Just for Fun Grapevine, Inc., John Lemley, and Laura Lemley v. Tejas Fun, L.P. and Peter J. Clark ( 2014 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-13-00316-CV
JUST FOR FUN GRAPEVINE, INC., APPELLANTS
JOHN LEMLEY, AND LAURA
LEMLEY
V.
TEJAS FUN, L.P. AND PETER J. APPELLEE
CLARK
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FROM THE 16TH DISTRICT COURT OF DENTON COUNTY
TRIAL COURT NO. 2011-11020-16
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MEMORANDUM OPINION 1
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Appellants Just For Fun Grapevine, Inc., John Lemley, and Laura Lemley
appeal the trial court’s judgment awarding appellee Tejas Fun, L.P. damages and
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See Tex. R. App. P. 47.4.
the title to two dinner boats. We modify the judgment and affirm the judgment as
modified.
Background Facts
In 2003, Peter J. Clark and John Lemley incorporated Just For Fun. Clark
was a 67% shareholder, and John and his wife Laura owned 33% of the
corporation. Pertinent to the case at hand, Just For Fun built two dinner boats,
and they were titled in the corporation’s name.
In 2004, Clark formed Tejas with Marshall Funk. Clark contributed to Tejas
the two boats belonging to Just For Fun. Clark maintained that he took the boats
as payment for money owed to him by Just For Fun. John initially believed that
Clark was contributing the boats to Tejas on behalf of Just For Fun and that in
return, Just For Fun would own an interest in Tejas. The boats’ titles, however,
were never transferred to Tejas.
Tejas and Just For Fun then entered into a lease agreement in which
Tejas rented the two boats back to Just For Fun. The lease was signed by Clark
on behalf of Just For Fun. It stated that it had “an initial term of one (1) year and
eight (8) months beginning May 1, 2004[,] and . . . shall be automatically
renewed for successive additional terms of one (1) year each thereafter.”
In February 2008, the Lemleys purchased Clark’s interest in Just For Fun.
In April 2008, Just For Fun entered into another lease agreement with Tejas for
the boats. John signed on behalf of Just For Fun, and he and Laura signed as
personal guarantors. The lease agreement stated that it had “an initial term of
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ONE (1) year[] beginning January 01, 2008 and . . . shall be automatically
renewed for successive additional terms of ONE year[] each thereafter.” From
2008 to 2010, John signed a series of identical lease renewal agreements
renewing the lease on the boats. The agreements stated,
This Renewal Agreement is made and entered into between
Tejas . . . and Just For Fun . . . for and in consideration of One Dollar
($1.00) and other good and valuable consideration, receipt of which
is hereby acknowledged.
WITNESSETH
1. Lessor and Lessee hereby confirm and ratify, except as
modified below, all of the terms, conditions[,] and covenants in that
certain written Lease Agreement dated January 1, 2008 between
Lessor and Lessee . . . .
....
3. Lessor and Lessee agree that the term of this Lease
Agreement including all Amendment[s] and previous Renewals shall
be extended for twelve (12) months. . . .
John signed on behalf of Just For Fun. Neither he nor Laura signed the renewals
as personal guarantors.
In 2011, the parties began disputing what Just For Fun owed under the
lease. Around this time, the Lemleys discovered that Clark’s interest in Tejas
was his personally and that Just For Fun had no interest in Tejas. In September
2011, Just For Fun owed Tejas $15,000 that it refused to pay based on its belief
that the lease was invalid. Tejas demanded that the boats be returned for failure
to pay, but Just For Fun refused. Tejas filed this suit after Just For Fun refused
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to deliver the boats’ titles to Tejas. Tejas sought “specific performance of the
terms of the written agreements in effect and the forced delivery by [Just For
Fun] of clear and clean titles to the two vessels[] to [Tejas]” and damages. 2
After a trial to the bench, the trial court found that the boats were Tejas’s
property and ordered that Just For Fun transfer the titles to Tejas. It also
awarded Tejas $190,500 for the cost of moving the boats, for the “wrongful
detention of and loss of use, revenue[,] and profits from the boats,” and for the
unpaid rentals. The Lemleys and Just for Fun then filed this appeal.
Discussion
I. The lease renewals
The appellants argue in their first issue that the trial court erred by finding
that John and Laura personally guaranteed the 2011 lease renewal.
The 2008 lease between Tejas and Just For Fun for the two party boats
states that the lease term is one year beginning January 1, 2008, and “shall be
automatically renewed for successive additional terms of [one year] each
thereafter.” It was signed by Jeff Rose on behalf of Tejas, by John on behalf of
Just For Fun, and by John and Laura as personal guarantors. In December
2008, 2009, and 2010, Tejas and Just For Fun entered into a series of three
2
The Lemleys and Just For Fun countersued for breach of contract,
tortious interference with business relationships, conversion, unjust enrichment,
and fraud. Just For Fun sought a declaration of the rights of the parties under
the lease and the ownership of the boats and injunctive relief. The trial court
denied their counterclaims, and the appellants do not appeal that part of the
judgment.
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“Lease Renewal Agreements” that acknowledged receipt of new consideration
and “confirmed and ratified” the 2008 lease “except as modified below.” Below
that statement was an agreement that the lease term would be extended for one
year. There was no signature block for personal guarantors, and John and Laura
did not sign the agreements in their personal capacities.
The trial court’s conclusions of law stated that the Lemleys were jointly and
severally liable for the damages awarded to Tejas for Just For Fun’s breach of
the lease agreement “by virtue of [their] personal guarantee.” The Lemleys
argue that the successive lease renewal agreements were new contracts
between the parties. And because they were new agreements, the only contract
in effect at the time of the breach was the 2010 renewal. Because the Lemleys
did not guarantee that renewal, they cannot be held personally liable for Just For
Fun’s breach of that contract.
Tejas notes that by the express terms of the 2008 agreement, the contract
between the parties automatically renews every year for one year. They argue
that the renewal agreements were therefore only memorializations of the
automatic renewals and made no material alterations of the original contract
terms. The renewal agreements, however, stated that the parties confirmed and
ratified the 2008 agreement “except as modified below.” Below that term were a
number of provisions, including a change in the lease term; each agreement
extended the lease for one year. These were modifications of the terms of the
2008 agreement and were supported by consideration. See Fubar, Inc. v.
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Turner, 944 S.W.2d 64, 67 (Tex. App.—Texarkana 1997, no writ) (“The
modification of an existing contract must be based upon sufficient fresh
consideration.”) (citing Rhoads Drilling Co. v. Allred, 123 Tex. 229, 244, 70
S.W.2d 576, 583 (1934)). The modifications made by the parties in the renewals
and the acts of signing new agreements themselves signal the parties’ intent to
enter into a new agreement instead of allowing the 2008 agreement to
automatically renew as its terms provided. See Centerpoint Apartments v.
Webb, No. 02-07-00278-CV, 2008 WL 4052929, at *4 (Tex. App.—Fort Worth,
Aug. 28, 2008, no pet.) (holding that when first lease automatically renewed,
signing of second lease was a new contract and guarantor of first lease was not
liable under second lease).
Also below the statement in the renewal agreements that the 2008
agreement was being modified were the signature lines, and those lines did not
include the Lemleys’ personal guarantees. Therefore these new contracts
modifying the 2008 contract were not personally guaranteed by the Lemleys.
Any other interpretation would extend the guaranty “by construction or implication
beyond the precise terms of the contract,” which we may not do. Futerfas Family
Partners v. Griffin, 374 S.W.3d 473, 478 (Tex. App.—Dallas 2012, no pet.); see
also Coker v. Coker, 650 S.W.2d 391, 394 & n.1 (Tex. 1983) (stating that any
uncertainty as to the terms of the guaranty must be resolved in the guarantor’s
favor). Because the renewal agreements modified the terms of the 2008 lease
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agreement to remove the Lemleys as personal guarantors, they cannot be held
liable for Just For Fun’s breach of contract. We sustain the appellants’ first issue.
II. Title to the vessels
In their second issue, the appellants argue that the there was no evidence
to support awarding title to the boats to Tejas. We may sustain a legal
sufficiency challenge only when (1) the record discloses a complete absence of
evidence of a vital fact; (2) the court is barred by rules of law or of evidence from
giving weight to the only evidence offered to prove a vital fact; (3) the evidence
offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence
establishes conclusively the opposite of a vital fact. Uniroyal Goodrich Tire Co.
v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998), cert. denied, 526 U.S. 1040
(1999); Robert W. Calvert, “No Evidence” and “Insufficient Evidence” Points of
Error, 38 Tex. L. Rev. 361, 362–63 (1960). In determining whether there is
legally sufficient evidence to support the finding under review, we must consider
evidence favorable to the finding if a reasonable factfinder could and disregard
evidence contrary to the finding unless a reasonable factfinder could not. Cent.
Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007); City of Keller
v. Wilson, 168 S.W.3d 802, 807, 827 (Tex. 2005).
Just For Fun argues that there is no evidence that Tejas had an ownership
interest in the boats because the boats have always been titled in Just For Fun’s
name, Clark never owned the boats and therefore could not contribute them to
Tejas, and no bill of sale was ever produced. There is, however, some evidence
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upon which the court could rely, in the form of Clark’s testimony, that Clark took
the boats as payment from Just For Fun for money that he had loaned the
company. See Uniroyal Goodrich Tire, 977 S.W.2d at 334. Although John
disputed Clark’s claim, neither party produced financial records to support their
contentions, and the determination of whether Clark had paid Just For Fun for
the boats was the province of the factfinder. See Bellefonte Underwriters Ins.
Co. v. Brown, 704 S.W.2d 742, 744–45 (Tex. 1986).
That the boats’ titles were never transferred to Tejas is also not
determinative. No one disputes that the legal titles to the boats have always
been in Just For Fun’s name. However, under the parks and wildlife code, an
owner of a vessel is “the person who rightfully claims lawful possession of a
vessel by virtue of the legal title or an equitable interest.” 3 Tex. Parks & Wild.
Code Ann. § 31.003(4) (West 2002 & Supp. 2014) (emphasis added). Tejas,
Clark, Just For Fun, and the Lemleys all treated the boats as Tejas’s property for
years despite title never transferring. By John’s own testimony, he had known
that the titles had not been transferred yet had still believed that Tejas owned the
boats. That the title documents had not been transferred to Tejas’s name does
not defeat its equitable claim. See Vibbert v. PAR, Inc., 224 S.W.3d 317, 322
(Tex. App.—El Paso 2006, no pet.) (noting that under the Uniform Commercial
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Equitable title is “the present right to compel legal title.” Hydroscience
Techs., Inc. v. Hydroscience, Inc., 401 S.W.3d 783, 801 (Tex. App.—Dallas
2013, pet. denied) (citing Smith v. Dass, Inc., 283 S.W.3d 537, 542 (Tex. App.—
Dallas 2009, no pet.)).
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Code, “title passes to the buyer at the time and place at which the seller
completes her performance with reference to the physical delivery of the
goods . . . even though a document of title is to be delivered at a different time or
place”) (citing Tex. Bus. & Comm. Code Ann. § 2.401(b) (West 2009)).
Just For Fun argues that Tejas cannot show an equitable interest in the
boats because it never produced a bill of sale. Equitable title requires proof that
the interest holder “has paid the purchase price and fully performed the
obligations under the contract.” Hydroscience Techs., 401 S.W.3d at 801. The
partnership agreement between Funk and Clark contemplates that Clark would
contribute the boats “to the Partnership pursuant to that certain Bill of Sale by
and between Clark and the Partnership.” Because there was no bill of sale, Just
For Fun argues that Tejas has not fully performed under the contract. However,
“[t]he general rule . . . is that only the parties to a contract have the right to
complain about any non-compliance with the contract. If they are satisfied with
the contract’s disposition, a third party has no right to insist there has been any
non-compliance.” Cadle Co. v. Harvey, 46 S.W.3d 282, 288 (Tex. App.—Fort
Worth 2001, pet. denied) (citing Bruner v. Exxon Co., 752 S.W.2d 679, 682 (Tex.
App.—Dallas 1988, writ denied)). Just For Fun was not a party to the partnership
contract between Funk and Clark, and both Funk and Clark considered the
contract fully performed. Just For Fun cannot therefore rely on its claim of
noncompliance to defeat Tejas’s equitable right of ownership. See id. (holding
that appellee acquired equitable title to property despite appellant’s claim that he
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had not performed a contract to which appellant was not a party). We therefore
hold that the evidence is legally sufficient to support the trial court’s award of title
to the boats to Tejas. We overrule the appellants’ second issue.
Conclusion
Having sustained the appellants’ first issue, we modify the judgment to
delete that portion holding John and Laura Lemley jointly and severally liable for
the damages awarded to Tejas for Just For Fun’s breach of the lease agreement,
including attorney’s fees, pre-judgment and post-judgment interest, and costs.
Having overruled the appellants’ second issue, we affirm the trial court’s
judgment as modified.
/s/ Lee Gabriel
LEE GABRIEL
JUSTICE
PANEL: WALKER, MCCOY, and GABRIEL, JJ.
DELIVERED: October 30, 2014
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