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Bradshaw v. G&T Farms, LLC

Court of Appeals of Texas, Seventh District, Amarillo

January 12, 2018


         On Appeal from the 69th District Court Hartley County, Texas Trial Court No. 4706H, Honorable Ron Enns, Presiding

          Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.



         Appellant James Roy Bradshaw, Trustee of the Robert Meeks 1998 Trust, appeals from the trial court's money judgment in favor of appellees, G&T Farms, LLC, and Greg Foster d/b/a Foster Real Estate. We will reverse and render in part, modify in part, and otherwise affirm the trial court's judgment.


         The case arises from a real estate transaction. Bradshaw, as trustee, contracted in 2011 to sell property owned by the Robert Meeks 1998 Trust for some $12 million. Foster was the listing real estate agent for Bradshaw's sale. Bradshaw sought to locate replacement property to purchase in a transaction under section 1031 of the Internal Revenue Code.[1] Foster proposed he acquire an irrigated 1845-acre farm in Hartley County, Texas, owned by G&T Farms. Bradshaw was interested in G&T's property, partly because it adjoined a ranch the Meeks trust owned.

         After negotiations, G&T agreed to sell the Hartley County farm to Bradshaw for $4.2 million. The agreement was documented by a Farm and Ranch Contract on a form promulgated by the Texas Real Estate Commission ("TREC").[2] The contract's broker information page, signed by both parties, lists Foster as an intermediary representing seller and buyer. It states Foster, on closing, would receive a fee from seller, G&T. The contract's effective date is stated as June 23, 2011. It shows each party was represented by counsel. Bradshaw deposited $420, 000 as earnest money.

         The contract called for a closing date of the later of November 4, 2011, or seven days after objections made to title were cured or waived. The remedies available to the non-defaulting party under the contract's default provisions included the remedy of terminating the contract and receiving the earnest money as liquidated damages.

         The sale under the contract was never closed. On November 23, 2011, G&T sent Bradshaw notice of termination of the contract and requested he authorize Foster, who held the earnest money, to release it to G&T. Bradshaw did not sign G&T's proffered release document, and G&T filed suit in February 2012.

         G&T alleged Bradshaw breached the contract by failing to close by the closing date, and by failing to sign a release for the earnest money. By an amended petition, G&T also sought declaratory relief and expressly sought liquidated damages of the amount of the earnest money, plus three times the amount of the earnest money, pursuant to a provision of the contract authorizing that amount as liquidated damages.[3]

         After a bench trial, the court signed a judgment ordering that Foster release the earnest money to G&T, and ordering that G&T recover damages from Bradshaw of $1, 260, 000, interest and attorney's fees. It denied claims asserted by Bradshaw, and awarded Foster his attorney's fees.

         The court later entered findings of fact and conclusions of law in support of its judgment. On appeal, Bradshaw raises issues contending that the parties had no enforceable contract, that no evidence supported a finding Bradshaw defaulted or that G&T was entitled to the earnest money as liquidated damages, and that G&T was not entitled to the triple liquidated damages provided under paragraph 18.D. Other issues challenge the award of prejudgment interest and attorney's fees.


         Issue One - Existence of Contract

         The essential elements of a breach of contract claim are (1) the existence of a valid contract, (2) the plaintiff performed or tendered performance, (3) the defendant breached the contract, and (4) the plaintiff was damaged as a result of the breach. Davis v. Friedson, No. 14-08-01098-CV, 2010 Tex.App. LEXIS 1818, at *15 (Tex. App.-Houston [14th Dist.] March 16, 2010, no pet.) (mem. op.) (citing Winchek v. Am. Express Travel Related Servs. Co., 232 S.W.3d 197, 202 (Tex. App.-Houston [1st Dist.] 2007, no pet.)). Findings of fact in a case tried to the court have the same force and effect as a jury's verdict. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991); Creative Mfg., Inc. v. Unik, Inc., 726 S.W.2d 207, 210 (Tex. App.-Fort Worth 1987, writ refd n.r.e.). They are reviewed under the same sufficiency standards applicable to jury verdicts. Id. When reviewing legal sufficiency of the evidence, an appellate court considers the evidence in the light most favorable to the fact-finder's decision and indulges every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 826 (Tex. 2005). When reviewing factual sufficiency, appellate courts consider and weigh all of the evidence and will set aside the verdict only if it is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Id. at 826. The trial court evaluates the credibility of the witnesses, determines the weight to be given their testimony, and resolves conflicts and inconsistencies in the testimony. Sw. Bell Media, Inc. v. Lyles, 825 S.W.2d 488, 493 (Tex. App.-Houston [1st Dist.] 1992, writ denied). An appellate court may not impose its own opinion on these matters contrary to that of the fact-finder. See City of Keller, 168 S.W.3d at 819.

         Among other witnesses, the court heard testimony from Foster, Bradshaw and G&T's only members, brothers Greg and Todd Hodnett. There was testimony that Foster prepared the contract and presented it to Bradshaw, who signed it. There was general agreement in the testimony that G&T made some handwritten changes to the contract after Foster delivered it. After making the handwritten changes, G&T executed the contract and returned it to Foster.

         The first of G&T's handwritten changes was to the contract's "special provisions" section. As originally prepared, the contract contained a special provision stating, "This contract is subject to all parties making a 1031 Tax Free Exchange." G&T lined that sentence out, and wrote in a sentence reading, "This contract shall give all parties the right to make a 1031 tax free exchange."

         The second change was to the contract's earnest money section which, as prepared, required Bradshaw to deposit $410, 000 as earnest money. G&T changed that figure to $420, 000.

         The third change was made in the section describing the property to be conveyed. That section begins with a paragraph A describing the land. After the legal description of the land, the paragraph's pre-printed language continues, "together with all rights, privileges, and appurtenances pertaining thereto, including but not limited to: water rights, claims, permits, strips and gores, easements, and cooperative or association memberships." Further down, after paragraphs referring to improvements, accessories and crops, is paragraph F, in which interests to be reserved by the seller may be described. It contains pre-printed wording reading, "Seller reserves the following water, timber, or other interests:" followed by a blank line. In this contract, in the blank, Foster put the language, "none all minerals right, [sic] water rights shall go with sale." Before G&T signed the contract, it added to the end of that language, the handwritten words "that are now owned."

         By his first issue, Bradshaw argues both that no contract was formed by his exchange of documents with G&T, and that any contract which was formed was unenforceable because it did not comply with the statute of frauds.

         Were G&T's contract modifications material?

         After review of the record, we conclude both of Bradshaw's arguments depend on his assertion that G&T, by its handwritten changes, materially altered the terms of the contract Bradshaw signed. Bradshaw contends that by signing the contract Foster prepared he extended an offer to buy G&T's farm but G&T's actions constituted a rejection and counter offer rather than acceptance of Bradshaw's offer. "A purported acceptance that changes or qualifies an offer's material terms constitutes a rejection and counter offer rather than an acceptance." Forged Components, Inc. v. Guzman, 409 S.W.3d 91, 100-01 (Tex. App.-Houston [1st Dist.] 2013, no pet.); see Davis v. Tex. Farm Bureau Ins., 470 S.W.3d 97, 104 (Tex. App.-Houston [1st Dist.] 2015, no pet.) (material change in a proposed contract constitutes a counteroffer). G&T argues its changes were not material.

         To determine their material terms, courts examine contracts on a case-by-case basis. McCalla v. Baker's Campground, Inc., 416 S.W.3d 416, 418 (Tex. 2013) (per curiam); Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 74 (Tex. App.- Houston [14th Dist.] 2010, pet. denied) (both citing T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992)). We have joined some other Texas courts in holding that a term is material, or essential, if the contracting parties would reasonably regard it as a vitally important element of their bargain. Domingo v. Mitchell, 257 S.W.3d 34, 40-41 (Tex. App.-Amarillo 2008, pet. denied); see, e.g., General Metal Fabricating Corp. v. Stergiou, 438 S.W.3d 737, 744 n.4, 5 (Tex. App.-Houston [1st Dist.] 2014, no pet.).

         Bradshaw focuses primarily on the language G&T added to the contract's reservation language. He points to the undisputed evidence that the water rights were essential to the value of G&T's irrigated acreage, and that at least some of the water rights actually were held by a corporation owned by Todd Hodnett rather than by G&T itself. Bradshaw then argues that G&T's addition of the words "that are now owned" to the end of the reservation language had the effect of removing those water rights from the transaction.

         Whether a particular contractual term is material is a question of law. Sharifi v. Steen Auto, LLC,370 S.W.3d 126, 142 (Tex. App.-Dallas 2012, no pet.) (citing Parker Drilling, 316 S.W.3d at 74). We might agree in principle that a contract change deleting the water rights from the sale of irrigated farmland would be a material change. But we cannot agree with Bradshaw's contention such a change is involved here. G&T's additional language does not make the contract's reservation paragraph say G&T was reserving the water rights or that the water rights would not ...

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