Declaire v. G & B Mcintosh Family Ltd.

• Decision Date: 08 May 2008
• Docket Number: No. 01-06-00423-CV.,01-06-00423-CV.
• Parties: Christopher G. DeCLAIRE, Appellant, v. G & B McINTOSH FAMILY LIMITED PARTNERSHIP, Appellee.
• Court: Texas Court of Appeals

260 S.W.3d 34

Christopher G. DeCLAIRE, Appellant, v. G & B McINTOSH FAMILY LIMITED PARTNERSHIP, Appellee.

No. 01-06-00423-CV.

Court of Appeals of Texas, Houston (1st Dist.).

May 8, 2008.

Brian E. Bro, Law Offices of Brian E. Bro, Byron C. Keeling, Keeling & Downes, P.C., Houston, TX, for appellant.

R. Russell Hollenbeck, Thomas C. Wright, Wright Brown & Close, LLP, Rayford J. Black Jr., Houston, TX, for appellee.

Panel consists of Chief Justice RADACK and Justices KEYES and HIGLEY.

OPINION ON REHEARING

EVELYN V. KEYES, Justice.

We grant appellee's motion for rehearing. See TEX.R.APP. P. 49.3. We withdraw our opinion and judgment of November 8, 2007 and issue the following in its stead.

Appellant, Chris DeClaire, appeals the trial court's judgment that found in favor of appellee, G & B McIntosh Family Limited Partnership ("Partnership"). In 13 issues, DeClaire argues that the trial court's findings of fact and conclusions of law are erroneous because (1) the evidence is legally and factually insufficient to establish fraud; (2) the parol evidence rule and the merger doctrine bar the admission of evidence concerning an oral agreement; (3) the judgment creates a usurious transaction; and (4) the trial court erred in awarding attorney's fees, interest, and costs.

We reverse and remand.

Background

In June 2001, DeClaire obtained a loan from Bank One in the face amount of $160,000 (the "Bank One Loan"). The Bank One Loan subsequently became undercollateralized. Bank One asked DeClaire to pledge additional collateral. DeClaire approached Jerry McIntosh, a general partner of the Partnership and with whom he had a previous business relationship, for assistance. In 2001, McIntosh agreed to pledge $193,000 in marketable securities owned by the Partnership against the Bank One Loan. McIntosh thought that the pledging of assets would be short term, but it actually lasted three to four years. Thereafter, on or about May 7, 2003, DeClaire signed a promissory note in favor of Bank One for $159,000 with a maturity date of February 8, 2004. McIntosh signed a pledge agreement incident to the Partnership assets already pledged against the Bank One Loan. In the summer of 2004, the Partnership thought that the Bank One Loan would not be renewed, and it feared that, unless the Bank One Loan was paid off, the Partnership's collateral would be liquidated to pay the outstanding balance. For the prior three years, DeClaire had paid only the interest on the Bank One Loan, and, therefore, the face amount remained approximately $160,000.

In 2004, McIntosh, on behalf of the Partnership, paid off DeClaire's debt at Bank One pursuant to an agreement with DeClaire and took a promissory note from DeClaire (the "DeClaire Note") that was secured by shares of common stock in a closely-held company known as Coastal Caverns, Inc.¹ The DeClaire Note, signed by DeClaire on September 16, 2004, stated that DeClaire promised to pay the Partnership $216,260.00 and provided a maturity date of March 6, 2005. The evidence conflicts as to when and where McIntosh picked up the DeClaire Note, but it is undisputed that he did not read it. Subsequently, McIntosh delivered the DeClaire Note to his financial advisor, David Russell, who, likewise, undisputedly did not read it. Russell directed Ann Guin at Bank One to pay off DeClaire's loan on September 16, 2004, prior to McIntosh's accepting the DeClaire Note.² A week after accepting the DeClaire Note, McIntosh submitted a letter directing Bank One to transfer the funds from the Partnership's account to pay off DeClaire's Bank One Note. DeClaire subsequently defaulted on the DeClaire Note.

In June 2004, DeClaire filed for divorce. The Partnership intervened and sought a temporary restraining order and a temporary injunction. The Partnership alleged causes of action for breach of contract and fraud and misrepresentation in connection with the DeClaire Note. In its second amended plea in intervention, the Partnership amended its breach of contract cause of action to a breach of an oral agreement. It asserted the same causes of action it had asserted in its original plea in intervention, plus claims for declaratory judgment and unjust enrichment. On March 17, 2005, DeClaire filed his original answer and counterclaim to the intervention of the Partnership. Additional amended answers were filed that culminated in a fifth amended answer. In his answer, DeClaire stated that the terms of the DeClaire Note provided that he could pay the Note off either by paying $216,260 to the Partnership or by letting 100,000 shares of Coastal Caverns common stock serve as the sole source of repayment to the Partnership.

On March 22, 2005, the presiding judge of the 312th District Court, the Honorable James D. Squire, issued a temporary injunction and ordered that DeClaire deposit $250,000 and 100,000 shares of Coastal Caverns, Inc. common stock into the court registry. Judge Squire severed the underlying divorce proceeding and transferred the intervention and counterclaim to the 269th District Court.³

The trial court entered a final judgment on March 3, 2006 in favor of the Partnership. The trial court ordered DeClaire to pay $159,000 "plus accrued but unpaid interest thereon at a rate of ten percent (10%) per annum beginning on September 15, 2004 through the date of trial, as repayment for the Partnership having paid off the Bank One Loan." The trial court further ordered DeClaire to pay the Partnership $54,000 "as payment for DeClaire's use of Partnership assets that were pledged on the Bank One Loan." The trial court further ordered that DeClaire pay to the Partnership $68,000 "as reasonable and necessary attorneys' fees and ... [$3,000] as taxable costs through the time of trial" and that he pay contingent attorney's fees for appeal. The trial court ordered that DeClaire could, at his option, pay part of the final judgment with the 100,000 shares of Coastal Caverns, Inc. common stock that was currently being held in the court registry. The trial court stated that the value of the stock could not exceed $.20 per share. In its final judgment, the trial court denied DeClaire's objections to the court's findings of fact and conclusions of law. DeClaire filed a motion for new trial, which the trial court denied.

Pertinent to this appeal, the trial court made the following findings:

10. On or about May 7, 2003, DeClaire signed a promissory note with Bank One for $159,000. At that time, McIntosh signed a pledge agreement incident to Partnership assets that were already pledged against the Bank One Loan. That loan was set to mature on February 8, 2004.

16. When Steve Barth ("Barth") learned of the situation with the Bank One Loan, he offered to assist with resolving the situation. Thereafter, Barth served as a facilitator between DeClaire on the one hand, and the Partnership (by and through Russell) on the other. Specifically, Barth helped DeClaire and the partnership establish the terms of an oral agreement whereby (i) the Partnership would pay off the Bank One Loan, (ii) DeClaire would repay the Partnership, with interest, in 2005, (iii) DeClaire would compensate the Partnership for the use of its collateral for three years, and (iv) DeClaire would pledge collateral (shares of Coastal Caverns, Inc. common stock) toward his obligation to the Partnership.

17. Rob James ("James") also offered to help DeClaire. In an effort to avoid DeClaire having to report ordinary income from the pay off of the Bank One Loan, Barth [sic] agreed to draft a promissory note to memorialize the oral agreement. That promissory note would also extend the payment of DeClaire's obligation to the partnership into 2005 so DeClaire could treat the transaction as a long-term capital gain (instead of ordinary income) if he were forced to liquidate the Coastal Caverns, Inc. common stock to pay off the partnership.

18. McIntosh had a conversation with DeClaire during which DeClaire agreed to pledge 100,000 shares of Coastal Caverns, Inc. common stock as collateral for his obligation to the Partnership. McIntosh, Russell and the partnership always expected DeClaire to repay his obligation to the Partnership in cash. Any collateral pledged was viewed as added security in the event of default.

20. On or about September 7, 2004, James drafted a promissory note for DeClaire and McIntosh to consider. James then e-mailed the draft to Barth, who e-mailed it to Russell on September 13, 2004. The draft did not contain any language limiting DeClaire's repayment to the Partnership, which was to be the payee on the promissory note. Russell made no other suggestions with regard to the draft.

23. On the morning of September 16, 2004, prior to DeClaire signing the Promissory Note, Russell e-mailed Guin with instructions to liquidate the Partnership's collateral account and pay off the Bank One Loan. The assets in the collateral account were mutual funds that could be liquidated in one day. At that time, McIntosh and Russell considered the oral agreement in place and the promissory note merely a formality to assist DeClaire with tax avoidance issues.

24. On that same morning, DeClaire, Barth and James all convened in Barth's office and revised the draft promissory note. DeClaire represented to Barth and/or James that McIntosh agreed to 100,000 shares of Coastal Caverns, Inc. common stock as collateral for the note. DeClaire further represented to Barth and/or James that McIntosh agreed to look solely to the 100,000 shares of Coastal Caverns, Inc. common stock for repayment of the note. DeClaire then requested that language be added to the draft to accomplish that outcome.

25. The Partnership did not receive any consideration for the revised language in the promissory note limiting repayment of DeClaire's obligation solely to Coastal Caverns, Inc. common stock.

26. James revised the draft promissory note on September 16, 2004 in accordance with DeClaire's...