Anna Lee Legg v. Johnny W. Legg--Appeal from 312th District Court of Harris County

NO. 10-89-130-CV

IN THE

COURT OF APPEALS

FOR THE

TENTH DISTRICT OF TEXAS

AT WACO

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ANNA LEE LEGG

Appellant

v.

JOHNNY W. LEGG AND

ROTATING EQUIPMENT SPECIALISTS, INC.

Appellees

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From 312th Judicial District Court

Harris County, Texas

Trial Court #87-005987

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O P I N I O N

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We must construe a contractual alimony agreement to decide if there is sufficient evidence to support findings that a former wife breached the agreement, excusing her ex-husband from further payment. Because we decide that Appellees produced no evidence of a breach of contract, we will reverse and render judgment for the balance due on the agreement, attorney's fees and costs.

Anna Lee Legg and Johnny W. Legg were divorced in 1982. As part of the settlement, they agreed that Johnny would pay Anna alimony in three $35,000 annual installments plus $1,400 per month for 121 months. Payment of these sums was guaranteed by Rotating Equipment Specialists, Inc. (RES). After three annual installments and fifty-four monthly installments, Johnny stopped paying. When suit was filed after Anna's demands went unheeded, Johnny and RES defended on the basis that Anna had breached a provision of the alimony agreement, which provided that Anna would not claim that the payments were not income to her or that they were not deductible by Johnny. The court entered judgment in favor of Johnny.

In the year of the divorce, RES redeemed 280 shares of its stock which had been awarded to Anna in the divorce, paying her $35,000. This transaction was reported on Anna's income tax return as a capital gain. Although the monthly installments of alimony were reported by Anna as ordinary income, the three annual $35,000 installments were reported as capital gains on returns prepared by her tax preparer.

The agreement provided in part:

The support obligation undertaken by the Husband in this Article is contractual in nature and is not an obligation imposed by order or decree of court.

. . .

Wife understands and agrees that the periodic payments being made to her under Paragraphs 5.03 and 5.04 are conditioned upon her reporting the same on her income tax returns, and if Wife shall ever administratively or judicially take the position that such payments are not income to her and are not deductible by Husband, no further periodic support payments whatsoever shall thereafter become due and payable from Husband to Wife, and Husband shall have no further obligation for the same.

Under the agreement Johnny would be relieved from further payments if Anna: (1) administratively or judicially took the position that such payments were not income to her and (2) administratively or judicially took the position that such payments were not deductible by Johnny.

One of the most fundamental principles is that a contract must be construed in accordance with the terms and language used in the agreement. Sorrels v. Sorrels, 592 S.W.2d 692, 696 (Tex. Civ. App.--Amarillo 1979, writ ref'd n.r.e.). The opinion in Sorrels states:

The terms of the agreement, if they are free of ambiguity and do not conflict with the policy of the law, will be deemed to establish the rights of the parties. The courts will enforce the agreement as the parties have made it, without regard to whether the parties have contracted wisely or foolishly and without regard to whether, in the light of the subsequent events, a hardship was effected. In the absence of a fraud or mistake, the courts will not make a new contract for the parties or add to, modify or change in any particular the agreement that they have made.

Id. Johnny does not contend that the agreement is ambiguous, violates public policy, or was the result of fraud or mistake. The contractual alimony agreement stands independent of the judgment of divorce and has whatever legal force the law of contracts provides. See Mackey v. Mackey, 721 S.W.2d 575, 578 (Tex. App.--Corpus Christi 1986, no writ).

Where findings of fact and conclusions of law are not properly requested and none are filed, as here, the judgment of the trial court must be affirmed if it can be upheld on any legal theory that finds support in the evidence. See In the Interest of W.E.R., 669 S.W.2d 716, 717 (Tex. 1984); Tejas Trail Property Owners Association v. Holt, 516 S.W.2d 441, 444-45 (Tex. Civ. App.--Fort Worth 1974, no writ). In a nonjury trial, where no findings of fact or conclusions of law are filed or requested, necessary findings by the court in support of its judgment are implied. Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex. 1989). When a statement of facts is brought forward, as here, these implied findings may be challenged by factual sufficiency and legal sufficiency points the same as jury findings or a court's findings of fact. Id.

Johnny contends that Anna, by reporting the annual installments as capital gains rather than ordinary income, breached the agreement, thereby relieving him of further liability. He takes the position that, because payments not included by Anna as income are not deductible by him under the Internal Revenue Code, the mere filing of a tax return reporting the annual installments as capital gains was the equivalent of an administrative act by Anna taking a position that those payments were not deductible by him. We disagree. If this were true there would have been no reason to include the second requirement in the contract to constitute a breach of the contract. See Sorrels, 592 S.W.2d at 696. No evidence exists in the record that Anna ever administratively or judicially took the position that the payments were not deductible by Johnny. See id. Two requirements for a breach are specified; evidence of both is required.

Because no evidence exists that Anna breached the agreement, she is entitled to recover the amount of the unpaid installments, $93,800. She properly presented her claim to Johnny and is entitled to recover attorney's fees in the amount of $1,290, the amount established by undisputed testimony at trial. See Tex. Civ. Prac. & Rem. Code Ann. 38.001, 38.002 (Vernon 1986). Because RES guaranteed the alimony payments in writing and received proper notice of Johnny's default, she is also entitled to judgment against it for the unpaid installments and attorney's fees. See id.

We reverse the judgment of the trial court and render judgment that Anna Lee Legg recover from Johnny W. Legg and Rotating Equipment Specialists, Inc., jointly and severally, the sum of $95,090, post-judgment interest, and all costs in the trial court and in this court.

BILL VANCE

Justice

Before Chief Justice Thomas,

Justice Cummings

and Justice Vance

Reversed and Rendered

Opinion delivered and filed April 25, 1991

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