Halmos v. Digital Motorworks ( 2003 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 01-51264
_______________________
PETER HALMOS and
PETER HALMOS & SONS, INC.,
Plaintiffs-Appellants,
versus
DIGITAL MOTORWORKS, INC.,
UMBRELLA ACQUISITIONS, INC.,
a/k/a “NEWCO”; and
JOHN GILBERT,
Defendants-Appellees.
________________________________________________________________
Appeal from the United States District Court
for the Western District of Texas
Civil Docket No. A-OO-CV-714-SS
_________________________________________________________________
January 6, 2003
Before JONES, SMITH and SILER,* Circuit Judges.
SILER, Circuit Judge:**
*
Judge of the United States Court of Appeals for the Sixth
Circuit, sitting by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
Plaintiffs Peter Halmos and Peter Halmos & Sons, Inc.
appeal the summary judgment granted in favor of Defendants John
Gilbert, Digital Motorworks, Inc. (“DMI”), and Umbrella
Acquisitions, Inc., a/k/a Newco (“Newco”), for breach of contract,
tortious interference with business opportunity, abuse of process,
defamation, tortious interference with, and breach of,
indemnification rights, and securities fraud. We AFFIRM.
BACKGROUND
Gilbert and Varick Foster were the founders of DMI. Gilbert
and Foster each owned 47.5 percent of the stock in the company. By
1999 their interests diverged and they became unable to work
together. On November 10, 1999, Halmos met with Gilbert and Foster
to discuss a sale of Gilbert’s shares in DMI. The parties do not
agree as to what occurred at this meeting. Halmos believes that an
oral agreement was reached whereby Gilbert was granted the option
to purchase Foster’s DMI shares for $10 million plus a nondilutable
ten percent equity interest, consisting of nonvoting shares in DMI
or any successor company, within thirty days of November 10. If
Gilbert failed to make a timely tender of both the money and the
equity interest, Halmos had the right and obligation within a
reasonable time to purchase Gilbert’s shares for $1 million plus a
nondilutable ten percent nonvoting equity interest. Gilbert
contends that no agreement was reached at the November 10 meeting.
2
On November 11, 1999 Foster sent a letter to Gilbert and
Halmos to “follow up” the November 10 meeting. In the letter
Foster states that:
[W]e have agreed that if in the next 30 days [Gilbert] is
able to secure financing in the amount of ten million
dollars ..., I will at the end of the period sell to
[Gilbert] all of my [DMI] shares for ten million dollars
cash and ten percent of any subsequent sale or cash-out
of DMI. If after 30 days [Gilbert] is not able to secure
the required cash financing, Peter Halmos in association
with me will purchase all of [Gilbert’s] shares in DMI
for one million dollars ($1,000,000.00) cash and ten
percent of any subsequent sale or cash-out of DMI.
The letter was signed only by Foster. The difference (which the
parties treat as dispositive) between the terms set out in this
letter and the purported oral agreement is the condition upon which
Halmos’s right to purchase Gilbert’s stock vests. Under Halmos’s
view of the facts regarding the oral agreement reached on November
10, Gilbert was required to tender both $10 million and a
nondilutable ten percent interest in DMI to Foster. Under the
terms of the letter, however, Gilbert was required only to provide
$10 million within 30 days. Gilbert’s conveyance of the
nondilutable ten percent, while part of the purchase price, was not
part of the condition that determined whether Halmos had the right
to purchase the stock.
On December 10, thirty days after the meeting, Gilbert
tendered to Foster $10 million in cash and an executed commitment
by Gilbert to cause Foster to receive ten percent of any subsequent
sale or cash out of DMI. Halmos argues, however, that Gilbert’s
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tender was defective because prior to December 10 other investors
became involved in the transaction and as a result Gilbert could no
longer tender a nondilutable ten percent interest in DMI. On
December 11, Foster rejected Gilbert’s tender. On December 17 and
20, Halmos tendered $1 million plus a ten percent equity interest
to Gilbert which was rejected by Gilbert.
The district court granted summary judgment on all of Halmos’s
claims. With respect to all of the claims except defamation, the
district court granted summary judgment because in its view
although an oral agreement was reached on November 10, it was
superseded by the November 11 letter which in the district court’s
view set forth the complete terms of the agreement. The court held
that under the November 11 agreement Gilbert provided an adequate
tender and thus Halmos’s rights were not triggered. Additionally,
the district court held that Halmos did not have standing to
challenge Gilbert’s tender to Foster. The district court also
granted summary judgment on the defamation claim, holding that
Halmos is a limited purpose public figure and that he failed to
produce evidence that Gilbert made a defamatory, false statement
while acting with actual malice.
STANDARD OF REVIEW
We review a district court's grant of summary judgment de
novo. Hodges v. Delta Airlines, Inc., 44 F.3d 334, 335 (5th Cir.
1995) (en banc). Summary judgment is appropriate when, viewing the
4
evidence and all justifiable inferences in the light most favorable
to the non-moving party, there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law.
Hunt v. Cromartie, 526 U.S. 541, 552, 119 S. Ct. 1545, 1551-52, 143
L. Ed. 2d 731 (1999); see also Fed. R. Civ. P. 56(c).
DISCUSSION
This dispute boils down to whether the November 10 oral
agreement or the November 11 letter is the controlling agreement
between Halmos, Gilbert, and Foster. For the November 11 letter to
constitute a contract there must be “(1) an offer; (2) an
acceptance in strict compliance with the terms of the offer; (3) a
meeting of the minds; (4) each party’s consent to the terms; and
(5) execution and delivery of the contract with the intent that it
be mutual and binding.” Copeland v. Alsobrook, 3 S.W.3d 598, 604
(Tex. App.–San Antonio 1999, pet. denied). The November 11 letter
was signed only by Foster. While there are no Texas cases holding
that a letter signed by only one party to a contract can nullify a
binding oral agreement reached among multiple parties, under Texas
law a contract need not be signed for the contract to be valid; a
party may accept a contract “by his acts, conduct or acquiescence
in the terms of the contract.” Hearthshire Braeswood Plaza Ltd.
P’ship v. Bill Kelly Co., 849 S.W.2d 380, 392 (Tex. App.–Houston
[14th Dist.] 1993, writ denied).
The district court held that Halmos recognized Foster’s letter
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as the contract when Halmos’s attorney, as part of Halmos’s tender,
forwarded an unsigned irrevocable commitment to cause Gilbert to
receive ten percent of any future cashout of DMI. The unsigned
document recites, “Whereas, on November 10, 1999, Gilbert agreed to
sell to Peter Halmos ... all of Gilbert’s stock ... in DMI as set
forth expressly in that certain letter from Foster to Gilbert and
Halmos, dated November 11, 1999.” The district court also pointed
to Halmos’s silence regarding the November 11 letter after he
received it despite the purported mistake in reducing the oral
agreement to writing as evidence demonstrating that he accepted the
letter. Thus, it appears that the November 11 letter constituted
a valid contract.
The record before us contains conflicting evidence as to
whether an oral agreement was reached by Halmos, Foster, and
Gilbert on November 10. Assuming arguendo, that Halmos’s view of
the facts is correct and that an oral agreement was reached on
November 10, we still conclude that the district court’s grant of
summary judgment was proper. This is because even if an oral
agreement was made on November 10, the agreement merged into the
November 11 letter. Under Texas law, “when the same parties to an
earlier agreement later enter into a written integrated agreement
covering the same subject matter,” the earlier agreement merges
into the subsequent written agreement. Carr v. Weiss, 984 S.W.2d
753, 764 (Tex. App.–Amarillo 1999, pet. denied). If the previous
agreement merges into the subsequent written agreement, then
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evidence of prior oral agreements is inadmissible parol evidence.
Id. (“the ‘merger doctrine’ is an analogue of the parol evidence
rule”).
Before one contract is merged into another, the subsequent
contract must: (1) be between the same parties as the first; (2)
embrace the same subject matter; and (3) must have been so intended
by the parties.” Kona Tech. Corp. v. Southern Pac. Transp. Co., 225
F.3d 595, 612 (5th Cir. 2000). In this case, there is no question
that the subsequent contract (the November 11 letter) was between
the same parties and embraced the same subject matter.
Furthermore, given that the letter explicitly stated that it was a
“follow up” to the November 10 meeting, we find that there is no
genuine issue of material fact as to whether the letter was
intended to merge with the prior oral agreement. Therefore, we
hold that the November 10 oral agreement, if made, merged into the
November 11 letter and as such evidence of the oral agreement is
inadmissible parol evidence.
Halmos argues that the court should have allowed parol
evidence regarding the November 10 meeting because (1) the
November 11 letter is not fully integrated, (2) the November 11
letter is ambiguous, and (3) parol evidence is always admissible to
establish whether a condition precedent was satisfied. These
arguments are not persuasive.
Integration occurs when the parties intend that a writing will
be the final and complete expression of their agreement. Aboussie
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v. Aboussie, 441 F.2d 150, 154, reh’g granted on other grounds, 446
F.2d 56 (5th Cir. 1971). A written letter agreement is incomplete
when it is “facially incomplete and requires extrinsic evidence to
clarify, explain or give meaning to its terms; or ... when viewed
in light of the circumstances surrounding its execution, the
writing does not appear to be the complete embodiment of the terms
relating to the subject matter of the writing.” Jack H. Brown &
Co. v. Toys “R” Us, Inc., 906 F.2d 169, 174 (5th Cir. 1990)
(internal citations omitted). On its face, the letter at issue
here identifies the parties, the object of the contract (the DMI
stock), the price to be paid, and the conditions upon which each
party has a right to tender performance. While perhaps not the
most thorough contract ever written, the letter is a complete
contract.
Halmos also argues that the statement regarding his right to
purchase Gilbert’s stock if “[Gilbert] is unable to secure the
required cash financing [to purchase Foster’s stock]” is ambiguous
because the letter also refers to Foster’s receiving ten percent of
any future cashout of DMI. “The question of whether a contract is
ambiguous is one of law for the court." R & P Enters. v. LaGuarta,
Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980). The
condition as expressed in the letter is not ambiguous; it is clear
that Halmos’s rights depended upon whether Gilbert arranged for the
cash financing. While Gilbert may have been required to provide
both cash and a nondilutable equity interest to purchase Foster’s
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stock, the letter clearly conditions Halmos’s rights only on
Gilbert’s inability to obtain $10 million in cash.
Finally, Halmos contends that parol evidence is admissible to
show the condition precedent to Halmos’s rights under the contract,
citing to De La Morena v. Ingenieria E Maquinaria De Guadalupe,
S.A., 56 S.W.3d 652 (Tex. App.–Waco 2001, no pet.). De La Morena
does not state or even suggest, however, that parol evidence of a
condition precedent is always admissible when the condition is
expressed in a written contract. Oral conditions precedent cannot
be proven by parol evidence when the alleged oral condition is
inconsistent with the written instrument. Texas Workers'
Compensation Ins. Fund v. Texas Employment Comm'n, 941 S.W.2d 331,
334 (Tex. App.–Corpus Christi 1997, no pet.) (citing Baker v.
Baker, 183 S.W.2d 724, 728 (Tex. 1944) (on petition for
rehearing)).
In sum, the November 11 letter was a valid contract, which by
its terms required Gilbert only to tender $10 million within 30
days, which he did. Therefore, the district court was correct in
awarding summary judgment to the defendants.1 Halmos’s other
1
DMI and Newco argue that Halmos’s right to buy Gilbert’s
stock for $1 million if Gilbert failed to make a sufficient tender
for Foster’s stock for $10 million is a liquidated damages clause
that is an unenforceable penalty. This argument is wholly lacking
in merit. Halmos’s ability to buy the stock at a lower price is
not compensation for a breach but simply a provision contingent on
a condition failing to occur.
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challenges to the district court’s ruling are likewise unavailing.2
AFFIRMED.
2
The district court also granted summary judgment on Halmos’s
defamation claim, holding that Halmos is a limited purpose public
figure and that Halmos had failed to produce any admissible
evidence of the alleged defamatory statements or that the alleged
statements were false and made with actual malice. Halmos asserts
that the court erred in granting summary judgment because it had
not allowed sufficient time for discovery to occur. Halmos did not
file a Rule 56(f) affidavit requesting time for additional
discovery in the lower court.
A district court’s denial of a motion for additional time for
discovery under Fed. R. Civ. P. 56(f) is reviewed for abuse of
discretion. Beattie v. Madison County School Dist., 254 F.3d 595,
605 (5th Cir. 2001). Even if Halmos did invoke Rule 56(f), he has
not made the required showing. When the court granted summary
judgment it specifically noted that Halmos had deposed seven DMI
workers who worked at DMI when the allegedly defamatory statement
was sent out over the DMI email system. Also, the period for
discovery had closed six weeks before the court entered the summary
judgment. Halmos’s argument does not explain why more time for
discovery would help him find the alleged defamatory statement
given that this issue was in the case from its inception.
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