Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION
No. 04-24-00358-CV
PDS ACQUISITION, CORP. n/k/a USIO Output Solutions, Inc., Appellant
v.
KDHM, LLC, Appellee
From the 73rd Judicial District Court, Bexar County, Texas Trial Court No. 2021CI18410 Honorable Marisa Flores, Judge Presiding
Opinion by: Adrian A. Spears II, Justice
Sitting: Lori I. Valenzuela, Justice Adrian A. Spears II, Justice H. Todd McCray, Justice
Delivered and Filed: April 2, 2025
REVERSED AND RENDERED IN PART AND REMANDED IN PART
This appeal stems from a dispute surrounding KDHM, LLC’s sale of its printing business
to PDS Acquisition Corp. n/k/a USIO Output Solutions, Inc. (“USIO”). The Asset Purchase
Agreement (“APA”) provided that certain assets were to be excluded from the sale, and in
particular, Article 2.1(c)(i) excluded from the sale “Seller’s bank accounts and cash, except for the
Customer Deposits to the extent that they have not been earned and offset against Seller’s accounts
receivable prior to the [c]losing [d]ate.” The meaning of Article 2.1(c)(i) is the basis of this appeal.
We hold that because the customer deposits at issue were earned by KDHM, but not accounted for 04-24-00358-CV
by offsetting the deposits against KDHM’s accounts receivables prior to closing, the customer
deposits were not “Excluded Assets” within the meaning of Article 2.1(c)(i) and were thus properly
transferred to USIO. We therefore reverse the trial court’s judgment and render judgment that
KDHM should take nothing against USIO on its “money had and received claim.” With respect to
the remaining claims, we remand the cause for further proceedings consistent with this opinion.
BACKGROUND
On December 15, 2020, USIO and KDHM entered into the APA, in which USIO bought
the printing business from KDHM. Among the “Purchased Assets” were KDHM’s accounts
receivable, inventories and supplies, equipment, permits, contracts, customer lists, intellectual
property, claims, customer deposits, books and records, business name, and work in progress.
Article 2.1(c)(i) further provided that certain assets were excluded from the sale:
After the closing date, the parties disagreed about whether certain customer deposits, which had
been earned but not offset against accounts receivable before closing, were “Excluded Assets”
under the APA.
On September 1, 2021, KDHM brought a legal action for “money had and received”
against USIO, alleging that money had been mistakenly paid to USIO at closing and that USIO
held money that belonged to KDHM. On September 30, 2021, USIO filed counterclaims against
KDHM for fraud, breach of contract, and conversion. On July 25, 2023, USIO filed a traditional
motion for summary judgment, arguing that under the plain meaning of the APA, the customer
deposits at issue were not retained by KDHM because they had not been both earned and offset
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before closing. According to USIO, the summary judgment evidence conclusively established that
no money was owed to KDHM and that judgment should be rendered that KDHM take nothing on
its “money had and received” claim.
On July 27, 2023, KDHM filed a traditional motion for partial summary judgment, arguing
that it was entitled to a portion of the proceeds transferred to USIO at closing. KDHM admitted
that “the funds in question had been ‘earned,’ but had not been offset against [its] accounts
receivable prior to the closing date.” However, KDHM argued that under the plain reading of
Article 2.1(c)(i), the funds in question did not need to be both earned and offset. KDHM noted that
pursuant to Article 2.1(c)(i), the “Purchased Assets” excluded KDHM’s bank account and cash
“except for the Customer Deposits to the extent they have not been earned and offset against
[KDHM’s] accounts receivable prior to the Closing Date.” KDHM then argued the following:
Thus, bank accounts are included among the Excluded Assets, with an exception provided as to Customer Deposits that have not been “earned and offset against [KDHM’s] accounts receivable.” Thus, to fit within the exception to the exclusion, the Customer Deposits within the bank account must both (1) have not been earned and (2) have not been offset against [KDHM’s] accounts receivable. The exception for Customer Deposits plainly requires both that the funds have not been earned and that they have not been offset. [] Since the funds in question had been earned, but had not been offset against [KDHM’s] account[s] receivable, the exception to the exclusion does not apply. [] Because the exception to the exclusion of Customer Deposits from the “Excluded Assets” does not apply, [KDHM] was legally entitled to receive the Customer Deposits in question because they had been earned by [KDHM] but had not been offset, and were thus excluded from the assets being purchased.
At the conclusion of its motion, KDHM “pray[ed] that the court enter partial summary judgment
in its favor as to the issue of whether earned customer deposits[,] which had been earned but which
had not been offset against [KDHM’s] account[s] receivable prior to the closing date[,] rightfully
belong to [KDHM].”
Both summary judgment motions acknowledged that the customer deposits at issue in this
appeal were earned by KDHM but were not offset against KDHM’s accounts receivable before
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the closing date. Thus, the sole issue before the trial court in both summary judgment motions was
the construction of the APA on the issue of whether the customer deposits at issue were “Excluded
Assets” as that term is defined in Article 2.1(c)(i).
On September 14, 2023, the trial court granted partial summary judgment in favor of
KDHM and denied USIO’s motion for summary judgment, ruling that
as to the unambiguous provision of the [APA], which is the subject of the respective [m]otions, (a) Customer Deposits in KDHM’s bank accounts for materials KDHM had printed and mailed, and for which the United States Postal Service had been paid by KDHM prior to the closing of the sale of the business to USIO, but not offset against KDHM’s Accounts Receivable, are Excluded Assets and thus remained the property of KDHM and (b) Customer Deposits in KDHM’s bank accounts are for items, whether printed or not, but which had not been mailed as of the closing of the sale of the business are not Excluded Assets and belong to USIO as of the conclusion of closing.
On November 9, 2023, KDHM filed a second amended petition, adding claims for
conversion and breach of contract against USIO. KDHM later nonsuited its breach of contract
claim against USIO. USIO then filed a motion to reconsider the trial court’s order granting partial
summary judgment. On January 19, 2024, the trial court signed a revised order granting partial
summary judgment in favor of KDHM and denying USIO’s motion for summary judgment. The
trial court interpreted Article 2.1(c)(i) of the APA as follows:
(a) Customer Deposits in KDHM’s bank accounts [that] had been earned by KDHM prior to the closing date of the sale to USIO and [that] had not been offset against KDHM’s Accounts Receivable prior to the closing of the sale to USIO are “Excluded Assets” and thus remained the property of KDHM as the conclusion of the closing; and (b) Customer Deposits in KDHM’s bank accounts [that] had not been earned by KDHM and had not been offset against KDHM’s Accounts Receivable prior to closing are not “Excluded Assets,” and belonged to USIO as of the conclusion of closing.
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On February 5, 2024, KDHM filed a motion for judgment pursuant to Texas Rule of Civil
Procedure 248 1 as to its “money had and received” claim, arguing that USIO had waived its 0F
affirmative defenses to that claim by not asserting them at the time the trial court considered the
parties’ competing summary judgment motions. Also on February 5, 2024, USIO filed its own
motion pursuant to Texas Rules of Civil Procedure 166(g) and 248, arguing that the economic loss
rule precluded KDHM’s conversion claim and requesting dismissal of that claim. On February 8,
2024, KDHM file a “Supplemental 166(g) Motion and Response to Defendant’s Rule 166(g) and
Rule 248 Motion,” again arguing that USIO had waived its affirmative defenses and responding
to USIO’s economic loss rule argument. On February 26, 2024, USIO filed a “Second Rule 166(g)
and Rule 248 Motion,” requesting that the trial court dismiss KDHM’s conversion and “money
had and received” claims against it. The trial court granted KDHM’s motion under Rule 248, and
on May 2, 2024, signed a final judgment awarding KDHM damages in the amount of $397,739.40
and attorneys’ fees in the amount of $90,361.75, plus pre- and post-judgment interest. USIO
appealed.
On appeal, USIO brings the following four issues: (1) whether the trial court erred in
finding that certain Customer Deposits were “Excluded Assets” under the APA and thus erred in
granting KDHM’s motion for partial summary judgment and denying USIO’s motion for summary
judgment; (2) whether the trial court erred in granting KDHM’s supplemental Rule 248 motion
and finding that USIO waived its affirmative defenses by not raising them at the time the trial court
considered the parties’ summary judgment motions; (3) whether the trial court erred in awarding
KDHM attorneys’ fees on a “money had and received” claim; and (4) whether the trial court erred
1 Texas Rule of Civil Procedure 248 provides in part that “[w]hen a jury has been demanded, questions of law, motions, exceptions to pleadings, and other unresolved pending matters shall, as far as practicable, be heard and determined by the court before trial commences.” TEX. R. CIV. P. 248.
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in awarding KDHM the attorneys’ fees of Don Cuba, who was not counsel of record for KDHM
in the trial court proceeding.
MOTIONS FOR SUMMARY JUDGMENT
A. Standard of Review
USIO first argues that the trial court erred in granting KDHM partial summary judgment
and in denying USIO’s motion for summary judgment. Both USIO and KDHM based their
respective motions for summary judgment on their competing interpretations of Article 2.1(c)(i).
We review a trial court’s decision to grant summary judgment de novo. Exxon Corp. v. Emerald
Oil & Gas Co., 331 S.W.3d 419, 422 (Tex. 2010); Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 661 (Tex. 2005). In order to prevail on a traditional motion for summary judgment, the movant
must show there are no genuine issues of material fact and that it is entitled to judgment as a matter
of law. See TEX. R. CIV. P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211,
215-16 (Tex. 2003). If the movant satisfies this burden, the burden shifts to the respondent to
provide evidence that raises a genuine issue of material fact. Amedisys, Inc. v. Kingwood Home
Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014). The reviewing court must consider all the
evidence in the light most favorable to the respondent, indulging every reasonable inference in
favor of the respondent and resolving any doubts against the motion. However, in doing so, a court
cannot ignore undisputed evidence unfavorable to the respondent. See Goodyear Tire & Rubber
Co. v. Mayes, 236 S.W.3d 754, 757 (Tex. 2007) (explaining that the “court of appeals erred in
considering only the evidence favorable to [the respondent], ignoring undisputed evidence in the
record that cannot be disregarded”).
Additionally, “[b]ecause courts construe unambiguous contracts as a matter of law, a trial
court may render summary judgment on an unambiguous contract.” Smart v. 3039 RNC Holdings,
LLC, No. 04-22-00426-CV, 2023 WL 3328168, at *2 (Tex. App.—San Antonio May 10, 2023,
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pet. denied) (citing Cmty. Health Sys. Pro. Servs. Corp. v. Hansen, 525 S.W.3d 671, 681 (Tex.
2017)). However, “if a contract is ambiguous, summary judgment is inappropriate because the
meaning of an ambiguous contract presents a question of fact.” Id. (citing Rosetta Res. Operating,
LP v. Martin, 645 S.W.3d 212, 219 (Tex. 2022)). When cross-motions for summary judgment are
filed, we consider each motion and render the judgment the trial court should have reached.
Coastal Liquids Transp., LP v. Harris Cnty. Appraisal Dist., 46 S.W.3d 880, 884 (Tex. 2001).
B. Applicable Law
The sole issue of the competing motions for summary judgment was the legal interpretation
of Article 2.1(c)(i) of the APA. In construing a contract, we must ascertain and give effect to the
parties’ intentions as expressed within the four corners of the agreement. URI, Inc. v. Kleberg Cnty,
543 S.W.3d 755, 757 (Tex. 2018); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.
2003). The objective intent expressed by the words the parties used in the agreement controls over
the parties’ subjective intent. URI, 543 S.W.3d at 757. We “presume parties intend what the words
their contract say and interpret contract language according to its plain, ordinary, and generally
accepted meaning unless the instrument directs otherwise.” Id. at 764 (citation omitted). We
consider the entire writing and attempt to harmonize and give effect to all the provisions of the
contract by analyzing the provisions with reference to the whole agreement. Webster, 128 S.W.3d
at 229. Thus, we must “read contractual provisions so none of the terms of the agreement are
rendered meaningless or superfluous.” In re Davenport, 522 S.W.3d 452, 457 (Tex. 2017) (orig.
proceeding). We “may not rewrite the parties’ contract, nor should [we] add to its language.” Id.
“We cannot make new contracts between the parties and must enforce the contract as written.” Id.
“The language in an agreement is to be given its plain grammatical meaning unless to do so would
defeat the parties’ intent.” DeWitt Cnty. Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 101 (Tex. 1999).
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We “construe contracts from a utilitarian standpoint bearing in mind the particular business
activity sought to be served and need not embrace strained rules of interpretation [that] would
avoid ambiguity at all costs.” Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987).
“Courts will avoid when possible and proper a construction [that] is unreasonable, inequitable, and
oppressive.” Id. If, after the pertinent rules of construction are applied, the contract “can be given
a definite or certain legal meaning,” it is unambiguous, and we construe it as a matter of law.
Webster, 128 S.W.3d at 229. On the other hand, a contract is ambiguous if it is susceptible to more
than one reasonable interpretation. Id. “Furthermore, under general rules of construction, we avoid
strictly construing [a contract’s] language if it would lead to absurd results.” Kourosh Hemyari v.
Stephens, 355 S.W.3d 623, 626 (Tex. 2011) (per curiam).
C. Analysis
As noted, Article 2.1(c)(i) of the APA defines “Excluded Assets” as follows:
KDHM’s interpretation of “Excluded Assets” seeks to narrowly construe Article 2.1(c)(i)
by separating it into two provisions: first categorizing the provision into an exclusion and then
categorizing an exception to the exclusion. This interpretation takes a narrow, hyper-focused
interpretation, and fails to harmonize and give effect to all the provisions of the APA with reference
to the whole agreement. See Webster, 128 S.W.3d at 229. In considering Article 2.1(c)(i) in
reference to the entire agreement, the plain language reflects that the parties anticipated customer
deposits would not only be earned by KDHM before closing, but would also need to be accounted
for before closing through the necessary accounting step of offsetting accounts receivable. In other
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words, for KDHM’s customer deposits to be considered excluded from the sale, KDHM had to
account for its earned deposits prior to closing. To hold otherwise would lead to absurd results.
Under KDHM’s interpretation, the Seller could return months later (as was done in this case) and
claim earned cash and deposits prior to the sale when there was nothing in the accounting books
to show that the receivables had been offset. Thus, KDHM’s interpretation leads to the absurd
result of requiring the Buyer to open the accounting books and make an entry to offset accounts
receivable several months after the sale of the business was completed and closed.
In considering the APA as a whole document and harmonizing all of its provisions so that
none are rendered meaningless, we conclude that customer deposits qualify as “Excluded Assets”
only if they have met both criteria (i.e., earned and offset against Seller’s accounts receivable
before closing). This conclusion that customer deposits are not “Excluded Assets” unless they have
been both earned and offset against KDHM’s accounts receivable before closing is the only correct
construction that gives effect to the written expression of the parties’ intent. See Coker v. Coker,
650 S.W.2d 391, 393 (Tex. 1983). First, we note that the use of the word “and” makes the
conditions conjunctive. See Bd. of Ins. Comm’rs v. Guardian Life Ins. Co., 142 Tex. 630, 635-36,
180 S.W.2d 906, 908-09 (1944) “The conjunctive ‘and’ expresses the general relation of
connection or addition, especially combination . . . and signifies something to follow, expressing
the idea that what follows is added and taken along with the first.” Cmty. Bank of Raymore v.
Chesapeake Expl., LLC, 416 S.W.3d 750, 757 (Tex. App.—El Paso 2013, no pet.) (quoting Int’l
Sec. Life Ins. Co. v. Arant, 463 S.W.2d 523, 525-26 (Tex. Civ. App.—Amarillo 1971, writ ref’d
n.r.e.)) (alteration in original).
Second, because the APA required accounting to be performed in accordance with
Generally Accepted Accounting Principles (“GAAP”), and not a cash basis accounting method, it
is apparent that other accounts besides cash are affected by offsetting accounts receivable. The
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record reflects that Pamela Jane Davis, the bookkeeper for KDHM, testified at her deposition that
in accordance with GAAP, the customer deposits were marked as a liability in QuickBooks until
they were earned. See Piranha Partners v. Neuhoff, 596 S.W.3d 740, 749 (Tex. 2020) (explaining
that “evidence of surrounding circumstances may ‘aid the understanding of an unambiguous
contract’s language,’ ‘inform the meaning’ of the language actually used, and ‘provide context
that elucidates the meaning of the word employed’”) (quoting URI, 543 S.W.3d at 757-59).
However, the record is devoid of evidence that customers were properly or timely invoiced prior
to closing or that accounts receivable had been offset to reflect same. Indeed, when asked if, as of
the closing date, all the customer deposit accounts had been offset, Davis testified that “[f]rom
what [she] could find, they had not.”
Third, we note that several other provisions in the APA are affected by offsetting accounts
receivable. Section 2.4 of the APA, titled “Purchase Price Adjustment,” requires the Seller to not
only provide accounts receivable information in accordance with GAAP but to also ensure that
such information was updated and reconciled to adjust for accounts receivables and inventory
shortfalls and excess. Section 2.4 also contains several provisions requiring updates as well as a
determination of the actual “Final Closing Accounts Receivable and Inventory” included in the
“Purchased Assets” and provides a process for the Seller to object and resolve any discrepancies
which affect the purchase price. In addition, Section 2.1(b)(i) of the APA provides that included
in “Purchased Assets” are not only all accounts receivable but also the right for the Buyer “to
invoice and collect for sales and service to its customers.” Section 2.1(b)(i) also includes references
to specific accounts receivable “listed on Schedule 2.1(b)(i) of the Disclosure Schedules.” In
reviewing the APA as a whole document and the deposition testimony, it is apparent that KDHM
failed to include the proper offset to accounts receivable prior to closing.
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After considering the entire APA and harmonizing all the provisions of the APA by
analyzing the provisions with reference to the whole agreement and the particular business activity,
we conclude that Article 2.1(c)(i) of the APA is unambiguous and that the only logical and correct
interpretation is that in order for the customer deposits to be excluded from the sale, KDHM would
have had to both earned the customer deposits and offset accounts receivable prior to the closing
date. In this case, it is undisputed that the customer deposits at issue were earned but accounts
receivable were not offset in the books prior to closing. Thus, the customer deposits at issue were
not excluded from the sale and were properly transferred to USIO at closing.
For these reasons, we hold the trial court erred in granting partial summary judgment in
favor of KDHM on its “money had and received” claim. As the trial court erred in granting partial
summary judgment in favor of KDHM, it also had no basis to grant KDHM’s Supplemental Rule
248 motion or award attorneys’ fees to KDHM. We therefore reverse the trial court’s judgment.
Further, USIO has shown that the trial court erred in denying its motion for summary
judgment and that it is entitled to summary judgment as a matter of law. See Coastal Liquids, 46
S.W.3d at 884 (explaining that when cross-motions for summary judgment are filed, an appellate
court considers each motion and renders judgment the trial court should have reached). USIO
moved for summary judgment on KDHM’s “money had and received” claim, arguing that under
the plain meaning of Article 2.1(c)(i), KDHM was not entitled to its claim as a matter of law. To
prove a claim for “money had and received,” KDHM had to show that USIO held money that “in
equity and good conscience belongs to” KDHM. See MGA Ins. Co. v. Charles R. Chesnutt, P.C.,
358 S.W.3d 808, 814 (Tex. App.—Dallas 2012, no pet). As explained above, it is undisputed that
the customer deposits at issue were not both earned and offset prior to the closing date. Thus, as a
matter of law, the money held by USIO was its money and did not belong to KDHM, and the trial
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court erred in failing to grant summary judgment in favor of USIO and render judgment that
KDHM take nothing on its “money had and received” claim against USIO.
CONCLUSION
We hold that under the unambiguous APA, the customer deposits only qualify as
“Excluded Assets” if they meet both criteria of being (1) earned and (2) offset against KDHM’s
accounts receivable prior to the closing date. Because it is undisputed that the customer deposits
at issue in this appeal were earned by KDHM but were not offset against accounts receivable prior
to the closing date, they are not “Excluded Assets” within the meaning of Article 2.1(c)(i) of the
APA and were properly transferred to USIO as part of the sale. Because we conclude the trial court
erred in granting partial summary judgment in favor of KDHM, we reverse the trial court’s
judgment. Further, as USIO proved that it was entitled to judgment as a matter of law on KDHM’s
“money had and received” claim, we render judgment that KDHM take nothing against USIO on
KDHM’s “money had and received” claim. Finally, we remand the remaining claims to the trial
court for further proceedings consistent with this opinion.
Adrian A. Spears II, Justice
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