Great Hans. LLC v. Liberty Bankers Life Insurance Co. ( 2019 )

AFFIRM in part; REVERSE and REMAND in part; and Opinion Filed March 15, 2019
Court of Appeals
S In The
Fifth District of Texas at Dallas
No. 05-17-01144-CV
GREAT HANS, LLC, Appellant
V.
LIBERTY BANKERS LIFE INSURANCE CO., Appellee
On Appeal from the 192nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-14-12254
MEMORANDUM OPINION
Before Justices Whitehill, Molberg, and Reichek
Opinion by Justice Reichek
Liberty Bankers Life Insurance Co. signed a contract to sell property in the U.S. Virgin
Islands to Great Hans, LLC, but ultimately sold the property to another party. LBLIC then sued
Great Hans seeking a declaration that their contract was not valid, binding, or enforceable. Great
Hans counterclaimed for breach of contract, fraud, and conspiracy and sought declarations
invalidating contractual clauses that limited LBLIC’s liability and waived a jury.
The trial court granted LBLIC’s motions for summary judgment and rendered a take-
nothing judgment on Great Hans’s claims.1 In five issues, Great Hans challenges the trial court’s
rulings. For reasons set out below, we reverse the trial court’s judgment on Great Hans’s breach
1
LBLIC nonsuited its claims for declaratory judgment and attorney’s fees, making the judgment final.
of contract claim and remand the claim for further proceedings. We affirm the judgment in all
other respects.
FACTUAL BACKGROUND
This case involves two private islands in the U.S. Virgin Islands––Great Hans Lollick
Island and Little Hans Lollick Island––and a third parcel of land, Megan’s Bay Lot (collectively
“Islands”). LBLIC obtained an interest in the Islands through a mortgage loan it extended to an
entity, referred to in the record as the “Tizes group,” that later defaulted on the note. The Tizes
group ultimately filed for bankruptcy, and the loan was modified to give the debtor an opportunity
to sell the properties through a bankruptcy court-approved plan. Under this plan, LBLIC received
the rights to the properties subject to an eighteen-month marketing process. LBLIC had deeds
created conveying the right, title, and interest in the Islands to Liberty Life Service Corporation, a
wholly owned subsidiary of LBLIC. The deeds were held in escrow during the marketing period
and, if there were a default, LBLIC had the right to cause the deeds to be recorded in the U.S.
Virgin Islands.2
The Tizes group did not sell the Islands and failed to pay off the debt. But LBLIC chose
not to exercise its right to record the deeds immediately and take title to the property. Rather, in
January 2013, the Tizes group entered an option agreement with another entity, Archipelago, LLC,
to purchase the property, and LBLIC approved the agreement. So long as timely and regular
payments were made to LBLIC, LBLIC agreed to not record the deeds and take the deeds in lieu
of foreclosure. Ultimately, the sale did not go through because the payments were not timely made
and LBLIC gave notice of default. Shortly after, Archipelago filed notices of interest in the
2
Because the record provided little information regarding the prior bankruptcy, the facts related to the bankruptcy proceeding were taken
from Great Hans’s brief only to provide historical context. LBLIC has not challenged the accuracy of any of these facts. See TEX. R. APP. P.
38.1(g).
–2–
Islands, claiming an ownership interest in the property pursuant to the option agreement and
creating a cloud on title. The Islands were deeded to LLSC, and LLSC recorded the deeds in lieu
of foreclosure in September 2013.
After the option agreement failed, LBLIC went forward with a proposal by James Eckel, a
real estate developer who expressed interest in purchasing the Islands while it was under option.
Over the next several months, Eckel’s attorney Peter Marullo and LBLIC negotiated several
versions of an agreement, and Eckel formed Great Hans as a single-purpose entity to consummate
the transaction. Although LLSC was actually the title owner, LBLIC and Great Hans signed a
Purchase and Sale Agreement on November 4, 2013. By the date of signing, Great Hans was
aware of the option agreement, Archipelago’s filing of notices of interest, and the previous
bankruptcy, but it was not actually aware that LLSC was the title owner.
Under the PSA, Great Hans agreed to pay $9.35 million for the Islands and the Megan’s
Bay lot with $4.67 million to be delivered to the title company on or before closing and the balance
to be seller-financed. The PSA provided for a sixty-day feasibility period with a closing date to
follow thirty days later. In apparent recognition of the ongoing title issue created by Archipelago’s
filing of notices of interest, the PSA also included a provision obligating LBLIC to use
“commercially reasonable efforts” to defend against claims by a prior owner, option holder, or
debtor or creditor in the original bankruptcy case that asserted a claim, right, or interest to purchase
the Islands. The provision provided an additional year for LBLIC to resolve any title issues and,
if unsuccessful, gave Great Hans the option of terminating the contract or proceeding to closing.
The PSA also contained two other provisions relevant to this appeal: (1) a waiver of jury trial and
(2) a limitation on damages if LBLIC defaulted and specific performance was unavailable.
Great Hans paid $250,000 in escrow as called for by the PSA. Also, in accordance with
the PSA, Great Hans requested a title report. Less than two weeks later, the title company
–3–
circulated a title commitment on the transaction. The commitment showed the interest in the
property was vested in LLSC and required an amendment to the PSA correcting the seller’s name
to LLSC. It also contained several exceptions.
Once the PSA was executed, LBLIC notified Archipelago it had a contract with another
buyer, which predictably resulted in litigation between the parties in early 2014. In that suit,
LBLIC took the position Archipelago no longer had a right to put cloud on the title because its
option was gone.
Over the next several weeks, Great Hans and LBLIC twice agreed to amend the PSA to
extend the feasibility and title objection periods.3 The feasibility period was extended to March 7,
2014, which then made the closing date April 6, 2014, subject to any other provisions of the PSA,4
and title objections were due March 4, 2014. On March 3, Great Hans gave written notice of its
objections to certain exceptions in the title report, including the Archipelago litigation. LBLIC,
through its counsel, Jay LaJone, responded in writing. With respect to the pending litigation,
LaJone said “we will need to address how it is to be treated. My initial feeling is that we make it
subject to the same provisions in the Contract regarding the Option Agreement, but I need to
discuss this with my client.” LaJone further stated until the issues were resolved, LBLIC reserved
the right to indicate which objections it could cure.
In March, after the feasibility period expired and Great Hans had not terminated the
transaction, LBLIC requested that $100,000 of the escrow deposit be released to it. Great Hans
authorized the release because it intended to purchase the property. The transaction, however, did
not close on April 6 because LBLIC could not convey good title. Great Hans believed the “contract
3
At the time of the second amendment in February 2014, the parties had received the revised title commitment, which again showed LLSC
as the fee simple owner of the properties.
4
Although the amendments use the term “Inspection Period,” it is undisputed this referred to the feasibility period.
–4–
continued” and LBLIC was still working to clear the title defects caused by the Archipelago
litigation. But, shortly after that date, Great Hans said it no longer received updates from LBLIC.
During this same timeframe in March 2014, Bradford Phillips, president of LBLIC, was
contacted by yet another company, U.S. Virgin Islands Properties, LLC, which was also interested
in buying the Islands. Phillips did not tell the company that the Islands were under contract and
did not tell Great Hans about the new potential buyer. Rather, in September 2014, LBLIC settled
the Archipelago litigation, and that same month, LLSC transferred the Islands to USVIP, who paid
$23 million. Phillips said the USVIP transaction was a “better transaction” because it was a higher
purchase price and all cash. LBLIC did not inform Great Hans that there was another bidder on
the property, that the Archipelago litigation had settled, or that the Islands were sold to another
buyer.
A month after the sale, LBLIC sued Great Hans, seeking a declaratory judgment that the
PSA was not a valid, binding, or enforceable contract. Great Hans filed an answer asserting a
general denial and affirmative defenses. Additionally, it filed a counterclaim alleging LBLIC
breached the PSA, engaged in fraud and conspiracy, and sought declarations invalidating the
contractual provisions waiving a jury trial and limiting LBLIC’s liability. Great Hans claimed
damages of at least $13.65 million, which is the difference between the price it would have paid
for the Islands and what USVIP paid for the Islands.
LBLIC filed traditional and no-evidence motions for summary judgment on Great Hans’s
counterclaims. The trial court granted the motions and (1) struck Great Hans’s demand for a jury,
(2) rendered a take-nothing judgment on all of Great Hans’s counterclaims, and (3) alternatively
declared the “liquidated damages clause” was reasonable and enforceable. This appeal followed.
–5–
STANDARD OF REVIEW
We review an order granting summary judgment de novo. Merriman v. XTO Energy, Inc.,
407 S.W.3d 244, 248 (Tex. 2013).
When reviewing a traditional summary judgment in favor of a defendant, we determine
whether the defendant conclusively disproved an element of the plaintiff’s claim or conclusively
proved every element of an affirmative defense. Durham v. Children’s Med. Ctr. of Dallas, 488
S.W.3d 485, 489 (Tex. App.—Dallas 2016, pet. denied). A matter is conclusively established if
ordinary minds could not differ as to the conclusion to be drawn from the evidence. Id. We take
as true all evidence favorable to the nonmovant and indulge every reasonable inference and resolve
any doubts in the nonmovant’s favor. Exxon Mobil Corp. v. Rincones, 520 S.W.3d 572, 579 (Tex.
2017).
In a no-evidence motion for summary judgment, the movant need only allege there is no
evidence to support an essential element of a claim on which a nonmovant has the burden of proof
at trial. See TEX. R. CIV. P. 166a(i); Sw. Elec. Power v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).
Once that occurs, the burden shifts to the nonmovant to present evidence that raises a fact issue on
the challenged elements. TEX. R. CIV. P. 166a(i); Swan v. GR Fabrication, LLC, No. 05-17-00827-
CV, 2018 WL 1959486, at *1 (Tex. App.—Dallas Apr. 26, 2018, no pet.) (mem. op.). The
nonmovant will defeat a no-evidence summary judgment by presenting more than a scintilla of
evidence to raise a genuine issue of material fact. Swan, 2018 WL 1959486, at *1. More than a
scintilla of evidence exists if the evidence rises to a level that would enable reasonable and fair-
minded people to differ in their conclusions. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601
(Tex. 2004).
“[I]f a no-evidence motion for summary judgment and a traditional motion for summary
judgment are filed which respectively asserts the plaintiff has no evidence of an element of its
–6–
claim and alternatively asserts that the movant has conclusively negated that same element of the
claim, we address the no-evidence motion for summary judgment first.” Cooper v. M.N. Gumbert
Corp., No. 04-17-00833-CV, 2018 WL 4470748, at *2 (Tex. App.—San Antonio Sept. 19, 2018,
pet. denied.) (mem. op.) (quoting Williams v. Parker, 472 S.W.3d 467, 469–70 (Tex. App.—Waco
2015, no pet.)). But if the traditional motion challenges a cause of action on an independent ground,
we consider that ground first “because it would be unnecessary to address whether a plaintiff met
his burden as to the no-evidence challenge if the cause of action is barred as a matter of
law.” Id. (citing Lotito v. Knife River Corp.-S., 391 S.W.3d 226, 227 n.2 (Tex. App.—Waco 2012,
no pet.) ); Union Pac. R.R. Co. v. Brown, No. 04-17-00788-CV, 2018 WL 6624507, at *2 (Tex.
App.—San Antonio Dec. 19, 2018, no pet.).
BREACH OF CONTRACT
Great Hans first challenges the trial court’s take-nothing summary judgment on its breach
of contract claim, which centered on LBLIC’s sale of the Islands to a third party, USVIP, during
a time in which Great Hans argues it had the Islands under contract.
With respect to this claim, the trial court determined the contract terminated on the original
closing date of April 6, 2014, which was months before LBLIC (1) settled the Archipelago
litigation and (2) sold the Islands to a different party. Great Hans argues this ruling was error
because the PSA contained a provision, paragraph 5(a)(iii), which effectively extended the closing
date for one year so that title claims, such as the Archipelago litigation, could be resolved. LBLIC
counters that paragraph 5(a)(iii) is not controlling and relies on other provisions, paragraphs
5(a)(ii) and (iv), to support its contention that the PSA terminated by its own terms when closing
did not occur on April 6, 2014. Consequently, it contends there was no contract in effect at the
time of the alleged breach in September 2014 when the Islands were sold.
–7–
A successful breach of contract claim requires proof of the following elements: (1) a valid
contract, (2) performance or tendered performance by the plaintiff, (3) breach of the contract by
the defendants, and (4) damages sustained by the plaintiff as a result of that breach. See Petras v.
Criswell, 248 S.W.3d 471, 477 (Tex. App.—Dallas 2008, no pet.).
In construing contracts, we must ascertain and give effect to the parties’ intentions as
expressed in the document. Hooks v. Samson Lone Star, Ltd. P’ship, 457 S.W.3d 52, 63 (Tex.
2015). We attempt to harmonize all contractual provisions by analyzing the provisions with
reference to the whole agreement. Id. We “construe contracts from a utilitarian standpoint bearing
in mind the particular business activity sought to be served,” and, when possible and proper, we
avoid a “construction which is unreasonable, inequitable, and oppressive.” Id. (quoting Reilly v.
Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)). If, through the use of relevant rules of
construction, the contract can be given a definite meaning, we construe it as a matter of law. Id.
at 63–64.
Paragraph 5 of the PSA addressed issues related to title insurance and liens. Under
subparagraph (i), the parties agreed Great Hans would obtain a title commitment for insurance and
then notify LBLIC of its objections to any title matters. The remaining provisions provided as
follows:
(ii) Seller shall have ten (10) business days after its receipt of the
Title Objections to determine whether it will cure the Title Objections (“Seller’s
Response Notice”). If Seller can or will not cure all of Purchaser’s Title Objections
other than claims of Prior Owner Parties as hereinafter defined (the “Real Estate
Title Objections”), Purchaser shall then have ten (10) business days to notify such
Seller of its intention to either (i) terminate this Agreement, in which event, the
entire Escrow Deposit shall be returned to Purchaser, or (ii) proceed to Closing and
accept title to Islands subject to the Real Estate Title Objections, without any
liability or obligation on the part of Seller by reason of such Real Estate Title
Objections. Property Taxes and accepted Real Estate Title Objections shall be
referred to herein as “Permitted Exceptions”.
(iii) . . . Seller shall also use commercially reasonable efforts to
defend against any claims made by any prior owner, mortgagor, contract vendee,
–8–
option holder or any debtor or creditor in the Bankruptcy Case or other party
asserting a claim, interest or right to purchase the Property (a “Title Claim”). As
used herein, “commercially reasonable efforts” shall include defending any
litigation regarding a Title Claim; provided, however, if such matter is not resolved
and removed from the Title Commitment by the date that is one (1) year from the
original Closing Date (“Remediation Date”), Purchaser shall have the option to
elect, by written notice to Seller within ten (10) business days of the Remediation
Date, to (i) proceed to Closing, subject to such Title Claim without any adjustment
to the Purchase Price, in which event Seller shall cause the Liberty Mortgages to be
assigned to a designee of Purchaser, or (ii) terminate this Agreement, in which event
Purchaser would receive the release of the entire $250,000 Escrow Deposit, plus
receive the lesser of (“Expense Reimbursement”) (aa) Purchaser’s documented out-
of-pocket expenses incurred in this transaction (including, without limitation, any
legal expenses incurred by Purchaser in defending litigation brought by anyone
asserting a Title Claim), or (bb) $50,000. In the event Purchaser elects option (i)
above, Closing shall be ten (10) business days after Purchaser gives notice of such
election. If Seller is required to remove a Monetary Lien pursuant to the terms of
this Agreement, Seller shall be entitled to postpone the Closing for a period of thirty
(30) days in order to endeavor to remove such Monetary Lien unless Purchaser
agrees to a longer postponement.
(iv) Notwithstanding anything to the contrary contained herein,
if a Seller is unable to eliminate the Title Objections other than Monetary Liens
which Seller is obligated to remove by the Closing Date (as hereinafter defined),
unless the same are waived by Purchaser, such Seller may, upon prior notice (“Title
Cure Notice”) to Purchaser, adjourn the Closing Date for a period not to exceed
thirty (30) days (inclusive of any adjournment taken pursuant to (iii) above) (“Title
Cure Period”), in order to attempt to eliminate such exceptions. Purchaser may
extend the time to cure the Title Objections in Purchaser’s discretion by not for
more than 30 days without Seller’s approval.
In its supplemental motion for summary judgment and in its brief on appeal, LBLIC argues
that subparagraphs (ii) and (iv) govern this case and demonstrate the contract terminated in April
2014. Subparagraph (ii) governed certain title objections for which LBLIC either could not or
would not cure. LBLIC argues it never agreed to cure the Archipelago litigation, leaving Great
Hans the option to terminate the contract or proceed to closing. LBLIC contends that because
Great Hans did not terminate the contract, it necessarily elected to proceed to closing. When Great
Hans failed to close on April 6, LBLIC contends the contract expired by its own terms. We cannot
agree.
–9–
LBLIC’s argument presumes the Archipelago litigation was a “Title Objection” for
purposes of determining Great Hans’s options when LBLIC decided not to cure. But “claims of
Prior Owner Parties” were specifically removed from the definition of “Title Objection” governed
by subparagraph (ii), and it is undisputed that the Archipelago litigation was a claim by a prior
owner. So, while subparagraph (ii) clearly put Great Hans to a decision if LBLIC did not agree to
cure a title objection, the specific title objection at issue here was eliminated from its application.
Consequently, subparagraph (ii) does not apply.
LBLIC argues that even if it had agreed to cure the Archipelago litigation objection but
was unable to do so, subparagraph (iv) gave it, not Great Hans, the option to extend the time to
cure, which it never did. But, again, subparagraph (iv) has limited application. It applies only to
title objections, other than monetary liens, which LBLIC was “obligated to remove by the Closing
Date.” The contract defined “Closing Date” as thirty days after the feasibility period ended, or
April 6. Whether LBLIC was obligated to remove the Archipelago litigation by that date, however,
requires consideration of subparagraph (iii).
Unlike subparagraphs (ii) and (iv), subparagraph (iii) specifically addressed “Title
Claims,” defines the term, and sets out the seller’s obligations and the buyer’s corresponding
options. The provision obligated LBLIC to use commercially reasonable efforts to defend a title
claim. A title claim was defined as including a claim by a prior owner or other party asserting a
claim, interest, or right to purchase the property. LBLIC’s obligation included defending litigation
regarding such a claim, but, if the matter was not resolved within a year from the original closing
date, the buyer could proceed to closing subject to the title claim or terminate the agreement,
receive a release of the entire escrow deposit plus the lesser of purchaser’s out-of-pocket expenses
incurred in the transaction or $50,000.
–10–
Thus, subparagraph (iii) in effect extended the contract for one year to allow LBLIC to
resolve title claims. Here, it is undisputed that the Archipelago entities made a claim against the
property by filing notices of interest which subsequently resulted in a lawsuit in the U.S. Virgin
Islands. That claim triggered LBLIC’s obligation to defend against the claim for up to a year after
the original closing date, i.e., the “remediation period.” Given the language of the contract, the
parties intended the contract to remain in effect during the remediation period or there would have
been no need to provide a term for the buyer to make an election to either close or terminate at the
end of the year.
On appeal, LBLIC does not dispute it had a contractual obligation to defend against title
claims; rather, it argues the provision does not apply because Great Hans failed to invoke it. In
particular, LBLIC urges that Great Hans had to give “written notice” and “adjourn” the closing to
wait for the one-year period to run. But LBLIC does not identify a contractual provision requiring
such action on Great Hans’s part and the provision itself contains no such demand. Moreover,
the evidence shows Great Hans timely notified LBLIC of its objections to title, which included the
Archipelago litigation.
For the above reasons, we conclude LBLIC’s interpretation of the contract is not reasonable
because neither subparagraph (ii) nor (iv) apply to the circumstances before us. By its plain
language, subparagraph (iii) extended the contract for up to one year and essentially provided
protection for both the buyer and the seller, giving both an end date by which (1) the seller could
end its obligation to defend against title claims and (2) the purchaser could elect to proceed to
closing or terminate the contract. Consequently, the trial court’s determination that the contract
terminated on April 6, 2014, based on an application of subparagraphs (ii) and (iv), was error. We
sustain Great Hans’s issue related to the trial court’s summary judgment on its breach of contract
claim.
–11–
SPECIFIC PERFORMANCE
Great Hans next argues the trial court erred by granting summary judgment that denies it
specific performance under the contract. LBLIC sought summary judgment on Great Hans’s
request for specific performance on the ground that this relief was not available because LBLIC
does not own the property.
Specific performance will not be decreed where it appears that performance of the contract
by the defendant is impossible. Nash v. Conatser, 410 S.W.2d 512, 519 (Tex. App.—Dallas 1966,
no writ). Thus, where the defendant does not own the land involved in the agreement, he may not
be compelled to perform. Id. This is true even though the want of title is due to the defendant’s
own act. O’Neill v. Powell, 470 S.W.2d 775, 779 (Tex. App.—Fort Worth 1971, writ ref’d n.r.e.).
Here, the evidence is undisputed that LBLIC does not own the property at issue. Although
this is the basis for LBLIC’s summary judgment, Great Hans has not addressed the fact that LBLIC
no longer owns the property, argued any exception, or provided any analysis as to how it can
receive the relief it requests. Because Great Hans has not shown reversible error, we overrule this
issue.
FRAUD
Great Hans next challenges the trial court’s summary judgment on its claims for statutory
fraud, common law fraud, and fraud in the inducement,5 all of which arose out of the contract.
Generally, Great Hans complains LBLIC induced it to enter the PSA by falsely representing it
owned the property and, once the contract was executed and pending, LBLIC represented it was
5
Great Hans also alleged fraudulent transfer but has not challenged the trial court’s take-nothing judgment on this claim.
–12–
attempting to clear title so the PSA could be concluded but instead failed to disclose it had settled
the Archipelago litigation and sold the property to another buyer.6
In its motion for summary judgment, LBLIC asserted that the economic loss rule barred all
fraud claims because Great Hans had not alleged an economic injury independent and separate
from the economic losses recoverable under breach of contract.
Great Hans first argues LBLIC’s ground “turned on an ‘allegation’ in the pleading” and
therefore should have been challenged by special exception, not summary judgment. But LBLIC
did specially except to the fraud claims earlier in the lawsuit and included an exception regarding
the economic loss rule. The trial court granted LBLIC’s special exceptions and ordered Great
Hans to replead by stating “the type of fraud, the misrepresentations or omissions complained of,
who made them and when they were made.” After that, Great Hans amended its pleadings multiple
times, once with leave of court. Accordingly, we conclude this argument is without merit.
Great Hans next addresses the substance of the doctrine in a mere seven sentences in its
brief. Great Hans broadly asserts the doctrine does not apply to fraud claims but provides only a
general discussion that is limited to fraud in the inducement. Within its issue, Great Hans does not
consider the application of the doctrine to any specific misrepresentation or omission.
The economic loss rule has been described as “one of the most confusing doctrines in tort
law.” R. Joseph Barton, Note, Drowning in a Sea of Contract: Application of the Economic Loss
Rule to Fraud and Negligent Misrepresentation Claims, 41 WM. & MARY L. REV. 1789, 1789
(2000). It provides that when a party’s acts breach a contract and the only alleged injury is
economic loss to the subject of the contract itself, the action sounds in contract alone. Sw. Bell
6
In its brief, Great Hans argues all of its fraud claims together, without identifying with any clarity which claim or element is being addressed
and, most importantly, the specific misrepresentation or omission that forms the basis for any particular claim. This scattershot approach has left
the Court in the position of sorting through the argument to determine what issue has actually been raised. Briefs are meant to acquaint the Court
with a case’s subject matter. Briefs should not require the Court “to connect unrelated dots, hunt down relevant authority, or speculate as to what
exactly it is a party is attempting to argue or what relief it is requesting.” Brazos Elec. Power Coop., Inc. v. Tex. Comm’n on Envt’l Quality, 538
S.W.3d 666, 700 (Tex. App.—El Paso 2017, pet. filed). Nevertheless, after reviewing the third amended counterclaim, Great Hans’s response to
the motion for summary judgment, and Great Hans’s brief, it appears the only allegations properly before us are those noted above.
–13–
Tel. Co. v. DeLanney, 809 S.W.2d 493, 494–95 (Tex. 1991). Thus, tort damages are generally not
recoverable unless the plaintiff suffers an injury that is independent and separate from the
economic losses recoverable under a breach of contract claim. See Formosa Plastics Corp. USA
v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 45–47 (Tex. 1998); DeLanney, 809 S.W.2d
at 494 (analyzing both source of duty and nature of remedy in determining claim’s characterization
as sounding either in contract or tort). The rule, however, does not apply to fraudulent inducement
claims. See Formosa, 960 S.W.2d at 47. Tort damages are recoverable for fraudulent inducement
irrespective of whether the fraudulent representations are later subsumed in a contract or whether
the plaintiff only suffers an economic loss related to the subject matter of the contract. Id.; Esty v.
Beal Bank S.S.B., 298 S.W.3d 280, 302–303 (Tex. App.—Dallas 2009, no pet.). Thus, to the extent
Great Hans complains it was induced to enter the PSA by LBLIC’s claim it owned the property,
summary judgment would have been improper on this particular allegation. See Formosa, 960
S.W.2d at 47; Esty, 298 S.W.3d at 302–03
Great Hans, however, has not attempted to explain why its claims for fraud in the
performance of the contract (failures to disclose the Archipelago settlement and the sale to USVIP)
are not barred by the economic loss rule under the particular facts of this case. We therefore
conclude Great Hans failed to effectively challenge LBLIC’s ground that the economic loss rule
barred these claims and will not disturb the summary judgment with respect to Great Hans’s claims
alleging nondisclosure of the Archipelago settlement and the sale to USVIP. See Staton Holdings,
Inc. v. Tatum, L.L.C., 345 S.W.3d 729, 732–33 (Tex. App.—Dallas 2011, pet. denied) (concluding
economic loss issue waived when appellant’s brief consisted only of abstract discussion of law
without explaining why rule barred claims under facts of case); Adams v. First Nat’l Bank of
Bells/Savoy, 154 S.W.3d 859, 875 (Tex. App.—Dallas 2005, no pet.) (“[A] reviewing court will
–14–
affirm the summary judgment as to a particular claim if an appellant does not present argument
challenging all grounds on which summary judgment could have been granted.”).
Although the economic loss rule does not bar Great Hans’s fraud in the inducement claim,
assuming that Great Hans raised a fact issue on the claim’s elements, the record establishes that
the trial court did not err in granting summary judgment on this claim for another reason––the
affirmative defense of ratification.
The elements of ratification are (1) approval by act, word, or conduct, (2) with full
knowledge of the facts of the earlier act, (3) with intent to validate the earlier act. Neese v. Lyon,
479 S.W.3d 368, 384 (Tex. App.—Dallas 2015, no pet.). A party ratifies an agreement when, after
learning of all of the material facts, he confirms or adopts an earlier act that did not then legally
bind him and that he could have repudiated. Id. Knowledge or notice to an attorney, acquired
during the existence of the attorney-client relationship and while acting within the scope of his
authority, is imputed to the client. Lehrer v. Zwernemann, 14 S.W.3d 775, 778 (Tex. App.—
Houston [1st Dist.] 2000, pet. denied).
As part of its traditional summary judgment, LBLIC presented evidence that in November
2013, Great Hans’s attorney, Peter Marullo, requested and received a title commitment from
Freedom Abstract on the Islands that showed fee simple title interest in the property was vested in
LLSC, not LBLIC. The title commitment further required an amendment to the PSA correcting
the seller’s name to LLSC. As Great Hans’s lawyer, Marullo’s knowledge was imputed to Great
Hans, meaning that just days after execution of the contract, Great Hans was charged with the
knowledge that LLSC held title to the property. See Lehrer, 14 S.W.3d at 778. Several weeks
later, Great Hans executed two amendments to the PSA, extending the feasibility and title
objection periods. So, while Great Hans may have been unaware that LBLIC did not hold legal
title to the property at the time PSA was executed, it was aware (through its attorney) of that fact
–15–
only days later and certainly weeks before it executed amendments to the PSA. Given these facts,
we conclude LBLIC conclusively established its affirmative defense of ratification, and the trial
court therefore did not err in granting summary judgment on this claim.
Moreover, these same facts establish as a matter of law a lack of reliance on the
representation by Great Hans. Both common law and statutory fraud require that Great Hans show
actual and justifiable reliance. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 182 (Tex.
1997); Coldwell Banker Whiteside Assocs. v. Ryan Equity Partners, Ltd., 181 S.W.3d 879, 888
(Tex. App.—Dallas 2006, no pet.). “If the person to whom a false representation is made is aware
of the truth, it is obvious that he is neither deceived nor defrauded, and therefore, any loss he may
sustain is not traceable to the representation but is self-inflicted.” Bynum v. Signal Life Ins. Co.,
522 S.W.2d 696, 700 (Tex. App.—Dallas 1975, writ ref’d n.r.e.). We overrule Great Hans’s issue
challenging the summary judgment on its fraud claims.
CONSPIRACY
Great Hans next contends summary judgment should have been denied on its civil
conspiracy claim. In its motion for summary judgment, LBLIC asserted that the conspiracy claim
failed because there is no underlying tort. Liability for conspiracy is predicated on the commission
of an underlying tort. Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996) (orig. proceeding) (op.
on reh’g). Having concluded the trial court did not err in granting summary judgment on Great
Hans’s fraud claims, there are no underlying tort claims at issue. Consequently, the trial court did
not err in granting summary judgment on this claim. We overrule the fourth issue.
DECLARATORY JUDGMENT CLAIMS
Finally, Great Hans contends the trial court erred in granting summary judgment declaring
as valid and enforceable the limitation of liability and jury waiver clauses in the PSA.
We begin with the limitation of liability clause. Paragraph 18(b) of the PSA provides:
–16–
If Seller defaults under this Agreement, Purchaser shall be entitled to either (1)
termination of this Agreement and receive the return of the entire $250,000 Escrow
Deposit, or (2) enforce specific performance. These shall be Purchaser’s exclusive
remedies, unless as a result of Seller’s intentional action, specific performance is
unavailable, in which case, in addition to receiving the return of the entire $250,000
Escrow Deposit, Purchaser shall be entitled to receive damages in the amount of
$500,000, which shall include any legal fees or costs of Purchaser.
Great Hans alleged the provision, limiting LBLIC’s liability when specific performance
was unavailable due to LBLIC’s intentional conduct, is “unconscionable, void, and unenforceable
as violating public policy.” The trial court, however, determined the provision was reasonable and
enforceable.
Texas has long recognized the “strongly embedded public policy favoring freedom of
contract.” Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, No. 17-0578, 2019 WL
406075, at *11 (Tex. Feb. 1, 2019). Absent a compelling reason, courts must respect and enforce
the terms of a contract that the parties have freely and voluntarily made. Id. As the Texas Supreme
Court has noted: “Freedom of contract is a policy of individual self-determination; individuals
can control their destiny and structure their business transactions through agreements with other
competent adults of equal bargaining power, absent violation of law or public policy.” Shields
Ltd. P’ship v. Bradberry, 526 S.W.3d 471, 482 (Tex. 2017). A damages-limitation clause is a
limited warranty that is the basis of the bargain and will limit recovery to the limited damages.
Bombardier, 2019 WL 40675, at *11. Limitation of liability clauses are generally valid and
enforceable. Id. at 12.
Here, Great Hans’s argument is underpinned by its belief that the contract was procured by
fraud. It argues since “fraud vitiates every transaction tainted by it,” a “stipulated damage
provision in a contract obtained by fraud cannot be enforced.” But the supreme court recently
rejected a similar argument: “We have never held . . . that fraud vitiates a limitation-of-liability
clause. We must respect and enforce terms of a contract that parties have freely and voluntarily
–17–
entered.” Id. at * 12. Moreover, we have concluded that summary judgment was proper on Great
Hans’s fraud claims; therefore, the foundation for its argument no longer exists. The record shows
the parties, who were sophisticated entities represented by counsel in an arms-length transaction,
negotiated the PSA over several months and numerous versions and bargained for the limitation
of liability clause to limit the damages recoverable in the event the seller intentionally breached
and specific performance was unavailable. We therefore conclude, as did the trial court, that the
clause is valid and enforceable.
We also reject Great Hans’s challenge to the trial court’s summary judgment on the
contractual jury waiver provision. This provision is found in Paragraph 20(p) of the PSA:
SELLER AND PURCHASER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION
WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT.
A party may waive its constitutional right to a jury trial. Contractual jury waivers do not
violate public policy and are enforceable as long as the waiver is voluntary, knowing, and
intelligent, and with full awareness of the legal consequences. See In re Prudential Ins. Co. of
Am., 148 S.W.3d 124, 132 (Tex. 2004) (orig. proceeding); In re Key Equip. Fin. Inc. 371 S.W.3d
296, 301 (Tex. App.—Houston [1st Dist.] 2012, orig. proceeding). A conspicuous jury waiver
provision is “prima facie evidence of a knowing and voluntary waiver and shifts the burden to the
opposing party to rebut it.” In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex. 2006)
(orig. proceeding) (per curiam). Under the business and commerce code, conspicuous means “so
written, displayed, or presented that a reasonable person against which it is to operate ought to
have noticed it.” TEX. BUS. & COM. CODE ANN. § 1.201(b)(10); In re Bank of Am., N.A., 278
S.W.3d 342, 344 (Tex. 2009) (orig. proceeding). We presume that “a party who signs a contract
knows its contents.” In re Bank of Am., 278 S.W.3d at 344.
–18–
The jury waiver clause here was one of eight provisions on the page. The provisions are
single-spaced, set apart by double spacing, and separately numbered. The jury waiver was
contained in a separate paragraph and stood out on the page as the only provision in all capital
letters. It was not printed in small type or hidden in lengthy text. The waiver was followed by a
provision in which the parties expressly acknowledged that they or their counsel had reviewed and
revised the agreement.
We conclude the clause was conspicuous and therefore served as prima facie evidence that
Great Hans knowingly and voluntarily waived its right to a jury trial. See In re Gen. Elec., 203
S.W.3d at 316 (concluding provision in capital letters in bold print was prima facie evidence of
knowing and voluntary waiver). Although the burden shifted to Great Hans to raise a fact issue,
it has directed us to no evidence in rebuttal. To the extent Great Hans argues the provision is
“tainted by fraud,” we again note that we have affirmed the take-nothing judgment on Great Hans’s
fraud claims. Further, as noted above, the summary judgment evidence showed the parties were
represented by counsel, negotiated the contract over several months, and went through several
versions before signing the agreement at issue. We conclude the trial court did not err in granting
summary judgment on this claim. We overrule Great Hans’s issue related to the summary
judgment on its declaratory judgment claims.
–19–
CONCLUSION
We reverse the trial court’s judgment with respect to Great Han’s breach of contract claim
and remand that claim for further proceedings consistent with this opinion. We affirm the trial
court’s judgment in all other respects.
/Amanda L. Reichek/
AMANDA L. REICHEK
JUSTICE
171144F.P05
–20–
S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
GREAT HANS, LLC, Appellant On Appeal from the 192nd Judicial District
Court, Dallas County, Texas
No. 05-17-01144-CV V. Trial Court Cause No. DC-14-12254.
Opinion delivered by Justice Reichek;
LIBERTY BANKERS LIFE INSURANCE Justices Whitehill and Molberg
CO., Appellee participating.
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED in part and REVERSED in part.
We REVERSE that portion of the trial court’s judgment granting summary judgment for
appellee Liberty Bankers Life Insurance Co. on appellant Great Hans, LLC's breach of contract
claim. In all other respects, the trial court’s judgment is AFFIRMED. We REMAND this
cause to the trial court for further proceedings consistent with this opinion.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered March 15, 2019.
–21–