Mark P. Hardwick, Individually and D/B/A Mark P. Hardwick Oil and Gas Properties and Mark P. Hardwick, LLC v. Smith Energy Company, on Its Own Behalf and on Behalf of Smith Energy Resource Oil, Ltd., a Texas Limited Partnership, and on Behalf of Smith Energy Partners I, Ltd., a Texas Limited Partnership

In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-15-00083-CV
MARK P. HARDWICK, INDIVIDUALLY AND
D/B/A MARK P. HARDWICK OIL AND GAS PROPERTIES
AND MARK P. HARDWICK, LLC, APPELLANTS
V.
SMITH ENERGY COMPANY, ON ITS OWN BEHALF
AND ON BEHALF OF SMITH ENERGY RESOURCE OIL, LTD.,
A TEXAS LIMITED PARTNERSHIP, AND ON BEHALF OF SMITH ENERGY
PARTNERS I, LTD., A TEXAS LIMITED PARTNERSHIP, APPELLEE
On Appeal from the 121st District Court
Terry County, Texas
Trial Court No. 19490, Honorable Rick Morris, Presiding
June 27, 2016
OPINION
Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.
Appellants, Mark P. Hardwick, individually and d/b/a Mark P. Hardwick Oil and
Gas Properties, and Mark P. Hardwick, LLC, appeal a judgment entered in favor of
appellee, Smith Energy Co., rescinding contracts between the parties, awarding Smith
$5,004,231 in equitable forfeiture damages, $104,876 for breach of contract, fraud,
theft, and breach of fiduciary duties, and $3,465,764 for attorney’s fees. The judgment
further denies all counterclaims asserted by appellants. We will affirm in part, reverse
and remand in part, and reverse and render in part.
Factual and Procedural Background
Mark Hardwick and two of his friends, Steve Blaylock and Jerry Elger, developed
a method of predicting the presence of oil and gas in certain locations. The three
friends took their method to Lester Smith, an investor in the oil and gas business, to see
whether he would be interested in investing in their proposed development. Rather than
the typical “third for a quarter” arrangement, whereby an investor agrees to pay one-
third of the acquisition, seismic, and drilling costs in exchange for a quarter of the
working interest, Lester Smith agreed to pay all costs in exchange for seventy-five
percent of the working interest.
As a result of this agreement, five different prospect areas were developed
resulting in five different sets of agreements: (1) North Mound Lake, (2) Big Bump, (3)
On Point, (4) Muy Caliente, and (5) North O’Donnell/On Point Extension. Collectively,
these agreements are referred to as the Fusselman Prospect Agreements (FPA). Each
of these agreements, or their subsequently executed operating agreements, expressly
disclaim the creation of a joint venture or partnership as well as the creation of any
fiduciary duties between the parties to the FPA.
Subsequently, Hardwick and Lester Smith entered into a second agreement to
develop another area referred to as the “Bad Billy” area. In the Bad Billy agreement,
2
Hardwick agreed to do land work in exchange for royalty interests and a day-work
brokerage fee.
The FPA prospects were extremely successful and everyone involved made a lot
of money. However, in August of 2011, a conflict arose between Hardwick and Lester
Smith. As a result of this conflict, Hardwick no longer performed additional land work
under any of the contracts. Because of Hardwick’s failure to provide land services,
Smith filed the instant suit against Hardwick and his LLC.
Smith’s suit alleges claims of fraud, theft, breach of contract, and breach of
fiduciary duties. Smith sought actual damages, exemplary damages, attorney’s fees,
interest, rescission of the FPA contracts, and equitable forfeiture. After trial, the jury
found for Smith on all four claims. It found actual damages of $104,876, and
determined that Smith had expended $3,465,764 in reasonable and necessary
attorney’s fees in prosecuting the case. The trial court ordered the contracts rescinded
and awarded Smith $5,004,231 in equitable forfeiture damages. After post-trial motions
were denied, Hardwick filed the instant appeal.
Hardwick presents ten issues by his appeal. His first five issues, many of which
present subissues, generally challenge the findings that Hardwick breached the FPA
and Bad Billy contracts (Issues 1 and 2), committed theft (Issue 3), breached fiduciary
duties (Issue 4), and committed fraud (Issue 5). Hardwick also presents five issues
directly related to the damages awarded. These issues challenge the equitable
forfeiture award (Issue 6), award of attorney’s fees to Smith (Issue 7), lack of an election
3
of remedies (Issue 8), rescission of the FPA (Issue 9), and failure to award the LLC
attorney’s fees (Issue 10).
Fusselman Prospect Agreements
Hardwick appeals the sufficiency of the evidence supporting the jury’s findings of
fraud, breach of contract, theft, and breach of fiduciary duties as each of these findings
relate to the FPA.
Standard of Review
When a party challenges the legal sufficiency of the evidence supporting a jury
finding, we consider the evidence in the light most favorable to the finding and indulge
every reasonable inference that supports it. See City of Keller v. Wilson, 168 S.W.3d
802, 822 (Tex. 2005). We credit favorable evidence if a reasonable jury could and
disregard contrary evidence unless a reasonable jury could not. Id. at 827. If the
evidence would permit reasonable and fair-minded people to reach the finding under
review, the legal sufficiency challenge fails. Id.
When a party challenges the factual sufficiency of the evidence, we consider all
the evidence and will set aside the finding only if the evidence supporting the finding is
so weak or so against the overwhelming weight of the evidence that the finding is
clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).
In conducting our review, we are mindful that the jury is the sole judge of the credibility
of the witnesses and the weight to be given their testimony. City of Keller, 168 S.W.3d
at 819; Hinkle v. Hinkle, 223 S.W.3d 773, 782 (Tex. App.—Dallas 2007, no pet.).
4
Fraudulent Inducement
To recover for fraud, Petitioners must prove: (1) that a material representation
was made; (2) that it was false; (3) that the speaker knew it was false when made or
that the speaker made it recklessly without any knowledge of the truth and as a positive
assertion; (4) that he made it with the intention that it be acted upon by the other party;
(5) that the party acted in reliance upon it; and (6) damage. T.O. Stanley Boot Co. v.
Bank of El Paso, 847 S.W.2d 218, 222 (Tex. 1992) (citing Stone v. Lawyers Title Ins.
Corp., 554 S.W.2d 183, 185 (Tex. 1977)). A promise to act in the future constitutes
fraud only when made with the intention, design, and purpose of deceiving—a promise
made with no intention of performing the act. Spoljaric v. Percival Tours, Inc., 708
S.W.2d 432, 434 (Tex. 1986). A party’s intent to defraud is determined at the time the
party made the misrepresentation. IKON Office Solutions, Inc. v. Eifert, 125 S.W.3d
113, 124 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). Partial performance can
negate an intent not to keep a promise at the time it was made. See id.
As an initial matter, we must determine what misrepresentation Smith claims
induced it to participate in the FPA. During the trial, Smith contended that Hardwick
agreed to provide land services under the FPA until the prospects were completed but
that Hardwick never actually intended to provide those services. Smith testified that,
had it known that Hardwick would not provide land services, Smith would not have
entered into the FPA. However, a close review of the evidence Smith relies on to
establish that Hardwick did not intend to provide land services fails to establish such an
intent.
5
Smith specifically points to four times that it contends Hardwick testified that he
never intended to provide land services to the FPA prospects. However, in each of
these instances, Hardwick’s testimony was that he never intended to be obligated to
provide land services in exchange for the working interest he acquired under the FPA.
In fact, the only direct testimony regarding whether Hardwick intended to provide land
services established that he did. Further, the evidence indisputably establishes that
Hardwick performed land services for the FPA prospects for over three years. There
was testimony from the other parties to the FPA that all of the parties were aware that
they were to serve a particular role in furtherance of the prospects but Smith was the
only party that claimed that such an agreement had been specifically expressed. As
such, accepting Smith’s testimony that Hardwick expressly agreed to provide land
services in furtherance of the FPA, there is no evidence in the record that such a
statement was false. Consequently, there is legally insufficient evidence of a material
misrepresentation.
Theft/Fraud1
Smith’s theft claims are entirely based on Hardwick overbilling for his landman
services. The jury found that Hardwick committed theft by overcharging Smith and that
the amount of the overcharges was $36,003 on the FPA and $43,425 on Bad Billy.
When specifically asked what sum of money would fairly compensate Smith for the
theft, the jury found that the combined amount of damages caused by Hardwick’s theft
was $79,428. The record reflects that the basis for the theft findings was due to
1
The trial court identified theft and fraud as two separate bases for recovery. However, it
appears that both of these findings were premised on Hardwick overcharging Smith for landman services.
As such, for consistency, we will discuss these claims in terms of theft.
6
Hardwick charging Smith for work on more days than exist in the given month.
Hardwick does not directly respond to the evidence establishing that he billed for more
days than existed in the given month.
The record contains evidence that supports the jury’s finding that Hardwick
overcharged Smith. Through the expert testimony of Jesse Daves, evidence was
presented to the jury that Hardwick charged Smith for performing landman services on
more days than exist in the given month and that Hardwick did so on a repeated and
systematic basis. This evidence supports the jury’s determination that Hardwick
overcharged Smith in such a manner that it constituted theft. We affirm this jury finding.
Breach of Contract
Jury Question No. 1 asks, “Was Mark Hardwick obligated to provide landman
services for the Fusselman prospects until the prospects were completed?” The jury
answered in the affirmative. Hardwick does not challenge this finding directly. Rather,
he challenges the sufficiency of the evidence in support of this finding.
On this issue, there is evidence in the record that supports a rational jury’s
conclusion that Hardwick was obligated to provide landman services for the FPA
prospects until they were completed. The clearest evidence in support of this finding is
Lester Smith’s testimony that the parties to the FPA expressly agreed and shook hands
that each were to provide the service over which they possessed expertise until the FPA
prospects were completed. Further, Joey Hardin2 testified that it was understood that
each party was to provide services to the prospects until they were completed. While
2
Hardin was an additional party to the FPA.
7
we acknowledge that the FPA contracts do not expressly obligate Hardwick to provide
landman services at all, let alone until the prospects were completed, our review of the
issue presented by Hardwick is limited to the sufficiency of the evidence to support the
jury’s answer to Question No. 1. The jury was free to believe the testimony of Smith
and to reject the contrary testimony of Hardwick. See Keller, 168 S.W.3d at 819;
Hinkle, 223 S.W.3d at 782. Under the applicable standards of review, we conclude that
the evidence is both legally and factually sufficient to support the jury’s answer to Jury
Question No. 1.
Bad Billy Contract
Hardwick expressly challenges Smith’s recovery under the Bad Billy contract on
the bases that the rate that Hardwick was to be paid for each day’s work was not
identified in the Bad Billy contract and that contract was not ambiguous, and the Bad
Billy claims violate the Statute of Frauds.
Overcharges
Without expressing any opinion as to whether the Bad Billy contract or the
parties’ subsequent conduct provided a set day rate that Hardwick could charge for
landman services performed under the contract, our analysis above and the jury’s
damages award was not based on Hardwick billing for more than $500 per day. Rather,
the overbilling damages were based on Hardwick billing for more days than exist in the
month. As such, any error in the trial court identifying a $500 per day rate of pay for
landman services in the jury charge was harmless even if it was erroneous.
8
Statute of Frauds
The Bad Billy contract indisputably conveys Hardwick an overriding royalty
interest in exchange for his land work. An overriding royalty interest in an oil and gas
lease is considered an interest in real estate that falls within the Statute of Frauds.
Quigley v. Bennett, 227 S.W.3d 51, 54 (Tex. 2007) (citing Consol. Gas & Equip. Co. v.
Thompson, 405 S.W.2d 333, 336 (Tex. 1966)). To satisfy the requirements of the
Statute of Frauds, a contract "must furnish within itself, or by reference to some other
existing writing, the means or data by which the [property] to be conveyed may be
identified with reasonable certainty." Long Trusts v. Griffin, 222 S.W.3d 412, 416 (Tex.
2006) (per curiam) (quoting Morrow v. Shotwell, 477 S.W.2d 538, 539, (Tex. 1972)).
Extrinsic evidence may be used only to identify the property with reasonable certainty
from the identification contained in the contract, "not for the purpose of supplying the
location or description of the [property]." Id. (quoting Pick v. Bartel, 659 S.W.2d 636,
637 (Tex. 1983)). However, it is sufficient if the contract includes enough of a
description of the property that a person familiar with the locality can identify the
premises with reasonable certainty. Gates v. Asher, 280 S.W.2d 247, 248-49 (Tex.
1955).
The record reflects that the question of whether the Bad Billy contract failed to
identify the property to be conveyed with reasonable certainty was submitted to the jury,
who found the identification sufficient. Hardwick objected to the submission of the
question on the basis that the Bad Billy contract “violates the Statute of Frauds” and is,
9
consequently, unenforceable. In his motions for new trial and for judgment
notwithstanding the verdict, Hardwick raised the specific objection that the identification
of the property could not be determined with reasonable certainty.
Looking at the Bad Billy contract, there is no written description of the property
covered by the agreement. Rather, the contract references a map that demarcates the
boundary of the Bad Billy area as well as an area that is to be excluded from the Bad
Billy area. In looking at the map, three sides of the area of inclusion follow county or
section lines. However, there is no description of or identification of which section lines
are being used as the boundary of the area of inclusion. Also, the fourth side, cutting
through Hockley, Yoakum, and Terry counties, is diagonal and does not follow any
section or county lines. Additionally, while the excluded area contained within the Bad
Billy area appears to follow section lines, these section lines are in no way described or
identified. The excluded area might be able to be determined with reasonable certainty
by reference to the FPA since the Bad Billy contract provides that its area is subject to
those agreements. But see U. S. Enters., Inc. v. Dauley, 535 S.W.2d 623, 629 (Tex.
1976) (when location, course, and distance is not written in the contract or on the map,
it “would do violence to the Statute of Frauds to permit extrinsic evidence to furnish
these essential descriptive elements”). Even with resort to the boundary descriptions of
the FPA area, the map’s demarcation of the Bad Billy area is not capable of being
determined with reasonable certainty. See Sabine Inv. Co. of Tex. v. Stratton, 549
S.W.2d 247, 250 (Tex. Civ. App.—Beaumont 1977, no writ) (to ascertain with
reasonable certainty the tract of land intended by the parties, the courses as well as the
distances would be needed); Guenther v. Amer-Tex Constr. Co., 534 S.W.2d 396, 398
10
(Tex. Civ. App.—Austin 1976, no writ) (no reasonable certainty when map not drawn to
scale, did not show width or length of boundary lines, and did not show the approximate
size of the tract or number of acres contained therein). Because we conclude that the
area cannot be identified with reasonable certainty, we must conclude that the Bad Billy
contract violates the Statute of Frauds. As such, the Bad Billy contract is unenforceable
as to future performance and will not justify an award for replacement landman costs.
See Long Trusts, 222 S.W.3d at 417.
Charge Error
Hardwick contends that Smith’s recovery under the FPA should be reversed
because the charge that was submitted to the jury was erroneous, specifically because
it groups all of the FPA contracts together and defines Smith to include assignees.
Smith contends that the jury charge was appropriate.
Whenever feasible, submission of jury questions must be in broad-form. TEX. R.
CIV. P. 277. In submitting broad-form jury questions, the “court shall submit such
instructions and definitions as shall be proper to enable the jury to render a verdict.” Id.
An instruction is proper if it assists the jury, accurately states the law, and finds support
in the pleadings and evidence. Columbia Rio Grande Healthcare, L.P. v. Hawley, 284
S.W.3d 851, 855-56 (Tex. 2009). Cases involving erroneous jury instructions are not
subject to presumed harm. See Bed, Bath, & Beyond, Inc. v. Urista, 211 S.W.3d 753,
756-57 (Tex. 2006). As such, an incorrect jury instruction requires reversal only if it is
reasonably calculated to and probably did cause the rendition of an improper judgment.
11
Id. at 757. To determine whether the instruction probably resulted in an improper
verdict, we must examine the entire record. Id.
Because Hardwick’s claims of charge error challenge jury instructions rather than
multiple liability or damages theories, we do not presume harm and must review the
entire record to determine whether the charge error was reasonably calculated to and
probably did cause the rendition of an improper judgment. See id.
Hardwick contends that the inclusion of assignees in the definition of Smith
invalidates the jury’s findings. Hardwick argues that the definition of Smith in the jury
charge caused harm because fraud requires reliance but the record does not contain
evidence that Smith’s assignees relied on any misrepresentation made by Hardwick.
However, we have determined above that there is no evidence to support the jury’s
fraud finding and this portion of the verdict has been reversed. As to the theft claims,
Hardwick contends that theft has a short statute of limitations and that there was no
proof that the theft claims of the Smith assignees were not time-barred. We have
previously determined that there is some evidence that would support the jury’s
determination that Hardwick committed theft by overbilling Smith. Limitations is an
affirmative defense and, as such, it was Hardwick’s burden to prove that Smith’s
assignees’ theft claims were time-barred. See TEX. R. CIV. P. 94; Pressure Sys. Int’l,
Inc. v. Sw. Research Inst., 350 S.W.3d 212, 215-16 (Tex. App.—San Antonio 2011, pet.
denied). Rather than citing to any proof or offer of proof that Smith’s theft claims were
time-barred, Hardwick argues that Smith did not prove that his assigned claims were
timely. However, such an argument shifts the appropriate burden. Because Hardwick
does not establish that any error in the trial court’s definition of Smith was harmful, we
12
cannot conclude that any error was reasonably calculated to and probably did cause the
rendition of an improper judgment.
Hardwick also contends that the jury charge erroneously groups each of the
Fusselman Prospect Agreements into one group even though each of the agreements
differ significantly. However, as indicated in our analysis above, the jury considered oral
agreements that modified what was required under the written agreements. The
evidence established that these oral modifications related to the entirety of the
Fusselman prospects. Further, Hardwick does not identify how the grouping of the FPA
contracts actually caused him harm. Thus, we conclude that, assuming that the charge
was in error, the grouping of the agreements within the definition of the Fusselman
Prospect Agreements was not harmful.
Breach of Fiduciary Duties
In addition to the claim of charge error addressed above, Hardwick contends that
there is no evidence to support the jury’s finding that he breached fiduciary duties owed
to Smith. Hardwick’s contention is essentially premised on the fact that the parties to
the FPA specifically disclaimed fiduciary duties. Smith contends that the FPA activities
established a joint venture between the parties and, consequently, Hardwick owed
Smith fiduciary duties regardless of the disclaimers.
Generally, when parties have bound themselves to an unambiguous contract,
courts will give effect to the manifest intent expressed in those contracts. Coastal
Plains Dev. Corp. v. Micrea, Inc., 572 S.W.2d 285, 287 (Tex. 1978). However, when
the record shows that the actual effect of the arrangement resulting from the parties’
13
agreement differs from that stated in the contract, the contractual designation will not
control. See id.
A joint venture must be based on an agreement, whether express or implied. Id.
Additional essential elements in determining that an enterprise constitutes a joint
venture are: (1) a community of interest in the venture, (2) an agreement to share
profits, (3) an agreement to share losses, and (4) a mutual right of control or
management of the enterprise. Id. However, we are mindful that the intention of the
parties to a contract is a prime element in determining whether a partnership or joint
venture exists. Id. Whether the parties have a formal fiduciary relationship, such as
would arise from a joint venture, is a question of law. Nat’l Plan Adm’rs, Inc. v. Nat’l
Health Ins. Co., 235 S.W.3d 695, 700 (Tex. 2007) (discussing agency).
Smith contends that, regardless of the disclaimers to the contrary, what the
parties entered into was, in fact, a joint venture and, as such, Hardwick owed fiduciary
duties to Smith and the other participants. However, regardless of whether the
disclaimers of joint venture are effective and without addressing whether the enterprise
under the FPA constitutes a joint venture, it is clear that the parties expressly disclaimed
fiduciary duties. The operating agreements for each of the FPA prospects provide,
It is not the intention of the parties to create, nor shall this agreement be
construed as creating, a mining or other partnership, joint venture, agency
relationship or association, or to render the parties liable as partners, co-
venturers, or principals. In their relations with each other under this
agreement, the parties shall not be considered fiduciaries or to have
established a confidential relationship but rather shall be free to act on an
arm's-length basis in accordance with their own respective self-interest,
subject, however, to the obligation of the parties to act in good faith in their
dealings with each other with respect to activities hereunder.
14
Smith contends that at least one court has concluded that a disclaimer that is
nearly identical to the one used in relation to the FPA is not evidence of a lack of
fiduciary relationship. However, the case cited by Smith, Beckham Res., Inc. v. Mantle
Res., L.L.C., No. 13-09-00083-CV, 2010 Tex. App. LEXIS 1323 (Tex. App.—Corpus
Christi Feb. 25, 2010, pet. denied) (mem. op.), actually works against Smith’s position.
While our sister court interprets a provision that states, “[t]he Parties expressly do not
intend to create, and no provision hereof shall be construed as creating a partnership,
joint venture, mining partnership, corporation, association or other relationship whereby
any Party shall ever be held liable for the acts either by omission or commission, of the
other . . .” as expressing an intent to disclaim liability as to claims by third-parties, it
ultimately concludes that the disclaimer “[i]n their relations with each other under this
agreement, the parties shall not be considered fiduciaries or have established a
confidential relationship but rather shall be free to act on an arms-length basis in
accordance with their own respective self-interest” constitutes an effective disclaimer of
any fiduciary duties that might arise by virtue of a joint venture or agency being created.
Id. at *36-37 & n.9. Consequently, the court concluded that there were no fiduciary
duties owed as a matter of law. See id. at *39.
We agree with this analysis. Courts must honor the contractual terms that
parties use to define the scope of their obligations and agreements, including limiting
fiduciary duties that might otherwise exist. Strebel v. Wimberly, 371 S.W.3d 267, 284
(Tex. App.—Houston [1st Dist.] 2012, pet. denied) (citing Nat’l Plan Adm’rs, Inc., 235
S.W.3d at 703); see TEX. BUS. ORGS. CODE ANN. § 152.002(b)(2) (West Supp. 2015).
This is especially true when the contractual limitation arises from an arms-length
15
business transaction between sophisticated businessmen. Strebel, 371 S.W.3d at 284;
see Nat’l Plan Adm’rs, Inc., 235 S.W.3d at 703. This principle adheres to Texas’s public
policy of freedom of contract. El Paso Field Servs., L.P. v. Mastec N. Am., Inc., 389
S.W.3d 802, 811-12 (Tex. 2012); see FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426
S.W.3d 59, 67 (Tex. 2014).
Because the parties expressly disclaimed any fiduciary duties owed to one
another as part of an arms-length business transaction between sophisticated
businessmen, there is no evidence in the record establishing that Hardwick breached
any fiduciary duties owed to Smith. As such, we affirm Hardwick’s sufficiency challenge
and reverse this portion of the judgment.3
Damages
Equitable Forfeiture
The largest portion of the damages awarded by the trial court is the $5,004,231
award for equitable forfeiture of Hardwick’s interest in the FPA. The judgment recites
that this equitable award is fully and independently supported by the fraud, fraudulent
inducement, and breach of fiduciary duties findings made by the jury.
Equitable forfeiture is available as a potential remedy for a breach of fiduciary
duty. ERI Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867, 872 (Tex. 2010) (citing
Burrow v. Arce, 997 S.W.2d 229, 237-45 (Tex. 1999)). It is also available where a
3
As for Bad Billy, the jury found that Hardwick breached his fiduciary duties by overcharging and
stopping before that prospect was completed. However, these independent grounds for recovery have
been addressed above. It does not appear that there is any independent claim for damages that derive
from an affirmative finding that Hardwick breach his fiduciary duties under the Bad Billy contract.
16
fiduciary fraudulently induces a party to enter into a contract when the party is ignorant
of the fraud. Id. at 874.
We have previously determined that Hardwick did not owe Smith any fiduciary
duties because the parties expressly disclaimed the existence of any fiduciary duties
between them in the FPA contracts. As such, Hardwick’s breach of fiduciary duties will
not support this equitable forfeiture award.4 Likewise, we have reversed the jury’s
findings of fraudulent inducement as not supported by legally sufficient evidence.
Therefore, the award of equitable forfeiture is not supported by the jury’s fraudulent
inducement finding. Finally, while the judgment indicates that the equitable forfeiture
award is fully and independently supported by the jury’s fraud finding, we have not
discovered and the parties have not cited this Court to authority that would authorize an
equitable forfeiture on the basis of contractual overbilling as occurred in this case. We
believe that such overbilling can be remedied by an award of actual damages sustained
by the overbilling. As such, we reverse the judgment’s $5,004,231 equitable forfeiture
award.
Rescission
The judgment rescinds the FPA and Bad Billy contracts as between Hardwick
and Smith while, otherwise, preserving the contracts as between the remaining parties.
Rescission of a contract is not allowed unless the parties are restored to the positions
they were in before the contract was made. Costley v. State Farm Fire & Casualty Co.,
894 S.W.2d 380, 387 (Tex. App.—Amarillo 1994, writ denied) (citing Leonard v. Eskew,
4
While the Bad Billy contract does not disclaim fiduciary duties, the entirety of the equitable
forfeiture award was based on the FPA.
17
731 S.W.2d 124, 131 (Tex. App.—Austin 1987, writ ref’d n.r.e.)). Here, neither party is
requesting that they be restored to the position they were in before the contracts were
made. As such, rescission of the contracts is not an appropriate remedy.
Theft
We previously determined that sufficient evidence established that Hardwick
committed theft by overbilling. The jury determined that Hardwick overcharged Smith in
the amount of $79,428, and awarded it this amount. This finding of the damages
caused by Hardwick’s overbilling on the prospects is supported by Daves’s testimony.
Daves testified that, based solely on Hardwick overbilling Smith for more days than exist
in the month, Hardwick overcharged Smith a total of $79,428, between the two
prospects. While Daves’s testimony does not segregate the overcharges between the
FPA and Bad Billy, it is sufficient to support the jury’s finding that the theft damages
were $79,428. As such, we conclude that there is sufficient evidence to support the
jury’s $79,428 damages finding for theft relating to the prospects.
Breach of Contract
The judgment awards an additional $25,448 that the judgment indicates is “fully
and independently” supported by the jury’s finding, inter alia, of breach of contract.
Based on the jury’s findings, this award reflects the reasonable and necessary
expenses involved in hiring replacement landmen for the Bad Billy prospect. However,
as we have determined that the Bad Billy contract violates the Statute of Frauds, it was
error to award $25,448 for replacement landmen expenses on the Bad Billy contract
after Hardwick and Smith parted. See Long Trusts, 222 S.W.3d at 417.
18
Smith’s Attorney’s Fees
The judgment awards Smith $3,465,764 as reasonable and necessary attorney’s
fees for representation in the trial court, with an additional $75,000 if Smith prevails on
appeal to this Court, and an additional $100,000 if Smith prevails in the Texas Supreme
Court.
The Texas Supreme Court has held, “subject to harmless error analysis, a
reduction in actual damages requires the case to be remanded for a new trial on
attorney's fees.” Barker v. Eckman, 213 S.W.3d 306, 308 (Tex. 2006). In that case, the
initial amount awarded was reduced to one-seventh of that amount once reversible
errors were taken into account. See id. at 314. The Court concluded that it would not
be possible for a higher court to properly consider the factual sufficiency of the evidence
supporting the award of attorney’s fees when there was such a significant reduction in
the “results obtained,” which was a factor in determining reasonable and necessary
attorney’s fees that the jury was instructed to consider. Id. at 313-14.
In the present case, we affirm the jury’s award of $79,428 for theft damages but
we have reversed the trial court’s equitable forfeiture award of $5,004,231, for a
reduction to less than one-fiftieth of the trial court’s erroneous award. Obviously, such a
significant reduction in the damages awarded prevents this court from meaningfully
reviewing the factual sufficiency of the $3,465,764 attorney fee award, especially when,
as in Barker, the jury was instructed to consider the “results obtained” in determining the
appropriate amount of attorney’s fees.
19
Mark P. Hardwick, LLC’s Attorney’s Fees
Hardwick contends that the trial court erred in failing to award the LLC its
attorney’s fees under the Texas Theft Liability Act because, by virtue of Smith’s nonsuit
of its theft claims against the LLC, the LLC was the prevailing party. However, our
review of Smith’s petitions reveal that it made no specific allegation of theft against the
LLC. Rather, its theft allegation was asserted against the defendants collectively.
Noteably, there are no factual allegations that the LLC committed theft in any of Smith’s
petitions, the LLC offered no defense to any theft claims, and Smith never offered
evidence to support any theft claims against the LLC. In addition, Smith did not nonsuit
any theft claims against the LLC. As such, we conclude that the trial court did not err in
failing to award attorney’s fees to the LLC.
Conclusion
For the foregoing reasons, we affirm those portions of the judgment that find that
Hardwick breached the FPA and Bad Billy contracts and committed theft in relation to
these agreements. As such, we affirm the $79,428 damage award to Smith for
Hardwick’s theft. Further, we affirm the trial court’s refusal to award attorney’s fees to
Mark P. Hardwick, LLC.
We reverse the findings that Hardwick fraudulently induced Smith to enter into
the FPA and owed Smith any fiduciary duty. As such, we render judgment that Smith is
not entitled to equitable forfeiture. We reverse the judgment’s rescission of the FPA and
Bad Billy contracts as between these parties. We also reverse the judgment’s award of
20
$25,448 for replacement landman costs under Bad Billy and render judgment that Smith
is not entitled to replacement landman costs under the Bad Billy contract.
We reverse the judgment’s award of attorney’s fees to Smith and remand that
issue to the trial court for further proceedings.
Mackey K. Hancock
Justice
21