Opinion

Hawkins v. BDC

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-95-00372-CV

Belize Development Corporation/Dan Hawkins, Appellants

v.

Dan Hawkins/Ronald B. Zent; Joe R. Long; British American Cattle Company;

Caribbean Shores Ltd., Inc.; and Belize Development Corporation, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT

NO. 94-05735, HONORABLE JOE HART, JUDGE PRESIDING

Appellant Dan Hawkins ("Hawkins") filed suit against appellees, Belize

Development Corporation ("Belize Development"), British American Cattle Company (the "Cattle

Company"), Caribbean Shores Ltd., Inc. ("Caribbean Shores"), Joe R. Long ("Long"), and

Ronald B. Zent ("Zent"), alleging beach of contract and fraud claims. The cause was tried to the

court. The court rendered judgment against Hawkins on his fraud and sales commission contract

claims. The court rendered judgment in favor of Hawkins and against Belize Development on his

breach of real estate contract claim. The court rendered judgment that Hawkins take nothing

against the remaining appellees. Hawkins appeals from the final judgment below. Belize

Development raises cross-points of error. We will affirm the trial court's judgment in part and

reverse and render in part.

BACKGROUND

The Cattle Company, a Texas Business Corporation, and Caribbean Shores, a

Belize Corporation, are companies which owned and developed land in the nation of Belize. The

Cattle Company is solely owned by Long, while Caribbean Shores is owned by the Cattle

Company and Long. Belize Development is a Cayman Islands Corporation which, soon after its

creation in 1993, purchased all of the Cattle Company and Caribbean Shores' unsold Belizian land

holdings. (1) Zent is the president and sole operations officer of all three companies.

Belize Development scheduled an auction to sell Belizian property in three cities

during July 9-10, 1993. The auction sites were Houston; Blaine, Washington; (2) and Taipei,

Taiwan. Hawkins had worked as a sales agent for the Cattle Company and Caribbean Shores in

the past selling land parcels in Belize. In June 1993, Hawkins contracted with Belize

Development to be its sales representative at the upcoming auction. The written contract provided

for Hawkins to use his "best efforts" in representing Belize Development at the auction to "assist

in the organization and employment of staff to promote the auction, and assist as needed in other

administrative capacities of establishing and promoting the auction." At trial, Hawkins testified

that his duty was to represent Belize Development at the Blaine auction site, inform bidders about

the properties to be auctioned, accept bidders' registrations and the deposits of successful bidders,

and sign receipts. As compensation, Belize Development was to pay Hawkins 2% of the gross

revenue at the Blaine auction site and 1/4% of the gross revenue at the remaining two sites with

a minimum guaranteed $2,500 commission.

Without Belize Development's knowledge or consent, Hawkins registered himself

at the Blaine site as a bidder on the afternoon of the first day and began openly bidding against

other buyers for land parcels. Hawkins was the successful bidder on a number of the properties.

He planned to establish a new company, Adventure Coast Properties, to resell the land he had

purchased. When Zent learned that Hawkins had bid at the auction, he refused to close Hawkins'

auction purchases. However, after a series of negotiations, Belize Development offered to sell

Hawkins twenty-three parcels of land in the Northern Lagoon, Estevez Works, and Sittee Point

Subdivisions for cash. Hawkins offered to pay cash for the Northern Lagoon and Estevez Works

tracts by applying sales commissions that were owing to him. However, Hawkins wanted credit

terms on the Sittee Point tracts because Belize Development had trouble delivering title due to

delays in subdivision plat approvals. Belize Development refused to give Hawkins credit terms,

insisting that he pay cash for all the tracts at one closing.

Belize Development prepared written contracts, dated October 27, 1993, for the

sale of the properties requiring Hawkins to pay cash in full for all the parcels. Both Hawkins and

Zent signed the contracts. The contracts contained the following "Special Provision":

It is understood and agreed that after a final accounting of commissions due Mr.

Daniel L. Hawkins on existing commission agreements against purchase price, all

balances will be settled with a cash payment either by SELLER or PURCHASER

(Mr. Daniel H. Hawkins, d/b/a/ Adventure Coast Properties). Final Accounting

and settlement to occur by February 1, 1994.

Moreover, the contracts provided that Belize Development would deliver deeds to Hawkins only

when he paid the cash price in full, as well as all the necessary taxes and road and deed-recording

fees.

Belize Development forwarded the contracts to First State Bank, its escrow agent,

with instructions that the contracts not be released to Hawkins until he paid the outstanding

balance due on the sales price. Hawkins never paid the balance due nor the taxes and fees.

Consequently, the contracts were never released from escrow.

Hawkins filed suit against Belize Development, the Cattle Company, Caribbean

Shores, Long, and Zent, alleging breach of the auction commission contract, breach of the real

estate contract, common law fraud, and fraud in real estate transactions. Hawkins also alleged

that Belize Development was a sham corporation, seeking to "pierce its corporate veil" and hold

the remaining defendants liable. The defendants responded in part that Hawkins' claims were

barred by the breach of his fiduciary duty when he bid at the auction seeking to acquire Belize

Development's assets, thereby betraying his principal.

The cause was tried to the court which issued findings of fact and conclusions of

law. The trial court found that Hawkins and Belize Development were parties to binding real

estate contracts on the Northern Lagoon, Estevez Works, and Sittee Point parcels as evidenced

by the October 27, 1993 contracts. The court found that Belize Development breached these

contracts, entitling Hawkins to $50,000. The court failed to find that the evidence supported

Hawkins' fraud claims or proved that Belize Development was a sham corporation. Accordingly,

the trial court rendered judgment that Hawkins take nothing on his fraud claims, but awarded him

$50,000 on the breach of contract claim and $20,000 in attorney's fees as against Belize

Development only. The court further rendered judgment that Hawkins take nothing against the

remaining parties. Moreover, all relief not expressly granted was denied. The judgment did not

specifically state that the $50,000 breach of contract award referred to the real estate contracts as

opposed to the sales commission contract. However, read in conjunction with the findings of fact,

the judgment impliedly did so. Therefore, the trial court denied Hawkins' breach of sales

commission contract claim. Hawkins appeals the judgment, alleging that he should have prevailed

on the sales commission contract claims, that the court should have awarded more damages on the

real estate contract claims, and that Belize Development is indeed a sham corporation, therefore

entitling him to pierce the corporate veil. Belize Development raises cross-points of error,

challenging the award on the real estate contract claim, as well as attorney's fees.

DISCUSSION

In his first point of error, Hawkins alleges that the trial court erred in denying his

breach of sales commission contract claim. The trial court did not specifically find that Hawkins

had breached his fiduciary duty by bidding at the auction. However, because the trial court

denied relief on this claim, Hawkins contends that the trial court must have implicitly so found. (3)

Hawkins urges that there was no evidence demonstrating that he breached any fiduciary duty, and

that therefore he was entitled to recover the commissions from the auction sales.

Whether an agency relationship exists is a question of fact unless the evidence

establishes the relationship as a matter of law. Bhalli v. Methodist Hosp. , 896 S.W.2d 207, 210

(Tex. App.--Houston [1st. Dist.] 1995, writ denied). In deciding a no-evidence point of error, we

must consider only the evidence and inferences tending to support the finding of the trier of fact

and disregard all the evidence and inferences to the contrary. Burroughs Wellcome Co. v. Crye ,

907 S.W.2d 497, 499 (Tex. 1995); Best v. Ryan Auto Group, Inc. , 786 S.W.2d 670, 671 (Tex.

1990). We will uphold a finding if more than a scintilla of evidence supports it. Crye , 907

S.W.2d at 499 ; Seideneck v. Cal Bayreuther Assocs. , 451 S.W.2d 752, 755 (Tex. 1970); In re

King's Estate , 244 S.W.2d 660, 661 (Tex. 1951). The evidence supporting a finding amounts to

more than a scintilla if reasonable minds could differ in their conclusions. Crye , 907 S.W.2d at

499 ; Transportation Ins. Co. v. Moriel , 879 S.W.2d 10, 25 (Tex. 1994). See generally William

Powers Jr. & Jack Ratliff, Another Look at "No Evidence" and "Insufficient Evidence," 69 Tex.

L. Rev. 515 , 523 (1991); Michol O'Connor, Appealing Jury Findings , 12 Hous. L. Rev. 65 , 78-80 (1974). However, evidence susceptible of two opposite inferences is no more than a scintilla

of evidence and cannot support a judgment. Tubelite, a Division of Indal, Inc. v. Risica & Sons,

Inc. , 819 S.W.2d 801, 805 (Tex. 1991); Litton Indus. Prods., Inc. v. Gammage , 668 S.W.2d

319, 324 (Tex. 1984).

An agent owes its principal the fiduciary duties of good faith and undivided loyalty.

See State v. Durham , 860 S.W.2d 63, 66 (Tex. 1993) ("[A]n agent charged with selling an asset

for the owner owes a fiduciary duty to the owner, and that agent violates this duty by acquiring

the asset for his own benefit."). Even a special agent, one with limited powers, owes the principal

the fiduciary duty of good faith and loyalty. See Hartford Cas. Ins. Co. v. Walker County

Agency, Inc. , 808 S.W.2d 681, 687 (Tex. App.--Corpus Christi 1991, no writ) ("Inherent in any

agency relationship is the fiduciary duty owed by the agent to his principal.") (emphasis added);

Trippett v. Nash McLarty Motor Co. , 269 S.W. 205, 207 (Tex. Civ. App.--Waco 1925, no writ)

(agent, whether general or special, owes principal fiduciary duty); see also Barnsdall Oil Co. v.

Willis , 152 F.2d 824, 828 (5th. Cir. 1946) (interpreting Texas law). The critical inquiry is not

the detriment to the principal, but rather the self interest of the agent. Burleson v. Earnest , 153

S.W.2d 869, 874 (Tex. Civ. App.--Amarillo 1941, writ ref'd w.o.m.).

In the instant cause, the evidence reveals that Hawkins was responsible for

administering the sale of Belize Development's property. Hawkins openly bid on the property.

His bidding at the auction tended to raise the prices, thereby raising his commission. In addition,

Belize Development received complaints about Hawkins' conduct from other bidders. In fact, one

bidder referred to Hawkins' conduct as a ground for rescinding his purchase. We conclude that

there was some evidence that Hawkins breached his fiduciary duty to Belize Development.

Therefore, the trial court did not err in refusing to award him the fees and commissions arising

from the subject of the agency, i.e. , the auction. See Russel v. Truitt , 554 S.W.2d 948, 955 (Tex.

Civ. App.--Fort Worth 1977, writ ref'd n.r.e.) (forfeiture of agency fees is proper when agent

breaches fiduciary duty); Anderson v. Griffith , 501 S.W.2d 695, 702 (Tex. Civ. App.--Fort Worth

1973, ref'd n.r.e.); Moore v. Kelley , 162 S.W. 1034, 1037 (Tex. Civ. App.--Amarillo 1914, writ

ref'd) (agent who breached fiduciary duty to principal forfeited right to compensation for

services). We overrule Hawkins' first point of error.

In his second point of error, Hawkins contends that the trial court erred in failing

to find that Belize Development had later ratified the real estate contracts made at the auction and

according to the auction terms.

Whenever an agent contracts to acquire its principal's property without the

principal's knowledge or consent, the contract becomes voidable at the principal's option. Ramsey

v. Gordon , 567 S.W.2d 868, 871 (Tex. Civ. App.--Waco 1978, writ ref'd n.r.e.). The principal,

however, may opt to ratify the transaction once it has full knowledge of the agent's action. Land

Title Co. v. Stigler , 609 S.W.2d 754, 756 (Tex. 1980). To ratify a contract the principal must

assent to the same terms of the original contract. See Kunkel v. Kunkel , 515 S.W.2d 941, 948

(Tex. Civ. App.--Amarillo 1974, writ ref'd n.r.e.); Curington v. Parks , 158 S.W.2d 839, 841

(Tex. Civ. App.--Dallas 1942, no writ); see also Brazell Bros. Contractors v. Hill , 138 S.E.2d

835, 837 (S.C. 1964) ("To ratify is to sanction or affirm, to give validity to something done by

another, not to contract anew or upon different terms .") (emphasis added); 2A C.J.S. Agency § 64

(1972).

In the instant cause, when Hawkins told Zent, the president and sole operations

officer of Belize Development, that he had purchased lots at the auction, Zent told him that Belize

Development would not honor the sale. Furthermore, the auction terms allowed buyers to buy

lots on credit. The final real estate sales agreement, as evidenced by the October 27, 1993

contracts, required Hawkins to pay cash. Therefore, the terms of the final real estate sales

agreement differed from the sale terms under the auction's provisions. Accordingly, the record

contains evidence demonstrating that Belize Development did not ratify Hawkins' real estate

purchases according to the terms of the auction's provisions. Therefore, the court did not err in

failing to find that Belize Development ratified the auction sales contracts. We overrule Hawkins'

second point of error.

In Belize Development's cross-point of error four, it challenges the trial court's

finding of damages. More specifically, Belize Development argues, without conceding, that even

if Hawkins is entitled to damages on the real estate contracts, he is entitled only to the purchase

price which has been refunded.

When a purchaser contracts to buy land from one who cannot convey good title,

in the absence of fraud, the purchaser may not recover benefit of the bargain damages. Instead,

the purchaser may only recover the purchase price. See Garcia v. Yzaguirre , 213 S.W. 236, 242

(Tex. Comm'n App. 1919, judgm't. adopted) ("[I]t seems to be the well settled law in this state

that a vendee who contracts to purchase land from one who has no title can, in the absence of

fraud, recover only the amount paid on the contract, if any, and such special damages, not

including the loss of the bargain , as he may allege and prove.") (emphasis added); Long v. Brown ,

593 S.W.2d 371, 372 (Tex. App.--Dallas 1979, writ ref'd n.r.e.) (seller's inability to convey good

title entitles buyer only to purchase price); see also Nelson v. Jenkins , 214 S.W.2d 140, 143 (Tex.

Civ. App.--El Paso 1948, writ ref'd); Texas Military Inst. v. Sun Oil Co. , 112 S.W.2d 329, 332

(Tex. Civ. App.--Galveston 1937, writ dism'd); 63 Tex. Jur. 3d Real Estate Sales § 655 (1988).

In the instant cause, the trial court failed to find that Belize Development defrauded

Hawkins in connection with the real estate contracts. Because Hawkins did not carry his burden

to prove fraud and has not challenged this factual finding on appeal, it is binding. See Wilson v.

Texas Parks & Wildlife Dep't , 853 S.W.2d 825, 832 (Tex. App.--Austin 1993), rev'd on other

grounds , 886 S.W.2d 259 (1994) (unchallenged factual findings binding on appeal). Therefore,

in the absence of fraud, the trial court's judgment awarding benefit of the bargain damages can

only stand if Belize Development was unwilling, as opposed to unable, to convey good title to the

properties in question.

The trial court's findings are silent as to whether Belize Development was unable

or unwilling to convey good title to the properties. Therefore, in order to support the judgment,

there must be a deemed finding. In a bench trial, where the parties request, and the court files,

findings of fact, an unrequested, omitted finding can only be presumed when (1) an element of

the ground of recovery was included in the findings of fact; (2) the omitted element has not been

properly requested; and (2) the omitted finding is supported by the evidence. Tex. R. Civ. P.

299; Tarrant County Water Control v. Haunt , 854 S.W.2d 909, 913 (Tex. 1993); Linder v. Hill ,

691 S.W.2d 590, 592 (Tex. 1985); 30 Jeremy C. Wicker, Civil Trial & Appellate Procedure

(Texas Practice 1985 & Supp. 1992). The trial court found that Hawkins and Belize Development

were parties to real estate contracts which Hawkins breached. Therefore, the trial court made

findings on at least one element of the breach of contract theory of recovery. Furthermore, the

parties did not request a finding on whether Belize Development was unwilling or unable to

convey title. As such, in order to presume an omitted finding that Belize Development was

unwilling, and not unable, to convey title, the record evidence must support such a finding. Tex.

R. Civ. P. 299.

A search of the record reveals no evidence that Belize Development failed to

deliver title because it was unwilling, yet able, to do so. On the contrary, the evidence suggests

that Belize Development was unable to convey title due to various government regulations. In

negotiating the terms of the real estate contracts, Hawkins did not want to pay cash for the parcels

in the Sittee Points Subdivision because he believed that Belize Development could not convey

good title to those lots. Moreover, Belize Development's inability to convey title extended to the

properties in the remaining subdivisions as well. According to the record, Hawkins acknowledged

in correspondence to Zent that:

Your responsibility is to deliver to me deeds or transfers of certificate of title on

the properties that I have purchased . . . . It is my information that you cannot

deliver these deeds in recordable form . . . . You have performed none of your

obligations under these contracts and I suspect that you cannot perform.

(emphasis added). In another correspondence with Zent, Hawkins wrote:

[The lawyers] can make application for the license necessary for me or Adventure

Coast Properties, Ltd. to take title to the Northern Lagoon and Estevez Properties,

but can give no assurance of their issuance . . . .

Furthermore, Hawkins concedes in his appellate brief that Belize Development is

unable to deliver title to the properties in dispute: "Hawkins has never received deed to any land

from Belize Development, which cannot to this day, deliver title to any properties for which

Hawkins contracted." (emphasis added). See Tex. R. App. P. 74(f) ("Any statement of fact made

by appellant in his original brief as to the facts or the record may be accepted by the [appellate]

court as correct unless challenged by the opposing party."). According to Hawkins' own

admissions, Belize Development was unable to convey title to the properties in dispute. Because

the evidence does not support such a finding, there can be no deemed finding that Belize

Development was unwilling, rather than unable, to convey title to the properties in dispute. Tex.

R. Civ. P. 299. Therefore, Hawkins was not entitled to recover benefit of the bargain damages.

He was entitled to recover, at most, his purchase price which was refunded. We sustain Belize

Development's fourth cross-point of error.

In Belize Development's cross-point of error six, it challenges the trial court's

award of attorney's fees. The trial court awarded Hawkins attorney's fees premised on his

successful contract claim. Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (8) (West Supp. 1996)

(attorney's fees recoverable upon successful contract claim). In Hawkins' point of error five, he

contends that the trial court abused its discretion in conditioning appellate attorney's fees upon

Belize Development's appeal. Because we hold that Hawkins is not entitled to recover on his

contract claim, we reverse the award of attorney's fees as well. We sustain Belize Development's

sixth cross-point of error and overrule Hawkins' fifth point of error.

In Belize Development's remaining cross-points of error and in Hawkins' fourth

point of error, each challenges certain aspects of the judgment awarding Hawkins benefit of the

bargain losses on the real estate contracts. Because we reverse the judgment's award of benefit

of the bargain damages, we need not consider these points of error.

In Hawkins' third point of error, he urges that Belize Development was a sham

corporation whose corporate veil should be pierced. See Mancorp, Inc. v. Culpepper , 802

S.W.2d 226, 228 (Tex. 1990). The trial court found that none of the appellee corporations was

used to perpetrate fraud. Hawkins argues that such a finding is against the overwhelming weight

of the evidence. Notably, with this point of error Hawkins does not challenge the trial court's

negative finding concerning whether Belize Development perpetrated fraud in relation to the

October 27, 1993 real estate contracts. Instead, Hawkins argues that Belize Development's

corporate veil should be pierced because it was a sham corporation.

An attempt to pierce the corporate veil is not an independent cause of action.

Rather, it is a means of imposing liability based on an underlying cause of action on entities other

than the "sham" corporation. Gallagher v. Bintliff , 740 S.W.2d 118, 119 (Tex. App.--Austin

1987, writ denied). In the instant cause, we have already determined that Hawkins is not entitled

to any damages. Therefore, whether Belize Development's corporate veil can be pierced is

irrelevant. We overrule Hawkins' third point of error.

CONCLUSION

We hold that the record contains no evidence to support a deemed finding that

Belize Development was able, yet unwilling, to convey good title to Hawkins on the properties

subject to the October 27, 1993 real estate contracts. Therefore, we reverse the trial court

judgment's award for breach of contract damages. Because we reverse the award of breach of

contract damages, we must also reverse the award of attorney's fees and render judgment that

appellant take nothing. The remainder of the judgment is affirmed.

Marilyn Aboussie, Justice

Before Justices Powers, Aboussie and B. A. Smith

Affirmed in Part; Reversed and Rendered in Part

Filed: July 17, 1996

Do Not Publish

1. These holdings consisted of parcels in the Estevez Works, Northern Lagoon,

Revenge Lagoon, and Sittee Point Subdivisions.

2. Belize Development had originally intended to hold the auction in Vancouver,

British Columbia. Due to permit problems with the Canadian government, the site was

moved to Blaine, Washington.

3. While not part of the judgment or of the findings of fact, the appellate record

contains a letter from the court to the parties relating that the court found that Hawkins

breached his fiduciary duty by bidding at the auctions.