- Ag Docket
This case involved contractual negotiations concerning a 190-acre tract of land near Houston, TX. The defendant, owner of a Houston area logistics company, was the first to enter into an option contract to buy the tract. Other options were also entered into by the owner with other parties. That lead to litigation, and a developer with whom the defendant had previous business dealings, became interested in the property, but couldn't acquire the property with the litigation concerning the tract pending. The developer (the plaintiff in this case), acting through its agent, offered to pay the defendant's attorney's fees in the pending litigation because, as the agent stated, the plaintiff and the defendant were going to become partners concerning the development of the property. The defendant received $10,000 from the plaintiff for the defendant's attorney's fees. The litigation ultimately settled and the plaintiff agreed to purchase the property when all other parties agreed to release their rights. In exchange for the defendant's agreement to settle which would allow the plaintiff to buy the tract, the plaintiff's agent orally promised the defendant that the defendant would become a partner in the development of the tract and that the defendant would receive $1 million plus an interest in the profits from future development and sale of the property. Upon the plaintiff's sale of 20 acres of the tract, the defendant asked for his $1 million, but the plaintiff's agent stated that the plaintiff could only pay $500,000 "right now", implying that the balance would be paid later. Upon being presented the $500,000 check, the plaintiff's agent presented the defendant with a document that the agent said was a "receipt" and that, "It's nothing. You don't have to worry about it." The agent also told the defendant that he would get the balance of the $1 million when the property was further developed. The defendant did not read the document, because he was "in a hurry" and didn't have his glasses or use his magnifying glass, which he needed to read. The document turned out to be a carefully drafted release under which the defendant gave up any and all interest in the tract and all claims against the plaintiff. The defendant sued for breach of contract, breach of partnership fiduciary duties and fraud. The plaintiff claimed that the oral contract was unenforceable under the statute of frauds. The trial court jury found for the defendant on all claims but determined that the defendant did not suffer damages. The trial court determination was affirmed on appeal that there was an oral contract that the plaintiff had breached that was supported by the plaintiff's payment of $500,000 as consideration. The appellate court awarded costs to the defendant and remanded for a new trial on attorney's fees.
On further review, the TX Supreme Court reversed. The Court determined that the defendant could not have justifiably relied on the agent's statements concerning the content of the "receipt" which was actually a release. The Court noted that the document was obvious on its face that it was a release, and that reliance on the agent's misrepresentations concerning the document was not reasonable where the defendant had a reasonable chance to review the document. Thus, there was no fraudulent inducement which would negate the validity of the release. The Supreme Court also determined that the partial performance to the Statute of Frauds did not apply because the $500,000 payment was made to avoid performance of the oral contract under the terms of the release, rather than to perform obligations under the contract. The Court also determined that there could be no oral agreement to form a partnership under the Statute of Frauds. National Property Holdings, L.P., et al. v. Westergren, No. 13-0801, 2015 Tex. LEXIS 1, rev'g., in part and aff'g., in part Westergren v. National Property Holdings, L.P., 409 S.W.3d 110 (Tex. Ct. App. 2013).
CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.