Henry Neal v. Wayne Guidry and Kat Guidry, 03-17-00525-CV

Background

In June 2013 Henry Neal and Wayne & Kat Guidry entered a written contract: Neal agreed to pay $90,000 for a collection described by categories (including "military medals") that Neal had received around May 19, 2013.
The collection included Congressional Medals of Honor, which federal law makes illegal to sell.
At trial the Guidrys contended the Medals of Honor were not part of the June 18 contract (i.e., the $90,000 price excluded them); Neal contended the medals were included and were shown to him before contracting.
The jury answered Question 1: the Congressional Medals of Honor were sold by Guidry to Neal and memorialized in the June 18, 2013 contract.
The trial court nevertheless rendered judgment enforcing the contract but effectively excluded the Medals of Honor (reducing price to $78,000) and awarded attorney’s fees to the Guidrys; Neal appeals arguing the court should have declared the entire contract void because part of the consideration was illegal and/or entered judgment for Neal on fraud defenses and preserved charge error.

Issues

Issue	Plaintiff's Argument (Neal)	Defendant's Argument (Guidrys)	Held / Trial-court ruling at issue
Whether the June 18 contract included the Congressional Medals of Honor	Jury properly found the medals were included; contract ambiguous so extrinsic evidence was admissible	Contract language "military medals" can be construed to exclude the Medals of Honor; therefore inclusion is immaterial	Jury answered "Yes" inclusion; trial court nevertheless treated contract as enforceable excluding the medals (reduced recovery)
Whether a contract is void where part of the consideration is illegal and the contract is indivisible	Because the illegal Medals of Honor were part of the lump-sum consideration, the entire contract is void and plaintiff should prevail	The illegal items can be severed and the legal residue enforced (court-created adjustment)	Appellant argues trial court erred by enforcing a modified contract instead of voiding the whole agreement
Whether trial court erred in refusing to submit Neal's affirmative fraud-in-the-inducement question	Neal timely tendered the question, obtained an adverse ruling before charge read, and the question was substantially correct — refusal preserved error	Guidrys contend objections were untimely and the requested question was legally deficient	Appellant asserts error preserved and that refusal prevented jury from deciding fraud defense (seeking reversal or new trial)
Effect of Neal's pre-contract investigation on reliance for fraud claim	Independent investigation does not automatically bar reliance; Neal did not investigate the critical issues (legality of medals; provenance) so reliance claim stands	Guidrys argue Neal investigated and therefore cannot rely on their representations	Appellant contends evidence shows he relied on Guidry representations and did not know medals were illegal until later

Key Cases Cited

Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996) (contract ambiguity and extrinsic evidence principles)
Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143 (Tex. 2015) (discussion of fraudulent inducement and fraud elements)
Nat'l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015) (elements of fraudulent inducement as defense to contract)
In re Kasschau, 11 S.W.3d 305 (Tex. App.—Houston [14th Dist.] 1999) (severability and effect of illegal contract terms)
Cox Feedlots, Inc. v. Hope, 498 S.W.2d 436 (Tex. App.—San Antonio 1973) (refusal to sever illegal consideration where it was part of bargain)
Raywood Rice Canal & Milling Co. v. Erp, 146 S.W. 155 (Tex. 1912) (rule on severability: illegal part voids whole when inseparable)
McFarland v. Haby, 589 S.W.2d 521 (Tex. App.—Austin 1979) (courts cannot reform parties' contract by creating new terms)