William T. Ott v. John W. Dimond, IV and Jack Dimond Lincoln-Mercury, Inc.--Appeal from County Court at Law No 2 of Gregg County

NO. 12-06-00395-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

WILLIAM T. OTT, APPEAL FROM THE

APPELLANT

V. COUNTY COURT AT LAW #2

JOHN W. DIMOND, IV AND JACK

DIMOND LINCOLN-MERCURY, INC.,

APPELLEES GREGG COUNTY, TEXAS

MEMORANDUM OPINION

William T. Ott appeals the trial court s summary judgment in favor of John W. Dimond, IV (John Dimond) and Jack Dimond Lincoln-Mercury, Inc. (Dimond Lincoln-Mercury) in Ott s suit for tortious interference and breach of an employment contract. Ott raises two issues on appeal regarding the validity of the contract and John Dimond s authority to act. We affirm.

Background

John W. Dimond, III (Jack Dimond), the father of John Dimond, was president of Dimond Lincoln-Mercury, which has dealerships in Longview and Tyler. Jack Dimond worried that his son s management style would hurt the company and in May 2004 terminated John Dimond from his position as vice president of Jack Dimond Lincoln-Mercury, Inc. Jack Dimond wanted Ott, sales manager of the Longview dealership, rather than his son, to run the Longview dealership. Thus, Jack Dimond prepared a document between Dimond Lincoln-Mercury and Ott providing that the dealer would employ Ott for a term of twenty-five years. The document was signed by Jack Dimond, as president of Dimond Lincoln-Mercury, and by Ott on June 15, 2004. In August 2004, John Dimond was terminated from his employment with the dealership.

Jack Dimond died in early September 2004. At the death of his father, John Dimond and his half-brother, Charles Wright, each inherited 25% of the stock in Dimond Lincoln-Mercury through the Doris Dimond Testamentary Trust, a trust set up by their deceased mother that by its terms terminated upon the death of Jack Dimond. John Dimond and Charles Wright then called a shareholders meeting with notice to all shareholders. At the shareholders meeting, John Dimond was elected president of Dimond Lincoln-Mercury. Shortly thereafter, on December 2, 2004, Ott was terminated.

Ott brought suit against Dimond Lincoln-Mercury for breach of contract and against John Dimond for tortious interference with the contract. Dimond Lincoln-Mercury and John Dimond then filed a combined traditional and no evidence motion for summary judgment under Rule 166a(c) and Rule 166a(i) of the rules of civil procedure arguing entitlement to judgment due to failure of consideration and because John Dimond was not a stranger to the contract. Ott filed his response to the motion, and the motion was heard by the trial court. After the hearing, Ott amended his petition to assert a claim of promissory estoppel in addition to his previously asserted claims. Without specifying the reason for its ruling, the trial court granted the motion for summary judgment and signed a take nothing final judgment against Ott and in favor of Dimond Lincoln-Mercury and John Dimond. The judgment specifically stated that it disposed of all claims and causes of action. This appeal followed.

Standard of Review

The movant for traditional summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). The movant must either negate at least one essential element of the nonmovant's cause of action or prove all essential elements of an affirmative defense. See Randall's Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). Once the movant has established a right to summary judgment, the nonmovant has the burden to respond to the motion for summary judgment and present to the trial court any issues that would preclude summary judgment. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979).

After an adequate time for discovery has passed, a party without the burden of proof at trial may move for summary judgment on the ground that the nonmoving party lacks supporting evidence for one or more essential elements of its claim. Tex. R. Civ. P. 166a(i). Once a no evidence motion has been filed in accordance with Rule 166a(i), the burden shifts to the nonmovant to bring forth evidence that raises a fact issue on the challenged evidence. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). We review a no evidence motion for summary judgment under the same legal sufficiency standards as a directed verdict. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750-51 (Tex. 2003). A no evidence motion is properly granted if the nonmovant fails to bring forth more than a scintilla of probative evidence to raise a genuine issue of material fact as to an essential element of the nonmovant s claim on which the nonmovant would have the burden of proof at trial. Id. at 751. If the evidence supporting a finding rises to a level that would enable reasonable, fair minded persons to differ in their conclusions, then more than a scintilla of evidence exists. Id. Less than a scintilla of evidence exists when the evidence is so weak as to do no more than create a mere surmise or suspicion of a fact, and the legal effect is that there is no evidence. Id.

In both traditional and no evidence summary judgment motions, we review de novo the entire record in the light most favorable to the nonmovant, indulging every reasonable inference and resolving any doubts against the motion. Sudan v. Sudan, 199 S.W.3d 291, 292 (Tex. 2006); KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). If the trial court s order does not specify the grounds on which it granted summary judgment, we affirm the trial court s ruling if any of the theories advanced in the motion is meritorious. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993). When a party moves for both a traditional and a no evidence summary judgment, we first review the trial court s summary judgment under the no evidence standards of Rule 166a(i). Ridgway, 135 S.W.3d at 600. If the no evidence summary judgment was properly granted, we do not reach arguments under the traditional motion for summary judgment. See id. at 602.

Breach of Contract

In his second issue, Ott asserts that the trial court erred in granting summary judgment as to his breach of contract claim. He argues that there was consideration for his agreement with Jack Dimond because Jack Dimond had valid business reasons for entering into a long term employment contract with Ott. He further argues that the statute of frauds does not bar enforcement of the employment agreement and the contract is enforceable under the unilateral contract rule.

In their motion for summary judgment, John Dimond and Dimond Lincoln-Mercury asserted entitlement to judgment as a matter of law on Ott s breach of contract claim because the contract fails for lack of consideration. They asserted that the contract did not identify the consideration to be provided by Ott in exchange for the dealer s promise of twenty five years of employment. They argued that this is a violation of the statute of frauds, which requires all essential terms to be in the written document, and that it resulted in an unenforceable document because the agreement lacks mutuality of obligation.

Ott filed a response, asserting that there are issues of material fact on the element of consideration. He relied on several exhibits including his affidavit, his deposition testimony, deposition testimony of the dealership s CEO, Charles Hilton, and the contract he and Jack Dimond signed.

Texas follows the employment at will doctrine, and employment for an indefinite term may be terminated at will and without cause. Williams v. First Tenn. Nat l Corp., 97 S.W.3d 798, 802-03 (Tex. App. Dallas 2003, no pet.). Absent a specific contract term to the contrary, this doctrine allows an employee to quit or be terminated without liability on the part of the employer or the employee, with or without cause. Id. at 803. A discharged employee who asserts that the parties have contractually agreed to limit the employer s right to terminate the employee at will has the burden of proving an express agreement or written representation to that effect. Id.

The elements of a breach of contract claim are (1) the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3) breach of the contract by the defendant, and (4) damages caused by the breach. Roof Sys., Inc. v. Johns Manville Corp., 130 S.W.3d 430, 442 (Tex. App. Houston [14th Dist.] 2004, no pet.). For a contract to be enforceable if it is not to be performed within one year from the date it is made, the contract must be in writing and signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him. Tex. Bus. & Com. Code Ann. 26.01(a), (b)(6) (Vernon Supp. 2007). The writing must be complete within itself in every material detail and contain all of the essential elements of the agreement, so that the contract can be ascertained from the writings without resorting to oral testimony. Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex. 1978).

It is a fundamental rule of the law of contracts that every contract must be supported by consideration. Stone v. Morrison & Powers, 298 S.W. 538, 539 (Tex. Comm n App. 1927, holding approved). Consideration may consist of some right, interest, profit, or benefit that accrues to one party, or, alternatively, of some forbearance, loss, or responsibility that is undertaken or incurred by the other party. In re C & H News Co., 133 S.W.3d 642, 647 (Tex. App. Corpus Christi 2003, orig. proceeding).

Application of the consideration requirement depends in part on the nature of the contract. A bilateral contract is one in which there are mutual promises between two parties to the contract, each being both a promisor and a promisee. Hutchings v. Slemons, 141 Tex. 448, 452, 174 S.W.2d 487, 489 (Tex. 1943). Thus, valid consideration for a bilateral contract involves mutuality of obligation. In re Palm Harbor Homes, Inc., 129 S.W.3d 636, 643 (Tex. App. Houston [1st Dist.] 2003, orig. proceeding).

In contrast, a unilateral contract has only one promisor and is completed by the promisee s performing the act or acts called for, rather than by the promisee s making any reciprocal promise or promises. Herschbach v. City of Corpus Christi, 883 S.W.2d 720, 733 (Tex. App. Corpus Christi 1994, writ denied). One party furnishes no consideration of value to the other party and does not obligate itself to do anything that may result in injury to itself, or a benefit to the opposite party. Id. Because there is no promise on the part of the promisee, there can be no mutual obligations. May v. Lee, 28 S.W.2d 202, 204-05 (Tex. Civ. App. Galveston 1930, no writ). Mutuality of obligation is inapplicable to a unilateral contract. Pace Corp. v. Jackson, 155 Tex. 179, 184, 284 S.W.2d 340, 344 (1955).

Enforceable contracts can be made between an employer and employee when one or both retains the option to discontinue employment at any time, but only so long as neither party relies on continued employment as consideration for the contract. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex. 2003). When either an employer or an employee retains the option of discontinuing employment in lieu of performance, that promise is illusory. Light v. Centel Cellular Co. of Tex., 883 S.W.2d 642, 645 (Tex. 1994). An illusory promise is not consideration. Id. at 644-45. However, if only one promise is illusory, a unilateral contract can still be formed. Alex Sheshunoff Mgmt. Servs. v. Johnson, 209 S.W.3d 644, 650 (Tex. 2006). In such a situation, the nonillusory promise is an offer that the promisor who made the illusory promise can accept by performance. Id.

The Agreement Regarding Employment provides:

1. It is agreed that Employee shall continue to be employed by the Employer in the capacity as Sales Manager and that the Employee s compensation will continue under the present structure and arrangement, subject to future adjustments by decision of the Board of Directors of the Employer.

2. The Employee s employment with the Employer shall continue for a period of twenty-five (25) years from the date of this Agreement, unless earlier terminated at the election of the Employee, by mutual agreement of the parties, or by the Employer for good cause . [sic]

The document was signed by John W. Dimond, III as President of Jack Dimond Lincoln Mercury, Inc. and by Ott.

Ott was sales manager for Dimond Lincoln-Mercury from 1989 to 1993 and again from 2001 until his termination on December 2, 2004. It is not contested that, prior to June 15, 2004, Ott was an at will employee. John Dimond and the dealership argue that Ott s continued employment cannot constitute consideration. We agree.

Ott presented as summary judgment evidence the agreement he and Jack Dimond signed. Pursuant to that agreement, Jack Dimond, as president of Dimond Lincoln-Mercury, promised Ott continued employment for twenty-five years except that he could be terminated for good cause.

Based on the terms of the contract, both Jack Dimond and Ott relied on Ott s continued employment as consideration for the contract. Dimond relied on Ott s promise to continue working at the dealership and Ott relied on Jack Dimond s promise that the dealership would employ him for twenty five years. However, continued employment is insufficient consideration for a contract between an at will employer and employee. See J.M. Davidson, 128 S.W.3d at 228.

Although the contract states Ott can be terminated before the end of twenty five years for good cause, the parties did not specify what would constitute good cause. Because the written contract does not include an agreement about what good cause would encompass, the contract does not limit the dealership s right to terminate Ott at will. See Montgomery County Hosp. Dist. v. Brown, 965 S.W.2d 501, 502 (Tex. 1998). Therefore, Jack Dimond s promise is illusory and fails as consideration. See Light, 883 S.W.2d at 644-45. The contract clearly states that Ott had the right to terminate his employment at any time and he made no promises other than that he will continue to work for the dealership. Consequently, Ott s promise to continue working was also illusory. See id. No valid bilateral contract exists because there is no mutuality of obligation. See In re Palm Harbor Homes, 129 S.W.3d at 643. Further, because at least one nonillusory promise is necessary to form a unilateral contract, the employment contract is not a unilateral contract. See Alex Sheshunoff Mgmt. Servs., 209 S.W.3d at 650; J.M. Davidson, 128 S.W.3d at 228.

Finally, even if we assume that no contractual definition of good cause was required, making Jack Dimond s promise nonillusory, the result would not change. Because Ott made no other promises and had the right to terminate his employment at any time, Jack Dimond relied only on Ott s continued employment as consideration for the agreement. See J.M. Davidson, 128 S.W.3d at 228. Thus, Ott s act of continuing to work for the dealership was not sufficient to constitute acceptance of Jack Dimond s offer of a unilateral contract. See Alex Sheshunoff Mgmt. Servs., 209 S.W.3d at 650; J.M. Davidson, 128 S.W.3d at 228.

The summary judgment evidence shows that John Dimond and the dealership conclusively negated the element of consideration. See Johnson, 891 S.W.2d at 644. Therefore, the trial court did not err by granting summary judgment on Ott s breach of contract claim. See Tex. R. Civ. P. 166a(i). We overrule Ott s second issue.

Tortious Interference with the Contract

In his first issue, Ott contends that the trial court erred in granting summary judgment as to his tortious interference claim. He argues that John Dimond had no authority to act on behalf of the dealership when he terminated Ott and the termination was based on personal motives.

Ott does not dispute that the acts of a corporate officer on the corporation s behalf are deemed corporate acts rather than individual acts. Instead, he argues first that John Dimond was not a proper corporate officer of Dimond Lincoln-Mercury, and second that John Dimond acted solely on personal interests rather than in furtherance of the corporation.

With regard to his claim that John Dimond was not a proper corporate officer of Dimond Lincoln-Mercury, Ott initially argued that John Dimond did not inherit the 25% ownership interest in Dimond Lincoln-Mercury until the Doris Dimond Testamentary Trust was modified in a court proceeding in February 2005. But in Ott s reply brief, he acknowledges that John Dimond actually inherited the 25% ownership interest at the time of his father s death in September 2005. Because the Doris Dimond Testamentary Trust expressly terminated at the death of Jack Dimond, John Dimond s 25% ownership in Dimond Lincoln-Mercury vested immediately upon the death of Jack Dimond. See Tex. Prop. Code Ann. 112.052 (Vernon 2007) (Rights vest in the beneficiaries of a trust, and the trust terminates if by the terms of the trust it is to continue only until the happening of a certain event and the event has occurred.). Thus, John Dimond owned a portion of Dimond Lincoln-Mercury before Ott was terminated. Further, we note that John Dimond, after his father s death but before Ott s termination, was voted president of Dimond Lincoln-Mercury at a shareholders meeting. Accordingly, John Dimond was a corporate officer of Dimond Lincoln-Mercury entitled to act on the corporation s behalf prior to Ott s termination.

To establish tortious interference with a contract, a plaintiff must prove (1) the existence of a contract subject to interference, (2) a willful and intentional act of interference (3) that was a proximate cause of damage, and (4) actual damage. Holloway v. Skinner, 898 S.W.2d 793, 795-96 (Tex. 1995). Third persons are not free to tortiously interfere with the performance of a contract for a term or one that is terminable at will. See Sterner v. Marathon Oil Co., 767 S.W.2d 686, 689 (Tex. 1989). The acts of a corporate agent on behalf of the corporation generally are deemed to be the corporation s acts. Latch v. Gratty, Inc., 107 S.W.3d 543, 545 (Tex. 2003). Thus, when the defendant serves dual roles of corporate agent and third party who allegedly induces the corporation s breach, the second element is of particular importance. Holloway, 898 S.W.2d at 796. Under such circumstances, the alleged act of interference must be performed in furtherance of the defendant s personal interests so as to preserve the logically necessary rule that a party cannot tortiously interfere with its own contract. Id. To meet its burden, the plaintiff must show that the defendant s act of interference was so contrary to the corporation s best interests that his actions could be motivated only by personal interests. Id. It is immaterial that the actor also profits by the [act] or that he dislikes that third party and takes pleasure in the harm caused to him by the [act]. Id. However, the actor cannot be held to have acted against the corporation s interests unless the corporation has objected. Latch, 107 S.W.3d at 545.

Here, Dimond Lincoln-Mercury did not object to the actions of John Dimond. Ott concedes this point but argues that the unusual circumstances presented dictate that we should not apply the no complaint principle in this case. We decline Ott s invitation to ignore Texas Supreme Court precedent.

Without evidence that Dimond Lincoln-Mercury objected to the action of John Dimond, Ott cannot show that Dimond s actions were against Dimond Lincoln-Mercury s interests. See id. Thus, Ott did not bring forth summary judgment evidence raising a genuine issue of material fact as to whether John Dimond performed a willful and intentional act of interference. Therefore, John Dimond could not be liable to Ott for tortious interference with contract as a matter of law, and the trial court properly granted summary judgment on that claim. See Tex. R. Civ. P. 166a(i). We overrule Ott s first issue.

Disposition

Because Dimond Lincoln-Mercury and John Dimond negated one element of Ott s breach of contract claim and because John Dimond could not as a matter of law be liable to Ott for tortious interference with contract, Dimond Lincoln-Mercury and John Dimond are entitled to summary judgment. We affirm the trial court s judgment.

BRIAN HOYLE

Justice

Opinion delivered February 22, 2008.

Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.

(PUBLISH)