Rena Abel v. Alexander Oil Company
474 S.W.3d 795
Tex. App.2014Background
- Rena Abel signed a personal guaranty (Feb. 28, 2006) guaranteeing “all amounts due by Company,” where the credit application identified the applicant as John Steele operating as a sole proprietorship (John Steele d/b/a John Steele Trucking).
- John and Shannon Steele operated the sole proprietorship; Shannon formed John Steele Trucking, LLC (JST LLC) in Sept. 2008, and the LLC thereafter took over operations and purchased fuel from Alexander Oil.
- Alexander Oil continued to bill a single open account. JST LLC later fell behind; Alexander Oil then asked John and Shannon to sign guaranties for the LLC business (they did); Alexander Oil began internally posting charges to JST LLC after March 1, 2010.
- Alexander Oil sued JST LLC, John, Shannon, and Rena for unpaid fuel. At trial the jury found John owed $127,608.51 and JST LLC owed $102,844.04, but also found in Rena’s favor on material alteration and novation defenses.
- The trial court granted JNOV in part for Alexander Oil, disregarded some jury findings, and entered judgment against Rena for $127,608.51 based on her guaranty; Rena appealed.
- The court of appeals held as a matter of law that Rena’s guaranty covered only debts of John’s sole proprietorship and not debts of JST LLC; because the jury’s finding as to John reflected liability only as an agent for JST LLC, Alexander Oil could not recover from Rena, so the judgment against her was reversed and rendered take-nothing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rena can be held on her guaranty for debts of JST LLC | Alexander Oil: jury’s damages allocation implies John acted as agent for undisclosed principal only until March 1, 2010, and thus Rena is liable on the amounts found against John | Rena: guaranty expressly covers only debts of John’s sole proprietorship; jury found John liable only as agent for JST LLC, so legal bar prevents recovery from Rena | Court: Rena’s guaranty covers only the sole proprietorship; evidence shows John’s liability was as agent for JST LLC, so Alexander Oil cannot recover from Rena — judgment reversed and rendered take-nothing against Rena |
| Whether the trial court properly granted JNOV disregarding jury findings on material alteration and novation | Alexander Oil: those findings lacked evidentiary support and conflicted with prior rulings | Rena: jury verdict supported her defenses | Court: trial court properly disregarded certain jury answers as to alteration/novation (not disturbed on appeal) |
| Interpretation standard for guaranty language | Alexander Oil: (implied) guaranty should be applied to amounts shown by jury | Rena: strictissimi juris requires guaranty be enforced to its precise terms | Court: contract interpretation is a legal question reviewed de novo; guaranty construed narrowly to its express terms |
| Burden to obtain JNOV on legal-bar theory | Rena: legal principle precludes recovery as matter of law so JNOV required | Alexander Oil: disputed sufficiency and timing but relied on jury monetary answers | Court: de novo review granted JNOV in favor of Rena on dispositive legal-bar issue |
Key Cases Cited
- Wasserberg v. Flooring Servs. of Tex., LLC, 376 S.W.3d 202 (Tex. App.—Houston [14th Dist.] 2012) (elements to recover on guaranty and rule of strictissimi juris)
- Tenneco Oil Co. v. Gulsby Eng’g, Inc., 846 S.W.2d 599 (Tex. App.—Houston [14th Dist.] 1993) (guaranty creates secondary obligation)
- JSC Neftegas–Impex v. Citibank, N.A., 365 S.W.3d 387 (Tex. App.—Houston [1st Dist.] 2011) (legal principles supporting JNOV where recovery precluded as a matter of law)
- COC Servs., Ltd. v. CompUSA, Inc., 150 S.W.3d 654 (Tex. App.—Dallas 2004) (standards for JNOV)
- Lee v. Martin Marietta Materials Sw., Ltd., 141 S.W.3d 719 (Tex. App.—San Antonio 2004) (proof required to recover on guaranty)
- Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417 (Tex. 2000) (interpretation of contract questions of law reviewed de novo)
- McKnight v. Va. Mirror Co., 463 S.W.2d 428 (Tex. 1971) (application of strictissimi juris to guarantors)
- First Interstate Bank of Tex., N.A. v. Turner, 791 S.W.2d 179 (Tex. App.—Texarkana 1990) (guarantor liable only for obligations of the specifically-guaranteed entity)
- Marshall v. Ford Motor Co., 878 S.W.2d 629 (Tex. App.—Dallas 1994) (same principle limiting guarantor liability to designated entity)
- Latch v. Gratty, Inc., 107 S.W.3d 543 (Tex. 2003) (agent who contracts for undisclosed principal is liable on the contract)