Preview
FILED
DALLAS COUNTY
4/1/2014 4:55:17 PM
GARY FITZSIMMONS
DISTRICT CLERK
CAUSE NO. DC-14-00936
DCB FINANCIAL CORPORATION, § IN THE DISTRICT COURT
§
Plaintiff, §
§
v. § 191ST JUDICIAL DISTRICT
§
G-6 CORPORATION, §
§
Defendant. § DALLAS COUNTY, TEXAS
PLAINTIFF’S RESPONSE TO DEFENDANT’S
SPECIAL EXCEPTIONS
COMES NOW Plaintiff DCB Financial Corporation (“DCB” or “Plaintiff”), and, subject
to and without waiver of its request for a continuance, files its Response to the Special
Exceptions filed by Defendant G-6 Corporation (“G-6”) to Plaintiff’s Original Petition (the
“Special Exceptions”), and in support thereof would show as follows:
I.
SUMMARY
1. G-6 seeks to improperly use its Special Exceptions to dismiss Plaintiff’s lawsuit at
its inception. This attempt to abort the numerous procedural protections afforded by the Texas
Rules of Civil Procedure to a plaintiff to develop its case through discovery should be overruled
because: (i) the Special Exceptions have been mooted by the filing of Plaintiff’s First Amended
Petition (the “Amended Petition”) on April 1, 2014, which contains new factual allegations and
new causes of action not addressed by Defendant’s Special Exceptions; (ii) G-6 has not shown
that the defects complained of are incurable defects; (iii) DCB has not pleaded facts that negate
its breach of contract claim; to the contrary, DCB has pleaded facts that show that all essential
elements of its contract claim are spelled out in the parties’ letter agreement, with all terms of the
agreement to be performed in good faith, and G-6’s breach of the letter agreement; (iv) the
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 1
4828-7127-5033_5/(90018/002)
00001
Special Exceptions are defective because G-6 is relying on inferences in G-6’s favor and not the
pleaded facts “taken as true;” and (v) DCB has pleaded facts that would permit an award of
specific performance. In the alternative, and as more thoroughly discussed in Plaintiff’s
Emergency Motion for Continuance filed on March 29, 2014, this Court should continue the
hearing on the Special Exceptions to enable DCB to obtain discovery and adequately prepare for
the hearing. DCB’s Amended Petition now pleads the maximum amount of damages.
II.
INTRODUCTION 1
2. This case involves a stock transaction. DCB, the owner of Preston State Bank
(“PSB”), contracted with G-6 to buy all of the stock of First State Bank (“FSB”), a Mesquite
community bank. Using the same law firm, Hunton & Williams, the parties negotiated and
executed a letter agreement (the “Letter Agreement”) that established two milestones:
• First, the parties had until December 20, 2013, to complete due diligence and if, after
due diligence, a party determined that the other party’s condition was not satisfactory,
that party could terminate the agreement. Otherwise, the parties would proceed to the
second step of preparing a definitive agreement that was consistent with the terms
stated in the Letter Agreement.
• Second, if the parties determined that each other’s condition was satisfactory, the
parties had until January 24, 2014, to negotiate, in good faith, certain terms of the
definitive agreement consistent with the Letter Agreement, and further conditioned on
(1) their promise to “proceed in mutual good faith to carry out the transactions
contemplated hereby substantially in the manner outlined herein,” and (2) their
agreement that certain identified terms were immediately binding and enforceable in
accordance with their terms. If the parties were unable to agree on such terms by
January 24, 2011 the Letter Agreement could be terminated.
3. Because the parties had previously negotiated the terms of a transaction, but G-6
had backed out of the transaction before signing any contract, this time around DCB told G-6 it
1
The facts stated in this Introduction are contained in Plaintiff’s petitions filed in this action.
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 2
4828-7127-5033_5/(90018/002)
00002
would have to sign a binding agreement and it would have to take FSB off the market. G-6
assured DCB that it would only sell to DCB and that it would sign a binding agreement.
Accordingly, DCB instructed its Hunton & Williams counsel to “make it as binding as possible
because we don’t want them walking away again.”
4. Hunton & Williams prepared a letter agreement that contained significant
revisions from the prior letter agreement that G-6 rejected. A redline of the changes is attached
hereto as Exhibit “A” and incorporated herein. Some of the notable changes were:
• Whereas the prior written offer made G-6’s exercise of its right to terminate the Letter
Agreement under paragraph 1 (after due diligence and upon a determination that DCB’s
condition was not satisfactory) subject to the caveat that only paragraphs 14 and 15
regarding confidentiality and public disclosure would survive termination, the revised
written offer provided that the termination was “subject to Paragraph 24 (Binding Effect)
of this Letter.”
• Whereas the prior written offer made G-6’s exercise of its right to terminate the Letter
Agreement under paragraph 2 (after the parties fail to agree on terms for the definitive
agreement) subject to the caveat that paragraphs 14 and 15 regarding confidentiality and
public disclosure would survive termination, the revised written offer provided that the
termination was “subject to Paragraph 24 (Binding Effect) of this Letter.”
• Whereas the prior written offer provided for a consideration of “approximately █
million,” the revised written offer provided a specific formula for calculating the price
dependent on shareholder’s equity, with the price to be paid in part by cash and in part by
shares of DCB.
• Whereas the prior written offer and the revised written offer both provided that the
definitive agreement would have indemnity provisions that were mutually satisfactory
and customary, the revised agreement added a requirement that a specific percentage of
the cash consideration would be deposited in escrow as security for the performance of
G-6’s indemnity obligations, and would be held for a specified time period.
• Whereas the prior written offer provided for each party to pay its own expenses of the
transaction, the revised offer provided that, if a definitive agreement is not executed by a
date certain, G-6 would reimburse DCB for a specified amount.
• The exclusivity provision was strengthened and now specifically addressed G-6’s broker,
SAMCO.
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 3
4828-7127-5033_5/(90018/002)
00003
• An expense reimbursement provision was added that required G-6 to pay DCB
$150,000.00 if a definitive agreement was not executed by January 24, 2013, to
reimburse DCB for its expenses in connection with the evaluation and execution of the
merger. The parties discussed a proposed “break-up” fee in addition to a reimbursement
of expenses. But, G-6 rejected the concept, and the Letter Agreement, therefore, contains
only a specific expense reimbursement, not a liquidated damages break-up fee
5. Paragraph 24 of the Letter Agreement provides:
24. The parties recognize that the proposed Acquisition will require further
documentation and approvals, including the preparation and approval of the
Definitive Agreement, setting forth the terms and conditions of the proposed
Acquisition in detail. The parties hereto execute this Letter to evidence their
intention to proceed in mutual good faith to carry out the transactions
contemplated hereby substantially in the manner outlined herein. It is understood
that this Letter sets forth an agreement in principle only; provided, however, that
the parties intend that Paragraphs 13, 14, 15, 17, and 19 through 24 are
immediately binding and enforceable in accordance with their respective terms.
(emphasis added)
6. Before the expiration of the first milestone (completion of due diligence), G-6
asked DCB for an extension of the deadline for due diligence, stating it was changing attorneys
and that its president was undergoing surgery and would be out of the office the last two weeks
of December. DCB agreed to extend the due diligence deadline to January 10, 2014. Unknown
to DCB, G-6’s merger advisor, SAMCO Capital Markets, Inc. (“SAMCO”), had received an
offer from a third party to buy FSB, and with this offer in hand and, without disclosing that it had
received and was considering the offer—in violation of the exclusivity provision in the Letter
Agreement—G-6 asked for and received the extension to perform due diligence. G-6 then
ceased its due diligence efforts and, without ever making a determination that DCB’s condition
was not satisfactory, on December 31, 2013, G-6 notified DCB it was terminating the Letter
Agreement. When questioned about the reasons for its decision, G-6 candidly admitted that it
was terminating because it received a “substantially” better offer and had decided to pursue the
other offer.
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 4
4828-7127-5033_5/(90018/002)
00004
7. Having been jilted twice, and having learned the reason for G-6’s latest betrayal,
DCB brought this lawsuit. In its Original Petition, DCB asserted a breach of contract claim and
requested specific performance, or damages. In its Amended Petition, DCB added claims for
common law fraud and statutory fraud.
8. 49 days after suit was filed, G-6 filed four special exceptions, three of which it
argues are case dispositive, arguing (1) DCB has not stated a cause of action for breach of
contract because the Letter Agreement is not a binding agreement on its face, (2) there is no
cause of action for failing to negotiate terms in good faith, and (3) there is no cause of action for
specific performance. For good measure, G-6 asks that DCB plead the maximum amount of
damages claimed.
9. In response to G-6’s Special Exceptions, DCB moved to continue the hearing on
G-6’s Special Exceptions so that DCB can obtain discovery from G-6 and SAMCO’s agents
regarding their intentions and actions that DCB contends establish that the Letter Agreement is
binding and was violated and fraudulently induced, and for more time to plead additional facts
developed through discovery if necessary. And, DCB is filing its First Amended Petition, which
adds factual allegations and adds claims for common law promissory fraud and statutory fraud.
10. The Amended Petition demonstrates that the alleged defects in DCB’s Original
Petition alleged by G-6 are curable, notwithstanding G-6’s arguments to the contrary, since DCB
has added factual allegations that provide additional evidence of the circumstances surrounding
the execution of the Letter Agreement, which would be admissible at trial under Sun Oil Co.
(Delaware) v. Madeley, 2; the Amended Petition added factual allegations regarding the
2
Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981) (“It is the general rule of the law of
contracts that where an unambiguous writing has been entered into between the parties, the courts will give effect to
the intention of the parties as expressed or as is apparent in the writing. . . . Where a question relating to the
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 5
4828-7127-5033_5/(90018/002)
00005
intentions of the parties about the binding nature of the letter agreement, which would be
admissible at trial under Foreca, S.A. v. GRD Development Co., 3 758 S.W.2d 744 (Tex. 1988);
and DCB added factual allegations that bring this case within the exceptions to the general rule
that specific performance does not apply to a claim for breach of a promise to deliver stock,
which would be admissible under Amsler v. Cavitt, 210 S.W. 766, 766-67 (Tex. Civ. App. –
1919 writ ref’d). Having demonstrated that the alleged defects are curable, as explained further
below, DCB should be given an opportunity to develop those facts and present them on a more
developed record in response to a summary judgment motion (with all of the procedural
protections built into the Rules of Civil Procedure for a summary judgment proceeding) or at
trial.
11. In any event, for the reasons discussed below, the Special Exceptions should be
overruled because DCB pleaded sufficient facts to provide fair notice of its claims and those
facts as pleaded state a claim upon which relief may be granted. Contrary to G-6’s arguments,
DCB has not pleaded itself out of court.
III.
APPLICABLE STANDARDS
12. The purpose of special exceptions is to inform the opposing party of defects in its
pleadings so it can cure them, if possible, by amendment. Horizon/CMS Healthcare Crop. v.
construction of a contract is presented, as here, we are to take the wording of the instrument, considering the same in
the light of the surrounding circumstances, and apply the pertinent rules of construction thereto and thus settle the
meaning of the contract.” See also Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d
461, 469 (Tex. 2011) (“A written contract must be construed to give effect to the parties’ intent expressed in the text
as understood in light of the facts and circumstances surrounding the contract’s execution, subject to the parol
evidence rule.”
3
Foreca, S.A. v. GRD Development Co., 758 S.W.2d 744, 746 (Tex. 1988) (“We hold that it is a question of fact in
this case whether the terms agreed to and embodied in the September 2 and October 19, 1983 writings were intended
to be the final expressions of the contract or were only preliminary negotiations which the parties did not intend to
have legal significance until execution of the contemplated legal documentation. The question was properly
submitted to and answered by the jury in fulfillment of its fact finding responsibility.”
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 6
4828-7127-5033_5/(90018/002)
00006
Auld, 34 S.W.3d 887, 897 (Tex. 2000). Texas follows the “fair notice” standard for pleadings,
which looks at whether the opposing party can ascertain from the pleadings the nature and basic
issues of the controversy and what testimony will be relevant. Id.; see also TRCP 45(b)
(requiring a “statement in plain and concise language of the plaintiff’s cause of action”). TRCP
45 does not require the plaintiff to describe the evidence in detail in its petition. Paramount Pipe
& Sup. Co. v. Muhr, 749 S.W.2d 491, 494-95 (Tex. 1988).
13. If a plaintiff’s suit is not permitted by law, the defendant may file special
exceptions and request dismissal of the suit. Wayne Duddlesten, Inc. v. Highland Ins., 110
S.W.3d 85, 96-97 (Tex. App. – Houston [1st Dist.] 2003, pet. denied). Examples of suits not
permitted by law include:
• Trevino v. Ortega, 969 S.W.2d 950, 951 (Tex. 1998) (no cause of action for
spoliation of evidence)
• Friesen v. Ryan, 960 S.W.2d 656, 658 & n. 1 (Tex. 1998) (no cause of action for
social host liability)
• Krishan v. Sepulveda, 916 S.W.2d 478, 479 (Tex. 1995) (no cause of action for
negligence to a fetus)
• Boyles v. Kerr, 855 S.W.2d 593, 595-96 (Tex. 1993) (negligent infliction of
emotional distress)
In such instances, no amount of repleading can cure the fact that Texas does not recognize the
cause of action.
15. Even though DCB has pleaded a well-established cause of action for breach of
contract, and the well-established remedy of specific performance, G-6 is asking the Court to
dismiss this lawsuit without leave to replead via a finding that the petition “affirmatively states a
fact which demonstrates that the suit is barred as a matter of law.” G-6 seeks extraordinary,
rarely granted, relief. 16. G-6 discusses legal standards for special exceptions in Section III
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 7
4828-7127-5033_5/(90018/002)
00007
of its special exceptions, and cites to five cases. None of those cases are analogous to this case,
and in none of those cases did the trial court dismiss the claims without the plaintiff having an
opportunity to amend.
• In Baylor Univ. v. Sonnichsen, 221 S.W.3d 632 (Tex. 2007) (plaintiff pleaded into a
Statute of Frauds defense), the plaintiff appealed from the trial court’s ruling sustaining
special exceptions to his second amended petition, without “giving him another
opportunity to amend his pleadings.” Sonnichsen at 634. (emphasis supplied)
• In Perry v. Cohen, 285 S.W.3d 137 (Tex. App.—Austin 2009, pet. denied) (plaintiff
pleaded claims belonging to the corporation and not the plaintiff shareholders), the
plaintiffs had filed two amended petitions prior to the sustaining of special exceptions,
then filed another amended petition prior to the court’s dismissal order. “The
shareholders had more than one opportunity to amend and cure their deficient pleadings.”
Cohen, 285 S.W.3d at 148.
• In Gatten v. McCarley, 391 S.W.3d 669 (Tex. App.—Dallas 2013, no pet.) (plaintiff
failed to plead facts which would give rise to a duty of care for a premises liability
claim), special exceptions were granted on the ground that plaintiff’s third amended
petition failed to state a claim, after the trial court had denied special exceptions with
respect to the first amended petition and granted special exceptions, along with
permission to replead, as to the second amended petition.
• In Owen v. Option One Mort. Corp., 2011 Tex. App. LEXIS 5843, *8-9 (Tex. App.—
Houston [1st Dist.] 2011, pet. denied) (plaintiff failed to plead an independent tort to
avoid the application of the economic loss rule), the trial court sustained special
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 8
4828-7127-5033_5/(90018/002)
00008
exceptions and permitted the plaintiffs to replead, then sustained special exceptions as to
the resulting amended petition but allowed the plaintiffs to replead once more.
• In Ford v. Performance Aircraft Serv., 178 S.W.3d 330 (Tex. App.—Fort Worth 2005,
pet. denied) (plaintiff failed to plead how defendant was liable in his individual capacity
for actions taken as president of his employer), the trial court granted special exceptions
and allowed the plaintiff nine months to replead, only dismissing the case when the
plaintiff failed to meet that generous deadline.
G-6 has failed to point this Court to any authority for its request that DCB’s claims be summarily
dismissed without leave to amend.
17. G-6 has not presented apposite authority supporting its request that DCB’s claims
should be dismissed without leave to amend or an opportunity to develop the facts through
discovery. DCB should be permitted to take discovery and replead, if necessary. The “purpose
of special exceptions is to furnish a party with a medium to force clarification of an adverse
party’s pleadings when they are not clear or sufficiently specific.” Connolly v. Gasmire, 257
S.W.3d 831, 839 (Tex. App.—Dallas 2008, no pet.); Owen, 2011 Tex. App. LEXIS 5843, at *14.
The general practice under the rules of procedure is to challenge deficiencies in pleadings by
special exception, and amendment is a matter of right under special exception practices. Estate
of Bourland v. Hanes, 526 S.W.2d 156, 159 (Tex. Civ. App. –Corpus Christi 1975, writ ref’d
n.r.e.).
18. Texas case law draws a clear line. If a plaintiff’s suit is not permitted by law, the
defendant may seek dismissal by special exceptions. These are the “plaintiff has pled himself
out of court” cases. See, e.g., Trevino, 969 S.W.2d at 951 (no cause of action for spoliation of
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 9
4828-7127-5033_5/(90018/002)
00009
evidence); Friesenhahn, 960 S.W.2d at 658 (no cause of action for social host liability). DCB’s
pleaded claims, however, are for recognized causes of action: specific performance and breach of
contract (and, in the Amended Petition, common law and statutory fraud). Here, G-6 incorrectly
argues that the agreement made the subject of Plaintiff’s claims proves that Plaintiff has pled
itself out of court.
19. While a court is not required to give the plaintiff an opportunity to amend if the
pleading defect is one that cannot be cured by amendment, such circumstances are rare.
“Situations in which such a motion can be sustained, however, are very limited . . . [this] is not a
case in which the facts alleged by a plaintiff establish the absence of a right of action or an
insuperable barrier to a right of recovery.” Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972).
IV.
ARGUMENT
A. The Special Exceptions should be overruled because they are mooted by the filing of
the Amended Petition.
20. The Amended Petition 4 includes new allegations which, for the purpose of special
exceptions, must be taken as true. Attached hereto as Exhibit “B” is a red-lined copy of the
Amended Petition showing the changes made to the Original Petition. The new allegations more
fully develop the facts which show that (i) the entire Letter Agreement is binding, subject to the
parties’ two termination options, which are limited, and were not properly exercised in
accordance with their terms; (ii) the parties intended the Letter Agreement to be binding; (iii) the
lawyers negotiating and drafting the Letter Agreement intended it to be binding; (iv) G-6,
knowing the Letter Agreement to be binding, nevertheless breached it; and (v) specific
performance is appropriate because (a) FSB’s stock is not traded on an open market and cannot
4
The Court is requested to take judicial notice of the Amended Petition.
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 10
4828-7127-5033_5/(90018/002)
00010
be replaced by other FSB stock, (b) FSB’s stock is unique and DCB has a particular reason for
acquiring the stock, and (c) the full amount of DCB’s damages resulting from G-6’s breach of
the Letter Agreement is difficult to ascertain. The Amended Petition also adds causes of action
for fraud not addressed by Defendant’s Special Exceptions.
21. The filing of the Amended Petition moots the Special Exceptions and requires that
they be overruled. See Wang v. Univ. of Tex. at Austin, 2013 Tex. App. LEXIS 12507 * 6 (Tex.
App. – San Antonio 2013, no pet.) (“After UT filed its special exceptions, Wang filed her First
Amended Petition, thereby mooting UT’s special exceptions.”). Amended pleadings take the
place of prior pleadings. TRCP 65 (substituted instrument takes the place of original). In fact,
the trial court cannot err in not ruling on the special exceptions because they are moot. Id. See
also FKM P’ship, Ltd. v. Bd. of Regents of Univ. of Houston Sys., 255 S.W.3d 619, 633 (Tex.
2008).
B. Special Exception No. 1 should be overruled because DCB has not pleaded facts
that conclusively establish that the Letter Agreement is unenforceable.
22. In order for the Court to grant Special Exception No. 1, it must find as a matter of
law that the parties did not intend for the Letter Agreement to be enforceable and the evidence of
that intent must be “clear and unambiguous on the face of the agreement.” West Beach Marina,
Ltd. v. Erdeljac, 94 S.W.3d 248 (Tex. App. – Austin 2002, no writ); Hardman v. Dault, 2
S.W.3d 378, 380 (Tex. App. – San Antonio 1999, no writ). For the reasons stated below,
Defendant cannot meet that burden and Special Exception No. 1 should be overruled.
(i) The Court should deny Special Exception No. 1 because the parties did not limit
the enforceability of the Letter Agreement.
23. Neither the Amended Petition nor the Letter Agreement states that any of the
provisions of the Letter Agreement are nonbinding. G-6 appears to hang its hat on the fact that
Paragraph 24 of the Letter Agreement provides that certain paragraphs are immediately binding,
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 11
4828-7127-5033_5/(90018/002)
00011
reading into this fact that the remaining provisions are not binding. However, the Letter
Agreement does not contain one single, clear and unambiguous statement that any of its
provisions are nonbinding and, as a result, Defendant’s argument fails. See General Metal
Fabricating Corporation, 2013 WL 5228494 (Tex. App. – Houston [1st] 2013, no writ); Kelly v.
Rio Grande Computerland Group, 128 S.W.3d 759, 767 (Tex. App. – El Paso 2004, no writ);
West Beach Marina, Ltd. v. Erdeljac, 94 S.W.3d 248 258 (Tex. App. – Austin 2002, no writ);
Geophysical Micro Computer Applications (International) Ltd. v. Paradigm Geophysical, Ltd.,
2001 WL 1270795 (Tex. App. – Dallas, October 24, 2001, pet. denied) (not designated for
publication).
24. Kelly illustrates this principal. In Kelly, the plaintiff argued that a letter of intent
was enforceable as a contract. The defendants, the other parties to the letter of intent, argued that
it was only an “agreement to agree” and non-binding due to the fact that there were open terms in
the agreement. Kelly, 128 S.W.3d at 766. The Court of Appeals, however, held that the letter of
intent was an enforceable agreement in part due to a lack of cautionary language and noted:
As letters of intent may be binding, authorities are quick to warn parties of the
risks involved with their use.… A party not wishing to be prematurely bound by a
Letter Agreement is advised to include a provision clearly stating that the letter is
nonbinding, as such negations of liability have been held to be effective…. No
such provision was included here.
Id. at 767. Similarly, the absence of such cautionary language in this case shows that at worst, a
fact issue exists on the parties’ intent, thus eliminating the possibility that the Letter Agreement
can be determined to be unenforceable as a matter of law. Id.
25. And, the fact that paragraph 24 states that the enumerated paragraphs are
“immediately binding and enforceable in accordance with their respective terms” does not
necessarily mean that all other provisions are not binding or enforceable. The immediately
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 12
4828-7127-5033_5/(90018/002)
00012
preceding language expresses the parties’ intention “to proceed in mutual good faith to carry out
the transactions contemplated hereby substantially in the manner outlined herein” and that the
Letter of Agreement “sets forth an agreement in principle only.” This language, taken together
with the pleaded history of the transaction, the intentions of the parties as reflected by their
statements both before and after execution to be bound, and the changes made in the Letter
Agreement from its prior form, are facts which evidence an intention to make a binding
agreement, which as the Texas Supreme Court held in Foreca, is a fact issue to be determined at
trial, not on the pleadings.
(ii) Special Exception No. 1 should be overruled because the Letter Agreement
contains all of the essential terms necessary to be an enforceable contract.
26. G-6 states that certain terms to the contract are missing and that, coupled with the
provision that a “Definitive Agreement” would be executed, renders the Letter Agreement
unenforceable as a matter of law. In Texas, however, a binding contract may be formed if the
parties agree on the material terms, even though they leave open other provisions for later
negotiation. See Foreca, 758 S.W.2d at 746; Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 555
(Tex.1972); Kelly, 128 S.W.3d at 766; John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12,
19 (Tex. App.-Houston [1st Dist.] 2000, pet. denied).
27. Thus, the Letter Agreement is binding even though it refers to the drafting of a
future, more formal agreement. Foreca, 758 S.W.2d at 746. The Letter Agreement contains the
three elements that determine whether a contract has been formed. The terms must include: (a)
the thing sold, which is the object of the contract; (b) the consideration or price to be paid for the
thing sold; and (c) the consent of the parties to exchange the thing for the price. Kelly, 128
S.W.3d at 766. Here, all three elements creating a contract for sale were agreed to by both DCB
and G-6 and were contained in the Letter Agreement. There was, therefore, a meeting of the
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 13
4828-7127-5033_5/(90018/002)
00013
minds on all essential terms. In fact, a contract may have many missing terms and still be
enforceable. For example, in Lerer v. Lerer, 2002 WL 31656109 (Tex. App. – Dallas, November
26, 2002, pet. denied) (not designated for publication), the Dallas Court of Appeals found a
contract to be enforceable even though the following terms were missing (and deemed non-
essential):
(1) a specific description of the real property to be sold;
(2) the expiration of the listing agreement for the sale of the real property and
the appointment of brokers;
(3) who controls the property during the sales;
(4) who controls the proceeds from the sales of the property;
(5) the date of the valuation of the properties and the terms of any sale;
(6) the failure of the current trustee of the Trust to agree to the terms of the
MSA;
(7) the deduction of taxes and costs from sale proceeds for LRC’s operations;
(8) the appointment of a guardian ad litem;
(9) mandatory mediation with a specified mediator;
(10) payment of attorney’s fees in future disputes; and
(11) the terms of the mutual release.
The court concluded that none of these terms were essential and, thus, had no effect on the
enforceability of the Contract. Id. Similarly, in Crisp Analytical Lab, L.C.C. v. Jakalam
Properties, Ltd., 2014 WL 117415 (Tex. App. – Dallas January 13, 2014, no writ), the Dallas
Court of Appeals found that even the failure to specify a purchase price does not render a
contract unenforceable. Id. As the Texas Supreme Court noted in Bendalin v. Delgado, 406
S.W.2d 897 (Tex. 1966):
Where the parties have done everything else necessary to make a binding
agreement for the sale of goods or services, their failure to specify the price does
not leave the contract so incomplete that it cannot be enforced. In such a case it
will be presumed that a reasonable price was intended.
Id. at 890. In fact, in such an instance the court can supply a reasonable price. Burnside Air
Conditioning & Heating, Inc. v. T.S. Young Corp., 113 S.W.3d 889, 894-95 (Tex. App. – Dallas
2003, no writ).
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 14
4828-7127-5033_5/(90018/002)
00014
28. There is no need in this case, however, for the Court to determine price. The
Letter Agreement provided a specific formula to derive the price for the acquisition of the stock
of G-6. Paragraph 3(a) of the Letter Agreement states that the total merger consideration would
be 60% of FSB’s book value, to be determined using standard accounting rules (GAAP).
29. The Letter Agreement bears the signatures of both parties consenting to the terms.
There is no dispute that the contract was delivered to the parties with the intent that it be mutual
and binding. See Letter Agreement at Paragraph 24. Thus, the Letter Agreement withstands the
scrutiny of the test determined by Texas courts. See Aegis Insurance Holding Company v.
Gaiser, 2007 WL 906328 (Tex. App. – San Antonio March 28, 2007, pet. denied); Calvary
Investments, L.L.C. v. Sunstar Acceptance Corporation, 2001 WL 371545 (Tex. App. – Dallas
August 16, 2001, pet. denied) (not designated for publication).
30. Moreover, G-6’s argument as to what constitutes an essential term only highlights
a potential fact issue exists on what terms it now believes were essential. The existence of a fact
issue on the essential terms question itself can be the basis to deny the special exception. It is
worth pointing out that, under Texas’ Pattern Jury Charges, whether the parties “intended to bind
themselves to an agreement that includes [disputed] terms” is a fact issue that must be submitted
to a jury. See Tex. Pattern Jury Charges, Business § 101.1 (2012).
(iii) Special Exception No. 1 should be overruled because the parties partially
performed their obligations under the Letter Agreement.
31. One of the factors that courts use to determine if the terms are sufficiently definite
is whether it is clear that the parties intended to be bound by a contract. Partial performance or
preparation to perform under the contract supports the parties' intent to be bound by the
agreement. Foreca, 758 S.W.2d at 746 n. 2; Scott, 945 S.W.2d at 556; Medallion International
Corporation v. Silva, 2004 WL 1211613 (Tex. App. – Waco June 2, 2004, no writ). In this
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 15
4828-7127-5033_5/(90018/002)
00015
instance, DCB fully performed until G-6 breached (which then excused DCB’s performance)
and, until its breach, G-6 partially performed. For example, G-6 provided information for DCB’s
due diligence and paid the required expense reimbursement. G-6 also asked for due diligence
materials, which DCB provided. And, recognizing the existence and binding nature of the Letter
Agreement, G-6 requested and documented an extension of the due diligence period in the Letter
Agreement. Even G-6’s repudiation of the Letter Agreement and payment of the $150,000.00
expense reimbursement to DCB is some evidence of performance under the terms of the Letter
Agreement (whether proper or wrongful). Thus, G-6’s partial performance (until breach) of the
Letter Agreement evidences G-6’s intent regarding the binding nature of the Letter Agreement
and defeats its argument that the contract is unenforceable as a matter of law.
C. The Special Exceptions should be overruled as a whole because they are
defective.
(ii) The Special Exceptions should be overruled because they are based on
Defendant’s allegations and inferences and not based on the matters pled in the
Amended Petition or the provisions of the Letter Agreement
32. Taken as true, DCB’s allegations in its Original Petition and the Amended
Petition and the provisions in the Letter Agreement prevent G-6 from prevailing on its Special
Exceptions. Instead, G-6 constructs its points by stating its own version of facts and drawing its
own inferences. For example:
• G-6 states that provisions of the Letter Agreement are nonbinding (Special
Exceptions at p. 2). Neither the Amended Petition nor the Letter Agreement states that
any of the Letter Agreement’s provisions are nonbinding. In fact the Amended Petition
specifically states that the Letter Agreement is binding in its entirety.
• G-6 states that certain essential terms in the Letter Agreement were either
nonbinding or “not present” (Special Exceptions at p. 3). Neither the Letter
Agreement nor the Amended Petition alleges this. Instead, Defendant’s claim relies on
evidence not presented or nonexistent but in any case at best supports a finding of
ambiguity in the Letter Agreement and a fact question on intent.
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 16
4828-7127-5033_5/(90018/002)
00016
• G-6 states that the provision in Paragraph 15 of the Letter Agreement that
reimburses DCB $150,000 “effectively amounts to a limited damages provision”
(Special Exceptions at p. 3). Neither the Amended Petition nor the Letter Agreement
states that the expense reimbursement is in any way related to damages. In fact, it is not
related to any breach or termination of the Letter Agreement: it is only tied to the passage
of time. As shown in the Amended Petition, an earlier draft of the Letter Agreement
included a liquidated damages provision that G-6 itself rejected.
• G-6 states that, at the time G-6 repudiated the Letter Agreement, “numerous
essential terms had yet to be negotiated and agreed upon” (Special Exceptions at p.
8). This allegation does not appear either in the Amended Petition or the Letter
Agreement. Instead, G-6 actually introduces its own new factual allegation which cannot
be a basis for a special exception.
• G-6 states that the purchase price is indeterminable (P. 8). This claim is false, and
has no support in the Letter Agreement or Amended Petition. The Letter Agreement
provides the specific formula to determine purchase price and standards for its
determination (e.g., GAAP).
G-6’s allegations and inferences are not proper special exceptions.
D. Special Exception No. 2 should be overruled because the Special Exception
misstates the Amended Petition And the Letter Agreement.
33. G-6 argues that the Letter Agreement’s provisions regarding good faith do not
support enforceability of the contract. In doing so, G-6 states that DCB alleged that the Letter
Agreement is premised on an obligation to negotiate in good faith. However, this argument is
based on a misreading of the Letter Agreement. Paragraph 24 provides that “the parties hereto
execute this Letter to evidence their intention to proceed in good faith to carry out the
transactions contemplated hereby substantially in the manner contemplated herein. (emphasis
added).” The good faith obligation was an expressed mutual promise tied to performance, not a
promise to negotiate. As a result, G-6’s authorities are inapplicable and the special exception
should be overruled.
34. In any event, when the parties have contractually agreed to perform in good faith,
the failure to perform in good faith is a breach of contract. See Northern Natural Gas Co. v.
Conoco, Inc., 986 S.W.2d 603, 606 (Tex. 1998) (“a failure to perform or enforce, in good faith, a
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 17
4828-7127-5033_5/(90018/002)
00017
specific duty or obligation under the contract, constitutes a breach of contract or makes
unavailable, under the particular circumstances, a remedial right or power”).
E. Special Exception No. 3 should be overruled because specific performance is an
available remedy.
35. G-6 argues that the request for specific performance should be dismissed because
the remedy is not an available remedy for the breach of a contract for a stock sale. This special
exception fails because specific performance is an available remedy. Specific performance may
be decreed where (i) the value of the stock is not easily ascertained, (ii) the stock is not to be
obtained readily elsewhere, and (iii) there is some particular reasonable cause for the vendee
requiring the stock contracted to be delivered. Amsler v. Cavitt, 210 S.W. 766 (Tex. Civ. App. –
Austin 1919, writ ref’d); Health Systems International, Inc. v. Suki, 1988 Tex. App. LEXIS
1801, * 13 (Tex. App. – Houston [1st Dist.] 1988, no writ) (unpubl. op.). DCB’s Amended
Petition has pleaded facts bringing its claims under exceptions (ii) and (iii) above. FSB stock is
not traded on an open market. It cannot be readily obtained from any other source since it is one
hundred percent was owned by G-6. And, money damages will not permit DCB to purchase
FSB stock from another source since all of the stock is owned by G-6. Furthermore, the stock is
unique due to how it fit in the strategic business plan of DCB. The Letter Agreement itself
provides in the second paragraph that:
We believe that Company and the Bank are an excellent strategic fit for us, and
that together we can substantially grow our franchise. We anticipate continuing
to use the name First State Bank at the Bank’s existing Mesquite location
following consummation of the Acquisition. Our financial strength and strategic
commitment to investing in this area will provide continuing developmental
opportunities for both the Company’s shareholders and DCB well into the future.
36. G-6 also states that specific performance is unavailable due to the fact that G-6
paid the expense reimbursement of $150,000.00 to DCB. This argument fails for at least two
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 18
4828-7127-5033_5/(90018/002)
00018
reasons. First, the Letter Agreement clearly provides that payment to DCB is an expense
reimbursement, not liquidated damages or any other damages. Expense reimbursement
provisions in contracts are not considered liquidated damages. See Dresser-Rand Company v.
Bolick, 2013 WL 3770950 (Tex. App. – Houston [14th] July 18, 2013, pet. abated); Sunbelt
Services, Inc. v. Grove Temp. Services, Inc., 2006 WL 2130133 (Tex. App. – Dallas, August 1,
2006, no writ). Second, G-6’s characterization of the expense reimbursement as liquidated
damages fails because damages for Defendant’s breach are ascertainable. See Flores v.
Millennium Interests, Ltd., 185 S.W.3d 427 (Tex. 2005). And, significantly, an earlier draft of
the Letter Agreement contained a liquidated damages provision, but that term was rejected by
Defendant and removed from the document.
IV.
REQUEST FOR CONTINUANCE
37. Two months into this lawsuit, before G-6 has fully responded to DCB’s first
discovery requests, before DCB has taken one deposition, before any hearings, and before the
expiration of any pretrial deadlines, including that for pleading, G-6 attempts to dismiss this
lawsuit in its entirety via the Special Exceptions. G-6 provided DCB only ten days’ notice of its
hearing. Understandably, DCB requested that G-6 postpone the hearing on its Special
Exceptions in order to provide DCB adequate time to respond to them. G-6 refused any
extension, which left DCB with no choice but to file an Emergency Motion for Continuance,
which is incorporated for reference herein. DCB seeks a continuance not to delay the case, but
to ensure it has an adequate time to conduct necessary discovery and to fully respond to G-6’s
potentially dispositive Special Exceptions.
V.
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO PLAINTIFF’S ORIGINAL PETITION – Page 19
4828-7127-5033_5/(90018/002)
00019
CONCLUSION AND PRAYER
38. For the reasons stated above the Special Exceptions should be overruled in all
respects. Plaintiff requests that Defendant’s Special Exceptions to Plaintiff’s Original Petition
(or if the Amended Petition if so applied) be overruled in all respects, and seeks all such other
and further relief at law or in equity to which it may be justly entitled.
PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS
TO
Preview
FILED DALLAS COUNTY 4/1/2014 4:55:17 PM GARY FITZSIMMONS DISTRICT CLERK CAUSE NO. DC-14-00936 DCB FINANCIAL CORPORATION, § IN THE DISTRICT COURT § Plaintiff, § § v. § 191ST JUDICIAL DISTRICT § G-6 CORPORATION, § § Defendant. § DALLAS COUNTY, TEXAS PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS COMES NOW Plaintiff DCB Financial Corporation (“DCB” or “Plaintiff”), and, subject to and without waiver of its request for a continuance, files its Response to the Special Exceptions filed by Defendant G-6 Corporation (“G-6”) to Plaintiff’s Original Petition (the “Special Exceptions”), and in support thereof would show as follows: I. SUMMARY 1. G-6 seeks to improperly use its Special Exceptions to dismiss Plaintiff’s lawsuit at its inception. This attempt to abort the numerous procedural protections afforded by the Texas Rules of Civil Procedure to a plaintiff to develop its case through discovery should be overruled because: (i) the Special Exceptions have been mooted by the filing of Plaintiff’s First Amended Petition (the “Amended Petition”) on April 1, 2014, which contains new factual allegations and new causes of action not addressed by Defendant’s Special Exceptions; (ii) G-6 has not shown that the defects complained of are incurable defects; (iii) DCB has not pleaded facts that negate its breach of contract claim; to the contrary, DCB has pleaded facts that show that all essential elements of its contract claim are spelled out in the parties’ letter agreement, with all terms of the agreement to be performed in good faith, and G-6’s breach of the letter agreement; (iv) the PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 1 4828-7127-5033_5/(90018/002) 00001 Special Exceptions are defective because G-6 is relying on inferences in G-6’s favor and not the pleaded facts “taken as true;” and (v) DCB has pleaded facts that would permit an award of specific performance. In the alternative, and as more thoroughly discussed in Plaintiff’s Emergency Motion for Continuance filed on March 29, 2014, this Court should continue the hearing on the Special Exceptions to enable DCB to obtain discovery and adequately prepare for the hearing. DCB’s Amended Petition now pleads the maximum amount of damages. II. INTRODUCTION 1 2. This case involves a stock transaction. DCB, the owner of Preston State Bank (“PSB”), contracted with G-6 to buy all of the stock of First State Bank (“FSB”), a Mesquite community bank. Using the same law firm, Hunton & Williams, the parties negotiated and executed a letter agreement (the “Letter Agreement”) that established two milestones: • First, the parties had until December 20, 2013, to complete due diligence and if, after due diligence, a party determined that the other party’s condition was not satisfactory, that party could terminate the agreement. Otherwise, the parties would proceed to the second step of preparing a definitive agreement that was consistent with the terms stated in the Letter Agreement. • Second, if the parties determined that each other’s condition was satisfactory, the parties had until January 24, 2014, to negotiate, in good faith, certain terms of the definitive agreement consistent with the Letter Agreement, and further conditioned on (1) their promise to “proceed in mutual good faith to carry out the transactions contemplated hereby substantially in the manner outlined herein,” and (2) their agreement that certain identified terms were immediately binding and enforceable in accordance with their terms. If the parties were unable to agree on such terms by January 24, 2011 the Letter Agreement could be terminated. 3. Because the parties had previously negotiated the terms of a transaction, but G-6 had backed out of the transaction before signing any contract, this time around DCB told G-6 it 1 The facts stated in this Introduction are contained in Plaintiff’s petitions filed in this action. PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 2 4828-7127-5033_5/(90018/002) 00002 would have to sign a binding agreement and it would have to take FSB off the market. G-6 assured DCB that it would only sell to DCB and that it would sign a binding agreement. Accordingly, DCB instructed its Hunton & Williams counsel to “make it as binding as possible because we don’t want them walking away again.” 4. Hunton & Williams prepared a letter agreement that contained significant revisions from the prior letter agreement that G-6 rejected. A redline of the changes is attached hereto as Exhibit “A” and incorporated herein. Some of the notable changes were: • Whereas the prior written offer made G-6’s exercise of its right to terminate the Letter Agreement under paragraph 1 (after due diligence and upon a determination that DCB’s condition was not satisfactory) subject to the caveat that only paragraphs 14 and 15 regarding confidentiality and public disclosure would survive termination, the revised written offer provided that the termination was “subject to Paragraph 24 (Binding Effect) of this Letter.” • Whereas the prior written offer made G-6’s exercise of its right to terminate the Letter Agreement under paragraph 2 (after the parties fail to agree on terms for the definitive agreement) subject to the caveat that paragraphs 14 and 15 regarding confidentiality and public disclosure would survive termination, the revised written offer provided that the termination was “subject to Paragraph 24 (Binding Effect) of this Letter.” • Whereas the prior written offer provided for a consideration of “approximately █ million,” the revised written offer provided a specific formula for calculating the price dependent on shareholder’s equity, with the price to be paid in part by cash and in part by shares of DCB. • Whereas the prior written offer and the revised written offer both provided that the definitive agreement would have indemnity provisions that were mutually satisfactory and customary, the revised agreement added a requirement that a specific percentage of the cash consideration would be deposited in escrow as security for the performance of G-6’s indemnity obligations, and would be held for a specified time period. • Whereas the prior written offer provided for each party to pay its own expenses of the transaction, the revised offer provided that, if a definitive agreement is not executed by a date certain, G-6 would reimburse DCB for a specified amount. • The exclusivity provision was strengthened and now specifically addressed G-6’s broker, SAMCO. PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 3 4828-7127-5033_5/(90018/002) 00003 • An expense reimbursement provision was added that required G-6 to pay DCB $150,000.00 if a definitive agreement was not executed by January 24, 2013, to reimburse DCB for its expenses in connection with the evaluation and execution of the merger. The parties discussed a proposed “break-up” fee in addition to a reimbursement of expenses. But, G-6 rejected the concept, and the Letter Agreement, therefore, contains only a specific expense reimbursement, not a liquidated damages break-up fee 5. Paragraph 24 of the Letter Agreement provides: 24. The parties recognize that the proposed Acquisition will require further documentation and approvals, including the preparation and approval of the Definitive Agreement, setting forth the terms and conditions of the proposed Acquisition in detail. The parties hereto execute this Letter to evidence their intention to proceed in mutual good faith to carry out the transactions contemplated hereby substantially in the manner outlined herein. It is understood that this Letter sets forth an agreement in principle only; provided, however, that the parties intend that Paragraphs 13, 14, 15, 17, and 19 through 24 are immediately binding and enforceable in accordance with their respective terms. (emphasis added) 6. Before the expiration of the first milestone (completion of due diligence), G-6 asked DCB for an extension of the deadline for due diligence, stating it was changing attorneys and that its president was undergoing surgery and would be out of the office the last two weeks of December. DCB agreed to extend the due diligence deadline to January 10, 2014. Unknown to DCB, G-6’s merger advisor, SAMCO Capital Markets, Inc. (“SAMCO”), had received an offer from a third party to buy FSB, and with this offer in hand and, without disclosing that it had received and was considering the offer—in violation of the exclusivity provision in the Letter Agreement—G-6 asked for and received the extension to perform due diligence. G-6 then ceased its due diligence efforts and, without ever making a determination that DCB’s condition was not satisfactory, on December 31, 2013, G-6 notified DCB it was terminating the Letter Agreement. When questioned about the reasons for its decision, G-6 candidly admitted that it was terminating because it received a “substantially” better offer and had decided to pursue the other offer. PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 4 4828-7127-5033_5/(90018/002) 00004 7. Having been jilted twice, and having learned the reason for G-6’s latest betrayal, DCB brought this lawsuit. In its Original Petition, DCB asserted a breach of contract claim and requested specific performance, or damages. In its Amended Petition, DCB added claims for common law fraud and statutory fraud. 8. 49 days after suit was filed, G-6 filed four special exceptions, three of which it argues are case dispositive, arguing (1) DCB has not stated a cause of action for breach of contract because the Letter Agreement is not a binding agreement on its face, (2) there is no cause of action for failing to negotiate terms in good faith, and (3) there is no cause of action for specific performance. For good measure, G-6 asks that DCB plead the maximum amount of damages claimed. 9. In response to G-6’s Special Exceptions, DCB moved to continue the hearing on G-6’s Special Exceptions so that DCB can obtain discovery from G-6 and SAMCO’s agents regarding their intentions and actions that DCB contends establish that the Letter Agreement is binding and was violated and fraudulently induced, and for more time to plead additional facts developed through discovery if necessary. And, DCB is filing its First Amended Petition, which adds factual allegations and adds claims for common law promissory fraud and statutory fraud. 10. The Amended Petition demonstrates that the alleged defects in DCB’s Original Petition alleged by G-6 are curable, notwithstanding G-6’s arguments to the contrary, since DCB has added factual allegations that provide additional evidence of the circumstances surrounding the execution of the Letter Agreement, which would be admissible at trial under Sun Oil Co. (Delaware) v. Madeley, 2; the Amended Petition added factual allegations regarding the 2 Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981) (“It is the general rule of the law of contracts that where an unambiguous writing has been entered into between the parties, the courts will give effect to the intention of the parties as expressed or as is apparent in the writing. . . . Where a question relating to the PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 5 4828-7127-5033_5/(90018/002) 00005 intentions of the parties about the binding nature of the letter agreement, which would be admissible at trial under Foreca, S.A. v. GRD Development Co., 3 758 S.W.2d 744 (Tex. 1988); and DCB added factual allegations that bring this case within the exceptions to the general rule that specific performance does not apply to a claim for breach of a promise to deliver stock, which would be admissible under Amsler v. Cavitt, 210 S.W. 766, 766-67 (Tex. Civ. App. – 1919 writ ref’d). Having demonstrated that the alleged defects are curable, as explained further below, DCB should be given an opportunity to develop those facts and present them on a more developed record in response to a summary judgment motion (with all of the procedural protections built into the Rules of Civil Procedure for a summary judgment proceeding) or at trial. 11. In any event, for the reasons discussed below, the Special Exceptions should be overruled because DCB pleaded sufficient facts to provide fair notice of its claims and those facts as pleaded state a claim upon which relief may be granted. Contrary to G-6’s arguments, DCB has not pleaded itself out of court. III. APPLICABLE STANDARDS 12. The purpose of special exceptions is to inform the opposing party of defects in its pleadings so it can cure them, if possible, by amendment. Horizon/CMS Healthcare Crop. v. construction of a contract is presented, as here, we are to take the wording of the instrument, considering the same in the light of the surrounding circumstances, and apply the pertinent rules of construction thereto and thus settle the meaning of the contract.” See also Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 461, 469 (Tex. 2011) (“A written contract must be construed to give effect to the parties’ intent expressed in the text as understood in light of the facts and circumstances surrounding the contract’s execution, subject to the parol evidence rule.” 3 Foreca, S.A. v. GRD Development Co., 758 S.W.2d 744, 746 (Tex. 1988) (“We hold that it is a question of fact in this case whether the terms agreed to and embodied in the September 2 and October 19, 1983 writings were intended to be the final expressions of the contract or were only preliminary negotiations which the parties did not intend to have legal significance until execution of the contemplated legal documentation. The question was properly submitted to and answered by the jury in fulfillment of its fact finding responsibility.” PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 6 4828-7127-5033_5/(90018/002) 00006 Auld, 34 S.W.3d 887, 897 (Tex. 2000). Texas follows the “fair notice” standard for pleadings, which looks at whether the opposing party can ascertain from the pleadings the nature and basic issues of the controversy and what testimony will be relevant. Id.; see also TRCP 45(b) (requiring a “statement in plain and concise language of the plaintiff’s cause of action”). TRCP 45 does not require the plaintiff to describe the evidence in detail in its petition. Paramount Pipe & Sup. Co. v. Muhr, 749 S.W.2d 491, 494-95 (Tex. 1988). 13. If a plaintiff’s suit is not permitted by law, the defendant may file special exceptions and request dismissal of the suit. Wayne Duddlesten, Inc. v. Highland Ins., 110 S.W.3d 85, 96-97 (Tex. App. – Houston [1st Dist.] 2003, pet. denied). Examples of suits not permitted by law include: • Trevino v. Ortega, 969 S.W.2d 950, 951 (Tex. 1998) (no cause of action for spoliation of evidence) • Friesen v. Ryan, 960 S.W.2d 656, 658 & n. 1 (Tex. 1998) (no cause of action for social host liability) • Krishan v. Sepulveda, 916 S.W.2d 478, 479 (Tex. 1995) (no cause of action for negligence to a fetus) • Boyles v. Kerr, 855 S.W.2d 593, 595-96 (Tex. 1993) (negligent infliction of emotional distress) In such instances, no amount of repleading can cure the fact that Texas does not recognize the cause of action. 15. Even though DCB has pleaded a well-established cause of action for breach of contract, and the well-established remedy of specific performance, G-6 is asking the Court to dismiss this lawsuit without leave to replead via a finding that the petition “affirmatively states a fact which demonstrates that the suit is barred as a matter of law.” G-6 seeks extraordinary, rarely granted, relief. 16. G-6 discusses legal standards for special exceptions in Section III PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 7 4828-7127-5033_5/(90018/002) 00007 of its special exceptions, and cites to five cases. None of those cases are analogous to this case, and in none of those cases did the trial court dismiss the claims without the plaintiff having an opportunity to amend. • In Baylor Univ. v. Sonnichsen, 221 S.W.3d 632 (Tex. 2007) (plaintiff pleaded into a Statute of Frauds defense), the plaintiff appealed from the trial court’s ruling sustaining special exceptions to his second amended petition, without “giving him another opportunity to amend his pleadings.” Sonnichsen at 634. (emphasis supplied) • In Perry v. Cohen, 285 S.W.3d 137 (Tex. App.—Austin 2009, pet. denied) (plaintiff pleaded claims belonging to the corporation and not the plaintiff shareholders), the plaintiffs had filed two amended petitions prior to the sustaining of special exceptions, then filed another amended petition prior to the court’s dismissal order. “The shareholders had more than one opportunity to amend and cure their deficient pleadings.” Cohen, 285 S.W.3d at 148. • In Gatten v. McCarley, 391 S.W.3d 669 (Tex. App.—Dallas 2013, no pet.) (plaintiff failed to plead facts which would give rise to a duty of care for a premises liability claim), special exceptions were granted on the ground that plaintiff’s third amended petition failed to state a claim, after the trial court had denied special exceptions with respect to the first amended petition and granted special exceptions, along with permission to replead, as to the second amended petition. • In Owen v. Option One Mort. Corp., 2011 Tex. App. LEXIS 5843, *8-9 (Tex. App.— Houston [1st Dist.] 2011, pet. denied) (plaintiff failed to plead an independent tort to avoid the application of the economic loss rule), the trial court sustained special PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 8 4828-7127-5033_5/(90018/002) 00008 exceptions and permitted the plaintiffs to replead, then sustained special exceptions as to the resulting amended petition but allowed the plaintiffs to replead once more. • In Ford v. Performance Aircraft Serv., 178 S.W.3d 330 (Tex. App.—Fort Worth 2005, pet. denied) (plaintiff failed to plead how defendant was liable in his individual capacity for actions taken as president of his employer), the trial court granted special exceptions and allowed the plaintiff nine months to replead, only dismissing the case when the plaintiff failed to meet that generous deadline. G-6 has failed to point this Court to any authority for its request that DCB’s claims be summarily dismissed without leave to amend. 17. G-6 has not presented apposite authority supporting its request that DCB’s claims should be dismissed without leave to amend or an opportunity to develop the facts through discovery. DCB should be permitted to take discovery and replead, if necessary. The “purpose of special exceptions is to furnish a party with a medium to force clarification of an adverse party’s pleadings when they are not clear or sufficiently specific.” Connolly v. Gasmire, 257 S.W.3d 831, 839 (Tex. App.—Dallas 2008, no pet.); Owen, 2011 Tex. App. LEXIS 5843, at *14. The general practice under the rules of procedure is to challenge deficiencies in pleadings by special exception, and amendment is a matter of right under special exception practices. Estate of Bourland v. Hanes, 526 S.W.2d 156, 159 (Tex. Civ. App. –Corpus Christi 1975, writ ref’d n.r.e.). 18. Texas case law draws a clear line. If a plaintiff’s suit is not permitted by law, the defendant may seek dismissal by special exceptions. These are the “plaintiff has pled himself out of court” cases. See, e.g., Trevino, 969 S.W.2d at 951 (no cause of action for spoliation of PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 9 4828-7127-5033_5/(90018/002) 00009 evidence); Friesenhahn, 960 S.W.2d at 658 (no cause of action for social host liability). DCB’s pleaded claims, however, are for recognized causes of action: specific performance and breach of contract (and, in the Amended Petition, common law and statutory fraud). Here, G-6 incorrectly argues that the agreement made the subject of Plaintiff’s claims proves that Plaintiff has pled itself out of court. 19. While a court is not required to give the plaintiff an opportunity to amend if the pleading defect is one that cannot be cured by amendment, such circumstances are rare. “Situations in which such a motion can be sustained, however, are very limited . . . [this] is not a case in which the facts alleged by a plaintiff establish the absence of a right of action or an insuperable barrier to a right of recovery.” Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972). IV. ARGUMENT A. The Special Exceptions should be overruled because they are mooted by the filing of the Amended Petition. 20. The Amended Petition 4 includes new allegations which, for the purpose of special exceptions, must be taken as true. Attached hereto as Exhibit “B” is a red-lined copy of the Amended Petition showing the changes made to the Original Petition. The new allegations more fully develop the facts which show that (i) the entire Letter Agreement is binding, subject to the parties’ two termination options, which are limited, and were not properly exercised in accordance with their terms; (ii) the parties intended the Letter Agreement to be binding; (iii) the lawyers negotiating and drafting the Letter Agreement intended it to be binding; (iv) G-6, knowing the Letter Agreement to be binding, nevertheless breached it; and (v) specific performance is appropriate because (a) FSB’s stock is not traded on an open market and cannot 4 The Court is requested to take judicial notice of the Amended Petition. PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 10 4828-7127-5033_5/(90018/002) 00010 be replaced by other FSB stock, (b) FSB’s stock is unique and DCB has a particular reason for acquiring the stock, and (c) the full amount of DCB’s damages resulting from G-6’s breach of the Letter Agreement is difficult to ascertain. The Amended Petition also adds causes of action for fraud not addressed by Defendant’s Special Exceptions. 21. The filing of the Amended Petition moots the Special Exceptions and requires that they be overruled. See Wang v. Univ. of Tex. at Austin, 2013 Tex. App. LEXIS 12507 * 6 (Tex. App. – San Antonio 2013, no pet.) (“After UT filed its special exceptions, Wang filed her First Amended Petition, thereby mooting UT’s special exceptions.”). Amended pleadings take the place of prior pleadings. TRCP 65 (substituted instrument takes the place of original). In fact, the trial court cannot err in not ruling on the special exceptions because they are moot. Id. See also FKM P’ship, Ltd. v. Bd. of Regents of Univ. of Houston Sys., 255 S.W.3d 619, 633 (Tex. 2008). B. Special Exception No. 1 should be overruled because DCB has not pleaded facts that conclusively establish that the Letter Agreement is unenforceable. 22. In order for the Court to grant Special Exception No. 1, it must find as a matter of law that the parties did not intend for the Letter Agreement to be enforceable and the evidence of that intent must be “clear and unambiguous on the face of the agreement.” West Beach Marina, Ltd. v. Erdeljac, 94 S.W.3d 248 (Tex. App. – Austin 2002, no writ); Hardman v. Dault, 2 S.W.3d 378, 380 (Tex. App. – San Antonio 1999, no writ). For the reasons stated below, Defendant cannot meet that burden and Special Exception No. 1 should be overruled. (i) The Court should deny Special Exception No. 1 because the parties did not limit the enforceability of the Letter Agreement. 23. Neither the Amended Petition nor the Letter Agreement states that any of the provisions of the Letter Agreement are nonbinding. G-6 appears to hang its hat on the fact that Paragraph 24 of the Letter Agreement provides that certain paragraphs are immediately binding, PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 11 4828-7127-5033_5/(90018/002) 00011 reading into this fact that the remaining provisions are not binding. However, the Letter Agreement does not contain one single, clear and unambiguous statement that any of its provisions are nonbinding and, as a result, Defendant’s argument fails. See General Metal Fabricating Corporation, 2013 WL 5228494 (Tex. App. – Houston [1st] 2013, no writ); Kelly v. Rio Grande Computerland Group, 128 S.W.3d 759, 767 (Tex. App. – El Paso 2004, no writ); West Beach Marina, Ltd. v. Erdeljac, 94 S.W.3d 248 258 (Tex. App. – Austin 2002, no writ); Geophysical Micro Computer Applications (International) Ltd. v. Paradigm Geophysical, Ltd., 2001 WL 1270795 (Tex. App. – Dallas, October 24, 2001, pet. denied) (not designated for publication). 24. Kelly illustrates this principal. In Kelly, the plaintiff argued that a letter of intent was enforceable as a contract. The defendants, the other parties to the letter of intent, argued that it was only an “agreement to agree” and non-binding due to the fact that there were open terms in the agreement. Kelly, 128 S.W.3d at 766. The Court of Appeals, however, held that the letter of intent was an enforceable agreement in part due to a lack of cautionary language and noted: As letters of intent may be binding, authorities are quick to warn parties of the risks involved with their use.… A party not wishing to be prematurely bound by a Letter Agreement is advised to include a provision clearly stating that the letter is nonbinding, as such negations of liability have been held to be effective…. No such provision was included here. Id. at 767. Similarly, the absence of such cautionary language in this case shows that at worst, a fact issue exists on the parties’ intent, thus eliminating the possibility that the Letter Agreement can be determined to be unenforceable as a matter of law. Id. 25. And, the fact that paragraph 24 states that the enumerated paragraphs are “immediately binding and enforceable in accordance with their respective terms” does not necessarily mean that all other provisions are not binding or enforceable. The immediately PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 12 4828-7127-5033_5/(90018/002) 00012 preceding language expresses the parties’ intention “to proceed in mutual good faith to carry out the transactions contemplated hereby substantially in the manner outlined herein” and that the Letter of Agreement “sets forth an agreement in principle only.” This language, taken together with the pleaded history of the transaction, the intentions of the parties as reflected by their statements both before and after execution to be bound, and the changes made in the Letter Agreement from its prior form, are facts which evidence an intention to make a binding agreement, which as the Texas Supreme Court held in Foreca, is a fact issue to be determined at trial, not on the pleadings. (ii) Special Exception No. 1 should be overruled because the Letter Agreement contains all of the essential terms necessary to be an enforceable contract. 26. G-6 states that certain terms to the contract are missing and that, coupled with the provision that a “Definitive Agreement” would be executed, renders the Letter Agreement unenforceable as a matter of law. In Texas, however, a binding contract may be formed if the parties agree on the material terms, even though they leave open other provisions for later negotiation. See Foreca, 758 S.W.2d at 746; Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 555 (Tex.1972); Kelly, 128 S.W.3d at 766; John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12, 19 (Tex. App.-Houston [1st Dist.] 2000, pet. denied). 27. Thus, the Letter Agreement is binding even though it refers to the drafting of a future, more formal agreement. Foreca, 758 S.W.2d at 746. The Letter Agreement contains the three elements that determine whether a contract has been formed. The terms must include: (a) the thing sold, which is the object of the contract; (b) the consideration or price to be paid for the thing sold; and (c) the consent of the parties to exchange the thing for the price. Kelly, 128 S.W.3d at 766. Here, all three elements creating a contract for sale were agreed to by both DCB and G-6 and were contained in the Letter Agreement. There was, therefore, a meeting of the PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 13 4828-7127-5033_5/(90018/002) 00013 minds on all essential terms. In fact, a contract may have many missing terms and still be enforceable. For example, in Lerer v. Lerer, 2002 WL 31656109 (Tex. App. – Dallas, November 26, 2002, pet. denied) (not designated for publication), the Dallas Court of Appeals found a contract to be enforceable even though the following terms were missing (and deemed non- essential): (1) a specific description of the real property to be sold; (2) the expiration of the listing agreement for the sale of the real property and the appointment of brokers; (3) who controls the property during the sales; (4) who controls the proceeds from the sales of the property; (5) the date of the valuation of the properties and the terms of any sale; (6) the failure of the current trustee of the Trust to agree to the terms of the MSA; (7) the deduction of taxes and costs from sale proceeds for LRC’s operations; (8) the appointment of a guardian ad litem; (9) mandatory mediation with a specified mediator; (10) payment of attorney’s fees in future disputes; and (11) the terms of the mutual release. The court concluded that none of these terms were essential and, thus, had no effect on the enforceability of the Contract. Id. Similarly, in Crisp Analytical Lab, L.C.C. v. Jakalam Properties, Ltd., 2014 WL 117415 (Tex. App. – Dallas January 13, 2014, no writ), the Dallas Court of Appeals found that even the failure to specify a purchase price does not render a contract unenforceable. Id. As the Texas Supreme Court noted in Bendalin v. Delgado, 406 S.W.2d 897 (Tex. 1966): Where the parties have done everything else necessary to make a binding agreement for the sale of goods or services, their failure to specify the price does not leave the contract so incomplete that it cannot be enforced. In such a case it will be presumed that a reasonable price was intended. Id. at 890. In fact, in such an instance the court can supply a reasonable price. Burnside Air Conditioning & Heating, Inc. v. T.S. Young Corp., 113 S.W.3d 889, 894-95 (Tex. App. – Dallas 2003, no writ). PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 14 4828-7127-5033_5/(90018/002) 00014 28. There is no need in this case, however, for the Court to determine price. The Letter Agreement provided a specific formula to derive the price for the acquisition of the stock of G-6. Paragraph 3(a) of the Letter Agreement states that the total merger consideration would be 60% of FSB’s book value, to be determined using standard accounting rules (GAAP). 29. The Letter Agreement bears the signatures of both parties consenting to the terms. There is no dispute that the contract was delivered to the parties with the intent that it be mutual and binding. See Letter Agreement at Paragraph 24. Thus, the Letter Agreement withstands the scrutiny of the test determined by Texas courts. See Aegis Insurance Holding Company v. Gaiser, 2007 WL 906328 (Tex. App. – San Antonio March 28, 2007, pet. denied); Calvary Investments, L.L.C. v. Sunstar Acceptance Corporation, 2001 WL 371545 (Tex. App. – Dallas August 16, 2001, pet. denied) (not designated for publication). 30. Moreover, G-6’s argument as to what constitutes an essential term only highlights a potential fact issue exists on what terms it now believes were essential. The existence of a fact issue on the essential terms question itself can be the basis to deny the special exception. It is worth pointing out that, under Texas’ Pattern Jury Charges, whether the parties “intended to bind themselves to an agreement that includes [disputed] terms” is a fact issue that must be submitted to a jury. See Tex. Pattern Jury Charges, Business § 101.1 (2012). (iii) Special Exception No. 1 should be overruled because the parties partially performed their obligations under the Letter Agreement. 31. One of the factors that courts use to determine if the terms are sufficiently definite is whether it is clear that the parties intended to be bound by a contract. Partial performance or preparation to perform under the contract supports the parties' intent to be bound by the agreement. Foreca, 758 S.W.2d at 746 n. 2; Scott, 945 S.W.2d at 556; Medallion International Corporation v. Silva, 2004 WL 1211613 (Tex. App. – Waco June 2, 2004, no writ). In this PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 15 4828-7127-5033_5/(90018/002) 00015 instance, DCB fully performed until G-6 breached (which then excused DCB’s performance) and, until its breach, G-6 partially performed. For example, G-6 provided information for DCB’s due diligence and paid the required expense reimbursement. G-6 also asked for due diligence materials, which DCB provided. And, recognizing the existence and binding nature of the Letter Agreement, G-6 requested and documented an extension of the due diligence period in the Letter Agreement. Even G-6’s repudiation of the Letter Agreement and payment of the $150,000.00 expense reimbursement to DCB is some evidence of performance under the terms of the Letter Agreement (whether proper or wrongful). Thus, G-6’s partial performance (until breach) of the Letter Agreement evidences G-6’s intent regarding the binding nature of the Letter Agreement and defeats its argument that the contract is unenforceable as a matter of law. C. The Special Exceptions should be overruled as a whole because they are defective. (ii) The Special Exceptions should be overruled because they are based on Defendant’s allegations and inferences and not based on the matters pled in the Amended Petition or the provisions of the Letter Agreement 32. Taken as true, DCB’s allegations in its Original Petition and the Amended Petition and the provisions in the Letter Agreement prevent G-6 from prevailing on its Special Exceptions. Instead, G-6 constructs its points by stating its own version of facts and drawing its own inferences. For example: • G-6 states that provisions of the Letter Agreement are nonbinding (Special Exceptions at p. 2). Neither the Amended Petition nor the Letter Agreement states that any of the Letter Agreement’s provisions are nonbinding. In fact the Amended Petition specifically states that the Letter Agreement is binding in its entirety. • G-6 states that certain essential terms in the Letter Agreement were either nonbinding or “not present” (Special Exceptions at p. 3). Neither the Letter Agreement nor the Amended Petition alleges this. Instead, Defendant’s claim relies on evidence not presented or nonexistent but in any case at best supports a finding of ambiguity in the Letter Agreement and a fact question on intent. PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 16 4828-7127-5033_5/(90018/002) 00016 • G-6 states that the provision in Paragraph 15 of the Letter Agreement that reimburses DCB $150,000 “effectively amounts to a limited damages provision” (Special Exceptions at p. 3). Neither the Amended Petition nor the Letter Agreement states that the expense reimbursement is in any way related to damages. In fact, it is not related to any breach or termination of the Letter Agreement: it is only tied to the passage of time. As shown in the Amended Petition, an earlier draft of the Letter Agreement included a liquidated damages provision that G-6 itself rejected. • G-6 states that, at the time G-6 repudiated the Letter Agreement, “numerous essential terms had yet to be negotiated and agreed upon” (Special Exceptions at p. 8). This allegation does not appear either in the Amended Petition or the Letter Agreement. Instead, G-6 actually introduces its own new factual allegation which cannot be a basis for a special exception. • G-6 states that the purchase price is indeterminable (P. 8). This claim is false, and has no support in the Letter Agreement or Amended Petition. The Letter Agreement provides the specific formula to determine purchase price and standards for its determination (e.g., GAAP). G-6’s allegations and inferences are not proper special exceptions. D. Special Exception No. 2 should be overruled because the Special Exception misstates the Amended Petition And the Letter Agreement. 33. G-6 argues that the Letter Agreement’s provisions regarding good faith do not support enforceability of the contract. In doing so, G-6 states that DCB alleged that the Letter Agreement is premised on an obligation to negotiate in good faith. However, this argument is based on a misreading of the Letter Agreement. Paragraph 24 provides that “the parties hereto execute this Letter to evidence their intention to proceed in good faith to carry out the transactions contemplated hereby substantially in the manner contemplated herein. (emphasis added).” The good faith obligation was an expressed mutual promise tied to performance, not a promise to negotiate. As a result, G-6’s authorities are inapplicable and the special exception should be overruled. 34. In any event, when the parties have contractually agreed to perform in good faith, the failure to perform in good faith is a breach of contract. See Northern Natural Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 606 (Tex. 1998) (“a failure to perform or enforce, in good faith, a PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 17 4828-7127-5033_5/(90018/002) 00017 specific duty or obligation under the contract, constitutes a breach of contract or makes unavailable, under the particular circumstances, a remedial right or power”). E. Special Exception No. 3 should be overruled because specific performance is an available remedy. 35. G-6 argues that the request for specific performance should be dismissed because the remedy is not an available remedy for the breach of a contract for a stock sale. This special exception fails because specific performance is an available remedy. Specific performance may be decreed where (i) the value of the stock is not easily ascertained, (ii) the stock is not to be obtained readily elsewhere, and (iii) there is some particular reasonable cause for the vendee requiring the stock contracted to be delivered. Amsler v. Cavitt, 210 S.W. 766 (Tex. Civ. App. – Austin 1919, writ ref’d); Health Systems International, Inc. v. Suki, 1988 Tex. App. LEXIS 1801, * 13 (Tex. App. – Houston [1st Dist.] 1988, no writ) (unpubl. op.). DCB’s Amended Petition has pleaded facts bringing its claims under exceptions (ii) and (iii) above. FSB stock is not traded on an open market. It cannot be readily obtained from any other source since it is one hundred percent was owned by G-6. And, money damages will not permit DCB to purchase FSB stock from another source since all of the stock is owned by G-6. Furthermore, the stock is unique due to how it fit in the strategic business plan of DCB. The Letter Agreement itself provides in the second paragraph that: We believe that Company and the Bank are an excellent strategic fit for us, and that together we can substantially grow our franchise. We anticipate continuing to use the name First State Bank at the Bank’s existing Mesquite location following consummation of the Acquisition. Our financial strength and strategic commitment to investing in this area will provide continuing developmental opportunities for both the Company’s shareholders and DCB well into the future. 36. G-6 also states that specific performance is unavailable due to the fact that G-6 paid the expense reimbursement of $150,000.00 to DCB. This argument fails for at least two PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 18 4828-7127-5033_5/(90018/002) 00018 reasons. First, the Letter Agreement clearly provides that payment to DCB is an expense reimbursement, not liquidated damages or any other damages. Expense reimbursement provisions in contracts are not considered liquidated damages. See Dresser-Rand Company v. Bolick, 2013 WL 3770950 (Tex. App. – Houston [14th] July 18, 2013, pet. abated); Sunbelt Services, Inc. v. Grove Temp. Services, Inc., 2006 WL 2130133 (Tex. App. – Dallas, August 1, 2006, no writ). Second, G-6’s characterization of the expense reimbursement as liquidated damages fails because damages for Defendant’s breach are ascertainable. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427 (Tex. 2005). And, significantly, an earlier draft of the Letter Agreement contained a liquidated damages provision, but that term was rejected by Defendant and removed from the document. IV. REQUEST FOR CONTINUANCE 37. Two months into this lawsuit, before G-6 has fully responded to DCB’s first discovery requests, before DCB has taken one deposition, before any hearings, and before the expiration of any pretrial deadlines, including that for pleading, G-6 attempts to dismiss this lawsuit in its entirety via the Special Exceptions. G-6 provided DCB only ten days’ notice of its hearing. Understandably, DCB requested that G-6 postpone the hearing on its Special Exceptions in order to provide DCB adequate time to respond to them. G-6 refused any extension, which left DCB with no choice but to file an Emergency Motion for Continuance, which is incorporated for reference herein. DCB seeks a continuance not to delay the case, but to ensure it has an adequate time to conduct necessary discovery and to fully respond to G-6’s potentially dispositive Special Exceptions. V. PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO PLAINTIFF’S ORIGINAL PETITION – Page 19 4828-7127-5033_5/(90018/002) 00019 CONCLUSION AND PRAYER 38. For the reasons stated above the Special Exceptions should be overruled in all respects. Plaintiff requests that Defendant’s Special Exceptions to Plaintiff’s Original Petition (or if the Amended Petition if so applied) be overruled in all respects, and seeks all such other and further relief at law or in equity to which it may be justly entitled. PLAINTIFF’S RESPONSE TO DEFENDANT’S SPECIAL EXCEPTIONS TO