Opinion
No. 10-02-00029-CV
Opinion delivered and filed September 8, 2004.
Appeal from the 87th District Court Leon County, Texas, Trial Court # 0-99-238-B.
Modified, affirmed as modified.
Jeff Kobs, Law Office of Jeff Kobs, Ft. Worth, TX, for appellant/relator.
Roger Bellows, Bellows Law Firm, Three Rivers, TX, for appellee/respondent.
Before Chief Justice GRAY, Justice VANCE, and Justice REYNA.
MEMORANDUM OPINION
Plantation Production Properties, Inc., Skyview Ranch, L.L.C., and Ken Watson appeal from a judgment ordering them to pay $45,822 for a metal building built on their property by plaintiff, Jack Meeks, at the request of a tenant. We modify the portion of the judgment allowing recovery on a mechanic's and materialman's lien because Meeks failed to exercise due diligence in serving process upon the appellants regarding that claim and affirm the judgment as modified.
BACKGROUND
In 1996, Jim Antley contracted with Jack Meeks to build a metal building on what Meeks believed to be Antley's property for $45,822. Meeks testified that Antley referred to himself as Skyview Ranch, and the contract lists "Skyview Ranch c/o Jim Antley" as a party. After the building was completed, Meeks requested payment from Antley. Antley told Meeks that he would need two weeks to come up with the money.
After waiting some time for payment, Meeks again contacted Antley. During their conversation, Meeks learned for the first time that Antley was not the owner of the property, but was leasing the property from Plantation Properties, Inc. Plantation, as recorded in the county records, holds legal title to the property, but the property is managed by Skyview Ranch, L.L.C. Ken Watson is both an officer of Plantation and an officer and manager of Skyview. Antley provided Meeks with information on how to contact Watson and told Meeks that Watson would pay him.
Meeks mailed statements to Watson, Skyview Ranch, and Antley. Antley received the statement, but Skyview's and Watson's statements were returned. Meeks then mailed and faxed the statement to Watson. After no response, Meeks called Watson. Watson told Meeks that he would pay the bill if Meeks would send him an affidavit stating Meeks had paid in full all the labor and materials used in the construction of the building. Meeks faxed and mailed the requested affidavit stating that all labor and materials had been paid for and that $45,822 remained due on the contract. After no response, Meeks requested by fax that Watson contact him regarding the bill, and again mailed the statement. Meeks again received no response.
Meeks signed a mechanic's and materialman's lien affidavit against the property, filed it on June 6, 1997, and sent copies of the affidavit along with a current statement to Watson, Plantation, and Antley by certified mail, return receipt requested, by regular mail, and by fax. Watson and Antley refused to claim the certified mail. After repeated attempts to collect payment, Meeks filed suit against Plantation, Skyview, Watson, (collectively, "Appellants") and Antley on May 28, 1999. In a bench trial, the trial court found Appellants had breached their contract to Meeks and awarded him $45,822, plus attorney's fees.
Appellants argue in seven issues that: (1) there is no evidence that Appellants entered into a contract with Meeks for the construction of the barn; (2) there is no evidence that Appellants gave Antley actual authority to contract on their behalf with Meeks; (3) there is no evidence that Appellants gave Antley apparent authority to contract on their behalf with Meeks; (4) the doctrine of undisclosed principle is not applicable to Meeks's claims; (5) the court erred in imposing the mechanic's and materialman's lien; (6) there is no evidence of unjust enrichment; (7) there is no evidence that Meeks exercised due diligence in obtaining service of process upon Appellants in regard to the lien; and (8) in the event of reversal, the judgment for attorney's fees should be set aside.
ACTUAL/APPARENT AUTHORITY AND RATIFICATION
Appellants argue in their second and third issues that there is no evidence that Antley had actual or apparent authority to enter into a contract with Meeks on Appellants' behalf. Meeks argues that Appellants gave Antley the authority to contract with Meeks, and in the alternative, Appellants ratified the contract.
Meeks had the burden to prove that an agency relationship existed between Appellants and Antley. Royal Mortgage Corp. v. Montague, 41 S.W.3d 721, 732-33 (Tex. App.-Fort Worth 2001, no pet.). When an appellant who did not have the burden of proof at trial complains of legally insufficient evidence, the appellant must show there is no evidence to support the contested finding. Beard v. Beard, 49 S.W.3d 40, 55 (Tex. App.-Waco 2001, pet. denied). The appellate court must consider only the evidence and inferences that support the adverse finding and ignore all evidence and inferences to the contrary. Lenz v. Lenz, 79 S.W.3d 10, 19 (Tex. 2002). A "no evidence" claim will be sustained if: (a) there is a complete absence of evidence of a vital fact, (b) the rules of law or evidence prevent the court from giving weight to the only evidence offered to prove a vital fact, (c) the evidence offered to prove a vital fact is not more than a scintilla, or (d) the evidence conclusively establishes the opposite of the vital fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998) (citing Robert W. Calvert, "No Evidence" and "Insufficient Evidence" Points of Error, 38 TEX. L. REV. 361, 362-63 (1960)). When the evidence "rises to a level that would enable reasonable and fair-minded people to differ in their conclusion," then there is more than a scintilla of evidence. Beard, 49 S.W.3d at 55 (quoting Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995)).
"An agent is one who consents to act on behalf of and subject to the control of another, the principal, who has manifested consent that the agent shall so act." Montague, 41 S.W.3d at 732 (citing Republic Bankers Life Ins. Co. v. Wood, 792 S.W.2d 768, 778 (Tex. App.-Fort Worth 1990, writ denied)). An agency relationship does not depend upon the express appointment or assent by the principal; rather, it may be implied from the conduct of the parties. Id. An agency relationship may be found from underlying facts or direct and circumstantial evidence showing the relationship of the parties. Walker Ins. Services v. Bottle Rock Power Corp., 108 S.W.3d 538, 550 (Tex. App.-Houston [14th Dist.] 2003, no pet.); Townsend v. Univ. Hosp.-Univ. of Colorado, 83 S.W.3d 913, 921 (Tex. App.-Texarkana 2002, pet. denied). An agency relationship may be established in two ways: actual authority of the agent or apparent authority of the agent.
Actual Authority
Actual authority is created when the principal communicates to the agent, by words or conduct, that the agent has authority to act on the principal's behalf. See Walker Ins. Services, 108 S.W.3d at 549-50; Spring Garden 79U, Inc. v. Stewart Title Co., 874 S.W.2d 945, 948 (Tex. App.-Houston [1st Dist.] 1994, no writ). The existence of an agency relationship based on actual authority may be implied from the conduct of the parties or from the facts and circumstances surrounding the transaction in question. Walker Ins. Services, 108 S.W.3d at 550.
Actual authority is based upon what the principal communicated to the agent. Neither Appellants nor Antley testified at trial. The only witness, Meeks, testified that he believed he was contracting directly with Antley during negotiations, acceptance, and performance of the contract. It was not until Meeks sought payment that he learned of Appellants' existence. There is no evidence as to the communications, express or implied, between Appellants and Antley. Therefore, there is no evidence, express or implied, that Antley had actual authority to contract for Appellants. Walker Ins. Services, 108 S.W.3d at 550.
Apparent Authority
Likewise, there is no evidence that Antley had apparent authority to contract on behalf of the Appellants. While actual authority is created by the principal's conduct, express or implied, to the agent, apparent authority is created by the principal's conduct, express or implied, to a third party. See Walker Ins. Services, 108 S.W.3d at 550; Cameron County Sav. Ass'n v. Stewart Title Guaranty Co., 819 S.W.2d 600, 603 (Tex. App.-Corpus Christi 1991, writ denied). Meeks must show that Appellants either knowingly permitted Antley to hold himself out as having authority or showed such lack of ordinary care as to clothe Antley with indicia of authority. See Nations Bank v. Dilling, 922 S.W.2d 950, 952-53 (Tex. 1996); Walker Ins. Services, 108 S.W.3d at 550. Meeks must establish conduct by Appellants that would lead a reasonably prudent person to believe Antley had the authority he purported to exercise. See Dilling, 922 S.W.2d at 952-53; Walker Ins. Services, 108 S.W.3d at 550-51. A prerequisite to a proper finding of apparent authority is evidence that the third party (Meeks) relied on the conduct of the principal (Appellants). Baptist Memorial Hosp. System v. Sampson, 969 S.W.2d 945, 949 (Tex. 1998) (citing Ames v. Great S. Bank, 672 S.W.2d 447, 450 (Tex. 1984)).
Meeks testified that Watson told him he would pay for the barn. This is an affirmative action on the part of Appellants that would lead a reasonable person to believe that Antley was acting as Appellants' agent. However, the agreement to pay for the barn occurred after the contract between Meeks and Antley was already in place. Meeks must prove that he relied upon Appellants' conduct when he was contracting with Antley. Patel v. Kuciemba, 82 S.W.3d 589, 597 (Tex. App.-Corpus Christi 2002, pet. denied) (holding no apparent authority when reliance upon the principal to pay back a loan occurred after the third party made the loan to the agent). The contract was complete, the barn built, and the time for reliance was past when Meeks first learned of the Appellants' existence. BML Stage Lighting, Inc. v. Mayflower Transit, Inc., 14 S.W.3d 395, 401 (Tex. App.-Houston [14th Dist.] 2000, pet. denied) (holding no apparent authority when third party did not learn of the existence of the principal until after he contracted with the agent). Therefore, we find that there is no evidence that Antley had apparent authority.
Ratification
Meeks argues that even if Antley did not have actual or apparent authority, the actions of the Appellants are sufficient to prove they ratified the contract with Meeks. The trial court's finding of fact #30 states that Appellants ratified the contract, and Appellants do not challenge this finding. Unchallenged findings of fact are binding on an appellate court unless the contrary is established as a matter of law or there is no evidence to support the findings. Tarrant Regional Water Dist. v. Gragg, 43 S.W.3d 609, 618-19 (Tex. App.-Waco 2001), aff'd, 2004 WL 1439646, 47 Tex. Sup.Ct. J. 707 (Tex. June 25, 2004) (citing McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986)).
A principal ratifies an unauthorized act if, by word or conduct, with knowledge of all material facts, he confirms or recognizes the act as valid. Mo. Pac. R.R. Co. v. Lely Dev. Corp., 86 S.W.3d 787, 792 (Tex. App.-Austin 2002, pet. dism'd). The critical factor in determining whether a principal has ratified an unauthorized act is the principal's knowledge of the transaction, and the principal's actions once the principal acquired the knowledge. In re Marriage of M.C., 65 S.W.3d 188, 192 (Tex. App.-Amarillo 2001, no pet.). Even if a principal was unaware of its agent's unauthorized action, it may ratify that action if, after acquiring full knowledge of the unauthorized action, the principal retains the benefits of the action. St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 536 (Tex. 2003).
Meeks testified that Watson agreed to pay for the barn, and that during their conversation, Watson did not seem surprised to hear that there was a barn on Appellants' property. Evidence was also introduced that Appellants were currently enjoying the use of the barn. By agreeing to pay Meeks for the contract he had with Antley, and by retaining and using the barn, Appellants ratified the contract. Thus, Appellants can be held liable for the breach of the contract. Id. The evidence supports the trial court's unchallenged finding of fact that the Appellants ratified the contract. Mehan v. WAMCO XXVVIII Ltd., 138 S.W.3d 415, 419 (Tex. App.-Fort Worth 2004, no pet.); Gragg, 43 S.W.3d at 618-19. Therefore, we overrule Appellants' first, second, and third issues.
DUE DILIGENCE
Appellants contend in their seventh issue that the statute of limitations bars Meeks's claim under the mechanic's and materialman's lien because Meeks did not exercise due diligence in perfecting service of citation upon them. Meeks responds that the Appellants have waived this issue because they did not plead or sufficiently raise the issue before the trial court.
Waiver
Seven days before trial, Plantation and Skyview filed a first amended petition in which they pled a statute-of-limitations defense. Watson did not affirmatively plead such a defense. At the beginning of the bench trial, Appellants' counsel stated that he was representing Plantation, Skyview, and Watson and mentioned the statute-of-limitations defense. Before the closing of the evidence, Appellants' counsel asked the court to take judicial notice of the clerk's record regarding the dates that Plantation, Skyview, and Watson were served with process. The trial court asked for briefs instead of closing arguments. In Appellants' closing brief, which included Plantation, Skyview, and Watson, counsel argued that Meeks had not exercised due diligence in serving Appellants, and therefore, the mechanic's and materialman's lien was barred by the statute of limitations. Meeks argued in the plaintiff's closing brief that Appellants had waived the affirmative defense by not pleading it.
The statute-of-limitations defense must be affirmatively pled in the party's pleadings. TEX. R. CIV. P. 93. However, if there is no objection by the opponent that the party failed to plead the defense, the issue may be tried by consent. An issue is tried by consent when a party introduces evidence relevant to the unpleaded issue without objection. Tex. R. Civ. P. 67; De La Morena v. Ingenieria E Maquinaria De Guadalupe, S.A., 56 S.W.3d 652, 659 (Tex. App.-Waco 2001, no pet.).
Plantation and Skyview raised the limitations defense in their pleadings and produced evidence at trial. Therefore, they have not waived the defense. TEX. R. CIV. P. 93. Watson did not plead the defense, yet raised evidence at trial and argued the issue in his closing brief. Meeks generally objected to the defendants' failure to plead the limitations defense, but it is not clear from his argument to which defendant he was objecting. A specific objection is required. TEX. R. APP. P. 33.1(a)(1)(A); see R R Contractors v. Torres, 88 S.W.3d 685, 695 (Tex. App.-Corpus Christi 2002, no pet.). Therefore, we find that Watson's statute-of-limitations defense was tried by consent and is properly before this court. TEX. R. CIV. P. 67.
Statute-of-Limitations Defense
In order to stop the running of limitations, a plaintiff must not only file the lawsuit within the applicable limitations period, but must also serve the defendants with process within that period. Gant v. DeLeon, 786 S.W.2d 259, 260 (Tex. 1990). However, as long as the lawsuit is filed within the limitations period, the plaintiff can serve the defendants outside the period, but only if the plaintiff exercises due diligence in doing so. Id.; $6453.00 v. State, 63 S.W.3d 533, 536 (Tex. App.-Waco 2001, no pet.). The exercise of due diligence tolls the limitations period until after the defendant is served. Id; $6453.00, 63 S.W.3d at 536. The duty to exercise due diligence is a continuous one, extending from the date the suit is filed until service is obtained. Tate v. Beal, 119 S.W.3d 378, 380-81 (Tex. App.-Fort Worth 2003, pet. denied). A plaintiff exercises due diligence if he: (1) acts as an ordinary prudent person would under the same circumstances, and (2) is diligent up until the time the defendant is served. $6453.00, 63 S.W.3d at 536.
Appellants complain that there is no evidence that Meeks exercised due diligence. The Appellants have the burden of proof to establish the affirmative defense of statute-of-limitations by showing that they were not served with process until after the statute of limitations has run. Dillard v. Parkland Hosp., 136 S.W.3d 16, 19 (Tex. App.-Dallas 2002, no pet.); Harrell v. Alvarez, 46 S.W.3d 483, 485 (Tex. App.-El Paso 2001, no pet.). Once they have established their defense, the burden shifts to Meeks to establish that he exercised due diligence in serving Appellants after the limitations period. Lexington Ins. Co. v. Bunckingham Gate, Ltd., Inc., 993 S.W.2d 185, 190 (Tex. App.-Corpus Christi 1999, pet. denied); Liles v. Phillips, 677 S.W.2d 802, 809 (Tex. App.-Fort Worth 1984, writ ref'd n.r.e.). See also, Harrell, 46 S.W.3d at 485 (citing Zale Corp. v. Rosenbaum, 520 S.W.2d 889, 890 (Tex. 1975) (holding plaintiff had burden of proof on application of discovery rule to defendant's statute-of-limitations defense)). The party claiming due diligence should bear the burden, as it will generally have greater access to the facts necessary to establish due diligence. See Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988) (holding that apart from being a non-movant in a motion for summary judgment, a plaintiff had the burden to prove the application of the discovery rule).
When an appellant contends that there is no evidence to support an adverse finding on which his opponent had the burden of proof, we consider only the evidence and inferences which tend to support the contested issue and disregard all evidence and inferences to the contrary. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997); Beard, 49 S.W.3d at 54-55.
Meeks filed the lawsuit on May 29, 1999. The statute of limitations for actions upon a mechanic's and materialman's lien is two years from the last day a claimant may file the lien. TEX. PROP. CODE ANN. § 53.158, 53.052 (Vernon 2004). The last day Meeks could have filed the lien was July 15, 1997; therefore, the statute of limitations ended on July 15, 1999. On September 10, 1999, Meeks asked the clerk to issue citations on Watson, Skyview, and Antley and to serve Plantation's citation through the Secretary of State. Skyview was served on September 28, and Antley on October 4. Plantation was served through the Secretary of State on November 29. Watson was served on February 1, 2000.
Watson repeatedly attempted to evade service of process. The process server reported that on numerous attempts to serve Watson, employees at Watson's place of business claimed not to have heard of Watson or replied that Watson was out of town. In the meantime, at Watson's home address, residents claimed that Watson was at the office. On one occasion, Watson was in his office but refused to answer the door. However, we note that Meeks did not first attempt to serve Watson by substituted service until January, 21, 2000.
Based on the above record, there is no question that Appellants were served outside the statute of limitations. Meeks argues that he used due diligence in serving process "as shown by the clerk's record." He argues that Plantation was a foreign corporation that failed to designate an agent for service of process, and therefore had to be served through the Secretary of State. He also points to Watson's evasion of service. He further refers us to evidence of a facsimile of the petition that he sent to Appellants' attorney on the day he filed the lawsuit. However, this evidence is outside the record, and we cannot consider it.
Meeks offers no explanation as to why he did not request issuance of citations during the nearly two months immediately following the running of the statute of limitations. While Watson's evasion of service would indeed be reason for not effecting service, it does not explain the prior fifty-seven day delay. Similarly, the fact that Plantation failed to designate an agent for service of process does not explain the delay in the first attempt to serve Plantation. It is not unusual, given the circumstances of individual cases, for a two-month delay to be considered unreasonable. Eichel v. Ullah, 831 S.W.2d 42, 45 (Tex. App.-El Paso 1992, no writ) (two-month delay constituted lack of due diligence); Rios v. Northwestern Steel and Wire Co., 974 S.W.2d 932, 934 (Tex. App.-Houston [14th Dist.] 1998, no pet.) (two-month delay along with invalid misnomer explanation for delay constituted lack of due diligence).
However, the length of the delay is not the critical factor. Keeton v. Carrasco, 53 S.W.3d 13, 18 (Tex. App.-San Antonio 2001, pet denied). We need not find a nearly two-month delay to be a lack of due diligence as a matter of law, because any unexplained extended periods of time in which no attempt at service of process is made constitutes a lack of due diligence as a matter of law. Gant v. DeLeon, 786 S.W.2d at 260; $6453.00, 63 S.W.3d at 536; Holt v. D'Hanis State Bank, 993 S.W.2d 237, 241 (Tex. App.-San Antonio 1999, no pet.); Rodriguez v. Tinsman Houser, Inc., 13 S.W.3d 47, 51 (Tex. App.-San Antonio 1999, pet. denied); Perkins v. Groff, 936 S.W.2d 661, 668 (Tex. App.-Dallas 1996, writ denied). Other cases in which due diligence was found involved explanations of clerical error, miscommunication, or inadvertence, but Meeks offers none of these. Harrell, 46 S.W.3d at 486; Hodge v. Smith, 856 S.W.2d 212, 216 (Tex. App.-Houston [1st Dist.] 1993, writ denied); Valdez v. Charles Orsinger Buick Co., 715 S.W.2d 126, 128 (Tex. App.-Texarkana 1986, no writ).
Meeks's argument is simply that due diligence is shown by the clerk's record which only serves as evidence of the glaringly obvious delay. Therefore, because Meeks offers no explanation as to the delay between the running of the statute of limitations and the issuance of citation, we find there is no evidence that Meeks exercised due diligence in serving process upon Appellants. Rodriguez, 13 S.W.3d at 51 (17 day delay with invalid explanation constitutes lack of diligence as a matter of law); Perkins, 936 S.W.2d at 668 (18 day delay with no explanation constitutes lack of due diligence as a matter of law). Meeks's suit upon his mechanic's and materialman's lien is barred by the statute of limitations. We sustain Appellants' seventh issue.
However, this holding does not effect the disposition of Meeks's breach-of-contract claim. The statute of limitations on a breach-of-contract claim is four years. TEX. CIV. PRAC. REM. CODE § 16.051. In the trial court's findings of fact, the court found Appellants breached the contract, and Appellants do not directly challenge this finding on appeal.
CONCLUSION
Because the addressed issues above are dispositive, we need not consider Appellants' other issues. We modify the judgment by deleting the paragraphs on page three and four relating to the foreclosure of the mechanic's and materialman's lien and affirm the judgment as modified.