Mclernon v. Dynegy Inc.

• Decision Date: 26 July 2011
• Docket Number: No. 14–09–00312–CV.,14–09–00312–CV.
• Citation: 347 S.W.3d 315
• Parties: Lawrence A. McLERNON, Appellant,v.DYNEGY, INC., Appellee.
• Court: Texas Court of Appeals

347 S.W.3d 315

Lawrence A. McLERNON, Appellant,

v.DYNEGY, INC., Appellee.

No. 14–09–00312–CV.

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

July 26, 2011.

Daryl L. Moore, Houston, for appellant.Douglas D. D'Arche, Dennis G. Herlong, Houston, for appellee.Panel consists of Justices SEYMORE, BROWN, and BOYCE.

OPINION

CHARLES W. SEYMORE, Justice.

Appellant, Lawrence A. McLernon, appeals a summary judgment in favor of appellee, Dynegy, Inc., in its suit to recover $2,645,807.60 allegedly due under a promissory note and on McLernon's counterclaims for fraud. In a threshold issue, McLernon contends the judgment is not final because the trial court failed to order recovery of an ascertainable amount. Then, in four issues, he contends the trial court erred by granting Dynegy's motion for summary judgment and denying his cross motion. We affirm summary judgment in favor of Dynegy but modify the judgment to order that Dynegy have and recover from McLernon $1,881,716.85 in principal and interest, costs of court, and post-judgment interest on the total judgment at 5% per annum.

I. Background

In September 2000, McLernon began employment with Dynegy as an Executive Vice–President and signed a four-year employment agreement. During his employment, McLernon participated in Dynegy's “Short–Term Executive Stock Purchase Loan Program.” Specifically, in October 2001, he purchased 40,000 shares of Dynegy stock at a total cost of $1,595,456.57 and executed a promissory note in this amount payable over a period of two years to “Dynegy Administrative Services Company” (“DASC”), a subsidiary whom Dynegy designated as payee so that it could serve as collection agent.

In his summary-judgment affidavit, McLernon averred that he decided to participate in the program after Dynegy's Chairman/CEO touted the company's financial forecast to encourage officer participation. According to McLernon, he later discovered that (1) Dynegy used the program as a ploy to “prop up” its stock value to the investing public by demonstrating that even officers were eager to purchase the stock, and (2) before McLernon's purchase, Dynegy had implemented “Project Alpha,” a complex scheme through which Dynegy falsified its books to artificially inflate its financial strength and stock price. McLernon further asserted that the stock price plummeted in early 2002 when Project Alpha was publicly exposed and the Securities Exchange Commission launched an investigation, and he lost the majority of his investment. Project Alpha became the subject of a federal class action against Dynegy, which it eventually settled.

McLernon's employment was terminated on September 16, 2002. In conjunction with the termination, McLernon and Dynegy executed a “Settlement Agreement and Release” (“the severance agreement”), which included the following provisions: (1) Dynegy agreed to pay McLernon $2,392,000, plus $161,771.99 representing the value of benefits to which he would have been entitled through the end of the contractual employment term; (2) Dynegy agreed to continue McLernon's group health insurance benefits for thirty-six months with premiums to be paid by McLernon but at the rate applicable to active employees; (3) McLernon agreed to pay the balance of his loan over a five-year period and contemporaneously execute a new note; (4) he released certain claims against Dynegy; and (5) he disclaimed reliance on certain representations by Dynegy. McLernon contemporaneously executed a promissory note (“the note”) for $1,608,570 plus interest, payable to DASC over a five-year period, which replaced the original note. DASC eventually assigned the note to Dynegy.

In his summary-judgment affidavit, McLernon averred that, before execution of the severance agreement and the note, Dynegy's then Chairman, Daniel Dienstbier, informed McLernon that Dynegy was requiring all executives to repay their stock-purchase loans in full but would adjust McLernon's loan if it forgave other executives' loans. According to McLernon, after executing these instruments, he discovered that Dienstbier's representations were untrue because Dynegy had already forgiven all or significant amounts owed by some other executives. McLernon claimed he would not have executed these instruments if he had known this information.

In 2004, Dynegy sued McLernon, alleging he had failed to pay all amounts owed under the note. McLernon filed counterclaims, alleging fraud and seeking a declaratory judgment that the note was unenforceable, rescission of the note and the severance agreement, punitive damages, and attorneys' fees. The parties eventually filed cross motions for traditional summary judgment.

In McLernon's motion, he contended that Dynegy's suit was conclusively barred by several affirmative defenses which he had raised in his pleadings. On February 15, 2007, the trial court signed an order denying McLernon's motion.

Pertinent to this appeal, Dynegy presented its request for summary judgment in three separate motions.¹

First, Dynegy filed a “Motion For Partial Summary Judgment” on June 26, 2006, seeking to recover $764,090.75 in outstanding principal and interest due on the note as of June 15, 2006, but reserving the right to later seek amounts that became due after June 15, 2006. In response, McLernon raised several additional affirmative defenses asserted in his pleadings. In the motion, Dynegy also sought summary judgment on McLernon's counterclaims based on Dynegy's own affirmative defenses. On March 13, 2007, the trial court signed an order granting this motion and ruling that (1) McLernon “is liable for the amount of $764,090.75 in outstanding principal and interest as of June 15, 2006,” (2) the order did not address principal, interest, or fees on the note due after June 15, 2006, and (3) McLernon's counterclaims “addressed in the motion” were dismissed with prejudice.²

Next, Dynegy filed a “Motion For Final Summary Judgment” on August 4, 2008, relying on the same legal issues in the previous motion but alleging the note had now matured and seeking to recover an additional $1,881,716.85 in principal and interest that purportedly became due after June 15, 2006. On August 27, 2008, the trial court signed another order granting “partial” summary judgment in Dynegy's favor, ruling that it “have and recover judgment” against McLernon for $1,881,716.85 in principal and interest, costs of court, and post-judgment interest on the total judgment at 5% per annum, but also ruling that affirmative defenses remained pending.

Dynegy filed another “Motion For Final Summary Judgment” on December 12, 2008. Dynegy referenced a status conference a few days earlier at which the trial court remarked that the only pending issues were some of McLernon's counterclaims. In the motion, Dynegy argued that the previous orders granting recovery on the note necessarily disposed of all counterclaims. On January 8, 2009, the court signed another order granting summary judgment in Dynegy's favor on McLernon's counterclaims and ruling that the judgment was final.

II. Preliminary Issue Regarding the Judgment

As a threshold issue, McLernon contends the trial court did not sign a final judgment. Before briefing was due, we denied McLernon's motion to abate the appeal on this ground, but he raises the finality issue again in his brief. In particular, he contends that the January 8, 2009 order (the last of the three orders) did not constitute a final judgment despite the trial court's recitation therein because it contained no language ordering recovery of an ascertainable amount. Dynegy responds that all three orders together reflect the trial court ordered a total recovery of $2,645,807.60 as requested in Dynegy's motions.

We disagree with McLernon that the lack of a sum certain specified in the last order would preclude it from constituting a final judgment. Instead, to the extent that the two previous interlocutory orders contained language ordering recovery of a sum certain, they would merge into the January 8, 2009 order to constitute a final, appealable judgment. See Webb v. Jorns, 488 S.W.2d 407, 409 (Tex.1972) (recognizing interlocutory judgment becomes final when it merges into final judgment disposing of whole case); see also Hyundai Motor Co. v. Alvarado, 892 S.W.2d 853, 855 (Tex.1995) (per curiam) (stating that partial summary judgment becomes final upon disposition of other issues in the case).

However, we disagree with Dynegy that the trial court clearly ordered a total recovery of $2,645,807.60 even when all three orders are construed together. In the first order, the court generally stated that McLernon “ is liable for the amount of $764,090.75 in outstanding principal and interest as of June 15, 2006” but did not specifically order recovery of this amount and stated the order did not address amounts accruing after that date. (emphasis added). However, in the second order, the court employed more definite language of recovery, ordering that Dynegy “ have and recover judgment from and against [McLernon]” for $1,881,716.85, plus costs and post-judgment interest. (emphasis added). Thus, the court's use of the phrase “is liable for” in the first order stands in contrast to its use of the phrase “have and recover judgment” in the second order. As we will discuss, Dynegy established at most its right to recover $1,881,716.85. Therefore, the court may have intended for the $764,090.75 to be subsumed within the $1,881,716.85, consistent with the summary-judgment evidence. On the other hand, the court may have intended to order recovery of $2,645,807.60 because it expressly “granted” each motion for summary judgment and Dynegy requested a total recovery of this amount in the motions.³

Nevertheless, because Dynegy conclusively proved, at most, its right to recover $1,881,716.85, we need not ascertain the full amount of recovery intended by the trial court. Instead, after disposing of all other summary-judgment...