ACCEPTED 05-15-00626-CV FIFTH COURT OF APPEALS DALLAS, TEXAS 10/27/2015 9:14:48 PM LISA MATZ CLERK
NO. 05-15-00626-CV __________________________________________________________________ FILED IN 5th COURT OF APPEALS IN THE FIFTH COURT OF APPEALS DALLAS, TEXAS DALLAS, TEXAS 10/27/2015 9:14:48 PM __________________________________________________________________ LISA MATZ Clerk
ARGENT DEVELOPMENT, L.P.,
Appellant,
v.
LAS COLINAS GROUP, L.P., and BILLY BOB BARNETT,
Appellees. __________________________________________________________________
On Appeal from the 134th District Court, Dallas, Texas Cause No. DC-13-13507 __________________________________________________________________
APPELLEES’ BRIEF __________________________________________________________________
J. Robert Arnett II CARTER SCHOLER ARNETT HAMADA & MOCKLER, PLLC 8150 N. Central Expy., Ste. 500 Dallas, Texas 75206 Tel: (214)-550-8188 Fax: (214)-550-8185
ATTORNEY FOR LAS COLINAS GROUP, L.P. AND BILLY BOB BARNETT
ORAL ARGUMENT REQUESTED TABLE OF CONTENTS
TABLE OF CONTENTS .......................................................................... ii
INDEX OF AUTHORITIES .................................................................... iv
STATEMENT OF THE CASE ............................................................... vii
STATEMENT REGARDING ORAL ARGUMENT .............................. viii
ISSUES PRESENTED ............................................................................ ix
STATEMENT OF FACTS ........................................................................ 1
I. LCG enters into a development agreement with the City of Irving to develop and subsequently lease from the City an entertainment center ................................................... 1
II. LCG executes a promissory note to Argent, and seven months later Barnett agrees to the conditional Guaranty .......................................................................................... 2
III. The LCG Development Agreement expires pursuant to its own terms on August 6, 2012, and litigation ensues ............... 4
IV. The City makes a deal with a new developer and settles the LCG-City Lawsuit ......................................................... 6
V. Argent files suit against LCG and Barnett and the trial court properly grants summary judgment in favor of Barnett on the Guaranty ................................................................ 9
SUMMARY OF THE ARGUMENT ....................................................... 10
STANDARD OF REVIEW ..................................................................... 12
ARGUMENT ........................................................................................... 12
I. LCG’s “release” of its claims arising under the LCG Development Agreement was not a “transfer” of an interest in that contract ................................................................ 13
ii II. That the City and LCG entered into a settlement agreement involving the City’s new developer paying money to LCG does not establish that LCG transferred its interest in the LCG Development Agreement ........................ 21
III. LCG did not sell, assign, or transfer its interest in the Development Agreement because it expired and terminated by its own terms ......................................................... 23
A. The overwhelming evidence establishes the LCG Development Agreement expired before any alleged transfer .................................................................... 23
B. Judicial estoppel cannot apply because the required elements of estoppel are met ................................ 27
CONCLUSION ....................................................................................... 32
CERTIFICATE OF SERVICE ............................................................... 35
CERTIFICATE OF COMPLIANCE WITH RULE 9.4(i) ...................... 36
iii INDEX OF AUTHORITIES
CASES PAGE(S)
Bob Short & Assocs., Inc. v. Heritage Res., Inc., No. 05-95-00472-CV, 1996 WL 223680 (Tex. App.— Dallas Apr. 30, 1996, writ denied) ........................................................... 31
Buck v. Palmer, 382 S.W.3d 525 (Tex. 2012) .......................................... 12
Carpet Servs., Inc. v. George A. Fuller Co. of Texas, Inc., 802 S.W.2d 343 (Tex. App.—Dallas 1990) (en banc), aff’d, 823 S.W.2d 603 (Tex. 1992) ................................................. 16
City of Brownsville v. AEP Texas Central Co., 348 S.W.3d 348 (Tex. App.—Dallas 2011, pet. denied) ........................... 19, 20
City of San Antonio v. Valemas, Inc., No. 04-11- 00768-CV, 2012 WL 2126932 (Tex. App.—San Antonio June 13, 2012, no pet.) ......................................................... 19, 20
Dearborn Stove Co. v. Caples, 236 S.W.2d 486 (Tex. 1951) .......................................................................................................... 20
e2 Creditors’ Trust v. Farris (In re e2 Communications, Inc.), 320 B.R. 849 (Bankr. N.D. Tex. 2004) ............................................................................................. 18-19
Edwards v. Kaye, 9 S.W.3d 310 (Tex. App.—Houston [14th Dist.] 1999, pet. denied)............................................................ 15, 16
Flying Diamond-W. Madisonville L.P. v. GW Petroleum, Inc., No. 10-07-00281-CV, 2009 WL 2707405 (Tex. App.—Waco Aug. 26, 2009, no pet.) ................................ 31
Gabarick v. Laurin Maritime (America) Inc., 753 F.3d 550 (5th Cir. 2014)............................................................................. 29
Galley v. Apollo Associated Servs., Ltd., 177 S.W.3d 523 (Tex. App.—Houston [1st Dist.] 2005, no pet.)............................ 28, 30
iv Griffin Indus. Inc. v. Foodmaker, Inc., 22 S.W.3d 33 (Tex. App.—Houston [14th Dist.] 2000, pet. denied) .............................. 23
Grohman v. Kahlig, 318 S.W.3d 882 (Tex. 2010) ............................... 14-17
Kastigar v. U.S., 406 U.S. 441 (1972) ...................................................... 16
King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003)................................................................................................. 12
Lester v. First American Bank, 866 S.W.2d 361 (Tex. App.—Waco 1993, writ denied) .......................................................... 15, 16
Mangione v. Gov’t Personnel Mutual Life Ins. Co., No. 04-01-00655-CV, 2002 WL 1677457 (Tex. App.— San Antonio July 24, 2002, pet. denied) ............................................. 23-24
Metroflight, Inc. v. Shaffer, 581 S.W.2d 704 (Tex. Civ. App.—Dallas 1979, writ ref’d n.r.e.) ................................................ 28
Nine Syllables, LLC v. Evans, No. 05-13-01677-CV, 2015 WL 3932751 (Tex. App.—Dallas June 26, 2015, no pet. hist.) ............................................................................. 27, 28, 31-32
Pagosa Oil and Gas, LLC v. Marrs and Smith P’ship, 323 S.W.3d 203 (Tex. App.—El Paso 2010, pet. denied) ................................................................................................. 19, 20
Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d 1 (Tex. 2008) ........................................................................... 29, 30
Reynolds-Penland Co. v. Hexter & Lobello, 567 S.W.2d 237 (Tex. Civ. App.—Dallas 1978, writ dism’d) ....................................................................................................... 16
Sims v. State, 82 S.W.3d 730 (Tex. App.—Waco 2002), aff’d, 117 S.W.3d 267 (Tex. Crim. App. 2003). ............................. 17
Southtex 66 Pipeline Co. v. Spoor, 238 S.W.3d 538 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) .............................. 18
v Texas Capital Sec. Mgmt., Inc. v. Sandefer, 80 S.W.3d 260 (Tex. App.—Texarkana 2002, pet. struck) .......................... 30
Texas Real Estate Commission v. Nagle, 767 S.W.2d 691 (Tex. 1989).......................................................................................... 30
Travelers Indem. Co. of Ill. v. Fuller, 892 S.W.2d 848 (Tex. 1995)................................................................................................. 18
Turner v. PV Int’l Corp., 765 S.W. 455 (Tex. App.— Dallas 1988), writ denied, 778 S.W.2d 865 (Tex. 1989) .......................................................................................................... 28
OTHER AUTHORITIES
BLACK’S LAW DICTIONARY (9th ed. 2009)....................................... 13-15, 17
TEX. R. CIV. P. 166a. ................................................................................. 12
vi STATEMENT OF THE CASE
Nature of the case: This is suit over a promissory note and a conditional guaranty. CR 8-50.1
Course of proceedings: After Argent Development, L.P., sued to collect on a promissory note against Las Colinas Group, L.P. (“LCG”) and a conditional guaranty against Billy Bob Barnett, CR 11-12, Barnett moved for summary judgment on Argent’s claims. CR. 718-1619.
Trial Court’s Disposition: After briefing and oral argument, the trial court granted Barnett’s summary judgment motion on Argent’s claims against him. CR 1800. Pursuant to an agreement between LCG and Argent, the trial court then entered an agreed judgment on Argent’s claims against LCG. CR 1802-04.
1 All citations to the Clerk’s Record appear as “CR __.”
vii STATEMENT REGARDING ORAL ARGUMENT
Barnett requests oral argument. While Barnett believes this is a
straightforward case of contract interpretation, oral argument may
assist the Court in addressing Argent’s creative arguments regarding
the legal principles at issue and their application to the facts.
viii ISSUES PRESENTED
Did the trial court properly grant Barnett’s summary judgment
motion where a condition precedent to his liability under a guaranty
agreement was not satisfied?
ix STATEMENT OF FACTS
I. LCG enters into a development agreement with the City of Irving to develop and subsequently lease from the City an entertainment center.
On December 11, 2008, LCG and the City of Irving entered into a
Entertainment Center Development Agreement (the “LCG Development
Agreement”), for LCG to design and develop an entertainment center
that would be owned by the City and leased and operated by LCG under
a long-term lease. CR 747-48, 751-801. The LCG Development
Agreement contemplated contributions towards the cost of the
entertainment center by both LCG (from private funds) and the City
(from bond proceeds). CR 748, 771-81.
The LCG Development Agreement contained a deadline for LCG
to close on its private funding, after the City notified LCG of the
amount of the estimated net bond proceeds. After several amendments,
this deadline was August 6, 2012. CR 748, 860. The last amendment to
the agreement specifically provided, “If the Closing Date does not occur
on or before August 6, 2012, then this Agreement automatically
terminates without any necessity for any further action by either
party.” CR 860.
1 II. LCG executes a promissory note to Argent, and seven months later Barnett agrees to the conditional Guaranty.
One of LCG’s sources of funding for its pre-development costs was
a loan from Argent. On December 1, 2010, LCG and Argent entered
into a Promissory Note. CR 863-65. The maturity date—and LCG’s
obligation to pay—under the Promissory Note was triggered by three
alternative events. Id.
“Doc” Cornutt, the owner of Argent, asked Barnett to personally
guaranty the Promissory Note from LCG, but Barnett declined to do so.
CR 745. Cornutt told Barnett he wanted to make sure he was repaid if
LCG received proceeds from bonds the City was going to issue for the
public financing piece of the entertainment center, or if LCG sold its
Development Agreement to someone else. Id. Barnett told Cornutt
that if one of those things happened, and LCG did not repay the
Promissory Note, Barnett would, but otherwise he was not going to
guaranty the LCG Promissory Note. Id. Based on that understanding,
Barnett and Argent entered into a Guaranty Agreement of the
Promissory Note on July 27, 2011. CR 868.
The Guaranty placed conditions on Barnett’s liability:
2 In the event the Maker [LCG] should not perform the obligations specified in Section 1 on or before the times they are to be performed, subject to the conditions stated in this paragraph 2, the Guarantor [Barnett] guarantees and agrees that Guarantor shall immediately pay, do, and perform all such obligations for the benefit of the Lender [Plaintiff], conditioned only upon the passage of thirty (30) days after the earlier of: a) issuance (the “Bond Issuance”) by the City of Irving, Texas, of city bonds, any portion of the proceeds of which are applied, or publicly announced to be for application, to the project costs for the project commonly referred to as the “Irving Entertainment Center” (the “Entertainment Center”) to be constructed at West Las Colinas Boulevard and Fuller Drive in Irving, Texas, or b) the sale, assignment, or other transfer by Las Colinas Group of all or any interest in that one certain Development Agreement by and between the City of Irving and Las Colinas Group, dated December 11, 2008 (as amended, the “Development Agreement”), or a change in ownership of more than fifty percent (50%) of Las Colinas Group (“LCG Transfer”). The Bond Issuance shall provide public financing for the Entertainment Center construction, as represented by Maker to Lender, and permit Maker to fund the commencement of construction of the Entertainment Center, as well as provide liquidity for payment of the Agreed Credit. Unless and until the passage of thirty (30) days after the earlier of the Bond Issuance or LCG Transfer shall occur, Guarantor shall not be liable hereunder for all or any portion of the Agreed Credit.
CR 745, 868 (emphasis added).
The rationale behind the condition on LCG selling, assigning, or
transferring the LCG Development Agreement was to assure Argent
that if LCG sold, assigned, or transferred its interest in the LCG
3 Development Agreement to someone else who took over the benefits of
the LCG Development Agreement, then Argent would be repaid either
by LCG or Barnett. CR 745. It was never intended or contemplated
that this condition would be triggered by LCG releasing claims against
the City arising out of or related to the LCG Development Agreement.
CR 745, 867. Indeed, according to the attorney who negotiated the
Guaranty, it was not discussed in any negotiations in which he
participated that the condition would be triggered by LCG releasing
claims against the City arising out of settlement of litigation related to
the LCG Development Agreement. CR 867.
III. The LCG Development Agreement expires pursuant to its own terms on August 6, 2012, and litigation ensues.
Due to problems with obtaining an appropriate rating of its bonds,
the City could not proceed with its proposed bond package. CR 749.
LCG attempted to work with the City to restructure the financing and
sought an extension of the August 6, 2012 deadline. CR 749. The City
rejected LCG’s proposal to extend the deadline, and the LCG
Development Agreement expired and terminated by its own terms on
August 6, 2012. CR 749, 860.
4 On August 7, 2012, LCG filed a lawsuit against the City in the
193rd District Court of Dallas County, Texas (the “LCG-City Lawsuit”),
over the termination of the LCG Development Agreement. CR 749.
LCG sought damages, in excess of $139 million, for the City’s wrongful
conduct that resulted in the termination of the LCG Development
Agreement. CR 1044-45. Pleading in the alternative, LCG sought
specific performance on the theory that the City should be estopped
from relying on the termination of the LCG Development Agreement.
CR 1045.
LCG’s live pleading, Plaintiff’s Third Amended Petition,
recognized that the LCG Development Agreement had expired by its
own terms. CR 1021-22. In its Original Answer, the City alleged, “The
development contract between the City and LCG, however, has fully
expired by its own terms.” CR 1053. The City filed a Cross-Motion for
Summary Judgment, in which it stated as an undisputed fact that “the
Closing Date did not occur by August 6, 2012, and the Development
Agreement therefore automatically terminated on that date.” CR 1082.
The City further stated in its motion, “As an initial matter, LCG does
5 not (and cannot) dispute that the Development Agreement expired by
its terms on August 6, 2012.” CR 1108.
In the LCG-City Lawsuit, LCG sought summary judgment on the
City’s immunity defenses to its claims of money damages for breach of
contract and the alternative remedy of specific performance. CR 1120-
54. On March 18, 2013, the 193rd Court entered an Amended Order that
neither the City’s sovereign immunity defenses nor the Texas Local
Government Code precluded LCG’s claims, without ruling on the merits
of the claims. CR 1575-76. The court further granted permission for an
interlocutory appeal. CR 1576.
IV. The City makes a deal with a new developer and settles the LCG-City Lawsuit.
On May 9, 2013, the City entered into a Memorandum of
Understanding (the “MOU”) with a new developer, Irving Music
Factory, LLC (“IMF”), to design, construct, and operate an
entertainment center on the site that had been covered by LCG’s
Development Agreement. CR 876-91. The MOU stated that the LCG
Development Agreement expired by its terms on August 6, 2012, and
that the City desired to negotiate and enter into a separate and
independent development agreement with IMF. CR 877. The MOU
6 included drawings and renderings depicting IMF’s own independent
plans and concepts for the entertainment center. CR 883-90. IMF later
assigned the MOU, with the City’s consent, to ARK Group of Irving, Inc.
(“ARK”). CR 892-96.
On July 25, 2013, the City adopted a resolution approving an
Entertainment Center Development Agreement (the “ARK
Development Agreement”) between the City and ARK. CR 909. The
resolution expressly stated that the LCG Development Agreement
“terminated by its terms on August 6, 2012.” Id. The ARK
Development Agreement—which differed in many respects from the
LCG Development Agreement—also expressly stated that the LCG
Development Agreement “terminated by its terms on August 6, 2012.”
CR 918. The City further adopted a resolution directing the City
Attorney to take all appropriate action related to settlement of the
LCG-City Lawsuit, which resolution stated that the LCG Development
Agreement “terminated by its terms on August 6, 2012.” CR 976.
At the same time, the City and LCG entered into a Settlement
Agreement with respect to the LCG-City Lawsuit, which contained the
following recital:
7 WHEREAS, the LCG Development Agreement terminated on August 6, 2012, thereby also terminating the Lease; and
CR 749, 1580-81, 1592 (emphasis added). In the Settlement
Agreement, LCG:
unconditionally and irrevocably releases and discharges the City . . . from any and all claims, debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, losses, judgments, executions, orders, fees, costs, expenses, and liabilities whatsoever of any kind, whether in law or in equity, whether now known or unknown, accrued or unaccrued, suspected or unsuspected, of any nature whatsoever, which the LCG Releasors have or ever had against the City . . . from the beginning of time to the Effective Date of this Agreement, in any way arising from or related to (i) the LCG Development Agreement . . .
CR 1584 (emphasis added). The release was “intended to be a broad,
general release of all claims the LCG Releasors have or could ever have
against the City Released Group.” CR 1585.
The settlement between LCG and the City was funded by ARK in
order to end the litigation between the City and LCG and clear the way
for ARK to obtain its own development agreement with the City, and
LCG and ARK entered into a separate settlement agreement. CR 749,
1584, 1602. As a result of the Settlement Agreement, the 193rd Court
entered an Agreed Order of Dismissal with Prejudice in the LCG-City
8 Lawsuit on August 5, 2013, in which it dismissed all claims in their
entirety with prejudice. CR 1578.
V. Argent files suit against LCG and Barnett and the trial court properly grants summary judgment in favor of Barnett on the Guaranty.
On November 13, 2013, Argent filed its lawsuit against LCG and
Barnett, alleging that the release of claims in the Settlement
Agreement triggered LCG’s obligations to pay under the Promissory
Note and satisfied the condition precedent to Barnett’s liability under
the Guaranty. Argent conceded that the other alternative trigger
events under the Promissory Note and Guaranty had not occurred.
Argent moved for summary judgment, which the 193rd Court denied.
CR 86, 717.
Barnett then moved for summary judgment on the grounds that a
condition precedent to Barnett’s liability under the Guaranty had not
occurred because a release of claims arising under a contract is not a
transfer of the contract and LCG could not have sold, assigned, or
transferred its interest in the LCG Development Agreement because it
had expired by its own terms. CR 718. The trial court granted
9 Barnett’s motion and dismissed Argent’s claims against Barnett with
prejudice. CR 1816.
Because the Promissory Note contained an alternative trigger
event for the maturity date, the passage of December 31, 2014 (CR 863),
LCG stipulated to the entry of an agreed judgment on the Promissory
Note. 2 CR 1808-10. The Guaranty, however, did not include this
alternative trigger event. CR 868.
Argent appealed. CR 1811-16.
SUMMARY OF THE ARGUMENT
The court should affirm the trial court’s judgment because
summary judgment was proper in this case. The undisputed evidence
establishes that none of the conditions precedent to Barnett’s
obligations to pay under the Promissory Note or Guaranty occurred.
Argent therefore cannot maintain a claim for breach of the Guaranty
against Barnett.
LCG simply released its claims against the City relating to the
LCG Development Agreement. Under these circumstances, the plain,
2 LCG’s interest in this appeal is restricted to the date the promissory note matured, which determines when default rate interest began accruing. CR 863, 1808-09. LCG joins in Barnett’s arguments, except the issue of privity for the application of judicial estoppel.
10 ordinary meanings of “release” and “transfer” are different. Argent
attempts to evade this distinction by inappropriately conflating claims
arising under a contract with an interest in the contract. By signing the
Settlement Agreement, however, LCG merely released any claims it
had arising under the LCG Development Agreement, which as a matter
of Texas law is not the contract or any right or interest in the contract.
ARK supported this arrangement to end the litigation between LCG
and the City in order to clear the way for its own, new development—
not to acquire an interest in the LCG Development Agreement.
Furthermore, LCG could not have transferred any interest in the
LCG Development Agreement because it had expired and terminated on
its own terms eleven months before LCG and the City entered into the
Settlement Agreement. LCG repeatedly acknowledged that the LCG
Development Agreement terminated. Argent attempts to suppress this
fact by resorting to judicial estoppel but fails to show that each required
element of judicial estoppel is met: there is no sworn statement, actual
inconsistency, or advantage gained by LCG’s alternative pleading. Nor
was Barnett in privity with LCG. Argent has failed to show that LCG
sold, assigned, or transferred its interest in the LCG Development
11 Agreement and therefore cannot establish that a condition precedent to
Barnett’s liability under the Guaranty has been satisfied. This Court
should therefore affirm the judgment.
STANDARD OF REVIEW
Summary judgments trigger de novo appellate review. See, e.g.,
Buck v. Palmer, 382 S.W.3d 525, 527 (Tex. 2012). Traditional motions
stand if the movant conclusively disproved an opponent’s vital fact or
conclusively proved their own. TEX. R. CIV. P. 166a. If “the evidence is
so weak as to do no more than create a mere surmise or suspicion of a
fact,” an award of summary judgment should be affirmed. King Ranch,
Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003) (internal quotation
marks omitted). The trial court correctly granted Barnett’s summary
judgment motion under these standards.
ARGUMENT
The trial court properly granted summary judgment because
LCG’s release of claims arising under the LCG Development Agreement
was not a “sale, assignment, or other transfer” of an interest in the LCG
Development Agreement. Nor could LCG have transferred an interest
in the LCG Development Agreement because it expired and terminated
12 by its own terms nearly a year earlier. Therefore, the condition
precedent to Barnett’s liability under the Guaranty was not satisfied
and Barnett has no liability to Argent.
I. LCG’s “release” of its claims arising under the LCG Development Agreement was not a “transfer” of an interest in that contract.
The parties did not agree that a release of claims against the City
arising under the LCG Development Agreement would trigger LCG’s
obligation to pay or Barnett’s liability under the Guaranty. In the
Settlement Agreement, LCG only released its claims against the City
relating to the LCG Development Agreement. CR 1584. LCG did not
“release” the LCG Development Agreement itself, and did not purport to
sell, assign, or transfer any interest in the LCG Development
Agreement to anyone. Further, the LCG Development Agreement itself
is distinct from claims that arise under it.
The plain, ordinary meanings of “transfer” and “release” are
different. The principal definition of “release” is, “Liberation from an
obligation, duty, or demand; the act of giving up a right or claim to the
person against whom it could have been enforced.” BLACK’S LAW
DICTIONARY 1403 (9th ed. 2009). That concept is distinct and different
13 from the concept of “transferring” something. “Transfer” when used as
a verb means, “1. To convey or remove from one place to another; to
pass or hand over from one to another, esp. to change over the
possession or control of. 2. To sell or give.” Id. at 1636. LCG’s release of
claims arising under the LCG Development Agreement did not convey,
hand over, or change the possession and control of the LCG
Development Agreement to anyone, and was not a “transfer” of an
interest in that contract. Instead, it was the giving up of claims against
the City. The plain meaning of the language in the Guaranty is
consistent with the parties’ intention at the time the Guaranty was
executed. CR 745, 867.
Argent’s reliance on Grohman v. Kahlig, 318 S.W.3d 882 (Tex.
2010), is misplaced. Grohman did not decide whether releasing claims
arising under a contract constitutes transferring an interest in the
contract. Grohman, 318 S.W.3d at 888. In fact, there was no “release”
involved in the case at all. Instead, the issue was whether the
conversion of corporations to limited partnerships constituted a
“transfer” of their stock, and the Court concluded it did not. Id.
14 The sole reference to “release” in Grohman was in a quote from
Black’s Law Dictionary of one of three alternative definitions of
“transfer” when used as a noun, and in which “release” appears among
several examples of disposing of or parting with an asset. Id. (quoting
BLACK’S LAW DICTIONARY 1636 (9th ed. 2009)). From this quote, Argent
draws the fallacious conclusion that “release” always means “transfer.”
That is an unjustified extrapolation from a quoted definition. Further,
words have different meanings, depending on how they are used.
Another definition of the noun “transfer,” and one applicable here, is, “A
conveyance of property or title from one person to another.” BLACK’S
LAW DICTIONARY 1636 (9th ed. 2009). LCG’s release of claims arising
under the LCG Development Agreement did not convey property or title
to anyone, and was not a “transfer.”
The single reference to “release” in Grohman is, at most, dictum—
an observation or remark made concerning some rule, principle, or
application of law suggested in a particular case, which observation or
remark is not necessary to the determination of the case. See Edwards
v. Kaye, 9 S.W.3d 310, 314 (Tex. App.—Houston [14th Dist.] 1999, pet.
denied); Lester v. First American Bank, 866 S.W.2d 361, 363 (Tex.
15 App.—Waco 1993, writ denied). Dictum does not create binding
precedent. Edwards, 9 S.W.3d at 314; Lester, 866 S.W.2d at 363;
Reynolds-Penland Co. v. Hexter & Lobello, 567 S.W.2d 237, 241 (Tex.
Civ. App.—Dallas 1978, writ dism’d). Broad language in an opinion
that is unnecessary to the court’s decision cannot be considered binding
authority. Kastigar v. U.S., 406 U.S. 441, 454-55 (1972).
Instead, the binding effect of a prior decision is determined by
reference to the important facts in that case and to the decision actually
made by that court. See Edwards, 9 S.W.3d at 314; Lester, 866 S.W.2d
at 363; Reynolds-Penland, 567 S.W.2d at 241. A prior decision is
binding precedent only if it addressed the precise question presented in
the current case, and if the facts on which the prior case was based are
substantially similar to those in the current case. Lester, 866 S.W.2d at
363; Carpet Servs., Inc. v. George A. Fuller Co. of Texas, Inc., 802
S.W.2d 343, 344 (Tex. App.—Dallas 1990) (en banc), aff’d, 823 S.W.2d
603 (Tex. 1992).
Applying these principles to Grohman makes clear that Argent’s
extrapolation of Grohman is incorrect and certainly not controlling in
this case. The precise question here—does releasing of claims arising
16 under a contract constitute transferring an interest in the contract—
was not addressed in Grohman. Nor are the facts of this case remotely
similar to the facts in Grohman. And, the inclusion of “release” among
examples in the definition was not necessary to the Court’s
determination. The result would have been the same if the definition
had omitted the examples, i.e., “Any mode of disposing of or parting
with an asset or an interest in an asset.”
Argent’s argument that the quotation of one definition in an
opinion is a binding conclusion that such definition—in its entirety—
applies in all cases and circumstances and excludes all other
definitions3 is illogical. And, Argent’s authorities do not support that
proposition. Sims v. State was a criminal case involving a defendant
challenging whether the evidence was legally sufficient to establish he
committed a “constructive transfer” of a controlled substance. 82
S.W.3d 730, 733-34 (Tex. App.—Waco 2002), aff’d, 117 S.W.3d 267 (Tex.
Crim. App. 2003). The court found that the definition of “constructive
transfer” provided by an earlier criminal case was not dictum but rather
necessary to its holding, and applied it against the defendant. Id. at 3 See BLACK’S LAW DICTIONARY 1403 (setting forth eight different definitions of “release”) and compare BLACK’S LAW DICTIONARY 1636 (setting forth five different definitions of “transfer” as a noun and verb).
17 733-34. Argent’s other authority actually undermines its argument
because the Court found language in its earlier cases to be dicta because
of the differences between those cases and the one before it. Travelers
Indem. Co. of Ill. v. Fuller, 892 S.W.2d 848, 851 n. 3 (Tex. 1995).
Argent attempts to salvage its “transfer” argument with two
inapposite cases. First, Argent repeats its flawed Grohman argument
with Southtex 66 Pipeline Co. v. Spoor, 238 S.W.3d 538, 548 (Tex.
App.—Houston [14th Dist.] 2007, pet. denied), which quoted the same
definition of “transfer” from Black’s Law Dictionary. Southtex did not
determine whether a release is a transfer, and certainly did not hold
that a release is always a transfer. The issue in Southtex was whether
rights in an easement acquired through a condemnation proceeding
could be assigned through a lease. See Southtex, 238 S.W.3d at 548. As
with Grohman, no release was involved, and therefore the issue was not
integral to or even presented in the determination of that case. See id.
Next, Argent relies on e2 Creditors’ Trust v. Farris (In re e2
Communications, Inc.), 320 B.R. 849 (Bankr. N.D. Tex. 2004), but fails
to recognize that the court there addressed “whether a release is a
‘transfer’ under the Bankruptcy Code.” e2 Creditors’ Trust, 320 B.R. at
18 856 (emphasis added). The court based its decision on the definition of
“transfer” under the Bankruptcy Code and its legislative history, which
revealed that the definition was drafted to be as broad as possible. Id.
The issue was whether a release of claims constituted a “transfer” for
purposes of fraudulent transfer and preference claims. The court first
concluded that a claim or cause of action is property of the estate, and
then concluded that releasing those claims was a method of disposing of
or parting with those claims. Of course, in this case, what was required
was a “transfer” of an interest in the contract itself, not claims arising
under the contract.
Claims arising under a contract do not constitute an interest in
the contract. Texas law distinguishes between a contracting party’s
ability to assign rights under a contract and that party’s ability to
assign causes of action arising from the breach of that contract. See
City of San Antonio v. Valemas, Inc., No. 04-11-00768-CV, 2012 WL
2126932 at *8 (Tex. App.—San Antonio June 13, 2012, no pet.); City of
Brownsville v. AEP Texas Central Co., 348 S.W.3d 348, 358 (Tex. App.—
Dallas 2011, pet. denied); Pagosa Oil and Gas, LLC v. Marrs and Smith
P’ship, 323 S.W.3d 203 (Tex. App.—El Paso 2010, pet. denied). Texas
19 courts uniformly hold that anti-assignment clauses in contracts do not
prohibit a party from assigning causes of action arising from an alleged
breach of the contract. See Dearborn Stove Co. v. Caples, 236 S.W.2d
486, 490 (Tex. 1951); Valemas, 2012 WL 2126932 at *8; AEP Texas, 348
S.W.3d at 358; Pagosa Oil, 323 S.W.3d at 212.
In the anti-assignment clause in Valemas, Valemas agreed not to
“assign, transfer, convey, sub-let or otherwise dispose of this contract, or
any portion thereof, or any right, title, or interest in, to or under the
same.” Valemas, 2012 WL 2126932 at *8. The court held that the
clause did not preclude Valemas from assigning causes of action arising
from an alleged breach of the contract because, “A breach of contract
claim is not a right or interest identified in the contract.” Id. at *8-9.
If assigning a cause of action for breach of a contract does not
constitute an assignment or transfer of the contract itself or a right or
interest in the contract, then releasing such claims cannot constitute a
transfer of the contract or any right or interest in the contract. LCG did
not sell, assign, or otherwise transfer the LCG Development Agreement
or any interest in the LCG Development Agreement. It simply released
its claims arising under the contract, which as a matter of Texas law is
20 not the contract or any right or interest in the contract. Therefore, the
condition precedent to Barnett’s liability under the Guaranty was not
satisfied.
Argent repeatedly emphasizes that, according to the Settlement
Agreement, LCG released its “covenants, contracts [and] agreements” in
“any way arising from or related to” the “development agreement.”
Brief at 15, 16, 19. This is an attempt at misdirection. The full
language of the Settlement Agreement demonstrates that this provision
“releases” and “discharges” the City from “claims” of whatever kind or
description “arising from” or “related to” the LCG Development
Agreement. CR 1584-86. It does not “transfer” anything to anyone.
And, “contracts” “arising from or related to” the LCG Development
Agreement are distinct from the LCG Development Agreement itself.
Accordingly, the condition precedent to Barnett’s liability under the
Guaranty was not satisfied.
II. That the City and LCG entered into a settlement agreement involving the City’s new developer paying money to LCG does not establish that LCG transferred its interest in the LCG Development Agreement.
Argent erroneously argues that the City entering into a
settlement agreement with LCG that (1) involved ARK paying money to
21 LCG and Barnett and (2) cleared the way for ARK to proceed with its
own development agreement for the entertainment center somehow
established LCG transferred its interest in the LCG Development
Agreement to ARK. Brief at 13-14. However, ARK did not acquire or
succeed to any of LCG’s rights under the LCG Development Agreement
by virtue of the Settlement Agreement but instead independently
obtained a new and different development agreement based upon the
MOU it had entered into with the City on May 9, 2013. CR 726-27.
It is undisputed that the City and LCG entered into the
Settlement Agreement to resolve claims between them in the LCG-City
Lawsuit. CR 726-27, 876, 1580-81, 1584, 1592. The mere fact that ARK
funded the Settlement Agreement to end the litigation between the City
and LCG—including LCG’s $139 million claim for damages for the
termination of the LCG Development Agreement—and clear the way for
ARK to proceed with its own development agreement with the City does
not establish that LCG transferred its interest in the LCG Development
Agreement to ARK. There is a material difference between entering
into a new and independent agreement and assuming an existing
22 agreement. Because this case involves the former, Argent’s inventive
arguments are without merit.
III. LCG did not sell, assign or transfer its interest in the LCG Development Agreement because it had expired and terminated by its own terms.
LCG could not have sold, assigned, or transferred any interest in
the LCG Development Agreement when it entered into the Settlement
Agreement with the City because the LCG Development Agreement had
terminated on its own terms on August 6, 2012, almost a year before
LCG and the City entered into the Settlement Agreement. Judicial
estoppel does not apply and cannot change this result.
A. The overwhelming evidence establishes the LCG Development Agreement expired before any alleged transfer.
Argent’s claim that LCG transferred its interest in the LCG
Development Agreement when it settled with the City on July 24-25,
2013 fails in light of the undisputed fact that the LCG Development
Agreement expired on its own terms more than eleven months earlier.
See Griffin Indus. Inc. v. Foodmaker, Inc., 22 S.W.3d 33, 36 (Tex. App.—
Houston [14th Dist.] 2000, pet. denied) (“Unlike the mythical Phoenix,
contracts that terminate by their express terms do not rise again.”); see
also Mangione v. Gov’t Personnel Mutual Life Ins. Co., No. 04-01-00655-
23 CV, 2002 WL 1677457, at *3 (Tex. App.—San Antonio July 24, 2002,
pet. denied). The facts demonstrate that the LCG Development
Agreement terminated on its own terms on August 6, 2012:
• The LCG Development Agreement, as amended, provided that, “If the Closing Date does not occur on or before August 6, 2012, then this Agreement automatically terminates without any necessity for any further action by either party.” CR 860.
• The Closing Date did not occur on or before August 6, 2012, and the LCG Development Agreement expired and terminated pursuant to its own terms on that date. CR 749.
• The May 9, 2013 MOU between the City and IMF recognized that the LCG Development Agreement “terminated by its terms on August 6, 2012.” CR 877.
• The City’s resolution approving the ARK Development Agreement expressly stated that the LCG Development Agreement “terminated by its terms on August 6, 2012.” CR 909.
• The ARK Development Agreement contains a recital that the LCG Development Agreement “terminated by its terms on August 6, 2012.” CR 918.
• In the Settlement Agreement between LCG and the City, the parties specifically agreed that, “the LCG Development Agreement terminated on August 6, 2012.” CR 1581.
• The City’s resolution approving the settlement with LCG expressly stated that the LCG Development Agreement “terminated by its terms on August 6, 2012.” CR 976.
In the LCG-City Lawsuit, LCG alleged that, “the Development
Agreement would automatically terminate if LCG’s financing was not
closed by August 6, 2012.” CR 1027. It further alleged that the City
24 Council held a special meeting on “August 6, 2012, the final day of the
term of the [LCG] Development Agreement,” to consider a proposed
resolution to extend the term of the agreement, but the resolution was
voted down. CR 1038. It alleged a claim for breach of contract seeking
money damages resulting from the loss of LCG’s rights under the LCG
Development Agreement. CR 1044-45. Pleading in the alternative, it
sought specific performance ordering the City to issue bonds, arguing
that the City by virtue of its conduct should be estopped from arguing
that the LCG Development Agreement had expired. CR 1045.
Argent does not refute that the LCG Development Agreement, as
amended, provided that, “If the Closing Date does not occur on or before
August 6, 2012, then this Agreement automatically terminates without
any necessity for any further action by either party.” CR 738, 860. It is
further undisputed that the Closing Date did not occur. As admitted by
Argent, the City, ARK, and LCG have consistently represented that the
LCG Development Agreement expired on August 6, 2012 in various
communications, agreements, and resolutions. CR 738-39. Because the
undisputed facts show that the LCG Development Agreement
25 terminated well before the settlement, there was nothing left that could
have been transferred.
While Argent makes an argument about the “four corners” of the
Settlement Agreement, it overlooks the express language that
eviscerates its argument. The Settlement Agreement expressly states,
“the LCG Development Agreement terminated on August 6, 2012.” CR
1581. Under Argent’s own authorities, this express language
conclusively establishes the LCG Development Agreement had
terminated.
Argent points to the fact that ARK funded the Settlement
Agreement between the City and LCG to claim that the LCG
Development Agreement did not expire prior to the alleged “transfer”
that purportedly occurred through the Settlement Agreement. Argent’s
argument that ARK had no other reason to pay Defendants under the
Settlement Agreement is incorrect because it is undisputed that this
payment was actually made to end the litigation between the City and
LCG, including the $139 million claim for termination of the LCG
Development Agreement. The Settlement Agreement itself expressly
provides that “the Parties to this Agreement now desire to resolve their
26 disputes and to compromise and settle all claims which each may have
against the other, without any admission of liability on the part of
anyone.” CR 1581.
Argent fails to explain how ARK’s intentions to clear the way for
its new development constitutes “an absurd result.” Brief at 16.
However, the plain language of the Guaranty defeats Argent’s claim.
The Guaranty does not obligate Barnett if LCG settled a lawsuit over
the LCG Development Agreement, regardless of who funded the
settlement. Under the unambiguous language of the Guaranty, the
Court should affirm the trial court’s award of summary judgment.
B. Judicial estoppel cannot apply because the required elements of estoppel are not met.
Barnett is not judicially estopped by LCG’s pleading in the
alternative in the LCG-City Lawsuit because the elements for judicial
estoppel are not met. Under Texas law, judicial estoppel requires: “(1) a
sworn, prior inconsistent statement made in a judicial proceeding; (2)
which was successfully maintained in the prior proceeding; (3) not made
inadvertently or by mistake, or pursuant to fraud or duress; and (4)
which is deliberate, clear, and unequivocal.” Nine Syllables, LLC v.
Evans, No. 05-13-01677-CV, 2015 WL 3932751, at *4 (Tex. App.—
27 Dallas June 26, 2015, no pet. hist.); Galley v. Apollo Associated Servs.,
Ltd., 177 S.W.3d 523, 528-29 (Tex. App.—Houston [1st Dist.] 2005, no
pet.). Judicial estoppel does not apply here for three reasons: (1) there
was no sworn, prior inconsistent statement; (2) the position was not
successfully maintained; and (3) Barnett was not a party or in privity
with a party to the lawsuit.
If there is no sworn inconsistent statement, judicial estoppel
cannot apply. See Turner v. PV Int’l Corp., 765 S.W.2d 455, 461 (Tex.
App.—Dallas 1988), writ denied, 778 S.W.2d 865 (Tex. 1989);
Metroflight, Inc. v. Shaffer, 581 S.W.2d 704, 709 (Tex. Civ. App.—Dallas
1979, writ ref’d n.r.e.). Argent can point to no sworn statement,
therefore, judicial estoppel cannot apply.
Contrary to Argent’s argument, Nine Syllables did not abrogate
this requirement, but recognized that judicial estoppel requires “a
sworn, prior inconsistent statement.” Nine Syllables, 2015 WL
3932751, at *4 (emphasis added). The appellant in Nine Syllables
argued that judicial estoppel could not apply because the pleading in
the prior lawsuit was not sworn. Id. at *5. This Court rejected that
argument because the pleading was supported by sworn testimony—
28 live testimony at an injunction hearing and in affidavits. Id. (“The
estoppel in this case is not based solely on Jacque’s pleadings in the
prior lawsuit. The estoppel arises from Jacque’s sworn testimony . . .”).
The Court did not endorse the notion proffered by Argent that judicial
estoppel does not require a sworn statement.
Additionally, if there is no actual inconsistency,4 judicial estoppel
cannot apply. Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d
1, 6-7 (Tex. 2008). Here, there is no actual inconsistency—LCG did not
plead that the LCG Development Agreement had not terminated by its
own terms on August 6, 2012, and indeed, recognized in its pleadings
that it had so terminated. CR 1012-13, 1027. LCG, pleading in the
alternative, alleged that the City should be estopped from arguing that
it had terminated. CR 1045. Reading the pleading as a whole, LCG did
not make a deliberate, clear, and unequivocal statement that the LCG
Development Agreement had not expired on August 6, 2012.
4 Argent cites Gabarick v. Laurin Maritime (America) Inc., 753 F.3d 550 (5th Cir. 2014) for the proposition that pleading in the alternative does not preclude judicial estoppel. Gabarick, however, merely points out that judicial estoppel only applies when all of the elements of estoppel are present. See Gabarick, 753 F.3d at 554 (noting that a court’s reliance on an alternative argument “makes all the difference.”). In that case, the party had convinced the prior court to accept its prior position and prevailed on the merits based on that position. Id.
29 Further, if the party does not gain some advantage by the
statement, e.g., some relief from the prior court, judicial estoppel cannot
apply. See Pleasant Glade, 264 S.W.3d at 8. Also, judicial estoppel does
not apply where the party’s prior claims were dismissed. See Galley,
177 S.W.3d at 529, n. 3. LCG did not obtain any relief on its alternative
claim because the 193rd Court did not rule on the merits of that claim—
it simply ruled that the City’s immunity defenses did not preclude the
claim, and later dismissed those claims.
Judicial estoppel also does not apply because Barnett was not in
privity with LCG and therefore cannot be bound by LCG’s statements in
the LCG-City Lawsuit. Privity does not exist merely when persons are
interested in the same question, but requires an identity of interest in
the legal right actually litigated. Texas Real Estate Commission v.
Nagle, 767 S.W.2d 691, 694 (Tex. 1989). Privity connotes those who are
in law so connected with a party to the earlier suit as to have such an
identity of interest that the party represented the same legal right. See
Texas Capital Sec. Mgmt., Inc. v. Sandefer, 80 S.W.3d 260, 266
(Tex.App.—Texarkana 2002, pet. struck). For example, privity does not
exist where a party is involved in both suits but in different capacities.
30 See Flying Diamond-W. Madisonville L.P. v. GW Petroleum, Inc., No.
10-07-00281-CV, 2009 WL 2707405 *6 (Tex. App.—Waco Aug. 26, 2009,
no pet.).
Barnett did not have an identity of interest with LCG in the legal
rights being litigated in the City-LCG Lawsuit because he was not a
party to and had no legal interest in the LCG Development Agreement.
The fact that his companies had separate agreements with LCG does
not give him a legal interest in LCG’s agreement with the City.
Accordingly, LCG could not have represented his interests. There also
was no evidence that Barnett controlled the prior litigation or was a
successor in interest to LCG. Under these circumstances, there is no
privity. See Bob Short & Assocs., Inc. v. Heritage Res., Inc., No. 05-95-
00472-CV, 1996 WL 223680 *2 (Tex. App.—Dallas Apr. 30, 1996, writ
denied).
Argent’s reliance on Nine Syllables to assert privity exists here is
misplaced. In that case, a wife joined a bank in her divorce proceeding,
claiming that a note and deed of trust were invalid and subject to
forfeiture because the property was her homestead. Nine Syllables,
2015 WL 3932751 at *2. She obtained a temporary injunction
31 preventing the bank from foreclosing. Id. She and her new husband
then formed a company to buy the note and deed of trust from the bank.
Id. at *3. When the new company demanded payment from the
husband, he filed a lawsuit seeking declaratory judgment that the note
and deed of trust were unenforceable. Id. This Court affirmed the trial
court’s finding that the company was in privity with the wife because
she formed the company for the purpose of acquiring the note and deed
of trust, she signed the purchase agreement on behalf of the company,
she was a part owner and managing member of the company, and she
controlled the company’s actions in the lawsuit. Id. at *6.
There are no remotely similar facts in this case. Barnett was not
an owner or manager of LCG, did not sign any agreements on behalf of
LCG, and did not control LCG’s actions in the LCG-City Lawsuit.
There was no privity and, for this additional reason, judicial estoppel
does not apply.
CONCLUSION
The trial court correctly awarded Barnett summary judgment.
The facts here conclusively establish that the LCG Development
Agreement terminated by its own terms on August 6, 2012.
32 Consequently, LCG could not have sold, assigned, or transferred the
LCG Development Agreement. Moreover, regardless of whether the
LCG Development Agreement had terminated or not, the facts
conclusively establish that LCG did not sell, assign, or transfer the LCG
Development Agreement or any interest in it. Texas law distinguishes
between claims arising under a contract and rights or an interest in the
contract. This case involves the former, not the latter. A “release” of
claims arising under a contract is not a “transfer” of a contract or any
interest in it. Accordingly, the Settlement Agreement did not trigger
Barnett’s obligation to pay under the Guaranty, the condition precedent
to Barnett’s performance under the Guaranty did not occur, and the
trial court’s judgment should be affirmed.
33 Date: October 27, 2015 Respectfully submitted,
/s/ J. Robert Arnett II J. Robert Arnett II Texas Bar No. 01332900 barnett@carterscholer.com CARTER SCHOLER ARNETT HAMADA & MOCKLER, PLLC 8150 N. Central Expy., Ste. 500 Dallas, Texas 75206 Tel: (214)-550-8188 Fax: (214)-550-8185
34 CERTIFICATE OF SERVICE
I certify that on October 27, 2015, I served all counsel of record
with a copy of Appellees’ Brief via the Court’s electronic filing system.
/s/ J. Robert Arnett II J. Robert Arnett II
35 CERTIFICATE OF COMPLIANCE WITH RULE 9.4(i)
Certificate of Compliance with Type-Volume Limitation, Typeface Requirements, and Type Style Requirements
1. This brief complies with the type-volume limitation of TEX.
R. APP. P. 9.4(i)(2)(B) because this brief contains 6,709 words, excluding
the parts of the brief exempted by TEX. R. APP. P. 9.4(i)(1).
2. This brief complies with the typeface requirements of TEX. R.
APP. P. 9.4(e) and the type style requirements of TEX. R. APP. P. 9.4(d)
because this brief has been prepared in a proportionally spaced typeface
using Microsoft Word for Mac 2011 in 14 font size and Century
Schoolbook style.
Date: October 27, 2015 /s/ J. Robert Arnett II J. Robert Arnett II Attorney for Las Colinas Group, L.P. and Billy Bob Barnett