Tuesday, December 18, 2007
Appellant's brief cited no case law - Court of Appeals nevertheless decides the merits
Court affirms damages against restaurant that did not honor its marketing contract. Admission of business records testimony found proper.
Loredana Enterprise, Inc., d/b/a Babbo Bruno and Stefano Bertolotti v. Rewards Network Services, Inc., f/k/a Idine Restaurant Group, Inc., No. 14-07-00118-CV (Tex.App.- Houston [14th Dist.] Dec. 18, 2007)(Opinion by Justice Seymore)(breach of contract, small business litigation, debt, personal guarantee, exclusion of evidence) (Before Chief Justice Hedges, Justices Anderson and Seymore)
Appeal from 280th District Court of Harris County (Hon. Tony Lindsay)
Disposition: Judgment for Plaintiff on breach of contract claim in bench trial affirmed
Appellee, Rewards Network Services, Inc. ("Rewards") sued appellants, Loredana Enterprise, Inc. ("Loredana") and Stefano Bertolotti, alleging breach of contract. Following a bench trial, the court found for Rewards and entered judgment for $29,520.24 plus pre-judgment interest, post-judgment interest, attorney's fees, and costs. In three issues, appellants challenge the legal and factual sufficiency of the evidence to support the trial court's judgment. All dispositive issues are clearly settled in law. Accordingly, we issue this memorandum opinion and affirm. See Tex. R. App. P. 47.4.
Loredana operates Babbo Bruno, a restaurant in Webster, Texas. Rewards is a marketing and advertising company that provides services to the restaurant industry. In February 2004, Loredana and Rewards entered into a contract whereby Loredana agreed to provide Rewards with dining credits for the purchase of food, beverages, and other services at Babbo Bruno. In exchange, Rewards agreed to pay Loredana a sum of money and promote Babbo Bruno to its members by providing credits cards funded with the dining credits. Under the agreement, Rewards was to receive ninety percent of each transaction. Additionally, to facilitate payment, Loredana agreed to place all the funds earned at Babbo Bruno through dining credits transactions into a bank account, segregated from its other funds. Rewards had access to the account and could withdraw its share of each transaction. Stefano Bertolotti provided his personal guaranty in the event Loredana failed to fulfill its obligations under the contract.
Subsequently, Rewards was denied access to the account and could not withdraw its portion of $183.24 in dining credit transactions. At the time, the total remaining credits equaled $39,360.33. Under the liquidated damages clause of the contract, Rewards was entitled to seventy-five percent of the remaining credits in the event of a breach of contract by Loredana. Rewards sued Loredana and Bertolotti for breach of contract. The trial court rendered a judgment in favor of Rewards; this appeal followed.
To recover in a breach of contract case, a plaintiff must prove (1) existence of a valid contract; (2) plaintiff performed or tendered performance; (3) defendant breached the contract; and (4) plaintiff was damaged as a result of that breach. Apache Corp. v. Dynegy Midstream Serv. Ltd. P'ship, 214 S.W.3d 554, 560 (Tex. App. - Houston [14th Dist.] 2006, no pet.).
In their stated appellate issues, appellants claim only that Rewards did not prove the third element of its claimCthat Loredana breached the contract. Specifically, appellants contend: (1) no evidence supports the trial court's finding that Loredana breached the contract; (2) the evidence was insufficient to support the trial court's finding that Loredana breached the contract; and (3) in the absence of a breach of contract by Loredana, there is no evidence to support the finding of liability of Bertolotti under his personal guaranty. Additionally, although not addressed in their stated issues, in their "Summary of the Argument," appellants seem to challenge the damages awarded. Accordingly, we will consider their complaints concerning the breach of contract finding and damages.
A. Breach of Contract
In their first and second issues, appellants contend there is no evidence or the evidence is factually insufficient to support the trial court's finding that Loredana breached the contract because (1) Rewards failed to prove Loredana owed money to Rewards; (2) Rewards' damages were not the result of any act or omission of Loredana; (3) the trial court could not rely on the testimony of Rewards' sole witness; and (4) Rewards made no demand for any amount owed.
1. Standard of Review
A trial court=s findings in a bench trial are reviewable for legal and factual sufficiency of the evidence under the same standards as are applied in reviewing evidence supporting a jury=s findings. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). Findings of fact in a bench trial have the same force and dignity as a jury=s verdict on jury questions. Arrellano v. State Farm Fire & Cas. Co., 191 S.W.3d 852, 855B56 (Tex. App.CHouston [14th Dist.] 2006, no pet.). However, the trial court=s findings are not conclusive when, as here, there is a complete reporter=s record. Id.
When reviewing the legal sufficiency of the evidence, we review the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We credit favorable evidence if a reasonable fact finder could, and disregard contrary evidence if a reasonable fact finder could not. Id. at 827. The evidence is legally sufficient if it would enable a reasonable and fair-minded person to reach the verdict under review. Id. There is Ano evidence@ or legally insufficient evidence when (a) there is a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence conclusively establishes the opposite of the vital fact. See Id. at 810; Merrell Dow Pharms., Inc., v. Havner, 953 S.W.2d 706, 711 (Tex. 1997).
In reviewing factual insufficiency claims, we consider all the evidence in the record, both supporting and contrary to the finding. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We may set aside a verdict only if it is so contrary to the overwhelming weight and preponderance of the evidence that it is clearly wrong and manifestly unjust. See id.
2. Whether Loredana Owed Money to Rewards?
Loredana contends the trial court erred in finding it breached the contract because Rewards failed to prove Loredana owed money pursuant to section 9 of the contract. We disagree.
Under Section 9 of the contract, Rewards was entitled to withdraw from Loredana=s bank account Aany amounts owed.@ The record contains ample evidence proving Loredana owed money to Rewards. Lisa Massey, Rewards= regional manager for Texas and Louisiana, testified that, pursuant to the contract, Rewards provided $15,000 to Loredana in return for $24,000 in dining credits. At some point, Rewards purchased additional dining credits, making the total dining credits due $47,000. Under the contract, Rewards held the right to withdraw from Loredana=s bank account ninety percent of the funds earned at Babbo Bruno through dining credits transactions. To document these transactions, Rewards introduced its Exhibit 5, an itemized list of its member=s dines. This exhibit documented that between May 19, 2004 and May 21, 2004 Rewards members spent $183.78 in dining credits at Babbo Bruno. Under the contract, Loredana owed Rewards ninety percent of these transactions. Massey testified Rewards was denied permission to withdraw the funds from Loredana=s bank account, and that Rewards was never paid these funds. This evidence demonstrates that Rewards was owed its share of the $183.78 in dining credits transactions. Therefore, we conclude Rewards presented sufficient evidence to support the trial court=s finding that Loredana owed money under Section 9 of the contract.
3. Whether Any Act or Omission of Loredana Prevented Rewards From Withdrawing Money Owed?
Loredana further contends Rewards presented insufficient evidence for the trial court to find the stop payments, which denied Rewards access to Loredana=s bank account, were the result of any act or omission by Loredana. We disagree.
Pursuant to the contract, Loredana agreed to maintain funds earned though dining credits transactions in a bank account, and it authorized Rewards to withdraw any amounts owed from this bank account at any time. In its Exhibit 4, Rewards introduced business records detailing its understanding regarding why payments from Loredana=s bank account were stopped. The exhibit contains notes from a conversation between a Rewards representative and a Loredana representative indicating Loredana believed the usage of dining credits was Atoo much@ and that the relationship was putting Loredana in a Afinancial snaffue [sic].@ According to the exhibit, payment was stopped because Loredana cancelled the payment.
Nevertheless, appellants contend Rewards did not prove the stop payment resulted from any act or omission by Loredana. In their brief, appellants suggest a number of alternative reasons why the bank may have stopped payment. However, at trial, after asserting Amyriad@ reasons might explain the bank=s stop payment, including accident by the bank, appellants offered no evidence to establish those reasons. Therefore, the evidence was sufficient to support the trial court=s finding that the stop payment order resulted from Loredana=s actions.
4. Whether the Trial Court Erred In Relying On Lisa Massey=s Testimony?
Massey was Rewards= sole witness at trial. Appellants contend the trial court erred in basing its judgment on Massey=s testimony because she relied on business records not within her personal knowledge, the relevant records were not admitted into evidence, and she did not have personal knowledge regarding the Loredana account.
a. Business Records
When a witness possesses knowledge regarding the preparation and retention of records, she may testify regarding the contents. See in re E.A.K., 192 S.W.3d 133, 142 (Tex. App.CHouston [14th Dist.] 2006, no pet.). Here, Massey demonstrated that she had knowledge regarding Rewards= business records. Regarding Rewards= Exhibit 4 (Rewards= Merchant Information records), Massey testified that Rewards maintained a call center whereby its representatives entered notes in their computers regarding all conversations with merchants. Regarding Rewards= Exhibit 5 (transaction list of Rewards= members= dining credits purchases), Massey testified Rewards tracked individual transactions through an automated process that tabulated the amount of dining credits in each transaction with a merchant and debited that amount from the total dining credits remaining under the agreement. Regarding Rewards= Exhibit 7 (Rewards= write-off statement), Massey testified that Rewards= legal department created the statement by determining the amount of dining credits Rewards would have been entitled to receive if Loredana had not breached the contract. Because Massey had knowledge regarding the preparation and retention of each business record, the trial court was entitled to rely on her description of those records. See in re E.A.K., 192 S.W.3d at 142.
b. Rewards' Exhibit 6
Appellants contend the trial court erred in finding that Loredana never remitted the amounts owed to Rewards because Rewards relied on its Exhibit 6 - records from a third party that were not admitted into evidence. However, Massey=s testimony was not based solely on Rewards= Exhibit 6. As stated above, Rewards= Exhibit 5 reflected the amount Loredana owed to Rewards. Rewards= Exhibit 7, prepared by its legal department, reflected the total amount of dining credits written-off by Rewards. Additionally, Massey had supervisory authority over Rewards= account with Loredana, and testified that she would have personal knowledge if Loredana had, at any time, paid Rewards. Therefore, even if we disregard Rewards= Exhibit 6, Rewards presented sufficient evidence to prove Loredana failed to remit the amount owed under the contract.
Accordingly, we conclude that the trial court did not err in relying on Massey=s testimony pertaining to Rewards= relationship and business transactions with Loredana.
5. Whether Rewards Made A Demand For Amounts Due?
Lastly, appellants contend Loredana did not breach the contract because the evidence is insufficient to prove Rewards made a demand for payment as required by the contract. Section 9 of the contract provides, in part: Afunds will be maintained by [Loredana] in the Bank Account and will be payable to [Rewards] on demand.@ (emphasis added). Also, under Section 9, Rewards may obtain payment of any amount owed from Loredana=s bank account through an automated clearinghouse debit or otherwise. Appellants contend the contract required Rewards to make a demand on Loredana for any amounts owed after receiving notice regarding the stop payment from the bank. However, in finding Loredana breached the contract, the trial court implicitly found Rewards made a demand as contemplated by the contract.
Under the framework created by the contract to facilitate payment, Loredana would segregate dining credit funds from other revenue earned at Babbo Bruno into a separate bank account from which Rewards could withdraw any amounts owed. However, when Rewards attempted to withdraw the amount owed for the May 19, 2004 through May 21, 2004 transactions, this payment was stopped. In finding Loredana breached the contract, the trial court implicitly concluded that the attempt to withdraw was a demand for amounts owed as contemplated by the contract. We conclude the evidence was sufficient to support the trial court=s implicit finding that Rewards demanded the amount due under the contract.
In sum, the evidence is legally sufficient to support the trial court=s breach of contract finding, and the finding is not so contrary to the overwhelming weight and preponderance of the evidence that it is clearly wrong and manifestly unjust. Appellants= first and second issues are overruled.
B. Personal Guaranty
In their third issue, appellants claim that, in the absence of a breach of contract by Loredana, there is no evidence to establish any liability by Stefano Bertolotti under his guaranty of the contract between Loredana and Rewards. However, having found the evidence sufficient for the trial court to conclude Loredana breached the contract with Rewards, the trial court did not err in holding Bertolotti to his guaranty of the contract. Appellants= third issue is overruled.
Although not included as a stated issue, in their ASummary of the Argument,@ appellants seem to challenge the damages awarded by the trial court. Appellants contend the trial court erred in finding appellants jointly and severally liable for $29,520.24 to bear post-judgment interest at the rate of 8.25% per annum plus attorney=s fees. However, we conclude the trial court properly calculated damages.
Under the liquidated damages clause of the contract, appellants were liable for seventy-five percent of the dining credits remaining at the time of a breach of contract plus reasonable attorney=s fees. At the time of breach, there were $39,360.33 in dining credits remaining under the contract. Seventy-five percent of $39,360.33 is $29,520.24. The trial court properly awarded judgment in the amount of $29,520.24.
Under the Finance Code, a money judgment on a contract that does not provide for interest or time price differential earns post-judgment interest at the prime rate as published by the Board of Governors of the Federal Reserve System on the date of computation. See Tex. Fin. Code Ann. ' 304.003 (Vernon 2006). The date of computation in this case was November 27, 2006, and the prime rate during November 2006 was 8.25%. The trial court imposed a post-judgment rate of interest at 8.25%; therefore, the rate of post-judgment interest does not violate the Finance Code. Accordingly, to the extent appellants challenge the amount of damages awarded, we overrule these complaints.
For the reasons stated above, the judgment of the trial court is affirmed.
/s/ Charles W. Seymore
Judgment rendered and Memorandum Opinion filed December 18, 2007.
Panel consists of Chief Justice Hedges and Justices Anderson and Seymore.
 Appellants= brief to this court contains no index of authorities and, in fact, cites no authority whatsoever as required by the Texas Rules of Appellate Procedure. See Tex. R. App. P. 38.1. However, we will review this case on the merits despite these deficiencies.
 Appellants do not challenge the validity of the personal guaranty itself. Appellants= sole contention is that in the absence of a breach of contract by Loredana, there is no evidence to find Bertolotti liable under his personal guaranty of the contract.