Appellants/Cross-Appellees’ Motion for Rehearing Granted in Part and Overruled in Part; Appellee/Cross-Appellant’s Motion for Rehearing Overruled; Opinion of August 29, 2002, Withdrawn; Affirmed as Modified in Part, Reversed and Remanded in Part, and Majority and Dissenting Opinions on Motions for Rehearing filed January 16, 2003.
In The
Fourteenth Court of Appeals
____________
NO. 14-99-00075-CV
____________
PATRICK A. WALDEN, CHARLES ACKERMAN, JOHN AVERETT,
SAM BAUGHMAN, ROBERT BUTLER, RALPH CANNADY,
MIKE CLENDENNEN, MILTON COWDEN, WILLIAM DELONG,
LESLIE FLYNNE, LINDA HEWLETT, JAMES HURST, DONALD IMRIE,
GEOFFREY JOHNSTON, LARRY KERSHNER, JERRY KILLINGSWORTH,
MYRA MAYER, DON RICE, LINNEA ROSE, JAMES SHIELD, and
JERE SHOPF, Appellants and Cross-Appellees
V.
AFFILIATED COMPUTER SERVICES, INC. f/k/a
AFFILIATED COMPUTER SYSTEMS, INC., Appellee and Cross-Appellant
On Appeal from the 127th District Court
Harris County, Texas
Trial Court Cause No. 96-25829
M A J O R I T Y O P I N I O N O N
M O T I O N S F O R R E H E A R I N G
We grant in part appellants/cross-appellees’ motion for rehearing and overrule appellee/cross-appellant’s motion for rehearing. We withdraw our opinion and judgment of August 29, 2002, and substitute the following in their place.
class=Section2>This case involves a dispute between a data-processing company and twenty-one individuals holding stock options in that company. When the option holders attempted to exercise those options, the company refused to issue the stock. The option holders sued for breach of contract, fraud, and negligent misrepresentation. The trial court entered judgment for the option holders, awarding them an aggregate amount of $14,138,588 plus interest and attorneys’ fees. Both parties appealed. We conclude the trial court erred in holding as a matter of law that an amendment to the stock option plan, signed by twenty of the twenty-one option holders, was void for lack of consideration. In addition, one option holder’s options expired as a matter of law before they were exercised. We reverse the trial court’s judgment in favor of the option holders who signed the amendment and remand for further proceedings consistent with this opinion. As for the remaining option holder, we affirm the court’s judgment regarding liability, but we reverse and remand for a recalculation of his damages.
Factual and Procedural Background
Affiliated Computer Services, Inc., formerly known as Affiliated Computer Systems, Inc. (“ACS”), was formed in July 1988 through the efforts of two jointly managed savings-and-loan associations, Gibraltar Savings Association (“Old Gibraltar”) and First Texas Savings Association (“First Texas”), together with a group of investors led by Darwin Deason. The savings associations provided data-processing facilities, computer equipment, software, and personnel to ACS, while the Deason group provided cash. In exchange, the savings associations and the Deason group received the bulk of ACS’s stock. ACS ultimately entered into a ten-year data-processing agreement with Old Gibraltar and First Texas.
ACS also agreed to grant stock options to senior managers and key employees at Old Gibraltar and First Texas. Accordingly, ACS adopted a Non-Qualified Stock Option Plan (the “Original Plan”), and the ACS board of directors appointed a special committee to prepare a list of Old Gibraltar and First Texas officers and employees to receive stock options. All twenty-one appellants (collectively, the “option holders”) were included on this list. In November 1988, ACS delivered to each option holder a Non-Qualified Stock Option Agreement (the “Original Agreement”), along with a copy of the Original Plan. Each option holder executed the Original Agreement and returned it to ACS.
On December 27, 1988, Old Gibraltar and First Texas were declared insolvent and the Federal Savings and Loan Insurance Corporation (“FSLIC”) was appointed as receiver. The same day, FSLIC organized a new bank, First Texas Bank, F.S.B., which later became known as First Gibraltar Bank, F.S.B. (“First Gibraltar”). Many of the assets formerly owned by Old Gibraltar and First Texas were transferred to First Gibraltar.
On December 28, 1988, ACS’s board of directors amended ACS’s stock option plan, retroactive to November 1988. By letters dated January 20, 1989, ACS sent each option holder an amendment to the Original Agreement (the “Amendment”), attaching a copy of the Amended and Restated Non-Qualified Stock Option Plan (the “Amended Plan”).[1] All the option holders except one, Robert Butler, signed the Amendment.
First Gibraltar later sued ACS, seeking to repudiate the data-processing agreement. FSLIC intervened, and the lawsuit eventually settled. As part of the settlement, on August 30, 1991, the Office of Thrift Supervision (“OTS”) issued a Cease and Desist Order relating to the issuance of ACS stock to former employees of Old Gibraltar and First Texas. Among other things, this order provided: “[ACS] shall henceforth not issue any stock or make any payments to . . . former employees of [Old] Gibraltar/First Texas who received such options, rights, contracts or interests from or at the direction of [Old] Gibraltar/First Texas and who might seek to exercise any such options, rights, contracts or other interests, unless required to do so by a court order.” The Cease and Desist Order remained in effect until it was terminated by an OTS order signed September 26, 1997.
In 1993, Patrick Walden attempted to exercise his ACS options. ACS rejected this attempt. On May 22, 1996, Walden filed suit against ACS in the 127th District Court. Walden alleged breach of his amended agreement with ACS (the “Amended Agreement”), fraud, and negligent misrepresentation. In the alternative, Walden sought a declaration that the Amendment failed for lack of consideration or fraud and alleged breach of the Original Agreement. Both parties moved for summary judgment. On November 15, 1996, the trial court denied both parties’ motions, except it granted Walden’s motion for summary judgment on ACS’s affirmative defense that Walden’s claims were barred for alleged failure to exercise his options in accordance with the Amended Agreement.
While Walden’s lawsuit was proceeding, a group of twelve other option holders filed suit against ACS in the 113th District Court, alleging fraud, negligent misrepresentation, and breach of the Original Agreements.[2] The lawsuits were eventually consolidated, and additional option holders were added as plaintiffs.[3] The option holders’ lawsuit ultimately consisted of the following claims against ACS:
• fraud;
• negligent misrepresentation;[4]
• breach of the Original Agreements; and
• breach of the Amended Agreements.[5]
The option holders (except Robert Butler) also sought a declaratory judgment that the Amendments failed for want of consideration or, in the alternative, did not release the option holders’ status as fully vested in their options.
The parties each filed motions for summary judgment. On September 22, 1998, the trial court signed a Partial Summary Judgment Order that had the following effect:
(1) it declared all option holders became 100% vested in their options to purchase ACS stock on December 26, 1988, subject to the affirmative defenses of mutual mistake, frustration of purpose, failure of consideration, and illegality, which remained to be decided;
(2) it set aside and rescinded the Amendments for lack of consideration;
(3) it ordered that the option holders take nothing on their negligent misrepresentation claims; and
(4) it stated the option holders’ fraud claims were rendered moot by virtue of the court’s ruling that the Amendments were not supported by consideration.
The order further stated all other issues raised in the summary judgment motions had been taken under advisement.
The same day, the trial court conducted voir dire of the jury panel. The court also continued to hear argument and allowed the parties to supplement their summary judgment evidence on other pending issues. On its docket sheet, the court described this proceeding as a “hearing to narrow issues per Rule 166.” The next morning, September 23, 1998, the trial court faxed each party a letter announcing its rulings on several issues. The parties then entered into a stipulation regarding the amount of attorneys’ fees. Believing no fact issues remained to be decided, the trial court excused the jury panel.
On November 5, 1998, the trial court again met with the attorneys “to conclude all remaining legal issues.” The trial court signed two orders reflecting its September 23 rulings. First, the court signed a “Partial Summary Judgment Order Ruling on Defendant’s Motion for Summary Judgment,” in which the trial court denied ACS’s motion for summary judgment on the following grounds: (1) the options were void ab initio; (2) the Original Plan as construed by the trial court was unenforceable as illegal or against public policy; and (3) the options expired or were untimely exercised. Second, the court signed an “Order on Rule 166 and Rule 166a Hearing,” in which the court:
(1) granted the option holders’ no-evidence motion for summary judgment and held there were no contested material facts supporting ACS’s defenses of failure of consideration, frustration of purpose, and waiver;
(2) held there was no defense of mutual mistake as a matter of law;
(3) denied all summary judgment motions not otherwise ruled upon in this or any prior orders;
(4) ruled damages were to be calculated based on the value of ACS stock as of the time of trial; and
(5) held no contested material issues remained for ACS to present evidence in opposition to the option holders’ claims for breach of the option agreements and the only issue that remained for a jury to decide was the amount of the option holders’ attorneys’ fees.[6]
At the November 5 conference, ACS’s counsel indicated ACS believed a jury question remained as to the proper measure of damages. Accordingly, the trial court continued the pretrial conference and held a hearing on November 30, 1998. At this hearing, the option holders offered numerous exhibits and the testimony of Marc Schwartz, a certified public accountant, on the issue of the option holders’ damages. The trial court stated it was accepting this evidence only for the purpose of determining whether any fact issues remained and how the court should decide legal issues “and not for the purpose of fact finding.” The parties subsequently filed a stipulation regarding the fair market value of one share of ACS common stock on various dates.
On December 16, 1998, the trial court signed a final judgment. The judgment awarded damages to each option holder, calculated as “the difference between the value of the stock at the time of trial, September 22, 1998, less the exercise price of the options, times the number of shares.” The judgment further awarded each option holder attorneys’ fees, prejudgment interest from September 23, 1998, at ten percent per year, and post-judgment interest.
Both parties filed notices of appeal. ACS contends the trial court erred by (1) granting the option holders’ motion for summary judgment and denying ACS’s motion, (2) disposing of numerous disputed issues, claims, and defenses in a pretrial conference under authority of Texas Rule of Civil Procedure 166, (3) entering a final judgment in favor of the option holders contrary to the evidence and the law, (4) measuring the option holders’ damages by using the date of trial rather than the date of breach, and (5) improperly calculating prejudgment interest. The option holders argue (1) the trial court improperly calculated their damages by using the date of trial to determine the value of the ACS stock and (2) the trial court erred in holding that ACS’s obligations under the option agreements were subject to the Cease and Desist Order.
Validity of the Amendments
We
begin by addressing ACS’s claim that the trial court
erred by granting a partial summary judgment on the grounds that the Amendments
should be rescinded and voided for lack of consideration.[7] ACS contends (1) no new consideration was
necessary for the Amendments because the Original Agreements expressly gave ACS
the right to modify the Original Plan and (2) even if consideration was
required, ACS raised issues of fact as to whether the Amendments were supported
by consideration. As the summary judgment
movants, the option holders have the burden to show
there is no genuine issue of material fact and they are entitled to judgment as
a matter of law. See Nixon v. Mr. Prop. Mgmt.
Co.,
With one exception, each of the option holders executed the Amendment. This Amendment purported to amend the Original Agreement so all references to the “Plan” would refer to the Amended Plan, rather than the Original Plan. The option holders argued, and the trial court agreed, the Amendments were not supported by consideration and, therefore, were void as a matter of law.
ACS first contends the trial court erred because ACS was entitled to amend the plan without additional consideration. ACS claims the Original Agreement, which was undeniably supported by consideration, gave ACS a contractual right to modify the Original Plan. Paragraph 7 of the Original Plan provides:
Amendments. The Board may, from time to time, alter, amend, suspend, or discontinue the Plan. However, no such action of the Board shall alter any outstanding Option Agreement to the detriment of the Option holder without his consent.
According to ACS, no additional consideration was needed to exercise this right, and thus the Amendments cannot be void for lack of consideration. We disagree.
Texas courts
have consistently adhered to the rule that a modification to a contract must
itself be supported by consideration to be valid. See
Hathaway v. General Mills, Inc., 711
S.W.2d 227, 228 (Tex. 1986); American Nat. Ins. Co. v. Teague, 237
S.W. 248, 250 (Tex. Comm’n App. 1922, holding
approved); Hill v. Heritage Res., Inc.,
We
next consider whether the trial court erred in concluding as a matter of law
the Amendments were void for lack of consideration. Consideration may consist of a benefit that
accrues to one party or, alternatively, a detriment incurred by the other
party. See Roark v. Stallworth Oil & Gas, Inc.,
(1) it expanded the option holders’ ability to become vested in their options;
(2) it permitted option holders who left their employment to become vested sooner and to exercise their options sooner;
(3) it removed the annual escalation in option price; and
(4) it decreased the likelihood that the plan would come under attack from federal regulators.
The option holders contend the first purported benefit is illusory because the option holders were each fully vested in their options before the Amendments were executed on January 20, 1989. The trial court held as a matter of law that, under the Original Plan, all issued options, whether or not earned, became fully vested in December 1988. Under this construction of the Original Plan, any change to the option holders’ ability to vest in their options would not benefit the option holders. However, ACS challenges the trial court’s construction of the vesting provision. To determine whether a change in the option holders’ vesting rights may constitute valid consideration for the Amendments, we must look to the language of the Original Plan.
Paragraph 2(f) of the Original Plan, titled “Vesting of Options Upon Reorganization,” states:
[I]f [Old] Gibraltar undergoes a Change of Control, then all of the Option holder’s outstanding Options, whether or not earned, shall become vested, effective the day immediately prior to such . . . Change of Control. For purposes of the preceding sentence, a “Change of Control” shall have occurred if [Old] Gibraltar or its parent corporation is merged, consolidated, or reorganized into or with another corporation or other person or if a majority of the outstanding capital stock or all or substantially all of the assets of [Old] Gibraltar are sold to any other person . . . .
ACS claims there was no “Change of Control” because (1) Old Gibraltar’s assets were not “sold” to anyone and (2) neither Old Gibraltar nor its parent company were “consolidated” or “reorganized.”
ACS first contends there was no “Change of Control” because there was no sale of “all or substantially all of the assets of [Old] Gibraltar” to another person. The same day FSLIC was appointed as receiver for Old Gibraltar, FSLIC (in its capacity as receiver) executed an Acquisition Agreement with First Gibraltar. Under the Acquisition Agreement, with certain specified exceptions, First Gibraltar agreed to purchase “all of [FSLIC]’s right, title, and interest in and to all of [Old Gibraltar]’s assets that [FSLIC] owns or holds and any of [Old Gibraltar]’s assets hereafter acquired by [FSLIC].” The following day, FSLIC (as
class=Section3>receiver for Old Gibraltar) executed a Receiver’s Agreement with FSLIC (in its corporate capacity), whereby Old Gibraltar’s remaining assets were either purchased by the corporate entity or liquidated, with the proceeds going to FSLIC, the corporation.
Despite these agreements, ACS argues that no “Change of Control” occurred because at the time these assets were sold, they were no longer “the assets of [Old] Gibraltar.” According to ACS, upon receivership, FSLIC succeeded to Old Gibraltar’s assets by operation of law; therefore, the Acquisition Agreement and the Receiver’s Agreement both involved transfers of receivership assets, not “the assets of [Old] Gibraltar” as required under the Original Plan. However, a plain reading of paragraph 2(f) does not support ACS’s position. Nothing in the language of this provision requires the assets must still be in the possession of Old Gibraltar at the precise moment they are sold. Old Gibraltar’s assets were undeniably sold to a third party, and the fact they might have been characterized as “former assets” at the moment of the sale is irrelevant.
ACS
next argues Old Gibraltar’s assets were not “sold” because neither First
Gibraltar nor FSLIC paid anything for them.
The Acquisition Agreement, however, expressly provided that First
Gibraltar would assume Old Gibraltar’s liabilities and that those liabilities
exceeded the value of the assets being purchased. A sale, in its broadest sense, includes any
transfer of property from one person to another for a valuable consideration. McKinney
v. City of Abilene,
Finally,
ACS claims other courts construing similar change-of-control provisions have
held a transfer of assets following insolvency and receivership of a bank does
not constitute a “sale” as a matter of law.
In each of these cases, however, the court’s conclusion was based on the
specific language in the change-of-control provision. For example, in McCarron v. FDIC,
Accordingly, we conclude a “Change of Control” was triggered under the Original Plan because “substantially all of the assets of [Old] Gibraltar” were “sold.” We express no opinion as to whether Old Gibraltar was “consolidated” or “reorganized” with another entity.
ACS
advances several reasons why it believes the trial court’s construction of the
Original Plan’s vesting provision is unreasonable. ACS argues allowing the options to vest upon
the forced sale of Old Gibraltar’s assets in receivership (1) would be contrary
to the provision’s intended purpose of encouraging employees to promote and
maintain the relationship with ACS, (2) would be inconsistent with the parties’
belief at the time the options were granted that Old Gibraltar would not be
placed into receivership, and (3) would result in an illegal contract. ACS’s first two
arguments amount to nothing more than an attempt to introduce parol evidence of the “true” intent behind the vesting
provision. Because we conclude that the
language in this provision is unambiguous, this parol
evidence is inadmissible. See National
Union Fire Ins. Co. v. CBI Indus., Inc.,
ACS’s third argument is that if the options vested immediately upon the failure of Old Gibraltar, the Original Plan would (1) violate federal regulations against excessive compensation, (2) constitute an “unsafe and unsound practice” in the operation of a savings-and-loan association, and (3) violate public policy. We disagree.
Whether
a contract is legally enforceable is a question of law. See
McCreary v. Bay Area Bank & Trust,
Compensation to officers, directors, and employees of each savings association and its service corporations shall not be in excess of that which is reasonable and commensurate with their duties and responsibilities.
Id.
The crux of ACS’s argument is that, by
allowing the options to vest immediately after Old Gibraltar was placed into
receivership, the Original Plan provided the option holders with excessive
compensation resulting from the failure of Old Gibraltar. Here, however, the stock options came not
from Old Gibraltar, but from ACS. Under
the current federal statute governing the operation of savings associations,
courts have held an institution’s practices are not unsafe and unsound unless
they “pose an abnormal risk to the financial stability of the banking
institution.” In re Seidman,
ACS also claims the trial court’s construction of the Original Plan violates public policy by creating an incentive for the option holders to make Old Gibraltar fail, thereby becoming vested in their options. Under the Original Plan, even if the option holders were fully vested, they could not exercise their options until five years after the options were issued. Presumably, the value of those options depended on the success of ACS. At the time the options were issued, ACS’s only customers were Old Gibraltar and First Texas. It defies logic to suggest the option holders would have had an incentive to make Old Gibraltar fail just so their options would vest, at the risk of making those options (which could not be exercised for five years) considerably less valuable.
We conclude, under the unambiguous language of the Original Plan, a “Change of Control” occurred no later than December 28, 1988, the date of the Receiver’s Agreement. Thus, under the Original Plan, all options issued to the option holders became vested no later than December 27, 1988. Having reached this conclusion, we agree with the option holders that any alleged expansion of their ability to become vested in their options would provide no additional benefit and cannot be consideration for the Amendments.
ACS next argues the Amended Plan provided a benefit to the option holders by allowing them to exercise their options sooner than they could have under the Original Plan. Under the Original Plan, the option holders could not exercise any options, whether or not vested, until five years after the options were granted. The Amended Plan added a provision whereby, in certain circumstances, the option holders could exercise some of their options sooner.[12] The option holders contend that this purported benefit is illusory because it is offset by (1) the loss of vested rights in some of their options and (2) a limit on the period of time during which the options could be exercised.
We
conclude the Amended Plan provided the option holders some benefit by giving
them an opportunity to exercise some of their options without having to wait
until five years after the options were issued.
The option holders’ own expert testified the ability to obtain ACS stock
before five years had passed might be a benefit to someone leaving his or her
employment. We recognize the value of
this benefit is diminished by (1) the fact that an option holder could not
exercise his or her options early without losing vested rights (provided under
the Original Plan) to some of those options and (2) the sixty-day limitation on
exercising those options. Nevertheless,
we cannot say the option holders have conclusively established, as a matter of
law, ACS provided no consideration to
support the Amendments. Accordingly,
summary judgment was not appropriate. See Roark,
ACS
argues it also gave consideration for the Amendments by eliminating the annual
escalation in option price in the Amended Plan.
Under the Original Plan, the price of the options would increase by
seven percent each year. However, this
provision was changed by an amendment to the Original Plan that was adopted and
incorporated into the Original Plan when the Original Agreements were
executed. Thus, the elimination of the
yearly seven-percent increase in the option price was already reflected in the
Original Plan. A promise to fulfill a
pre-existing obligation cannot serve as new consideration. See
Barnes v. Forest Hills Inv., Inc.,
Finally, ACS claims the Amended Plan reduced the likelihood that the granting of options to employees of Old Gibraltar and First Texas would be construed as unlawful. As we note above, the vesting provision of the Original Plan, as construed by the trial court, does not run afoul of any laws or regulations. Accordingly, any alleged reduction of risk does not constitute consideration.
In summary, we conclude the option holders failed to establish as a matter of law that the Amendments were void for lack of consideration. Specifically, the option holders did not conclusively show the change in the procedure for exercising options upon termination of employment conferred no benefit on the option holders. The trial court’s judgment in favor of the option holders was based on the option holders’ claim that the Original Agreements governed the parties’ relationship. We therefore reverse the judgment with respect to all option holders except Robert Butler and remand for further proceedings.
The Trial Court’s Legal Rulings
Next, ACS contends the trial court erred in disposing of various claims and defenses as a matter of law. ACS asserts it raised fact issues precluding summary judgment on its affirmative defenses of failure of consideration, frustration of purpose, and waiver. ACS also complains the trial court improperly disposed of other affirmative defenses and found breach as a matter of law at a pretrial conference under the purported authority of Texas Rule of Civil Procedure 166. Finally, ACS claims it established as a matter of law that the option holders’ options expired while they were legally unexercisable.
Summary Judgment Rulings
The option holders moved for summary judgment on the following defenses: (1) statute of limitations, (2) failure of consideration, (3) waiver, (4) frustration of purpose, and (5) legal impossibility and/or superseding federal regulatory order. In its partial summary judgment order, the trial court concluded, based on its interpretation of the unambiguous language in the “Change of Control” provision of the Original Plan, the option holders became fully vested in their options, subject to the affirmative defenses of (1) mutual mistake, (2) frustration of purpose, (3) failure of consideration, and (4) illegality. The trial court’s order further stated these four affirmative defenses remained to be decided. The court’s order concluded with the statement that “[a]ll other issues raised in the Parties’ summary judgment motions have been taken under advisement.”
On November 5, 1998, the trial court issued both a “Partial Summary Judgment Order Ruling on Defendant’s Motion for Summary Judgment” and an “Order on Rule 166 and Rule 166a Hearing.” These two orders had the following combined effect regarding ACS’s affirmative defenses:
(1) the court denied ACS’s motion for summary judgment on the grounds that the options were (a) void ab initio and (b) unenforceable for being illegal or against public policy, finding ACS’s motions to be without merit;
(2) the court denied ACS’s motion for summary judgment on the grounds that the options expired or were untimely exercised, based on the court’s finding that, as a matter of law, the options did not expire until October 3, 1997;
(3) the court granted the option holders’ motion for summary judgment on ACS’s defenses of complete and partial failure of consideration, finding no contested material facts to support submission of these defenses to the jury;
(4) the court granted the option holders’ motion for summary judgment on ACS’s defense of frustration of purpose, ruling that (a) no such legal defense exists as a matter of law and (b) even if it were to be adopted in Texas, it is not available to ACS as a matter of law;
(5) the court granted the option holders’ motion for summary judgment on the defense of waiver, finding no contested material facts to support submission of the defense to the jury; and
(6) the court found no defense of mutual mistake as a matter of law, based on the court’s previous finding that the vesting provision in the Original Plan was unambiguous.
ACS
begins by attacking the trial court’s order granting summary judgment to the
option holders on ACS’s defenses of failure of
consideration, frustration of purpose, and waiver. The option holders moved for summary judgment
on the ground there was no evidence to support these defenses. See
Tex. R. Civ.
P. 166a(i).
In reviewing a no-evidence summary judgment, we look at the evidence in
the light most favorable to the nonmovant and
disregard all evidence and inferences to the contrary. Lampasas
v. Spring Ctr., Inc.,
ACS
first argues the trial court erred in granting summary judgment on ACS’s affirmative defense of failure of consideration. Generally, failure of consideration occurs
when, because of some supervening cause after an agreement is reached, the
promised performance fails. Stewart v. United States Leasing Corp.,
ACS next claims the trial court erred in granting summary judgment on ACS’s frustration-of-purpose defense. However, ACS fails to cite to a single Texas case applying frustration of purpose as an affirmative defense to a claim for breach of contract. Nor does ACS present any argument or authorities explaining why this defense should be adopted. The trial court properly granted summary judgment on this purported defense.
Next,
ACS asserts it raised fact issues precluding summary judgment on the defense of
waiver. Waiver is defined as an
intentional relinquishment of a known right or intentional conduct inconsistent
with claiming that right. United States Fid. & Guar. Co. v. Bimco Iron & Metal Corp.,
ACS also cites deposition testimony from two option holders, James Shield and Linnea Rose. Rose testified she recognized the Amendment would alter the “Change of Control” provision in the Original Plan, but she did not understand what effect this change would have on her own options. We find this evidence insufficient to raise a fact issue with respect to ACS’s waiver defense. Shield, however, testified that at the time he signed the Amendment, he believed his options may have already been vested and the Amendment might change that. We conclude ACS has provided more than a scintilla of summary judgment evidence to support its claim that by signing the Amendment, Shield intended to relinquish known rights. Accordingly, with respect to ACS’s affirmative defense of waiver, we reverse only that portion of the summary judgment in favor of James Shield.
ACS
also argues that by insisting on performance, the option holders waived any
prior breaches or repudiations of the Original Agreement. Although this court has stated a party to a
contract may effectively waive a breach by the other party by continuing to
insist on performance, waiver in such cases is found only when the previously
breaching party subsequently performs. See, e.g., Delgado v. Methodist Hosp.,
In summary, we conclude ACS raised an issue of fact as to whether James Shield intentionally relinquished his rights under the Original Agreement by signing the Amendment. Thus, we reverse the summary judgment granted in favor of Shield on ACS’s affirmative defense of waiver. We find no error in the trial court’s other summary judgment rulings challenged by ACS.
Pretrial Conference Rulings
Next,
ACS complains the trial court exceeded its authority under Rule 166 by
disposing of disputed issues in a pretrial conference. The purpose of Rule 166 is “to assist in the
disposition of the case without undue expense or burden to the parties.” Tex.
R. Civ. P. 166. Before 1990, Rule 166 did not expressly
authorize the trial court to determine the merits of an issue, absent either
admissions by a party or an agreement of counsel. See,
e.g., Mason v. Tobin, 408 S.W.2d
243, 245 (Tex. Civ. App.—Houston 1966, no writ). However, a 1990 amendment, among other
things, added subsection (g), expressly allowing the trial court to use the
pretrial conference to consider “[t]he identification of legal matters to be
ruled on or decided by the court.” Tex. R. Civ. P. 166;
see also id. (“The court shall make an order . . . which limits the issues
for trial to those not disposed of by admissions, agreements of counsel, or rulings of the court . . . .”)
(emphasis added). Of course, the trial
court’s authority in a pretrial conference is limited to deciding legal, not
factual, issues. Issues that are
ordinarily fact questions become questions of law when reasonable minds cannot
differ on the outcome. See, e.g., Logan v. Mullis,
ACS
contends the trial court’s purported pretrial conference was actually a trial
on the merits, exceeding the trial court’s authority and depriving ACS of due
process and its right to a jury trial.
The constitutional right to trial by jury ultimately depends on the
existence of a material issue of fact. In re Higganbotham’s
Estate,
With
respect to ACS’s due-process complaint, ACS provides
no explanation why the trial court’s actions allegedly deprived it of due
process. ACS merely cites two opinions
from the First Court of Appeals: Murphree v. Ziegelmair,
Although
the trial court received exhibits and heard testimony from an expert witness,
the court made clear it was not admitting evidence for fact-finding purposes
but merely determining whether any fact issue remained for submission to a
jury.[15] We do not believe Rule 166, in its present
form, prevents a trial court from adopting such a procedure for the limited
purpose of identifying and ruling on legal issues, provided the court’s rulings
do not resolve factual disputes that properly fall within the province of the jury. Cf.
Martin v. Dosohs
I, Ltd.,
To
the extent ACS contends the trial court improperly disposed of claims or issues
that should have gone to the jury, we review ACS’s
complaint by the same standard used in reviewing a directed verdict. A directed verdict is warranted when the
evidence is such that no other verdict can be rendered and judgment should be
granted as a matter of law. Seymour v. American Engine & Grinding
Co.,
ACS first complains the trial court erred in finding no contested material issues existed on the option holders’ claim that ACS breached the Original Agreements. ACS does not dispute it failed to issue ACS stock in response to each option holder’s delivery to ACS of “written notice . . . accompanied by full payment” for the shares. ACS instead relies on its various affirmative defenses to avoid liability. Accordingly, the trial court did not err in concluding as a matter of law that ACS’s conduct, subject to any applicable affirmative defense, constituted a breach of the Original Agreements.
Next, ACS alleges the trial court improperly determined its affirmative defense of legal impossibility failed as a matter of law. In response, the option holders argue the trial court erred in concluding ACS’s obligations under the agreements were subject to the Cease and Desist Order. The option holders claim this ruling is contrary to OTS’s interpretation of its order as expressed in a letter from Richard Stearns, OTS’s Deputy Chief Counsel for Enforcement, in response to an inquiry about Patrick Walden’s suit against ACS. Stearns’s letter merely states the Cease and Desist Order does not prohibit Walden (or any other option holder not expressly named in that order) from seeking a court order or judgment to determine his entitlement to stock or payments.[17] This is consistent with the language in the Cease and Desist Order prohibiting ACS from issuing stock or making payments “unless required to do so by court order.” Here, in the absence of any court order to the contrary, ACS was bound by the terms of the Cease and Desist Order. Thus, we find no error in the trial court’s conclusion that ACS was subject to that order.
ACS
alleges its performance under either the Original or Amended Agreements was
excused by the doctrine of legal impossibility, citing Centex Corp. v. Dalton,
Unlike
the Bank Board’s order in Centex,
however, the Cease and Desist Order in this case had been terminated by the
time of trial. Accordingly, there
currently exists no legal impediment making ACS’s
performance impracticable. See Heritage
Bank v. Redcom Labs., Inc.,
At the time of delivery, [ACS] shall . . . deliver to the Option holder . . . a certificate or certificates for such shares, provided, however, that the time of delivery may be postponed by [ACS] for such period as may be required for it with reasonable diligence to comply with any requirements of law . . . . [Emphasis added.]
Thus, even though the Cease and Desist Order prevented
ACS from issuing stock, it did not prohibit ACS from performing its duties
under the Original Agreements. The only
allegations of impossibility center around the Cease and Desist Order and
issues of contract construction. These
are questions of law. See Elliott-Williams
Co. v. Diaz,
ACS
contends it raised fact issues on its affirmative defense of illegality. However, whether a contract is legally
enforceable is a question of law. See McCreary,
Next,
ACS claims it presented evidence that at the time the Original Plan was formed,
both ACS and Old Gibraltar mistakenly believed that Old Gibraltar would not be
dissolved, but instead would continue to exist under a federal program known as
the Southwest Plan.[18] Thus, ACS asserts it raised a contested issue
of fact as to whether the Original Plan was the product of a mutual mistake,
and should be rescinded. Under the
doctrine of mutual mistake, when parties to an agreement have contracted under
a misconception or ignorance of a material fact, the agreement will be
avoided. Williams v. Glash,
Finally,
ACS alleges Old Gibraltar’s board of directors never approved the list of
option recipients. ACS contends the
board’s approval was a condition precedent under the Original Plan, and
therefore, ACS raised a fact issue as to whether the options were void ab initio. Whether language in an agreement constitutes
a condition precedent is a matter of contract construction, which is a question
of law. See Elliott-Williams, 9
S.W.3d at 803; C & C Partners v. Sun
Exploration & Prod. Co.,
Because Rule 166 expressly authorizes the trial court to rule on legal issues before trial, we find no error in the trial court’s procedure for disposing of various claims and defenses as a matter of law. ACS failed to demonstrate that a genuine issue of material fact existed as to any of the matters ruled on by the trial court at the pretrial conference.
Failure To Exercise Options
ACS claims judgment should be rendered in its favor because the options expired by their terms while they could not legally be exercised. Both the Original Plan and the Amended Plan provide that “each unexercised Option, whether or not vested, shall expire . . . three years after an initial public offering of [ACS] Common Stock.” ACS argues the options expired on September 25, 1997, and the Cease and Desist Order prevented the options from being exercised until the next day. The trial court concluded as a matter of law ACS’s obligations under the option agreements were subject to the Cease and Desist Order, which was terminated on September 26, 1997. However, the trial court further ruled as a matter of law the date of the “initial public offering” of ACS stock was October 3, 1994, and therefore, the options expired by their terms on October 3, 1997.
ACS
first contends the trial court erred in concluding the “initial public offering
of Common Stock” occurred on October 3,
1994. We agree with
ACS. Construction of a contract is a
question of law. Elliott-Williams,
Next, the parties dispute how to calculate the date the options expire. ACS argues “three years after” September 26, 1994, ended just before midnight on September 25, 1997. Thus, according to ACS, any action taken by the option holders on September 26, 1997, would have been too late. While we agree with ACS’s method of calculating the three-year period, we disagree with its use of midnight as the cut-off. By law, ACS was not entitled to offer its common stock to the public until 4:30 p.m. on September 26, 1994. Accordingly, three years did not pass from ACS’s initial public offering until the same time on September 26, 1997.
The option holders contend they had a right to a one-year extension of the exercise period under the Original Plan. However, this provision applies only if ACS first determined “in its sole discretion” that no exemption from registration of the stock to be issued is available with respect to an option holder. Furthermore, the Original Plan states if ACS declines to issue stock under this provision, the option holder is “entitled to opt” for an extension of the exercise period. The option holders presented no evidence they sought such an extension. Thus, the three-year period for exercising options was not extended.
Finally, ACS contends because the Cease and Desist Order was not terminated until September 26, 1997, the options expired before they could be legally exercised by the option holders. We disagree. Both the Original Plan and the Amended Plan provide only for the expiration of “unexercised” options. The plans further state, “Options may be exercised . . . by written notice to [ACS] . . . accompanied by full payment, if any, for the shares . . . .” While the Cease and Desist Order expressly prohibited ACS from issuing stock to the option holders, it did not prohibit the option holders from exercising their options by delivering written notice to ACS accompanied by payment. With the sole exception of Don Rice, the option holders conclusively established that each of them provided written notice to ACS of their intent to exercise their options, with payment, before 4:30 p.m. on September 26, 1997. Because the record affirmatively shows Rice did not exercise his options before they expired, we conclude ACS is entitled to judgment as a matter of law on Rice’s claim for breach of the Original Agreement. As for the remaining option holders, however, the trial court properly held the options were timely exercised.
Based
on our conclusion judgment should have been entered against Rice on his breach-of-contract
claim, ACS urges us to render judgment that Rice take nothing. The option holders respond that rendition is
inappropriate because issues of negligent misrepresentation and fraud remain
for consideration.[19] The trial court expressly granted ACS summary
judgment on the option holders’ negligent-misrepresentation claims, and the
option holders have not assigned error to this ruling. Although ACS also moved for summary judgment
on the option holders’ fraud claims, the trial court held that those claims
were rendered moot by the court’s ruling that the Amendments were void for lack
of consideration. Thus, the trial court
never reached this issue. Furthermore,
the parties did not brief the question of whether ACS is entitled to judgment
on the option holders’ fraud claims.
Accordingly, we reverse Don Rice’s portion of the judgment and remand it
to the trial court to consider whether ACS is entitled to summary judgment on
Rice’s fraud claim. See Monsanto Co. v. Boustany,
Measure of Damages
Both
parties complain on appeal the trial court erred in measuring the option
holders’ damages on their breach-of-contract claims. Determining the proper method for measuring
damages is a question of law for the court.
See Allied Vista, Inc. v. Holt,
The
ultimate goal in measuring damages for a breach-of-contract claim is to provide
just compensation for any loss or damage actually sustained as a result of the
breach. See Stewart v. Basey, 150 Tex. 666, 245
S.W.2d 484, 486 (1952). In a case
involving a contract to deliver stock, the proper measure of damages for breach
of that contract is the same as for other contracts: the difference between the price contracted
to be paid and the value of the article at the time when it should have been
delivered. Miga v. Jensen, 46 Tex. Sup. Ct.
J. 89, 94,
Prejudgment Interest
Finally, ACS complains the trial court erred in awarding the option holders prejudgment interest at a rate of ten percent per year. ACS argues the court should have awarded prejudgment interest at the rate of six percent per year pursuant to section 302.002 of the Texas Finance Code. We hold that this statute does not apply to an award of prejudgment interest.
Until
1997, article 5069–1.03 of the Texas Revised Civil Statutes provided for
prejudgment interest at the rate of six percent per year on a
breach-of-contract claim involving a contract in which the amount payable could
be ascertained with reasonable certainty.
See Great Am. Ins. Co. v. North Austin Mun. Util. Dist. No. 1,
When the Texas Legislature enacted the Texas Credit Title in 1997, it apparently superseded former article 5069–1.03 with article 5069–1C.002. In 1999, the Legislature amended Texas Finance Code section 302.002 to delete the language of former article 5069–1.03 and substitute the language of article 5069–1C.002. See Act of Apr. 23, 1999, 76th Leg., R.S., ch. 62, § 7.18, 1999 Tex. Gen. Laws 127, 222–54. The Legislature noted that the purpose of this amendment was not to make a substantive change, but rather it was intended to conform the Texas Finance Code to the 1997 enactment of the Texas Credit Title. See id. Therefore, we look to article 5069–1C.002 to determine whether the option holders’ contract claim is subject to a statutory rate of prejudgment interest.
The relevant portion of article 5069–1C.002 provides as follows:
If a creditor has not agreed with an obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal interest at the rate of six percent a year on the principal amount of the credit extended by the creditor to the obligor beginning on the 30th day after the date on which the amount is due.
Act of June 2, 1997, 75th Leg., R.S., ch. 1396, § 1, 1997 Tex. Gen. Laws 5202, 5205 (codified at Tex. Fin. Code Ann. § 302.002 (Vernon Supp. 2002)). The Texas Credit Title specifically excludes “judgment interest” from the definition of “legal interest” in this provision. Id., 1997 Tex. Gen. Laws at 5203 (codified at Tex. Fin. Code Ann. § 301.002(a)(8)). “Judgment interest” is defined as “interest on a money judgment, whether the interest accrues before, on, or after the date the judgment is rendered.” Id. (codified at Tex. Fin. Code Ann. § 301.002(a)(7)). In addition, the statute excludes a judgment creditor from the definition of “creditor,” and the definition of “obligor” excludes a judgment debtor. Id., 1997 Tex. Gen. Laws at 5203–04 (codified at Tex. Fin. Code Ann. § 301.002(a)(3), (13)). Thus, we conclude that article 5069–1C.002, now Texas Finance Code section 302.002, does not apply to an award of prejudgment interest.
ACS
argues that this construction of section 302.002 conflicts with this court’s
prior opinion in Academy Corp. v.
Interior Buildout & Turnkey Construction, Inc.,
Because section 302.002 does not govern the award of prejudgment interest in this case, we overrule ACS’s complaint regarding the trial court’s method of calculating prejudgment interest.[23]
class=Section4>Conclusion
We conclude the trial court did not err in entering judgment in favor of Robert Butler on his claim for breach of the Original Agreement; however, the trial court erred in calculating his damages. We reverse those portions of the trial court’s judgment (1) determining that the measure of damages for ACS’s failure to transfer its stock is based on the value of the stock at the time of trial and (2) awarding Butler actual damages of $910,813.00. We remand to the trial court to recalculate Butler’s damages based on the value of ACS stock on September 29, 1997. Because the trial court’s award of prejudgment interest in a specified amount was presumably based on the amount of Butler’s actual damages, we modify the judgment to delete the court’s reference to Butler’s prejudgment interest “being the sum of $19,463.94.” As modified, we affirm the remainder of the trial court’s judgment in favor of Butler.
The trial court also erred in entering judgment for Don Rice on his breach-of-contract claim because, as a matter of law, his options expired before they were exercised. We reverse the portion of the trial court’s judgment in favor of Rice and remand for consideration of Rice’s fraud claim.
As to the remaining option holders, we conclude the trial court erred in granting summary judgment on their claim the Amendments should be rescinded for lack of consideration. Additionally, we conclude the trial court erred in granting summary judgment in favor of James Shield on ACS’s affirmative defense of waiver. We reverse the judgment in favor of these option holders and remand for further proceedings consistent with this opinion.
/s/ Leslie Brock Yates
Justice
Judgment rendered and Majority and Dissenting Opinions on Motions for Rehearing filed January 16, 2003.
Panel consists of Justices Yates, Edelman, and Wittig.[24] (Edelman, J., dissenting.)
Appellants/Cross-Appellees’ Motion for Rehearing Granted in Part and Overruled in Part; Appellee/Cross-Appellant’s Motion for Rehearing Overruled; Opinion of August 29, 2002, Withdrawn; Affirmed as Modified in Part, Reversed and Remanded in Part, and Majority and Dissenting Opinions on Motions for Rehearing filed January 16, 2003.
In The
Fourteenth Court of Appeals
_______________
NO. 14-99-00075-CV
_______________
PATRICK A. WALDEN, CHARLES ACKERMAN, JOHN AVERETT,
SAM BAUGHMAN, ROBERT BUTLER, RALPH CANNADY,
MIKE CLENDENNEN, MILTON COWDEN, WILLIAM DELONG,
LESLIE FLYNNE, LINDA HEWLETT, JAMES HURST, DONALD IMRIE, GEOFFREY JOHNSTON, LARRY KERSHNER, JERRY KILLINGSWORTH, MYRA MAYER, DON RICE, LINNEA ROSE, JAMES SHIELD, and
JERE SHOPF, Appellants and Cross-Appellees
V.
AFFILIATED COMPUTER SERVICES, INC. f/k/a
AFFILIATED COMPUTER SYSTEMS, INC., Appellee and Cross-Appellant
______________________________________________________________________
On Appeal from the 127th District Court
Harris County, Texas
Trial Court Cause No. 96-25829
______________________________________________________________________
D I S S E N T I N G O P I N I O N
The dissenting opinion issued in this case on August 29, 2002 is withdrawn and replaced by this opinion.
I agree with the majority opinion except with regard to the trial court’s actions at the pretrial conferences. In the absence of a no-evidence or traditional motion for summary judgment, admission, stipulation, or agreement of the parties on an issue, I do not agree that: (1) a trial court has authority in a pretrial conference to decide that sufficient evidence does not exist to allow that issue to be tried; or (2) such a decision by a trial court can be reviewed under a directed verdict standard.
Before a trial court may decide, by way of a summary judgment, that sufficient evidence does not exist to allow an issue to be tried, a motion must be filed at least 21 days before the matter is decided, during which time the non-moving party is on notice to submit evidence on the specified issue(s).[25] A motion for summary judgment must be filed by a party,[26] not sua sponte by the trial court. Moreover, a summary judgment may be granted and affirmed only on grounds expressly set forth in the motion[27] and can readily be reviewed on that basis. Unless a motion for summary judgment is properly granted, a party cannot be denied the right to present his evidence (or lack thereof) at a trial based on the insufficiency of that evidence.
By contrast, if a trial court is going to be allowed in a pretrial conference to decide whether sufficient evidence exists to allow an issue to be tried without a motion for a summary judgment being filed, there are no safeguards to assure that: (1) parties will be apprised in advance that evidence will need to be presented at the conference, on what issues, and in what forms, i.e., affidavits or live testimony; (2) the no-evidence grounds will be those raised by an opposing party, not the trial court; or (3) the means will exist to create an adequate record of what and how evidence was presented. How then can a pretrial conference ruling be reviewed under a directed verdict standard, particularly if no actual trial ever takes place at which the adversely affected party can make an offer of proof or bill of
class=Section6>exceptions?
The purpose of pretrial conferences is to simplify the trial to those issues not disposed of by admissions, agreement of the parties, or other rulings contemplated by the rules of procedure, such as summary judgments, not to circumvent the safeguards afforded by those rules.[28] Under the majority holding, pretrial conferences can be used as gatekeeping proceedings in which trial courts, rather than opponents, can put parties to task to demonstrate the sufficiency of their evidence before trials on those issues will be allowed. Even if there were merit in allowing such a gatekeeping step in the litigation process, the current lack of uniform procedures for doing so in a rule 166 pretrial conference make that an ill-suited mechanism for effecting it. Therefore, I would reverse and remand the judgment on the claims that were disposed of at the pretrial conferences other than by summary judgment, admission, stipulation, or agreement clearly reflected in the record.
/s/ Richard H. Edelman
Justice
Judgment rendered and Majority and Dissenting Opinions filed January 16, 2003.
Panel consists of Justices Yates, Edelman, and Wittig.[29]
[1] Among other things, the Amended Plan altered the vesting provision in the Original Plan to provide for vesting of options upon a “Change of Control” of ACS, rather than Old Gibraltar.
[2] One of the option holders in the 113th District Court also brought a claim for breach of the Amended Agreement.
[3] Subsequent pleadings also named as defendants Darwin Deason; Charles M. Young, ACS’s president; and ACS Government Services, Inc. Young was later nonsuited, and neither Deason nor ACS Government Services is a party to this appeal.
[4] Robert Butler, who never signed the Amendment, did not assert a claim for fraud or negligent misrepresentation.
[5] Only nine of the option holders asserted claims for breach of the Amended Agreements.
[6] As noted above, however, the parties entered into a stipulation regarding attorneys’ fees.
[7] The option holders argue, in the alternative,
the Amendments are void because they were not adopted in conformity with ACS’s by-laws. This
argument was not presented as a ground for summary judgment in the options
holders’ motion, but rather it appears for the first time in a “supplemental
reply” filed by the option holders.
Therefore, we cannot consider this argument on appeal. See
Guest v. Cochran,
[8] A third case cited by ACS, Winters v. FDIC,
[9] The Hibyan court’s conclusion was based on the use of the active
voice in the change-of-control provision: “The contract language plainly states
that a change of control event occurs if ‘The Company or the Bank shall . . . sell, exchange or transfer all or
substantially all of its assets to some other person . . . .’”
[10] Title IV of the National Housing Act was repealed when FSLIC was abolished in 1989; however, any rights, duties, or obligations that arose under Title IV and existed before August 9, 1989, were unaffected by the abolishment of FSLIC. See Pub. L. No. 101-73, § 401(f)(1), 103 Stat. 183, 356 (1989).
[11] The only other regulation ACS cites is one relating to employment contracts between a savings association and its employees. See 12 C.F.R. § 563.39 (2001). ACS fails to demonstrate how this regulation applies to ACS’s issuance of options to employees of Old Gibraltar and First Texas.
[12] Under the Amended Plan, each option holder “earned” twenty percent of his or her options each year for five years from the date the options were granted. Upon the termination of an option holder’s employment (other than for cause) with Old Gibraltar, First Texas, or a successor in interest, the option holder would become vested in all options that had been earned to that time. The option holder could then exercise those options for a period of sixty days from the date of termination.
[13] ACS also points to a short excerpt from the deposition of Kenneth Biederman, whom ACS does not otherwise identify. We find nothing in the cited excerpt supporting ACS’s position that the existence of the data-processing agreement was consideration for either the Original or Amended Agreements.
[14] Notably, at the November 5, 1998 hearing, in response to ACS’s general objection that “there are fact issues that should be submitted to the jury,” the trial court repeatedly indicated its willingness to sustain the objection and asked ACS to identify those issues that should have been submitted to a jury. With the sole exception of the proper measure of damages, for which the only factual dispute was later resolved by stipulation, ACS refused to identify a single issue.
[15] Furthermore, while ACS objected to the presentation of evidence during the various hearings, it filed an extensive offer of proof with exhibits (totaling over 3000 pages) in opposition to the court’s proposed rulings.
[16] The trial court’s approach is similar to that
recognized by several federal circuits under the federal counterpart to Rule
166. See
Fed. R. Civ.
P. 16. At least four courts of
appeals have held Federal Rule 16 permits the trial court to dispose of issues
summarily and without a motion when the pretrial conference discloses that no
material facts are in dispute. See Berkovitz v. Home Box Office, Inc.,
The dissent expresses some concerns with the use of Rule 166 in this way, most notably that a party may not be apprised of the need to present its evidence at the pretrial conference and a party may not be able to create an adequate record of the evidence presented. However valid these concerns may be in the abstract, they do not apply here. The pretrial conference in this case began the same day the case was set for trial; thus, ACS clearly was on notice it should be prepared to present its evidence and all claims and defenses were subject to final disposition. As for ACS’s ability to make a record, the trial court twice continued the pretrial conference and repeatedly gave ACS the opportunity to present evidence it believed raised a triable issue of fact. ACS ultimately filed an offer of proof consisting of over 3000 pages of affidavits and exhibits. Accordingly, ACS had the opportunity to and did create an adequate record for this court to review.
[17] At the time Stearns wrote this letter, the Cease and Desist Order was still in effect.
[18] The Southwest Plan was a program adopted by
the Federal Home Loan Bank Board in the late 1980s and designed to induce
private capital investors to bail out failed savings-and-loan associations in
the southwestern United States. See
generally Bluebonnet Sav. Bank v. FDIC,
[19] Rice did not allege breach of the Amended Agreement.
[20] As amended, article 5069–1.03 stated:
When no specified rate of interest is agreed upon by the parties, interest at the rate of six percent per annum shall be allowed on all accounts and contracts ascertaining the sum payable, commencing on the thirtieth (30th) day from and after the time when the sum is due and payable.
Act of May 24, 1979, 66th Leg., R.S., ch. 707, 1979 Tex. Gen. Laws 1718 (repealed 1997).
[21] We presume Academy was applying the current version of section 302.002 based on its cite to the version of the statute appearing in the 2000 supplement to the Vernon’s bound volume of the Texas Finance Code. See Academy, 21 S.W.3d at 744. We note, however, that the opinion does not set forth the statute’s language. Furthermore, the parties’ briefs in that case referred only to the pre-1999 version of section 302.002, which had purportedly codified article 5069–1.03.
[22] ACS also claims our decision conflicts with
this court’s opinion in Certain
Underwriters of Lloyd’s London v. Smith,
[23] On appeal, the only issue regarding prejudgment interest is whether the trial court should have applied the statutory rate of six percent per year. We otherwise express no opinion on the trial court’s calculation of prejudgment interest.
[24] Senior Justice Don Wittig sitting by assignment.
[25] See Tex. R. Civ. P. 166a(c), (i).
[26] See Tex. R. Civ. P. 166a.
[27] See Tex. R. Civ. P. 166a(c); Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 204 (Tex. 2002).
[28] See
Provident Life & Accident Ins. Co. v. Hazlitt,
[29] Senior Justice Don Wittig sitting by assignment.