Summary
holding because appellees did not plead or try partial performance exception to statute of frauds by consent, it was waived
Summary of this case from Wood v. WigginsOpinion
No. 14-02-01243-CV
Memorandum Opinion filed June 17, 2004.
On Appeal from the 125th District Court, Harris County, Texas, Trial Court Cause No. 00-45493.
Reversed and Rendered.
MEMORANDUM OPINION
In this breach of contract action, appellants, Terry R. Parks, West End Management Group, and Parks Management Group, appeal a judgment in favor of appellees, Imre Szekelyhidi and Landfill Marketing Consultants, Inc. In seven issues, appellants claim (1) the oral contract was unenforceable under the statute of frauds, (2) the trial court erred in disregarding the jury finding on that issue, (3) the trial court erred in finding Parks and Park Management Group individually liable for the contract of West End Management Group, a corporation, (4) the evidence was legally insufficient to support the jury's finding of damages, (5) appellees did not make a proper claim for attorneys' fees, and (6) the evidence was insufficient to support the award of attorneys' fees, and (7) the trial court erred in calculating prejudgment interest. Because the trial court erred in disregarding the jury's finding on the statute of frauds, we reverse and render a take-nothing judgment.
I. Background
Szekelyhidi, owns Landfill Marketing Consultants, a consulting service for landfill projects. Appellant, Terry Parks, is the sole shareholder and president of West End Management, a corporation that brokers waste and establishes landfill developments. In 1995, Szekelyhidi and Parks created TSP Development, Ltd., a limited partnership, to develop and sell a landfill in Chambers County. Parks, Szekelyhidi, as well as other individuals were partners in TSP Development. Parks Management Group, a corporation, was created by Parks to be the general partner of TSP Development. Parks was the sole shareholder of Parks Management Group.
This was the second such project that Szekelyhidi and Parks developed together.
Szekelyhidi and Parks orally agreed that Szekelyhidi would perform the consulting work necessary to obtain the required permits for the Chambers County landfill. They agreed that in exchange for this work, Szekelyhidi would receive $10,000 a month. Szekelyhidi began performing the consulting work and receiving monthly payments in February 1995. However, TSP Development began suffering financial difficulties when the project encountered legal obstacles and became involved in litigation. In June 1999, Parks stopped making the payments to Landfill Marketing Consultants. Nevertheless, Szekelyhidi performed some consulting work until July 2000. At the time of trial in February 2002, TSP Development was still attempting to obtain the necessary permits to operate a landfill on the Chambers County site.
The parties disagree over the intended length of this agreement.
Szekelyhidi and Landfill Marketing Consultants (hereafter collectively "appellees") sued Parks, Parks Management Group, and TSP Development (hereafter collectively "appellants") for breach of contract. The jury found that appellants breached the contract and awarded appellees $155,000. The jury also found that the contract could not be performed within one year. However, the trial court disregarded this finding on appellees' motion and entered judgment for appellees in the amount of $155,000 and attorney's fees.
II. STATUTE OF FRAUDS
In their first and second issues, appellants claim that (1) enforcement of the agreement is barred by the statute of frauds because it could not be performed in one year, and (2) the trial court erred in disregarding the jury finding to that effect. The statute of frauds requires that an agreement which is not to be performed within one year from the date it is made must be in writing. TEX. BUS. COM. CODE ANN. § 26.01 (Vernon 2002). If a contingent event that would result in the full performance of the agreement could conceivably occur within one year, the statute of frauds does not apply. Young v. Ward, 917 S.W.2d 506, 511 (Tex. App.-Waco 1996, no writ). However, if the occurrence of a contingent event would simply terminate the agreement, the possibility of that event happening within one year does not take the agreement out of the statute of frauds. Id.
A trial court may disregard a jury finding if it is immaterial or unsupported by the evidence. Spencer v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994). The jury was asked, "Do you find that the contract could not be performed within one year from [the date Szekelyhidi began his consulting work]?" The jury answered, "yes." On their motion to disregard the jury finding, appellees claimed this finding was immaterial because (1) the application of the statute of frauds is a question of law, (2) the evidence conclusively established the contract could have been performed in one year, and (3) they conclusively proved two exceptions to the statute of frauds. The trial court granted the motion without specifying the grounds for its ruling. Therefore, we will consider all the grounds raised in the motion.
A. QUESTION OF LAW
Appellees asserted the jury finding was immaterial because application of the statute of frauds to a contract is a question of law. See Metromarketing Servs., Inc. v. HTT Headwear, Ltd., 15 S.W.3d 190, 195 (Tex. App.-Houston [14th Dist.] 2000, no pet.). Questions that should not have been submitted to the jury, including questions of law that are beyond the province of the jury, are immaterial. Spencer, 876 S.W.2d at 157. However, in this case, the parties disagree over what express contingency under the terms of the contract would result in full performance of the agreement. When the parties disagree on the terms of their oral agreement, this creates a question for the trier of fact to determine the intentions of the parties. Dech v. Daniel, Mann, Johnson Mendenhall, 748 S.W.2d 501, 503 (Tex. App.-Houston [1st Dist.] 1988, no writ).
Szekelyhidi testified that under the terms of the agreement, his performance would be completed when the permit was issued or denied, or when the project was abandoned. He presented further evidence that the project conceivably could have been abandoned within a year for various reasons, including failure to find an appropriate site, or not being able to afford a site. Appellees claim this testimony is proof that the agreement could have conceivably been performed within one year, therefore, taking the agreement out of the statute of frauds.
Appellees claim Parks also admitted at trial that the agreement would have been fully performed had the project been abandoned. However, appellees' counsel asked Parks whether he would have continued to pay Landfill Marketing Consultants had the project ended. Parks replied, "I hate to say it, but that's a loaded question . . . If the project was dead, then there would be no need to pay a consulting fee." Especially in light of Parks's testimony and the other evidence presented by appellants that under the terms of the agreement Szekelyhidi would consult on the project until a permit was obtained, we construe Parks's statement as an admission that the agreement would have terminated, had the project ended.
In contrast, Appellants deny that abandonment of the project would have resulted in full performance of the agreement. They presented evidence that according to the terms of the agreement, performance would have been completed when a permit for the landfill was issued or after five years had passed. They presented additional evidence that the permitting process would take a minimum of two years, but would more likely take three to four years. There was no evidence presented that the permit could have conceivably been obtained within one year. Appellants claim that had the project ended, this would have terminated the agreement, but it would not have resulted in the agreement being fully performed. See Young, 917 S.W.2d at 511.
Although application of the statute of frauds is generally a question of law, because the parties in this case disagreed on the terms of their agreement, the intended duration of the contract was properly a fact issue for the jury. See Dech, 748 S.W.2d at 503. Accordingly, the jury answer was not immaterial on the ground that it involved a question of law, and the trial court could not properly disregard it on that basis. See Spencer, 876 S.W.2d at 157.
B. CONCLUSIVE PROOF
Appellees also claimed the jury finding should be disregarded because the evidence conclusively established the contract could conceivably have been performed within one year. When we review the grant of a motion to disregard on the ground that the finding is unsupported by the evidence, we must consider all the evidence in the light most favorable to the verdict, indulging every reasonable inference in its favor. Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 593 (Tex. 1986). If a jury answer has any support in the evidence, the trial court may not disregard it. Arch Const., Inc. v. Tyburec, 730 S.W.2d 47, 51 (Tex. App.-Houston [14th Dist.] 1987, writ ref'd n.r.e.)
Although appellees presented evidence that the contract would have been fully performed when the project ended which could have happened within one year, appellants presented conflicting evidence that the contract would not have been fully performed had the project ended. According to appellants' evidence, performance under the contract would have been complete when the permit was issued, or when five years had passed, and the granting of the permit would take a minimum of two years. Appellees presented no evidence that the permitting process could possibly be completed within one year. Viewing this evidence in the light most favorable to the jury finding, there is some evidence to support the finding. Therefore, the trial court could not properly disregard the jury finding on this ground.
C. EXCEPTIONS TO THE STATUTE OF FRAUDS
Appellees also asserted the jury finding was immaterial because they conclusively proved two exceptions to the statute of frauds. Appellees did not request a jury issue on any statute of frauds exception. Generally, the party claiming an exception to the statute of frauds must secure a finding to that effect. Barbouti v. Munden, 866 S.W.2d 288, 295 (Tex. App.-Houston [14th Dist.] 1993, writ denied), overruled on other grounds by Formosa Plastics Corp. USA v. Presidio Eng'rs Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998). However, if the evidence conclusively establishes an exception to the statute of frauds, the issue is not waived for failing to obtain a finding. See TEX. R. CIV. P. 279; Choi v. McKenzie, 975 S.W.2d 740, 744 (Tex. App.-Corpus Christi 1998, pet. denied). Therefore, we will consider appellees' claims that they conclusively proved two exceptions.
1. Partial Performance
First, appellees claimed they conclusively proved the exception of partial performance. In certain situations, partial performance takes a contract out of the statute of frauds when the party seeking enforcement of the contract partially performed. See Welch v. Coca-Cola Enters., Inc., 36 S.W.3d 532, 539 (Tex. App.-Tyler 2000, pet. withdrawn); Hill v. Heritage Res., Inc., 964 S.W.2d 89, 135 (Tex. App.-El Paso 1997, pet. denied); see also Exxon Corp. v. Breezevale Ltd., 82 S.W.3d 429, 439 (Tex. App.-Dallas 2002, pet. denied).
However, appellants contend that the trial court could not have disregarded the jury finding on this ground because appellees failed to plead this exception. See TEX. R. CIV. P. 94; Mann v. NCNB Texas Nat'l Bank, 854 S.W.2d 664, 668 (Tex. App.-Dallas 1992, no writ) (holding that the party invoking an exception to the statute of frauds must plead and prove it). Pleadings must give fair notice of the defense asserted. Crockett v. Bell, 909 S.W.2d 70, 72 (Tex. App.-Houston [14th Dist.] 1995, no writ) (citing Tex. R. Civ. P. 45). A petition is sufficient if the defense can be reasonably inferred from what is stated. Id. (citing Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993)). In the absence of special exceptions, we will construe the petition in favor of the pleader. See Boyles, 855 S.W.2d at 601.
In the "Nature of the Case" section of appellees' petition, they stated that Landfill Marketing Consultants "has received partial performance in the form of payments or consideration." Even construing this allegation in favor of appellees, it was insufficient to give notice of the defense of partial performance because appellees, the parties seeking enforcement of the contract, did not allege their partial performance, but only alleged performance by appellants.
Appellees also claim that even if their pleadings were insufficient, the matter was tried by consent because appellants did not object to the admission of evidence of Szekelyhidi's partial performance. See TEX. R. CIV. P. 67. An unpleaded issue may be deemed tried by consent when evidence is developed under circumstances indicating both parties understood the issue was in the case. Frazier v. Havens, 102 S.W.3d 406, 411 (Tex. App.-Houston [14th Dist.] 2003, no pet.). To determine whether an issue was tried by consent, the court must examine the record for evidence of the trial of the issue, not just evidence of the issue. Stephanz v. Laird, 846 S.W.2d 895, 901 (Tex. App.-Houston [1st Dist.] 1993, writ denied). Additionally, the doctrine of trial by implied consent generally does not apply if the evidence supporting the issue is relevant to other issues raised in the pleadings. Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 446 (Tex. 1993). Trial by consent is not intended to establish a general rule of practice, and it should never be applied in a doubtful situation. Stephanz, 846 S.W.2d at 901.
As appellees note, testimony was admitted without objection that Szekelyhidi partially performed under the contract. However, appellees pled a cause of action for breach of contract. The evidence of Szekelyhidi's partial performance was relevant to this issue. See Frost Nat'l Bank v. Burge, 29 S.W.3d 580, 593 (Tex. App.-Houston [14th Dist.] 2000, no pet.) (noting an element of a breach of contract claim is performance or tender of performance by the plaintiff). Therefore, the admission of evidence on Szekelyhidi's partial performance does not establish that the partial performance exception to the statute of frauds was tried by consent. See Sage St. Assocs., 863 S.W.2d at 446. Because appellees did not plead or try the partial performance exception by consent, they have waived it.
2. Quasi-Estoppel
Appellees also contend they conclusively proved quasi-estoppel as an exception to the statute of frauds. Under the general doctrine of quasi-estoppel, a party is precluded from asserting to another's disadvantage, a right that is inconsistent with a position previously taken. Lopez v. Munoz, Hockerma Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000). The doctrine applies when it would be unconscionable to allow a party to maintain a position that is inconsistent with one from which he accepted a benefit. Id. Appellees contend that because appellants accepted the benefit of Szekelyhidi's work and partially paid him for it, they are now estopped from taking the inconsistent position that the agreement is unenforceable under the statute of frauds.
Appellants contend the trial court could not disregard the jury finding on this ground because appellees did not include it in their pleadings. However, appellees explicitly pled quasi-estoppel in their petition.
Quasi-estoppel has not previously been applied in Texas as a statute of frauds exception. However, one party's acceptance of the benefits of the other party's performance has been addressed in the statute of frauds context. Cf. id. (noting that acceptance of the benefits is a species of quasi-estoppel). The statute of frauds defense is unavailable to a party who knowingly accepts the benefits of another party's full performance and partly performs. 626 Joint Venture v. Spinks, 873 S.W.2d 73, 76 (Tex. App.-Austin, 1993 no writ); Estate of Kaiser v. Gifford, 692 S.W.2d 525, 526 (Tex. App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.). This exception to the statute of frauds for fully performed contracts is well settled under Texas law. Frost Nat'l Bank, 29 S.W.3d at 595.
We also note that outside the statute of frauds context, quasi-estoppel has only been applied to bar a challenge to the validity of fully performed contracts. For example, appellees cite Enochs v. Brown, in which the court held that under the doctrine of quasi-estoppel, a party that had accepted the benefits of the other party's performance under a contract was estopped from challenging its validity on the ground that the contract did not comport with certain statutory requirements. 872 S.W.2d 312, 317 (Tex. App.-Austin, 1994, no writ), overruled on other grounds by Roberts v. Williamson, 11 S.W.3d 113 (Tex. 2000). However, the performing party in Enochs had performed all the work related to the underlying contract. See id. at 316. Although the Enoch's court did not address full performance as a dispositive factor, another court later refused to apply Enochs where the performing party had not fully performed. Tillery Tillery v. Zurich Ins. Co., 54 S.W.3d 356, 359 (Tex. App.-Dallas 2001, pet. denied).
The statute of frauds exception for fully performed contracts is well settled under Texas law, and no case has held quasi-estoppel will bar a challenge to the validity of a partially performed contract. Therefore, we decline to hold that quasi-estoppel will preclude application of the statute of frauds where one party has accepted the benefits of the other party's partial performance. Appellees have not claimed that Szekelyhidi fully performed under the contract; they specifically claimed that he only partially performed. Therefore, appellants failed to present conclusive proof establishing an exception to the statute of frauds based on appellants' acceptance of the benefits, and the trial court could not properly disregard the jury finding on this ground.
We note that partial performance of a contract already exists as an exception to the statute of frauds. See Exxon Corp., 82 S.W.3d at 439. Certain conditions must be met in order for this exception to apply. Id. Recognizing quasi-estoppel as an exception to the statute of frauds when one party partially performed would eliminate any additional requirements under the partial performance exception.
III. Conclusion
The trial court erred in disregarding the jury finding on any of the grounds raised in appellees' motion. We sustain appellants' first and second issues. Because the trial court improperly disregarded the jury finding, we reverse the judgment of the trial court and render judgment based on the jury verdict. As a result of the jury's finding, the oral contract was barred by the statute of frauds and will not support a recovery for breach of contract. See Tex. Bus. Com. Code Ann. § 26.01. Accordingly, we reverse the trial court's judgment and render judgment that appellees take nothing.
In light of our ruling on appellants' first and second issues, we need not consider appellants' remaining issues.