v.

• Decision Date: 08 December 2014
• Docket Number: NO. 03-10-00319-CV,03-10-00319-CV
• Court: Texas Court of Appeals
• Parties: Appellants, Lou Ann Hughes and Performance Products, Inc. // Cross-Appellant, James Pearcy v. Appellee, James Pearcy // Cross-Appellees, Lou Ann Hughes and Performance Products, Inc.

Appellants, Lou Ann Hughes and Performance Products, Inc. // Cross-Appellant, James Pearcy v. Appellee, James Pearcy //Cross-Appellees, Lou Ann Hughes and Performance Products, Inc.

NO. 03-10-00319-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

December 8, 2014

FROM THE DISTRICT COURT OF COMAL COUNTY, 433RD JUDICIAL DISTRICT NO. C2007-0787D, HONORABLE DIB WALDRIP, JUDGE PRESIDING

MEMORANDUM OPINION

This suit arises from James Pearcy's sale of his microbial feed supplement business, Performance Products, Inc. (PPI), to his former attorney Lou Ann Hughes.¹ Hughes and PPI (collectively Appellants) appeal from the trial court's final judgment, consistent with the jury's findings, denying their breach of contract, fraud, and negligent misrepresentation claims and awarding Pearcy $714,010 in damages for his breach of contract claim, $1 in damages for his breach of fiduciary duty claim, and $163,644 in attorney's fees. Appellants challenge the trial court's denial of their motion to transfer venue, contend the trial court submitted an improper jury charge, and challenge the legal and factual sufficiency of the jury's findings on Pearcy's breach of contract claim and on their claims for negligent misrepresentation and fraud. On cross-appeal, Pearcy challengesthe sufficiency of the evidence supporting the jury's award of nominal damages for his breach of fiduciary duty claim. We affirm the trial court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Prior to purchasing PPI from Pearcy, Hughes had served as either Pearcy's or PPI's lawyer in several transactions, including negotiating a prior attempted sale of PPI to another buyer. After Hughes offered to purchase PPI, Pearcy initially sought separate counsel but terminated the representation before his lawyer completed any work on the transaction. Hughes then agreed to draft all of the legal documents related to her purchase of PPI, including a licensing agreement.

Under the terms of the licensing agreement, Pearcy granted PPI—for a five-year period—the exclusive rights to the microbial formulations used to create PPI's feed supplement products in exchange for royalty payments. The royalty payments were fourteen percent of net sales up to a total payment of $1,350,000. At the end of the five-year period, PPI then would have an opportunity to purchase the microbial formulations for $100,000. The licensing agreement additionally provided PPI the right to accelerate its option to purchase the microbial formulations if the company paid Pearcy both the maximum unpaid royalties remaining under the term of the agreement and the purchase price for the formulations.

Before the end of the five-year period, Pearcy contends that Hughes accelerated PPI's option to purchase the microbial formulations by verbally demanding that he deliver the formulations. Pearcy further contends that after he provided her with the formulations, PPI refused to pay him the $100,000 purchase price and remaining unpaid royalties. Pearcy sued Hughes and PPI alleging causes of action for breach of contract, misappropriation of trade secrets, breach offiduciary duty, negligent misrepresentation, and fraud. Hughes countered that she never demanded the formulations and that any formulations delivered were not discernible and were insufficient to trigger the acceleration option. Hughes further contended that Pearcy misrepresented in the licensing agreement that he had invented and exclusively owned the formulations and countersued for breach of contract, fraud, and negligent misrepresentation.

VENUE

In their first issue on appeal, Appellants contend the trial court erred in denying their motion to transfer venue from Comal to Bexar County based on a contractual choice of venue provision. Venue may be proper in many counties under the venue rules, and the plaintiff has the first choice in the filing of the lawsuit. Wilson v. Texas Parks & Wildlife Dep't, 886 S.W.2d 259, 260 (Tex. 1994). In reviewing the trial court's venue determination, we must conduct an independent review of the entire record—including the trial on the merits—to determine whether any probative evidence supports the trial court's venue decision. Tex. Civ. Prac. & Rem. Code § 15.064(b); Ruiz v. Conoco, Inc., 868 S.W.2d 752, 758 (Tex. 1993). We review the evidentiary record in the light most favorable to the venue ruling but review de novo the trial court's application of the law to the facts of the case. Ruiz, 868 S.W.2d at 758; Chiriboga v. State Farm Mut. Auto Ins. Co., 96 S.W.3d 673, 678 (Tex. App.—Austin 2003, no pet.). In our review, our task is not to determine the best venue. Chiriboga, 96 S.W.3d at 681. Rather, if any probative evidence supports the trial court's venue decision—even if the preponderance of the evidence is to the contrary—we must affirm. Ruiz, 868 S.W.2d at 758; Chiriboga, 96 S.W.3d at 678.

Pearcy filed this suit in Comal County on permissive venue grounds.² See Tex. Civ. Prac. & Rem. Code § 15.002(a)(1). Appellants filed a motion to transfer venue objecting to venue in Comal County on the grounds that venue was mandatory in Bexar County pursuant to Texas Rule of Civil Procedure section 15.020, a mandatory venue provision governing the specification of venue by written agreement for actions arising from major transactions. See id. § 15.020 (defining "major transaction"venue provision). Because Pearcy's chosen venue rests on permissive grounds and the motion to transfer was based on a mandatory venue provision, it is reversible error if the trial court erroneously denied application of the mandatory venue provision. See Wichita Cnty. v. Hart, 917 S.W.2d 779, 781 (Tex. 1996).

As the mandatory venue provision under section 15.020 applies only to actions arising from major transactions, our first task is to determine whether the sale of PPI constituted a "major transaction" within the meaning of the statute. See Tex. Civ. Prac. & Rem. Code § 15.020. "Major transaction" is defined as:

A transaction evidenced by a written agreement under which a person pays or receives, or is obligated to pay or entitled to receive, consideration with an aggregate stated value equal to or greater than $1 million.

Id. § 15.020(a). Here, there are four written agreements relevant to Hughes purchase of PPI, titled: (1) Stock Purchase Agreement; (2) Non-Competition Agreement; (3) Consulting Agreement; and (4) Licensing Agreement. All four documents were executed at the same time as part of the single transaction of selling PPI to Hughes, and the Stock Purchase Agreement expressly incorporates both the Non-Competition Agreement and Licensing Agreement. "The general rule is that separate instruments or contracts executed at the same time, for the same purpose, and in the course of the same transaction are to be considered as one instrument, and are to be read and construed together." Jones v. Kelley, 614 S.W.2d 95, 98 (Tex. 1981). Accordingly, for purposes of establishing venue under section 15.020, we will construe the four documents together as "a written agreement."

Construing the agreements together as a single written agreement, our next task is to determine whether under the agreements "a person pays or receives, or is obligated to pay or entitled to receive, consideration with an aggregate stated value equal to or greater than $1 million." Tex. Civ. Prac. & Rem. Code § 15.020. The Stock Purchase agreement expressly entitles Pearcy to receive $400,000, and the Non-Competition and Consulting Agreements each expressly entitle Pearcy to receive $50,000. Thus, the aggregate stated value of $500,000 for these three documents is easily determinable. The dispute, however, is over the "aggregate stated value" of the Licensing Agreement. The Licensing Agreement provides that for a period of five years Pearcy is entitled to royalty payments of fourteen percent of PPI's net sales up to $189,000 per twelve-month period and further provides PPI with the option to buy Pearcy's microbial formulations for $100,000 at the end of the five-year royalty period. Thus, under the licencing agreement, Pearcy may receive a totalpayment of over $1 million. The payments, however, are contingent upon PPI's future sales and PPI electing to purchase the formulations at a later date.

Under section 15.020(a), the parties' written agreement must state the aggregate value of the consideration and obligate a person to pay or receive the stated consideration. Id. (major transaction when person "is obligated to pay or entitled to receive, consideration with an aggregate stated value equal to or greater than $1 million) (emphasis added); see also In re Togs Energy, Inc., No. 05-09-01018-CV, 2009 WL 3260910, at *1 (Tex. App.—Dallas Oct. 13, 2009, no pet.) (mem. op.) (venue selection clause unenforceable where extraneous evidence showed purchased property rights were worth over $1 million but written agreement itself did not contain the aggregate stated value of consideration). On the face of this agreement, PPI may never have been obligated to pay any sum as consideration because all payments are conditioned on future, uncertain net sales and the Appellants electing to exercise their option to purchase Pearcy's formulations at a future date. Thus, we cannot conclude that the licensing agreement on its face obligates any person to pay or receive consideration with an aggregate stated value of at least $500,000—the amount needed for the entire transaction to have a stated value equal to or greater than $1 million and qualify as a major transaction under section 15.020. See In re Texas Ass'n of Sch. Bds., Inc., 169 S.W.3d 653, 658-59 (Tex. 2005) (insurance policy providing over $1 million in coverage not a "major transaction" under section 15.020 as payment of policy limits was conditioned on the happening on an event of chance); see also Spin Doctor Golf, Inc. v. Paymentech, L.P., 296 S.W.3d 354, 359 (Tex. App.—Dallas 2009, pet. denied) (concluding credit card service agreement...