Opinion
No. 14-03-01392-CV
Memorandum Opinion filed July 27, 2004.
On Appeal from the 80th District Court, Harris County, Texas, Trial Court Cause No. 02-58122.
Affirmed.
Panel consists of Justices YATES, ANDERSON, and HUDSON.
MEMORANDUM OPINION
William J. McMillan, ("Bill"), appeals from the grant of traditional and no-evidence summary judgment motions in favor of appellees, Hillman International Brands, LTD., ("HIB"), Hillman Distributing Company, and Mr. M.H. "Hal" Hillman. Alleging an agreement to purchase HIB for $20 million, Bill asserts that Hal fraudulently entered into this purchase agreement with no intention of consummating the sale. Bill pleaded damages of at least $40 million under the benefit-of-the-bargain rule and of at least $80 million in exemplary damages. On appeal, Bill contends the trial court erred in granting appellees' traditional motion for summary judgment, in granting appellees' no-evidence motion for summary judgment, and in denying his motion for summary judgment. We affirm.
HIB is a limited partnership organized to distribute a number of beer brands in Harris County. Accordingly, HIB was composed of a limited partner, Barksdale, White White, Inc., and a general partner, the Hillman Distributing Company ("HDC"). HIB was primarily owned and operated by the Hillman family. Hal was the president and chairman of HDC. Hal's son, Robert Michael Hillman ("Mike") was HIB's chief executive officer and a HDC board member.
Bill began working as HIB's general manager in 1998. In response to a changing market, the Hillman family began to consider selling HIB. Bill approached Mike about the possibility of buying HIB and running it with existing employees. In March 2000, Bill, Hal, Mike, and Joe Polichino, who was the director of marketing for HIB and executive vice president of Barksdale, White White, met to discuss the sale of HIB. Several weeks later, Mike prepared a letter memorializing this meeting. The document, which appears to be in the form of a letter, was dated April 11, 2000 and was signed by Bill, Hal, Mike, and Joe. It reads, in pertinent part:
In today's business world any company is for sale at the right price. HIB, Ltd is no exception. This has actually been true all along. Having said that I want to go one step further and say the time has come for the Hillman family to exit this business that has been our livelihood for all these years. There are a number of reasons why I've come to this conclusion which I won't go into, but they are compelling enough for me to make this very difficult decision.
It is my desire that we sell to Bill McMillan and we will work with him every way we can to make that happen. We do have a value in mind and hopefully we can reach a workable agreement. I earnestly believe there is great potential to grow our brands in this market for whoever takes this portfolio into the future. That growth will easily pay for the fair price we are asking for the company.
I am in support of the recommended personnel changes advocated by you and agree with your timetable for implementation.
I am very proud of my top management team. You have done a truly admirable job and I will expect that to continue regardless of what might happen. I have great confidence in all of you that we can continue to build on past success and take this company to new heights.
You have my sincere gratitude for a job well done and I will expect the standard of excellence established by your leadership to continue come what may.
Bill contacted a consultant to assist him in purchasing HIB. There is no explanation in the record as to how this consultant would be paid if Bill was successful in acquiring HIB. The consultant eventually withdrew his services, and HIB was sold to an unrelated company for $38.5 million. Bill thereafter initiated this suit for fraud.
Bill contends that the written "agreement" of April 11, together with an oral statement that HIB would be sold for $20 million, created an enforceable contract. Specifically, Bill asserts that appellees made fraudulent representations with respect to the sale of HIB and never intended to sell HIB to Bill. In response, appellees asserted in their first amended original answer that no enforceable contract was formed. They described the document as merely an agreement to negotiate; moreover, appellees argued that the document failed as an enforceable contract because it lacked essential terms to evidence a meeting of the minds, lacked consideration, and violated the Statue of Frauds. Additionally, appellees asserted that benefit-of-the-bargain damages were not available when the underlying contract is unenforceable and that Bill had waived any recovery under the alleged agreement.
Although we do not address the issue of waiver in this opinion, it appears Bill acknowledged he would not able to purchase HIB and was interested in a receiving a portion of the sale price. In a letter to Hal, Mike, and Joe, which is dated January 15, 2002, Bill stated:
Shortly after I came to work for Hillman International Brands Mr. Hillman, Mike Hillman, Joe Polichino and I met. We mutually agreed to grant me the right to purchase the HIB franchise when it became available. We signed an agreement to that affect which was placed in a safe for future consideration. During the past four years the subject came up from time to time but never materialized
The dynamics of the industry changed during this year and obviously has made it more feasible to sell to a strategic buyer. As talks began with the current buyer, an agreement was made to pay me 5% or approximately $2,000,000 of the selling price. I accepted that offer and I understand it has been discussed with certain members of the General and Limited Partnerships. I have always wanted what is best for the company therefore this arrangement is acceptable.
Multiple motions for summary judgment were filed by the parties. Bill filed his motion for summary judgment on April 17, 2003. Appellees filed a traditional motion for summary judgment on May 1, 2003. The trial court denied Bill's motion for summary judgment by written order on September 2, 2003. Subsequently, appellees filed a no-evidence motion for summary judgment on October 28, 2003. In their traditional motion for summary judgment, appellees presented multiple legal theories that would prevent the formation of an enforceable contract. In addition to those defenses set forth in appellee's amended answer, appellees described the April 11 document not as evidence of a contract, but of an unenforceable expression of expectation. Through their no-evidence motion for summary judgment motion, appellees requested that Bill produce competent summary judgment evidence to raise an issue of fact on the elements of his claim. After considering both of appellees' motions, the trial court issued a written order granting appellees' motions on December 1, 2003.
Although the trial court granted both motions for summary judgment, we analyze the grant of the no-evidence summary judgment first. Ford Motor Co. v. Ridgway, No. 02-0552, 2004 WL 250898, at *1(Tex. Feb. 6, 2004). If Bill did not produce summary judgment evidence raising an issue of material fact as required by Rule of Civil Procedure 166a(i), it is unnecessary for us to consider whether appellees' traditional motion for summary judgment was properly granted. Id. (contrasting the different burdens under Rule 166a(c) and (i)). In evaluating whether the no-evidence summary judgment was properly granted, we need only consider the evidence presented in the nonmovant's response. See Saenz v. S. Union Gas Co., 999 S.W.2d 490, 494 (Tex. App.-El Paso 1999, pet. denied) (holding that Rule 166a(i) requires the court to look only at the evidence produced in the nonmovant's response to the present motion and not at other evidence produced in response to a previous no-evidence summary judgment motion that may be in the court's file).
The proponent of a no-evidence motion for summary judgment asserts there is no evidence of one or more essential elements of claims upon which the opposing party would have the burden of proof at trial. See TEX. R. CIV. P. 166a(i); McCombs v. Children's Med. Ctr., 1 S.W.3d 256, 258 (Tex. App.-Texarkana 1999, no pet.). Unlike a movant for traditional summary judgment, a movant for a no-evidence summary judgment does not bear the burden of establishing a right to judgment by proving each claim or defense. See Holmstrom v. Lee, 26 S.W.3d 526, 530 (Tex. App.-Austin 2000, no pet.). A no-evidence summary judgment is essentially a pretrial directed verdict, to which we apply the same legal sufficiency standard of review. See id.; Moore v. K Mart Corp., 981 S.W.2d 266, 269 (Tex. App.-San Antonio 1998, pet. denied). A no-evidence summary judgment is properly granted if the nonmovant fails to produce more than a scintilla of probative evidence raising a genuine issue of fact as to an essential element of a claim on which the nonmovant would have the burden of proof at trial. See TEX. R. CIV. P. 166a(i); Holmstrom, 26 S.W.3d at 530. When both parties move for summary judgment and the trial court grants one motion and denies the other, the reviewing court reviews both parties' summary judgment evidence and determines all questions presented. Bradley v. State ex rel. White, 990 S.W.2d 245, 247 (Tex. 1999). The reviewing court renders the judgment that should have been rendered by the trial court. Id.
In asserting a fraud claim, Bill was required to prove that (1) appellees made material misrepresentation to him, (2) the representation was false, (3) when appellees made the representation, they knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion, (4) appellees made the representation with the intention that Bill act upon it, (5) Bill acted in reliance upon the representation, and (6) Bill suffered injury. Beal Bank, S.S.B v. Schleider, 124 S.W.3d 640, 647 (Tex. App.-Houston [14th Dist.] 2003, pet. denied) (citing Johnson Higgins v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998)). The alleged agreement to sell HIB to Bill is best described as a future promise to act. Bill's alleged future promise to act "constitutes fraud only when made with the intent to deceive and with no intention of performing the act." Beal Bank, 124 S.W.3d at 647. Additionally, by pleading for benefit-of-the-bargain damages, Bill must also prove that this promise to sell HIB is itself enforceable as a contract. See Haase v. Glazner, 62 S.W.3d 795, 799-800 (Tex. 2001) (holding that a plaintiff cannot use a fraud claim to enforce an otherwise unenforceable contract).
In Haase, the supreme court discussed the difference between fraud and fraudulent inducement claims with regard to damages. While proof of an enforceable contract is required for a fraudulent inducement claim, an enforceable contract is not always required for a fraud claim. Haase, 62 S.W.3d at 800. The plaintiff in Haase brought suit for breach of contract, fraud, fraudulent inducement, and unjust enrichment. Id. at 796. Additionally, plaintiff alleged both benefit-of-the-bargain damages and out-of-pocket damages. Id. In rendering a take-nothing judgment on plaintiff's fraud and fraudulent inducement claims for benefit-of-the-bargain damages, the supreme court explained that the award of benefit-of-the-bargain damages would allow plaintiff to enforce a contract that was barred by the Statute of Frauds. Id. at 799. Alternatively, plaintiff's out-of-pocket damages arising out of the fraud claim would not necessarily be barred as they are independent of any alleged contractual agreement. Id. at 799-800. Unlike in Haase, where the plaintiff alleged that he "`made efforts concerning demographics, decor, potential profits, and location,'" Bill alleges no out-of-pocket damages in his petition. See id.
After reviewing Bill's response to the no-evidence summary judgment motion, we hold he produced no evidence of an enforceable contract. The material terms of a contract must be agreed upon before it may be enforced. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). The material terms in a contract for sale necessarily include: (1) identification of the property being sold, (2) the consideration or price paid for the property, and (3) the parties' consent to exchange the property for the agreed price. John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12, 20 (Tex. App.-Houston [1st Dist.] 2000, pet. denied). No binding contract is formed where material terms are open for future negotiation. T.O. Stanley Boot, 847 S.W.2d at 221.
In his response to appellees' motion for summary judgment, Bill presents no evidence that identifies what property is actually for sale. In fact, the summary judgment proof does not define what property was being sold under the alleged agreement. Still to be resolved were such issues as whether the sale would include a leasehold interest in a warehouse, company stock, other hard assets, or merely the distributorship rights. Bill alleges that the binding contract was partly oral and partly written; the enforceable contract was created through the April 11, 2000 document and an oral representation that HIB would be sold for $20 million. However, the alleged oral representation that HIB would be sold for $20 million does not answer "what" would be sold. Likewise, the April 11, 2000 document does not provide these material terms. At best, the document conveys a hope for future negotiations.
Although Bill argues that it was clear that he was only purchasing "the brands," we note that there is evidence that Bill was unsure as to what he was purchasing. Attached to appellees' response to Bill's motion for summary judgment is Bill's deposition testimony that provides:
Q. What is "the company"? When you say "the company," what are you talking about?
A. Talking about Hillman International Brands.
Q. Composed of Hillman Distributing Company and its limited partner?
A. I can't tell you that. I know that the representation here is what I am telling you that I had thought it to be, what I interpreted it to be.
Q. So you thought you had a first option to purchase not only the hard assets on Seamist, but also all the brands?
A. The brands, yes, sir.
Q. As well as the hard assets on Seamist?
A. The hard assets, I'm not sure about. I can't tell you that. I'm telling you what was represented to me, that you will have the opportunity to buy this company as it says.
When questioned about the structure of the sale, he did not know whether he was purchasing company stock or acquiring company assets. Curiously, Bill's own deposition testimony was not attached to either his motion for summary judgment or his response to appellant's no-evidence motion for summary judgment.
Similarly, the other evidence supplied by Bill in his response supports the proposition that the parties were only beginning to negotiate and had not identified what would be sold. For example, the consultant, who was retaind by Bill to assist in the purchase, expressed this specific concern in his engagement letter. In this letter, dated May 3, 2000, the consultant notes, "Bill, before we begin this most important project, it is also crucial to know (1) specifically what markets and assets we are making an effort to acquire and (2) specifically what purchase price, terms and conditions are anticipated by the shareholders of Hillman."
An agreement to negotiate toward the formation of a contract is unenforceable. John Wood Group USA, 26 S.W.3d at 21(including those instances where the agreement calls for a "`good faith effort'" in the negotiations). Without an enforceable contract, Bill cannot survive summary judgment when he seeks benefit-of-the-bargain damages. Haase, 62 S.W.3d at 799-800. We overrule appellant's point of error and affirm the grant of the no-evidence summary judgment motion; accordingly, we need not consider Bill's point of error related to the traditional motion for summary judgment. See Ridgway, 2004 WL 250898, at *1.
In Bill's remaining point of error he contends the trial court erred in denying his motion for summary judgment. Bill alleged in his motion for summary judgment that the parties had entered into an enforceable agreement. As a movant for summary judgment, Bill has the burden to show that no genuine issue of material fact exists and that he is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991). However, after reviewing his summary judgment evidence, which consists of the same evidence produced in his response to appellees' no-evidence motion for summary judgment, we come to the same conclusion that we did in our analysis of appellees' no-evidence motion for summary judgment — no enforceable contract was formed. Thus, we must overrule Bill's final point of error.
The judgment of the trial court is affirmed.