Morris v. LTV Corp.

• Decision Date: 02 March 1984
• Docket Number: No. 82-1715,82-1715
• Citation: 725 F.2d 1024
• Parties: 15 Fed. R. Evid. Serv. 256 Winston S. MORRIS, Executor of the Estate of Robert Taylor Morris, Deceased, Plaintiff-Appellant, v. The LTV CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1024

725 F.2d 1024

15 Fed. R. Evid. Serv. 256

Winston S. MORRIS, Executor of the Estate of Robert Taylor

Morris, Deceased, Plaintiff-Appellant, v. The LTV CORPORATION, Defendant-Appellee.

No. 82-1715.

United States Court of Appeals, Fifth Circuit.

March 2, 1984.

Walker, Charfield & Doan, Timothy L. Bouscaren, Matthew Jay Lane, Cincinnati, Ohio, for plaintiff-appellant.

Rain, Harrell, Emery, Young & Doke, Morris Harrell, Robert W. Jordan, Dallas, Tex., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before CLARK, Chief Judge, GARZA and JOLLY, Circuit Judges.

GARZA, Circuit Judge.

I. FACTS

Robert Taylor Morris, plaintiff/appellant, was a real estate broker in Mexico. On February 28, 1977, he received a letter from LTV authorizing him, on a nonexclusive basis, to obtain a buyer for the Hyatt Regency Hotel in Acapulco, Mexico. LTV owned the Hyatt and appellant claims LTV had been trying, without success, to sell it during the ten years prior to 1977. Morris' authorization expired on April 30, 1977. On May 16, 1977, Morris notified LTV that he had a bonafide buyer. On May 19, 1977, LTV sent Morris two letters. These letters authorized Morris, on a nonexclusive basis, to offer the hotel for 31.5 million U.S. currency. One letter stated that Morris' authorization to offer the hotel expired on June 30, 1977, and that Morris would be paid a commission of five percent of the stated purchase price if the sale closed during the stated authorization period (which could be extended in writing). Morris was not required to conduct or to participate in negotiations. These agreements were accepted by the plaintiff in writing and returned to LTV. By a letter dated May 30, 1977, Morris formally offered the property to Dr. Velasco and Banca Serfin, the group he represented.

On July 15, 1977, Morris gave written notice to LTV's chairman, Paul Thayer, requesting On July 25, 1977, Morris met with Dr. Velasco and Mr. Jorge Morales Trevino, Director of Financiera Aceptaciones, S.A. (part of Banca Serfin and a subsidiary of VISA). VISA is a large conglomerate that owns 77.8 percent of Banca Serfin and which eventually bought the hotel. Velasco and Trevino said they were interested in the hotel and asked Morris to call LTV and have them send a representative for negotiations. On August 2, 1977, Bennett Corley, LTV's representative, had a formal meeting with Trevino, Coppel and Morris in Mexico. During the last week in August of 1977 Morris visited Mr. Paulos at LTV's offices in Dallas. Morris asked Paulos about the letter he sent requesting an extension of his authorization. Morris claims that at this time he was encouraged by Mr. Paulos to keep working on the sale and to write Mr. Paulos if he obtained any other possible buyers.

an extension of his authorization, which had expired. Although LTV never acknowledged this letter, Morris continued to seek a buyer and keep in contact with LTV and Banca Serfin officials.

After telephone conversations between Corley and Dr. Velasco, the latter flew to Dallas on September 7, 1977, for detailed meetings with LTV employees. Dr. Velasco made Corley an offer for the hotel in November of 1977 but it was rejected as insufficient. Appellee argues that the offer made by Trevino was only on behalf of Banca Serfin, not VISA. After this offer was rejected Banca Serfin ceased its efforts to purchase the hotel.

In late 1977 Morales Trevino introduced Jack Pratt to Mario Mora, director of VISA. The trial court found that Mora was unaware that the hotel was for sale until he talked with Pratt. Pratt set up a meeting between Mora and Corley for the purpose of discussing the sale of the hotel. Up until late February Morris continued to keep in touch with Dr. Velasco and Mr. Corley, sometimes relaying messages about prices and financing. After February 27, 1978, LTV refused to return Morris' calls. On April 6, 1978, VISA and LTV reached oral agreement for the sale of the hotel. On April 14, 1978, LTV accepted a letter of agreement for the sale of the hotel. Appellee paid Jack Pratt $351,000 dollars for his efforts.

II. ISSUES

Appellant presents four points of error involving the district court's memorandum opinion. First, appellant argues that the trial judge incorrectly held that the Statute of Frauds provision of the Texas Real Estate License Act barred his claim. Second, he contends that the trial judge failed to recognize that even if the Statute of Frauds is applicable, the plaintiff's action falls within exceptions to the statute. Third, appellant claims that the trial judge improperly excluded critical documents necessary to prove his action. Finally, appellant maintains that the trial judge misapplied Mexican law (which governs the substantive issues at dispute in this case). We find that none of appellant's contentions justify reversal of the trial court's opinion.

Appellant contends that the district court erred in holding that the Statute of Frauds provision of the Texas Real Estate License Act barred his claim. Appellant agrees that since the Texas Real Estate License Act, if applied, would determine the outcome of this suit, it is therefore a substantive question and the trial court, which was sitting in diversity, was correct in applying substantive state law. Appellant also notes that in determining which of the competing bodies of state substantive law is applicable in this suit, the district court was correct in applying the Texas conflict-of-laws rules. Texas conflict-of-laws rules require application of foreign law if such law is characterized as substantive instead of procedural by Texas courts. Although appellant agrees with this point of law he claims that the trial court incorrectly held that Texas courts have viewed the Statute of Frauds as a substantive matter.

The starting point of our analysis is, of course, Erie R.R. Co. v. Tompkins, 304 U.S 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), which held that except in matters controlled by federal law, when federal court jurisdiction is based upon diversity of citizenship a federal court must apply the substantive law of the state in which it is sitting. In Maryland Casualty Co. v. Williams, 377 F.2d 389, 393 n. 1 (5th Cir.1967), this court noted that:

there are really two substantive-procedural rules to be applied in a federal suit where jurisdiction rests upon diversity of citizenship and there is a conflict of laws problem.

In the first of two-step procedure, the federal court must decide whether the case, under the teachings of Erie, involves issues which are substantive. Substantive in this context means that the state law applicable to the issue or issues of the suit would significantly affect the outcome of the suit. If so, the federal court must apply the applicable state law on these issues, Guaranty Trust Co. of New York v. York, 326 U.S. 99, 109, 65 S.Ct. 1464 [1470], 89 L.Ed. 2079 (1945), and will follow its own rules of procedure.

Since application of the Texas Real Estate License Act would significantly affect the outcome of this suit and since we are faced with a conflict-of-laws problem, we move on to the second step of the analysis recommended in Maryland Casualty, supra, where we decide which state law we are to follow.

When, in a conflicts case like the one at bar, a question arises as to which substantive state law should be applied, a federal court must apply the conflict-of-laws rule of the state in which it is sitting. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). See also Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3, 96 S.Ct. 167, 46 L.Ed.2d 3 (1975); Maryland Casualty Co. v. Williams, 377 F.2d 389, 393 n. 1 (5th Cir.1967). In Griffin v. McCoach, 313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481 (1941), decided the same day as Klaxon, the Supreme Court held that a federal court in Texas sitting in diversity must follow the Texas conflicts rule even though applying the rule would bar the plaintiff's recovery.

The general conflict-of-laws rule in Texas is that "questions of substantive law are controlled by the laws of the state where the cause of action arose, but ... matters of remedy and of procedure are governed by the laws of the state where the action is sought to be maintained." State of California, Department of Mental Hygiene v. Copus, 158 Tex. 196, 309 S.W.2d 227, 230 cert. denied 356 U.S. 967, 78 S.Ct. 1006, 2 L.Ed.2d 1074 (1958) (citing Home Ins. Co. v. Dick, 15 S.W.2d 1028 (Tex.Com.App.1929) rev'd on other grounds 281 U.S. 397, 50 S.Ct. 338, 74 L.Ed. 926 (1930)).

Both parties agree with the foregoing analysis, their dispute concerns how Texas courts have characterized the nature of section 20(b). We now examine Texas courts' holdings in this area. In Hutchings v. Slemons, 141 Tex. 448, 174 S.W.2d 487 (1943), the Texas Supreme Court held with regard to the predecessor of section 20(b) that "[t]he Statute of Frauds ... does not render void or illegal a promise or contract within its terms. The statutes establish a rule of evidence." Id. 174 S.W.2d at 490; see also Hall v. Hard, 160 Tex. 565, 335 S.W.2d 584, 589 (1960) (recognizing that section 19 of the Real Estate License Act denies the use of the courts when not complied with, as opposed to rendering the contracts unenforceable). Hutchings is still good law and has been cited for the proposition that section 20(b) of the act merely establishes a rule of evidence. Castrejana v. Davidson, 549 S.W.2d 466, 468 (Tex.Civ.App.--Austin 1977, no writ); Paine v. Moore, 464 S.W.2d 477, 479 (Tex.Civ.App.--Tyler 1971, no writ).

Texas courts have recognized that "matters of evidence are procedural in nature and, in situations involving conflict-of-laws, the law of the forum in procedural matters applies." E.g. Paine, 464 S.W.2d at 479. In a conflict-of-laws context this court has also recognized that Texas courts consider the Statute...