For=20 The
CHRISTOPHER G.=20
DECLAIRE, Appellant G&B =
MCINTOSH=20
FAMILY LIMITED PARTNERSHIP, Appellee
On =
Appeal from the=20
269th District Court Harris =
County,=20
Texas Trial =
Court Cause=20
No. 2004-32948A
O P I N =
I O=20
N Appellant, =
Chris=20
DeClaire, appeals the trial court's judgment that found in favor =
of=20
appellee, G&B McIntosh Family Limited Partnership =
("Partnership"). In=20
13 issues, DeClaire argues that the trial court's findings of fact =
and=20
conclusions of law are erroneous because (1) the evidence is =
legally and=20
factually insufficient to establish fraud; (2) the parol evidence =
rule and=20
the merger doctrine bar the admission of evidence concerning an =
oral=20
agreement; (3) the judgment creates a usurious transaction; and =
(4) the=20
trial court erred in awarding attorney's fees, interest, and=20
costs. We reverse and =
remand.
In June 2001, DeClaire obtained =
a loan=20
from Bank One in the face amount of $160,000 (the "Bank One =
Loan"). The=20
Bank One Loan subsequently became undercollateralized. Bank One =
asked=20
DeClaire to pledge additional collateral. DeClaire approached =
Jerry=20
McIntosh, a general partner of the Partnership and with whom he =
had a=20
previous business relationship, for assistance. In 2001, McIntosh =
agreed=20
to pledge $193,000 in marketable securities owned by the =
Partnership=20
against the Bank One Loan. McIntosh thought that the pledging of =
assets=20
would be short term, but it actually lasted three to four years.=20
Thereafter, on or about May 7, 2003, DeClaire signed a promissory =
note in=20
favor of Bank One for $159,000 with a maturity date of February 8, =
2004.=20
McIntosh signed a pledge agreement incident to the Partnership =
assets=20
already pledged against the Bank One Loan. In the summer of 2004, =
the=20
Partnership thought that the Bank One Loan would not be renewed, =
and it=20
feared that, unless the Bank One Loan was paid off, the =
Partnership's=20
collateral would be liquidated to pay the outstanding balance. For =
the=20
prior three years, DeClaire had paid only the interest on the Bank =
One=20
Loan, and, therefore, the face amount remained approximately =
$160,000.=20
In 2004, McIntosh, on behalf of =
the=20
Partnership, paid off DeClaire's debt at Bank One pursuant to an =
agreement=20
with DeClaire and took a promissory note from DeClaire (the =
"DeClaire=20
Note") that was secured by shares of common stock in a =
closely-held=20
company known as Coastal Caverns, Inc. In June=20
2004, DeClaire filed for divorce. The Partnership intervened and =
sought a=20
temporary restraining order and a temporary injunction. The =
Partnership=20
alleged causes of action for breach of contract and fraud and=20
misrepresentation in connection with the DeClaire Note. In its =
second=20
amended plea in intervention, the Partnership amended its breach =
of=20
contract cause of action to a breach of an oral agreement. It =
asserted the=20
same causes of action it had asserted in its original plea in=20
intervention, plus claims for declaratory judgment and unjust =
enrichment.=20
On March 17, 2005, DeClaire filed his original answer and =
counterclaim to=20
the intervention of the Partnership. Additional amended answers =
were filed=20
that culminated in a fifth amended answer. In his answer, DeClaire =
stated=20
that the terms of the DeClaire Note provided that he could pay the =
Note=20
off either by paying $216,260 to the Partnership or by letting =
100,000=20
shares of Coastal Caverns common stock serve as the sole source of =
repayment to the Partnership. On March=20
22, 2005, the presiding judge of the 312th District Court, the =
Honorable=20
James D. Squire, issued a temporary injunction and ordered that =
DeClaire=20
deposit $250,000 and 100,000 shares of Coastal Caverns, Inc. =
common stock=20
into the court registry. Judge Squire severed the underlying =
divorce=20
proceeding and transferred the intervention and counterclaim to =
the 269th=20
District Court. The trial=20
court entered a final judgment on March 3, 2006 in favor of the=20
Partnership. The trial court ordered DeClaire to pay $159,000 =
"plus=20
accrued but unpaid interest thereon at a rate of ten percent (10%) =
per=20
annum beginning on September 15, 2004 through the date of trial, =
as=20
repayment for the Partnership having paid off the Bank One Loan." =
The=20
trial court further ordered DeClaire to pay the Partnership =
$54,000 "as=20
payment for DeClaire's use of Partnership assets that were pledged =
on the=20
Bank One Loan." The trial court further ordered that DeClaire pay =
to the=20
Partnership $68,000 "as reasonable and necessary attorneys' fees =
and . . .=20
[$3,000] as taxable costs through the time of trial" and that he =
pay=20
contingent attorney's fees for appeal. The trial court ordered =
that=20
DeClaire could, at his option, pay part of the final judgment with =
the=20
100,000 shares of Coastal Caverns, Inc. common stock that was =
currently=20
being held in the court registry. The trial court stated that the =
value of=20
the stock could not exceed $.20 per share. In its final judgment, =
the=20
trial court denied DeClaire's objections to the court's findings =
of fact=20
and conclusions of law. DeClaire filed a motion for new trial, =
which the=20
trial court denied. Pertinent=20
to this appeal, the trial court made the following =
findings: 10. On or about May 7, 2003, =
DeClaire=20
signed a promissory note with Bank One for $159,000. At that time, =
McIntosh signed a pledge agreement incident to Partnership assets =
that=20
were already pledged against the Bank One Loan. That loan was set =
to=20
mature on February 8, 2004. 16. When Steve Barth ("Barth") =
learned of=20
the situation with the Bank One Loan, he offered to assist with =
resolving=20
the situation. Thereafter, Barth served as a facilitator between =
DeClaire=20
on the one hand, and the Partnership (by and through Russell) on =
the=20
other. Specifically, Barth helped DeClaire and the partnership =
establish=20
the terms of an oral agreement whereby (i) the Partnership would =
pay off=20
the Bank One Loan, (ii) DeClaire would repay the Partnership, with =
interest, in 2005, (iii) DeClaire would compensate the Partnership =
for the=20
use of its collateral for three years, and (iv) DeClaire would =
pledge=20
collateral (shares of Coastal Caverns, Inc. common stock) toward =
his=20
obligation to the Partnership. 17. Rob James ("James") also =
offered to=20
help DeClaire. In an effort to avoid DeClaire having to report =
ordinary=20
income from the pay off of the Bank One Loan, Barth [sic] agreed =
to draft=20
a promissory note to memorialize the oral agreement. That =
promissory note=20
would also extend the payment of DeClaire's obligation to the =
partnership=20
into 2005 so DeClaire could treat the transaction as a long-term =
capital=20
gain (instead of ordinary income) if he were forced to liquidate =
the=20
Coastal Caverns, Inc. common stock to pay off the=20
partnership. 18. McIntosh had a conversation =
with=20
DeClaire during which DeClaire agreed to pledge 100,000 shares of =
Coastal=20
Caverns, Inc. common stock as collateral for his obligation to the =
Partnership. McIntosh, Russell and the partnership always expected =
DeClaire to repay his obligation to the Partnership in cash. Any=20
collateral pledged was viewed as added security in the event of =
default.=20
20. On or about September 7, =
2004, James=20
drafted a promissory note for DeClaire and McIntosh to consider. =
James=20
then e-mailed the draft to Barth, who e-mailed it to Russell on =
September=20
13, 2004. The draft did not contain any language limiting =
DeClaire's=20
repayment to the Partnership, which was to be the payee on the =
promissory=20
note. Russell made no other suggestions with regard to the draft.=20
23. On the morning of September =
16, 2004,=20
prior to DeClaire signing the Promissory Note, Russell e-mailed =
Guin with=20
instructions to liquidate the Partnership's collateral account and =
pay off=20
the Bank One Loan. The assets in the collateral account were =
mutual funds=20
that could be liquidated in one day. At that time, McIntosh and =
Russell=20
considered the oral agreement in place and the promissory note =
merely a=20
formality to assist DeClaire with tax avoidance =
issues. 24. On that same morning, =
DeClaire, Barth=20
and James all convened in Barth's office and revised the draft =
promissory=20
note. DeClaire represented to Barth and/or James that McIntosh =
agreed to=20
100,000 shares of Coastal Caverns, Inc. common stock as collateral =
for the=20
note. DeClaire further represented to Barth and/or James that =
McIntosh=20
agreed to look solely to the 100,000 shares of Coastal Caverns, =
Inc.=20
common stock for repayment of the note. DeClaire then requested =
that=20
language be added to the draft to accomplish that =
outcome. 25. The Partnership did not =
receive any=20
consideration for the revised language in the promissory note =
limiting=20
repayment of DeClaire's obligation solely to Coastal Caverns, Inc. =
common=20
stock. 26. James revised the draft =
promissory=20
note on September 16, 2004 in accordance with DeClaire's =
representations=20
and requests. James also included the face amount of $216,260.00 =
in the=20
revised draft. When DeClaire inquired [about] the amount, James =
told him=20
that it included compensation to the Partnership for use of its=20
collateral. DeClaire did not complain about the amount, or any =
other term=20
of the revised draft, and later signed it. DeClaire knew that his =
Coastal=20
Caverns, Inc. common stock was speculative and had little or no =
market=20
value. 28. The revised promissory not =
was never=20
presented to McIntosh or Russell prior to DeClaire signing=20
it. 29. Neither McIntosh, Russell =
nor the=20
Partnership agreed to look solely to the Coast[al] Caverns, Inc. =
common=20
stock as full repayment of DeClaire's obligation to the=20
Partnership. 30. After the note was printed =
in its=20
revised form, DeClaire signed it on the afternoon of September 16, =
2004=20
(the "Promissory Note"). 31. McIntosh later took =
possession of the=20
Promissory Note while in Houston. Prior to taking possession of =
the=20
Promissory Note, McIntosh called Russell to make sure it was =
proper to=20
take it. Russell told McIntosh to take the Promissory Note as long =
as it=20
was the same as the draft Russell received from Barth. Upon =
inquir[y],=20
McIntosh was told that the Promissory Note was the same as the =
draft, so=20
he took possession. The trial court made the =
following=20
pertinent conclusions of law: Breach of=20
Contract 1. Prior to September 16, 2004, =
DeClaire=20
and the Partnership orally agreed to the following terms: (i) the=20
Partnership would pay off the $159,000.00 Bank One Loan for =
DeClaire, (ii)=20
DeClaire would repay the partnership the $159,000.00 plus accrued=20
interest; (iii) DeClaire would pledge 100,000 shares of coastal =
Caverns,=20
Inc. common stock as collateral to secure his obligation to the=20
Partnership, (iv) DeClaire would reasonably compensate the =
Partnership for=20
having pledged assets for DeClaire's benefit for the preceding =
three=20
years, (v) DeClaire would pay interest on the obligation at a =
reasonable=20
rate, and (vi) the obligation would mature in the spring of=20
2005. 4. Neither McIntosh nor the =
Partnership=20
accepted the Promissory Note or its terms to the extent that it =
includes=20
language limiting repayment solely to 100,000 shares of Coastal =
Caverns,=20
Inc. common stock. 5. DeClaire did not give =
consideration to=20
the partnership for language inserted into the Promissory Note =
limiting=20
repayment to 100,000 shares of Coastal Caverns, Inc. common=20
stock. 6. The Partnership is not =
required to=20
accept 100,000 shares of Coastal Caverns, Inc. common stock as the =
sole=20
source of repayment of DeClaire's obligation under the oral=20
contract. 8. There was mutual mistake =
and/or no=20
meeting of the minds with regard to the inclusion of the limited =
recourse=20
language in the Promissory Note. The facts demonstrate that the =
sole=20
source language was not agreed to by the parties, but rather was =
inserted=20
by DeClaire in an attempt to personally avoid repayment of the =
loan for=20
cash. Declaratory=20
Judgment 9. DeClaire agreed to =
reasonably=20
compensate McIntosh (and ultimately the Partnership) for the use =
of=20
Partnership assets that were pledged on the Bank One =
Loan. 10. McIntosh (and the =
Partnership) is=20
entitled to reasonable compensation in the amount of $54,000.00 =
for the=20
use of its collateral from 2001 to 2004. Fraud 2. DeClaire misrepresented to =
Barth and=20
James (who were acting as intermediaries) that McIntosh had agreed =
to=20
revisions to the Promissory Note that would limit the repayment of =
that=20
obligation solely to 100,000 shares of Coastal Caverns, Inc. =
common=20
stock.
3. Neither McIntosh (and the =
Partnership)=20
nor Russell ever agreed to limit repayment of the Promissory Note =
to=20
100,000 shares of Coastal Caverns, Inc. common =
stock. 5. The Partnership relied to =
its=20
detriment on the representations of DeClaire under the terms of =
the oral=20
contract. DeClaire's attempt to modify that contract has harmed =
the=20
Partnership. Unjust=20
Enrichment 1. DeClaire will be unjustly =
enriched in=20
the absence of him reasonably compensating the Partnership for the =
use of=20
its collateral from 2001 to 2004. 2. DeClaire will be unjustly =
enriched in=20
the absence of him repaying the Partnership for it having paid off =
the=20
Bank One Loan. The 100,000 shares of Coastal Caverns, Inc. common =
stock is=20
wholly insufficient to fully repay the Partnership.
In an=20
appeal of a judgment rendered after a bench trial, the trial =
court's=20
findings of fact have the same weight as a jury's verdict, and we =
review=20
the legal and factual sufficiency of the evidence used to support =
them=20
just as we would review a jury's findings. Catalina v. =
Blasdel,=20
881 S.W.2d 295, 297 (Tex. 1994); In re K.R.P., 80 S.W.3d =
669, 673=20
(Tex. App.--Houston [1st Dist.] 2002, pet. denied). When =
challenged, a=20
trial court's findings of fact are not conclusive if, as in the =
present=20
case, there is a complete reporter's record. In re =
K.R.P., 80=20
S.W.3d at 673; Amador v. Berrospe, 961 S.W.2d 205, 207 =
(Tex.=20
App.--Houston [1st Dist.] 1996, writ denied). When a party without =
the=20
burden of proof at trial challenges the legal sufficiency of the =
evidence,=20
we consider all of the evidence in the light most favorable to the =
prevailing party, indulging every reasonable inference in that =
party's=20
favor. Assoc. Indem. Corp. v. CAT Contracting, Inc., 964 =
S.W.2d=20
276, 285-86 (Tex. 1998). If there is any evidence of probative =
force to=20
support the finding, i.e., more than a mere scintilla, we will =
overrule=20
the issue. Formosa Plastics Corp. USA v. Presidio Eng'rs & =
Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998). In our =
review of=20
the factual sufficiency of the evidence, we must consider and =
weigh all of=20
the evidence, and we will set aside a verdict only if the finding =
is so=20
against the great weight and preponderance of the evidence, that =
it is=20
clearly wrong and unjust. Ortiz v. Jones, 917 S.W.2d 770, =
772=20
(Tex. 1996). We review a trial court's conclusions of law de novo. =
In=20
re Moers, 104 S.W.3d 609, 611 (Tex. App.--Houston [1st Dist.] =
2003,=20
no pet.). We independently evaluate a trial court's conclusions to =
determine their correctness, and we will uphold conclusions on =
appeal if=20
the judgment can be sustained on any legal theory supported by the =
evidence. Id.
Did the parties =
have a valid,=20
written contract? In his fourth issue, DeClaire =
argues that=20
the parol evidence rule bars the Partnership from asserting the =
existence=20
of an alleged oral agreement that is inconsistent with the terms =
of the=20
written DeClaire Note. In his twelfth issue, he argues that the =
trial=20
court's conclusion of law regarding the Partnership's request for=20
declaratory relief is incorrect. To address these issues, we first =
determine whether the parties had a valid, written =
contract. The September 16, 2004 =
promissory note=20
states: FOR VALUE RECEIVED, CHRISTOPHER =
G.=20
DECLAIRE, 2300 McCue #138, Houston, Texas 77056 (the "Maker"), =
promises to=20
pay to the order of G&B McIntosh Family Limited partnership =
(the=20
"payee"), 20 Laurelwood Drive, Fletcher, North Carolina 28732, the =
principal sum of TWO HUNDRED SIXTEEN THOUSAND TWO HUNDRED SIXTY =
AND 00/100=20
DOLLARS ($216,260.00), in such coin or currency of the United =
States of=20
America as at the time of payment shall be legal tender for the =
payment of=20
public and private debts, together with interest on the unpaid =
balance=20
thereof from the date hereof at the rate of ten percent (10%) per =
annum,=20
compounded monthly, payable in like coin or currency, until the =
full=20
amount of this Note, both principal and interest, is =
paid. All principal of this Note and =
all unpaid=20
accrued interest thereon shall be due and payable in full in one =
payment=20
on or before March 6, 2005. . . . This Note is solely secured by =
those=20
100,000 shares of the common stock of Coastal Caverns, Inc. placed =
into=20
escrow with the Payee as security for this Note. If the Note is =
not paid=20
in full prior to the maturity date, the escrowed shares shall =
serve as the=20
sole source of repayment for the outstanding principal and =
interest due=20
under this note. The promissory note in this =
case is a=20
negotiable instrument to which the Texas Uniform Commercial Code=20
applies. Here, the=20
DeClaire Note was signed by DeClaire and dated September 16, 2004. =
The=20
DeClaire Note contains all the terms of a valid contract in that =
it=20
provides that DeClaire promises to pay the Partnership $216,260.00 =
due on=20
March 6, 2005. Although McIntosh did not sign the Note, a contract =
can=20
still be effective if only signed by one party. See, e.g, =
Velasquez v. Schuehle, 562 S.W.2d 1, 3 (Tex. Civ. =
App.--San=20
Antonio 1977, no writ). McIntosh picked up the Note on the same =
day and=20
subsequently gave it to his financial advisor. Neither McIntosh =
nor anyone=20
else representing the interests of the Partnership objected to the =
terms=20
of the DeClaire Note. By taking possession of the Note and not =
objecting=20
to any part of it, McIntosh accepted its terms on behalf of the=20
Partnership. See Anderson, 115 S.W.2d at 610. =
Thus, we=20
conclude that the parties entered into a valid, written=20
contract. We next=20
determine whether the trial court could consider parol evidence. =
The parol=20
evidence rule is a rule of substantive law. Hubacek v. Ennis =
State=20
Bank, 159 Tex. 166, 317 S.W.2d 30, 31 (1958); Gonzalez v. =
United=20
Bd. of Carpenters & Joiners, 93 S.W.3d 208, 211 (Tex.=20
App.--Houston [14th Dist.] 2002, no pet.); Piper, Stiles & =
Ladd v.=20
Fid. & Deposit Co., 435 S.W.2d 934, 940 (Tex. Civ. =
App.--Houston=20
[1st Dist.] 1968, writ ref'd n.r.e.). When parties reduce an =
agreement to=20
writing, the law of parol evidence presumes, in the absence of =
fraud,=20
accident, or mistake, that any prior or contemporaneous oral or =
written=20
agreements merged into the written agreement and, therefore, that =
any=20
provisions not set out in the writing were either abandoned before =
execution of the agreement or, alternatively, were never made and =
are thus=20
excluded from consideration in interpreting the written agreement. =
See=20
Hubacek, 317 S.W.2d at 31; Smith v. Smith, 794 =
S.W.2d 823,=20
827 (Tex. App.--Dallas 1990, no writ); Muhm v. Davis, 580 =
S.W.2d=20
98, 101 (Tex. Civ. App.--Houston [1st Dist.] 1979, writ ref'd =
n.r.e.). The=20
terms of a promissory note cannot be contradicted or varied by =
parol=20
evidence of a manner of payment other than as expressed in the =
note.=20
Dameris v. Homestead Bank, 495 S.W.2d 52, 54 (Tex. Civ.=20
App.--Houston [1st Dist.] 1973, no writ). We review=20
parol evidence questions de novo, as questions of law. City of =
Pasadena v. Gennedy, 125 S.W.3d 687, 691 (Tex. App.--Houston =
[1st=20
Dist.] 2003, pet. denied). Evidence that violates the parol =
evidence rule=20
has no legal effect and "merely constitutes proof of facts that =
are=20
immaterial and inoperative." Piper, Stiles & Ladd, =
435 S.W.2d=20
at 940. Because all prior negotiations and agreements are presumed =
merged=20
into the final agreement, parol evidence is not admissible to =
vary, alter,=20
or supplement the terms of an otherwise unambiguous contract =
except to=20
show (1) that the contract was induced by fraud, accident, or =
mistake; (2)=20
that an agreement was to become effective only upon certain =
contingencies;=20
or (3) in the case of ambiguity, that the parties' true intentions =
differ=20
from those expressed in the agreement. See Messer v. =
Johnson, 422=20
S.W.2d 908, 912 (Tex. 1968); Gonzalez, 93 S.W.3d at 211;=20
Litton v. Hanley, 823 S.W.2d 428, 430 (Tex. App.--Houston =
[1st=20
Dist.] 1993, no writ). Parol=20
evidence may also be admissible, under an additional exception, to =
show=20
collateral, contemporaneous agreements that are consistent with =
the=20
underlying agreement to be construed. See Hubacek, 317 =
S.W.2d at=20
31; see also Transit Enter., Inc. v. Addicks Tire =
& Auto=20
Supply, Inc., 725 S.W.2d 459, 461 (Tex. App.--Houston [1st =
Dist.]=20
1987, no writ) (applying exception for collateral, consistent,=20
contemporaneous agreements); Sherrod v. Bailey, 580 =
S.W.2d 24, 29=20
(Tex. Civ. App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.) =
(same). But=20
this latter exception does not permit parol evidence that varies =
or=20
contradicts either the express terms or the implied terms of the =
written=20
agreement. Hubacek, 317 S.W.2d at 31; Loe v. =
Murphy, 611=20
S.W.2d 449, 451-52 (Tex. Civ. App.--Dallas 1980, writ ref'd =
n.r.e.);=20
NHA, Inc. v. Jones, 500 S.W.2d 940, 944-45 (Tex. Civ. =
App.--Fort=20
Worth 1973, writ ref'd n.r.e.) (both citing =
Hubacek). Here, the=20
trial court found that DeClaire and McIntosh entered into an oral=20
agreement whereby DeClaire would repay the Partnership $159,000.00 =
plus=20
interest. The parties' written contract--the DeClaire =
Note--included the=20
same terms as the oral agreement, with the addition of the sole =
recourse=20
language. Because the oral agreement is inconsistent with the =
written=20
contract, we conclude that the trial court was precluded from =
enforcing=20
the prior oral agreement. See Baroid Equip., 184 S.W.3d =
at 16;=20
Simmons v. Compania Financiera Libano, S.A., 830 S.W.2d =
789, 791=20
(Tex. App.--Houston [1st Dist.] 1992, writ denied) (holding that =
the=20
"clear terms of a negotiable instrument, such as the ones in this =
case,=20
cannot be varied by a parol agreement which purports to change the =
obligor's responsibilities"); Texas Export =
Development Corp.=20
v. Schleder, 519 S.W.2d 134, 137 (Tex. Civ. App.--Dallas =
1974, no=20
writ) (holding that parol evidence tendered by maker of note is=20
inadmissible because it "negates the very obligation imposed upon =
him in=20
the written instrument"). Because the trial court could not rely =
on parol=20
evidence, we also conclude that legally insufficient evidence =
supports the=20
trial court's ninth and tenth conclusions of law under the =
declaratory=20
judgment sub-heading. We sustain=20
DeClaire's fourth and twelfth issues. Because we sustain =
DeClaire's fourth=20
issue and twelfth issues, it is not necessary to address =
DeClaire's fifth=20
and sixth issues, concerning the validity of an oral agreement. =
See=20
Tex. R. App. P. 47.1. In his=20
second issue, DeClaire argues that legally and factually =
insufficient=20
evidence supports the trial court's findings of fact and =
conclusions of=20
law regarding McIntosh's justifiable reliance on any alleged=20
misrepresentation in connection with the DeClaire Note. DeClaire =
asserts=20
that the Partnership's fraud theory fails because (a) "DeClaire's =
alleged=20
'misrepresentation' never reached [McIntosh] and thus [McIntosh] =
cannot=20
purport to have reasonably or justifiably relied on it, and (b) =
because=20
the evidence conclusively shows that [McIntosh] did not in fact =
reasonably=20
or justifiably rely on any alleged =
'misrepresentation.'" To recover=20
on an action for fraud, the plaintiff must prove that (1) a =
material=20
representation was made; (2) the representation was false; (3) =
when the=20
speaker made the representation, he knew it was false or made it=20
recklessly without knowledge of the truth as a positive assertion; =
(4) the=20
speaker made it with the intention that it should be acted upon by =
the=20
party; (5) the party acted in reliance upon it; and (6) the party =
thereby=20
suffered injury. Johnson & Higgins of Tex., Inc. v. =
Kenneco=20
Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998). One of the=20
elements of a fraud claim is that the plaintiff actually and =
justifiably=20
relied on the misrepresentation to suffer injury. Ernst & =
Young,=20
L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. =
2001);=20
Restatement (Second) of Torts =A7 537 (1977). In this regard, a =
party to an=20
arm's length transaction must exercise ordinary care and =
reasonable=20
diligence for the protection of his own interests, and a failure =
to do so=20
is not excused by mere confidence in the honesty and integrity of =
the=20
other party. Thigpen v. Locke, 363 S.W.2d 247, 251 (Tex. =
1962);=20
Coastal Bank SSB v. Chase Bank of Tex., N.A., 135 S.W.3d =
840, 843=20
(Tex. App.--Houston [1st Dist.] 2004, no pet.). Therefore, =
reliance upon=20
an oral representation that is directly contradicted by the =
express,=20
unambiguous terms of a written agreement between the parties is =
not=20
justified as a matter of law. DRC Parts & Accessories, =
L.L.C. v.=20
VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex. App.--Houston =
[14th=20
Dist.] 2003, pet. denied). In DRC Parts, the Fourteenth =
Court of=20
Appeals stated, This=20
principle is also dictated by policy and practical considerations. =
If=20
written contracts are to serve a purpose under the law, relative =
to oral=20
agreements, it is to provide greater certainty regarding what the =
terms of=20
the transaction are and that those terms will be binding, thereby=20
lessening the potential for error, misfortune, and dispute. =
a =
party's=20
exercise of a right under the written contract, which is contrary =
to the=20
oral agreement, would subject that party to a fraudulent =
inducement claim=20
based on the oral agreement. In that event, however, the party who =
entered=20
into the written contract while relying on a contrary oral =
agreement would=20
have thereby itself entered into the written contract with an =
intent not=20
to perform it. Thus, in order to show its reliance on the oral =
agreement=20
to sustain its own fraudulent inducement claim, that party would=20
necessarily prove that it was guilty of fraudulent inducement as=20
well. The=20
essential issue, then, is not whether that party's evidence of the =
contrary oral agreement is admissible or sufficient to prove that=20
agreement, but instead whether the law will deem such reliance to =
be=20
justified and thereby favor that party to the detriment of the =
other=20
contracting party, which has at least declared its intent in the =
contract=20
and sought to abide by its terms. Because such an approach would =
defeat=20
the ability of written contracts to provide certainty and avoid =
dispute,=20
the prevailing rule, recited above, is instead that a party who =
enters=20
into a written contract while relying on a contrary oral agreement =
does so=20
at its peril and is not rewarded with a claim for fraudulent =
inducement=20
when the other party seeks to invoke its rights under the =
contract.=20
The=20
undisputed evidence shows that McIntosh received the written =
promissory=20
note, i.e., the DeClaire Note, but did not read it other than to =
verify=20
that DeClaire had signed it. He subsequently gave the DeClaire =
Note to=20
Russell, his financial advisor, who also admitted that he did not =
read the=20
DeClaire Note. It was not until the Partnership attempted to =
enforce the=20
DeClaire Note that McIntosh discovered that it included the sole =
recourse=20
language. Because the parties entered into a valid, written =
promissory=20
note, McIntosh cannot now complain that he justifiably relied on a =
prior=20
oral representation as a matter of law. See id.; =
see=20
also In re Media Arts Group, 116 S.W.3d 900, 908 (Tex.=20
App.--Houston [14th Dist.] 2003, orig. proceeding) (stating that, =
absent=20
fraud, a party to a contract may not successfully claim he =
believed the=20
provisions of a contract were different from those plainly set out =
in the=20
contract or he did not understand the language used). Moreover, "a =
party=20
to a written agreement is charged as a matter of law with =
knowledge of its=20
provisions . . . unless he can demonstrate that he was tricked =
into its=20
execution." Town North Nat. Bank v. Broaddus, 569 S.W.2d =
489, 492=20
(Tex. 1978) (quoting Texas Export Dev., 519 S.W.2d at =
139). The=20
Partnership did not claim that it was tricked into accepting the =
terms of=20
the DeClaire Note. Rather, the evidence shows that McIntosh and =
Russell=20
failed to read the contents of the DeClaire Note. Thus,=20
because the Partnership cannot rely on a prior oral agreement =
after=20
accepting the terms of the written promissory note, we conclude =
that=20
legally insufficient evidence supports the trial court's findings =
of fact=20
and conclusions of law stating that the written contract was =
procured by=20
fraud. We sustain=20
DeClaire's second issue. Because we sustain DeClaire's second =
issue, it is=20
not necessary to address DeClaire's first and third issues =
concerning=20
fraud. We now turn=20
to whether the Partnership raised any defenses that would preclude =
the=20
trial court from enforcing the DeClaire Note. In its fourth, =
fifth, and=20
eighth conclusions of law under the breach of contract =
sub-heading, the=20
trial court found that the limited recourse clause lacked =
consideration,=20
that the parties had made a mutual mistake, and that the limited =
recourse=20
clause was not accepted. Appellant challenges these conclusions in =
his=20
seventh, eighth, and ninth, issues on appeal. In its=20
pleadings, the Partnership raised none of the defenses that the =
trial=20
court found in its conclusions of law. See Tex. R. Civ. =
P. 301=20
("The judgment of the court shall conform to the pleadings . . . =
.").=20
Affirmative defenses not affirmatively pled are waived. See =
Tex.=20
R. Civ. P. 94 (providing that affirmative defense of lack of =
consideration=20
and any other matter constituting an avoidance or affirmative =
defense must=20
be affirmatively pled). Here, the=20
evidence shows that the Partnership sought to enforce a prior oral =
agreement that did not include sole recourse language, while =
DeClaire=20
sought to enforce the written agreement that included the sole =
recourse=20
language. Instead of a mutual mistake, the evidence demonstrates =
that the=20
parties were relying on separate agreements with different =
meanings.=20
DeClaire testified that he would not have signed the DeClaire Note =
if it=20
did not have the sole recourse language, while McIntosh testified =
that he=20
would not have accepted the Note if he had known that it had the =
sole=20
recourse language. Although it is possible that one of the parties =
was=20
mistaken about the contents of the Note, no evidence shows that =
both=20
parties were under the same misunderstanding of the same fact. =
Thus, the=20
trial court's eighth conclusion of law is incorrect as a matter of =
law. We sustain=20
DeClaire's seventh, eighth, and ninth issues on appeal. In his=20
tenth issue on appeal, DeClaire argues that the trial court erred =
in=20
concluding that DeClaire was liable to the Partnership under the =
doctrine=20
of unjust enrichment. Generally=20
speaking, when a valid, express contract covers the subject matter =
of the=20
parties' dispute, there can be no recovery under a quasi-contract =
theory,=20
such as unjust enrichment. Fortune Prod. Co. v. Conoco, =
Inc., 52=20
S.W.3d 671, 684 (Tex. 2000). There are, however, exceptions to =
this=20
general rule. A claim for unjust enrichment may be had where =
overpayment=20
was made under a valid contract. See Southwestern Elec. Power =
Co. v.=20
Burlington N. R.R. Co., 966 S.W.2d 467, 469 (Tex. =
1998). Here, the=20
parties entered into a valid, written contract and nothing =
suggests that=20
overpayment was made on the contract. Thus, the Partnership cannot =
rely on=20
unjust enrichment. Therefore, we hold that the trial court's =
unjust=20
enrichment conclusions of law to the contrary are incorrect as a =
matter of=20
law. We sustain=20
DeClaire's tenth issue on appeal. Because we=20
hold that the parties are bound to the September 16, 2007 =
promissory note,=20
it is not necessary for us to address DeClaire's eleventh issue, =
which=20
argues that the trial court erred in concluding that DeClaire =
could not=20
maintain a usury claim or defense. See Tex. R. App. P. =
47.7.=20
In his=20
thirteenth issue, Declaire argues that the trial court erred in =
awarding=20
attorney's fees, postjudgment interest and costs. Because of our=20
disposition on DeClaire's issues, we reverse and remand the =
portion of the=20
trial court's judgment that awarded attorney's fees, postjudgment=20
interest, and costs. We sustain=20
DeClaire's thirteenth issue on appeal.
We reverse=20
the judgment of the trial court and render judgment that the =
Partnership=20
is bound by the terms of the September 16, 2007 promissory note. =
We remand=20
to the trial court to enter a judgment in accordance with this =
opinion. We=20
also reverse the portion of the trial court's judgment that =
awarded=20
attorney's fees, postjudgment interest, and costs in this cause =
and remand=20
for further proceedings on this issue. Evelyn V.=20
Keyes Panel=20
consists of Chief Justice Radack and Justices Keyes and =
Higley. 1. Coastal=20
Caverns is a company in the business of developing caverns for use =
in=20
waste disposal.=20
2. According to Guin, Russell did not have =
authority=20
to distribute funds out of the Partnership's accounts, and =
therefore,=20
Russell's communication to Guin was not effective.=20
3. The Honorable John Wooldridge presiding.=20
4. Section 3.104(a) provides that a =
negotiable=20
instrument is
an unconditional promise or =
order to pay=20
a fixed amount of money, with or without interest or other charges =
described in the profit or order, if it:
(1) is payable to bearer or to =
order at=20
the time it is issued or first comes into possession of a holder;=20
(2) is payable on demand or at =
a definite=20
time; and (3) does not state any other =
undertaking=20
or instruction by the person promising or ordering payment to do =
any act=20
in addition to the payment of money . . . . Tex. Bus. & Com. Code Ann. =
=A7 3.104(a)=20
(Vernon 2002).=20
5. At trial, DeClaire's counsel argued that =
McIntosh=20
never pled lack of consideration.=20