Opinion
NO. 01-15-01034-CV
02-28-2017
ROBERT HYNDS, Appellant v. DALE FOSTER, Appellee
On Appeal from the 129th District Court Harris County, Texas
Trial Court Case No. 2014-68548
MEMORANDUM OPINION
Appellee Dale Foster sued his business partner, appellant Robert Hynds, for fraud, breach of contract, and other claims arising out of an investment opportunity in an oil and gas field in Alabama. Foster moved for summary judgment on his fraud and breach of contract claims. After the trial court rendered summary judgment in Foster's favor, ordering rescission of the parties' contract, requiring Hynds to return Foster's $500,000 investment, and awarding attorney's fees, Foster nonsuited his remaining claims against Hynds. In five issues on appeal, Hynds contends that: (1 rescission of the parties' agreement was not available as a matter of law; (2) Foster failed to conclusively establish that he was entitled to rescission because he received the benefit of his bargain; (3) Foster failed to conclusively establish that the parties had a contract or that Hynds breached the contract; (4) Foster failed to conclusively establish that Hynds made a false representation or that Foster suffered damages; and (5) the trial court improperly awarded Foster attorney's fees.
We affirm.
Background
Hynds and Foster have been friends since they were teenagers attending school in Jamaica. Foster works as a doctor in Jamaica. Hynds has experience working as an engineer in the oil and gas industry, and he lives in the Houston area. In 2007, Hynds and Foster formed Tryall Omega, Inc. ("Tryall") to pursue investment opportunities in oil and gas interests and real estate. Both parties owned a 50% interest in Tryall, with Hynds running the day-to-day operations of the company and Foster serving as the primary source of capital. Through Tryall, Hynds and Foster purchased shares in an offshore oil and gas company and purchased an interest in a condominium development.
In 2013, Hynds identified a new potential investment opportunity: the purchase of a 49% working interest in the Pleasant Home Field oil and gas reserve in Alabama. According to Foster, Hynds informed him that he had negotiated a $1 million purchase price from the owner of the field, Gulf Coast Mineral, L.L.C. ("Gulf Coast"). Hynds sent Foster an assignment and bill of sale that listed the purchase price for the working interest as $1 million in cash. Foster averred that Hynds requested that Foster contribute $500,000 to fund the purchase price and that Hynds promised also to contribute $500,000. Although wary of the prospect of making such a large investment, Foster was persuaded by Hynds's willingness to invest an equal amount of his own money, and Foster agreed to wire $500,000 to Hynds. The sale of the 49% working interest in the Pleasant Home Field was ultimately consummated by Hynds on behalf of Tryall.
Several months after the purchase, and after he had not received any income from the working interest Tryall had purchased in the field, Foster requested information from Hynds about their investment. After Hynds failed to respond, Foster began investigating, and, according to his testimony, he discovered that Tryall had filed for bankruptcy in early 2014. Foster also discovered that Hynds and Gulf Coast had structured the sale of the Pleasant Home Field interest such that Tryall had paid $400,000 in cash and had executed a $335,000 promissory note for the interest, for a total purchase price of $735,000 instead of $1 million. Hynds had contributed no money to the purchase price.
In November 2014, Foster filed suit against Hynds and asserted a cause of action for fraud, among other claims. Foster alleged that Hynds had committed fraud by falsely representing that he would also contribute $500,000 to the purchase price of the Pleasant Home Field interest and that the purchase price equaled $1 million in cash. Foster alleged that Hynds had negotiated the purchase price to be $400,000 in cash and a $335,000 promissory note and that he had made the misrepresentations to Foster with the intent of inducing Foster "to invest $500,000 in cash and thereby finance Tryall's entire purchase of the Pleasant Home Field interest." Foster alleged that he would not have made the investment had he known that "he alone would bear the risk of the investment." Foster asserted that he had been damaged in the amount of $500,000, representing his contribution to the Pleasant Home Field investment. Foster did not allege a cause of action for breach of contract in his original petition.
Hynds answered and also filed a plea to the jurisdiction, arguing that the case against him ought to be dismissed because he was not a party to the contract to purchase the Pleasant Home Field interest, Tryall was, and Hynds was merely acting as Tryall's officer when it purchased the interest from Gulf Coast. Hynds acknowledged that Tryall purchased the Pleasant Home Field interest for $400,000 in cash and a $335,000 promissory note. However, he categorized Foster's $500,000 payment as an "equity contribution" to Tryall, and he alleged that Gulf Coast reduced the purchase price of the working interest after Foster had made his contribution.
In February 2015, Foster sought written discovery from Hynds, including requests for admissions. It is undisputed that Hynds did not timely respond to these requests.
In May 2015, Foster moved for partial summary judgment, arguing that Hynds's deemed admissions, as well as other evidence, conclusively established Foster's affirmative claims. Foster argued that by failing to contribute $500,000 towards the purchase of the Pleasant Home Field interest Hynds breached the parties' contract as a matter of law, entitling Foster to rescission and a return of his $500,000 contribution. Foster argued that the parties formed a valid contract when they both agreed to contribute $500,000 for the purchase of the Pleasant Home Field interest, that Foster performed his contractual obligations by actually contributing $500,000 to Hynds, and that Hynds breached the contract by failing to match Foster's contribution. Foster sought rescission of the parties' contract.
Foster also argued that his summary judgment evidence, including Hynds's deemed admissions, established his fraud claim as a matter of law. Foster argued that Hynds's material misrepresentations included misrepresentations that the purchase price of the Pleasant Home Field interest was $1 million in cash, when it was actually $400,000 in cash and a $335,000 promissory note, and that Hynds himself would contribute $500,000 towards the purchase. Foster argued that, at the time of the misrepresentations, Hynds knew the purchase price was not $1 million, but he made the misrepresentations to induce Foster to provide the entire purchase price for the interest. As summary judgment evidence, Foster attached a declaration in which he swore to each of these facts. Foster attached a letter sent from Hynds to Foster's former counsel on May 19, 2014, more than a year after Tryall purchased the Pleasant Home Field interest, in which Hynds stated, "[Pleasant Home Field] 49% working interest acquisition cost break down was as follows: $400,000 transfer to [Gulf Coast]; $335,000 promissory note; $250,000 secured bond, $59,881.82 well insurances; $20,000 startup expenses." Foster also attached the declaration of his counsel, who averred that $9,965 would be a reasonable and necessary amount of attorney's fees through the summary judgment proceedings.
Foster presented evidence that he contributed $500,000 in cash to the purchase of the Pleasant Home Field interest in reliance on Hynds's representations that the purchase price of the interest was $1 million and that Hynds himself would also contribute $500,000 in cash, and he would not have made this contribution were it not for Hynds's misrepresentations. Foster stated in his declaration that he has received no income from the Pleasant Home Field interest. He also stated, "The Pleasant Home Field interest is, due to non-production, lawsuits, and bankruptcies, worthless."
The May 2014 letter from Hynds to Foster's former counsel detailed several problems that had arisen with the interest since Tryall purchased it. Hynds started off the letter by stating that Tryall had been in discussions with Gulf Coast concerning whether to sell the 49% working interest it had purchased the year before. Hynds stated, "In mid-December 2013, it became very apparent that neither receipt of the production payments [nor] assignment was going to occur without taking legal action against [Gulf Coast]," and Tryall contemplated suing Gulf Coast to "acquire title and production revenue." Hynds then stated that in January 2014, Gulf Coast served Tryall with a notice of default and took steps to sell the working interest. Hynds informed Foster's counsel that the only course of action to block the sale and protect Tryall's interest was to file an emergency bankruptcy. Hynds stated that Tryall had received no production revenues from September 2013 to March 2014. He also advised that one of the two wells on the Pleasant Home Field was no longer producing and that the remaining well "has been showing signs of a decline in production and [Gulf Coast] alleges that there is an issue with the pump and it may have to be changed at some point to potentially increase production." Hynds also hinted at the possibility of further legal action involving Tryall and Gulf Coast.
Foster thus presented evidence that he had spent $500,000 in reliance on Hynds's representation that he would also contribute $500,000 but that the Pleasant Home Field interest was essentially worthless and he had received no income or revenue from Tryall's investment in the Field. This evidence was not controverted by any other evidence in the summary judgment record.
Hynds moved for withdrawal of the deemed admissions and filed a response to Foster's partial summary judgment motion. In his response, Hynds argued that Foster had not pleaded a cause of action for breach of contract, and, thus, he could not be entitled to summary judgment on that claim. He also argued that he and Foster did not execute a valid and enforceable contract. Hynds further argued that, at the time Foster made his "equity contribution," Tryall had not signed an assignment and bill of sale for the working interest from Gulf Coast.
Hynds's summary judgment evidence included an assignment and bill of sale for the Pleasant Home Field interest, purportedly executed by Gulf Coast and Tryall. This document, which stated that it was executed on April 1, 2013, but made effective as of February 1, 2013, listed the purchase price for the interest at $1 million. Hynds's summary judgment evidence also included an affidavit that he executed, which stated only that he had personal knowledge of the facts contained within his response and that the statements in the response were true and correct.
On June 1, 2015, Foster amended his petition to assert a cause of action for breach of contract. Foster alleged that he and Hynds entered into a contract in which both parties agreed to contribute $500,000 to purchase the Pleasant Home Field interest. Foster alleged that he performed his contractual obligations by contributing $500,000, but Hynds breached the contract by failing to make his contribution.
The trial court held a hearing on Foster's summary judgment motion on June 8, 2015. At this hearing, the trial court allowed the withdrawal of the deemed admissions. The trial court, after noting that Hynds's summary judgment evidence did not include an affidavit from Hynds in which he controverted Foster's allegations, allowed Hynds seven days to supplement the summary judgment record with a controverting affidavit.
Hynds filed a controverting affidavit on June 15, 2015, within the one-week continuance granted by the trial court. This affidavit included statements that Hynds did not have a contract with Foster, that he did not agree to make a matching $500,000 contribution, that Foster made his contribution before Gulf Coast lowered the purchase price of the Pleasant Home Field interest, and that Foster performed his own due diligence regarding the purchase. This affidavit, however, was not signed by Hynds. Attached to this affidavit was a document entitled "Terms of Trade Pleasant Home Working Interest Purchase," executed by Hynds on behalf of Tryall and the managing member of Gulf Coast on February 17, 2013. This document listed the purchase price of the interest as $400,000 in cash and a $335,000 promissory note.
On June 18, 2015, outside of the one-week continuance granted by the trial court, Hynds filed an additional response to Foster's summary judgment motion. Hynds argued that Foster failed to establish his breach of contract claim as a matter of law because Foster had not introduced a written contract between the parties and any oral contract that may have existed was barred by the statute of frauds. Hynds also argued that Foster failed to establish his fraud claim as a matter of law because Foster produced no evidence that Hynds "induced Foster to make a contribution to [Tryall] by failing to disclose material facts about the prospective [Pleasant Home Field] acquisition," and Foster could not establish that he had suffered an injury because Tryall still owned the 49% working interest in the Pleasant Home Field, which was producing oil and gas. Hynds objected to Foster's attorney's fees as unreasonable. Hynds also attached a signed version of the affidavit that he had filed with the trial court on June 15, 2015, as well as other evidence, such as documents that Hynds sent to Foster concerning oil and gas investment opportunities, including documents relating to the Pleasant Home Field.
Foster replied to Hynds's response and also filed an amended declaration concerning his attorney's fees. In this declaration, Foster's counsel stated that Foster had incurred $21,742.50 in attorney's fees, and he estimated that an additional $30,000 in conditional appellate attorney's fees would be reasonable and necessary. Foster also attached evidence to his reply. This evidence included an email from Hynds to Foster, sent February 19, 2013, concerning the transaction that attached a document entitled "Terms of Trade" for the Pleasant Home Field Acquisition. This document, signed by Hynds and the managing member of Gulf Coast on February 17, 2013, listed the purchase price of the interest as $1 million. Foster also attached two wire transfer receipts demonstrating that he had wired $400,000 to Hynds's bank account on February 20, 2013, and $100,000 on March 19, 2013. Foster also attached an email from Hynds, dated July 11, 2013, that provided documents concerning the Pleasant Home Field acquisition to Foster for his review. These documents included an assignment and bill of sale, dated April 1, 2013, but made effective as of February 1, 2013, that listed the purchase price of the working interest as $1 million.
As additional evidence, Foster also attached an additional declaration in which he discussed the documentary evidence he had attached to his reply. He stated:
Attached as Exhibit A . . . is a true and correct copy of the email and attachment that I received from Defendant Robert Hynds on February 19, 2013 showing the final purchase price of the Pleasant Home Field Interest as $1 million. Defendant Hynds never sent me the "Terms of Trade" agreement between Tryall Omega, Inc. and Gulf Coast Mineral, L.L.C. showing the actual purchase price of $400,000 cash-plus-$335,000-promissory-note. Instead, the one that Defendant Hynds sent me shows a purchase price of $1 million.Foster also stated in this declaration that as of July 11, 2013, Hynds had not informed him of the actual purchase price for the Pleasant Home Field interest.
Additionally, Foster attached Hynds's responses to Foster's requests for admissions, which included statements that Hynds admitted that he "did not make a loan or equity contribution of $500,000 in cash to Tryall Omega, Inc." and that he did not tell Foster that Tryall would pay $400,000 in cash for the working interest plus a promissory note for the remaining balance. Hynds's responses included a statement denying that he told Foster that he would contribute $500,000 of his own money to the acquisition. Foster did not attach as summary judgment evidence the "Terms of the Trade" agreement signed by Hynds and Gulf Coast's managing member on February 17, 2013, that listed the purchase price of the working interest as $400,000 cash plus a $335,000 promissory note, although he referenced this document both in his declaration and in his reply.
On July 6, 2015, the trial court granted Foster's motion to strike Hynds's summary judgment evidence, and it struck Hynds's affidavits, his summary judgment evidence, and his amended summary judgment response "in their entirety." On that same day, the trial court granted Foster's summary judgment motion on his fraud and breach of contract claims. Foster then nonsuited his remaining claims.
Hynds's summary judgment evidence struck by the trial court included his controverting affidavit as well as the "Terms of the Trade" agreement signed by Hynds on behalf of Tryall and the managing member of Gulf Coast on February 17, 2013, and listing the purchase price of the Pleasant Home Field interest as $400,000 in cash and a $335,000 promissory note.
The trial court signed a final judgment on October 9, 2015. In this judgment, the trial court recited that it had granted summary judgment in favor of Foster on his fraud and breach of contract claims and that Foster had nonsuited his remaining claims. The trial court also stated that, "given the circumstances of this case, [Foster] is entitled to the equitable remedy of rescission." The trial court ordered Hynds to pay Foster $500,000 in damages and $21,742.50 in trial-level attorney's fees. The trial court also ordered that upon Hynds's payment of the amounts he owed to Foster, Foster was to assign any interest he had in the Pleasant Home Field to Hynds.
This appeal followed.
Propriety of Summary Judgment in Favor of Foster
In his second issue, Hynds contends that Foster failed to conclusively establish that he was entitled to rescission as a remedy because he received the benefit of his bargain. In his third issue, Hynds argues that Foster failed to conclusively establish that the parties had a contract or that Hynds breached the contract. And in his fourth issue, Hynds argues that Foster failed to conclusively establish that Hynds made a false representation or that Foster suffered damages. A. Standard of Review
We review a trial court's ruling on a summary judgment motion de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). To prevail on a traditional summary judgment motion, the movant bears the burden of proving that no genuine issues of material fact exist and that he is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). When a plaintiff moves for summary judgment on his own claim, he must prove that he is entitled to judgment as a matter of law on each element of his cause of action. Cleveland v. Taylor, 397 S.W.3d 683, 696-97 (Tex. App.—Houston [1st Dist.] 2012, pet. denied).
A matter is conclusively established if reasonable people could not differ as to the conclusion to be drawn from the evidence. See City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005); Cleveland, 397 S.W.3d at 697. If the movant meets his burden, the burden then shifts to the nonmovant to raise a genuine issue of material fact precluding summary judgment. See Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995); see also Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007) (per curiam) (stating that summary judgment evidence raises fact question if reasonable and fair-minded jurors could differ in their conclusions in light of all evidence presented). We review the evidence presented in the motion and response in the light most favorable to the nonmovant, crediting favorable evidence if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. Fielding, 289 S.W.3d at 848 (citing City of Keller, 168 S.W.3d at 827); Cleveland, 397 S.W.3d at 697. We indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002) (citing Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997)); Cleveland, 397 S.W.3d at 697.
If the movant does not satisfy his initial burden, then the burden does not shift and the nonmovant need not respond or present any evidence. Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014) (citing City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979)). "This is because 'summary judgments must stand or fall on their own merits, and the non-movant's failure to answer or respond cannot supply by default the summary judgment proof necessary to establish the movant's right' to judgment." Id. (quoting McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 343 (Tex. 1993)). Thus, a nonmovant who fails to raise any issues in response to a summary judgment motion may still challenge on appeal "the legal sufficiency of the grounds presented by the movant." Id. (quoting McConnell, 858 S.W.2d at 343). That is, the nonmovant may still argue on appeal that the movant did not conclusively establish his causes of action. See id. ("The nonmovant has no burden to respond to a summary judgment motion unless the movant conclusively establishes its cause of action or defense. The trial court may not grant summary judgment by default because the nonmovant did not respond to the summary judgment motion when the movant's summary judgment proof is legally insufficient.") (quoting Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999)). B. Foster's Breach of Contract Claim
We therefore disagree with Foster that the appropriate inquiry on appeal is whether Foster presented more than a scintilla of evidence to support every essential element of his fraud and breach of contract claims. Instead, in determining whether the trial court properly granted summary judgment on Foster's claims, we must determine whether Foster conclusively established each element of his claims. See Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979) (stating that movant "still must establish his entitlement to a summary judgment on the issues expressly presented to the trial court by conclusively proving all essential elements of his cause of action or defense as a matter of law" and that nonmovant "needs no answer or response to the motion to contend on appeal that the grounds expressly presented to the trial court by the movant's motion are insufficient as a matter of law to support summary judgment") (emphasis in original).
To prevail on a breach of contract claim, the plaintiff must establish (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 sustained by the plaintiff as a result of the breach. S. Elec. Servs., Inc. v. City of Houston, 355 S.W.3d 319, 323-24 (Tex. App.—Houston [1st Dist.] 2011, pet. denied). The requirements of a valid contract are: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Hubbard v. Shankle, 138 S.W.3d 474, 481 (Tex. App.—Fort Worth 2004, pet. denied). The elements of written and oral contracts are the same, and all elements must be present for a contract to be binding. Id. "[I]n a breach-of-contract case, the normal measure of damages is just compensation for the loss or damage actually sustained, commonly referred to as the benefit of the bargain." Bowen v. Robinson, 227 S.W.3d 86, 96 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).
1. Existence of a Contract
As summary judgment evidence that the parties had a contract, Foster pointed to his own declaration. In this declaration, Foster stated that Hynds had informed him that he had negotiated a $1 million purchase price for the Pleasant Home Field interest. Foster then stated, "In order to fund the $1 million cash portion of the transaction, Hynds requested a $500,000 cash contribution from me, and represented that he would match my investment with a $500,000 cash investment of his own."
Hynds argues on appeal that Foster failed to conclusively establish that the parties had a contract because Hynds, in his responses to Foster's requests for admissions, denied that he represented that he would contribute $500,000 towards the purchase of the interest, and Foster attached this response to his summary judgment evidence. Foster argues that this denial is not competent summary judgment evidence. We agree with Foster.
Denials to requests for admissions are not summary judgment evidence in Texas. Americana Motel, Inc. v. Johnson, 610 S.W.2d 143, 143 (Tex. 1980) (per curiam); CKB & Assocs., Inc. v. Moore McCormack Petroleum, Inc., 809 S.W.2d 577, 586 n.5 (Tex. App.—Dallas 1991, writ denied); Acevedo v. Droemer, 791 S.W.2d 668, 669 (Tex. App.—San Antonio 1990, no writ). This Court has previously held that "[a]nswers to interrogatories and discovery responses may only be used against the party who answered them." Schulz v. State Farm Mut. Auto. Ins. Co., 930 S.W.2d 872, 876 (Tex. App.—Houston [1st Dist.] 1996, no writ); see TEX. R. CIV. P. 197.3 ("Answers to interrogatories may be used only against the responding party.").
Hynds acknowledges this rule but argues that, in this case, his denial does constitute proper summary judgment evidence because Foster, not Hynds himself, attached all of Hynds's responses to the requests for admissions as summary judgment evidence, including Hynds's statement denying that he told Foster that he would contribute $500,000 of his own money to the transaction. Thus, Foster's own evidence demonstrates the existence of a material fact issue and therefore demonstrates that Foster failed to conclusively establish that the parties had a contract.
The Fort Worth Court of Appeals addressed this argument in Denton Construction Co. v. Mike's Electric Co., 621 S.W.2d 846 (Tex. App.—Fort Worth 1981, writ ref'd n.r.e.). In that case, Mike's Electric Company moved for summary judgment and attached Denton Construction Company's answers to requests for admissions as summary judgment evidence. Id. at 848. The trial court granted summary judgment in favor of Mike's Electric Company. Id. at 847. On appeal, Denton Construction Company argued that "its denial of certain requests for admissions filed by [Mike's Electric Company, the summary judgment movant] raises material fact issues which should have prevented the granting of [Mike's] motion for summary judgment." Id. at 848. The Fort Worth Court disagreed, noting that "[d]enials to requests for admissions are not proper summary judgment evidence." Id.; see also Oliver v. Allstate Ins. Co., 456 S.W.2d 558, 560 (Tex. Civ. App.—Dallas 1970, writ dism'd) ("It is true that plaintiff in this case in answering Request for Admissions refused to admit that he had received the notice. But this is not summary judgment evidence that he did not receive the notice. It is merely a refusal to Admit that he received the notice—it does not raise a fact issue such as to preclude a summary judgment.").
Hynds cites no law holding that denials to requests for admissions become competent and proper summary judgment evidence if the opposing party attaches those denials to his summary judgment motion. Instead, the law holds the contrary. Hynds, therefore, may not rely upon his denial to the request that he admit that he told Foster that he would contribute $500,000 of his money as summary judgment evidence raising a fact issue. Thus, the only competent summary judgment evidence in the record concerning whether the parties had a contract was Foster's declaration, in which he stated that Hynds "requested a $500,000 cash contribution from [Foster], and represented that he would match [Foster's] investment with a $500,000 cash investment of his own." We conclude that Foster conclusively established that the parties had an oral contract to contribute $500,000 each to the purchase of the Pleasant Home Field interest.
2. Breach of the Contract
In his declaration, Foster stated, "In order to fund the $1 million cash portion of the transaction [to purchase the Pleasant Home Field interest], Hynds requested a $500,000 cash contribution from [Foster], and represented that he would match [Foster's] investment with a $500,000 cash investment of his own." Foster also stated that he learned that the purchase price of the Pleasant Home Field interest was not $1 million in cash, but instead "Hynds had structured the purchase of the 49% working interest to be a total of $735,000, with $400,000 paid as cash up-front and the remaining $335,000 due under a promissory note." Foster also attached Hynds's responses to his requests for admissions, in which Foster requested that Hynds admit that he "did not contribute $500,000 in cash to Tryall Omega pursuant to Tryall Omega's purchase in the [Pleasant Home Field Interest]." Hynds responded, "Defendant Admits in part that Defendant did not make a loan or equity contribution of $500,000 in cash to Tryall Omega, Inc."
In arguing that Foster did not conclusively establish that he breached the contract, Hynds contends on appeal that "to the extent Hynds admitted not paying $500,000 'in cash' to Tryall, this would not preclude his contribution of such amount in some other negotiable form." Hynds further argues that "it may be inferred that Tryall was able to negotiate a purchase price substantially lower than the $1 million initially discussed and that Hynds did contribute $500,000 to Tryall in a form other than cash, but Tryall used his contribution for other purposes." Hynds urges that, under the proper standard of review, this Court must accept this inference, resolve any doubts in Hynds's favor, and hold that Foster did not conclusively establish that Hynds breached the parties' contract.
"A fact issue exists when conflicting inferences may be drawn from uncontroverted summary judgment proof." Cullins v. Foster, 171 S.W.3d 521, 534 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). However, when reviewing a summary judgment, we indulge every reasonable inference in the nonmovant's favor. See Sw. Elec. Power Co., 73 S.W.3d at 215. To raise a fact issue, "the evidence must transcend mere suspicion. Evidence that is so slight as to make any inference a guess is in legal effect no evidence." Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004); Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex. 1993) ("[W]hile circumstantial evidence may be used to establish any material fact, we are not empowered to convert mere suspicion or surmise into some evidence.").
Hynds argues that it can be inferred from the evidence that Tryall negotiated a purchase price for the Pleasant Home Field interest "substantially lower than the $1 million initially discussed" and that, although Hynds did not contribute $500,000 in cash, as he admitted in his discovery responses, he contributed $500,000 to Tryall in some other form, which Tryall then used for other purposes. There is, however, no summary judgment evidence to support this inference. Although it is possible that Hynds made a contribution to Tryall in some form other than cash, there is no summary judgment evidence to support his claim that he in fact did this. Thus, this inference does not "transcend mere suspicion." See Ridgway, 135 S.W.3d at 601. Because there is no summary judgment evidence supporting the inference that Hynds made a $500,000 contribution to Tryall in some form other than cash, we conclude that this inference is not reasonable and that it does not create a fact issue regarding whether Hynds breached the parties' contract. See Sw. Elec. Power Co., 73 S.W.3d at 215; see also Ridgway, 135 S.W.3d at 601 ("Evidence that is so slight as to make any inference a guess is in legal effect no evidence."). We therefore hold that Foster conclusively established that Hynds, by failing to make a $500,000 cash contribution to Tryall for purchase of the Pleasant Home Field interest, breached the parties' contract.
3. Materiality of Breach
On appeal, Hynds argues that Foster received the benefit of the bargain because Tryall successfully purchased the working interest in the Pleasant Home Field and, thus, any failure by Hynds to contribute $500,000 in cash to Tryall did not constitute a material breach of the contract. As a result, Hynds contends that Foster did not conclusively establish his entitlement to rescission as a remedy for breach of contract.
The Texas Supreme Court has deemed five circumstances significant in determining whether a party's failure to perform under a contract constitutes a material breach:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 199 (Tex. 2004) (per curiam) (quoting RESTATEMENT (SECOND) OF CONTRACTS § 241 (1981)); see also Lennar Corp. v. Markel Am. Ins. Co., 413 S.W.3d 750, 755 (Tex. 2013) ("One factor in determining materiality is 'the extent to which the nonbreaching party will be deprived of the benefit that it could have reasonably anticipated from full performance.'"). "The less the non-breaching party is deprived of the expected benefit, the less material the breach." Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d 691, 693 (Tex. 1994). If the trial court determines that the breaching party committed a material breach, the court may grant unilateral rescission of the contract. Humphrey v. Camelot Ret. Cmty., 893 S.W.2d 55, 59 (Tex. App.—Corpus Christi 1994, no writ).
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of the circumstances including any reasonable assurances; [and]
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
Hynds contends that his alleged breach of the contract was not material because the purpose of the contract was to furnish capital to Tryall to allow it to purchase the working interest in the Pleasant Home Field, which it successfully purchased. Foster, as a 50% owner of Tryall, "bears only a 50% risk of loss with respect to Tryall's assets," just as Hynds does, and therefore Foster substantially received the benefit he reasonably anticipated when he made the deal with Hynds.
In his declaration, Foster discussed the circumstances surrounding Hynds's solicitation of his investment in the Pleasant Home Field:
In or around February 2013, Hynds identified another investment opportunity in "Pleasant Home Field," an oil and gas reserve located in
Alabama. Hynds informed me that Tryall could purchase a 49% working interest in the reserve from Gulf Coast Mineral, L.L.C. ("Gulf Coast"), which he claimed would be extremely profitable for us. Hynds further informed me that he had negotiated a purchase price of $1 million in cash, and that we would pay another $100,000 out of the well's production revenues over the first year. Hynds then sent me an unexecuted "Assignment and Bill of Sale" evidencing the purported $1 million cash purchase price. This bill of sale listed the total cash purchase price of the Pleasant Home Field interest at $1 million.Foster also stated in his declaration that he would not have contributed $500,000 if he had known that "the purchase price only required $400,000 cash" or that "Hynds would not be contributing any of his own money." He further stated, "Hynds tricked me into financing the entire purchase of the Pleasant Home Field interest, thereby obtaining a risk-free investment for himself." Foster concluded by stating that "[t]he Pleasant Home Field interest is, due to non-production, lawsuits, and bankruptcies, worthless."
In order to fund the $1 million cash portion of the transaction, Hynds requested a $500,000 cash contribution from me, and represented that he would match my investment with a $500,000 cash investment of his own. I was extremely hesitant in making such a large contribution, which was ten times larger than any contribution I had previously made. However, I was assuaged and assured by [Hynds's] willingness to contribute $500,000 of his own money. After all, if Hynds—an experienced oil and gas engineer and businessman—was willing to contribute $500,000 of his own money, then surely it was safe for me to contribute my own money.
Foster also attached as summary judgment evidence the letter Hynds wrote in May 2014 to Foster's former attorney in response to Foster's inquiries about the status of the Pleasant Home Field operations, which set out Tryall's battles with Gulf Coast after purchasing the working interest, including legal action in Alabama.
Hynds is correct that the primary purpose of the parties' contract was to provide capital so Tryall could purchase the Pleasant Home Field interest. However, Foster presented summary judgment evidence that he was concerned about making such a large contribution and that he ultimately decided to make this contribution because Hynds promised that he would contribute an equal amount of money to the transaction. It was thus of primary importance to Foster that Hynds also contribute $500,000 to the purchase of the working interest, as that alleviated his fear that he would be out a significant amount of money on an unprofitable venture. And it assured that Foster would not bear the entire risk of the project by himself while sharing the profits, if any, with Hynds.
Hynds, however, did not contribute $500,000 in cash to the purchase, and, as it turned out, Foster's contribution was greater than the cash portion of the purchase price ultimately negotiated between Hynds and Gulf Coast. Thus, as Foster's evidence reveals, Hynds contributed nothing to what turned out to be an unprofitable investment, whereas Foster contributed $500,000. Therefore, Foster bore the entire actual loss of his money, and Hynds bore none of that loss.
We agree with Foster and hold that his summary judgment evidence conclusively establishes that he did not receive the benefits that he reasonably anticipated from his contract with Hynds and that Hynds's failure to contribute $500,000 in cash to the purchase of the Pleasant Home Field interest constituted a material breach of the contract. See Lennar Corp., 413 S.W.3d at 755; Mustang Pipeline Co., 134 S.W.3d at 199; Hernandez, 875 S.W.2d at 693.
We overrule Hynds's second and third issues. C. Foster's Fraud Claim
At a hearing on attorney's fees after it had granted summary judgment, the trial court asked Foster's counsel if he was "electing on [his] breach of contract claim." Foster's counsel responded that he was, and the trial court stated, "[T]hey're making election of remedies. They're obviously not going forward on both. Their fraud and breach of contract claim—they're going to go forward on breach of contract claim, elect for the—the remedies are going to be rescission and attorney's fees." In the final judgment, the trial court stated that it granted summary judgment on Foster's fraud and breach of contract claims, it stated that Foster is entitled to the equitable remedy of rescission, it awarded Foster $500,000 plus attorney's fees, and it required Foster to assign any interest he had in the Pleasant Home Field to Hynds. The trial court did not award separate damages for Foster's fraud and breach of contract claims.
In light of our holding that Foster conclusively established the elements of his breach of contract claim and Foster's election before the trial court to recover on his breach of contract claim, we need not address Hynds's fourth issue, in which he argues that Foster failed to conclusively establish several elements of his fraud claim.
Availability of Rescission
In his first issue, Hynds contends that the trial court erred by awarding Foster rescission because this remedy was not available to Foster. Specifically, Hynds argues that because the alleged contract between Foster and himself was made for the benefit of Tryall, but Tryall was not a party to the underlying lawsuit and had not assented to rescinding the contract, rescission was not available as a remedy.
"Rescission is an equitable remedy that operates to extinguish a contract that is legally valid but must be set aside due to fraud, mistake, or for some other reason to avoid unjust enrichment." Ginn v. NCI Bldg. Sys., Inc., 472 S.W.3d 802, 837 (Tex. App.—Houston [1st Dist.] 2015, no pet.) (quoting Gentry v. Squires Constr., Inc., 188 S.W.3d 396, 410 (Tex. App.—Dallas 2006, no pet.)); Isaacs v. Bishop, 249 S.W.3d 100, 109 (Tex. App.—Texarkana 2008, pet. denied) ("Rescission of a contract is an equitable remedy used as a substitute for monetary damages when such damages would not be adequate."). Rescission is also a remedy for common-law fraud. Ginn, 472 S.W.3d at 837. "To be entitled to rescission, a party must show that (1) he or she and the defrauding party are in the status quo (i.e., there are no retained benefits received under the instrument and not restored to the other party) or (2) there are equitable considerations that obviate the need for the status quo relationship." Isaacs, 249 S.W.3d at 110. Courts should consider an inability to return the parties to their former positions in determining whether rescission is equitable. Id.
A trial court may grant unilateral rescission of the contract if the plaintiff demonstrates that the defendant has materially breached the contract or if the defendant has committed a partial breach that "goes to the essence of the contract." Humphrey, 893 S.W.2d at 59. Upon the rescission of a contract, "the rights and liabilities of the parties are extinguished, any consideration that was paid is returned, and the parties are restored to their respective positions as if no contract between them had ever existed." Ginn, 472 S.W.3d at 837 (citing Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 855 (Tex. App.—Houston [14th Dist.] 2001, pet. denied)); see also Morton v. Nguyen, 412 S.W.3d 506, 511 (Tex. 2013) (stating that rescission "is not a one-way street" and that rescission "requires a mutual restoration and accounting, in which each party restores property received from the other") (quoting Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817, 825-26 (Tex. 2012)). The decision to grant rescission "lies strictly within the sound discretion of trial courts," and thus we will not disturb the trial court's decision granting rescission absent a showing that the court abused its discretion. Ginn, 472 S.W.3d at 837.
The Fourteenth Court of Appeals has previously held that after a contract for the benefit of a third party has been accepted or acted upon by that party, the contract cannot be rescinded by the parties to the contract without the third party's consent. Houston Lighting & Power Co. v. Wheelabrator Coal Servs. Co., 788 S.W.2d 933, 937 (Tex. App.—Houston [14th Dist.] 1990, no writ); San Pedro State Bank v. Engle, 643 S.W.2d 450, 452 (Tex. App.—San Antonio 1982, no writ) ("The rule is well-settled that a third-party beneficiary contract may be rescinded or modified by the original parties prior to acceptance by the third party."). Whether a particular remedy is available to a plaintiff is a question of law. Pressil v. Gibson, 477 S.W.3d 402, 408 (Tex. App.—Houston [14th Dist.] 2015, pet. denied).
Hynds argues on appeal that because the purpose of the parties' alleged contract was to provide sufficient capital to Tryall to allow it to purchase the Pleasant Home Field interest, Tryall was a third-party beneficiary of the parties' contract. Tryall accepted the benefits under the contract when it purchased the working interest. However, Tryall was not a party to the underlying suit between Hynds and Foster, and Tryall did not assent to rescission of the contract. Thus, the trial court could not order rescission of the parties' contract.
As Foster points out, however, his summary judgment motion sought the remedy of rescission, but Hynds did not raise the unavailability of rescission in this case as a reason to deny summary judgment in his response. Instead, Hynds raised this argument for the first time in his motion for reconsideration and for a new trial, filed after the trial court rendered final judgment in this case.
"Issues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal" of a summary judgment ruling. TEX. R. CIV. P. 166a(c). In reviewing an order granting summary judgment, we are restricted to the arguments expressly presented to the trial court in the written summary judgment motion and the written response to the motion. Ritchey v. Pinnell, 324 S.W.3d 815, 821 (Tex. App.—Texarkana 2010, no pet.); Driskill v. Ford Motor Co., 269 S.W.3d 199, 206 (Tex. App.—Texarkana 2008, no pet.) ("A summary judgment cannot be reversed on appeal based on an issue that was not expressly and timely presented to the trial court by written response or other document."); see also Clear Creek Basin Auth., 589 S.W.2d at 679 ("[T]he non-movant must now, in a written answer or response to the motion, expressly present to the trial court those issues that would defeat the movant's right to a summary judgment and failing to do so, may not later assign them as error on appeal."). A party does not preserve the issue for appeal by raising the issue for the first time in a post-judgment filing. Unifund CCR Partners v. Weaver, 262 S.W.3d 796, 797 (Tex. 2008) (per curiam).
Hynds argues that despite his failure to raise the availability of rescission in a written summary judgment response, he may raise this issue on appeal because, due to Tryall's acceptance of benefits under the contract and its failure to assent to rescission, Foster did not conclusively establish his entitlement to rescission. However, whether a particular remedy, such as rescission, is available to a plaintiff is a question of law for the trial court. See Pressil, 477 S.W.3d at 408. Thus, the availability of rescission as a remedy is a legal question, and an issue that could potentially defeat Foster's right to summary judgment, that Hynds was required to present to the trial court in a written summary judgment response in order to raise that issue on appeal. See Clear Creek Basin Auth., 589 S.W.2d at 679. Because Hynds did not raise this issue in a written summary judgment response, we conclude that he cannot raise the issue now on appeal as a basis to overturn the trial court's summary judgment ruling. See id.; Ritchey, 324 S.W.3d at 821; Driskill, 269 S.W.3d at 206; see also Haden v. David J. Sacks, P.C., 332 S.W.3d 503, 511-17 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (holding that because nonmovant failed to respond to summary judgment motion, nonmovant could permissibly argue on appeal that evidence supporting attorney's fees was insufficient as matter of law to warrant summary judgment, but nonmovant could not argue on appeal that movant failed to segregate nonrecoverable fees because that argument was not presented to trial court in written response).
We overrule Hynds's first issue.
Moreover, we note that Foster prevailed on both his fraud claim, for which rescission is indisputably a remedy, and his breach of contract claim, and that a trial court may grant unilateral rescission of a contract if the plaintiff demonstrates that the defendant has materially breached the contract. See Humphrey v. Camelot Ret. Cmty., 893 S.W.2d 55, 59 (Tex. App.—Corpus Christi 1994, no writ). The decision to grant rescission "lies strictly within the sound discretion of trial courts." Ginn v. NCI Bldg. Sys., Inc., 472 S.W.3d 802, 837 (Tex. App.—Houston [1st Dist.] 2015, no pet.). We cannot say that the trial court abused its discretion in awarding rescission in this case. Thus, even if Hynds had preserved this issue, he would not have prevailed.
Attorney's Fees
Finally, in his fifth issue, Hynds challenges the trial court's award of attorney's fees in favor of Foster. Specifically, Hynds argues that Foster failed to properly present his claim for attorney's fees.
Generally, each party to a dispute bears the cost of his own attorney, absent a contractual or a statutory provision allowing for the recovery of attorney's fees. Sacks v. Hall, 481 S.W.3d 238, 250 (Tex. App.—Houston [1st Dist.] 2015, pet. denied); Gordon v. Leasman, 365 S.W.3d 109, 116 (Tex. App.—Houston [1st Dist.] 2011, no pet.). A person may recover reasonable attorney's fees if the claim is for breach of an oral or written contract. TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (West 2015). To recover attorney's fees under Chapter 38, the fees claimant must "present the claim to the opposing party" and "payment for the just amount owed must not have been tendered before the expiration of the 30th day after the claim is presented." Id. § 38.002(2)-(3) (West 2015); Sacks, 481 S.W.3d at 250. The purpose of the presentment requirement is to "allow the person against whom a claim is asserted an opportunity to pay within thirty days of receiving notice of the claim, without incurring an obligation for attorney's fees." Sacks, 481 S.W.3d at 250 (quoting Helping Hands Home Care, Inc. v. Home Health of Tarrant Cty., Inc., 393 S.W.3d 492, 515 (Tex. App.—Dallas 2013, pet. denied)).
The burden of proof is on the attorney's fees claimant to plead and prove presentment. Id. However, when a claimant avers in his petition that all conditions precedent to recovery have occurred or have been performed, "it is required to prove only those conditions precedent that have specifically been denied by the opposing party." Shin-Con Dev. Corp. v. I.P. Invs., Ltd., 270 S.W.3d 759, 768 (Tex. App.—Dallas 2008, pet. denied); see also TEX. R. CIV. P. 54 (providing that when party generally pleads that all conditions precedent have been performed, "the party so pleading same shall be required to prove only such of them as are specifically denied by the opposite party"); Marrs & Smith P'ship v. Sombrero Oil & Gas Co., --- S.W.3d ---, No. 08-12-00372-CV, 2014 WL 1999006, at *7 (Tex. App.—El Paso May 16, 2014, no pet.) ("[An attorney's fees] claimant is excused from proving presentment if it pleads that all conditions precedent to recovery have been met and the opposing party fails to specifically deny presentment."). Texas Rule of Civil Procedure 93 requires that a pleading "[t]hat notice and proof of loss or claim for damage has not been given as alleged" must be verified. TEX. R. CIV. P. 93(12). "A denial of such notice or such proof shall be made specifically and with particularity." Id.
Foster did not, in either his original or in his amended petition, specifically allege that he presented his claim to Hynds. Instead, in both petitions, he alleged that "[a]ll conditions precedent have been performed or have occurred." In response, Hynds filed a verified denial stating, "Plaintiff has not performed all conditions precedent because Plaintiff did not give notice and proof of his claim as alleged." Hynds did not specifically deny in his answer that Foster presented his claim. Nor did he ever make this argument at any stage before the trial court.
Although Hynds denied that Foster gave "notice and proof of his claim as alleged," he did not specifically deny that Foster had failed to present his contract claim as required by statute. See Shin-Con Dev. Corp., 270 S.W.3d at 768; see also TEX. R. CIV. P. 93(12) (requiring that denial of notice or proof of loss "shall be made specifically and with particularity"). As a result, Hynds has waived his right to complain about Foster's failure to plead and prove presentment on appeal. See Shin-Con Dev. Corp., 270 S.W.3d at 768; see also Marrs & Smith P'ship, 2014 WL 1999006, at *8 (holding that because defendants did not specifically deny in their answers that plaintiff had failed to present its contract claim, plaintiff "was not obligated to produce specific evidence of presentment" and defendants could not "now complain on appeal of [plaintiff's] failure to prove presentment"); Belew v. Rector, 202 S.W.3d 849, 857 (Tex. App.—Eastland 2006, no pet.) ("[B]ecause Rector pleaded that all conditions precedent had been met, Belew was obligated to affirmatively deny presentment. This she did not do. Rector, therefore, was not obligated to produce specific evidence of presentment.").
We overrule Hynds's fifth issue.
Conclusion
We affirm the judgment of the trial court.
Evelyn V. Keyes
Justice Panel consists of Justices Keyes, Higley, and Lloyd.