Opinion
NO. 01-18-00997-CV
04-07-2020
AD-WEAR & SPECIALTY OF TEXAS, INC., Appellant v. HONEYCOMB FARMS, LLC D/B/A NEXTLEVEL THINKING, Appellee
On Appeal from the County Civil Court at Law No. 4 Harris County, Texas
Trial Court Case No. 1081338
MEMORANDUM OPINION
Honeycomb Farms, LLC d/b/a NextLevel Thinking is a marketing firm that for years submitted graphic art designs for the Gulf Coast Regional Blood Center's "Commit for Life" campaign. Ad-Wear & Specialty of Texas, Inc. is a vendor that has produced T-shirts for the Blood Center using NextLevel's artwork. Honeycomb Farms sued Ad-Wear for breach of contract, asserting a claim for $11,000 in unpaid invoices. The trial court entered judgment against Ad-Wear for $11,000 in damages, plus costs and attorney's fees.
Ad-Wear raises seven issues. They can be grouped into two arguments. First, Ad-Wear raises a jurisdictional challenge, arguing that Honeycomb Farms lacks standing to recover a debt owed to NextLevel. Second, Ad-Wear argues there is insufficient evidence of a contractual obligation to pay $12,000 annually to NextLevel when the evidence supports only a monthly obligation to pay $1,000 but only if artwork was produced that month. Relatedly, Ad-Wear contends there is no evidence NextLevel produced any artwork during the eleven-month period for which damages were awarded.
We affirm.
Background
Honeycomb Farms, LLC operates as a marketing firm under the assumed name NextLevel Thinking. An assumed name certificate filed with the Office of the Secretary of State in 2015 is in the record.
More than ten years ago, NextLevel began providing marketing services to Gulf Coast Regional Blood Center aimed at increasing the number of blood donations made to the Blood Center. As part of the marketing plan, NextLevel created graphic artwork that was printed on T-shirts used by the Blood Center to promote its blood drives. The artwork was created by NextLevel's independent contractor graphic designer, Kirk Louden. After NextLevel created the artwork and the Blood Center selected which artwork to incorporate into T-shirts, Ad-Wear screenprinted the shirts for use by the Blood Center.
The owner of NextLevel is Eric Poerschke. The owner of Ad-Wear is David Tanenbaum. They were the only two trial witnesses. Both men agree that an agreement existed between NextLevel and Ad-Wear that involved Ad-Wear paying NextLevel a monthly payment of $1,000. The parties disputed whether the agreement was an annual or monthly agreement and whether NextLevel produced any artwork after January 2015 to support its monthly invoices from February through December 2015.
Poerschke testified that, between 2008 and 2011, the agreement between NextLevel and Ad-Wear was only an "informal arrangement" with varying payment dates. As he described it, Ad-Wear "would cut us a check from time to time." According to Poerschke, the relationship became "more formalized" in 2011 through discussions between Louden and Tanenbaum, which he, as owner, approved.
According to Poerschke, the agreement "was for $12,000 a year regardless of number of designs." Poerschke explained that "the reason we said regardless of number of designs is because there was so many of them that it would have been cost prohibitive and wouldn't have made any sense" to charge per design. Poerschke testified that the parties agreed Ad-Wear would owe $1,000 per month for an unlimited number of designs, for a total obligation of $12,000 per year, with the agreement's term being "year to year." According to Poerschke, Ad-Wear paid the monthly invoices through January 2015 and did not pay any invoices thereafter. NextLevel sued to recover the invoiced amounts between February 2015 and December 2015, which totaled $11,000. Those NextLevel invoices were included as trial exhibits.
The Blood Center produced its business records in response to a deposition on written questions, and they were admitted as exhibits without objection. The deposition on written questions asked for three categories of documents:
1. the number of NextLevel designs that have been printed by Ad-Wear and used by The Blood Center since February 1, 2015,The Blood Center responded: "No exact records exist. We have provided info regarding all T-shirts purchased." A couple hundred pages of documents were attached. They include many T-shirt purchase requisitions from the Blood Center to Ad-Wear between February 2015 and December 2015. The purchase requisitions contain pictures of T-shirt designs to be produced. A few of the pictures have a handwritten notation of "Kirk design" next to them. The parties agree that "Kirk" refers to Kirk Louden, NextLevel's graphic artist. At least one of the designs was for a particular blood drive and incorporated the name of the entity sponsoring that particular blood drive into the design. That blood drive was in December 2015, during the period of dispute.
2. the number of actual T-shirts with NextLevel designs that have been printed by Ad-Wear and used by The Blood Center since February 1, 2015, and
3. the dollar amount, per NextLevel design, that has been paid to Ad-Wear for T-shirts printed by Ad-Wear and used by the Blood Center since February 1, 2015.
Poerschke testified about the notations. Poerschke testified that designs were created by Louden, and NextLevel had not been paid for them. He did not directly state that the designs were created after January 2015; however, he did testify that payment for designs occurred when they were given to the Blood Center, that the graphic designer, Louden, worked with NextLevel throughout 2015, and that the invoices submitted after January 2015 were for services NextLevel provided during that billing period. Further, the December 2015 blood drive design was marked as a "Kirk Design" and was specific to the company sponsoring that late-2015 drive.
David Tanenbaum, the owner of Ad-Wear, was the only other witness. He testified that Ad-Wear began working with NextLevel in 2004 or earlier. At that time, the Blood Center paid NextLevel directly for Louden's artwork, it chose which artwork to use, and it forwarded its selections to Ad-Wear to print the T-shirts. Later, the Blood Center decided to no longer pay for artwork. That is when, according to Tanenbaum, Ad-Wear and NextLevel created a direct relationship between their companies. According to Tanenbaum, the agreement, entered around 2004, was "a thousand dollars a month for work produced."
Tanenbaum testified that NextLevel produced artwork every month until February 2015, when the production stopped. He testified that the stop in production coincided with a change in business practice at the Blood Center. The new Blood Center chief operating officer decided in February 2015 that all art would be produced in-house by Blood Center artists. According to Tanenbaum, beginning in February 2015, all artwork for the benefit of the Blood Center was received exclusively from the Blood Center artists. Tanenbaum affirmatively testified that Ad-Wear did not receive any new artwork from NextLevel after January 2015. It was on this basis that Tanenbaum testified that no fees were due after January 2015.
Tanenbaum also testified about the Blood Center's documents. He testified that the references to "Kirk Design" did not correspond to designs created and supplied after January 2015. Tanenbaum pointed to specific designs and testified that they were first created years earlier, with NextLevel receiving payment for those designs at that time. The Blood Center was reusing one design during 2015. He also testified that some of the designs were erroneously marked as "Kirk Design," when, actually, they had been created in-house by Ad-Wear, not by Kirk Louden or NextLevel. Tanenbaum described the notation of "Kirk Design" on some page of the Blood Center's documents as "a mistake." (1 RR 88) He testified that no NextLevel designs were supplied to Ad-Wear after January 2015. He agreed, though, that he had no documents to support his assertion.
Poerschke testified that he sent monthly invoices to Ad-Wear between February 2015 and January 2016 without ever receiving a response from Ad-Wear. The trial court inquired how the contract terminated. Counsel for NextLevel indicated that it terminated at the end of 2015, with NextLevel no longer billing beyond the December 2015 billing period in the year-to-year contract. NextLevel sought as damages for breach of contract $1,000 per month from February 2015 through December 2015, for a total of $11,000, plus interest and attorney's fees.
Standing
Ad-Wear contends Honeycomb Farms LLC does not have standing to pursue a breach-of-contract claim for any damages owed to NextLevel and that no evidence establishes a legal connection between the two during the relevant billing periods. In making this argument, Ad-Wear mischaracterizes the trial testimony and ignores the legal arguments and ruling made at trial.
In support of its no-evidence assertion, Ad-Wear argues that "the name Honeycomb" does not "appear on any of Plaintiff's exhibits admitted into evidence." Ad-Wear, itself, though, admitted into evidence the assumed name certificate filed by Honeycomb Farms LLC with the Secretary of State to use the name NextLevel Thinking. Thus, "the name Honeycomb" is on its own evidence, thus providing some evidence that Honeycomb Farms LLC operated as NextLevel.
As further support for its no-evidence assertion, Ad-Wear describes Poerschke testimony as establishing that "the very first time Honeycomb appeared to be doing business as NextLevel Thinking [was] on November 4, 2015," which was after NextLevel invoiced Ad-Wear and Ad-Wear failed to pay the eleven invoices. That was not Poerschke's testimony.
Poerschke testified that he initially filed an assumed name certificate in 2000 or 2001. At the time, he had not realized that assumed name certificates expire after ten years. See TEX. BUS. & COM. CODE § 71.151(a). His certificate expired around 2010, but he did not realize it had expired until 2015. Once he realized it expired, he filed a second assumed name certificate, in 2015, to reinstate the legal affiliation. Counsel for Ad-Wear questioned Poerschke about the legal effect of the lapse between 2010 and 2015, and the trial court stated that Poerschke is "not required to answer a legal question."
Later, counsel for Ad-Wear presented its legal argument that Honeycomb Farms did not have a legal right to collect on a debt to NextLevel during the period of lapse. The trial court rejected the argument, noting that, after a period of lapse, a new certificate "relates back" to the time of the earlier-filed certificate. See id. § 71.201(a) ("A person's failure to comply with this [Assumed Business or Professional Name] chapter does not impair the validity of any contract . . . or prevent the person . . . proceeding in any court of this state, but the person may not maintain in a court of this state an action or proceeding arising out of a contract or act in which an assumed name was used until an original, new, or renewed certificate has been filed as required by this chapter.").
Ad-Wear's standing argument is based on a misstatement of the evidence and is untethered to the legal analysis underlying the trial court's ruling. More importantly, non-compliance with the assumed name certificate requirements raises an issue of capacity, not standing. See Schlein v. Griffin, No. 01-14-00799-CV, 2016 WL 1456193, at *6 (Tex. App.—Houston [1st Dist.] Apr. 12, 2016, pet. denied) (mem. op.); Eckman v. Northgate Terrace Apts., LLC, No. 03-18-00254-CV, 2018 WL 3150845, at *2 (Tex. App.—Austin June 28, 2018, pet. denied) (mem. op.) ("While the Assumed Business or Professional Name Act prohibits the maintaining of a lawsuit until an assumed-name certificate has been filed or renewed, see [TEX. BUS. & COM. CODE § 71.201], a plaintiff's failure to have a valid certificate on file is not a jurisdictional issue but, rather, a capacity issue that is properly raised in a plea in abatement so that the cause may be suspended while the defect is corrected.").
Because there is no factual or legal support for Ad-Wear's standing argument, we overrule its first issue.
Breach of Contract
Ad-Wear argues there is legally and factually insufficient evidence that Ad-Wear owed NextLevel $12,000 annually because the evidence established that Ad-Wear only had a monthly obligation to pay $1,000 for artwork produced that month and no artwork was produced by NextLevel after January 2015.
A. Standard of review
"In an appeal of a judgment rendered after a bench trial, the trial court's findings of fact have the same weight as a jury's verdict, and we review the sufficiency of the evidence supporting those findings by using the same standards to review jury verdicts." Ferrara v. Nutt, 555 S.W.3d 227, 235 (Tex. App.—Houston [1st Dist.] 2018, no pet.); see MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 663 n.3 (Tex. 2009). When challenged, a trial court's findings of fact are not conclusive if, as here, there is a complete reporter's record on appeal. Choice! Power, L.P. v. Feeley, 501 S.W.3d 199, 208 (Tex. App.—Houston [1st Dist.] 2016, no pet.) (citing BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)).
We review a trial court's findings of fact under the same legal and factual sufficiency of the evidence standards used when determining if sufficient evidence exists to support an answer to a jury question. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Merry Homes, Inc. v. Luu, 312 S.W.3d 938, 943 (Tex. App.— Houston [1st Dist.] 2010, no pet.). When an appellant challenges the factual sufficiency of the evidence on an issue, we consider all the evidence supporting and contradicting the finding. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). We set aside the finding for factual insufficiency only if the evidence supporting the finding is so weak as to be "clearly wrong and unjust." Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam); Cameron v. Cameron, 158 S.W.3d 680, 683 (Tex. App.—Dallas 2005, pet. denied). In a bench trial, the trial court, as factfinder, is the sole judge of the credibility of the witnesses. Townsend v. Vasquez, 569 S.W.3d 796, 808 (Tex. App.—Houston [1st Dist.] 2018, pet. denied). As long as the evidence falls "within the zone of reasonable disagreement," we will not substitute our judgment for that of the factfinder. See City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005).
A party prevails on a legal-sufficiency challenge to the evidence supporting an adverse finding on an issue for which the opposing party bears the burden of proof if there is a complete absence of evidence of a vital fact or if the evidence offered to prove a vital fact is no more than a scintilla. Waste Mgmt. of Tex., Inc. v. Tex. Disposal Sys. Landfill, Inc., 434 S.W.3d 142, 156 (Tex. 2014). The evidence is legally sufficient if it "would enable reasonable and fair-minded people to reach the verdict under review." City of Keller, 168 S.W.3d at 827; see Waste Mgmt of Tex., 434 S.W.3d at 156. When reviewing a legal-sufficiency challenge, we consider all of the evidence supporting the judgment, "credit[ing] favorable evidence if reasonable jurors could, and disregard[ing] contrary evidence unless reasonable jurors could not." City of Keller, 168 S.W.3d at 827. We consider the evidence in the light most favorable to the findings and indulge every reasonable inference that would support them. Id. at 822; see Zenner v. Lone Star Striping & Paving L.L.C., 371 S.W.3d 311, 314 (Tex. App.—Houston [1st Dist.] 2012, pet. denied).
We review de novo a trial court's conclusions of law. See BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).
B. Applicable law
The elements of a breach of contract claim are: (1) a valid contract, (2) the party suing to enforce the contract performed or tendered performance, (3) the other party breached the contract, and (4) the suing party was damaged as a result of the breach. USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 501 n.21 (Tex. 2018); Thornton v. Dobbs, 355 S.W.3d 312, 316 (Tex. App.—Dallas 2011, no pet.). The elements of written and oral contracts are identical and must be present for a contract to be binding. Thornton, 355 S.W.3d at 317.
The first of these elements—a valid contract—looks to the formation of the contract between the parties. The following elements are required for the formation of a valid and binding contract: (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. Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.—Houston [1st Dist.] 2002, pet. denied); Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex. App.—San Antonio 1999, pet. denied) (analyzing oral contract).
For an agreement to be enforceable, there must be a meeting of the minds with respect to its subject matter and essential terms. David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008); Davis v. Tex. Farm Bureau Ins., 470 S.W.3d 97, 104 (Tex. App.—Houston [1st Dist.] 2015, no pet.). "The determination of a meeting of the minds—and thus offer and acceptance—is based on the objective standard of what the parties said and did and not on their subjective state of mind." DeClaire v. G&B Mcintosh Fam. Ltd. P'ship, 260 S.W.3d 34, 44 (Tex. App.—Houston [1st Dist.] 2008, no pet.); see Copeland, 3 S.W.3d at 604; see also Ishin Speed Sport, Inc. v. Rutherford, 933 S.W.2d 343, 348 (Tex. App.—Fort Worth 1996, no writ) (stating that whether conduct exhibits acceptance is question of fact for factfinder).
In determining the existence of an oral contract, the courts look to the communications between the parties and to the acts and circumstances surrounding those communications. Prime Prods, Inc., 97 S.W.3d at 636; Copeland, 3 S.W.3d at 605. C. The trial court's judgment, findings of fact, and conclusions of law
At the conclusion of evidence, the trial court announced its ruling, holding that NextLevel established there was "an oral contract for $12,000 a year for the designs by NextLevel Thinking for Blood Center T-shirts to be produced by AD-Wear and that was . . . billed at a thousand dollars per month. That agreement continued until January 2016 when it was terminated by NextLevel Thinking . . . ." The trial court entered a judgment in NextLevel's favor for $11,000 in actual damages, plus pre- and post-judgment interest, court costs, and attorney's fees.
Ad-Wear requested findings of fact and conclusions of law. The trial court issued them. The trial court found that an oral agreement existed "by which designs for t-shirts were produced by [NextLevel] at the direction of Gulf Coast Regional Blood Center and incorporated into t-shirts produced by [Ad-Wear]." It found that the agreement was that $12,000 was to be paid annually, that the timing of the annual payment "varied over the term of the agreement," and, by 2015, the amount due was being paid by Ad-Wear "in monthly payments of $1,000 per month." Next, the court found that Ad-Wear "failed to make the payments due . . . for eleven months—from February 2015 and December 2015." Further, the court found that the "agreement terminated on January 1, 2016." Finally, the court found that the amount of money that "would fairly and reasonably compensate [NextLevel] as damages is $11,000."
The trial court also made conclusions of law. The only legal conclusion linked to the substantive claims and damages (versus affecting interest owed, attorney's fees owed, or nonsuited claims) was that Ad-Wear "owes" NextLevel "the amount of $11,000."
D. There was legally and factually sufficient evidence to support the trial court's findings and judgment
Our review of the record reveals ample evidence of an oral contract that extended year to year for the provision of graphic art designs and the payment of $12,000 annually. First, regarding the existence of a contract, we note that Ad-Wear did not dispute there was an oral contract between the parties, only its terms. In describing the contract, Poerschke testified the agreement was a "year to year" contract that, at first, was billed quarterly but, later, was billed monthly. NextLevel admitted into evidence an invoice from NextLevel to Ad-Wear dated March 2013 for $3,000. NextLevel also admitted into evidence later invoices from 2014 that billed $1,000 for a single month. Both parties agreed there was a history of NextLevel submitting monthly invoices of $1,000 and Ad-Wear paying those monthly invoices for years.
Ad-Wear's argument was limited to contending that the agreement was monthly instead of yearly and that no money was owed if no artwork was produced.
Regarding whether NextLevel produced art to warrant payment after January 2015, we note that Ad-Wear's assertion that no artwork was produced is based, in part, on misattributed trial testimony. Ad-Wear contends that Poerschke admitted no artwork was produced by NextLevel after January 2015. Ad-Wear quotes directly from the reporter's record and designates the quoted evidence as "Poerschke's Testimony Page 84" in making its assertion. The quoted testimony, however, is Tanenbaum's, whose testimony began on page 81 of the record.
While Tanenbaum claimed that NextLevel did not submit any artwork after January 2015, the documentary evidence and Poerschke's testimony, if found credible, reasonably supported an opposite conclusion. See Townsend, 569 S.W.3d at 808 (providing that, in bench trial, trial court acts as factfinder and is sole judge of witness credibility). The record includes the Blood Center's purchase requisitions dated February 2015 and later. Several T-shirts designs on these purchase requisitions are marked "Kirk Design," and it is undisputed that "Kirk" refers to NextLevel's graphic designer, Kirk Louden. Poerschke testified that NextLevel was paid for artwork as the artwork was submitted monthly. And he testified that NextLevel, and by extension Louden, had not been paid for the designs shown in the Blood Center's 2015 purchase requisition documents. In other words, there is evidence NextLevel submitted artwork after January 2015, contrary to Ad-Wear's assertion. One design referenced in the Blood Center's documents was for a December 2015 blood drive. The artwork was specific to the entity sponsoring that particular blood drive. And the design was designated a "Kirk Design" in the Blood Center's 2015 documents.
Because there is more than a scintilla of evidence supporting the trial court's findings and judgment, we conclude there is legally sufficient evidence and overrule Ad-Wear's issues raising legal sufficiency challenges. After properly attributing the trial testimony and reviewing the entire record, we further conclude the evidence supporting the trial court's findings is not so weak as to be clearly wrong and manifestly unjust. We, therefore, overrule Ad-Wear's issues raising factual-sufficiency challenges.
Conclusion
We affirm.
Sarah Beth Landau
Justice Panel consists of Justices Kelly, Landau, and Countiss.