ACCEPTED 03-17-00525-CV 21562019 THIRD COURT OF APPEALS AUSTIN, TEXAS 1/2/2018 4:24 PM JEFFREY D. KYLE CLERK ORAL ARGUMENT REQUESTED
NO. 03-17-00525-CV FILED IN 3rd COURT OF APPEALS AUSTIN, TEXAS 1/2/2018 4:24:47 PM JEFFREY D. KYLE IN THE COURT OF APPEALS Clerk FOR THE THIRD DISTRICT OF TEXAS AUSTIN, TEXAS
HENRY NEAL, Appellant v.
WAYNE GUIDRY AND KAT GUIDRY, Appellees.
Appeal from County Court at Law No. 2, Hay County, Texas Trial Court Cause No. 13-0776C The Honorable David Glickler, Presiding
APPELLANT’S REPLY BRIEF
Michael J. Morris Texas Bar No. 24002651 Morris & Bermudez, pllc 299 W. San Antonio New Braunfels, Texas 78130 Phone 830-626-8779 Fax 830-627-0890 mmorris@mmbiblaw.com
Attorney for Appellants TABLE OF CONTENTS
Index of Authorities………………………………………………...................ii
Argument…………………………………………………………………….…...1
A. The trial court erred by failing to declare the June 18, 2013 contract for the sale of the collection for $90,000—including Congressional Medals of Honor—void because part of the consideration (the Medals of Honor) was illegal and because there was no meeting of the minds as to buying the collection without the Medals of Honor.
Prayer……………………………………………………………………………33
i INDEX OF AUTHORITIES
CASES
2001 Trinity Fund, LLC v. Carrizo Oil & Gas, Inc., 393 S.W.3d 442
(Tex.App.--Houston [14th Dist.] 2012, pet. denied) ............................... 8
Alaniz v. Jones & Neuse, Inc., 907 S.W.2d 450 (Tex.1995) .................... 21
Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420 (Tex. 1997) ..................... 24
Anderson, Greenwood & Co. v. Martin, 44 S.W.3d 200 (Tex. App.—
Houston [14th Dist.] 2001, pet. denied) ......................................... 22, 27
Argo Data Res. Corp. v. Shagrithaya, 380 S.W.3d 249 (Tex. App.--Dallas
2012, pet. denied) ................................................................................. 16
BNSF Ry. Co. v. Epple, 07-15-00355-CV, 2016 WL 7010581 (Tex. App.--
Amarillo Nov. 30, 2016, pet. denied).................................................... 21
Carruth v. Allen, 368 S.W.2d 672 (Tex.App.--Austin 1963, no writ) ..... 27
Cox Feedlots, Inc. v. Hope, 498 S.W.2d 436 (Tex. App.--San Antonio
1973, writ ref'd n.r.e.), .......................................................................... 10
Daimler Chrysler Motors Co., LLC v. Manuel, 362 S.W.3d 160 (Tex.
App.—Fort Worth 2012, no pet.) ............................................................ 7
Dallas Market Center Development Co. v. Liedeker, 958 S.W.2d 382
(Tex.1997) ............................................................................................. 20
ii Dietz v. Van Nortwick, 188 S.W.2d 590 (Tex. Civ. App.—Galveston
1945, writ ref’d) ........................................................................ 13, 14, 15
Double Diamond, Inc. v. Saturn, 339 S.W.3d 337 (Tex. App.—Dallas
2011, pet. denied) ................................................................................. 17
Greenstein, Logan & Co. v. Burgess Marketing, Inc., 744 S.W.2d 170
(Tex. App.--Waco 1987, writ denied) .................................................... 22
Hartsell v. Town of Talty, 130 S.W.3d 325 (Tex.App.-Dallas 2004, pet.
denied ................................................................................................... 17
Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996)............. 4
In re Int'l Profit Assocs., Inc., 274 S.W.3d 672 (Tex. 2009) .............. 24, 26
In re Kasschau, 11 S.W.3d 305 (Tex. App.—Houston [14th Dist.] 1999,
no pet.), ................................................................................................... 7
In re Stevenson, 27 S.W.3d 195 (Tex. App.—San Antonio 2000, no pet.)
.................................................................................................. 18, 20, 21
In re VNA Inc., 403 S.W.3d 483 (Tex. App.—El Paso 2013, no pet)....... 25
Int'l Bus. Machines Corp. v. Lufkin Indus., Inc., 12-15-00223-CV, 2017
WL 2962836 (Tex. App.—Tyler July 12, 2017, no pet.) ....................... 26
Johnson v. World All. Fin. Corp., 830 F.3d 192 (5th Cir. 2016)............. 25
iii Karns v. Jalapeno Tree Holdings, L.L.C., 459 S.W.3d 683 (Tex. App.—El
Paso 2015, pet. denied)........................................................................... 4
Kelly v. Rio Grande Computerland Group, 128 S.W.3d 759 (Tex. App.—
El Paso 2004, no pet.) ........................................................................... 16
KSWO Television Co., Inc. v. KFDA Operating Co., LLC, 442 S.W.3d 695
(Tex. App.—Dallas 2014, no pet.) .......................................................... 5
Lawrence v. Fed. Home Loan Mortg. Corp., 808 F.3d 670 (5th Cir. 2015)
.............................................................................................................. 25
Magee v. I. & G. N. Wood & Coal Co., 269 S.W.2d 498 (1954). .............. 12
McFarland v. Haby, 589 S.W.2d 521 (Tex.App.--Austin 1979, writ ref'd
n.r.e.) ................................................................................................. 7, 12
Methodist Hosps. of Dallas v. Corp. Communicators, Inc., 806 S.W.2d
879 (Tex.App.--Dallas 1991, writ denied) ............................................ 19
Missouri Pac. R. Co. v. Cross, 501 S.W.2d 868 (Tex. 1973) .................... 19
Modica v. Howard, 161 S.W.2d 1093 (Tex. Civ. App.–Beaumont 1942,
no writ) ................................................................................................. 22
Montgomery v. Browder, 930 S.W.2d 772 (Tex.App.—Amarillo 1996,
writ denied) ............................................................................................ 7
iv Nat'l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015). 24,
Placencio v. Allied Indus. Int'l, Inc., 724 S.W.2d 20 (Tex. 1987) 21, 22, 27
Progressive County Mut. Ins. Co. v. Kelley, 284 S.W.3d 805 (Tex. 2009) . 5
Prudential Ins. Co. of Am. v. Jefferson Associates, Ltd., 896 S.W.2d 156
(Tex. 1995) ............................................................................................ 24
R.R. Comm'n of Texas v. Gulf Energy Expl. Corp., 482 S.W.3d 559 (Tex.
2016) ..................................................................................................... 32
Ramos v. Frito–Lay, Inc., 784 S.W.2d 667 (Tex.1990), ........................... 11
Raywood Rice Canal & Milling Co. v. Erp, 146 S.W. 155 (Tex. 1912) ... 12
Redgrave v. Wilkinson, 208 S.W.2d 150 (Tex. Civ. App.—Waco 1948,
writ ref’d n.r.e.)............................................................................... 13, 14
Rogers v. Wolfson, 763 S.W.2d 922 (Tex. App.—Dallas 1989, writ
denied) .................................................................................................. 11
Royal Indemnity Company v. Marshall, 388 S.W.2d 176 (Tex. 1965)...... 7
Royal Maccabees Life Ins. Co. v. James, 146 S.W.3d 340 (Tex. App.—
Dallas 2004, pet. denied) ........................................................................ 4
Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997) ..... 24
Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432 (Tex. 1986) ............... 25
v State Dep't of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235
(Tex.1992) ............................................................................................. 21
State Dept. of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235 (Tex.
1992) ..................................................................................................... 18
Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493 (Tex. 1991), .................. 11
T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218 (Tex.1992) .. 16
Texas Dept. of Human Services v. Hinds, 904 S.W.2d 629 (Tex.1995) .. 21
Volmich v. Neiman, 02-12-00050-CV, 2013 WL 978770 (Tex. App.—Fort
Worth Mar. 14, 2013, no pet.) .............................................................. 28
Whiteside v. Griffis & Griffis, P.C., 902 S.W.2d 739 (Tex. App.—Austin
1995, writ denied)................................................................................. 11
Wyrick v. Tillman & Tillman Realty, Inc., 03-00-00061-CV, 2001 WL
123877 (Tex. App.—Austin Feb. 15, 2001, no pet.) ....................... 29, 30
Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143 (Tex. 2015).. 22, 23, 27
RULES
TEX. R. CIV. P. 278 ................................................................................... 21
vi ARGUMENT
A. The trial court erred by failing to declare the June 18, 2103 contract for the sale of the collection for $90,000—including Medals of Honor of Honor—void because a part of the consideration (the Medals of Honor) was illegal and because there was no meeting of the minds as to buying the collection without the Medals of Honor.
The only contract at issue is the parties’ June 18, 2013 contract for
$90,000. The Guidrys' only theory at trial was that the June 18 contract
for Neal to pay $90,000 did not include Congressional Medals of Honor.
The jury did not find that Neal agreed to buy the collection without the
Medals of Honor. There was no severable agreement for Neal to pay for
the remainder of the collection without the Medals of Honor. Because a
part of the consideration for the only actual agreement made by the
parties was the Medals of Honor that are illegal to sell, the trial court
erred by failing to declare the contract void.
1. Question 1 was not “immaterial” and the jury’s answer is supported by the evidence.
Did the parties include the Medals of Honor in their contract for the
sale of “military medals” that were “already received by [Neal] on and
around May 19th, 2013.” It was, as Mrs. Guidry put, “a he said/he said
1 case.” (RR3 52). This disputed question of fact was submitted to the jury.
In Question 1, the jury was asked: “Were the Congressional Medals of
Honor sold by Guidry to Neal and memorialized in the Contract dated
June 18, 2013?” (CR 347). The jury answered, “Yes.” (Id).
The Guidrys somewhat perfunctorily argue that Question 1 was
immaterial because “[w]hether a contract provision is illegal is, by its
very nature, a question of law.” This argument merely begs the question:
what were the terms of the contract?
The parties’ written contract provides that “Henry Neal has agreed
to pay to Wayne Guidry $90,000.00 for the purchase of items already
received by him on and around May 19th, 2013 […] includ[ing] but are
not limited to: […] military medals …” (RR7 at 5 (PX1) (emphasis added).
First, even the Guidrys admit (as they must) the contract (they wrote)
does not specifically list any items covered by the contract but only
provides general categories (such as “military medals”). (RR3 67-68, 94,
224). Second, the Medals of Honor were indisputably among the
“military medals” that were “already received by [Neal] on and around
May 19th, 2013.” (RR3 88, 224).
2 It was also undisputed that Guidry showed the Medals of Honor to
Neal as part of the collection on at least two occasions before Neal agreed
to buy the collection. (RR3 190, 211). There was yet additional evidence
that the parties did include the Medals of Honor in their June 18
Contract:
[Q.] [Y]ou contend that the Congressional Medals of Honor were purchased as a part of the collection; correct?
A [Neal:] Yes, they were.
(RR3 93; see also RR4 272 (Q. And including the Congressional Medals
of Honor? A [Neal:] Yes.”); RR3 107-108 (Neal: “I didn't discover until
later that things (including the Medals of Honor] had been conveyed to
me [by Guidry] that were illegal to convey); RR3 169 (Neal: “(“T]he
medals that I can't possess, I can't own, I can't resell are part of this sale,
[and] were conveyed to me as part of the sale.”).
Verburgt: “He [Guidry] said that these were Congressional Medals of Honor […] and it was part of his inheritance that was being sold with everything. […] He was telling us that they could be worth between five and six, maybe $7,000 each[.]
(RR4 181).
Q. At any time on May 19th, did Mr. Guidry or Mrs. Guidry tell you that the Congressional Medals of Honor were a gift or being thrown in or being – not part of the sale?
3 A. [Verburgt:] No. […] They were never a gift to anybody. […] They were part of the collection. […] It was all part of the sale that Neal negotiated with [Guidry.]”
(RR4 193; see also RR3 69 (“Q Were you ever told [the Medals of Honor]
were a gift to you? A. [Neal:] No.”); RR4 200 (Q. Did anyone mention [the
Medals of Honor] were going to be gifted if he bought the rest of the
collection? A. [Verburgt:] No.)).
Whether a contract is ambiguous is a question of law. See Heritage
Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). “Once a
contract is found to be ambiguous, the interpretation of the contract
becomes a fact issue.” Royal Maccabees Life Ins. Co. v. James, 146 S.W.3d
340, 346 (Tex. App.—Dallas 2004, pet. denied); see also Karns v. Jalapeno
Tree Holdings, L.L.C., 459 S.W.3d 683, 690 (Tex. App.—El Paso 2015,
pet. denied) (“If the parties' intentions as expressed in the document are
indefinite and unclear, ambiguity exists, and the issues of contract
formation and intent to be bound become questions of fact.”).
Having properly determined the June 18 contract was ambiguous,
the trial court allowed both sides to present extrinsic evidence; i.e. the
Guidrys’ parole evidence claiming the Medals of Honor were a “gift” and
Neal’s evidence the Medals of Honor were not only among the “military
4 medals” that were “received by him on and around May 19th, 2013” but
had been marketed to him as particularly valuable parts of the collection.
Question 1 was properly submitted and was hardly “immaterial.”
2. The jury found that “the Congressional Medals of Honor [were] sold by Guidry to Neal and memorialized in the Contract dated June 18, 2013.”
The Guidrys also argue “[t]he term ‘military medals’ is subject to a
construction that renders the Contract legal.” But the question is not
whether the parties could have made an entirely lawful contract (of
course they could have), the question is whether they did in fact make a
contract that was in part unlawful.
As just discussed, the jury was properly asked to resolve whether
the “the Congressional Medals of Honor [were] sold by Guidry to Neal
and memorialized in the Contract dated June 18, 2013.” See, KSWO
Television Co., Inc. v. KFDA Operating Co., LLC, 442 S.W.3d 695, 704
(Tex. App.—Dallas 2014, no pet.) (“When a contract is ambiguous, ‘a fact
finder should resolve the meaning.’”), quoting Progressive County Mut.
Ins. Co. v. Kelley, 284 S.W.3d 805, 809 (Tex. 2009). Furthermore, there
was clearly sufficient evidence to support the jury’s answer to Question
1. (See Appellant’s Brief at 46-49).
5 The jury properly decided a question of fact: whether the contract
included the Medals of Honor. The jury’s answer gave rise to a question
of law (that the trial court wrongly decided): whether the contract is void.
3. There was no agreement to purchase the collection minus the Medals of Honor (and, accordingly, no agreement to do so for $78,000).
Before the jury returned its verdict, the trial court properly
understood the significance of asking Question 1. At the charge
conference, the court noted “[t]here's no way in this contract to have
separated out the Congressional Medals of Honor or the skulls and
then find an enforcement of the contract because we don't have specific
numbers or items broken down.” (RR5 90).
In answer to Question 1, the jury found that the illegal-to-sell
Medals of Honor were included. Accordingly, “there's no way in this
contract” to sever the Medals of Honor and yet find an enforceable
contract remaining “because we don't have specific numbers or items
broken down.” More importantly, there is no evidence of any enforceable
contract for Neal to buy the rest of the collection without the Medals of
Honor. The only agreement was to pay a lump sum of $90,000 for the
entire collection including the Medals of Honor.
6 The post-verdict stipulation that the Medals of Honor were “worth”
$12,000 has nothing to do with the parties’ June 18, 2013 Contract. (RR4
283). “Severability of the contract is determined by the intent of the
parties as evidenced by the language in the contract.” In re Kasschau,
11 S.W.3d 305, 313 (Tex. App.—Houston [14th Dist.] 1999, no pet.)
(emphasis added), citing Montgomery v. Browder, 930 S.W.2d 772, 778-
79 (Tex.App.—Amarillo 1996, writ denied); see also McFarland v. Haby,
589 S.W.2d 521, 524 (Tex.App.--Austin 1979, writ ref'd n.r.e.). Courts
cannot make new contracts between the parties, but must enforce the
contracts as written.” Royal Indemnity Company v. Marshall, 388
S.W.2d 176, 181 (Tex. 1965) (emphasis added). Furthermore, the
stipulation as to value is irrelevant to “the subjective intent of the parties
… at the time they entered into the contract.” Daimler Chrysler Motors
Co., LLC v. Manuel, 362 S.W.3d 160, 179 (Tex. App.—Fort Worth 2012,
no pet.). Surely a party can stipulate to the value of a thing without
agreeing to buy it. More specifically, to stipulate as to a value for the
Medals of Honor is not at all the same thing as stipulating that Neal
would have bought the rest of the collection for $78,000 without those
Medals. There was no such stipulation and no such evidence. Instead, the
7 June 18, 2013 Contract (the only contract at issue) is clearly an
agreement to buy everything in the collection for a lump sum. Under the
circumstances, to change both what is being bought and what it will cost
is to impose an agreement on Neal that he never made.
Neither party testified to the existence of an agreement to pay
$78,000 for the collection minus the Medals of Honor. The relevant
positions can be summarized as:
—Neal: I will pay $90,000 for the whole collection including Medals of Honor.
—Guidry: I will accept $90,000 but Medals of Honor are not included.
—Court’s Judgment: Neal will pay $78,000 for the collection excluding the Medals of Honor.
An enforceable contract requires (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. 2001 Trinity
Fund, LLC v. Carrizo Oil & Gas, Inc., 393 S.W.3d 442, 449 (Tex.App.--
Houston [14th Dist.] 2012, pet. denied). The court’s judgment fails to
clear the first hurdle. There is nothing to suggest Neil ever offered to buy
the collection without Medals of Honor. For their part, the Guidrys
8 insisted the only agreement was for Neal to pay $90,000 without the
Medals of Honor. In short, there is no evidence of any offer at $78,000,
much less an acceptance at $78,000, and certainly not any meeting of the
minds at $78,000.
Where a part of the consideration for an agreement is illegal, the
entire agreement is void whenever, as here, the contract is entire and
indivisible. In re Kasschau, 11 S.W.3d 305, 312 (Tex. App.—Houston
[14th Dist.] 1999, no pet.) In In re Kasschau, the question was whether
the court could enforce a divorce settlement even though one of its
provisions called for an illegal destruction of certain phone recordings.
Although the husband argued the illegal provision was not at all
“essential” to the broader settlement agreement, there was no way to
know whether the wife would have settled or what the other terms would
have been without the illegal provision. Id.
In this case, would Neal have bought the collection without the
Medals of Honor? There is no evidence that he would have done so.
Would the parties have agreed a price to $78,000 if the Medals of Honor
were not included? According to Guidry, he agreed to sell the collection
9 without the Medals of Honor for $90,000. And, Neal never offered or
agreed to buy the collection without Medals of Honor at any price.
In Cox Feedlots, Inc. v. Hope, 498 S.W.2d 436, 438–39 (Tex. App.--
San Antonio 1973, writ ref'd n.r.e.), the court could have easily severed
an illegal ten percent commission and enforced the remainder of the
contract. In fact, in that case (and unlike here), the agreement contained
a savings clause:
… the entire contract should not be voided, in that the contract contains a ‘savings clause’ wherein the parties agreed ‘. . . that if any portion of this Contract is illegal, the remainder of the Contract shall not be affected thereby.’ He also asserts that there is other consideration in that Hope agreed to give Cox Feedlots first option on the use of his equipment.
Id. at 438. The court rejected the broker’s argument to sever and enforce
the remainder of the agreement:
This covenant [for the ten percent commission] is obviously a part of the consideration for Cox Feedlots' giving Hope the hauling contract. […] Since the illegal rebate formed a part of the consideration for Cox Feedlots' promise to give Hope first option on all hauling, it cannot be said that such illegal transaction was not any part of Hope's cause of action. […] Furthermore, there is no way of separating this illegal consideration from the legal portion of same. Therefore, the court will not grant its aid in enforcing said contract, but will leave said parties where it finds them.
Id. at 439 (emphasis added).
10 If the Guidrys had wanted to establish the Medals of Honor were
merely “incidental” to the parties’ contract, the Guidrys should have pled,
proven and obtained jury findings to support such a theory. See
Appellant’s Brief at 53-55 citing Rogers v. Wolfson, 763 S.W.2d 922 (Tex.
App.—Dallas 1989, writ denied) (whether illegal portion could be severed
presented a question of fact for factfinder); Whiteside v. Griffis & Griffis,
P.C., 902 S.W.2d 739, 742 (Tex. App.—Austin 1995, writ denied) (same)
The Guidrys did not ask the jury anything along the lines of whether
Neal would have bought the collection even if Medals of Honor were not
included. See Whiteside, 902 S.W.2d at 742 (“The issue is whether the
parties would have entered into the agreement absent the illegal parts.”).
The Guidrys, as plaintiffs, had the “burden to obtain affirmative answers
to jury questions as to the necessary elements of his cause of action.” Sw.
Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 495 (Tex. 1991), quoting
Ramos v. Frito–Lay, Inc., 784 S.W.2d 667, 668 (Tex.1990), citing
TEX.R.CIV.P. 279
Instead, the jury here was asked only whether the Medals of Honor
were part of Neal’s agreement to pay a $90,000 lump sum (the only
contract between the parties), and the jury found the Medals of Honor
11 were included. (CR 347). “[S]elective enforcement of the contract, as
argued for by [the Guidrys], would result in a new and different contract
not intended by the parties.” McFarland, 589 S.W.2d at 524. “Courts are
created for the purpose of enforcing contracts, if they be legal, and
denying enforcement, if they be illegal, but they cannot make contracts for
parties.” Magee v. I. & G. N. Wood & Coal Co., 269 S.W.2d 498, 505 (1954)
(emphasis added).
Because the Guidrys’ claims are based solely on a contract the jury
found did include Medals of Honor that are indisputably illegal to sell,
the judgment below should be reversed. Judgment should be rendered in
favor of Neal that the Guidrys take nothing on their claims.
4. Unlike cases cited by the Guidrys, the trial court here did not construe the parties’ agreement, it made a new one.
The Guidrys quote the proper rule: “[a] contract illegal in part and
legal to the residue is void as to all, when the parts cannot be separated;
when they can be, the good will stand and the rest fall.” Raywood Rice
Canal & Milling Co. v. Erp, 146 S.W. 155, 159 (Tex. 1912) (emphasis
added). But the Guidrys then suggest the illegal Medals of Honor can be
separated from the parties’ contract and that a valid contract will remain
(for whatever is left, at a new price).
12 The Guidrys rely on Redgrave v. Wilkinson, 208 S.W.2d 150 (Tex.
Civ. App.—Waco 1948, writ ref’d n.r.e.) and Dietz v. Van Nortwick, 188
S.W.2d 590, 590-91 (Tex. Civ. App.—Galveston 1945, writ ref’d). Neither
of these cases involve a sales contract to pay a lump sum for everything
in a collection. These cases do not support the judgment below.
Redgrave has nothing in common with this case beyond a party
raising illegality. The case involves the winding down of a partnership.
Redgrave and Wilkinson had first entered into a partnership for the
purpose of operating illegal gaming devices. Redgrave, 208 S.W.2d at 152.
“They were successful in this business venture and in 1942 they invested
some of their profits in cigarette vending machines and operated such
business under the assumed name of the Central Cigarette Service on
the basis of equal partners.” Id. “[T]he operation of the cigarette vending
machines was in all things legal and such operation created new property
rights which Redgrave and Wilkinson shared equally.” Id. Furthermore,
“the cigarette business was separated from the gaming business
conducted by the partnership.” Id. (emphasis added). As part of an
accounting and division of the partnership, the court held that Redgrave
was entitled to one half of the partnership’s cigarette vending machines.
13 Id. The court rejected Wilkinson’s contention that Redgrave—who was
only trying to get his half of his partnership’s machines—was attempting
to enforce an illegal contract (because they had used proceeds from their
gaming business to initially buy the machines). The court found that
nothing illegal was required for Redgrave to recover his one-half of the
machines. Id. This division of property owned by former `partners in
Redgrave (who had, among other things, made sure their “cigarette
business was separated from the gaming business”) simply does not
speak to the present case.
The Dietz facts may be closer, but the case is also no help for the
Guidrys. Unlike the present case, Dietz provides an example of a
situation where a sales contract is severable. 188 S.W.2d at 590. The case
involved illegal gaming devices called “punch boards.” Id. Specifically,
Dietz and Van Nortwick “entered into a written contract by which Dietz
agreed to buy certain described beer and pay therefor the sum of
$7,399.90; and to buy certain described punch boards (which are gaming
devices) and pay therefor the sum of $4,981.46[.]” Id. “The lawful part of
the contract is to the unlawful contract as $7,399.90, the contract price of
the beer, is to $4,981.46, the contract price of the gaming devices.” Id. at
14 593. After severing “the contract price of the gaming devices,” the court
found that “appellant should be adjudged […] $7,399.90, [for the beer]
and be denied recovery of the portion which corresponds to $4,981.46” for
gaming devices. Id. The unlawful contract price for gaming devices could
be severed from the lawful part because the parties had entered into a
severable agreement from the start: “Dietz agreed to buy certain
described beer and pay therefor the sum of $7,399.90; and to buy certain
described punch boards […] and pay therefor the sum of $4,981.46[.]” Id.
at 590. In the present case, there was only an agreement to buy the entire
collection for a single lump sum.
Here, the illegal part (the Medals of Honor) is a part of the
consideration for the agreement to pay $90,000. There is no evidence that
Neil ever agreed to buy only other parts of the collection (i.e., without the
Medals of Honor), much less that he agreed to do so for $78,000. Indeed,
there is not even any evidence the Guidrys agreed to sell the collection
for $78,000 (the Guidrys claimed the agreement was for $90,000 without
Medals of Honor). This case is not Dietz.
The court in Dietz refused to enforce the agreement “to buy certain
described punch boards [for] $4,981.46” and enforced only the remaining
15 agreement “to buy certain described beer [for] $7,399.90.” In the present
case, there was no agreement between the parties to pay one sum for
Medals of Honor and one sum for the rest of the collection (assuming
Medals of Honor were not included). The trial court simply created a new
agreement that neither party claimed during trial was the agreement.
While “Texas courts favor validating transactions rather than voiding
them, a court may not create a contract where none exists and generally
may not add, alter, or eliminate essential terms.” Kelly v. Rio Grande
Computerland Group, 128 S.W.3d 759, 766 (Tex. App.—El Paso 2004, no
pet.); T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 222
(Tex.1992); Argo Data Res. Corp. v. Shagrithaya, 380 S.W.3d 249, 274
(Tex. App.--Dallas 2012, pet. denied) (“Although Texas courts favor
validating contracts, we may not create one where none exists.”).
5. The trial court’s ruling on attorney’s fees should be reversed and remanded.
As the contract should be declared void, Neal should recover
attorney’s fees pursuant to the Declaratory Judgment Act. (CR 190).
Because the judgment as to the enforceability of the contract should be
reversed, the decision below awarding fees to the Guidrys should also be
reversed and remanded to reconsider fees. See, e.g. Double Diamond, Inc.
16 v. Saturn, 339 S.W.3d 337, 347 (Tex. App.—Dallas 2011, pet. denied)
citing Hartsell v. Town of Talty, 130 S.W.3d 325, 329, 330 (Tex.App.-
Dallas 2004, pet. denied).
B. Even assuming arguendo the contract is not void for illegality, Neal’s defense of fraud in the inducement entitles him to judgment or at least a new trial.
1. By tendering a proper question and obtaining an adverse ruling before the charge was read to the jury, Neal preserved charge error.
The Guidrys correctly note that the trial court instructed the
attorneys they would state “formal” objections to the charge after the
charge had been read to the jury. Nonetheless, before the charge was read
to the jury, Neal tendered, in writing, his proper requested question on
the affirmative defense of fraud/misrepresentation (see CR 307, 319), and
Neal obtained an adverse ruling on that request. (RR4 310).
THE COURT: […] Now on the proposed question about -- this is I guess the affirmative defense based on a false representation or concealed material facts? MR. MORRIS: Yes, Your Honor. THE COURT: All right. The request for this instruction [sic] is denied.
(RR:4 310 (emphasis added)). The Court did not treat this conference are
merely “preliminary,” as suggested by the Guidrys. (See, e.g., id. at 312:
“THE COURT: Yeah, your -- your objections are noted. We're doing this
17 all on the record.”).1 Neal preserved error with regard to his fraud
affirmative defense to the contract.
“There should be but one test for determining if a party has
preserved error in the jury charge, and that is whether the party made
the trial court aware of the complaint, timely and plainly, and obtained
a ruling.” State Dept. of Highways & Pub. Transp. v. Payne, 838 S.W.2d
235, 241 (Tex. 1992). “The more specific requirements of the rules should
be applied, while they remain, to serve rather than defeat this principle.”
Id. Here, Neal made the court aware of the specific affirmative defense
question he believed he was entitled to submit and that the jury should
be asked, and Neil obtained a ruling from the trial court on his requested
question. Neal clearly met the test. Id.; see also, e.g. In re Stevenson, 27
S.W.3d 195, 201 (Tex. App.—San Antonio 2000, no pet.) (error preserved
when question was submitted and refused during “informal” charge
conference).
There is an additional and alternative reason Neal preserved error.
This is not a case where the parties agreed to submit objections after the
1The trial court then stated that “for convenience sake, in the morning what I may do is read the Charge, send the jury out to deliberate and then put any formal objections that you want to go further on …” (Id.). 18 charge was read and the court consented to the parties’ agreement. See,
e.g., Missouri Pac. R. Co. v. Cross, 501 S.W.2d 868, 873 (Tex. 1973)
(“Having been parties to the agreement, neither plaintiff nor defendant
is in a position to complain …”); Methodist Hosps. of Dallas v. Corp.
Communicators, Inc., 806 S.W.2d 879, 885 (Tex.App.--Dallas 1991, writ
denied) (involving “[a]n agreement of the parties”). Rather, the trial
court here instructed the parties that they could state their objections
after the charge was read and the parties responded by ensuring that
their objections to the charge were not being waived. (RR5 42). Shortly
before the charge was to the jury, the following occurred:
THE COURT: All right. Bring in the jury. MR. YOUNG [Counsel for Guidrys] : While we're waiting for them to come in, I do need to make formal objections to this Charge. I mean this is just part of the process that we do. When it's finally -- the final Charge is submitted, you make formal objections. I know it's not going to change this Court's ruling and so, because of that, I don't mind making them after the arguments; however, I do want to reserve my ability to do that and I haven't waived that. THE COURT: All of your previous objections are carried forward to this point and you can memorialize them on the record after the jury goes out to deliberate. MR. YOUNG: And I can make formal objections at that point and I haven't waived anything? THE COURT: Correct. MR. MORRIS [Counsel for Guidrys]: And just so you can say on
19 the record, good for the goose, good for the gander? THE COURT: Absolutely. Both parties will be allowed to object to the Charge, which means it must be a good Charge if both parties are objecting to it.
(RR5 42 (emphasis added). Accordingly, during the time allotted by the
judge for him to do so, Neal had the trial court formally sign the requested
question on Neal’s affirmative defense of fraud/misrepresentation as
“denied.” (RR5 94-95; RR8 359 (DX 13)).
Neal did not fail to preserve error under these circumstances. If the
Guidrys had disliked the judgment below, the Guidrys would no doubt be
(properly) taking this very position. Before the charge was read to the
jury, the parties made clear to the trial court that they were entitled to
“make formal objections to this Charge,” as “part of the process that we
do” is “[w]hen the final Charge is submitted, [the parties] make formal
objections.” (RR5 42). The trial court ruled that both parties were not
waiving their objections. (Id.) The Texas Supreme Court “has repeatedly
emphasized its holding in connection with the timing of objections and
the wording of requests, asserting that we should concern ourselves with
common sense and not promote form over substance.” In re Stevenson, 27
S.W.3d at 201, citing Dallas Market Center Development Co. v. Liedeker,
958 S.W.2d 382, 386 (Tex.1997); Alaniz v. Jones & Neuse, Inc., 907
20 S.W.2d 450, 451–52 (Tex.1995); Texas Dept. of Human Services v. Hinds,
904 S.W.2d 629, 637–38 (Tex.1995).
Again, Neal had already adequately preserved error by tendering
his requested question and obtaining an adverse ruling by the trial court
before the charge was read. (CR 319; RR4 310). See State Dep't of
Highways & Pub. Transp. v. Payne, 838 S.W.2d 235, 241 (Tex.1992); In
re Stevenson, 27 S.W.3d at 201. However, even assuming arguendo that
that was insufficient for any reason, under the circumstances herein, the
trial court’s subsequent “formal” signed denial of the requested question
at issue was not “untimely,” even though the charge had been read.
Charge error was preserved.
2. Neal’s tendered question was substantially correct.
Neal’s proposed question on his defense of being induced into the
contract by misrepresentation or material omission was “substantially
correct.” TEX. R. CIV. P. 278. “‘Substantially correct’ does not mean that
the instruction is perfect.” BNSF Ry. Co. v. Epple, 07-15-00355-CV, 2016
WL 7010581, at *3 (Tex. App.--Amarillo Nov. 30, 2016, pet. denied),
quoting Placencio v. Allied Indus. Int'l, Inc., 724 S.W.2d 20, 21 (Tex.
1987). Rather, it satisfies the test when it is “in substance and in the
21 main correct, and ... not affirmatively incorrect.” Placencio, 724 S.W.2d
at 21, quoting Modica v. Howard, 161 S.W.2d 1093 (Tex. Civ. App.–
Beaumont 1942, no writ); Greenstein, Logan & Co. v. Burgess Marketing,
Inc., 744 S.W.2d 170, 182 (Tex. App.--Waco 1987, writ denied).
Using snippets out of context from cases examining differences in
damages recoverable for a cause of action for common law fraud as
distinguished from a cause of action for fraudulent inducement, the
Guidrys argue that Neal’s question was inadequate because it did not ask
about “a promise of future performance made with no intention to
perform.” First, Neal was not submitting a cause of action for any sort of
damages but rather an affirmative defense. See, e.g., Anderson,
Greenwood & Co. v. Martin, 44 S.W.3d 200, 211 (Tex. App.—Houston
[14th Dist.] 2001, pet. denied) (party established fraudulent inducement
as a defense by jury’s answer to fraud question). Second, the Guidrys are
misreading the cases.
The Guidrys primarily rely on part of a sentence from Zorrilla v.
Aypco Constr. II, LLC, 469 S.W.3d 143, 153 (Tex. 2015): “Fraudulent
inducement is a distinct category of common-law fraud that shares the
same elements but involves a promise of future performance made with
22 no intention of performing at the time it was made.” Id. The Guidrys
suggest that “a promise of future performance made with no intention of
performing” is a separate, required element of fraudulent inducement
regardless of the facts of the case. But the Guidrys ignore Zorrilla’s
statement in the same sentence that fraudulent inducement “shares the
same elements” as common law fraud. Id. (emphasis added).
Furthermore, the Guidrys ignore that Zorrilla affirmed an award of
damages for fraudulent inducement when the jury question in that case
specifically did not require a finding of “a promise of future performance
made with no intention of performing at the time it was made” as a
required element. See id. Rather, the jury was given an alternative:
In the present case, the fraud liability question submitted to the jury included all the elements of a common-law fraud claim and defined “misrepresentation” to mean “a false statement of fact” or “a promise of future performance made with an intent, at the time the promise was made, not to perform as promised.”
Id. at 153 (emphasis added). The Supreme Court held that “based on the
measure of damages submitted to the jury, the only viable fraud claim is
fraudulent inducement” and then affirmed the jury’s award of those
damages based on the above-quoted liability question. Id. at 153-154.
23 Antecedent fraud of many sorts is a defense to a contract. See, e.g.,
Prudential Ins. Co. of Am. v. Jefferson Associates, Ltd., 896 S.W.2d 156,
162 (Tex. 1995) (“A buyer is not bound by an agreement to purchase
something ‘as is’ that he is induced to make because of a fraudulent
representation or concealment of information by the seller.”). The
required elements of the defense of fraudulent inducement as stated by
the Texas Supreme Court are:
To prove that Plank fraudulently induced him to sign the release, Westergren had to establish that (1) Plank “made a material representation”; (2) Plank's “representation was false and was either known to be false when made or made without knowledge of its truth”; (3) Plank's “representation was intended to be and was relied upon by the injured party”; and (4) Westergren's “injury complained of was caused by the reliance.”
Nat'l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 423 (Tex. 2015),
quoting In re Int'l Profit Assocs., Inc., 274 S.W.3d 672, 678 (Tex. 2009)
(citing Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 436 (Tex. 1997));
Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997).
The court did not mention “a promise of future performance made with
no intention of performing at the time it was made” as being an additional
distinct and required element.
The Fifth Circuit has recently stated:
24 The elements of fraudulent inducement are the same as the elements for fraud, “plus the added element that the fraud related to an agreement between the parties.” In re VNA Inc., 403 S.W.3d 483, 487 (Tex. App.—El Paso 2013, no pet).
Under Texas law, the elements of fraud are (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury.
Lawrence v. Fed. Home Loan Mortg. Corp., 808 F.3d 670, 674 (5th Cir. 2015). A fraudulent inducement claim can also be based on the failure to disclose a material fact. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986).
Johnson v. World All. Fin. Corp., 830 F.3d 192, 198 (5th Cir. 2016).
In affirming a jury finding of fraudulent inducement, the Tyler
Court of Appeals noted:
Fraudulent inducement is a particular species of fraud that arises only in the context of a contract. Nat'l Prop. Holdings v. Westergren, 453 S.W.3d 419, 423 (Tex. 2015). A party asserting that it was fraudulently induced into entering into a contract must show that (1) the other party made a material representation, (2) the representation was false and was either known to be false when made or made without knowledge of the truth, (3) the representation was intended to be and was relied upon by the injured party, and (4) the injury complained of was caused by the reliance. In re Int'l
25 Profit Assocs., Inc., 274 S.W.3d 672, 678 (Tex. 2009).
Int'l Bus. Machines Corp. v. Lufkin Indus., Inc., 12-15-00223-CV, 2017
WL 2962836, at *4 (Tex. App.—Tyler July 12, 2017, no pet.). Again, these
courts do not mention “a promise of future performance made with no
intention of performing at the time it was made” as being an additional
The Guidrys also suggest that Neal’s proposed question fails to
establish the elements of fraud “as they relate to the Contract.” However,
in reality, the tendered question begins by stating, “Failure to comply by
HENRY NEAL is excused if …” and concludes by asking “Was HENRY
NEAL’S failure to comply excused?” (RR8 359 (DX 13). As was done with
Neal’s affirmative defense question regarding duress, the jury would
have known that “failure to comply” means “to comply with the June 18,
2013 Agreement.” (CR 347). The question thus properly established the
elements of fraud “as they relate to the Contract.”
Furthermore, the June 18, 2013 Contract was the only issue at trial
raised by either party. The June 18, 2013 Contract was the only subject
of the entire Court’s Charge. Additionally, cases mentioned above that
involve an affirmance of jury findings for fraudulent inducement, were
26 based on jury questions that tracked the generic elements of fraud
without specifically mentioning the contract at issue in the case. See
Zorrilla, 469 S.W.3d at 152-153; Anderson, Greenwood & Co, 44 S.W.3d
at 211. When, as here, the contract is the issue at trial, there is no need
to do more. Indeed, by specifically inquiring about Neal’s “failure to
comply …” with the contract, Neal’s question is more specifically “related
to the contract” than the questions in cases such as Zorrilla and
Anderson, Greenwood & Co.
Neal’s proposed question included the required elements and was
substantially correct. The question was ““in substance and in the main
correct, and ... not affirmatively incorrect.” Placencio, 724 S.W.2d at 21.
The trial court erred by refusing to submit the question.
3. To merely say a buyer conducted his own “investigation” into some matters does not absolve the seller from misrepresentations unrelated to any such “investigation.”
Nothing has changed since this court’s pronouncement that “an
independent investigation of matters that eventually culminate in a
contract does not as a matter of law defeat a right to rely on allegedly
false representations.” Carruth v. Allen, 368 S.W.2d 672, 679 (Tex.App.-
-Austin 1963, no writ). Nonetheless, the Guidrys persist in arguing that
27 Neal’s fraudulent inducement defense and DTPA claim must fail because
of evidence that Neal began “investigating” some aspects of the collection
before signing the contract on June 18, 2013.
Although buyers who discovered the very problem that forms of
their basis of their later suit can be barred2, there is no rule that any and
every “independent investigation” by a buyer necessarily precludes the
buyer from showing detrimental reliance on a seller’s misrepresentations
or material omissions. See, e.g., Volmich v. Neiman, 02-12-00050-CV,
2013 WL 978770, at *8 (Tex. App.—Fort Worth Mar. 14, 2013, no pet.)
(“We do not hold that an independent inspection will always bar DTPA
and fraudulent inducement claims.”). If you kick the truck’s tires or even
take a quick test drive, have you conducted an “investigation” such that
you are now barred from raising a fraud claim based on false fuel
efficiency claims? Of course not.
The actual rule is that one cannot recover for fraudulent
representations when he knows the representation is false, or when he
2 See, e.g., Chitsey v. Nat'l Lloyd's Ins. Co., 698 S.W.2d 766, 769 (Tex. App.--Austin 1985), aff'd sub nom., 738 S.W.2d 641 (Tex. 1987 (“This fact was also noted in the inspector's report. Accordingly, National Lloyd's possessed this information before it wrote the coverage.”). 28 has relied solely on his own investigation rather than on the
representations of the other party. (See Appellant’s Brief at pp. 69-70 and
cases cited therein) If the buyer has not even investigated the particular
representation that turns out to be fraudulent, the buyer is obviously not
relying solely on his “investigation” and may still be able to show reliance
on the seller’s misrepresentation.
The Guidrys mistakenly rely on a case from this Court which
provides yet another illustration of the rule that there is no absolute bar
just because the buyer conducts an “investigation.” In Wyrick v. Tillman
& Tillman Realty, Inc., 03-00-00061-CV, 2001 WL 123877 (Tex. App.—
Austin Feb. 15, 2001, no pet.), the court said:
Tillman Realty, in its third ground for summary judgment, argued that Wyrick is deemed to have relied upon her own personal investigation that was free and unhampered. Tillman argues on appeal, therefore, that he did not have a duty to Wyrick with respect to the railroad right-of-way or the meat-processing plant that would support a cause of action against Tillman Realty. Wyrick concedes that she did not perform an investigation of the area where the right-of-way or meat-processing plant are located. She argues, however, that a broker has a duty to disclose all material facts that would not be discovered by the exercise of ordinary care and diligence, which, at a minimum, she performed.
The rule is that where a person makes his own investigation of the facts, he cannot sustain an action of misrepresentation made by others. […] According to Wyrick's affidavit, she
29 spent time driving around the neighborhood and the town at night after work. One evening, she returned to visit New Braunfels and the neighborhood with a friend, and they drove around together looking at the area. From the record, the evidence tends to show that the railroad tracks were difficult to discover; many of them had been torn up and covered with asphalt. When Wyrick did visit the neighborhood, it was in the evening and often dark outside. The summary judgment evidence does not prove conclusively that Wyrick should have discovered the right-of-way and the meat- processing plant during her drives around the neighborhood. Tillman Realty has not proven the factual premise of the rule deeming one to have relied on one's own investigation. Wyrick's fifth point of error is sustained.
Wyrick, 2001 WL 123877, at *8 (emphasis added).
In the present case, Neal’s fraud in the inducement defense is
supported by evidence of Guidry’s material misrepresentations
regarding: (1) whether the Medals of Honor were quite valuable or
instead illegal to sell; and (2) whether the “Indian artifacts” had been
personally dug up by Guidry’s father and family at known “Indian
locations” which could be documented by family record and photos or
instead 30-40% had been purchased by Guidry’s father from “dealers”
without records of source or documentation of authenticity. There is no
evidence of any “independent investigation” at all by Neal
regarding either of these issues before the June 18 contract, much
less any evidence that Neal relied “solely” on his own
30 investigation as to either of his issues. Rather, all evidence is to the
contrary. (Appellant’s Brief at 59-72).
First, as to the legality of selling Medals of Honor, Neal agreed to
buy the collection including the Medals of Honor for $90,000 on June 18,
2013 still believing “the representations made by the Guidrys were ac- --
were factual,” and “didn't discover until later that things had been
conveyed to [him] that were illegal to convey.” (RR3 107-108). Neal only
learned it was illegal to sell Medals of Honor in July 2013. (RR3 158).
As to the source and origin of the collection, there is no evidence
Neal found out that Guidry’s father had purchased many of the items
until this lawsuit. (RR4 at 272-274; see also RR4 at 165-167 (“I never
heard that. That's the first time I've heard that.”). Back when signing the
June 18, 2013 contract, Neal suspected only “a few of the pieces” might
be “retips”—not that Guidry’s father had purchased 30-40% from dealers
and that Guidry had “no clue” where those dealers got them items. Of
course, even then, Guidry was still defending the collection and “strongly
disagreed” that arrowheads were not real. Guidry certainly did not
disclose to Neal the true source of 30-40% of the collection.
31 There is no evidence he had even investigated the relevant issues
much less was relying solely on his own such investigation. Neal’s fraud
in the inducement defense does not fail just because there was some
evidence that Neal began an investigation of sorts before signing the
contract.
Neal’s proposed question on its affirmative defense that
performance of the contract was excused by Guidry’s misrepresentation
or concealment of material facts should have been submitted to the jury.
(RR8 359 (DX 13)). The defense was supported by pleadings and by
evidence at trial. (Indeed, the jury answered “Yes” in response to
Question 6 based on the same facts. (CR 359)). The defense would have
established a bar to the Guidrys’ claim for damages. It was an abuse of
discretion and error to refuse to the submit the question, and, as a result,
the judgment should be reversed and the case remanded for a new trial.
See, e.g., R.R. Comm'n of Texas v. Gulf Energy Expl. Corp., 482 S.W.3d
559, 576 (Tex. 2016) (remanding for new trial where trial court failed to
submit jury question on affirmative defense).
32 CONCLUSION AND PRAYER
The judgment below should be reversed. Judgment should be
rendered for Appellee and the question of attorney’s fees remanded to the
trial court. Alternatively, the entire case should be remanded for a new
trial.
Respectfully submitted,
By: /s/ Michael J. Morris Michael J. Morris
Texas Bar No. 24002651 Morris & Bermudez, pllc 299 W. San Antonio St. New Braunfels, Texas 78130 Tel: (830) 626-8779 Fax: (830) 627-0890 mmorris@mmbiblaw.com
Attorneys for Appellant
33 CERTIFICATE OF COMPLIANCE
This brief on the merits complies with the word limit of TEX. R. APP. P. 9.4 because it contains 7,204 words, excluding the parts of the brief exempted by TEX.R. APP. P. 9.4(i)(1).
/s/ Michael J. Morris. Michael J. Morris
CERTIFICATE OF SERVICE
This will certify that a true and correct copy of the foregoing brief has been electronically served concurrent with the electronic filing of the brief on this 2nd day of January, 2018, on lead counsel of record for Appellees: Mr. Kevin Young, Prichard Young LLP, 10101 Reunion Pl Ste 600, San Antonio, TX 78216-4162, at kyoung@prichardyoungllp.com.