Kerry Haliburton, Mabree Haliburton and Taylor Haliburton v. Nancy Gilmore and Lindsey Hendricks

IN THE
TENTH COURT OF APPEALS
No. 10-12-00062-CV
KERRY HALIBURTON, MABREE HALIBURTON
AND TAYLOR HALIBURTON,
Appellants
v.
NANCY GILMORE AND LINDSEY HENDRICKS,
Appellees
From the 12th District Court
Madison County, Texas
Trial Court No. 10-12376-012-10
MEMORANDUM OPINION
This appeal involves a dispute over the ownership of three Beefmaster cattle—
Clara’s Jade, Hope’s Cracker Jack, and Clara Belle. Appellants Kerry Haliburton and
his daughters Mabree and Taylor Haliburton appeal the final judgment, entered after a
bench trial, in favor of Appellees Nancy Gilmore and her daughter Lindsey Gilmore
Hendricks (the Gilmores). We will reverse and remand.
Background
The Haliburtons met the Gilmores in 2006 through livestock shows. Taylor and
Mabree had been involved in showing horses but were interested in showing cattle.
The Gilmores operate the Gilmore Ranch where they breed Beefmaster cattle. Kerry
noticed that the cattle with Gilmore cattle genetics were winning at the livestock shows;
therefore, the Haliburtons contacted the Gilmores about buying some cattle from them.
In 2010 at the Junior Beefmaster Breeders Association (JBBA) livestock show, the
Haliburtons won the national championship for the third year in a row. But after the
show, Kerry was informed that a protest had been filed. That night at the banquet
recognizing the champions, Kerry approached the officials and asked them who had
filed the protest. The officials told him that it was confidential. Kerry then confronted
Nancy. Kerry stated that he had been surprised when, either earlier that day or the day
before, Nancy had told another competitor that the only reason the Haliburtons win is
because they cheat and because they had influence over the judge of the national show.1
Kerry also said that after the Haliburtons had won the national championship, he
invited Nancy to join them in the picture, as he had done every time they had won, but
Nancy refused, which he also thought was “bizarre.” Kerry asked Nancy if she had
anything to do with the protest. Nancy denied having anything to do with it and
identified someone else as having filed the protest. Nevertheless, the next morning,
Kerry demanded that the Gilmores return Clara’s Jade, Hope’s Cracker Jack, and Clara
1 The Gilmores deny that Nancy made such a statement.
Haliburton v. Gilmore Page 2
Belle, all three of which had been at the Gilmores’ ranch. The Gilmores refused to
return the cattle.2
The Gilmores sued the Haliburtons, seeking a declaratory judgment that the
Gilmores owned the cattle and that the Haliburtons’ demand for return of the cattle was
an act of bad faith. The Gilmores also alleged causes of action for breach of contract,
common-law fraud, and intentional infliction of emotional distress and sought the
recovery of actual damages, punitive damages, and attorney’s fees. The Haliburtons
answered by denying the allegations, affirmatively asserting the statute of frauds as a
defense, and seeking findings that they actually owned and were entitled to possession
of the cattle, not the Gilmores. The Haliburtons also sought the recovery of attorney’s
fees.
The Haliburtons’ Version of Events
Kerry testified that the first cows he bought from the Gilmores were Betty Boop
and Clara’s Jade—one cow for each of his daughters. The cows were $5,000 each.
Clara’s Jade had already been bred and was pregnant; thus, the sale/purchase also
included her unborn calf. Kerry paid for the cows with one $10,000 check, dated
October 15, 2006, and the Haliburtons received Certificates of Breeding reflecting the
sale.3
2Kerry testified that three or four days after the protest was made, experts from Texas A&M examined
his cattle and concluded that the allegations had no merit.
3 When asked if the previous testimony explained the entirety of his agreement with the Gilmores with
respect to Clara’s Jade, Kerry replied that the only other thing that the Haliburtons had discussed
generally with the Gilmores was that if the Haliburtons chose to have any of the cattle “flushed,” and the
flushing resulted in the recovery of more eggs than the Haliburtons could handle, then the Haliburtons
would split the extra eggs with the Gilmores in return for the Gilmores splitting the cost of the breeding
Haliburton v. Gilmore Page 3
Beefmaster cattle are registered with the Beefmaster Breeders United (BBU)
organization. Registration and ownership of a cow is reflected by a Certificate of
Breeding. Kerry explained that registration with the BBU is like the registration of a car.
When a registered Beefmaster cow is sold, ownership of the cow is assigned to the new
owner and reflected by completing the transfer form on the back of the Certificate of
Breeding. The transfer form provides, “When the ownership of the animal named on
this Certificate changes, the Seller must immediately complete the transfer and return
the Certificate to Beefmaster Breeders United.” The form then states, “I/We hereby
authorize the transfer of this Certificate of Breeding on the records of Beefmaster
Breeders United to the buyer indicated below,” under which the “Seller,” who must be
the current registered owner, identifies himself or herself, the “Buyer,” and the “Date of
Sale” and then signs the form. Once the transfer form has been completed, the
Certificate is then submitted to the BBU, after which the BBU issues a new Certificate of
Breeding listing the “Buyer” on the previous Certificate’s transfer form as the new
“Current Owner.”
The original Certificate of Breeding for Clara’s Jade, showing Lindsey as the
registered owner, was admitted into evidence. The transfer form on the back of the
Certificate reflects the transfer of Clara’s Jade from Lindsey, the “Seller,” to Mabree, the
“Buyer” on October 15, 2006, the “Date of Sale,” and Lindsey signed the form. The
current Certificate of Breeding for Clara’s Jade was also admitted into evidence.
services. “Flushing” is a process by which eggs from a cow with superior genetics are harvested to
produce embryos. The embryos are then placed in recipient cows, allowing for the breeding of multiple
cattle with the donor cow’s superior genetics. Nancy’s husband is certified to perform artificial
insemination services.
Haliburton v. Gilmore Page 4
Sometime after Lindsey’s transfer of Clara’s Jade to Mabree, Mabree transferred fifty
percent ownership of Clara’s Jade to Taylor; therefore, the current Certificate of
Breeding lists the “Breeder-Member-First Owner” of Clara’s Jade as Lindsey and the
“Current Owner” as fifty percent Mabree and fifty percent Taylor. The Certificates of
Breeding and the check by which Kerry paid the Gilmores were the only writings
between the parties related to the sale/purchase of Clara’s Jade.
After Betty Boop and Clara’s Jade, the Haliburtons then purchased Felicity’s
Lucy on March 1, 2007 for $5,000 and Hope’s Cracker Jack on June 20, 2007 for $6,000.
A BBU “BILL OF SALE” for Hope’s Cracker Jack was admitted into evidence. It states
that Lindsey, the “Seller,” “sold” Hope’s Cracker Jack to Taylor, the “Buyer,” on June
20, 2007, the “Date of Sale,” and Lindsey signed the form. The current Certificate of
Breeding for Hope’s Cracker Jack was also admitted into evidence. It lists the “Breeder-
Member-First Owner” of Hope’s Cracker Jack as Lindsey and the “Current Owner” of
Hope’s Cracker Jack as Taylor. The Bill of Sale and the Certificate of Breeding were the
only writings between the parties related to the sale/purchase of Hope’s Cracker Jack.
After Hope’s Cracker Jack, the Haliburtons then purchased Fritzi’s Angelina on
September 1, 2007 for $5,000 and Clara Belle on February 5, 2008 for $6,000. The
original Certificate of Breeding for Clara Belle, showing Lindsey as the registered
owner, was admitted into evidence. The transfer form on the back of the Certificate
reflects the transfer of Clara Belle from Lindsey, the “Seller,” to Taylor, the “Buyer,” on
February 5, 2008, the “Date of Sale,” and Lindsey signed the form. The current
Certificate of Breeding for Clara Belle was also admitted into evidence, listing Lindsey
Haliburton v. Gilmore Page 5
as the “Breeder-Member-First Owner” and Taylor as the “Current Owner.” These
Certificates of Breeding were the only writings between the parties related to the
sale/purchase of Clara Belle.
After Clara Belle, the only other show heifers that the Haliburtons purchased
from the Gilmores were Hope’s Pepper Jack on March 15, 2008 for $6,000 and Clara
Kate’s Bliss on January 2, 2009 for $6,000.4 At one time the Haliburtons also had an
arrangement with the Gilmores regarding a cow named Clara’s Kate, but the
Haliburtons never purchased her. In fact, the Gilmores received no compensation for
the arrangement, which was as follows: Lindsey had shown Clara’s Kate, but once
Lindsey had gotten beyond the age to show her, the Gilmores allowed Mabree to show
her for a few months. In doing this, the Gilmores transferred the Certificate of Breeding
for Clara’s Kate to Mabree in the same manner as they had done with the other cattle
that the Haliburtons had purchased. Kerry stated that his understanding was that a
person had to be one of the listed owners to be able to show the animal. When the
Haliburtons had finished showing Clara’s Kate, they then transferred the Certificate of
Breeding back to the Gilmores. The purchase of Clara Kate’s calf, Clara Kate’s Bliss, had
nothing to do with the arrangement.
Besides purchasing cattle from the Gilmores, the Haliburtons also sent their
cattle to the Gilmores from time to time for breeding services, after which the cattle
would be returned to the Haliburtons. The cattle sent to the Gilmores included Clara’s
Jade, Hope’s Cracker Jack, and Clara Belle, as well as other cattle the Haliburtons had
4 Besides show heifers, Kerry testified that he had also purchased at least one bull from the Gilmores.
Haliburton v. Gilmore Page 6
purchased from the Gilmores and even some cattle that the Haliburtons had not
purchased from the Gilmores. Clara’s Jade, Hope’s Cracker Jack, and Clara Belle just
happened to be at the Gilmores’ ranch for breeding services when Kerry demanded
their return.
Clara’s Jade had been at the Gilmores for approximately two years when Kerry
demanded her return. She had been at the Gilmores for that amount of time because
her eligibility to be shown had been over for some time and thus her value was in
repetitive flushing. Also, Clara’s Jade was injured at some point during the process of
being artificially inseminated, and there was a long recovery time before they could
attempt to breed her again. Hope’s Cracker Jack and Clara Belle had been at the
Gilmores since either 2009 or 2010 when Kerry demanded their return. Hope’s Cracker
Jack’s eligibility to be shown had ended by that time, but Clara Belle was still eligible to
be shown.
Kerry did not return any of the Certificates of Breeding with the cattle when they
were sent to the Gilmores for breeding services. Taylor testified that she did have her
mother send Mr. Gilmore the Certificate of Breeding for Hope’s Cracker Jack, but she
did not sign the transfer form on the back of the Certificate. Mr. Gilmore had told
Taylor that the original Certificate of Breeding for Hope’s Cracker Jack was needed for
her first flush.
Kerry ultimately testified that in all his discussions with the Gilmores, he never
discussed leasing or borrowing Clara’s Jade, Hope’s Cracker Jack, or Clara Belle from
the Gilmores and then transferring ownership of the cattle back to them. Before the
Haliburton v. Gilmore Page 7
date when he demanded the cattle back from the Gilmores, the Gilmores had never told
him that they expected the cattle to be transferred back into the Gilmores’ name.
Furthermore, he never promised Nancy that he would draft a separate contract
concerning his purchases of Clara’s Jade, Hope’s Cracker Jack, and Clara Belle.5
The Gilmores’ Version of Events
Nancy testified that in October 2006, the Haliburtons purchased Betty Boop for
$5,000 and expressed an interest in purchasing Clara’s Jade but that the Gilmores did
not want to sell her. Clara’s Jade was about two years old at the time and ready to have
a calf. She was also the first black-coated daughter of Clara, the Gilmores’ donor cow
that had produced all the champions, and black-coated Beefmaster cattle were rarer
than red-coated ones at that time.
The Gilmores nevertheless reached an agreement with the Haliburtons regarding
Clara’s Jade, and notes regarding this agreement were recorded in a document
maintained by Nancy and her husband in the normal course of their cattle-raising
business. The Gilmores sold twenty-five percent ownership in Clara’s Jade and one
hundred percent ownership in her calf to the Haliburtons for $5,000. Even though the
Gilmores retained a majority interest in Clara’s Jade, Nancy said they transferred the
Certificate of Breeding into Mabree’s name so that she could show Clara’s Jade at JBBA
5On cross-examination, Nancy did admit that the Gilmores reported the transfer of Clara’s Jade, Hope’s
Cracker Jack, and Clara Belle to the Haliburtons as sales on their tax returns just as they did when the
Haliburtons purchased other cattle from the Gilmores. The Gilmore Ranch also maintains a website for
which Nancy’s company controls the content. On the website is a list of at least some of the cattle that the
Gilmores have sold. The list includes: in February 2008, congratulations to Taylor on the purchase of
Clara Belle; in August 2007, congratulations to Mabree on the purchase of Angelina; in August 2007,
congratulations to Taylor on the purchase of Hope’s Cracker Jack; in March 2007, congratulations to
Taylor on the purchase of Felicity’s Lucy; and in October 2006, congratulations to Mabree on the purchase
of Clara’s Jade. The transaction for Clara’s Kate was not included on the website.
Haliburton v. Gilmore Page 8
and other heifer shows.6 The Haliburtons were then to return Clara’s Jade to the
Gilmores at the end of her show career. Once Clara’s Jade was returned, the
Haliburtons would then receive a twenty-five percent ownership interest in any of her
resulting embryos or calves, as well as be responsible for twenty-five percent of her
future costs.
Nancy said that Kerry was supposed to draft a contract memorializing the
agreement, but he never did. In January 2007, Nancy received an email from Kerry’s
wife confirming that he was working on the contract. The email read in pertinent part,
“Kerry has been out of town all week but will get to the contract as soon as possible.”
After the email, the Gilmores were told several more times that Kerry was going to get
them a contract, but it never happened. Nancy was not more forceful in insisting upon
a contract from the Haliburtons because they were friends, even “like family” by June
2007.
Nancy testified that Clara’s Jade was returned to the Gilmores in June 2008 as her
show career was over. The Haliburtons and Gilmores had not originally negotiated in
whose name Clara’s Jade would be registered after she was returned to the Gilmores,
but when Clara’s Jade was returned, the Haliburtons asked if the Gilmores would leave
Clara’s Jade registered in the Haliburtons’ name so that they would be able to show her
future calves in a “bred and owned show.” The Gilmores agreed, and Clara’s Jade
remained in the Haliburtons’ name.
6Nancy testified that one cannot show an animal in a JBBA event unless that animal is registered in the
person’s name. Nancy also stated that it is common for someone to register an animal in another person’s
name so that the other person can show the animal and then the animal is returned to the original owner.
Haliburton v. Gilmore Page 9
According to Nancy, the Haliburtons and Gilmores made agreements similar to
that with Clara’s Jade with three other heifers because the heifers were considered
“super heifers or daughters of Clara.” But like with Clara’s Jade, Kerry never reduced
the entire agreements to written contracts.
Hope’s Cracker Jack was the second cow that the Gilmores agreed to transfer to
the Haliburtons until the end of her show career, at which time the Haliburtons were to
return her to the Gilmores. The agreement also included that the Haliburtons would
get one of Cracker Jack’s natural calves and twelve embryos. Notes of the agreement
were again recorded in a document maintained by Nancy and her husband in the
normal course of their cattle-raising business.
Hope’s Cracker Jack was returned in December 2009, her show career being over
at that time. The Gilmores requested that the Haliburtons sign the Certificate of
Breeding back over to them after Cracker Jack’s return, but the Haliburtons forgot to
bring the Certificate of Breeding when they returned her. The Gilmores did eventually
receive it in the mail, but the Haliburtons had forgotten to sign the transfer form on the
back, according to Nancy.
Nancy said that Clara Belle was also transferred to the Haliburtons under the
same terms as the transfer of Hope’s Cracker Jack. Notes of the agreement were again
recorded in a document maintained by Nancy and her husband in the normal course of
their cattle-raising business. Clara Belle was returned to the Gilmores in May 2010. Her
show career was not over, but when the Haliburtons asked for the three cattle, Nancy
Haliburton v. Gilmore Page 10
did not inquire as to whether the cow still had eligibility. Clara Belle’s Certificate of
Breeding was not returned when she was returned.
Finally, in December 2008, the Gilmores transferred Clara’s Kate to the
Haliburtons. The Certificate of Breeding was transferred into one of the Haliburton’s
names. She was ready to calf at that time. Nancy said that the agreement was that for
$5,000 or $6,000, the Haliburtons could show Clara’s Kate in the major livestock shows,
keep her calf, and then bring Clara’s Kate back. There was no embryo deal. Clara’s
Kate was returned in July 2009. The Haliburtons also returned the Certificate of
Breeding with the transfer form executed on the back. The current Certificate of
Breeding shows Gilmore Ranch as the owner of Clara’s Kate.
Nancy acknowledged that the Gilmores also performed breeding services for the
Haliburtons. When asked how long it takes for a cow to be flushed, Nancy replied that
the cow is given drugs for about two weeks and then the actual flush takes about a
month to a month and a half. Nancy stated that when it is time for cattle that are
owned by someone else, or currently being borrowed by someone else, to be bred, the
cattle are brought to the Gilmores for approximately thirty days and then returned to
the respective owner or borrower. Nancy did not recall it being Clara’s Jade that was
injured during the breeding process; nevertheless, she stated that the injured cow was
taken to Texas A&M for examination after the injury, the cow was returned, and the
cow was being bred again within about a month and a half to two months after that.
The Gilmores flushed Hope’s Cracker Jack in May 2010 and again in July 2010.
The flushing resulted in three embryos. The Gilmores had cows available to receive the
Haliburton v. Gilmore Page 11
embryos, but the Haliburtons had only one cow that could receive an embryo. The
Gilmores thus took two of the embryos and the Haliburtons took one. Cracker Jack was
still in the Haliburtons’ name when the flushes were done, so the embryos would have
been in their name as well. Kerry’s wife transferred the embryos to the Gilmores by a
bill of sale, but the Gilmores did not pay the Haliburtons any money at that time.
Nancy was unaware of any other method that the embryos could have been transferred
to them other than by bill of sale.
Nancy testified that before July 2010, the Haliburtons never made any request
that possession of the three cattle be returned to them after the cattle had been returned
to the Gilmores after the end of their show careers.
The Trial Court’s Ruling
The trial court ordered that the Gilmores are the owners of Clara’s Jade, Hope’s
Cracker Jack, and Clara Belle, that the Haliburtons are divested of any and all interests
in the cattle, that the Haliburtons are to execute any and all documents, including but
not limited to Beefmaster Breeders United Certificates of Breeding and Transfer,
transferring legal title of the cattle to the Gilmores within ten days from the date of the
judgment, and that the Gilmores recover from the Haliburtons reasonable and
necessary attorney’s fees in the amount of $10,000. The trial court also made findings of
fact and conclusions of law as follows:
FINDINGS OF FACT
1. Plaintiffs and Defendants entered into an oral agreement
whereby Plaintiffs would transfer Beefmaster Breeders United Certificates
of Breeding (“Certificates”) to three (3) registered Beefmaster cattle (the
Haliburton v. Gilmore Page 12
“Cattle”) and the Cattle to Defendants to enable Defendants to exhibit the
Cattle in Junior Beefmaster Breeders Association sanctioned shows (the
“Shows”).
2. As part of the agreement, Defendants were to receive or did
receive ownership of the first born calf of each of the Cattle to exhibit
along side the Cattle in the Shows and a certain number of embryos from
flushes of the Cattle.
3. At the end of their show careers, the Cattle were to be
returned to Plaintiffs and the Cattle were to be re-registered in Plaintiffs’
names.
4. The Cattle were returned to Plaintiffs and are currently in
Plaintiffs’ possession.
5. Defendants retained ownership and possession of the calves
and received embryos as agreed by the parties.
6. Defendants did not re-register the Cattle in Plaintiffs’ names
as agreed.
7. Defendant, Kerry Haliburton is an attorney licensed to
practice law in the State of Texas.
8. Defendant, Kerry Haliburton agreed to reduce the parties’
agreement to writing, [b]ut failed to do so.
9. Plaintiffs relied on the representations made by Defendant
Kerry Haliburton.
10. The representations made by Defendant Kerry Haliburton
were material and were false.
11. Plaintiffs relied on the representations made by Defendant
Kerry Haliburton to their detriment.
12. Plaintiffs suffered damages as a result of the false
representations made by Defendant Kerry Haliburton.
13. Plaintiffs incurred reasonable and necessary attorney’s fees
of $10,000.00 in prosecuting their claim.
Haliburton v. Gilmore Page 13
14. The agreement between Plaintiffs and Defendants could be
performed within one (1) year.
CONCLUSIONS OF LAW
15. A valid enforceable contract existed between Plaintiffs and
Defendants.
16. Defendants breached the contract.
17. The statute of frauds does not apply to the contract between
Plaintiffs and Defendants.
18. The transfer of the Cattle to Defendants and the agreed upon
return of the Cattle to Plaintiffs was not a “sale” within the meaning of the
Texas Uniform Commercial Code.
19. The Certificates do not constitute the written agreement
between the parties.
20. The oral agreement between the parties constitutes a[]
contemporaneous and collateral agreement that would naturally and
normally be included in a separate agreement apart from the Certificates.
21. The Parol[] Evidence Rule does not prevent the introduction
of intrinsic evidence regarding the Certificates or any other part of the
agreement between the parties.
22. Plaintiffs are the owners of the Cattle and are entitled to
immediate possession and ownership of the Cattle.
23. Defendants have a legal obligation to re-register the Cattle in
Plaintiffs’ names.
24. Plaintiffs are entitled to receive reasonable and necessary
attorney’s fees of $10,000.00 from Defendants.
This appeal ensued.
Haliburton v. Gilmore Page 14
Standard of Review
Findings of fact entered in a case tried to the court have the same force and
dignity as a jury verdict. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.
1991). We thus review findings of fact by the same standards that are applied in
reviewing the legal and factual sufficiency of the evidence supporting a jury’s answer to
a jury question. Id.
The test for legal sufficiency is “whether the evidence at trial would enable
reasonable and fair-minded people to reach the verdict under review.” City of Keller v.
Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In making this determination, we credit
favorable evidence if a reasonable fact-finder could and disregard contrary evidence
unless a reasonable fact-finder could not. Id. So long as the evidence falls within the
zone of reasonable disagreement, we may not substitute our judgment for that of the
fact-finder. Id. at 822. The trier of fact is the sole judge of the credibility of the witnesses
and the weight to give their testimony. See id. at 819. Although we consider the
evidence in the light most favorable to the challenged findings, indulging every
reasonable inference that supports them, we may not disregard evidence that allows
only one inference. Id. at 822.
When considering a factual sufficiency challenge, we consider all the evidence
supporting and contradicting the finding. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d
442, 445 (Tex. 1989). We set aside the finding only if it is so contrary to the
overwhelming weight of the evidence as to be clearly wrong and unjust. See Cain v.
Bain, 709 S.W.2d 175, 176 (Tex. 1986).
Haliburton v. Gilmore Page 15
The standard of review for conclusions of law is de novo. See BMC Software Belg.,
N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). We evaluate the trial court’s legal
conclusions independently to determine whether the trial court correctly drew the legal
conclusions from the facts. Id. We uphold conclusions of law on appeal if the judgment
can be sustained on any legal theory the evidence supports. Material P’ships, Inc. v.
Ventura, 102 S.W.3d 252, 257 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). Thus,
incorrect conclusions of law do not require reversal if the controlling findings of fact
support the judgment under a correct legal theory. Id.
Discussion
In their first issue, the Haliburtons contend that the trial court erred in admitting
parol evidence to alter the terms of the Bill of Sale and Certificates of Breeding. The
Haliburtons argue that the parol evidence rule applies because the Bill of Sale and
Certificates of Breeding are writings that reflect the parties’ agreement as to the cattle in
question. The Gilmores respond that the parol evidence rule does not apply because
the documents are only part of the agreement of the parties and not integrations of the
entire agreement. We agree with the Haliburtons that the parol evidence rule applies in
this case.
Texas Business and Commerce Code section 2.202, the parol evidence rule
applicable to the sale of goods,7 provides:
7 The Gilmores describe the transactions regarding Clara’s Jade, Hope’s Cracker Jack, and Clara Belle as
more of a sale that functions as a lease than an outright sale. Thus, although the Gilmores cite section
2.202 as authority in this case, we note that section 2A.202, the parol evidence rule applicable to the lease
of goods, is virtually identical to section 2.202. See TEX. BUS. & COM. CODE ANN. § 2A.202 (West 2009).
Haliburton v. Gilmore Page 16
Terms with respect to which the confirmatory memoranda of the parties
agree or which are otherwise set forth in a writing intended by the parties
as a final expression of their agreement with respect to such terms as are
included therein may not be contradicted by evidence of any prior
agreement or of a contemporaneous oral agreement but may be explained
or supplemented (1) by course of performance, course of dealing, or usage
of trade (Section 1.303); and (2) by evidence of consistent additional terms
unless the court finds the writing to have been intended also as a complete
and exclusive statement of the terms of the agreement.
TEX. BUS. & COM. CODE ANN. § 2.202 (West 2009); see id. § 2.102 (West 2009). In
determining whether this rule is applicable, the first question is whether the Bill of Sale
and Certificates of Breeding constitute “confirmatory memoranda” containing terms
upon which the parties agree or “writing[s] intended by the parties as a final expression
of their agreement with respect to such terms as are included therein” (i.e., integrated
agreements). See id. § 2.202; Morgan Bldgs. & Spas, Inc. v. Humane Soc’y of Southeast Tex.,
249 S.W.3d 480, 486 (Tex. App.—Beaumont 2008, no pet.). A fully integrated written
agreement is a final and complete expression of all the terms agreed upon by the
parties. Morgan Bldgs. & Spas, 249 S.W.3d at 486. A partially integrated agreement is a
final and complete expression of all the terms addressed in that written agreement, but
is not a final and complete expression of all the terms the parties have agreed upon. Id.
A court considers the surrounding circumstances in determining whether, and to what
degree, an agreement is integrated. Id. (citing Sun Oil Co. v. Madeley, 626 S.W.2d 726,
731-32 (Tex. 1981)).
The Bill of Sale and Certificates of Breeding are not fully integrated written
agreements. For instance, neither the Bill of Sale nor the Certificates of Breeding include
the price for the cattle, and both parties seem to acknowledge that there was some
Haliburton v. Gilmore Page 17
agreement regarding breeding services that was not included in the Bill of Sale or
Certificates of Breeding. But the analysis does not end there. Although neither the Bill
of Sale nor the Certificates of Breeding include all the terms agreed upon by the parties,
both the Haliburtons and the Gilmores agree that the Bill of Sale and the Certificates of
Breeding are writings that reflect at least part of their agreement. And the documents
themselves as well as the parties’ testimony establish that the Bill of Sale and
Certificates of Breeding were the final expression of the terms of the agreement
included in those documents. Nancy specifically testified that a bill of sale or certificate
of breeding is a sufficient contract that transfers the rights to a cow. Therefore, the Bill
of Sale and Certificates of Breeding are “confirmatory memoranda” containing terms
upon which the parties agree or “writing[s] intended by the parties as a final expression
of their agreement with respect to such terms as are included therein.”
The Gilmores nevertheless argue that the parol evidence rule does not apply in
this case because exceptions to the rule apply. The Haliburtons disagree and also
challenge such findings of fact and conclusions of law.
The Gilmores first argue that they were properly allowed to introduce evidence
that the Haliburtons agreed to reconvey the cattle to them and failed to do so because
parol evidence is allowed to show the failure or lack of consideration. Parol evidence is
allowed to show the failure or lack of consideration, see DeLuca v. Munzel, 673 S.W.2d
373, 376 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.), but the evidence that the
Gilmores introduced was not evidence of failure or lack of consideration. The Gilmores
did not contest that the Haliburtons paid them $5,000 in the transaction regarding
Haliburton v. Gilmore Page 18
Clara’s Jade, $6,000 in the transaction regarding Hope’s Cracker Jack, and $6,000 in the
transaction regarding Clara Belle. Instead, the Gilmores introduced evidence that their
own promise in exchange for the Haliburtons’ money was not an outright sale of the
cattle but rather a sale that actually functioned as a lease. Thus, this exception to the
parol evidence rule does not apply.
The Gilmores next argue that the oral agreement to reconvey the cattle to them is
a contemporaneous collateral agreement, as stated in the trial court’s conclusions of law
(No. 20). The Supreme Court recently explained this exception:
The general rule for an unambiguous contract is that evidence of
prior or contemporaneous agreements is inadmissible as parol evidence.
David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (per curiam).
However, an exception exists for consistent collateral agreements. As we
stated over half a century ago in Hubacek v. Ennis State Bank, the parol
evidence rule “does not preclude enforcement of prior or
contemporaneous agreements which are collateral to an integrated
agreement and which are not inconsistent with and do not vary or
contradict the express or implied terms or obligations thereof.” 159 Tex.
166, 317 S.W.2d 30, 32 (1958); accord Haden, 266 S.W.3d at 451 (“Under the
exception, parol evidence can be used to demonstrate a prior or
contemporaneous agreement that is both collateral to and consistent with
a binding agreement, and that does not vary or contradict the agreement’s
express or implied terms or obligations.”). A collateral agreement
between parties concerning the relationship of several distinct obligations
between them falls within the exception. See, e.g., Hubacek, 317 S.W.2d at
34 (“A and B in an integrated contract respectively promise to sell and to
buy Blackacre for $3,000.00. A contemporaneous oral agreement between
them that the price shall be paid partly by discharge of a judgment which
B has against A is operative.” (quoting with approval RESTATEMENT (FIRST)
OF CONTRACTS section 240 cmt. d (1939))).
ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 875-76 (Tex. 2010).
Here, the evidence of an oral agreement to reconvey the subject cattle to the
Gilmores is not consistent with the Bill of Sale and Certificates of Breeding. The Bill of
Haliburton v. Gilmore Page 19
Sale and Certificates of Breeding unambiguously show that Lindsey sold the subject
cattle to Taylor and Mabree. Evidence of an oral agreement to reconvey the subject
cattle to the Gilmores at the end of their show careers contradicts that the transactions
were sales and instead indicates that the transactions were more like leases. Thus, the
consistent-collateral-agreement exception to the parol evidence rule does not apply in
this case.
The Gilmores next argue that although there is no “intrinsic evidence exception”
to the parol evidence rule, it is true that the parol evidence rule does not prevent the
admission of intrinsic evidence as to the Certificates or other agreements of the parties,
as stated in the trial court’s conclusions of law (No. 21). The Gilmores argue that the
trial court’s “intrinsic evidence” conclusion simply means that the parol evidence rule
does not apply because the Bill of Sale and Certificates of Breeding were not integrated
agreements setting forth the entire agreement of the parties and that evidence of an oral
agreement to reconvey the subject cattle to the Gilmores at the end of the cattle’s show
career is thus admissible because it does not contradict or vary the terms of the Bill of
Sale or Certificates of Breeding. But, as just explained, the parol evidence that the
transactions were more like leases contradicts the unambiguous language of the Bill of
Sale and Certificates of Breeding showing that Lindsey sold the subject cattle to Taylor
and Mabree.
Having found no caselaw setting forth an “intrinsic evidence” exception to the
parol evidence rule, the Haliburtons theorize that the trial court’s “intrinsic evidence”
conclusion of law meant that it found the Bill of Sale and Certificates of Breeding to be
Haliburton v. Gilmore Page 20
ambiguous and that parol evidence (i.e., “intrinsic evidence”) could thus be considered
to resolve the ambiguity and explain the meaning of the written instruments. But, as
the Haliburtons go on to explain, the trial court’s conclusion of law cannot be upheld
even under this interpretation. The Bill of Sale and Certificates of Breeding are
unambiguous. They show that Lindsey sold the subject cattle to Taylor and Mabree.
The parol evidence that the transactions were more like leases would not then resolve
an ambiguity but create one, and parol evidence is not admissible for the purpose of
creating an ambiguity. Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464
(Tex. 1998).
Finally, the Gilmores state in their brief that although they pled common-law
fraud, at no time have they contended that the Haliburtons’ alleged fraud was an
exception to the parol evidence rule. Nevertheless, the parol evidence rule does not bar
extrinsic evidence that the defendant procured the contract by fraud. See DRC Parts &
Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 864 (Tex. App.—Houston [14th
Dist.] 2003, pet. denied). And the trial court made several findings of fact in favor of the
Gilmores on their fraud claim. The Haliburtons contend that the trial court’s fraud
findings are not an exception to the parol evidence rule.
The Gilmores alleged, and the trial court found that the Haliburtons orally
agreed to return the subject cattle to the Gilmores and to re-register the cattle in the
Gilmores’ name. The trial court also found that Kerry, a licensed attorney, agreed to
reduce the parties’ oral agreement to writing but failed to do so and that the Gilmores
relied on this representation to their detriment.
Haliburton v. Gilmore Page 21
An essential element of a fraud claim is that the plaintiff actually and justifiably
relied on the defendant’s misrepresentation to suffer injury. Id. at 858; TCA Bldg. Co. v.
Entech, Inc., 86 S.W.3d 667, 674 (Tex. App.—Austin 2002, no pet.). A party to an arm’s
length transaction must exercise ordinary care and reasonable diligence for the
protection of his own interests, and failure to do so is not excused by mere confidence in
the honesty and integrity of the other party. DRC Parts & Accessories, 112 S.W.3d at 864.
Therefore, reliance upon an oral representation that is directly contradicted by the
express, unambiguous terms of a written agreement between the parties is not justified
as a matter of law. Id.
Even if we accept as true that the Haliburtons made the alleged
misrepresentations stated above, we cannot conclude that the Gilmores justifiably relied
on them to their detriment. We reiterate that the Bill of Sale and Certificates of Breeding
unambiguously show that Lindsey sold the subject cattle to Taylor and Mabree and that
an oral agreement that the transactions were to function more like leases than sales
would thus directly contradict the Bill of Sale and Certificates of Breeding. The
Gilmores’ reliance on such a representation is therefore not justified as a matter of law.
See id. For the same reason, reliance on a representation by Kerry to reduce an oral
agreement that directly contradicts the Bill of Sale and Certificates of Breeding to
writing is not justified as a matter of law. See id.
Nancy did testify that the Haliburtons were “like family” to the Gilmores by June
2007, indicating that the transactions were no longer being made at arm’s length;
however, even accepting Nancy’s testimony as true, the transaction regarding Clara’s
Haliburton v. Gilmore Page 22
Jade was made in 2006, soon after the Gilmores and Haliburtons had met. According to
Nancy, the Haliburtons orally agreed at that time to return Clara’s Jade to the Gilmores
at the end of her show career, and Kerry agreed to reduce this oral agreement to writing
but failed to do so. Thus, even though the transactions regarding Hope’s Cracker Jack
and Clara Belle were in 2007 and 2008, respectively, any reliance by the Gilmores on a
representation by Kerry to reduce these later agreements to writing when he never
reduced the agreement regarding Clara’s Jade to writing is not justified. Thus, the
fraud exception to the parol evidence rule does not apply in this case.
In light of the foregoing, we conclude that the parol evidence rule applies in this
case and that the trial court therefore erred in admitting evidence of the oral agreements
contradicting the Bill of Sale and Certificates of Breeding. See TEX. BUS. & COM. CODE
ANN. § 2.202. We sustain the Haliburtons’ first issue. Furthermore, because the trial
court clearly relied on the Gilmores’ parol evidence, the Haliburtons were harmed, and
we need not address their second or third issues.
The Haliburtons contend that without the parol evidence of the oral agreements
contradicting the Bill of Sale and Certificates of Breeding, this case should be reversed
and rendered, declaring the Haliburtons to be the owners of the cattle as reflected in the
writings and awarding them their fees and costs incurred in this matter. But because
the Haliburtons have not raised the issue that the evidence established their ownership
of the three cows as a matter of law, we reverse the judgment and remand the case to
the trial court for further proceedings consistent with this opinion.
Haliburton v. Gilmore Page 23
REX D. DAVIS
Justice
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Reversed and remanded
Opinion delivered and filed May 2, 2013
[CV06]
Haliburton v. Gilmore Page 24