HALMOS v. BOMBARDIER AEROSPACE CORP.

• Decision Date: 02 June 2010
• Docket Number: No. 05-08-00865-CV.,05-08-00865-CV.
• Parties: Peter A. HALMOS, Individually and d/b/a Pah Corporation, and Pah Co., Appellants, v. BOMBARDIER AEROSPACE CORPORATION, Appellee.
• Court: Texas Court of Appeals

314 S.W.3d 606

Peter A. HALMOS, Individually and d/b/a Pah Corporation, and Pah Co., Appellants, v. BOMBARDIER AEROSPACE CORPORATION, Appellee.

No. 05-08-00865-CV.

Court of Appeals of Texas, Dallas.

June 2, 2010.

COPYRIGHT MATERIAL OMITTED

Michael J. Stanley, Stanley, Frank & Rose, LLP, Houston, for Appellants.

Robert P. Latham, Jackson & Walker, L.L.P., Dallas, for Appellee.

Before Justices FITZGERALD, MURPHY, and MYERS.

OPINION

Opinion By Justice MURPHY.

This appeal involves disputes relating to the purchase and operation of a Learjet 31A aircraft. PAH Co.,¹ as the purchaser of a fractional interest in the jet, appeals the judgment entered in favor of Bombardier Aerospace Corporation after a directed verdict against PAH on its breach of contract claims and a jury verdict in favor of BAC on BAC's breach of contract claims.² PAH's president and owner, Peter A. Halmos, also appeals the trial court's order striking his individual counterclaim. We conclude the trial court erred in granting the directed verdict against PAH and in its jury instruction on conditional tender as to BAC's breach of contract claims. Accordingly, we reverse the judgment against PAH as to those claims and remand for further proceedings. Otherwise, the judgment is affirmed.

Background

PAH is a real estate and investment company based in West Palm Beach, Florida. BAC is a Dallas-based corporation whose business includes the manufacture, sale, and operation of aircraft. As part of that business, BAC sold fractional interests in its aircraft through its FlexJet program and managed a fleet of planes under that program. In June 1999, PAH purchased a one-eighth interest in a Learjet 31A for $773,000 and contracted with BAC for management services and 100 annual flight hours. The transaction was governed by five documents, two of which are at issue—the management agreement and the purchase agreement.

The terms of the management agreement required PAH to pay in advance a predetermined monthly management fee due on the first day of each month. That amount was $7308 and was subject to annual escalation. That agreement also required PAH to pay, within thirty days after the date of invoice, a variable rate for the costs associated with each flight taken. In connection with the variable rate charges, PAH paid a deposit of $10,345.06. This amount represented "a sum equal to one month's estimated Variable Rate charge to be used by BAC to defer the cost of maintenance, fuel, and miscellaneous expenses incurred by BAC and as a result of invoicing Variable Rate charges in arrears." The deposit was to be returned at the expiration of the agreement, after PAH paid all sums due. The management agreement provided that in the event PAH did not pay any required amount when due, or within a ten-day notice-and-cure period, BAC could declare PAH in default, deny PAH use of the jet, and, at its discretion, repurchase PAH's fractional interest. The repurchase would be at a twenty percent discount from the fair market value as determined by the parties' mutual agreement, or absent such agreement, by a mutually agreed upon independent appraiser or a majority of three independent appraisers. This repurchase provision was also contained in the purchase agreement.

The parties' breach of contract claims involve disputed variable rate fees for flights between April 1999 and November 2001. Those fees included charges for flights Halmos asserted were to be non-stop, but required fuel stops. Halmos claimed the jet was not performing as represented at the time of purchase and BAC was not operating and managing the jet safely. Halmos worked with BAC staff during that time trying to resolve the issues. As a result, BAC made some concessions and offered credits. By November 2001, however, BAC records reflected PAH had an outstanding balance of $46,497.69.

On November 20, 2001, BAC notified PAH by letter of the outstanding balance and its intent to suspend PAH's account if payment was not received within thirty days. On December 10, PAH sent a check for $46,497.69, which contained a handwritten notation that it was "IN FULL PAYMENT PAID UNDER PROTEST AND DURESS WITHOUT PREJUDICE. ALL RIGHTS RESERVED." The cover letter stated that "under extreme duress and protest, PAH . . . remits in full payment $46,497.69 pursuant to your letter of November 20." BAC rejected the check and, on January 11, 2002, declared PAH in default, suspended flight privileges, and notified PAH that it intended to exercise its right to repurchase PAH's interest in the jet. BAC sent PAH the documents necessary to repurchase the jet a week later and offered a net repurchase price of $840,557.48. PAH rejected the repurchase offer and retained its fractional interest, but BAC denied PAH use of the jet.

A year and a half later, PAH executed and tendered the repurchase documents. BAC did not accept the documents, but drafted new documents showing a net repurchase value of $321,367.05. PAH rejected this offer, and no other offers were tendered. In June 2004, BAC sued Halmos individually and "d/b/a PAH Corporation and PAH Co." Nine months later, after Halmos had answered the lawsuit denying he individually was a proper party, BAC added PAH as a separate defendant. In its live pleading at time of trial, BAC alleged breach of the management agreement for failure to pay amounts due. BAC also alleged breach of the management and purchase agreements for failure to reconvey the jet. In addition to its request for actual damages, attorney's fees, interest, and costs, BAC sought recovery under the doctrine of quantum meruit and reconveyance of the jet through specific performance, injunctive relief, and a declaratory judgment.

PAH, asserting it was "misnamed" in BAC's petition as "Peter A. Halmos d/b/a PAH Corporation," answered the original suit with a general denial and counterclaim. Halmos did not individually counterclaim, but PAH's pleading alleged that "should it be determined by this court that PAH has not been misnamed and that Peter Halmos individually is the correct party defendant, which is not admitted and is specifically denied, then this counterclaim is being brought by Peter A. Halmos individually." Over the course of the three years leading to trial, PAH amended its answer and counterclaim numerous times. An amended pleading filed in April 2005 included defenses and sworn denials on behalf of Halmos and PAH, but Halmos's prior assertion that he was counterclaiming individually "should it be determined" he was the correct party, was omitted. Only PAH asserted counterclaims from that date forward. In their live pleading at the time of trial, the "Fifth Amended Original Answer and Sixth Amended Original Counterclaim" filed November 2006, PAH and Halmos asserted defenses that included fraudulent inducement and accord and satisfaction. PAH also alleged causes of action for (1) fraud, fraudulent inducement, and negligent misrepresentation based on BAC's statements at the time of purchase concerning the jet's range and flight capabilities; (2) breach of contract on eleven grounds, including unsafe operation of the jet, demand for payments not due, failure to "give promised credits," refusal of PAH's check for $46,497.69, and wrongful termination; (3) conversion of the jet based on BAC's denial of use; and (4) breach of agreement to repurchase the jet. PAH sought rescission of the agreements, actual and punitive damages, the January 2002 repurchase price of the jet, the difference between the value of the plane as represented and as received, and attorney's fees.

The case was tried to a jury for six days. At the close of evidence, the trial court granted directed verdicts in favor of Halmos individually on all of BAC's claims and against PAH on its breach of contract claims against BAC. The jury then returned a verdict against PAH on the remainder of its claims. As to BAC's breach of contract claims against PAH, the jury found that PAH had breached the management agreement, but not the purchase agreement, and awarded damages in the amount of $156,678.78. The jury also found that the fair market value of a one-eighth interest in the jet was $363,043.77 at the time of trial and BAC was entitled to attorney's fees in excess of one million dollars. The trial court subsequently rendered judgment on the jury's verdict and also ordered that PAH's fractional interest in the jet be reconveyed to BAC "for the total consideration of $373,389.63"—the fair market value of the jet as determined by the jury, plus a credit in favor of PAH for the deposit it had paid at the time of purchase. This appeal followed.

Evidence

Our review of the issues related to the parties' breach of contract claims requires that we consider the entire record, which includes testimony from fifteen witnesses the jury heard over the course of seven days. Testimony from six of the witnesses is significant to our analysis. We therefore include a lengthy recitation of the testimony of those witnesses: (1) Halmos; (2) Dennis Keith and (3) Michael Riegel, both of whom signed the purchase agreement on BAC's behalf; (4) Dylan Haynie, BAC's contract administrator at the time PAH purchased its interest in the jet and counsel at the time PAH tendered the $46,497.69 check; (5) Shelly Hedrick, BAC's assistant to the president and owner complaints representative; and (6) Allyn Needham, BAC's expert on damages. We begin with testimony from Halmos.

Halmos testified he purchased the fractional interest in the jet primarily for urgent and last-minute business trips between West Palm Beach and two northeastern cities—Providence, Rhode Island, and New York. He was looking for "fast and high," and BAC's marketing materials described the jet as "a 548 mph time machine" that could fly over most weather. Halmos testified the approximate 1000 mile distance between West Palm Beach and Providence, and West Palm Beach and New York City, fell within the jet's...