Marcus Hiles v. Arnie & Company, P.C.

Affirmed and Substitute Opinion filed April 25, 2013.
In The
Fourteenth Court of Appeals
NO. 14-12-00088-CV
MARCUS HILES, Appellant,
V.
ARNIE & COMPANY, P.C., Appellee.
On Appeal from the 270th District Court
Harris County
Trial Court Cause No. 2010-42061
SUBSTITUTE OPINION
We originally issued our opinion affirming the trial court’s judgment on
March 14, 2013. Appellant Marcus Hiles filed a motion for rehearing. We deny the
motion for rehearing, vacate our earlier judgment, withdraw our previous opinion,
and issue this substitute opinion in its place. The disposition of the case remains
unchanged.
Hiles appeals from a trial-court judgment incorporating a jury verdict in
favor of Arnie & Company, P.C., in Arnie’s suit on a sworn account. On appeal,
Hiles complains that he filed suit against Arnie in Dallas County before Arnie filed
suit in Harris County, and because the Dallas County court had dominant
jurisdiction, the trial court erred in refusing to transfer, abate, or dismiss Arnie’s
suit. Hiles also contends that the trial court erred by refusing Hiles’s tendered jury
instruction concerning whether Arnie’s prior material breach excused Hiles’s
performance. For the reasons explained below, we affirm.
I
Hiles is a real-estate investor and developer who lives in Fort Worth and
offices in Grand Prairie. Hiles became involved in litigation arising out of a
partnership dispute over a large real-estate project in Tyler known as the Cascades.
Hiles believed he was losing millions of dollars on the Cascades project and
suspected his partners had engaged in some kind of “funny business.” Hiles’s
counsel, the law firm of Coats, Rose, Yale, Ryman & Lee, L.L.P., and its partner,
Bill Short, recommended retaining Arnie & Company, located in Houston, to
conduct a forensic accounting review of the Cascades’s records. Arnie’s president,
Dennis Arnie, is a CPA and certified fraud examiner. Dennis had worked with
Coats Rose on many other cases.
Hiles agreed that Coats Rose could retain Arnie to assist in the Cascades
litigation. Coats Rose and Hiles each signed an engagement letter Arnie drafted.
Hiles also modified the letter, interlineating “and/or Hiles” at the end of the
sentence “Your engagement of [Arnie] is at the will and discretion of Coats Rose.”
The engagement letter set out the hourly rates for Arnie personnel, provided for an
“evergreen” retainer of $20,000, and reflected that Hiles was “solely liable for any
fees incurred in this matter.” The engagement letter also included a venue-selection
clause specifying that the venue of any litigation or arbitration “SHALL LIE
2
SOLELY AND EXCLUSIVELY IN HARRIS COUNTY, TEXAS[,] UNLESS
MANDATORY VENUE RULES OR LAWS PROVIDE THAT VENUE MUST
LIE IN ANOTHER COUNTY.”
Arnie personnel conducted an extensive review of the Cascades’s records
and determined, as Hiles suspected, that his partners were committing fraud. The
damage model amounted to about $10 million. But Coats Rose and Hiles disagreed
on the best way to make use of Arnie’s work. Short did not want Arnie to prepare a
report, preferring instead to surprise the adverse parties with Arnie’s opinions at
trial; Hiles, however, instructed Dennis to prepare a report that Hiles could use as
leverage at mediation. On April 29, 2010, Dennis met with Hiles at his office to
discuss the details of the report and to drop off some unpaid invoices. Dennis also
gave Hiles the option of either a short report highlighting a few significant
transactions or a detailed report describing every allegedly fraudulent transaction
discovered.
Hiles did not immediately decide which report he wanted, but the next day
he left Dennis a voicemail directing him to prepare the detailed report. In the
voicemail, which Dennis transcribed, Hiles also communicated an understanding
that the additional work needed to compile the report would be minimal, requiring
only “a little extra staff time” to type up the report and attach the exhibits. On May
4, Hiles confirmed in an email that he wanted Dennis to complete the “full written
report” by May 12. According to Dennis, he never told Hiles that preparing the
report would be simply a matter of administrative time, although he did not recall
specifically correcting any misunderstanding on Hiles’s part.
On May 12, Dennis delivered a draft of the report, titled “Analysis of
3
Economic Damages and Related Events,” to Hiles.1 The report totaled twenty-three
pages and was supported by over 400 pages of attached documentation. Hiles was
pleased with the report, and he instructed Short to distribute copies of the report to
all opposing counsel in the Cascades litigation. The Cascades litigation was
ultimately resolved.
In early June, Arnie sent Hiles the bill for its work during the month of May
in the amount of $76,199.74. Less than two weeks later, Hiles responded to Arnie’s
bill by filing suit against Arnie in Dallas, alleging breach of contract and seeking
declaratory relief.2
On July 8, 2010, after Arnie was served with Hiles’s suit, Arnie filed suit
against Hiles in Houston for unpaid bills totaling $364,502.00 on a sworn-account
theory. After substituted service of citation was ordered in September, Hiles
answered Arnie’s suit subject to a motion to transfer venue.3 On December 16, the
trial court denied Hiles’s motion to transfer venue. On January 21, 2011, Hiles
filed a motion to abate Arnie’s Harris County suit, and re-urged his motion to abate
in September 2011.4 The trial court denied the motion to abate and the case
1
Dennis also testified that he hand delivered to Hiles an invoice for $91,185.68 for
Arnie’s work in April, and Hiles said that he would send the invoice to the accounting
department and it would be paid.
2
Hiles appeared as a plaintiff along with Western Rim Investors 2006-3, L.P., Western
Rim Investors 2006-4, L.P., Western Rim Investors 2006-5, L.P., Western Rim Investors 2007-1,
LP., Mansions Custom Homes III, LP, Cascades of Tyler Joint Venture, L.L.P., and Cascades of
Tyler Homes Joint Venture, L.L.P. In addition to suing Arnie, the plaintiffs sued the Coats Rose
law firm, Short, and another retained expert. However, Hiles and Arnie are the only parties to
this appeal.
3
Arnie also filed two amended pleadings subject to a motion to transfer venue raising the
same arguments on November 12, 2010, and June 22, 2011.
4
Exhibits to motions filed in this case reflect that the Dallas court denied a motion to
transfer venue filed by Arnie, but the court also denied Hiles’s motion to consolidate the Houston
and Dallas cases and impose an anti-suit injunction against Arnie. Consequently, the cases
proceeded simultaneously in both courts.
4
proceeded to trial.
At the end of the trial, the jury returned a verdict in Arnie’s favor. On
October 7, 2011, the trial court rendered judgment on the jury’s verdict, awarding
Arnie actual damages of $364,502.41 and attorney’s fees in excess of $200,000.
This appeal followed.
II
In his first issue, Hiles contends that the trial court erred in refusing to
transfer, abate, or dismiss the Harris County suit. Hiles makes three primary
arguments: (1) the venue-selection clause in Arnie’s engagement letter is
unenforceable; (2) Hiles filed suit first in a proper venue and therefore the Dallas
County court had dominant jurisdiction; and (3) no exception to dominant
jurisdiction applies.
A
Section 15.002(a)(1) of the Civil Practices and Remedies Code provides that
venue for an action is proper in the county in which “all or a substantial part of the
events or omissions giving rise to the claim occurred.” Tex. Civ. Prac. & Rem.
Code § 15.002(a)(1). Venue may be proper in more than one county under the
venue rules. See Wilson v. Tex. Parks and Wildlife Dep’t, 886 S.W.2d 259, 260
(Tex. 1994); Moveforfree.com, Inc. v. David Hetrick, Inc., 288 S.W.3d 539, 542
(Tex. App.—Houston [14th Dist.] 2009, no pet.). In general, plaintiffs are allowed
to choose venue first, and when the county in which the plaintiff files suit is at least
a permissive venue and no mandatory provision applies, the plaintiff’s venue
choice should not be disturbed. KW Constr. v. Stephens & Sons Concrete
Contractors, Inc., 165 S.W.3d 874, 879 (Tex. App.—Texarkana 2005, pet.
denied); Chiriboga v. State Farm Mut. Auto. Ins. Co., 96 S.W.3d 673, 678 (Tex.
5
App.—Austin 2003, no pet.). Thus, “[t]he court in which suit is first filed generally
acquires dominant jurisdiction to the exclusion of other courts if venue is proper in
the county in which suit was first filed.” Gonzalez v. Reliant Energy, Inc., 159
S.W.3d 615, 622 (Tex. 2005) (emphasis in original) (citing Wyatt v. Shaw
Plumbing Co., 760 S.W.2d 245, 248 (Tex. 1988)).
Filing a plea in abatement is the proper method for drawing a court’s
attention to another court’s possible dominant jurisdiction. In re Puig, 351 S.W.3d
301, 305 (Tex. 2011) (per curiam); Wyatt, 760 S.W.2d at 247–48; Curtis v. Gibbs,
511 S.W.2d 263, 267 (Tex. 1974). Generally, the plea in abatement must be
granted when an inherent interrelation of the subject matter exists in the two
pending lawsuits. Perry v. Del Rio, 66 S.W.3d 239, 252 (Tex. 2001); Wyatt, 760
S.W.2d at 247. Abatement of a suit due to the pendency of a prior suit is based on
the principles of comity, convenience, and the necessity for an orderly procedure in
the trial of contested issues. Miles v. Ford Motor Co., 914 S.W.2d 135, 138 (Tex.
1995) (per curiam); Wyatt, 760 S.W.2d at 248.
But exceptions to this “first-filed” rule may apply when its justifications fail,
as when the first court does not have the full matter before it, when conferring
dominant jurisdiction on the first court will delay or even prevent a prompt and full
adjudication, or “when the race to courthouse was unfairly run.” Perry, 66 S.W.3d
at 252. Thus, a plaintiff who filed the first suit may be estopped from asserting the
dominant jurisdiction of the first court if it is found that he is guilty of inequitable
conduct. Wyatt, 760 S.W.2d at 248; V.D. Anderson Co. v. Young, 101 S.W.2d 798,
800 (Tex. 1937).
Texas courts have found parties guilty of inequitable conduct and applied the
estoppel exception to the first-filed rule when the plaintiffs in the first-filed suit (1)
filed suit merely to obtain priority, without a bona fide intention to prosecute the
6
suit; or (2) prevented their adversaries from filing the subsequent suits more
promptly by fraudulently representing that they would settle. In re Henry, 274
S.W.3d 185, 191 (Tex. App.—Houston [1st Dist.] 2008, pet. denied). Courts have
also found inequitable conduct when the plaintiffs in the first-filed suit
affirmatively represented to the court in the second-filed suit that it had
jurisdiction, Howell v. Mauzy, 899 S.W.2d 690, 698 (Tex. App.—Austin 1994,
writ denied), or manipulated the courts by sitting in silence while sister courts
issued conflicting orders regarding the same subject matter. Grimes v. Harris, 695
S.W.2d 648, 651–52 (Tex. App.—Dallas 1985, orig. proceeding).
When raised, estoppel is a fact issue that must be determined by the second
court in which the plea in abatement is filed. Curtis, 511 S.W2d at 267; In re
Henry, 274 S.W.3d at 191; see also Parr v. Hamilton, 437 S.W.2d 29, 31 (Tex.
Civ. App.—Corpus Christi 1968, no writ) (“The question of good faith, fraud and
conduct of a party relating to the matter of estoppel is a fact issue that must be
finally determined by the court hearing the plea in abatement.”). If the second court
denies the plea in abatement, it assumes dominant jurisdiction and its ruling
postpones the action in the first court until the second court finally disposes of the
case. 4M Linen & Unif. Supply Co. v. W.P. Ballard & Co., Inc., 793 S.W.2d 320,
322 (Tex. App.—Houston [1st Dist.] 1990, writ denied).
A party also must raise a plea in abatement in a timely manner or it is
waived. Wyatt, 760 S.W.2d at 248; Howell, 899 S.W.2d at 698. If the second court
has jurisdiction over the subject matter and a party does not file a plea in abatement
in the second court at the proper stage, the second court can determine the issues
before it and a judgment in the second court may have preclusive effect on the
pending proceeding in the other court. Mower v. Boyer, 811 S.W.2d 560, 563 n.2
(Tex. 1991).
7
We review a trial court’s ruling on a motion to abate under an abuse-of-
discretion standard. See Wyatt, 760 S.W.2d at 248. An abuse of discretion occurs
when a trial court acts without reference to any guiding rules and principles.
Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985).
B
In his motion to abate, Hiles asserted that the Harris County suit should be
abated because he filed and served the Dallas County suit first, the Dallas County
suit remained pending, and both suits involved many of the same parties and
issues.5 Attached in support of Hiles’s motion were copies of Hiles’s original and
amended petition in the Dallas County suit, proof of citation of service on Arnie,
Arnie’s original petition in the Harris County suit, and the affidavit of Hiles’s
counsel attesting that the copies were true and correct and stating that the Dallas
County suit was pending as of the date of his affidavit.
In response to Hiles’s motion to abate, Arnie did not dispute Hiles’s
assertions that Hiles filed suit first and the two actions were interrelated. Arnie did
argue, however, that Hiles was estopped from abating the Harris County suit
because he contractually agreed to venue in Harris County, he evaded service in
the Harris County suit, and he waived abatement by not filing the motion to abate
for five months.6 In support of its response, Arnie attached various documents
5
In a second motion to abate filed shortly before the trial in the Harris County suit was to
commence, Hiles additionally argued that Arnie had filed compulsory counterclaims in the
Dallas court seeking the same fees and expenses sought in the Harris County suit without noting
any objection or reservation, and therefore it had subjected itself to the jurisdiction of the Dallas
court. In response, Arnie argued that the trial in Harris County had been reset and so Arnie filed
the compulsory counterclaims in Dallas to preserve its rights and comply with the Dallas court’s
pleadings deadlines.
6
Although Arnie also argued that Hiles “delayed Arnie’s filing suit in Harris County by
conveying a false impression that they would pay Arnie’s invoices,” none of the attached
documents support this statement.
8
including copies of its engagement letter containing the venue-selection provision;
the order for substituted service on Hiles in the Harris County suit; the affidavit of
the investigator detailing his unsuccessful efforts to serve Hiles with Arnie’s
lawsuit; Dennis’s affidavit stating that Hiles signed the engagement letter and
reciting facts supporting permissive venue in Harris County; and an email
forwarding a copy of Arnie’s invoice for March to Hiles.
After an oral hearing, the trial court denied the motion to abate. No record of
the hearing appears in the appellate record.
On appeal, Hiles contends that the estoppel exception to dominant
jurisdiction does not apply in this case because (1) it was not inequitable for Hiles
to have signed Arnie’s engagement letter containing the venue-selection clause
specifying Harris County because that clause is unenforceable; (2) the allegation
that he evaded service is not relevant to the equities involved in his earlier filing of
the Dallas County suit; and (3) Hiles did not waive abatement. Arnie responds that
it raised factual issues supporting estoppel and inequitable conduct in opposing
Hiles’s motion to abate, and the trial court did not abuse its discretion in resolving
these fact issues in Arnie’s favor.
As an initial matter, Arnie argues that this court cannot overturn the trial
court’s discretionary decision in the absence of a record of the hearing on Hiles’s
motion to abate. According to Arnie, the record supports the conclusion that the
hearing was evidentiary, and therefore it was Hiles’s burden to present the record
of that hearing. In the absence of such a record, Arnie argues, this court must
presume that evidence existed to support the trial court’s decision. Arnie also
claims that its counsel made unsworn, factual statements and representations in the
9
hearing, which “can constitute evidence supporting a trial court’s ruling.”7
In Michiana Easy Livin’ Country, Inc. v. Holten, the supreme court
instructed that appellate courts should presume that pretrial hearings are non-
evidentiary unless the proceeding’s nature, the trial court’s order, the party’s briefs,
or other indications show that an evidentiary hearing took place in open court. 168
S.W.3d 777, 783 (Tex. 2005). Only if the hearing was evidentiary is a complaining
party required to present a record of that hearing to establish harmful error. Id. The
trial court’s order denying Hiles’s motion to abate provides no affirmative
indication of an evidentiary hearing, reflecting only that the court considered
Hiles’s motion and Arnie’s response, as well as “any further replies or responsive
pleadings, the discovery on file, the pleadings, the evidence, and the arguments of
counsel, if any . . . .” Further, nothing else in the record suggests an evidentiary
hearing took place. We conclude, therefore, that Hiles was not required to present
the record of the hearing on appeal, and we decline to presume that the record of
the hearing would support the trial court’s decision. See id.
Turning to Hiles’s arguments, we first consider Hiles’s contention that the
venue-selection clause was unenforceable and therefore his agreement that venue
was proper in Harris County should not be considered when balancing the equities.
Hiles is correct that venue-selection clauses are generally unenforceable in Texas
unless the contract evinces a “major transaction” as defined in the venue rules. See
7
Arnie also points to Dennis’s testimony at trial that Hiles assured Dennis that Arnie’s
invoices would be paid, used the report to his advantage, and never voiced any complaint about
the bills before filing suit. However, Hiles contends that we may not consider Dennis’s trial
testimony when determining whether the trial court erred in denying the motion to abate. We
agree. “When an appellate court is called upon to revise the ruling of a trial court, it must do so
upon the record before that court when such ruling was made.” Stephens Cnty. v. J.N.
McCammon, Inc., 52 S.W.2d 53, 55 (Tex. 1932); see also Keck v. First City Nat’l Bank of Hous.,
731 S.W.2d 699, 700 (Tex. App.—Houston [14th Dist.] 1987, no writ) (“It is the court’s opinion
that it is improper to consider any pleadings, actions by the parties, or actions by other courts
taking place after the date of the order now appealed.”).
10
In re Tex. Ass’n of Sch. Bds., 169 S.W.3d 653, 660 (Tex. 2005) (venue-selection
clause in contract that was not a major transaction unenforceable); Yarber v.
Iglehart, 264 S.W.2d 474, 476 (Tex. Civ. App.—Dallas 1953, no writ) (real-estate
agent committed no actionable wrong in contract or in tort by refusing to perform
an unenforceable oral agreement); see also Tex. Civ. Prac. & Rem. Code § 15.020
(venue may be specified by written agreement in a “major transaction” in which “a
person pays or receives, or is obligated to pay or entitled to receive, consideration
with an aggregate stated value equal to or greater than $1 million”).
But Hiles did not argue that the engagement letter’s venue-selection clause
was unenforceable in response to Arnie’s motion to abate. Because Hiles never
objected to the trial court’s consideration of the venue-selection clause in ruling on
abatement, Hiles may not raise this argument on appeal. See, e.g., In re Am.
Optical Corp., 988 S.W.2d 711, 714 (Tex. 1998) (per curiam). Therefore, the trial
court could have considered Hiles’s conduct in contractually agreeing to venue in
Harris County and then filing suit in Dallas County contrary to his agreement when
weighing whether his conduct was inequitable.
Hiles maintains, however, that he raised the argument that the venue-
selection clause was unenforceable in connection with his motion to transfer
venue. In Hiles’s first motion to transfer venue, he argued that he filed suit against
Arnie in Dallas County before Arnie filed suit against him in Harris County, the
Dallas County suit related to the identical facts and circumstances as the Harris
County suit, and Arnie had actual notice of it before filing the Harris County suit.
Hiles mentioned the venue-selection clause briefly, arguing that “the venue-
selection clause is, at most, a basis for permissive venue,” and stating that the first-
filed Dallas County suit took precedence over Arnie’s selection of Harris County.
In response, Arnie argued, among other things, that the general venue rules
11
supported venue in Harris County and that Hiles contractually agreed to venue in
Harris County. Hiles filed a reply brief in which he argued, for the first time, that
the venue-selection clause was unenforceable. In a surreply, Arnie argued that
Hiles had not shown that Harris County was an improper venue or that venue was
mandatory in another county, and further asserted estoppel based on the
contractual venue-selection clause. The trial court denied the motion to transfer.
On appeal, Hiles argues that the trial court should have construed his motion
to transfer venue as a motion to abate, citing Texas Rule of Civil Procedure 71 and
cases directing courts to look to the substance of the relief requested and not
merely the title of the pleading. Rule 71 provides that when a party has mistakenly
designated any plea or pleading, “the court, if justice so requires, shall treat the
plea or pleading as if it had been properly designated.” Tex. R. Civ. P. 71.
However, Hiles’s motion to transfer venue explicitly requested the relief of
transfer, not abatement. See Tovias v. Wildwood Props. P’ship, L.P., 67 S.W.3d
527, 529 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (distinguishing between
dismissal and abatement). Because the Harris County and Dallas County courts
had concurrent jurisdiction, and Hiles did not show that Arnie’s choice of Harris
County was an improper venue or that venue was mandatory in another county
under the applicable venue provisions, he was not entitled to a transfer to Dallas
County based on dominant jurisdiction. See Tex. R. Civ. P. 86; Wilson, 886
S.W.2d at 260–61 (if plaintiff initially files suit in a county of proper venue the
plaintiff’s venue choice cannot be disturbed).
Moreover, Hiles’s request for a transfer of venue was not the proper method
for drawing a court’s attention to another court’s possible dominant jurisdiction.
See, e.g., In re Puig, 351 S.W.3d at 306 (holding that because “the relators should
have filed a plea in abatement” the “district court’s denial of the relators’ plea to
12
the jurisdiction, therefore, did not constitute an abuse of discretion”); Tovias, 67
S.W.3d at 529 (holding that trial court erred in granting plea to the jurisdiction
when plea in abatement was proper procedure for asserting dominant jurisdiction).
Therefore, we disagree that the trial court should have concluded that Hiles’s
motion to transfer was really a motion to abate and treated it as such. 8 And because
Hiles’s motion to transfer was not the proper procedure to assert a dominant-
jurisdiction theory, the trial court did not err by denying the motion. See In re Puig,
351 S.W.3d at 305; Tovias, 67 S.W.3d at 529.
Next, Hiles argues that the allegation that he evaded service cannot be
relevant to the equities involved in his earlier filing of the Dallas County suit,
because “[t]ime moves forward, not backwards.” But the court could have
considered Hiles’s actions in evading service as further evidence of inequitable
conduct directly relevant to venue, because the evidence supports a conclusion that
not only did Hiles file suit in Dallas County after agreeing to venue in Harris
County, he sought to unfairly delay the Harris County suit by deliberately evading
service while moving forward with his suit in Dallas County. Taken together,
Hiles’s actions could be seen as demonstrating contempt for legal process and a
willingness to unfairly manipulate the system to his advantage. Moreover, in the
briefing before the trial court, Hiles offered no contradicting evidence or
explanation for his actions.
Additionally, Arnie suggests that the trial court could have considered
8
We further note that, although Hiles argued that the venue-selection clause was
unenforceable in his reply brief to his motion to transfer venue, he did not repeat that argument
in either his later-filed motions to transfer venue or his motions to abate. Nor did he raise it in his
post-trial motions. Based on the briefing on the abatement, the trial court could have concluded
that Hiles abandoned any argument that the venue-selection clause was unenforceable, if the trial
court even recalled that Hiles had raised it in the earlier briefing on the motion to transfer. In any
event, the trial court was not obliged to consider an argument mentioned briefly in a different
motion that was not re-urged in the motion to abate.
13
whether Hiles’s failure to file the motion to abate for four months was inequitable
and constituted waiver. The record shows that Arnie filed suit July 8, 2010, and
after substituted service was ordered in September, Hiles answered Arnie’s suit on
October 10. Arnie filed his motion to abate on January 21, 2011, and obtained a
hearing on the motion in February. Hiles offers no explanation for his failure to file
the motion to abate earlier other than pointing to his previously filed, procedurally
incorrect attempts to raise dominant jurisdiction in his motions to transfer venue.
In sum, Arnie presented the trial court with evidence that Hiles contractually
agreed to venue in Harris County for any litigation arising between himself and
Arnie, but despite this contractual agreement Hiles filed suit against Arnie in
Dallas County. Hiles then evaded service of the Harris County suit, further
delaying Arnie’s prosecution of its suit in the agreed-upon venue. Hiles also did
not move to abate the Harris County suit for four months.9 Hiles offered no
controverting or mitigating evidence, nor did he argue that the venue-selection
clause was unenforceable or that estoppel and waiver did not apply. On this record,
the trial court could have concluded Hiles’s conduct was sufficiently inequitable to
bar him from asserting the defense of dominant jurisdiction, and therefore we
cannot say that the trial court abused its discretion in denying the motion to abate.
See Curtis, 511 S.W.2d at 267; Young, 101 S.W.2d at 800–801; cf. Perry, 66
S.W.3d at 252–53 (holding that, consistent with the justifications for the first-filed
rule, a party who files suit on manifestly unripe claims, merely to win a race to the
courthouse, should be estopped from arguing dominant jurisdiction).
9
We express no opinion concerning whether Hiles’s four-month delay in filing the
motion to abate, alone, could have resulted in waiver. We note that Arnie cites no authority for
the proposition that a four-month delay is grounds for denying a motion to abate, and we have
found none. We merely hold that the trial court could have considered the evidence of Hiles’s
delay along with the other evidence when weighing the equities, particularly in the absence of
any responsive arguments or controverting evidence.
14
III
In his second issue, Hiles contends that the trial court erred in refusing to
submit Hiles’s tendered jury question on prior material breach. Hiles contends he
properly preserved this issue and he presented evidence in support of this
affirmative defense. Arnie responds that Hiles did not preserve the issue and no
evidence exists of a prior material breach to support the submission of the
proposed question. Arnie also argues that no reversible error resulted from the trial
court’s refusal to submit Hiles’s requested question because the sworn-account
questions on services “in accordance with an agreement” and the finding that the
“account [was] due, owing and unpaid” fairly submitted the breach issue.
A
A party is entitled to a jury question, instruction, or definition if the
pleadings and evidence raise an issue. Tex. R. Civ. P. 278. If there is some
evidence to support the submission, the trial court commits reversible error if it
fails to submit the instruction. 4901 Main, Inc. v. TAS Auto., Inc., 187 S.W.3d 627,
631 (Tex. App.—Houston [14th Dist.] 2006, no pet.). We review a trial court’s
decision to refuse a particular jury question or instruction under an abuse-of-
discretion standard. See Shupe v. Lingafelter, 192 S.W.3d 577, 579 (Tex. 2006)
(per curiam). A trial court’s error in refusing an instruction is reversible if it
“probably caused the rendition of an improper judgment.” Tex. R. App. P. 44.1;
4901 Main, Inc., 187 S.W.3d at 631.
B
Initially, we consider Arnie’s argument that Hiles failed to preserve this
issue. According to Arnie, Hiles’s proposed jury instructions on material breach
were multifarious and inadequately explained to the trial court.
15
Hiles proposed three instructions, one of which dealt with excuse from a
material breach. Hiles also requested a question that asked whether Hiles’s
performance was excused because Arnie had previously failed to comply with a
material obligation of the parties’ contract.10 At the charge conference, Hiles did
not lodge any objections based on the instructions. However, concerning the
proposed question, Hiles’s counsel argued, “We have pled a material prior breach
which would obviate [Hiles’s] obligation to pay anything under this contract” and
counsel requested that the trial court submit a question on prior material breach.
The trial court refused the proposed submissions in writing.
When determining whether a complaint of charge error is preserved, we ask
whether the complaining party “made the trial court aware of the complaint, timely
and plainly, and obtained a ruling.” See State Dep’t of Highways & Pub. Transp. v.
Payne, 838 S.W.2d 235, 241 (Tex. 1992). On this record, we conclude Hiles has
sufficiently preserved his complaint that the trial court refused to submit a question
10
Hiles’ proposed question asked whether the account between Hiles and Arnie remained
unpaid and, if so, whether it was excused because “Arnie previously failed to comply with a
material obligation of the contract between the parties.” The proposed question also included the
following instructions:
The circumstances to consider in determining whether a failure to comply
with a contract is material include:
a. the extent to which the injured party will be deprived of the benefit which he
reasonably expected;
b. the extent to which the injured party can be adequately compensated for the
part of that benefit of which he will be deprived;
c. the extent to which the party failing to perform or to offer to perform will suffer
forfeiture;
d. the likelihood that the party failing to perform or to offer to perform will cure
his failure, taking into account the circumstances including any reasonable
assurances;
e. the extent to which the behavior of the party failing to perform or to offer to
perform comports with standards of good faith and fair dealing.
Answer “Yes” or “No”: _______
16
concerning prior material breach. See id; see also Alaniz v. Jones & Neuse, Inc.,
907 S.W.2d 450, 451–52 (Tex. 1995) (per curiam) (“While Payne does not revise
the requirements of the rules of procedure regarding the jury charge, it does
mandate that those requirements be applied in a common sense manner to serve the
purposes of the rules, rather than in a technical manner which defeats them.”).
C
A party breaches a contract when it neglects or refuses to perform a
contractual obligation. Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.—Houston
[14th Dist.] 2006, pet. denied). If the breach is material, the other party is excused
from further performance of the contract. Mustang Pipeline Co. v. Driver Pipeline
Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam) (citing Hernandez v. Gulf Grp.
Lloyds, 875 S.W.2d 691, 692 (Tex. 1994)). Generally, the issue of whether a
breach rises to the level of a material breach that will render the contract
unenforceable presents a dispute for resolution by the trier of fact. See Cont’l
Dredging, Inc. v. De-Kaizered, Inc., 120 S.W.3d 380, 394–395 (Tex. App.—
Texarkana 2003, pet. denied). But the materiality of a breach and the resulting
unenforceability of the agreement can present questions for the court to resolve as
a matter of law. See Mustang Pipeline Co., 134 S.W.3d at 199–200 (concluding
that when contract stated time was of the essence and one party failed to perform,
other party was excused from performance as a matter of law); see also Fedgess
Shopping Cntrs., Ltd. v. MNC SSP, Inc., No 14-07-00211-CV, 2007 WL 4387337,
at *3 (Tex. App.—Houston [14th Dist.] Dec. 18, 2007, no pet.) (concluding
appellant raised no issue of material fact concerning prior material breach and
affirming summary judgment for appellee).
Hiles argues that he presented evidence that he was overcharged and not
timely billed for the services rendered. The evidence Hiles points to includes the
17
engagement letter’s provision that Arnie’s work would be “at the will and
discretion of Coats Rose and/or Hiles” and Hiles’s “understanding” that he would
receive a monthly bill for his approval.11 Hiles also testified that he understood
from his conversation with Dennis that preparing the report would require minimal
staff time, and his transcribed voicemail reflects his instruction to Dennis to
prepare the report based on this understanding, but Hiles was then billed $76,000
for the work. Additionally, Hiles complained that if he had known Arnie’s initial
bills were as high as they were, he would have terminated Arnie’s engagement.
The evidence shows that Hiles signed Arnie’s engagement letter in August
2009. In the engagement letter, Arnie agreed to provide consulting and expert
services on financial issues relating to the partnership litigation. Hiles agreed to be
solely liable to pay Arnie’s hourly rates and expenses, as well as a $20,000
retainer. The letter specified the hourly rates to be charged for shareholders,
associates, and other staff. The letter also recited that it “constitutes the only
agreement of the parties” and “may not be altered or amended except in writing
signed by all of the parties” to the agreement. The evidence shows that Hiles paid
the retainer and one of Arnie’s monthly invoices that had been included in a Coats
Rose bill. Although Arnie generally forwarded its invoices to Coats Rose rather
than directly to Hiles, the engagement letter did not specify that Hiles was to
receive Arnie’s invoices directly, and there is no evidence that Hiles complained
about not receiving them directly.
The engagement letter also specified that invoices were due and payable
within thirty days, and if Arnie was terminated, Hiles remained liable for the bill.
But the engagement letter did not require Arnie to submit invoices on a particular
11
The only other contractual language Hiles points to is the provision that Hiles will pay
Arnie’s invoices within thirty days or Arnie will “cease all work.” But prompt payment is Hiles’s
obligation, not Arnie’s.
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date or at specific intervals. Nor did it require pre-approval or authorization of the
amounts that Arnie would bill Hiles. Most of Hiles’s testimony concerning Arnie’s
alleged prior material breach is based on Hiles’s understanding of the contract, not
the contract itself. “If the parties have expressly stated the terms of their
agreement, they have created an express contract and are bound by it to the
exclusion of conflicting implied terms.” Malallah v. Noble Logistic Servs., Inc.,
No. 14-08-01030-CV, 2010 WL 343487, at *2, (Tex. App.—Houston [14th Dist.]
Feb. 2, 2010, pet. denied) (quoting Emmer v. Phillips Petroleum Co., 668 S.W.2d
487, 490 (Tex. App.—Amarillo 1994, no writ)) (internal quotation marks omitted);
see also David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (per
curiam) (declining to hold that a written attorney-fee agreement which specified
only hourly rates may be modified by evidence of an oral capping agreement).
The evidence also shows that Arnie worked continuously on the matter
between August 2009 and May 2010. On April 30, 2010, Hiles instructed Arnie to
prepare a full report documenting Arnie’s findings using “a little extra staff time,”
and Arnie provided the report by mid-May, billing him $76,000 for the work.12
Hiles never indicated any dissatisfaction with Arnie’s services before he filed suit
less than two weeks after receiving Arnie’s invoice for May. We recognize that the
written contract gives Hiles discretion over Arnie’s engagement, and Hiles’s
instruction to prepare the written report using “a little extra staff time” is arguably
an exercise of that discretion. Yet even if Arnie breached the contract by
12
Hiles also emailed Dennis on May 4, 2010, instructing him as follows: “Please have
the full written report on each of every matter you have discovered at the Cascades to me by next
Tuesday. Please include all exhibits and back up.” There is also evidence that Dennis personally
delivered a number of unpaid invoices to Hiles at their April 29 meeting and also forwarded a
statement reflecting a balance owed through March 2010 of $217,116.99, via email directly to
Hiles in April, before Hiles requested the full report. Hiles testified, however, that he did not see
the email and did not review the invoices Dennis handed him before forwarding them to his
attorney.
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disobeying Hiles’s instruction and overbilling him for May, that would neither
excuse Hiles from paying prior bills nor excuse him from all liability to pay the
May bill, which even Hiles contemplated would include charges for some staff
time. Because Hiles points to no evidence that Arnie’s alleged overbilling and
failure to timely bill breached a material element of the contract that would excuse
Hiles from all liability for failing to pay Arnie’s bills, he was not entitled to the
prior-material-breach question he tendered. See Mustang Pipeline Co., 134 S.W.3d
at 199; see also Williams v. Jackson, No. 01-07-00850-CV, 2008 WL 4837484, at
*4 (Tex. App.—Houston [1st Dist.] Nov. 6, 2008, no pet.) (holding that, as a
matter of law, attorney’s failure to comply with alleged duty to bill appellant
monthly as provided in fee agreement did not discharge appellant’s duty to pay
attorney); cf. Long Trusts v. Griffin, 222 S.W.3d 412, 415–16 (Tex. 2006) (per
curiam) (holding that party who elects to treat a contract as continuing is deprived
of any excuse for terminating his own performance).
We conclude, therefore, that the trial court did not abuse its discretion in
refusing to submit Hiles’s proposed question to the jury, and we do not reach
Arnie’s argument that any error in failing to submit the question to the jury was
harmless.
***
We overrule Hiles’s issues and affirm the trial court’s judgment.
/s/ Jeffrey V. Brown
Justice
Panel consists of Chief Justice Hedges and Justices Brown and Busby.
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