Innovate Technology Solutions, L.P. v. Youngsoft, Inc. ( 2013 )

Reverse and Remand; Opinion Filed November 19, 2013.
S
Court of Appeals
In The
Fifth District of Texas at Dallas
No. 05-12-00658-CV
INNOVATE TECHNOLOGY SOLUTIONS, L.P., Appellant
V.
YOUNGSOFT, INC., Appellee
On Appeal from the 192nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-09-17061
OPINION
Before Justices Moseley, Lang, and Richter 1
Opinion by Justice Moseley
Appellant Innovate Technology Solutions, L.P. appeals the trial court’s adverse summary
judgment and adverse directed verdict on its counterclaims against appellee Youngsoft, Inc. In
two issues, Innovate argues the trial court erred by concluding its claims were barred by a
limitation of liability provision contained in the parties’ agreement and that the evidence was
insufficient to support the trial court’s judgment.
We conclude the trial court erred by granting Youngsoft’s motions for summary
judgment and for directed verdict. We do not reach Innovate’s argument regarding sufficiency
of the evidence. We reverse the trial court’s judgment and remand for further proceedings.
1
The Hon. Martin Richter, Justice, Assigned
Innovate provides information technology (IT) consulting and training services and
software to its clients. In connection with a client project, it entered into a Professional Services
Agreement (Agreement) to acquire IT services from Youngsoft. There is evidence the project
did not proceed smoothly and that the client was unhappy.
Subsequently, Youngsoft sued Innovate for nonpayment; Innovate counterclaimed for
breach of express warranty and breach of contract. Youngsoft moved for summary judgment,
arguing that all of Innovate’s counterclaims were all barred by a limitation of liability clause in
the Agreement. The trial court granted Youngsoft’s motion. Innovate later filed another
counterclaim for indemnification.
The case proceeded to trial on Youngsoft’s claims and Innovate’s remaining
indemnification counterclaim. Near the end of the trial, the trial court granted a directed verdict
in Youngsoft’s favor on Innovate’s indemnification claim. The trial judge stated he believed that
Youngsoft’s indemnification claim “was taken care of in the summary judgment,” and that “there
is no affirmative relief available to” Innovate.
Youngsoft’s case was submitted to the jury, which answered a single liability question in
Youngsoft’s favor and awarded damages of $43,452.50. The trial court entered judgment based
on the verdict. Innovate appealed.
In its second issue, Innovate argues the trial court erred by granting Youngsoft’s motion
for summary judgment and motion for directed verdict.
We review the trial court’s summary judgment de novo. Provident Life & Accident Ins.
Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). A motion for summary judgment on traditional
grounds must show there is no genuine issue as to a specified material fact and, therefore, the
moving party is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c). Thus, to
prevail on a traditional motion for summary judgment, a defendant must either disprove at least
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one element of the plaintiff’s claim as a matter of law, or conclusively establish all elements of
an affirmative defense. See Friendswood Dev. Co. v. McDade & Co., 926 S.W.2d 280, 282
(Tex. 1996).
We review a trial court’s ruling on a motion for directed verdict under a legal-sufficiency
standard. City of Keller v. Wilson, 168 S.W.3d 802, 823-24 (Tex. 2005). A directed verdict is
proper when a defect in the opponent’s pleadings makes them insufficient to support a judgment,
the evidence conclusively proves the fact that establishes a party’s right to judgment as a matter
of law, or the evidence is insufficient to raise an issue of fact. Keyes Helium Co. v. Regency Gas
Servs., L.P., 393 S.W.3d 858, 864 (Tex. App.—Dallas 2012, no pet.). We must determine
whether the nonmovant produced more than a scintilla of probative evidence to raise a fact issue
on the material questions presented. SeeYost v. Jered Custom Homes, 399 S.W.3d 653, 659
(Tex. App.—Dallas 2013, no pet.). We consider the evidence in the light most favorable to the
nonmovant and indulge every reasonable inference to resolve any doubts against the motion. Id.
Youngsoft’s motions for summary judgment and for directed verdict are both based on
section 6 of the Agreement, which states:
6. LIMITATION OF LIABILITY
Not withstanding anything contained elsewhere in this Agreement and under any
circumstance, for any reason whatsoever, YS shall not be liable for any incidental,
ancillary, direct, indirect, special or consequential damages, including but not
limited to lost profits, whether in tort or contract, and based on any theory of
liability.
Youngsoft argues section 6, by its plain language, overrides all other provisions in the
Agreement, and (to quote its brief) means that “Innovate is not entitled to recover any damages
from Youngsoft under any circumstances, notwithstanding anything to the contrary in the . . .
Agreement.”
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When construing a written contract, our primary concern is to ascertain and give effect to
the true intentions of the parties as expressed in the agreement. El Paso Field Sers., L.P. v.
MasTec N. Am., Inc., 389 S.W.3d 802, 805 (Tex. 2012); Carbona v. CH Med., Inc., 266 S.W.3d
675, 680 (Tex. App.—Dallas 2008, no pet.). We consider the entire writing and attempt to
harmonize and give effect to all the provisions of the contract by analyzing the provisions with
reference to the whole agreement. Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310,
311-12 (Tex. 2005) (per curiam); Hackberry Creek Country Club, Inc. v. Hackberry Creek Home
Owners Assn., 205 S.W.3d 46, 55 (Tex. App.—Dallas 2006, pet. denied). “No single provision
taken alone will be given controlling effect; rather, all the provisions must be considered with
reference to the whole instrument.” J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.
2003).
If we are unable to harmonize the provisions and give effect to all the contract’s clauses,
the contract is susceptible to more than one reasonable interpretation and is ambiguous.
Hackberry Creek Country Club, 205 S.W.3d at 56. Whether a contract is ambiguous is a
question of law. Id; Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). A court may conclude a
contract is ambiguous even in the absence of such a pleading by either party. Hackberry Creek,
205 S.W.3d at 56 (citing Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex.
1993)). When a contract contains an ambiguity, the granting of a motion for summary judgment
or directed verdict is improper because the intent of the contracting parties is an issue of fact.
See Coker, 650 S.W.2d at 394 (summary judgment); Hackberry Creek, 205 S.W.3d at 56
(summary judgment); Schwartz v. Prairie Producing Co., Inc., 833 S.W.2d 629, 632 (Tex.
App.—Houston [1st Dist.] 1992, writ dism’d) (instructed verdict); ETL Corp. v. Forrester, 667
S.W.2d 247, 249 (Tex. App.—Dallas 1984, no writ) (ambiguous contract entitled party to jury
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findings on questions of fact raised by evidence); Baker v. Powell, 105 S.W.2d 289, 291 (Tex.
Civ. App.—Amarillo 1937, no writ) (directed verdict).
Youngsoft’s motions and argument are based entirely on the limitation of damages
provision found in section 6. However, Youngsoft’s proposed interpretation of section 6
considers that provision only, isolating it from all other provisions in the Agreement.
Youngsoft’s interpretation fails to consider the entire Agreement and does not attempt to
harmonize and give effect to all the provisions. See Hackberry Creek, 205 S.W.3d at 55.
For example, to accept Youngsoft’s interpretation, we must ignore the mutual indemnity
provision in the Agreement, which states:
9. INDEMNIFICATION
YS shall indemnify, defend and hold harmless [Innovate] . . . from and against
any and all claims, damages and judgments, including reasonable attorney’s fees
and expenses, arising out of or relating to any breach of this Agreement.
If Youngsoft’s interpretation of the Agreement is correct, and section 6 means that “Innovate is
not entitled to recover any damages from Youngsoft under any circumstances, notwithstanding
anything to the contrary in the Professional Services Agreement,” then Innovate could not
enforce the indemnification provision against Youngsoft if Youngsoft failed to perform its
contractual obligations. Similarly, Youngsoft’s interpretation would leave Innovate without a
remedy if Youngsoft breached sections 3, 8, and 17 of the Agreement, which obligate Youngsoft
to perform its services in a professional and workmanlike manner, maintain the confidentiality of
Innovate’s information, and maintain certain insurance coverage.
Youngsoft’s interpretation would render all of these provisions of the Agreement
surplusage, preventing the court from giving effect to all provisions of the contract. See Frost
Nat’l Bank, 165 S.W.3d at 312. But courts “must favor an interpretation that affords some
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consequence to each part of the instrument so that none of the provisions will be rendered
meaningless.” Coker, 650 S.W.2d at 394.
Moreover, interpreting the Agreement to mean (in Youngsoft’s words) that “Innovate is
not entitled to recover any damages from Youngsoft under any circumstances, notwithstanding
anything to the contrary . . .” renders the Agreement illusory, void, and unenforceable. See Tex.
S. Univ. v. State Street Bank & Trust Co., 212 S.W.3d 893, 914 (Tex. App.—Houston [1st Dist.]
2007, pet. denied); In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (“When illusory promises
are all that support a purported bilateral contract, there is no mutuality of obligation, and
therefore, no contract”); D.R. Horton, Inc. v. Brooks, 207 S.W.3d 862, 867 (Tex. App.—Houston
[14th Dist.] 2006, no pet.) (illusory promise is one that fails to bind the promisor who retains the
option of discontinuing performance). If Youngsoft is completely insulated from any damage
claims from Innovate, it effectively retains the option of discontinuing performance at any time.
At the trial court, Innovate argued for a different interpretation of Section 6; it asserted
the limitation of liability provision
protects Youngsoft against purchasers from Innovate (i.e., third parties to the
relationship between Youngsoft and Innovate . . . ); but it does not protect
Youngsoft from Innovate in its capacity as a Client of Youngsoft. . . . If the
Limitation of Liability provision prohibits Innovate from recovering for damages
and losses inflicted on Innovate by Youngsoft’s breaches of duty to Innovate, then
the Warranty provision is rendered meaningless and the Indemnity provision
endangered.
This interpretation of the Agreement gives effect to other provisions of the Agreement
mentioned above, while it leaves Section 6 with some meaning. However, it renders
meaningless the introductory phrase of Section 6, namely the phrase: “Not withstanding anything
contained elsewhere in this Agreement and under any circumstance, for any reason
whatsoever . . .”
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Having reviewed the parties’ arguments, we conclude Youngsoft did not demonstrate that
its construction of the Agreement is a reasonable interpretation of the Agreement—much less the
only reasonable interpretation. Therefore, Youngsoft did not meet its burdens to show it was
entitled to summary judgment, see Hackberry Creek Country Club, 205 S.W.3d at 63-64, or
directed verdict, see Keyes Helium Co., 393 S.W.3d at 864, and the trial court erred by granting
its motions. We sustain Innovate’s second issue.
In its first issue, Innovate asserts the expert opinion presented at trial by Youngsoft was
conclusory, speculative, subjective, unsubstantiated, and not probative. As a result, Innovate
argues, there was no evidence showing whether the damages sought by Youngsoft were for
services performed in a professional and workman-like manner, and the evidence did not support
the jury’s finding. We decline to address this argument.
“Appellate courts have broad discretion to remand a case for a new trial in the interest of
justice.” Knapp v. Wilson N. Jones Mem’l Hosp., 281 S.W.3d 163, 176 (Tex. App.—Dallas
2009, no pet.) (citing TEX. R. APP. P. 43.3(b); Scott Bader, Inc. v. Sandstone Prods., Inc., 248
S.W.3d 802, 822 (Tex. App.—Houston [1st Dist.] 2008, no pet.)); Ahmed v. Ahmed, 261 S.W.3d
190, 196 (Tex. App.—Houston [14th Dist.] 2008, no pet.). “Remand is appropriate when, for
any reason, a case has not been fully developed,” including where the trial court’s action
prevented the case from being properly developed and presented at trial. Knapp, 281 S.W.3d at
176; Ahmed, 261 S.W.3d at 196 (“As long as there is a probability that a case has, for any reason,
not been fully developed, an appellate court has discretion to remand for a new trial rather than
render a decision.”); In re S.E.W., 168 S.W.3d 875, 885-86 (Tex. App.—Dallas 2005, no pet.).
When the trial court granted summary judgment and a directed verdict in Youngsoft’s
favor, the court shaped the development of the case and its presentation to the jury; the trial
court’s rulings on Youngsoft’s motions prevented Innovate from properly developing and
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presenting its claims to a jury. See Knapp, 281 S.W.3d at 176. It seems clear that had the trial
court not granted the motion for summary judgment, both parties would have presented
additional evidence and arguments during trial, and the jury would have been asked to decide
additional issues. See id. (citing Scott Bader, Inc., 248 S.W.3d at 822).
Because we conclude that the trial court erred by granting Youngsoft’s motions for
summary judgment and directed verdict, thereby shaping the development and outcome of the
case, we conclude the proper disposition of this appeal is to reverse the trial court’s judgment
and remand this case to the trial court for further proceedings.
120658F.P05 /Jim Moseley/
JIM MOSELEY
JUSTICE
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
INNOVATE TECHNOLOGY, Appellant On Appeal from the 192nd Judicial District
Court, Dallas County, Texas
No. 05-12-00658-CV V. Trial Court Cause No. DC-09-17061.
Opinion delivered by Justice Moseley.
YOUNGSOFT, INC., Appellee Justices Lang and Richter participating.
In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and this cause is REMANDED to the trial court for further proceedings consistent
with this opinion.
It is ORDERED that appellant Innovate Technology Solutions, L.P. recover its costs of
this appeal from appellee Youngsoft, Inc.
Judgment entered this 19th day of November, 2013.
/Jim Moseley/
JIM MOSELEY
JUSTICE
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