Dynegy Inc. v. Terry W. Yates, Individually, and Terry W. Yates, P.C.
422 S.W.3d 638
| Tex. | 2013Background
- Dynegy authorized advancement of Olis’s legal fees if he acted in good faith and in Dynegy’s best interests, per a board resolution that could be altered.
- Olis engaged Yates to defend him; Olis signed a fee agreement with Yates stating fees were due when billed, with Dynegy not mentioned.
- Yates and Dynegy’s legal team asserted an oral promise by Dynegy to pay Olis’s fees through trial; Cracraft testified to such a promise, though her trial testimony conflicted with Yates’s version.
- Dynegy directly paid an initial $15,000 and escrowed subsequent fees; later, it refused to release escrowed funds after concluding Olis did not meet the good-faith indemnification standard.
- Yates sued for breach of contract and fraudulent inducement, seeking benefit-of-the-bargain damages; the jury found for Yates on both claims, with damages awarded on the fraudulent inducement claim.
- The trial court and court of appeals grappled with the statute of frauds’ suretyship provision and the main purpose doctrine as exceptions to enforceability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the statute of frauds bars the oral promise to pay | Yates | Dynegy | Yes; statute of frauds bars enforceability |
| Whether main purpose doctrine takes the promise out of the statute | Yates failed to plead/obtain findings on main purpose | Dynegy argues main purpose applies | No; main purpose not established; not out of statute |
Key Cases Cited
- Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817 (Tex.2012) (main purpose doctrine; elements of exception to statute of frauds)
- Gulf Liquid Fertilizer Co. v. Titus, 354 S.W.2d 378 (Tex.1962) (main purpose doctrine framework and consideration)
- Cobb v. Johnson, 108 S.W. 811 (Tex.1908) (burden shifting on statute of frauds exceptions)
- Bank of Garvin v. Freeman, 181 S.W. 187 (Tex.1915) (distinguishes surety vs. primary obligation under statute)
- Haas Drilling Co. v. First Nat'l Bank, 456 S.W.2d 886 (Tex.1970) (main purpose doctrine applied where primary benefit to promisor)