Court Opinion

ID: 5128158
Source: CourtListenerOpinion
Date Created: 2021-11-22 08:14:36.774631+00
Date Added: 2024-06-11T08:23:05.491388
License: Public Domain

Supreme Court of Texas
                           ══════════
                            No. 20-0964
                           ══════════

                        Pura-Flo Corporation,
                             Petitioner,

                                 v.

                          Donald Clanton,
                             Respondent

   ═══════════════════════════════════════
               On Petition for Review from the
     Court of Appeals for the Fourteenth District of Texas
   ═══════════════════════════════════════

                           PER CURIAM

      This case concerns whether a jury’s $50,000 future-damages
award for breach of a terminable-at-will rental contract was based on
reasonable certainty.   The jury found that Pura-Flo breached its
indefinite agreement to make monthly rental payments to Donald
Clanton and failed to find that Pura-Flo had terminated the contract.
The evidence, however, demonstrated that Pura-Flo actively (although
unsuccessfully) sought to terminate the contract at its earliest
opportunity, and no evidence supported any finding that the contract
would endure.   Further, no evidence supports the $50,000 amount
awarded by the jury.    Because both the fact and amount of future
damages lacked reasonable certainty, we reverse the court of appeals’
judgment.
      Pura-Flo is in the business of renting water coolers. In 1994,
Pura-Flo (known at the time as Water Equipment Company) contracted
with Misty Vanderzyden to invest in its business. Under the terms of
the “Rental Income Agreement,” Pura-Flo agreed to “transfer
ownership” of fifty “units” (defined in the contract as “income producing
water coolers rental customers”) already placed “in location” to
Vanderzyden for about $50,000. Pura-Flo agreed to continue to service
the “equipment,” carry insurance, repossess and reinstall any “units” if
a rental customer canceled its rental contract, and pay Vanderzyden
$1,750 per month in rental income, less a monthly fee.
      The contract provided that its initial term would last sixty
months, followed by an option to renew for thirty-six months. After this
initial ninety-six-month period, the contract included an option to renew
“for an indefinite length of time” “[u]pon mutual agreement of both
parties.”   Vanderzyden signed the agreement in March 1994 and
exercised the right to renew for thirty-six months in March 1999. She
sold the contract to Donald Clanton in June 2002—three months after
the initial ninety-six-month period had expired.
      After he purchased the contract, Clanton met with Rocky
Rasberry, Pura-Flo’s president, to discuss the duration of the
agreement. Clanton believed he had purchased “a stream of income” in
addition to the fifty physical water coolers, which he evidenced to
Rasberry by forwarding correspondence from Vanderzyden confirming
his purchase of “fifty (50) units along with all future rental income.”

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Rasberry sent Clanton a contract-renewal letter after their meeting,
which congratulated Clanton on his “new venture.”         Once Clanton
signed the contract renewal, Pura-Flo sent him monthly payments
without incident for the next fourteen years, until December 2016.
         It is unclear why Pura-Flo stopped paying Clanton. Rasberry
initially stated that an unrelated investigation at the company revealed,
for the first time, that Clanton had been receiving monthly checks for
the previous fourteen years due to “an oversight.”        After Clanton
produced a copy of the renewed contract, Rasberry next responded that
Pura-Flo halted its monthly payments because Clanton’s water coolers
had become obsolete and were no longer earning income. Two months
later, Rasberry asserted a third explanation in a letter to Clanton—that
the contract had already expired when Clanton purchased it from
Vanderzyden in 2002—and asked Clanton to “consider the agreement
terminated.” Clanton sued Pura-Flo for breach of contract.
         In the trial court, Clanton argued that the contract was for the
sale of “income producing water cooler rental customer[s]”—not just
physical water coolers—and that he was therefore owed past damages
for the months since Pura-Flo ceased payments. Clanton further argued
he was owed future damages for the duration of the contract given Pura-
Flo’s breach and that he understood the contract to be of indefinite
duration. As to the amount of future damages, Clanton testified that he
had earned about $9,000 per year under the contract between 2002 and
2016, and he hypothesized that he could replace this lost income stream
with a $300,000 certificate of deposit with an average three-percent
yield.

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       The jury found that Pura-Flo breached a valid contract of
indefinite duration that had not been terminated. It awarded $19,500
in past losses and future damages of $50,000.        Pura-Flo appealed,
arguing only the insufficiency of the evidence supporting the
future-damages award. 609 S.W.3d 320, 326 (Tex. App.—Houston [14th
Dist.] 2020).
       A divided court of appeals affirmed. Id. at 329. Although the
contract was terminable-at-will by either party, the court held that
Pura-Flo’s cessation of payments to Clanton did not terminate the
contract because it continued to possess the contract’s subject matter—
which the jury found was rental income rather than physical water
coolers—and to rent out the water coolers for its own benefit and to
Clanton’s prejudice.   Id. at 327-28 (citing Kennedy v. McMullen, 39
S.W.2d 168, 174 (Tex. App.—Beaumont 1931, writ ref’d) (holding that a
party may not terminate an indefinite contract so long as it continues
“to hold in [its] possession and operate for [its] own use and benefit the
entire subject-matter of the contract, to the prejudice of the other
party”)).
       As to future damages, the court of appeals held that the evidence
established the damages with reasonable certainty.        Id. at 328-29.
Vanderzyden’s initial investment in Pura-Flo was $50,000, which she
spent to purchase the physical water coolers in 1994. Id. at 329. The
original rental-information package Pura-Flo provided to Vanderzyden
included an investment proposal that drew a comparison between an
investment in Pura-Flo’s program and a hypothetical $50,000 certificate
of deposit with a four-percent yield.    Id.   The investment proposal

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detailed several possible options after the initial sixty-month term, one
of which involved Pura-Flo repurchasing the water coolers for a net gain
of $50,259.   Id.     The court of appeals held that, indulging every
reasonable inference, this evidence supported the jury’s determination
that $50,000 was a reasonable amount to compensate Clanton for his
future damages. Id.
      The dissent noted that an open question remains as to whether
this contract—or indeed, any contract of indefinite duration—could
support an award for future damages under any circumstances. Id. at
331-32 (Frost, C.J., dissenting). In the dissent’s view, the law requires
that future damages be calculated with reasonable certainty, which the
inherently uncertain duration of terminable-at-will contracts seems to
render impossible. Id. (Frost, C.J., dissenting). Pura-Flo petitioned this
Court for review.
      Pura-Flo does not appeal the jury’s findings that the contract was
indefinite in duration and was not terminated by Pura-Flo’s breach.
Instead, it makes two arguments to this Court. First, it argues that the
evidence does not support the jury’s award of future damages. Second,
it argues that breach of a contract of indefinite duration may never
support an award of future damages. We need not determine here
whether terminable-at-will contracts can support future-damages
awards in some cases because, whether or not such cases may exist, this
is not one of them.
      On this record, no reasonable basis exists for a juror to believe the
contract would have continued after trial, and thus, no basis exists for
reasonable certainty as to either the fact or amount of future damages.

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See Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848, 860
(Tex. 2017); see also Sw. Battery Corp. v. Owen, 115 S.W.2d 1097, 1098
(Tex. 1938) (stating that future losses need not be susceptible to exact
calculation, but the amount “must be shown by competent evidence with
reasonable certainty” (citation omitted)).      As to the fact of future
damages, no reasonable basis exists to believe the contract would have
continued to produce future income owed to Clanton.              Pura-Flo
vigorously sought to end its relationship with Clanton at the time of its
breach. It stopped paying Clanton, denied knowledge of him as a client,
claimed his water coolers could no longer produce income, and asserted
that his contract had been void for the entire fourteen-year period since
he signed it.    Rasberry asked Clanton to “consider the agreement
terminated.” While the jury found that these actions were insufficient
to terminate the contract at the time, see Kennedy, 39 S.W.2d at 174,
Pura-Flo’s numerous attempts and unmistakable intent to terminate
the contract were sufficient to ensure that no reasonable juror could
have concluded Pura-Flo would not terminate the contract as soon as
possible. No countervailing evidence demonstrated any reason Pura-
Flo, which had not paid Clanton rent for the past two years and
unequivocally communicated its desire to terminate the relationship,
would have opted to continue the contract.        See Phillips v. Carlton
Energy Gr., LLC, 475 S.W.3d 265, 279 (Tex. 2015) (emphasizing “the
necessity that [a] claim of lost profits not be hypothetical or hopeful but
substantial in the circumstances”); Holt Atherton Indus., Inc. v. Heine,
835 S.W.2d 80, 84 (Tex. 1992) (“What constitutes reasonably certain
evidence of lost profits is a fact intensive determination.”).

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      As to the amount of future damages, the jury awarded one-sixth
of the $300,000 Clanton estimated would be required to offset his losses,
equivalent to roughly five more years of rental payments to Clanton.
Future-damages awards must be ascertained using “objective facts,
figures, or data.” Szczepanik v. First S. Tr. Co., 883 S.W.2d 648, 649
(Tex. 1994). Here, no evidence indicated the contract would endure for
any length of time, let alone five years after trial. Perhaps, as the court
of appeals suggested, the jury sought to award Clanton either the
amount Vanderzyden originally paid Pura-Flo to buy the water coolers
in 1994 or the amount Pura-Flo’s investment proposal claimed the
company would pay to repurchase the water coolers after sixty months.
See 609 S.W.3d at 329. But neither suggested rationale can be the basis
for an award of future damages, which, as evidenced by its name, is an
award for damages that Clanton was reasonably certain to incur in the
future. See MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d
647, 654-55 (Tex. 1999).    Without evidence that the contract would
continue in the future, the jury’s $50,000 future-damages award has no
reasonable basis in evidence and therefore was not reasonably certain
as required by law.    See Sw. Battery, 115 S.W.2d at 1099 (denying
recovery “where the facts show that such profits claimed are too
uncertain or speculative” and were not “established by proof to that
degree of certainty which the law demands” (citation omitted)).
      Both the fact and amount of future damages lacked reasonable
certainty, and there was thus no evidence supporting the jury’s award.
The significant contrary evidence indicating Pura-Flo would terminate
the contract at its first opportunity was not counterbalanced by any

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evidence the contract would endure.       Thus, without hearing oral
argument, TEX. R. APP. P. 59.1, we grant Pura-Flo’s petition for review,
reverse that portion of the court of appeals’ judgment affirming the
award of future damages, and render judgment that Clanton take
nothing on his claim for future damages. The rest of the trial court’s
judgment, including the award of $19,500 for past damages, remains
intact.

OPINION DELIVERED: November 19, 2021

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