Showing posts with label breach of contract. Show all posts
Showing posts with label breach of contract. Show all posts
Tuesday, February 9, 2010
Settlement Agreement Enforced
Houston Court of Appeals reverses trial court's refusal to enforce settlement agreement breached by defendant in legal malpractice suit.
Hernandez v. Labella
(Tex.App.- Houston [14th Dist.] Feb. 9, 2010)($100K settlement agreement reached after jury trial in malpractice lawsuit against lawyer enforced)(breach of settlement agreement addressed in same suit as underlying claim tried to jury)
MEMORANDUM OPINION BY JUSTICE JOHN S. ANDERSON
Appellant, Salomon Juan Hernandez, sued appellees, Joseph J. LaBella and LaBella, Dennis & Associates, P.L.L.C., for breach of fiduciary duty arising out of their legal representation of appellant. After the jury rendered a verdict in favor of appellant, the parties negotiated a settlement of the dispute. Following a short delay by a third party in the completion of one of the terms of the settlement agreement, the trial court entered a final judgment holding that (1) the settlement agreement was unenforceable; (2) the issue of damages in the case was a question of law for the court; and (3) appellant’s damages were limited to the forfeiture of the $1,000.00 fee collected by appellees. We reverse.
* * *
After a bench trial on the disputed Settlement Agreement, the trial court entered a final judgment holding (1) the Settlement Agreement was unenforceable and the case was returned to its posture before the attempted settlement; (2) the issue of damages for breach of fiduciary duty is a question of law;[2] and (3) appellees were to forfeit their $1,000.00 fee as damages for their breach of fiduciary duty. This appeal followed.
Discussion
While appellant raises five issues on appeal, they can be divided into two groups. First, appellant contends the trial court erred when it (1) ruled the issue of damages for breach of fiduciary duty is a question of law for the trial court, (2) disregarded the jury’s damages finding, and (3) determined appellant’s damages were limited to appellees’ forfeiting their $1,000.00 fee. Second, appellant argues the trial court erred when it determined the Settlement Agreement was breached and unenforceable as a result of a third party’s failure to perform, thereby allowing appellees to elect the remedy of setting the Settlement Agreement aside. Because they are dispositive, we need only address appellant’s second group of issues.[3]
I. Did the trial court err when it refused to enforce the Settlement Agreement?
A. The Standard of Review
The law of contracts is applicable to settlement agreements. Shaw v. Kennedy, Ltd., 879 S.W.2d 240, 247 (Tex. App.—Amarillo 1994, writ denied). Once the parties accept the terms of the settlement, the agreement is binding and can be enforced by the courts. Id. When, as in this case, the contract is unambiguous and the relevant facts are undisputed, we interpret the contract and determine whether a party has breached the contract as a matter of law. Gupta v. E. Idaho Tumor Inst., 140 S.W.3d 747, 756 (Tex. App.—Houston [14th Dist.] 2004, pet. denied).
B. Was the Settlement Agreement enforceable?
Citing Murray v. Crest Const., Inc., appellees argued in the trial court and again here that Medley’s January 22, 2008 letter constituted an anticipatory repudiation or breach of the Settlement Agreement which permitted appellees to elect not to go forward with the Settlement Agreement. Murray v. Crest Const., Inc., 900 S.W.2d 342, 344 (Tex. 1995). We disagree.
If a settlement agreement is breached by one of the parties, the other party may treat the agreement as repudiated and claim rights either under the settlement or the underlying cause of action. Shaw, 879 S.W.2d at 247. An anticipatory repudiation of a contract may consist of either words or actions by a party to a contract which indicate an intention that he or she is not going to perform the contract according to its terms in the future. Builders Sand, Inc. v. Turtur, 678 S.W.2d 115, 120 (Tex. App.—Houston [14th Dist.] 1984, no writ). The intention to abandon a contract must be expressed in positive and unconditional terms. Pollack v. Pollack, 39 S.W.2d 853, 856–57 (Tex. Comm’n App. 1931, holding approved).
A party claiming anticipatory breach of a contract must establish the following three elements: (1) a party to a contract has absolutely repudiated the obligation; (2) without just excuse; and (3) the other party is damaged as a result. Id. at 855; Hauglum v. Durst, 769 S.W.2d 646, 651 (Tex. App.—Corpus Christi 1989, no writ). Appellees’ claim of anticipatory repudiation falls short on each element; however, we need only address the first.
We conclude that no party to the Settlement Agreement absolutely repudiated an obligation under the Settlement Agreement when appellant forwarded Medley’s January 22, 2008 letter to appellees’ attorney. The January 22, 2008 letter from Medley cannot represent an absolute repudiation by a party as neither Stephen Dennis nor Kandis Renee Garrett Dennis, Medley’s clients, were parties to the Settlement Agreement. See Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex. 2006) (holding that shareholder of corporate defendant was not a party to agreement as he had no duties under the agreement and refused to sign the agreement); see also Haddad v. Bagwell, 317 S.W.2d 781, 786 (Tex. App.—Amarillo 1958, writ ref’d n.r.e.) (holding architects were not parties to contract at issue in litigation even though the parties to the contract agreed architects would do certain things).
Appellees attempt to avoid this simple fact by arguing appellant’s forwarding Medley’s letter to appellees’ attorney constituted a material breach of a contractual duty to obtain a signature from the Dennis parties. Appellees’ argument is not persuasive. Even if we were to accept appellees’ contention that appellant alone had the contractual duty to obtain the Dennis parties’ signatures on documents dismissing the LaBella-Dennis litigation, the fact appellant’s attorney forwarded, without comment, a copy of Medley’s letter to appellees, is insufficient to constitute a distinct and absolute refusal to perform the Settlement Agreement by appellant. See McKenzie v. Farr, 541 S.W.2d 879, 882 (Tex. App.—Beaumont 1976, writ ref’d n.r.e.) (holding that a party not in default will be justified in treating the contract as repudiated or abandoned only where the other party to the agreement by his conduct or misconduct, clearly shows a fixed intention during nonperformance to repudiate the agreement and not to comply with its terms in the future). The undisputed evidence also demonstrates that appellant continued his efforts to obtain the Dennis parties’ approval of the dismissal of the LaBella-Dennis litigation and attempted to deliver the executed LaBella-Dennis settlement documents two days later on January 24, 2008, which appellees would not accept. Therefore, we hold that (1) appellant did not repudiate or breach the Settlement Agreement as a result of Medley’s initial refusal to execute the LaBalla-Dennis dismissal documents, and (2) the Settlement Agreement was an enforceable contract between appellant and appellees.
C. Did appellees breach the Settlement Agreement?
Finally, the undisputed evidence establishes appellees materially breached the Settlement Agreement when they rejected the delivery of the LaBella-Dennis dismissal documents and refused to pay appellant the required $100,000.00 settlement amount. Therefore, we sustain appellant’s third, fourth, and fifth issues on appeal.[4]
Conclusion
Having sustained appellant’s third, fourth, and fifth issues, we reverse the judgment of the trial court and render judgment that (1) the Settlement Agreement was enforceable; (2) appellees breached the Settlement Agreement when they refused to perform their obligation to pay appellant $100,000.00; and (3) appellant recover $100,000.00 from appellees. We remand to the trial court for further proceedings to determine appellant’s entitlement to prejudgment interest and the calculation of the amount of prejudgment interest to be awarded, if any.
Hernandez v. Labella (Tex.App.- Houston [14th Dist.] Feb. 9, 2010)(Anderson) (breach of settlement agreement in attorney malpractice case, settlement agreement enforced)(fee forfeiture for breach of fiduciary duty by lawyer to client, election of remedies in breach of contract case, repudiation of settlement agreement, anticipatory repudiation, rescission of contract)
REVERSED AND RENDERED IN PART AND REMANDED IN PART: Opinion by Justice Anderson
Before Chief Justice Hedges, Justices Anderson and Boyce
14-08-00327-CV Salomon Juan Hernandez v. Joseph J. Labella and LaBella Dennis & Associates, P.L.L. C. | Appeal from 284th District Court of Montgomery County (name of trial court judge not shown on docket)
Thursday, May 22, 2008
Parol evidence rule nixes breach of contract claim
Court concludes that the parol evidence rule barred the introduction of the evidence on which Edascio based its breach of contract claim and on which the jury awarded Edascio damages and, thus, that the trial court did not err in granting NextiraOne judgment notwithstanding the verdict.
Edascio, LLC v. NextiraOne, LLC (Tex.App.- Houston [1st Dist.] May 22, 2008)(Jennings)
(commercial law, breach of contract, JNOV, parol evidence rule precludes consideration of evidence to support claim)
Parol Evidence
In its first cross-issue, NextiraOne contends that the parol evidence rule barred evidence of the purported oral agreement on which Edascio based its breach of contract claim. NextiraOne asserts that the oral agreement Edascio sought to enforce at trial, which obligated NextiraOne to assign Edascio a specific category and number of accounts (approximately 45,000 accounts described during trial as NextiraOne's small and medium sized customers with fewer than 200 ports and the GBS and Staples accounts) on the effective date of the SOA, contradicted, varied, and supplemented the express terms of the SOA. NextiraOne further asserts that the alleged oral agreement violated the SOA's merger clause, in which the parties objectively manifested their intent to conclude a complete agreement and to bar any oral agreements. Edascio responds that the term "Territory" in the SOA was ambiguous, and it argues that the SOA was incomplete because it failed to identify the customers to be assigned. Thus, Edascio asserts that parol evidence was permissible to resolve the ambiguity and complete the SOA. Edascio also asserts that the existence of a merger clause does not eliminate the "facial ambiguity and incompleteness exceptions to the parol evidence rule."The parol evidence rule is a rule of substantive contract law, and we review parol evidence questions de novo. Baroid Equip., Inc. v. Odeco Drilling, Inc., 184 S.W.3d 1, 13 (Tex. App.--Houston [1st Dist.] 2005, pet. denied); City of Pasadena v. Gennedy, 125 S.W.3d 687, 691 (Tex. App.--Houston [1st Dist.] 2003, pet. denied).
When the parties have concluded a valid, integrated agreement, the parol evidence rule precludes enforcement of a prior or contemporaneous inconsistent agreement. Ledig v. Duke Energy Corp., 193 S.W.3d 167, 178 (Tex. App.--Houston [1st Dist.] 2006, pet. denied); Baroid Equip., Inc.,184 S.W.3d at 13. A written instrument presumes that all prior agreements relating to the transaction have been merged into it and will be enforced as written and cannot be added to, varied, or contradicted by parol testimony. Baroid Equip.,184 S.W.3d at 13. The parol evidence rule "is particularly applicable when the written contract contains a recital that it contains the entire agreement between the parties or a similarly-worded merger provision." Id.
When parol evidence is determined to be inadmissible, it has no legal effect and merely constitutes proof of facts that are immaterial and inoperative. Id.However, parol evidence is admissible to show the parties' true intentions if the writing is ambiguous. Ledig, 193 S.W.3d at 178-79; Gonzalez v. United Bhd. of Carpenters and Joiners of America, Local 551, 93 S.W.3d 208, 211 (Tex. App.--Houston [14th Dist.] 2002, no pet.). The determination of whether the terms of a contract are ambiguous is a question of law, which we review de novo. Bowden v. Phillips Petroleum Co., 247 S.W.3d 690, 705 (Tex. 2008); Standard Constructors, Inc. v. Chevron Chemical Co., 101 S.W.3d 619, 622 (Tex. App.--Houston [1st Dist.] 2003, pet. denied).
To determine whether a contract is ambiguous, we look at the agreement as a whole in light of the circumstances present when the parties entered into the contract. Enter. Leasing Co. of Houston v. Barrios, 156 S.W.3d 547, 549 (Tex. 2004). We examine and consider the entire writing in an effort to harmonize and to give effect to all the provisions of the contract so that none will be rendered meaningless. Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006).Our primary concern in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument. Id. If a written contract is worded in such a way that it can be given a definite or certain legal meaning, then the contract is not ambiguous. SAS Inst., Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005). A contract will become ambiguous only if its meaning is uncertain or if it is subject to two or more reasonable interpretations. Seagull Energy, 207 S.W.3d at 345. An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract. Tex. Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex. 2004). Moreover, we may not consider extrinsic evidence to contradict or to vary the meaning of unambiguous language in a written contract in order to create an ambiguity. See Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006).
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Excerpt from Opinion by Justice Terry Jennings
Before Chief Justice Radack, Justices Jennings and Bland
No. 01-07-00362-CV Edascio, L.L.C. v. NextiraOne, L.L.C.
Appeal from 281st District Court of Harris County
Trial Court Judge: Hon. David J. Bernal
Attorneys: Stephen G. Tipps, James J. Ormiston, D. Scott Funk, Jennifer Kingaard
Sean Gorman, James E. Doyle
Edascio, LLC v. NextiraOne, LLC (Tex.App.- Houston [1st Dist.] May 22, 2008)(Jennings)
(commercial law, breach of contract, JNOV, parol evidence rule precludes consideration of evidence to support claim)
Parol Evidence
In its first cross-issue, NextiraOne contends that the parol evidence rule barred evidence of the purported oral agreement on which Edascio based its breach of contract claim. NextiraOne asserts that the oral agreement Edascio sought to enforce at trial, which obligated NextiraOne to assign Edascio a specific category and number of accounts (approximately 45,000 accounts described during trial as NextiraOne's small and medium sized customers with fewer than 200 ports and the GBS and Staples accounts) on the effective date of the SOA, contradicted, varied, and supplemented the express terms of the SOA. NextiraOne further asserts that the alleged oral agreement violated the SOA's merger clause, in which the parties objectively manifested their intent to conclude a complete agreement and to bar any oral agreements. Edascio responds that the term "Territory" in the SOA was ambiguous, and it argues that the SOA was incomplete because it failed to identify the customers to be assigned. Thus, Edascio asserts that parol evidence was permissible to resolve the ambiguity and complete the SOA. Edascio also asserts that the existence of a merger clause does not eliminate the "facial ambiguity and incompleteness exceptions to the parol evidence rule."The parol evidence rule is a rule of substantive contract law, and we review parol evidence questions de novo. Baroid Equip., Inc. v. Odeco Drilling, Inc., 184 S.W.3d 1, 13 (Tex. App.--Houston [1st Dist.] 2005, pet. denied); City of Pasadena v. Gennedy, 125 S.W.3d 687, 691 (Tex. App.--Houston [1st Dist.] 2003, pet. denied).
When the parties have concluded a valid, integrated agreement, the parol evidence rule precludes enforcement of a prior or contemporaneous inconsistent agreement. Ledig v. Duke Energy Corp., 193 S.W.3d 167, 178 (Tex. App.--Houston [1st Dist.] 2006, pet. denied); Baroid Equip., Inc.,184 S.W.3d at 13. A written instrument presumes that all prior agreements relating to the transaction have been merged into it and will be enforced as written and cannot be added to, varied, or contradicted by parol testimony. Baroid Equip.,184 S.W.3d at 13. The parol evidence rule "is particularly applicable when the written contract contains a recital that it contains the entire agreement between the parties or a similarly-worded merger provision." Id.
When parol evidence is determined to be inadmissible, it has no legal effect and merely constitutes proof of facts that are immaterial and inoperative. Id.However, parol evidence is admissible to show the parties' true intentions if the writing is ambiguous. Ledig, 193 S.W.3d at 178-79; Gonzalez v. United Bhd. of Carpenters and Joiners of America, Local 551, 93 S.W.3d 208, 211 (Tex. App.--Houston [14th Dist.] 2002, no pet.). The determination of whether the terms of a contract are ambiguous is a question of law, which we review de novo. Bowden v. Phillips Petroleum Co., 247 S.W.3d 690, 705 (Tex. 2008); Standard Constructors, Inc. v. Chevron Chemical Co., 101 S.W.3d 619, 622 (Tex. App.--Houston [1st Dist.] 2003, pet. denied).
To determine whether a contract is ambiguous, we look at the agreement as a whole in light of the circumstances present when the parties entered into the contract. Enter. Leasing Co. of Houston v. Barrios, 156 S.W.3d 547, 549 (Tex. 2004). We examine and consider the entire writing in an effort to harmonize and to give effect to all the provisions of the contract so that none will be rendered meaningless. Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006).Our primary concern in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument. Id. If a written contract is worded in such a way that it can be given a definite or certain legal meaning, then the contract is not ambiguous. SAS Inst., Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005). A contract will become ambiguous only if its meaning is uncertain or if it is subject to two or more reasonable interpretations. Seagull Energy, 207 S.W.3d at 345. An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract. Tex. Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex. 2004). Moreover, we may not consider extrinsic evidence to contradict or to vary the meaning of unambiguous language in a written contract in order to create an ambiguity. See Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006).
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Excerpt from Opinion by Justice Terry Jennings
Before Chief Justice Radack, Justices Jennings and Bland
No. 01-07-00362-CV Edascio, L.L.C. v. NextiraOne, L.L.C.
Appeal from 281st District Court of Harris County
Trial Court Judge: Hon. David J. Bernal
Attorneys: Stephen G. Tipps, James J. Ormiston, D. Scott Funk, Jennifer Kingaard
Sean Gorman, James E. Doyle
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.[1] All dispositive issues are clearly settled in law. Accordingly, we issue this memorandum opinion and affirm. See Tex. R. App. P. 47.4.
I. Background
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.
II. Analysis
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.[2] 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.
C. Damages
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
Justice
Judgment rendered and Memorandum Opinion filed December 18, 2007.
Panel consists of Chief Justice Hedges and Justices Anderson and Seymore.
[1] 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.
[2] 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.
Friday, November 23, 2007
Judge Dorfman ascends to the First Court of Appeals
The Honorable Samuel Grant Dorfman, presiding judge of the 129th District Court and occasional professor of law, helps Justices George C. Hanks, Jr. and Jane Bland decide that former fellow civil trial court judge Gary Block (since disgraced) erred in bench trial of commercial contract dispute. Justice Hanks writes opinion reversing Block and rendering take-nothing judgment.
HP/Management Services, Inc. v. Guaranteed Nursing Staff, L.L.C, No. 01-05-00944-CV (Tex.App.- Houston [1st Dist.] Nov. 15, 2007) (Opinion by Justice Hanks) (no authority, no agency, no contract, no breach, no recovery - judgment reversed)
Appeal from County Civil Court at Law No 2 of Harris County
Trial court judge: Hon. Gary Michael Block
Appellant's attorney: Maurice E. Klein
Appellee's attorneys: Sean A. Roberts, Wendell Maurice Champion
MEMORANDUM OPINION
After a bench trial, Guaranteed Nursing Staff, L.L.C. (“GNS”), appellee, prevailed on its breach of contract claim against HP/Management Services, Inc. (“HP”), appellant. In eight issues, HP contends that the trial court erred in rendering judgment for GNS because GNS did not file any pleadings against HP and the evidence is legally and factually insufficient to establish that (1) a contract existed between GNS and HP, (2) HP was responsible for any contractual obligation incurred by Hermann Park Manor relating to GNS, and (3) Michael Mileski was acting for or on behalf of HP when he signed the agreement. HP also appeals the award of attorney’s fees. We reverse and render judgment in favor of HP.
Background
Hermann Park Manor, a healthcare facility, entered into a contract with GNS for GNS to provide temporary personnel staffing for the facility. The contract, entitled “Supplemental Staffing Agreement,” was signed by Michael Mileski, as the administrator of Hermann Park Manor, and Helen Royston, as the marketing director of GNS. GNS was not fully compensated for the services it provided under the contract, and it sued the following parties for, among other things, breach of contract: HCCI-Houston, Inc. d/b/a Hermann Park Manor, the owner of Hermann Park Manor; HP, the management company for Hermann Park Manor; and Mileski, the administrator of Hermann Park Manor. GNS proceeded to trial against Mileski and HP.
[The record does not reflect how the claims against defendant, HCCI-Houston, Inc. d/b/a Hermann Park Manor, were resolved.]
At trial, Cynthia Champion, the owner of GNS, gave undisputed testimony that, while she believed that Mileski had signed the Supplemental Staffing Agreement on behalf of Hermann Park Manor, she learned, after this suit had been filed, that Mileski, in addition to being Hermann Park Manor’s administrator, was also HP’s employee at the time that he signed this contract. During Champion’s testimony, the parties stipulated that GNS was owed $16,853.98 in compensation for services that it provided under the contract.
The court also heard testimony from H.P.’s president Douglas Mittleider. Mittleider testified that HCCI owns Hermann Park Manor. He also testified that, pursuant to the Long Term Care Facility Management Agreement between HP and HCCI, HP is responsible for running the day-to-day operations of Hermann Park Manor on behalf of HCCI and for appointing an administrator to serve as the onsite manager of Hermann Park Manor. This agreement nevertheless specifies that HCCI retains ownership and control over the management duties and obligations of Hermann Park Manor.
HP appointed Mileski as the administrator of Hermann Park Manor. Mittleider testified that, although Mileski was an employee of HP, Mileski did not sign the Supplemental Staffing Agreement with GNS on behalf of HP. Mittleider testified that Mileski signed the Agreement on behalf of the facility and its sole owner: Hermann Park Manor and HCCI, respectively. Mittleider further testified that HP (1) did not enter into the Supplemental Staffing Agreement with GNS, (2) did not make any payments to GNS under this Agreement, and (3) did not enter into any vendor contracts while it managed Hermann Park Manor. Mittleider testified that Mileski, as the administrator of Hermann Park Manor, decided which invoices under the Agreement with GNS were to be paid, and that HCCI, not HP would make these payments. No evidence controverted Mittleider’s testimony that Hermann Park Manor was owned by and doing business as HCCI or that the Long Term Care Facility Management Agreement defined the relationship between Mileski, HP, HCCI, and Hermann Park Manor.
The Long Term Care Facility Management Agreement between HCCI and HP was entered into evidence. Under the terms of this Agreement, HP was required to get permission, in writing, from HCCI to contract with any third party on behalf of HCCI involving a value in excess of $10,000. The Agreement also provided that HP would indemnify HCCI if HP breached the Agreement. The Agreement provides in pertinent part that:
1.03 Management of Facility. During the term of this Agreement, [HP] shall on behalf of [HCCI] manage all aspects of the operation of [Hermann Park Manor], including, but not limited to, staffing, accounting, billing, collections, setting of rates and charges and general administration. In connection therewith, [HP] (either directly or through supervision of employees of [Hermann Park Manor]) shall:
. . .
(j) Negotiate and enter into in the name of and on behalf of [HCCI] such agreements, contracts and orders as it may deem necessary or advisable, for the furnishing of services, concessions and supplies for the operation and maintenance of [Hermann Park Manor]; provided, however, that [HCCI] must approve, in writing, any agreement, contract or order, which has a term greater than one (1) year or which requires annual payments of more than $10,000.
. . .
5.09 Costs and Expenses: Indemnity
. . .
(b) [HP] agrees to indemnify and hold [HCCI] and its officers, directors, agents and employees harmless from and against all losses, claims, damages or other liabilities, including without limit, reasonable attorneys fees and the costs and expenses incurred in connection therewith, arising out of or relating to the willful misconduct, breach of contract or gross negligence of [HP], in performing its duties under this Agreement.
Mittleider testified that he did not believe HP had received written approval from HCCI to bind HCCI to the agreement with GNS, which was valued in excess of $10,000.
After the close of evidence, the trial court made the following findings of fact and conclusions of law:
Findings of Fact
1. On December 26, 2001, Defendant, Michael Mileski, an employee of HP Management Services and Administrator of Hermann Park Manor, executed a written contract with Plaintiff Guaranteed Nursing Staff to provide temporary personnel staffing for their local facility. Prior to executing the agreement, Defendants failed to properly disclose that the company could not or would not willingly pay for the services rendered under the contract, within the terms of the agreement. Specifically, prior to entering into the agreement, Defendants concealed the material fact that their business was operating under budget constraints and that they would not make timely payments pursuant to their contractual obligations.
2. From December 26, 2001 until on or about April 22, 2002, Plaintiff provided supplemental staffing services to the Defendant under the executed agreement which provided for payment within 30 days after receipt of the invoice. Clause 5(c), Compensation and Payment, provides “All amounts due to the Agency are due within (30) days from receipt of invoice. Facility will send all payments to the address printed on the Agency invoice.” Defendants requested and accepted the temporary personnel services of the Plaintiff for their healthcare facility and became bound to pay Plaintiff its designated charges, which were reasonable and customary for such services.
3. The account accurately sets forth the services, the dates of services, the hours and prices for the services that the Plaintiff provided Defendant. The account represents the record of the transactions that Plaintiff systematically keeps in the ordinary course of business. Defendants have refused to make full payment for services rendered and the principal balance due Plaintiff on the account is $16,853.98 after allowing for all just and lawful offsets, payments and credits.
4. Subsequent to the execution of the contract, Defendants have failed to perform the terms of the contract without legitimate legal excuse. Defendants have failed to pay Plaintiff for services rendered.
5. As a result of the Defendants’ conduct, Plaintiff found it necessary to employ attorneys. Plaintiff also properly presented its breach of contract claim such that attorneys’ fees are recoverable. Thus, in addition to the damages suffered by Plaintiff, Guaranteed Nursing Staff, L.L.C. has a right to be reimbursed reasonable attorneys’ fees as permitted by law. Although the Court heard no evidence of the reasonableness or amount of attorneys’ fees incurred by Plaintiff, the Court takes judicial notice that Plaintiff’s attorneys have expended time and effort prosecuting this case and that a reasonable fee for the services is $5,000.00.
Conclusions of Law
1. The Court finds Plaintiff has non-suited all claims asserted against HP/Hermann Park., Inc. and are hereby dismissed with prejudice to re-riling. [sic]
2. The Court finds that Plaintiff take nothing by its suit against Defendant Michael Mileski and that Michael Mileski recover his court costs from Plaintiff.
3. The Court finds that Plaintiff recover judgment from Defendant HP Management Service, Inc., on its cause of action for breach of contract only and shall recover the sum of $16,853.98, together with post-judgment interest at the annual rate of 6% until paid.
4. Plaintiff recover prejudgment interest on the judgment at thed [sic] annual rate of 6% from May 2, 2002 to the date of judgment in the sum of $3,167.57.
5. The Court finds Plaintiff recover its attorney fees from HP Management Service, Inc., in the amount of $5,000.
6. The Court finds that all of Plaintiffs court costs be taxed against Defendant HP Management Service, Inc.
7. The Court finds its judgment is final and disposes of all claims and all parties and that relief not expressly given is denied and that the parties are allowed such writs and processes as may be necessary in the collection or enforcement of this judgment.
The trial court awarded GNS $16,853.98 in addition to interest and attorney’s fees.
HP as a Named Defendant
In issue one, HP contends that the trial court erred in rendering judgment for GNS because GNS did not file any pleadings against HP. Specifically, HP alleges that “there were no pleadings on file with the trial court wherein GNS named [HP] as a Defendant or asserted any claim against [HP].” HP further argues that “there were no pleadings in the trial court wherein GNS asserted a breach of contract claim against [HP].” We disagree.
The appellate record includes a copy of GNS’s third amended petition in which it names HP as a defendant. Within the petition, GNS alleges that it suffered damages when the defendants breached the contract by failing to perform the terms of the contract and failing to pay GNS for services rendered. HP did not specially except to the third amended petition. In addition, the record contains a Rule 11 Agreement from HP’s attorney wherein he agreed to accept service on behalf of HP. We overrule issue one.
Breach of Contract
In issues two through six, HP asserts that the evidence is legally and factually insufficient to establish that (1) a contract existed between GNS and HP, (2) HP was responsible for any contractual obligation incurred by Hermann Park Manor relating to GNS, and (3) Mileski was acting for or on behalf of HP when he signed the agreement. In issues seven and eight, HP asserts that there is no evidence to support an award of damages in this case for breach of contract. The crux of HP’s argument is that the evidence is legally and factually insufficient to show that Mileski was acting as an agent of HP and had the authority to bind HP to vendor contracts when he signed the Supplemental Staffing Agreement. Accordingly, HP argues that the trial court erred in finding HP liable for breaching the agreement and for the payment of damages under the court’s conclusions of law three and four. We agree.
Standard of Review
We review de novo a trial court’s conclusions of law and uphold them on appeal if the judgment can be sustained on any legal theory supported by the evidence. BMC Software Belgium v. Marchand N.V., 83 S.W.3d 789, 794 (Tex. 2002); In re Moers, 104 S.W.3d 609, 611 (Tex. App.—Houston [1st Dist.] 2003, no pet.). An appellant may not challenge a trial court’s conclusions of law for lack of factual sufficiency, but we review the legal conclusions drawn from the facts to determine their correctness. BMC, 83 S.W.3d at 794. If the reviewing court finds that a conclusion of law is erroneous but that the trial court rendered the proper judgment, the erroneous conclusion of law does not require reversal. Id. When performing a de novo review, we exercise our own judgment and redetermine each legal issue. Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998).
In this case, the undisputed facts establish that Mileski did not have actual authority to bind HP to the Supplemental Staffing Agreement as HP’s agent, nor did HP ratify such conduct on its behalf by Mileski. As reflected on the signature blocks provided on the Agreement, Mileski signed the Agreement as the “administrator of Herman Park Manor,” not on behalf of HP. Accordingly, the trial court erred in its legal conclusions that HP was liable for breach of the contract and for the payment of damages to GNS.
Agency Relationship
It is undisputed that GNS did not learn that Mileski was an HP employee until shortly after this suit was filed.
An undisclosed principal is liable for the contracts of its agent only if the agent acted with the principal’s actual authority in making the contract for the principal or the principal ratified the contract. See Latch v. Gratty, Inc. 107 S.W.3d 543, 546 (Tex. 2003)
[In its briefing, GNS does not argue that HP ratified the Supplemental Staffing Agreement onits behalf nor have we found any evidence in the record to support this conclusion. There isno evidence that HP ever acknowledged the Supplemental Staffing Agreement as anagreement between HP and GNS nor was there any evidence that HP has ever asserted anyrights against GNS based on this Agreement. ]
Assuming, without deciding, that Mileski was HP’s agent by virtue of his status as an HP employee, the evidence is legally insufficient to conclude that Mileski had actual authority from HP to bind it to the Supplemental Staffing Agreement.
“Actual authority” is based on manifestations of consent by the alleged principal to the alleged agent, and such authority can be conferred either expressly or by implication. See Intermedics, Inc. v. Grady, 683 S.W.2d 842, 847 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.).
Express authority exists where the principal has made it clear to the agent that he wants the act under scrutiny to be done. City of San Antonio v. Aguilar, 670 S.W.2d 681, 683 (Tex. App.—San Antonio 1984, writ dism’d).
Implied authority exists when appearances justify a finding that the principal authorized the agent’s act; in other words, there is circumstantial evidence of actual authority. Id. at 683–84. Implied actual authority exists only as an adjunct to express actual authority, because implied authority is that which is proper, usual, and necessary to the exercise of the authority that the principal expressly delegates. Behring Int’l, Inc. v. Greater Houston Bank, 662 S.W.2d 642, 649 (Tex. App.—Houston [1st Dist.] 1983, writ dism’d by agr.); Employers Cas. Co. v. Winslow, 356 S.W.2d 160, 168 (Tex. Civ. App.—El Paso 1962, writ ref’d n.r.e.).
In this case, there is no evidence of express or implied actual authority for Mileski to sign the Supplemental Staffing Agreement on behalf of HP and bind HP to the terms of this contract. Mittleider, the president of HP, testified that Mileski executed the Supplemental Staffing Agreement on behalf of HCCI, the owner of the facility, not HP. Furthermore, it is undisputed that HCCI is doing business as Herman Park Manor and the Agreement expressly bears Mileski’s signature in his capacity as the administrator of Hermann Park Manor, not as an employee of HP. There is also no evidence of what authority Mileski had to bind HP to any contracts with vendors who did business with Hermann Park Manor, which was owned by HCCI. It is undisputed that Mileski never entered into any vendor contracts on behalf of HP while HP managed Hermann Park Manor, and HP never paid any of the invoices from GNS under the Supplemental Staffing Agreement: only Hermann Park Manor’s owner, HCCI, paid them.
Nevertheless, GNS argues that because (1) Mileski was an HP employee at the time he signed the Supplemental Staffing Agreement; (2) GNS was directed to make its billing inquiries through HP, as administrator of the facility; (3) Mileski made the decision as to which bills to submit to HCCI, as owner, for payment, and HP forwarded payments for GNS’s invoices from HCCI to GNS; and (4) HP and HCCI are located in the same city in Georgia, there is sufficient evidence of actual authority to bind HP to the Supplemental Staffing Agreement.
We disagree.
These facts establish Mileski’s and HP’s status as agents for HCCI under the Long Term Care Facility Management Agreement. They do not, however, establish that Mileski signed the Agreement on behalf of HP or that he had authority to bind HP to the terms of the Agreement, particularly where the Agreement expressly states that he did so on behalf of Hermann Park Manor, a facility owned by HCCI.
Next, GNS argues that Mileski’s apparent breach of the Long Term Care Facility Agreement by entering into the Supplemental Staffing Agreement, without HCCI’s permission, for an amount in excess of $10,000 is sufficient evidence to show implied actual authority to enter into the agreement on behalf of HP. We disagree. Absent evidence of Mileski’s authority to contract on behalf of HP, or of whether Mileski ever had express authority or exercised any authority to bind HP, this evidence cannot establish implied actual authority. See Behring Int’l, Inc., 662 S.W.2d at 649; Employers Cas., 356 S.W.2d at 168 (holding that, for implied authority to exist, there must be some evidence concerning what authority had been given to agent).
Finally, HP argues that, because Mileski never disclosed to GNS that he was an employee of HP or that Hermann Park Manor was owned by HCCI, under “an undisclosed principal theory,” HP is liable for payment due under the Supplemental Staffing Agreement. GNS’s reliance on the holdings in Posey v. Broughton Farm Co., 997 S.W.2d 829, 832 (Tex. App.—Eastland 1999, pet. denied) and Hideca Petroleum Corp. v. Tampimex Oil International, Ltd., 740 S.W.2d 838, 841 (Tex. App.—Houston [1st Dist.] 2003, no pet.), for this argument is misplaced.
These cases stand for the proposition that, if an agent fails to disclose its principal, the agent is liable for the contract it enters into with third parties. As noted above, an undisclosed principal is only liable for the contracts entered into by its agents with the actual authority of the undisclosed principal or if the undisclosed principal subsequently ratifies the contract. See Latch, 107 S.W.3d at 546.
Here, this was not the case.Assuming, without deciding, that Mileski was an agent of HP by virtue of his employment with HP, the evidence is legally insufficient to establish that he had actual authority to sign the Agreement on behalf of HP or bind HP to the terms of the Agreement, where he did so expressly on behalf of Hermann Park Manor, owned by HCCI, but not HP.
Accordingly, the evidence is legally insufficient to establish that (1) a contract existed between GNS and HP, (2) HP was responsible for any contractual obligation incurred by Hermann Park Manor relating to GNS, and (3) Mileski acted for or on behalf of HP when he signed the agreement of the facility.
The trial court thus erred in concluding that HP was liable for breach of the contract to GNS, and we sustain issues two through six. Because we hold that there is insufficient evidence of liability for breach of contract, we do not need to reach points of error seven and eight regarding the trial court’s damage award.
Conclusion
We reverse and render judgment that GNS take nothing from HP.
HP/Management Services, Inc. v. Guaranteed Nursing Staff, L.L.C, No. 01-05-00944-CV (Tex.App.- Houston [1st Dist.] Nov. 15, 2007) (Opinion by Justice Hanks) (no authority, no agency, no contract, no breach, no recovery - judgment reversed)
Appeal from County Civil Court at Law No 2 of Harris County
Trial court judge: Hon. Gary Michael Block
Appellant's attorney: Maurice E. Klein
Appellee's attorneys: Sean A. Roberts, Wendell Maurice Champion
MEMORANDUM OPINION
After a bench trial, Guaranteed Nursing Staff, L.L.C. (“GNS”), appellee, prevailed on its breach of contract claim against HP/Management Services, Inc. (“HP”), appellant. In eight issues, HP contends that the trial court erred in rendering judgment for GNS because GNS did not file any pleadings against HP and the evidence is legally and factually insufficient to establish that (1) a contract existed between GNS and HP, (2) HP was responsible for any contractual obligation incurred by Hermann Park Manor relating to GNS, and (3) Michael Mileski was acting for or on behalf of HP when he signed the agreement. HP also appeals the award of attorney’s fees. We reverse and render judgment in favor of HP.
Background
Hermann Park Manor, a healthcare facility, entered into a contract with GNS for GNS to provide temporary personnel staffing for the facility. The contract, entitled “Supplemental Staffing Agreement,” was signed by Michael Mileski, as the administrator of Hermann Park Manor, and Helen Royston, as the marketing director of GNS. GNS was not fully compensated for the services it provided under the contract, and it sued the following parties for, among other things, breach of contract: HCCI-Houston, Inc. d/b/a Hermann Park Manor, the owner of Hermann Park Manor; HP, the management company for Hermann Park Manor; and Mileski, the administrator of Hermann Park Manor. GNS proceeded to trial against Mileski and HP.
[The record does not reflect how the claims against defendant, HCCI-Houston, Inc. d/b/a Hermann Park Manor, were resolved.]
At trial, Cynthia Champion, the owner of GNS, gave undisputed testimony that, while she believed that Mileski had signed the Supplemental Staffing Agreement on behalf of Hermann Park Manor, she learned, after this suit had been filed, that Mileski, in addition to being Hermann Park Manor’s administrator, was also HP’s employee at the time that he signed this contract. During Champion’s testimony, the parties stipulated that GNS was owed $16,853.98 in compensation for services that it provided under the contract.
The court also heard testimony from H.P.’s president Douglas Mittleider. Mittleider testified that HCCI owns Hermann Park Manor. He also testified that, pursuant to the Long Term Care Facility Management Agreement between HP and HCCI, HP is responsible for running the day-to-day operations of Hermann Park Manor on behalf of HCCI and for appointing an administrator to serve as the onsite manager of Hermann Park Manor. This agreement nevertheless specifies that HCCI retains ownership and control over the management duties and obligations of Hermann Park Manor.
HP appointed Mileski as the administrator of Hermann Park Manor. Mittleider testified that, although Mileski was an employee of HP, Mileski did not sign the Supplemental Staffing Agreement with GNS on behalf of HP. Mittleider testified that Mileski signed the Agreement on behalf of the facility and its sole owner: Hermann Park Manor and HCCI, respectively. Mittleider further testified that HP (1) did not enter into the Supplemental Staffing Agreement with GNS, (2) did not make any payments to GNS under this Agreement, and (3) did not enter into any vendor contracts while it managed Hermann Park Manor. Mittleider testified that Mileski, as the administrator of Hermann Park Manor, decided which invoices under the Agreement with GNS were to be paid, and that HCCI, not HP would make these payments. No evidence controverted Mittleider’s testimony that Hermann Park Manor was owned by and doing business as HCCI or that the Long Term Care Facility Management Agreement defined the relationship between Mileski, HP, HCCI, and Hermann Park Manor.
The Long Term Care Facility Management Agreement between HCCI and HP was entered into evidence. Under the terms of this Agreement, HP was required to get permission, in writing, from HCCI to contract with any third party on behalf of HCCI involving a value in excess of $10,000. The Agreement also provided that HP would indemnify HCCI if HP breached the Agreement. The Agreement provides in pertinent part that:
1.03 Management of Facility. During the term of this Agreement, [HP] shall on behalf of [HCCI] manage all aspects of the operation of [Hermann Park Manor], including, but not limited to, staffing, accounting, billing, collections, setting of rates and charges and general administration. In connection therewith, [HP] (either directly or through supervision of employees of [Hermann Park Manor]) shall:
. . .
(j) Negotiate and enter into in the name of and on behalf of [HCCI] such agreements, contracts and orders as it may deem necessary or advisable, for the furnishing of services, concessions and supplies for the operation and maintenance of [Hermann Park Manor]; provided, however, that [HCCI] must approve, in writing, any agreement, contract or order, which has a term greater than one (1) year or which requires annual payments of more than $10,000.
. . .
5.09 Costs and Expenses: Indemnity
. . .
(b) [HP] agrees to indemnify and hold [HCCI] and its officers, directors, agents and employees harmless from and against all losses, claims, damages or other liabilities, including without limit, reasonable attorneys fees and the costs and expenses incurred in connection therewith, arising out of or relating to the willful misconduct, breach of contract or gross negligence of [HP], in performing its duties under this Agreement.
Mittleider testified that he did not believe HP had received written approval from HCCI to bind HCCI to the agreement with GNS, which was valued in excess of $10,000.
After the close of evidence, the trial court made the following findings of fact and conclusions of law:
Findings of Fact
1. On December 26, 2001, Defendant, Michael Mileski, an employee of HP Management Services and Administrator of Hermann Park Manor, executed a written contract with Plaintiff Guaranteed Nursing Staff to provide temporary personnel staffing for their local facility. Prior to executing the agreement, Defendants failed to properly disclose that the company could not or would not willingly pay for the services rendered under the contract, within the terms of the agreement. Specifically, prior to entering into the agreement, Defendants concealed the material fact that their business was operating under budget constraints and that they would not make timely payments pursuant to their contractual obligations.
2. From December 26, 2001 until on or about April 22, 2002, Plaintiff provided supplemental staffing services to the Defendant under the executed agreement which provided for payment within 30 days after receipt of the invoice. Clause 5(c), Compensation and Payment, provides “All amounts due to the Agency are due within (30) days from receipt of invoice. Facility will send all payments to the address printed on the Agency invoice.” Defendants requested and accepted the temporary personnel services of the Plaintiff for their healthcare facility and became bound to pay Plaintiff its designated charges, which were reasonable and customary for such services.
3. The account accurately sets forth the services, the dates of services, the hours and prices for the services that the Plaintiff provided Defendant. The account represents the record of the transactions that Plaintiff systematically keeps in the ordinary course of business. Defendants have refused to make full payment for services rendered and the principal balance due Plaintiff on the account is $16,853.98 after allowing for all just and lawful offsets, payments and credits.
4. Subsequent to the execution of the contract, Defendants have failed to perform the terms of the contract without legitimate legal excuse. Defendants have failed to pay Plaintiff for services rendered.
5. As a result of the Defendants’ conduct, Plaintiff found it necessary to employ attorneys. Plaintiff also properly presented its breach of contract claim such that attorneys’ fees are recoverable. Thus, in addition to the damages suffered by Plaintiff, Guaranteed Nursing Staff, L.L.C. has a right to be reimbursed reasonable attorneys’ fees as permitted by law. Although the Court heard no evidence of the reasonableness or amount of attorneys’ fees incurred by Plaintiff, the Court takes judicial notice that Plaintiff’s attorneys have expended time and effort prosecuting this case and that a reasonable fee for the services is $5,000.00.
Conclusions of Law
1. The Court finds Plaintiff has non-suited all claims asserted against HP/Hermann Park., Inc. and are hereby dismissed with prejudice to re-riling. [sic]
2. The Court finds that Plaintiff take nothing by its suit against Defendant Michael Mileski and that Michael Mileski recover his court costs from Plaintiff.
3. The Court finds that Plaintiff recover judgment from Defendant HP Management Service, Inc., on its cause of action for breach of contract only and shall recover the sum of $16,853.98, together with post-judgment interest at the annual rate of 6% until paid.
4. Plaintiff recover prejudgment interest on the judgment at thed [sic] annual rate of 6% from May 2, 2002 to the date of judgment in the sum of $3,167.57.
5. The Court finds Plaintiff recover its attorney fees from HP Management Service, Inc., in the amount of $5,000.
6. The Court finds that all of Plaintiffs court costs be taxed against Defendant HP Management Service, Inc.
7. The Court finds its judgment is final and disposes of all claims and all parties and that relief not expressly given is denied and that the parties are allowed such writs and processes as may be necessary in the collection or enforcement of this judgment.
The trial court awarded GNS $16,853.98 in addition to interest and attorney’s fees.
HP as a Named Defendant
In issue one, HP contends that the trial court erred in rendering judgment for GNS because GNS did not file any pleadings against HP. Specifically, HP alleges that “there were no pleadings on file with the trial court wherein GNS named [HP] as a Defendant or asserted any claim against [HP].” HP further argues that “there were no pleadings in the trial court wherein GNS asserted a breach of contract claim against [HP].” We disagree.
The appellate record includes a copy of GNS’s third amended petition in which it names HP as a defendant. Within the petition, GNS alleges that it suffered damages when the defendants breached the contract by failing to perform the terms of the contract and failing to pay GNS for services rendered. HP did not specially except to the third amended petition. In addition, the record contains a Rule 11 Agreement from HP’s attorney wherein he agreed to accept service on behalf of HP. We overrule issue one.
Breach of Contract
In issues two through six, HP asserts that the evidence is legally and factually insufficient to establish that (1) a contract existed between GNS and HP, (2) HP was responsible for any contractual obligation incurred by Hermann Park Manor relating to GNS, and (3) Mileski was acting for or on behalf of HP when he signed the agreement. In issues seven and eight, HP asserts that there is no evidence to support an award of damages in this case for breach of contract. The crux of HP’s argument is that the evidence is legally and factually insufficient to show that Mileski was acting as an agent of HP and had the authority to bind HP to vendor contracts when he signed the Supplemental Staffing Agreement. Accordingly, HP argues that the trial court erred in finding HP liable for breaching the agreement and for the payment of damages under the court’s conclusions of law three and four. We agree.
Standard of Review
We review de novo a trial court’s conclusions of law and uphold them on appeal if the judgment can be sustained on any legal theory supported by the evidence. BMC Software Belgium v. Marchand N.V., 83 S.W.3d 789, 794 (Tex. 2002); In re Moers, 104 S.W.3d 609, 611 (Tex. App.—Houston [1st Dist.] 2003, no pet.). An appellant may not challenge a trial court’s conclusions of law for lack of factual sufficiency, but we review the legal conclusions drawn from the facts to determine their correctness. BMC, 83 S.W.3d at 794. If the reviewing court finds that a conclusion of law is erroneous but that the trial court rendered the proper judgment, the erroneous conclusion of law does not require reversal. Id. When performing a de novo review, we exercise our own judgment and redetermine each legal issue. Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998).
In this case, the undisputed facts establish that Mileski did not have actual authority to bind HP to the Supplemental Staffing Agreement as HP’s agent, nor did HP ratify such conduct on its behalf by Mileski. As reflected on the signature blocks provided on the Agreement, Mileski signed the Agreement as the “administrator of Herman Park Manor,” not on behalf of HP. Accordingly, the trial court erred in its legal conclusions that HP was liable for breach of the contract and for the payment of damages to GNS.
Agency Relationship
It is undisputed that GNS did not learn that Mileski was an HP employee until shortly after this suit was filed.
An undisclosed principal is liable for the contracts of its agent only if the agent acted with the principal’s actual authority in making the contract for the principal or the principal ratified the contract. See Latch v. Gratty, Inc. 107 S.W.3d 543, 546 (Tex. 2003)
[In its briefing, GNS does not argue that HP ratified the Supplemental Staffing Agreement onits behalf nor have we found any evidence in the record to support this conclusion. There isno evidence that HP ever acknowledged the Supplemental Staffing Agreement as anagreement between HP and GNS nor was there any evidence that HP has ever asserted anyrights against GNS based on this Agreement. ]
Assuming, without deciding, that Mileski was HP’s agent by virtue of his status as an HP employee, the evidence is legally insufficient to conclude that Mileski had actual authority from HP to bind it to the Supplemental Staffing Agreement.
“Actual authority” is based on manifestations of consent by the alleged principal to the alleged agent, and such authority can be conferred either expressly or by implication. See Intermedics, Inc. v. Grady, 683 S.W.2d 842, 847 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.).
Express authority exists where the principal has made it clear to the agent that he wants the act under scrutiny to be done. City of San Antonio v. Aguilar, 670 S.W.2d 681, 683 (Tex. App.—San Antonio 1984, writ dism’d).
Implied authority exists when appearances justify a finding that the principal authorized the agent’s act; in other words, there is circumstantial evidence of actual authority. Id. at 683–84. Implied actual authority exists only as an adjunct to express actual authority, because implied authority is that which is proper, usual, and necessary to the exercise of the authority that the principal expressly delegates. Behring Int’l, Inc. v. Greater Houston Bank, 662 S.W.2d 642, 649 (Tex. App.—Houston [1st Dist.] 1983, writ dism’d by agr.); Employers Cas. Co. v. Winslow, 356 S.W.2d 160, 168 (Tex. Civ. App.—El Paso 1962, writ ref’d n.r.e.).
In this case, there is no evidence of express or implied actual authority for Mileski to sign the Supplemental Staffing Agreement on behalf of HP and bind HP to the terms of this contract. Mittleider, the president of HP, testified that Mileski executed the Supplemental Staffing Agreement on behalf of HCCI, the owner of the facility, not HP. Furthermore, it is undisputed that HCCI is doing business as Herman Park Manor and the Agreement expressly bears Mileski’s signature in his capacity as the administrator of Hermann Park Manor, not as an employee of HP. There is also no evidence of what authority Mileski had to bind HP to any contracts with vendors who did business with Hermann Park Manor, which was owned by HCCI. It is undisputed that Mileski never entered into any vendor contracts on behalf of HP while HP managed Hermann Park Manor, and HP never paid any of the invoices from GNS under the Supplemental Staffing Agreement: only Hermann Park Manor’s owner, HCCI, paid them.
Nevertheless, GNS argues that because (1) Mileski was an HP employee at the time he signed the Supplemental Staffing Agreement; (2) GNS was directed to make its billing inquiries through HP, as administrator of the facility; (3) Mileski made the decision as to which bills to submit to HCCI, as owner, for payment, and HP forwarded payments for GNS’s invoices from HCCI to GNS; and (4) HP and HCCI are located in the same city in Georgia, there is sufficient evidence of actual authority to bind HP to the Supplemental Staffing Agreement.
We disagree.
These facts establish Mileski’s and HP’s status as agents for HCCI under the Long Term Care Facility Management Agreement. They do not, however, establish that Mileski signed the Agreement on behalf of HP or that he had authority to bind HP to the terms of the Agreement, particularly where the Agreement expressly states that he did so on behalf of Hermann Park Manor, a facility owned by HCCI.
Next, GNS argues that Mileski’s apparent breach of the Long Term Care Facility Agreement by entering into the Supplemental Staffing Agreement, without HCCI’s permission, for an amount in excess of $10,000 is sufficient evidence to show implied actual authority to enter into the agreement on behalf of HP. We disagree. Absent evidence of Mileski’s authority to contract on behalf of HP, or of whether Mileski ever had express authority or exercised any authority to bind HP, this evidence cannot establish implied actual authority. See Behring Int’l, Inc., 662 S.W.2d at 649; Employers Cas., 356 S.W.2d at 168 (holding that, for implied authority to exist, there must be some evidence concerning what authority had been given to agent).
Finally, HP argues that, because Mileski never disclosed to GNS that he was an employee of HP or that Hermann Park Manor was owned by HCCI, under “an undisclosed principal theory,” HP is liable for payment due under the Supplemental Staffing Agreement. GNS’s reliance on the holdings in Posey v. Broughton Farm Co., 997 S.W.2d 829, 832 (Tex. App.—Eastland 1999, pet. denied) and Hideca Petroleum Corp. v. Tampimex Oil International, Ltd., 740 S.W.2d 838, 841 (Tex. App.—Houston [1st Dist.] 2003, no pet.), for this argument is misplaced.
These cases stand for the proposition that, if an agent fails to disclose its principal, the agent is liable for the contract it enters into with third parties. As noted above, an undisclosed principal is only liable for the contracts entered into by its agents with the actual authority of the undisclosed principal or if the undisclosed principal subsequently ratifies the contract. See Latch, 107 S.W.3d at 546.
Here, this was not the case.Assuming, without deciding, that Mileski was an agent of HP by virtue of his employment with HP, the evidence is legally insufficient to establish that he had actual authority to sign the Agreement on behalf of HP or bind HP to the terms of the Agreement, where he did so expressly on behalf of Hermann Park Manor, owned by HCCI, but not HP.
Accordingly, the evidence is legally insufficient to establish that (1) a contract existed between GNS and HP, (2) HP was responsible for any contractual obligation incurred by Hermann Park Manor relating to GNS, and (3) Mileski acted for or on behalf of HP when he signed the agreement of the facility.
The trial court thus erred in concluding that HP was liable for breach of the contract to GNS, and we sustain issues two through six. Because we hold that there is insufficient evidence of liability for breach of contract, we do not need to reach points of error seven and eight regarding the trial court’s damage award.
Conclusion
We reverse and render judgment that GNS take nothing from HP.
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