Pre-War Art, Inc. v. Stanford Coins & Bullion, Inc. , 640 F. App'x 379 ( 2016 )

Case: 15-10033 Document: 00513399564 Page: 1 Date Filed: 02/29/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 15-10033
Fifth Circuit
FILED
February 29, 2016
PRE-WAR ART, INCORPORATED; GAGOSIAN GALLERY, Lyle W. Cayce
INCORPORATED, Clerk
Plaintiffs - Appellants
v.
STANFORD COINS AND BULLION, INCORPORATED; DILLON GAGE
INCORPORATED OF DALLAS, doing business as The Dillon Gage Group,
doing business as Dillon Gage Metals,
Defendants - Appellees
RALPH S. JANVEY, Receiver,
Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:09-CV-559
Before STEWART, Chief Judge, and REAVLEY and DAVIS, Circuit Judges.
PER CURIAM:*
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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Plaintiff-Appellant Pre-War Art, Inc., d/b/a Gagosian Gallery (the
“Gallery”) appeals a judgment entered on a jury verdict in favor of Defendant-
Appellee Dillon Gage Incorporated of Dallas d/b/a The Dillon Gage Group d/b/a
Dillon Gage Metals (“Dillon Gage”). We affirm.
I.
This case arose from the Gallery’s purchase of a large quantity of gold.
The relevant facts produced at trial taken in the light most favorable to the
verdict are as follows.
The Gallery planned to display a work of art featuring a tower of
identical gold bars. To assemble the artwork, the Gallery ordered 101 gold bars
from Stanford Coins and Bullion, Inc. (“SCB”), a business owned by a now-
disgraced financier, Allen Stanford (“Stanford”). The Gallery wired SCB the
approximately $3 million purchase price. In return, SCB promised to deliver
one gold bar to the Gallery immediately. SCB promised to deliver the
remaining 100 gold bars to the Gallery on March 4, 2009, shortly before the
Gallery was scheduled to exhibit the artwork.
SCB then contacted Defendant-Appellee Dillon Gage, a wholesale
supplier of coins and bullion with which SCB had an ongoing business
relationship, and arranged for Dillon Gage to drop-ship the 101 gold bars
directly to the Gallery. SCB informed Dillon Gage that the Gallery wanted the
101 identical gold bars to assemble an art exhibit. SCB took its commission out
of the $3 million payment it received from the Gallery and wired the remainder
of the money to Dillon Gage. Dillon Gage applied this payment to SCB’s
outstanding debt, which SCB had incurred with Dillon Gage during the course
of other transactions for clients other than the Gallery. SCB did not inform the
Gallery at this time that it had contracted with Dillon Gage to furnish the gold
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bars, and the Gallery had no information about where or how SCB was
acquiring the gold.
Pursuant to its deal with SCB, Dillon Gage immediately drop-shipped
the single gold bar to the Gallery. However, several weeks before the date by
which SCB had promised to deliver the remaining 100 gold bars, Stanford was
charged with fraud, and a federal court placed all of Stanford’s companies,
including SCB, into a receivership.
The director of the Gallery learned of the receivership and contacted SCB
to determine whether SCB would timely deliver the gold. For the first time,
SCB informed the Gallery that it had contracted with another entity, namely
Dillon Gage, to supply the gold for the exhibit.
On February 19, 2009, the Gallery contacted Dillon Gage for the first
time and inquired whether it would timely deliver the gold to the Gallery.
Dillon Gage told the Gallery it would not deliver the gold without instructions
from SCB’s receiver. Dillon Gage also informed the Gallery that, because Dillon
Gage had applied SCB’s $3 million payment to the outstanding debt that SCB
incurred as a result of its previous orders for other clients, Dillon Gage could
not deliver the remaining 100 gold bars to the Gallery until SCB paid it an
additional $2 million.
The receiver ultimately did not pay the balance SCB owed to Dillon Gage
for the gold. As a result, Dillon Gage never delivered the remaining 100 gold
bars to the Gallery.
The Gallery then sued Dillon Gage 1 for breach of contract under Texas
law. 2 Although the Gallery was not a formal party to the contract between SCB
1 The Gallery also sued SCB, but this appeal does not implicate the Gallery’s claims
against SCB.
2 We have diversity jurisdiction over the case.
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and Dillon Gage, the Gallery sought to enforce the contract against Dillon Gage
as a third-party beneficiary to that contract.
The case proceeded to trial. The jury returned a verdict in Dillon Gage’s
favor and rejected the Gallery’s third-party beneficiary claim. The Gallery then
filed a motion for judgment as a matter of law, which the district court denied.
The Gallery now appeals.
II.
Under Texas law, “there is a presumption against conferring third-party-
beneficiary status on noncontracting parties.” 3 Nevertheless, “a third party
may enforce or challenge a contract between others” if the parties enter into
that contract with the intent to benefit the third party. 4 “A third party may
only enforce a contract when the contracting parties themselves intend to
secure some benefit for the third party and entered into the contract directly
for the third party's benefit.” 5 “The intent to confer a direct benefit upon a third
party ‘must be clearly and fully spelled out or enforcement by the third party
must be denied.’” 6 Importantly, “[i]ncidental benefits that may flow from a
contract to a third party do not confer the right to enforce the contract.” 7
III.
The Gallery argues that the evidence introduced at trial fully supported
its position that SCB and Dillon Gage entered into their contract with the
3 South Tex. Water Auth. v. Lomas, 223 S.W.3d 304, 306 (Tex. 2007) (citing MCI
Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999)).
4 Id. (citing Corpus Christi Bank & Trust v. Smith, 525 S.W.2d 501, 503-04 (Tex.
1975)).
5 Id. (citing Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002); MCI Telecomms. Corp.,
995 S.W.2d at 651).
6 Id. (quoting MCI Telecomms. Corp., 995 S.W.2d at 651).
7 Id. (citing MCI Telecomms. Corp., 995 S.W.2d at 652).
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intent to directly benefit the Gallery as a third-party beneficiary. According to
the Gallery, Dillon Gage knew that the Gallery had paid SCB a sizable sum of
money to order a large quantity of gold bullion for a specific and unusual
purpose; namely, to create an art installation. The Gallery further contends
that Dillon Gage’s agreement to drop-ship the gold bars directly to the Gallery
instead of to SCB strongly indicated that Dillon Gage intended the Gallery to
benefit from its transaction with SCB. Thus, argues the Gallery, the contract
between Dillon Gage and the Gallery was a bespoke transaction, different from
Dillon Gage’s previous agreements to provide bullion to SCB’s other clients. As
a result, the Gallery claims that the evidence supported its right to enforce the
contract against Dillon Gage.
Dillon Gage, by contrast, argues that the evidence was uncontradicted
that SCB had one contract with the Gallery and a completely separate contract
with Dillon Gage. Dillon Gage further emphasizes the evidence showing that
it did not intend its contract with SCB to directly benefit the Gallery. Dillon
Gage asserts that it is a wholesaler that typically deals with retail dealers like
SCB, not the ultimate consumer. Dillon Gage contends that its agreement to
drop-ship gold bars to the Gallery was a common accommodation it provided
to SCB and other customers during the regular course of its business. Dillon
Gage claims that it had no instructions to earmark the $3 million payment
from SCB for this particular transaction and it had no reason to do so. Rather,
Dillon Gage applied the $3 million to SCB’s outstanding debt, and then sent
out 74 orders to SCB’s other customers that SCB had previously placed without
paying the purchase price. Dillon Gage also emphasizes that the invoice it
issued to SCB did not mention the Gallery or otherwise indicate that the
parties intended the transaction to benefit the Gallery. Dillon Gage further
emphasizes that the Gallery was unaware that Dillon Gage was in any way
involved with the transaction until SCB was placed into a receivership. For
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these reasons, Dillon Gage claims that the Gallery cannot be a third-party
beneficiary to Dillon Gage’s contract with SCB.
IV.
The jury explicitly found that the Gallery was not “a third-party
beneficiary of the agreement between [SCB] and Dillon Gage” and accordingly
entered a verdict in Dillon Gage’s favor. The Gallery now challenges the jury’s
verdict on two grounds. It first argues that the district court misadvised the
jury regarding the third-party beneficiary standard under Texas law. The
Gallery also argues that the district court erroneously denied its post-verdict
motion for judgment as a matter of law.
A.
We first consider the Gallery’s challenge to the jury instructions. The
Gallery contends that the district court erred by refusing to explicitly instruct
the jury that an oral contract can create a third-party beneficiary relationship.
The Gallery also objects to the following sentence from the jury instructions:
“The intent to confer a direct benefit upon a third party must be clearly and
fully spelled out or enforcement by the third-party must be denied.” According
to the Gallery, the phrase “spelled out” erroneously implies that an oral
contract cannot create a third-party-beneficiary relationship. The Gallery
therefore requests a new trial.
“This court reviews challenges to jury instructions for abuse of
discretion.” 8
8 Cozzo v. Tangipahoa Parish Council – President Gov’t, 279 F.3d 273, 293 (5th Cir.
2002) (citing United States v. Huynh, 246 F.3d 734, 738 (5th Cir. 2001)).
Dillon Gage argues that the Gallery failed to preserve its objection to the jury
instructions, so this Court should review the instructions for plain error rather than for abuse
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Because of the broad discretion afforded district courts in framing
the instructions to the jury, we will find such an abuse of discretion
only if the charge as a whole is not a correct statement of the law
and does not clearly instruct the jurors regarding the legal
principles applicable to the factual issues before them. 9
We will reverse only if “the charge as a whole creates substantial and
ineradicable doubt whether the jury has been properly guided in its
deliberations.” 10 “A single inaccurate, ambiguous, or incomplete clause does
not dictate reversal if the instructions as a whole properly express the law.” 11
“Even if the challenger proves the instructions misguided the jury, we reverse
only if the erroneous instruction affected the outcome of the case.” 12
The district court did not abuse its discretion here. The jury instructions
quoted almost verbatim from a recent Supreme Court of Texas case describing
the standard for third-party beneficiary status under Texas law. 13 Crucially,
that Texas case contains the following phrase: “The intent to confer a direct
benefit upon a third party ‘must be clearly and fully spelled out or enforcement
by the third party must be denied.’” 14 Thus, the phrase in the jury instructions
to which the Gallery objects comes directly from the Texas Supreme Court. As
a result, the instructions correctly stated the applicable legal principles.
The Gallery argues that the questions that the jury posed to the court
during its deliberations demonstrate that the jury was confused regarding
whether an oral contract can give rise to a third-party beneficiary
of discretion. We will assume that the more favorable abuse of discretion standard applies
because the Gallery’s challenge fails under either standard of review.
9 Id. (citing Huynh, 246 F.3d at 738).
10 Thomas v. Tex. Dep’t of Criminal Justice, 297 F.3d 361, 365 (5th Cir. 2002) (quoting
Deines v. Tex. Dep’t of Protective & Regulatory Servs., 164 F.3d 277, 279 (5th Cir. 1999)).
11 Id. (citing Vicksburg Furniture Mfg., Ltd. v. Aetna Cas. & Sur. Co., 625 F.2d 1167,
1169 (5th Cir. Unit A 1980)).
12 Id. (citing Deines, 164 F.3d at 279).
13 See Lomas, 223 S.W.3d at 306.
14 Id. (quoting MCI Telecomms. Corp., 995 S.W.2d at 651) (emphasis added).
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relationship. 15 We disagree. The jury never asked whether an oral contract can
create a third-party beneficiary relationship. The questions the jury did ask do
not indicate that the jury thought an oral contract was insufficient to create
third-party beneficiary status.
Thus, “the instructions as a whole properly express[ed]” Texas law
regarding third-party beneficiary status. 16 Therefore, the district court did not
abuse its broad discretion in framing the issues for the jury.
B.
The Gallery next contends that the district court erroneously denied its
post-verdict motion for judgment as a matter of law. According to the Gallery,
the evidence introduced at trial unambiguously demonstrates that SCB and
Dillon Gage intended to confer a direct benefit upon the Gallery when they
formed their contract to deliver the gold bars to the Gallery. Thus, claims the
Gallery, the evidence was insufficient for the jury to decide in Dillon Gage’s
favor on the Gallery’s third-party breach of contract claim.
15 Those questions were as follows:
[1] Must all of the criteria for third party beneficiary status . . . be met in order
to answer “yes” or is it sufficient that any one criterium [sic] be met? (We
understand that the donee/creditor distinction is one or the other.)
***
[2] In order to qualify as a creditor beneficiary, must the “duty or legally
enforceable commitment owed by the promisee” exist at the time the
contracting parties entered into the agreement, or may it arise subsequently?
16 See Thomas, 297 F.3d at 365 (citing Vicksburg Furniture Mfg., Ltd., 625 F.2d at
1169).
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“We review de novo a denial of a motion for judgment as a matter of
law.” 17 We will reverse the jury’s verdict “only if there [wa]s ‘no legally
sufficient evidentiary basis for a reasonable jury to find for’” Dillon Gage. 18
“‘[W]e view all evidence and draw all reasonable inferences in the light most
favorable to the verdict’ and reverse only when the evidence and inferences
‘point so strongly in favor of the movant that a rational jury could not reach a
contrary verdict.’” 19
After reviewing the trial record, we conclude that the evidence does not
“point so strongly in favor of” the Gallery “that a rational jury could not reach”
a verdict in Dillon Gage’s favor. 20 Dillon Gage presented sufficient evidence
from which the jury could reasonably infer that Dillon Gage’s contract with
SCB was only intended to benefit SCB, and was not intended to benefit the
Gallery as a third-party beneficiary. Under these circumstances, the district
court correctly denied the Gallery’s motion for judgment as a matter of law.
AFFIRMED.
17 Allstate Ins. Co. v. Plambeck, 802 F.3d 665, 673 (5th Cir. 2015) (citing Allstate Ins.
Co. v. Receivable Fin. Co., 501 F.3d 398, 405 (5th Cir. 2007)).
18 Id. (citing Receivable Fin. Co., 501 F.3d at 405).
19 Id. (citing Receivable Fin. Co., 501 F.3d at 405).
20 See id. (citing Receivable Fin. Co., 501 F.3d at 405).
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