Regions Bank v. Bay, Jeffrey

• Court: Court of Appeals of Texas
• Decided: September 18, 2013
• Docket: 05-12-00531-CV
• Status: Published

Opinion

MODIFY, AFFIRM, REVERSE, and REMAND; and Opinion Filed September 18, 2013.

In The QIourl of peala !Ti1tl j1rid of exao at aUao

No, 05-12-00531-CV

REGIONS BANK, Appellant V. JEFFREY BAY, Appellee

On Appeal from the .134th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-09-09203

MEMORANDUM OPINION Before Justices O’Neill, Francis, and Fillmore Opinion by Justice O’Neill Appellant Regions Bank appeals a judgment in favor of appellee Jeffrey Bay for breach

of an escrow agreement. In four points of error, Regions contends (1) it did not breach the

Escrow Agreement, (2) there is insufficient evidence of causation, (3) there is insufficient

evidence to support the award of attorneys’ fees, and (4) the trial court erred in failing to

apportion fault or allow a settlement credit. For the following reasons, we modify the trial

court’s judgment to reduce the trial court’s damages award by $10,000, otherwise affirm the

judgment as to damages, and reverse the attorney’s fees award and remand that claim to the trial

court for further proceedings.

Jeffrey Bay agreed to invest $500,000 of his personal funds in a joint venture called the

Midland Basin Lease Acquisition Joint Venture (the JV) that was to acquire oil and gas leases.

Bay subsequently sued the JV and the individuals that marketed the interest to him, Joel Johnson and Tony Morrison. Bay also sued appellee Regions, the escrow agent that was to hold the

investors’ funds under terms specified in an escrow agreement. According to Bay, the JV never

acquired any oil and gas leases and Morrison and Johnson committed fraud and various

securities violations to acquire his $500,000. Bay’s claim against Regions was based on its

alleged breach of the Escrow Agreement that was intended to protect investors’ funds.

According to Bay, Regions’s breach resulted in the loss of his entire investment. Following a

bench trial, the trial court rendered judgment in favor of Bay for $500,000. Regions appeals.

In its first point of error, Regions asserts it did not breach the Escrow Agreement as a

matter of law. Bay alleged Regions breached the Escrow Agreement by disbursing his funds

without first obtaining a letter from counsel that was a prerequisite to disbursement. Section 4(a)

of the Escrow Agreement required, among other things, that before Regions could disburse any

funds it was to receive “lain opinion of counsel to Underwriter that (a) the Shares described in

the Offering Document have been registered or are exempt from registration under the Securities

Act of 1993 and have been registered or are exempt from registration under applicable state

securities laws . . . .“ The trial court found Regions breached the Agreement because it did not

receive such an opinion letter. According to Regions, there is no evidence to support this

finding.

Whether a party has breached a contract is a question of law when the facts of the parties’

conduct are undisputed or conclusively established, Groham v. Kahlig, 318 S.W.3d 882, 887

(Tex. 2010). Because the facts surrounding Regions’s conduct are not disputed, we consider

whether Regions’s conduct breached the Escrow Agreement as a matter of law.

According to Regions, there is no evidence to show it breached the Escrow Agreement by

failing to obtain a letter from counsel because it did obtain such a letter. It relies on a letter

prepared by Ralph Janvey, a securities lawyer, stating that it was his opinion that the “offering”

—2— was a “private placement designed to be exempt under Section 4(2) of the Securities Act of 1933

According to Regions, this letter satisfied the contractual requirement and it was under no

duty to determine whether the letter was “was true or accurate” The plain language of the

Escrow Agreement required an opinion from counsel that the shares were either registered or

were exempt from registration. Regardless of whether Regions had an obligation to determine

whether the Janvey letter was “true or accurate,” the letter did not, on its face, provide the

opinion required by the Agreement. Rather, the letter stated only that the “offering” was

“designed” to he exempt. Janvey did not provide an opinion or purport to provide an opinion as

to whether the actual shares were in fact exempt from registration. Janvey himself testified he

was not asked to provide, and did not provide, an opinion as to whether the securities were in

fact exempt. Moreover, he testified that to provide such an opinion, he would have had to

become much more involved in the offering process, the solicitation process, and the sales

process. We conclude the evidence is sufficient to show Regions breached the Escrow

Agreement by disbursing funds without having obtained the opinion letter required by the

Escrow Agreement. We overrule Regions’s first point of error.

In its second point of error, Regions contends “there is insufficient evidence of

causation.” According to Regions, Bay failed to prove any breach of the Escrow Agreement

was the “proximate cause” of his loss. In its findings of fact and conclusions of law, the trial

court found that Regions’s failure to follow the strict tenus of the Escrow Agreement was the

proximate cause of Bay’s loss. In the alternative, the trial court also determined that under the

terms of the Escrow Agreement, the money remained Bay’s because the conditions for release of

Bay’s money were never met. Thus, the trial court determined that Regions was deemed to be

holding Bay’s money as a depository and it was therefore required to return Bay’s money to him. \Ve hetin by observini! that. in brie! ing this point, Regions tails to adequately address

this latter hasis for the trIal court’s judgment.’ Au appellant must attack all independent bases

that support U trial court S ruling. OIiithunt Fin. LLC V Angiano. 295 S.W .3d 422, 42.324

(Tex. App.—1)ah1as 2009, no pet.): I$rnton r. ii’v. I)cp ‘I oiCriin. .!usiice. 95 S.W.3d 676. 681 $2

(Tex. App.—ilonslon II si Dist. 1 2002, no pel.L If an appellant does not attack an independent

ground, we must accept the validity of that ground and affirm on that basis. Oliphant Fin., 295

S.W.3d at 24; Briuon, 95 S.W.3d at 681..82. Here, the Escrow Agreement specifically provided,

“All funds [deposited by investorsj shall remain the property of Ithe investorsi ... until released

or eligible to he released to issuer in accordance with Section 4(a) Although Regions (foes

not directly address this basis for the trial court s judgment. Regions does assert “all conditions

• . of the Escrow Agreement were satisfied prior to j Ray’s{ investment” and that it was therefore

‘required to disburse lBay’sI funds We have previously concluded otherwise. Regions

has not argued. much less provided any legal analysis or authority, for the proposition the trial

court erred in concluding Regions was deemed to he holding Bay’s funds for him as a depository

and should return the funds to Bay. Because Regions has not shown this basis for the trial

court’s judgment was erroneous, we must affirm on this basis alone. cj: Pat Baker Co., Inc. v.

Wilson, 971 S.W.2d 447, 450 (Tex. 1998) (appellate court cannot reverse a trial court’s judgment

absent properly assigned error).

Moreover, we cannot agree with Regions that there is no evidence to support the trial

court’s determination that its breach of contract caused Bay’s loss. To prove damages for breach

of contract, the plaintiff must prove that he suffered some pecuniary loss as a result of the

breach. Abraxas Petroleum C’orp. t’. Homburg, 20 S.W.3d 741, 758 (Tex. App.—El Paso 2000,

Regions’s briefing of this point of error is generally confused and convolutes several distinct legal issues. Specifically, although presented as a “causation of damages” point, the brief raises arguments germane to materiality of breach, negligence, and gross negligence. Even giving Regions’s brief the most liberal construction, these issues are not adequately briefed. See Tc. R. App. P. 38.1(i) (appellant’s brief must include “a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record”).

-4- no pet. ) 41ulnMoio rp. ‘. Iii Commercial I”i,i. Corp.. 806 S.W.2d 560. 569 (Tex. App.—

Dallas 1990, iii denied). Such losses must he the natural. probable. and foreseeable

consequence of the defendant’s conduct. Mead i’. Johnson Group, Inc., 615 S.W.2d 685, 687

(Tex. 1981). According to Regions, it was not foreseeable that its breach would result in Bay’s

loss. We disagree.

The very purpose ol an Escrow Agreement is to preserve funds until payment is

authorized under the Agreement .5cc Eu/IC Mort,’. C’orp. v. Jones. 252 S.W.3d 857, 868 (Tex.

App—Dallas 2008. no pet.). The Escrow Agreement expressly described the conditions that

had to be met before Regions could disburse Bay’s funds. One of these conditions was obtaining

an opinion from counsel that the shares were either registered or exempt from registration under

the Securities Act of 1933. The registration and exemption requirements are intended to protect

investors from fraudulent activities .5cc Sec. & Eve/i. Comm ‘a v. Ralston Purina Co.. 346 U.S.

119, 124-25 (1953); Peoples Sec. Co. i’. Sec. & Evch. Co., 289 F.2d 268, 271 (5th Cir. 1961).

We cannot agree it was not foreseeable that Bay would be damaged by Regions’s breach of a

provision that was intended to protect investors from the very fraud Regions now claims caused

Bay’s loss.

Regions has thus failed to show the evidence is legally insufficient to support the trial

court’s damages finding. Although Regions purports to challenge the factual sufficiency of the

evidence to prove causation, the substance of its complaint raises only legal sufficiency

arguments. We conclude Regions has not adequately briefed a factual sufficiency challenge.

See La Sara Grain, Co. v. First Nat’l Bank, 673 S.W.2d 558, 568 (Tex, 1984) (op. on reh’g);

City of Houston v. Levingston, 221 S.W.3d 204, 216 n.9 (Tex. App.—Houston list. Distj 2006,

no pet.). We overrule Regions’s second point of error.

—5— In its third point of error, Regions contends the evidence is insulhcient to suj)port the trial

court’s award of auorncy’ s lees. The trial court awarded Bay S56.009 in attorney’s lees.

Reions contends the evidence is insufficient to support this award because Bay luled to present

sufficient evidence segregating his recoverable attorney’s fees from non-recoverable fees.

Bay’s attorney. Roger F. Claxton. testified that he was retained by Bay to pursue claims

against Regions and other detendants. Claxton testiflcd that he segregated fees expended on

Bay’s claims against the other defendants, but he did not segregate fees related to Bay’s

noncontractual claims against Regions, which included conversion, negligence, gross negligence,

breach of fiduciary duty, and securities violations. Claxton testified he did not do so because it

was “all intertwined.” According to Regions. Ray failed to present sufficient evidence that all

the legal services for which fees were claimed advanced his breach of contract claim. We agree.

A party seeking to recover attorney’s fees has the burden to show that the fees were

reasonable and necessary, which, among other things, requires the party to show the fees were

incurred on a claim that allows recovery of such fees .Sce Stewart Title Guar. Co. v. Sterling.

822 S.W.2d 1. 10-11 (Tex. 1991). Where, as here, a party seeks attorney’s fees in a case where

some claims permit the recovery of fees and others do not, the party must segregate and exclude

the fees for services related to the claims for which fees are not recoverable unless “the discrete

legal services advance[dI both [thel recoverable claim and the unrecoverable claim.” See Tony

Ga/Jo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 313-14 (Tex. 2006). When a party does not

segregate attorney’s fees between recoverable and unrecoverable claims in the court below and

we determine segregation is required, the fee award must be reversed and the case must be

remanded to the trial court to determine which fees are recoverable. See Tony GuIlo, 212 S.W.3d

at 314.

—6— I Icre. (laxton testified getierall v that he could not segregate ees expemled on Bay’s

claims aains1 Re!lons because it was an intertwined mass of evidence to unianele a business

transaction. On cross—examinalion. Claxton testified he included fees expended on a motion for

summary judgment solely on negligence causation because “most” of the services were “about

the facts of what happened,” and the same core set of facts was driving the case regardless of the

legal theory advanced. Claxton also testilied that he included fees incurred for responding to a

motion to dismiss in bankruptcy court associated with Bay’s securities claims against Regions.

Claxton did not assert those services advanced his breach of contract claim. Indeed, he testified

that work included briefing “control person” and “aider and abetter” liability under State and

Federal securities laws. Claxton also conceded that he included all fees incurred in drafting a

second amended complaint that included claims for conversion and negligence that do not permit

recovery of attorney’s fees. He said he did do so because it was “all intertwined.”

Intertwined facts (10 not make nonrecoverable fees recoverable: it is only when discrete

legal services advance both a recoverable and unrecoverable claim that they are so intertwined

that they need not be segregated. Id. Here, Bay failed to show all the legal fees for which he

sought recovery advanced his breach of contract claim. See Tony Guilo, 212 S.W.3d at 313-14.

Therefore, the fee award must be reversed and the case remanded to the trial court to determine

which fees are recoverable. See Tony Gui/a, 212 S.W.3d at 314. We sustain Regions’s third

point of error.

In its fourth point of error, Regions contends the trial court erred in failing to “apportion

fault” or grant a settlement credit. According to Regions, the trial court failed to properly

apportion fault under the proportionate responsibility statute. However, by its plain terms, that

statute applies only to tort and Deceptive Trade Practices claims. TEX. Civ. PRAc. & REM. CODE

ANN. § 33.002 (West 2008): Doncaster v. Henai, 161 S.W.3d 594, 604 (Tex. App.—San

—7— Antomo 2005, iio pet.). litre. l3ay’s recovery was tor breach ot contract. Therefore, we ovelTule

Re2ions s tourib point ol error in part.

Regions 11S() complains the trial court erred in failing to grant a settlement credit of

$10,000 that 13a recovered from another defendant br the same loss. Under the onesatisfaction

rule, a plaintiff is entitled to oniy one recovery br any damages suffered. Crown LUè Ins. Co. v.

Costee!, 22 SW3d 378, 390 (2000). Bay concedes he recovered $10,000 in settlement from

another defendant to compensate him for the same loss. Therefore, Regions is entitled to a

settlement credit in that amount. We sustain Regions’s fourth point of error in part

We modify the trial court’s judgment to reduce the trial cotLrt’s damages award by

$l0.000, hut otherwise affirm the judgment as to damages. We reverse the trial court’s

attorney’s fees award and remand the case to the trial court for the purpose of determining which

fees are recoverable.

/Michael J. O’Neill! MICHAEL J. O’NEILL JUSTICE

12053 lFP05

—8— ourt of A.ipiat Fiftti Oiitrict of at Ja11a JUDGMENT

REGIONS BANK. Appellant On Appeal from the 1 34th Judicial District Court. Dallas (‘ounty. Texas No. 05-I 2-0053 I -CV V. Trial Court Cause No. DC-09-09203. Opinion delivered by Justice O’NeilL JEFFREY BAY, Appellee Justices Francis and Fillmore participating.

In accordance with this Court’s opinion of this date, the judgment of the trial court is MODIFIEI) to reduce the award of actual damages to $490,000 to reflect a settlement credit.

As modified, the trial court’s judgment as to actual damages is AFFIRMEJ).

We REVERSE and REMAND the trial court’s award of attorney’s fees and remand the case to the trial court For the purpose of determining recoverable attorney’s fees.

It is ORI)ERED that appellee JEFFREY BAY recover his costs of this appeal and the full amount of the modified judgment from appellant REGIONS BANK and from Fidelity and Deposit Company of Maryland as surety on appellant’s supersedeas bond.

Judgment entered this 18th day of September, 2013.

—9—