Opinion
No. 14-03-00163-CV.
Opinion Filed: February 5, 2004.
On Appeal from the County Civil Court at Law No. 4, Harris County, Texas, Trial Court Cause No. 740,929.
Affirmed.
Panel consists of Chief Justice HEDGES and Justices ANDERSON and SEYMORE.
MEMORANDUM OPINION
Abraham Company, Inc. appeals from a judgment favoring Rebecca Vance Smith in her breach of contract and conversion action. Smith sued Abraham based on a consignment agreement to sell four rugs she owned. After a bench trial, the court awarded Smith $12,000 in damages plus $28,000 in attorney's fees through trial, $5,000 for an appeal, and $2,500 in the event of an appeal to the Texas Supreme Court. On appeal, Abraham concedes liability for conversion but contends that the trial court erred in awarding attorney's fees because (1) Smith's pleadings and evidence do not support a breach of contract finding, and (2) the trial court was not required to interpret a contract to decide the conversion claim. We affirm.
Abraham Company, Inc. is owned by Samuel Abraham. For simplicity, we will use the name "Abraham" to refer both to the company and its owner.
Background
In 1991, Smith and Abraham entered into a written consignment agreement, under which Abraham accepted four of Smith's oriental rugs and agreed to restore the rugs and attempt to sell them for a 10 percent commission. The contract placed a total value of $14,000 on the rugs, guaranteed a $7,000 payment to Smith after 90 days, and provided that Abraham would return two of the rugs if not sold within six months. At the conclusion of the six month contractual period, Abraham had not sold any of the rugs and had neither returned the rugs nor paid the guaranteed $7,000. Smith testified that she wrote to Abraham in 1991 requesting $7,000, but she received no response. She further testified that in a telephone conversation, she agreed to leave the rugs with Abraham, and he agreed to continue to try to sell them in exchange for a 10 percent commission. This agreement was reiterated in letters and further telephone calls. Abraham subsequently sold one of the rugs and sent Smith a $2,000 check for her share of the proceeds. In 2000, Smith requested return of her rugs and was informed that the rugs were no longer at Abraham's and were believed to have been returned to her. She testified that she never received the rugs.
Smith sued Abraham for breach of contract and conversion. During trial, at the close of Smith's case, the court granted judgment based on limitations against the breach of the original written contract claim; however, the court permitted Smith to go forward on her claims for conversion and subsequent breach of the orally modified contract. The court's judgment finds liability against Abraham but does not specify its basis. No findings of fact or conclusions of law were requested or filed; hence, we view the trial court's judgment as impliedly finding all facts necessary to support its judgment. See Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 52 (Tex. 2003).
Smith also plead claims for breach of fiduciary duty, fraud, malice, and exemplary damages, but the court granted partial summary judgment on these issues.
The trial judge spoke of the agreement as either a "subsequent oral agreement" or a modified contract. As will be discussed, the evidence supports the conclusion that the parties agreed to an oral modification of the contract, so we will categorize the agreement accordingly.
The Pleadings
Abraham first contends that Smith's pleadings do not support judgment for a breach of an orally modified agreement. Abraham acknowledges that Smith pled a breach of a written contract cause of action but argues that the petition does not mention the word "oral" and does not specifically set out a claim for breach of a modified contract.
Under Texas law, pleadings must meet a "fair notice" standard, requiring that an opposing party be able to ascertain from the pleading the nature and basic issues of the controversy and the testimony that will be relevant. Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 897 (Tex. 2000). Specifically, a petition is deemed sufficient if it gives fair and adequate notice of the facts upon which the plaintiff bases her claim. Id. The purpose of the rule is to give the opposing party sufficient information to enable him to prepare a defense. Id. When no special exceptions are filed, as in the present case, we construe a petition liberally in favor of the pleader. See id.
In the "Facts" section, Smith's live petition states "The original consignment agreement called for certain actions to occur 90 days and six months after March 5, 1991, however, the parties subsequently agreed to forego those actions and the rugs remained with Defendant on consignment for sale to customers." This language clearly apprised Abraham that Smith was not suing solely on the basis of the original written contract but was alleging a modification occurred. Although the petition does not use the term "oral," Abraham cites no authority requiring the use of such precise terminology to plead an oral modification, and we are aware of no such authority. The petition then alleges that Abraham made continuing assurances that he was trying to sell the rugs and would remit the proceeds to Smith for a 10 percent commission. Indeed, the Facts section closely matches the evidence adduced at trial concerning the parties' dealings. Accordingly, we find that Smith's pleadings sufficiently apprised Abraham of the claims on a modified contract. This sub-issue is overruled.
The Evidence
Abraham next contends that the evidence was legally and factually insufficient to support the trial court's implied finding on breach of contract. In reviewing Abraham's sufficiency challenges, we utilize the normal standards of review. See St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 519-20 (Tex. 2003) (legal sufficiency); Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex. 1998) (factual sufficiency). To establish a breach of contract claim, a party must show: (1) a valid contract existed, (2) the party performed or tendered performance, (3) the defendant breached the contract, and (4) the plaintiff sustained damages as a result of the breach. Renteria v. Trevino, 79 S.W.3d 240, 242 (Tex. App.-Houston [14th Dist.] 2002, no pet.). The elements of a valid contract are: (1) an offer, (2) an acceptance, (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. Angelou v. African Overseas Union, 33 S.W.3d 269, 278 (Tex. App.-Houston [14th Dist.] 2000, no pet.). In determining the existence of an oral contract, we look to the communications between the parties and to the acts and circumstances surrounding those communications. Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.-Houston [1st Dist.] 2002, pet. denied). Generally, a written contract may be modified by a subsequent oral agreement. See, e.g., DiMiceli v. Affordable Pool Maint., Inc., 110 S.W.3d 164, 171 (Tex. App.-San Antonio 2003, no pet. h.); Robbins v. Warren, 782 S.W.2d 509, 512 (Tex. App.-Houston [1st Dist.] 1989, no writ).
Abraham does not distinguish between its legal and factual sufficiency arguments, so we will discuss them together.
Abraham primarily argues under this issue that no modification ever occurred. As discussed above, the parties' original contract contained provisions guaranteeing a $7,000 payment to Smith after 90 days, and requiring Abraham to return two of the rugs if not sold within six months. After the sixth month period, Abraham had not sold any of the rugs, returned the rugs, or paid the guaranteed $7,000. Smith then sent Abraham a letter insisting on payment of $7,000, but she received no response. Smith clearly and repeatedly testified, however, that she and Abraham agreed in a telephone conversation that she would leave the rugs with him and that he would continue to try to sell them in exchange for a 10 percent commission. In his testimony, Abraham confirmed that, after the six month period, he agreed in a telephone conversation to continue to try to sell the rugs. The contract was thereby modified to eliminate the provisions regarding time and the return of the rugs. Abraham eventually did sell one of the rugs, took his commission, and remitted the remainder to Smith, all pursuant to the modified agreement. Based on the communications between, and actions by, the parties, we find that the evidence was legally and factually sufficient to support the conclusion that there was an offer, an acceptance, and a meeting of the minds regarding the modification. Ultimately, however, Abraham failed to either return the remaining rugs or remit the proceeds if sold. Accordingly, the trial court as fact finder could have reasonably found that Abraham breached the modified agreement.
Abraham notes that when one party breaches a contract, the other party has two options: continue performance or cease performance, citing Chilton Insurance Co. v. Pate Pate Enterprises, 930 S.W.2d 877, 887-88 (Tex. App.-San Antonio 1996, writ denied). Based on this rule, Abraham argues that by leaving her rugs with him, Smith elected to continue performance and cannot now sue for breach. This argument evidences a misunderstanding both of the cited rule and of the nature of the court's implied finding. The rule does not affect whether the nonbreaching party can sue for a former or future breach, it only affects whether the nonbreaching party itself is then required to perform. See id.; Board of Regents of Univ. of Texas v. S G Constr. Co., 529 S.W.2d 90, 97 (Tex.Civ.App.-Austin 1975, writ ref'd n.r.e.); see also Assoc. Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 286 n. 8 (Tex. 1998) (discussing S G Constr.). In other words, if the party continues performance in the face of a breach, it obligates itself to fully perform; if it ceases performance, it cannot be held to its obligation. See Chilton Ins. Co., 930 S.W.2d at 887-88; S G Constr. Co., 529 S.W.2d at 97. In the present case, however, we find the evidence supports the trial court's implied finding that the parties modified their agreement. Therefore, we need not consider whether the evidence could support the proposition that Smith simply elected to continue under the original contract.
During cross-examination, Smith repeated her claim that the agreement was not just what was in the written contract so many times that defense counsel finally said "I understand You've said that numerous times. . . . And I will throw in with you that you're always going to say that. Okay? . . . So you don't need to say it again." In its brief, however, Abraham emphasizes portions of Smith's testimony wherein she said that the basic agreement remained as it was in the written contract. Clearly, seen in its entirety (and not just selected excerpts), Smith's testimony is that the parties agreed to modify the contract to eliminate certain provisions in the original document.
Abraham also cites to a fax Smith sent to Abraham in 2000 in which she included a copy of the original contract as proof the written document contained the sole agreement between them. However, the fax cover letter states that the invoice was included for the purpose of showing "where my four rugs were picked up"; therefore, the fax does not support the contention that no modification occurred.
Abraham further contends the alleged modification lacked consideration. To be valid, a modification to a contract must itself be supported by consideration. Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 314 (Tex. App.-Houston [14th Dist.] 2003, pet. denied). Consideration may consist of a benefit that accrues to one party or a detriment incurred by the other party. Id. at 315. At the conclusion of the six month period in the original contract, Smith had the right to receive two of her rugs back and $7,000, and Abraham had the right to keep two of the rugs. Although it is unclear whether Smith intended to relinquish her right to the cash, she did relinquish her right to immediate return of the rugs, and, in promising to continue to sell the rugs for a 10 percent commission, Abraham relinquished his right to keep two of the rugs. Thus, in agreeing to the modified contract, Smith relinquished her right to immediate return of the rugs and promised a 10 percent commission for sale of the rugs, and Abraham relinquished his right to keep two of the rugs and promised to continue attempting to sell the rugs. In short, both parties received consideration for modifying the contract.
Smith argues that no consideration was necessary because Uniform Commercial Code sections 2.209 and 2.236 control. See TEX. BUS. COM. CODE ANN. §§ 2.209, 2.326 (Vernon 1994 Supp. 2004). Under those sections, a modification to a "sale or return" agreement requires no consideration. This argument was not preserved for appellate review because it was not raised in the trial court.
In sum, the pleadings and evidence were sufficient to support the implied breach of contract finding. Accordingly, the award of attorney's fees was not only proper but mandatory. See TEX. CIV. PRAC. REM. CODE ANN. § 38.001(8) (Vernon 1997); Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998). Abraham's first issue is overruled.
Conversion
In his second issue, Abraham contends that the implied finding of liability on the conversion claim does not support the award of attorney's fees. Generally, attorney's fees are not recoverable in a tort cause of action. See TEX. CIV. PRAC. REM. CODE ANN. § 38.001 (Vernon 1997); Academy Corp. v. Interior Buildout Turnkey Constr., Inc., 21 S.W.3d 732, 743 (Tex. App.-Houston [14th Dist.] 2000, no pet.). However, when a conversion claim is significantly intertwined with or dependent upon the interpretation of a contract between the parties, an award of fees may be appropriate. See High Plains Wire Line Servs., Inc. v. Hysell Wire Line Serv., Inc., 802 S.W.2d 406, 408, 410 (Tex. App.-Amarillo 1991, no writ); Exxon Corp. v. Bell, 695 S.W.2d 788, 791 (Tex. App.-Texarkana 1985, no writ); see also Kucel v. Walter E. Heller Co., 813 F.2d 67, 73 (5th Cir.) (citing Bell as Texas rule); F.D.I.C. v. Golden Imports, Inc., 859 S.W.2d 635, 646-47 (Tex. App.-Houston [1st Dist.] 1993, no writ) (citing Bell but holding resolution of conversion claim did not depend on contract interpretation and thus declining to award fees). In the present case, we find the conversion claim was significantly interwoven with the contract claim and indeed was dependent on the court's interpretation of the contract. The original contract stated Abraham received four of Smith's rugs for consignment sale, that after 90 days $7,000 was guaranteed, and after six months, if no rugs had been sold, Abraham was to return two of the rugs. The subsequent modification dispensed with some but not all of the provisions in the original contract. Therefore, in order to resolve the conversion liability issue, the court had to decide which contract provisions were still in effect, particularly as to whether Abraham was required to return any of the rugs, all of the rugs, or just two of the rugs. The court also had to reference the contract in calculating the proper amount of damages, given the $7,000 guarantee, the value placed on the rugs in the contract, and the fact that Abraham partially performed by selling one of the rugs and remitting $2,000 of the proceeds to Smith. In short, we find Smith's conversion claim fits within the limited Bell/ High Plains exception. Accordingly, Abraham's second issue is overruled.
In High Plains, the trial court was required to interpret whether a contract effecting the sale of a business included certain property, which was the basis of the conversion action. 802 S.W.2d at 408, 410. Although the court of appeals found the plaintiff could thus be entitled to attorney's fees, it nevertheless held the plaintiff forfeited the fees by failing to properly present the claim. Id. at 410.
In Bell, the trial court was required to determine whether a contract for sale of a water well included the pump and pipe that were subjects of the conversion action. 695 S.W.2d at 789-91. Based on this intertwining between the contract and the conversion claim, the court of appeals affirmed the award of attorney's fees. Id. at 791.
The court in Golden Imports stated that the conversion claim depended primarily on an analysis of defendant's right of offset and not on an interpretation of a contract between the parties. 859 S.W.2d at 646-47.
Abraham's argument on this issue consists entirely of a discussion of the Bell and High Plains cases followed by the bald assertion that the conversion claim stood on its own without any need to reference the agreement.
Abraham asserted at trial that he was to receive two of the rugs to recover the costs of cleaning and restoration, but Smith testified she understood the costs to be covered by the commission.
Abraham does not attack the court's finding of conversion liability or the amount of actual damages.
Conclusion
In sum, the award of attorney's fees was supported by both the contract claim and the conversion claim. The trial court's judgment is affirmed.