Westergren v. Nat'l Prop. Holdings, L.P.

• Decision Date: 05 September 2013
• Docket Number: Nos. 14–11–00058–CV, 14–11–00229–CV.,s. 14–11–00058–CV, 14–11–00229–CV.
• Citation: 409 S.W.3d 110
• Parties: Gordon WESTERGREN, Appellant/Cross–Appellee v. NATIONAL PROPERTY HOLDINGS, L.P., Michael Plank, and Russell Plank, Appellees/Cross–Appellants.
• Court: Texas Court of Appeals

409 S.W.3d 110

Gordon WESTERGREN, Appellant/Cross–Appellee

v.NATIONAL PROPERTY HOLDINGS, L.P., Michael Plank, and Russell Plank, Appellees/Cross–Appellants.

Nos. 14–11–00058–CV, 14–11–00229–CV.

Court of Appeals of Texas, Houston (14th Dist.).

June 28, 2013.

Rehearing En Banc Overruled Sept. 5, 2013.

Mark C. Sparks, Beaumont, TX, for Appellant.

Mark Ryan Trachtenberg, Michael J. Mazzone, Houston, TX, for Appellees.

Panel consists of Justices FROST, CHRISTOPHER, and McCALLY.

OPINION

TRACY CHRISTOPHER, Justice.

Gordon Westergren sued two individuals and a limited partnership, alleging breach of contract with regard to an oral agreement, breach of partnership duties, statutory fraud, and common-law fraud. Defendants National Property Holdings, L.P., Michael Plank, and Russell Plank (collectively, the “Plank Parties”) counterclaimed, alleging breach of contract with regard to a settlement agreement and a release. The jury rendered findings favorable to Westergren and adverse to the Plank Parties. The trial court rendered judgment that the parties take nothing on their respective claims. On appeal, Westergren asserts that the trial court erred in rendering judgment he take nothing, in denying him leave to amend his petition during trial, and in awarding court costs to the Plank Parties. On cross-appeal, the Plank Parties argue that the trial court erred in rendering judgment they take nothing. We affirm in part, reverse in part, and remand for limited proceedings.

I. Factual and Procedural Background

Appellant Gordon Westergren, a lifelong resident of LaPorte, Texas, wanted to purchase and develop certain real property in LaPorte, specifically, 190 acres on the east side of Powell Road. These 190 acres are situated along a rail line between two shipping terminals. Westergren entered into a purchase option contract with the owners of the 190 acres. The owners later entered into two additional purchase option contracts on the same 190 acres. In July 2004, Westergren filed suit (“the 190–acres litigation”) against the owners and the two other parties who claimed an option to purchase the 190 acres, asserting that he possessed the superior right to purchase. Westergren also filed a lis pendens on the property, which effectively prevented the sale and development of the 190 acres.

While the 190–acres litigation was pending, Westergren met the Planks. Specifically, Walter Johnson, then CEO of Amegy Bank, had participated in several “handshake” transactions with Westergren in which Johnson served as the financial partner while Westergren “found and sourced” property deals in the LaPorte area. Although Johnson was not interested in purchasing and developing the 190 acres, Johnson introduced Westergren to two brothers, Michael Plank and Russell Plank, who were clients of the bank. Michael Plank is the President of the corporate general partner of National Property Holdings, L.P. (“NPH”), a Texas limited partnership involved in real estate development. Russell Plank performs consulting services for various companies, including NPH. Several developers, including NPH, were interested in purchasing and developing the 190 acres.

In January 2005, after Westergren met the Planks, Russell Plank contacted Robert Langston, the attorney representing Westergren in the 190–acres litigation. Russell Plank called Langston about paying Westergren's attorney's fees. Langston asked Russell Plank why he would do that for Westergren; Russell Plank responded “[b]ecause we're going to be partners.” Langston then received a $5000 check from NPH ¹ and a $5000 check “personally” from Russell Plank.²

Although the Plank Parties were not parties to the 190–acres litigation, Russell Plank, sent by Michael Plank on behalf of NPH, attended a mediation involving the litigation parties in August 2005. Westergren and Langston attended the mediation. At this mediation, NPH agreed to pay out cash settlements to all the litigants, except Westergren, for their claims on the 190 acres. At the mediation, according to Westergren and Langston, Russell Plank promised that, in exchange for Westergren's release of his lis pendens and the settlement of the 190–acres litigation, Westergren would become a partner of the Plank Parties and would receive $1 million cash and an interest in profits (the exact percentage to be negotiated) from the purchase and development of the 190 acres. Westergren testified that at the mediation Russell Plank said, “Don't worry about it, Gordon. Let's get these guys out of the way, and we'll get it handled.”

Langston repeatedly requested of both Russell Plank and Westergren that the parties reduce their partnership deal to writing. In October 2005, Russell Plank presented Westergren with a profits interest agreement drafted by appellees' attorneys. This draft agreement stated that Westergren was to provide consulting services in exchange for a 5% profit interest in funds distributed by NPH. Russell Plank then crossed out the 5% term and hand-wrote 10%, then 20%. This agreement was not signed.

In January 2006, NPH and the parties to the 190–acres litigation entered into a Mediation Settlement Agreement (“MSA”). NPH was a signatory party to the MSA. Neither Michael Plank nor Russell Plank individually was a signatory to the MSA. In the MSA, NPH agreed to purchase the 190 acres in dispute; Westergren and the other parties to the litigation agreed to release any lis pendens, and to release and dismiss all claims regarding the 190 acres.

According to Westergren, at the time that he agreed to sign the MSA, he did so in reliance upon the oral partnership deal with NPH, Michael Plank, and Russell Plank:

[The Plank Parties] were going to pay me a cool million bucks for signing off, letting them have control of the property, and give me a 5 percent interest in the 190 acres. That's what caused me to give them control of the property.

Westergren further testified that the “final” deal at the time he agreed to “sign away” his lis pendens was “a million in cash and a 5 percent[ ]—a 5 percent profits participation.” ³ According to Westergren, under this 5% profits participation, the Plank Parties would pay Westergren 5% of the profits, if any, that they realized upon selling or “flipping” the 190 acres to a third party.

After the mediation, because 190 acres was more land than the Plank Parties were comfortable purchasing and developing, the Plank Parties held meetings with various companies to serve as potential partners, including ML Realty Partners, a Chicago-based investment and development company interested in long-term real estate holdings. In January 2006, NPH entered into a contribution agreement with ML Realty Partners. Under this agreement, upon NPH's acquisition of the entire 190 acres, ML Realty Partners would distribute $6 million to NPH.

On February 14, 2006, Westergren released his lis pendens and dismissed his claim in the 190–acres litigation with prejudice. Two days later, NPH purchased 20 of the 190 acres, and Port Crossing Land, L.P., a limited partnership in which the limited partners were an NPH-affiliated entity ⁴ and ML Realty Partners, purchased the remaining 170 acres. The purchase price of the 190 acres was approximately $.75 per square foot. ML Realty Partners distributed $6 million to NPH. In June 2006, NPH sold the 20–acre parcel to Del Piso Investments, an Arizona limited partnership, for $1.742 million, or a purchase price of approximately $2 per square foot.⁵

At this time, Westergren still had not received any payment from the Plank Parties, and started calling them. According to Westergren, Russell Plank finally told him, “Look, we can't give you the whole million right now but we're going to give you a half a million bucks.” Both Michael Plank and Russell Plank testified that they agreed to pay Westergren $500,000. Westergren met with Russell Plank at the NPH office on June 30, 2006, at which time Russell Plank gave Westergren a check for $500,000.⁶ Without reading it, Westergren also signed a two-page document entitled “Agreement and Release” (“Release”), which was notarized in Westergren's presence. The Release was drafted by the Plank Parties' attorneys, and the Plank Parties did not send the Release to or discuss it with Langston. The Release stated that in exchange for “receipt” of the $500,000, Westergren released and relinquished any rights and interests in the 190 acres, and released all claims regarding the 190 acres against Michael Plank, NPH, and their agents. Westergren testified that he did not read the document because he did not have his reading glasses ⁷ with him and was “in a hurry.” Westergren admitted he was wearing a watch with a built-in magnifying glass that he sometimes used to help him read. According to Westergren, after he asked what the document was, Russell Plank described it as “just a receipt” and “nothing,” and told Westergren “you don't have to worry about it.” Russell Plank did not tell Westergren that the document was a release. Westergren testified he relied on Russell Plank's “representation” that the document was “just a receipt” in signing the Release.

In February 2007, Westergren sent a letter to Michael Plank to request the other $500,000 and his “5% interest.” Westergren and Michael Plank then met for lunch. Westergren testified that, during lunch, he found out about the Release and Michael Plank told Westergren “you need to read what you sign.” The Plank Parties refused to pay Westergren any additional compensation. Westergren filed suit against the Plank Parties, asserting various claims, including breach of contract, breach of partnership duties, common-law fraud, and statutory fraud. The Plank Parties filed a counterclaim asserting that Westergren breached the MSA and the Release by filing suit.

After a trial, the jury found the following:

• Russell Plank agreed to pay Westergren $1 million and a 5% profit interest in the development of the 190 acres in...