Opinion Released September 22, 2016

In this weekly blog, the Law Offices of Brandy Wingate Voss, PLLC will summarize recent decisions from the Thirteenth Court of Appeals and provide links to decisions on the court’s website.

Kingsley Properties, LP v. San Jacinto Title Services of Corpus Christi, LLC, No. 13-15-00128-CV (Opinion by Justice Rodriguez; Panel Members: Justices Benavides and Perkes)

In this direct appeal, Plaintiff Kingsley Properties challenged the trial court’s exclusion of expert witness testimony and award of attorney’s fees.

In 2005, Kingsley Properties—owned by shareholders Basil and Wendy Beck—purchased a golf course and country club called King’s Crossing. San Jacinto Title Services was the escrow and title agent for the purchase. San Jacinto’s representative thus signed the acquisition contract, stating that it acknowledged receipt of the contract and agreed not to disclose the terms.

Kingsley mismanaged King’s Crossing, and golf course membership significantly declined. Kingsley then sent a letter to neighboring residents soliciting new members and threatening them that their property values would drop if the golf course was unprofitable and Kingsley used the land for alternate development. Yet, membership continued to decline. Kingsley thus began discussing using the land for alternate developments, including a trailer park or condo complex.

In 2009, Mark Scott—the current regional president of San Jacinto, and a candidate for Corpus Christi City Council—sent a letter to local residents assuring them that Scott would oppose the re-platting of King’s Crossing if elected to City Council. Kingsley sued Scott, claiming business disparagement based on false statements in Scott’s letter. Kingsley also asserted breach of contract and breach of fiduciary duty regarding San Jacinto’s 2005 confidentiality agreement, and tortious interference with prospective business relations. San Jacinto counterclaimed for attorney’s fees on the breach of contract action.

The case was presented to a jury. At the close of Kingsley’s case, the trial court issued a directed verdict against Kingsley on the breach of fiduciary duty claim. The jury then found against Kingsley on the remainder of the claims, and the trial court awarded San Jacinto attorney’s fees.

Kingsley appealed, challenging the award of attorney’s fees and the trial court’s exclusion of its expert testimony.

Held: The portion of the judgment relating to attorney’s fees was reversed, because San Jacinto was not a “party” under the terms of the contract awarding attorney’s fees to the “prevailing party.” The trial court’s exclusion of Kingsley’s expert testimony however, was affirmed.

Attorney’s Fees

Kingsley first argued that San Jacinto was not a “party” as that term was used in the contract of sale that provided for an award of attorney’s fees. Kingsley claimed that the contract used the word “party” to refer only to the buyer and seller of land, and thus the contract’s provision regarding attorney’s fees did not allow a non-party such as San Jacinto to recover. In response, San Jacinto noted that it was a signatory to the contract and urged the court to applied the meaning of “prevailing party” developed in the case law. San Jacinto bore the burden of proof to establish its right to attorney’s fees.

Reading the contract as a whole, the Thirteenth Court agreed with Kinsley that the term “party” included only the buyer and seller of land. The contract explicitly stated that it was only binding upon and inured benefit to the seller and buyer, but not to any other party. On numerous occasions the contract indicated that only two signatories were encompassed within the word “party” by using phrases such as “either party” or “neither party.” Furthermore, San Jacinto’s obligations and commitments were substantially different than those of the seller and buyer; San Jacinto merely accepted the agreement, while the buy and seller executed the terms. Finally, the Thirteenth Court analogized the contractual language to that presented in Lesieur v. Fryar, 325 S.W.3d 242 (Tex. App.—San Antonio 2010, pet. denied), where the San Antonio Court of Appeals held that a signatory relator was not a “party” to a contract of sale and barred the relator from collecting attorney’s fees under the contract’s terms. Thus, San Jacinto could not collect attorney’s fees.

In a footnote, the Thirteenth Court also rejected San Jacinto’s argument regarding equitable estoppel. San Jacinto claimed that Kingsley’s argument that it was not a “party” to the contract was inconsistent with its suit for breach of contract. However, San Jacinto failed to prove numerous elements of this defense, and Kingsley’s positions were not “clearly inconsistent” given the existence of multiple definitions for the term “party.” Thus, equitable estoppel did not apply.

Justice Perkes filed a dissenting opinion regarding the attorney’s fees issue, stating that San Jacinto was a “party” to the contract. Justice Perkes emphasized that San Jacinto was a signatory to the contract, assented to the entire agreement, and was subject to several contractual obligations. Justice Perkes distinguished the cases cited by the majority—particularly Lesieur v. Fryar—noting that the cases cited involved real estate agents who ratified only the broker’s fee, rather than the entire agreement. Thus, Justice Perkes would have permitted San Jacinto to collect attorney’s fees.

Exclusion of Expert Testimony

Kingsley’s second challenge was to the trial court’s exclusion of the testimony of its expert witness, Philo. Philo was hired to discuss the falsity of the statements in Scott’s letter, and intended to testify at trial that the Corpus Christi City Council could not approve or disapprove proposed platting, contrary to the letter’s statement that “a re-plat . . . would require city council approval.” However, San Jacinto claimed that during Philo’s deposition he had assured San Jacinto he would not base his opinions on Corpus Christi laws. Kingsley disputed this statement, asserting that Philo simply told San Jacinto he had not reviewed Corpus Christi ordinances at the time of his deposition. Kingsley further argued that it was not required to supplement or produce the relevant laws during discovery, and pointed out that San Jacinto called several witnesses to testify on the Corpus Christi ordinances without producing them during discovery.  Nonetheless, the trial court excluded Philo’s testimony.

On appeal, the Thirteenth Court agreed with many of Kingsley’s arguments, including its characterization of Philo’s statements at his deposition regarding the Corpus Christi laws. Philo stated that he had not reviewed the ordinances, but did not promise that he would never use the Corpus Christi laws to contextualize his opinion about Scott’s letter. However, in a technical sense the laws formed the basis for Philo’s opinion and thus could require supplementation under Texas Rule of Civil Procedure 195.6. Since the exclusion of evidence was reviewed for an abuse of discretion, the trial court’s decision was thus not arbitrary.

The portion of the judgment relating to attorney’s fees was reversed, and the remainder affirmed.

Read the Majority Opinion Here

Read the Dissenting Opinion Here