Summary
granting partial summary judgment to Plaintiffs on identical OrthAlliance counterclaims
Summary of this case from Penny v. Orthalliance, Inc.Opinion
Civil Action No. 3:01-CV-1569-N
July 9, 2003
ORDER
Before the Court is Defendant Orthalliance, Inc.'s ("Orthalliance") motion for reconsideration of summary judgment ruling, filed April 11, 2003. Orthalliance requests reconsideration of the Court's March 27, 2003 order (the "Summary Judgment Order"), in part, because the basis for the Court's decision was not argued or briefed by the parties. Though the Court finds that the parties did address the effect of section 251.003(a)(4) of the Texas Occupation Code on their contracts both in their briefs and in oral argument, Orthalliance additionally has had a full and fair chance to argue this precise issue in its motion for reconsideration. The Court's Summary Judgment Order held that the parties' contracts are illegal in their entirety and thus unenforceable. Upon consideration, Orthalliance's motion for reconsideration of the Summary Judgment Order is DENIED for the reasons stated in the Summary Judgment Order.
In light of the Summary Judgment Order, Orthalliance's motion for summary judgment, filed on November 4, 2002, is DENIED as moot. The Summary Judgment Order also is dispositive of many of the issues raised in Plaintiffs Robert C. Penny, Penny Orthodontics, P.C., Keith Stewart, Stewart Orthodontics, P.C., William M. Reeves, and William M. Reeves, P.C.'s (collectively "Plaintiffs") motion for summary judgment as to Orthalliance's counterclaims. Plaintiffs' motion is GRANTED as to Orthalliance's counterclaims for specific performance, breach of contract, promissory estoppel, breach of the guaranty as to Dr. Reeves, and tortious interference with contract, and DENIED as to Orthalliance's unjust enrichment counterclaim.
Courts will generally not enforce contracts "expressly or impliedly prohibited by statutes or by public policy." Woolsey v. Panhandle Refining Co., 116 S.W.2d 675, 678 (Tex. 1938); see Lewis v. Davis, 199 S.W.2d 146, 148-49 (Tex. 1947). This policy is not to protect or punish either party to the contract, but is for the benefit of the public. Lewis, 199 S.W.2d at 151. The courts, therefore, will generally leave the parties as they find them. Mercury Life Health Co. v. Hughes, 271 S.W.2d 842, 846 (Tex.Civ.App.-San Antonio 1954, writ ref'd).
Orthalliance's counterclaims for specific performance and breach of contract fail because the parties' contracts violate section 251.003(a)(4) of the Texas Occupation Code. Orthalliance's promissory estoppel counterclaim similarly fails because estoppel will not make an illegal contract enforceable. See Schmidt v. Matise, 747 S.W.2d 883, 887 (Tex.App.-Dallas 1988, writ denied). Orthalliance's counterclaim for breach of William Reeves' guaranty also fails because its claim is premised on the enforceability of the underlying contracts among William Reeves, his P.C., and Orthalliance. Because the underlying contracts are illegal and unenforceable, the guaranty also is unenforceable. See Savin Corp. v. Copy Distrib. Co., 716 S.W.2d 690, 692 (Tex.App.-Corpus Christi 1986, no writ). Likewise, Orthalliance's tortious interference counterclaim fails because contracts that are illegal and void cannot be interfered with. See Juliette Fowler Homes, Inc. v. Welch Assoc., Inc., 793 S.W.2d 660, 664-65 (Tex. 1990).
The details regarding the parties' contracts and the rational finding the contracts violative of section 251.003(a)(4) of the Texas Occupation Code is in the Court's Summary Judgment Order.
The Court, however, will not dismiss Orthalliance's counterclaim for unjust enrichment. Though courts typically leave parties to an illegal contract as they find them, Mercury Life Health Co., 271 S.W.2d at 846, this policy is not without exception. Courts sometimes must question whether the policy against assisting a wrongdoer outweighs the policy against permitting unjust enrichment of one party at the expense of the other; the solution depends upon the particular facts and equities of the case. See Lewis v. Davis, 199 S.W.2d 146, 151 (Tex. 1947); see also RESTATEMENT (SECOND) OF CONTRACTS, § 197 cmt. b (1981). Though the parties' contracts violated section 251.003(a)(4) of the Texas Occupation Code, the case law and legislative history interpreting section 251.003(a)(4) is sparse. Additionally, as shown by Orthalliance's briefs before the Court and the language of the contracts themselves, Orthalliance did not appear to violate section 251.003(a)(4) intentionally; rather, Orthalliance misunderstood the application of this statute to the parties' contracts. Though ignorance of the law is no excuse for the parties' violation, the paucity of law interpreting 251.003(a)(4) coupled with the apparent good intentions of Orthalliance do weigh on the Court's decision of whether to dismiss Orthalliance's claim for unjust enrichment. On these facts, the Court holds that the disproportionate impact from leaving the parties where they are currently outweighs the policy against assisting a wrongdoer. Therefore, the Court DENIES Plaintiffs' motion for summary judgment on Orthalliance's unjust enrichment claim.
Plaintiffs' motion to strike, filed on February 7, 2003 is DENIED as moot in light of this Order; the parties' agreed motion to modify scheduling order and reset trial date is DENIED as moot; Orthalliance's motion for leave to file supplemental authority, filed on February 24, 2003, is GRANTED; and Orthalliance's motion to withdraw counsel, filed on March 13, 2003, is GRANTED.