Avasthi & Associates, Inc. v. Ashish K. Banik

Reversed and Remanded and Plurality and Dissenting Opinions filed May 17, 2011.

In The

Fourteenth Court of Appeals

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NO. 14-09-01016-CV

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Avasthi & Associates, Inc., Appellant

V.

Ashish K. Banik, Appellee

On Appeal from the 164th District Court

Harris County, Texas

Trial Court Cause No. 2008-20366

PLURALITY OPINION

            This is an appeal from the granting of a motion for summary judgment.  Because we conclude the trial court erred when it granted appellee Ashish K. Banik’s motion for summary judgment, we reverse and remand for further proceedings in accordance with this opinion.

Factual and Procedural Background

            On January 28, 2008 appellant, Avasthi and Associates, Inc. (“Avasthi”) and Banik executed a contract entitled: Independent Contractor Agreement (the “Agreement”).  Pursuant to the Agreement, Banik agreed to perform services including “[o]il & gas field petrophysical and geological studies, integrated asset modeling, improved/enhanced oil recovery, and related studies, and training.”  In addition, the parties agreed to the following:

3.4       [Banik] agrees to submit monthly invoice by 3rd of the month for any consulting work performed by [Banik] during the previous month, and, as full and complete consideration for consulting work performed by [Banik], [Avasthi] agrees to pay [Banik’s] invoice within fifteen (15) days of [Avasthi] receiving payment from its Client for invoice submitted by [Avasthi] for consulting work performed.  [Avasthi] has written agreements with its Clients for payment of [Avasthi’s] invoices for consulting work performed within thirty (30) days after receipt of its invoices by its clients.

22.       COMPENSATION

Before start of any assignment, [Avasthi] shall provide [Banik] a Work Directive, in the attached Schedule-A format, describing the scope of work and compensation that will be paid to [Banik] for working on that assignment.  As compensation for the services rendered on the specified assignment, during the term of this Agreement, [Avasthi] agrees to compensate [Banik] according to the fixed amount of the billing rate agreed to on the Work Directive for the specified assignment.  After the Work Directive has been signed and dated by [Banik] and by [Avasthi] it shall be deemed incorporated herein by reference for all purposes.  [Avasthi] shall be entitled to withhold or off-set any damages it may incur, or other payments owed to [Avasthi] by [Banik], against any compensation due to [Banik], if, in the sole discretion of [Avasthi], such damages have been caused by the errors or omissions of, or any other damage or loss caused by, [Banik], in particular, [Banik] agrees that no compensation is due for work that is not performed or is not acceptable to [Avasthi] or its Clients.

Finally, the parties agreed in section 13 of the Agreement that “[a]t any time [Avasthi] and [Banik] will each have the right to terminate this Agreement at [Avasthi’s] or [Banik’s] respective convenience by giving the other at least 45 (forty-five) days written advance notice.”

            On February 7, 2008 Banik and Avasthi executed a “Work Directive.”  Under this Work Directive, which was incorporated into the Agreement by virtue of section 22, Banik agreed he would provide petrophysical multi-mineral analysis services to Repsol YPF Puesto Molina Field, an oil and gas field in Argentina.  In exchange, Avasthi agreed it would pay Banik $100.00 per hour.

            Banik commenced working under the Agreement in February 2008.  When he had not received any payment for the services he performed in February and March 2008, Banik resigned on April 1, 2008.  It is undisputed that Banik did not give Avasthi forty-five days’ written notice of his decision to resign.

            Following Banik’s resignation, Avasthi filed suit alleging Banik breached section 13 of the Agreement by not providing forty-five days’ written advance notice.  Banik, in turn, filed a counterclaim asserting Avasthi had breached the Agreement by not paying Banik for the work he performed in February and March 2008.

            Asserting both traditional and no-evidence grounds, Banik filed a motion for summary judgment on Avasthi’s breach-of-contract cause of action.  Initially, Banik moved for a no-evidence summary judgment on the ground that Avasthi had no evidence of damages arising from Banik’s resignation.  Next, Banik moved for traditional summary judgment on the affirmative defense that Avasthi had been the first to breach the Agreement, thereby excusing Banik’s continued performance.

Finally, Banik moved for traditional summary judgment arguing the Agreement was illusory and therefore unenforceable.  Banik began his third summary-judgment ground by asserting that while the Agreement required Banik to perform assigned work, the only thing Avasthi promised in return was to pay Banik “within fifteen (15) days of [Avasthi] receiving payment from its Client for invoices submitted by [Avasthi] for consulting work performed.”  Next, Banik emphasized the fact that the Agreement does not contain an express promise by Avasthi that it would submit any invoices to any client for work performed by Banik.   Banik argued this renders the Agreement illusory and unenforceable because Avasthi had the ability to nullify any contractual obligation to pay Banik simply by choosing not to bill its client for Banik’s services.

            The trial court, without specifying the grounds, granted Banik’s motion.  Following the trial court’s granting of his motion for summary judgment, Banik non-suited his counterclaim which made the interlocutory summary judgment a final, appealable judgment.  This appeal followed.

Discussion

            In two issues on appeal, Avasthi challenges the three summary-judgment grounds asserted by Banik. However, in his response brief, Banik concedes there are genuine issues of material fact on his first two summary-judgment grounds, leaving the contention that the Agreement was illusory and unenforceable as the only summary-judgment ground at issue in this appeal.

I.         The Standard of Review and Applicable Law.

            While Banik moved for summary judgment on both no-evidence and traditional grounds, the only ground still at issue in this appeal was raised in his traditional motion for summary judgment.  In a traditional motion for summary judgment, the movant has the burden to show there is no genuine issue of material fact and it is entitled to judgment as a matter of law.  Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985).  In determining whether there is a genuine fact issue precluding summary judgment, evidence favorable to the non-movant is taken as true and the reviewing court makes all reasonable inferences and resolves all doubts in the non-movant’s favor.  Id. at 548–49.  If there is no genuine issue of material fact, summary judgment should issue as a matter of law.  Haase v. Glazner, 62 S.W.3d 795, 797 (Tex. 2001).  A defendant who conclusively negates at least one of the essential elements of a plaintiff’s cause of action is entitled to a summary judgment on that claim.  IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004).  A defendant is entitled to summary judgment on an affirmative defense if the defendant conclusively proves all of the elements of the affirmative defense.  Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999).  Once a defendant establishes its right to summary judgment, the burden then shifts to the plaintiff to come forward with summary-judgment evidence raising a genuine issue of material fact.  Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995).  We review a trial court’s summary judgment de novo.  Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).

            In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument.  Id. at 662. Ordinarily, the writing alone is sufficient to express the parties’ intentions because it is the objective, not subjective, intent that controls.  Matagorda Hosp. Dist. v. Burwell, 189 S.W.3d 738, 740 (Tex. 2006) (per curiam).  To achieve this, we examine and consider the entire writing in an effort to harmonize and give effect to all provisions of the contract so that none will be rendered meaningless.  Valence Operating Co., 164 S.W.3d at 662.  No single provision will control; rather, all the provisions must be considered with reference to the entire instrument.  Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193, 196 (Tex. 1962).  We presume the parties to the contract intended every clause to have some effect.  Fein v. R.P.H., Inc., 68 S.W.3d 260, 266 (Tex. App.—Houston [14th Dist.] 2002, pet. denied) (citing Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)).  Contract terms are given their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense.  Valence Operating Co., 164 S.W.3d at 662.  We construe contracts from a utilitarian standpoint, bearing in mind the particular business activity sought to be served.  Frost Nat’l Bank v. L & F Distrbs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005).  We will avoid, when possible and proper, a construction which is unreasonable, inequitable, and oppressive.  Id.  A contract in which there is no consideration moving from one party to the other, or no obligation upon that party, lacks mutuality and is unenforceable.  Kunz v. Machine Repair & Maintenance, Inc., 2001 WL 1288995, *3 (Tex. App.—Houston [14th Dist.] 2001, no pet.) (not designated for publication) (citing Texas Gas Utilities Co. v. Barrett, 460 S.W.2d 409, 412 (Tex. 1970)).  However, courts strive to construe a contract to promote mutuality and to avoid a construction that makes promises illusory.  Young v. Netherlin, 102 S.W.3d 415, 420 (Tex. App.—Houston [14th Dist.] 2003, no pet.).

II.        Did the trial court err when it granted Banik’s motion for summary judgment on Avasthi’s breach of contract cause of action?

Avasthi asserts that the trial court erred in granting Banik’s motion for summary judgment on the basis that the Agreement was illusory and therefore unenforceable.

We begin our analysis by examining the language of the Agreement.  We agree with Banik that Section 3.4 of the Agreement does not include an express provision requiring Avasthi to submit an invoice billing an Avasthi client, such as Repsol YPF Puesto Molina Field, for Banik’s services. Because we must consider the entire Agreement, we disagree that the lack of such a provision renders the Agreement illusory and unenforceable.  To accept Banik’s argument regarding Section 3.4 would defeat the entire purpose of the Agreement and require this court to construe the Agreement in a manner producing an absurd result.  See Lane v. Travelers Indem. Co., 391 S.W.2d 399, 402 (Tex. 1965) (refusing to construe contract in a manner that would produce an absurd result); see also Ill. Tool Works, Inc. v. Harris, 194 S.W.3d 529, 533 (Tex. App.—Houston [14th Dist.] 2006, no pet.)(stating a court will not construe a contract to produce an absurd result).  Because there is a construction of the Agreement that does not produce an absurd result, we decline to accept Banik’s construction of the Agreement.

In Section 22 of the Agreement Avasthi agreed to compensate Banik “according to the fixed amount or the billing rate agreed to on the Work Directive for the specified assignment.”  This unequivocal promise represents adequate consideration for Banik’s return promise to render services to Avasthi and Avasthi’s clients.  See Northern Natural Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 607–08 (Tex. 1999).[1] In addition, the fact the parties did not execute a specific Work Directive until February 7, 2008, several days after they executed the Agreement, does not change this analysis because the determination of whether a contract is unenforceable for want of mutuality of obligation is determined at the time of the alleged breach, not at the time of the making of the contract.  Gaede v. Six Investments, Inc., 38 S.W.3d 753, 760 (Tex. App.—Houston [14th Dist.] 2001, pet. denied).

Finally, despite Banik’s argument to the contrary, we conclude Section 3.4 of the Agreement does not control Avasthi’s obligation to pay Banik.  Instead, we conclude Section 3.4 establishes the deadline for Banik to submit his monthly invoices to Avasthi and the timeframe within which Avasthi would then be required to pay Banik, a requirement we hold is established by Section 22 and the February 7, 2008 Work Directive.  This construction fits within the overall purpose of the other parts found in Section 3 of the Agreement: (1) Sections 3.1 and 3.2 require Banik and Avasthi to agree on a timeline and budget for the completion of assigned projects; (2) Section 3.3 establishes the requirement that Banik must submit weekly time reports to Avasthi; and (3) Section 3.5 establishes the type of expenses incurred by Banik that Avasthi would reimburse.

Because we conclude the Agreement is supported by mutual, reciprocal consideration, we sustain Avasthi’s first issue on appeal.

Conclusion

            Having sustained appellant Avasthi & Associates, Inc.’s first issue on appeal, we reverse the judgment of the trial court and remand this case to the trial court for further proceedings consistent with this opinion.  

                                                                        /s/        John S. Anderson

                                                                                    Justice

Panel consists of Justices Anderson, Frost, and Brown.  (Frost, J. Dissenting; Brown, J. Concurring without Opinion.)

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[1] In support of his contention that the Agreement is illusory and unenforceable, Banik cites the case of Kunz v. Machine Repair & Maintenance, Inc., 2001 WL 1288995, *2 (Tex. App.—Houston [14th Dist.] 2001, no pet.) (not designated for publication). In Kunz, we held that because one of the contracting parties had retained the power to nullify all contractual responsibilities owed to the other contracting party, the contract lacked mutual reciprocal obligation and was therefore illusory and unenforceable.  Id.  Because we have determined the Agreement is supported by adequate mutual consideration we conclude the Kunz case is distinguishable and does not control the outcome here.