Gregory Nelson and Yankee Enterprises, Inc. v. Greg Dykeman

In The

Court of Appeals

Ninth District of Texas at Beaumont

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NO. 09-01-226 CV

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GREGORY NELSON and YANKEE ENTERPRISES, INC., Appellants

GREG DYKEMAN, INDIVIDUALLY, and STRONG, PIPKIN,

NELSON, BISSELL & LEDYARD, L.L.P., Appellees

On Appeal from the 136th District Court

Jefferson County, Texas

Trial Cause No. D-159,754

OPINION

Yankee Enterprises, Inc. ("Yankee")⁽¹⁾ appeals the summary judgment and partial summary judgment in favor of Greg Dykeman, individually, and Strong, Pipkin, Nelson, Bissell & Ledyard, L.L.P.("Strong Pipkin"). In this case, Yankee presents legal malpractice claims against appellees that allegedly occurred in an underlying federal lawsuit. We affirm.

Yankee hired Dykeman and his law firm, Strong Pipkin, to represent Yankee on a contingent fee basis in its federal suit against Dunkin' Donuts, Inc. ("Dunkin'"). Yankee was a franchisee of Dunkin', and claimed Dunkin' breached the written franchise agreement between them. Yankee contended some of the breaches violated the Texas Deceptive Trade Practices Act ("DTPA"). See Tex. Bus. & Com. Code Ann. §§ 17.41-17.63 (Vernon 1987 & Supp. 2002). The jury found Dunkin' had failed to comply with the franchise agreement and violated the DTPA. The jury awarded damages to Yankee. Dunkin' moved for judgment as a matter of law. The district court granted Dunkin's motion on the DTPA claim, but rejected Dunkin's motion on the breach of contract claim. Both parties appealed. The Fifth Circuit partially reversed the district court's judgment and ordered that Yankee take nothing from Dunkin'. Yankee Enters., Inc. v. Dunkin' Donuts, Inc., 121 F.3d 703 (5th Cir. 1997). The Fifth Circuit concluded that Yankee presented only a claim for breach of contract in support of its DTPA claim and affirmed the district court order setting aside the verdict on the DTPA claim. The Fifth Circuit also determined that any unfairness suffered by Yankee did not rise to the level of gross unfairness, and affirmed the district court's order setting aside the jury's verdict on the unconscionability prong of the DTPA claim. As to the breach of contract claim, the Fifth Circuit concluded that Yankee presented no credible evidence to support the jury's finding that the alleged breach by Dunkin' caused Yankee to suffer damages. Thus, the Fifth Circuit reversed the judgment entered on the breach of contract claim and rendered a take nothing judgment in favor of Dunkin'.

Alleging legal malpractice and breach of fiduciary duty, Yankee then filed this suit against Dykeman and Strong Pipkin. After the trial court granted a partial summary judgment in favor of the defendants as to the breach of fiduciary duty, Dykeman and Strong Pipkin filed a motion for summary judgment on the negligence claim. Yankee subsequently amended its pleadings to affirmatively abandon its cause of action for breach of fiduciary duty. Granting the motion for summary judgment, the trial court ordered that Nelson and Yankee recover nothing from Dykeman and Strong Pipkin.

In a traditional summary judgment motion, the movant has the burden of showing there is no genuine issue of material fact, and it is entitled to judgment as a matter of law. See American Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997). In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true, and every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. Id. When the trial court's order granting summary judgment does not specify the ground or grounds relied on for its ruling, the appellate court affirms the judgment if any theory advanced has merit. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989). "On appeal, the movant still bears the burden of showing that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law." Allen v. W.A. Virnau & Sons, Inc., 28 S.W.3d 226, 231 (Tex. App.--Beaumont 2000, pet. denied) (citing Nixon v. Mr. Property Management Co. 690 S.W.2d 546, 548 (Tex. 1985)).

In seeking a "no-evidence" summary judgment under Rule 166a(i), a party may move for summary judgment if, after adequate time for discovery, there is no evidence of one or more essential elements of a claim or defense on which the non-movant would have the burden of proof at trial. See Allen, 28 S.W.3d at 231; see Tex. R. Civ. P. 166a(i). The motion must state the elements as to which there is no evidence. Unless the non-movant produces summary judgment evidence raising a genuine issue of material fact, the reviewing court must grant the motion. Id. As a no-evidence motion for summary judgment essentially is a pretrial motion for instructed verdict, we apply the same standard of review. Allen, 28 S.W.3d at 231. When reviewing the summary judgment record to determine if there is legally sufficient evidence to raise a fact question on each of the elements for which movant alleges there is "no evidence," we consider the evidence in the light most favorable to the nonmovant. See Morgan v. Anthony, 27 S.W.3d 928, 929 (Tex. 2000); see also Tex. R. Civ. P. 166a(i) and cmt. A no-evidence summary judgment is improper if the adverse party has produced more than a scintilla of probative evidence raising a genuine issue of material fact on each challenged element of a claim or defense. But, evidence that is so weak as to do no more than create a mere surmise or suspicion of a fact is "legally insufficient and constitutes no evidence." Allen, 28 S.W.3d at 231 (quoting Vallance v. Irving C.A.R.E.S., Inc., 14 S.W.3d 833, 836 (Tex. App.--Dallas 2000, no pet.)). However, the non-movant need not "marshal its proof"; rather it "need only point out evidence that raises a fact issue on the challenged elements." Tex. R. Civ. P. 166a(i) and cmt.; see Weiss v. Mechanical Associated Servs., Inc., 989 S.W.2d 120, 123-24 (Tex. App.--San Antonio 1999, pet. denied).

As a preliminary matter, we consider appellees' argument that this Court should disregard all statements in Yankee's brief that are taken from Greg Nelson's affidavit. Relying on Blum v. Julian, 977 S.W.2d 819 (Tex. App.--Fort Worth 1998, no pet.), appellees maintain the trial court implicitly sustained their objections to Nelson's affidavit when it granted appellees' summary judgment. In Blum, the Fort Worth Court of Appeals held the trial court implicitly overruled the plaintiff's objections to the defendant's summary judgment proof when it granted the defendant's motion for summary judgment. Id. at 823-24. In a later case, the Fort Worth court also determined that the existence of the movant's written objections along with a recitation that the court "reviewed all competent summary judgment evidence," created an inference that the trial court implicitly sustained objections to summary judgment evidence. See Frazier v. Yu, 987 S.W.2d 607, 610 (Tex. App.--Fort Worth 1999, pet. denied). Several courts of appeal have rejected Blum and Frazier. See In re Estate of Loveless, 64 S.W.3d 564, 573 (Tex. App.--Texarkana 2001, no pet.); Jones v. Ray Ins. Agency, 59 S.W.3d 739, 752-53 (Tex. App.--Corpus Christi 2001, pet. filed); Well Solutions, Inc. v. Stafford, 32 S.W.3d 313, 317 (Tex. App.--San Antonio 2000, no pet.); Dolcefino v. Randolph, 19 S.W.3d 906, 926-27 (Tex. App.--Houston [14th Dist.] 2000, pet. denied). In comparing these cases, significant factors include whether a matter of trial waiver or of appellate preservation was at issue, and whether the party objecting to the summary judgment evidence was the one moving for judgment.

In Blum, the trial court granted the defendant's summary judgment without expressly overruling the appealing non-movant's objections to the movant's affidavit. The appellate court held the ruling to be implicit for purposes of preserving error on appeal. Blum, 977 S.W.2d at 824; see Tex. R. App. P. 33.1(a)(2)(A). Loveless also concerned an appealing non-movant's objections to the movant's affidavit. The appellate court held that error had not been preserved because the overruling of the objections to the affidavit filed in support of the regular motion for summary judgment was not implicit from the judgment, which could have been based upon the alternate "no evidence" motion for summary judgment. Loveless, 64 S.W.3d at 573.

The cases in which the movant objected to the non-movant's affidavit more closely resemble the appeal at hand. See Jones 59 S.W.3d at 752-53; Well Solutions, 32 S.W.3d at 317; Dolcefino, 19 S.W.3d at 926-27. The movant was the appealing party in Dolcefino. The appellate court presumed the trial court considered the appealing movant's objections but could not discern from the record whether the trial court granted or overruled the objections. Dolcefino, 19 S.W.3d at 926. The court considering Well Solutions refused to imply a favorable ruling on the movant's objections from the mere fact that it obtained a summary judgment. Well Solutions, 32 S.W.3d at 317. The Jones court noted that the appellant was not required to anticipate an implied ruling on the appellee's objections to her affidavit, and held that the appellees had waived their objections at the trial level. Jones, 59 S.W.3d at 753.

Frazier also involved a movant's objections to the non-movant's affidavit. The summary judgment recited that the court had considered all "competent" summary judgment evidence. The appellate court reasoned that recital indicated the trial court had sustained the objections. Since the appellant had no summary judgment evidence at trial, the appellate court held that the granting of the "no evidence" motion for summary judgment was proper. Frazier, 987 S.W.2d at 611. The problem with the rationale employed in this opinion is that the ruling, whether express or implicit, was obtained not by the party seeking review of error on appeal, but by the appellee.

Under the facts presented in this case, we decline to impose a rule that would essentially require the appellant to preserve error regarding the opposing party's objections to the summary judgment record. Absent a clear indication that the trial court actually excluded evidence offered in accordance with Rule 166a, its inclusion in the record must be presumed. We therefore consider Nelson's affidavit in our analysis of the issues raised in this appeal.

In its first issue, Yankee asserts the trial court erred in granting summary judgment regarding Yankee's claims of negligence (professional malpractice) because genuine issues of material fact exist as to each ground of the motion for summary judgment. Appellees respond that:

Yankee is claiming rescission damages that are not available in the present suit;

Yankee failed to submit any evidence it would have prevailed in the underlying suit, as it provided no evidence:

of being able to succeed with a "lost profits" damage measure;

disputing that Yankee was claiming rescission was the appropriate measure of damages that should have been sought in the underlying federal suit;

disputing that Yankee was not entitled to rescission damages in the underlying suit; or

any damage model would succeed or any amount of damages would be recoverable; and

Appellees are not vicariously liable.

Appellees' arguments primarily address rescission issues that were the focus of Yankee's superceded pleadings. Yankee's third amended petition pleaded there were alternative forms of remedies on which the underlying suit should have been pleaded and tried, one equitable and the other legal. The equitable remedy was again stated to be rescission, and the legal damages for breach of contract were termed "out of pocket damages," where the jury would be asked to find the difference between what Yankee paid to Dunkin' and what it received. Thus, Yankee's pleadings clearly allege that remedies other than rescission should have been sought in the underlying federal suit.

Yankee's issue, as well as most of appellees' summary judgment grounds and some of its responsive arguments, concern the remedies or the measure of damages Yankee maintains should have been sought in the underlying federal suit. "Damages for breach of contract protect three interests: a restitution interest, a reliance interest, and an expectation interest." O'Farrill Avila v. Gonzalez, 974 S.W.2d 237, 247 (Tex. App.--San Antonio 1998, pet. denied); see Lafarge Corp. v. Wolff, Inc., 977 S.W.2d 181, 187 (Tex. App.--Austin 1998, pet. denied).⁽²⁾ At issue here is Yankee's reliance interest, the contract theory equivalent for "out of pocket" damages. See Hart v. Moore 952 S.W.2d 90, 97 (Tex. App.--Amarillo 1997, pet. denied)(finding that out-of-pocket damages and reliance damages are the same type of damages and that an award of both would be a prohibited double recovery). Yankee contends that the summary judgment is improper because there exists more than a scintilla of competent summary judgment proof that Dunkin's breach of the franchise agreement was the producing cause of "out-of-pocket" damages to Yankee. "Out-of-pocket damages measure the difference between the value the buyer has paid and the value of what he has received." Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 817 (Tex. 1997).

Yankee's summary judgment evidence offered in support of its damages theory for the underlying suit included the affidavit of an expert, Herbert Lyon, who stated in deposition:

Well, it would go back to - in my way of thinking a very simple thing. If they paid - if there was a breach found, as the jury did find, then, what is the remedy? Well, they paid fees, about 9 percent or thereabouts, of their income to Dunkin'. And so to use, I guess, a legal term one could argue they really didn't get the benefit of the bargain if somebody had breached the contract. So just give them their money back and make them whole.

And as to the cost of remodeling the store, Lyon testified: "[W]e can agree that if he's no longer a Dunkin' Donuts dealer, franchisee, the sign comes down, the store gets changed in some way so we don't get it confused. Now, that cost money. . . ." Lyon agreed that if Yankee were to recover all of the money it had paid to Dunkin', it would also have to give back anything that it had benefitted from Dunkin'. Asked, "And do you have any idea what the value of the franchise is?", Lyon replied, "No." Lyon had not calculated the proper damage model and did not know the proper measure of damages.

Yankee also offered the affidavit testimony of its president, Greg Nelson, who stated, in pertinent part:

"I was aware that Yankee had not earned the profits that it had in the past."

"I did not know how to measure damages. . . ."

"I informed [Dykeman] that I did not know how to measure my economic losses."

I tried to understand the complicated elements of damages from what I read, but I really could not decide what I was to do or how I could help."

"I have computed that my economic losses and damages have been approximately $500,000.00 pre trial, based on the difference between the royalties fees and advertising fees paid to Dunkin' Donuts, less what benefits Yankee received from the Franchise Agreement. In my opinion, I did not receive any benefit from the Franchise Agreement after the breach of the agreement commenced in 1990 when Allied acquired Dunkin'."

I must re-identify the real property only, at a minimum cost of approximately $125,000.00 so as to disassociate Yankee from Dunkin'. In addition, I have elected not to cancel the franchise contract with Dunkin'. . . ."⁽³⁾

There is more than a scintilla of evidence of Yankee's expenditures made in performing the contract, but no evidence of the value of the benefit it received, other than Nelson's statement that, "In my opinion, I did not receive any benefit from the Franchise Agreement after the breach of the agreement commenced in 1990 when Allied acquired Dunkin'." The issue, then, is whether this statement is sufficient to establish the existence of a fact issue. The appellees argue Nelson does not qualify as an expert and his assertion that he received "no benefit" is without any stated basis in fact.

An owner of property is qualified to testify about the market value of his property. Porras v. Craig, 675 S.W.2d 503, 504 (Tex.1981). However, such testimony must show that it refers to his knowledge of the market value, and is not merely based on his opinion as to its intrinsic or some other value. Id. at 504-05. Conclusory statements unsupported by facts are not competent summary judgment proof. Wright v. Greenberg, 2 S.W.3d 666, 675 (Tex. App.--Houston [14th Dist.] 1999, pet. denied); Rizkallah v. Conner, 952 S.W.2d 580, 587 (Tex. App.--Houston [1st Dist.] 1997, no writ). An affidavit consisting only of conclusions is insufficient to raise an issue of fact. See Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984). "An interested witness' affidavit which recites that the affiant 'estimates,' or 'believes' certain facts to be true will not support summary judgment. Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (holding that a non-movant's supporting affidavit failed to raise a fact issue). See also Wadewitz v. Montgomery, 951 S.W.2d 464, 466 (Tex. 1997)("[c]onclusory statements by an expert are insufficient to support or defeat summary judgment."); Blan v. Ali, 7 S.W.3d 741, 748 (Tex. App.--Houston [14th Dist.] 1999, no pet.)(applying Wadewitz to "no evidence" summary judgment).

Nelson's bare assertion that he received no benefit from his franchise agreement with Dunkin' Donuts reveals no underlying facts which form the basis of his opinion. He must be referring to intrinsic benefit, rather than actual benefit, because his affidavit also states that Yankee continued to operate a profitable Dunkin' Donuts shop. Nelson also negated the basis for his lay opinion testimony by stating that he did not have personal knowledge of the proper computation of damages. Without an identified factual basis for his opinion, Nelson's declaration is a mere statement of belief. We hold that Yankee failed to submit more than a scintilla of competent summary judgment proof that Dunkin's breach of the franchise agreement caused Yankee to pay more than it received under the franchise agreement. As Yankee failed to submit any evidence that it would have prevailed in its proof of damages in the underlying suit, the trial court did not err in granting summary judgment on Yankee's malpractice claims against Dykeman.

Yankee sued Strong Pipkin solely under a theory of respondeat superior. The appellant did not assert a claim of liability against Strong Pipkin independent of Dykeman's individual liability. The firm's liability is contingent on Dykeman's liability. See Bossin v. Towber, 894 S.W.2d 25, 33 (Tex. App.--Houston [14th Dist.] 1994, writ denied). If Dykeman is not liable to Yankee, there can be no derivative liability to Strong Pipkin. Id. As summary judgment was properly entered in favor of Dykeman, it is also proper in favor of Strong Pipkin. See Bradt v. West, 892 S.W.2d 56, 77-78 (Tex. App.--Houston [1st Dist.] 1994, writ denied). Yankee's first issue is overruled.

In its second issue, Yankee maintains the trial court erred in granting partial summary judgment that negated Yankee's claims for breach of fiduciary duty as a matter of law. The Plaintiff's Third Amended Petition, which Yankee filed after the second motion for summary judgment was filed, deleted the allegations for breach of fiduciary duty that had been included in its earlier pleadings. Yankee's "Response to Motion to Strike", filed two days after it amended the pleadings, states, "Plaintiff has filed a Third Amended Petition in this matter, removing allegations of breach of a fiduciary duty. The matters relating thereto is now moot." Yankee intentionally and voluntarily abandoned its claim for breach of fiduciary duty. A viable complaint on appeal is lost when, following an allegedly erroneous ruling by the trial court on a claim, the plaintiff files an amended pleading abandoning the claim upon which the trial court ruled. See Akin v. Santa Clara Land Co., Ltd., 34 S.W.3d 334, 339 (Tex. App.--San Antonio 2000. pet. denied); Randolph v. Walker, 29 S.W.3d 271, 274-75 (Tex. App.--Houston [14th Dist.] 2000, pet. denied); Farmer v. Ben E. Keith Co., 919 S.W.2d 171, 173 (Tex. App.--Fort Worth 1996, no writ); Direkly v. ARA Devcon, Inc., 866 S.W.2d 652, 655 (Tex. App.--Houston [1st Dist.] 1993, writ dism'd w.o.j.); Radelow-Gittens Real Property Mgmt. v. Pamex Foods, 735 S.W.2d 558, 559 (Tex. App.--Dallas 1987, writ ref'd n.r.e.); Dolenz v. All Saints Episcopal Hosp., 638 S.W.2d 141, 142 (Tex. App.--Fort Worth 1982, writ ref'd n.r.e.). Yankee waived error, if any, in granting the partial summary judgment on Yankee's breach of fiduciary duty allegations. Point of error two is overruled. The judgment is affirmed.

AFFIRMED.

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RONALD L. WALKER

Chief Justice

Submitted on October 4, 2001

Opinion Delivered April 11, 2002

Do Not Publish

Before Walker, C.J., Burgess and Gaultney, JJ.

DISSENTING OPINION

I respectfully dissent. The majority overrules the first issue because they hold "that Yankee failed to submit more than a scintilla of competent summary judgment proof that Dunkin's breach of the franchise agreement caused Yankee to pay more than it received under the franchise agreement." Thus, neither Dykeman nor Strong Pipkin can be potentially liable. I disagree.

Yankee's expert, Herbert Lyon, in explaining how Yankee was hurt, stated:

While Lyon did not use the words "out-of-pocket" damages, he states that Yankee could have sought fees it paid to Dunkin,' or, in other words, Yankee could have sought to recover payments it made in performance of the contract. Thus, Yankee could have sought to protect its reliance interest. Even if Lyon's description of the recovery Yankee could have sought does not use precise terminology, it is sufficient here to constitute more than a scintilla of evidence that Yankee could have sought damages based on its reliance interest. Moreover, a party who breaches its contract does not escape liability because the non-breaching party cannot state or prove a "perfect measure of damages." Municipal Admin. Servs., Inc. v. City of Beaumont, 969 S.W.2d 31, 38 (Tex. App.--Texarkana 1998, no pet.).

Evidence that Yankee suffered reliance damages is found in the affidavit of Greg Nelson, president of Yankee. Nelson testified that Yankee had been damaged approximately $500,000 based on the difference between what it paid in royalty fees and advertising fees and what it received as benefits from Dunkin' under the franchise contract. This is evidence of Yankee's expenditures made in performing the contract, and it is more than a scintilla of evidence.

Thus, the majority's contentions that Yankee presented no evidence to avoid summary judgment are incorrect. Yankee has submitted more than a scintilla of evidence of a damage model that would have been recoverable in the underlying suit, namely, its reliance interest damages, or out-of-pocket damages. In addition, the majority's contention that Strong Pipkin is not vicariously liable is premised on Yankee's not being able to establish any cause of action against Dykeman, individually. As the summary judgment was not proper in favor of Dykeman, neither is it proper in favor of Strong Pipkin. See DeWitt v. Harris County, 904 S.W.2d 650, 654 (Tex. 1995)(the doctrine of respondeat superior imposes liability on an employer when the negligence of its employee, acting in the scope of his employment, is the proximate cause of another's injury). Yankee's first issue should be sustained.

Therefore, I would affirm the trial court's summary judgment and partial summary judgment as they relate to Gregory Nelson and in favor of appellees as to the breach of fiduciary duty claim, but reverse the judgments as they otherwise relate to Yankee and remand this cause to the trial court.

DON BURGESS

Justice

Dissent Delivered

April 11, 2002

Do Not Publish

Though Gregory Nelson, the president and sole shareholder of Yankee, filed a notice of appeal, he did not file a brief and Yankee raises no issues on his behalf.

Yankee pleaded that the "lost profits"measure of legal damages could not be proven. The "lost profits" measure, or expectation interest, is measured by the anticipated receipts and losses caused by the breach less any cost or other loss the non-breaching party has avoided by not having to perform. See Lafarge, 977 S.W.2d at 187 (citing RESTATEMENT (SECOND) OF CONTRACTS § 347 (1981)).

3. These last two statements contradict each other. If Yankee has elected to continue to operate under the franchise agreement, there will be no cost to re-identify the property.

Gregory Nelson and Yankee Enterprises, Inc. v. Greg Dykeman

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