Angel, Trustee for Gobsmack Gift Trust v. Tauch
| Citation | 642 S.W.3d 481 |
| Decision Date | 14 January 2022 |
| Docket Number | 19-0793 |
| Parties | Virginia ANGEL, TRUSTEE FOR the GOBSMACK GIFT TRUST, as Assignee of South State Bank, and South State Bank, N.A., Petitioners, v. Kyle TAUCH, Respondent |
| Court | Supreme Court of Texas |
Charles W. Getman, Wanda McKee Fowler, Anthony T. Golz, Roger D. Townsend, Houston, for Respondent.
Elizabeth G. Bloch, Austin, Claire Carroll, Dallas, Dale Wainwright, Austin, Nolan C. Knight, Dallas, Richard A. Schwartz, Matthew Storey, Houston, for Petitioners South State Bank, N.A., formerly known as CenterState Bank, N.A., as successor in interest by merger to South State Bank, Virginia C. Angel, Trustee for the Gobsmack Gift Trust, as Assignee of South State Bank.
Offer and acceptance are essential elements of a valid and binding contract. As a matter of blackletter law, an offer empowers the offeree to seal the bargain by accepting the offer.1 But equally well-established is the rule that acceptance is ineffective to form a binding contract if the power of acceptance has been terminated, such as by the offeror's revocation before acceptance.2 The main issue in this contract dispute is whether a purported offer to settle a debt for a reduced sum was accepted before it was revoked. Resolution of that issue turns on the parameters of the recognized, but rarely implicated, doctrine of implied revocation.
In the mid-twentieth century, we adopted the implied-revocation doctrine in Antwine v. Reed , which held that an outstanding offer for the sale of land was revoked when the offeree learned that the offeror had engaged in "some act inconsistent" with the offer.3 Since then, the doctrine has never again been invoked in this Court, and questions exist about whether and how it applies beyond the facts of the seminal case. Here, the parties dispute whether the implied-revocation doctrine (1) is limited to offers involving the sale of land, (2) applies if the offeree learns about the offeror's inconsistent act from someone other than the offeror, and (3) is satisfied under the undisputed facts in this case. We hold that the doctrine is not constrained to real-property transactions and the settlement offer was impliedly revoked when the offeror assigned the underlying judgment to a third party for collection and the assignee gave the offeree a copy of the assignment agreement before he accepted the settlement offer. We therefore reverse the court of appeals' judgment and render judgment that no contract to settle the debt was formed.
In 2015, South State Bank (the Bank) domesticated a South Carolina judgment against Kyle Tauch for $4,635,877 plus interest. Subsequently, the Bank's senior vice president, James Holden, and Tauch began negotiating to settle the debt. Following a series of email exchanges over many months, Tauch offered the Bank $1 million to purchase the judgment.
With the debt having grown to more than $6 million, Holden responded to Tauch by email on April 11, 2016, rejecting his offer:
I received word late Friday afternoon that the bank will not be able to accept your offer to sell your note/judgment or take a discounted settlement for the outright release price of $1M that you had offered. To assist you in understanding what amount the bank would be able to accept, I did ask for a counter figure and received authority to release your judgment for net proceeds of $2,000,000 which is still over a 50% discount. If you find that you and your investors can make this happen, please let me know as quickly as possible as the bank will likely be look[ing] at other collection alternatives.
Tauch did not immediately respond to the email.
As Holden's email implied, but unbeknownst to Tauch, the Bank was simultaneously pursuing alternative collection methods with another of Tauch's judgment creditors, Virginia Angel, trustee of The Gobsmack Gift Trust (Angel).4 In an unrelated garnishment proceeding, Angel had secured a temporary restraining order prohibiting Tauch from transferring, using, or disposing of funds held in several bank accounts and assets held in his name. In light of Angel's successes in locating, identifying, and freezing Tauch's assets, the Bank sought a strategic alliance with Angel to facilitate recovery on its own judgment.
On April 13, having received no response from Tauch, Holden executed, on the Bank's behalf, an agreement assigning the judgment to Angel for collection. As consideration for the assignment, the Bank would receive the first $3 million collected on the judgment with Angel retaining any additional sums collected. The agreement, which bore an April 14, 2016 effective date,5 also included the following terms:
At 4:27 p.m. on April 13—the day both parties signed the agreement but before its stated effective date—Angel's attorney sent Tauch's attorney an email notifying him about the assignment and demanding payment in full on the judgment. Confirming receipt of that email, Tauch's attorney requested documentation of the assignment, and shortly thereafter, at approximately 5:23 p.m., Angel's attorney forwarded a copy of the assignment agreement to him.
Recognizing this assignment as the "other collection alternatives" Holden had warned him the Bank would likely pursue, Tauch promptly emailed Holden at 6:12 p.m. on April 13 purporting to accept the settlement terms stated in Holden's April 11 email:
I have spoken with my investors and they are OK with your offer. We agree to the 2 million payment which is a release and not a purchase. Please send paperwork so I can review.
Neither Holden nor any other Bank representative had informed Tauch about the assignment agreement prior to Tauch's attempted acceptance. Rather, all communications about the assignment agreement had come from Angel's attorney.
Two days later, the Bank's attorney responded to Tauch's email:
Please be advised that, prior to its receipt of your email on Thursday morning, the [B]ank assigned its judgment. I understand your agent received notice [o]f this fact prior to your email to Mr. Holden and, based on the terms [of the assignment], you knew the [B]ank could not release the judgment when you sent the email.
Tauch denied that the purported settlement offer had been effectively revoked, insisted that a valid settlement agreement had been formed, and refused to pay Angel.
On April 25, 2016, Tauch's counsel acknowledged in a Rule 11 agreement that Angel's judgment had, at that point, been fully satisfied. Nonetheless, given the percolating dispute over settlement of the Bank's judgment, the parties agreed to extend the temporary restraining order with a modification allowing Tauch to transfer $7 million from his bank accounts to his attorney's IOLTA account "to be held in trust for purposes of either transferring those funds into an escrow account ... or paying off the balance of the [Bank's] judgment."
Less than a month later, Angel sued Tauch seeking a declaration that (1) Tauch's power of acceptance terminated on receipt of the assignment agreement; (2) Tauch's April 13 email came too late and was thus ineffective as an acceptance; (3) Tauch's April 13 email was not an acceptance because it lacked essential terms and contemplated further action; and (4) Tauch owed the full amount of the judgment, plus interest, to Angel. In a counterclaim, Tauch sued Angel for tortious interference with a contract and sought a declaration that he had a valid contract with the Bank to settle the debt for $2 million based on his acceptance of the Bank's April 11 offer before the assignment agreement's stated effective date. Tauch also filed a third-party claim against the Bank for breach of contract. The Bank responded with a counterclaim against Tauch, seeking a declaration that no contract was formed.
Angel and Tauch filed cross-motions for partial summary judgment on their declaratory-judgment claims. The trial court granted Angel's motion and implicitly denied Tauch's, concluding that "Tauch has no binding contract with [the] Bank to compromise and settle the Judgment" because (1) "Tauch's power of acceptance terminated by notice of and Tauch's receipt of the Assignment from [the Bank] to Angel" and (2) "[a]s a matter of law, Tauch could not have accepted the offer made by the [Bank]." The court subsequently rendered final judgment for Angel and...
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