Hynds v. Foster
| Decision Date | 28 February 2017 |
| Docket Number | NO. 01-15-01034-CV,01-15-01034-CV |
| Parties | ROBERT HYNDS, Appellant v. DALE FOSTER, Appellee |
| Court | Texas Court of Appeals |
On Appeal from the 129th District Court Harris County, Texas
Appellee Dale Foster sued his business partner, appellant Robert Hynds, for fraud, breach of contract, and other claims arising out of an investment opportunity in an oil and gas field in Alabama. Foster moved for summary judgment on his fraud and breach of contract claims. After the trial court rendered summary judgment in Foster's favor, ordering rescission of the parties' contract, requiring Hynds to return Foster's $500,000 investment, and awarding attorney's fees, Foster nonsuited his remaining claims against Hynds. In five issues on appeal, Hynds contends that: (1 rescission of the parties' agreement was not available as a matter of law; (2) Foster failed to conclusively establish that he was entitled to rescission because he received the benefit of his bargain; (3) Foster failed to conclusively establish that the parties had a contract or that Hynds breached the contract; (4) Foster failed to conclusively establish that Hynds made a false representation or that Foster suffered damages; and (5) the trial court improperly awarded Foster attorney's fees.
We affirm.
Hynds and Foster have been friends since they were teenagers attending school in Jamaica. Foster works as a doctor in Jamaica. Hynds has experience working as an engineer in the oil and gas industry, and he lives in the Houston area. In 2007, Hynds and Foster formed Tryall Omega, Inc. ("Tryall") to pursue investment opportunities in oil and gas interests and real estate. Both parties owned a 50% interest in Tryall, with Hynds running the day-to-day operations of the company and Foster serving as the primary source of capital. Through Tryall, Hyndsand Foster purchased shares in an offshore oil and gas company and purchased an interest in a condominium development.
In 2013, Hynds identified a new potential investment opportunity: the purchase of a 49% working interest in the Pleasant Home Field oil and gas reserve in Alabama. According to Foster, Hynds informed him that he had negotiated a $1 million purchase price from the owner of the field, Gulf Coast Mineral, L.L.C. ("Gulf Coast"). Hynds sent Foster an assignment and bill of sale that listed the purchase price for the working interest as $1 million in cash. Foster averred that Hynds requested that Foster contribute $500,000 to fund the purchase price and that Hynds promised also to contribute $500,000. Although wary of the prospect of making such a large investment, Foster was persuaded by Hynds's willingness to invest an equal amount of his own money, and Foster agreed to wire $500,000 to Hynds. The sale of the 49% working interest in the Pleasant Home Field was ultimately consummated by Hynds on behalf of Tryall.
Several months after the purchase, and after he had not received any income from the working interest Tryall had purchased in the field, Foster requested information from Hynds about their investment. After Hynds failed to respond, Foster began investigating, and, according to his testimony, he discovered that Tryall had filed for bankruptcy in early 2014. Foster also discovered that Hynds and Gulf Coast had structured the sale of the Pleasant Home Field interest such that Tryallhad paid $400,000 in cash and had executed a $335,000 promissory note for the interest, for a total purchase price of $735,000 instead of $1 million. Hynds had contributed no money to the purchase price.
In November 2014, Foster filed suit against Hynds and asserted a cause of action for fraud, among other claims. Foster alleged that Hynds had committed fraud by falsely representing that he would also contribute $500,000 to the purchase price of the Pleasant Home Field interest and that the purchase price equaled $1 million in cash. Foster alleged that Hynds had negotiated the purchase price to be $400,000 in cash and a $335,000 promissory note and that he had made the misrepresentations to Foster with the intent of inducing Foster "to invest $500,000 in cash and thereby finance Tryall's entire purchase of the Pleasant Home Field interest." Foster alleged that he would not have made the investment had he known that "he alone would bear the risk of the investment." Foster asserted that he had been damaged in the amount of $500,000, representing his contribution to the Pleasant Home Field investment. Foster did not allege a cause of action for breach of contract in his original petition.
Hynds answered and also filed a plea to the jurisdiction, arguing that the case against him ought to be dismissed because he was not a party to the contract to purchase the Pleasant Home Field interest, Tryall was, and Hynds was merely acting as Tryall's officer when it purchased the interest from Gulf Coast. Hynds acknowledged that Tryall purchased the Pleasant Home Field interest for $400,000in cash and a $335,000 promissory note. However, he categorized Foster's $500,000 payment as an "equity contribution" to Tryall, and he alleged that Gulf Coast reduced the purchase price of the working interest after Foster had made his contribution.
In February 2015, Foster sought written discovery from Hynds, including requests for admissions. It is undisputed that Hynds did not timely respond to these requests.
In May 2015, Foster moved for partial summary judgment, arguing that Hynds's deemed admissions, as well as other evidence, conclusively established Foster's affirmative claims. Foster argued that by failing to contribute $500,000 towards the purchase of the Pleasant Home Field interest Hynds breached the parties' contract as a matter of law, entitling Foster to rescission and a return of his $500,000 contribution. Foster argued that the parties formed a valid contract when they both agreed to contribute $500,000 for the purchase of the Pleasant Home Field interest, that Foster performed his contractual obligations by actually contributing $500,000 to Hynds, and that Hynds breached the contract by failing to match Foster's contribution. Foster sought rescission of the parties' contract.
Foster also argued that his summary judgment evidence, including Hynds's deemed admissions, established his fraud claim as a matter of law. Foster argued that Hynds's material misrepresentations included misrepresentations that thepurchase price of the Pleasant Home Field interest was $1 million in cash, when it was actually $400,000 in cash and a $335,000 promissory note, and that Hynds himself would contribute $500,000 towards the purchase. Foster argued that, at the time of the misrepresentations, Hynds knew the purchase price was not $1 million, but he made the misrepresentations to induce Foster to provide the entire purchase price for the interest. As summary judgment evidence, Foster attached a declaration in which he swore to each of these facts. Foster attached a letter sent from Hynds to Foster's former counsel on May 19, 2014, more than a year after Tryall purchased the Pleasant Home Field interest, in which Hynds stated, "[Pleasant Home Field] 49% working interest acquisition cost break down was as follows: $400,000 transfer to [Gulf Coast]; $335,000 promissory note; $250,000 secured bond, $59,881.82 well insurances; $20,000 startup expenses." Foster also attached the declaration of his counsel, who averred that $9,965 would be a reasonable and necessary amount of attorney's fees through the summary judgment proceedings.
Foster presented evidence that he contributed $500,000 in cash to the purchase of the Pleasant Home Field interest in reliance on Hynds's representations that the purchase price of the interest was $1 million and that Hynds himself would also contribute $500,000 in cash, and he would not have made this contribution were it not for Hynds's misrepresentations. Foster stated in his declaration that he has received no income from the Pleasant Home Field interest. He also stated, "ThePleasant Home Field interest is, due to non-production, lawsuits, and bankruptcies, worthless."
The May 2014 letter from Hynds to Foster's former counsel detailed several problems that had arisen with the interest since Tryall purchased it. Hynds started off the letter by stating that Tryall had been in discussions with Gulf Coast concerning whether to sell the 49% working interest it had purchased the year before. Hynds stated, "In mid-December 2013, it became very apparent that neither receipt of the production payments [nor] assignment was going to occur without taking legal action against [Gulf Coast]," and Tryall contemplated suing Gulf Coast to "acquire title and production revenue." Hynds then stated that in January 2014, Gulf Coast served Tryall with a notice of default and took steps to sell the working interest. Hynds informed Foster's counsel that the only course of action to block the sale and protect Tryall's interest was to file an emergency bankruptcy. Hynds stated that Tryall had received no production revenues from September 2013 to March 2014. He also advised that one of the two wells on the Pleasant Home Field was no longer producing and that the remaining well "has been showing signs of a decline in production and [Gulf Coast] alleges that there is an issue with the pump and it may have to be changed at some point to potentially increase production." Hynds also hinted at the possibility of further legal action involving Tryall and Gulf Coast.
Foster thus presented evidence that he had spent $500,000 in reliance on Hynds's representation that he would also contribute $500,000 but that the Pleasant Home Field interest was essentially worthless and he had received no income or revenue from Tryall's investment in the Field. This evidence was not controverted by any other evidence in the summary judgment record.
Hynds moved for withdrawal of the deemed admissions and filed a...
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