Opinion
No. 11-02-00346-CV.
October 23, 2003.
Appeal from Dallas County.
Panel consists of: ARNOT, C.J., and WRIGHT, J., and McCALL, J.
Memorandum Opinion
The trial court granted a motion for summary judgment filed by Nicholaos C. Bellos, M.D., P.A. and enforced a contractual liquidated damages clause against Healix Infusion Therapy, Inc. The trial court awarded Dr. Bellos $10,000.00 in his suit against Healix. The trial court also awarded attorney's fees to Dr. Bellos. In two issues on appeal, Healix argues that the liquidated damages clause is an unenforceable penalty and that there are genuine issues of material fact regarding damages. We affirm.
The award of attorney's fees is not contested in this appeal.
Dr. Bellos sued Healix in another lawsuit; the parties reached a settlement in that suit. Both parties agreed not to disclose the nature of the settlement agreement. The agreement provided for $10,000.00 in liquidated damages in the event of a breach by either party. After the settlement agreement was signed, Methodist Hospitals of Dallas (Methodist), where Dr. Bellos practiced, sent $6,385.13, which it owed to Dr. Bellos, because it mistakenly believed that Healix held a lien against Dr. Bellos. Healix sent a letter and a copy of the settlement agreement to Methodist to show that there was no lien. Dr. Bellos claimed that Healix breached the settlement agreement when Healix furnished the agreement to Methodist, and he sued Healix to recover under the liquidated damages provision of the agreement.
A trial court must grant a motion for summary judgment if the moving party establishes that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. TEX.R.CIV.P. 166a(c); Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991). Once the movant establishes a right to a summary judgment, the non-movant must come forward with evidence or law that precludes summary judgment. City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678-79 (Tex. 1979). When reviewing a summary judgment, the appellate court takes as true evidence favorable to the non-movant. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. American Tobacco Company, Inc. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997); Nixon v. Mr. Property Management Company, Inc., 690 S.W.2d 546, 548-49 (Tex. 1985). In order to succeed on an affirmative defense in a summary judgment proceeding, a defendant must establish every element of the affirmative defense. American Tobacco Company, Inc. v. Grinnell, supra.
Courts will enforce liquidated damages provisions in contracts when the court finds that the harm resulting from a breach of the contract is incapable or difficult to estimate and when it also finds that the amount provided as liquidated damages is a reasonable forecast of just compensation. Rio Grande Valley Sugar Growers, Inc. v. Campesi, 592 S.W.2d 340, 342 n. 2 (Tex. 1979). The "difficulty of estimation" and "reasonable forecast" questions must be determined from evidence of the circumstances which existed at the time the parties executed the agreement. Baker v. International Record Syndicate, Inc., 812 S.W.2d 53 (Tex.App. B Dallas 1991, no writ). Courts will not enforce liquidated damages clauses which do not meet those criteria because the clauses would constitute unenforceable penalties. Phillips v. Phillips, 820 S.W.2d 785 (Tex. 1991). Determining whether a liquidated damages clause is enforceable or whether it is an unenforceable penalty is a question of law. Phillips v. Phillips, supra.
In this case, the initial burden was on the movant. However, when a party raises the affirmative defense of penalty, that party assumes the burden to conclusively establish the defense. Baker v. International Record Syndicate, Inc., supra. Therefore, the burden was upon Healix to prove that the contractual liquidated damages was an unenforceable penalty.
The settlement agreement offered as summary judgment evidence by Dr. Bellos showed that the parties agreed to keep the nature of the settlement agreement confidential. The parties further agreed that a breach of the confidentiality clause would result in imminent and irreparable harm and that the damages for a breach of confidentiality would be $10,000.00. Healix admitted in its response to Dr. Bellos's request for admissions that it agreed to the confidentiality of the agreement and that it agreed to the $10,000.00 liquidated damages clause. Dr. Bellos's affidavit reflected that he agreed to the confidential nature of the agreement and that he had performed all acts required of him under the settlement agreement. His affidavit further showed that Methodist subjected him to a re-credentialing process every two years. He was unaware of how the disclosure of the agreement would affect the re-credentialing process, but states that he has been harmed in a manner that is "incapable of or difficult of estimation."
As part of its proof, Healix attached the affidavit of Heather Hughes-Glass, the corporate risk manager for Healix. In her affidavit, Heather Hughes-Glass stated that, as soon as she became aware of the confidentiality provision of the agreement that was sent to Methodist, she contacted Dean Matthys, the corporate risk manager for Methodist, to have him destroy the agreement. She further stated that Matthys indicated that only he and his assistant were aware of the settlement agreement. Also included in the summary judgment evidence was an affidavit given by Matthys as well as a letter from Matthys to Healix. These documents indicated that the copy of the settlement agreement was destroyed soon after it was received by Methodist and that the only two people to see the agreement, Matthys and his assistant Lisa Irby, were not involved with the re-credentialing process at Methodist. Finally, Healix offered as summary judgment evidence Dr. Bellos's response to a request for disclosure that any economic damages suffered by Dr. Bellos were difficult to estimate.
This evidence does not meet the burden Healix must bear:
that at the time the agreement was made damages could be easily ascertained and that the amount of the liquidated damages award was not a reasonable forecast of just compensation. Healix contends that the award of liquidated damages is disproportionate to the actual damages suffered by Dr. Bellos because Dr. Bellos did not have any actual damages. To emphasize this point, Healix relies on Baker. AIf the liquidated damages are shown to be disproportionate to the actual damages, then the liquidated damages can be declared a penalty and recovery limited to actual damages proven."
Baker v. International Record Syndicate, Inc., supra at 55. Healix still must show that, at the time the agreement was made, the amount of the liquidated damages was not a reasonable forecast. To prove this defense, Healix must prove actual damages, if any, to show that the actual loss was not an approximation of the stipulated sum. Baker v. International Record Syndicate, Inc., supra. That damages are not yet ascertainable is not tantamount to evidence of Azero" damages.
The summary judgment evidence establishes that there was an agreement between Healix and Dr. Bellos that prohibited the disclosure of the nature of the settlement agreement and that Dr. Bellos performed all the required acts under the agreement. Healix breached the agreement by sending a copy of the agreement to Methodist. Because we find that Healix failed to meet its burden of proof on the penalty issue and because Healix failed to raise a genuine issue of material fact, we hold that the trial court did not err when it granted Dr. Bellos's motion for summary judgment. Healix's issues on appeal are overruled.
The judgment of the trial court is affirmed.