Robert Orr Junior v. John K. Broussard, Prince's Hamburgers No. 5, L.L.C., P.H. 2003, L.P., PHSW Limited Partnership, Broussard Manufacturing Co. 2003, L.L.C., and Prince's Famous Hamburger Stand 10, Inc. And Prince's Hamburgers No. 4, L.L.C.

Citation: 565 S.W.3d 415Docket: 14-17-00836-CV

Court: Court of Appeals of Texas; November 14, 2018; Texas; State Appellate Court

Original Court Document: View Document

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Reversed and rendered on November 15, 2018, in case No. 14-17-00836-CV, Robert Orr Jr. appealed against John K. Broussard and several entities related to Prince’s Hamburgers No. 5. Orr, one of six guarantors for a loan to Prince’s Hamburgers No. 5 from Post Oak Bank, paid off a defaulted loan amounting to $283,110.71 and sought equitable contribution from Broussard. The jury determined Broussard's share to be $47,185.12, but found he did not breach his obligations after paying Orr $15,750.00 and after Orr foreclosed on restaurant equipment valued at $750.00. The trial court ruled in favor of Broussard, but Orr contended that the jury’s finding was incorrect based on the evidence presented. The appellate court agreed that Broussard breached his co-guarantor obligations and that the trial court erred in upholding the jury's finding regarding the breach and its conclusion on the disposition of a trademark under the Uniform Commercial Code. However, the court denied Orr's request for attorney’s fees, citing that such fees are not recoverable for equitable contribution claims. The appellate court reversed the lower court's judgment and ruled in favor of Orr for $30,685.12. The background details reveal that Prince’s Hamburgers No. 5 borrowed $667,500.00 in 2008, with six guarantors, and defaulted in 2013, leading to Orr fulfilling the guaranty and subsequently suing Broussard for reimbursement. Broussard argued Orr was pursuing a deficiency suit, which Orr denied, asserting his claim for equitable contribution.

Orr foreclosed on and sold restaurant equipment securing Prince’s No. 5’s debt, with the jury determining that this sale was commercially reasonable and valued the equipment at $750. Despite Orr being tendered a trademark as additional security, he refused it; the jury found he did not make a commercially reasonable disposition of the trademark, valuing it at $0. The jury confirmed that Orr paid $283,110.71 to the bank under his Guaranty Agreement and found that Broussard did not breach his co-guarantor obligations by failing to reimburse Orr. Orr moved to disregard the jury's finding regarding Broussard's non-breach and the disposition of the trademark, while Broussard sought a take-nothing judgment based on the jury’s findings. The trial court granted Broussard’s motion. 

In his appeal, Orr argues the trial court erred in not disregarding the jury's finding on Broussard's obligations, asserting it was immaterial and that evidence conclusively showed Broussard's breach. He also contests the jury’s negative finding regarding the trademark's disposition. The principles of equitable contribution were cited, emphasizing that co-guarantors must share losses from the principal debtor's default. It was established that Orr paid more than his share of the debt, while Broussard paid less than one-sixth. Broussard defended the trial court's ruling, claiming Orr did not plead a claim for equitable contribution, waived his complaint about the jury's finding, and that the jury's finding implied Orr prevented Broussard from fulfilling his obligations, excusing any potential breach.

Texas adheres to the fair-notice pleading standard, requiring that pleadings provide enough information for the opposing party to prepare a defense. A pleading is deemed sufficient if it allows the court to reasonably identify the elements of a cause of action and the relief sought. Orr met this standard by alleging that he and the co-guarantors were responsible for a note executed by Prince’s No. 5, which defaulted, leading Orr to pay off the note. He claimed that the other guarantors failed to fulfill their share of the liability. Although Orr labeled his claim as "Breach of Contract against Co-Guarantors," he adequately pleaded a claim for equitable contribution, and the mislabeling did not affect the sufficiency of the pleadings.

Broussard argued that he could not be found in breach of his obligations because Orr did not request his proportionate share prior to trial. However, Broussard failed to cite any authority supporting this as a necessary element for equitable contribution, and the record indicated that Orr had indeed requested payment from all co-guarantors well before the trial.

Broussard also contended that Orr waived any challenge to the jury's negative finding regarding Broussard’s breach of the co-guarantor obligations by not objecting to the jury charge. However, a materiality complaint can be preserved through motions filed after the verdict, and Orr's arguments in his motion to disregard findings and for judgment notwithstanding the verdict preserved this issue for review.

Finally, the jury found that Broussard did not breach his obligations to Orr. The trial court's denial of Orr's motion to disregard this finding was reviewed under a legal-sufficiency standard, which requires evaluating the evidence in the light most favorable to the verdict. The jury specifically answered "No" to whether Broussard breached his obligations by failing to reimburse Orr.

Orr's post-verdict motion contends that the trial court should disregard a jury finding, arguing that (a) the finding is immaterial as it pertains to a legal determination, (b) lacks evidentiary support, and (c) evidence establishes that Broussard is a co-guarantor and owes Orr reimbursement for his share of the debt. The court may disregard jury findings deemed immaterial, particularly those asking the jury to resolve a question of law, which includes applying law to undisputed or conclusively established facts. The court agrees with Orr that the jury's Question 3 was immaterial since it required a legal determination regarding Broussard's obligation as a co-guarantor. Key undisputed facts include: Broussard is one of six co-guarantors, Orr paid $283,110.71, Broussard’s share of that amount is $47,185.12, and the total amount Broussard has reimbursed Orr is less than this share, indicating a breach of obligation. The trial court erred by not disregarding the jury's incorrect answer on this matter.

Broussard's argument that the jury's response indicated Orr obstructed his performance is invalid, as prevention of performance is an affirmative defense that must be explicitly pleaded. Since Broussard did not assert this defense, it is waived. Additionally, the burden to establish an affirmative defense lies with the party claiming it, and a jury's negative finding on breach does not imply an affirmative defense has been proven. Consequently, without a pleaded defense or factual finding of prevention, Broussard’s breach remains unexcused.

Orr has sought varying reimbursement shares for Broussard, now asserting either one-third or one-sixth of the total amount paid, referencing legal principles that co-guarantors are liable for the debt proportionate to their number.

Orr did not provide legal authority for his claim that each co-guarantor's liability should be divided among the number of active guarantors at a specific date, nor did he specify which date should be used to assess the number of existing guarantors. As a result, his request for reimbursement of one-third of the total amount he paid to the bank is deemed waived due to insufficient briefing. The court determined that Orr is entitled to recover one-sixth of the total debt, amounting to $47,185.12, from Broussard. Additionally, Broussard is credited with $15,750 already paid to Orr and the value of equipment foreclosed upon, which was established at $750. Consequently, after applying these credits, Broussard's remaining obligation to Orr is $30,685.12, leading to a reversal of the previous judgment and a ruling in favor of Orr for that amount.

Regarding the trademark collateral, after Orr settled the debt, the bank transferred its security interest in the trademark to him. Broussard contested Orr's entitlement to recovery, citing the jury's finding that Orr failed to dispose of the trademark in a commercially reasonable manner. However, Orr argued that this issue was irrelevant since he was not obligated under the Uniform Commercial Code (UCC) to sell or dispose of the trademark if it could not be done reasonably. The parties agreed that Broussard offered the trademark to Orr, who rejected it, and Broussard confirmed his continued ownership and usage of the trademark. The court concluded that since neither the UCC nor the security agreement mandated Orr to accept the trademark, the question of its commercial disposition was legally immaterial. The trial court's failure to disregard this finding was deemed an error, leading to the acceptance of Orr's argument on appeal.

Attorney’s fees are recoverable only as permitted by statute or contractual agreement. Under Texas Civil Practice and Remedies Code section 38.002, fees can be awarded for specific claims, including services rendered and contracts, but not for equitable contribution claims. Orr sought attorney’s fees based on jury assessment but was not entitled to them for pursuing equitable contribution, as established in case law. It was acknowledged that when Prince’s No. 5 defaulted, Orr paid $283,110.71, and thus holds a right of contribution for one-sixth of that amount from each co-guarantor, totaling $47,185.12. After accounting for payments received by Orr, the net amount due is $30,685.12. The trial court's judgment was reversed, and judgment was rendered in favor of Orr for this amount.