United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
May 5, 2006
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 04-20845
_____________________
MD SARDAR A. DAUD KHAN,
Plaintiff - Appellant,
versus
TRANS CHEMICAL LTD,
Defendant - Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:02-CV-109
_________________________________________________________________
Before JOLLY, BEAM,1 and BARKSDALE, Circuit Judges.
PER CURIAM:2
This appeal arises from a 1988 employment contract between
Sardar A. Daud Khan and Trans Chemical Ltd., of which Khan was half
owner. Khan brought suit against TCL seeking salary and penalties
under the ten-year employment contract entered between the parties
on October 1, 1988. The parties stipulated damages and waived a
jury trial. The district court conducted a bench trial and entered
judgment for TCL. Khan appeals, alleging four points of error by
the district court: (1) construing both the board minutes from the
1
Senior Circuit Judge, United States Court of Appeals for the
Eighth Circuit, sitting by designation.
2
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
October 1, 1988 board meeting together with the document entitled
“Employment Contract of The Chairman” (employment contract) as the
contract between Khan and TCL; (2) concluding that Khan was not due
compensation under the contract after the TCL hydrogen peroxide
plant in Pakistan was closed in February 1994; (3) finding that the
claims for salary prior to December 14, 1997 were barred by the
statute of limitations; and (4) denying Khan attorney’s fees.
After consideration of the arguments and review of the record, we
affirm largely for the reasons stated by the district court.
I
Khan’s first point of error requires consideration of two
points. First, what document or documents constitute the agreement
between these parties and, second, whether that agreement contains
the December 31, 1996 deferral deadline. We consider each question
in turn.
A
The district court found that TCL entered an employment
agreement with Khan that contained a provision allowing salary to
be deferred up to December 31, 1996, and that their agreement was
memorialized by both the minutes of the board meeting and the
employment contract. Consequently, both documents combine to
create the unified contract between Khan and TCL. We agree for the
following reasons:
1. Texas follows the established principle that when
construing a contract, “our first priority is to determine the
2
intent of the parties.” Ludwig v. Encore Medical, L.P., __ S.W.3d
__, 2006 WL 565922, *4 (Tex. App. March 9, 2006) (citations
omitted). To that end Texas law requires that “all writings that
pertain to the same transaction . . . be considered together, even
if they were executed at different times and do not expressly refer
to one another.” DeWitt County Elec. Coop., Inc. v. Parks, 1
S.W.3d 96, 102 (Tex. 1999); see also 17A Am. Jur. 2d Contracts §
379; Restatement (Second) of Contracts § 202(2) (1981). Although
this principle “cannot be applied arbitrarily and without regard to
the realities of the situation,” Miles v. Martin, 321 S.W.2d 62, 65
(Tex. 1959), it is clear that under Texas law “courts may construe
all the documents [relating to the same transaction] as if they
were part of a single, unified instrument” in order to give effect
to the parties’ intent. See Ft. Worth Indep. Sch. Dist. v. City of
Ft. Worth, 22 S.W.3d 831, 840 (Tex. 2000) (finding that “two [city]
ordinances and the contemporaneous, related documents comprise the
parties’ agreement”) (citations omitted); see also DeWitt Co. Elec.
Coop., 1 S.W.3d at 102 (construing an easement agreement, a service
agreement, and a cooperative tariff as one contract); Jones v.
Kelley, 614 S.W. 2d 95, 98-99 (Tex. 1981) (holding that two
contracts, a financing agreement, and one vendor’s affidavit
together constituted the contract between the parties); Rudes v.
Field, 204 S.W.2d 5, 7-8 (Tex. 1947) (holding a deed and an
agreement relating to the sale and management of the property
together constituted the contract).
3
2. By Khan’s own testimony, the board minutes and the
employment contract were considered by the respective parties as
“one package,” executed at the same time, with the same signature
page, for the purpose of officially hiring Khan and Halipoto to
conduct the necessary business to build and operate the peroxide
plant. Together these documents document the entirety of the
agreement between TCL and Khan.3
3. Consequently, the district court (quoting Jim Walter Homes
v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984)) was correct to
3
There are three relevant documents: first, the one-page
employment contract; second, the three pages of minutes from the
October 1, 1988 board meeting; and finally, an undated signature
page on TCL letterhead containing only the signatures of the six
TCL board members. At trial, counsel for Khan attached the
signature page to the employment contract and tendered that as a
separate exhibit from the three pages of board minutes. The
inference that these documents were separately considered or
separately executed is, as the district court found, inconsistent
with the reality of the situation. By Khan’s own deposition
testimony the minutes and the employment contract were typed by him
and presented together to the board for consideration with one
signature page covering the whole package:
You know, they approved -- the board approved
this contract and the board approved the
minutes of the meeting. That’s why they
signed the minutes of the meeting. And this
[the signature page] is also a part of the
contract -- I mean, I’m sorry. This is
basically -- it’s one package, signed by the –
by the board members.”
. . . .
I say it so many times that this contract and
the minutes of the meeting were done
simultaneously and it was approved by the
board members and here [signature page] are
the board members and their signatures.
4
find that “Khan’s employment contract and the contemporaneous board
meeting minutes -- ‘executed at the same time, for the same
purpose, and in the course of the same transaction’ -- are properly
construed as one document.”4
Having determined that the board minutes and the employment
contract together provide the unified agreement of the parties we
turn next to examine whether that agreement contains the December
31, 1996 deferral deadline.
B
The district court found that the board unanimously adopted
the resolution of Dr. Halipoto that in the event TCL was unable to
pay, all salaries and resulting penalties could be deferred until
December 31, 1996. This resolution was memorialized in the
minutes. Thus, the December 31, 1996 compensation deferral date is
a part of the contract between these parties, and the statute of
limitations bars Khan’s claims for salary and the associated
4
Khan’s argument that the parol evidence rule prohibits this
result is without merit. The parol evidence rules prohibits the
examination of extraneous evidence to interpret an unambiguous
contract. However, a document is only “extraneous evidence” if it
is not a part of the contract itself. Our inquiry is not “what
does the contract mean,” but rather “what is the contract.”
Consequently the parol evidence rule is not implicated at this
stage in the analysis.
5
penalties from June 15, 19915 through December 31, 1996. We affirm
for the following reasons:
1. Khan repeatedly testified both at his deposition and at
trial that the board minutes constitute an accurate account of the
proceedings at the October 1, 1988 TCL board meeting.
2. The minutes clearly reflect that Dr. Halipoto suggested,
and the board unanimously adopted, a resolution requiring that all
deferred salary and the accrued penalty be paid by December 31,
1996.6
5
Khan does not appeal the September 4, 2003, district court
ruling that he is judicially estopped from claiming any salary or
penalty arising before June 14, 1991, the date on which he filed
his bankruptcy petition. Consequently, the earliest date from
which Khan can claim damages in this suit is June 15, 1991.
6
Specifically, pages 1 and 2 of the minutes reflect the
following:
Dr. Halipoto suggested an idea of deferred
salary program. . . . The officers will be
paid only monthly salary for their duties
performed regarding TCL’s business. If
because of cash flow problems, TCL does not
have to pay the salary to its officers, the
payment will then be deferred till [sic] TCL’s
finances improve. However[,] under no
circumstances will salary payment to officers
be deferred beyond December 31, 1996, and full
payment and a penalty will become due in full.
. . . .
After a discussion, the directors considered
the delayed payment idea to be the most
logical approach. Motion was made dually by
Dr. Halipoto and seconded by Mrs. Khan, after
discussion it was unanmously [sic] resolved
that:
6
3. The minutes then provide Khan’s job description. The job
description, while containing the details of the compensation
package, does not contain an express deferral provision, nor does
it reference the earlier adopted board resolution containing the
December 31, 1996 deferral provision. The job description was
adopted unanimously by the board. The employment contract mirrors
the job description section of the minutes. Like the minutes, the
employment contract contains no deferral provision.
4. Khan argues that this omission in the job description and
employment contract was intentional. He testified at trial that
the board reconsidered and ultimately rejected the December 31,
1996 deferral date and intended that deferral be allowed up until
the date the contract terminated on September 31, 1998.
5. The district court found that Khan’s testimony was not
credible.7 Khan’s testimony is the only evidence that suggests the
“Dr. Khan and Dr. Halipoto were appointed
Chairman and Managing Director of TCL[,]
respectively[,] and their salary will be paid
as recommended by Dr. Halipoto.”
7
Specifically the district court noted the following
testimony:
Q: Part of the issue that brings us here,
among the issues, is the dispute over
what happened to the board resolution
that was initially proposed that no
salary is going to be deferred beyond
December 31, 1996. Do you recall any
specific discussion of eliminating that
provision?
A: To the best of my recollection, it was
7
proposed by Dr. Halipoto.
Q: Right.
A. And later it is amended. Because if you
read – I believe a couple more pages down
the line, it said the contract should be
for ten years.
. . . .
Q: [M]y question to you is whether you
recall any specific discussion of
disapproving the eight-year, but no more
than eight-year deferral provision.
A: I’m going to use my best recollection
that this 1996 was not acceptable, and
that’s the reason we changed [it] to ten
years. And that’s how the contract was
written.
Q: Do you recall a specific discussion of
the relationship between -- about why
eight years wasn’t acceptable because
it’s not reflected in these minutes.
A: What I’m saying is to the best of my
recollection, it was not acceptable. So,
that’s why it was changed to ten years.
And the board agreed to it, and they had
the minutes of the meeting. They had the
contract in front of them. They agreed
to the ten years. And, you know, ten
years was acceptable to everybody and
that’s how it was signed.
Q: Do you have any recollection of any
specific discussion of why the eight
years which you had just approved was not
acceptable, to use your word?
A: To the best of my recollection, it was
not acceptable to me and to Dr. Halipoto.
We discussed that issue, and we decided
to go for ten years.
8
December 31, 1996 deferral date was intentionally omitted, that the
board revoked its resolution adopting the December 31, 1996
deferral date, or that the board intended the lack of deferral term
in the job description and employment contract to imply
compensation deferral until termination of the contract on
September 31, 1998. The otherwise detailed minutes do not mention
any conversation disapproving of the 1996 deferral date, nor do
they reference a resolution to that effect.
6. Applying the December 31, 1996 deferral date adopted by
the unanimous board of TCL does not void or conflict with any other
term of the job description or employment contract. Nor does it in
any way alter the duties or responsibilities of the parties in a
way that is inconsistent with the express terms of the agreement.
7. Giving the district court’s credibility findings the
deference due them, we find nothing in the record to suggest the
board intended to reject its adoption of the December 31, 1996
Q: Do you have any explanation for why that
wasn’t -- why that discussion after first
specifically approving an eight-year
deferral period is not reflected in the
minutes directly or explicitly?
. . . .
A: To the best of my recollection, I don’t
believe that 1996 was the cutoff period.
I don’t believe that. I strongly believe
it was for ten years. And it was
acceptable to Dr. Halipoto. He signed
it. I signed it. Both agreed upon it,
and that’s how this ten-year period came
up.
9
deferral date. See Matter of Complaint of Luhr Bros., Inc., 157
F.3d 333, 337-38 (5th Cir. 1998) (citing Rule 52(a) and holding
that “Rule 52(a) requires greater deference to the trial court’s
findings when they are based upon determinations of credibility”).
Nor do we find any evidence in the otherwise detailed minutes, or
the record to suggest that the parties intended to imply deferral
of compensation until the termination of the contract on September
30, 1998.
8. We are required to examine the entirety of a contract,
construing it in a way that gives meaning to each of its terms in
order to give full effect to the parties’ intent. See, e.g., Coker
v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) (holding that the “entire
writing” must be considered in an effort to harmonize and give
effect to all the provisions of the contract so that none are
rendered meaningless). Thus, we conclude that the district court
was correct in finding that the December 31, 1996 deferral term,
adopted unanimously by the board of directors (including Khan), is
a part of the employment agreement between TCL and Khan.
9. A breach of contract claim accrues when a party fails or
refuses to do something it has promised to do. See, e.g., Stine v.
Stewart, 80 S.W.3d 586, 592 (Tex. 2002). Thus, when TCL failed to
pay the deferred salary and penalty due Khan on December 31, 1996,
Khan’s breach of contract claim as to those damages accrued.
Applying Texas’s four-year contract statute of limitations, TEX.
CIV. PRAC. & REM. CODE ANN. §§ 16.004(a), 16.051 (Vernon 2004), Khan’s
10
claim for the salary and penalty owed him from June 15, 1991
through December 31, 1996 is barred by the statute of limitations.8
II
In his second point of error Khan argues that he is due
compensation under the contract even after the plant ceased
operations in February 1994. Under Texas law, in order to recover
damages a party claiming a breach of contract must either tender
performance or show that he was ready, willing, and able to perform
his obligations under the contract. See, e.g., Whitney Props.
Corp. v. Moran, 494 S.W.2d 587, 590 (Tex. App. 1973, no writ). We
consider each possibility in turn.
A
Khan argues that by conducting the arbitration and litigation
against China National Import and Export Corporation (CMC) on
behalf of TCL he tendered performance under the contract and is
thus due compensation. The district court rejected this
contention. We affirm for the following reasons:
1. Khan’s contract with TCL authorized him to perform six
specific duties, each relating to building the plant, operating the
plant, and selling what it produced. The contract required Khan to
8
Khan does not appeal the finding of the district court that
his failure to serve TCL until five months after the filing of this
suit demonstrated a lack of the required diligence. Consequently,
the district court’s holding that the statute of limitations was
tolled only when service was accomplished on December 14, 2001
stands. Thus, the statute of limitations bars all claims under the
contract which accrued prior to December 14, 1997.
11
use his best effort and judgment to have the plant completed in a
timely manner and to “enhance its business”; preside over the
meetings of the board of directors; provide an office, secretarial
assistants, telephone, computers, telex, and stationery in Houston;
travel in the United States and abroad at his own expense and
negotiate and purchase the catalysts and chemicals for the plant;
visit the project periodically in Pakistan and assist in legal and
financial work needed during the construction phase; and provide a
liaison between CMC and other vendors with respect to importation
of the catalysts and chemicals for the plant. None of these
descriptions authorize any activity continuing after the plant has
closed.9
2. By Khan’s own testimony, the arbitration and litigation
against CMC were pursued to “take care of the interests of [TCL’s]
shareholders.” This action, although certainly understandable
given Khan’s own personal investment in TCL and ownership of 50% of
its stock, is simply not within the scope of his contract to build
and operate the peroxide plant. The district court found that:
Pursuing arbitration and litigation after
construction had ended and after the plant had
ceased to operate, to protect the interests of
9
To the extent that Khan claims he was acting under a broader
authority vested in him by virtue of the title or position of
“Chairman” he is incorrect. Apparent authority may exist by virtue
of a position when an agent or officer of a corporation is dealing
with a third party. It does not, however, create extra-contractual
authority as between the parties to a contract such that an officer
may seek compensation for actions not authorized by the board of
directors.
12
the shareholders consisting primarily of Khan
and Halipoto does not fall within the scope of
the specifically-defined contractual
responsibilities to complete the hydrogen
peroxide plant construction project and
“enhance” the business. That business
depended on a functioning, operating hydrogen
peroxide plant, which did not exist after
February 1994.
We agree. Consequently the district court was correct to find that
Khan did not tender performance under his employment agreement
after the plant closed in February 1994.
B
Alternatively, Khan argues that he is due compensation as he
was ready, willing, and able to perform his duties under the
contract for the duration of the contract term. The district court
rejected this contention. We affirm for the following reasons:
1. The doctrine of impossibility recognizes that “if
performance is contingent upon the continued existence of a state
of things or set of circumstances, a condition is implied that the
cessation of existence of such state of things excuses
performance.” See In Interest of Doe, 917 S.W.2d 139, 142 (Tex.
App. 1996 reh’g overruled). Khan’s ability to perform under the
contract post-construction was contingent upon an operating
peroxide plant. Consequently, when the plant closed Khan was not,
and could not be, “ready, willing, and able” to perform his post-
construction duties as provided in his employment contract.
2. It is undisputed that Khan fully performed under the
contract up to February 1994. Further, no party contends that Khan
13
was in any way responsible for the closure of the plant. Thus, the
non-existence of an operational plant by fault of a third party
excuses Khan’s non-performance under the contract. See e.g.,
Tractebel Energy Mktg., Inc. v. E.I. Du Pont De Nemours & Co., 118
S.W.3d 60, 65 (Tex. App. 2003), opin. supplemented on overruling of
reh’g, 118 S.W. 3d 929 (Tex. App. 2003) (holding that Texas courts
will excuse performance where a thing necessary for performance has
deteriorated or been destroyed); see also Restatement (Second) of
Contracts § 261 (1981) (“Where, after a contract is made, a party’s
performance is made impracticable without his fault by the
occurrence of an event the non-occurrence of which was a basic
assumption on which the contract was made, his duty to render that
performance is discharged, unless the language or the circumstances
indicate the contrary.”).
3. Well-accepted contract law provides that if one party’s
failure to perform is excused due to the non-occurrence of a
condition, the other party to the contract is excused from
performance unless it agreed to perform in spite of such failure.
See Restatement (Second) of Contracts § 239 (1981); 14 Williston on
Contracts § 43:11 (4th ed.); 14 Corbin on Contracts § 75.4 (2001).
4. There is no evidence to suggest that any agreement between
Khan and TCL addressed the risk or the obligation of the parties
should the hydrogen peroxide plant close. The record indicates
that the plant’s closure was attributed to the faulty technology
provided by CMC. The failure of the plant to operate, due to acts
14
of a third party, excused both Khan and TCL from their contractual
obligations. Thus, Khan cannot recover under the contract for any
activities he undertook after the plant closed in February 1994.
III
Khan’s third contention is that the district court erred in
construing the statute of limitations to run each month such that
he is barred from claiming any salary or penalties due prior to
December 14, 1997. Our determinations that the statute of
limitations bars any claim for salary before December 31, 1996, and
that the closure of the plant excused both parties from performance
after February 1994 make resolution of this issue unnecessary, and
accordingly we will not address this alleged point of error.
IV
Khan’s final claim is that he is due reasonable attorneys’
fees in the stipulated amount. Because Khan is not the prevailing
party, the district court’s denial of attorneys’ fees is affirmed.
See DP Solutions, Inc. v. Rollins, Inc., 353 F.3d 421, 436 (5th
Cir. 2003) (“An award of attorneys’ fees is mandatory for a party
prevailing in a breach of contract case.”); TEX. CIV. PRAC. & REM.
CODE ANN. § 38.001 (Vernon 2005).
V
For the reasons stated herein we hold that the employment
agreement between Khan and TCL includes the December 31, 1996
deferral date, and thus all claims for salary and penalty due up to
that date are barred by the statute of limitations. Further, we
15
hold that the actions of Khan after the closure of the plant in
February 1994 were not authorized by the contract, and that the
unanticipated closure of the plant excused both Khan and TCL from
performing under the contract after February 1994. Consequently,
Khan is not entitled to salary and penalties for his post-closure
activities. Finally, Khan is not due attorneys’ fees as he has not
prevailed on his claim. Accordingly the judgment of the district
court is
AFFIRMED.
16