Regenbogen De RyDy, Ltd., a Texas Limited Partnership and Regenbogen Enterprises, LLC v. David Runkle ( 2013 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
________________________
No. 07-12-00293-CV
________________________
REGENBOGEN DE RYDY LTD., A TEXAS LIMITED PARTNERSHIP, AND
REGENBOGEN ENTERPRISES, LLC, APPELLANTS
V.
DAVID RUNKLE, APPELLEE
On Appeal from the 423rd District Court
Bastrop County, Texas
Trial Court No. 423-852, Honorable Christopher Duggan, Presiding
August 8, 2013
MEMORANDUM OPINION
Before QUINN, C.J., and HANCOCK and PIRTLE, JJ.
Appellants, Regenbogen De RyDy Ltd. and Regenbogen Enterprises, LLC,
(collectively “Regenbogen”) appeal from a judgment in favor of Appellee, David Runkle,
in a breach of contract action sounding in quantum meruit. In support, Regenbogen
asserts (1) there is no evidence Runkle performed compensable work for Regenbogen
because Jimmy Sissom did not have apparent authority to act on Regenbogen’s behalf
when he contracted with Runkle to renovate Sissom’s building and (2) Runkle failed to
offer any evidence of the reasonable cost of his work. Because we sustain the first
issue, we pretermit the second issue, and reverse and render judgment that Runkle
take nothing from Regenbogen.
Background
Regenbogen De RyDy, Ltd. is a Texas limited partnership, formed February 22,
2008. Regenbogen Enterprises, LLC is its general partner and Edit Louden is the
president of Regenbogen Enterprises, LLC. It is undisputed that Regenbogen De RyDy
Ltd. is the owner of the real property commonly known as 1002 College Street, Bastrop,
Texas. Jimmy Sissom leased that property from Regenbogen based upon an oral
lease.
On January 27, 2009, Runkle, a contractor, entered into a general agreement
with Sissom to renovate a portable building located at 1002 College Street, for the
general purpose of establishing a restaurant. Per the agreement, Runkle was to
provide certain renovation services in exchange for six months of free rent. After the
six-month period, Runkle was to continue leasing the property for a rental payment to
be determined. The first $10,000 of renovation costs was to be provided by Sissom,
with the remainder to be provided by Runkle. When the agreement was executed,
Runkle believed Sissom owned both the building and the lot. Runkle immediately
commenced work.
On June 16, 2009, the City of Bastrop issued a building permit for the renovation
that named Regenbogen De RyDy, Ltd. as owner of the property. Based on that permit,
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Runkle testified he began thinking he was providing work for Regenbogen, however, he
did not speak with anyone at Regenbogen to inquire whether Sissom had authority to
act on the partnership’s behalf. Instead, he “just assumed [Sissom] was acting as a
family member, and a representative of whomever owned the property.” (Emphasis
added). When Runkle observed a for-sale sign posted on the property in September,
he ceased work.
Runkle filed suit against Regenbogen alleging that Sissom was acting as its
agent. Sissom was never made a party to the suit. Runkle’s active pleadings sought
specific performance, quantum meriut, foreclosure of a mechanic’s lien and orders for
sale. At trial, Louden testified she was the only person with authority to act on
Regenbogen’s behalf. She indicated she bought the College Street property as an
investment with the intention of helping her niece, Susan Sissom, and her husband,
Jimmy establish an income. She agreed to let Sissom use the property to support his
family and gave him free reign to generate income from the property. She testified she
did not have the ability to direct Sissom with regard to the property—“[j]ust Jimmie (sic)
working for Jimmie.” There was no written agreement and she had no right to share in
any income Sissom generated from the property.
Louden further testified Sissom was not authorized to represent Regenbogen,
was not an employee and held no ownership interest in either the partnership or the
property in question. She learned of the general agreement between Sissom and
Runkle after the fact and knew only that Sissom had moved his building onto the
property. She did not have any dealings with Runkle and believed he was working for
Sissom. She was unaware of any construction permits until after Runkle’s suit was filed
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and testified Sissom was not authorized to sign any permits or make any applications
on Regenbogen’s behalf. “If he did, he did not have authority or asked her permission.”
Following trial testimony, the jury was given the following instruction:
QUESTION NO. 1
Did Jimmy Sissom have apparent authority to act on behalf of
Regenbogen?
A party’s conduct includes the conduct of another who acts with apparent
authority.
Apparent authority exists if a party (1) knowingly permits another to hold
himself out as having authority, or (2) through lack of ordinary care,
bestows on another such indications of authority that lead a reasonably
prudent man to rely on the apparent existence of authority to his
detriment.
Only the acts of Regenbogen may be considered in determining whether
apparent authority exists. The actions or statements of Jimmy Sissom
may not be considered in determining whether apparent authority exists.
Answer: Yes or No
The jury affirmatively answered Question No. 1. Finding that Runkle performed
services for Regenbogen based on that apparent authority, the trial court awarded
Runkle damages of $24,412, and attorney’s fees of $ 27,000. This appeal followed.
Legal Sufficiency -- Standard of Review
In reviewing the legal sufficiency of the evidence, we must consider the evidence
in the light most favorable to the fact-finder’s decision and indulge every reasonable
inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex.
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2005). We must credit favorable evidence if reasonable jurors could, and disregard
contrary evidence unless reasonable jurors could not. Id. at 827.
When a party challenges the legal sufficiency of an adverse finding on an issue
for which it did not have the burden of proof, it must demonstrate there is no evidence to
support the adverse finding. Exxon Corp. v. Emerald Oil & Gas Co., L.P., 348 S.W.3d
194, 215 (Tex. 2011). Such a no-evidence challenge will be sustained when (1) there is
a complete absence of evidence of a vital fact, (2) the court is barred by rules of law or
of evidence from giving weight to the only evidence offered to prove a vital fact, (3) the
evidence offered to prove a vital fact is no more than a scintilla, or (4) the evidence
conclusively establishes the opposite of the vital fact. King Ranch, Inc. v. Chapman,
118 S.W.3d 742, 751 (Tex. 2003) (quoting Merrell Dow Pharms., Inc. v. Havner, 953
S.W.2d 706, 711 (Tex. 1997)). More than a scintilla of evidence exists when 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)
(quoting Havner, 953 S.W.2d at 711). Evidence does not exceed a scintilla if it is so
weak as to do no more than to create a mere surmise or suspicion that the fact exists.
Id.
Apparent Agency
“An agent is one authorized by another to transact some business for the
principal; the relationship is a consensual one between two parties by which one party
acts on behalf of the other, subject to the other’s control.” Jamison v. Nat’l Loan
Investors, L.P., 4 S.W.3d 465, 468 (Tex.App.—Houston [1st Dist.] 1999, pet. denied).
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Authorization to act and control of the action are two essential elements of agency.
Gonzales v. Am. Title Co., 104 S.W.3d 588, 593 (Tex.App.—Houston [1st Dist.] 2003,
pet. denied). An agent’s authority to act on behalf of a principal depends on words or
conduct by the principal either to the agent (actual authority) or to a third-party
(apparent authority). Reliant Energy Services, Inc. v. Cotton Valley Compression, LLC,
336 S.W.3d 764, 784 (Tex.App.—El Paso 2004, no pet.).
The law does not presume agency, and the party asserting agency has the
burden to prove it. IRA Res., Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007).
Apparent authority is the power of an agent to affect the legal relations of the principal
by transactions with a third person. Nears v. Holiday Hospitality Franchising, Inc., 295
S.W.3d 787, 793 (Tex.App.—Texarkana 2009, no pet.) (citing Ames v. Great S. Bank,
672 S.W.2d 447, 450 (Tex. 1984)). Apparent authority is based on estoppel, and only
the conduct of the principal in leading a third party to believe that the agent has
authority may be considered. Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). A
declaration of authority by an alleged agent, without more, does not establish either the
existence or the scope of the alleged authority; id. at 183-84, and a good faith belief on
the part of a third-party that a person with whom it is dealing is the agent of another is
not enough to bind the purported principal. 2616 S. Loop LLC v. Health Source Home
Care, Inc., 201 S.W.3d 349, 356 (Tex.App.—Houston [14th Dist.] 2006, no pet.).
Rather, the reviewing court looks to acts of participation, knowledge, or acquiescence
by the principal in the acts of the agent. Reliant Energy Services, Inc., 336 S.W.3d at
784.
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Apparent authority arises either from (1) a principal knowingly permitting an
agent to hold himself out as having authority, or (2) a principal’s actions which lack such
ordinary care as to clothe an agent with indicia of authority, thus leading a reasonably
prudent person to believe that the agent has the authority he purports to exercise.
Gaines, 235 S.W.3d at 182. The standard used is that of a “reasonably prudent person,
using diligence and discretion to ascertain the agent’s authority.” Id. at 182-83 (citing
Chastain v. Cooper & Reed, 152 Tex. 322, 257 S.W.2d 422, 427 (Tex. 1953)). In order
for apparent authority to be established, it is essential that the principal have full
knowledge of all material facts at the time of the conduct alleged to be the basis for the
estoppel. Gaines, 235 S.W.3d at 182. Because apparent authority is an estoppel
principle, a party seeking to recover under such legal theory must also show justifiable
reliance on the principal’s words or conduct resulting in harm to the party. See Tex. S.
Rentals, Inc. v. Gomez, 267 S.W.3d 228, 246 (Tex.App.—Corpus Christi 2008, no pet.)
(citing Baptist Mem’l Hosp. v. Sampson, 969 S.W.2d 945, 948 & n.2 (Tex. 1988)).
Accordingly, in order to determine an agent’s apparent authority, we examine the
conduct of the principal and the reasonableness of the third party’s assumptions
regarding authority. See Gaines, 235 S.W.3d at 183.
Analysis
Runkle’s evidence establishes Sissom’s use and enjoyment of the property
located at 1002 College Street, Bastrop, Texas, on his own behalf but not on behalf of
Regenbogen. See Crooks v. M1 Real Estate Partners, 238 S.W.3d 474, 483-84
(Tex.App.—Dallas 2007, pet. denied). Neither does Runkle produce any evidence as to
Louden’s---or anyone else representing Regenbogen—conduct to him as to Sissom’s
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alleged authority to act on Regenbogen’s behalf. Id. at 484. See also Baptist Mem’l
Hosp., 969 S.W.2d at 950. Instead, we have a written agreement between Runkle and
Sissom with Runkle looking to Sissom for the initial financing and a grace period on a
future lease with Sissom when the renovation is completed. At the time the agreement
was entered into and work commenced, Runkle did not know Regenbogen was the
property’s record owner. That Runkle subsequently saw Regenbogen’s name on a
permit creates, at best, no more than a mere surmise or suspicion that Sissom may
have been acting as Regenbogen’s agent. Accordingly, Runkle cannot assert he relied
upon any conduct by Regenbogen that would lead a reasonably prudent person to
believe Sissom had authority to act on Regenbogen’s behalf. This is particularly so
when both Louden and Runkle testified neither one of them had any dealings with the
other. See Gibson v. Bostick Roofing and Sheet Metal, 148 S.W.3d 482, 491
(Tex.App.—El Paso 2004, no pet.).
Alternatively, even if Runkle’s belief that Sissom represented Regenbogen were
reasonable, which is doubtful, that belief must be based on or generated by some
conduct on the part of Louden and/or Regenbogen. Since the court may only consider
Louden’s or Regenbogen’s conduct in determining whether Runkle could reasonably
believe that Sissom had authority, there is no evidence of apparent authority. See
Crooks, 238 S.W.3d at 483-84; Gibson, 148 S.W.3d at 491.
Accordingly, because the jury’s finding that Sissom had apparent authority to act
for Regenbogen was unsupported by the evidence, we sustain Regenbogen’s first
issue. This pretermits the remaining issues. TEX. R. APP. P. 47.1.
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Conclusion
The trial court’s judgment is reversed and a take-nothing judgment is rendered
against Runkle.
Patrick A. Pirtle
Justice
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