Picard v. Badgett

EDDIE PICARD, Appellant v. THERESA BADGETT, Appellee

NO. 14-19-00006-CV

State of Texas in the Fourteenth Court of Appeals

March 2, 2021

On Appeal from the 125th District Court Harris County, Texas

Trial Court Cause No. 2014-73680

MEMORANDUM OPINION

This case involves the sale of a tax, bookkeeping, and financial services business. The dispute centers around the buyer's default on the note and the seller's reacquisition of the business. After a bench trial, the trial court rendered judgment for the seller.

In eight issues, the buyer Eddie Picard challenges the trial court's judgment for the seller Theresa Badgett. Picard contends (1) Badgett lacked standing or capacity to bring the lawsuit; (2) the parties did not create an enforceable contract; (3) Picard was not a party to the contract in his individual capacity and did not personally guarantee performance; (4) Picard established several affirmative defenses; (5) the trial court's award of damages and several findings of fact and conclusions of law are not supported by sufficient evidence, consequential damages are not recoverable, and the judgment does not conform to the pleadings; and (6) the trial court erred in awarding attorney's fees to Badgett. We affirm.

Background

The agreement that forms the basis of this lawsuit states, "This Asset Sale and Purchase Agreement . . . is made by and between EAP Ventures Ltd., ('Buyer') and Theresa Badgett and BTFS Management, Inc. (collectively 'Seller')" ("Purchase Agreement"). The Purchase Agreement includes a clause entitled "Acknowledgment and Guarantee" that states, "By signing below, Buyer and Seller acknowledge that they have read and understand this Agreement and have received a copy of it. The undersigned warrant that their signatures are legally sufficient to bind the Buyer and Seller, respectively, and personally guarantee performance hereunder." The Purchase Agreement was signed by "Theresa Badgett, Individual" as "Seller" and "Eddie Picard, Individual" and on behalf of "PMP Ventures, GP, LLC" as "Buyer." A signature line for "BTFS Management, Inc." under "Seller" was left blank, and PMP Ventures was designated as "General Partner."

Picard made a payment of $115,000 and signed a promissory note individually and on behalf of PMP Ventures as "Buyer," agreeing to pay "Seller" an additional $485,000 in monthly installments. Badgett signed the note individually as "Seller," and the signature line for BTFS Management again was left blank.

According to Picard, Badgett "never transferred the assets or clients of the business to [the] Buyer as contemplated by the agreement." Picard purchased the business in the middle of tax season, and Badgett told him that she would transfer the tax filing software to Picard after tax season but never did so. Badgett transferred the phone system to Picard, but had it transferred back after approximately one month. Badgett did not transfer her cell phone number or the business email address to Picard, which Picard contends was essential to the business transfer. The tax software likewise was never transferred to Picard, and according to Picard, Badgett did not make client introductions to him.

Badgett asserts that she "performed her obligations under the contract, conveying all the assets of an accounting, tax preparation, bookkeeping, auditing and/or other financial services business to a legal entity owned by Picard," but Picard failed to perform all the duties necessary to transfer the business, failed to obtain the license required to "serve as a financial advisor," and caused damages to the business and Badgett. According to Badgett, she never transitioned the financial services clients to Picard because she was not authorized to do so until Picard acquired his license, which never happened.

Picard operated the business at a loss, was forced to close it, and stopped making payments on the promissory note. Badgett reacquired the business and filed suit against Picard for breach of contract. By the time of trial, Badgett had control of all the business assets, including real estate, and all the employees were working for Badgett. After a bench trial, the trial court rendered judgment awarding damages and attorney's fees to Badgett.

Discussion

The issues can be divided into the following categories: (1) legal authority to bring the lawsuit (issue four), (2) contract formation (issue two), (3) contract interpretation (issue three), (4) breach of contract defenses (issues two, five, and six), and (5) damages and attorney's fees (issues one and eight).¹ We first turn to whether Badgett had legal authority to bring the lawsuit.

I. Legal Authority to Bring Lawsuit

In issue four, Picard contends that Badgett lacked standing to sue because the "Seller" was identified in the Purchase Agreement as both BTFS Management and Badgett. Picard also asserts "[i]f [his] standing arguments are construed as capacity arguments, . . . Badgett lacked capacity to sue on the [Purchase] Agreement without BTFS Management." Badgett contends that as the only seller who signed the Purchase Agreement, she was personally aggrieved and has standing and capacity to sue. We conclude that the issue is one of capacity, not standing.

Issues regarding standing and capacity to sue are both questions of law that we review de novo. Farmers Tex. Cty. Mut. Ins. Co. v. Beasley, 598 S.W.3d 237, 240 (Tex. 2020) (standing); Byrd v. Estate of Nelms, 154 S.W.3d 149, 155 (Tex. App.—Waco 2004, pet. denied) (capacity); Anderson v. New Prop. Owners' Ass'n of Newport, Inc., 122 S.W.3d 378, 384 (Tex. App.—Texarkana 2003, pet. denied) (capacity). A plaintiff must have both standing and capacity to bring a lawsuit. Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). Standing involves whether a party has a sufficient relationship with the lawsuit to have a "justiciable interest" in its outcome; capacity is "a procedural issue dealing with the personal qualifications of a party to litigate." Id. A plaintiff has standing when she is personally aggrieved, regardless of whether she is acting with legal authority. Harrison v. Reiner, 607 S.W.3d 450, 459 (Tex. App.—Houston [14th Dist.] 2020, pet. filed). Conversely, capacity implicates the legal authority to act, regardless of whether a party has a justiciable interest in the controversy. Id. A party to a contract has a justiciable interest in an alleged breach, regardless of whether all proper parties have been joined in the lawsuit. See id. at 460 (holding party to surety bond contract had an enforceable interest as a party to sue for the contract's alleged breach).

Picard conflates standing with capacity. He relies on Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 249 (Tex. App.—Dallas 2005, no pet.), for the proposition that issues regarding who has the primary right of action are questions of standing. In that case, neither of the plaintiffs were actual parties to the subject agreement. Id. at 247. The contracting party was a limited partnership. Id. The two plaintiffs were an individual who did not have a direct interest in the limited partnership and the limited partner. Id. Neither the general partner nor the limited partnership was a plaintiff in the lawsuit. Id. In this case, by contrast, Badgett herself is a party to the contract. Nauslar is distinguishable on this basis.²

We must construe the Purchase Agreement to determine the identity of the contracting parties. See Mission Grove, L.P. v. Hall, 503 S.W.3d 546, 552 (Tex. App.—Houston [14th Dist.] 2016, no pet.). We examine the instrument as a whole and not just isolated parts; no single provision is given controlling effect. See id. at 552, 554. The Purchase Agreement states that it "is made by and between EAP Ventures Ltd. ('Buyer') and Theresa Badgett and BTFS Management, Inc. (collectively 'Seller'). Buyer and Seller are occasionally referred to herein singularly as the 'Party' or collectively as the 'Parties.'" The "Seller Financing Addendum" attached to the Purchasing Agreement includes a section entitled "Promissory Note," which states, "At the time of closing Buyer agrees to pay Seller $115,000 and Buyer agrees to provide Seller with a Note as follows. . . ." As discussed, both the Purchase Agreement and the Seller Financing Addendum have signature blocks under "Seller" for "Theresa Badgett, Individual" and "BTFS Management, Inc.," but Badgett signed only the "Individual" signature blocks on both documents, and the signature blocks for BTFS Management are unsigned.

Picard contends that Badgett and BTFS Management together form a general partnership and Badgett is an individual stakeholder in the general partnership who cannot "recover personally for harms done to the legal entity." Given that Badgett is a named party to the Purchase Agreement, we do not agree that she is an individual stakeholder who cannot recover personally.

As a party to the Purchase Agreement, Badgett has standing; the question is whether she has the capacity to sue without BTFS Management. See Pike v. Tex. EMC Mgmt., LLC, 610 S.W.3d 763, 779 (Tex. 2020) ("[T]he question whether a claim brought by a partner actually belongs to the partnership is . . . a matter of capacity [not standing] because it is a challenge to the partner's legal authority to bring the suit."). As the party challenging capacity, Picard bore the burden of proof.³ See Christi Bay Temple v. GuideOne Specialty Mut. Ins. Co., 330 S.W.3d 251, 253 (Tex. 2010).

We must determine the effect, if any, of BTFS Management's not signing the Purchase Agreement and Seller Financing Addendum. The inclusion of a name in the opening sentence of an agreement generally will not bind a party that declines to sign the agreement. See, e.g., Willis v. Donnelly, 199 S.W.3d 262, 271 (Tex. 2006) (holding a person was not a party to an agreement when his name was included in the opening sentence "individually" but he crossed out the signature block and refused to sign in his personal...