SOUTHWEST GRAIN CO. v. MARTIN N. GARZA, JR., ABEL N. GONZALEZ, JR. AND AIDA GRACIELA GONZALEZ--Appeal from 92nd District Court of Hidalgo County

NUMBER 13-04-409-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG

SOUTHWEST GRAIN CO., Appellant,

 
v.

MARTIN P. GARZA, JR.,

ABEL N. GONZALEZ, JR.,

AND AIDA GRACIELA

GONZALEZ, Appellees.

On appeal from the 92nd District Court of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Ya ez and Wittig (1)
Memorandum Opinion by Justice Wittig

Appellant, Southwest Grain Co., appeals an adverse jury verdict based upon breach of contract. In twenty-five issues, appellant raises points of error concerning the legal and factual sufficiency of the evidence, the four-year statute of limitations, waiver, ambiguity of the contract language, charge error, lack of credit for additional rent paid, the award of attorney's fees, and error by the trial court in granting a new trial after an earlier jury verdict in favor of appellant. As modified, we will affirm in part, and reverse and remand in part on the issue of attorney's fees.

The jury found damages on behalf of plaintiffs below, appellees, Martin P. Garza, Jr., Abel N. Gonzalez, Jr., and Aida Graciela Gonzalez. Although appellees pleaded and secured findings of fraud and breach of contract, they elected to recover on their contract claims. The contract claims were based upon a series of ground leases for an easement. The leases provided for a base rental plus 1.66% "additional rent." The jury found a breach of the lease and awarded damages on an annual basis dating back to 1985. The damages were awarded per annum for sixteen years through 2001, plus the first two months of 2002. They totaled $2,863,222.63 each for the two groups of appellees. Attorney's fees were also awarded in the amount of $2,061,520.30 through trial, plus additional amounts in the event of appeals. One juror did not sign the verdict form.

1. Breach of Contract

In its first issue, appellant asserts the trial court erred by overruling its motion for directed verdict regarding breach of contract. In its second issue, appellant charges error because the trial court denied its motion for new trial on the breach of contract issues. In issue fifteen, appellant contends there was error because the trial court refused a directed verdict on the statute of limitations. In issue twenty, appellant contends the trial court erred in denying its motion for new trial on the basis that there was no evidence of contractual damages. Appellant argues these matters together and we will likewise address these matters together, first as to breach of contract, and then as to the statute of limitations.

Appellees contend these and other issues were waived because appellant failed to comply with Texas Rule of Appellate Procedure 38.1(h) concerning the requisites for briefs. See Tex. R. App. P. 38.1(h). Appellant, in its reply brief, seeks to satisfy this requirement by providing additional authority addressing appellees' complaints.

We have been instructed that appellate courts should not dismiss an appeal for a procedural defect whenever any arguable interpretation of the Rules of Appellate Procedure would preserve the appeal. Verburgt v. Dorner, 959 S.W.2d 615, 617 (Tex. 1997). Our decisions should reflect the policy embodied in our appellate rules that disfavors disposing of appeals based upon harmless procedural defects. Id. Thus, we should reasonably and liberally construe the Texas Rules of Appellate Procedure so that the right to appeal is not lost by imposing requirements not absolutely necessary to effect the purpose of a rule. Id.; cf. Borg-Warner Corp. v. Flores, 153 S.W.3d 209, 218 (Tex. App.-Corpus Christi 2004, pet. filed) (issue of factual sufficiency not preserved where appellant failed to provide appellate court with any statement of the law regarding same). We find that appellant has minimally met the requirements to preserve its issues.

Appellant contends no evidence was presented that it breached the lease terms. It contends that no grain sales were conducted at the Rio Grande City facility, the location of the leased premises. Instead, it claims that sales of grain were conducted at its facility in McCook, Texas. The sales of grain at McCook were not "derived from, arising out of, or payable on account of" grain transfer activities that admittedly occurred at Rio Grande City. Several of appellant's witnesses testified to this effect. Further, the numerous grain sales invoices introduced into evidence had the letter "M" on them indicating, according to appellant, that the sales originated at McCook and not Rio Grande City.

Appellees counter that the lease language defined "gross sales" as the "dollar value of all sales of goods, services, or combination thereof, and all revenue of every kind and character derived from, arising out of, or payable on account of a business or business activities conducted on the sales premises. . . ." Appellees' witnesses, Garza and Gonzalez, testified that the grain invoices reflected appellant's sales. These numerous documents were summarized. One derivative exhibit, admitted by agreement, reflected the gross sales of all business activity that went through the Rio Grande City facility. The evidence also indicated that Rio Grande City was pivotal to appellant's very successful grain sales to Mexican markets. The Rio Grande City facility allowed oversized Mexican trucks to load grain in the United States then traverse the border without the necessity of traveling on state highways where the use of these larger trucks was prohibited. A former executive vice president for appellant, Norma Myers, testified that Rio Grande City generated the sales documents and conducted related activities supporting the grain sales at the site. She stated the Rio Grande City facility was appellant's selling point for grain to Mexico. Before appellant had the facility, it did not sell grain to Mexico. Once the Rio Grande City facility opened, appellant became one of the biggest grain sellers to Mexico. One of appellant's directors spent seventy to eighty per cent of his time at the facility and met, often daily, with Mexican grain customers at the Rio Grande City facility. Myers testified that most of the sales were made out of this facility, not McCook. Appellant's sales representative for Mexico also worked out of the facility. The invoices indicated the business activity originated from Rio Grande City, and not McCook or Brownsville. In sum, the record reflects that many of the material operative facts were hotly contested by the parties.

Myers further testified she was instructed to only show appellees the scale tickets and not the actual sales invoices. In an affidavit submitted in a preliminary matter in the case, appellant's general manager swore the company would lose $70,000 per day if the Rio Grande City facility were shut down. At trial, the manager qualified the prior affidavit language to say the company was not making that much money per day, and that the figure included "people breaking contracts and our suppliers' trucks being parked outside and we couldn't get them in."

Appellant criticizes the testimony of Myers because she left the company in March of 1996. According to some of appellant's witnesses, she was a disgruntled employee and left on bad terms. This too was disputed. Myers was also to receive three percent of any recovery for additional rent payments.

A court may instruct a verdict if no evidence of probative force raises a fact issue on the material questions in the suit. Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000). A directed verdict for a defendant is proper in two situations. First, a court may direct a verdict when a plaintiff fails to raise a fact issue essential to the plaintiff's right of recovery. Id. Second, a trial court may direct a verdict for the defendant if the evidence conclusively establishes a defense to the plaintiff's cause of action. Id.

The evidence outlined above reveals that appellees adequately raised fact issues on their contract claims. Id.; see also City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005) (challenge to the legal sufficiency of evidence will be sustained when, among other things, the evidence offered to establish a vital fact does not exceed a scintilla); Kroger Texas Ltd. Partnership v. Subaru, 2006 Tex. LEXIS 441, at *9, 49 Tex. Sup. Ct. J. 592 (Tex. May 5, 2006).

In its second issue, appellant again contends the trial court erred by denying its motion for new trial on the breach of contract issues. A trial court's denial of a motion for new trial is reviewed for abuse of discretion. See Pharo v. Chambers County, 922 S.W.2d 945, 947 (Tex.1996). In determining whether an abuse of discretion has occurred, we view the evidence in a light most favorable to the court's decision and indulge every legal presumption in favor of its judgment. In re J.I.Z., 170 S.W.3d 881, 883 (Tex. App.-Corpus Christi 2005, no pet.). Based upon our review of the record, including the evidence outlined above, we find no abuse of discretion. See Cliff v. Huggins, 724 S.W.2d 778, 779 (Tex. 1987). Appellant's first and second issues are overruled.

2. Limitations Issues

In appellant's issues fifteen and nineteen, it complains that the trial court erred in denying its motion for directed verdict on the statute of limitations and no evidence of contract damages. In issue twenty, it similarly complains of error because the trial court denied its motion for new trial regarding damages on the basis of no evidence.

Suit was filed February 23, 1998. As a general rule, a breach of contract claim accrues when the contract is breached. Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002) (citing Smith v. Fairbanks, Morse & Co., 101 Tex. 24, 102 S.W. 908, 909 (Tex. 1907)). Accordingly, under the four-year statute of limitations, no claims or damages before February 23, 1994 should be allowed. Tex. Civ. Prac. & Rem. Code Ann. 16.004 (Vernon 2002). The jury awarded damages from February 2002, back to and including 1985.

In defense of the limitations issue, appellees pleaded: "The Plaintiffs did not discovery (sic) the fraud and concealment, by the employees and agents of Southwest grain until a short time ago. The fraudulent concealment by employees and agents of Southwest Grain prevented the Plaintiffs from discovery of the important records and information." Appellees argue the limitations statute was tolled by appellant's fraud and the doctrine of fraudulent concealment. (2) According to appellees, fraud in and of itself tolls the statute, citing S.V. v. R.V. 933 S.W.2d 1, 6 (Tex. 1996). S.V. states that the accrual of a cause of action is deferred in two types of cases: (1) in those involving allegations of fraud or fraudulent concealment, accrual is deferred because a person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run; and (2) in those cases in which the discovery rule applies, "the nature of the injury incurred is inherently undiscoverable and the evidence of injury is objectively verifiable." Id. However, the facts of the S.V. decision are distinguishable because the party R.V. did not allege fraud or fraudulent concealment, and could not in that sexual abuse case. Id. at 8. R.V. was not deceived into thinking that she was not being abused when she was. Id.

Appellees next cite Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 736 (Tex. 2001). There, the Texas Supreme Court discusses in dicta: "If Wagner & Brown fraudulently misrepresented or concealed facts forming the basis of Horwood and Glass's injury, which we do not decide, then limitations may, indeed, have been tolled. But the discovery rule exception and tolling based on fraudulent concealment are distinct concepts that exist for different reasons." Id. "The fraudulent concealment doctrine, unlike the discovery rule, resembles equitable estoppel." Id. Appellee also cites Mitchell Energy Corp. v. Bartlett, 958 S.W.2d 430, 439 (Tex. App.-Fort Worth 1997, pet. denied) (fraudulent concealment is based on the doctrine of equitable estoppel; doctrine tolls or suspends the running of limitations after it has begun because the defendant concealed from the plaintiff facts necessary for the plaintiff to know that he had a cause of action). Mitchell Energy also holds that the plaintiff asserting fraudulent concealment must have reasonably relied on the defendant's lies or improper silence; once a plaintiff knows or should know of the deceit, reliance is no longer reasonable, and the tolling effect ends. Id. Appellees admit they must show: (1) existence of the underlying "tort;" (2) the defendant's knowledge of the tort; (3) the defendant's use of deception to conceal the tort; and (4) the plaintiff's reasonable reliance on the deception. Id.; Cass v. Stephens, 156 S.W.3d 38, 64 (Tex. App.-El Paso 2004, pet. denied). Cass holds that fraudulent concealment applies to any cause of action, including breach of contract claims. Id. (citing Hurbrough v. Cain, 571 S.W.2d 216, 221 (Tex. Civ. App.-Tyler 1978, no writ) (op. on reh'g); Shipp v. O'Dowd, 454 S.W.2d 845, 847 (Tex. Civ. App.-Waco 1970, writ ref'd n.r.e.)). Appellees contend the jury's favorable answer to question five of the charge, based upon the Texas Pattern Jury charge on equitable estoppel, sustains their burden. Appellant argues the question should not have been answered.

For context, the questions of the charge asked in substance:

(1) Did appellant agree to pay additional rent?

 

(2) Did appellant fail to comply with the agreement?

 

(3) Was the failure excused by waiver?

 

(4) Specify the years in which waiver occurred.

 

(5) Was the failure of appellees to exercise any rights under the lease excused?

 

Question three was predicated upon a "yes" answer to question two, asking whether appellant failed to comply with the contract. It inquired whether appellant's failure to comply was excused as to any of the appellees. The jury answered "no" and accordingly, did not answer question four regarding which years appellant was excused from compliance. Question five followed, predicated upon a "yes" answer to any part of question four. There was no "yes" answer to question four. The improperly worded predicate may explain why the jury answered a question they were instructed not to answer.

Appellant also argues that because the gratuitous answer to question five was not necessarily referable to the statute of limitations, appellees cannot rely thereon in this appeal, citing Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 516 (Tex. 1998). There, the question was clearly submitted as part of the DTPA/Insurance Code claim and the jury was instructed not to answer it unless it found that J & H had engaged in an "unfair or deceptive act or practice" that was a producing cause of damages to Kenneco. Id. The question was not submitted as an independent common-law issue. Id. Accordingly, the wording of the question and its placement after other questions concerning statutory claims revealed that it was an attempt to submit the 180-day extension issue either under the Insurance Code or the DTPA. Id. While there is merit to appellant's argument, particularly regarding the predicate, question five here more closely aligns itself with equitable estoppel than does the analogous question in Johnson & Higgins. See id.

More problematic for appellees is the jury's answer to question fourteen. That question inquired: "By what date did Abel N. Gonzalez, Jr. or Aida Graciela Gonzalez, or Martin P. Garza, Jr. become aware that grain sales income was not being used by Southwest Grain Co. to calculate rent payments?" (3) The jury responded as to all three plaintiffs: "1985." Appellees counter that question thirteen was answered the year 2000. That inquiry asked when did the plaintiffs become aware of the information regarding gross grain sales income to calculate the additional rent payments.

Appellees concede they tried to obtain grain sales records at least in 1988 and 1994. The record suggests that these gross sales records were not produced until 2000 after a court order. This was two years after suit was filed. Because the evidence showed fraud and fraudulent concealment, appellees argue their failure to exercise rights under the contract was excused.

We first address appellees' argument that a finding of fraud, standing alone, will defer the accrual date of their contract claim. In fraud or fraudulent concealment cases, accrual is deferred under a species of equitable estoppel known as fraudulent concealment. Advent Trust Co. v. Hyder, 12 S.W.3d 534, 538 (Tex. App.-San Antonio 1999, pet. denied) (citing Borderlon v. Peck, 661 S.W.2d 907, 908 (Tex.1983)). A defendant is estopped from relying on the statute of limitations until the plaintiff learns of the right of action or should have learned of it through the exercise of reasonable diligence. Advent Trust, 12 S.W.3d. at 538 (citing Computer Assocs. Int'l, Inc. v. Altai, 918 S.W.2d 453, 456 (Tex. 1996)). However, in both the case at bar and Advent Trust, when the charge is viewed as a whole, the fraud question submitted to the jury involved the substantive tort of fraud, not fraudulent concealment or equitable estoppel as avoidances to the statute of limitations. Advent Trust, 12 S.W.3d at 542. Furthermore, appellees' issue of fraud omits the critical element of the appellees' reasonable reliance or lack of means of obtaining knowledge of the facts. Id. The doctrine of equitable estoppel requires: (1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of those facts; (3) with the intention that it should be acted on; (4) to a party without knowledge or means of obtaining knowledge of the facts; (5) who detrimentally relies on the representations. Johnson & Higgins, 962 S.W.2d at 516-17 (emphasis added). Accordingly, we conclude that the fraud question was not submitted as an independent common-law defense to the four-year statute of limitations and will not support a deferral of accrual of limitations. See id.

In jury question five, a similar submission problem of the jury charge obtains. In a series of three questions, the jury is first asked in question three whether appellant's failure to comply with the agreement was excused because of waiver. The jury responded "no." Question four was predicated upon a "yes" answer and instructed the jury to specify which years in which the waiver occurred. The jury followed the court's instructions and did not answer question four. Question five was predicated again upon a "yes" answer to question four and should not have been answered under the charge. (4) Again, viewing the charge as a whole, the first five issues deal with the breach of contract claims. The questions asked in substance whether appellant agreed to pay additional rent, whether appellant failed to comply with the agreement, whether the failure was excused by waiver, in what years did the waiver occur, and whether the failure of appellees to exercise any rights under the lease was excused. Once again, question five was not submitted as an independent common-law defense to the four year statute of limitations to support a deferral of accrual of limitations. See id. However, even assuming arguendo that question five submitted equitable estoppel in a substantially correct form, appellees are burdened with the jurors' answer to question fourteen. There, the finders of fact concluded that by 1985, appellees became aware that "grain sales income was not being used by Southwest Grain Co. to calculate rental payments." This was the gravamen of appellees' breach of contract claims.

We also observe that hundreds of mega-sized Mexican grain trucks traversed appellees' Rio Grande City property, year after year. It is difficult to contend that landowners could somehow be ignorant of millions of dollars worth of grain being trucked through their property. See Barfield v. Howard M. Smith Co. of Amarillo, 426 S.W.2d 834, 840 (Tex. 1968) (a party to arm's-length business transactions had a duty to use ordinary care for the protection of its own interests and is charged with knowledge of all facts which would have been discovered by a reasonably prudent person similarly situated).

The accrual date of a cause of action is a question of law. Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990) (the question of when a cause of action accrues is a judicial one unless defined by the legislature). A cause of action accrues when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later, and even if all resulting damages have not yet occurred. Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex. 1997) (citing S.V., 933 S.W.2d at 4). The legal injury rule can be traced to Houston Water-Works Co. v. Kennedy, 70 Tex. 233, 8 S.W. 36, (1888). The estoppel effect is not permanent. Fraudulent concealment merely tolls or suspends the statute of limitations until the time the plaintiff learns of the facts that give rise to his cause of action or should learn of the facts in the exercise of reasonable diligence. As with any form of equitable estoppel, a party asserting fraudulent concealment must have relied reasonably on appellant's lies or improper silence. Once appellees knew or should have known of the deceit, reliance is no longer reasonable, and the tolling effect ends. Arabian Shield Development Co. v. Hunt, 808 S.W.2d 577, 585 (Tex. App.-Dallas 1991, writ denied). Once on notice of the deception, a party must act diligently. Id. According to the jury, appellees knew that grain sales income was not being used to calculate rent payments in 1985. (5) That was also the first year the jury awarded damages. We conclude the first breach of contract cause of action accrued no later than 1985. See id.; Murphy 964 S.W.2d at 270; see also, Exxon Corp. v. Miesch, 180 S.W.3d. 299, 313-14 (Tex. App.-Corpus Christi 2005, pet. granted); see also KPMG Peat Marwick v. Harrison County Housing Finance Corp., 988 S.W.2d 746, 749 (Tex. 1999) (accrual occurs when the plaintiff knew or should have known of the wrongfully caused injury); Earle v. Ratliff, 998 S.W.2d 882, 888 (Tex. 1999); Stine v. Stewart, 80 S.W.3d at 592. Therefore, appellees' claims before February 23, 1994, are disallowed. We will reduce appellees' damages accordingly. See Tex. R. App. P. 43.2(b). We sustain appellant's issues nineteen and twenty. We overrule appellant's issue fifteen. See Guzman v. Ugly Duckling Car Sales of Texas, L.L.P., 63 S.W.3d 522, 528 (Tex. App.-San Antonio 2001, pet. denied) (a directed verdict is improper when the evidence offered on an issue is sufficient to raise an issue of fact).

3. Waiver Issues

Appellant's issues three, four, and five urge that the jury's answer to the waiver issue was against the great weight and preponderance of the evidence and that the court erred in refusing to grant a directed verdict on waiver, or erred in refusing to grant a new trial in connection with the waiver issue. Appellant argues that by accepting its own calculation of the additional rent due on sales from the Rio Grande City facility year after year, appellees waived the right to collect any further additional rent based upon grain sales.

Waiver is defined as "an intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right." Jernigan v. Langley, 111 S.W.3d 153, 157 (Tex. 2003) (citing Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex.1987); U.S. Fid. & Guar. Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353, 357 (Tex.1971)). Waiver is largely a matter of intent. For implied waiver to be found through a party's actions, intent must be clearly demonstrated by the surrounding facts and circumstances. Motor Vehicle Bd. v. El Paso Indep. Auto. Dealers Ass'n, Inc., 1 S.W.3d 108, 111 (Tex. 1999). There is no waiver of a right if the person sought to be charged with waiver says or does nothing inconsistent with an intent to rely upon such right. Maryland Cas. Co. v. Palestine Fashions, Inc., 402 S.W.2d 883, 888 (Tex. 1966). Waiver is ordinarily a question of fact, but when the facts and circumstances are undisputed, the question becomes one of law. Motor Vehicle Bd., 1 S.W.3d at 111.

Appellant argues that appellees claimed that appellant paid insufficient additional rent after the execution of the first leases in 1981. Appellant calculated and paid additional rent to appellees for many years. Appellees accepted and cashed all rent checks. According to appellant, appellees were furnished summary sheets and backup records detailing the additional rent calculations. Appellees hired certified public accountants and a law firm to audit the material records beginning in 1987. Appellant also hired a CPA in 1997 to provide another explanation of the rent calculations. Despite knowing how the rent was being calculated, appellees accepted and cashed all rent checks prior to the lawsuit, according to appellant.

Appellees counter that appellant did not prove that appellees intended to waive their rights to additional rents, citing Enserch Corp. v. Rebich, 925 S.W.2d 75, 82 (Tex. App.-Tyler 1996, writ dism'd). We agree. The key element in establishing waiver is the intent of the alleged waiving party. Id. The very factors argued by appellant, that appellees continued to ask for records and complained the additional rents were not being properly calculated, demonstrate a lack of intent to waive their rights under the contracts. Appellees also made some notations on checks and correspondence expressing their concern that appellant was not complying with the contract. Further, as argued by appellee, "waiver by implication should not be inferred contrary to the intention of the party whose rights would be injuriously affected thereby, unless the opposite party has been misled to his or her prejudice." Id. (citing Cecil Pond Const. Co. v. Ed Bell Investments, Inc., 864 S.W.2d 211, 215 (Tex. App.-Tyler 1993, no writ). Appellant neither alleges nor points us to any evidence that it was somehow prejudiced or misled by paying less than the agreed upon additional rents for many years.

The various annual leases also contained an express non-waiver clause. Appellees argue such clauses are valid and enforceable. We agree. Although non-waiver clauses may themselves be waived, they are generally considered valid and enforceable. A.G.E., Inc. v. Buford, 105 S.W.3d 667, 676 (Tex. App.-Austin 2003, pet. denied). Appellant points to no evidence in the record that appellees expressly or impliedly waived this clause of the contract. We would also note that each contract had a period of one year. The non-waiver clause was thus renewed year after year.

Finally, the law also indicates that when a person accepting benefits does not have knowledge of all material facts, ratification or estoppel cannot ensue from acceptance of the benefits. Herschbach v. City of Corpus Christi, 883 S.W.2d 720, 737 (Tex. App.-Corpus Christi 1994, writ denied) (citing Frazier v. Wynn, 472 S.W.2d 750, 753 (Tex. 1971)). The record is also devoid of evidence that appellant was prejudiced by appellees' acceptance of lesser monies for additional rent. Therefore, the affirmative defense of waiver by implication is not available to appellant. Enserch Corp. 925 S.W.2d at 82. Thus, we cannot conclude, as appellant advocates, that the verdict is so against the great weight and preponderance of the evidence as to be manifestly unjust. See Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986). Similarily, a directed verdict is improper when the evidence offered on an issue is sufficient to raise an issue of fact. See Guzman, 63 S.W.3d at 528. And, there being sufficient evidence to support the jury's findings of no waiver, the trial court properly denied appellant's motion for new trial on this issue. Oyster Creek Financial Corp. v. Richwood Investments II, Inc., 176 S.W.3d 307, 324 (Tex. App.-Houston [1st Dist.] 2004, pet. denied) (standard of review of the denial of a motion for new trial is abuse of discretion). We overrule appellant's issues three, four, and five.

4. Ambiguity

In issues six, seven, eight, nine, and ten, appellant argues the additional rent provision of the lease contracts is ambiguous. It claims the lease contracts are reasonably susceptible to more than one meaning. The challenged provision states:

5. Additional Rent. LESSEE further agrees to pay LESSORS without prior notice or demand at their address listed on the last page hereof, or such other place as LESSORS may designate in writing, as additional rent for the leased premises, a sum equal to the amount by which One and 66/100 (1.66%) percent of LESSEE'S gross sales in any lease year exceeds LESSEE'S annual rental for such year. In this connection, the terms "lease year", "annual rental", "gross rental" and "sales premises shall mean as follows:

 

* * *

 

C. "Gross Sales": The total amount of the dollar value of all sales of goods, services or combination thereof, and all revenue of every kind and character derived from, arising out of, or payable on account of a business or business activities conducted on the sales premises . . . .

D. "Sales Premises": The real property presently leased by LESSEE from the Rio Grande City Consolidated Independent School District and served by the easement herein granted.

 

6. Records. LESSEE shall maintain (according to good accounting practices) full and accurate books and records with respect to the gross sales made at or from the sales premises . . . .

According to appellant, the disputed language relates to the definition of "gross sales." Appellant argues that the language "derived from and, arising out of, or payable on account of a business or business activities conducted on the sales premises" pertains only to specific activities conducted on the leased premises. Appellant claims that appellees' interpretation relates to other activities off premises "if those activities are even remotely connected to the other . . . ." Appellant concludes by arguing that a written instrument is ambiguous when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning, taking into consideration the circumstances present when the instrument was executed. Appellant cites and quotes from Towers of Texas, Inc. v. J & J Sys., Inc., 834 S.W.2d 1, 2 (Tex. 1992).

Appellees counter that the language is not ambiguous and to the contrary, is clear. The leases required appellant to pay additional rent as a percentage of the company's "gross sales." Gross sales are broadly and clearly defined as, "[t]he total amount of the dollar value of all sales of goods, services or combination thereof, and all revenue of every kind and character derived from, arising out of, or payable on account of a business or business activities conducted on the sales premises . . . ." Appellees also point out that counsel for appellant argued in his motion for directed verdict: "In connection with the theory of recovery related to contract and breach of contract, the intent of the parties is clear." However, in context, counsel went on to say that to the extent the contract may be ambiguous, the evidence showed the clear intent.

Appellees further argue that appellant cannot create an ambiguity by combing the "records" provision of the lease. The "records" provision simply mandates books be kept regarding gross sales "at and from" the sales premises. This phrasing is not inconsistent with the gross sales provision "derived from, arising out of, or payable on account of a business or business activities conducted on the sales premises . . . ." In our view, the records-keeping provision is a lesser included, more narrow provision, which is itself included in the broader definition of "gross sales."

A contract is not ambagious if it can be given a certain or definite legal meaning. Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000). Whether a contract is ambiguous is a question of law for the court to decide. Id. In construing contracts, we ascertain and give effect to the parties' intentions as expressed in the document. Id. Ambiguity does not arise simply because the parties advance conflicting interpretations of the contract; rather, for an ambiguity to exist, both interpretations must be reasonable. Id. We agree that the contract language is unambiguous because it can be given a definite legal meaning, and it is not reasonably susceptible to more than one meaning. Id. Appellant's issue six is overruled. Because appellant's issues seven, eight, nine, and ten are predicated upon the assumption that the contract was ambiguous, they are also overruled.

5. The Court's Charge

Appellant attacks the trial court's rulings on the charge in issues eleven, twelve, thirteen, and fourteen. In issue eleven, appellant claims the trial court would not allow appellant to "object to the charge." More appropriately, appellant's actual complaint at the charge conference was that the trial judge did rule on appellant's objections and refused issues, but did not allow appellant to reiterate its objections. Appellant attempted to repeat the same identical objection over and over again to each of his requested and refused issues. The trial court marked each request refused, signed the refusal, and overruled appellant's objection to the refusal. The standard of review for error in a jury charge is abuse of discretion. In re V.L.K., 24 S.W.3d 338, 341 (Tex.2000). Contrary to appellant's assertion, the trial court did rule upon appellant's objections. Thus, we find no abuse of discretion. See id. We overrule this issue.

In its issue number twelve, appellant argues the trial court erred in refusing its issue on anticipatory repudiation of the contract. When appellees filed suit on February 23, 1998, they also requested and obtained a temporary restraining order against appellant. According to appellant, this effectively deprived appellant of the use of the property and thus appellant repudiated the contract. The restraining order was stayed four days later by this Court. No permanent injunction ensued. After four days, parties did business as usual. Appellant cites Group Life and Health Ins. Co. v. Turner, 620 S.W.2d 670, 672-73 (Tex. Civ. App.-Dallas 1981, no writ) (repudiation is conduct which shows a fixed intention to abandon, renounce, and refuse to perform the contract, without just excuse). The primary thrust of the restraining order was to prohibit the spoliation of evidence by appellant. Appellant points to no evidence in the record that appellees had a fixed intent to renounce and refuse to perform the contract. (6) In fact, appellees' original petition, containing the request for the restraining order, was to enforce the contract, not renounce it. We find no abuse of discretion by the court's refusal of appellant's repudiation issue. See In re V.L.K., 24 S.W.3d at 341. We overrule this issue.

In its thirteenth issue, appellant complains of error by the trial court in refusing a jury issue asking in which years the contract was breached. This question was already included in two places, that is, in damage questions fifteen and sixteen. These questions inquired on a year-by-year basis what damages were proximately caused by appellant's conduct. Furthermore, as appellees suggest, there was no dispute that appellant did not pay the claimed additional rent in each of the years that damages were found by the jury. Appellant argued in trial, as it does on appeal, that it had properly calculated additional rent based only on the transfer charges. Appellant also contended that it did not owe anything on McCook sales and that those sales, even if the grain went through Rio Grande City, were not sales of goods, or revenue arising out of, or payable on account of a business or business activities conducted in Rio Grande City. Stated otherwise, appellant's defense was consistent for each year and it did not argue or present evidence that appellees' claims or its defenses were somehow different in different years. (7) Therefore, the trial court did not abuse its discretion by refusing the requested issue both because the issue was not raised and, in any event, was covered by questions 15 and 16. See In re V.L.K., 24 S.W.3d at 341; Bedford v. Moore, 166 S.W.3d 454, 458 (Tex. App.-Fort Worth 2005, no pet.) (to have a question submitted to the jury, there must be a proper legal theory, and there must be sufficient evidence adduced to warrant its submission). We overrule this issue.

6. Appellant's Attorney's Fees

Next appellant complains it was entitled to an issue on attorney's fees. Appellant cites no authority that would allow its recovery of attorney's fees when unsuccessfully defending a breach of contract case. This issue was properly rejected by the trial court. Appellant did not prevail and even a successful defense of a contract claim does not allow attorney's fees unless provided by contract. Horizontal Holes, Inc. v. River Valley Enterprises, Inc., 197 S.W.3d 834, 835-36 (Tex. App.-Dallas 2006, no pet.). The civil practices and remedies code allows a party to recover such fees if the party prevails on a cause of action for which attorney's fees are recoverable and recovers damages. Tex. Civ. Prac. & Rem. Code Ann. 38.001(8) (Vernon 1997); Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). However, a party who does not recover for breach of contract cannot recover attorney's fees under that theory. Horizontal Holes, Inc. 197 S.W.3d at 835-36. Appellant's fourteenth issue is overruled.

7. Credits

In issues sixteen and nineteen, appellant contends that the jury did not properly credit it for additional rent payments actually made by appellant. While the jury properly deducted base rent paid from the damages found, it did not deduct additional rent payments made by appellant. Appellees argue waiver of the issue which we addressed above. Thereafter, appellees inform us that "it appears that the jury failed to give credit for additional rent actually paid." We agree.

As we discussed in the limitations issue supra, no claims or damages before February 23, 1994, should be allowed and therefore, no credits before that date are allowed. The amounts of additional rents already paid are found on appellant's exhibit seven. Credits should have been deducted from the damages awarded to Abel N. Gonzalez, Jr. and Aida Graciela Gonzalez in the amount of $19,405.03, and a similar credit should have been deducted from the damages awarded to Martin Garza in like amount. We sustain issue nineteen, and modify the judgment accordingly. See Tex. R. App. P. 43.2(b). (8)

8. Appellees' Attorney's Fees

In its issues seventeen, eighteen, twenty-one, twenty-two, twenty-three, and twenty-four, appellant argues: (1) no attorney's fees should be awarded; (2) improper award of attorney's fees; (3) a contingent fee was improper; (4) the amount awarded was too large; and (5) alternatively, appellees' award of attorney's fees should be adjusted. Appellant begins its argument by insisting that the attorney's fees must be segregated between the fraud and contract claims, as well as the defense of the counter-claim. It cites Crow v. Central Soya Co., Inc., 651 S.W.2d 392, 396 (Tex. App.-Fort Worth 1983, ref. n.r.e.) (fees attributable to the defense of a counterclaim are not recoverable unless the facts necessary for the plaintiff to recover also serve to defeat the counterclaim). We agree. Appellant also cites Bray v. Curtis, 544 S.W.2d 816, 820 (Tex. Civ. App.-Corpus Christi 1976, ref. n.r.e.) (unless attorney's fees are provided by statute, or by a contract between the parties, such fees are not recoverable). Again, we agree. Finally, appellant cites Panizo v. Young Men's Christian Ass'n of Greater Houston Area, 938 S.W.2d 163,170 (Tex. App.-Houston [1st Dist.] 1996, no writ). Panizo holds that a party seeking attorney's fees usually has a duty to segregate nonrecoverable fees from recoverable fees and to segregate the fees owed by different parties. Id. However, it also reiterates the historical exception to the duty to segregate when the attorney's fees rendered are in connection with claims arising out of the same transaction and are so interrelated that their prosecution or defense entails proof or denial of essentially the same facts. Id. (citing Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10 (Tex.1991)).

The supreme court has recently reaffirmed the rule that if any attorney's fees relate solely to a claim for which such fees are unrecoverable, a claimant must segregate recoverable from unrecoverable fees. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313 (Tex. 2006). Intertwined facts do not make tort fees recoverable per se; it is only when discrete legal services advance both a recoverable and unrecoverable claim that they are so intertwined that they need not be segregated. Id. The court modified Sterling to that extent. Id. at 314.

Whether fees can be segregated between various claims historically has been a question for the court. Cotten v. Weatherford Bancshares, Inc., 187 S.W.3d 687, 709 (Tex. App.-Fort Worth 2006, pet. denied). Again, Tony Gullo Motors somewhat modifies that rule indicating that sometimes the matters in issue are more a mixed question of law and fact for the jury. Tony Gullo Motors, 212 S.W.3d at 313. Here, the duties of the parties arose out of a single contract that was renewed year after year. The same facts necessary for appellees to establish their breach of contract claims would also inure to the defense of appellant's counter-claim, both in pre-trial discovery, and during the trial itself. Whether or not appellant fraudulently concealed vital information concerning the additional rents or committed fraud was also intertwined with both the assertions and defenses of all the parties regarding recovery under the contract. Discovery, voir dire, examination of the witnesses, and most every aspect of the trial required the same attorney services in order to prove or disprove these contentions. See id. We conclude that the discrete legal services advanced both recoverable and unrecoverable claims that were so intertwined that they need not be segregated. Id. These issues are overruled. (9)

With regard to appellant's issue contesting the contingent fee award, appellant cites Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997) (party's contingent fee agreement should be considered by the fact finder, and is admissible in evidence, but the agreement alone cannot support an award of attorney's fees under Texas Business and Commerce Code section 17.50(d)). Similarly, appellant cites Lubbock County v. Strube, 953 S.W.2d 847, 858 (Tex. App.-Austin 1997, no writ) (finding there was insufficient evidence for the jury to determine whether the amount was reasonable and necessary; therefore reversing award of attorney's fees). The record here decidedly departs from the appellant's authorities. First, we are not dealing with either a DTPA claim or a jury submission requesting a percentage answer. See Arthur Andersen & Co. 945 S.W.2d at 818-19. Second, appellees duly supported their claim for attorney's fees through the testimony of both of appellees' trial counsel. Cf. Lubbock County, 953 S.W.2d at 858 (finding insufficient evidence where jury was asked to award attorney's fees as a percentage of damages). Counsel for appellant also testified about the reasonableness and necessity of his attorney's fees. Appellees' counsel's testimony covered, in varying degrees, the eight factors found in the rules of professional conduct. See Tex. Disciplinary R. Prof'l Conduct 1.04; see also Arthur Andersen & Co. 945 S.W.2d at 818-19. This issue is overruled as to the argument that any contingent award was improper.

Appellant next argues the fees are excessive, citing Argonaut Ins. Co. v. ABC Steel Products Co., Inc., 582 S.W.2d 883, 889 (Tex. Civ. App.-Texarkana 1979, writ ref'd, n.r.e.) (in determining whether the award is excessive, the reviewing court is entitled to look at the entire record and to view the matter in the light of the testimony, the amount in controversy, the nature of the case, and our own common knowledge and experience as lawyers and judges). Over 1000 hours were spent on this matter by appellees' two trial counsel. Given the difficulty and novelty of the questions involved, the time, the preclusion of other employment, the usual and customary fees charged, the amounts involved, the result, the nature and length of the professional relationships with the clients, the experience, reputation, and ability of the lawyers performing the services, and the fact that the attorney's fees contract was contingent, based upon the jury's verdict we would not conclude the attorney's fees were excessive. See Id.; Tex. Disciplinary R. Prof'l Conduct 1.04. However, the fact that we have substantially reduced the damage award, which dated back to 1985, also works to change one of the most significant factors to be considered by the fact finder, i.e., the results obtained. Id.

Finally, appellant also contends that, even if appellees were properly awarded attorney's fees based upon a contingent fee contract, the jury's award should be adjusted to reflect a percentage of the actual damages recoverable. The jury's attorney's fees question asked for a total dollar amount to be awarded appellees. Both sides agree that the award was based upon a contingent fee. The percentages awarded were supported by the testimony of Mr. Ramirez for an amount of 36% through trial, 40% if appealed to the court of appeals, and 45% if reviewed by the Texas Supreme Court. According to the record, these calculations were clearly based upon the recovery of additional rents dating back to 1985. We have disallowed any recovery on claims for damages before February 23, 1994. Therefore, we must likewise disallow any attorney's fees for any recovery before February 23, 1994. See Argonaut Ins. Co., 582 S.W.2d at 889. While in this case, it would seem that a remittitur is easily discernable, as we read the Texas Supreme Court's latest pronouncement, we may not substitute our judgment for that of the jury as to how much weight to give the "results obtained" factor and how to balance that factor in conjunction with the evidence of each of the other factors the jury was instructed to consider in awarding attorney's fees. Barker v. Eckman, 2006 Tex. LEXIS 1187, at *18-20, 50 Tex. Sup. Ct. J. 175 (Tex. Dec. 1, 2006). Nor may we apparently use a "presumptive proportionality" to effectuate a remittitur of attorneys fees. (10) Id. at *19-*20 (citing Tatum v. Preston Carter Co., 702 S.W.2d 186, 188 (Tex. 1986)) (holding that court of appeals erred in proportionally reducing exemplary damages in the exact ratio as the actual damages were reduced). We conclude that for us to simply reduce or remit excessive attorney's fees according to the percentages found by the jury is problematic. We are authorized to reverse and remand only the award of attorneys' fees. ASAI Corp. v. Vanco Insulation Abatement, Inc., 932 S.W.2d 118, 124 (Tex. App.-El Paso 1996, no writ). We so hold. Appellant's issue seventeen is sustained. Appellant's other issues concerning appellees' attorney's fees are overruled.

9. New Trial Granted

In its final issue, appellant contends the trial court erred by granting a new trial in January 2003 allegedly based on jury misconduct. In any event, the new trial was granted "in the interests of justice." Appellees cite Wilkins v. Methodist Health Care System, 160 S.W.3d 559, 563 (Tex. 2005). Wilkins holds that, except in very limited circumstances, an order granting a motion for new trial rendered within the period of the trial court's plenary power is not reviewable on appeal, citing Cummins v. Paisan Constr. Co., 682 S.W.2d 235, 236 (Tex.1984). See also Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 918 (Tex. 1985) (noting two instances when a Texas appellate court has overturned the trial court's grant of a new trial: when the trial court's order was wholly void, and where the trial court specified in a written order that the sole ground for granting the motion was that the jury's answers to special issues were irreconcilably conflicting). When a motion for new trial is granted, "the case shall be reinstated upon the docket of the trial court and stand for trial the same as though no trial had been had." Wilkins 160 S.W.3d. at 563. Issue twenty-five is overruled.

Conclusion

The judgment of the trial court is reversed and remanded on the issue of attorney's fees only. The remainder of the judgment is modified, and affirmed as modified, by reducing each set of appellees' damages by $1,210,919.52. The remaining damages are further each reduced by a credit of $19,405.03. The judgment in favor of appellee Martin P. Garza is therefore affirmed in the amount of $1,632,898.18. The judgment in favor of appellees, Abel N. Gonzalez, Jr. and Aida Graciela Gonzalez, is likewise affirmed in the amount of $1,632,898.18.

 

DON WITTIG,

Justice

 

Memorandum opinion delivered and filed

this the 12th day of April, 2007.

1. Retired Fourteenth Court of Appeals Justice Don Wittig assigned to this Court by Chief Justice of the Supreme Court of Texas pursuant to the government code. Tex. Gov't Code Ann. 74.003 (Vernon 2005).

2. Appellants do not contend that the discovery rule applies.

3. At oral argument, appellees argued that there was no dispute about the base rent and that, of course, appellees knew that grain sales were not being used to calculate the base rent. This argument was not raised by objection at the charge conference or in appellees' brief and is therefore waived. In any event, in context of the charge as a whole, the only time rent was to be based on grain sales was in the application of the 1.66% of gross sales as additional rent. According to the record, the two primary sources of gross sales were, first and foremost, grain sales, and to a much lesser degree, transfer charges generated by the Rio Grande City facility. The voluminous records introduced by appellees were grain sales, which were the sine qua non of appellees' claims. Without the grain sales in question, no additional rent was due, other than that due for transfer fees already paid by appellant. Appellant contended throughout that it only owed the transfer fees. Appellees contended throughout that additional rent was also due on the grain sales.

4. As indicated above, the predicate to question five was incorrectly worded. A more appropriate wording would have been: "If you answered by specifying any year or years to any part of question 4, then answer yes or no as to each of the corresponding individuals. Otherwise do not answer this question."

5. Appellant could well have been guilty of fraud or fraudulent concealment before 1985. But, by that date, appellees were charged with knowledge that appellants were not paying additional rents based upon grain sales. Appellant's consistent approach, well known to appellees, was to base additional rent solely upon transfer fees at the Rio Grande facility.

6. Pleadings are ordinarily not evidence. See Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 660 (Tex. 1995).

7. The primary variation of the evidence between the years was the amount of sales and damages, not that different types of breaches occurred or that appellant's defense varied.

8. Issue sixteen is accordingly moot.

9. Appellant's first two arguments are overlapping and are overruled. In any event, upon remand, the trial court and/or jury will be required to follow the new precedent set in Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310 - 314(Tex. 2006).

10. It is not at all clear that a presumptive proportionality could not be used where the parties agree the attorney's fees award were largely based upon a fixed contingent fee contract and where, as here, the percentages found by the jury are clear. Nor should Tatum apply when the record demonstrates the patent contractual basis for the jury's findings. Cf. Tatum v. Preston Carter Co., 702 S.W.2d 186, 188 (Tex. 1986).