M7 CAPITAL LLC v. Miller

• Decision Date: 29 April 2010
• Docket Number: No. 14-08-00951-CV.,14-08-00951-CV.
• Citation: 312 S.W.3d 214
• Parties: M7 CAPITAL LLC, Appellant, v. Theodore B. MILLER, Jr. a/k/a Ted B. Miller, Jr., Appellee
• Court: Texas Court of Appeals

312 S.W.3d 214

M7 CAPITAL LLC, Appellant, v. Theodore B. MILLER, Jr. a/k/a Ted B. Miller, Jr., Appellee

No. 14-08-00951-CV.

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

April 29, 2010.

COPYRIGHT MATERIAL OMITTED

Louis Jerome Stanley, Baton Rouge, LA, for appellant.

Robert H. Singleton, Jr., Randall L. Brim, Houston, for appellee.

Panel consists of Justices ANDERSON, BOYCE, and CHRISTOPHER.^*

SUBSTITUTE OPINION

TRACY CHRISTOPHER, Justice (Assigned).

We overrule appellee's motion for rehearing, withdraw our opinion of March 25, 2010, and substitute this opinion in its place.

This is an appeal of a summary judgment granted in the defendant's favor on the claimed breach of an option contract. On appeal, the plaintiff argues that (a) the absence of a signed writing setting forth the agreement's terms does not bar enforcement of an option contract to purchase an interest in a limited partnership, and (b) there is evidence raising a genuine issue of material fact on each of the challenged elements of plaintiff's claim. Because we agree with both points, we reverse the judgment and remand the case to the trial court.

I. FACTUAL AND PROCEDURAL BACKGROUND¹

In November 2002, John P. Miller ("John") and Ted Miller ("Ted") began to discuss forming a limited partnership to purchase the assets of Fairchild Aircraft out of bankruptcy. Ted bid on some assets from a San Antonio bankruptcy in December and on some assets from a Virginia bankruptcy in February 2003. Closing on both purchases was set for April 1, 2003. John and Ted agreed that an entity controlled by Ted would own at least a 51%-interest in the limited partnership they planned to form (the "Partnership"). John or an entity he controlled would have an option to purchase up to 49% of the Partnership by paying (a) an amount equal to 49% of the equity Ted invested, and (b) 20% compound interest on the amount Ted invested, with such interest accruing only until John's company bought a share in the Partnership. As consideration for the option contract, John agreed to give Ted 3% of Lifebridge, an entity controlled by John's family. Ted and John orally agreed that John's company would have to purchase its interest in the Partnership within ninety days after Ted's company closed on the assets.

In March 2003, Ted formed the Limited Partnership (M7 Holdings, LP), invested $3.4 million in it, and obtained financing for the remaining $10 million required to purchase the assets. Ted sent John the Limited Partnership Agreement for M7 Holdings, LP at that time. John formed appellant M7 Capital LLC ("M7") to purchase an interest in the Partnership, and he and Ted agreed that the percentage that M7 would be permitted to purchase in the Partnership would decrease over time. On March 26, 2003, John sent an email to Ted summarizing their agreement as follows:

M7 has an option to make the investment of 49% of the equity required at closing. If not, the option to buy equity reduces to 44% for the first 30 days following closing, then 39% for the second 30 days following closing, then 34% for the next 30 days, at which time M7 will have no option to buy stock. . . .

The Partnership closed on the assets of the bankrupt companies on April 1, 2003. Thus, M7 could have purchased 49% on April 1, 44% on May 1, 39% on May 31, and 34% on June 30, 2003.

On June 4, 2003, John, acting as CEO and Managing Principal for M7, sent Ted an email entitled "Decision concerning partnership purchase," in which John stated as follows:

M7 will move forward with its purchase of 34% of the partnership. . . . I will yield to your decision as to when Taylor Cooksey, Ted's attorney should become involved. I have attached the ownership structure if you wish to provide this to Taylor, which includes the purchase price plus accrual of bridge loan fees to you until closing. . . . I will continue to follow your lead as to my role in the building of the company.

Attached to the email is a document entitled "Purchase Price and Fees Until Closing," in which John lists the "Purchase Price for 34% ownership" of the Partnership as $1,184,582 and states that bridge loan fees until June 1, 2003 are $39,486, with an additional fee of $649 per diem until closing.

On June 27, 2003, Taylor Cooksey sent a memorandum (the "Memorandum") to Ted and two nonparties regarding M7's proposed acquisition of an interest in the Partnership. In the Memorandum, a copy of which was sent to M7, Cooksey wrote as follows:

We may anticipate that the referenced investment, pursuant to which M7 may acquire up to² a thirty-four percent (34%) interest in the Partnership, will require modification of the existing partnership agreement as generally outlined below. . . . Please note that the following is intended only for the convenience of the parties and is not intended to be a definitive term sheet.

1. Our office must receive written confirmation of the escrow deposit of M7's funds by no later than 5:00 p.m. (CST) on Monday, June 30, 2003. Time is of the essence and failure to meet this deadline will terminate any further discussions. The amount of deposit should be $1,255,000 ($1,245,000 for the 34% interest, plus $10,000 toward Ted Miller's attorneys' fees.). . . .

. . .

3. The Agreement will be modified to include Buy/Sell provisions triggered upon various events including . . . cessation of employment by John Miller. . . . Any purchase price arising under the Buy/Sell provisions will be fair market value established via one or more independent appraisers.

M7 did not deposit $1,255,000 into escrow by 5:00 p.m. on June 30, 2003. Instead, John H. Bryan III, an investor in M7, transferred $750,000 to the escrow account on that date. M7 argues that this sum represents the purchase price for a 20.48% interest in the partnership. There is no evidence in the record explaining how M7 computed that percentage.

Nine days later, on July 9, 2003, Ted emailed John an amended Limited Partnership Agreement for M7 Holdings LP, with a signature line for M7 as a Class B limited partner and with a provision for transfer of "a ___ percent (___%) Class B Limited Partnership interest to M7." Under this agreement, if John ceased to be both (a) a direct or indirect owner of M7 and (b) an employee or consultant of the Partnership, then the Partnership or its remaining partners had the right to purchase all or part of M7's interest in the Partnership for the lesser of the dollar value reflected in M7's capital account or half of its fair market value.

Ted filled in the evidentiary gaps in his reply brief to his motion for summary judgment. John wired $10,000 to Ted on July 2, 2003 for the attorney fees. John emailed Ted on July 11, 2003 cancelling the transaction. John stated in the email that M7 would not proceed with the purchase of the ownership interest from Ted and requested return of the escrow money. However, Ted did not request or receive permission to supplement the summary judgment record; therefore this evidence cannot be considered by this court on appeal. See TEX.R. CIV. P. 166a(d) (a summary judgment movant relying on previously unfiled discovery products must file the material or a notice specifically referring to such material twenty-one days before the summary judgment hearing). Because there is no basis in the record from which to conclude that the trial court granted leave for the late filing, we presume the trial court did not consider this evidence. Envtl. Procedures, Inc. v. Guidry, 282 S.W.3d 602, 620 (Tex.App.-Houston 14th Dist. 2009, pet. denied).

On July 5, 2007, M7 sued Ted Miller for over $13 million, alleging that Ted "made it impossible for M7 to perform on the agreement by purposefully including provisions in the Amended Partnership Agreement that would allow Ted to purchase M7's interest in the Partnership" at half of fair market value if John Miller—who had no employment contract with the Partnership—ceased to be employed by it. Ted filed a motion for traditional and no-evidence summary judgment which the trial court granted, and this appeal ensued.

II. ISSUES PRESENTED

In three issues to be addressed in this appeal, M7 challenges the trial court's grant of summary judgment in Ted's favor.³ In its first issue, M7 contends the trial court erred in granting Ted's no-evidence summary judgment motion because M7 produced summary judgment evidence that raised a genuine issue of material fact on each of the challenged breach of contract elements. In its second issue, M7 argues that the trial court erred in granting no-evidence summary judgment based on Ted's erroneous assertion that an option contract is unenforceable unless it is in writing, signed by the offeror, recites the consideration for the option, and proposes an exchange within a reasonable time. M7 argues in its third issue that the trial court erred in granting the traditional summary judgment because the absence of a signed option contract does not conclusively negate the existence of an enforceable contract.

III. STANDARD OF REVIEW

We review summary judgments de novo. Ferguson v. Bldg. Materials Corp. of Am., 295 S.W.3d 642, 644 (Tex.2009) (per curiam). When the trial court grants the judgment without specifying the grounds, we affirm the judgment if any of the grounds presented are meritorious. See W. Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex.2005). We consider all grounds the appellant preserves for review that are necessary for final disposition of the appeal. See Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex.2005). Here, Ted moved for summary judgment on both traditional and no-evidence grounds; thus, we apply the standard of review appropriate for each type of summary judgment, taking as true all evidence favorable to the nonmovant and indulging every reasonable inference and resolving any doubts in the nonmovant's favor. See Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex.2004).

In a traditional motion for...