Fort Worth Neuropsychiatric Hospital, Inc. v. Bee Jay Corp.

• Decision Date: 12 July 1979
• Docket Number: No. 18120,18120
• Citation: Fort Worth Neuropsychiatric Hospital, Inc. v. Bee Jay Corp., 587 S.W.2d 746 (Tex. Ct. App. 1979)
• Parties: FORT WORTH NEUROPSYCHIATRIC HOSPITAL, INC., Appellant, v. BEE JAY CORPORATION, Appellee.
• Court: Texas Civil Court of Appeals

Page 746

587 S.W.2d 746

FORT WORTH NEUROPSYCHIATRIC HOSPITAL, INC., Appellant, v. BEE JAY CORPORATION, Appellee.

No. 18120.

Court of Civil Appeals of Texas, Fort Worth.

July 12, 1979.

Rehearing Denied Sept. 20, 1979.

Second Motion for Rehearing Overruled Oct. 18, 1979.

Garrett & Burkett and Mike R. Burkett, Fort Worth, for appellant.

Staples & Foster and Ross T. Foster, Hurst, for appellee.

OPINION

MASSEY, Chief Justice.

Bee Jay Corporation, hereinafter termed Bee Jay, brought suit against Fort Worth Neuropsychiatric Hospital, Inc., hereinafter termed Hospital, for damages because of breach of contract. Trial was to a jury, upon the verdict of which judgment was rendered for Bee Jay for $122,700.00 in damages. Such amount was that by which Bee Jay suffered loss of rentals from a Dr. Dolenz because of Hospital's breach. Hospital appealed.

We affirm.

We have heretofore had an aspect of the case under consideration. Bee Jay Corp. v. Fort Worth Neuropsychiatric, 557 S.W.2d 161 (Tex.Civ.App. Fort Worth 1977, no writ). Upon that occasion our holding was that disposition of the case by a summary judgment was improper; that issues existed making the case one which should be tried on the merits. Such a trial did follow, and it is from the judgment rendered therein that the instant appeal is presented. Observed in our former opinion was that the claim of Bee Jay was that Hospital had violated a sales contract; that the suit of Bee Jay was for Hospital's breach of contract.

Important in the consideration of the appeal is to recognize that rule of law relative to the Statute of Frauds, to-wit: the inhibitory provisions of the statute shall not apply where a fraud would result if repudiation of an oral contract were permitted or where the case is such that the non-enforcement of the contract or the enforcement of the statute would, itself, plainly amount to a fraud. Hooks v. Bridgewater, 111 Tex. 122, 229 S.W. 1114 (1921). As it should, the law has supplied a positive rule to insure that an exception to the statute is provided for the prevention of an actual fraud, as distinguished from a mere wrong, which if not prevented would foreclose relief for actual harmful loss. Kirk v. Beard, 162 Tex. 144, 345 S.W.2d 267 (1961). See also "Moore" Burger, Inc. v. Phillips Petroleum Company, 492 S.W.2d 934 (Tex.1972); and cases annotated under Tex.Dig., "Estoppel", k85, "(Representations)-Future events".

In the instant case Bee Jay has no right to relief by way of rescission of contract because title to the realty involved has passed into the hands of third persons. However, relief by recourse to remedy of damages for breach of contract is available if the Bee Jay right to make proof by parol evidence is proper, and suffices to prove that character of action. Were that not so there would remain available to Bee Jay the equitable remedy of restitution. Where one person is accountable to another on the ground that otherwise he would unjustly benefit or the other unjustly suffer loss remedy is available in equity if not at law. See Restatement of the Law, Restitution (1937).

One reason for our expression upon the law, stated in the paragraph in which we cited Hooks, Kirk, and "Moore" Burger, is because in the instant case there was an erroneous written lease involved, to be hereafter detailed, and that contract is unenforceable as a writing (as a written lease) because of misdescription of property intended to be leased. That lease, from Bee Jay to a Dr. Dolenz, was for an initial five year period beginning January 1, 1970, plus option for Dolenz to renew and extend the same for a period of five years at same rental as before, to-wit: $1,500.00 per month. The location and identification of the premises stated to be leased was erroneously stated to have been in a Block 3 of a particular survey, when that actually intended as the premises was in a different block. Dr. Dolenz did actually enter upon the premises intended to be leased to him by Bee Jay. He had occupied the premises for over a year before the events which gave rise to the litigation took place. In other words, what we attempt to show is that Dr. Dolenz and Bee Jay understood and took action upon that as to which they had contracted. There has never been dispute between Dr. Dolenz and Bee Jay over their agreement of lease. Indeed Bee Jay, though a corporation, has at all times in fact been the Alter ego of Dr. Dolenz, who was its president and owner of all the Bee Jay stock. Materiality of that fact does not exist in this case. No fraud was accomplished or even attempted by a misuse of the Bee Jay relationship by Dr. Dolenz as its Alter ego. No one was ever thereby deceived to his prejudice. Furthermore, until about February 10, 1971, Hospital was also the Alter ego of Dolenz, who was its president and owner of all the stock. Materiality of that fact is not a factor in this case.

Background information would serve to clarify what might seem to be a very complicated situation. Reflected in the record is that in the conduct of the business of a psychiatric hospital the hospital frequently desires that physicians in psychiatric practice maintain offices upon its premises; of course that means those physicians whose patients in sufficient number to become profitable to the hospital are directed to be hospitalized or are expected to be so directed. Therefore, it is probable that even without any contract relative thereto Dr. Dolenz would have been supplied with substantially the same office premises as those deemed to have been provided by contract of Bee Jay. That is, it would have been probable up to the time circumstances of dispute developed, about two and one-half years later, when Dr. Dolenz' personal difficulties with new management of Hospital resulted in the ouster of Dolenz.

In further simplification: Dr. Dolenz, as a businessman, was interested in handling his affairs in such manner as to minimize the amount of his taxes. In the accomplishment of such objective of "tax avoidance" (as contrasted with "tax evasion" which would be improper) he caused corporations to be formed of which he became sole owner, and as to which he was the Alter ego. It was primarily for tax purposes he formed the two corporations, Hospital and Bee Jay.

Therein lies the "key" to Dolenz' rather loose handling of the affairs of both corporations. Different parcels of realty, the whole of which was generally used by Hospital for hospital purposes, apparently was owned by Bee Jay and Dolenz. Bee Jay owned some of them and Dolenz owned others. None was jointly owned. Dolenz, as an individual, knew the premises he would occupy on Hospital's premises. Hospital as Alter ego of Dolenz knew what premises Dolenz would occupy. Bee Jay, also Alter ego of Dolenz, was in accord and fully informed. It was for tax purposes that there was agreement of these relative to the occupancy of Dolenz; hence it initially was of small importance that the premises be properly described in the lease which, purportedly, was of premises Bee Jay had the right to lease and the right to receive rents from Dolenz as Bee Jay's tenant. If the premises proved to have been erroneously described (as it was) and, if that proved to be important to be corrected, it was thought by these parties that no problem would be presented for they might easily accomplish such. To them what was important (for tax purposes) was that there be something written as evidence for the tax collector that there was the $1,500.00 monthly rent payable to Bee Jay and not the free occupancy by Dr. Dolenz.

Whether the parties' agreement was formally or informally made there was meeting of the minds whatever the object sought to be thereby accomplished of the two corporations with one another and with Dr. Dolenz. This meeting of the minds was upon the matter of the leased property, the lease period, and upon the Bee Jay entitlement to receive monthly rents at $1,500.00 as from Dolenz. Consideration for the agreement was not a problem for it could be found existent, and as applied to the rights of Bee Jay might be found existent in its capacity as a third party beneficiary of the contract of Dolenz and Hospital.

Hereinabove described is presented the situation when a California domiciled corporation, the Neuro-psychiatric Hospital and Health Services, Incorporated, became interested in the purchase of all the stock of Hospital plus purchase, for Hospital, as its wholly owned subsidiary, all the real estate of Bee Jay and of Dolenz.

In general chronological order, the factual circumstances were shown to have been:

1. As of January, 1970, Dr. Dolenz and Bee Jay owned all the properties proximate to the corner of West Magnolia and South Adams Streets in Fort Worth, all generally referred to as 1066 West Magnolia, and being premises which may be treated as leased by Hospital, except for a part thereof leased to Dr. Dolenz by Bee Jay pursuant to an agreement made one and one-half months prior. (This was the lease which failed as a "writing". Nevertheless our holding is that it, or the oral contract of which it was intended to be a memorandum, never failed as a lease upon the premises intended for the period and upon the terms therein prescribed.)

2. The agreement effective as of 1 January, 1970 between Bee Jay and Dolenz relative to the aforesaid premises, (occupied and in use by Dolenz from that date), was one by which he was obligated to pay Bee Jay rent at $1,500.00 per month for an initial lease period of 5 years, with option for Dolenz to renew and extend for an additional 5 years. What this amounted to was an oral lease because of the failure of the written instrument to describe the premises constituting the actual subject of their contract. Neither Bee Jay nor Dolenz ever owned the property described in the "writing". (A question exists upon whether it was Bee Jay or Dr. Dolenz who owned the property intended to be leased. In the...