Panamerican Operating, Inc., a Texas Corporation v. Maud Smith Estate, a Texas General Partnership

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
PANAMERICAN OPERATING, INC., §
No. 08-12-00036-CV
Appellant, §
Appeal from the
v. §
97th Judicial District Court
MAUD SMITH ESTATE, A TEXAS §
GENERAL PARTNERSHIP, of Archer County, Texas
§
Appellee. (TC#2009-0000028A-CV)
§
OPINION
In this breach-of-contract action, PanAmerican Operating, Inc. (“PanAmerican”) appeals
from the trial court’s judgment in favor of the Maud Smith Estate (“Maud Smith”). In three
issues, PanAmerican challenges the sufficiency of the trial court’s findings of fact regarding
apparent authority and ratification and the correctness of its conclusions of law concerning breach
and ratification. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Maud Smith is in the business of leasing mineral interests it owns to companies like
PanAmerican. To help it acquire leases from mineral owners like Maud Smith, PanAmerican
hires landmen as independent contractors. One of the landmen hired by PanAmerican to obtain
oil and gas leases from mineral owners in Archer County, Texas was Robert Wormser.
In mid-May 2008, Wormser called William T. Elder, the attorney responsible for
negotiating leases on Maud Smith’s behalf. Without disclosing that he was an independent
contractor, Wormser identified himself as a representative of PanAmerican. Wormser informed
Elder that PanAmerican was interested in leasing minerals owned by Maud Smith and the two men
began negotiating. After agreeing on terms such as the bonus and royalty payment, Elder asked
Wormser to send him an offer in writing. Wormser responded by sending an email to which he
attached a form lease. The email, sent from the address “r.wormser@panamop.com” and dated
May 28, 2008, read:
Mr. Elder
Here is the lease form and our offer includes $150.00 per net mineral acre for a 3
year primary term, 1/5th royalty and a 2 yr option at $200.00 per net mineral acre.
If you would fill in the lessor’s address and make sure i put the correct name on
there and if not change it to the capacity they would neet [sic] to sign the lease in.
Thank you
robert wormser
806-535-8576
During the next four days, Elder and Wormser exchanged several emails in which they
discussed the lease’s format and its contents. Believing the lease had been drafted to both parties’
satisfaction, Elder sent Wormser an email on June 2, 2008, accepting the offer and asking for the
lease bonus on Maud Smith’s behalf. When the lease bonus was not paid promptly, Elder began a
two-month campaign to secure its payment. Despite exchanging more emails with Wormser,
providing Wormser with a copy of the signed lease, and mailing the original lease to Wormser at
PanAmerican’s office, Elder failed to obtain the lease bonus.
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Approximately seven months later, Maud Smith sued PanAmerican for breach of contract
and a declaratory judgment alleging it was entitled to the lease bonus and PanAmerican was
obligated to pay it. PanAmerican answered, denying Wormser was an employee or held a general
power of agency and the communications between Wormser and Elder formed a basis for a
contract between Maud Smith and PanAmerican. Only then did Maud Smith learn Wormser was
an independent contractor. Following a bench trial, the trial court awarded Maud Smith damages
and attorney’s fees and, upon PanAmerican’s request and prompting, issued findings of fact and
conclusions of law.
FINDINGS OF FACT
In its first and second issues, PanAmerican challenges the trial court’s findings of fact
concerning apparent authority and ratification.
STANDARD OF REVIEW
Findings of fact in a bench trial have the same force and dignity as a jury’s verdict, and we
review them for legal and factual sufficiency by the same standards applied in reviewing evidence
supporting a jury’s answer. See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).
In reviewing the legally sufficiency of the evidence, we view the evidence in the light most
favorable to the verdict, crediting favorable evidence if reasonable jurors could, and disregarding
contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802,
822, 827 (Tex. 2005). Evidence is legally insufficient when: (1) there is a complete absence of a
vital fact; (2) the rules of law or evidence bar the court 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 scintilla;
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or (4) the evidence establishes conclusively the opposite of the vital fact. City of Keller, 168
S.W.3d at 810. Less than a scintilla of evidence exists if the evidence is “so weak as to do no
more than create a mere surmise or suspicion” that the fact exists. Ford Motor Co. v. Ridgway,
135 S.W.3d 598, 601 (Tex. 2004). More than a scintilla of evidence exists if the evidence
furnishes some reasonable basis for differing conclusions by reasonable minds about the existence
of a vital fact. Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 77 S.W.3d 253, 262
(Tex. 2002).
In reviewing the factual sufficiency of the evidence, we consider all the evidence and set
aside a finding only if it is so against the great weight and preponderance of the evidence as to be
clearly wrong and unjust. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996).
APPARENT AUTHORITY
In its first issue, PanAmerican contends the trial court’s findings of fact concerning
apparent authority are factually and legally insufficient. We disagree.
1. Applicable Law
Apparent authority arises when a principal either knowingly permits its agent to hold
himself out as having authority or acts with such a lack of ordinary care as to clothe its agent with
indicia of authority. Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). Only the principal’s
conduct is relevant in determining whether apparent authority exists and it is gauged by the
standard “of a reasonably prudent person, using diligence and discretion to ascertain the agent’s
authority.” Id. at 182-83. Such conduct, however, “is not limited to spoken or written words
. . . . Silence may constitute a manifestation when, in light of all the circumstances, a reasonable
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person would express dissent to the inference that other persons will draw from silence. Failure
then to express dissent will be taken as a manifestation of affirmance.” RESTATEMENT (THIRD) OF
AGENCY § 1.03, cmt. b (2006).1
2. Discussion
Evidence adduced at trial established that a reasonably prudent person would have
believed Wormser possessed the authority to contract on PanAmerican’s behalf because
PanAmerican acted with such a lack of ordinary care as to clothe Wormser with indicia of
authority.2
1
See generally RESTATEMENT (THIRD) OF AGENCY § 1.03 cmt. b (“[A]n agent is sometimes placed in a position in an
industry or setting in which holders of the position customarily have authority of a specific scope. Absent notice to
third parties to the contrary, placing the agent in such a position constitutes a manifestation that the principal assents to
be bound by actions by the agent that fall within that scope. A third party who interacts with the person, believing the
manifestation to be true, need not establish a communication made directly to the third party by the principal to
establish the presence of apparent authority . . . .”).
2
The following are the trial court’s findings concerning apparent authority:
a. Defendant provided Robert Wormser with a PanAmerican Operating, Inc. email address, phone
line and physical office, in order to negotiate mineral leases on behalf of Defendant.
b. As a result of Defendant providing Robert Wormser with a PanAmerican Operating, Inc. email
address, phone line and physical office and knowingly allowing him to utilize same on behalf of and
in the name of Defendant, Defendant gave Robert Wormser the appearance of an agent/employee of
Defendant to Plaintiff and of having the authority which he purported to exercise in negotiations
with Plaintiff.
c. Robert Wormser did utilize the email address, phone line and physical office provided by
Defendant in a manner and purpose to benefit Defendant by obtaining an Oil and Gas Lease in
Archer County, Texas, in the name of Defendant on Plaintiff’s minerals.
d. Defendant PanAmerican Operating, Inc. failed to require Robert Wormser in his use of the
provided email address, phone line and physical office to inform Plaintiff that he lacked authority to
bind Defendant in any negotiations or that any agreement reached required approval by any others,
which caused Plaintiff to conclude that Robert Wormser actually held the authority which he
purported to exercise.
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It is undisputed that Wormser had authority to obtain oil and gas leases on PanAmerican’s
behalf and to negotiate terms on its behalf. Geary Trigleth, founder and president of
PanAmerican, admitted as much at trial.
It is also undisputed that PanAmerican used Wormser as the point man in obtaining a lease
from Maud Smith. Elder testified he dealt exclusively with Wormser in negotiating and
finalizing the lease in issue and that they communicated primarily by email. Trigleth conceded
not only that PanAmerican provided Wormser with a “@panamop.com” email address, a cubicle
in the office, and a company landline to use in his efforts to obtain leases on PanAmerican’s
behalf, but also he knew Wormser was negotiating a lease with Elder. 3 Indeed, Wormser
described his efforts in securing the lease from Maud Smith in reports he was required to submit.
Although disputed by PanAmerican, it is likewise evident PanAmerican endorsed
Wormser’s actions. Trigleth boasted of his ability to monitor emails to and from PanAmerican’s
e. Defendant failed to produce any evidence that Defendant required Robert Wormser to disclose
that he was not an agent/employee of Defendant, or acting as an agent/employee of Defendant.
f. Defendant knowingly permitted Robert Wormser to negotiate with Plaintiff on the Oil and Gas
Lease while utilizing Defendant’s address, email domain, and telephone without either requiring
Robert Wormser to communicate his lack of binding authority or notifying Plaintiff directly that
Wormser lacked such authority.
g. Neither Defendant, nor Robert Wormser, ever notified Plaintiff or its authorized representative
that Robert Wormser lacked authority from Defendant.
h. The Plaintiff relied on Robert Wormser’s representations of his authority and on Defendant’s
allowing Robert Wormser to engage in such negotiations on its behalf without a disclaimer of
authority.
i. Defendant’s conduct clothed Robert Wormser with the indicia of authority that Robert Wormser
purported to have.
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employees and independent contractors, though denied monitoring Wormser’s communications
with Elder. Whether true or not, the fact remains that the emails sent by Wormser from his
“@panamop.com” email address contain no disclaimers that he was not authorized to negotiate
contracts on PanAmerican’s behalf and, in fact, suggest otherwise. 4 In his emails to Elder,
Wormser repeatedly used the words “we,” “us,” “our,” “they,” and “our attorney.” Pointedly, one
of the emails introduced into evidence by Maud Smith, which was authored by a PanAmerican
attorney and dated August 12, 2008, states: “I have gone over all curative with Robert Wormser
in detail. This is also to confirm that we now have copies of executed leases on all mineral
owners except . . . .” Yet as acknowledged by Trigleth, at no point during the negotiations with
Elder or even shortly after PanAmerican received the lease did he or anyone else at PanAmerican
inform Maud Smith that Wormser lacked authority to execute a lease on PanAmerican’s behalf.
It was only when the price of oil dropped precipitously that PanAmerican asserted that Wormser
had no authority to execute leases on its behalf.
Thus, from all outward appearances, Elder had no reason to believe Wormser did not have
the authority to execute leases on PanAmerican’s behalf and nothing in the record indicates
PanAmerican dissuaded Elder from so believing.
On appeal, PanAmerican advances four arguments in support of its contention that the trial
court erred in finding Wormser had apparent authority to bind PanAmerican. None are
persuasive, however.
First, PanAmerican asserts the trial court erroneously considered only Wormser’s acts,
3
The email address “r.wormser@panam.op” itself was unremarkable––Trigeleth assigned “@panamop.com” email
addresses to all PanAmerican officers, employees, and independent contractors.
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rather than those of PanAmerican, and, further, there was no evidence Maud Smith relied on
PanAmerican’s conduct to believe Wormser had apparent authority. This assertion is belied by
our discussion of the evidence.
Second, PanAmerican contends that as a matter of law, the “@panamop.com” email
address provided to Wormser did not cloak Wormser with apparent authority. In support of its
contention, PanAmerican cites CSX Transp., Inc. v. Recovery Express, Inc., 415 F. Supp. 2d 6 (D.
Mass. 2006), as authority. PanAmerican’s reliance on CSX is misplaced, however.
At its core, CSX Transp., Inc. is a case about a credulous third party who is taken advantage
of by a scheming individual with no formal business relationship to the entity sued. In that case,
CSX received an email from an individual stating he was from Recovery Express and another
entity and interested in purchasing rail cars for scrap. 415 F. Supp. 2d at 7. After a few
subsequent phone calls, CSX delivered the rail cars to the individual, who disassembled and
transported them away. Id. at 7-8. When the individual’s check bounced, CSX sought recovery
from Recovery Express and the other entity. Id. at 8. However, by the time suit was brought, the
other entity was no longer in existence allegedly because of fraudulent conduct by the individual.
Id. at 8 n1. CSX asserted Recovery Express, with which the individual and the other entity shared
office space, was liable as a principal because Recovery Express had assigned the individual an
email address containing its domain name. Id. at 8-9. In concluding apparent authority did not
exist because CSX’s inference of the individual’s authority was unreasonable as a matter of law,
the federal district court reasoned: “Granting an e-mail domain name, by itself, does not cloak the
recipient with carte blanche authority to act on behalf [of] the [grantor]. Were this so, every
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subordinate employee with a company e-mail address – down to the night watchman – could bind
a company to the same contracts as the president.” CSX Transp., Inc., 415 F. Supp. 2d at 11.
This case, on the other hand, is about a principal who employs an agent to carry out its
business but, regretting the outcome of the agent’s actions, opportunistically denies the agent acted
with authority. PanAmerican, unlike Recovery Express, had a formal business relationship with
its agent, knew its agent would be contacting third parties on its behalf for the express purpose of
carrying out its business objectives, and outfitted him with the tools necessary to accomplish his
task. As discussed above, these tools included more than just an email address and gave rise to
the reasonable inference that Wormser was authorized to execute leases on PanAmerican’s behalf.
Moreover, unlike CSX, Elder dealt frequently and extensively with the purported principal’s agent
in consummating the deal and in seeking payment, receiving numerous emails from that agent
informing him that once “they” resolved some issues payment would be forthcoming. As noted
above, PanAmerican asserted Wormser had no authority to execute leases on its behalf only after
the price of oil had dropped precipitously.
Third, PanAmerican posits the trial court erred in “presum[ing] that PanAmerican had an
affirmative obligation to require its independent contractor agents to expressly disclaim authority
. . . when dealing with third parties” because “[t]hat is not the law in Texas.” However, not only
does PanAmerican fail to cite any authority in support of its position, it is also wrong. See
Funderburg v. Sw. Drug Corp., 210 S.W.2d 607, 610 (Tex.Civ.App.--Fort Worth 1948, no
writ)(“When an agent acts within the apparent scope of his authority, a duty rests upon his
principal to give notice of any limitations which affect the rights of parties dealing with the agent,”
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citing TEX.JUR.2d p. 408, sec. 24); Sealy Oil Mill & Mfg. Co. v. Bishop Mfg. Co., 235 S.W. 850,
852 (Tex.Comm’n App. 1921, opinion adopted)(“That the powers of an agent are prima facie
coextensive with the business intrusted to his care, and that they will not be narrowed by
limitations not communicated to the person with whom he deals.”).
Fourth, PanAmerican argues Elder’s belief that Wormser had apparent authority was
unreasonable and his reliance on this belief was unjustifiable. In support of this argument,
PanAmerican cites case law holding that a third party who fails to ascertain both the fact and the
scope of an agent’s authority cannot rely on apparent authority. See e.g., Humble Nat. Bank v.
DCV, Inc., 933 S.W.2d 224 (Tex.App.--Houston [14th Dist.] 1996, writ denied); Suarez v. Jordan,
35 S.W.3d 268 (Tex.App.--Houston [14th Dist.] 2000, no pet.). However, these cases are
distinguishable and thus inapposite. In Humble Nat. Bank, the third party knew that the agent was
not the individual who had authority to cash checks for the principal. 933 S.W.2d at 237-38.
Here, Maud Smith did not know that Wormser could not execute a lease on PanAmerican’s behalf.
In Suarez, there was no evidence whatsoever suggesting that a son who signed a settlement
agreement signed it on his father’s behalf. 35 S.W.3d at 273-74. Here, there was ample
evidence suggesting that Wormser had the apparent authority to bind PanAmerican to a lease
negotiated by him.
Having disposed of PanAmerican’s arguments, we hold that the evidence is legally and
factually sufficient to support the trial court’s finding that PanAmerican clothed Wormser with the
indicia of authority he purported to have and on which Maud Smith relied by knowingly failing to
take any action to dissuade Elder from believing Wormser had the authority to bind PanAmerican.
10
See Walker Ins. Servs. v. Bottle Rock Power Corp., 108 S.W.3d 538, 550-52 (Tex.App.--Houston
[14th Dist.] 2003, no pet.)(holding that individual who helped obtain a bond for the principal had
apparent authority to negotiate or contract on principal’s behalf because most of the negotiations
were conducted through the individual, the individual was actively involved in securing the bond,
and the individual’s efforts were accepted and ratified by the principal.)
Issue One is overruled.
RATIFICATION
In its second issue, PanAmerican argues the trial court’s findings of fact regarding
ratification are factually and legally insufficient. We disagree.
1. Applicable Law
Ratification is the adoption or confirmation, by a party with actual knowledge of all
material facts, of a prior act that did not then legally bind that party and which that party had a right
to repudiate. Thomson Oil Royalty, LLC v. Graham, 351 S.W.3d 162, 165 (Tex.App.--Tyler
2011, no pet.). A party ratifies a contract by acting under it, performing under it, or affirmatively
acknowledging it. Id. at 166. Where silence is the basis of ratification, the party seeking to hold
a principal liable for an unauthorized act of his agent must show that the principal had knowledge
of all material facts. Thermo Products Co. v. Chilton Independent School District, 647 S.W.2d
726, 733 (Tex.App.--Waco 1983, writ ref’d n.r.e.); Diamond Paint Company of Houston v. Embry,
525 S.W.2d 529, 535 (Tex.Civ.App.--Houston [14th Dist.] 1975, writ ref’d n.r.e.). The critical
focus is on the actions taken by the party seeking to avoid a contract after he or she becomes aware
of the contract. Thomson Oil Royalty, 351 S.W.3d at 166.
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2. Discussion
The evidence shows that PanAmerican was aware of the circumstances surrounding the
acquisition of the lease in dispute and chose not to repudiate the validity of the lease until doing so
approximately three months after receiving the lease.5
It is undisputed that PanAmerican received the lease in issue. Elder testified he mailed the
original signed lease to Wormser at PanAmerican’s business address. In an email, counsel for
PanAmerican acknowledged the lease had been received by PanAmerican and Trigleth did not
contend otherwise at trial. So too is it undisputed that PanAmerican did not repudiate the lease
immediately after receiving it, but instead remained silent for a number of months afterwards. As
demonstrated above in our discussion of apparent authority, PanAmerican knew of all the material
facts surrounding Wormser’s acquisition of the mineral lease. Thus, by keeping the lease and
5
These are the trial court’s findings on ratification:
a. Plaintiff emailed a copy of the signed Oil and Gas Lease to Defendant on June 2, 2008.
b. Plaintiff sent the original signed Oil and Gas Lease to Defendant on or about July 21, 2008.
c. Defendant’s prior counsel, Mr. Buchan, acknowledged receipt of the Oil and Gas Lease on
August 12, 2008.
d. Defendant received and retained the Oil and Gas Lease after being made fully aware of the terms
surrounding the Oil and Gas Lease.
e. Defendant failed [to] take any action to dispute the validity of the Oil and Gas Lease within a
reasonable time.
f. Defendant failed to return the original Oil and Gas Lease within a reasonable time.
g. Defendant’s possession of the Oil and Gas Lease prevented Plaintiff from leasing its mineral
rights to a third party or from mitigating their damages.
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failing to repudiate it when presented with the opportunity to do so, PanAmerican affirmatively
acknowledged its validity, thereby ratifying it.
PanAmerican contends the trial court’s findings are factually insufficient because there is
no clear evidence PanAmerican intended to ratify the lease. But Maud Smith was required to
demonstrate only that PanAmerican performed an intentional act that was inconsistent with any
intention to avoid the lease. Old Republic Ins. Co., Inc. v. Fuller, 919 S.W.2d 726, 728 n.1
(Tex.App.--Texarkana 1996, writ denied). As recognized by this Court, that intent may be
inferred from the acceptance of benefits under the lease after having full knowledge of the act that
would make the lease voidable. See Williams v. City of Midland, 932 S.W.2d 679, 685
(Tex.App.--El Paso 1996, no pet.)(stating that intentional ratification may be shown by party’s
acceptance of benefits under agreement, after becoming fully aware of fraud). The benefit
PanAmerican received here was obtaining a signed lease without having to pay until PanAmerican
could determine whether, based on the future price of oil, it made economic sense to honor the
lease.
Second, PanAmerican asserts the trial court’s findings are legally and factually insufficient
because the record does not reflect “that PanAmerican, as an entity, had full knowledge of the
terms of the agreement.” This assertion is belied by Trigelth’s testimony that as president and
founder of PanAmerican, he knew Wormser was negotiating a lease with Elder and by the email
authored by the PanAmerican attorney confirming that PanAmerican had copies of executed
leases on all mineral interest owners except one.
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Third, PanAmerican argues the trial court’s findings are legally and factually insufficient
because PanAmerican “never received, much less retained, a benefit.” As mentioned above,
PanAmerican received the benefit of a signed lease to minerals it could have developed had it
made economic sense to do so.
Having disposed of PanAmerican’s arguments, we hold that the evidence is legally and
factually sufficient to support the trial court’s finding that PanAmerican ratified the lease by
failing to take any action to dispute its validity after receiving the lease with full knowledge of the
circumstances surrounding its acquisition.
Issue Two is overruled.
CONCLUSIONS OF LAW
In its third and final issue, PanAmerican contends the trial court’s conclusions of law that
PanAmerican ratified and breached the contract are clearly erroneous because the evidence
supporting these conclusions is legally and factually insufficient. We disagree.
We review a trial court’s conclusions of law de novo and uphold them if the judgment can
be sustained on any legal theory supported by the evidence. BMC Software Belgium, N.V. v.
Marchand, 83 S.W.3d 789, 794 (Tex. 2002). Although a trial court’s conclusions of law may not
be challenged for factual sufficiency, we may review the legal conclusions drawn from the facts to
determine whether the conclusions are correct. Marchand, 83 S.W.3d at 794. If a conclusion of
law is erroneous, but the trial court nevertheless rendered the proper judgment, the error does not
require reversal. Id.
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As demonstrated above, the evidence adduced at trial was legally and factually sufficient to
support the trial court’s finding of fact supporting its conclusions of law. The trial court’s
conclusions are therefore correct.
Issue Three is overruled.
CONCLUSION
Having overruled all three of PanAmerican’s issues, we affirm the judgment of the trial
court.
July 24, 2013
YVONNE T. RODRIGUEZ, Justice
Before Rivera, J., Rodriguez, J., and Larsen, J. (Senior Judge)
Larsen, J. (Senior Judge)(Sitting by Assignment)
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