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applying unclean hands to quasi-estoppel
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No. 05-07-00079-CV
Opinion Filed June 4, 2008.
On Appeal from the 14th Judicial District Court, Dallas County, Texas, Trial Court Cause No. 04-05354-A.
Before Justices WRIGHT, O'NEILL, and FRANCIS.
MEMORANDUM OPINION
This appeal follows a trial before the court without a jury. Edward Pickett d/b/a Mobile Diagnostics of Texas challenges the trial court's judgment that he take-nothing on his claims against appellees for failing to pay for echocardiograms provided as part of the Fen-Phen litigation. Appellant also challenges the trial court's pre-trial decision to grant summary judgment on claims against one appellee under a vicarious liability theory. Because the issues are well-settled in law, we issue this memorandum opinion. See Tex. R. App. P. 47.4. We affirm.
In 1997, a Mayo Clinic study linked the prescription-only weight loss drug Fen-Phen and its derivatives, Redux and Pondimin, with fatal heart disease and pulmonary hypertension. As a result, the drugs were withdrawn from the market. In 1999, the federal district court in the eastern district of Pennsylvania approved a $3.75 billion settlement offer by American Home Products, manufacturer of the drugs. The settlement divided the users of the drugs into various classes, based on which drugs they took, how long they took them, and their medical condition. Additionally, it contained four matrices of compensatory payments and future medical services matched to the classification of the plaintiffs. A patient's medical condition was generally determined by an echocardiogram. In the beginning, only fifteen percent of all echocardiograms submitted with claims were audited by the settlement trust; later, all echocardiograms were audited.
Reyes Associates and/or Heygood, Orr Reyes, L.L.P. (collectively HOR) began an advertising campaign to attract clients who had taken Fen-Phen to pursue claims against AHP (and its successor Wyeth). HOR would send the clients to have an echocardiogram performed to determine if they had damage to their hearts. HOR would continue to represent clients whose results were positive and release those whose results were negative. Initially, HOR used a group in Fort Worth to perform the echocardiogram services. After several months, however, HOR learned there was a problem with the group's work. At about the same time, HOR was approached by Andrew Hillman, who represented Mobile Diagnostics and offered its services. Hillman and Lorin Subar, on behalf of HOR, negotiated an oral agreement and ultimately HOR began sending its clients to appellant. Although the evidence at trial was undisputed that the price was $500 per echocardiogram and corresponding interpretive report, the parties did dispute the other terms of the agreement.
Between December 2001 and January 2003, HOR sent 917 clients to appellant and, initially, made payments for the services. At some point, however, HOR stopped paying the bills, in part because of finances. Later, HOR began getting results of the audit from the settlement trust and learned the echocardiagram readings were unacceptable and had failed the audit. Ultimately, HOR had 323 echocardiograms provided by appellant reread and learned that 94.5 percent of the reports were not accurate. When appellees refused to pay the outstanding bills, appellant filed suit alleging various direct and vicarious liability claims to recover for the unpaid echocardiogram services. Appellees denied the allegations and brought several counterclaims alleging the echocardiograms were of poor unreadable quality, were performed in a manner that falsely exaggerated the damage, and were not interpreted correctly and accurately. While the lawsuit was pending, HOR shut down and sold its pending Fen-Phen claims to ARJOMH, a limited liability parternership.
The partners of ARJOMH are Angel L. Reyes Associates, P.C., James C. Orr, Jr., and Michael E. Heygood; the partners of HOR were Reyes Associates, P.C., James Orr Associates, Inc., Michael Everett Heygood, P.C., and Angel L. Reyes, III, P.C.
After hearing three days of evidence, the trial court rendered a take-nothing judgment on appellant's claims and appellees' counterclaims. In Findings of Fact and Conclusions of Law, the trial court made one general "finding" — that neither appellant nor appellees met their respective burdens of proof on any of their claims. The trial court rejected twenty-one more specific proposed findings. Mobile Diagnostics appeals.
In his first issue, appellant argues he established his claims as a matter of law or, alternatively, by the great weight and preponderance of the evidence. Specifically, he challenges the trial court's failure to find in his favor on his claims for breach of contract, sworn account, quantum meruit, civil theft, and theories of vicarious liability. Additionally, he challenges the trial court's failure to apply his affirmative defense of quasi-estoppel to bar appellees' defense that the echocardiograms were worthless.
When a party attacks the legal sufficiency of an adverse finding on an issue on which he has the burden of proof, he must show the evidence establishes, as a matter of law, all vital facts in support of the desired finding. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). We consider the evidence in the light most favorable to the verdict and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). The ultimate question is whether the evidence, crediting favorable evidence if a reasonable factfinder could and disregarding contrary evidence unless a reasonable factfinder could not, would permit reasonable and fair-minded people to reach the verdict under review. Id. at 827. When the party also complains about the factual sufficiency of the evidence, he must show the adverse finding is so contrary to the great weight and preponderance of the evidence so as to be cleary wrong and unjust. Dow Chem. Co., 46 S.W.3d at 242. We cannot reverse merely because we conclude that a preponderance of the evidence supports an affirmative finding, nor can we substitute our opinion for that of the trier of fact and determine that we would reach a different result. Honeycutt v. Billingsley, 992 S.W.2d 570, 577 (Tex.App.-Houston [1st Dist.] 1999, pet. denied). With these standards in mind, we begin our review of the evidence with respect to each of appellant's claims, beginning with sworn account and breach of contract.
A suit on sworn account is not an independent cause of action; it is a procedural rule for proof of certain types of contractual (account) claims under Texas Rule of Civil Procedure 185. Tex. R. Civ. P. 185; Sanders v. Total Heat Air, Inc. No. 05-05-00524-CV, slip op. at 3 (Tex.App.-Dallas Mar. 31, 2008 no pet. h.). Under rule 185, a plaintiff's petition on sworn account must contain a systematic, itemized statement of the services rendered, reveal offsets made to the account, and be supported by an affidavit stating the claim is within the affiant's knowledge and is "just and true." Nguyen v. Short, How, Frels Heitz, P.C., 108 S.W.3d 558, 562 (Tex.App.-Dallas 2003, pet. denied). If a plaintiff complies with rule 185, the sworn account is received as prima facie evidence of the debt. Id. Here, appellant went to trial on his sixth amended petition. The petition, however, was not supported with an affidavit; accordingly, he was not entitled to the evidentiary benefits of the rule.
To prove his breach of contract claim, appellant had to establish the following elements: (1) a valid contract, (2) the plaintiff performed or tendered performance, (3) the defendant breached the contract, and (4) the plaintiff was damaged as a result of the breach. Richter v. Wagner Oil Co., 90 S.W.3d 890, 898 (Tex.App.-San Antonio 2002, no pet.). A valid contract requires that the parties have a "meeting of the minds," and each must communicate consent to the terms of the agreement. Meru v. Huerta, 136 S.W.3d 383, 390 (Tex.App.-Corpus Christi 2004, no pet.). In determining the existence of an oral contract, the court looks to the communications between the parties and to the acts and circumstances surrounding the communications. Cessna Aircraft Co. v. Aircraft Network, L.L.C., 213 S.W.3d 455, 465 (Tex.App.-Dallas 2006, pet. denied).
The evidence showed that the oral agreement regarding echocardiagram testing was negotiated by Hillman and Subar on behalf of appellant and appellees, respectively. Despite his burden at trial, appellant did not present Hillman as a witness. Similarly, appellees did not call Subar. Given the absence of these two key witnesses, the trial court heard no direct evidence of the agreement negotiated by Hillman and Subar. Although Pickett testified as to what he believed the alleged agreement was, he acknowledged he was not a party to any discussions about the price of the echocardiagrams or what would be provided for the price. Pickett acknowledged he had no personal knowledge regarding the agreement and that his understanding of any agreement came from what he was told by Hillman. Moreover, the evidence presented showed that the parties had conflicting understandings of the terms of agreement, such as what services were going to be provided. Pickett testified he believed the agreement was to provide an echocardiogram and cardiologist's interpretation for a flat fee of $500 with payment in thirty days. While appellees did not dispute the price, they did dispute the terms. In particular, Michael Heygood, who was not involved in the formation of any agreement, said any agreement included more than just providing an echocardiogram and an interpretation. Heygood said that because of problems with its previous echocardiogram provider, appellees required an assurance that the echocardiograms would be accurate and would pass the audit procedures of AHP. Heygood testified that having an accurate echocardiogram "was the central important issue in our whole situation."
In sum, the parties who had first-hand knowledge as to the terms of any agreement did not testify, and the parties that did testify — and who did not have personal knowledge — had conflicting understandings of what the agreement was. Viewing this evidence, the trial court's failure to find a breach of contract could reasonably be based on appellant's failure to establish a valid contract. In particular, the trial court could have found that it could not determine the terms of the agreement or it could have found that the parties simply did not have a meeting of the minds on the material terms of the agreement. Accordingly, we cannot conclude appellant conclusively established his breach of contract claim. Further, considering all of the evidence, we cannot conclude the trial court's failure to find a breach of contract is so against the overwhelming weight of the evidence so as to be clearly wrong and unjust. We overrule appellant's point of error as it relates to breach of contract.
Appellant next argues that, if there was no contract, appellees are liable under the theory of quantum meruit. Quantum meruit is an equitable remedy based on the promise implied by law to pay for beneficial services rendered and knowingly accepted. Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). Founded on unjust enrichment, quantum meruit "will be had when non payment for the services rendered would `result in an unjust enrichment to the party benefited by the work.'" Id. (quoting City of Ingleside v. Stewart, 554 S.W.2d 939, 943 (Tex.Civ.App.-Corpus Christi 1977, writ ref'd n.r.e.).
To recover under quantum meruit, a claimant must prove four elements: (1) either valuable services or materials or both were furnished, (2) to the party sought to be charged, (3) which were accepted by the party sought to be charged, (4) under such circumstances as reasonably notified the recipient that the plaintiff, in performing, expected to be paid by the recipient. Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992). The proper measure of damages for a claim in quantum meruit is the reasonable value of work performed and the materials furnished. M.J. Sheridan Son Co. v. Seminole Pipeline Co., 731 S.W.2d 620, 625 (Tex.App.-Houston [1st Dist.] 1987, no writ).
Appellant argues the evidence shows that he provided the services and appellees accepted and used the benefit of these services by "continuing with the Fen-Phen litigation and settling certain claims and receiving payment, as well as attorney's fees, on behalf of clients for which [appellant] performed his services." He argues he is entitled to recover $358,150 for the value of the services he provided.
Heygood testified that of 917 echocardiograms provided by appellant, 323 had been reread by one or more parties. Of those reread, less than six percent confirmed the interpretation provided by appellant. Evidence also showed that appellees had already paid appellant over $142,000. Finally, the evidence also showed that of the $500 charged by appellant for the services, $50 went to the cardiologist to read the echocardiogram. Given this evidence, the trial court could have believed that appellees had already paid the "reasonable value" of the work performed and appellant was not entitled to more. Applying the appropriate standards, we cannot conclude appellant either established conclusively, or by the great weight and preponderance of the evidence, his claim for quantum meruit.
Appellant next argues the evidence is legally and factually insufficient to support the trial court's failure to find a violation under the Texas Theft Liability Act, which creates civil liability for theft. Under the Act, theft means "unlawfully appropriating property or unlawfully obtaining services" as described in various sections of the Texas Penal Code. See Tex. Civ. Prac. Rem. Code Ann. § 134.002(2) (Vernon 2005). Appellant alleged theft of service under penal code sections 31.04(a)(2) and (4).
Appellant's entire analysis of this issue is five sentences; thus, we question whether the issue is adequately briefed. See Tex. R. App. P. 38.1. Regardless, given our determination that the trial court could have reasonably believed appellees have paid reasonable value for the echocardiograms, appellants cannot establish conclusively, or by the great weight and preponderance of the evidence, that appellees committed theft of services.
Finally, appellant argues appellees were barred by equitable principles — quasi-estoppel and judicial estoppel — from denying the value of the echocardiogram service was $500 each, given that appellees used them "to obtain money for themselves and their clients." Specificially, he argues that appellees used his services "to weed out the bad cases, submitted claims to the [settlement trust], settled some opt out claims, withdrew no claims based on these alleged improprieties, and did not notify any clients that their echos were read improperly or were, as [a]ppellees' conveniently claimed at trial, `worthless.'"
Quasi-estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken. Lopez v. Munoz, Hockema Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000). The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one to which he acquiesed or from which he accepted a benefit. Id. However, before the acceptance of benefits can trigger estoppel, it must be shown that the benefits were accepted with knowledge of all material facts. Anadarko Petroleum Corp. v. Thompson, 60 S.W.3d 134, 142 (Tex.App.-Amarillo 2000), rev'd on other grounds, 94 S.W.3d 550 (Tex. 2002); see Frazier v. Wynn, 472 S.W.2d 750, 753 (Tex. 1971). Additionally, it is well-settled that a party seeking an equitable remedy must do equity and come to court with clean hands. Truly v. Austin, 744 S.W.2d 934, 938 (Tex. 1988). Here, the evidence shows that at the time appellees submitted the echocardiogram tapes and interpretations to the settlement trust, they were unaware of the problems with them. Consequently, appellees did not have knowledge of all material facts. Moreover, Heygood was asked why appellees had not withdrawn the echoes and reports that they later learned were inaccurate, and Heygood said he was not "even sure how that could even conceivably be an option . . . You submit what you submit and they tell you if it passes audit or not, and that's just the process."
With respect to the "opt-out" cases that were settled in private litigation, Heygood testified the settlement of those cases was not based on the echocardiograms provided by appellant. He explained that in the opt-out cases (unlike opt-in cases), appellees had more time to get new experts because they were not constrained by the settlement trust deadlines. Wyeth knew this and opted to settle the cases, even though it knew appellees believed the echocardiograms were worthless, according to Heygood. Given this evidence, we cannot say appellant conclusively established his affirmative defense of quasi-estoppel/acceptance of benefits.
We likewise reach the same decision with respect to judicial estoppel. Judicial estoppel applies only if, among other things, the sworn, prior inconsistent statement was not made inadvertently or because of mistake, fraud, or duress. See Long v. Knox, 155 Tex. 581, 291 S.W.2d 292, 295 (1956); Galley v. Apollo Assoc. Servs., Ltd., 177 S.W.3d 523, 529 (Tex.App.-Houston [1st Dist.] 2005, no pet.). Here, appellant complains that appellees made inconsistent sworn statements in the echocardiogram forms and reports filed with the settlement trust. However, as stated previously, at the time the forms and reports were filed, the evidence shows appellees were not aware of the problems with the echocardiograms and interpretive reports. Thus, the trial court could have found that any statement made by appellees at the time was a mistake.
We conclude the evidence is legally and factually sufficient to support the trial court's failure to find in appellant's favor on his breach of contract, sworn account, quantum meruit, and theft act violations as well his affirmative defenses of quasi-estoppel and judicial estoppel. Having reached this conclusion, we need not addresss appellant's remaining issues within this point relating to the claims for vicarious liability that were presented at trial. See Cresthaven Nursing Residence v. Freeman, 134 S.W.3d 214, 220 (Tex.App.-Amarillo 2003, no pet.) (explaining that vicarious liablity is imposition of liability on one party for actionable conduct of another based on a relationship between the parties). Id. We overrule the first point of error.
In his second point of error, appellant argues we should reverse and remand the trial court's summary judgment on vicarious liability claims of sworn account and breach of contract against ARJOMH. To ultimately hold ARJOMH liable for sworn account or breach of contract, appellant had to obtain a liablity finding against HOR. Appellant did not. Consequently, even if we assumed the trial court erred in granting the no-evidence summary judgment prior to trial, appellant cannot show harm now, given the trial court's judgment and our resolution of appellant's first point. We therefore overrule the second point of error. We affirm the trial court's judgment.