precedent of payment of premiums was excused because AIG prevented her performance by various actions. However, she presented no evidence that AIG prevented her performance. After her initial request on January 22, 2009 for forms to reinstate the lapsed Policy, she, despite asserting that she never received the forms, made no further request of AIG for the forms. And there is no evidence that AIG did anything to prevent Lombana from paying the Policy premiums to reinstate the Policy before the death of Dr. Lombana. In fact, she did not contact AIG again until after Dr. Lombana's death on April 30, 2009.

Lombana did not present evidence creating a question of material fact regarding her payment of premiums, any excused nonpayment, or waiver or estoppel based on negotiations with AIG demonstrating that AIG recognized the continued validity of the policy. Similarly, Lombana points to no evidence demonstrating that AIG actually in any way prevented her from paying the Policy premiums. Accordingly, we hold that the trial court did not err in granting AIG summary judgment on Lombana's claim for promissory estoppel.

We overrule Lombana's fourth and fifth issues.

SOURCE: HOUSTON COURT OF APPEALS - No. 01-12-00168-CV. - 2/27/2014

In her fourth and fifth issues, Lombana argues that the trial court erred in granting AIG summary judgment on her claim for promissory estoppel because she presented evidence that "AIG made representations to her and remained silent on other matters [AIG] would later claim were necessary for reinstatement of a lapsed policy." Lombana further argues that AIG is estopped and has waived its argument that her non-payment of premiums caused the Policy to terminate because of AIG's "course of dealing of repeatedly sending late payment offers," by accepting her late payment of the Policy premiums in 2010 and keeping the payment for an extended period of time, and by violating the terms of the Policy including its "multiple failures to change the Policy contact information and send the reinstatement forms."

Insurer not liable under life insurance policy when premium was not paid and grace period for reinstatement had expired

CONTRACT FORMATION GENERALLY 

Whether an alleged agreement constitutes an enforceable contract is generally a question of law. Searcy v. DDA, Inc., 201 S.W.3d 319, 322 (Tex. App."Dallas 2006, no pet.). The elements of a valid and enforceable contract are: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Id.

INSURANCE POLICY IS A CONTRACT 

Insurance policies are contracts and are controlled by the same general rules that govern contract construction. See Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 665 (Tex. 1987); Columbia Cas. Co. v. CP Nat'l., Inc., 175 S.W.3d 339, 343 (Tex. App.-Houston [1st Dist.] 2004, no pet.). The elements of a valid contract are (1) an offer, (2) an acceptance, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. See Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.-Houston [1st Dist.] 2002, pet. denied). To establish a valid contract, a plaintiff must prove that the parties agreed on all of the essential terms of the contract and the essential terms were sufficiently certain so as to define the parties' legal obligations. See Nickerson v. E.I.L. Instruments, Inc., 874 S.W.2d 936, 939 (Tex. App.-Houston [1st Dist.] 1994, writ denied). To establish a claim for breach of contract, a plaintiff must prove (1) the existence of a valid contract between the plaintiff and the defendant, (2) the plaintiff's performance or tender of performance, (3) the defendant's breach of the contract, and (4) the plaintiff's damages as a result of the breach. See Prime Products, 97 S.W.3d at 636.


SOURCE: HOUSTON COURT OF APPEALS - No. 01-12-00168-CV. - 2/27/2014 

INSURANCE COVERAGE TERMINATED BECAUSE PREMIUMS WAS NOT PAID 

As a matter of law, the insurance provided by the Policy "end[ed]" and was not "in force" after the end of the grace period. See MacIntire v. Armed Forces Benefit Ass'n, 27 S.W.3d 85, 89 (Tex. App.-San Antonio 2000, no pet.) (stating that when grace period passes without payment of defaulted premium, insurance policy lapses and terminates); P.M. Baker v. Penn. Mut. Life Ins. Co., 617 S.W.2d 814, 816 (Tex. Civ. App.-Houston [14th Dist.] 1981, no writ). Moreover, by its express terms, the lapsed Policy terminated upon the death of Dr. Lombana.

An insurance policy constitutes a contract for the period of time that is covered in the contract. See Hartland v. Progressive Cnty. Mut. Ins. Co., 290 S.W.3d 318, 322 (Tex. App.-Houston [14th Dist.] 2009, no pet.); Zuniga v. Allstate Ins. Co., 693 S.W.2d 735, 738 (Tex. App.-San Antonio 1985, no writ); Harrington v. Aetna Cas. & Sur. Co., 489 S.W.2d 171, 176 (Tex. App.-Waco 1972, writ. ref'd n.r.e.). Thus, the Policy insured Dr. Lombana's life only during the policy period. And, for an insurance contract to be renewed, the insurer's renewal offer must be accepted by the insured completely and unequivocally. Hartland, 290 S.W.3d at 322.

It is well settled that the payment of premiums is a condition for acceptance of an insurance contract, necessary for contract formation. See id. Thus, under Texas law, the payment of premiums is a condition precedent to the existence of liability of the insurer. See id.; Walker v. Federal Kemper Life Assur. Co., 828 S.W.2d 442, 449 (Tex. App.-San Antonio 1992, writ denied). If an insured fails to meet the condition of premium payment, the policy expires. Southland Life Ins. Co. v. Hopkins, 244 S.W. 989, 990 (Tex. Comm'n App. 1922, judgm't adopted) (holding that failure to pay premium "would ipso facto terminate all liability" under insurance policy); Hartland, 290 S.W.3d at 322; Walker, 828 S.W.2d at 447; Zuniga, 693 S.W.2d at 738. Here, Lombana presented no evidence that she paid the premium due on April 28, 2008 or at any time during the thirty-one day grace period that followed. In fact, Lombana admitted that she did not pay the premium and acknowledged that the Policy had lapsed for nonpayment of the premium as of April 28, 2008.

Because Lombana did not pay the Policy premium, the condition for acceptance of the contract was not met. See Walker, 828 S.W.2d at 447; Viking Cnty. Mut. Ins. Co. v. Jones, No. 05-91-01815-CV, 1992 WL 211068, at *3 (Tex. App.-Dallas Aug. 31, 1992, no writ) (mem. op., not designated for publication) (offer by insurer to renew insurance contract must be accepted completely and unequivocally by insured to constitute new contract); Zuniga, 693 S.W.2d at 738 (renewal policy never came into existence because insured did not make payments in accordance with policy terms); So. Farm Bureau Cas. Ins. Co. v. Davis, 503 S.W.2d 373, 377 (Tex. App.-Amarillo 1973, writ ref'd n.r.e.) (offer for renewal of auto insurance could not come to fruition until premium was paid); Trinity Universal Ins. Co. v. Rogers, 215 S.W.2d 349, 352 (Tex. App.-Dallas 1948, no writ)(contract not completed when insured did not indicate acceptance of renewal policy). Thus, by its own terms, the Policy lapsed and the insurance "end[ed]" when Lombana failed to pay the premiums by the end of the thirty-one day grace period. See Hopkins,244 S.W. at 990; Hartland, 290 S.W.3d at 322; Walker, 828 S.W.2d at 447; Zuniga, 693 S.W.2d at 738.

In sum, because Lombana failed to pay the requisite premiums as per the terms of the Policy, the Policy lapsed, the insurance ended, and the Policy terminated upon the death of Dr. Lombana on April 30, 2009. Dr. Lombana's life had not been insured since April 29, 2008, for just over twelve months prior to his date of death. Therefore, Lombana cannot establish an essential element of her breach of contract claim, i.e., the existence of a valid contract. Accordingly, we hold that the trial court did not err in granting AIG summary judgment on Lombana's claim for breach of contract.

We overrule Lombana's second issue.

SOURCE: HOUSTON COURT OF APPEALS - No. 01-12-00168-CV. - 2/27/2014