KELLY DAVIS, Appellant v. INSURTEK, INC., Appellee

Reverse and Render in part; Affirm in part; Remand in part; Opinion Filed
December 30, 2010.
 
 
 
In The
Court of Appeals
Fifth District of Texas at Dallas
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No. 05-09-01029-CV
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KELLY DAVIS, Appellant
V.
INSURTEK, INC., Appellee
.............................................................
On Appeal from the 298th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 05-10131-M
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MEMORANDUM OPINION
Before Justices Bridges, Francis, and Lang-Miers
Opinion By Justice Francis
        Insurtek, Inc. hired Kelly Davis as vice president in 1997. As part of her compensation package, Davis was promised 10 percent ownership in the company vesting over five years. The agreement was not put in writing. After more than seven years of employment, Insurtek refused to deliver the promised stock in the company. Davis resigned and sued Insurtek for breach of contract.
After hearing the evidence, the jury made affirmative findings in Davis's favor on her breach of contract claim. The jury, however, also found the parties intended that she had to be employed for more than one year to obtain any ownership in Insurtek. This question was directed at Insurtek's statute of frauds affirmative defense. Based on the finding, the trial court disregarded the favorable breach of contract findings and rendered a take-nothing judgment.
On appeal, Davis contends the statute of frauds does not apply to her claim because the agreement was performable within one year, but, even if it does apply, she conclusively established her full performance as an exception. For the reasons set out below, we agree with Davis's latter argument. We therefore reverse the trial court's judgment and render judgment in Davis's favor.
In 1997, Davis had several years of experience in the insurance industry and was vice president of a managing general agency. That summer, she was contacted by Clarke Stephan, who wanted her to join him to start a managing general agency. Stephan was experienced in premium finance, not insurance, and was looking for someone with Davis's industry experience. After a meeting, Davis told Stephan she would need at least $70,000 in annual salary and health benefits and, most importantly, ownership in the company. Davis said she told Stephan that ownership in the company was the “only thing that would make me move” because she “needed to build some security” for her future. No agreement was reached at that meeting, but both parties agreed to “think about it” and talk later.
Stephan called her back and said he was prepared to offer her the salary, benefits, and 10 percent ownership. The two then met again, and Davis asked him specifically about ownership. Stephan told her he wanted ownership to be earned over five years because he did not want “somebody to come to work and leave two days later and walk away with ten percent of the company.” Davis asked if that meant that she would have no ownership if she worked for only four years. Stephan told her no, that whatever percentage she had worked towards the five years, she would have that amount of ownership up to a maximum of ten percent. According to Davis, Stephan said he would put the agreement in writing, and she accepted the offer. They did not discuss provisions for a covenant not to compete or a buy-sell agreement. Insurtek began business operations on October 1, 1997. Over the next seven years, Stephan referred to Davis as “owner,” “shareholder,” and “business partner” to employees, vendors, and reinsurers. During this same time, she asked him multiple times each year for a written agreement, and he always said he was too busy because of various events happening. However, he always promised he would “get to it,” and Davis said in reliance on those promises, she continued her employment. Finally, in April 2004, Davis told Stephan it was “ridiculous” that he had not presented her with a writing and she believed he “had no intention of ever giving” her anything in writing. She told him she needed to decide whether she was going to stay with the company. Four months later, in August, Stephan presented her with a written Stock Bonus Agreement and suggested she have her attorney review it. Davis read the agreement and found that it contained numerous terms never discussed, including a covenant not to compete and buy-back provision, while leaving blank the amount of her ownership. She did not sign the document and resigned six months later.
In almost all respects, Stephan's testimony corroborated Davis's. In particular, he admitted the employment agreement included 10 percent ownership in the company vested over five years; he told Davis he would put the agreement in writing; Davis asked him at least once a year about a written agreement; he said he would put it in writing but “just didn't do it;” and he referred to Davis as owner, shareholder or partner on “probably more” than two dozen occasions to employees, potential hirees, vendors, reinsurers, and fronting company representatives. However, in contrast to Davis's testimony, Stephan said the employment agreement also contained non-compete and buy- back provisions, although he acknowledged that details of these terms were never discussed. Both Davis and Stephan testified that Davis's employment was terminable at any time without cause.
After hearing the evidence, the jury found that in connection with the employment agreement, Insurtek and Davis intended to bind themselves to an agreement that included a term that Davis would receive 10 percent of the common stock of Insurtek vested over five years but failed to find there would be a written agreement containing a buy-back provision or covenant not to compete. The jury further found Insurtek failed to comply with the agreement; Insurtek's failure to comply was not excused; and Davis's damages from the failure to comply amounted to $125,000. Finally, in Question 6, the jury found the parties intended that Davis had to be employed for more than one year to obtain any ownership in Insurtek.   See Footnote 1 
Both sides filed motions for judgment. Insurtek contended Davis's breach of contract claim was barred by the statute of frauds because the agreement was not in writing. Specifically, Insurtek asserted that it had established its affirmative defense of the statute of frauds with the jury's finding that Davis had to be employed for more than one year to obtain any ownership. See Tex. Bus. & Com. Code Ann. § 26.01(a)(6) (West 2009) (providing that promise or agreement “which is not to be performed within one year from the date of making the agreement” is not enforceable unless it is in writing).
Davis countered that her employment was at will because she could be terminated at any time. She also argued the oral agreement could be performed within a year and therefore did not fall within the statute of frauds. She argued the promised ownership, earned over time, was simply part of her compensation package and the jury's finding that ownership did not begin to vest until she had been employed for more than one year is irrelevant, immaterial, and should be disregarded. Further, she argued that even if the agreement fell within the statute's prohibition, she conclusively established full performance and estoppel exceptions which took the agreement out of the statute. After considering the parties' motions, the trial court rendered a take-nothing judgment. On appeal, Davis raises the same arguments she did in the trial court.   See Footnote 2  We need not decide whether Insurtek's promise was performable within one year because, even if we assume it was not and the statute of frauds applies, Davis conclusively established the full performance exception.
When one party fully performs a contract, the statute of frauds is unavailable to the other who knowingly accepts the benefits and partly performs. Estate of Kaiser v. Gifford, 692 S.W.2d 525, 526 (Tex. App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.); see Restatement (Second) of Contracts § 130 cmt. d (1981) (“But unlike other provisions of the Statute, the one-year provision does not apply to a contract which is performed on one side at the time it is made, such as a loan of money, nor to any contract which has been fully performed on one side, whether the performance is completed within a year or not.”). “The rationale of the full performance doctrine is that when one party, in reasonable reliance on the contract, performs all of its obligations, it would be unfair to allow the other party to accept the benefits under the contract but to avoid its reciprocal obligation by asserting the Statute of Frauds.” Noesges v. Servicemaster Co., 598 N.E.2d 437, 441 (Ill. App. 2 Dist. 1992) (quoting Am. Coll. of Surgeons v. Lumbermens Mut. Cas. Co., 491 N.E.2d 1179, 1193 (Ill. App. 1 Dist. 1986)).
Davis did not request a jury issue on any statute of frauds exception. Generally, the party claiming an exception to the statute of frauds must secure a finding to that effect. Barbouti v. Munden, 866 S.W.2d 288, 295 (Tex. App.-Houston [14th Dist.] 1993, writ denied), overruled on other grounds by Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex.1998). However, if the evidence conclusively establishes an exception to the statute of frauds, the issue is not waived for failing to obtain a finding. See Tex.R. Civ. P. 279; Choi v. McKenzie, 975 S.W.2d 740, 744 (Tex. App.-Corpus Christi 1998, pet. denied).
        Here, the evidence is undisputed that Stephan promised Davis she would earn 10 percent ownership in the company over five years if she came to work for him in his new enterprise and that he would put the agreement in writing. It is also undisputed that for the next nearly seven years, Davis asked for a written agreement multiple times, and Stephan repeatedly promised he would provide her with one. During this time, Davis continued to build Insurtek in reliance on Stephan's promises, benefiting Insurtek with her insurance industry experience that Stephan lacked. In return, Insurtek partly performed its end of the bargain by paying her a salary and health benefits. Finally, almost seven years later, Stephan presented Davis with a written agreement containing terms that were not agreed to by the parties. Months later, Davis left the company, and Insurtek refused to deliver the stock in the company.
        These undisputed facts conclusively establish that Davis fully performed her obligations under the agreement while Insurtek benefited but only partly performed, squarely placing this case within the full performance exception to the statute of frauds. To conclude otherwise would be to allow Insurtek to avoid its obligations on an agreement it admits it made, after enjoying the full benefits of Davis's services, because Stephan never put the agreement in writing as he promised he would. In our view, allowing Insurtek protection from the agreement by way of a statute designed to prevent fraud perverts the statute's very purpose. See Estate of Kaiser, 692 S.W.2d at 527; Callahan v. Walsh, 49 S.W.2d 945, 948 (Tex. Civ. App.-San Antonio 1932, writ ref'd).
        In reaching this decision, we have considered a line of cases involving oral employment agreements where this Court rejected the partial performance exception when the plaintiff received a salary for her services. See Biko v. Siemens Corp., 246 S.W.3d 148, 161 (Tex. App.-Dallas 2007, pet. denied); Timmons v. Scarbrough, Medlin & Assocs., Inc., No. 05-05-00235-CV, 2005 WL 3436706, *2 (Tex. App.-Dallas 2005, no pet.) (mem. op.); Daesaeng Corp. v. Stone, No. 05-95- 01760-CV, 1997 WL 557091, *4 (Tex. App.-Dallas 1997, pet. denied) (not designated for publication). Partial performance removes an oral agreement from the statute of frauds only if the performance is unequivocally referable to the agreement and corroborative of the fact that the contract was made. Biko, 246 S.W.3d at 161. Relying on Wiley v. Bertelsen, 770 S.W.2d 878, 882 (Tex. App.-Texarkana 1989, no pet.), we concluded in each of the cases that rendition of services for which a person receives a monthly salary is insufficient to take the alleged agreement out of the statute of frauds because the services were fully explained by the salary without supposing any additional consideration. See Biko, 246 S.W.3d at 161; Timmons, 2005 WL 3436706, at *2; Daesaeng, 1997 WL 557091, at *4.
        Assuming this law applies in the full performance context, Davis has also conclusively established that her performance was unequivocally referable to the agreement.   See Footnote 3  In each of the cases where we have applied this law, there was a dispute about the underlying agreement. Here, Stephan admitted he promised Davis ownership in the company as part of her compensation. Further, Davis testified she told Stephan the “only thing” that would cause her to leave her job and go to work for him was ownership in the company, and Stephan did not dispute this testimony. Moreover, Davis testified she continued to work for Insurtek because of Stephan's repeated promises that he would provide her with the written agreement establishing this promise. This evidence established that Davis's performance was unequivocally referable to the agreement and corroborative of the fact the contract was made.         Because the evidence conclusively established the full performance exception to the statute of frauds, the trial court erred in applying the statute of frauds to bar Davis's breach of contract claim. Additionally, the jury found the reasonable fee for the necessary services of Davis's attorney in prosecuting the breach of contract claim was $68,368 for preparation and trial and $15,000 for an appeal to this Court. Having found Davis may recover on her contract claim, she is also entitled to recover the attorney's fees awarded by the jury.
        We reverse the trial court's judgment that Davis take nothing on her breach of contract claim against Insurtek. We render judgment that Davis recover $125,000 as actual damages assessed by the jury on her breach of contract claim against Insurtek. Additionally, we render judgment that Davis recover the amount of attorney's fees found by the jury for trial and appeal to this Court and the conditional award if she is successful in any appeal to the supreme court. We remand the cause to the trial court to render a judgment consistent with this opinion, including a calculation and award of any interest that may be required by law as well as any court costs. We affirm the trial court's judgment in all other respects.
 
 
                                                          
                                                          MOLLY FRANCIS
                                                          JUSTICE
 
091029F.P05
 
        
 
Footnote 1 The jury answered issues with respect to other causes of action alleged by Davis and counterclaims against her. Davis's breach of contract claim is the only issue in this appeal.
Footnote 2 Davis requested a partial record that contained her testimony and Stephen's testimony and, in her request to the court reporter, stated issues that she intended to raise on appeal, including various exceptions to the statute of frauds. Consequently, we presume the partial reporter's record constitutes the entire record for purposes of reviewing Davis's issues. See Tex. R. App. P. 34.6(c), (1), (4). Insurtek has not filed a responsive brief.
Footnote 3 Although full performance and partial performance are considered to be distinct exceptions to the statute of frauds, Texas courts have used the terms interchangeably, particularly when one party has fully performed and the other has only partly performed. “There is a fundamental difference in the principle involved, however, in that part performance is ordinarily regarded as a strictly equitable doctrine, available in equity courts only, whereas complete performance by one party is frequently regarded as taking the contract out of the statute, even in an action at law.” 41 Tex. Jur.3d Statute of Frauds § 115 (2007).