SYSCO FOOD SERVICES OF AUSTIN, L.P., by tam26166

VIEWS: 50 PAGES: 26

									          No.
                    IN THE
            SUPREME COURT OF TEXAS




               DANNY S. DAVIS,

                                 Petitioner

                       v.

   SYSCO FOOD SERVICES OF AUSTIN, L.P.,

                                 Respondent



             ON PETITION FOR REVIEW
FROM THE THIRD COURT OF ApPEALS AT AUSTIN, TEXAS
           CAUSE No. 03-08-00593-CV



             PETITION FOR REVIEW




                            ELIZABETH G. BLOCH
                            State Bar No. 02495500
                            Brown McCarroll, L.L.P.
                            111 Congress, Suite 1400
                            Austin, Texas 78701
                            Telephone: (512) 472-5456
                            Facsimile: (512) 479-1101

                            ATTORNEYS FOR     DANNY S. DAVIS
                   IDENTITY OF TH PARTIS                      AN COUNSEL

PETITIONER:                                ATTORNEYS FOR PETITIONER ON ApPEAL:

Danny S. Davis                             ELIZABETH G. BLOCH
("Davis")                                  State Bar No. 02495500
                                           BROWN McCARROLL, L.L.P.
                                           111 Congress, Suite 1400
                                           Austin, Texas 78701
                                           (512) 472-5456 (telephone)
                                           (512) 479-1101 (facsimile)

                                           ATTORNEYS FOR PETITIONER AT TRIAL:

                                           STEPHEN A. ROBERTS
                                           State Bar No. 01701920
                                           ROBERT B. TYLER
                                           State Bar No. 24009347
                                           CLINTON A. ROSENTHAL
                                           State Bar No. 24037393
                                           STRASBURGER & PRICE, LLP
                                           600 Congress, Suite 1600
                                           Austin, Texas 78701
                                           (512) 499-3600 (telephone)
                                           (512) 499-3660 (facsimile)


RESPONDENT:                                ATTORNEYS FOR RESPONDENTS:

Sysco Food Services of                     Bill Malone, Jr.
Austin, L.P.                               Law Offices of Bill Malone, Jr.
("Sysco")                                  8650 Spicewood Springs # 145-598
                                           Austin, Texas 78759
                                           (512) 346-9660 (telephone)
                                           (512) 681-9600 (facsimile)
                                                TABLE OF CONTENTS

IDENTITY OF THE PARTIES AND COUNSEL............................................................i

TABLE OF CONTENTS................................................................................................. ii

INDEX OF AUTHORITIES........................................................................................... iv

S T A TEMENT OF THE CASE....................................................................................... vi

STATEMENT OF JURISDICTION .............................................................................. vii

ISSUES PRESENTED.................................................................................................. viii

STATEMENT OF FACTS............................................................................................... 1

SUMMARY OF ARGUMENT........................................................................................ 3

ARGUMENT AND AUTHORITIES............................................................................... 5

         i. The court of appeals improperly re-wrote the trial court's findings. .............................6

                   A. The trial court found that Davis, not EI Dorado, agreed to make payments on
                   the equipment debt.............................................................................................. 6

                   B. The court of appeals re-wrote this finding to support its theory that EI Dorado
                   agreed to assume the debt, making Davis liable under his personal guarantee...... 7

         II. Even ifEI Dorado did orally agree to answer for Dam View's debt, that agreement is
         unenforceable under the statute of frauds. ....................................................................... 8

                   A. The statute of frauds applies to this claim. ..................................................... 8

                   B. Partial performance does not take this oral agreement out of the statute of
                   frauds.................................................................................................................. 9

                               1. Sysco's partial performance was not unequivocally and exclusively
                              referable to an agreement by EI Dorado to assume the entire
                              indebtedness. .......................................................................................... 9

                              2. Sysco did not suffer a substantial detriment in reliance on the oral
                              agreement for which it had no adequate remedy. ................................... 12

                              3. Enforcing the statute of frauds would not result in a fraud against
                              S ysco. ................................................................................................... 14




                                                                   11
CONCLUSION AND PRAyER.................................................................................... 15

CERTIFICATE OF SERVICE....................................................................................... 16

APPENDIX................................................................................................................... 17




                                                             11
                                          INEX OF AUTHORITIS
                                                 STATE CASES

Anderson v. City of Seven Points,
          806 S.W.2d 791 (Tex. 1991) .................................................................................7

Bank of    Texas, NA. v. Gaubert,
          286 S.W.3d 546 (Tex. App.-Dallas 2009, no pet.)............................................. 10

Choleva v. Spartan Aviation, Inc.,
      524 S.W.2d 739 (Tex. Civ. App.-Corpus Christi 1975, no writ)....................... 11

Cohen v. McCutchin,
          565 S.W.2d 230 (Tex. 1978) .................................................................................9

Exxon v. Breezevale,
          82 S.W.3d 429 (Tex. App.-Dallas 2002, pet denied) .........................................10

Hercules Exploration, Inc. v. Halliburton Co.,
      658 S.W.2d 716 (Tex. App.-Corpus Christi 1983, writ retd n.r.e.) .....................9

Hil v. Heritage Resources, Inc.,
       964 S.W.2d 89 (Tex. App.-EI Paso 1997, pet. denied) .......................... 10, 12, 13

Hooks v. Bridgewater,
          229 S.W. 1114 (Tex. 1921) .......................................................................9, 10, 14

Leonard v. Eskew,
          731 S.W.2d 124 (Tex. Civ. App.-Austin 1987, writ retd n. r. e.) ........................ 7

Nagle v. Nagle,
      633 S.W.2d 796 (Tex. 1982) ...............................................................................14

Osterberg v. Peca,
          12 S.W.3d 31 (Tex. 2000) .....................................................................................7

Wiley v. Bertelsen,
          770 S.W.2d 878 (Tex. App.- Texarkana 1989, no writ)................................ 10, 11

Young v. Young,
      168 S. W.3d 276 (Tex. App. -Dallas 2005, no pet.)............................................... 6



                                                           iv
                                             STATUTES

TEX. BuS. & COM. CODE § 26.01 ..................................................................................... 8

TEX. GOV'T CODE § 22.001 (a)(1)( 6).............................................................................. vii




                                                         v
                           STATEMENT OF TH CASE

Nature of the Case:          This is a suit by Sysco to recover on two debts. One,
                             which is not contested on appeal, was a grocery account
                             for a restaurant, EI Dorado, that was personally
                             guaranteed by Davis. The second was the debt of an
                             umelated company for equipment that was later used by
                             EI Dorado. Sysco sought to hold Davis responsible for
                             this equipment debt under two alternative theories: 1)
                             quantum meruit by Davis having benefited from the use
                             of the equipment; and 2) an oral agreement by EI
                             Dorado to assume responsibility for the debt, making
                             Davis liable on his personal guarantee.
Trial Court:                 The County Court at Law Number One,
                             Travis County, Texas, Cause No. C-I-CV-03-271634.

Trial Court Disposition:     The case was tried to the bench and the trial court found
                             in favor of Sysco on both claims and entered findings of
                             fact and conclusions of law. (Appendix A). As for the
                             equipment debt at issue here, the trial court imposed
                             liability on Davis under a quantum meruit theory. Final
                             Judgment was entered on 06/22/08. (Appendix B).
Parties in the               Appellant/Cross-Appellee: Davis, who appealed that
Court of Appeals:            portion of the judgment awarding damages based on the
                             equipment debt and attorneys fees.
                             Appelle/Cross-Appellant: Sysco, who cross-appealed,
                             claiming that Davis' liability should have been based on
                             his written guarantee, not on quantum meruit, and
                             therefore should have accrued interest at 18% per
                             annum.

Court of Appeals:            Court of Appeals for the Third Judicial District of
                             Texas, Cause No. 03-08-00593-CV.

Disposition by               By majority opinion, the court of appeals modified and
Court of Appeals:            affirmed the judgment below, although it did so on a
                             different ground than the trial court. (Appendix C).
                             Justice Henson dissented, concluding that the statute of
                             frauds prevented Sysco's recovery. (Appendix D).
                             Davis' motion for rehearing was denied on 01/28/10.
                             The court of appeals' judgment is attached as Appendix
                             E.


                                       VI
                             STATEMENT OF JUSDICTION
       This court has jurisdiction under TEX. GOV'T CODE § 22.001 (a)(1) because the

justices of the court of appeals disagreed on a question of law that is material to the case

- the proper application of the partial performance exception to the statute of frauds - and

under TEX. GOV'T CODE § 22.001 (a)(6) since the court of appeals has erred in a manner

that is of significance to the jurisprudence of the state.




                                               V11
                                  ISSUES PRESENTED


1. When the tral court distinguishes between two entities-an individual and a
corporation-in its findings of fact after a bench trial, and then finds that the individual
took some action, may the cour of appeals re-write that finding to say that the corporation
took the action in order to support affrmance on a different ground than that found by the
trial court?

2. In order for partial performance to negate application of the statute of frauds, the
oral agreement must be unequivocally and exclusively referable to the agreement sought
to be enforced. Is this test satisfied when there is some evidence that the partial
performance was referable to the oral agreement sought to be enforced (payment of the
entire debt of another), regardless of other evidence that the partial performance was also
referable to a different agreement (payment of monthly amounts in order to forestall
repossession)? Did the court of appeals fail to properly apply this exception by ignoring
the latter evidence?

3. Does a part suffer a substantial detriment in reliance on an oral agreement to pay
by failing to repossess equipment when the undisputed evidence shows that the part
could have, but did not repossess the equipment even long after the monthly payments
stopped, and likely would not have repossessed in any event?

4. Did the court of appeals err in modifying the judgment to include the contractual
interest rate of 18% per annum? (Not briefed).

5. Should the attorneys fees' award be reversed and remanded in light of Sysco' s
failure to segregate its fees between two claims, one for which attorneys fees is
recoverable and one for which they are not? (Not briefed).




                                            V11
                                    STATEMENT       OF   FACTS

            For a brief period in 2002, Davis was involved in a restaurant in Austin owned by

EI Dorado, of      which Davis was on officer. (RR Vol 2, 70). EI Dorado operated in space

that had previously been occupied by another umelated restaurant named Dam View.

(CR 140, FOF No.3). Dam View had entered into a credit agreement with Sysco for the

lease of restaurant equipment. (RR VoL. 2, 31, 139). When Dam View ceased

operations, it owed Sysco $51,326.79 on the lease ("the equipment debt"). (RR VoL. 2,

37). The principal behind Dam View, Craig Gatewood, had personally guaranteed this

debt. (RR Vol 2, 29, 37-38, 139).

           EI Dorado never formally purchased any Dam View assets or assumed any of

Dam View's obligations (RR VoL. 2, 35, 37, 39), but the equipment remained at the site

and EI Dorado began using the equipment. (RR VoL. 2, 75). After EI Dorado began

operations, Sysco approached Davis and asked if he would guarantee the Dam View

equipment debt. (RR VoL. 2, 84-85). Sysco even presented Davis with a written

guarantee and requested that he sign it. (DX 4). Davis refused to do so, clearly


indicating that he did not intend to guarantee the equipment debt. (RR VoL. 2, 84-85).

           EI Dorado did, however, enter into an agreement with Sysco for the purchase of

groceries. (PX 1; RR VoL. 2, 72-73). Davis personally guaranteed EI Dorado's debts to


Sysco. (PX 1). Based on this written guarantee, Sysco sought and obtained recovery in

this case against Davis on its sworn account for groceries that were purchased by EI

Dorado, and Davis does not contest and in fact has paid this part of the judgment.




                                                1
            The judgment against Davis for the Dam View equipment debt, however, is very

much in dispute. The trial court found that "Davis agreed to pay Sysco $1,000.00 per

month against the unpaid amount," and that "Davis made two payments to Sysco." (CR

140-41, FOF No.5). Significantly, the court did not find that Davis agreed to assume

primary responsibility for the entire indebtedness, nor did the court find that EI Dorado,

as opposed to Davis, agreed to pay anything toward the equipment debt. The trial court's

findings made a clear distinction between Davis and EI Dorado, and the court found only

that Davis, not EI Dorado, agreed to make payments on the debt. (CR 140-41). This is

significant because it demonstrates that the trial court found Davis directly liable for the

equipment debt under Sysco' s quantum meruit theory or other direct liability theory, not

secondarily liable through his written guarantee of EI Dorado's debts.

           Another confirmation that the trial court did not base Davis' liability on his written

guarantee of EI Dorado's debts is that the trial court imposed pre-judgment interest on the

equipment debt at the statutory rate of five percent per year, instead of the contractual

rate of eighteen percent per year set forth in the guarantee, despite Sysco' s request for the


higher contractual rate. In Defendant's Motion to Set Aside Judgment and for New Trial

or Alternatively for Entr of Modified Judgment, Davis' trial counsel referenced and


attached as Exhibit 1 to that Motion a July 17, 2008 letter from Sysco's counsel to the

trial court. (CR 123, n. 1). This attachment does not appear in the Clerk's Record, and a
                                                                                         1
copy is attached hereto as Appendix F for the court's convenience.




1 Davis would ask that he be allowed to supplement the Clerk's Record with this Exlbit since it was clearly
attached to the filed document, but is missing in the Clerk's Record that was filed with the court of appeals.


                                                                     2
       In this letter, Sysco' s counsel acknowledged that "the Court apparently believed

Defendant's counsel that Sysco' s equipment claim was based on quantum meruit and the

Court then ruled that the interest rate on equipment damages should be the 5% statutory

rate." (See Appendix F). Sysco's counsel asserted that its claim should have been based

on a written guarantee, and that the 18% contractual interest rate should apply. (Id.). The

trial court denied Sysco' s request and applied the 5% statutory rate to the equipment debt

portion of the judgment. (CR 103). This is a clear indication that the trial court based its

finding of liability against Davis under a quantum meruit theory, and not on his written

guarantee.

       The court of appeals modified this judgment, concluding that Davis was liable for

the equipment lease debt, but that his liability was based on his written guarantee, not on

quantum meruit or any other theory of direct liability. The court therefore concluded that

the award should accrue interest at the contractual rate of 18%. In doing so, the court re-

wrote the trial court's finding to amount to a finding that EI Dorado, not Davis, had

agreed to pay the debt, and that Davis was therefore liable under his personal guarantee

of EI Dorado's debt. The court also concluded that Sysco' s partial performance negated

application of the statute of frauds, which otherwise would have prevented Sysco from

enforcing the oral promise to pay Dam View's debt.

                              SUMY OF ARGUMNT
       There are two aspects of the case that ought to get this Court's attention. First, the

court of appeals ignored the trial court's actual findings, and measured the evidence

against different findings that the trial court did not make. Specifically, the trial court


                                              3
held Davis directly liable, finding that Davis himself       had agreed to pay $1,000 per month

toward the equipment debt, and that he had made two such payments. As discussed

above, the fact that the trial court did not base Davis' liability on his written guarantee of

EI Dorado's debt is evidenced by the trial court's assessment of only the statutory interest

rate of 5% on that portion of the judgment.

            Yet the court of appeals ignored this direct theory of liability, presumably in part

because Sysco abandoned its quantum meruit claim on appea¡2 and there was no evidence

to support the findings that Davis individually had agreed to make or had made any

payments. Instead, the court of appeals re-wrote the trial court's finding to be that EI

Dorado, not Davis individually, agreed to pay $1,000 per month toward the debt, and that

EI Dorado, not Davis individually, had made the two payments. This, in turn, supported

the court of appeals' new theory that EI Dorado has assumed responsibility for Dam

View's equipment lease debt, and that Davis therefore became secondarily liable by

virte of his personal guarantee of EI Dorado's debts. In other words, in upholding the


judgment on a different theory than the trial court, the court of appeals simply re-wrote

the trial court's fact findings to fit this different theory. This is no more permissible than

it would be to re-write a jury's findings on appeal to suit a different ground for


affirmance.

            Second, the court of appeals misapplied the exacting test that this and other courts

have established for negating application of the statute of frauds. In order to avoid the


strong public policy behind refusing to enforce certain oral agreements, a partial

2 (Appendix C, Slip. Op. at 3).



                                                         4
performance by one of the parties must have been "unequivocally referable" to only the

agreement sought to be enforced - here, the alleged agreement to assume and be

responsible for the entire debt of another. As Justice Henson correctly pointed out in her

dissent, the evidence at trial just as easily supported another agreement - one to make

monthly payments of $1,000 in order to postpone repossession of the equipment.

(Appendix D, Dissenting Opinion at 2). This month-to-month arrangement is very

different than agreeing to be responsible for the entire debt.

       Because the test is whether the partial performance is "unequivocally referable" to

only the agreement sought to be enforced, it does not matter that there was some, or even

substantial evidence that the partial performance was referable to an agreement to assume

the entire indebtedness. The undeniable fact that it was also referable to an agreement to

make monthly payments to stave off repossession nullifies the partial performance

exception as a matter of law.

                           ARGUMNT AN AUTHORITIS
       One thing is clear - Davis never signed a written guarantee for the Dam View

equipment debt even though Sysco asked him to do so. Sysco can therefore attach

liability to Davis individually in only one of two ways: (1) under a quantum meruit or

other direct liability theory that Davis agreed to make payments and benefited from EI

Dorado's use of the equipment; or (2) under a theory that EI Dorado agreed to answer for

the Dam View debt, thus making Davis secondarily liable on his written guarantee of EI

Dorado's debts. The trial court based its judgment against Davis on the former theory.

But in affirming the judgment on the latter ground, the court of appeals made two legal


                                              5
errors. It impermissibly re-wrote the trial court's findings to fit its different theory, and

then it misapplied the partial performance exception to the statute of frauds, which would

otherwise render EI Dorado's oral agreement unenforceable.

I. The court of appeals improperly re-wrote the trial court's findings.

       A. The trial court found that Davis, not El Dorado, agreed to make
              payments on the equipment debt.
       Since the trial court entered findings of fact, they have the same force and effect of

jury findings, and a case may not be affirmed on a theory that is different from those

findings. Young v. Young, 168 S.W.3d 276, 280-81 (Tex. App.-Dallas 2005, no pet.).

In other words, if a jury had found that Davis, not EI Dorado, had agreed to answer for

the debt, the appellate court could not simply "reform" the jury's answer to be that EI

Dorado had agreed to answer for the debt. Yet that is precisely what the court of appeals

did here.


       The trial court did not find that EI Dorado agreed to pay anything toward the Dam

View equipment debt or that it made any such payments. (CR 140-41). In its findings,

the trial court made a clear distinction between Davis individually and EI Dorado as an

entity, going so far as to expressly define "EI Dorado Bar & Grill, Inc." as "EI Dorado,"

and "Danny Davis" as "Davis." (Appendix B; CR 140, FOF 3 and 4). After making this

distinction, The trial court found that "Davis agreed to pay Sysco $1,000.00 per month

against the unpaid amount," and that "Davis made two payments to Sysco." (Appendix

B; CR 140-41, FOF No.5; emphasis added). The trial court did not find that EI Dorado

had agreed to make or had made any payments.



                                              6
      B. The court of appeals re-wrote this finding to support its theory that El
           Dorado agreed to assume the debt, making Davis liable under his
             personal guarantee.
       Courts are to constre findings of fact under the same legal standards as are

applied to review of jury verdicts. Anderson v. City of Seven Points, 806 S.W.2d 791,

794 (Tex. 1991). Findings may be constred in a way that sustains the judgment only if

the court is able to do so "without doing violence to the language used." Leonard v.

Eskew, 731 S.W.2d 124, 13 1-32 (Tex. Civ. App.-Austin 1987, writ refd n. r. e.).

      Even though the trial court found that Davis, not EI Dorado, had agreed to make

the payments, the court of appeals held that "Davis's oral agreement to pay the debt on

the equipment is enforceable under the partial-performance exception to the statute of

frauds. . . (and) that Davis was acting on behalf of El Dorado in making such

agreement." (Appendix C, Slip Op. at 1; emphasis added). Changing the trial court's

findings here to read that Davis made the agreement and the payments "on behalf of EI

Dorado" would require inserting new language into the findings, thus doing violence to

the language used.

      Appellate courts may not change the trial court's findings of fact any more than

they can re-write a jury's verdict to answer a different question than the one that was

asked. Here, there was no finding that EI Dorado, as opposed to Davis individually,

made any agreement to Sysco regarding the Dam View equipment debt. The fact that

there may have been evidence to support such a finding is irrelevant since the trial court

did not make that finding. See, e.g. Osterberg v. Peca, 12 S.W.3d 31, 54 (Tex. 2000)




                                            7
(sufficiency of the evidence must be measured against a jury's finding as submitted, not

against a hypothetical question that should have been submitted).

           Without a finding that EI Dorado agreed to pay the debt, Davis cannot be liable for

that debt under his personal guarantee of EI Dorado's debts. If the equipment debt never

became an EI Dorado debt, Davis' personal guarantee of EI Dorado's debts would not

come into play. And in any event, the trial court's findings that Davis individually

agreed to pay the equipment debt cannot support liability for two reasons. First, there is

absolutely no evidence to support this finding. And second, such a finding would

nonetheless fail because it would be unenforceable under the statute of frauds for the

same reasons discussed below.

II. Even if El Dorado did orally agree to answer for Dam View's debt, that agreement
           is unenforceable under the statute of frauds.

           A. The statute of frauds applies to this claim.
           As the court of appeals noted, Sysco concedes that the oral agreement to pay the

Dam View equipment debt is subject to the statute of frauds. (Appendix C, Slip Op at 3).

Section 26.01 of       the Texas Business & Commerce Code provides:

           ( a) a promise or agreement described in Subsection (b) of this section is not
           enforceable unless the promise or agreement or a memorandum of it, is

                   (1) in writing; and

                   (2) signed by the person to be charged with the promise or
                        agreement or by someone lawfully authorized to sign for him.

TEX. BuS. & COM. CODE § 26.01(a). Among the promises to which this requirement

applies is "a promise by one person to answer for the debt. . . of another person." TEX.

BuS. & COM. CODE § 26.01(b)(2). This can only be satisfied by a written memorandum


                                                 8
that is complete within itself in every material detail and that contains the essential


elements of the agreement, so that the agreement can be ascertained from the writing

without resort to oral testimony. Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex. 1978).

There are strong public policy reasons behind the statute of frauds - it is designed to

prevent just this type of claim, where there is conflicting oral testimony about the


existence, scope, and terms of an agreement. Indeed, Sysco' s own representative


candidly admitted that he could not "recall any terms on which (Sysco was) alleging Mr.

Davis or EI Dorado promised to repay this unpaid debt of Dam View. . . (and) there is no

term set out." (RR VoL. 2, 41).

       A personal guarantee of a debt is not enforceable if the underlying debt that it

guarantees is not enforceable. See Hercules Exploration, Inc. v. Halliburton Co., 658

S.W.2d 716, 724 (Tex. App.-Corpus Christi 1983, writ refd n.r.e.) ("The guarantor's

liability is measured by the principal's liability."). So if the statute of frauds prevents EI

Dorado from being liable on the Dam View equipment debt, it also prevents Davis from

being liable on his guarantee.

       B. Partial performance does not take this oral agreement out of the
              statute of frauds.

              1. Sysco's partial performance was not unequivocally and exclusively
                     referable to an agreement by EI Dorado to assume the entire
                     indebtedness.

       In Hooks v. Bridgewater, 229 S.W. 11 14 (Tex. 1921), this Court considered the

policy question of when equity should permit the courts to circumvent the statute of

frauds. The Court recognized the need for a positive, definite standard for deciding the




                                              9
question, stating that equity can circumvent the legislature's statutory directive only

through "some positive rule which will insure its exercise for . . . the prevention of an

actual fraud as distinguished from a mere wrong . . . so as to leave the statute itself,

through the exactness of the exception, with some definiteness of operation." Id, 229

S.W. at 1116. Otherwise, the exception will swallow the rule, and render the statute

meaningless. See, Bank of Texas, NA. v. Gaubert, 286 S.W.3d 546, 553 (Tex. App.-

Dallas 2009, no pet.).

       The exactness of the partial performance exception has been clearly defined by the

courts. In order for partial performance to negate operation of the statute of frauds, the

performance must be "unequivocally referable to the agreement" at issue. Wiley v.

Bertelsen, 770 S.W.2d 878, 882 (Tex. App.- Texarkana 1989, no writ). The partial

performance must be such that it could have been done with no other design than to

fulfill the particular agreement sought to be enforced. Exxon v. Breezevale, 82

S.W.3d 429, 439-40 (Tex. App.-Dallas 2002, pet denied). Because the test requires

unequivocal exclusivity, the evidence must be such that the performance can be

consistent with only one possible agreement, which here is an alleged agreement to

assume full responsibility for the equipment lease debt in its entirety. If there is any


evidence that the performance is consistent with another possible scenario, then the test

has not been satisfied.

       Partial performance requires performance by the part seeking to enforce the oral

promise - here Sysco - not the part making the promise. Hil v. Heritage Resources,


Inc., 964 S.W.2d 89, 135 (Tex. App.-EI Paso 1997, pet. denied). In its majority


                                            10
opinion, the court of appeals held that Sysco' s partial performance was its failure to

repossess the equipment in reliance on the oral promise to pay, and that "there is evidence

that Sysco's partial performance was unequivocally referable to the oral agreement."

(Appendix C, Slip Op at 7). But this ignores the substantial evidence that Sysco's partial

performance was also referable to a different scenario - an agreement to make lease

payments of $1,000.00 per month in order to prevent repossession of        the equipment on a

month-to-month basis. The evidence showed that Sysco had threatened to repossess the

equipment unless it was paid, and Davis agreed to make monthly payments "to not have

it taken away." (RR VoL. 2, 32). As Justice Henson pointed out in her dissent, the

undisputed evidence demonstrates that Sysco' s actions are equally referable to both

agreements - one to pay the entire debt, and the other to make monthly payments in

exchange for using the equipment on a month-to-month basis. Therefore, Sysco's actions

cannot, as a matter of law, be "unequivocally" referable only to the agreement sought to

be enforced, which is an alleged agreement to assume the entire indebtedness.

            The month-to-month aspect of this case is similar to that in Wiley v. Bertelsen,

where the court held that:

            Rendition of services for which a person receives a monthly salary is
            insufficient to take the alleged agreement out of the statute of frauds
            because the services were fully explained by the (monthly) salary without
            supposing any additional consideration.

Wiley v. Bertelsen, 770 S.W.2d 878, 882 (Tex. App.- Texarkana 1989, no writ) (citing

Choleva v. Spartan Aviation, Inc., 524 S.W.2d 739 (Tex. Civ. App.-Corpus Christi

1975, no writ). In other words, a person's having worked for two months and receiving a



                                                                      11
salary for those two months is not unequivocally and exclusively referable to an

agreement to employ that person for a longer period of time. The same reasoning applies

here. Forgoing repossession for those two months was fully explained by the two


monthly payments without supposing any additional consideration for an agreement to

assume the indebtedness in its entirety.

       The "consideration," if any, for EI Dorado's payments was to prevent repossession

of the equipment. (RR VoL. 2, 32: Sysco's representative told Davis that Sysco would

need to be paid "to not have (the equipment) taken away."). The two payments that were

made accomplished that purpose for two months. This partial performance cannot be

said to be only referable to an agreement to pay the debt in its entirety over the next year.

Instead, it is just as referable to an agreement to pay on a month-to-month basis in order

to postpone repossession for however many months payment is made.

              2. Sysco did not suffer a substantial detriment in reliance on the oral
                    agreement for which it had no adequate remedy.

       Partial performance applies to prevent application of the statute of frauds only

when the part performing changes his or her position in reliance on the oral promise,

and thereby suffers a "substantial detriment" for which there is no adequate remedy. Hil

v. Heritage Resources, Inc., 964 S.W.2d 89, 135 (Tex. App.-EI Paso 1997, pet. denied).

       The court of appeals held that Sysco had partially performed the oral promise by

not foreclosing on the equipment. But the court did not and cannot explain how this


passive conduct was in reliance on the oral promise. Sysco' s remedy for non-payment

would have been to repossess the equipment. But the evidence establishes that Sysco not



                                             12
only failed to repossess the equipment when it had the chance to do so, but likely never

would have repossessed in any event, and therefore did not "change its position" or suffer

a "substantial detriment" in reliance.

       A part's partial performance must also constitute a substantial detriment for

which the part has no adequate remedy. Hil v. Heritage Resources, 964 S.W.2d at 135.


But the evidence reveals that Sysco had an adequate remedy in that it maintained its right

to repossess the equipment at any time. At best, any reasonable reliance on the promise


to make monthly payments would have ended after the monthly payments stopped, at

which point Sysco could easily have exercised its adequate remedy to repossess the

equipment. Instead, Sysco slept on its rights. For well over a year, Sysco could have

repossessed the equipment, but chose not to do so. It did not repossess the equipment


after Dam View stopped making payments on the debt in May 2001. (PX 16). It did not

repossess the equipment after EI Dorado began using the equipment in February 2002

even thought it made no payments until September 2002. (See CR 140; FOF 2 and 3; PX

16). It did not repossess the equipment after EI Dorado made its last payment in October

2002. (PX 16). In fact Sysco never repossessed the equipment even though EI Dorado


used it for more that a year while making only two payments and Sysco had a long

opportnity to take the equipment back. (RR VoL. 2, 39-40).


       The evidence also reveals that Sysco likely would never have repossessed the

equipment in any event. Sysco' s representative was not aware of one situation where

Sysco had repossessed any equipment in the thirteen years he had been there. (RR VoL.

2, 48). As a matter of law, therefore, failing to repossess, which apparently was its usual


                                            13
course of conduct, cannot be a substantial detriment that occurred in reliance on the

promise to make payments. Sysco did not repossess the equipment because of its own

voluntary inaction, not because it detrimentally relied on any promise by Davis.

       There is no express finding by the trial court that Sysco substantially and

detrimentally relied on the oral promise by failing to repossess the equipment, nor that it

gave up an adequate remedy, and there is certainly no evidence at trial that would have

supported such implied findings. The court of appeals erred in concluding otherwise.

Instead, as a matter of law, the evidence conclusively establishes that Sysco had an

adequate remedy, but chose not to pursue it, and therefore did not suffer any detrimental

reliance on the promise to pay the debt.

              3. Enforcing the statute of frauds would not result in a fraud against
                     Sysco.

       This Court has consistently required a showing that a virtal fraud would result if


equity was not applied to avoid application of the statute of frauds. In Hooks v.

Bridgewater, this Court held that

       (T)o warrant equity's "breaking through the statute" to enforce . . . a parol
       contract the case must be such that the non-enforcement of the contract -
       or the enforcement of the statute - would, itself, plainly amount to a fraud.
       This is the basis, and the only basis, for the jurisdiction which courts of
       equity have assumed in their creation of exceptions to the statute.

Hooks, 229 S.W. at 1116; See also, Nagle v. Nagle, 633 S.W.2d 796, 799 (Tex. 1982).

The legislature has directed courts to enforce the statute of frauds based on long-standing

policy considerations, and courts must do so unless an equitable exception is present.




                                            14
That equitable exception must be carefully and sparingly applied lest the exception

overtake the rule.

       Here, as a matter of law, it cannot be said that application of the statute of frauds

would effectuate a virtal fraud upon Sysco. Sysco asked Davis to sign a written

personal guarantee for the equipment debt, and he refused to do so. Despite that refusal,

Sysco risked relying on an oral promise to make payments in exchange for not
repossessing the equipment. But then it failed to exercise its right to repossess the

equipment even long after those payments stopped. Proper application of the statute of

frauds will certainly not effectuate a fraud upon Sysco given that it had an adequate

remedy but chose not to pursue it.

                             CONCLUSION AN PRAYER
       WHEREFORE, PREMISES CONSIDERED, Davis respectfully requests that this

court grant his Petition for Review, reverse that portion of the final judgment awarding

Sysco the amount of $49,326.79 on the Dam View equipment debt, and render judgment

that Sysco take nothing by that claim. Alternatively, Davis requests that this court

reverse that portion of the court of appeals' judgment awarding pre and post judgment

interest at the rate of 18%. Davis further requests that this court reverse and remand the

award of attorneys fees. Davis requests such other relief to which he may be entitled.




                                             15
                                                 Respectfully submitted,


                                                 BROWN McCARROLL, L.L.P.
                                                 111 Congress, Suite 1400
                                                 Austin, Texas 78701
                                                 (512) 472-5456 (telephone)
                                                 (512) 479-1101 (facsimile)


                                                 By: /s/ ELIZABETH G. BLOCH
                                                      ELIZABETH G. BLOCH
                                                      State Bar No. 02495500

                                                 ATTORNEYS FOR PETITIONER,
                                                 DANY S. DAVIS


                              CERTIICATE OF SERVICE

       This is to certfy that on the 10th day of March, 2010, a tre and correct copy of the
foregoing has been served upon counsel of record by certified mail, retu receipt requested,
addressed as follows, and in compliance with Rule 9 of the Texas Rules of Appellate
Procedure:

       Bill Malone, Jr.
       Law Offices of Bill Malone, Jr.
       8650 Spicewood Springs # 145-598
      Austin, Texas 78759




                                                 /s/ ELIZABETH G. BLOCH
                                                 Elizabeth G. Bloch




                                            16
                                     APPENDIX

        A. Findings of Fact and Conclusions of Law

        B. Final Judgment

        C. Court of Appeals' Majority Opinion

        D. Court of Appeals' Dissenting Opinion

        E. Court of Appeals' Judgment

        F. July 17,2008 letter from Sysco's counsel to the trial court




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