Cysco Enterprises, Inc., d/b/a Rhino Linings of Austin v. Hardeman Family Joint Venture, Ltd.--Appeal from 98th District Court of Travis County

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-02-00230-CV

Cysco Enterprises, Inc., d/b/a Rhino Linings of Austin, Appellant

 

v.

 

Hardeman Family Joint Venture, Ltd., Appellee

 

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT

NO. 99-12073, HONORABLE PAUL DAVIS, JUDGE PRESIDING

This dispute arises from an attempted sale of real estate. Appellant Cysco Enterprises, Inc., d/b/a Rhino Linings of Austin ("Cysco") was the buyer under the contract, and appellee Hardeman Family Joint Venture, Ltd. ("Hardeman") was the seller. The parties held different interpretations of their obligations under the contract and of the final closing date. When Cysco failed to respond to Hardeman's request to close by a certain date, Hardeman terminated the contract. Cysco sued Hardeman for specific performance under the contract and for damages; Hardeman counterclaimed for breach of contract. The dispute was submitted to a jury. The trial court rendered judgment on the jury's verdict that Cysco take nothing and that Hardeman recover its attorney's fees, plus court costs and post-judgment interest. By three issues on appeal, Cysco challenges (1) the factual sufficiency of the evidence to support the judgment and (2) the trial court's award of costs and attorney's fees to Hardeman. We overrule Cysco's issues and affirm the judgment.
BACKGROUND

Gregory Sellards is Cysco's chief executive officer, and Jon Glover manages its Austin operation, Rhino Linings. In 1998, Cysco was looking for a new location to expand its Rhino Linings business. Cysco became interested in a parcel of property that Hardeman was selling. The property was adjacent to another piece of undeveloped property owned by Hardeman. The parties' representatives signed a contract, and upon Cysco's deposit of $10,000 earnest money, the contract became effective August 7, 1998. Included in the contract was the provision: "Time is of the essence in this contract. Strict compliance with the times for performance stated in this contract is required." The parties set the closing date for "120 days from effective date of contract," which would have been December 5, 1998.

The contract also included a special provision, which stated: "Contract contingent upon seller installing Lamar curb cut." Hardeman had agreed to install a new curb cut (or driveway) providing access to the property from Lamar, a street abutting the property. Installation of the curb cut required City of Austin approval. Hardeman's representative, Bryan Hardeman, represented to Glover that approval would not be difficult to secure, as Hardeman held a "site plan exemption" that Bryan Hardeman assumed would apply to the proposed curb cut. Contrary to the parties' assumptions, the City advised Bryan that the site plan exemption was not sufficient for the proposed curb cut.

On September 23, 1998, Roger Duck, the listing agent and representative for Hardeman, wrote to Glover, proposing to extend the closing date to January 5, 1999, to allow more time to obtain the necessary City permit. The letter stated that the contractor employed by Hardeman represented to Hardeman that a City permit could be obtained upon submission of a site plan. Through this letter, Duck also requested that Glover have the engineers begin preparing the site plan and confirmed that Hardeman would pay for half of the site plan expenses. Bryan Hardeman signed the letter, acknowledging his approval of the proposal. On October 15, Glover accepted the proposed new closing date in writing. In his letter, Glover insisted that Bryan Hardeman sign the engineering contract before preparation of the site plan could begin.

On December 7, Duck wrote to Cysco's realtor, Kevin Scraggs, assuring him that Bryan Hardeman had signed the engineering contract. In his memo, Duck reiterated the assumption that a City permit could be obtained upon submission of a site plan and expected the real estate sale to close within seventy-two hours after acquisition of the permit: "As soon as the site plan is submitted and we acquire the permit and start construction on the driveway permit, Hardeman Family Joint Venture, Ltd. will expect your client to close within 72 hours." This letter was not signed by Bryan Hardeman, and no written response was sent by Glover.

Unfortunately, Duck's assumption that a City permit could be obtained upon mere submission of a site plan was mistaken. It became evident to Hardeman that approval of the site plan was necessary to secure a City permit. Cysco and Hardeman jointly selected but separately entered into contracts with CFX, Inc., an engineering firm, to prepare a site plan.

After some communication and negotiations between Cysco, Hardeman, and CFX, the parties agreed to CFX's proposal to design a joint detention pond to handle storm runoff from both pieces of property owned by Hardeman instead of designing two separate detention ponds for each piece of property. The plan for a joint detention pond required the parties to enter into a joint use agreement or to record a restrictive use covenant. A site plan could not be approved without such an agreement.

The parties and CFX continued to work on preparing a site plan even after the January 5, 1999 closing deadline had passed. CFX requested the submission of architectural drawings of Cysco's proposed building; the drawings were a necessary component of the site plan. Deanna Dawson of DK Enterprises prepared the drawings, which were dated January 31, 1999, and provided them to CFX. CFX submitted an initial site plan to the City of Austin on April 7, 1999. On May 28, CFX initiated a series of communications with Glover and Bryan Hardeman, seeking additional information to respond to the City's concerns. On June 11, CFX informed both men that it needed information on the restrictive covenant agreement and updated drawings from DK Enterprises. CFX submitted an updated plan to the City on July 16, 1999, but had not yet received the requested information from the parties. (1)

Hardeman's attorney, John Avery, prepared a draft restrictive covenant agreement and sent it to Vince Musat, a CFX engineer. On August 2, Musat sent the draft to Bryan Hardeman and Glover. Glover forwarded the draft to Sellards, who forwarded the draft to his attorneys. No Cysco representative ever responded to the draft agreement.

On August 12, CFX again contacted the parties and again requested a restrictive covenant agreement and updated drawings. The letter also noted that Hardeman had failed to pay an invoice dated in March. CFX informed the parties that all work would cease until Hardeman paid its invoice. Hardeman eventually paid the bill on August 24. The site plan was never completed or approved.

Subsequently, at the request of Bryan Hardeman, Avery prepared a letter dated August 31, 1999, requesting that Cysco close the real estate transaction on September 10, 1999. No Cysco representative responded to the letter; no one for Cysco appeared on September 10 to close on the property. Accordingly, Bryan Hardeman sent a letter to Glover dated September 10, 1999, informing him that the contract was terminated. The following month, the title company refunded to Cysco the $10,000 earnest money, but Cysco returned the money to the title company.

Cysco then sued Hardeman for breach of contract and sought specific performance. By its second amended petition, Cysco added a claim for mandatory injunctive relief, seeking to enjoin Hardeman from improving the property at issue; Cysco also added claims for recovery of its engineering fees, lost profits, and exemplary damages. Hardeman responded and filed a counterclaim for breach of contract. The case was tried before a jury. Cysco argued that the December 7 memo by Duck to Scraggs amended the contract and extended the closing deadline; according to Cysco (Glover and Sellards), the parties would close the deal within seventy-two hours after the site plan was approved and a City permit issued, whenever that might occur. During the jury trial, Sellards tendered a check for the balance of the purchase price under the contract, and the funds were deposited into the registry of the court. Sellards also waived the requirements that Hardeman install a curb cut or proceed with a site plan and requested a deed to the property. The jury found that the parties did not agree that the contract would be amended by the December 7 memo and that Hardeman was not entitled to recover any money for Cysco's failure to close the contract. The trial court rendered a take-nothing judgment on the verdict against Cysco and awarded costs to Hardeman along with attorney's fees in the amounts found by the jury. Cysco filed a motion for new trial and a motion to modify, correct, or reform judgment; both were denied.

 

DISCUSSION

By its first issue, Cysco challenges the factual sufficiency of the evidence to support the verdict. Specifically, Cysco claims that the evidence presented at trial establishes that the parties intended that the contract be amended by the memo dated December 7, 1998. When reviewing a factual sufficiency challenge, we must assess all the evidence and may not substitute our judgment for that of the trier of fact. Westech Eng'g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex. App.--Austin 1992, no writ). If, as here, the challenge is to an adverse finding, or failure to find, on which the appellant had the burden of proof, we may reverse only if the failure to find is so contrary to the overwhelming weight and preponderance of the evidence as to be clearly wrong and manifestly unjust. Ames v. Ames, 776 S.W.2d 154, 158 (Tex. 1989); Cropper v. Caterpillar Tractor Co., 754 S.W.2d 646, 651 (Tex. 1988).

In order to prevail on its breach of contract claim, Cysco first had to prove that the contract had been amended and the closing date extended by the December 7 memo. Cysco claims that there is no evidence in the record that either repudiates Duck's authority to have sent the December 7 memo on behalf of Hardeman or contradicts the fact that both Cysco and Hardeman relied and acted upon the terms of the memo. Cysco argues that the record is replete with evidence that both parties relied on the memo, including significant acts that occurred well beyond January 5, 1999, the prior closing date.

Both Glover and Sellards testified that their understanding of the memo was that it effectively extended the closing date. Both testified that they relied on this understanding of the memo. Furthermore, both testified that they were aware that a permit could not be obtained by merely submitting a site plan. They knew that the site plan had to be approved before they could be granted a City permit. Thus, they believed that as of the date of the memo, December 7, it was no longer possible to obtain site plan approval, a City permit, and begin construction of the curb cut before the January 5 closing date.

Cysco also points to the preparation of the detailed site plan drawings by CFX, the engineering firm employed by both parties. The site plan drawings were not completed until February 2, 1999, and were not submitted to the City of Austin until April 7, 1999. Furthermore, CFX sent to both parties updates regarding the progress of the site plan submission to the City of Austin in June, July, and August 1999. In addition, Dawson prepared and delivered architectural compatibility drawings to CFX in February 1999 and revised those drawings pursuant to CFX's request in June 1999. Finally, Cysco directs this Court to the preparation of a proposed restrictive covenant agreement prepared by Hardeman's attorney in late July or early August 1999.

On the other hand, Duck testified that the December 7 memo was never intended to extend the closing date beyond January 5, 1999. He did not intend to wait until the site plan was approved before closing the sale. In fact, Duck mistakenly believed that the site plan did not have to be approved before Hardeman could obtain a City permit and begin installing the curb cut. He believed that the closing could occur before the January 5 deadline, so long as a site plan was prepared and submitted and a permit issued within the period between December 7, the date of the memo, and January 5.

Similarly, Bryan Hardeman testified that the December 7 memo was only intended to provide Glover with the security he needed to go forward with the site plan. Glover had requested that Hardeman sign a contract with the engineers before they proceed with the site plan, and the December 7 memo was intended to assure Glover that a contract had been executed. Cysco had not requested another extension, and Bryan Hardeman had not agreed to one. Bryan Hardeman testified that he did not authorize Duck to propose an extension on the closing date to Cysco; he did not sign the document, and the memo does not purport to be an agreement proposed by Bryan Hardeman. According to Bryan Hardeman, he merely asked Duck to pass on some information to Cysco's real estate broker to let him know that Hardeman had "released the engineer to proceed forward." The memo was simply an information memo. Bryan Hardeman also continued to believe, at the time the memo was prepared, that Hardeman would be able to obtain a City permit upon submission of a site plan, and would not have to wait for site plan approval. Moreover, Bryan Hardeman testified that he never would have agreed to wait for the City's approval of the site plan to close on a real estate transaction. Based on his experience, he knew that site plan approval could take a long time, and he was only willing "to give 120 days, and no longer than that basically, at the time we signed the contract." He ultimately had his attorney, Avery, prepare a letter requiring Cysco to close on the sale by September 10, 1999 because thirteen months had passed since the contract was signed and "it became clear to me that we . . . weren't going anywhere."

In sum, although Glover and Sellards testified that they believed the contract had been amended by the December 7 memo and that the closing date had been extended, Hardeman presented evidence to the contrary. The jury as fact-finder is the sole judge of the witnesses' credibility and the weight to be given their testimony. Simons v. City of Austin, 921 S.W.2d 524, 531 (Tex. App.--Austin 1996, writ denied). We will not substitute our opinion for that of the jury when the verdict is sufficiently grounded in evidence. Id. We cannot say that the jury's failure to find in favor of Cysco is so contrary to the overwhelming weight and preponderance of the evidence as to be clearly wrong and manifestly unjust. We hold that the evidence is factually sufficient to support a finding that the contract was not amended by the December 7 memo and overrule Cysco's first issue.

By its second issue, Cysco contends the trial court erred in awarding court costs to Hardeman. Because each party prevailed in its defense to the breach of contract claim asserted by the other party, the trial court abused its discretion in awarding the court costs solely to Hardeman absent a finding of good cause, argues Cysco. By its third issue, Cysco argues that the trial court erred in awarding Hardeman attorney's fees. Cysco claims that the only theory of recovery pleaded by Hardeman for recovery of attorney's fees was in connection with the breach of contract claim. Cysco asserts that under section 38.001 of the civil practice and remedies code, Hardeman could not recover attorney's fees because it did not recover any damages for its breach of contract claim.

Hardeman responds that the award of costs and attorney's fees was proper under the terms of the earnest money contract. Hardeman did not specify in its pleadings that it was relying on the civil practice and remedies code for its attorney's fees request. The contract provides in pertinent part:

 

ATTORNEY FEES: If, Buyer, Seller, Listing Broker, Other Broker, or Escrow Agent is a prevailing party in any legal proceeding brought under or with relation to this contract or this transaction, such party shall be entitled to recover from the non-prevailing parties all costs of such proceeding and reasonable attorney fees.

 

Attorney's fees are not recoverable unless provided for by statute or by contract between the parties. New Amsterdam Cas. Co. v. Texas Indus., Inc., 414 S.W.2d 914, 915 (Tex. 1967). In this case, the contract between the parties provides that in the event of litigation relating to the contract or transaction, the prevailing party shall be entitled to recover from the losing party "all costs of such proceeding and reasonable attorney fees." Parties have a right to contract as they see fit as long as the contract does not contravene public policy and their contracts are not illegal. See Benbow v. Boney, 240 S.W.2d 438, 441 (Tex. Civ. App.--Waco 1951, writ ref'd). Parties are free to adopt a more liberal (or more strict) standard for recovery of attorney's fees in their contract than the statute provides, and the appellate court is bound by their choice. Wayne v. A.V.A. Vending, Inc., 52 S.W.3d 412, 417-18 (Tex. App.--Corpus Christi 2001, pet. denied); One Call Sys., Inc. v. Houston Lighting & Power, 936 S.W.2d 673, 676 (Tex. App.--Houston [14th Dist.] 1996, writ denied). Because the contract's provisions control, we need not consider the requirements of chapter 38 of the civil practices and remedies code. See, e.g., Twelve Oaks Tower I, Ltd. v. Premier Allergy, Inc., 938 S.W.2d 102, 118 (Tex. App.--Houston [14th Dist.] 1996, no writ) (basing attorney's fees on underlying contract rather than statutory requirements); One Call Sys., 936 S.W.2d at 676 (upholding award of attorney's fees in absence of other affirmative relief because parties were free to adopt more liberal standard for recovery of attorney's fees in their contract and appellate court is bound by their choice). The issue then is whether Hardeman was the prevailing party.

A prevailing party is a party who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even though not to the extent of its original contention. Operation Rescue-Nat'l v. Planned Parenthood of Houston & Southeast Tex., Inc., 937 S.W.2d 60, 86 (Tex. App.--Houston [14th Dist.] 1996, no writ) (citing Perez v. Baker Packers, 694 S.W.2d 138, 143 (Tex. App.--Houston [14th Dist.] 1985, writ ref'd n.r.e.)), aff'd as modified, 975 S.W.2d 546 (Tex. 1998); Weng Enters. v. Embassy World Travel, Inc., 837 S.W.2d 217, 222-23 (Tex. App.--Houston [1st Dist.] 1992, no writ). Determining whether a party is the prevailing or successful party must be based upon success on the merits, and not whether damages were awarded. Scholl v. Home Owners Warranty Corp., 810 S.W.2d 464, 468 (Tex. App.--San Antonio 1991, no writ); Perez, 694 S.W.2d at 143. In other words, a prevailing party is one who is vindicated by the trial court's judgment. Dear v. City of Irving, 902 S.W.2d 731, 739 (Tex. App.--Austin 1995, writ denied). Allocation of costs is a matter for the trial court's discretion and cannot be overturned absent a showing of abuse. Operation Rescue-Nat'l, 937 S.W.2d at 86.

In this case, Cysco sued Hardeman for breach of contract and sought specific performance; Cysco also sought mandatory injunctive relief and recovery of its engineering fees, lost profits, and exemplary damages. By its counterclaim, Hardeman also claimed breach of contract, alleging that Cysco's conduct in failing to deliver architectural drawings and to execute a restrictive covenant agreement constituted anticipatory repudiation. Hardeman sought recovery for engineering and site development fees and attorney's fees. The court's charge to the jury asked whether the parties agreed that the earnest money contract would be amended by the December 7 memo. The jury answered no. This answer defeated Cysco's claim for specific performance and injunctive relief. As to these claims, Hardeman was the prevailing party. With regard to Hardeman's claim, the jury was not asked to determine whether Cysco breached the contract. Rather, the jury was asked, without objection, what sum of money would fairly and reasonably compensate Hardeman for its damages that resulted from Cysco's failure to close the contract. The jury answered zero. Thus, the jury's verdict does not clearly establish that Hardeman failed to prevail on the merits of its claim. Although Hardeman did not recover the damages it requested, as a result of the jury's verdict, it also was not required to specifically perform under the contract. We hold that under these circumstances, the trial court did not abuse its discretion in awarding costs and attorney's fees to Hardeman as the prevailing party.

 

CONCLUSION

Having overruled all of appellant's issues, we affirm the trial court's judgment.

 

Jan P. Patterson, Justice

Before Chief Justice Aboussie, Justices Patterson and Puryear

Affirmed

Filed: December 19, 2002

Do Not Publish

1. Dawson testified that she believed she had provided the updated drawings to CFX. She telephoned CFX and explained that she had delivered them herself. After she made this phone call, she assumed the matter had been taken care of. CFX, however, continued to communicate to the parties that it had not received the updated drawings.