American Housing Resources, Inc. v. Slaughter
| Decision Date | 13 February 1980 |
| Docket Number | No. 20131,20131 |
| Citation | 597 S.W.2d 13 |
| Parties | AMERICAN HOUSING RESOURCES, INC. et al., and Robert S. Coit, Appellants, v. Elbert R. SLAUGHTER, Jr., and Richard E. Slaughter, Appellees. |
| Court | Texas Court of Appeals |
Frank G. Newman, Ronald E. Holub, Newman, Shook & Newman, Philip I. Palmer, Jr., Palmer, Palmer, Coffee & Bush, Christopher M. Weil, Dallas, for appellants.
Michael P. Carnes, Charles L. Evans, Johnson, Bromberg, Leeds & Riggs, Dallas, for appellees.
Before GUITTARD, C. J., and ROBERTSON and HUMPHREYS, JJ.
This is an appeal from a judgment directing specific performance of two agreements to place funds in an escrow account. As an inducement for the contributions of appellees Elbert R. Slaughter, Jr. and Richard E. Slaughter to the capital of two limited partnerships, appellants American Housing Resources, Inc., American Multi-Family Housing Company, Inc., American Community Corporation, and Robert S. Coit entered into agreements with the Slaughters to indemnify the Slaughters, upon certain conditions, if their tax deductions for the year 1972 resulting from their contributions were not at least $152,832.00. In 1976 the conditions triggering the indemnity agreement occurred, but the indemnitors failed to fully comply with the agreement's provisions. The Slaughters subsequently filed this action, and the trial court entered judgment ordering specific performance of the agreement by the indemnitors. We reverse the trial court's judgment, because the Slaughters have failed to establish that their remedy at law is inadequate, and dismiss the case.
The pertinent provisions of the indemnity agreements are as follows: 1
2.b. In the event of the receipt by either of the Slaughters or by the Partnership of any determination by the Internal Revenue Service as stated in paragraph 1. hereinabove (for this purpose "determination" shall mean any written proposal by a representative of the Internal Revenue Service, including a proposal or determination by the District Director of Internal Revenue, or his agent, whether or not protested by the Slaughters), the Slaughters, or either of them, may at their election give any one or more of the Indemnitors written notice at any time within sixty (60) days from said receipt thereof. Thereupon, unless the provisions of subparagraph 2.c. below shall become applicable, the Indemnitors shall promptly purchase from the Slaughters their entire interest in the Partnership and in Keller Plaza, Ltd., for cash in the amount contributed by each of them to the capital of the Partnership and to the capital of said Keller Plaza, Ltd. (net of any cash distributions theretofore received by them from said partnership), less the amount of any net reduction in the Federal income tax liability of each of the Slaughters (and their respective wives) for 1972 and all subsequent years (including the year of said purchase by the Indemnitors) by reason of their having been limited partners thereof and taking into account the income tax consequences to the Slaughters of said purchase by the Indemnitors.
2.c. Notwithstanding any other provision in paragraphs 1. and 2. above, in the event any determination of the type described hereinabove is made by the Internal Revenue Service with respect to either of the Slaughters, for the calendar year 1972 and the Slaughters, or either of them, gives any one or more of the Indemnitors timely written notice thereof as provided in subparagraph 2.b. above, then instead of the Indemnitors being required promptly to purchase the Slaughters' entire interest in the Partnership and in Keller Plaza, Ltd., the Indemnitors may jointly give written notice to the Slaughters within thirty (30) days of the Indemnitors' desire to contest such determination, in which case the following provisions shall apply:
(i) The Indemnitors shall undertake at their sole expense any and all actions which may be appropriate in such contest up to but not beyond the point of a final court judgment passing upon such determination.
(ii) The Slaughters shall not be required to take any action in such contest other than to cooperate in the formalities incident to any proceeding being conducted in their names, although, if the Slaughters, or either of them, are contesting any other issue affecting their Federal income tax liability for 1972, they shall have the right to participate jointly in such proceeding at their expense with respect to such other issue.
(iii) At the time of the Indemnitors' giving notice to the Slaughters of the Indemnitors' election to contest such determination, the Indemnitors shall place in escrow with a national bank having principal office in Dallas, Texas, cash funds in the amount which would be payable to the Slaughters if the Slaughters' interest in the Partnership and in Keller Plaza, Ltd., were purchased under subparagraph 2.b. above and subject to an escrow agreement whereby the escrowed funds (together with any interest accruing thereon during the escrow) shall be payable to the Slaughters (in satisfaction of the Indemnitors' indemnity obligation set forth hereinabove) upon (a) the rendition of any adverse final court judgment in the Indemnitors' contest of such determination or (b) the Indemnitors' earlier abandonment of such contest, but with said escrowed funds to be returnable to the Indemnitors in the event of and upon any successful contest of such determination to a final court judgment (all costs incident to the establishment and maintenance of such escrow to be for the sole account of the Indemnitors).
A fundamental rule of equity is that a court will not grant specific performance unless it is shown that no adequate remedy exists at law. Lone...
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