Geis v. Colina Del Rio, LP
362 S.W.3d 100
Tex. App.2011Background
- Geis owns Rio Architects (not an architect) and developed Villaje Del Rio project with Villaje Del Rio, Ltd.; July 2002 contract for architectural services for Villaje with 5.25% of construction costs; HUD loan review required and initially failed HUD guidelines; plans were revised and Deutsche Bank approved loan closing Feb 13, 2003, paying Rio $881,958; construction overseen by Andres Holding Corp., with over 100 changes at cost >$500,000; Deutsche Bank/ HUD/Geis/Andres met to resolve issues; Deutsche Bank later assigned the loan to HUD, which Villaje later defaulted on in Dec 2004 leading to Villaje bankruptcy and Colina credit bid for Villaje claims; Colina acquired Villaje’s non-tort claims against Geis/Rio Architects via a $100,000 credit bid and pursued this suit.
- Colina sued Geis d/b/a Rio Architects in May 2007 alleging (1) unlawful/fraudulent contract due to failure to employ or associate with a licensed architect and failure to register with the Texas Board of Architectural Examiners, seeking rescission and return of $881,958; (2) breach of contract alleging defective plans causing damages.
- Trial in Feb 2009 was non-jury; final judgment May 11, 2009 in Colina’s favor on both theories; Geis sought to amend pleadings to raise limitations, which was denied; Geis appealed raising in pari delicto and other defenses, as well as standing; panel withdrew prior opinion and substituted addressing in pari delicto; subsequently the trial court’s judgment was affirmed for Colina.
- The court addressed in pari delicto defenses, holding public policy favored recovery because the defective plans demonstrated serious design deficiencies and public policy supports architectural regulation; Villaje was less culpable than Rio Architects, and public policy weighs in favor of recovering damages to discourage illegal practice.
- The court also analyzed breach-of-contract defenses (retention of benefits, waiver, offset) and held Villaje’s receipt of benefits did not bar breach recovery; waiver was not proven; on damages, court found out-of-pocket damages supported by expert McGinty’s non-conclusory, fact-based testimony that Rio’s plans had negative value.
- Regarding the motion to amend to add limitations defense, court held the trial court did not abuse its discretion in denying the late amendment, finding prejudice and reshaping of the case; standing was supported by bankruptcy order and Adelman’s testimony showing Colina purchased Villaje’s non-tort claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| In pari delicto applies to unlawful contract claim | Geis: Villaje and Rio were in pari delicto; Colina cannot recover. | Colina seeks relief despite illegality; public policy weighs against enforcement. | Not barred; public policy supports recovery given the facts and equities. |
| Remedy for breach of contract despite in pari delicto | Colina may recover for breach despite illegality. | Waiver/offset defenses undermine recovery; evidence insufficient. | Waiver not proven; damages recoverable under breach theory. |
| Damages sufficiency and method | Damages properly measured as out-of-pocket; expert supported value/negative value of plans. | Evidence insufficient or unreliable; remittitur possible. | Damage award supported; no remittitur; evidence sufficient. |
| Motion to amend pleadings to add limitations defense | amendment should be allowed as procedural. | late, prejudicial, changes case nature; known defense should have been raised earlier. | Trial court did not abuse discretion; amendment denied. |
| Colina’s standing to sue | Colina has standing via bankruptcy sale of Villaje claims. | Assignment not shown; standing lacking. | Bankruptcy order and testimony show Colina had standing. |
Key Cases Cited
- Graham v. Dean, 144 Tex. 61, 188 S.W.2d 372 (Tex. 1945) (not in pari delicto where public policy supports recovery or where one party knew of illegality)
- Lewis v. Davis, 199 S.W.2d 146 (Tex. 1947) (exceptions to in pari delicto when public policy demands relief)
- New Boston Gen. Hosp., Inc. v. Tex. Workforce Comm'n, 47 S.W.3d 34 (Tex.App.-Texarkana 2001) (applies to when statute applies to only one party)
- Oakes v. Guar. Ins. Co., 573 S.W.2d 899 (Tex.Civ.App.-Eastland 1978) (in pari delicto not universal; statutory obligations matter)
- Hagco Bldg. Sys., Inc. v. Hagco Bldg. Sys., Inc., 733 S.W.2d 635 (Tex.App.-San Antonio 1987) (rescission vs breach distinction; offset rules)
- Am. Nat'l Ins. Co. v. Tabor, 230 S.W.2d 397 (Tex. 1921) (statutory applicability to only one party affecting in pari delicto)