Intermedics, Inc. v. Grady

• Decision Date: 20 December 1984
• Docket Number: No. 01-84-00306-CV,01-84-00306-CV
• Citation: 683 S.W.2d 842
• Parties: INTERMEDICS, INC., Appellant, v. Frank J. GRADY, M.D., Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 842

683 S.W.2d 842

INTERMEDICS, INC., Appellant, v. Frank J. GRADY, M.D., Appellee.

No. 01-84-00306-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Dec. 20, 1984.

Rehearing Denied Jan. 17, 1985.

Dan Matthews, Fulbright & Jaworski, San Antonio, Joseph Patterson, Leland B. Kee, Kee & Patterson, Angleton, for appellant.

Ron Etzel, Pearland, for appellee.

Before EVANS, C.J., and SMITH and DUGGAN, JJ.

OPINION

EVANS, Chief Justice.

The plaintiff, Dr. Frank J. Grady, brought this action against the defendant, Intermedics, Inc., to recover the value of certain shares of Intermedics stock, basing his claim on an oral contract of employment. The trial court submitted the case to a jury, and upon its verdict, the court entered judgment for the plaintiff in the amount of $561,000 plus $7,900 as attorney's fees. We affirm.

Dr. Grady testified that, in December 1975, he was contacted by Mr. Albert Beutel, who was then the executive vice-president and one of three board members of Intermedics. Mr. Beutel had decided that Intermedics, a medical equipment manufacturer, should expand its product line to include intraocular lenses, and his investigation showed that Dr. Grady was one of the most knowledgeable and respected persons in that field. After a series of conversations, the parties reached an oral agreement under which Dr. Grady was to perform consulting services for Intermedics in return for a $20,000 annual salary and 17,000 shares of Intermedics stock. For a period of several years thereafter, Dr. Grady did perform services for Intermedics, as agreed, and was paid his annual salary in sporadic payments. However, Intermedics never issued the stock certificates evidencing Dr. Grady's ownership of the 17,000 shares of stock. On repeated occasions during the course of his employment, Dr. Grady questioned Mr. Beutel about the stock, and in each instance, he was told not to worry, that his stock certificates would be forthcoming at a time more convenient for the corporation. In March 1979, Mr. Albert Beutel died suddenly, and Dr. Grady demanded the transfer of the stock to him and asked for a raise in salary because of the increasing calls on his time. However, Intermedics did not honor Dr. Grady's requests and instead terminated his employment contract. Dr. Grady then brought this suit in 1981 to recover his 17,000 shares of Intermedics stock, which had increased in number because of stock splits.

In response to special issues, the jury found: (1) that Intermedics had orally agreed to hire Dr. Grady as an employee and to compensate him with stock and a salary, (2) that Intermedics, through Albert Beutel, promised Dr. Grady 17,000 shares of stock, (2a) that Dr. Grady was entitled to receive Intermedics stock within a period of not more than one year of the agreement in May or June 1976, (2b) that the contract between Intermedics and Dr. Grady involved an outright grant of stock rather than an option to purchase, (3) that the fair market value of Intermedics stock in March 1979 was $22 per share, (4) that Dr. Grady should receive $7,900 as reasonable attorney's fees, (4a) that Dr. Grady was reasonably diligent in asserting his claim to the Intermedics stock, (5) that Intermedics, through Albert Beutel, continued to promise Dr. Grady that he would receive his stock until March 1979, (6) that such promise lulled Dr. Grady into a false sense of security, (7) that, therefore, Dr. Grady did not file his action until after March 1979, and (8) that an ordinary, prudent person in Dr. Grady's circumstances would have concluded that Intermedics was waiving any rights to assert the statute of limitations. The jury further found that the contract for Dr. Grady's consulting services could be terminated at the will of either party.

Intermedics' first six points of error relate to its defensive theory that Dr. Grady's action is barred by the applicable two-year statute of limitations. In its first two points, Intermedics contends that the undisputed evidence and the jury's finding to Special Issue No. 2a established the bar of limitations as a matter of law. In its points of error three, four, five, and six, Intermedics complains of the submission of Special Issues 5, 6, 7 and 8, asserting that such issues are not controlling on the question of estoppel to assert limitations and that there are no pleadings or evidence to support the submission of such issues.

Intermedics' first two points are based upon the jury's finding, in Special Issue No. 2a, that Dr. Grady was entitled to receive stock within one year of May or June 1976, and upon Dr. Grady's similar testimony.

Limitation of actions is an affirmative defense that must be specifically pleaded and proved. A party asserting limitations must not only establish the applicability of the limitations statute, but must, as well, prove when the opponent's cause of action accrued in order to demonstrate the bar of limitations. Hoffman v. Wall, 602 S.W.2d 324, 326 (Tex.Civ.App.--Texarkana 1980, writ ref'd n.r.e.). Where the facts are undisputed, the defendant may establish that the plaintiff's claim is barred by the statute of limitations as a matter of law. See, e.g., Axcell v. Phillips, 473 S.W.2d 554, 558 (Tex.Civ.App.--Houston [1st Dist.] 1971, writ ref'd n.r.e.). However, where reasonable minds may differ as to the inferences to be drawn from the evidence, it is incumbent upon the party asserting limitations to secure findings sustaining the plea of limitations. Metal Structures Corp. v. Plains Textiles, Inc., 470 S.W.2d 93, 99 (Tex.Civ.App.--Amarillo 1971, writ ref'd n.r.e.). The question then, in the case at bar, is whether the testimony and jury's finding that Dr. Grady was entitled to the stock within one year of May or June 1976, established, as a matter of law, that his cause of action commenced at that time.

A breach of contract occurs when a party fails or refuses to do something he has promised to do. Fidelity & Deposit Co. v. Stool, 607 S.W.2d 17, 24 (Tex.Civ.App.--Tyler 1980, no writ). Thus, a cause of action for the breach of a promise to pay usually arises when a demand for payment has been made and refused. See, e.g., Dyer v. Sterett, 248 S.W.2d 234, 240 (Tex.Civ.App.--San Antonio 1952, writ ref'd n.r.e.). It is also usually at that point, with the right to institute suit, when the limitations period commences. Gabriel v. Alhabbal, 618 S.W.2d 894, 896-97 (Tex.Civ.App.--Houston [1st Dist.] 1981, writ ref'd n.r.e.).

If the parties' agreement contemplates a continuing contract for performance, the limitations period does not usually commence until the contract is fully performed, unless one party refuses to fulfill the contract or prevents the other party from performing. See, e.g., Thomason v. Freberg, 588 S.W.2d 821, 828 (Tex.Civ.App.--Corpus Christi 1979, no writ); Alexander & Polley Construction Co. v. Spain, 477 S.W.2d 301 (Tex.Civ.App.--Tyler 1972, no writ). In such a continuing contract, where a claim for work, labor, or materials furnished is based on an entire contract for continuous work, labor, or materials, the claim is considered to be an entire demand, and the limitations period will not commence until the contract is finished. Godde v. Wood, 509 S.W.2d 435, 441 (Tex.Civ.App.--Corpus Christi 1974, writ ref'd n.r.e.). However, if the terms of an agreement call for periodic payments during the course of the contract, a cause of action for such payments may arise at the end of each period, before the contract is completed. See, e.g., Parker v. Rolls, 338 S.W.2d 523, 528-29 (Tex.Civ.App.--Austin 1960, no writ). But see City and County of Dallas Levee Improvement District v. Halsey, Stuart, & Co., 202 S.W.2d 957, 960-61 (Tex.Civ.App.--Amarillo 1947, no writ). It has also been held that limitations may begin to run, notwithstanding a continuing performance of the contract, if a demand for performance is required and not made within a reasonable time. Irwin v. Prestressed Structures, Inc., 471 S.W.2d 865, 867-68 (Tex.Civ.App.--Eastland 1971, writ ref'd n.r.e.).

The circumstances related in Irwin are similar to those in the instant case, and Intermedics urges that the Irwin case should be given controlling effect. There, the jury found that an officer of the corporation had orally promised Irwin that, as compensation for working for the company, he would receive a relatively low salary, but in addition he would be given 12 1/2% of the corporation's stock. The other officers and directors of the corporation were not informed of this promise. The jury further found that under the terms of such agreement, Irwin had the right to receive the stock within one year from the date of the contract. Finding that the corporation was not estopped to rely on limitations, the trial court entered a take-nothing judgment for the defendant.

On appeal, Irwin argued that the agreement called for his "continuing performance" and that the statute of limitations did not begin to run until he made a demand for stock. The court of civil appeals rejected Irwin's contentions, concluding that even if he was correct in his assertion that limitations did not begin to run until demand was made, such demand itself had to be made within a reasonable time, which ordinarily would be concurrent with the statute of limitations period. Because Irwin did not demand his stock for seven years after the agreement was made, the court held that his cause of action was barred.

The facts and circumstances in the instant case are distinguishable from those in Irwin in several respects. However, even under the rationale of the Irwin court, Dr. Grady's cause of action would not be barred. The contract between Intermedics and Dr. Grady was made in May or June 1976. The jury found that Dr. Grady was entitled to receive stock within a year, in May or June 1977....