Adams v. Big Three Industries, Inc., 7888

• Decision Date: 17 February 1977
• Docket Number: No. 7888,7888
• Citation: 549 S.W.2d 411
• Parties: C. S. ADAMS, Jr., et al., Appellants, v. BIG THREE INDUSTRIES, INC., Appellee.
• Court: Texas Court of Appeals

Page 411

549 S.W.2d 411

C. S. ADAMS, Jr., et al., Appellants, v. BIG THREE INDUSTRIES, INC., Appellee.

No. 7888.

Court of Civil Appeals of Texas, Beaumont.

Feb. 17, 1977.

Rehearing Denied March 17, 1977.

Will Sears, Michael T. Powell, Sears and Burns, Houston, for appellants.

Charles R. Vickery, Houston, for appellee.

DIES, Chief Justice.

Plaintiffs below, C. S. Adams, Jr., individually, and Cyril S. Adams, Inc., sued defendant, Big Three Industries, Inc., for the breach of five contracts and sought to recover actual and exemplary damages sustained thereby, attorney's fees, and prejudgment interest. We shall refer to the parties as Adams, Jr., Adams, Inc., and Big Three.

Trial was to a jury, and the court below rendered judgment that Adams, Inc., recover actual and exemplary damages and prejudgment interest. Adams, Jr., recovered nothing by reason of his suit, and all parties have appealed.

At the outset, and for the sake of lending clarity to our disposition of the issues involved, we outline the facts which led up to this lawsuit. Briefly, the facts are that Big Three builds and operates air separation plants which separate air into oxygen, nitrogen, and argon, and then sells same in liquid or gaseous form. Adams, Jr., is, as was his father before him, a registered professional engineer, who offers his services in drafting the plans for plants such as Big Three operates. Both Adams, Jr., and his late father offered their services through the aegis of Adams, Inc., however, and in this form have performed numerous civil engineering contracts for Big Three over a period of twenty to thirty years. Subsequent to the death of Adams, Sr., Big Three apparently became dissatisfied with the work performed by Adams, Inc., and eventually the relationship was ended by, at least, some of the contract breaches made a part of this suit. Since liability under three of the contracts sued upon is conceded by Big Three, we will confine most of our discussion to the two which are disputed.

Adams, Jr., and Adams, Inc., complain of the trial court's action in disregarding the jury's answers to Special Issues Nos. 1 and 7 and in rendering judgment that Adams, Jr., take nothing as against Big Three. ¹ By disregarding these issues, the trial court disallowed attorney's fees on the ground that, at the time of the making of the contracts at issue, corporations could not recover attorney's fees under Tex.Rev.Civ.Stat.Ann. art. 2226. ²

Adams, Jr., being the only shareholder, employee, officer and director of Adams, Inc., argues that the corporation is only "a piece of paper" in the office of the Secretary of State and, in effect, urges that the "corporate veil" should be pierced and attorney's fees thereby permitted. ³ We disagree.

It is obvious that Adams, Jr., deliberately chose to operate his business as a corporation, and we are of the opinion that it would be inequitable now to allow him to recover attorney's fees as an individual. See Eastwood Model Market v. State, 359 S.W.2d 294, 296 (Tex.Civ.App. Austin 1962), affirmed, 365 S.W.2d 781 (Tex.1963), wherein the Austin Court of Civil Appeals stated:

"A corporation cannot be used when it benefits the stockholders and officers and be disregarded when it is to the advantage of the organizers to do so."

While Adams, Jr., vigorously argues to the contrary, we are also of the opinion that Tenneco Oil Company v. Padre Drilling Company, 453 S.W.2d 814, 820 (Tex.1970), clearly holds that at the time these contracts were made corporations could not recover attorney's fees under Art. 2226 for personal services rendered. In so holding, then Chief Justice Calvert explained that personal services and labor done by the employees of one corporation in performance of a contract with another corporation are not "services rendered" for the latter. The personal services rendered and labor done by those employees are rendered and done for their own employer. Tenneco Oil Co., supra, at 820.

We now proceed to consider the contentions of the parties as to the proper basis of recovery under the contracts in question. The Bayport I contract was an express written contract whereas Bayport II was based on an oral agreement. Adams, Jr., and Adams, Inc., sought to recover in quantum meruit as to the written contract and on the contract itself as to Bayport II. We will first consider the written contract for Bayport I.

While the jury found that the reasonable value of the services performed on Bayport I was $50,000, the trial court limited the recovery for same to the agreed contract price of $36,000. Adams, Inc., relying on, among other cases, McFaull v. Collins, 208 S.W.2d 142 (Tex.Civ.App. Austin 1948, writ ref'd), contends that the trial court erred in so doing on the ground that Big Three's repudiation of the contract freed it from the contractual fee.

In McFaull, supra, at 144, however, the plaintiff was wrongfully discharged and so prevented by his employer from completing the performance agreed upon. We believe this and other cases cited by Adams, Inc. to be distinguishable from the case at bar in that as to Bayport I, Adams, Inc., was not discharged prior to completion of his part of the contract ⁴ and the contract expressly set out the fee to be paid. Big Three's repudiation of this contract lay solely in its refusal to pay the agreed fee after Adams, Inc., had performed its part of the contract. Under these circumstances, quantum meruit is not available to Adams, Inc.

In Woodard v. Southwest States, Inc., 384 S.W.2d 674, 675 (Tex.1964), Justice Culver set out the applicable rule as follows:

"Recovery on an express contract and on quantum meruit are inconsistent. Where there exists a valid express contract covering the subject matter, there can be no implied contract."

In Dallas Electric Supply Co. v. Branum Co., 143 Tex. 366, 185 S.W.2d 427, 429 (1945), in an analogous factual situation, our Supreme Court rejected a similar argument for quantum meruit recovery, saying:

"It follows that there is no basis for the application of the doctrine of quantum meruit in this case. A recovery on that ground would be recovery of what the agent's services were worth. The contract expressly covered that subject by providing for a very substantial commission to the agent for all its services, . . . The amount of compensation was not left to implications, but was definitely fixed. For the court to determine what the agent's services were worth would be for it to make a contract for the parties. That, of course, it cannot do. Tennant v. Fawcett, 94 Tex. 111, 58 S.W. 824; Fordtran v. Stowers, 52 Tex.Civ.App. 226, 113 S.W. 631; Bennett v. Giles, Tex.Civ.App., 12 S.W.2d 843."

See also, Freeman v. Carroll, 499 S.W.2d 668, 670 (Tex.Civ.App. Tyler 1973, writ ref'd n. r. e.); University State Bank v. Gifford-Hill Con. Corp., 431 S.W.2d 561, 574 (Tex.Civ.App. Fort Worth 1968, writ ref'd n. r. e.).

We, therefore, find that the trial court properly limited the recovery of Adams, Inc., to the $36,000 contract price and, accordingly, overrule all points of error complaining of this action.

As to the parties' oral contract for engineering services in re Bayport II, it is undisputed that the fee agreed upon was $30,000. Adams, Inc., here sued to recover on the contract rather than in quantum meruit.

Big Three complains, inter alia, that the trial court erred in allowing recovery of the $30,000 contract price because this oral contract was barred by the Statute of Frauds. We sustain this point.

Tex. Bus. & Comm. Code Ann. § 26.01 (1968) provides, in pertinent part:

"(a) A promise or agreement described in Subsection (b) of this section is not enforceable unless the promise or agreement, or a memorandum of it, is

(1) in writing; and

(2) signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him.

"(b) Subsection (a) of this section applies to

(6) an agreement which is not to be performed within one year from the date of making the agreement; . . . "

In considering the contract before us, we bear in mind the general rule governing the applicability of Sec. 26.01 to oral agreements, i. e., where the time for performance of a contract is uncertain in that the same merely provides for performance of a particular act or acts, which can conceivably be performed within one year, the statute of frauds is inapplicable however improbable performance within one year might be. Hall v. Hall, 158 Tex. 95, 308 S.W.2d 12, 15 (1957); Miller v. Riata Cadillac Company, 517 S.W.2d 773 (Tex.1974); cf. Bratcher v. Dozier, 162 Tex. 319, 346 S.W.2d 795 (1961).

It is equally clear, however, that when no time for performance has been specified, a "reasonable time" will be implied, and what is a reasonable time must be determined from all the circumstances, the situation of the parties, and the subject matter of the contract. Krueger v. Young, 406 S.W.2d 751, 756 (Tex.Civ.App. Eastland 1966, writ ref'd n. r. e.); Cheek v. Metzer, 116 Tex. 356, 291 S.W. 860, 863 (1927). Where an agreement, by its terms or the nature of the performance required, cannot be performed within one year, it necessarily comes within the purview of the statute. Krueger v. Young, supra, at 755. If, as here, the contract is not a written one and depends upon disputed facts, the determination of what constitutes a reasonable time is a question of fact. McRae v. Lindale Independent School District, 450 S.W.2d 118, 122-123 (Tex.Civ.App. Tyler 1970, writ ref'd n. r. e.); Hamilton v. Shirley-Self Motor Co., 202 S.W.2d 952, 954 (Tex.Civ.App. Fort Worth 1947, writ ref'd n. r. e.).

In the case at bar, a jury finding was secured to the effect that the oral contract could not have been performed or completed within one year, and there is ample evidence in the record to support this conclusion. As the Supreme Court said in the Hall Case (308 S.W.2d at 15):

"In the first place, and despite the strict requirement...