Faucette v. Chantos

• Decision Date: 23 September 2010
• Docket Number: No. 14-08-00536-CV.,14-08-00536-CV.
• Citation: 322 S.W.3d 901
• Parties: H. Frank FAUCETTE and J. Lawrence Schadler, Appellants/Cross-Appellees, v. Grace C. CHANTOS and A.J. Chantos & Associates, Inc. d/b/a Sarco of Texas, Appellees/Cross-Appellants.
• Court: Texas Court of Appeals

322 S.W.3d 901

H. Frank FAUCETTE and J. Lawrence Schadler, Appellants/Cross-Appellees,

v.Grace C. CHANTOS and A.J. Chantos & Associates, Inc. d/b/a Sarco of Texas, Appellees/Cross-Appellants.

No. 14-08-00536-CV.

Court of Appeals of Texas,Houston (14th Dist.).

Sept. 23, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Clinard J. Hanby, The Woodlands, for appellants.

Bradley R. Walton, Peter Michael Kelly, James B. Lewis, Susan J. Taylor, Houston, for appellees.

Panel consists of Justices FROST, BROWN, and Senior Justice HUDSON. ^*

OPINION

JEFFREY V. BROWN, Justice.

This case involves the failed sale of a company to its employees, who instead resigned from the company, formed their own business, and obtained some of the seller's former lines of business. The company, A.J. Chantos & Associates, Inc., d/b/a Sarco of Texas (“Sarco”) and its principal shareholder, Grace C. Chantos, sued former employees H. Frank Faucette and J. Lawrence Schadler, alleging breach of contract, tortious interference with contract, and other claims. Both sides moved for summary judgment on the breach-of-contract claim, and the trial court granted Chantos and Sarco's motion for partial summary judgment on liability for breach of contract.

The case was then tried to a jury on damages for breach of contract and on the tortious-interference claim. The jury awarded Chantos $192,266.00 in damages for breach of contract. The jury found both defendants liable for tortious interference and awarded Sarco $201,407.21 in damages. The trial court granted Faucette and Schadler's motion for judgment notwithstanding the verdict on the tortious-interference claim, but entered a judgment on the breach-of-contract claim for the amount awarded by the jury, attorney's fees, pre- and post-judgment interest, and costs.

On appeal, appellants Faucette and Schadler contend the trial court erred in granting Chantos and Sarco's motion for partial summary judgment on the breach-of-contract claim and in not granting their motion for summary judgment. In resolving this issue, we are asked to consider the infrequent circumstance of a grantor of an option suing the holder of the option for allegedly breaching the option's terms. The appellants also contend that the evidence at trial was legally and factually insufficient to prove damages for breach of contract.

On cross-appeal, Chantos and Sarco contend that the trial court erred in granting Faucette and Schadler's motion for judgment notwithstanding the verdict because Chantos and Sarco presented legally sufficient evidence of each element of tortious interference.

For the reasons explained below, we affirm.

I

Grace Chantos and her husband, Andy, formed Sarco of Texas, a representative sales agency for plumbing supplies, in 1979. In 1983, they incorporated the agency as A.J. Chantos & Associates, Inc., d/b/a Sarco of Texas. Sarco had contracts with manufacturers in the plumbing, air-conditioning, and heating industry. It was standard in the industry that the contracts with the manufacturers had thirty-day termination provisions. Despite the thirty-day cancellation provision, Sarco represented several manufacturers for twenty years or more. These manufacturers included Elkay, Vanguard, McGuire, and Precision.

Grace and Andy had two children, Linda and Andrew. Andrew worked for Sarco until 1993, when he started his own agency, Sarco Central, in New Braunfels. Linda married Faucette, who worked for Sarco for a few years in the 1980s, returned to Sarco as a salesman in 1994, and remained there until October 7, 2003. J. Lawrence Schadler worked as a salesman for Sarco from 1994 until October 7, 2003. The only other sales employee for Sarco was Lane Malmburg, who started with Sarco in 2002. Malmburg resigned the same day as Faucette and Schadler-October 7, 2003.

For many years, Andy Chantos had suffered from a serious illness. In 2001, he and Grace began to consider retiring and entered into negotiations with Chumley & Associates to sell the agency. Ultimately, Andy and Grace broke off negotiations with Chumley and offered to sell Sarco to Andrew, Faucette, and Schadler. ¹ Andrew already owned 260 of Sarco's 1,000 shares, most of which were obtained in 2001 when Sarco acquired Andrew's company, Sarco Central. In the spring and summer of 2001, the parties executed the “Sale and Purchase Agreement” containing the option to purchase all the shares of stock in Sarco (the “contract”).

The contract provided that, when Faucette, Schadler, and Andrew acquired forty-nine percent of the company, they would have the option to purchase the remainder of the company from Chantos. The relevant portion of the contract provided:

At such time as Buyers have acquired a total of forty-nine percent (49%) of the

authorized and outstanding shares of the Corporation, Buyers shall have the option to purchase the remaining shares, but only in a lump sum wherein Buyers purchase all remaining shares.

* * *

This Agreement shall terminate unless the Sale and Purchase contemplated is completed in its entirety within thirty-two (32) months from the date of execution of the Agreement.

Andy became gravely ill in late 2001, and after that he and Grace did not actively participate in the operation of Sarco. Faucette, Schadler, and Linda operated Sarco on a day-to-day basis. On August 18, 2002, Andy died. Grace returned to work in May of 2003, and Linda resigned.

On July 22, 2003, Faucette, Schadler, Chantos, Andrew, and attorney Brad Walton met to discuss exercising the option. At the time of the meeting, Faucette owned 118 of Sarco's 1,000 shares; Schadler owned 116 shares, and Andrew owned 260 shares. Thus, together they owned 494 shares, or 49.4 percent of the company. ² The parties discussed a plan in which Faucette and Schadler were to purchase enough shares from Chantos to bring their ownership to 260 shares each-the same number Andrew already owned. ³ The company would then purchase the remaining shares. The parties also discussed having another meeting within sixty days, apparently to finalize the agreement. But no second meeting occurred, and Faucette and Schadler did not purchase the shares.

Sometime after the July 22 meeting, Faucette and Schadler's business relationship with Grace deteriorated, and after one particularly heated encounter with Grace, they decided to leave Sarco and form their own representative agency. In early September, Faucette discussed leaving Sarco with Schadler and Malmburg. They all resigned on October 7, 2003. About a week or two before they resigned, Schadler went to some of the manufacturers with which Sarco had representative contracts, including Elkay, Vanguard, McGuire, and Precision, and posed a “hypothetical” question asking if he and the others left Sarco, whether they could represent those manufacturers. Also, in late September or early October, Faucette spoke with an attorney about incorporating a new manufacturer's representative company to be called Tri-Rep Sales, Inc. Faucette, Schadler, and Malmburg did not inform Grace of their plans or that they were going to quit. They continued to represent to Grace and Andrew that they intended to complete the purchase of shares in Sarco.

On the day Faucette, Schadler, and Malmburg resigned, Grace was in California. Consequently, the office was left without salespeople and unable to function adequately. ⁴ That same day, Vanguard sent Sarco written notice that it was terminating its manufacturer's sales representative contract with the company. Three days later, on October 10, 2003, Elkay also terminated its sales agreement with Sarco. Elkay and Vanguard signed representation agreements with Tri-Rep shortly after that. Grace and Andrew were unable to find experienced salespeople to staff the company, and Sarco was therefore unable to service its remaining lines. After Tri-Rep began operating, its annual sales ranged between $1 million and $3 million.

II Breach of the Option Contract

Grace and Sarco moved for partial summary judgment on their breach-of-contract claim. They alleged that, after Andy passed away, Faucette and Schadler “concluded that it would be far less expensive to simply take the clients and suppliers of [Sarco] rather than to continue with the purchase.” They also alleged that Faucette and Schadler persuaded several of Sarco's largest manufacturers and clients to leave Sarco and to sign representation contracts with them. Grace and Sarco contended that Faucette and Schadler breached the option contract when, at the meeting on July 22, 2003, Faucette and Schadler gave notice of their intent to exercise their option to purchase all of the remaining shares of the company, but then failed to complete the purchase.

Faucette and Schadler responded to this motion and filed their own motion for summary judgment on the breach-of-contract claim. In Faucette and Schadler's motion for summary judgment and response, they argued that they did not exercise the option because they did not tender the funds to purchase the shares within the time required by the contract. Consequently, they argued, their failure to timely exercise the option according to its terms legally amounted to nothing more than a rejection of the option.

On November 2, 2006, the trial court granted Grace and Sarco's motion for partial summary judgment. Faucette and Schadler moved for reconsideration, which the trial court denied.

In their first issue, Faucette and Schadler contend that the trial court erred in denying their motion for summary judgment on the breach-of-contract claim and in granting Grace and Sarco's motion.

We review the trial court's grant of summary judgment de novo. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 156-57 (Tex.2004). A movant must establish its right to summary judgment by showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d...