Tom Kartsotis v. Richard L. Bloch, Individually and as a Trustee of the Richard and Nancy Bloch Family Trust, and Nancy Bloch as a Trustee of the Richard and Nancy Bloch Family Trust
503 S.W.3d 506
Tex. App.2016Background
- Parties: Kartsotis (Bedrock Dirt, LP) invested with Bloch and Cureton in CLB Capital; they executed a Contribution and Indemnity Agreement (CIA), a Put and Call Agreement, and a Guaranty Bank Agreement (GBA).
- CIA defined “Existing Obligations” and “Future Obligations” (collectively “Obligations”) and provided that a Guarantor who pays more than its pro rata share of an Obligation may recover contribution, reimbursement, and indemnity from other Guarantors.
- Exhibit A to the CIA listed certain primary-debtor loan obligations (including BBR loans and a Wells Fargo lease); Commonwealth Title was not listed on Exhibit A.
- CLB/BBR defaulted; Bloch settled lawsuits arising from guaranties/indemnities (BBR Settlements). Separately, the Guaranty Bank Loan was addressed by the GBA, which expressly removed the Guaranty Loan from the CIA’s Obligations.
- Procedural posture: Cross-motions for summary judgment and a bench trial resulted in a net judgment for Bloch. Kartsotis appealed; the Court of Appeals reversed in part, affirmed in part, and remanded limited fee issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “Existing Obligations” in the CIA (trigger for contribution/reimbursement) | Bloch: “Existing Obligations” means the parties’ secondary liabilities (guaranties/indemnities); contribution triggered when a Guarantor pays more than his pro rata share of his own guaranty payments. | Kartsotis: “Existing Obligations” means primary-debtor obligations listed on Exhibit A; contribution triggered only if a Guarantor pays more than 1/3 of the primary debtor’s outstanding debt. | Held: “Existing Obligations” unambiguously means primary-debtor obligations (Exhibit A); trial court erred to the extent it awarded Bloch CIA-based recovery. |
| Whether miscellaneous expenses and attorneys’ fees are recoverable as CIA contributions | Bloch: Fees/expenses are payments “in respect of” an Obligation and thus recoverable. | Kartsotis: CIA does not authorize inclusion of such miscellaneous expenses in contribution calculations. | Held: Miscellaneous expense items (and attorney fees) are not recoverable under the CIA contribution scheme; court may not add contract language. |
| Failure-to-mitigate defense re: refusal to seek third extension of Guaranty Bank Loan | Bloch: Kartsotis should have sought a further extension; his refusal increased damages. | Kartsotis: No duty to seek extension; no evidence bank would have extended or that Bloch could have paid even if extension granted. | Held: No genuine fact issue; legally insufficient evidence that third extension would have been granted or that damages increased by failure to mitigate; summary judgment for Kartsotis proper. |
| Attorneys’ fees awarded to Bloch under Chapter 38 and/or Chapter 37 | Bloch: Fees recoverable with his contract/declaratory-judgment recovery. | Kartsotis: Bloch not entitled to contract damages so no Chapter 38 fee; Chapter 37 award must be assessed for equitable justification. | Held: Reversed Chapter 38 fee award (Bloch did not prevail on contract claims). Chapter 37 fees remanded for trial court to decide whether award is equitable and just. |
Key Cases Cited
- Tex. Mun. Power Agency v. Pub. Util. Comm’n of Tex., 253 S.W.3d 184 (Tex. 2007) (standard of review for summary judgment)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (when both parties move for summary judgment, appellate court reviews both records)
- Matheson Tri–Gas, Inc. v. Atmel Corp., 347 S.W.3d 339 (Tex. App.—Dallas 2011) (construction of unambiguous contract is a legal question reviewed de novo)
- Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310 (Tex. 2005) (primary concern is parties’ objective intent in contract construction)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (give effect to written expression of parties’ intent)
- Ashford Partners, Ltd. v. ECO Res., Inc., 401 S.W.3d 35 (Tex. 2012) (to recover attorney’s fees under §38.001, a party must prevail on a contract claim and recover damages)