Gray Reed & McGraw

Imagine how much better off you would be if the contract you want to enforce had been reduced to writing. See West v. Quintanilla for what happens when it wasn’t.

The agreements

West and Quintanilla had three agreements:

  • The 2014 Commodity Trading Agreement (written and undisputed)
  • The 2015 Purchase Agreement (written and undisputed)
  • The March 15 Sale (unwritten and disputed … Why are we not surprised?)

The facts

In the first agreement West would trade commodities for himself and Quintanilla; he signed a $5 million promissory note and pledged his personal assets. In the second, which included an “entire agreement” clause, West sold Quintanilla assets for $4.5 million, who paid West’s debts and paid $1 million to West to cover projected taxes from the event. By the time of the third, West had lost $14 million under the first agreement (half his, half Quintanilla’s) and he owed the note. The parties agreed that Quantanilla could take the entire tax loss on the $14 million trading losses, and West sold assets to Quintanilla for $4.3 million less than their value.

Quintanilla then made demand upon West for full recovery of all amounts due under the note and asserted liens against West’s mineral interests in McMullen County. West then sued for slander of title for Quintanilla’s filing fraudulent liens, alleging that the third agreement satisfied his obligations under the earlier agreements.

The parol evidence rule

The rule precludes enforcement of any prior or contemporaneous agreement that addresses the same subject matter and is inconsistent with a written contract. Note: This is not the same thing as the contract construction rule, which prohibits, in an unambiguous written contract, consideration of extrinsic evidence to modify or add to the contract’s terms. The two rules are often confused but are different.

The parol evidence rule does not preclude enforcement of an agreement that is collateral to (supported by separate consideration and that the parties might naturally make separately under the circumstances) and not inconsistent with another agreement.

The court concluded that the March 2015 Sale was related and correlated with and culminated in the 2015 Purchase Agreement, but that “related” and “correlated” agreements can be collateral. Also, the two agreements did not address the same subject matter. The March 2015 Sale was a collateral oral agreement that was consistent with the 2015 Purchase Agreement even if it was construed to provide additional consideration for the sale of West’s assets. The parol evidence was admissible and did not bar West’s enforcement of the March 2015 Sale.

The parol evidence rule would prohibit extrinsic evidence to show that a written instrument was executed for a consideration different from that expressed in the instrument where the consideration is not a mere recital but is contractual in nature. Quantanilla’s problem: The parol evidence rule applies to contractual or general writings evidencing the creation, modification, termination or securing of particular right or obligation. The rule does not apply to mere statements or recitals of past facts.

The Texas Citizens Participation Act – RIP 

This statute underwent a major overhaul by the 2019 Legislature and this case is one reason why. These parties traded punches all the way to the Texas Supreme Court just to decide whether West’s claims should be dismissed under the TCPA. The case didn’t determine whose testimony should be believed but merely decided whether the testimony was admissible.

Now, Joe Avery Blues featuring sons and grandsons of N O greats.

A fanciful quiz

Would these contracts be enforced even if they were written:

  • Manny Machado’s promise to never again step on the first baseman’s ankle.
  • Cersei’s promise to send troops North to defend Winterfell from the White Walkers.
  • A celebrity’s promise not to fly his or her private jet to a global warming protest.

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