Guillermo R. Pechero, M.D., Appellant, v. Agustin Garcia and Ronald Jackson, Appellees. (2015)

MEMORANDUM OPINION

By two issues, appellant, Guillermo Pechero, appeals the trial court's final judgment.   Pechero argues:  (1) the trial court erred by granting the appellee's motion for summary judgment;  and (2) the trial court erred in denying appellant's motion to exclude attorney fee evidence.   We affirm.

I. Background

Appellees, Agustín (“Gus”) Garcia and Ronald Jackson ¹ , originally filed suit in 2010 against Pechero, for tortious interference in a contractual relationship relating to Leaps and Bounds Pediatric Rehab, Inc., a company in which Garcia, Jackson, and Pechero were shareholders.   Pechero filed a motion to remove Garcia as the administrator of Leaps and Bounds due to concerns he had regarding Garcia's handling of the business. The trial court appointed an independent auditor and an overseer to help with the management of Leaps and Bounds while the lawsuit was pending.   The auditor filed a preliminary report with the trial court in September 2010, disclosing the financial status up to that date.   The parties agreed to attend mediation on March 9, 2011, in an effort to resolve their dispute.   The day prior to the scheduled mediation, the trial court held a hearing on Pechero's motion to remove Garcia as the administrator of Leaps and Bounds. The following day, the mediation was held, and a settlement agreement was reached and signed by all parties and their respective attorneys.²

The relevant terms of the mediated settlement agreement were as follows:

4.  The parties agree to mutually release, discharge, and forever hold the other harmless from any and all claims, demands or suits, known or unknown, fixed or contingent, liquidated or unliquidated (whether or not asserted in this case).

․

As of March 9, 2011, Gus Garcia will no longer be involved in the business in any way.   His salary will be paid for 90 days and Defendant [Pechero] will receive credit for the amount against the first payment as indicated below.   He will have no access to any bank accounts and will not withdraw any funds from the bank.   He will be allowed to remove all his personal effects from his office on the evening of the date of the signing of this document.

․

Gus Garcia will enter into a non competition agreement for 18 months for Hidalgo County, Texas beginning on March 9, 2011 for pediatric rehabincluding working for, marketing for, beginning a new facility or performing contract services for (defined as a rehab with 1/3 or more pediatric patients).

․

Gus Garcia will release all contracts that he might have entered into on behalf of Leaps and Bounds not including Alliance One.

Defendant will purchase Leaps and Bounds Pediatric Rehab, Inc. and will own 100% of same and will pay $395,000.00 for the outstanding shares payable $200,000.00 in 90 days and $195,000.00 in 150 days.

Defendant's name will be removed as guarantor on personal note at Lone Star Bank in the name of Agustin Garcia in the original principal sum of $50,000.00 within 150 days.

․

10. Each signatory to this settlement has entered into same freely and without duress after having consulted with professionals of his or her choice.   Each party hereto has been advised by the mediator that the mediator is not the attorney for any party and that each party should have this agreement reviewed by the parties' attorney prior to executing the same.   This settlement agreement is not subject to revocation.

On the evening of the mediation, Garcia began complying with his terms of the settlement agreement by moving his belongings out of the Leaps and Bounds office.   Garcia and Jackson both complied with additional terms of the mediated settlement agreement before the first ninety days.   Pechero, however, did not comply with his obligation to make his payment of $200,000.00 on the ninetieth day.   During the first ninety days, Pechero's counsel was responsible for drafting an additional settlement document entitled “Mutual Release and Compromise Settlement and Indemnity Agreement”, which was to be a more detailed settlement agreement.   Pechero's counsel tendered the second agreement to Garcia's counsel on June 1, 2011, and Garcia, Jackson, and their counsel returned it signed to Pechero's counsel the following day.   Pechero and his counsel never signed the second agreement.

When Pechero's non-compliance of the mediated settlement agreement occurred, Garcia filed a motion to enforce the settlement agreement.   The trial court ordered a second mediation between the parties on June 20, 2011, but it was not successful.   On July 15, 2011, Garcia filed an amended motion asking for a traditional summary judgment based on the breach of contract by Pechero.   Pechero filed a response to the traditional motion for summary judgment, raising the affirmative defense of fraudulent inducement.   The remaining terms of the mediated settlement agreement were not complied with by either party.   There were multiple hearings in the trial court regarding the traditional motion for summary judgment.   It was during these hearings that Pechero's trial counsel stated on the record that Garcia's trial counsel was requesting attorney's fees and had designated himself as an expert in regards to those attorney's fees.   The trial court granted Garcia's traditional motion for summary judgment based only on the original mediated settlement agreement with the issue of attorney's fees being left for a jury to determine.   The trial court held that the second agreement that Pechero refused to sign was not valid or enforceable.

On February 11, 2013, a jury trial was held solely to determine attorney's fees.   Prior to trial, Pechero's trial counsel urged a motion to exclude attorney fee evidence, on the grounds that Garcia had not timely designated his expert witness, his original trial counsel, and Pechero stated Garcia's counsel should not be allowed to testify.   See Tex.R. Civ. P. § 194.2(e), (f);  193.6. The trial court denied Pechero's motion and allowed Garcia's original trial counsel to testify as an expert witness regarding his time and fees charged.   Pechero's counsel extensively cross-examined him during the trial.   The jury found unanimously that Garcia was entitled to attorney's fees in the amount of $87,500.00 and additional amounts for all stages of appeal.   The trial court denied Pechero's motion for new trial and this appeal followed.

II. Motion for Summary Judgment

By his first issue, Pechero argues that the trial court erred in granting Garcia's motion for summary judgment.

A. Standard of Review

We review summary judgments de novo.  Guevara v. Lackner, 447 S.W.3d 566, 571 (Tex.App.—Corpus Christi 2014, no pet).   In a traditional motion for summary judgment, the movant has the burden to show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law.  Tex R. Civ. P. 166a(c);  Provident Life & Acc. Ins. Co. v Knott, 128 S.W.3d 211, 216 (Tex.2003).   We take as true all evidence that is favorable to the respondent, and indulge every reasonable inference and resolve any doubts in favor of the non-movant.  Knott, 128 S.W.3d at 215.   Once the movant shows that it is entitled to summary judgment, the burden shifts to the respondent to produce evidence that raises a genuine issue of material fact so as to avoid summary judgment.  Tex.R. Civ. P. 166a(c);  Guevara, 447 S.W.3d at 571.   To conclusively establish a matter, the movant must show that reasonable minds could not differ as to the conclusion to be drawn from the evidence.  Hen ry v. Masson, 333 S.W.3d 825, 843 (Tex.App.–Houston [1st Dist.] 2010, pet. denied).

B. Discussion and Applicable Law

1. Summary Judgment

The parties to this case entered into a settlement agreement during mediation, and all parties signed the agreement.   Garcia relied upon this agreement when he started performance of his obligations.   Pechero refused to sign the subsequent agreement that was drafted by his counsel.   Garcia moved the trial court to grant his traditional motion for summary judgment based on the original mediated settlement agreement that was signed by all parties.

“If the parties reach a settlement and execute a written agreement disposing of the dispute, the agreement is enforceable in the same manner as any other written contract”.  Tex. Civ. Prac. & Rem.Code Ann. § 154.071(a) (West, Westlaw through 2013 3d C.S.), Martin v. Black, 909 S.W.2d 192, 195 (Tex.App.–Houston [14th Dist.] 1994, writ denied).   Since mediated settlement agreements are “enforceable under contract law, then the same procedures used to enforce and enter judgments on other contracts should apply to mediated settlement agreements.”  Martin, 909 S.W.2d at 195.   Under Texas law, the elements of a binding contract are:  “(1) an offer;  (2) an acceptance in strict compliance with the terms of the offer;  (3) a meeting of the minds;  (4) each party's consent to the terms;  and (5) execution and delivery of the contract with the intent that it be mutual and binding.”  ABB Kraftwerke Aktiengesellschaft v. Brownsville Barge & Crane, Inc., 15 S.W.3d 287, 291 (Tex.App.–Corpus Christi 2003, pet. denied).   In order to prove a breach of contract, Garcia needed to show as a matter of law:  (1) the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3) breach of the contract by the defendant, (4) and damages sustained as a result of the breach.  Winchek v. Am. Exp. Travel Related Svcs. Co., Inc., 232 S.W.3d 197, 199 (Tex.App.– Houston [1st Dist.] 2007, no pet.) (mem. op. on reh'g);  Levetz v. Sutton, 404 S.W.3d 798, 806 (Tex.App.–Dallas 2013, pet. denied).   Under the rules of civil procedure, “the only applicable vehicles for obtaining judgment on a dispute over whether a contract exists are (1) a motion for summary judgment, if no fact issue exists, and (2) a non-jury or jury trial, if a fact issue exists.”  Id. at 195–196 (citing Tex.R. Civ. P. 166(a), 262–270, 295).

Garcia and Pechero agree that there was a valid contract at the time they entered into it and Garcia began his performance.   Garcia relied on the representations in the mediated settlement agreement and completed most of requirements of the agreement by the time Pechero claims he was misled in entering the agreement.   Garcia gave up his employment with Leaps and Bounds, as well as his ownership percentage and suffered damages.   Garcia also entered into a non-compete clause as part of the settlement agreement for a period of eighteen months.   Pechero initially complied with his obligations by paying the salaries of Garcia and Jackson for a period of ninety days, but there was no further compliance by Pechero.   Garcia filed his traditional motion for summary judgment alleging breach of contract after Pechero failed make the first payment as required by this agreement.

Pechero's obligations included the requirement that he pay $200,000 ninety days after they entered into the settlement agreement and an additional $195,000 in one-hundred-and-fifty days to compensate Garcia and Jackson for selling their outstanding shares of the business.   In turn, within one-hundred-and-fifty days of entering into the mediated settlement agreement, Garcia was to remove Pechero's name from a personal loan note at Lone Star National Bank. Garcia did not comply with removing Pechero's name from the bank loan because he had already filed his breach of contract suit prior to the one-hundred-and-fifty days.

Garcia would be entitled to his motion for traditional summary judgment due to Pechero's breach of contract unless Pechero could raise an affirmative defense.   Pechero raised the affirmative defense of fraudulent inducement in his response to Garcia's traditional motion for summary judgment.

2. Fraudulent Inducement

Pechero argues his affirmative defense of fraudulent inducement precludes summary judgment in Garcia's favor.   Pechero asserts that he was fraudulently induced into the settlement agreement based on statements Garcia made during a pre-trial hearing and during mediation.   Pechero argues that he was not required to comply with the mediated settlement agreement because of these false representations.

In order to show fraud based on affirmative misrepresentations, Pechero had to prove:

(1) the defendant made a material representation;  (2) the representation was false;  (3) when made, the defendant knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth;  (4) the defendant made the representation with the intent to induce the plaintiff to act upon it;  (5) the plaintiff actually and justifiably relied upon the representation;  and (6) the plaintiff thereby suffered injury.

Guevara, 447 S.W.3d at 573 (citing Italian Cowboy Partners, Ltd. V. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex.2011)).  “When one individual fraudulently induces another to enter into a contract, no contract results because the one who was fraudulently induced gave no real consent to the agreement.”  Wright v. Sydow, 173 S.W.3d 534, 546 (Tex.App.–Houston [14th Dist.] 2004, pet. denied).

In order for a party “opposing a summary judgment [to rely] on an affirmative defense, he must come forward with summary judgment evidence sufficient to raise an issue of fact on each element of the defense to avoid summary judgment.”  Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex.1984).   “Affidavits consisting of only conclusions are insufficient to raise an issue of fact.”  Id. “The summary judgment rule does not provide for a trial by deposition or affidavit.   The rule provides a method of summarily ending a case that involves only a question of law and no genuine fact issue.”  Green v. Unauthorized Practice of Law Comm., 882 S.W.2d 293, 297 (Tex.App.–Dallas 1994, no writ).   Legal conclusions and opinions made in an affidavit are not competent summary judgment evidence and are insufficient to raise an issue of fact in response to a motion for summary judgment.  Id.;  see Mercer v. Daoran Corp., 676 S.W.2d 580, 582 (Tex.1984).

Pechero must present a fact issue on each of the elements of his affirmative defense in order to defeat the motion for summary judgment.   Pechero asserts that Garcia made statements both in open court and during the mediation discussions that caused him to believe facts about the business that were not true and enter into the settlement agreement.   Specifically, Pechero claims that Garcia misrepresented the financial stability of Leaps and Bounds and the debts owed by the business.   During the hearing one day prior to the mediation, Pechero stated that Garcia testified that the business was profitable and the debts owed by the business were much less than they actually were.   Pechero had filed a motion asking the trial court to remove Garcia as the administrator of Leaps and Bounds because, as his appellate attorney stated, he felt Garcia was “running the business into a ditch” and Pechero wanted him “out of the driver's seat.”   Based on his motion, Pechero already had some indication that Leaps and Bounds was not doing well financially and there were other monetary problems that needed investigation.

On the elements of his affirmative defense, Pechero has not raised a fact issue on each element that would entitle him to prove fraudulent inducement.   Pechero had attached as evidence to his response to Garcia's traditional motion for summary judgment two affidavits, one from his accountant and one from himself, as well as the transcript of the testimony from a pre-trial hearing.   However, Garcia objected to the two affidavits, and the trial court sustained those objections.³  First, Pechero presented the transcript from the pre-trial hearing to produce evidence that Garcia made a material representation regarding the financial health of the business.   Garcia was questioned by both trial counsels regarding the revenue and profits of Leaps and Bounds and stated he believed they had raised revenue and profits substantially.   Second, Pechero asserted that based on his review of the financial documents after the mediation, Garcia's representation was false.   Pechero stated that he relied on Garcia's statements going into the mediation.   However, in reviewing the trial court records, there was other documentation exchanged during discovery that showed Leaps and Bounds was not doing well financially and that Pechero had access to those documents prior to the hearing and the mediation.   Third, Pechero must have shown that Garcia knew the representation was false or made these representations recklessly as a positive assertion without knowledge of their truth.   There is no evidence found within the record that would affirmatively show that Garcia knew these statements to be false.   During the pre-trial hearing, Garcia's statements were in response to both trial counsel's questions about the profitability of the business.   Pechero presented no evidence to show Garcia knew or recklessly knew his assertions were not correct.   Fourth, Pechero must have shown Garcia made those representations with the intent to cause Pechero to act upon them.   There was also no evidence that Garcia acted with intent.   His statements were made in response to questions by mainly Pechero's own trial counsel.   Pechero was trying to remove him as the administrator from the business, and the statements made at the pre-trial hearing were in relation to that action, not the future mediation.   Fifth, Pechero must have shown he actually and justifiably relied on the representation and suffered injury because of that reliance.   See Guevara, 447 S.W.3d at 573.   He could not make that showing.   Although Garcia made statements that Pechero heard in open court, Pechero had access to the bank records and the auditor's report prior to mediation.   Pechero's trial counsel references the bank records during the pre-trial hearing held prior to mediation.   Relying on statements Garcia made, when it was clear there was already distrust between the two parties cannot be considered justifiable.   Additionally, Pechero never paid Garcia and Jackson for their shares of the business, so he would be unable to show how he suffered damages.

Even though fraud can void a contract, “fraud must be something more than merely oral representations that conflict with the terms of a written contract.   Instead, to vitiate the contract, the fraud must be such that it ‘prevents the coming into existence of any valid contract at all.’ ”   Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex.1997) (citing Distributors Invest.   Co. v. Patton, 110 S.W.2d 47, 48 (Tex.1937)).   Pechero's only evidence supporting his affirmative defense were oral representations and the transcript from the pre-trial hearing.

However, even if Pechero could raise a fact issue on every element of his affirmative defense, he tries to do so by relying on affidavits that use oral representations made by Garcia both during a judicial proceeding and during the confidential mediation conference.   With limited exceptions, “a communication relating to the subject matter of any civil or criminal dispute made by a participant in an alternative dispute resolution proceeding ․is confidential, is not subject to disclosure, and may not be used as evidence against the participant in any judicial or administrative proceedings.”   Tex. Civ. Prac. & Rem.Code Ann. § 154.073(a) (West, Westlaw through 2013 3d C.S.).   However, “an oral communication or written material used in or made a part of an alternative dispute resolution procedure is admissible or discoverable if it is admissible or discoverable independent of the procedure.”  Id. at § 154.073(c).  If there is a conflict with other “legal requirements for disclosure,” the trial court may be presented with the issue of confidentiality “in camera” to determine if the “communications or materials are subject to disclosure.”  Id. at § 154.073(e).

There are exceptions to section 154.073;  however, those exceptions are not present here.  Id. In Avary v. Bank of America, the court determined “if the communication does not relate to the subject matter of the dispute, or does not relate to or arise out of the matter in dispute, it may not be confidential under subsections (a) and (b).”  72 S.W.3d 779, 794 (Tex.App.–Dallas 2002, pet. denied).   In Knapp v. Wilson N. Jones Memorial Hospital., that court also held that “disclosure may be warranted in a case alleging a new and independent cause of action when disclosure of the confidential communications or written materials will not disturb the settlement in the underlying arbitration.”  281 S.W.3d 163, 173 (Tex.App.–Dallas 2009, no pet.).   This case is distinguishable from Knapp and Avary because those cases involved a new and independent cause of action that came out of the alternative dispute resolution proceedings.  Id., Avary, 72 S.W.3d at 779.   Pechero's case more closely aligns with In re Empire Pipeline Corporation.   323 S.W.3d 308, 312 (Tex.App.–Dallas 2010, orig. proceeding).   The trial court in that case had issued an order allowing the depositions of persons that were at the previously held mediation regarding events that occurred during the settlement talks.   Id. However, the court of appeals overturned that order and stated that normally “unless the parties agree otherwise, all matters, including the conduct and demeanor of the parties and their counsel during the settlement process, are confidential and may never be disclosed to anyone, including the appointing court.”  Id. (citing Tex. Civ. Prac. & Rem.Code Ann. § 154.053(c)).  Similarly, Pechero now wants to disclose his version of what happened during mediation to cause the trial court to find he has an affirmative defense and deny the motion for summary judgment.   However, he did not ask for an “in-camera inspection” or show that the statements he intends to use would be admissible otherwise before disclosing what he finds relevant in his response to Garcia's traditional motion for summary judgment.   Since he is trying to use representations from a judicial proceeding or alternative dispute resolution proceeding to undo the existing settlement agreement and there were no exceptions to the break confidentiality, the trial court correctly held they were not proper evidence to sustain a factual issue and properly granted Garcia's motion for traditional summary judgment.   We overrule Pechero's first issue.

III. Motion to Exclude Attorney Fee Evidence

By his second issue, Pechero argues the trial court committed error by denying his motion to exclude attorney fee evidence and allowing the expert witness to testify at a jury trial.

A. Standard of Review

In order to review a trial court's decision to admit or exclude evidence, we use an abuse of discretion standard.  Allan v. Nersesova, 307 S.W.3d 564, 575 (Tex.App.–Dallas 2010, no pet.).   A “trial court abuses its discretion only if it acts in an arbitrary or unreasonable manner without reference to any guiding rules or principles.”  Id. (citing Columbia Med. Ctr. Subsidiary, L.P. v. Meier, 198 S.W.3d 408, 411 (Tex.App.–Dallas 2006, pet. denied).  “When reviewing matters reserved for the trial court's discretion, a court of appeals may not substitute its own judgment for that of the trial court.”  Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex.1985).

B. Discussion

Pechero argues that because Garcia did not designate his former trial attorney as an expert witness in his live pleadings, the trial court should not have allowed Garcia's former trial counsel to testify as an expert witness during the jury trial regarding attorney's fees.  “A party who fails timely to respond to a discovery request, or to supplement its response, shall not be entitled to offer testimony of a witness having knowledge of a discoverable matter unless the trial court (1) finds good cause sufficient to require admission, or (2) determines the other party will not be unfairly surprised or prejudiced.”   Tex.R. Civ. P. 193.6(a);  Bellino v. Comm'n for Lawyer Discipline, 124 S.W.3d 380, 384 (Tex.App.–Dallas 2003, pet. denied).  “The party offering the witness has the burden to establish good cause or lack of surprise.”  Tex.R. Civ. P. 193.6(b).  “The trial court has discretion to determine whether the offering party met this burden.”  Bellino, 124 S.W.3d at 383.

In looking at a timeline of this case, Pechero's trial counsel had notice that Garcia's original trial counsel would be requesting attorney's fees as far back as 2011, having represented Garcia from the outset of the case dating back in 2010.   He filed an affidavit with a description of the time spent initially on the case in August 2011.   At a hearing in late August 2011, Pechero's trial counsel told the trial court that Garcia's trial counsel was requesting attorney's fees and had designated himself as an expert the week prior to the hearing.   However, both parties' trial counsels exchanged messages requesting depositions and Garcia's counsel represented that they would be using another attorney as an expert witness, but that attorney was never produced for a deposition, nor was he disclosed as an expert witness.   Additional documents regarding hours worked by Garcia's attorneys were produced to Pechero's counsel the Friday before the jury trial.   It was apparent that Garcia's trial counsel would be asking for attorney's fees based on the work he had done on the case.   Although Garcia's counsel produced documents relating to the hours worked by Garcia's attorneys at a late hour, Pechero's counsel was still prepared to go forward and did not argue that they were unfairly surprised by the fact that Garcia was using his previous trial counsel as an expert witness for attorney's fees.   Accordingly, the trial court did not abuse its discretion by allowing Garcia's former trial counsel to testify as an expert on attorney's fees because it could have held that Garcia had good cause to allow him to testify and that Pechero would not be unfairly surprised or prejudiced.  Tex.R. Civ. P. 193.6(a);  Bellino, 124 S.W.3d at 383.   The second issue is overruled.

IV. Conclusion

We affirm the trial court's judgment.

FOOTNOTES

1.   Although both Garcia and Jackson are listed as appellees in this case, the argument of Pechero dealt mainly with Garcia and his dealings with the business.

2.   During the mediation, the parties agreed to execute two settlement agreements.   The original agreement was written out following the mediation and titled the “settlement agreement.”   That is the agreement at issue.   That document was signed by all parties and their attorneys.   There was a second, more detailed settlement agreement titled “mutual release and compromise settlement and indemnity agreement” that Pechero's counsel was to draft with input from Garcia's counsel.   The second agreement was drafted, signed by Garcia, Jackson and their counsel, but Pechero refused to sign.

3.   The affidavits were not considered by the trial court in deciding to grant the motion for summary judgment.

Memorandum Opinion by Justice Benavides