ACCEPTED
01-15-00326-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
12/21/2015 3:00:20 PM
CHRISTOPHER PRINE
CLERK
No. 01-15-00326-CV
_____________________________________________________________
FILED IN
IN THE COURT OF APPEALS 1st COURT OF APPEALS
HOUSTON, TEXAS
FIRST DISTRICT OF TEXAS
12/21/2015 3:00:20 PM
HOUSTON, TEXAS CHRISTOPHER A. PRINE
_____________________________________________________________
Clerk
DON ABBOTT HOLMES, GAYLE EISLER HOLMES,
and the COMMUNITY PROPERTY ESTATE OF
DON ABBOTT HOLMES and GAYLE EISLER HOLMES,
Appellants,
v.
JETALL COMPANIES, INC.,
Appellee.
On Appeal from the 127th District Court
Harris County, Texas
CORRECTED BRIEF AND APPENDIX OF APPELLANTS
Geoffrey Berg Martin J. Siegel
Texas Bar No. 00793330 Texas Bar No. 18342125
BERG FELDMAN JOHNSON LAW OFFICES OF
BELL, LLP MARTIN J. SIEGEL, P.C.
4203 Montrose Blvd., Suite 150 2222 Dunstan Road
Houston, Texas 77006 Houston, Texas 77005
Telephone: (713) 526-0200 Telephone: (281) 772-4568
Gberg@bfjblaw.com Martin@Siegelfirm.com
Attorneys for Appellants
Oral Argument Requested
IDENTITY OF PARTIES AND COUNSEL
Appellants:
Don Abbott Holmes
Gayle Eisler Holmes
Trial and Appellate Counsel for Appellants:
Christopher D. Nunnallee
Law Offices of Christopher D. Nunnallee
1413 Brittmoore Road
Houston, Texas 77043
Charles T. Kelly
Julie Hamrick
Kelly & Smith, P.C.
4305 Yoakum Blvd.
Houston, Texas 77006
Martin J. Siegel
Law Offices of Martin J. Siegel, P.C.
2222 Dunstan Road
Houston, Texas 77005
Geoffrey Berg
Berg Feldman Johnson Bell, LLP
4203 Montrose Boulevard, Suite 150
Houston, Texas 77006
Appellee:
Jetall Companies, Inc.
i
Trial and Appellate Counsel for Appellees:
Mark D. Goranson
GoransonKing PLLC
550 Westcott Street, Suite 415
Houston, Texas 77007
Mike O’Brien
Mike O’Brien PC
14355 Highway 105
Washington, Texas 77880
Stephen D. Fox
2500 West Loop South, Suite 255
Houston, Texas 77027
Richard D. Howell
Buckley, White, Castaneda & Howell, L.L.P.
2401 Fountainview, Suite 1000
Houston, Texas 77057
ii
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ................................................................ i
TABLE OF CONTENTS ...................................................................................... iii
INDEX OF AUTHORITIES ................................................................................... v
STATEMENT OF THE CASE ................................................................................ x
STATEMENT REGARDING ORAL ARGUMENT ................................................... xi
ISSUES PRESENTED ........................................................................................ xii
INTRODUCTION ................................................................................................ 1
STATEMENT OF FACTS ..................................................................................... 2
I. The Parties’ Contract And Don’s Efforts To Comply With It ....... 2
II. Jetall’s Refusal To Close Unless Don And Gayle
Lowered The Sales Price By At Least $12,000 ............................. 6
III. The Proceedings Below ............................................................... 11
SUMMARY OF THE ARGUMENT ...................................................................... 16
ARGUMENT .................................................................................................... 18
I. Jetall Failed To Prove Lost Profits Damages .............................. 19
A. Standard Of Review ........................................................... 19
B. Jetall Offered Legally Insufficient Evidence
Of Lost Profits .................................................................... 20
C. The Lost Profits Award Is Further Suspect
Because The Jury Plucked A Figure Out
Of Thin Air ......................................................................... 27
iii
II. The District Court Erred By Disallowing A Jury
Question On Whether The Holmeses’ Breach
Was Excused By Jetall’s Prior Repudiation ........................ 30
A. Standard Of Review ................................................... 30
B. Ample Evidence Supported Don And
Gayle’s Position That Jetall Repudiated .................... 31
PRAYER ......................................................................................................... 39
CERTIFICATE OF SERVICE .............................................................................. 41
CERTIFICATE OF COMPLIANCE ....................................................................... 42
iv
INDEX OF AUTHORITIES
page
Case
Builders Sand, Inc. v. Turtur,
678 S.W.2d 115 (Tex. App. – Houston [14th Dist.] 1984) ....................... 32
Callejo v. Brazos Elec. Power Co-op., Inc.,
755 S.W.2d 73 (Tex. 1988) ................................................................ 27, 28
City of Keller v. Wilson,
168 S.W.3d 802 (Tex. 2005) .................................................................... 19
CMA-CGM (America), Inc. v. Empire Truck Lines, Inc.,
416 S.W.3d 495 (Tex. App. – Houston [1st Dist.] 2013, rev. denied) ...... 31
Coastal Transport Co., Inc. v. Crown Cent. Petroleum Corp.,
136 S.W.3d 227 (Tex. 2004) .................................................. 19, 20, 26, 27
Crown Life Ins. Co. v. Reliable Machine and Supply Co., Inc.,
427 S.W.2d 145 (Tex. App. – Austin 1968, writ ref’d n.r.e.) ................. 36
Cuidado Casero Home Health of El Paso, Inc. v.
Ayuda Home Health Care Serv., LLC,
404 S.W.3d 737 (Tex. App. – El Paso 2013) ........................ 21, 23, 25, 26
Cunningham v. Haroona,
382 S.W.3d 492 (Tex. App. – Ft. Worth 2012, rev. denied) .................... 15
Dror v. Mushin,
2013 WL 5643407 (Tex. App. – Houston [14th Dist.] 2013,
rev. denied) ............................................................................................... 36
Dunham and Ross Co. v. Stevens,
538 S.W.2d 212 (Tex. App. – Waco 1976) .............................................. 32
Elbaor v. Smith,
845 S.W.2d 240 (Tex. 1992) .................................................................... 30
v
Estrada v. Cheshire,
__ S.W.3d __, 2015 WL 4101195
(Tex. App. – Houston [1st Dist.] July 7, 2015) ......................................... 19
Examination Mgmt. Serv. v. Kersh Risk Mgmt, Inc.,
367 S.W.3d 835 (Tex. App. – Dallas 2012) ................................. 24, 26, 28
E-Z Mart Stores, Inc. v. Ronald Holland’s A-Plus
Transmission & Automotive, Inc.,
358 S.W.3d 665 (Tex. App. – San Antonio 2011, pet. denied)................. 18
First Fed. Sav. & Loan Assoc. of Wilmette, Ill. v. Pardue,
545 F. Supp. 433 (N.D. Tex. 1982),
aff’d, 703 F.2d 555 (5th Cir. 1983) ........................................................... 36
First State Bank v. Keilman,
851 S.W.2d 914 (Tex. App. – Austin 1993, writ denied)......................... 27
Great Pines Water Co. v. Liqui-BoxCorp.,
203 F.3d 920 (5th Cir. 2000) ..................................................................... 24
Grp. Life and Health Ins. Co. v. Turner,
620 S.W.2d 670 (Tex. Civ. App. – Dallas 1981) ..................................... 31
Gulf States Utilities v. Low,
79 S.W.3d 561 (Tex. 2002) ...................................................................... 27
Hampton v. Minton,
785 S.W.2d 854 (Tex. App. – Austin 1990)............................................. 32
Helena Chem. Co. v. Wilkins,
47 S.W.3d 486 (Tex. 2001) ...................................................................... 21
Hernandez v. Gulf Grp. Lloyds,
875 S.W.2d 691 (Tex. 1994) .................................................................... 33
Holt Atherton Indus., Inc. v. Heine,
835 S.W.2d 80 (Tex. 1992) .................................................... 20, 21, 23, 24
vi
Humphrey v. Placid Oil Co.,
142 F. Supp. 246 (E.D. Tex. 1956),
aff’d, 244 F.2d 184 (5th Cir. 1957) ..................................................... 36, 37
Hunter Bldgs. & Mfg., L.P. v. MBI Global, LLC,
436 S.W.3d 9 (Tex. App. – Houston [14th Dist.] 2014, rev. denied)........ 23
Hyundai Motor Co. v. Rodriguez,
995 S.W.2d 661 (Tex. 1993) .................................................................... 30
In re Interest of Doe,
917 S.W.2d 139 (Tex. App. – Amarillo 1996, writ denied) ..................... 33
Jon-T Farms, Inc. v. Goodpasture, Inc.,
554 S.W.2d 743 (Tex. App. – Amarillo 1977,
writ ref’d n.r.e., disapproved on other grounds,
McKinley v. Drozd, 685 S.W. 2d 7 (Tex. 1985))...................................... 36
Kellmann v. Workstation Integrations, Inc.,
332 S.W.3d 679 (Tex. App. – Houston [14th Dist.] 2010) ................. 24, 27
Knox v. Taylor,
992 S.W.2d 40 (Tex. App. – Houston [14th Dist.] 1999) ......................... 29
Lytle Lake Water Control and Imp. Dist. v. Shaw Envtl., Inc.,
2006 WL 6863698 (N.D. Tex. 2006) ................................................. 35, 36
M & A Technology, Inc. v. iValue Group, Inc.,
295 S.W.3d 356 (Tex. App. – El Paso 2009, rev. denied) ................. 28, 29
Marriage of Braddock,
64 S.W.3d 581 (Tex. App. – Texarkana 2001) ........................................ 31
Natural Gas Pipeline Co. of Am. v. Justiss,
397 S.W.3d 150 (Tex. 2012) .................................................................... 20
Phillips v. Carlton Energy Grp., LLC,
___ S.W.3d ___, 2015 WL 2148951 (Tex. May 8, 2015) .................. 21, 22
vii
Phillips v. Phillips,
820 S.W.2d 785 (Tex. 1991) .................................................................... 28
Powell Elec. Sys., Inc. v. Hewlett Packard Co.,
356 S.W.3d 113 (Tex. App. – Houston [1st Dist.] 2011) .......................... 29
Preston Reserve, L.L.C. v. Compass Bank,
373 S.W.3d 652 (Tex. App. – Houston [14th Dist.] 2012) ................. 22, 29
Rusty’s Weigh Scales and Serv., Inc. v. N. Tex. Scales, Inc.,
314 S.W.3d 105 (Tex. App. – El Paso 2010) ..................................... 23, 24
Saenz v. Martinez,
2008 WL 4809217 (Tex. App. – San Antonio 2008) ............................... 32
Schroeder v. HB Assoc., LLC,
2002 WL 1494351 (Tex. App. – Dallas 2002)
(not designated for publication)................................................................ 27
Sewing v. Bowman,
371 S.W.3d 321 (Tex. App. – Houston [1st Dist.] 2012,
rev. dismissed) .......................................................................................... 30
Silver Oak Custom Homes LLC v. Tredway,
2013 WL 3522916 (Tex. App. – Houston [1st Dist.] 2013) ..................... 15
State v. Hufstutler,
871 S.W.2d 955 (Tex. App. – Austin 1994)............................................. 29
State ex rel D.L.S.,
446 S.W.3d 506 (Tex. App. – El Paso 2014) ........................................... 18
Stevens v. Nat’l Education Ctrs.,
11 S.W.3d 185 (Tex. 2000) (Mem. Op.) .................................................. 31
Superior Broadcast Prod.v. Doud Media Grp., LLC,
392 S.W.3d 198 (Tex. App. – Eastland 2012).......................................... 25
Szczepanik v. First So. Trust Co.,
883 S.W.2d 648 (Tex. 1994) .............................................................. 21, 25
viii
Tabrizi v. Daz-Rez Corp.,
153 S.W.3d 63 (Tex. App. – San Antonio 2004) ..................................... 27
Taylor v. Trans-Continental Properties, Ltd.,
739 S.W.2d 873 (Tex. App. – Tyler 1987) ................................................ 22
Texas Instruments, Inc. v. Teletron Energy Mgmt., Inc.,
877 S.W.2d 276 (Tex. 1994) .................................................................... 21
U.S. Tire-Tech, Inc. v. Boeran, B.V.,
110 S.W.3d 194 (Tex. App. – Houston [1st Dist.] 2003,
rev. denied) ............................................................................................... 30
Rules
TEX. R. CIV. P. 278 ....................................................................................... 30
TEX. R. EVID. 401 ......................................................................................... 20
ix
STATEMENT OF THE CASE
Nature of the case: This is a suit for breach of contract. CR 6-12.1
Trial court and District Court No. 127, Harris County, Texas; Hon.
Judge: Ravi Sandill.
Course of The case was tried to a jury, which awarded Appellee
Proceedings and $975,000 in damages as well as attorneys’ fees. App.
Disposition in Tab 1 (CR 302-16). The trial court entered judgment
the trial court: on the verdict on January 22, 2015, and later denied
Appellants’ post-trial motions. Id. (CR 300-01), CR
338).
1
“CR __” refers to a specific page number in the clerk’s record. “SCR”
refers to the supplemental clerk’s record requested on July 30, 2015. “RR __/___”
refers to a specific volume and page number in the reporter’s record. “App. Tab
__” refers to a specific tab in Appellants’ Appendix.
x
STATEMENT REGARDING ORAL ARGUMENT
The Court should hear argument in this appeal. Although the legal
principles are familiar, the facts are somewhat complex, involving a failed
real estate transaction. Moreover, one issue involves whether Appellee is
entitled to a substantial award of lost profits from Appellants, two
individuals, and the Court has traditionally applied a rigorous, fact-intensive
review of such awards. Hence, Appellants respectfully submit that the Court
would benefit from an in-person exploration of the issues at stake in this
appeal with counsel for the parties.
xi
ISSUES PRESENTED
1. A jury awarded $900,000 in lost profits to a developer who was
unable to acquire property needed to build two new townhomes, but
the developer offered no evidence at all of the applicable real estate
market or comparable sales, and could only roughly estimate what the
townhomes would cost to build. An award of lost profits requires
objective and detailed facts and figures in support, and cannot be
speculative. Should the award be reversed?
2. Before closing, the developer said it would withhold at least $12,000
from the property’s $450,000 purchase price because the seller
supposedly failed to perform certain minor terms of the sales contract.
There was evidence, however, that this was unjustified and that the
developer simply wanted to pay less for the land. Should the jury
have been asked whether the seller’s breach in failing to close the sale
was excused by the developer’s prior refusal to pay the full sales
price?
xii
INTRODUCTION
Appellant Don Holmes signed a contract to sell a vacant lot he and his
wife Gayle owned in a residential neighborhood in Houston to Appellee
Jetall Companies for $450,000, but the sale never closed. Jetall sued for
breach and the jury awarded $900,000 for profits supposedly lost when Jetall
was unable to build and sell two townhomes on the property.
The Court should reverse the lost profits award for legal insufficiency
because the sole evidence propping it up – brief testimony from Ali
Choudhri, a principal in Jetall – falls far short of the exacting requirements
for proving lost profits. Choudhri did not testify about the market for homes
in the applicable neighborhood, comparable sales, what he planned to charge
for the townhomes, why he believed he could sell them and for what, and so
on. Nor did he provide precise and detailed figures about costs, making it
impossible to calculate lost profits with any specificity. Instead, Choudhri
just baldly asserted that Jetall would have netted $1.2 million on the project,
and introduced no corroborating facts, figures or data. To make matters
worse, the jury arbitrarily awarded $900,000 – a sum never mentioned at
trial and 25% less than what Choudhri testified to – for no discernible reason
in the record. Choudhri’s ipse dixit is legally insufficient evidence of lost
profits, and this portion of the award should be reversed.
1
Reversal is also required by the district court’s refusal to submit a
question on whether Jetall’s prior repudiation or anticipatory breach of the
contract excused Don and Gayle’s breach. Don testified that Choudhri said
Jetall would not pay the full $450,000 purchase price at closing but would
instead withhold $12,000 or $15,000. This was ostensibly to compensate
Jetall for what Choudhri claimed was Don’s failure to perform certain minor
provisions of the contract, such as the duty to replat the property into two
separate lots. But a jury could find that Jetall had no rightful basis to pay
less than the full sales price, and that Choudhri’s expressed reason for doing
so was simply a pretext to obtain the property more cheaply. In that event,
Choudhri’s insistence on paying less than $450,000 at closing was a breach
or repudiation of the contract, and Don and Gayle were entitled to a question
on whether it excused their own failure to close the sale. This error calls for
reversal and a new trial.
STATEMENT OF FACTS
I. The Parties’ Contract And Don’s Efforts
To Comply With It
Don and Gayle own a vacant lot at 1204 Banks Street in Houston as
community property. RR 2/206. In 2011, they decided to sell the property,
initially posting a “for sale by owner” sign on the lot and later exploring a
potential partnership with a friend and developer, Robert Davis, to build
2
townhouses there. RR 2/216-17, 265. Don and Gayle never entered into a
formal agreement with Davis, however, and nothing came of the idea. RR
2/265-66.
Choudhri is a principal in Jetall Companies, a property development
and management firm. RR 3/25-29. After seeing a “for sale” sign on the
Holmeses’ lot, he inquired about buying it and contacted Don. RR 3/33-40.
They met in Jetall’s offices on October 28, 2011, and Choudhri told Don that
he was interested in building and selling two townhomes on the property.
RR 3/32. Don agreed to sell the lot to Jetall for $450,000, and they executed
a form contract memorializing the sale. RR 3/40-42, 54; App. Tab 2 (Pl.
Exh. 1).
In addition to its form terms, the sales contract contains five “special
provisions” added to the document by Choudhri during the meeting. App.
Tab 2 (Pl. Exh. 1, ¶ 11); RR 3/43-44. Four of these were warranties that the
property (i) is unrestricted and has no positive or negative easements, (ii) is
not on a fault line, (iii) is “environmentally clean,” and (iv) has no height
restrictions. Id. The other special condition states: “Seller to provide
replatting with elec. survey and soil test report.” Id. Closing was to occur
within thirty business days of the title commitment. Id., ( Pl. Exh. 1 ¶ 9).
3
After Don signed the contract, Choudhri gave him an earnest money
check payable to Declaration Title Company for $10,000, which the title
company later picked up from him along with the contract. RR 2/224-25,
RR 3/54-55, Pl. Exh. 2. The following week, Choudhri transferred $450,000
to the title company in order to facilitate a quick closing, which Don
preferred in light of certain financial problems he was having. RR 3/43, 67-
68; RR 2/245-46; Pl. Exh. 14.
Don emailed Choudhri a soil report for the property, completed in
1997, a few days after their meeting. Pl. Exh. 10. Although the contract
didn’t require a soil report of any particular age, App. Tab 2 (Pl. Exh. 1 ¶ 11),
Choudhri testified that Don told him at their meeting that the report he
would deliver was only two years old. RR 3/65-66. Choudhri called Don
and they discussed obtaining a new report. RR 3/66-67. But Don later
called the company that had performed the 1997 report and was told a new
one was unnecessary because soil conditions hadn’t changed on the property.
RR 2/269, RR 4/95-96.
At his October 28 meeting with Choudhri, Don offered to provide an
existing survey he had of 1204 Banks Street. RR 2/270. The following
week, he emailed it in electronic form to the title company but the company
lacked the software to open it. RR 2/257, RR 4/95. Because the survey
4
dated to 1998, it did not reflect a replatting of the property. RR 3/73, 184.
The title company also objected that the survey’s failure to show the lot as
vacant precluded using it for closing. RR 3/72-73, Pl. Exh. 11. Don
therefore inquired whether a new survey was necessary, and later emailed
stating that he assumed the title company would order a new one if needed.
Pl. Exh. 13, Pl. Exh. 15, RR 2/257-58. He had previously closed the sale of
a different property using a fifteen year-old survey and so assumed that sale
of the Banks Street lot could proceed using his 1998 survey. RR 2/257-58.
Don had done most of the work to compete the replatting of the
property, incurring $3,000 in cost, before he entered into the contract with
Jetall because he had previously explored dividing the lot in order to build
townhouses. RR 2/254-56, RR 4/100-01. All that remained was to pay a
$525 fee to the City of Houston and file an application to record the
replatting. RR 2/254-56, 271-72. At their meeting, Don told Choudhri that
he would not finalize the replatting before closing because, if the sale fell
through, a replatting would prevent the Holmeses or another buyer from
doing something different with the property, such as building a single family
5
home or more than two townhouses. Id., RR 4/100-01. Don testified that
Choudhri told him this was fine. RR 2/271-72, 255.2
II. Jetall’s Refusal To Close Unless Don And Gayle
Lowered The Sales Price By At Least $12,000
In the weeks following their execution of the contract, Don and
Choudhri spoke and emailed about closing the sale and what Choudhri
believed Don still had to do to fulfill the contract’s special provisions. RR
3/72-74, Pl. Exh. 13-18. On November 15, the title company obtained a new
survey of the property at Don’s direction and emailed it to Choudhri, adding:
“The seller is ready to close do you want to do this on Wednesday, Thursday
or Friday of this week.” Pl. Exh. 18, 19.
Rather than close, however, Choudhri demanded that Don complete
the replatting of the property. Pl. Exh. 20; RR 3/74-75, 82-83. Frustrated by
what he believed were Choudhri’s new demands, Don emailed Choudhri on
November 18, writing:
Ali
I am not sure what is going on. When we were working on an
agreement I told you I had an old electronic survey but that
would be an advantage for your designer. Additionally we
discussed that I had started getting the lot replated [sic] but that
2
There was also testimony at trial that the Holmes lot may have had an
easement toward the back of the property in violation of the seller’s warranty of no
easements, but Choudhri confirmed that this was not a material concern. RR
3/220.
6
had not been filed so it would not impact your desire to build a
single family home on the lot. Thirdly, I offered a soil test that
I had performed a few years ago to you. After you later refused
to accept the electronic survey, I had a new survey done which
showed the lot as vacant and undivided. Now I am told you
want the lot replated [sic], which is new, and that the soil
surveys are old, which was known. I assume you are having
buyers [sic] remorse and wish that you had purchased the other
lot you were considering. I certainly have no interest in trying
to sell something to someone that doesn’t want it so I think it is
probably best that we just back away and you can pursue the
other location.
Pl. Exh. 21. Don also called the title company and learned for the first time
that Choudhri had instructed the company to deduct $12,000 from the price
to be paid at closing. RR 4/96.
On December 12, Choudhri emailed and hand-delivered a letter to
Don stating that Jetall “looks forward” to closing the sale on December 15.
Pl. Exh. 24. The letter asserted that Don had not replatted the property or
provided an electronic survey or soil report; demanded performance of these
tasks; and indicated that Jetall “is entitled to specific performance as well as
other relief under law, such as damages and attorney’s fees” for Don’s
supposed noncompliance. Id. “Notwithstanding the forgoing,” however, the
letter stated that Jetall would attend the closing on December 15 while
reserving its rights under the contract. Id.
The next day, Choudhri emailed Don with a similar message, asking
“please let me know if you intend to honor the contract and all terms we
7
entered into?” Pl. Exh. 23. The email asked whether Don would provide a
completed replatting, electronic survey, and soil report – or if not, “will you
offset the costs for me off the sales price?” Id. Choudhri asserted that “[t]he
estimated costs” for these items “is at least $12,000 plus the time and
carrying costs of doing do [sic].” The email concluded:
If you need more time to complete these items I am amenable to
extended [sic] the contract to allow you to complete.
Alternatively, I am willing to accommodate you and close and
fund the transaction December 15, 2011 as long as you credit
me at least $12,000 for the cost of accomplishing these items at
closing.
I am trying my best to resolve this matter at hand before it is
escalated.
Please reply by 10:00 am December 14, 2011.
Id. Although Choudhri wrote that the soil report, replatting, and survey cost
“at least $12,000,” he later acknowledged that he did not actually know the
exact price of performing these tasks. RR 4/61-62.
Don went to Jetall’s offices to meet with Choudhri on December 13 in
an effort “to resolve the issues and close.” RR 3/6. According to Don,
Choudhri told him during this meeting that he would close on the sale but
would deduct $15,000 or $12,000 from the $450,000 purchase price in order
to complete the disputed items Choudhri claimed had not been performed.
RR 2/272-73; RR 3/11, 23; RR 4/102-03. As Don testified:
8
What happened, on Tuesday the 13th, I went by his office in an
attempt to negotiate some kind of settlement that we could
conclude the transaction and at that point in time we discussed
– you know, I told him that I wasn’t going to pay more for the
items that he wanted to charge me. I think that during the day
he said $15,000 but I see that he was back down to $12,000, but
the amount kind of varied.
But he was going to take off for these items and I said
that I had given him what I promised and that was what I had
already developed or what I had already purchased and all I was
giving him was old documents. I didn’t – had never agreed to
any of the new ones and that if we were going to close, that I
wanted the full amount. And he told me that he was losing
money by not being able to move ahead and that he was going
to sue me and if I didn’t close immediately, I better get a lawyer.
And this was the most threatening he had been and I had just
gone to his office trying to resolve it.
RR 4/102-03. A title company employee also told Don that $15,000 of the
price would be placed in escrow, and Choudhri told Don that Don would be
unable to access these funds until Choudhri “fe[lt] like it.” RR 2/272-73.
Gayle objected to the special provisions in the contract and to
consummating the deal under the agreement Don signed. RR 2/274, RR 3/7,
RR 4/77-79. Nonetheless, they were ready to close on December 13 and
would have willingly done so but for Choudhri’s demand to lower the
purchase price. RR 4/106, RR 3/11. They also feared “that even if we
conceded the $15,000, that he was going to come back again on other – on
the other points. It was just going to be an ongoing dilemma of trying to get
money from him.” RR 2/274.
9
Choudhri gave a different account of the parties’ December 13
meeting, testifying that Don asked to increase the sales price and that the
discussion ended when Choudhri told him “We have a deal” and that he was
“not even going to entertain” a higher price. RR 3/97. Choudhri testified
that, in fact, Jetall would have closed the sale on December 15 without
further action by the Holmeses, and without deducting anything from the
$450,000 sales price. RR 3/98-105, RR 4/64-65. He denied demanding
anything from Don. RR 4/64. As Choudhri put it: “to get the deal closed,
he [Don] didn’t even have to do anything more under my letter to him. He
just had to come and sign and close… Sign the deed and take his funds and
it was our reservation if we wanted to go after him later and we wouldn’t
have.” RR 3/98-99, 127, 185-86. Still, Choudhri acknowledged that he
never told Don he would not sue for alleged breach of the special provisions
after the sale closed. RR 3/181-82.
On December 14, Don emailed Choudhri in response to Choudhri’s
December 13 email and communicated that he had an appointment with his
lawyer that morning and that he still “would like to work this out and [g]et
the deal done but I do need to talk to my attorney before going forward.” Pl.
Exh. 25. A week later, Jetall’s lawyer wrote Don demanding that the
Holmeses close by December 31. Pl. Exh. 29. The letter reprised the claim
10
that Don was obligated to comply with the special provisions but stated that,
if he chose not to, Jetall “would be willing” to deduct their cost from them at
closing, and that the cost was estimated to be $12,000. Id. The letter
warned that Jetall would file suit if no closing occurred and invited Don to
request a copy of Jetall’s draft petition (though one was actually included
with the letter). Id., RR 4/81.
On January 5, Don’s attorney wrote Jetall’s lawyer and agreed to
close the sale if the original contract was declared null and void and the
parties released each other from any liabilities under it, if the purchase price
was increased to $456,000, and if Jetall paid outstanding ad valorem taxes
on the property. Pl. Exh. 30. The Holmeses increased the purchase price by
$6,000 in this offer to cover fees they had to pay their attorney while dealing
with Jetall. RR 3/10-11. The parties then stopped negotiating, and the sale
was never completed.
III. The Proceedings Below
Jetall sued Don and Gayle and their community property estate for
breach of contract and fraud, seeking damages and specific performance.
CR 6-12. The case eventually proceeded to a jury trial.
At trial, Choudhri argued that he had wanted to close the sale on
December 15 and would not have deducted any funds from the purchase
11
price at closing. RR 3/95-105. As for damages, Choudhri testified as
Jetall’s expert witness on the topic. CR 17, RR 5/9. He claimed that the
profit Jetall would have reaped on the sale of the two townhomes planned
for the lot “would have been in excess of $1.2 million.” RR 3/122. Jetall
offered an exhibit (Exhibit 36) its counsel called a “pro forma” for the
project, including “calculations of the cost, expenses… [and] profitability”
of the planned development, but the document was never admitted. RR
3/115-17, 133-34. On cross-examination, Choudhri gave the following
testimony about what it would cost to build the townhomes:
Q. And you previously told me it would have cost you
approximately $850,000 in cost to build those homes,
correct?
A. I don’t recall what I told you, but if – the numbers are
about $800,000 per home. If you’re saying it’s 850, I
know my depo was about a year ago; so I don’t know if I
– I can’t recall exactly, but close, yes sir.
Q. North of $800,000 it was going to cost you to build these
homes, correct?
A. Yes.
RR 3/125-26. Other than that, Jetall offered no evidence about expenses
connected to the project. RR 3/115-26.
Choudhri did not testify about how long construction would take,
when the homes would be for sale, what the real estate market was like then,
12
what other comparable townhomes near 1204 Banks Street were selling for,
or any other data about Jetall’s planned development. Id. He testified
generally that buyers were interested in Jetall’s homes, RR 3/29-32, 84, and
he stated that his sister initially wanted one of the townhouses planned on
the Holmes lot. RR 3/32. But Choudhri gave no more no more specific
information about the likelihood of selling the townhomes, what he planned
to charge for them, how many buyers might be available, what and whether
they could pay, and so forth. RR 3/115-26. In addition to lost profits, Jetall
sought to recover the claimed rise in the value of the land. RR 4/163-64.
Don and Gayle defended against Jetall’s claim for breach by arguing
that the company breached first when Choudhri told Don that Jetall would
withhold $12,000 or $15,000 from the purchase price under the pretext that
Don failed to complete the special provisions. RR 2/192-93. Gayle,
represented by separate counsel, also defended by arguing that she never
signed the contract or ratified it, that Don did not act as her agent in the
transaction, and that the contract was therefore void given Don’s incapacity
to sell their community property on his own. RR 2/186-87, 192. Thus,
much of the trial testimony concerned whether Gayle intended to enter into
the contract with Jetall and authorized Don to act for her. The Holmeses
13
also argued that Choudhri failed to substantiate Jetall’s damages for lost
profits. RR 4/181.
The parties began discussing the charge before testimony concluded
on the last day of trial. The district court indicated that he would find that
Jetall waived performance of the special provisions as a matter of law, but
that Jetall could not have committed breach because Choudhri had
previously transferred the purchase price to the title company. RR 4/4-10.
“So once the 450 is at the title company,” the court stated, “he can’t breach.”
RR 4/9. When Gayle’s counsel objected that Choudhri had instructed the
title company to withhold part of the sales proceeds due to Don’s supposed
failure to have completed the replatting process, the court responded:
“There’s no evidence of that,” and added: “The issue in this case is at the
time of closing was the land conveyed. Nothing else matters.” RR 4/12-13.
At the charge conference later that day, Don and Gayle’s counsel
requested a question on whether their breach was excused by Jetall’s prior
anticipatory breach, that is, Choudhri’s stated intention to withhold at least
$12,000 from the purchase price to compensate for supposed non-
performance of the special provisions. RR 4/118-120, 127; SCR (Jury
Question No. 4). Consistent with its earlier comments, the court refused,
finding that there was no fact question on the issue and that, as a matter of
14
law, the Holmeses breached the contract but Jetall did not. RR 4/119, 127,
131.3 As a result, the charge did not include questions on whether either
party breached or whether any breach by Don and Gayle was excused by
Jetall’s prior anticipatory breach or repudiation. App. Tab 1 (CR 306-16).
The jury found that Gayle authorized Don to enter into the contract,
and that the Holmeses did not commit fraud. Id. It awarded $75,000 in
breach of contract damages for the difference in the value of the property,
and $900,000 in damages for Jetall’s lost profits. Id. (CR 308). The jury
also awarded Jetall $52,800 in attorneys’ fees through trial, and additional
fees if the company prevails on appeal. Id. (CR 314). The court later
entered judgment on the jury’s verdict. Id. (CR 300-01).
Don and Gayle timely moved for a new trial, to disregard the jury’s
findings, and for judgment notwithstanding the verdict based on the trial
3
In later colloquy, the court stated that Gayle could not request an
anticipatory breach question while also asking the jury to decide whether Don was
authorized to agree to the sale on her behalf. RR 4/129-30. The court evidently
thought that an anticipatory breach question would mean Gayle was “admitting
that she’s party to the contract,” thus conceding the authority issue. RR 4/130. In
fact, parties may place alternative theories before the jury. See Silver Oak Custom
Homes LLC v. Tredway, 2013 WL 3522916 at * 5 (Tex. App. – Houston [1st Dist.]
2013). Faced with this erroneous ruling and the unnecessary choice imposed by
the court, Gayle indicated she was withdrawing her request for an anticipatory
breach question. RR 4/130. Nevertheless, her earlier objection notified the court
of the issue and thereby preserved the point for appellate review. See, e.g.,
Cunningham v. Haroona, 382 S.W.3d 492, 510 (Tex. App. – Ft. Worth 2012, rev.
denied) (“The trial court clearly understood [plaintiff’s] complaint, and this is all
that was required”).
15
court’s refusal to submit a question on breach and excused performance and
the lack of evidence of lost profits. CR 317-26. At the hearing on the
motion, the court reiterated: “I found as a matter of law that there was a
breach” by Don and Gayle. RR 5/4. On the issue of lost profits, the court
dismissed the Holmeses’ argument that, among other failings, Choudhri
never testified to the cost of building the townhomes by stating: “Everyone
knows, I mean, you go to a builder today, they’ll build you a house for $150
a square foot. They’ll tell you that, correct?” RR 5/7. Jetall defended
Choudhri’s testimony on the basis that he was qualified as an expert to opine
on the topic. RR 5/9. The court denied the motion. CR 338.
SUMMARY OF ARGUMENT
First, there is legally insufficient evidence of Jetall’s lost profits.
Choudhri testified that the failure to acquire the land and build and sell two
townhouses cost Jetall $1.2 million in profits, but little besides his ipse dixit
supports the claim. Choudhri did not testify at all about the relevant real
estate market at the relevant time. The record is silent on comparable sales
near 1204 Banks at whatever time Jetall expected to finish the project
(Choudhri didn’t say), what Jetall intended to charge for the townhomes,
whether sales could have been achieved and why, what buyers might have
paid, and so forth. Without this kind of basic evidence, Jetall’s claim is
16
entirely speculative. Moreover, claims for lost profits must be supported by
objective and detailed facts, figures and data, but Jetall introduced none of
this. Choudhri gave only a rough estimate of what building the homes
would cost, but the lack of specificity makes it impossible to tally Jetall’s
damages with any precision. On top of all that, the jury ignored Jetall’s
evidence and its request for $1.2 million and randomly awarded only
$900,000, though no evidence at all supports this figure and it was never
mentioned by anyone at trial. Given the lack of any evidentiary basis for the
jury’s award, it should be reversed. See Point I, infra.
Second, the Court should reverse the judgment because the trial court
erred in declining to submit a question on whether Jetall’s prior repudiation
or anticipatory breach of the contract excused Don and Gayle’s breach.
Choudhri told Don that Jetall would withhold $12,000 or $15,000 from the
purchase price at closing. Title company employees in communication with
Choudhri said the same thing. Choudhri’s reason for this was Don’s claimed
nonperformance of the special provisions, but a jury could find that this was
just an excuse to pay less for the lot. The trial court decided that Jetall
waived performance of the special provisions as a matter of law, and a jury
could have found that they were non-material. Moreover, Don performed
these terms adequately, and no evidence in the record supports the claim that
17
Jetall would have incurred as much as $12,000 or $15,000 to take care of
them after closing. As a result, a jury could have determined that Jetall’s
insistence on withholding such a substantial portion of the sales price was an
anticipatory breach or repudiation of the contract that excused the Holmeses’
later failure to close the sale, and the court consequently should have
included a question on this issue in the charge. Its failure to do so mandates
reversal. See Point II, infra.
ARGUMENT
Don and Gayle urge reversal on two grounds: insufficiency of the
evidence supporting lost profits damages, and the trial court’s erroneous
failure to include a question for the jury on whether the Holmeses’ breach of
contract was excused. Because the legal insufficiency point would require
rendition and should therefore be decided first, it is addressed first in this
brief. See State ex rel D.L.S., 446 S.W.3d 506, 519 (Tex. App. – El Paso
2014) (“Where the finding is legally insufficient, reversal and rendition are
the proper remedies”); E-Z Mart Stores, Inc. v. Ronald Holland's A-Plus
Transmission & Automotive, Inc., 358 S.W.3d 665, 670 (Tex. App. – San
Antonio 2011, pet. denied) (“Because legal sufficiency is a rendition issue,
we must address it before addressing issues that would require a remand”).
18
I. Jetall Failed To Prove Lost Profits Damages
A. Standard Of Review
A jury’s finding is legally insufficient and must be reversed “if the
record shows: (1) that a vital fact is completely absent; (2) that the court is
barred by rules of law or evidence from giving weight to the only evidence
offered to prove a vital fact; (3) that the evidence offered to prove a vital fact
is not more than a scintilla; or (4) that the evidence establishes conclusively
the opposite of the vital fact.” Estrada v. Cheshire, __ S.W.3d __, 2015 WL
4101195 at * 6 (Tex. App. – Houston [1st Dist.] July 7, 2015) (citing City of
Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005)). The Court should
consider the evidence in the light most favorable to the finding under review
and indulge all reasonable inferences that would support the finding. See
City of Keller, 168 S.W.3d at 822.
Findings supported only by conclusory expert or lay opinion
testimony must also be reversed. “[A]lthough expert opinion testimony
often provides valuable evidence in a case, it is the basis of the witness’s
opinion, and not the witness’s qualifications or his bare opinions alone, that
can settle an issue as a matter of law; a claim will not stand or fall on the
mere ipse dixit of a credentialed witness.” Coastal Transport Co., Inc. v.
Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (quotation
19
omitted). Thus:
Opinion testimony that is conclusory or speculative is not
relevant evidence, because it does not tend to make the
existence of a material fact “more probable or less probable.”
See TEX. R. EVID. 401. This Court has labeled such testimony
as “incompetent evidence,” and has often held that such
conclusory testimony cannot support a judgment. Furthermore,
this Court has held that such conclusory statements cannot
support a judgment even when no objection was made to the
statements at trial.
Id. (citations omitted). The Supreme Court has specifically singled out lost
profits testimony by business owners as the sort of opinion or quasi-expert
testimony governed by this rule. See Natural Gas Pipeline Co. of Am. v.
Justiss, 397 S.W.3d 150, 157 (Tex. 2012) (“We have also recognized that a
business owner’s conclusory or speculative testimony of lost profits will not
support a judgment,” citing Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d
80, 84 (Tex.1992)).
B. Jetall Offered Legally Insufficient Evidence Of Lost
Profits
Jetall’s sole evidence of lost profits consisted of brief testimony from
Choudhri. The company also offered a document supposedly detailing
“calculations of the cost, expenses… [and] profitability” of the townhomes,
but it was not admitted. RR 3/115-17, 133-34. Because Choudhri’s
testimony on this subject was purely speculative and self-serving rather than
a factual account rooted in objective data, that portion of the award must be
20
reversed.
Lost profits must be shown with “reasonable certainty.” Helena
Chem. Co. v. Wilkins, 47 S.W.3d 486, 505 (Tex. 2001). “As a minimum,
opinions or estimates of lost profits must be based on objective facts, figures,
or data from which the amount of lost profits can be ascertained.” Phillips v.
Carlton Energy Grp., LLC, ___ S.W.3d ___, 2015 WL 2148951 at * 10 (Tex.
May 8, 2015) (quoting Holt Atherton Indus., 835 S.W.2d at 84). Moreover,
“[t]he record must show how the lost profits were calculated.”
Cuidado
Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care Serv.,
LLC, 404 S.W.3d 737, 744 (Tex. App. – El Paso 2013); see also Szczepanik
v. First So. Trust Co., 883 S.W.2d 648, 650 (Tex. 1994) (“There is nothing
in the record to show how FST determined the amount of lost profits”).
“Profits which are largely speculative, as from an activity dependent on
uncertain or changing market conditions… cannot be recovered.” Phillips,
2015 WL 2148951 at * 10 (quoting Texas Instruments, Inc. v. Teletron
Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994)).
In this case, Jetall’s scant evidence of lost profits is both speculative
and lacking the objective data needed to justify an award. The claim is
speculative because Choudhri provided no information at all about the real
estate market in Houston at the time he would supposedly be selling the
21
townhomes he planned to build. RR 3/115-24. In fact, he did not even say
when he expected to complete any sale of the townhomes – that is, how long
it would take to construct them, how long they might be on the market, and
how long it would take to complete a sale. Nor did Jetall introduce evidence
of what other similar homes near 1204 Banks Street sold for at any time, let
alone at or near the time he expected to offer the townhomes on the Holmes
lot for sale.
Obviously, the market for real estate fluctuates based on a wide
variety of factors. See, e.g., Preston Reserve, L.L.C. v. Compass Bank, 373
S.W.3d 652, 667 (Tex. App. – Houston [14th Dist.] 2012); Taylor v. Trans-
Continental Properties, Ltd., 739 S.W.2d 873, 881 (Tex. App. – Tyler 1987).
Conditions in the market may be “uncertain or changing,” Phillips, 2015 WL
2148951 at * 10, in light of the wider economy, the dynamics of a particular
neighborhood, the level of supply, and many other considerations. Neither a
robust nor an anemic market can simply be assumed by the parties or the
factfinder. Without knowing the condition or specifics of the relevant
market at the relevant time, it is impossible to know if the townhomes likely
would have sold, or for how much. Claiming that a sale would have
generated $1.2 million in profits is therefore entirely speculative.
Choudhri did generically refer to having unspecified “buyers” for the
22
townhomes. RR 3/29-32, 84. He identified one of these as his sister, though
she later became uninterested in the project and it is unclear if she would
have paid the market rate as a buyer when her family’s own company was
the seller. CR 2/32. Again, Choudhri did not say. Id. No other potential
buyer was named. Yet “[t]he bare assertion that contracts were lost does not
demonstrate a reasonably certain, objective determination of lost profits.”
Hunter Bldgs. & Mfg., L.P. v. MBI Global, LLC, 436 S.W.3d 9, 17 (Tex.
App. – Houston [14th Dist.] 2014, rev. denied); accord Holt Atherton Indus.,
835 S.W.2d at 85; Cuidado Casero Home Health, 404 S.W.3d 744. Lost
profits must be non-speculative and corroborated.” Cuidado Casero Home
Health, 404 S.W.3d 745 (emphasis added); accord Rusty’s Weigh Scales and
Serv., Inc. v. N. Tex. Scales, Inc., 314 S.W.3d 105, 111 (Tex. App. – El Paso
2010). It is insufficient to assert baldly that buyers or customers were lost
without providing corroborative detail and proof, such as the buyers’
identities, evidence that they had firmly agreed to buy, proof that their loss
or cancellation is the defendant’s fault rather than the result of other market
forces, information about the transactions that had to be cancelled (such as
pricing), and so on.
For example, a company seeking $2 million in lost profits due to a
former employee’s theft of trade secrets asserted that the theft led to a loss of
23
buyers, but it failed to offer proof that it had actual contracts lined up or that
customers hadn’t switched for other reasons. See Rusty’s Weigh Scales, 314
S.W.3d at 111. The mere assertion that unspecified customers defected was
not enough. See id. Likewise, in Great Pines Water Co. v. Liqui-BoxCorp.,
a business owner testified that a supplier’s malfunctioning equipment
resulted in 4,000 lost customers based on his observations of the company’s
plant, talking to the company’s drivers, and “conversations with an unknown
number of customers who complained.” 203 F.3d 920, 923 (5th Cir. 2000).
But the lack of hard proof that 4,000 customers actually discontinued service
and why doomed any claim for lost profits. See id. For the same reasons,
Choudhri’s blanket, uncorroborated statement that he had buyers for the
townhomes cannot, without more, justify an award of lost profits.
Jetall’s bid for $1.2 million in lost profits is not only speculative, it
lacks the necessary supporting, “objective facts, figures, or data.” Holt
Atherton Indus., 835 S.W.2d at 84. Plaintiffs seeking lost profits must detail
the expenses of the work or project they claim would have yielded the profit.
See Examination Mgmt. Serv. v. Kersh Risk Mgmt, Inc., 367 S.W.3d 835,
843 (Tex. App. – Dallas 2012) (faulting plaintiff’s failure to “enumerate
costs”);
Kellmann v. Workstation Integrations, Inc., 332 S.W.3d 679, 685-86
(Tex. App. – Houston [14th Dist.] 2010). Yet Choudhri barely referred to
24
expenses at all. He ignored the subject entirely during his direct testimony.
RR 2/115-24. Questioned in cross examination about the costs of building
the townhomes, he stated that “the numbers are about $800,000 per home,”
then agreed that it was actually “close” to $850,000 (the figure he gave in his
deposition), then agreed it was “north of $800,000.” RR 2/125-26. He
provided no supporting detail or back-up documentation at all, such as
evidence showing what specific items in the budgets for construction and
marketing would have cost. “Rough estimates” cannot support recovery, but
Choudhri offered nothing more. Superior Broadcast Prod.v. Doud Media
Grp., LLC, 392 S.W.3d 198, 212 (Tex. App. – Eastland 2012).
It is impossible to determine precisely “how [Jetall’s] lost profits were
calculated” in the absence of specific, exact evidence of expenses. Cuidado
Casero, 404 S.W.3d at 744; Szczepanik, 883 S.W.2d at 650. The trial court
appears to have let Jetall off the hook on this score because “[e]veryone
knows, I mean, you go to a builder today, they’ll build you a house for $150
a square foot.” RR 5/7. But presumed common knowledge about building
costs is no substitute for actual, admitted evidence a fact-finder could
properly have used to calculate the profits Jetall claims to have lost.
Equally problematic, Choudhri never testified to what he would
charge for the townhouses. When Jetall designated him as an expert witness,
25
it stated that “[e]ach townhouse would have sold for at least $400,000.” CR
18. But if it cost $800,000 or $850,000 to build each townhome, Jetall
would have lost approximately $400,000 on each and earned no profit at all
with anything close to a $400,000 sales price. How and why these figures
changed radically between Choudhri’s expert designation and trial, such that
Choudhri claimed the company would have made $1.2 million, is a mystery.
Lacking concrete and objective facts and figures, all that remains are
Choudhri’s qualifications and his “take my word for it” figure of $1.2
million. Don and Gayle have never questioned that, given his experience in
real estate development, Choudhri could opine on Jetall’s lost profits. RR
5/9. But what matters is the basis of his opinion, not his “qualifications or
his bare opinions alone… [A] claim will not stand or fall on the mere ipse
dixit of a credentialed witness.” Coastal Transport, 136 S.W.3d at 232.
Choudhri testified at length about his credentials, RR 2/117-19, but he failed
to go much beyond his background as a developer and adequately support
his opinion about this specific project. Courts have repeatedly reversed lost
profits awards based on nothing more than an expert’s or business owner’s
say so – cases where the plaintiff’s witness testified to a net amount but
failed to provide detailed supporting evidence. See, e.g., Cuidado Casero,
404 S.W.3d at 745-46; Examination Mgmt. Serv., 367 S.W.3d at 839-44;
26
Tabrizi v. Daz-Rez Corp., 153 S.W.3d 63, 68 (Tex. App. – San Antonio
2004); Schroeder v. HB Assoc., LLC, 2002 WL 1494351 at * 3 (Tex. App. –
Dallas 2002) (not designated for publication). This case is no different, and
Choudhri’s conclusory opinion testimony is “incompetent evidence” that
cannot justify the jury’s award. Coastal Transport, 136 S.W.3d at 232.
“When a review of the surrounding circumstances establishes that the
profits are not reasonably certain, there is no evidence to support the lost
profits award.” Kellmann, 332 S.W.3d at 684. The Court should therefore
reverse the $900,000 award.
C. The Lost Profits Award Is Further Suspect Because
The Jury Plucked A Figure Out Of Thin Air
The jury’s decision to award $900,000 in lost profits – when Choudhri
testified that the sum was actually $1.2 million – further illustrates its legal
insufficiency.
“In determining damages, the jury has discretion to award damages
within the range of evidence presented at trial.” Gulf States Utilities v. Low,
79 S.W.3d 561, 566 (Tex. 2002). But jurors may not “arbitrarily assess an
amount neither authorized nor supported by the evidence presented at trial.
In other words, a jury may not ‘pull figures out of a hat’; a rational basis for
calculation must exist.” First State Bank v. Keilman, 851 S.W.2d 914, 930
(Tex. App. – Austin 1993, writ denied); accord Callejo v. Brazos Elec.
27
Power Co-op., Inc., 755 S.W.2d 73, 75 (Tex. 1988) (jurors may not “leap
entirely outside of the evidence” and award a sum unsupported by proof).
This rule is particularly apt in breach of contract cases, where damages
should neither exceed nor understate the loss. See Phillips v. Phillips, 820
S.W.2d 785, 788 (Tex. 1991) (“The universal rule for measuring damages
for the breach of a contract is just compensation for the loss or damage
actually sustained. By the operation of that rule a party generally should be
awarded neither less nor more than his actual damages” (quotation omitted)).
In this case, however, the jury did not award Jetall the only sum that
Choudhri tried to justify at trial and which Jetall’s lawyer argued for in
closing: $1.2 million. RR 4/165. Rather, the jury inexplicably awarded
$900,000 in lost profits. There is no basis in the record whatsoever for
determining that Jetall’s lost profits were $900,000. Jurors may have chosen
to lop off a quarter of what Jetall requested for some reason known only to
them, but the $900,000 figure does not appear in any testimony or document.
When juries deviate dramatically from the damages proven at trial – whether
by awarding too much or too little – reversal is necessary. See, e.g.,
Examination Mgmt. Serv., 367 S.W.3d at 844 (reversing lost profits award in
part because it was $8,262 less than the amount indicated by plaintiff’s
evidence); M & A Technology, Inc. v. iValue Group, Inc., 295 S.W.3d 356,
28
368 (Tex. App. – El Paso 2009, rev. denied) (award higher than range
supported by evidence); Preston Reserve,
373 S.W.3d at 667 (“It follows
that the trial [court] was not authorized to find that the property's value was
$2.4 million when the only competent evidence presented at trial supports a
fair market value of at least $2.7 million”); State v. Hufstutler, 871 S.W.2d
955, 959-60 (Tex. App. – Austin 1994) (same).
True, “[e]vidence corresponding to the exact amount found by the
trier of fact is not essential,” and juries can pick a figure that falls on a
spectrum supported by the evidence. Powell Elec. Sys., Inc. v. Hewlett
Packard Co., 356 S.W.3d 113, 126 (Tex. App. – Houston [1st Dist.] 2011).
The jury may also sometimes blend conflicting expert testimony to arrive at
a proper figure. See Knox v. Taylor, 992 S.W.2d 40, 63 (Tex. App. –
Houston [14th Dist.] 1999). But here, Choudhri did not testify that Jetall’s
profits would fall within a particular range; he claimed simply that the
company lost $1.2 million. RR 3/115-24. Nor did Don and Gayle offer
expert testimony of some lower amount that might permit the jury to blend
the two contrasting views and somehow arrive at $900,000. Moreover, the
jury did not stray only slightly from the evidence. It unaccountably reduced
Jetall’s claimed amount by a full 25%. In these circumstances, the jury’s
arbitrary award lends further support to Don and Gayle’s argument that it is
29
devoid of record support and thus legally insufficient.
II. The District Court Erred By Disallowing A Jury Question
On Whether The Holmeses’ Breach Was Excused By
Jetall’s Prior Repudiation
A. Standard Of Review
“In its charge to the jury, a trial court must submit all questions,
instructions, and definitions raised by the pleadings and evidence. TEX. R.
CIV. P. 278; Hyundai Motor Co. v. Rodriguez, 995 S.W.2d 661, 663
(Tex.1999).” U.S. Tire-Tech, Inc. v. Boeran, B.V., 110 S.W.3d 194, 202
(Tex. App. – Houston [1st Dist.] 2003, rev. denied). “A trial court may
refuse to submit an issue only if no evidence exists to warrant its
submission.” Id. (citing Elbaor v. Smith, 845 S.W.2d 240, 243 (Tex.1992)).
“Conflicting evidence presents a fact question for the jury to decide.”
Sewing v. Bowman, 371 S.W.3d 321, 339 (Tex. App. – Houston [1st Dist.]
2012, rev. dismissed).
In this case, Don and Gayle requested submission of a question asking
whether their non-performance of the contract – failure to close the sale of
the property – was excused by Jetall’s prior anticipatory breach or
repudiation, but the court refused. RR 4/118-20, 127; SCR (Jury Question
No. 4). As a result, this Court should examine the record for any evidence
supporting the Holmeses’ defense of excuse, and if it exists, reverse and
30
remand for a new trial. See Stevens v. Nat’l Education Ctrs., 11 S.W.3d 185
(Tex. 2000) (Mem. Op.) (remand for new trial is remedy for charge error).
B. Ample Evidence Supported Don And Gayle’s Position
That Jetall Repudiated
Don and Gayle presented more than enough evidence that Jetall
committed an anticipatory breach or repudiation by using a demand for
performance from the Holmeses beyond that required under the agreement
as cover for withholding $12,000 to $15,000 from the purchase price. This
anticipatory breach excused Don and Gayle’s own breach of refusing to
close the sale. Given the evidence in the record supporting this theory, the
trial court should have submitted the issue to the jury.
“The terms ‘repudiation’ and ‘anticipatory breach’ are used somewhat
interchangeably by our courts.” Grp. Life and Health Ins. Co. v. Turner, 620
S.W.2d 670, 673 (Tex. Civ. App. – Dallas 1981). They refer to one party’s
“positive and unconditional refusal to perform the contract in the future,
expressed either before performance is due or after partial performance. It is
conduct that shows a fixed intention to abandon, renounce, and refuse to
perform the contract.” CMA-CGM (America), Inc. v. Empire Truck Lines,
Inc., 416 S.W.3d 495, 519 (Tex. App. – Houston [1st Dist.] 2013, rev.
denied). The intent to repudiate may be expressed through either words or
actions. See Marriage of Braddock, 64 S.W.3d 581, 585 (Tex. App. –
31
Texarkana 2001); Builders Sand, Inc. v. Turtur, 678 S.W.2d 115, 120 (Tex.
App. – Houston [14th Dist.] 1984). When one party repudiates, the other
party’s performance is excused. See Hampton v. Minton, 785 S.W.2d 854,
857 (Tex. App. – Austin 1990); accord Saenz v. Martinez, 2008 WL
4809217 (Tex. App. – San Antonio 2008); Dunham and Ross Co. v. Stevens,
538 S.W.2d 212, 216 (Tex. App. – Waco 1976).
Don testified that, at his meeting with Choudhri on December 13,
2011, Choudhri told him he would deduct $15,000 or $12,000 from the
$450,000 purchase price of the property – ostensibly because Don had not
completed the special provisions. RR 2/272-73; RR 3/11, 23; RR 4/102-03.
Don also testified that title company employees told him that $15,000 of the
funds wired to the company for closing would be placed in escrow, and that
Don could not access these funds until Choudhri “fe[lt] like it.” RR 2/272-
73. Another title company employee told him that Choudhri would deduct
$12,000 from the price to be paid at closing. RR 4/96. This evidence
establishes that Jetall decided not to perform the contract by paying the
required $450,000 purchase price, but instead resolved to pay no more than
$435,000 or $438,000 for the property. If credited by a jury, it excuses Don
and Gayle’s failure to go through with the closing, since they were not
32
obliged to part with the lot for less than Choudhri agreed to when the
contract was signed.
According to Don, Choudhri justified his insistence on lowering the
purchase price by claiming that Don failed to complete the special
provisions, but a jury could find that this was nothing more than a pretext to
pay less than the contract required. After all, Choudhri testified that he
wanted to close the sale regardless of Don’s supposed non-performance, that
he would have done so on December 15, and that he would not have sued for
reimbursement afterward. RR 3/98-105, 127, 185-86; RR 4/64-65. Indeed,
the trial court found that Jetall waived performance of the special provisions
as a matter of law. RR 4/4, 9. A jury could therefore have found that they
were not material elements of the Holmeses’ performance, that Jetall was
therefore obligated to pay the full purchase price at closing, and that
demanding to pay significantly less based on the special provisions
constituted repudiation. See Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d
691, 692-93 (Tex. 1994) (discussing materiality of breach); In re Interest of
Doe, 917 S.W.2d 139, 142 (Tex. App. – Amarillo 1996, writ denied)
(substantial compliance excuses “contractual deviations or deficiencies
which do not seriously impair the purpose underlying the contractual
provision”).
33
Even forgetting about waiver and non-materiality, a jury could have
found that Don adequately performed the special provisions and that Jetall
lacked any justification for withholding $12,000 or $15,000 from the sales
price. The contract obligated Don and Gayle to provide a soil report and an
electronic survey. App. Tab 2 (Pl. Exh. 1 ¶ 11). The parties agree that Don
provided a soil report. Pl. Exh. 10; RR 3/65-67. Choudhri complained that
it dated to 1997, RR 3/65-67, but the contract does not expressly require a
new or recent report. App. Tab 2 (Pl. Exh. 1 ¶ 11). Moreover, Choudhri
admitted telling Don: “Don’t worry about the soil report. That’s fine. I’ll
deal with it.” RR 3/85-86, 200-01 (Choudhri “willing to… forgive and
forget” soil report). Likewise, Don testified that he provided an electronic
survey. RR 2/257, RR 4/95. As with the soil report, Choudhri testified that
he was expecting a newer one, RR 3/184, but the contract does not expressly
require a new survey or one completed only after the replatting. App. Tab 2
(Pl. Exh. 1 ¶ 11). And any understandings or expectations Choudhri may
have had about these items based on conversations with Don are irrelevant
to what the literal terms required of the Holmeses. Id. (Pl. Exh. 1 ¶ 22)
(“entire agreement” clause). Thus, a jury could find that Don and Gayle
fully complied with the soil report and survey provisions.
34
As for the replatting, Don acknowledged that he did not finish the task,
based on his understanding that this would happen after the closing. RR
2/254-56, 271-72; RR 4/100-01. While this was not compliant with the
contract, Don testified that finishing the process would only have cost $525.
Id. Thus, a jury could find that there was no basis to withhold $12,000 to
$15,000 in order to compensate for the failure to complete the replatting
before closing, and that Choudhri’s stated insistence that he would do so
(according to Don) was a repudiation of his obligation to pay $450,000 for
the lot. In fact, even if all three items – the soil report, the survey and the
replatting – are considered breaches by Don and Gayle, there is no evidence
that they would cost Jetall $12,000 to $15,000 to ameliorate. On the
contrary, Choudhri conceded that he did not know exactly how much
obtaining these items would actually have cost. RR 4/61-62. Hence, there is
ample evidence that Choudhri simply resolved to pay a lower price for the
property, set out to use the special provisions as a smokescreen for doing so,
and thereby anticipatorily breached.
“An anticipatory breach has been committed when one party demands
of the other party a performance to which he has no right under the contract
and states definitively that unless demand is complied with he will not
render the promised performance.” Lytle Lake Water Control and Imp. Dist.
35
v. Shaw Envtl., Inc., 2006 WL 6863698 at * 5 (N.D. Tex. 2006); accord Jon-
T Farms, Inc. v. Goodpasture, Inc., 554 S.W.2d 743, 746 (Tex. App. –
Amarillo 1977, writ ref’d n.r.e., disapproved on other grounds, McKinley v.
Drozd, 685 S.W. 2d 7 (Tex. 1985)) (citing comment to Tex. Bus & Com.
Code § 2.610: “repudiation occurs when one party… declares that he will
not perform except on conditions which go beyond the contract”);
Humphrey v. Placid Oil Co., 142 F. Supp. 246, 252 (E.D. Tex. 1956), aff’d,
244 F.2d 184 (5th Cir. 1957).
Examples of this sort of repudiation include refusing to fund a
previously agreed settlement unless a party acquiesced in new demands
concerning an exchange of stock, see Dror v. Mushin, 2013 WL 5643407 at
* 5 (Tex. App. – Houston [14th Dist.] 2013, rev. denied); refusing to pay for
dredging unless the payee used a different measurement of sediment than the
contract prescribed, see Lytle Lake, 2006 WL 6863698 at * 5; refusing to
close a real estate sale absent changes to a loan at odds with the sales
contract, see First Fed. Sav. & Loan Assoc. of Wilmette, Ill. v. Pardue, 545 F.
Supp. 433, 436-37 (N.D. Tex. 1982), aff’d, 703 F.2d 555 (5th Cir. 1983);
refusing to reinstate an insurance policy without extra, unauthorized
premium payments, see Crown Life Ins. Co. v. Reliable Machine and Supply
Co., Inc., 427 S.W.2d 145, 150 (Tex. App. – Austin 1968, writ ref’d n.r.e.);
36
and refusing to make payments unless oil well operators ran additional tests
not required by the contract. Humphrey, 142 F. Supp. at 254.
This is the sort of repudiation that occurred in this case. Here too, a
jury could find that Don and Gayle adequately performed the special
provisions, that not performing them did not add up to $12,000 or $15,000
anyway, that they were not material, and that Jetall waived them. Under any
of these circumstances, Jetall would have no basis under the contract to
lodge the new and additional demand of a significantly lower sales price as
its condition for consummating the sale. Telling Don that closing would
only occur with Jetall withholding or escrowing part of the previously
decided purchase price due to the special provisions communicated a
repudiation that excused the Holmeses’ performance.
In rejecting this argument at trial, the district court construed the
written correspondence from Choudhri to Don in December 2011 to be
making a new offer – withholding $12,000 in exchange for relief from the
special provisions – and that, when Don declined, the new offer “died on the
vine.” RR 4/7-8, 52-58; Pl. Exh. 23, 24, 29. But the court overlooked the
more unequivocal testimony from Don that Choudhri told him at their
December 13 meeting that he would withhold $12,000 or $15,000 at closing
or place it in escrow, as well as Don’s testimony that title company
37
employees told him the same thing. See supra. This testimony alone is
some evidence that Jetall committed anticipatory breach. To the degree that
Choudhri’s writings might have communicated a different or mixed message,
it was the jury’s job to choose among the disputed facts and multiple
potential meanings once properly instructed by the court on repudiation and
excuse.
Moreover, the trial court misconstrued Choudhri’s written
correspondence. In his December 13 email, Choudhri did not simply
indicate that Jetall would close the sale; he flatly demanded performance of
the special provisions (“The property is to be delivered with this done”) and
insisted that Don either delay the closing or credit $12,000 to Jetall. Pl. Exh.
23. If, as discussed above, a jury could find that Don and Gayle had already
substantially complied with the special provisions by this time, that they
were waived or non-material, or that, at most, they should credit $525 to
Jetall to finish the replatting, Choudhri’s requirement of either an
unspecified delay or the forfeiture of $12,000 was a new and extra-
contractual demand that could be construed as repudiation. See pp. 35-36,
supra (and authority cited therein). This is even more true of Jetall’s
lawyer’s letter to Don dated December 21. Pl. Exh. 29. That letter did not
propose deferring the closing but demanded either compliance with the
38
special provisions or deduction of $12,000 from the sales price, and
threatened litigation to boot. Id. In any event, while these documents may
be subject to more than one reading, Don’s testimony alone is some
evidence of Jetall’s repudiation.
In the end, whether Jetall would have simply closed the sale on
December 15 and paid the full purchase price was a disputed issue of fact.
Choudhri testified that Jetall would have, and would have forgiven any
supposed noncompliance with the special provisions. The documentary
evidence is arguably open to interpretation. But Don’s testimony directly
contradicted Choudhri’s account and would permit a jury to find that closing
would only have occurred if he and Gayle accepted $12,000 to $15,000 less
for their property. Given that testimony, they were entitled to a question on
anticipatory breach, and the trial court’s failure to submit one requires
reversal and a new trial.
PRAYER
The Court should reverse the award of lost profits and render
judgment for Jetall in the amount of $127,800 – representing the $75,000
award for the difference in value of the property and the $52,800 award for
attorneys’ fees incurred through trial – plus allowable interest. Failing that,
the Court should reverse the judgment and remand the case for retrial solely
39
on liability and on damages based only on the difference between the price
Jetall agreed to pay and the market value of the property. As a last option,
the Court should remand and order a retrial on all issues. In addition, since
the district court’s judgment will be altered by this Court’s judgment, the
Court should dissolve the abstract of judgment filed by Jetall during the
pendency of this appeal.
August 10, 2015 Respectfully Submitted,
/s/ Martin J. Siegel
Martin J. Siegel
Texas State Bar No. 18342125
LAW OFFICES OF MARTIN J. SIEGEL, P.C.
2222 Dunstan Road
Houston, Texas 77005
Telephone: (713) 226-8566
Martin@Siegelfirm.com
Geoffrey Berg
Texas Bar No. 00793330
BERG FELDMAN JOHNSON BELL, LLP
4203 Montrose Blvd., Suite 150
Houston, Texas 77006
Telephone: (713) 526-0200
Gberg@bfjblaw.com
Attorneys for Appellants
40
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing corrected brief was served
on counsel of record for Appellee on December 21, 2015, by electronic
means:
Lori Twomey
George May
Twomey May PLLC
2 Riverway, 15th Fl.
Houston, TX 77056
Counsel for Appellee
/s/ Martin J. Siegel
Martin J. Siegel
41
CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the word limit of TEX. R. APP. P.
9.4(i)(2) because this brief contains 9,389 words, excluding the parts of the
brief exempted by TEX. R. APP. P. 9.4(i)(1).
/s/ Martin J. Siegel
Martin J. Siegel
Dated: December 21, 2015
42
APPENDIX
INDEX
Tab:
Final Judgment and Charge of the Court ........................................................ 1
Jetall-Holmes Sales Contract, Plaintiff’s Exh. 1 ............................................ 2