Opinion
No. 05-15-00110-CV
06-27-2016
WON KYU KYE, Appellant v. NEW STAR REALTY, INC., Appellee
On Appeal from the 191st Judicial District Court Dallas County, Texas
Trial Court Cause No. DC-12-01830
MEMORANDUM OPINION
Before Justices Francis, Lang-Miers, and Myers
Opinion by Justice Lang-Miers
In three issues, appellant Won Kyu Kye argues that the trial court erred in granting appellee New Star Realty, Inc.'s traditional and no-evidence motions for summary judgment. Because all dispositive issues are settled in law, we issue this memorandum opinion. TEX. R. APP. P. 47.2(a), 47.4. We affirm.
BACKGROUND
Appellant was in California and saw an advertisement in a Korean newspaper offering three retail alcohol stores in Texas for sale. He contacted the broker, David Hwang of New Star Realty, Inc., to inquire about the stores. The seller, Young C. Park, owned and operated the stores through his companies, Angel Brotherhood I, Inc., Angel Brotherhood II, Inc., and Angel Brotherhood III, Inc. (the "Brotherhood Entities"). When he contacted Hwang, he "understood that he was dealing with New Star Realty, Inc." Hwang had him sign a confidentiality agreement and explained that he was entering into a contract with New Star Realty for the release of business information and to keep information received during his "negotiations with New Star Realty" confidential. Hwang told him that the confidentiality agreement designates New Star Realty as the broker. He said that, because he cannot read English fluently and the confidentiality agreement was in English, Hwang explained the document to appellant in Korean.
Because we review the summary judgment record in the light most favorable to the nonmovant, we recite the facts as stated in appellant's summary judgment affidavit. See Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).
Appellant said that he visited the New Star Realty website and the website listed Hwang as "Vice President" and indicated that New Star Realty opened its Dallas office in 2006, that the owner of the Dallas office was a "Branch Owner[,]" and that the address of the Dallas office is 11111 Shady Trail, which is the same address that Hwang stated was his address. Appellant testified that he relied on information on the website and that, if he had "been advised that [he] was not dealing with New Star Realty, [he] would not have purchased the Businesses."
Appellant also testified by affidavit that, when he viewed the website at a later date, there were "significant differences" from when he originally viewed the site, including the addition of "franchise information," a description that "[e]ach office owned and operated separately and independently[,]" and the identification of Hwang as an "Honorary Vice President."
Appellant traveled to Dallas to meet with Park and Hwang to discuss the proposed sale of the stores. At the meeting Hwang provided him with a pro forma income statement, and appellant, Park, and Hwang discussed the performance of the stores. During the meeting "Park and Hwang had to explain" to him "the concept of 'wet' areas versus 'dry' areas" because appellant was "completely unfamiliar with the Texas concept of 'wet' areas versus 'dry' areas[,]" that "alcohol could only be sold in areas designated as 'wet' and that alcohol could not be sold in areas designated as 'dry.'" Park and Hwang explained to appellant that "residents of the adjacent 'dry' areas would drive" to the stores—which were in a "wet" area—to purchase alcohol and "nearly all the sales" for the stores "came from residents of the surrounding 'dry' areas."
Appellant testified that Park and Hwang both told him that "the 'wet' and 'dry' areas do not change because this is a Christian state." Appellant also testified:
During our meeting, Park and Hwang told me that "dry" areas stay "dry" forever. They said these "dry" areas never change to "wet" that is why the Businesses are so profitable. I then asked Park to guarantee that the surrounding areas would stay "dry" forever. I also asked Hwang to guarantee that the surrounding "dry" areas would stay "dry." Park told me that he guaranteed that the surrounding "dry" areas adjacent to the Businesses would stay "dry" forever. Hwang also guaranteed that the surrounding "dry" areas would stay "dry" forever.
. . . .
Hwang told me that he is a licensed real estate and business broker with New Star Realty. I trusted Hwang when he told me that he guaranteed that the surrounding "dry" areas adjacent to the Businesses would stay "dry" forever in part because he was a New Star Realty Vice President. Hwang worked for New Star Realty, Inc. as a Vice President. New Star Realty is the largest Korean realtor in Los Angeles County. New Star Realty publicizes that it is a national realty with offices in many states. I always believed that Hwang was an employee of New Star Realty, Inc. I would send faxes to Hwang with a coversheet addressed to 'New Star Realty, Mr. David Hwang.'
Appellant also testified that "David Hwang always represented himself to me as a New Star Realty, Inc. broker" and, had he "been told that David Hwang was not a Vice President of New Star Realty, Inc.," he "would not have purchased the Businesses."
Appellant purchased the stores for $1,275,000. Within a year of his purchase, voters in Dallas approved changing the areas surrounding the stores from "dry" to "wet" areas. Appellant claimed that, as a result, the stores experienced a significant decrease in revenues and eventually closed.
Appellant sued Park, the Brotherhood Entities, Hwang, Young Sung d/b/a Era New Star Realty (the owner of New Star in Dallas), and appellee for fraud, fraudulent inducement, violation of the Deceptive Trade Practices Act, civil conspiracy, and respondeat superior. By amended petition, appellant added claims of breach of warranty against all defendants and claims of agency and apparent authority against appellee and Sung. Appellant later settled with Park and nonsuited his claims against the Brotherhood Entities, Sung, and Hwang, leaving appellee as the sole defendant. Appellee moved for traditional and no-evidence summary judgment on appellant's claims. The trial court granted appellee's motions for summary judgment without stating a basis for its ruling. After the trial court denied appellant's motion for new trial, he brought this appeal.
Appellant later nonsuited his DTPA claims.
Appellant's brief on appeal contains no discussion of alleged error by the trial court in granting summary judgment in appellee's favor on appellant's claim of respondeat superior. Consequently, that issue is not before us on appeal. See TEX. R. APP. P. 38.1(i); Bever Props. L.L.C. v. Jerry Huffman Custom Builder, L.L.C., 355 S.W.3d 878, 885-86 (Tex. App.—Dallas 2011, no pet.).
The trial court also granted appellant's motion for sanctions for discovery abuses by appellee. The sanctions order is not before us on appeal.
STANDARD OF REVIEW
We review the trial court's summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). For a defendant to prevail on a traditional motion for summary judgment, it must either disprove at least one element of the plaintiff's claim as a matter of law or conclusively establish all elements of an affirmative defense. Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex. 1996). If the defendant satisfies that burden, the nonmovant plaintiff must respond and present evidence raising a fact issue as to the material facts in question. Kalyanaram v. Univ. of Tex. Sys., 230 S.W.3d 921, 925 (Tex. App.—Dallas 2007, pet. denied). We review the summary judgment record in the light most favorable to the nonmovant, indulging reasonable inferences and resolving doubts in his favor. Walters v. Cleveland Reg'l Med. Ctr., 307 S.W.3d 292, 296 (Tex. 2010). Where, as here, the trial court's summary judgment does not specify the basis for the ruling, we must affirm the trial court's judgment if any of the grounds on which summary judgment was sought are meritorious. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013).
Although appellee moved for both traditional and no-evidence summary judgment, because of our disposition, it is only necessary for us to address appellee's traditional summary judgment.
APPARENT AUTHORITY
One of the grounds for appellee's motion for summary judgment was that Hwang did not have authority, on behalf of appellee New Star Realty, to make the alleged representation that the laws in Dallas regarding "wet" and "dry" areas would never change. On appeal, appellant contends that he raised an issue of fact regarding whether Hwang had apparent authority to make the claimed representation. He argues that it was reasonable for him to believe that it was within the scope of Hwang's authority to make this representation to potential buyers. Appellee claims that there is no issue of fact and that on this basis alone we should affirm. We agree with appellee.
Applicable Law
"An agent's authority to act on behalf of a principal depends on some communication by the principal either to the agent (actual or express authority) or to the third party (apparent or implied authority)." Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). Apparent authority is based on estoppel, "arising either from a principal knowingly permitting an agent to hold [himself] out as having authority or by a principal's actions which lack such ordinary care as to clothe an agent with the indicia of authority, thus leading a reasonably prudent person to believe that the agent has the authority [he] purports to exercise." Id. (quoting Baptist Mem. Hosp. Sys. v. Sampson, 969 S.W.2d 945, 948 (Tex. 1998)); see Wilburn v. Valliance Bank, No. 05-14-00965-CV, 2015 WL 9281271, at *3 (Tex. App.—Dallas Dec. 21, 2015, no pet.) (mem. op.). The principal's full knowledge of all material facts is essential to establish a claim of apparent authority based on estoppel. Gaines, 235 S.W.3d at 182. To determine if a person has apparent authority, only the conduct of the principal is relevant. Id. And "the standard [applied to the third party] is that of a reasonably prudent person, using diligence and discretion to ascertain the agent's authority." Id. To determine an agent's apparent authority, we examine the principal's conduct and the reasonableness of the third party's assumptions about authority. Id.; Wilburn, 2015 WL 9281271, at *3.
Arguments
Appellant contends that the following summary judgment evidence raised an issue of fact regarding Hwang's apparent authority: (1) appellant believed that Hwang was an agent for appellee, (2) the confidentiality agreement appellant signed has the New Star logo on it and states that New Star was the broker in the transaction, and (3) the New Star website listed Hwang as a vice president and the office in Dallas as the Dallas office.
In addition, appellant contends that Hwang stated that he was a vice president of New Star and had a business card that listed him as a vice president of New Star. Appellant also states that the broker's agreement signed by Park and Hwang listed the broker as "New Star Realty / David (Il Kyu) Hwang" and the signature line read "New Star Realty / David Hwang[.]" And Sung—the New Star owner in Dallas—testified that if Hwang, as the broker, signed a contract with Park, that would "be binding to New Star Realty[.]"
Additionally, appellant states that, after he brought his apparent authority claims against appellee, the New Star website changed to indicate that the Dallas location was a franchise and Hwang was "Honorary Vice President." He argues that appellee gives "carte blanche permission for its franchisees to use the New Star webpage to disseminate any information the franchisee desire[s] and to use the New Star logo on any document that the franchisee creates."
Appellee argues that there is no summary judgment evidence that appellee gave Hwang apparent authority to make the alleged representation or that a person could reasonably perceive that Hwang had "authority to guarantee that the law can never change." Appellee argues that the evidence that New Star's website listed Hwang as a vice president and that he used the New Star logo does not establish that he had apparent authority as an agent of New Star to guarantee that the law would not change.
Analysis
The issue here is whether—based on the actions of appellee—Hwang had apparent authority to make the alleged representation on behalf of appellee that the "dry" and "wet" areas would never change. "[A]n agent's authority is presumed to be co-extensive with the business entrusted to his care" and, as a result, "includes only those contracts and acts incidental to the management of the particular business with which he is entrusted." Gaines, 235 S.W.3d at 185. But "[d]eclarations of the alleged agent, without more, are incompetent to establish either the existence of the alleged agency or the scope of the alleged agent's authority." Id. at 183-84. Rather, apparent authority is based on acts of the principal and "is limited to the scope of responsibility that is apparently authorized." First Valley Bank of Los Fresnos v. Martin, 144 S.W.3d 466, 471 (Tex. 2004). Consequently, we focus on appellee's acts to determine whether appellant raised an issue of fact regarding Hwang's apparent authority. Gaines, 235 S.W.3d at 184.
The summary judgment evidence of appellee's conduct on which appellant relies to support his contention is that appellee's website identified Hwang as a vice president and referred to the Dallas office. Although appellant also identifies other summary judgment evidence that he considers significant on this issue, it is not evidence of appellee's conduct. For example, he states that Hwang's business card showed the New Star corporate logo and identified him as a vice president of New Star, Hwang stated that he was a vice president of New Star, Hwang used a confidentiality agreement with the New Star corporate logo on it, that agreement stated that New Star was the broker, and the broker agreement identified "New Star Realty / David (Il Kyu) Hwang" as the broker. But as in Gaines, that summary judgment evidence "consists . . . of acts or statements attributed to the alleged agent," Hwang, "rather than to the putative principal," appellee. Id. at 185.
Additionally, appellant claims that appellee did not control how franchisees used and changed information on the website and used the New Star logo on documents. Evidence that appellant cites supporting these claims, however, related to appellant's motion for sanctions and was not submitted as summary judgment evidence. And appellant does not explain how his subsequent discovery that franchisees used or changed the information on the New Star website or used the New Star logo on documents gave Hwang apparent authority at the time of the claimed representation and made the claimed representation legally attributable to appellee. See Boyd v. Leasing Assocs., Inc., 516 S.W.2d 485, 489 (Tex. Civ. App.—Houston [1st Dist.] 1974, writ ref'd n.r.e.) ("[A]pparent authority or estoppel cannot be established except by facts known to the party dealing with the agent and relied upon by him in such dealings.").
Appellant relies on Reliant Energy Services, Inc. v. Cotton Valley Compression, L.L.C., 336 S.W.3d 764, 789 (Tex. App.—Houston [1st Dist.] 2011, no pet.) to support his position. Cotton Valley sued Reliant for breach of contract based upon the claimed actual and apparent authority of Westfield Oil & Gas, Inc. The jury found against Reliant on the theory that Westfield had apparent authority. Id. at 770. The court of appeals concluded that there was an actual, direct, and unusual course of dealing between Reliant and Cotton Valley that sometimes involved the claimed agent and sometimes did not. Id. at 790. And the court concluded there was some evidence to support the jury's finding that there were "acts or omissions" by Reliant and a pattern of conduct by Reliant in its dealings with Cotton Valley that amounted to a lack of ordinary care bestowing indications of authority on Westfield. Id. at 789-90. Unlike Reliant, however, there was no summary judgment evidence here of similar direct and ongoing transactions between appellee and appellant or direct representations by appellee to appellant involving Hwang.
The court of appeals also noted that the jury charge did not require the jury to consider whether Cotton Valley exercised "reasonable diligence to ascertain the fact or scope of Westfield's apparent authority" in making its apparent authority finding. Id. at 787. And it stated that reasonable diligence to ascertain an agent's authority is part of the standard under Texas law for determining whether a person is reasonably prudent in the context of apparent authority. Id. But without such an instruction or an objection on that basis to the charge that was given to the jury, the court went on to evaluate the evidence as applied to the actual charge given. Id. --------
Appellant generally argues, without citing authority, that "[i]t is reasonable and within the scope of an agent to represent to potential buyers the state of the laws that affect the business[,]" "[i]t is not outside the scope of an agent's duties to tell a potential buyer that the statement[] the broker is making is true[,]" and "it is not outside of a business agent's duties to sell a business." And he cites Shahan-Taylor Co. v. Foremost Dairies, 233 S.W.2d 885, 890-91 (Tex. App.—San Antonio 1950, writ ref'd n.r.e.), to support his general statement that "an officer in a corporation has the apparent authority to bind the corporation in ordinary contracts that a reasonable person would view as being consistent with an agent's scope of authority in that position." But the issue there was not apparent authority to make an alleged misrepresentation. Instead, it was whether the third party reasonably believed a branch manager had apparent authority to bind his company to agree to pay for feed purchased by a cattle owner to feed his herd of cattle. Id. The court described many of the types of matters for which an agent would generally not have apparent authority to bind its principal but concluded that the "nature of the business empowered" the branch manager with the apparent authority to incur the debt on behalf of his company. Id. at 890-91. The court noted that the branch manager made statements directly to the claimant that the company would pay the bills and that the company also actually paid most of the bills either directly to the claimant or as an "advance" to the cattle owner. Id. at 888. The claimant also introduced evidence that in good faith and based upon the business history it believed the business incurred the debt. Id. at 890-91. Similar to Reliant, there was evidence of an ongoing direct relationship between the claimant and the business.
Here, appellant's claim is that appellee bestowed on Hwang the apparent authority to promise that the designation of "wet" and "dry" areas would never change. To raise an issue of fact, appellant had to show there was summary judgment evidence that appellee clothed Hwang with the indicia of authority, leading a reasonably prudent person to believe that Hwang had the authority to make that statement on behalf of appellee and that he exercised reasonable diligence and discretion to ascertain the scope of Hwang's authority. Summary judgment evidence that appellee identified Hwang as vice president and referred to the Dallas office on appellee's website did not raise an issue of fact regarding whether Hwang had apparent authority to make the alleged statement. See Gaines, 235 S.W.3d at 185 (stating evidence that a mortgage broker "brought the parties together, delivered the paperwork, and assisted in its completion is not evidence that" the lender "authorized or acquiesced in" the broker's "representation that the loan was 'a done deal'"); First Valley Bank, 144 S.W.3d at 471 (holding acts of principal, a bank, did not clothe director with apparent authority to waive bank's lien on collateral and scope of apparent authority did not include authority to orally release collateral or forgive debt); Elaazami v. Lawler Foods, Ltd., No. 14-11-00120-CV, 2012 WL 376687, at *4 (Tex. App—Houston [14th Dist.] Feb. 7, 2012, no pet.) (mem. op.) ("The mere appointment of a person as a 'vice president' does not by itself establish apparent authority as a matter of law for the person to execute employment contracts on behalf of the company."); RESTATEMENT (THIRD) OF AGENCY § 3.03 cmt. e(4) ("The office of vice president by itself does not carry actual or apparent authority to bind the corporation."); 20A ELIZABETH S. MILLER & ROBERT A. RAGAZZO, TEXAS PRACTICE SERIES: BUSINESS ORGANIZATIONS § 35.9 (3rd ed. 2013) (stating "the vice president normally has no inherent authority merely by virtue of his office").
In summary, appellant did not establish that the summary judgment evidence raised a fact issue concerning whether Hwang's alleged agency included the apparent authority to make the alleged representation. As a result, appellant did not raise an issue of fact regarding whether appellee is liable for Hwang's alleged representation that "dry" and "wet" areas in Dallas would never change. See Gaines, 235 S.W.3d at 185. Consequently, we affirm the trial court's grant of summary judgment in favor of appellee.
CONCLUSION
We affirm the trial court's judgment.
/Elizabeth Lang-Miers/
ELIZABETH LANG-MIERS
JUSTICE 150110F.P05
JUDGMENT
On Appeal from the 191st Judicial District Court, Dallas County, Texas
Trial Court Cause No. DC-12-01830.
Opinion delivered by Justice Lang-Miers, Justices Francis and Myers participating.
In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellee NEW STAR REALTY, INC. recover its costs of this appeal from appellant WON KYU KYE. Judgment entered this 27th day of June, 2016.