Principal Life Ins. Co. v. Revalen Dev., LLC

• Decision Date: 23 January 2012
• Docket Number: No. 05–10–00680–CV.,05–10–00680–CV.
• Parties: PRINCIPAL LIFE INSURANCE CO., Appellant, v. REVALEN DEVELOPMENT, LLC, Appellee.
• Court: Texas Court of Appeals

358 S.W.3d 451

PRINCIPAL LIFE INSURANCE CO., Appellant,

v.REVALEN DEVELOPMENT, LLC, Appellee.

No. 05–10–00680–CV.

Court of Appeals of Texas, Dallas.

Jan. 23, 2012.

David M. O'Dens, Dallas, TX, for Appellant.

Ernest Walter Leonard, Friedman & Feiger, L.L.P., for Appellee.

Before Justices MORRIS, O'NEILL, and FILLMORE.

OPINION

Opinion by Justice O'NEILL.

Appellee Revalen Development, LLC sued appellant Principal Life for breach of contract after Principal Life refused to sell it certain property. The trial court, following a bench trial, found in favor of Revalen and awarded it $2.49 million. In four points of error, Principal Life contends (1) the evidence is legally and factually insufficient to prove a valid contract was formed, (2) any alleged oral contract would violate the statute of frauds, (3) Revalen did not prove it could have performed its obligations under the contract, and (4) Revalen did not prove its damages with reasonable certainly. For the following reasons, we reverse the trial court's judgment and render judgment that Revalen take nothing.

This case concerns the alleged breach of an oral contract for the sale of a note that was secured by commercial real estate—a shopping center in Addison, Texas. The note matured on June 1, 2009 and the borrower defaulted. The face value of the note was $16.8 million and the value of the real property was $19.1 million. After the borrower defaulted, Principal Life, the holder of the note, attempted to negotiate with the borrower to refinance. Its initial attempts were unsuccessful. As a consequence, Principal Life posted the property for foreclosure. Principal Life also began marketing the note, preferring to sell the note at a discount over foreclosing. Michael Logsdon, asset manager of special servicing for an affiliate of Principal Life, began seeking bids on the note.

Paul Cheng of Cheng Investments heard of the opportunity to purchase the note at a discount and contacted Logsdon. Cheng asked Logsdon for Principal Life's form contract and also asked about financing through Principal Life on the note. Logsdon informed Cheng that Principal Life would not finance the note, but sent him its shell Purchase and Sale Agreement (PSA). When Cheng received the shell PSA, he forwarded it to his attorney and sought financing. His friend and business associate, Oscar Renda, told Cheng he would personally finance the deal.

Renda testified he agreed to put up $14.3 million in cash to purchase the property. Renda testified he thought he was purchasing a shopping center and could not recall whether they discussed purchasing a note. He said he would have done the transaction even if they were obtaining the property by foreclosing on a note. Although his commitment to do the deal was “very firm,” he testified that he would have required a written partnership agreement with Cheng as well as a written PSA.

Cheng told Logsdon he had financing and was interested in purchasing the note. Because Principal Life required sales in excess of $10 million be approved by its Investment Committee before such a contract could be authorized, Logsdon and Cheng discussed the terms of a proposal that would be presented to the Committee. Ultimately, Cheng and Logsdon agreed Logsdon would present a proposed purchase price of $14.3 million. The proposal also included a closing date of July 30, 2009 and an option to extend closing until August 15th for a nonrefundable deposit of $200,000. Logsdon told Cheng he would present the proposal to the Investment Committee.

On July 16, 2009, the proposal was presented to Principal Life's “Real Estate Committee,” which recommended the Investment Committee approve the transaction. That day, Logsdon called Cheng. This phone call is at the heart of Revalen's case. Cheng testified that Logsdon told him, “Congratulations, the Investment Committee has approved the proposed purchase of the note by you.” ¹ Cheng testified he responded, “I agree to it. I have no problems with it. I accept it.” Cheng acknowledged he and Principal Life both contemplated a written PSA would ultimately be signed and specifically testified that Logsdon “required” or “asked for” a written PSA. Regardless, he asserts a binding oral contract was nevertheless formed at that moment.

The following day, Cheng sent Logsdon the original shell PSA and his redline version of the PSA. The redline contained numerous provisions that the parties had not yet discussed or agreed upon and altered some of the terms that the parties had agreed on. The “redline” contract, changed the buyer from Cheng Investments to Revalen Development, a limited liability company. Cheng explained “Cheng Investments” is a d/b/a of himself “and all of my companies.” The redline also changed the purchase price from $14.3 million to $14.299 million. The redline changed the earnest money amount from 5% of the purchase price to $100. The redline also gave Revalen the option to extend closing to August 24. The redline struck out a liquidated damages provision that would have limited Cheng's damages to $25,000 if Principal Life had wrongfully terminated the contract. Finally, the redline gave Revalen the unilateral right to terminate the contract during the due diligence period. Logsdon sent the red line to Principal Life's legal department to review.

Meanwhile, the defaulting borrower agreed to renew negotiations to refinance the note. Ultimately, Principal Life and the borrower agreed to refinance and the note was no longer for sale. When Cheng discovered Principal Life was not going to sell the note, Revalen filed suit alleging breach of an oral contract. After hearing the evidence, the trial court entered a judgment in favor of Revalen. This appeal followed.

In its first issue, Principal Life contends the evidence is legally and factually insufficient to support the judgment because there was no evidence of an offer, acceptance, or a meeting of the minds on the essential terms of the agreement. Rather, it asserts the evidence showed only continued negotiations of a deal that was to be consummated only by a formal written contract. According to Principal Life, the Investment Committee approval of the proposed transaction meant only Cheng and Principal Life were authorized to move forward with negotiating the written PSA. Logsdon's communication of that approval did not transform the approval into an offer to enter into an oral contract.

In an appeal from a bench trial, the trial court's findings of fact have the same weight as a jury verdict. Thornton v. Dobbs, 355 S.W.3d 312, 315–16 (Tex.App.-Dallas 2011, no pet.); Pulley v. Milberger, 198 S.W.3d 418, 426 (Tex.App.-Dallas 2006, pet. denied). Therefore, we review a trial court's findings of fact under the same sufficiency standards we use when determining if sufficient evidence exists to support an answer to a jury question. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994); Thornton, 355 S.W.3d at 315–16. In reviewing the legal sufficiency of the evidence, we consider the evidence in the light most favorable to the verdict, disregarding all contrary evidence that a reasonable factfinder could have reasonably disbelieved. AutoZone Inc. v. Reyes, 272 S.W.3d 588, 592 (Tex.2008) (citing City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005)). While we view the evidence in the light most favorable to the findings, we cannot consider the evidence in isolation divorced from its surroundings. Id. Rather, we review the evidence in its proper context with other evidence. Id.

To prove contract formation a party must prove, among other elements, an offer and acceptance and a meeting of the minds on all essential elements. See Thornton, 355 S.W.3d at 316; Cessna Aircraft Co. v. Aircraft Network, L.L.C., 213 S.W.3d 455, 465 (Tex.App.-Dallas 2006, pet. denied). For there to be an offer which may ripen into a contract by simple acceptance, the offer must be reasonably definite in its terms and must sufficiently cover the essentials of the proposed transaction that, with an expression of assent, there will be a complete and definite agreement on all essential details. Edmunds v. Houston Lighting & Power, Co., 472 S.W.2d 797, 798–99 (Tex.App.-Houston [14th Dist.] 1971, writ ref'd n.r.e). The term “meeting of the minds” refers to the parties mutual understanding and assent to the expression of their agreement. Weynand v. Weynand, 990 S.W.2d 843, 846 (Tex.App.-Dallas 1999, pet. denied). To create an enforceable contract, the minds of the parties must meet with respect to the subject matter of the agreement and all its essential terms. Id. The parties must agree to the...