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Quick v. Plastic Solutions of Texas, Inc.

Court of Appeals of Texas, Eighth District, El Paso

June 27, 2008

DAVID J. QUICK, Appellant

          Appeal from the 380th District Court of Collin County, Texas (TC#380-2143-04)

          Before Chew, C.J., McClure, and Carr, JJ.


          Kenneth R. Carr, Justice.

         Appellant, David J. Quick, appeals a take-nothing judgment on various contract claims he brought against Appellees, Plastic Solutions of Texas, Inc. ("PST"), Plastic Solutions Molding, Inc. ("PSMI"), Kurt H. Ruppman, Sr. (collectively, the "PST Defendants"), and Fairfield Enterprises, Inc. ("Fairfield"). We affirm the judgment of the trial court.

         I. BACKGROUND

         Quick is a certified public accountant. In 1994, he started his own accounting practice. Shortly thereafter, Quick met Appellee Kurt Ruppman, Sr. who, at the time, was serving as president of Piper Plastics. Ruppman left Piper Plastics in late 1994 and started PST. Ruppman began experimenting with the use of very cold temperatures in the manufacture of hot-fill PET (Polyethylene Terephthalate) plastic bottles. He developed a process by which preform plastic bottles were heated, stretched with a stretch rod, injected with liquid nitrogen at high pressure, and molded. Ruppman referred to the process as "cryogenic," because of the cold temperatures involved, due to the presence of liquid nitrogen. Ruppman applied for and received a patent for his process.

         During this time, Quick did some work for Ruppman by preparing projections and forecasts for potential business pursuits. Ruppman informed Quick that he was not able to pay him for such services, but suggested that he might work for an interest in the company. Quick was impressed with Ruppman's knack for ideas and saw a potential financial gain in working for an interest in his business. In February or March of 1995, Quick and Ruppman discussed an agreement, which Quick had prepared, that would grant him a royalty interest in PST. The two discussed various terms, but never executed the agreement. Nevertheless, Quick believed that he had an oral agreement for 5 percent of the gross margin of Ruppman's business. In return, according to Quick, he was to provide various services to PST.

         Beginning in late 1995, Ruppman entered into a series of agreements with the Ball Corporation ("Ball"), in which Ball acquired exclusive licensing rights to Ruppman's patented process. Under the agreements (collectively, the "Ball Agreements"), Ball paid a total of $1.5 million to PST during 1995 and 1996. PST was obligated to use its best efforts to develop a commercially viable process for manufacturing bottles using the cryogenic technology. If PST could do so, Ball was obligated to commit to firm orders for production machinery or market sub-licenses of the patented technology. Ball and PST were to split any sub-licensing revenue. During the following months, Ruppman attempted to develop such a commercially viable process to manufacture PET bottles, using the cryogenic technology.

         Ball is well-known in the container industry. Due to its participation with Ball, many people in the plastics industry were interested in PST's cryogenic technology. PST had very high expectations for the relationship with Ball and believed that Ball, which had become the exclusive sub-licensor of the technology, would be successful in licensing it. Ball, in turn, appeared to believe that the licensing would be successful, and it represented to PST that it was a good technology.

         Sometime in late 1996 or early 1997, Quick assisted Ruppman in locating two eventual investors in PST--J. Lewis Partners ("Lewis Partners") and ELK Trust. The deal which the parties discussed was a loan to PST in exchange for a royalty interest. Quick prepared a proposed royalty agreement for Lewis Partners, ELK Trust, and himself based on a contract that Ruppman had previously used and given to him. Lewis Partners and ELK Trust ultimately loaned a total of $650, 000 to PST, and PST granted each a royalty interest in revenues generated by income from licensed patents, products, and technical information. Quick and Ruppman and PST entered into an agreement, entitled "Royalty Revenue Agreement" (the "Agreement"), on January 23, 1997.

         The Agreement defines the participants as Quick on the one hand and Ruppman and PST on the other, and it is signed by Quick and by Ruppman, as president of PST. The Agreement grants Quick a 3 percent interest in Net Royalty Income Revenue, which is calculated by deducting legal fees and costs incurred in enforcing PST's patent rights or defending PST against claims for infringement. Paragraph 1.7 of the Agreement defines "Royalty Income Revenue" as:

[I]ncome derived from Licensed Products which are covered by one or more claims of an issued and existing Licensed Patent or which are manufactured by any licensee through use of a Licensed Process covered by one or more claims of an issued and existing Licensed Patent paid to PST's Royalty account.

         In the spring of 1997, Ruppman attended a conference known as "Bev Pak." The major plastics companies and numerous companies from around the world attended. PST, Ball, and others gave a presentation regarding the cryogenic technology. Following Ruppman's portion of the presentation, Ball representatives announced that they could not talk about the technology and would not license it, because it was too premature. The Ball announcement had a significantly negative impact on PST's business. PST's plans for significant licensing revenue from Ball vanished, and the relationship between PST and Ball deteriorated. The two companies disputed whether the technology was commercially viable. Ultimately, an arbitrator concluded that the technology had not been commercially viable. PST settled the dispute by repurchasing the licensing rights granted to Ball.

         By May of 1997, PST was cash broke and needed additional investment. At the time, PSMI, a wholly-owned subsidiary of PST, which was started by Ruppman as a small manufacturing operation, was manufacturing flower pot carrying trays, high density bottles for fertilizer, and PET water bottles. This brought in approximately $40, 000 to $50, 000 a month.

         At Ruppman's request, Quick approached Lewis Partners to solicit additional investment, but they refused. Thereafter, Quick approached his parents, the Quicks, [1] and his aunt and uncle, the Bollners, about investing. In exchange for a royalty interest in certain revenue streams of the PST Defendants, the Quicks and the Bollners agreed to a loan totaling $100, 000. Unlike Quick's royalty agreement, the Bollners' and Quicks' agreements defined the royalty interest to include net manufacturing of PSMI.[2]

         Around the time the Bollners and the Quicks entered into their agreements, PSMI's manufacturing revenue dropped, due to the fact that PSMI's handful of customers were experiencing problems of their own. By the fall of 1997, PST and PSMI were in dire financial condition. PST was no longer able to make the payments required under the Quicks' and Bollners' notes. This put a strain on the relationship between Ruppman and Quick.

         In October 1997, PST received $200, 000 from a nitrogen supply company known as "BOC." BOC was willing to provide money to help PST stay afloat, in the hopes that PST could commercially develop the cryogenic technology, which used liquid nitrogen. BOC ultimately agreed to provide PST with $1.5 million for a potential marketing agreement and a share in revenue. However, this infusion of cash was made on the condition that the money be repaid as a loan at BOC's election. BOC tried unsuccessfully to license PST's cryogenic technology and eventually opted to cancel the agreement and sought repayment from PST. PST and Ruppman were ultimately unsuccessful in convincing the bottling industry to use the technology.

         By April 1998, PST was again in desperate financial condition and was about to shut down. Ruppman met John Albers, a potential investor. After reviewing PST's and PSMI's financials, Albers, through Appellee Fairfield, began to invest in the companies, keeping them alive. Ultimately, Albers, through Fairfield, invested over $20 million in PST and PSMI. The PST Defendants continued to try to license the cryogenic technology, but without success. Their focus changed from licensing to manufacturing.

         Around May of 1998, Quick stopped providing any services for the PST Defendants. In November of 2002, Quick visited Ruppman at the PST/PSMI facility. Quick believed that the company had expanded and appeared to be doing well. He and his uncle, Daniel Bollner, became suspicious that the PST Defendants had not been honest with them regarding potential royalty income. Bollner sent Ruppman a letter inquiring about his interest. Ruppman responded that none of the royalty provisions had been triggered and that there were no current plans to use the cryogenic technology.

         Thereafter, Quick filed this lawsuit, asserting claims against PST Defendants in tort, contract, and for a declaratory judgment as to the Agreement. The PST Defendants counterclaimed for usury and sought a declaratory judgment that no sums were owed to Quick. Quick subsequently brought claims against Fairfield, based on a vicarious liability theory. Fairfield brought a no-evidence motion for summary judgment on all of Quick's claims against it, which the trial court granted. The PST Defendants moved for partial summary judgment, based, among other things, on the defense of limitations. The trial court granted the motion as to all contract claims prior to June 1, 2000. Quick has not appealed that order.

         Following a bench trial, the trial court entered a take-nothing judgment against Quick. The court concluded that the "unambiguous and proper construction of the term 'Net Royalty Income Revenue' is limited to licensing income PST received on or after January 23, 1997," which is the date of the Agreement. The court also concluded that the scope of the technology defined in the Agreement was ambiguous. The court found that the intention of the parties in that respect was that PST was only obligated to pay a royalty for licensing income received on or after January 23, 1997, "from the heat-set/barrier blow molding technology process PST was trying to market in January of 1997, which used nitrogen at the blow molding stage in bottle manufacturing, and that process alone." The court found that PST had received no such income since the date of the Agreement. The court also concluded that Quick's claim for breach of contract was barred by failure of consideration and prior material breach. Finally, the trial court awarded Fairfield attorney's fees, pursuant to the Uniform Declaratory Judgments Act.

         On appeal, Quick challenges the trial court's construction of the Agreement, the court's findings and conclusions as to failure of consideration and prior material breach, and the court's award of attorney's fees to Fairfield. The claims that are relevant to this appeal are Quick's claims for declaratory judgment, for an accounting of the income derived from the PST Defendants' products, and breach of contract.


         A. Standard of Review

         Legal and factual sufficiency of the evidence standards of review govern an appeal of a non-jury trial on the merits. IKB Indus. (Nigeria) Ltd. v. Pro-Line Corp., 938 S.W.2d 440, 445 (Tex. 1997). When a party appeals from a non-jury trial, it must complain of specific findings and conclusions of the trial court. Carrasco v. Stewart, 224 S.W.3d 363, 367 (Tex. App.--El Paso 2006, no pet.); see also Serrano v. Union Planters Bank, N.A., 162 S.W.3d 576, 580 (Tex. App.--El Paso 2004, pet. denied). A general complaint against the trial court's judgment does not present a justiciable question. Carrasco, 224 S.W.3d at 367; Serrano, 162 S.W.3d at 580.

         A "no-evidence," or legal-insufficiency, point is a question of law which challenges the legal sufficiency of the evidence to support a particular fact finding. Serrano, 162 S.W.3d at 579. There are two separate "no-evidence" claims. Id. When the party with the burden of proof suffers an unfavorable finding, the point of error challenging the legal sufficiency of the evidence should be that the fact or issue was established as "a matter of law." Id. When the party without the burden of proof suffers an unfavorable finding, the challenge on appeal is one of "no evidence to support the finding." Id. (citing In re Estate of Livingston, 999 S.W.2d 874, 879 (Tex. App.--El Paso 1999, no pet.)). An appellate court will sustain a legal-sufficiency, or "no-evidence," challenge, if the record shows: (1) the complete absence of a vital fact, (2) that the court is barred by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact, (3) that the evidence offered to prove a vital fact is no more than a scintilla, or (4) that the evidence establishes conclusively the opposite of the vital fact. Carrasco, 224 S.W.3d at 367 (citing City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005)).

         We review a trial court's conclusions of law de novo. Austin Hardwoods, Inc. v. Vanden Berghe, 917 S.W.2d 320, 322 (Tex. App.--El Paso 1995, writ denied). Erroneous conclusions of law are not binding on the appellate court, but, if the controlling findings of fact will support a correct legal theory, are supported by the evidence, and are sufficient to support the judgment, then the adoption of erroneous legal conclusions will not mandate reversal. Heritage Resources, Inc. v. Hill, 104 S.W.3d 612, 621 (Tex. App.--El Paso 2003, no pet.).

         Findings of fact made by the trial judge, sitting as the fact finder, enjoy the same status as findings of a jury. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991); Heritage Resources, 104 S.W.3d at 619. Where the party with the burden of proof is challenging the factual sufficiency of the findings, the appropriate complaint is that the adverse findings are "against the great weight and preponderance of the evidence." Tate v. Tate, 55 S.W.3d 1, 5 (Tex. App.--El Paso 2000, no pet.). In reviewing a factual sufficiency point, we must consider all of the evidence and determine whether the adverse finding was so against the great weight and preponderance of the evidence that it was clearly wrong and unjust. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996). We do not pass upon the witnesses' credibility, nor do we ...

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