Centre Equities, Inc. v. Tingley

• Citation: 106 S.W.3d 143
• Decision Date: 06 March 2003
• Docket Number: No. 03-01-00453-CV.,03-01-00453-CV.
• Parties: CENTRE EQUITIES, INC. and E. John Hosch, Appellants, v. Wallace G. TINGLEY, Jr., Appellee.
• Court: Court of Appeals of Texas

106 S.W.3d 143

CENTRE EQUITIES, INC. and E. John Hosch, Appellants, v. Wallace G. TINGLEY, Jr., Appellee.

No. 03-01-00453-CV.

Court of Appeals of Texas, Austin.

March 6, 2003.

Rehearing Overruled May 22, 2003.

COPYRIGHT MATERIAL OMITTED

Julia L. Kurtz, Robin L. Harrison, The Wright Law Firm, Houston, for appellants.

Kemp W. Gorthey, Kemp W. Gorthey, P.C., Austin, for appellee.

Before Justices KIDD, PATTERSON and PURYEAR.

OPINION

DAVID PURYEAR, Justice.

This is an appeal from a summary judgment in a suit brought by Centre Equities, Inc. and E. John Hosch (collectively "Hosch"), the seller-optionor under a stock purchase agreement, against Wallace G. Tingley, Jr., the Texas attorney representing an optionee with a right of first refusal under the agreement. Tingley allegedly made fraudulent or negligent misrepresentations, tortiously interfered with the sale of the stock to alternate purchasers, and conspired with the optionee to defeat that sale. Hosch, the seller-optionor, sued Tingley's client, the optionee, in Alabama, and although he prevailed on liability, he was awarded only nominal damages. He subsequently filed this lawsuit in Texas against Tingley alleging, among other things, consequential damages incurred after rendition of judgment in the Alabama case. Tingley filed a summary judgment motion based on collateral estoppel alleging that the award and satisfaction of the nominal damages in the Alabama judgment precludes relitigation of the damage issues in this case. On appeal, Hosch argues that collateral estoppel does not apply because: (1) there is no identity of issues between the two cases; (2) the nominal damage award of the Alabama judgment is not preclusive because subsequent damages are sought; and (3) the issue of damages was not fully and fairly litigated in the Alabama suit. We will reverse the judgment of the district court and remand for further proceedings.

FACTUAL BACKGROUND

John Hosch is president and sole shareholder of Centre Equities, Inc., an Alabama corporation which is the subject of this lawsuit. It owns an office building known as the Burger-Phillips Centre located in Birmingham, Alabama. Hosch engaged the services of Don Legacy in connection with managing and leasing that building. They are alleged to have made an oral employment contract whereby Legacy was to act as a leasing agent and manage the property in return for fifteen percent of the stock of the corporation. A dispute arose concerning whether Legacy was to receive the fifteen percent ownership interest contemporaneously with the formation of the agreement or upon the Burger-Phillips building being fully leased and sold. The corporation entered into a separate oral agreement with Legacy whereby the corporation was to pay Legacy commissions for leasing its property.

The dispute over Legacy's stock ownership led to litigation between Hosch and Legacy in Alabama. Hosch sued Legacy for breach of contract, rescission of the employment contract, and for "usurping the Texas business opportunity" in connection with the Legacy-Tingley business venture in Texas.¹ Hosch also sought a declaratory judgment that Legacy had no interest in Centre Equities. Legacy countersued for breach of contract and numerous other torts.

In the meantime, Hosch agreed to sell Centre Equities to James Rudnick and Donald Carrigan for $4.1 million. Hosch, Rudnick, and Carrigan executed a stock purchase agreement on May 14, 1997. Hosch alleges that because of the ongoing disagreement with Legacy, the parties gave Legacy a right of first refusal in the stock purchase agreement to purchase all of the stock of the corporation "on the same terms and conditions" as Rudnick and Carrigan agreed to pay.

The right of first refusal contained in paragraph 7.06 of the stock purchase agreement provides:

7.06 Right of First Refusal. The Purchasers agree that Mr. Legacy shall have the option to purchase the Shares hereunder on the same terms and conditions to this Agreement, if such is accepted by Mr. Legacy no later than June 11, 1997 in writing. Furthermore, the Seller shall immediately provide Mr. Legacy a copy of this Agreement with a notification of his right of first refusal immediately after the execution hereof.

One of the "terms and conditions" of the stock purchase agreement was an earnest money requirement:

7.12 Earnest Money. The Purchasers shall deposit the sum of Fifty Five Thousand and No/100 Dollars ($55,000.00) with their attorney, who shall acknowledge the receipt of such funds to the Seller. All amounts paid to the lender by Purchasers, or already paid to the lender by Purchasers, shall be credited or may be deducted respectively from the earnest money deposit.

Legacy initiated the process under this contract in an effort to exercise his option to purchase Centre Equities. Hosch alleges that Legacy did so maliciously with no intent to actually purchase the stock in an effort to injure Hosch by frustrating the sale to Rudnick and Carrigan.

Legacy's written notice of his choice to exercise his option to purchase the stock came in the form of a letter from his lawyer, Tingley. Tingley's letter to Hosch, dated June 13, 1997, states:

RE: Stock Purchase Agreement (Agreement) dated May 14th, 1997 between E. John Hosch (Seller) and James M. Rudnick and Donald T. Carrigan (Purchasers).

Dear Mr. Hosch:

I represent Don Legacy, in connection with the above-referenced matter.

This letter will serve as my acknowledgement [sic] and your notification that Mr. Legacy has complied with paragraph 7.12 of the Agreement, in accordance with the provisions set out therein.

It is undisputed that Legacy did not deposit any money with Tingley. It is Tingley's alleged role in facilitating Legacy's interference with the Rudnick — Carrigan purchase of the corporation that forms the basis of this lawsuit by Hosch against Tingley.

Hosch's pleadings in this Texas lawsuit allege causes of action for tortious interference with contract, negligent misrepresentation, fraudulent misrepresentation, fraudulent inducement, fraudulent concealment, conspiracy to defraud, as well as violations of the Texas Fraud in Real Estate and Stock Transactions Act and the Texas Securities Act. See Tex. Bus. & Comm.Code Ann. § 27.01 (West 1987); Tex.Rev.Civ. Stat. Ann. art. 581-33B (West Supp.2003). Hosch's petition expressly seeks the following damages:

1. Actual damages resulting from Defendant's misrepresentation and from the loss of the Rudnick and Carrigan sale, including but not limited to lost profits;

2. Incidental and consequential damages, including but not limited to lost profits, lost equity, commissions paid, refinancing costs, interest expenses and related costs incurred in financing the Burger — Phillips Centre after the lost sale, additional taxes incurred after the lost sale, additional build-out costs incurred after the lost sale, additional operating expenses and costs incurred after the lost sale, attorney's fees and litigation costs incurred as a result of Defendant's misrepresentation, as well as all other additional costs and expenses incurred as a result of the lost sale;....

In the Alabama lawsuit against Legacy, Hosch asserted a claim for intentional interference with a business relationship or contract under Alabama law. A jury in that case found in favor of Hosch on the liability portion of his claim. However, it awarded Hosch only one dollar as damages. It is this nominal damage award against Legacy in the Alabama lawsuit that Tingley contends precludes entirely Hosch's claims against him in this lawsuit.

The record before us contains Hosch's amended complaint in the Alabama litigation. That pleading contains the following factual allegations:

14. On May 14, 1997, Plaintiffs agreed to sell and James E. Rudnick ("Rudnick") and Donald T. Carrigan ("Carrigan") agreed to purchase the majority of the stock of Centre Equities. The contract contained a clause which allowed Defendant Legacy to have the right of first refusal to purchase the majority of the stock of Centre Equities....

15. Defendant Legacy stated that he would exercise the option in the contract to purchase the majority of the stock of Centre Equities.

16. Defendant Legacy did not close within the time allowed under the contract. Moreover, Defendant Legacy could not arrange for the financing of the purchase of Centre Equities within a reasonable time, nor did Legacy intend to purchase the corporate stock. Defendant Legacy's intention was to maliciously interfere and prevent Plaintiffs from completing the sale of the corporate stock to the buyers.

17. The actions of Defendant Legacy prevented the sale of the corporate stock to Rudnick and Carrigan.

. . . .

20. Defendant Legacy did not have the means to purchase ... the Centre Equities stock, and Defendant Legacy failed to make a good faith effort to arrange for the financing or purchase of ... the corporate stock of Centre Equities. Defendant Legacy's conduct constitutes a tortious interference with contracts between the buyer and seller.

21. The actions of Defendant Legacy caused the Plaintiffs to expend more time and resources to manage the property subsequently and also attempt to obtain other buyers. This increase in time and resources spent by Plaintiffs entitles the Plaintiffs to recover both compensatory and punitive damages for the malicious interference. Moreover, the actions of Defendant Legacy caused excessive costs, lost rent, a loss of profits, accrued interest on all loans related to Centre Equities and the other assets, and a loss of tax credits and capital.

The June 1998 final judgment in the Alabama lawsuit contains the following pertinent provisions:

This case was tried before this Court from May 4, 1998, to May 19, 1998, at which time a struck jury returned special verdicts on interrogatories submitted by the Court and verdicts as follows:

"We, the jury, find for the Plaintiff, John Hosch, and against the...