VERIZON CORPORATE SERVICES CORP. F/D/B/A VERIZON LOGISTICS,
APPELLANT v. KAN-PAK SYSTEMS, INC., APPELLEE
NO. 07-08-0165-CV
COURT OF APPEALS OF TEXAS, SEVENTH DISTRICT, AMARILLO
290 S.W.3d 899; 2009 Tex. App. LEXIS 4977
June 30, 2009, Decided
PRIOR HISTORY:
FROM THE 96TH DISTRICT COURT OF TARRANT COUNTY; NO. 96-223905-07; HONORABLE
JEFF WALKER, JUDGE.
JUDGES: PANEL A. Before CAMPBELL and HANCOCK and PIRTLE, JJ.
OPINION BY: Mackey K. Hancock
OPINION
Appellant, Verizon Corporate Services Corp., appeals the granting of summary
judgment in favor of appellee, Kan-Pak Systems, Inc. The judgment awarded
Kan-Pak actual damages in the amount of $ 97,464, attorney fees of $ 8,000,
court costs, and post-judgment interest at the rate of 8.25 percent per annum.
Verizon further contends that the trial court erred in denying Verizon's motion
for summary judgment. We reverse and remand.
Background
In 1999, Verizon hired GLM to manage and oversee waste management at
Verizon's Texas facilities. As part of the agreement by which Verizon hired GLM,
Verizon authorized GLM to review its current waste management and to negotiate
leases with vendors for waste management services. However, Verizon expressly
denied GLM the authority to enter into contracts on Verizon's behalf. In
addition, Verizon supplied GLM with a letter of authorization to present to
potential vendors that specified that GLM was authorized to "act on behalf of
Verizon to obtain information on waste removal and recycling" and to "negotiate
rates, service levels, and commodity rebates for the benefit of Verizon."
However, this letter also expressly provided that, "GLM is not authorized to
enter into any agreement for service(s). Any negotiated rates, services levels,
and commodity rebates will be subject to review and final approval by
[Verizon]."
Between July 1999 and June 2002, a GLM employee negotiated and entered into
five rental contracts with Kan-Pak. According to these contracts, the GLM
employee entered into these contracts on behalf of Verizon. The five rental
contracts were nearly identical in their terms. Of particular relevance to the
present appeal, each rental contract was for a term of 60 months and contained
an automatic renewal clause that would renew the contracts for an additional 60
month period unless written notice of termination was received by the other
party no less than 60 days prior to the expiration of the current term.
Kan-Pak supplied compactors to the five Verizon facilities covered under the
separate rental contracts. Either GLM or Verizon paid the monthly rental
payments called for under the rental contracts until September 2006. From
September 2002 until September 2006, Verizon received copies of all invoices
covered by each of the five rental contracts. In September 2004, Verizon
contacted Kan-Pak about two of the locations covered by the rental contracts
requesting that half of the equipment be removed and that the corresponding
billing amount be decreased to reflect this change. Kan-Pak complied with this
request.
In August 2006, Verizon informed Kan-Pak that it should submit its billing to
Allied Waste. Kan-Pak obliged and began to receive payments from Allied on four
of the five rental contracts. 1 The reason for this change was that Verizon had
terminated its waste management consultation relationship with GLM and had
retained Allied to perform this task. As part of reviewing Verizon's waste
management, Allied discovered the rental contracts that GLM had entered into
with Kan-Pak. In December 2006, Allied forwarded a copy of these rental
contracts to Verizon. Verizon contends that the receipt of these contracts in
mid-December 2006 was when they became aware that such contracts existed and was
the first time that they saw the terms of the contracts. In February 2007,
Verizon contacted Kan-Pak by phone and advised Kan-Pak that Verizon had just
discovered the rental contracts and did not believe that it was bound by the
contracts. Verizon asked Kan-Pak to remove the compactors from all five
facilities. Initially, Kan-Pak agreed, but, the day before it was to remove the
compactors, Kan-Pak told Verizon that it was going to stand by the terms of the
rental contracts. In a letter dated April 25, 2007, Verizon notified Kan-Pak
that it was to remove all equipment from the five sites covered by the rental
contracts and that these rental contracts were terminated.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -1 There is
some dispute regarding the extent to which Allied made payments under the rental
contracts, however, for purposes of this appeal, we conclude that this factual
issue is not material.
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As a result of receiving Verizon's termination letter, Kan-Pak filed the
present action. Kan-Pak's petition alleges that Verizon breached the rental
agreements because its termination letter was received after each of the five
rental agreements had automatically renewed for new 60 month periods. After
discovery, both parties moved for summary judgment. In its motion, Kan-Pak
contends that Verizon breached the rental contracts, ratified the rental
contracts, and is estopped from challenging the validity of the contracts. By
its motion, Verizon contends that the rental contracts are unenforceable against
it because GLM lacked either actual or apparent authority to contract on behalf
of Verizon, Verizon did not ratify the rental contracts, and Verizon is not
estopped from challenging the validity of the contracts. The trial court granted
Kan-Pak's summary judgment, denied Verizon's summary judgment, and awarded
Kan-Pak $ 97,464, attorney fees of $ 8,000, court costs, and post-judgment
interest at the rate of 8.25 percent per annum.
Following entry of summary judgment, Verizon filed a motion for new trial
challenging the amount of the award of actual damages assessed by the trial
court as well as whether Kan-Pak had established ratification or estoppel as a
matter of law. As it relates to the amount of damages awarded, Verizon contends
that the award was improper as a matter of law because future payments under the
rental contracts were not discounted to present value. The trial court denied
Verizon's motion.
On appeal, Verizon presents two issues. By its first issue, Verizon contends
that the trial court erred in granting summary judgment in favor of Kan-Pak and
in failing to grant summary judgment in favor of Verizon. By its second issue,
Verizon contends that the trial court erred in denying Verizon's motion for new
trial because Kan-Pak's evidence is legally insufficient to support the award of
actual damages in the summary judgment.
Summary Judgment
Verizon contends that the trial court erred in granting Kan-Pak's motion for
summary judgment and in denying Verizon's motion for summary judgment.
Specifically, Verizon contends that the evidence raised a genuine issue of
material fact as to each of the grounds upon which Kan-Pak sought summary
judgment: ratification and equitable estoppel. Furthermore, Verizon contends
that it is entitled to summary judgment because it established, as a matter of
law, that the rental contracts were not binding on Verizon and, therefore, there
was no enforceable contract upon which Kan-Pak could assert its breach of
contract action.
When both parties to a suit move for summary judgment, each party bears the
burden of establishing that it is entitled to judgment as a matter of law. City
of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000). When the
trial court grants one party summary judgment and denies the other, we review
both parties' summary judgment evidence, determine all questions presented, and
render the judgment the trial judge should have rendered. FM Props. Operating
Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). When the trial court does
not specify the basis on which it granted summary judgment, the judgment will be
affirmed on any meritorious ground expressly presented in the motion and which
is preserved for appellate review. State Farm Fire & Cas. Co. v. S.S., 858
S.W.2d 374, 380 (Tex. 1993).
Verizon moved for summary judgment on both traditional and no-evidence
grounds, while Kan-Pak's motion asserted only traditional summary judgment
grounds. See TEX. R. CIV. P.166a. We review a summary judgment de novo to
determine whether the movant has established its right to summary judgment as a
matter of law. See Dallas Cent. Appraisal Dist. v. Cunningham, 161 S.W.3d 293,
295 (Tex.App.--Dallas 2005, no pet.). In reviewing a summary judgment, we must
examine the entire record in the light most favorable to the nonmovant,
indulging every reasonable inference and resolving any doubts against the
motion. See City of Keller v. Wilson, 168 S.W.3d 802, 824-25 (Tex. 2005).
Enforceability of the Rental Contracts
Verizon contends that it is entitled to summary judgment because it
established, as a matter of law, that GLM had no authority to enter into
contracts on Verizon's behalf and, therefore, the rental contracts are not
enforceable against Verizon. 2
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -2 We are
aware that, even if the rental contracts are not enforceable against Verizon
based on GLM's lack of authority, the rental contracts would be enforceable if
Verizon ratified the contracts or was equitably estopped from denying the
validity of the contracts. We will address those issues below. In this analysis,
our review is limited to whether a fact issue was raised as to whether GLM had
the actual or apparent authority to bind Verizon by entering into the rental
contracts on its behalf.
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An agent cannot bind a principal unless the agent has actual or apparent
authority to do so. See Lifshutz v. Lifshutz, 199 S.W.3d 9, 22 (Tex.App.--San
Antonio 2006, pet. denied). Actual authority arises when the principal
intentionally confers authority upon the agent or intentionally or by want of
ordinary care allows the agent to believe he has authority. See id. Apparent
authority exists when the principal's acts would lead a reasonably prudent
person to believe that the agent had authority to act on behalf of the
principal, the principal has either affirmatively held out the agent as
possessing authority or knowingly and voluntarily permitted the agent to act in
an unauthorized manner, and the party relying on the agent's apparent authority
must have ascertained the fact and scope of the agent's authority. See Tex.
Cityview Care Ctr., L.P. v. Fryer, 227 S.W.3d 345, 353 (Tex.App.--Fort Worth
2007, pet. dism'd by agr.). Only the actions of the principal can give rise to
apparent authority; actions or representations of the agent have no effect on
the determination. See id. Under either theory, the party alleging agency has
the burden to prove its existence. Id. at 352.
In the present case, there is no evidence in the record that would raise a
fact issue as to whether GLM had actual authority to contract on behalf of
Verizon. The only evidence relating to the actual authority that Verizon
intentionally conferred on GLM is the Waste Removal and Recycling Consultant
Agreement between Verizon and GLM and a letter of authorization that Verizon
gave to GLM to present to potential vendors. Each of these documents expressly
provide that GLM was not authorized to enter into any agreement or contract for
services. Because this right was expressly denied GLM, we cannot conclude that
Verizon intentionally conferred authority to contract to GLM, intentionally
allowed GLM to believe that it had authority to contract on behalf of Verizon,
or that Verizon failed to exercise the degree of care necessary to prevent GLM
from believing that it had authority to contract on behalf of GLM. Thus, we
agree with Verizon's summary judgment contention that it established, as a
matter of law, that GLM did not have actual authority to contract on Verizon's
behalf and, thus, Kan-Pak's breach of contract claims cannot be founded on the
basis of GLM's actual authority to enter into the rental contracts on Verizon's
behalf.
As to GLM's apparent authority, we are constrained to review only the
evidence of the actions of Verizon in determining whether Kan-Pak could
reasonably believe that GLM had authority to enter into the rental contracts on
behalf of Verizon. See id. at 353. The evidence of Verizon's actions as it
relates to whether they would lead a reasonably prudent person to believe that
GLM was acting on Verizon's behalf is the letter of authorization that
specifically defines the scope of GLM's agency and expressly prohibits GLM from
contracting on Verizon's behalf. There is no evidence that Verizon held GLM out
as having authority to contract on its behalf. Most significantly, however, is
that there is no evidence that Kan-Pak ascertained the fact and scope of GLM's
authority, which is a required element of a claim of apparent authority. See id.
Kan-Pak was notified, by the letter of authorization, that GLM did not have
authority to bind Verizon to a contract and, further, there is no evidence that
Kan-Pak took any action to ascertain that GLM had been granted greater authority
than what was expressly identified in the letter of authorization. Because there
is no evidence to support one or more elements of a claim that Verizon is bound
by the rental contracts because GLM had apparent authority to contract on behalf
of Verizon, Kan-Pak's breach of contract claims may not rest on the apparent
authority of GLM to enter into the rental contracts on behalf of Verizon.
Ratification
However, even though Verizon is not bound by the rental contracts based on
the actual or apparent authority of GLM to contract on Verizon's behalf, Verizon
would still be bound by the contracts if it acted in a manner that ratified
these contracts. In its motion for summary judgment, Kan-Pak contends that
Verizon ratified the rental contracts by directly making 156 monthly payments
under the rental contracts over the course of five to seven years. Kan-Pak
further cites evidence that GLM paid another 148 monthly payments. By its
summary judgment motion, Verizon contends that its actions were insufficient as
a matter of law to ratify the rental contracts and that it could not have
ratified the rental contracts before December 2006 because it was not aware of
the material terms of the contracts. Remaining mindful that this issue is
presented in the context of competing motions for summary judgment, we are
required to examine the entire record in the light most favorable to the
nonmovant, indulging every reasonable inference and resolving any doubts against
the motion. See City of Keller, 168 S.W.3d at 824-25.
Ratification of a contract occurs when a party recognizes the validity of the
contract by acting under the contract, performing under the contract, or
affirmatively acknowledging the contract. Stable Energy, L.P. v. Newberry, 999
S.W.2d 538, 547 (Tex.App.--Austin 1999, pet. denied). However, a party can only
ratify a contract if, at the time of ratification, it knew all of the material
terms of the contract. See T & R Assocs., Inc. v. City of Amarillo, 688 S.W.2d
622, 630 (Tex.App.--Amarillo 1985, writ ref'd n.r.e.). Thus, if a party acts in
a manner that recognizes the validity of a contract with full knowledge of the
material terms of the contract, the party has ratified the contract and may not
later withdraw its ratification and seek to avoid the contract. See Spellman v.
Am. Universal Inv. Co., 687 S.W.2d 27, 29-30 (Tex.App.--Corpus Christi 1984,
writ ref'd n.r.e.). Any retention of the beneficial part of the transaction
affirms the contract and bars rescission as a matter of law. Id. at 30.
Kan-Pak contends that Verizon's direct payment of 156 monthly payments on
three of the five contracts over the course of five to seven years coupled with
GLM's payment of 148 monthly payments on the remaining contracts is sufficient
evidence to establish that Verizon ratified the rental contracts as a matter of
law. However, there is no direct evidence that, prior to December 2006, Verizon
had any knowledge of all of the material terms of the rental contracts.
Certainly, there is no direct evidence that Verizon made those payments with
knowledge that the terms of the rental contracts included a 60 month term that
would be automatically renewed for an additional 60 month term if not terminated
in writing within 60 days of the expiration of the initial 60 month term. For
Verizon to have ratified the rental contracts, it would have to be shown that
Verizon had knowledge of the material terms of the contract at the time that it
performed under the contract. Because, prior to December 2006, there is no
direct evidence that Verizon knew the material terms of the rental contracts
that it was performing under, we cannot conclude that Verizon ratified the
rental contracts as a matter of law by paying the monthly rental payments. 3
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -3 Because
we are reviewing Kan-Pak's traditional motion for summary judgment, we may not
indulge reasonable inferences in Kan-Pak's favor. Thus, while we conclude that
it is reasonable to infer that Verizon knew the material terms of the rental
contracts prior to December 2006, that inference does not support Kan-Pak's
motion for summary judgment.
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However, the evidence does establish that Verizon received copies of the
rental contracts in December 2006. Verizon made no direct monthly rental
payments under the rental contracts after it received copies of the rental
contracts. 4 Further, in February 2007, Verizon contacted Kan-Pak and expressly
repudiated the rental contracts. 5 Looking at the entire record and indulging
all reasonable inferences in favor of Verizon, we conclude that Verizon took no
action after December of 2006 that ratified the rental contracts prior to its
express repudiation of those rental contracts in February 2007. Thus, Kan-Pak
has failed to establish that it was entitled to summary judgment on the basis
that Verizon ratified the rental contracts.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -4 However,
we are aware that Verizon's new waste management consultant, Allied, did make
monthly rental payments under the contracts after December 2006. However, there
is no evidence that Allied had the actual or apparent authority to bind Verizon.
Further, Allied's payments were not made until after Verizon had expressly
repudiated the rental contracts. Thus, we do not conclude that Allied's sporadic
payments in 2007 was evidence that Verizon ratified the rental contracts as a
matter of law.
5 In its brief, Kan-Pak contends that Verizon did not repudiate the rental
contracts until its written notification of termination of the rental contracts
was received in May 2007. While the terms of the rental contracts required
written notification of termination, an oral repudiation of a contract is
sufficient to show an intent to avoid the contract.
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Verizon contends, in support of its motion for summary judgment, that the
evidence establishes that it did not ratify the rental contracts as a matter of
law. As discussed above, Verizon received services and made monthly rental
payments under the rental contracts for five to seven years. Thus, Verizon
retained some benefit under the rental contracts and the retention of this
benefit is some evidence of ratification. See Spellman, 687 S.W.2d at 30.
Further, Verizon contends that GLM had no authority to contract on Verizon's
behalf, yet Verizon acknowledges that it "knew that Kan-Pak had installed
compactors at its sites and what Kan-Pak was charging for each month's rent." We
believe that the presence of Kan-Pak's compactors at five of Verizon's Texas
facilities and the invoicing of monthly rental charges gives rise to a
reasonable inference that a reasonably prudent business would have investigated
the basis of the monthly rental invoices and that, in the exercise of ordinary
diligence, such an investigation would have revealed the terms of the rental
contracts. While we cannot say that Verizon's accepting of the benefits of the
rental contracts, without proof of its knowledge of the material terms of the
rental contracts, was a ratification of those contracts, we do conclude that
Verizon's conscious indifference to discovering the terms of the rental
contracts gives rise to a reasonable inference that it knew or, at least, should
have known the material terms of the rental contracts. As such, we conclude that
the evidence raises a genuine issue of material fact as to whether Verizon
ratified the rental contracts by making monthly rental payments under those
contracts. Therefore, we affirm the trial court's denial of Verizon's motion for
summary judgment.
Equitable Estoppel
Finally, Kan-Pak contends that Verizon is equitably estopped from denying the
validity of the rental contracts based on its payment of the monthly rental
charges.
A claim of equitable estoppel requires proof of five elements: (1) a false
representation or concealment of material facts, (2) done with actual or
constructive knowledge that the representation was false or that the concealed
facts were material, (3) made to a party without knowledge or the means to
discover the facts, (4) with intent that the other party act upon the
representation or concealment, and (5) the other party detrimentally relied on
the representation or concealment. See Hausman v. Hausman, 199 S.W.3d 38, 43
(Tex.App.--San Antonio 2006, no pet.).
However, in the present case, Kan-Pak has presented no evidence that would
establish, as a matter of law, that Verizon made any knowing false
representation or intentionally concealed any material facts relating to the
rental contracts. As discussed above, it is possible that Verizon had knowledge
of the terms of the rental contracts and continued to receive the benefit of
those rental contracts, which might rise to the level of an intentional
concealment of material fact, but the evidence does no more than raise an
inference of that fact and, therefore, is insufficient to support Kan-Pak's
motion for summary judgment. Because Kan-Pak has failed to establish as a matter
of law that Verizon is equitably estopped from denying the validity of the
rental contracts, the trial court could not have granted summary judgment on
that basis.
Conclusion
Because genuine issues of material fact are raised by the evidence as to each
of the grounds upon which Kan-Pak moved for summary judgment and because the
evidence does not establish that Verizon did not ratify the rental contracts as
a matter of law, we reverse the trial court's grant of summary judgment in favor
of Kan-Pak and affirm the trial court's denial of Verizon's motion for summary
judgment.
Damages
Finally, Verizon contends that the trial court erred in denying its motion
for new trial because the trial court's award of actual damages was not
discounted to present value. Because we have reversed the trial court's summary
judgment, the award of damages has also been reversed. As such, the issue of the
propriety of the trial court's award of damages is not before this Court. The
"judicial power does not embrace the giving of advisory opinions." Gen. Land
Office of Texas v. OXY U.S.A., Inc., 789 S.W.2d 569, 570 (Tex. 1990) (quoting
Firemen's Ins. Co. v. Burch, 442 S.W.2d 331, 333 (Tex. 1968)).
Conclusion
For the foregoing reasons, we reverse the trial court's grant of summary
judgment in favor of Kan-Pak, affirm the trial court's denial of Verizon's
motion for summary judgment, and remand the cause to the trial court.
Mackey K. Hancock
Justice