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Hynds v. Foster

Court of Appeals of Texas, First District

February 28, 2017

ROBERT HYNDS, Appellant
v.
DALE FOSTER, Appellee

         On Appeal from the 129th District Court Harris County, Texas, Trial Court Case No. 2014-68548

          Panel consists of Justices Keyes, Higley, and Lloyd.

          MEMORANDUM OPINION

          EVELYN V. KEYES JUSTICE.

         Appellee Dale Foster sued his business partner, appellant Robert Hynds, for fraud, breach of contract, and other claims arising out of an investment opportunity in an oil and gas field in Alabama. Foster moved for summary judgment on his fraud and breach of contract claims. After the trial court rendered summary judgment in Foster's favor, ordering rescission of the parties' contract, requiring Hynds to return Foster's $500, 000 investment, and awarding attorney's fees, Foster nonsuited his remaining claims against Hynds. In five issues on appeal, Hynds contends that: (1 rescission of the parties' agreement was not available as a matter of law; (2) Foster failed to conclusively establish that he was entitled to rescission because he received the benefit of his bargain; (3) Foster failed to conclusively establish that the parties had a contract or that Hynds breached the contract; (4) Foster failed to conclusively establish that Hynds made a false representation or that Foster suffered damages; and (5) the trial court improperly awarded Foster attorney's fees.

         We affirm.

         Background

         Hynds and Foster have been friends since they were teenagers attending school in Jamaica. Foster works as a doctor in Jamaica. Hynds has experience working as an engineer in the oil and gas industry, and he lives in the Houston area. In 2007, Hynds and Foster formed Tryall Omega, Inc. ("Tryall") to pursue investment opportunities in oil and gas interests and real estate. Both parties owned a 50% interest in Tryall, with Hynds running the day-to-day operations of the company and Foster serving as the primary source of capital. Through Tryall, Hynds and Foster purchased shares in an offshore oil and gas company and purchased an interest in a condominium development.

         In 2013, Hynds identified a new potential investment opportunity: the purchase of a 49% working interest in the Pleasant Home Field oil and gas reserve in Alabama. According to Foster, Hynds informed him that he had negotiated a $1 million purchase price from the owner of the field, Gulf Coast Mineral, L.L.C. ("Gulf Coast"). Hynds sent Foster an assignment and bill of sale that listed the purchase price for the working interest as $1 million in cash. Foster averred that Hynds requested that Foster contribute $500, 000 to fund the purchase price and that Hynds promised also to contribute $500, 000. Although wary of the prospect of making such a large investment, Foster was persuaded by Hynds's willingness to invest an equal amount of his own money, and Foster agreed to wire $500, 000 to Hynds. The sale of the 49% working interest in the Pleasant Home Field was ultimately consummated by Hynds on behalf of Tryall.

         Several months after the purchase, and after he had not received any income from the working interest Tryall had purchased in the field, Foster requested information from Hynds about their investment. After Hynds failed to respond, Foster began investigating, and, according to his testimony, he discovered that Tryall had filed for bankruptcy in early 2014. Foster also discovered that Hynds and Gulf Coast had structured the sale of the Pleasant Home Field interest such that Tryall had paid $400, 000 in cash and had executed a $335, 000 promissory note for the interest, for a total purchase price of $735, 000 instead of $1 million. Hynds had contributed no money to the purchase price.

         In November 2014, Foster filed suit against Hynds and asserted a cause of action for fraud, among other claims. Foster alleged that Hynds had committed fraud by falsely representing that he would also contribute $500, 000 to the purchase price of the Pleasant Home Field interest and that the purchase price equaled $1 million in cash. Foster alleged that Hynds had negotiated the purchase price to be $400, 000 in cash and a $335, 000 promissory note and that he had made the misrepresentations to Foster with the intent of inducing Foster "to invest $500, 000 in cash and thereby finance Tryall's entire purchase of the Pleasant Home Field interest." Foster alleged that he would not have made the investment had he known that "he alone would bear the risk of the investment." Foster asserted that he had been damaged in the amount of $500, 000, representing his contribution to the Pleasant Home Field investment. Foster did not allege a cause of action for breach of contract in his original petition.

         Hynds answered and also filed a plea to the jurisdiction, arguing that the case against him ought to be dismissed because he was not a party to the contract to purchase the Pleasant Home Field interest, Tryall was, and Hynds was merely acting as Tryall's officer when it purchased the interest from Gulf Coast. Hynds acknowledged that Tryall purchased the Pleasant Home Field interest for $400, 000 in cash and a $335, 000 promissory note. However, he categorized Foster's $500, 000 payment as an "equity contribution" to Tryall, and he alleged that Gulf Coast reduced the purchase price of the working interest after Foster had made his contribution.

         In February 2015, Foster sought written discovery from Hynds, including requests for admissions. It is undisputed that Hynds did not timely respond to these requests.

         In May 2015, Foster moved for partial summary judgment, arguing that Hynds's deemed admissions, as well as other evidence, conclusively established Foster's affirmative claims. Foster argued that by failing to contribute $500, 000 towards the purchase of the Pleasant Home Field interest Hynds breached the parties' contract as a matter of law, entitling Foster to rescission and a return of his $500, 000 contribution. Foster argued that the parties formed a valid contract when they both agreed to contribute $500, 000 for the purchase of the Pleasant Home Field interest, that Foster performed his contractual obligations by actually contributing $500, 000 to Hynds, and that Hynds breached the contract by failing to match Foster's contribution. Foster sought rescission of the parties' contract.

         Foster also argued that his summary judgment evidence, including Hynds's deemed admissions, established his fraud claim as a matter of law. Foster argued that Hynds's material misrepresentations included misrepresentations that the purchase price of the Pleasant Home Field interest was $1 million in cash, when it was actually $400, 000 in cash and a $335, 000 promissory note, and that Hynds himself would contribute $500, 000 towards the purchase. Foster argued that, at the time of the misrepresentations, Hynds knew the purchase price was not $1 million, but he made the misrepresentations to induce Foster to provide the entire purchase price for the interest. As summary judgment evidence, Foster attached a declaration in which he swore to each of these facts. Foster attached a letter sent from Hynds to Foster's former counsel on May 19, 2014, more than a year after Tryall purchased the Pleasant Home Field interest, in which Hynds stated, "[Pleasant Home Field] 49% working interest acquisition cost break down was as follows: $400, 000 transfer to [Gulf Coast]; $335, 000 promissory note; $250, 000 secured bond, $59, 881.82 well insurances; $20, 000 startup expenses." Foster also attached the declaration of his counsel, who averred that $9, 965 would be a reasonable and necessary amount of attorney's fees through the summary judgment proceedings.

         Foster presented evidence that he contributed $500, 000 in cash to the purchase of the Pleasant Home Field interest in reliance on Hynds's representations that the purchase price of the interest was $1 million and that Hynds himself would also contribute $500, 000 in cash, and he would not have made this contribution were it not for Hynds's misrepresentations. Foster stated in his declaration that he has received no income from the Pleasant Home Field interest. He also stated, "The Pleasant Home Field interest is, due to non-production, lawsuits, and bankruptcies, worthless."

         The May 2014 letter from Hynds to Foster's former counsel detailed several problems that had arisen with the interest since Tryall purchased it. Hynds started off the letter by stating that Tryall had been in discussions with Gulf Coast concerning whether to sell the 49% working interest it had purchased the year before. Hynds stated, "In mid-December 2013, it became very apparent that neither receipt of the production payments [nor] assignment was going to occur without taking legal action against [Gulf Coast], " and Tryall contemplated suing Gulf Coast to "acquire title and production revenue." Hynds then stated that in January 2014, Gulf Coast served Tryall with a notice of default and took steps to sell the working interest. Hynds informed Foster's counsel that the only course of action to block the sale and protect Tryall's interest was to file an emergency bankruptcy. Hynds stated that Tryall had received no production revenues from September 2013 to March 2014. He also advised that one of the two wells on the Pleasant Home Field was no longer producing and that the remaining well "has been showing signs of a decline in production and [Gulf Coast] alleges that there is an issue with the pump and it may have to be changed at some point to potentially increase production." Hynds also hinted at the possibility of further legal action involving Tryall and Gulf Coast.

         Foster thus presented evidence that he had spent $500, 000 in reliance on Hynds's representation that he would also contribute $500, 000 but that the Pleasant Home Field interest was essentially worthless and he had received no income or revenue from Tryall's investment in the Field. This evidence was not controverted by any other evidence in the summary judgment record.

         Hynds moved for withdrawal of the deemed admissions and filed a response to Foster's partial summary judgment motion. In his response, Hynds argued that Foster had not pleaded a cause of action for breach of contract, and, thus, he could not be entitled to summary judgment on that claim. He also argued that he and Foster did not execute a valid and enforceable contract. Hynds further argued that, at the time Foster made his "equity contribution, " Tryall had not signed an assignment and bill of sale for the working interest from Gulf Coast.

         Hynds's summary judgment evidence included an assignment and bill of sale for the Pleasant Home Field interest, purportedly executed by Gulf Coast and Tryall. This document, which stated that it was executed on April 1, 2013, but made effective as of February 1, 2013, listed the purchase price for the interest at $1 million. Hynds's summary judgment evidence also included an affidavit that he executed, which stated only that he had personal knowledge of the facts contained within his response and that the statements in the response were true and correct.

         On June 1, 2015, Foster amended his petition to assert a cause of action for breach of contract. Foster alleged that he and Hynds entered into a contract in which both parties agreed to contribute $500, 000 to purchase the Pleasant Home Field interest. Foster alleged that he performed his contractual obligations by contributing $500, 000, but Hynds breached the contract by failing to make his contribution.

         The trial court held a hearing on Foster's summary judgment motion on June 8, 2015. At this hearing, the trial court allowed the withdrawal of the deemed admissions. The trial court, after noting that Hynds's summary judgment evidence did not include an affidavit from Hynds in which he controverted Foster's allegations, allowed Hynds seven days to supplement the summary judgment record with a controverting affidavit.

         Hynds filed a controverting affidavit on June 15, 2015, within the one-week continuance granted by the trial court. This affidavit included statements that Hynds did not have a contract with Foster, that he did not agree to make a matching $500, 000 contribution, that Foster made his contribution before Gulf Coast lowered the purchase price of the Pleasant Home Field interest, and that Foster performed his own due diligence regarding the purchase. This affidavit, however, was not signed by Hynds. Attached to this affidavit was a document entitled "Terms of Trade Pleasant Home Working Interest Purchase, " executed by Hynds on behalf of Tryall and the managing member of Gulf Coast on February 17, 2013. This document listed the purchase price of the interest as $400, 000 in cash and a $335, 000 promissory note.

         On June 18, 2015, outside of the one-week continuance granted by the trial court, Hynds filed an additional response to Foster's summary judgment motion. Hynds argued that Foster failed to establish his breach of contract claim as a matter of law because Foster had not introduced a written contract between the parties and any oral contract that may have existed was barred by the statute of frauds. Hynds also argued that Foster failed to establish his fraud claim as a matter of law because Foster produced no evidence that Hynds "induced Foster to make a contribution to [Tryall] by failing to disclose material facts about the prospective [Pleasant Home Field] acquisition, " and Foster could not establish that he had suffered an injury because Tryall still owned the 49% working interest in the Pleasant Home Field, which was producing oil and gas. Hynds objected to Foster's attorney's fees as unreasonable. Hynds also attached a signed version of the affidavit that he had filed with the trial court on June 15, 2015, as well as other evidence, such as documents that Hynds sent to Foster concerning oil and gas investment opportunities, including documents relating to the Pleasant Home Field.

         Foster replied to Hynds's response and also filed an amended declaration concerning his attorney's fees. In this declaration, Foster's counsel stated that Foster had incurred $21, 742.50 in attorney's fees, and he estimated that an additional $30, 000 in conditional appellate attorney's fees would be reasonable and necessary. Foster also attached evidence to his reply. This evidence included an email from Hynds to Foster, sent February 19, 2013, concerning the transaction that attached a document entitled "Terms of Trade" for the Pleasant Home Field Acquisition. This document, signed by Hynds and the managing member of Gulf Coast on February 17, 2013, listed the purchase price of the interest as $1 million. Foster also attached two wire transfer receipts demonstrating that he had wired $400, 000 to Hynds's bank account on February 20, 2013, and $100, 000 on March 19, 2013. Foster also attached an email from Hynds, dated July 11, 2013, that provided documents concerning the Pleasant Home Field acquisition to Foster for his review. These documents included an assignment and bill of sale, dated April 1, 2013, but made effective as of February 1, 2013, that listed the purchase price of the working interest as $1 million.

         As additional evidence, Foster also attached an additional declaration in which he discussed the documentary evidence he had attached to his reply. He stated:

Attached as Exhibit A . . . is a true and correct copy of the email and attachment that I received from Defendant Robert Hynds on February 19, 2013 showing the final purchase price of the Pleasant Home Field Interest as $1 million. Defendant Hynds never sent me the "Terms of Trade" agreement between Tryall Omega, Inc. and Gulf Coast Mineral, L.L.C. showing the actual purchase price of $400, 000 cash-plus-$335, 000-promissory-note. Instead, the one that Defendant Hynds sent me shows a purchase price of $1 million.

         Foster also stated in this declaration that as of July 11, 2013, Hynds had not informed him of the actual purchase price for the Pleasant Home Field interest.

         Additionally, Foster attached Hynds's responses to Foster's requests for admissions, which included statements that Hynds admitted that he "did not make a loan or equity contribution of $500, 000 in cash to Tryall Omega, Inc." and that he did not tell Foster that Tryall would pay $400, 000 in cash for the working interest plus a promissory note for the remaining balance. Hynds's responses included a statement denying that he told Foster that he would contribute $500, 000 of his own money to the acquisition. Foster did not attach as summary judgment evidence the "Terms of the Trade" agreement signed by Hynds and Gulf Coast's managing member on February 17, 2013, that listed the ...


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