Potter v. Gmp, L.L.C.

• Decision Date: 02 June 2004
• Docket Number: No. 04-03-00482-CV.,04-03-00482-CV.
• Citation: 141 S.W.3d 698
• Parties: Bertie Carlyn POTTER, Jr., Appellant, v. GMP, L.L.C., Appellee.
• Court: Texas Court of Appeals

141 S.W.3d 698

Bertie Carlyn POTTER, Jr., Appellant, v. GMP, L.L.C., Appellee.

No. 04-03-00482-CV.

Court of Appeals of Texas, San Antonio.

June 2, 2004.

Appeal from the 37th Judicial District Court, Bexar County, David A. Berchelmann, Jr., J Lewin Plunkett, Cathy J. Sheehan, Plunkett & Gibson, Charles M. Jefferson, Law Office of Charles M. Jefferson, Sara E. Dysart, San Antonio, for appellant.

Ruth G. Malinas, William H. Ford, Christopher J. Deeves, Bradley S. Wilder, Ball & Weed, P.C., San Antonio, for appellee.

Sitting: PAUL W. GREEN, Justice, SANDEE BRYAN MARION, Justice, PHYLIS J. SPEEDLIN, Justice.

OPINION

PHYLIS J. SPEEDLIN, Justice.

Bertie Carlyn Potter, Jr. ("Potter") appeals a judgment rendered against him in favor of GMP, Limited Liability Company ("GMP"). We affirm.

BACKGROUND

In August of 1999, Potter, Steve Miller ("Miller"), and Larry Grothues ("Grothues") formed three interrelated business entities to purchase 300 acres of land in Medina County, for a concrete quarry. Two of the entities were limited partnerships, Alamo Reserve, Ltd. ("Alamo, Ltd.") and Geronimo Creek, Ltd. ("Geronimo, Ltd."). Both limited partnerships had the same ownership structure. Potter owned the majority interest with 39.51%, Grothues and Miller each owned 22.245%, and two other individuals owned 15%. The third entity, GMP, was a newly created limited liability company owned by Potter (49%), Grothues and Miller (25.5% each). GMP served as the general partner in the two limited partnerships, with a 1% ownership interest.

In April 2001, GMP sought additional operational funds for the quarry venture and made a capital contribution call on Potter, Grothues and Miller. Potter objected and refused to make a contribution. Ultimately, GMP sued Potter for breach of contract, maintaining that the regulations of GMP provide that if a majority of the members agree to the capital call, then it is mandatory on all. Potter, in turn, filed suit against Miller for breach of fiduciary duty and against both Grothues and Miller for fraud and negligent misrepresentation. The suits were consolidated and tried to a jury. The jury found that Potter agreed to make additional capital contributions to GMP, and that he failed to comply with the agreement, awarding GMP $189,595.00 in damages. The jury also found that Miller breached his fiduciary duty, and awarded Potter $65,000.00 in damages. The jury did not find that Grothues or Miller committed fraud or negligent misrepresentation. This appeal followed and is limited to the judgment rendered against Potter on GMP's capital contribution claim and the attorney's fees awarded in connection with that claim.

CONTRACTUAL AMBIGUITY

The central issue in this appeal is whether the regulations of GMP allow the limited liability company to make a mandatory capital contribution call on all of its members. Potter maintains the regulations provide that capital contributions are not mandatory on members who object. Potter further argues the regulations are not ambiguous and have a definite meaning as a matter of law; therefore, the trial court erred in allowing a jury to decide whether Potter was required to make an additional capital contribution to GMP.

Under well-established principles of Texas contract construction, whether a contract is ambiguous is a question of law for the court. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). A trial court's determination of a question of law is reviewed de novo. Id. at 394. In making this decision, the court must consider the entire agreement, and should harmonize all of the provisions in the contract so that none are rendered meaningless. Id. at 393. If the contract is worded so that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous. Id. at 393. Parol evidence is not admissible for the purpose of creating an ambiguity. Nat'l Union Fire Ins. Co v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995). A contract is ambiguous as a matter of law if its meaning is uncertain or susceptible to more than one reasonable interpretation. Coker, 650 S.W.2d at 393.

With these rules of contractual construction in mind, we turn to the language contained in the GMP regulations at issue in this appeal. The first sentence of section 5.2 of the regulations provides:

Without creating any right in favor of any third party, each Member shall contribute to the Company, in cash, on or before the date specified as hereinafter described, that Member's Sharing ration of all monies that in the judgment of a Majority in Interest of the Members are necessary to enable the Company to cause the assets of the Company to be properly operated and maintained and to discharge its costs, expenses, obligations, and liabilities. (emphasis added)

Considered in isolation, this sentence provides support for GMP's position that additional capital contributions are mandatory. Specifically, this sentence uses the language that each member "shall" contribute; the word "shall" is generally considered to be mandatory rather than permissive. The first sentence, however, cannot be considered in isolation from the rest of the regulations. Potter contends the remaining verbiage in section 5.2 "qualifies" the apparently mandatory nature of additional capital contributions, as set forth in the first sentence. This additional language provides:

The Managers shall notify each Member of the need for Capital Contributions pursuant to this Section 5.2 when appropriate, which notice must include a statement in reasonable detail of the proposed uses of the Capital Contributions ... Members shall express their assent or objection to such additional Capital Contributions in writing or at a meeting of the Members within ten (10) days of receipt of the referenced Notice. (emphasis added)

Potter argues that the option to agree or object makes capital contributions voluntary; otherwise, why have such a provision if contributions must be paid whether agreed to or not? Potter maintains the purpose of including a right to object is to prevent the majority, who in this case authorized the additional capital call, from forcing the objecting member to make a contribution against his will.

Potter points to the first sentence in section 5.7 of the regulations for further support of his argument. The first sentence in that section states:

No Member shall be liable for the debts, liabilities, or obligations of the Company beyond his respective Initial Capital Contribution, unless separately agreed in writing by said Member.

Potter asserts that this sentence makes understandable the requirement contained in section 5.2 that members are required to express their assent or objection to additional capital contributions in writing. Potter argues that, as the first sentence of section 5.7 makes clear, no member is liable beyond his initial capital contribution unless he agrees to such liability in a separate writing.

GMP responds that a straightforward reading of section 5.2 indicates that a manager, not a majority of the members, "shall notify each member of the need for capital contribution" along with a "statement in reasonable detail of the proposed uses of the capital contributions." The member "shall," in turn, express his assent or objection within ten days of being notified. If, "in the judgment of a majority interest of the members," these subsequent contributions are necessary for the proper operation and maintenance of the company, the subsequent capital contributions "shall" be made by each member. In other words, GMP argues the requirement that the members agree or object in writing is to determine whether a majority of the members agree that the capital call is necessary.

The legal question presented here is whether Potter's interpretation of the contract is correct as a matter of law, or whether the parties' true intent, as expressed in the written regulations, is unclear or susceptible to two or more reasonable interpretations. Id. We hold that the regulations are susceptible to two or more reasonable interpretations. The trial court could have interpreted the regulations as providing for mandatory subsequent capital contributions by all members if requested by the manager and agreed to by the majority of the members; or, the trial court could have found, as Potter argues, that additional capital contributions are not mandatory on members who object. Therefore, the regulations are ambiguous and the trial court properly submitted the issue of contract interpretation to the jury. We overrule Potter's first point of error.

JURY'S DETERMINATION OF PARTIES' INTENT

In a related issue, Potter also contends the evidence is legally and factually insufficient to support the jury's finding that he agreed to make additional capital contributions to GMP. Potter argues that: 1) the language of the regulations did not make additional contributions mandatory; 2) there was no separate writing showing his agreement to make additional contributions as required by the regulations; and 3) there was no discussion concerning mandatory additional contributions when the regulations were signed by the parties.

When a party who does not bear the burden of proof on an issue challenges the legal sufficiency of the evidence, we consider all the evidence in the light most favorable to the jury's finding, disregarding all evidence and inferences to the contrary. Texas Dept. of Mental Health & Mental Retardation v. Rodriguez, 63 S.W.3d 475, 480 (Tex.App.-San Antonio 2001, pet. denied). If there is more than a scintilla of evidence to support the finding, the finding will be upheld. Id. On a challenge to the factual sufficiency of the evidence, we examine the entire record to determine whether there is some probative evidence to support the jury finding, after which we determine whether the evidence supporting the finding is so weak or so contrary to the overwhelming weight of the evidence...