Lovelace v. Sabine Consol., Inc.

• Decision Date: 11 June 1987
• Docket Number: No. C14-86-348-CV,C14-86-348-CV
• Citation: 733 S.W.2d 648
• Parties: Jesse R. LOVELACE, Individually and D/B/A Jesse Lovelace Construction Company, Appellant, v. SABINE CONSOLIDATED, INC., Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 648

733 S.W.2d 648

Jesse R. LOVELACE, Individually and D/B/A Jesse Lovelace Construction Company, Appellant, v. SABINE CONSOLIDATED, INC., Appellee.

No. C14-86-348-CV.

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

June 11, 1987.

Carl T. Schultz, Houston, for appellant.

Robert Scott, Barry Abrams, Houston, for appellee.

Before CANNON, DRAUGHN and ELLIS, JJ.

OPINION

ELLIS, Justice.

Sabine Consolidated, Inc., appellee, sued Jesse R. Lovelace, individually and d/b/a Jesse Lovelace Construction Company, appellant, seeking an accounting and money damages for breach of contract, breach of fiduciary duty, and fraud. Trial was to a jury which found for the plaintiff on all issues and awarded actual damages, punitive damages, and attorneys' fees. We affirm the judgment as modified.

In the spring of 1983, the City of Houston awarded two contracts for sewer construction to Jesse Lovelace Construction Company, the lowest responsible bidder in the competitive bidding. Subsequently, Lovelace entered into two separate joint venture agreements with Sabine Consolidated, Inc., to share responsibility, control, and profits of the construction projects. A separate bank account was established for each joint venture. The initial payment received from the City for each project was deposited into the appropriate account. In August, however, Mr. Lovelace began diverting payments on the Market Street project to his personal account in contravention of the joint venture agreement. Although portions of the diverted payments were later transferred into the Market Street account, after January 1, 1984, Mr. Lovelace failed to deposit any payment from either project to the joint venture accounts. By February 1984, over one million dollars had been diverted, and Sabine sued for an accounting and damages.

The first trial of the case resulted in a judgment in favor of Sabine awarding it $450,000 in actual damages, $200,000 in punitive damages, and $100,000 in attorneys' fees. When Lovelace's motion for new trial was granted, Lovelace amended its pleadings, asserting counterclaims against Sabine for failure to provide promised consideration to the joint venture agreements. The second jury found approximately $950,000 in actual damages, $400,000 in punitive damages, and $110,000 in attorneys' fees. Lovelace now appeals the judgment of the second trial.

In its first point of error Lovelace asserts that the trial court erred in entering judgment because the joint venture agreements were illegal, and hence, unenforceable as a matter of law. The appellant argues (i) that the City of Houston ordinances, 83-527 and 83-903, prohibit the transfer or subletting of any portion of the construction contract, (ii) that the joint venture agreements were a violation of that ordinance, (iii) that ordinances have the effect of law, and (iv) that a contract which cannot be performed without a violation of the law is void and therefore cannot be enforced by our courts, citing Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146, 148-49 (1947). Appellee contends that the agreements are not illegal in that they do not violate a penal statute or ordinance, and, alternatively, public policy against unjust enrichment outweighs any prohibition against enforcement of the agreements.

The specifications and general conditions for each of the construction contracts included a provision that "[t]he contractor shall not let or transfer this contract, nor any part thereof (excepting only for the delivery of material), without the consent of the City Council." The contracts between the City and Lovelace were incorporated by reference in the joint venture agreements; thus both parties had actual or constructive knowledge of the prohibition against any party other than Lovelace performing the work. Lovelace asserts that this provision of the City's contract had the force of a city ordinance. From this contention, Lovelace proceeds to show by case law that city ordinances have the effect of law. Thus, Lovelace argues, one who enters into an agreement with the contractor chosen by the City to do work covered by the contract has made an illegal contract, void and unenforceable as a matter of law; regardless of any injury caused by breach of the agreement, the trial court erred in not leaving the parties where it found them.

We do not accept the reasoning of the appellant. The prohibition of letting or transferring the contract is a provision of the contract with the City; it is not a provision of either City ordinance cited by Lovelace. Certified copies of both ordinances are a part of the appellate record. Each is a one page document by which the City Council of Houston "ordains" three acts:

1. Jesse Lovelace Construction Company is the lowest responsible bidder, and therefore the contract for the work described is awarded to Lovelace.

2. The City Council approves and authorizes the contract.

3. The ordinance will take effect immediately.

Conspicuously absent from the ordinance is any prohibition against letting or transferring the contract. There is also no language incorporating the contract by reference into the ordinance. Appellant's argument appears to be that the mere approval of a contract, its plans and specifications by city ordinance gives every provision the force of law, the infringement of which, even by one not a party to the contract, will be sanctioned as if it were a statutory violation. We know of no authority supporting such a contention. The contract clearly prohibited the contractor, i.e., Lovelace, from entering the agreement with Sabine or any other contractor or subcontractor. The provision existed for the protection of the City and only the City can claim its benefits. Each joint venture agreement constituted a breach of contract by Lovelace, not an illegal contract. In contrast, the ordinance before this court contains no reference to letting or transferring the work. We hold that the joint venture agreements were not illegal as a matter of law. Appellant's first point of error is overruled.

The central issue of appellant's second point of error is whether the trial court erred in refusing to compel discovery by Lovelace of Sabine's records related to other construction projects accomplished without Lovelace's involvement. Lovelace contends that the projects were similar in many respects to those for which Sabine sought damages and further contends the projects were performed within the time period material to alleged lost profits on jobs subsequent to the Market Street and Esplanade projects. Lovelace asserts he sought to discover records of two projects, one in Bellaire and another in Austin. His attempt to discover records of the Bellaire project occurred in connection with the first trial of this case. We see no record that the request was renewed during the brief pendency of the second trial. Error, if any, related to discovery of the Bellaire project was not preserved for appeal. Our discussion will therefore concern the Austin project only.

Between the first and second trials, Sabine was working on a construction project in Austin, Texas, that involved a very deep trench for a sewer line. In September 1985, the sides of the trench collapsed, two construction workers were killed, and indictments for criminally negligent homicide were filed against Sabine's supervisors. Lovelace asserts that the records of the Austin project are relevant to his contention that he removed Sabine from working on the joint venture projects because Sabine was incompetent, lacked the expertise in deep trenches that it had represented it could contribute to the joint venture, and was not the prudent commercial contractor that it purported to be. Lovelace further argues that the records would have shown (i) whether Sabine was capable of making the profits it claimed it could have made on projects undertaken without the involvement of Lovelace and (ii) whether Sabine was actually available to perform the construction job in New Caney, Texas, for which it sought lost profits. Sabine defends its action and that of the trial court in refusing to permit discovery, contending that the information sought is irrelevant or, alternatively, inadmissible because any slight probative value is outweighed by the highly prejudicial effect.

Lovelace contends that the trial court's refusal to permit discovery of the Austin construction project denied it a fair trial and constitutes reversible error. The scope of discovery largely rests within the discretion of the trial court and the court's action cannot be set aside unless there is a clear showing of abuse of discretion. Ginsberg v. Fifth Court of Appeals, 686 S.W.2d 105, 108 (Tex.1985); Tucker v. Gayle, 709 S.W.2d 247, 249 (Tex.App.--Houston [14th Dist.] 1986, no writ). To support a reversal, the trial court's refusal to permit discovery must have been such a denial of the rights of the appellant as was reasonably calculated to cause and probably did cause rendition of an improper judgment. Tex.R.App.P. 81(b)(1); First Employees Insurance Co. v. Skinner, 646 S.W.2d 170, 172 (Tex.1983); Liberty Mutual Insurance Co. v. Woody, 640 S.W.2d 718, 721 (Tex.App.--Houston [1st Dist.] 1982, no writ). With respect to Lovelace's allegation that the information sought was essential to show that Sabine had neither the expertise to perform the Market Street and Esplanade jobs nor the ability to have reaped the high profits alleged on the joint venture, we hold that the trial court did not abuse its discretion in limiting the discovery. The parties sought to be deposed by appellant had been deposed prior to the Austin incident. Appellant does not complain by point of error that he was denied all opportunity to investigate Sabine's prior performance records. There were alternative methods of demonstrating the job performance, expertise, and profit history of a company that had been in business for thirty years. To be discovered,...