Todd Harmon v. James T. Harmon, 11-14-00343-CV

Background

James T. Harmon (father) owned Blackcross Cattle, LLC; Todd Harmon (son) joined in Jan 2012 after father sought help while struggling with alcoholism.
A Feb 1, 2012 document ("points of consideration") contemplated Todd receiving a 75% ownership interest and managing the business; the relationship soured within weeks.
Disputes arose over bank-account control and cattle sales; parties agreed to an interim Rule 11 arrangement on Apr 27, 2012 governing operation and a $20,000 budget.
Litigation followed; a temporary injunction (May 25, 2012) found Rule 11 violations, required a $20,000 deposit, and ordered accountings.
Blackcross later filed bankruptcy and liquidated; Plaintiff James sued Todd in cause no. CV07703 seeking accounting, alleging fiduciary breach and conversion; bench trial held June 5, 2014.
Trial court rescinded the parties’ initial agreement, awarded James 100% ownership of Blackcross, and ordered Todd reimbursed $39,000 (Todd’s original investment). Court concluded returning parties to pre-contract positions was appropriate.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the April 27, 2012 Rule 11 agreement modified or replaced the parties’ earlier consummated agreement	Rule 11 reflected a new interim arrangement affecting control and operation	Todd argued he wasn't party individually and Rule 11 did not alter ownership interests	Court treated Rule 11 findings as evidentiary (not controlling ultimate facts) and found no reversible error on this point
Whether James was entitled to rescission of the parties’ agreement	James argued contract became unworkable, remedies at law were inadequate, and rescission would restore pre-contract positions	Todd argued James had adequate remedy (bankruptcy trustee funds), accepted benefits, and failed to return consideration	Court affirmed rescission as equitable, finding remedies at law inadequate, parties could be returned to pre-contract positions, and trial court did not abuse discretion
Whether evidence supported trial court’s finding that Todd breached the parties’ agreement	James asserted Todd breached (e.g., removing James from bank account, violating Rule 11, precipitating bankruptcy)	Todd contended he paid $39,000, managed Blackcross, and did not mismanage or breach	Court applied legal/factual sufficiency review, found evidence Todd breached (including Rule 11 violations and bankruptcy filing), and overruled challenge
Whether rescission was barred by James having accepted benefits or by mutual breach	James asserted parity of benefits and that trial court reimbursed Todd’s investment	Todd argued James accepted benefits and did not tender repayment, and that he breached too	Court held benefits were roughly equal, trial court ordered repayment of $39,000, and implicit finding Todd breached first supported rescission

Key Cases Cited

Andrews v. Key, 13 S.W. 640 (Tex. 1890) (erroneous immaterial findings are harmless)
Cooke County Tax Appraisal Dist. v. Teel, 129 S.W.3d 724 (Tex. App.—Fort Worth 2004) (distinguishes ultimate vs. evidentiary findings)
In re Marriage of Edwards, 79 S.W.3d 88 (Tex. App.—Texarkana 2002) (ultimate fact v. evidentiary issue discussion)
Catalina v. Blasdel, 881 S.W.2d 295 (Tex. 1994) (bench-trial findings review standards)
Sw. Bell Media, Inc. v. Lyles, 825 S.W.2d 488 (Tex. App.—Houston [1st Dist.] 1992) (trial court as factfinder)
City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal sufficiency review standards)
Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442 (Tex. 1989) (factual sufficiency standard)
Martin v. Cadle Co., 133 S.W.3d 897 (Tex. App.—Dallas 2004) (rescission principles)
H.E.B., L.L.C. v. Ardinger, 369 S.W.3d 496 (Tex. App.—Fort Worth 2012) (rescission restores parties to precontract positions)
Costley v. State Farm Fire & Cas. Co., 894 S.W.2d 380 (Tex. App.—Amarillo 1994) (unilateral rescission for material breach)
Gentry v. Squires Constr., Inc., 188 S.W.3d 396 (Tex. App.—Dallas 2006) (abuse of discretion review)
Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238 (Tex. 1985) (abuse of discretion standard)
Nordstrom v. Nordstrom, 965 S.W.2d 575 (Tex. App.—Houston [1st Dist.] 1997) (presumptions favoring judgment on appeal)
Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004) (material breach discharges other party)
Ferguson v. DRG/Colony N., Ltd., 764 S.W.2d 874 (Tex. App.—Austin 1989) (rescission prerequisites)