Ex parte Charles James Pulte--Appeal from 235th District Court of Cooke County

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State: Texas

Court: Texas Northern District Court

Docket No: 02-03-00202-CR

Case Date: 11/13/2003

Plaintiff: MARY LOUISE WATKINS, M.D.

Defendant: GARY JONES--Appeal from 197th District Court of Cameron County

Preview:E Z Auto, L.L.C. v. H.M. Jr., Auto Sales--Appeal from
37th Judicial District Court of Bexar County
No. 04-01-00820-CV
EZ AUTO, L.L.C.,
Appellant
v.
H.M. JR. AUTO SALES,
Appellee
From the 37th Judicial District Court, Bexar County, Texas
Trial Court No. 99-CI-15088
Honorable Karen Pozza, Judge Presiding
Opinion by: Phil Hardberger, Chief Justice
Sitting: Phil Hardberger, Chief Justice
Alma L. L pez, Justice
Karen Angelini, Justice
Delivered and Filed: June 26, 2002
AFFIRMED
EZ Auto, L.L.C. ("EZ") appeals a judgment rendered in favor of H.M. Jr. Auto Sales ("HM") following a bench trial.
EZ raises three issues in its brief challenging the sufficiency of the evidence to support the trial court's findings that EZ
is bound by the actions of William J. Marks ("Marks") and asserting that the trial court erred in concluding that HM
was entitled to judgment against EZ based on Marks's actions. HM raises three "cross-points" asserting: (1) the trial
court improperly allowed evidence to be introduced regarding a partial payment; (2) the trial court erred in refusing to
award HM appellate attorney's fees; and (3) EZ forfeited its franchise and lost its capacity to defend against the suit.
We affirm the trial court's judgment.
Factual and Procedural Background
EZ is a limited liability company managed under the direction of its managers. Marks was named as the initial
manager in EZ's articles of organization.
HM is in the wholesale automobile business. Beginning in February of 1999, HM sold four vehicles to Marks. HM's
principal, H.M. Adams, Jr. ("Adams"), testified that he checked with dealers regarding EZ's reputation and verified that
EZ's license was "good." The license is required to enable a dealer to transfer title without paying sales tax.
The first three vehicles were purchased using an envelope draft signed by Marks on behalf of EZ. In an envelope draft,
the selling dealer places the title and other documents in an envelope and deposits them with his bank which forwards
the envelope and its contents to the purchasing dealer's bank. The purchasing dealer verifies the accuracy and
completeness of the documents and then orders his bank to pay the selling dealer for the draft. After the third draft was
returned unopened and unpaid, Marks paid HM with a personal check, explaining that he was having problems with
his account. Marks also paid HM for the fourth vehicle on April 19, 1999, with his personal check in the amount of
$19,600; however, the title history revealed that the vehicle was sold to EZ which transferred title to a third party.
When the check was returned for insufficient funds, HM sued EZ. HM subsequently received $15,000 in payment
against the amount due.
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Donald E. Kirkham testified that Marks had been removed as manager at a meeting in November of 1998. Although
minutes were introduced reflecting a special meeting, the documents do not reflect that notice of the meeting was sent
to all members. Kirkham testified that he did not cancel EZ's license or otherwise take any action to ensure that Marks
was not using EZ's license number. Kirkham explained that EZ continued to use the license to sell its remaining
inventory through auction.
The trial court entered findings of fact and conclusions of law. The trial court found: (1) HM sold the fourth vehicle to
EZ through Marks and the vehicle was assigned to EZ on the title certificate and references EZ's license number; (2)
Marks explained that he was paying by personal check due to EZ's banking difficulties and the check was in essence a
loan to EZ; and (3) Marks was named as the sole manager of EZ and was never removed as manager because EZ did
not give proper notice of the special meeting at which it claimed Marks was terminated as manager. The trial court
concluded that Marks had actual and apparent authority to act for EZ.
Based on its findings of fact and conclusions of law, the trial court rendered judgment in favor of HM for the sum of
$4,600 (the balance of the purchase price that was unpaid), $1,220.45 (interest paid by HM under its line of credit
because the purchase price remained unpaid), plus pre-judgment interest and attorney's fees. EZ was the only party to
file a notice of appeal.
Sufficiency of the Evidence
A trial court's findings of fact are reviewable for legal and factual sufficiency of the evidence by the same standards
applied in reviewing the legal and factual sufficiency of the evidence supporting a jury's finding. Anderson v. City of
Seven Points, 806 S.W.2d 791, 794 (Tex. 1991). We consider only the evidence and inferences tending to support the
trial court's finding and disregard all evidence to the contrary. Id. If there is any evidence of probative value to support
the trial court's finding, the evidence is legally sufficient. Id In reviewing a factual sufficiency point, the court of
appeals must weigh all of the evidence in the record. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996). Findings may
be overturned only if they are so against the great weight and preponderance of the evidence as to be clearly wrong
and unjust. Id. We review conclusions of law de novo. J.C. Penney Life Ins. Co. v. Heinrich, 32 S.W.3d 280, 284 (Tex.
App.--San Antonio 2000, pet. denied).
Absent actual or apparent authority, an agent may not bind a principal. Suarez v. Jordan, 35 S.W.3d 268, 272-73 (Tex.
App.--Houston [14th Dist.] 2000, no pet.). Both actual and apparent authority are created through conduct of the
principal directed either to the agent (actual authority) or to a third person (apparent authority). Id.
Actual authority includes authority that the principal: (1) intentionally confers upon the agent; (2) intentionally allows
the agent to believe he has; or (3) by want of ordinary care allows the agent to believe himself to possess. See, e.g.,
Suarez, 35 S.W.3d at 273; Disney Enterprises, Inc. v. Esprit Finance, Inc., 981 S.W.2d 25, 30 (Tex. App.--San Antonio
1998, pet. dism'd w.o.j.); Spring Garden 79U, Inc. v. Stewart Title Co., 874 S.W.2d 945, 948 (Tex. App.--Houston [1st
Dist.] 1994, no writ); Currey v. Lone Star Steel Co., 676 S.W.2d 205, 209 (Tex. App.--Fort Worth 1984, no writ).
Article 2.21 of the Texas Limited Liability Company Act ("Act") provides that each manager of a limited liability
company whose management is vested in managers is an agent of the limited liability company for purposes of its
business. Tex. Rev. Civ. Stat. Ann. art. 1528n, art. 2.21B (Vernon 1997). Any act of such a manager binds the limited
liability company unless: (1) the manager lacks the authority to act for the limited liability company; and (2) the person
with whom the manager is dealing has knowledge of the manager's lack of authority. Id.
EZ's articles of organization vest management in its managers and provide that "[a]ny one manager may act on behalf
of" EZ. Marks is named as the initial manager. EZ's regulations provide that a manager may only be removed at a
meeting of the members called expressly for that purpose, and the regulations require notice be given to each member
of any such meeting.
The evidence in this case conclusively established that Marks was the initial manager of EZ, vesting him with actual
authority. However, the question is whether Marks continued to have actual authority to act on behalf of EZ at the time
of the transaction in question.
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Evidence was introduced to show that Marks had been removed as manager at a special meeting held on November 1,
1998. HM contends that the removal was invalid because notice of the meeting was not properly given, and the record
supports the contention that notice of the meeting was not sent. EZ correctly asserts, however, that HM does not have
standing to complain about the regularity of the notice. Swain v. Wiley College, 74 S.W.3d 143, 148 (Tex. App.--
Texarkana 2002, no pet.); Texlite, Inc. v. Wineburgh, 373 S.W.2d 325, 328 (Tex. Civ. App.--Dallas 1963, writ ref'd
n.r.e.). Because HM was not a member of EZ, it cannot collaterally attack the legality of the actions taken at the
special meeting based on any informality or irregularity in the notice. Swain, 74 S.W.3d at 148; Texlite, 373 S.W.2d at
328.
Although HM does not have standing to complain directly about the regularity of the notice, the absence of notice still
is important in determining whether Marks continued to have actual authority. Marks was a member of EZ, thus
entitling him to notice of any meeting at which he would be removed as manager. Our record contains no evidence that
Marks was notified of the meeting or otherwise notified that he no longer had actual authority to act on behalf of EZ.
(1) In the absence of such notice, our record contains no evidence that EZ exercised ordinary care to dispossess Marks
of the belief that he had authority to act on behalf of EZ. The belief that Marks continued to have authority to act on
EZ's behalf is supported by Kirkham's testimony that he told customers, who were having trouble obtaining titles to
vehicles sold to them by EZ, that Marks "apparently had taken care of it" and that "apparently you [the customers] will
get your license plates." We conclude that the record supports the trial court's finding of actual authority because our
record contains no evidence that EZ exercised ordinary care to dispossess Marks of the belief that he continued to have
authority to bind EZ. On the contrary, our record contains evidence that EZ represented to customers that Marks
continued to have authority to "take care" of EZ's business. (2) See Suarez, 35 S.W.3d at 273 (actual authority includes
authority that the principal by want of ordinary care allows the agent to believe himself to possess).
Cross-Points
HM asserts three cross-points contending that: (1) the trial court should have rendered judgment for a greater amount
of damages because the trial court erred in admitting evidence of a partial payment; (2) the trial court should have
rendered judgment awarding appellate attorney's fees; and (3) EZ should not have been permitted to defend the lawsuit
because its charter had been forfeited; therefore, EZ did not have legal capacity to bring this appeal.
With regard to HM's first two cross-points, HM seeks to alter the trial court's judgment by increasing the amount of
damages and attorney's fees awarded. "A party who seeks to alter the trial court's judgment or other appealable order
must file a notice of appeal." Tex. R. App. P. 25.1(c). "The appellate court may not grant a party who does not file a
notice of appeal more favorable relief than did the trial court except for just cause." Id. Because HM did not file a
notice of appeal and has not given us reason to find "just cause," it has waived its right to seek a greater recovery. See
City of Denton v. Municipal Admin. Servs., Inc., 59 S.W.3d 764, 772 n.7 (Tex. App.--Fort Worth 2001, no pet.); City
of Freeport v. Vandergrifft, 26 S.W.3d 680, 683 (Tex. App.--Corpus Christi 2000, pet. denied); D.S.A., Inc. v.
Hillsboro Ind. Sch. Dist., 999 S.W.2d 887, 894 (Tex. App.--Waco 1999, pet. denied).
With regard to HM's third cross-point, lack of capacity does not make a suit void, and lack of capacity must be
challenged with a verified plea in abatement or it is waived. El T. Mexican Restaurants, Inc. v. Bacon, 921 S.W.2d
247, 250 (Tex. App.--Houston [1st Dist.]1995, writ denied). A challenge to capacity cannot be urged for the first time
on appeal. Id. HM did not challenge EZ's lack of capacity by a verified plea in abatement; therefore, any challenge to
EZ's ability to defend and appeal has been waived.
Conclusion
Actual authority includes the authority that the principal, by want of ordinary care, allows an agent to believe himself
to possess. The record supports the trial court's finding of actual authority because our record: (1) contains no evidence
that EZ exercised ordinary care to dispossess Marks of the belief that he continued to have authority to bind EZ; and
(2) does contain evidence that EZ represented to customers that Marks continued to have authority to "take care" of
EZ's business. Accordingly, the trial court's judgment is affirmed.
PHIL HARDBERGER,
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CHIEF JUSTICE
DO NOT PUBLISH
1. The record does contain a letter dated May 25, 1999, addressed to each of the members advising them of the annual
meeting to be held on May 30, 1999. The letter states that it was being sent on behalf of Kirkham, "who is the current
manager of EZ." However, this letter was dated after the date of the transaction in question.
2. During oral argument, HM's attorney relied on the dealer license being in the names of both Marks and EZ. The
only reference in our record to the license is the following excerpt read from Kirkham's deposition:
"This is a document that's number 39, I produced to your lawyer.
Answer: Uh-huh.
Mr. Kolb: Let's mark that. Exhibit 2 is marked."
Reading on page 17, line 4: " This document that I marked Exhibit 2, it is a fax from TXDOT and it says Willie Marks
and EZ Auto both had P 35633. Their license expired on 10/31/99. Can you read that?
Yes I can read it.
My question is: Did Willie Marks also have that license number or was that just EZ Auto's?
You mean, back before I took over?
Well, if it expired on 10/31.
I assume it was EZ Auto is the answer, but I never saw whose name it was in at the time I took over.
All right. So you never actually saw the licenses?
No, I did not. I knew we had one."
Question beginning on page 20, line 15: "By Mr. Kolb: Did you do anything after you came in on November 1 of '98 to
see to it that Willie Marks or other people were not using the license number, the P number of EZ Auto?
Answer: No."
Because the license was not admitted into evidence before the trial court, we do not rely on the license to support our
decision with regard to the sufficiency of the evidence to support the trial court's finding of actual authority.
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