Msw Corpus Christi Landfill, Ltd. v. Gulley-Hurst L.L.C. ( 2023 )

Supreme Court of Texas
══════════
No. 21-1021
══════════
MSW Corpus Christi Landfill, Ltd.,
Petitioner,
v.
Gulley-Hurst, L.L.C.,
Respondent
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Thirteenth District of Texas
═══════════════════════════════════════
PER CURIAM
This case concerns the correct calculation of damages when (1) a
buyer breaches a real estate contract (2) after the seller has fully
performed, and (3) the value of the property at the time of the breach
exceeds the contract price. Because the trial court incorrectly instructed
the jury to calculate the seller’s “benefit of the bargain” damages as the
difference between the market price—rather than the contract price—
and what the seller received, we affirm the trial court’s judgment
notwithstanding the verdict (JNOV) deleting the jury’s award of these
damages. Additionally, because the seller did not adequately prove the
foreseeability of its consequential “lost opportunity cost” damages, we
reverse that portion of the judgment and render a take-nothing
judgment as to those damages.
I
In 2011, Gulley-Hurst, L.L.C. (GH) sold a one-half interest in a
landfill it owned to MSW Corpus Christi Landfill, Ltd. for $7,500,000.
MSW financed the transaction by executing a promissory note payable
to GH for $3,500,000 (the $3.5 Million Note) and acquiring $5,000,000
in loans from AmeriState Bank (the $5 Million Loan). The parties
entered a landfill operating agreement, which provided that MSW would
operate the landfill and pay GH fifty percent of the net operating income.
Following some disagreements, MSW and GH entered into a
Mediated Settlement Agreement, which allowed MSW to purchase GH’s
remaining one-half interest in the landfill within 120 days of the
Settlement Agreement’s execution. If MSW did not purchase GH’s
one-half interest by the 120-day deadline—that is, by September 24,
2015—MSW was required to sell its one-half interest back to GH.
MSW did not purchase GH’s one-half interest by the deadline. As
a result, MSW was required to “provide clear title” to GH by
September 24, 2015, and GH was required to refinance the $5 Million
Loan and write off the $3.5 Million Note by January 23, 2016. Thus,
MSW was the seller and GH was the buyer in this transaction, which
gave rise to the suit before us.
MSW fulfilled its requirements and conveyed the property to GH.
GH wrote off the $3.5 Million Note but did not timely refinance the
$5 Million Loan, though there is evidence it made the payments
2
required under the loan. 1 MSW sued GH, and the trial court granted
several of GH’s motions for traditional summary judgment, disposing of
MSW’s claims except its claim for breach of contract due to GH’s failure
to refinance the $5 Million Loan from AmeriState Bank.
By the time of trial, the value of the landfill had appreciated
significantly. 2 A jury awarded MSW two types of damages: (1) lost
“benefit of the bargain” damages of $10.235 million and (2) lost
“opportunity cost” damages of $372,484.70. The trial court had
instructed the jury to calculate MSW’s benefit of the bargain damages
as the difference between the market value of the property at the time
of the breach (which some evidence showed was $17.735 million) and the
contract price ($7.5 million). After the jury’s award, the trial court
granted GH’s motion for JNOV, stating: “I did not submit the proper
measure of damages to the jury.” In its judgment, the trial court reduced
MSW’s benefit of the bargain damages to $0.
Regarding MSW’s lost opportunity cost damages, the jury heard
expert testimony that GH’s failure to refinance the $5 Million Loan for
MSW prevented MSW from receiving another loan, the proceeds of
which MSW could have invested at a return of $372,484.70. The trial
1According to GH, “[s]ince assuming operation of the Landfill in August
2013, [GH] has made all installment payments required under the [$5 Million
Loan],” has “timely paid all obligations owing to AmeriState Bank by MSW,
and neither MSW nor any of its individual guarantors has been required to
make any payments in connection with the [$5 Million Loan].”
2 The 2015 Settlement Agreement valued MSW’s one-half interest in
the landfill at $7.5 million. By the time of trial, MSW’s expert testified that a
June 1, 2016 appraisal estimated the landfill had a market value of $35.47
million, making MSW’s half interest worth $17.735 million.
3
court rendered judgment on that portion of the jury’s verdict, awarding
MSW $372,484.70 in lost opportunity costs.
The court of appeals affirmed, ___ S.W.3d ___, 2021 WL 4898080,
at *5-6 (Tex. App.—Corpus Christi–Edinburg Oct. 21, 2021), and the
parties petitioned this Court for review. MSW seeks to have the benefit
of the bargain damages reinstated, while GH petitions to have the lost
opportunity cost damages deleted. We agree with GH on both
points: MSW’s benefit of the bargain damages were incorrectly
calculated and are $0 as a matter of law, 3 and MSW did not sufficiently
prove the foreseeability of its lost opportunity cost damages. Therefore,
we affirm the court of appeals’ judgment in part, reverse in part, and
render judgment that MSW take nothing. 4
II
The general rule for measuring benefit of the bargain damages is
to calculate the difference between what was promised and what was
received. Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 636 (Tex. 2007)
(“Benefit-of-the-bargain damages, which derive from an expectancy
theory, evaluate the difference between the value that was represented
and the value actually received.”); Formosa Plastics Corp. USA v.
Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 49 (Tex. 1998)
3 Besides defending the jury’s award of damages in excess of the
contract price, MSW makes no other argument and does not request any other
amount of money for benefit of the bargain damages.
4 We echo, however, the court of appeals’ caution: GH remains obligated
to refinance the $5 Million Loan according to the terms of the Settlement
Agreement. Nothing in this opinion shall be construed to absolve GH of this
obligation. Moreover, nothing herein shall be construed as restricting MSW’s
right to bring a separate suit if GH fails to comply with this obligation.
4
(“[T]he benefit-of-the-bargain measure computes the difference between
the value as represented and the value received.”). Although courts
have noted that “[w]hen the breached contract is for real estate, the
measure of [the seller’s] damages is the difference between the contract
price and the property’s market value at the time of the breach,” Barry
v. Jackson, 309 S.W.3d 135, 140 (Tex. App.—Austin 2010, no pet.), this
formula applies only when the value of the property has remained the
same or decreased after the purchaser’s breach, leaving the seller unable
to receive the expected value of the contract. See, e.g., id. at 138, 140.
When the property’s market value at the time of breach exceeds the
contract price, the correct measure of benefit of the bargain damages is
the difference between the promised contract price and what the seller
received.
Policy and precedent compel this conclusion. The purpose of
benefit of the bargain damages is to place the seller “in the same
economic position he would have been in had the contract been
performed.” Id. at 140. Thus, a party “generally should be awarded
neither less nor more than his actual damages.” Stewart v. Basey, 245
S.W.2d 484, 486 (Tex. 1952). Permitting a seller to recover more than
the contract price would place him in a better economic position than
had the contract been performed. Worse, this windfall would come at
the buyer’s expense.
Conversely, calculating benefit of the bargain damages as the
difference between what the seller expected and what she received
causally connects the seller’s compensation to the buyer’s breach. See
Signature Indus. Servs., LLC v. Int’l Paper Co., 638 S.W.3d 179, 186
5
(Tex. 2022) (noting breach must cause damages). The breach cost the
seller the previously agreed-upon contract price, not the property’s
market value. See Stewart, 245 S.W.2d at 486 (“The universal rule for
measuring damages for the breach of a contract is just compensation for
the loss or damage actually sustained.” (emphasis added)). The seller
lost the opportunity to sell the property at market value not because of
the buyer’s actions, but because the seller decided to contract with the
buyer for a lower price.
Finally, this measure brings the calculation of real estate
damages in line with similar fact patterns outside the real estate
context. See, e.g., Yazdani-Beioky v. Sharifan, 550 S.W.3d 808, 834 (Tex.
App.—Houston [14th Dist.] 2018, pet. denied) (holding that “the sum
contracted for by the parties” was the appropriate damages measure
when partnership interest increased in value after seller’s conveyance
and buyer’s breach (quotation marks omitted)).
Here, had the contract been fully performed, MSW would have
received $7.5 million for its ownership interest in the landfill—not
$10.235 million. As MSW only expected $7.5 million, the damages to
which MSW is entitled are the difference between $7.5 million and what
MSW received. MSW received $3.5 million when GH wrote off the Note,
and GH made payments on the $5 Million Loan. In addition, as the
court of appeals noted, GH remains obligated to refinance that Loan,
and MSW requested no other measure of damages. See 2021 WL
4898080, at *5 n.1.
In arguing for a different measure, MSW conflates its economic
position absent the contract with its economic position absent GH’s
6
breach. As expectation damages compare a party’s current position to
the position it would occupy had the contract been fully performed—not
had there been no contract at all—MSW’s reliance on its economic
position absent the contract is beside the point. Additionally, MSW did
not “lose” the opportunity to sell its interest at $10.235 million because
of GH’s breach. MSW lost that opportunity because it agreed to sell its
interest to GH for $7.5 million. Because the jury incorrectly calculated
MSW’s benefit of the bargain damages as the difference between the
market price—rather than the contract price—and what MSW received,
we affirm the JNOV deleting the jury’s award of these damages.
III
The jury awarded MSW lost opportunity cost damages based on
expert testimony that GH’s failure to refinance the $5 Million Loan
prevented MSW from receiving another loan, the proceeds of which
MSW could have invested at a return of $372,484.70. MSW’s damages
from its inability to invest in a new loan are consequential damages. See
Signature Indus. Servs., 638 S.W.3d at 186. A plaintiff may recover
consequential damages only if “the parties contemplated at the time
they made the contract that such damages would be a probable result of
the breach.” Id. (quoting Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex.
1998)). And to find liability for consequential damages resulting from
the breach of a loan commitment, we have noted that “the lender must
have known, at the time the commitment was made, the nature of the
borrower’s intended use of the loan proceeds.” Basic Cap. Mgmt., Inc. v.
Dynex Com., Inc., 348 S.W.3d 894, 903 (Tex. 2011).
7
MSW makes the same argument as the plaintiffs in Basic
Capital: GH’s breach prevented MSW from receiving, investing, and
reaping profits from a loan. But MSW has not met Basic Capital’s
foreseeability standard. In particular, MSW does not cite any evidence
that GH knew at the time the Settlement Agreement was executed that
MSW intended to use the refinancing proceeds to obtain another loan,
the nature of MSW’s intended use of the second loan, or that MSW would
be unable to secure alternative financing if GH breached its
commitment to refinance MSW’s original loan. Therefore, MSW has not
shown that the damages awarded based on GH’s breach were reasonably
foreseeable. Consequently, we reverse the portion of the court of
appeals’ judgment affirming the award of lost opportunity cost damages.
IV
MSW’s briefing raises several other issues, requesting that this
Court (1) reverse the portion of the court of appeals’ judgment affirming
summary judgment against MSW on its claims for declaratory judgment
and trespass to try title, and either remand or render judgment that
MSW did not convey title; (2) remand the case to the trial court for a
lost-profits determination based on the landfill’s accrued profits after
MSW transferred the deed to GH; or—failing both—(3) rescind the
parties’ contract. We address these additional issues in turn.
First, MSW argues it did not convey its one-half ownership
interest in the landfill to GH. MSW contends that a deed conveys an
interest only if delivered with the intent that it become operative as a
conveyance. MSW argues it did not intend to convey its interest until
GH complied with its obligations under the Settlement Agreement. As
8
GH did not comply with the Settlement Agreement’s terms, MSW did
not intend to convey its interest to GH, and thus MSW did not convey
the interest.
The summary-judgment record does not support MSW’s
assertions that it did not intend to transfer title to GH. The
summary-judgment evidence supporting a party’s position must be
attached to the motion for summary judgment or the nonmovant’s
response. See TEX. R. CIV. P. 166a(c). In its responses to GH’s motions
for partial summary judgment on MSW’s claims for trespass to try title
and to quiet title, MSW did not argue that it lacked intent to transfer.
And the summary-judgment evidence regarding MSW’s claim for
declaratory judgment does not raise a genuine issue of material fact to
support MSW’s contention that, when MSW provided clear title of its
interest to GH by special warranty deed, MSW did not intend to convey
that interest.
Evidence that a deed has been signed, delivered, and recorded
gives rise to a presumption that the grantor intended the deed to become
operative as a conveyance. Paull & Partners Invs., LLC v. Berry, 558
S.W.3d 802, 811 (Tex. App.—Houston [14th Dist.] 2018, no pet.). This
presumption may be overcome if the facts and circumstances
surrounding the execution of the deed raise a question of fact regarding
whether the grantor intended to divest himself of title. Id. But here,
the surrounding circumstances reinforce rather than undermine this
presumption.
The Settlement Agreement does not show that the conveyance
was conditioned on GH’s first fulfilling its obligations. Indeed, the
9
Settlement Agreement requires MSW to provide GH clear title up to
three months before GH fulfills its obligations. Moreover, emails
exchanged between MSW’s and GH’s attorneys show that MSW knew
GH intended to record the deed rather than hold it in escrow until GH
fulfilled its obligations, but MSW delivered the deed anyway. MSW has
not offered evidence that could support a finding that it did not convey
its interest in the landfill when it provided clear title to GH under the
deed. See Adams v. First Nat’l Bank of Bells/Savoy, 154 S.W.3d 859,
870 (Tex. App.—Dallas 2005, no pet.) (“[A] secret or undisclosed
intention of the grantor not to divest himself of title will not prevent a
duly executed and delivered deed from taking effect.”). Accordingly, this
issue provides no basis for reversal.
Next, MSW argues that because it never conveyed its one-half
interest in the landfill, it owned fifty percent of the landfill and thus is
entitled to fifty percent of the landfill’s profits that GH has accrued since
MSW transferred the deed to GH. As we hold that MSW conveyed its
ownership in the landfill when it transferred the deed, this issue
likewise provides no basis for reversal.
Finally, regarding rescission of the Settlement Agreement, we
agree with the court of appeals that MSW did not preserve its request
for this remedy. As the court of appeals noted:
MSW claims that “[t]he trial court rejected its claim for
rescission of the [Settlement Agreement],” . . . [but it] does
not cite the record wherein it requested the relief of
rescission. See TEX. R. APP. P. 38.1(i). MSW acknowledges
that the trial court made a dispositive ruling pre-trial on
its rescission claim; however, MSW does not share where
in the record we may review that ruling.
10
2021 WL 4898080, at *13. MSW’s briefing in this Court similarly lacks
citations to a request for rescission in the trial court or a ruling by that
court. Moreover, a decision not to grant rescission is subject to review
for abuse of discretion. See Wagner & Brown, Ltd. v. Sheppard, 282
S.W.3d 419, 429 (Tex. 2008); Davis v. Estridge, 85 S.W.3d 308, 310 (Tex.
App.—Tyler 2001, pet. denied). And the party complaining “has the
burden to bring forth a record showing such abuse.” Simon v. York
Crane & Rigging Co., 739 S.W.2d 793, 795 (Tex. 1987). “Absent such a
record, the reviewing court must presume that the evidence before the
trial judge was adequate to support the decision.” Id. Given the dearth
of information proffered by MSW, we presume that the trial court had
adequate evidence to justify its decision to deny rescission.
V
Accordingly, without hearing oral argument, see TEX. R. APP. P.
59.1, we grant the petitions for review, affirm the portion of the court of
appeals’ judgment affirming the JNOV as to the benefit of the bargain
damages, reverse the portion of the judgment affirming the award of lost
opportunity cost damages, and render a take-nothing judgment as to
those damages.
OPINION DELIVERED: March 24, 2023
11