Opinion
No. 04-15-00609-CV
04-05-2017
BREAKFRONT, LLC, Golden Oak Partners, LLC, Mark Slotkin, Individually and Mark Slotkin as Trustee of the Slotkin Family Children's Trust Dated January 1, 1997, Appellants v. SOUTHWEST GUARANTY INVESTORS, LTD., Appellee
MEMORANDUM OPINION
From the 81st/218th Judicial District Court, Atascosa County, Texas
Trial Court No. 14-04-0331-CVA
Honorable Russell Wilson, Judge Presiding Opinion by: Luz Elena D. Chapa, Justice Sitting: Sandee Bryan Marion, Chief Justice Rebeca C. Martinez, Justice Luz Elena D. Chapa, Justice AFFIRMED
Breakfront, LLC, Golden Oak Partners, LLC, and Mark Slotkin, Individually and as Trustee of the Slotkin Family Children's Trust, appeal the trial court's judgment, which was rendered after a jury trial. They argue there is insufficient evidence to support the jury's findings that (1) they breached their Settlement Agreement with Southwest Guaranty Investors, Ltd. (SWGI); (2) SWGI did not breach the Settlement Agreement; and (3) SWGI did not waive appellants' breach. We affirm the trial court's judgment.
BACKGROUND
Mark Slotkin is a trustee for Breakfront LLC, Golden Oak Partners LLC, and the Slotkin Family Children's Trust. In 2008, Breakfront and Golden Oak Partners borrowed $2.5 million from SWGI. Slotkin, individually and as trustee of the Slotkin's Family Children's Trust, signed as a guarantor on the note. Appellants refer to themselves collectively as "Slotkin."
After SWGI foreclosed on the security for the loan, Slotkin sued for wrongful foreclosure and SWGI counterclaimed for a deficiency judgment. SWGI obtained a final summary judgment in the amount of $987,548.84, post-judgment interest, and attorney's fees. Slotkin notified SWGI he intended to appeal the judgment, and the parties entered into the Settlement Agreement that is the subject of this case. Article I of the Settlement Agreement contains recitations regarding the factual background. Article II provides the following settlement terms:
1. At closing of this Agreement, the Slotkin Parties shall file with the Clerk of the Atascosa County, Texas District Court, a Stipulation to Forego Appeal (the "Stipulation") in the form attached hereto as Exhibit "A".
2. The Judgment shall remain in full force and effect, and shall continue to accrue interest at the legal rate of 5% per annum as therein provided, subject only to compromise as hereinbelow provided.
3. The Judgment shall be compromised and settled for the total sum of $40,000, paid by the Breakfront Parties and the Slotkin Parties to SWGI (or its designee) as follows (the "Payout"):
(a) $10,000.00 immediately at closing of this Agreement;
(b) $1,000.00/month installments for 12 months beginning Jan 1, 2012 = $12,000.00;
(c) $1,500.00/month installments for 12 months beginning Jan. 1, 2013 = $18,000.00
4. These Payout installments are net, non-interest bearing so long as paid timely and without Default. Payments are due on the first day of each month, and shall be deemed late if not received by SWGI (or its designee) by the 10th of the month. A late payment shall bear a penalty of 10% of the amount due. During the course of the Payout, if there are more than two (2) late payments, the entire remaining balance of the $40,000 settlement is due immediately and if not paid within 5 calendar days, there is a Default. The balance of the settlement amount
may be prepaid at any time. SWGI agrees to provide a bank account number to allow the Breakfront Parties and the Slotkin Parties to make automatic payments of the Payout.Article III provides the consideration for the Settlement Agreement is the mutual release of all claims. Article IV contains provisions regarding the parties' representations, warranties, and covenants, and Article V contains other general provisions. The parties signed the Settlement Agreement in November 2011.
5. SWGI agrees to hold and not transfer the Judgment (except to a wholly owned subsidiary or affiliate which subsidiary or affiliate shall be bound by the terms of this Agreement as if an original party hereto) unless there is a Default. Unless and until Default occurs, neither SWGI nor any other owner or holder of the Judgment shall exercise any effort to enforce or execute the Judgment. No abstracts of the Judgment shall be recorded except in Atascosa County, Texas, nor shall any owner or holder of the Judgment file any petition or take other action to domesticate the Judgment in the State of California or any other jurisdiction.
6. On final completion of the Payout, the Judgment shall be released in full and a Notice in Satisfaction of Judgment (in the form attached as Exhibit "B") shall be filed in the official records of the District Clerk of Atascosa County, Texas. If a Default occurs, then the entire Judgment is enforceable, including accrued interest, less a credit for the amounts actually paid by the Breakfront Parties and the Slotkin Parties up to the date of the Default.
Slotkin made late payments for the months of January, October, and November 2012. On January 24, 2013, SWGI sent a demand letter stating Slotkin would be in default if he did not pay the full remaining balance within five days of the letter. Slotkin claimed he did not receive the letter. Slotkin did not pay the full remaining balance within five days, but he continued making monthly payments. When Slotkin made a $1,500 payment to SWGI on December 4, 2013, Slotkin had paid SWGI a total of $40,000. SWGI did not release the judgment, and instead sought to domesticate the judgment in California in September 2013.
Slotkin sued SWGI in Atascosa County for breach of contract, alleging SWGI breached the Settlement Agreement by not releasing the judgment. SWGI countersued, alleging Slotkin had defaulted under the Settlement Agreement. Slotkin alleged SWGI waived any breach by "accepting monthly payments despite alleged notice of default." The case proceeded to a trial by jury, which found Slotkin breached the Settlement Agreement and SWGI did not. The jury also found SWGI did not waive Slotkin's failure to comply with the Settlement Agreement. After the trial court rendered judgment for SWGI, Slotkin appealed.
STANDARD OF REVIEW
We will sustain a legal sufficiency challenge if the record confirms: (a) a complete absence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence conclusively establishes the opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). In a legal sufficiency review, we review all of the evidence in the light most favorable to the verdict. Id. at 822. We "assume jurors made all inferences in favor of their verdict if reasonable minds could, and disregard all other inferences in their legal sufficiency review." Id. at 821. In a factual sufficiency review, the court of appeals reviews all of the evidence and may set aside a finding only if it is "so against the great weight and preponderance of the evidence that it is clearly wrong and unjust." Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (per curiam).
BREACH OF THE SETTLEMENT AGREEMENT
Slotkin argues his three late payments in 2012 are not a material breach because the Settlement Agreement did not expressly provide "time is of the essence" and the circumstances surrounding the signing of the Settlement Agreement did not demonstrate time was of the essence. Slotkin also argues the evidence conclusively establishes he paid SWGI $40,000 within the two-year period provided in the Settlement Agreement. Slotkin further contends there is legally insufficient evidence that he breached the Settlement Agreement and SWGI did not.
The trial court submitted the following question to the jury regarding appellants' breach of the Settlement Agreement:
Did [appellants] fail to comply with the Settlement Agreement?
The jury answered "yes." The jury also found SWGI did not fail to comply with the Settlement Agreement. When, as here, there is no objection to the jury charge, we measure the sufficiency of the evidence by the jury charge as it was submitted." Romero v. KPH Consol., Inc., 166 S.W.3d 212, 221 (Tex. 2005). Because the material facts are undisputed, we do not detail all of the testimony and exhibits admitted at trial at length.Compliance with an agreement must occur within a reasonable time under the circumstances unless the parties agreed that compliance must occur within a specified time and the parties intended compliance within such time to be an essential part of the agreement.
In determining whether the parties intended time of compliance to be an essential part of the agreement, you may consider the nature and purpose of the agreement and the facts and circumstances surrounding its making.
The trial court admitted the Settlement Agreement into evidence. The Settlement Agreement permitted Slotkin to prepay the settlement amount "at any time," but otherwise required Slotkin to make timely payments in monthly installments. The Settlement Agreement provided payments were due "on the first day of each month," but a payment was "late" if SWGI received the payment after "the 10th of the month." Thus, the plain, unambiguous language of the Settlement Agreement supports the jury's implied finding that the parties intended Slotkin's "compliance must occur within a specified time." See id.
The Settlement Agreement's provisions also support an implied finding that "the parties intended compliance within such time to be an essential part of the agreement." Although the Settlement Agreement does not contain the words "time is of the essence," "the parties' contract may make time essential without including the magic words 'time is of the essence.'" Capcor at KirbyMain, L.L.C. v. Moody Nat'l Kirby Houston S, L.L.C, — S.W.3d —, No. 01-13-00068-CV, 2014 WL 982858, at *8 (Tex. App.—Houston [1st Dist.] Mar. 13, 2014, no pet.) (quoting 2 MILTON R. FRIEDMAN & JAMES CHARLES SMITH, FRIEDMAN ON CONTRACTS AND CONVEYANCES OF REAL PROPERTY § 7:3.2 (7th ed. 2005)). The Settlement Agreement provided, "if there are more than two (2) late payments, the entire remaining balance is due immediately"; if there were more than two late payments and the remaining balance was not paid within five days, "there is a Default"; and (3) "If a Default occurs, then the entire Judgment is enforceable, including accrued interest, less a credit for the amounts actually paid by [Slotkin] up to the date of the Default." The primary benefit Slotkin was to receive was SWGI's full release of the judgment. Construing the Settlement Agreement as a whole, the parties specifically agreed that if Slotkin made more than two late payments and did not timely pay the balance, then he was in default and the judgment would remain enforceable. Thus, the provisions of the Settlement Agreement support the jury's implied finding that Slotkin's timely payments were an essential part of the agreement.
There is also evidence regarding the facts and circumstances surrounding the making of the Settlement Agreement. Article I states the Settlement Agreement was to settle the judgment against Slotkin because he "indicated their intention to appeal the judgment." SWGI's President Alfred Kelly Williams testified Slotkin had defaulted on the entire $2.5 million balance of the original loan, he had made late payments, and he was a "chronic late payer." Williams explained Slotkin "said he would appeal it and appeal it and appeal it, and cost us a whole lot of money." He testified it was "equally as important" to SWGI to receive timely payments just as it was to receive payments at all. Williams further testified SWGI's decision to settle for only $40,000 of the deficiency "was a business decision that we made based on Mr. Slotkin's history."
The Settlement Agreement and Williams's testimony regarding the facts and circumstances surrounding the making of the agreement constitute more than a scintilla of evidence to prove the parties intended the time of compliance to be an essential part of the agreement. See City of Keller, 168 S.W.3d at 810. Although Slotkin testified timely payments were not important to him, his testimony alone does not conclusively establish the parties did not intend his timely compliance to be an essential part of the Settlement Agreement. See id. We therefore hold the jury's finding that appellants failed to comply with the Settlement Agreement is supported by legally sufficient evidence. See id. We also cannot say the jury's findings are so against the great weight and preponderance of the evidence so as to be clearly wrong and unjust. See Dow Chem. Co., 46 S.W.3d at 241.
Appellants further argue there is legally and factually insufficient evidence to support the jury's finding that SWGI did not breach the Settlement Agreement because it is undisputed SWGI did not release the judgment. "It is a fundamental principle of contract law that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from further performance." Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam). Because the evidence establishes that appellants' compliance with the Settlement Agreement within the time provided was an essential part of the agreement, appellants committed a material breach of the Settlement Agreement. Consequently, SWGI was discharged or excused from releasing the judgment. See id. Although it is undisputed Slotkin paid SWGI a total of $40,000 within the two year period, we may not rewrite the parties' contract to remove the provisions that Slotkin was in default if he made more than two late payments and did not timely pay the remaining balance. See Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 239 (Tex. 2016).
Slotkin argues the breach was not material under the "material breach" factors in the RESTATEMENT (SECOND) OF CONTRACTS § 241 (1981). Because the Settlement Agreement expressly provides the deficiency judgment would remain in effect if Slotkin made more than two late payments and failed to pay the balance of the $40,000 within five days, we need not address all of the Restatement's factors to determine the parties' intent. See Anderson Energy Corp. v. Dominion Okla. Tex. Expl. & Prod., Inc., 469 S.W.3d 280, 287 (Tex. App.—San Antonio 2015, no pet.) (stating we construe contracts using the "four corners" rule); cf. Mustang Pipeline Co., 134 S.W.3d at 199 (discussing the factors when the contract did not expressly provide whether the breach was material).
WAIVER
Slotkin also argues there is legally and factually insufficient evidence to support the jury's finding that SWGI did not waive his failure to make timely payments. He contends the evidence conclusively establishes SWGI continued accepting Slotkin's timely payments through December 2013 and SWGI did not sue for breach of contract until July 2014.
A legal sufficiency challenge to an adverse jury finding on which the party challenging the finding had the burden of proof requires showing the evidence conclusively established all vital facts in support of the issue. Dow Chem. Co., 46 S.W.3d at 241. We "first examine the record for evidence that supports the finding, while ignoring all evidence to the contrary." Id. If there is no evidence to support the finding, we will sustain a legal sufficiency challenge only if the contrary proposition is conclusively established as a matter of law. Id. "Waiver is an affirmative defense" on which the defendant has the burden of proof. Sedona Contracting, Inc. v. Ford, Powell & Carson, Inc., 995 S.W.2d 192, 195 (Tex. App.—San Antonio 1999, pet. denied). The jury charge defined "waiver" as "an intentional surrender of a known right or intentional conduct inconsistent with claiming the right."
There is no evidence in the record showing SWGI intentionally surrendered its known right to enforce the judgment after Slotkin's three late payments. We may therefore sustain Slotkin's legal sufficiency challenge only if (1) there is no evidence that SWGI's conduct was consistent with its right to enforce the judgment, and (2) the evidence conclusively establishes SWGI's conduct was inconsistent with claiming the right to enforce the judgment. There is evidence showing SWGI sent Slotkin a letter on January 24, 2013, notifying him that the balance of the $40,000 was due and, if the balance was not paid, "there is a Default," and "SWGI will proceed under the Default provisions of the agreement to collect its judgment against you." There is also evidence showing SWGI sought to enforce the judgment against Slotkin by domesticating the judgment in California in September 2013. We therefore conclude there is some evidence showing SWGI's conduct was consistent with its right to enforce the judgment.
Slotkin argues SWGI's conduct was inconsistent with its rights under the Settlement Agreement solely because SWGI continued to accept late payments. While the acceptance of late performance may be some evidence of waiver, "the acceptance of late performance does not waive the breach as a matter of law." See Horton v. DaimlerChrysler Fin. Servs. Americas, L.L.C., 262 S.W.3d 1, 6 (Tex. App.—Texarkana 2008, no pet.). We hold the evidence does not conclusively establish that SWGI waived Slotkin's breach of contract. We also cannot say the jury's finding on waiver is so against the great weight and preponderance of the evidence so as to be clearly wrong and unjust. See Dow Chem. Co., 46 S.W.3d at 241.
CONCLUSION
We affirm the trial court's judgment.
Luz Elena D. Chapa, Justice