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West v. Quintanilla

Supreme Court of Texas

April 5, 2019

Andrew Bradford West, Petitioner,
Oscar Leo Quintanilla, Respondent

          Argued January 9, 2019

          On Petition for Review from the Court of Appeals for the Fourth District of Texas.

          Justice Busby did not participate in the decision.


          Jeffrey S. Boyd, Justice.

         The plaintiff in this case claims that after he fully satisfied his debt to the defendant, the defendant filed fraudulent liens and slandered the plaintiff's title to mineral interests that secured that debt. The defendant argues, and the court of appeals agreed, that the parol evidence rule bars evidence and enforcement of the agreement through which the plaintiff claims to have satisfied the debt. Because we disagree, we reverse the court of appeals' judgment and remand the case for that court to consider arguments it did not reach.



         This case involves three agreements between former business partners Brad West and Leo Quintanilla. The first agreement, which we will call the 2014 Trading Agreement, is not disputed. While employed as CEO and manager of several of Quintanilla's businesses, West also traded commodities using funds Quintanilla deposited in an account for that purpose. In early 2014, West and Quintanilla formalized that arrangement by executing a "Commodity Trading Agreement" (CTA). The parties agreed in the CTA that Quintanilla would provide $5 million, West would use those funds for trading, and the two would equally share any profits or losses at the end of each calendar year. To cover his share of any losses, West executed a promissory note for an amount up to $5 million and a separate agreement pledging all of his personal assets to secure that note. The parties do not dispute that these three separate documents-the CTA, the promissory note, and the security agreement-memorialize the parties' 2014 Trading Agreement.

         The second agreement-a written Purchase Agreement dated March 1, 2015-is also undisputed. The 2015 Purchase Agreement details the terms of West's agreement to sell certain assets to Quintanilla, including equipment, claims, contracts, and ownership interests in various business entities. The 2015 Purchase Agreement stated a total purchase price of just over $4.5 million. A "reference spreadsheet" incorporated into the written agreement provided further detail, listing the estimated value, purchase price, estimated cost basis, gain or loss, tax rate, and tax projected as to each of the assets.[1] Quintanilla agreed to pay the total purchase price by forgiving or paying certain debts that West or his companies owed to Quintanilla or third parties, along with a $1 million payment directly to West, either in lump sum or quarterly installments, to cover the projected taxes West would owe as a result of the sale.[2] The 2015 Purchase Agreement includes an "Entire Agreement" clause, providing that the agreement "and each other agreement contemplated to be executed and delivered hereunder constitute the entire agreement between the Parties and supersede any prior understandings or agreements by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof." The 2015 Purchase Agreement does not mention the 2014 Trading Agreement or West's debt to Quintanilla under that agreement.

         The third agreement-an oral arrangement West refers to as the March 2015 Sale-is disputed, although the facts leading up to it are not. West had traded profitably with Quintanilla's money in 2011, 2012, and 2013, but he was not successful in 2014. By the time West stopped trading near the end of that year, the total losses exceeded $14 million. West was liable for half that amount under the CTA and owed Quintanilla $5 million under the promissory note, secured by his personal assets.

         West alleges that the March 2015 Sale was an oral agreement through which he fully satisfied the $7 million he owed Quintanilla under the 2014 Trading Agreement. According to West, the March 2015 Sale involved two key components. First, West agreed that Quintanilla could claim the entire $14 million in trading losses on his 2014 tax return, allowing Quintanilla to save an additional $3 million in taxes. Second, West agreed to sell several of his assets to Quintanilla for a price that was about $4.3 million less than their fair market value. According to West, the 2015 Purchase Agreement memorializes the details of this sale, which provided the second component of the March 2015 Sale. West asserts that Quintanilla agreed that the two components together more than satisfied West's $7 million debt, and the parties and their lawyers and tax advisors carefully structured the March 2015 Sale to satisfy the $7 million debt in a way that would minimize Quintanilla's tax liabilities and allow both parties to proceed as if the 2014 Trading Agreement had never existed.

         West alleges that Quintanilla agreed to and acted in accordance with all of the March 2015 Sale's terms. Under the first component, Quintanilla claimed the $14 million in trading losses, realizing over $3 million in additional tax savings.[3] And under the second component, Quintanilla gained a $4.3 million profit through the 2015 Purchase Agreement. When West requested confirmation that he had satisfied the $7 million debt through the March 2015 Sale, Quintanilla's general counsel-who was also West's personal lawyer-handed West the originals of the three documents that made up the 2014 Trading Agreement. On the first and last pages of both the promissory note and the security agreement, someone handwrote "Pd 3-1-15." The lawyer delivered these documents to West in a folder on which was handwritten, "4/10/15 -shared deal -did not exist PEP," and told West "this is all you need" to confirm West had paid the debt.[4] West contends that Quintanilla thus surrendered the note and confirmed that West had satisfied his $7 million debt in a way that allowed the parties to act as if the 2014 Trading Agreement never existed.

         West testified that, through the rest of 2015, both parties acted consistently with the March 2015 Sale. For example, some of his prior commodities investments paid off in 2015, resulting in a net gain of around $3 million, but West neither expected nor received any share of those profits. For reasons the parties hotly dispute, however, their relationship deteriorated significantly in 2015. In January 2016, Quintanilla terminated West's employment. Under his employment contract, West was entitled to a large severance payment unless he was terminated "for cause." Quintanilla claimed he terminated West for cause in part because West had not paid the $7 million he owed under the 2014 Trading Agreement.

         In February 2016, Quintanilla sent West a letter demanding "full recovery of all amounts due and owing under" the 2014 promissory note. In April 2016, Quintanilla refused to pay West the final $350, 000 installment he owed under the 2015 Purchase Agreement for West's quarterly tax payments, citing West's outstanding debt under the 2014 Trading Agreement. Quintanilla then filed documents asserting a lien against West's assets in the real-property records of McMullen County, where West owned mineral interests. West asserts that, by filing these lien documents, Quintanilla scuttled a deal West had made to sell his mineral interests for $900, 000.

         West promptly filed this suit claiming that Quintanilla had knowingly and intentionally slandered West's title to the minerals by filing fraudulent liens when he knew that West had fully satisfied the $7 million debt. West also asserted claims for breach of contract, promissory estoppel, and a declaratory judgment that he had satisfied the 2014 debt and that Quintanilla's liens were void. Quintanilla answered the suit, generally denying West's allegations and asserting numerous defenses and counterclaims. Quintanilla denied that the parties had resolved West's 2014 debt and accused West of forging the handwritten notations on the promissory note, security agreement, and folder.

         Quintanilla also filed a motion to dismiss West's slander-of-title and fraudulent-lien claims[5] under the Texas Citizens Participation Act (TCPA), asserting that those claims are based on or relate to Quintanilla's exercise of his rights to free speech and to petition. See Tex. Civ. Prac. & Rem. Code § 27.003(a). Among other arguments, Quintanilla asserted that West could not establish prima facie support for his slander-of-title and fraudulent-lien claims because the parol evidence rule applies and precludes West from establishing the March 2015 Sale or any enforceable agreement that satisfied his $7 million debt. The trial court denied the motion, finding that although the TCPA applies to West's slander-of-title and fraudulent-lien claims, West proved a prima facie case on those claims by clear and specific evidence, and Quintanilla did not establish a valid defense. See id. § 27.005 (explaining the TCPA's burden-shifting framework).

         On Quintanilla's interlocutory appeal from the order denying his dismissal motion, the court of appeals agreed that the TCPA applied but disagreed that West proved a prima facie case for his claims. Quintanilla v. West, 534 S.W.3d 34, 50-51 (Tex. App.-San Antonio 2017). The court agreed with Quintanilla that the parol evidence rule bars West from establishing the March 2015 Sale, and thus West cannot prove that he satisfied the $7 million debt or that Quintanilla's liens were fraudulent or falsely slandered West's title. Id. at 49. The court granted Quintanilla's dismissal motion and remanded the case to the trial court for a determination of an award of attorney's fees, costs, and expenses. Id. at 51. We granted West's petition for review.


         The Parol Evidence Rule

         To avoid dismissal under the TCPA, West bore the burden to establish by clear and specific evidence a prima facie case for each essential element of his slander-of-title and fraudulent-lien claims. Tex. Civ. Prac. & Rem. Code § 27.005(c).[6] The only element at issue here is whether Quintanilla's assertion that West still owes Quintanilla under the 2014 Trading Agreement is false.[7] West argues that he met that burden by pleading and submitting evidence[8] that:

(1) West fully satisfied his debt under the 2014 Trading Agreement through the March 2015 Sale by giving Quintanilla the right to claim the full $14 million in trading losses and to purchase West's assets for ...

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