Court Opinion

ID: 42727
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:26:21+00
Date Added: 2024-06-11T09:33:25.934683
License: Public Domain

United States Court of Appeals
                                                                   Fifth Circuit
                                                                F I L E D
                IN THE UNITED STATES COURT OF APPEALS
                                                                  May 5, 2006
                         FOR THE FIFTH CIRCUIT
                         _____________________              Charles R. Fulbruge III
                                                                    Clerk
                              No. 04-20845
                         _____________________

MD SARDAR A. DAUD KHAN,

                                                 Plaintiff - Appellant,

                                versus
TRANS CHEMICAL LTD,

                                            Defendant - Appellee.
_________________________________________________________________

           Appeal from the United States District Court
                for the Southern District of Texas
                       USDC No. 4:02-CV-109
_________________________________________________________________

Before JOLLY, BEAM,1 and BARKSDALE, Circuit Judges.

PER CURIAM:2

     This appeal arises from a 1988 employment contract between

Sardar A. Daud Khan and Trans Chemical Ltd., of which Khan was half

owner.   Khan brought suit against TCL seeking salary and penalties

under the ten-year employment contract entered between the parties

on October 1, 1988.     The parties stipulated damages and waived a

jury trial.    The district court conducted a bench trial and entered

judgment for TCL.     Khan appeals, alleging four points of error by

the district court:    (1) construing both the board minutes from the

     1
      Senior Circuit Judge, United States Court of Appeals for the
Eighth Circuit, sitting by designation.
     2
       Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
October 1, 1988 board meeting together with the document entitled

“Employment Contract of The Chairman” (employment contract) as the

contract between Khan and TCL; (2) concluding that Khan was not due

compensation under the contract after the TCL hydrogen peroxide

plant in Pakistan was closed in February 1994; (3) finding that the

claims for salary prior to December 14, 1997 were barred by the

statute of limitations; and (4) denying Khan attorney’s fees.

After consideration of the arguments and review of the record, we

affirm largely for the reasons stated by the district court.

                                   I

     Khan’s first point of error requires consideration of two

points. First, what document or documents constitute the agreement

between these parties and, second, whether that agreement contains

the December 31, 1996 deferral deadline. We consider each question

in turn.

                                   A

     The district court found that TCL entered an employment

agreement with Khan that contained a provision allowing salary to

be deferred up to December 31, 1996, and that their agreement was

memorialized by both the minutes of the board meeting and the

employment contract.     Consequently, both documents combine to

create the unified contract between Khan and TCL.     We agree for the

following reasons:

     1.    Texas   follows   the   established   principle   that   when

construing a contract, “our first priority is to determine the

                                   2
intent of the parties.”      Ludwig v. Encore Medical, L.P., __ S.W.3d

__, 2006 WL 565922, *4 (Tex. App. March 9, 2006) (citations

omitted).    To that end Texas law requires that “all writings that

pertain to the same transaction . . . be considered together, even

if they were executed at different times and do not expressly refer

to one another.”      DeWitt County Elec. Coop., Inc. v. Parks, 1
S.W.3d 96, 102 (Tex. 1999); see also 17A Am. Jur. 2d Contracts §

379; Restatement (Second) of Contracts § 202(2) (1981).           Although

this principle “cannot be applied arbitrarily and without regard to

the realities of the situation,” Miles v. Martin, 321 S.W.2d 62, 65

(Tex. 1959), it is clear that under Texas law “courts may construe

all the documents [relating to the same transaction] as if they

were part of a single, unified instrument” in order to give effect

to the parties’ intent.      See Ft. Worth Indep. Sch. Dist. v. City of

Ft. Worth, 22 S.W.3d 831, 840 (Tex. 2000) (finding that “two [city]

ordinances and the contemporaneous, related documents comprise the

parties’ agreement”) (citations omitted); see also DeWitt Co. Elec.

Coop., 1 S.W.3d at 102 (construing an easement agreement, a service

agreement, and a cooperative tariff as one contract); Jones v.

Kelley, 614 S.W.2d 95, 98-99 (Tex. 1981) (holding that two

contracts,   a   financing   agreement,   and   one   vendor’s   affidavit

together constituted the contract between the parties); Rudes v.

Field, 204 S.W.2d 5, 7-8 (Tex. 1947) (holding a deed and an

agreement relating to the sale and management of the property

together constituted the contract).

                                     3
     2.    By Khan’s own testimony, the board minutes and the

employment contract were considered by the respective parties as

“one package,” executed at the same time, with the same signature

page, for the purpose of officially hiring Khan and Halipoto to

conduct the necessary business to build and operate the peroxide

plant.    Together these documents document the entirety of the

agreement between TCL and Khan.3

     3. Consequently, the district court (quoting Jim Walter Homes

v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984)) was correct to

     3
       There are three relevant documents:     first, the one-page
employment contract; second, the three pages of minutes from the
October 1, 1988 board meeting; and finally, an undated signature
page on TCL letterhead containing only the signatures of the six
TCL board members.     At trial, counsel for Khan attached the
signature page to the employment contract and tendered that as a
separate exhibit from the three pages of board minutes.         The
inference that these documents were separately considered or
separately executed is, as the district court found, inconsistent
with the reality of the situation.       By Khan’s own deposition
testimony the minutes and the employment contract were typed by him
and presented together to the board for consideration with one
signature page covering the whole package:

           You know, they approved -- the board approved
           this contract and the board approved the
           minutes of the meeting.      That’s why they
           signed the minutes of the meeting. And this
           [the signature page] is also a part of the
           contract -- I mean, I’m sorry.        This is
           basically -- it’s one package, signed by the –
           by the board members.”

           . . . .

           I say it so many times that this contract and
           the   minutes  of   the  meeting   were  done
           simultaneously and it was approved by the
           board members and here [signature page] are
           the board members and their signatures.

                                   4
find that “Khan’s employment contract and the contemporaneous board

meeting minutes -- ‘executed at the same time, for the same

purpose, and in the course of the same transaction’ -- are properly

construed as one document.”4

     Having determined that the board minutes and the employment

contract together provide the unified agreement of the parties we

turn next to examine whether that agreement contains the December

31, 1996 deferral deadline.

                                  B

     The district court found that the board unanimously adopted

the resolution of Dr. Halipoto that in the event TCL was unable to

pay, all salaries and resulting penalties could be deferred until

December 31,   1996.   This    resolution   was   memorialized   in   the

minutes. Thus, the December 31, 1996 compensation deferral date is

a part of the contract between these parties, and the statute of

limitations bars Khan’s claims for salary and the associated

     4
       Khan’s argument that the parol evidence rule prohibits this
result is without merit. The parol evidence rules prohibits the
examination of extraneous evidence to interpret an unambiguous
contract. However, a document is only “extraneous evidence” if it
is not a part of the contract itself. Our inquiry is not “what
does the contract mean,” but rather “what is the contract.”
Consequently the parol evidence rule is not implicated at this
stage in the analysis.

                                  5
penalties from June 15, 19915 through December 31, 1996.    We affirm

for the following reasons:

     1.   Khan repeatedly testified both at his deposition and at

trial that the board minutes constitute an accurate account of the

proceedings at the October 1, 1988 TCL board meeting.

     2.   The minutes clearly reflect that Dr. Halipoto suggested,

and the board unanimously adopted, a resolution requiring that all

deferred salary and the accrued penalty be paid by December 31,

1996.6

     5
       Khan does not appeal the September 4, 2003, district court
ruling that he is judicially estopped from claiming any salary or
penalty arising before June 14, 1991, the date on which he filed
his bankruptcy petition.    Consequently, the earliest date from
which Khan can claim damages in this suit is June 15, 1991.
     6
       Specifically, pages 1 and 2 of the minutes reflect the
following:

           Dr. Halipoto suggested an idea of deferred
           salary program. . . . The officers will be
           paid only monthly salary for their duties
           performed regarding TCL’s business.         If
           because of cash flow problems, TCL does not
           have to pay the salary to its officers, the
           payment will then be deferred till [sic] TCL’s
           finances improve.       However[,] under no
           circumstances will salary payment to officers
           be deferred beyond December 31, 1996, and full
           payment and a penalty will become due in full.

           . . . .

           After a discussion, the directors considered
           the delayed payment idea to be the most
           logical approach. Motion was made dually by
           Dr. Halipoto and seconded by Mrs. Khan, after
           discussion it was unanmously [sic] resolved
           that:

                                 6
     3.   The minutes then provide Khan’s job description.        The job

description, while containing the details of the compensation

package, does not contain an express deferral provision, nor does

it reference the earlier adopted board resolution containing the

December 31, 1996 deferral provision.        The job description was

adopted unanimously by the board.      The employment contract mirrors

the job description section of the minutes.       Like the minutes, the

employment contract contains no deferral provision.

     4.   Khan argues that this omission in the job description and

employment contract was intentional.       He testified at trial that

the board reconsidered and ultimately rejected the December 31,

1996 deferral date and intended that deferral be allowed up until

the date the contract terminated on September 31, 1998.

     5.   The district court found that Khan’s testimony was not

credible.7    Khan’s testimony is the only evidence that suggests the

             “Dr. Khan and Dr. Halipoto were appointed
             Chairman and Managing Director of TCL[,]
             respectively[,] and their salary will be paid
             as recommended by Dr. Halipoto.”
     7
         Specifically    the   district   court   noted   the   following
testimony:

             Q:   Part of the issue that brings us here,
                  among the issues, is the dispute over
                  what happened to the board resolution
                  that was initially proposed that no
                  salary is going to be deferred beyond
                  December 31, 1996.   Do you recall any
                  specific discussion of eliminating that
                  provision?

             A:   To the best of my recollection, it was

                                   7
     proposed by Dr. Halipoto.

Q:   Right.

A.   And later it is amended. Because if you
     read – I believe a couple more pages down
     the line, it said the contract should be
     for ten years.

 . . . .

Q:   [M]y question to you is whether you
     recall   any  specific   discussion   of
     disapproving the eight-year, but no more
     than eight-year deferral provision.

A:   I’m going to use my best recollection
     that this 1996 was not acceptable, and
     that’s the reason we changed [it] to ten
     years. And that’s how the contract was
     written.

Q:   Do you recall a specific discussion of
     the relationship between -- about why
     eight years wasn’t acceptable because
     it’s not reflected in these minutes.

A:   What I’m saying is to the best of my
     recollection, it was not acceptable. So,
     that’s why it was changed to ten years.
     And the board agreed to it, and they had
     the minutes of the meeting. They had the
     contract in front of them. They agreed
     to the ten years.    And, you know, ten
     years was acceptable to everybody and
     that’s how it was signed.

Q:   Do you have any recollection of any
     specific discussion of why the eight
     years which you had just approved was not
     acceptable, to use your word?

A:   To the best of my recollection, it was
     not acceptable to me and to Dr. Halipoto.
     We discussed that issue, and we decided
     to go for ten years.

                      8
December 31, 1996 deferral date was intentionally omitted, that the

board   revoked    its   resolution   adopting     the       December   31,   1996

deferral date, or that the board intended the lack of deferral term

in   the   job    description   and        employment    contract       to    imply

compensation      deferral   until    termination       of    the    contract    on

September 31, 1998.      The otherwise detailed minutes do not mention

any conversation disapproving of the 1996 deferral date, nor do

they reference a resolution to that effect.

     6.    Applying the December 31, 1996 deferral date adopted by

the unanimous board of TCL does not void or conflict with any other

term of the job description or employment contract.                 Nor does it in

any way alter the duties or responsibilities of the parties in a

way that is inconsistent with the express terms of the agreement.

     7.    Giving the district court’s credibility findings the

deference due them, we find nothing in the record to suggest the

board intended to reject its adoption of the December 31, 1996

           Q:      Do you have any explanation for why that
                   wasn’t -- why that discussion after first
                   specifically approving an eight-year
                   deferral period is not reflected in the
                   minutes directly or explicitly?

           . . . .

           A:      To the best of my recollection, I don’t
                   believe that 1996 was the cutoff period.
                   I don’t believe that. I strongly believe
                   it was for ten years.       And it was
                   acceptable to Dr. Halipoto.    He signed
                   it. I signed it. Both agreed upon it,
                   and that’s how this ten-year period came
                   up.

                                       9
deferral date.    See Matter of Complaint of Luhr Bros., Inc., 157
F.3d 333, 337-38 (5th Cir. 1998) (citing Rule 52(a) and holding

that “Rule 52(a) requires greater deference to the trial court’s

findings when they are based upon determinations of credibility”).

Nor do we find any evidence in the otherwise detailed minutes, or

the record to suggest that the parties intended to imply deferral

of compensation until the termination of the contract on September

30, 1998.

     8.     We are required to examine the entirety of a contract,

construing it in a way that gives meaning to each of its terms in

order to give full effect to the parties’ intent.    See, e.g., Coker

v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) (holding that the “entire

writing” must be considered in an effort to harmonize and give

effect to all the provisions of the contract so that none are

rendered meaningless).    Thus, we conclude that the district court

was correct in finding that the December 31, 1996 deferral term,

adopted unanimously by the board of directors (including Khan), is

a part of the employment agreement between TCL and Khan.

     9.     A breach of contract claim accrues when a party fails or

refuses to do something it has promised to do.   See, e.g., Stine v.

Stewart, 80 S.W.3d 586, 592 (Tex. 2002).    Thus, when TCL failed to

pay the deferred salary and penalty due Khan on December 31, 1996,

Khan’s breach of contract claim as to those damages accrued.

Applying Texas’s four-year contract statute of limitations, TEX.

CIV. PRAC. & REM. CODE ANN. §§ 16.004(a), 16.051 (Vernon 2004), Khan’s

                                  10
claim for the salary and penalty owed him from June 15, 1991

through December 31, 1996 is barred by the statute of limitations.8

                                            II

       In his second point of error Khan argues that he is due

compensation         under   the   contract       even   after   the    plant     ceased

operations in February 1994.           Under Texas law, in order to recover

damages a party claiming a breach of contract must either tender

performance or show that he was ready, willing, and able to perform

his obligations under the contract.                   See, e.g., Whitney Props.

Corp. v. Moran, 494 S.W.2d 587, 590 (Tex. App. 1973, no writ).                        We

consider each possibility in turn.

                                            A

       Khan argues that by conducting the arbitration and litigation

against China National Import and Export Corporation (CMC) on

behalf of TCL he tendered performance under the contract and is

thus       due    compensation.       The        district   court      rejected    this

contention.         We affirm for the following reasons:

       1.        Khan’s contract with TCL authorized him to perform six

specific duties, each relating to building the plant, operating the

plant, and selling what it produced. The contract required Khan to

       8
       Khan does not appeal the finding of the district court that
his failure to serve TCL until five months after the filing of this
suit demonstrated a lack of the required diligence. Consequently,
the district court’s holding that the statute of limitations was
tolled only when service was accomplished on December 14, 2001
stands. Thus, the statute of limitations bars all claims under the
contract which accrued prior to December 14, 1997.

                                            11
use his best effort and judgment to have the plant completed in a

timely manner and to “enhance its business”; preside over the

meetings of the board of directors; provide an office, secretarial

assistants, telephone, computers, telex, and stationery in Houston;

travel in the United States and abroad at his own expense and

negotiate and purchase the catalysts and chemicals for the plant;

visit the project periodically in Pakistan and assist in legal and

financial work needed during the construction phase; and provide a

liaison between CMC and other vendors with respect to importation

of the catalysts and chemicals for the plant.        None of these

descriptions authorize any activity continuing after the plant has

closed.9

     2.    By Khan’s own testimony, the arbitration and litigation

against CMC were pursued to “take care of the interests of [TCL’s]

shareholders.”    This action, although certainly understandable

given Khan’s own personal investment in TCL and ownership of 50% of

its stock, is simply not within the scope of his contract to build

and operate the peroxide plant.    The district court found that:

           Pursuing arbitration and litigation after
           construction had ended and after the plant had
           ceased to operate, to protect the interests of

     9
       To the extent that Khan claims he was acting under a broader
authority vested in him by virtue of the title or position of
“Chairman” he is incorrect. Apparent authority may exist by virtue
of a position when an agent or officer of a corporation is dealing
with a third party. It does not, however, create extra-contractual
authority as between the parties to a contract such that an officer
may seek compensation for actions not authorized by the board of
directors.

                                  12
            the shareholders consisting primarily of Khan
            and Halipoto does not fall within the scope of
            the    specifically-defined       contractual
            responsibilities to complete the hydrogen
            peroxide   plant  construction   project   and
            “enhance” the business.        That business
            depended on a functioning, operating hydrogen
            peroxide plant, which did not exist after
            February 1994.

We agree.   Consequently the district court was correct to find that

Khan did not tender performance under his employment agreement

after the plant closed in February 1994.

                                       B

     Alternatively, Khan argues that he is due compensation as he

was ready, willing, and able to perform his duties under the

contract for the duration of the contract term.               The district court

rejected this contention.      We affirm for the following reasons:

     1.     The   doctrine    of     impossibility       recognizes      that   “if

performance is contingent upon the continued existence of a state

of things or set of circumstances, a condition is implied that the

cessation    of   existence     of     such    state     of     things    excuses

performance.”     See In Interest of Doe, 917 S.W.2d 139, 142 (Tex.

App. 1996 reh’g overruled).          Khan’s ability to perform under the

contract    post-construction      was      contingent    upon    an     operating

peroxide plant.    Consequently, when the plant closed Khan was not,

and could not be, “ready, willing, and able” to perform his post-

construction duties as provided in his employment contract.

     2.     It is undisputed that Khan fully performed under the

contract up to February 1994. Further, no party contends that Khan

                                       13
was in any way responsible for the closure of the plant.              Thus, the

non-existence of an operational plant by fault of a third party

excuses Khan’s non-performance under the contract.                    See e.g.,

Tractebel Energy Mktg., Inc. v. E.I. Du Pont De Nemours & Co., 118
S.W.3d 60, 65 (Tex. App. 2003), opin. supplemented on overruling of

reh’g, 118 S.W.3d 929 (Tex. App. 2003) (holding that Texas courts

will excuse performance where a thing necessary for performance has

deteriorated or been destroyed); see also Restatement (Second) of

Contracts § 261 (1981) (“Where, after a contract is made, a party’s

performance    is   made    impracticable       without    his    fault   by    the

occurrence of an event the non-occurrence of which was a basic

assumption on which the contract was made, his duty to render that

performance is discharged, unless the language or the circumstances

indicate the contrary.”).

     3.   Well-accepted contract law provides that if one party’s

failure to perform is excused due to the non-occurrence of a

condition,    the   other   party   to    the    contract    is   excused      from

performance unless it agreed to perform in spite of such failure.

See Restatement (Second) of Contracts § 239 (1981); 14 Williston on

Contracts § 43:11 (4th ed.); 14 Corbin on Contracts § 75.4 (2001).

     4. There is no evidence to suggest that any agreement between

Khan and TCL addressed the risk or the obligation of the parties

should the hydrogen peroxide plant close.                 The record indicates

that the plant’s closure was attributed to the faulty technology

provided by CMC.     The failure of the plant to operate, due to acts

                                     14
of a third party, excused both Khan and TCL from their contractual

obligations.     Thus, Khan cannot recover under the contract for any

activities he undertook after the plant closed in February 1994.

                                  III

     Khan’s third contention is that the district court erred in

construing the statute of limitations to run each month such that

he is barred from claiming any salary or penalties due prior to

December   14,   1997.    Our   determinations   that   the   statute   of

limitations bars any claim for salary before December 31, 1996, and

that the closure of the plant excused both parties from performance

after February 1994 make resolution of this issue unnecessary, and

accordingly we will not address this alleged point of error.

                                    IV

     Khan’s final claim is that he is due reasonable attorneys’

fees in the stipulated amount.      Because Khan is not the prevailing

party, the district court’s denial of attorneys’ fees is affirmed.

See DP Solutions, Inc. v. Rollins, Inc., 353 F.3d 421, 436 (5th

Cir. 2003) (“An award of attorneys’ fees is mandatory for a party

prevailing in a breach of contract case.”); TEX. CIV. PRAC. & REM.

CODE ANN. § 38.001 (Vernon 2005).

                                    V

     For the reasons stated herein we hold that the employment

agreement between Khan and TCL includes the December 31, 1996

deferral date, and thus all claims for salary and penalty due up to

that date are barred by the statute of limitations.           Further, we

                                    15
hold that the actions of Khan after the closure of the plant in

February 1994 were not authorized by the contract, and that the

unanticipated closure of the plant excused both Khan and TCL from

performing under the contract after February 1994.    Consequently,

Khan is not entitled to salary and penalties for his post-closure

activities.   Finally, Khan is not due attorneys’ fees as he has not

prevailed on his claim.   Accordingly the judgment of the district

court is

                                                          AFFIRMED.

                                 16