RAY FISCHER AND CORPORATE TAX MANAGEMENT, INC. N/K/A RY FISCHER & ASSOCIATES, INC. v. MARK BOOZER, JERROD RAYMOND, AND CTMI, LLC
No. 02-19-00320-CV
Court of Appeals Second Appellate District of Texas at Fort Worth
October 7, 2021
Before Sudderth, C.J.; Kerr and Womack, JJ. Memorandum Opinion by Justice Womack
On Appeal from the 48th District Court Tarrant County, Texas Trial Court No. 048-284212-16
I. INTRODUCTION
In a prior lawsuit, Appellants Ray Fischer and Corporate Tax Management, Inc. n/k/a RY Fischer & Associates, Inc. (the Fischer Parties) entered into a settlement agreement (the Settlement Agreement) in open court with Appellees Mark Boozer, Jerrod Raymond, and CTMI, LLC (the CTMI Parties). As part of the Settlement Agreement, the parties agreed that one of the claims in the lawsuit would proceed to trial and that CTMI would place certain funds relating to that claim in an account controlled by T. Wesley Holmes, attorney for two of the CTMI Parties, pending resolution of the case. The parties further agreed that if Fischer was ultimately successful on the claim, he would receive payment of the funds. While the Fischer Parties ultimately prevailed on the claim, Fischer did not receive payment because Holmes absconded with the money that CTMI had placed in the account.
In this lawsuit, the CTMI Parties sought a declaration that they had fulfilled their obligations under the Settlement Agreement and owed no further liability to the Fischer Parties under the Settlement Agreement, and the Fischer Parties brought a breach-of-contract claim against the CTMI Parties for breach of the Settlement Agreement. The Fischer Parties filed a motion to transfer venue, which was denied by the trial court. The parties also filed dueling motions for summary judgment, and the trial court ultimately ruled in the CTMI Parties’ favor. In their first issue, the Fischer Parties argue that the trial court abused its discretion by denying the motion
II. BACKGROUND
A. Fischer Sells His Business, a Lawsuit Arises from the Sale, and the Parties Enter into the Settlement Agreement.
In 2007, Fischer owned Corporate Tax Management, Inc.,1 a tax-consulting business.2 Sometime that year, Fischer began negotiations to sell the assets of the business to Boozer and Raymond. Boozer and Raymond created a business, CTMI, LLC, to receive the assets and operate the business, and in 2007, the parties executed a written asset-purchase agreement by which CTMI purchased the business from Fischer.
In 2008, a dispute arose between the Fischer Parties and the CTMI Parties regarding payments made under the asset-purchase agreement, and the parties filed claims against each other in the 192nd District Court of Dallas County. At the 2011 trial of that case, the parties entered into the Settlement Agreement in open court. Through the Settlement Agreement, the parties agreed to a judgment awarding Fischer $1.7 million; the settlement, however, specifically excluded one of CTMI‘s
Because it is key to our analysis, we will set forth pertinent portions of the Settlement Agreement concerning CTMI‘s obligation to pay the 2010 Adjustment. Those portions read:
[Mr. Cunningham4]: All right. Upon - thereafter, upon receipt of the revenue [relating to the 2010 Adjustment], 15 percent of all that revenue received on those projects listed will, upon receipt, be paid into an interest bearing escrow account.
[Mr. Shamoun]: Either, either in Mr. Holmes’ escrow account or my escrow account, depending on what Mr. Holmes and I agree in that regard.
Is that fair, Mr. Holmes?
[Mr. Holmes]: That is correct.
[Mr. Shamoun]: Okay.
[Mr. Holmes]: And I just want to say it would probably be a new account that we would have control of so it wouldn‘t be comingled with other client trust funds.
[Mr. Shamoun]: Well, I think it has to be a separate account, because I‘m not going to be paying income tax on the interest that accrues on it.
[Mr. Holmes]: I agree.
[Mr. Shamoun]: And so it won‘t be under my tax ID number.
[Court]: All right. Let‘s move on.
[Mr. Shamoun]: Well, I need to know whose tax ID number it needs to be opened under, because then that‘s going to be the reporting requirement for the IRS.
Who would you recommend?
[Mr. Holmes]: Your Honor, I don‘t know exactly how to handle that.
[Court]: Whoever‘s going to be benefitting from the numbers. I would assume ya‘ll [sic] will be.
[Mr. Holmes]: Correct. Probably what we‘ll do is have it be a CTMI account, but have it be controlled by me.
[Mr. Shamoun]: That‘s fair. I agree with that.
[Mr. Holmes]: Then they will pay the taxes on it, but I‘m on the hook.
[Mr. Shamoun]: I agree with that. Okay.
[Mr. Turner]: I think [I] like that one too because I wasn‘t on the hook.
[Mr. Shamoun]: But I want to make absolutely sure, guys, that we understand how when that money comes in, 15 percent of the gross receipts is put into that account.
Right Mr. Holmes?
[Mr. Holmes]: Correct.
[Mr. Shamoun]: And that money is not going to be used to pay Mr. Fischer, if Devon money comes in, I don‘t want to use that 15 percent. That comes off the top, irrespective of anything do you . . . understand?
[Mr. Holmes]: That‘s correct.
[Mr. Shamoun]: Is that what we agreed to?
[Mr. Holmes]: That‘s correct.
[Mr. Shamoun]: Thank you. Go ahead.
[Mr. Cunningham]: Then upon the exhaustion of all appellate rights by any party that relate to an appeal of the declar[a]tory judgment, which will be severed from the causes of action in this suit - in other words, separate from the agreed judgment the Court will sever the declaratory judgment action the defendants have asked for regarding the issue of agreement to agree, and the Judge will issue a separate declar[a]tory judgment on that. Okay?
Which will also award fees regarding that declar[a]tory judgment, which will incur trial fees and appellate fees.
So then, upon the exhaustion of all appellate rights relating to that declar[a]tory judgment, if the declar[a]tory judgment of the trial Court is upheld, then Ray Fischer will receive payment of the 15 percent gross revenue that is being held in escrow. And 15 per - I mean, he will receive - he will be distributed that 15 percent of the gross revenue that was being held in escrow, okay. 100 percent of that.
. . . .
[Mr. Shamoun]: That concludes our settlement. I [w]ould like to - I would like to call my client.
[Mr. Cunningham]: Let me be sure and be clear on the record that what is - it‘s agreed by the parties that what is being entered onto the record in this Rule 11 setting, does not contemplate the parties sitting down and executing any further settlement agreement to be written or agreed upon.
This is to be used as the settlement agreement, this transcript.
[Mr. Shamoun]: Is that correct?
[Mr. Cunningham]: For all purposes.
[Mr. Holmes]: Yes.
[Mr. Turner]: Yes.
[Mr. Shamoun]: Is that correct, Mr. Turner?
[Mr. Turner]: Agreed.5
B. The 192nd District Court Enters a Judgment Relating to the 2010 Adjustment, the Dallas Court of Appeals Reverses, and the Texas Supreme Court Reverses.
In June 2011, the 192nd District Court of Dallas County entered judgment in the Fischer Parties’ favor regarding the 2010 Adjustment, declaring that the 2010 Adjustment was not an unenforceable agreement to agree as CTMI had claimed. CTMI appealed that judgment to the Dallas Court of Appeals, and in August 2013,
C. Holmes Sets Up a CTMI Bank Account, CTMI Deposits Funds into that Account, and Holmes Absconds with the Funds.
In October 2011—while the 192nd District Court‘s final judgment was being appealed to the Dallas Court of Appeals—Holmes opened a Regions Bank account. CTMI was listed as the owner of the account, although the address listed for CTMI was the address of Holmes‘s law firm. According to a declaration made by Raymond, one of CTMI‘s owners, “[n]either CTMI nor any of its principals, agents or employees had any control” over the bank account, and Holmes was the “sole authorized signatory” on the account. Bank statements relating to the account were sent to “Thomas Wesley Holmes FBO CTMI LLC” at the address of Holmes‘s law firm, and Regions Bank likewise issued 1099-INT forms to “Thomas Wesley Holmes FBO CTMI LLC” at the address of Holmes‘s law firm.
Between October 2011 and December 2012—while the appeal was still pending in the Dallas Court of Appeals—CTMI deposited funds totaling $990,175.66
D. The CTMI Parties File the Present Lawsuit, the Trial Court Denies the Fischer Parties’ Motion to Transfer Venue, the Fischer Parties File a Counterclaim for Breach of Contract, and the Trial Court Enters a Final Judgment in the CTMI Parties’ Favor.
According to Raymond, the CTMI Parties discovered that Holmes had absconded with the funds sometime in early March 2016. A few days later, the CTMI Parties filed the present lawsuit in the 48th District Court of Tarrant County. The CTMI Parties sought a declaration that they had fulfilled their obligations under the Settlement Agreement and owed no further liability to the Fischer Parties under the Settlement Agreement.6 The Fischer Parties filed a motion to transfer venue to Dallas County, and the trial court denied the motion. The Fischer Parties also filed a counterclaim against the CTMI Parties for, among other things, breach of the Settlement Agreement.
The Fischer Parties sought summary judgment on their breach-of-contract claim, arguing that they had not received the funds due to them under the Settlement Agreement and had been damaged in the amount of $990,175.66. The trial court denied the Fischer Parties’ motion for summary judgment.
The trial court later incorporated its summary-judgment rulings into a final judgment. In the final judgment, the trial court declared that “[t]he Settlement Agreement created an escrow account” and that “the CTMI Parties have no further
III. DISCUSSION
A. We Will Address the Fischer Parties’ Second Issue First Because It Provides the Greatest Relief.
In their first issue, the Fischer Parties argue that the trial court erred by denying their motion to transfer venue. As to that issue, the Fischer Parties ask that we reverse and remand the case with instructions to transfer it to Dallas County. In their second issue, the Fischer Parties argue that the trial court erred by granting summary judgment in the CTMI Parties’ favor. As to that issue, the Fischer Parties ask that we reverse and render judgment in their favor.
When a party presents multiple grounds for reversal of a judgment on appeal, the appellate court should first address those grounds that would afford the party the greatest relief. CMH Homes, Inc. v. Daenen, 15 S.W.3d 97, 99 (Tex. 2000); Bradleys’ Elec., Inc. v. Cigna Lloyds Ins. Co., 995 S.W.2d 675, 677 (Tex. 1999). Therefore, we will address the Fischer Parties’ second issue first. See CMH Homes, 15 S.W.3d at 99 (declining to “reach the venue question, which if sustained would only result in a remand,” when a different issue entitled the appellant to rendition of judgment in its
B. Standard of Review
We review a summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). When both parties move for summary judgment and the trial court grants one motion and denies the other, the reviewing court should review both parties’ summary-judgment evidence and determine all questions presented. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We should then render the judgment that the trial court should have rendered. See Myrad Props., Inc. v. LaSalle Bank Nat‘l Ass‘n, 300 S.W.3d 746, 753 (Tex. 2009); Mann Frankfort, 289 S.W.3d at 848.
C. Did the Settlement Agreement Create an Escrow Agreement?
Through this appeal, we must construe whether the Settlement Agreement created an escrow agreement. The CTMI Parties argued at the trial level and now argue on appeal that the Settlement Agreement created a “valid [e]scrow [a]greement.” According to the CTMI Parties, because the Settlement Agreement created an escrow agreement, their obligations and liability under the Settlement Agreement ceased when they deposited the $990,175.66 into the Regions Bank account. See Norman v. Wilson, 41 S.W.2d 331, 332 (Tex. App.—Austin 1931, writ ref‘d) (“When the bank accepted by written indorsement thereon the escrow agreement deposited with it, and which
1. The Law
All parties agree that the Settlement Agreement was a Rule 11 agreement. See
“We construe contracts ‘from a utilitarian standpoint bearing in mind the particular business activity sought to be served’ and ‘will avoid when possible and proper a construction which is unreasonable, inequitable, and oppressive.‘” Frost Nat‘l Bank v. L & F Dist., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (quoting Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)). When construing a contract, our primary concern is to ascertain the true intent of the parties as expressed in their contract. Chrysler Ins. Co. v. Greenspoint Dodge of Hous., Inc., 297 S.W.3d 248, 252 (Tex. 2009); NP Anderson Cotton Exch., L.P. v. Potter, 230 S.W.3d 457, 463 (Tex. App.—Fort Worth 2007, no pet.). We must examine and consider the entire contract to harmonize and give effect to all provisions so that none are rendered meaningless. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999); NP Anderson, 230 S.W.3d at 463. We presume that parties to a contract intend every clause to have some effect, and we give terms used in a contract their plain, ordinary, and generally accepted meaning unless the contract shows that the parties used them in a technical or different sense. FWT, Inc. v. Haskin Wallace Mason Prop. Mgmt., L.L.P., 301 S.W.3d 787, 794 (Tex. App.—Fort Worth 2009, pet. denied) (op. on reh‘g).
Under Texas law, an escrow agreement is
a written instrument which by its terms imports a legal obligation, and which is deposited by the grantor, promisor, or obligor, or his agent, with a stranger or third party, to be kept by the depositary until the performance of a condition or the happening of a certain event, and then to be delivered over to the grantee, promisee, or obligee.
Campbell v. Barber, 272 S.W.2d 750, 753 (Tex. App.—Fort Worth 1954, writ ref‘d n.r.e.); see Escrow, Black‘s Law Dictionary (11th ed. 2019) (defining “escrow” as a “legal document or property delivered by a promisor to a third party to be held by the third party for a given amount of time or until the occurrence of a condition, at which time the third party is to hand over the document or property to the promisee“).
Cases defining escrow agreements highlight that escrow involves deposits with neutral third parties who are strangers to the contract. See, e.g., Williams v. Land Title Co. of Dall., No. 05-96-00039-CV, 1997 WL 196345, at *5 (Tex. App.—Dallas Apr. 23, 1997, no pet.) (not designated for publication) (“To create an escrow, the parties to an underlying transaction must deposit instruments or funds with a neutral third party.“); Bell v. Safeco Title Ins. Co., 830 S.W.2d 157, 160 (Tex. App.—Dallas 1992, writ denied) (explaining that for escrow agreements, “the grantor deposits the funds or property with a neutral third party“); Campbell, 272 S.W.2d at 753 (stating that escrow is a written instrument deposited with “a stranger or third party“). Indeed, an escrow deposit cannot typically be made with one of the parties to the escrow agreement, nor with the agent or attorney of one of the parties to the agreement. See Bradley v. Howell, 126 S.W.2d 547, 564 (Tex. App.—Fort Worth 1939, writ dism‘d judgm‘t cor.) (“An escrow deposit cannot be made with one of the parties to the instrument, or his agent.“); Smith v. Daniel, 288 S.W. 528, 531 (Tex. App.—Beaumont 1926, writ dism‘d w.o.j.) (“A deed is not in escrow while deposited with one of the parties, nor with his agent or attorney.“); see also Johnson v. Freytag, 338 S.W.2d 257, 262 (Tex. App.—Beaumont 1960, writ ref‘d n.r.e.) (stating that “[a]n escrow depositary should be a stranger or third party” but recognizing that there may be circumstances where an agent of or party to an instrument may be a depositary).
“The purpose of requiring a promisor to place [an item] in escrow is to protect the promisee by having a neutral third party hold the item until the happening of a contingency or performance of a condition, and then deliver that item to the promisee.” Vector Indus., Inc. v. Dupre, 793 S.W.2d 97, 101 (Tex. App.—Dallas 1990, no writ). An escrow agent owes fiduciary duties to the parties of the escrow agreement, including the duty of loyalty, the duty to make full disclosure, and the duty to exercise a high degree of care to conserve the money placed in escrow and pay it only to those persons entitled to receive it. Trahan v. Lone Star Title Co. of El Paso, 247 S.W.3d 269, 287 (Tex. App.—El Paso 2007, pet. denied); Williams, 1997 WL 196345, at *5.
2. Application of the Law to the Facts
We begin our analysis by examining whether Holmes was a neutral third party who was a stranger to the Settlement Agreement. See Williams, 1997 WL 196345, at *5; Bell, 830 S.W.2d at 160; Campbell, 272 S.W.2d at 753. The summary-judgment record reflects that Holmes was an attorney representing Boozer and Raymond at trial in the 192nd District Court, that the Settlement Agreement was entered at trial, that Boozer and Raymond were parties to the Settlement Agreement, that Holmes spoke on behalf of Boozer and Raymond when the parties entered the Settlement Agreement, and that Holmes represented Boozer and Raymond in the appeal before the Dallas Court of Appeals where the parties were substantively arguing over who was entitled to the funds placed in the Regions Bank account. See CTMI, 479 S.W.3d at 280. Based on that record, we cannot say that Holmes was a neutral third party
The CTMI Parties argue that even if Holmes was not a neutral third party who was a stranger to the Settlement Agreement, that did not necessarily prevent him from serving as an escrow agent, particularly where the escrow agreement was made in open court. But just because parties may agree that a party or agent of a party may be a depositary to an escrow agreement does not necessarily mean that the Settlement Agreement was an escrow agreement. See Johnson, 338 S.W.2d at 262 (“We do not mean to say that under no circumstances may an agent of or party to an instrument be a depositary, but in the absence of a clearly expressed mutual agreement of both parties to the instrument to that effect it will not be implied . . . .“).
And, here, if we are to harmonize and give effect to all provisions of the Settlement Agreement so that none are rendered meaningless, we must construe the Settlement Agreement to be something other than an escrow agreement. First, the Settlement Agreement establishes that the contemplated bank account was to be a CTMI account—not Holmes‘s account—and the summary-judgment evidence
Based on our review of the summary-judgment record, we hold that the unique Settlement Agreement before us was not an escrow agreement but was simply a Rule 11 agreement—a contract—entered between the parties. Accordingly, we hold that the trial court erred by declaring that the Settlement Agreement was an escrow agreement and erred by declaring that the CTMI Parties had fulfilled their obligations under the Settlement Agreement and owed no further liability to the Fischer Parties
3. Award of Attorney‘s Fees
Prior to the trial court‘s entering its final judgment, the parties entered a Rule 11 agreement concerning attorney‘s fees. Pursuant to that agreement, the parties agreed that if the Fischer Parties ultimately prevailed in the lawsuit, they were to recover from the CTMI Parties $450,000 as their reasonable and necessary attorney‘s fees for work done at the trial level, an additional $60,000 if they were successful following an appeal to the Court of Appeals, an additional $10,000 if they were successful on appeal following a petition of review to the Texas Supreme Court, and
In the trial court‘s final judgment, the trial court awarded the CTMI Parties their attorney‘s fees in accordance with the Rule 11 agreement. Because the Fischer Parties have ultimately prevailed on this appeal, we reverse the trial court‘s award of attorney‘s fees to the CTMI Parties, and we order that the Fischer Parties recover from the CTMI Parties $450,000 for the Fischer Parties’ reasonable and necessary attorney‘s fees for work done at the trial court level, and we further order that the Fischer Parties recover from the CTMI Parties $60,000 for the Fischer Parties’ reasonable and necessary attorney‘s fees for work done at the Court of Appeals level. We further order that if the Fischer Parties prevail in an appeal of this court‘s judgment to the Texas Supreme Court, the Fischer Parties will additionally recover from the CTMI Parties $10,000 for the Fischer Parties’ reasonable and necessary attorney‘s fees if a petition for review is filed, and in the event the petition for review is granted by the Texas Supreme Court and the Fischer Parties ultimately prevail, the Fischer Parties will recover from the CTMI Parties an additional $30,000 for the Fischer Parties’ reasonable and necessary attorney‘s fees.
Having sustained the Fischer Parties’ second issue and needing not decide the Fischer Parties’ first issue, we reverse the trial court‘s final judgment and render judgment awarding Fischer $990,175.66 on its breach-of-contract claim and awarding attorney‘s fees as set forth above.
/s/ Dana Womack
Dana Womack
Justice
Delivered: October 7, 2021