







Appellants/Cross-Appellees’ Motion for Rehearing Granted in Part and
Overruled in Part; Appellee/Cross-Appellant’s Motion for 
















Appellants/Cross-Appellees’ Motion for Rehearing Granted in Part and
Overruled in Part; Appellee/Cross-Appellant’s Motion
for Rehearing Overruled; Opinion of August 29, 2002, Withdrawn; Affirmed as
Modified in Part, Reversed and Remanded in Part, and Majority and Dissenting
Opinions on Motions for Rehearing filed January 16, 2003.
 
 
 
In The
 
Fourteenth Court of Appeals
____________
 
NO. 14-99-00075-CV
____________
 
PATRICK A. WALDEN, CHARLES
ACKERMAN, JOHN AVERETT,
SAM BAUGHMAN, ROBERT BUTLER, RALPH CANNADY,
MIKE CLENDENNEN, MILTON COWDEN, WILLIAM
DELONG,
LESLIE FLYNNE, LINDA HEWLETT, JAMES HURST,
DONALD IMRIE,
GEOFFREY JOHNSTON, LARRY KERSHNER, JERRY
KILLINGSWORTH,
MYRA MAYER, DON RICE, LINNEA ROSE, JAMES
SHIELD, and 
JERE SHOPF, Appellants and Cross-Appellees
 
V.
 
AFFILIATED COMPUTER SERVICES,
INC. f/k/a
AFFILIATED COMPUTER SYSTEMS, INC., Appellee and Cross-Appellant
 
 
On Appeal from the 127th District Court
Harris County, Texas
Trial Court Cause No. 96-25829
 
 
M A J O R I
T Y   O P I N I O N   O N
M O T I O N
S   F O R   R E H E A R I N G
            We
grant in part appellants/cross-appellees’ motion for
rehearing and overrule appellee/cross-appellant’s
motion for rehearing.  We withdraw our
opinion and judgment of August 29,
 2002, and substitute the following in their place.

 class=Section2>

            This
case involves a dispute between a data-processing company and twenty-one
individuals holding stock options in that company.  When the option holders attempted to exercise
those options, the company refused to issue the stock.  The option holders sued for breach of
contract, fraud, and negligent misrepresentation.  The trial court entered judgment for the
option holders, awarding them an aggregate amount of $14,138,588 plus interest
and attorneys’ fees.  Both parties
appealed.  We conclude the trial court
erred in holding as a matter of law that an amendment to the stock option plan,
signed by twenty of the twenty-one option holders, was void for lack of
consideration.  In addition, one option
holder’s options expired as a matter of law before they were exercised.  We reverse the trial court’s judgment in
favor of the option holders who signed the amendment and remand for further
proceedings consistent with this opinion. 
As for the remaining option holder, we affirm the court’s judgment
regarding liability, but we reverse and remand for a recalculation of his
damages.
                                             Factual and Procedural Background
            Affiliated
Computer Services, Inc., formerly known as Affiliated Computer Systems, Inc.
(“ACS”), was formed in July 1988 through the efforts of two jointly managed
savings-and-loan associations, Gibraltar Savings Association (“Old Gibraltar”)
and First Texas Savings Association (“First Texas”), together with a group of
investors led by Darwin Deason.   The savings associations provided
data-processing facilities, computer equipment, software, and personnel to ACS,
while the Deason group provided cash.  In exchange, the savings associations and the
Deason group received the bulk of ACS’s
stock.  ACS ultimately entered into a
ten-year data-processing agreement with Old Gibraltar and First Texas.
            ACS
also agreed to grant stock options to senior managers and key employees at Old
Gibraltar and First Texas.  Accordingly,
ACS adopted a Non-Qualified Stock Option Plan (the “Original Plan”), and the
ACS board of directors appointed a special committee to prepare a list of Old
Gibraltar and First Texas officers and employees to receive stock options.  All twenty-one appellants (collectively, the
“option holders”) were included on this list. 
In November 1988, ACS delivered to each option holder a Non-Qualified
Stock Option Agreement (the “Original Agreement”), along with a copy of the
Original Plan.  Each option holder
executed the Original Agreement and returned it to ACS.
            On December 27, 1988, Old
Gibraltar and First Texas were declared insolvent and the Federal Savings and
Loan Insurance Corporation (“FSLIC”) was appointed as receiver.  The same day, FSLIC organized a new bank,
First Texas Bank, F.S.B., which later became known as First Gibraltar Bank,
F.S.B. (“First Gibraltar”).  Many of the
assets formerly owned by Old Gibraltar and First Texas were transferred to
First Gibraltar.
            On December 28, 1988, ACS’s board of directors amended ACS’s
stock option plan, retroactive to November 1988.  By letters dated January 20, 1989, ACS sent each option
holder an amendment to the Original Agreement (the “Amendment”), attaching a
copy of the Amended and Restated Non-Qualified Stock Option Plan (the “Amended
Plan”).[1]  All the option holders except one, Robert
Butler, signed the Amendment.
            First
Gibraltar later sued ACS, seeking to
repudiate the data-processing agreement. 
FSLIC intervened, and the lawsuit eventually settled.  As part of the settlement, on August 30,
1991, the Office of Thrift Supervision (“OTS”) issued a Cease and Desist Order
relating to the issuance of ACS stock to former employees of Old Gibraltar and
First Texas.  Among other things, this
order provided: “[ACS] shall henceforth not issue any stock or make any
payments to . . . former employees of [Old] Gibraltar/First Texas who received
such options, rights, contracts or interests from or at the direction of [Old]
Gibraltar/First Texas and who might seek to exercise any such options, rights,
contracts or other interests, unless required to do so by a court order.”  The Cease and Desist Order remained in effect
until it was terminated by an OTS order signed September 26, 1997.
            In
1993, Patrick Walden attempted to exercise his ACS options.  ACS rejected this attempt.  On May 22, 1996, Walden filed suit against ACS in the 127th District
Court.  Walden alleged breach of his
amended agreement with ACS (the “Amended Agreement”), fraud, and negligent
misrepresentation.  In the alternative,
Walden sought a declaration that the Amendment failed for lack of consideration
or fraud and alleged breach of the Original Agreement.  Both parties moved for summary judgment.  On November 15, 1996, the trial court denied both
parties’ motions, except it granted Walden’s motion for summary judgment on ACS’s affirmative defense that Walden’s claims were barred
for alleged failure to exercise his options in accordance with the Amended
Agreement.
            While
Walden’s lawsuit was proceeding, a group of twelve other option holders filed
suit against ACS in the 113th District Court, alleging fraud, negligent
misrepresentation, and breach of the Original Agreements.[2]  The lawsuits were eventually consolidated,
and additional option holders were added as plaintiffs.[3]  The option holders’ lawsuit ultimately consisted
of the following claims against ACS:
•           fraud;
•           negligent misrepresentation;[4]
•           breach of the Original Agreements; and
•           breach of
the Amended Agreements.[5]
The option holders (except Robert Butler) also sought
a declaratory judgment that the Amendments failed for want of consideration or,
in the alternative, did not release the option holders’ status as fully vested
in their options.
            The
parties each filed motions for summary judgment.  On September 22, 1998, the trial court signed a Partial
Summary Judgment Order that had the following effect:
(1)       it declared all option holders became 100% vested in their
options to purchase ACS stock on December 26, 1988, subject to the affirmative
defenses of mutual mistake, frustration of purpose, failure of consideration,
and illegality, which remained to be decided;
(2)       it set aside and rescinded the Amendments for lack of
consideration;
(3)       it ordered that the option holders take nothing on their
negligent misrepresentation claims; and
(4)       it stated the
option holders’ fraud claims were rendered moot by virtue of the court’s ruling
that the Amendments were not supported by consideration.
The order further stated all other issues raised in
the summary judgment motions had been taken under advisement.
            The
same day, the trial court conducted voir dire of the
jury panel.  The court also continued to
hear argument and allowed the parties to supplement their summary judgment
evidence on other pending issues.  On its
docket sheet, the court described this proceeding as a “hearing to narrow
issues per Rule 166.”  The next morning, September 23, 1998, the trial
court faxed each party a letter announcing its rulings on several issues.  The parties then entered into a stipulation
regarding the amount of attorneys’ fees. 
Believing no fact issues remained to be decided, the trial court excused
the jury panel.
            On November 5, 1998, the trial
court again met with the attorneys “to conclude all remaining legal
issues.”  The trial court signed two
orders reflecting its September 23 rulings. 
First, the court signed a “Partial Summary Judgment Order Ruling on
Defendant’s Motion for Summary Judgment,” in which the trial court denied ACS’s motion for summary judgment on the following grounds:
(1) the options were void ab initio;
(2) the Original Plan as construed by the trial court was unenforceable as
illegal or against public policy; and (3) the options expired or were untimely
exercised.  Second, the court signed an
“Order on Rule 166 and Rule 166a Hearing,” in which the court:
(1)       granted the option holders’ no-evidence motion for summary
judgment and held there were no contested material facts supporting ACS’s defenses of failure of consideration, frustration of
purpose, and waiver;
(2)       held there was no defense of mutual mistake as a matter of
law;
(3)       denied all summary judgment motions not otherwise ruled upon
in this or any prior orders;
(4)       ruled damages were to be calculated based on the value of ACS
stock as of the time of trial; and
(5)       held no
contested material issues remained for ACS to present evidence in opposition to
the option holders’ claims for breach of the option agreements and the only
issue that remained for a jury to decide was the amount of the option holders’
attorneys’ fees.[6]
            At
the November 5 conference, ACS’s counsel indicated
ACS believed a jury question remained as to the proper measure of damages.  Accordingly, the trial court continued the
pretrial conference and held a hearing on November 30, 1998. 
At this hearing, the option holders offered numerous exhibits and the
testimony of Marc Schwartz, a certified public accountant, on the issue of the
option holders’ damages.  The trial court
stated it was accepting this evidence only for the purpose of determining whether
any fact issues remained and how the court should decide legal issues “and not
for the purpose of fact finding.”  The
parties subsequently filed a stipulation regarding the fair market value of one
share of ACS common stock on various dates.
            On December 16, 1998, the trial
court signed a final judgment.  The
judgment awarded damages to each option holder, calculated as “the difference
between the value of the stock at the time of trial, September 22, 1998, less the
exercise price of the options, times the number of shares.”  The judgment further awarded each option
holder attorneys’ fees, prejudgment interest from September 23, 1998, at ten percent per year,
and post-judgment interest.
            Both
parties filed notices of appeal.  ACS
contends the trial court erred by (1) granting the option holders’ motion for
summary judgment and denying ACS’s motion, (2)
disposing of numerous disputed issues, claims, and defenses in a pretrial
conference under authority of Texas Rule of Civil Procedure 166, (3) entering a
final judgment in favor of the option holders contrary to the evidence and the
law, (4) measuring the option holders’ damages by using the date of trial
rather than the date of breach, and (5) improperly calculating prejudgment
interest.  The option holders argue (1)
the trial court improperly calculated their damages by using the date of trial
to determine the value of the ACS stock and (2) the trial court erred in
holding that ACS’s obligations under the option
agreements were subject to the Cease and Desist Order.
                                                     Validity of the Amendments
            We
begin by addressing ACS’s claim that the trial court
erred by granting a partial summary judgment on the grounds that the Amendments
should be rescinded and voided for lack of consideration.[7]  ACS contends (1) no new consideration was
necessary for the Amendments because the Original Agreements expressly gave ACS
the right to modify the Original Plan and (2) even if consideration was
required, ACS raised issues of fact as to whether the Amendments were supported
by consideration.  As the summary judgment
movants, the option holders have the burden to show
there is no genuine issue of material fact and they are entitled to judgment as
a matter of law.  See Nixon v. Mr. Prop. Mgmt.
Co., 690 S.W.2d 546, 548–49 (Tex. 1985).
            With
one exception, each of the option holders executed the Amendment.  This Amendment purported to amend the
Original Agreement so all references to the “Plan” would refer to the Amended
Plan, rather than the Original Plan.  The
option holders argued, and the trial court agreed, the Amendments were not
supported by consideration and, therefore, were void as a matter of law.
            ACS
first contends the trial court erred because ACS was entitled to amend the plan
without additional consideration.  ACS
claims the Original Agreement, which was undeniably supported by consideration,
gave ACS a contractual right to modify the Original Plan.  Paragraph 7 of the Original Plan provides:
            Amendments.  The Board may, from time to time, alter,
amend, suspend, or discontinue the Plan. 
However, no such action of the Board shall alter any outstanding Option
Agreement to the detriment of the Option holder without his consent.
According to ACS, no additional consideration was
needed to exercise this right, and thus the Amendments cannot be void for lack
of consideration.  We disagree.
            Texas courts
have consistently adhered to the rule that a modification to a contract must
itself be supported by consideration to be valid.  See
Hathaway v. General Mills, Inc., 711
S.W.2d 227, 228 (Tex. 1986); American Nat. Ins. Co. v. Teague, 237
S.W. 248, 250 (Tex. Comm’n App. 1922, holding
approved); Hill v. Heritage Res., Inc.,
964 S.W.2d 89, 113 (Tex. App.—El Paso 1997, pet. denied); Hovas v. O’Brien, 654 S.W.2d 801, 803 (Tex. App.—Houston [14th Dist.]
1983, writ ref’d n.r.e.).  The lone case cited by ACS, Wiman v. Tomaszewicz,
877 S.W.2d 1 (Tex. App.—Dallas 1994, no writ), does not support ACS’s position.  In Wiman, the court
addressed the question of whether a material modification to a note acts as a
bar to a claim against a person who had guaranteed the note.  The court held this affirmative defense did
not apply when the guaranty agreement expressly permitted the note to be
modified.  Id. at 7.  Nothing in Wiman suggests the language in the guaranty agreement permitted the
underlying note to be modified without additional consideration.  We conclude consideration was necessary to
make the Amendments enforceable.
            We
next consider whether the trial court erred in concluding as a matter of law
the Amendments were void for lack of consideration.  Consideration may consist of a benefit that
accrues to one party or, alternatively, a detriment incurred by the other
party.  See Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991); Lassiter v. Boxwell
Bros., 362 S.W.2d 884, 886 (Tex. Civ.
App.—Amarillo 1962, no writ).  ACS
contends the Amended Plan provided a benefit to the option holders in four
ways:
(1)       it expanded the option holders’ ability to become vested in
their options;
(2)       it permitted option holders who left their employment to
become vested sooner and to exercise their options sooner;
(3)       it removed the annual escalation in option price; and
(4)       it decreased
the likelihood that the plan would come under attack from federal regulators.
            The
option holders contend the first purported benefit is illusory because the
option holders were each fully vested in their options before the Amendments
were executed on January
 20, 1989.  The trial
court held as a matter of law that, under the Original Plan, all issued options,
whether or not earned, became fully vested in December 1988.  Under this construction of the Original Plan,
any change to the option holders’ ability to vest in their options would not
benefit the option holders.  However, ACS
challenges the trial court’s construction of the vesting provision.  To determine whether a change in the option
holders’ vesting rights may constitute valid consideration for the Amendments,
we must look to the language of the Original Plan.
            Paragraph
2(f) of the Original Plan, titled “Vesting of Options Upon Reorganization,”
states:
[I]f [Old]
Gibraltar undergoes a Change of Control, then all of the Option holder’s
outstanding Options, whether or not earned, shall become vested, effective the
day immediately prior to such . . . Change of Control.  For purposes of the preceding sentence, a
“Change of Control” shall have occurred if [Old] Gibraltar or its parent
corporation is merged, consolidated, or reorganized into or with another corporation
or other person or if a majority of the outstanding capital stock or all or
substantially all of the assets of [Old] Gibraltar are sold to any other person
. . . .
ACS claims there was no “Change of Control” because
(1) Old Gibraltar’s assets were not “sold” to anyone and (2) neither Old
Gibraltar nor its parent company were “consolidated” or “reorganized.”
            ACS
first contends there was no “Change of Control” because there was no sale of
“all or substantially all of the assets of [Old] Gibraltar” to
another person.  The same day FSLIC was
appointed as receiver for Old Gibraltar, FSLIC (in its capacity as receiver)
executed an Acquisition Agreement with First Gibraltar.  Under the Acquisition Agreement, with certain
specified exceptions, First Gibraltar agreed to purchase “all of [FSLIC]’s
right, title, and interest in and to all of [Old Gibraltar]’s assets that
[FSLIC] owns or holds and any of [Old Gibraltar]’s assets hereafter acquired by
[FSLIC].”  The following day, FSLIC (as 

 class=Section3>

receiver for Old Gibraltar) executed a Receiver’s
Agreement with FSLIC (in its corporate capacity), whereby Old Gibraltar’s
remaining assets were either purchased by the corporate entity or liquidated,
with the proceeds going to FSLIC, the corporation.
            Despite
these agreements, ACS argues that no “Change of Control” occurred because at
the time these assets were sold, they were no longer “the assets of [Old] Gibraltar.”  According to ACS, upon receivership, FSLIC
succeeded to Old Gibraltar’s assets by operation of law; therefore, the
Acquisition Agreement and the Receiver’s Agreement both involved transfers of receivership assets, not “the assets of
[Old] Gibraltar” as required under the Original
Plan.  However, a plain reading of
paragraph 2(f) does not support ACS’s position.  Nothing in the language of this provision
requires the assets must still be in the possession of Old Gibraltar at the
precise moment they are sold.  Old Gibraltar’s assets
were undeniably sold to a third party, and the fact they might have been
characterized as “former assets” at the moment of the sale is irrelevant.
            ACS
next argues Old Gibraltar’s assets were not “sold” because neither First
Gibraltar nor FSLIC paid anything for them. 
The Acquisition Agreement, however, expressly provided that First
Gibraltar would assume Old Gibraltar’s liabilities and that those liabilities
exceeded the value of the assets being purchased.  A sale, in its broadest sense, includes any
transfer of property from one person to another for a valuable consideration.  McKinney
v. City of Abilene, 250 S.W.2d 924, 925 (Tex. Civ.
App.—Eastland 1952, writ ref’d n.r.e.).  The assumption of liabilities is valid
consideration for a sale of assets.  See Shaw
v. Warren, 68 S.W.2d 588, 590 (Tex. Civ.
App.—Eastland 1933, no writ).  We
conclude substantially all of Old Gibraltar’s assets
were sold to First Gibraltar and FSLIC.
            Finally,
ACS claims other courts construing similar change-of-control provisions have
held a transfer of assets following insolvency and receivership of a bank does
not constitute a “sale” as a matter of law. 
In each of these cases, however, the court’s conclusion was based on the
specific language in the change-of-control provision.  For example, in McCarron v. FDIC, 111 F.3d 1089 (3d Cir. 1997), the agreement specifically
required the approval of the bank’s board of directors before a “change of
control” could trigger an executive’s right to severance pay.  Because it would be impossible to obtain such
approval after the bank was closed by regulators, the court concluded that
involuntary transfers were not contemplated by the agreement.  Id. at
1095.  In Hibyan v. FDIC, 812 F. Supp. 271 (D. Me. 1993),[8] the court
held the change-of-control provision clearly excluded involuntary transfers
because it required affirmative action on the part of the bank to sell,
exchange or transfer its assets.  Id. at 274.[9]  In this case, the definition of “Change of
Control” focuses on the act of selling the assets, not on who sells them.
            Accordingly,
we conclude a “Change of Control” was triggered under the Original Plan because
“substantially all of the assets of [Old] Gibraltar” were
“sold.”  We express no opinion as to
whether Old Gibraltar was “consolidated” or “reorganized” with another entity.
            ACS
advances several reasons why it believes the trial court’s construction of the
Original Plan’s vesting provision is unreasonable.  ACS argues allowing the options to vest upon
the forced sale of Old Gibraltar’s assets in receivership (1) would be contrary
to the provision’s intended purpose of encouraging employees to promote and
maintain the relationship with ACS, (2) would be inconsistent with the parties’
belief at the time the options were granted that Old Gibraltar would not be
placed into receivership, and (3) would result in an illegal contract.  ACS’s first two
arguments amount to nothing more than an attempt to introduce parol evidence of the “true” intent behind the vesting
provision.  Because we conclude that the
language in this provision is unambiguous, this parol
evidence is inadmissible.  See National
Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex. 1995) (per
curiam).
            ACS’s third argument is that if the options vested
immediately upon the failure of Old Gibraltar, the Original Plan would (1)
violate federal regulations against excessive compensation, (2) constitute an
“unsafe and unsound practice” in the operation of a savings-and-loan
association, and (3) violate public policy. 
We disagree.  
            Whether
a contract is legally enforceable is a question of law.  See
McCreary v. Bay Area Bank & Trust,
68 S.W.3d 727, 733 (Tex. App.—Houston [14th
Dist.] 2001, pet. dism’d).  ACS contends, based on the trial court’s
construction of the vesting provision, the Original Plan constitutes an “unsafe
and unsound” practice in violation of Title IV of the National Housing Act, 12
U.S.C. §§ 1724–1730i (repealed 1989).[10]  ACS also alleges the Original Plan, as
construed by the trial court, violates a federal regulation against excessive
compensation.  See 12 C.F.R. § 563.161(b) (2001).[11]  That regulation provides as follows:
Compensation
to officers, directors, and employees of each savings association and its
service corporations shall not be in excess of that which is reasonable and
commensurate with their duties and responsibilities.
Id. 
The crux of ACS’s argument is that, by
allowing the options to vest immediately after Old Gibraltar was placed into
receivership, the Original Plan provided the option holders with excessive
compensation resulting from the failure of Old Gibraltar.  Here, however, the stock options came not
from Old Gibraltar, but from ACS.  Under
the current federal statute governing the operation of savings associations,
courts have held an institution’s practices are not unsafe and unsound unless
they “pose an abnormal risk to the financial stability of the banking
institution.”  In re Seidman, 37 F.3d 911, 928 (3d Cir.
1994).  This is not a case where a
savings association’s employees received compensation directly from their
employer that was triggered solely by the failure of the savings association.  ACS issued the options and decided they would
immediately vest upon a sale of Old Gibraltar’s assets, whether voluntary or
involuntary, and without regard to when such a sale might occur.  Nothing about this vesting provision posed a
risk to Old Gibraltar’s financial stability. 
The fact that the sale occurred, apparently unexpectedly, within two
months after the options were issued does not alter this conclusion.
            ACS
also claims the trial court’s construction of the Original Plan violates public
policy by creating an incentive for the option holders to make Old Gibraltar
fail, thereby becoming vested in their options. 
Under the Original Plan, even if the option holders were fully vested,
they could not exercise their options until five years after the options were
issued.  Presumably, the value of those
options depended on the success of ACS. 
At the time the options were issued, ACS’s
only customers were Old Gibraltar and First Texas.  It defies logic to suggest the option holders
would have had an incentive to make Old Gibraltar fail just so their options
would vest, at the risk of making those options (which could not be exercised
for five years) considerably less valuable.
            We
conclude, under the unambiguous language of the Original Plan, a “Change of
Control” occurred no later than December
 28, 1988, the date of the Receiver’s Agreement.  Thus, under the Original Plan, all options
issued to the option holders became vested no later than December 27, 1988.  Having reached this conclusion, we agree with
the option holders that any alleged expansion of their ability to become vested
in their options would provide no additional benefit and cannot be
consideration for the Amendments.
            ACS
next argues the Amended Plan provided a benefit to the option holders by
allowing them to exercise their options sooner than they could have under the
Original Plan.  Under the Original Plan,
the option holders could not exercise any options, whether or not vested, until
five years after the options were granted. 
The Amended Plan added a provision whereby, in certain circumstances,
the option holders could exercise some of their options sooner.[12]  The option holders contend that this
purported benefit is illusory because it is offset by (1) the loss of vested
rights in some of their options and (2) a limit on the period of time during
which the options could be exercised.
            We
conclude the Amended Plan provided the option holders some benefit by giving
them an opportunity to exercise some of their options without having to wait
until five years after the options were issued. 
The option holders’ own expert testified the ability to obtain ACS stock
before five years had passed might be a benefit to someone leaving his or her
employment.  We recognize the value of
this benefit is diminished by (1) the fact that an option holder could not
exercise his or her options early without losing vested rights (provided under
the Original Plan) to some of those options and (2) the sixty-day limitation on
exercising those options.  Nevertheless,
we cannot say the option holders have conclusively established, as a matter of
law, ACS provided no consideration to
support the Amendments.  Accordingly,
summary judgment was not appropriate.  See Roark,
813 S.W.2d at 496 (reversing a summary judgment based on lack of consideration
because the movant failed to prove conclusively that
no consideration supported the alleged contract).
            ACS
argues it also gave consideration for the Amendments by eliminating the annual
escalation in option price in the Amended Plan. 
Under the Original Plan, the price of the options would increase by
seven percent each year.  However, this
provision was changed by an amendment to the Original Plan that was adopted and
incorporated into the Original Plan when the Original Agreements were
executed.  Thus, the elimination of the
yearly seven-percent increase in the option price was already reflected in the
Original Plan.  A promise to fulfill a
pre-existing obligation cannot serve as new consideration.  See
Barnes v. Forest Hills Inv., Inc., 11 F. Supp. 2d 699, 707 (E.D.
Tex. 1998); Restatement (Second) of
Contracts § 73 (1981).
            Finally,
ACS claims the Amended Plan reduced the likelihood that the granting of options
to employees of Old Gibraltar and First Texas would be construed as
unlawful.  As we note above, the vesting
provision of the Original Plan, as construed by the trial court, does not run
afoul of any laws or regulations. 
Accordingly, any alleged reduction of risk does not constitute
consideration.
            In
summary, we conclude the option holders failed to establish as a matter of law
that the Amendments were void for lack of consideration.  Specifically, the option holders did not
conclusively show the change in the procedure for exercising options upon
termination of employment conferred no benefit on the option holders.  The trial court’s judgment in favor of the
option holders was based on the option holders’ claim that the Original
Agreements governed the parties’ relationship. 
We therefore reverse the judgment with respect to all option holders
except Robert Butler and remand for further proceedings.
                                                The Trial Court’s Legal Rulings
            Next,
ACS contends the trial court erred in disposing of various claims and defenses
as a matter of law.  ACS asserts it
raised fact issues precluding summary judgment on its affirmative defenses of
failure of consideration, frustration of purpose, and waiver.  ACS also complains the trial court improperly
disposed of other affirmative defenses and found breach as a matter of law at a
pretrial conference under the purported authority of Texas Rule of Civil
Procedure 166.  Finally, ACS claims it
established as a matter of law that the option holders’ options expired while
they were legally unexercisable.
                                                     Summary
Judgment Rulings
            The
option holders moved for summary judgment on the following defenses: (1)
statute of limitations, (2) failure of consideration, (3) waiver, (4)
frustration of purpose, and (5) legal impossibility and/or superseding federal
regulatory order.  In its partial summary
judgment order, the trial court concluded, based on its interpretation of the
unambiguous language in the “Change of Control” provision of the Original Plan,
the option holders became fully vested in their options, subject to the
affirmative defenses of (1) mutual mistake, (2) frustration of purpose, (3)
failure of consideration, and (4) illegality. 
The trial court’s order further stated these four affirmative defenses
remained to be decided.  The court’s
order concluded with the statement that “[a]ll other
issues raised in the Parties’ summary judgment motions have been taken under
advisement.”
            On November 5, 1998, the trial
court issued both a “Partial Summary Judgment Order Ruling on Defendant’s
Motion for Summary Judgment” and an “Order on Rule 166 and Rule 166a
Hearing.”  These two orders had the
following combined effect regarding ACS’s affirmative
defenses:
(1)       the court denied ACS’s motion for
summary judgment on the grounds that the options were (a) void ab initio and
(b) unenforceable for being illegal or against public policy, finding ACS’s motions to be without merit;
(2)       the court denied ACS’s motion for
summary judgment on the grounds that the options expired or were untimely
exercised, based on the court’s finding that, as a matter of law, the options
did not expire until October 3, 1997;
(3)       the court granted the option holders’ motion for summary
judgment on ACS’s defenses of complete and partial
failure of consideration, finding no contested material facts to support
submission of these defenses to the jury;
(4)       the court granted the option holders’ motion for summary
judgment on ACS’s defense of frustration of purpose,
ruling that (a) no such legal defense exists as a matter of law and (b) even if
it were to be adopted in Texas, it is not available to ACS
as a matter of law;
(5)       the court granted the option holders’ motion for summary
judgment on the defense of waiver, finding no contested material facts to
support submission of the defense to the jury; and
(6)       the court
found no defense of mutual mistake as a matter of law, based on the court’s
previous finding that the vesting provision in the Original Plan was
unambiguous.
            ACS
begins by attacking the trial court’s order granting summary judgment to the
option holders on ACS’s defenses of failure of
consideration, frustration of purpose, and waiver.  The option holders moved for summary judgment
on the ground there was no evidence to support these defenses.  See
Tex. R. Civ.
P. 166a(i). 
In reviewing a no-evidence summary judgment, we look at the evidence in
the light most favorable to the nonmovant and
disregard all evidence and inferences to the contrary.  Lampasas
v. Spring Ctr., Inc., 988 S.W.2d 428, 432 (Tex. App.—Houston [14th Dist.]
1999, no pet.).  A no-evidence summary
judgment is improperly granted if the nonmovant
counters with more than a scintilla of probative evidence to raise a genuine
issue of material fact.  Id.  
            ACS
first argues the trial court erred in granting summary judgment on ACS’s affirmative defense of failure of consideration.  Generally, failure of consideration occurs
when, because of some supervening cause after an agreement is reached, the
promised performance fails.  Stewart v. United States Leasing Corp.,
702 S.W.2d 288, 290 (Tex. App.—Houston [1st Dist.] 1985, no writ).  A complete failure of consideration
constitutes a defense to an action for breach of contract.  Gensco, Inc. v. Transformaciones Metalurgicias Especiales, S.A., 666 S.W.2d 549, 553 (Tex.
App.—Houston [14th Dist.] 1984, writ dism’d).  Here, ACS contends the consideration for both
the Original Agreements and the Amended Agreements failed because the
data-processing agreement between ACS and Old Gibraltar/First Texas was
repudiated by FSLIC.  In support of its
claim that the data-processing agreement constituted consideration for its
agreements with the option holders, ACS relies on a provision in the Original
Plan (which also appears in the Amended Plan) whereby, “[i]n
further consideration” for the data-processing agreement, Old Gibraltar’s board
of directors was given the right to designate a list of individuals to receive
options.[13]  Even assuming the data-processing agreement
constitutes consideration for the right given to Old Gibraltar’s board to
designate option recipients, it does not follow that the data-processing
agreement was also consideration for the individual agreements between ACS and
the option holders.  ACS failed to
present more than a scintilla of evidence to support its failure-of-consideration
defense.  Accordingly, the trial court
did not err in granting summary judgment on this affirmative defense.
            ACS
next claims the trial court erred in granting summary judgment on ACS’s frustration-of-purpose defense.  However, ACS fails to cite to a single Texas case
applying frustration of purpose as an affirmative defense to a claim for breach
of contract.  Nor does ACS present any
argument or authorities explaining why this defense should be adopted.  The trial court properly granted summary
judgment on this purported defense.
            Next,
ACS asserts it raised fact issues precluding summary judgment on the defense of
waiver.  Waiver is defined as an
intentional relinquishment of a known right or intentional conduct inconsistent
with claiming that right.  United States Fid. & Guar. Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353, 357 (Tex.
1971).  Waiver can be established either
by a party’s express renunciation of a known right or by silence or inaction
for so long a period as to show an intention to yield the known right.  Tenneco
Inc. v. Enterprise Prods. Co., 925 S.W.2d 640, 643 (Tex.
1996).  ACS contends the summary judgment
evidence shows that many of the option holders were aware that the Amendment
would eliminate their vested rights and renounced those rights by signing the
Amendment.  ACS first points to
admissions from nine of the option holders that they received and had an
opportunity to review the Amended Plan before they signed the Amendment.  We cannot say these admissions constitute
more than a scintilla of evidence that any of these option holders (1) knew all
their options had already vested and (2) signed the Amendment with the intent
of relinquishing their vested rights.
            ACS
also cites deposition testimony from two option holders, James Shield and Linnea Rose.  Rose testified
she recognized the Amendment would alter the “Change of Control” provision in
the Original Plan, but she did not understand what effect this change would
have on her own options.  We find this
evidence insufficient to raise a fact issue with respect to ACS’s
waiver defense.  Shield, however,
testified that at the time he signed the Amendment, he believed his options may
have already been vested and the Amendment might change that.  We conclude ACS has provided more than a
scintilla of summary judgment evidence to support its claim that by signing the
Amendment, Shield intended to relinquish known rights.  Accordingly, with respect to ACS’s affirmative defense of waiver, we reverse only that
portion of the summary judgment in favor of James Shield.
            ACS
also argues that by insisting on performance, the option holders waived any
prior breaches or repudiations of the Original Agreement.  Although this court has stated a party to a
contract may effectively waive a breach by the other party by continuing to
insist on performance, waiver in such cases is found only when the previously
breaching party subsequently performs.  See, e.g., Delgado v. Methodist Hosp., 936 S.W.2d 479, 485 (Tex. App.—Houston
[14th Dist.] 1996, no writ) (holding that a patient who alleged a hospital
breached an agreement by denying her a private room waived her contract claim
by insisting on and accepting a private room). 
Here, ACS refused to issue stock in response to the option holders’ attempt
to exercise their options in September 1998. 
Thus, as a matter of law, the option holders did not waive their
breach-of-contract claims.  See Consolidated
Eng’g Co. v. Southern Steel Co., 699 S.W.2d 188,
191 (Tex. 1985)
(stating that a jury finding that the non-breaching party continued to insist
on performance after the breach occurred does not establish waiver).
            In
summary, we conclude ACS raised an issue of fact as to whether James Shield
intentionally relinquished his rights under the Original Agreement by signing
the Amendment.  Thus, we reverse the
summary judgment granted in favor of Shield on ACS’s
affirmative defense of waiver.  We find
no error in the trial court’s other summary judgment rulings challenged by ACS.
                                                     Pretrial
Conference Rulings
            Next,
ACS complains the trial court exceeded its authority under Rule 166 by
disposing of disputed issues in a pretrial conference.  The purpose of Rule 166 is “to assist in the
disposition of the case without undue expense or burden to the parties.”  Tex.
R. Civ. P. 166.  Before 1990, Rule 166 did not expressly
authorize the trial court to determine the merits of an issue, absent either
admissions by a party or an agreement of counsel.  See,
e.g., Mason v. Tobin, 408 S.W.2d
243, 245 (Tex. Civ. App.—Houston 1966, no writ).  However, a 1990 amendment, among other
things, added subsection (g), expressly allowing the trial court to use the
pretrial conference to consider “[t]he identification of legal matters to be
ruled on or decided by the court.”  Tex. R. Civ. P. 166;
see also id. (“The court shall make an order . . . which limits the issues
for trial to those not disposed of by admissions, agreements of counsel, or rulings of the court . . . .”)
(emphasis added).  Of course, the trial
court’s authority in a pretrial conference is limited to deciding legal, not
factual, issues.  Issues that are
ordinarily fact questions become questions of law when reasonable minds cannot
differ on the outcome.  See, e.g., Logan v. Mullis, 686 S.W.2d 605, 608 (Tex. 1985); Robertson County v. Wymola,
17 S.W.3d 334, 342 n.12 (Tex. App.—Austin 2000, pet. denied).  Thus, with respect to those issues properly
categorized as legal, the trial court did not err procedurally in disposing of
them by a pretrial order issued under Rule 166.
            ACS
contends the trial court’s purported pretrial conference was actually a trial
on the merits, exceeding the trial court’s authority and depriving ACS of due
process and its right to a jury trial. 
The constitutional right to trial by jury ultimately depends on the
existence of a material issue of fact.  In re Higganbotham’s
Estate, 192 S.W.2d 285, 289 (Tex. Civ.
App.—Beaumont 1946, no writ).  Just as
the proper granting of a summary judgment or directed verdict does not offend
the constitution, neither does the use of Rule 166 to dispose of legal
issues.  See Wyche v. Works, 373 S.W.2d 558, 561 (Tex. Civ. App.—Dallas 1963, writ ref’d
n.r.e.) (summary judgment); Henry v. Thomas, 74 S.W. 599, 601 (Tex. Civ.
App.—Dallas 1903, writ ref’d) (directed verdict).[14]
            With
respect to ACS’s due-process complaint, ACS provides
no explanation why the trial court’s actions allegedly deprived it of due
process.  ACS merely cites two opinions
from the First Court of Appeals:  Murphree v. Ziegelmair,
937 S.W.2d 493 (Tex. App.—Houston [1st Dist.] 1995, no writ), and Masterson v. Cox, 886 S.W.2d 436 (Tex.
App.—Houston [1st Dist.] 1994, no writ). 
Both cases involved the trial court’s entry of a post-answer default
judgment against a defendant who failed to attend a pretrial conference.  In each instance, the court held the trial
court erred by disposing of the case without providing the defendant notice of
a trial setting or otherwise notifying the defendant that disposition could
occur at the conference.  See Murphree, 937 S.W.2d at 495; Masterson, 886 S.W.2d at 438–39.  Here, in contrast to those cases, the court
had already called the case to trial when the first pretrial-conference hearing
took place.  ACS was undeniably on notice
of that trial setting and appeared at the pretrial conference.
            Although
the trial court received exhibits and heard testimony from an expert witness,
the court made clear it was not admitting evidence for fact-finding purposes
but merely determining whether any fact issue remained for submission to a
jury.[15]  We do not believe Rule 166, in its present
form, prevents a trial court from adopting such a procedure for the limited
purpose of identifying and ruling on legal issues, provided the court’s rulings
do not resolve factual disputes that properly fall within the province of the jury.  Cf.
Martin v. Dosohs
I, Ltd., 2 S.W.3d 350, 355 (Tex. App.—San Antonio 1999, pet. denied)
(concluding that dismissal of a case following a pretrial hearing, while not
favored, is allowed in limited situations when determination of a legal
question is dispositive of the case).[16]
            To
the extent ACS contends the trial court improperly disposed of claims or issues
that should have gone to the jury, we review ACS’s
complaint by the same standard used in reviewing a directed verdict.  A directed verdict is warranted when the
evidence is such that no other verdict can be rendered and judgment should be
granted as a matter of law.  Seymour v. American Engine & Grinding
Co., 956 S.W.2d 49, 57 (Tex. App.—Houston [14th Dist.] 1996, writ
denied).  In its brief, ACS broadly
states that “contested issues of material fact exist for the jury on all
issues, claims and defenses improperly disposed of by the trial court under
Rule 166.”  However, ACS specifically
identified only five such issues—the option holders’ claim for breach and ACS’s affirmative defenses of legal impossibility,
illegality, mutual mistake, and void ab initio.  With respect to any other issue ACS contends
was improperly disposed of by the trial court under Rule 166, ACS has waived
its complaint on appeal.  See Tex.
R. App. P. 38.1(h); Melendez v.
Exxon Corp., 998 S.W.2d 266, 280 (Tex. App.—Houston [14th Dist.] 1999, no
pet.).
            ACS
first complains the trial court erred in finding no contested material issues
existed on the option holders’ claim that ACS breached the Original
Agreements.  ACS does not dispute it
failed to issue ACS stock in response to each option holder’s delivery to ACS
of “written notice . . . accompanied by full payment” for the shares.  ACS instead relies on its various affirmative
defenses to avoid liability. 
Accordingly, the trial court did not err in concluding as a matter of
law that ACS’s conduct, subject to any applicable
affirmative defense, constituted a breach of the Original Agreements.
            Next,
ACS alleges the trial court improperly determined its affirmative defense of
legal impossibility failed as a matter of law. 
In response, the option holders argue the trial court erred in
concluding ACS’s obligations under the agreements
were subject to the Cease and Desist Order. 
The option holders claim this ruling is contrary to OTS’s
interpretation of its order as expressed in a letter from Richard Stearns, OTS’s Deputy Chief Counsel for Enforcement, in response to
an inquiry about Patrick Walden’s suit against ACS.  Stearns’s letter merely states the Cease and
Desist Order does not prohibit Walden (or any other option holder not expressly
named in that order) from seeking a court order or judgment to determine his
entitlement to stock or payments.[17]  This is consistent with the language in the
Cease and Desist Order prohibiting ACS from issuing stock or making payments
“unless required to do so by court order.” 
Here, in the absence of any court order to the contrary, ACS was bound
by the terms of the Cease and Desist Order. 
Thus, we find no error in the trial court’s conclusion that ACS was
subject to that order.
            ACS
alleges its performance under either the Original or Amended Agreements was
excused by the doctrine of legal impossibility, citing Centex Corp. v. Dalton, 840 S.W.2d 952 (Tex. 1992).  In Centex,
the Texas Supreme Court held when a governmental regulation or order makes a
party’s performance under an agreement impracticable, the defendant is excused
from performance.  Id. at
954.  Centex had agreed to pay John
Dalton a finder’s fee of $750,000 in connection with Centex’s acquisition of a
group of banks.  After the agreement was
signed, however, the Federal Home Loan Bank Board adopted a regulation
prohibiting the payment of any such fee. 
OTS later issued a cease-and-desist order to prevent Centex’s
payment.  The court concluded Centex’s
performance under the agreement was made impracticable by having to comply with
the Bank Board’s order; therefore, Centex’s duty to perform was discharged.  Id.
            Unlike
the Bank Board’s order in Centex,
however, the Cease and Desist Order in this case had been terminated by the
time of trial.  Accordingly, there
currently exists no legal impediment making ACS’s
performance impracticable.  See Heritage
Bank v. Redcom Labs., Inc., 250 F.3d 319, 328
(5th Cir. 2001) (“[T]he presence of an injunction, in and of itself, does not
excuse performance indefinitely.”) 
Furthermore, although the Cease and Desist Order was in effect at the
time most of the options holders exercised their options, the Original Plan
expressly addresses this situation. 
Paragraph 2(d), which governs the manner by which options may be
exercised, provides as follows:
At the time
of delivery, [ACS] shall . . . deliver to the Option holder . . . a certificate
or certificates for such shares, provided,
however, that the time of delivery may be postponed by [ACS] for such period as
may be required for it with reasonable diligence to comply with any
requirements of law . . . . [Emphasis added.]
Thus, even though the Cease and Desist Order prevented
ACS from issuing stock, it did not prohibit ACS from performing its duties
under the Original Agreements.  The only
allegations of impossibility center around the Cease and Desist Order and
issues of contract construction.  These
are questions of law.  See Elliott-Williams
Co. v. Diaz, 9 S.W.3d 801, 803 (Tex.
1999).  Thus, the trial court did not err
in concluding ACS’s legal-impossibility defense
failed as a matter of law.
            ACS
contends it raised fact issues on its affirmative defense of illegality.  However, whether a contract is legally
enforceable is a question of law.  See McCreary,
68 S.W.3d at 733.  For the reasons set
forth in our discussion above concerning consideration for the Amendments, we
agree with the trial court’s conclusion that the Original Agreements are not
illegal and do not violate public policy.
            Next,
ACS claims it presented evidence that at the time the Original Plan was formed,
both ACS and Old Gibraltar mistakenly believed that Old Gibraltar would not be
dissolved, but instead would continue to exist under a federal program known as
the Southwest Plan.[18]  Thus, ACS asserts it raised a contested issue
of fact as to whether the Original Plan was the product of a mutual mistake,
and should be rescinded.  Under the
doctrine of mutual mistake, when parties to an agreement have contracted under
a misconception or ignorance of a material fact, the agreement will be
avoided.  Williams v. Glash, 789 S.W.2d 261, 264 (Tex.
1990).  To prove a mutual mistake,
however, the evidence must show that both parties were acting under the same
misunderstanding of the same material fact.  Seymour, 956
S.W.2d at 58.  Here, the alleged
“mistake” did not concern any presently existing fact, but rather a belief
regarding some future occurrence.  Accordingly,
the trial court did not err in concluding this defense fails as a matter of
law.
            Finally,
ACS alleges Old Gibraltar’s board of directors never approved the list of
option recipients.  ACS contends the
board’s approval was a condition precedent under the Original Plan, and
therefore, ACS raised a fact issue as to whether the options were void ab initio.  Whether language in an agreement constitutes
a condition precedent is a matter of contract construction, which is a question
of law.  See Elliott-Williams, 9
S.W.3d at 803; C & C Partners v. Sun
Exploration & Prod. Co., 783 S.W.2d 707, 715 (Tex. App.—Dallas 1989, writ
denied).  ACS relies on language in the
Original Plan that states “the Board of Directors of [Old] Gibraltar will have
a one-time right to designate the recipients of Options to acquire . . . [ACS]
Common Stock.”  Nothing in this language
suggests the approval of Old Gibraltar’s board
was intended to be an act “that must occur before there is a right to immediate
performance and before there is a breach of contractual duty.”  Hohenberg Bros. v.
George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex.
1976);  Marsh v. Marsh, 949 S.W.2d 734, 743–44 (Tex. App.—Houston [14th
Dist.] 1997, no pet.).  We conclude the
board’s right to designate the option recipients was not a condition precedent
to the granting of options by ACS to the option holders.  The trial court did not err in disposing of ACS’s void-ab-initio
affirmative defense.
            Because
Rule 166 expressly authorizes the trial court to rule on legal issues before
trial, we find no error in the trial court’s procedure for disposing of various
claims and defenses as a matter of law. 
ACS failed to demonstrate that a genuine issue of material fact existed
as to any of the matters ruled on by the trial court at the pretrial
conference.
                                                     Failure
To Exercise Options
            ACS
claims judgment should be rendered in its favor because the options expired by
their terms while they could not legally be exercised.  Both the Original Plan and the Amended Plan
provide that “each unexercised Option, whether or not vested, shall expire . .
. three years after an initial public offering of [ACS] Common Stock.”  ACS argues the options expired on September 25, 1997, and the
Cease and Desist Order prevented the options from being exercised until the
next day.  The trial court concluded as a
matter of law ACS’s obligations under the option
agreements were subject to the Cease and Desist Order, which was terminated on September 26, 1997.  However, the trial court further ruled as a
matter of law the date of the “initial public offering” of ACS stock was October 3, 1994, and
therefore, the options expired by their terms on October 3, 1997.
            ACS
first contends the trial court erred in concluding the “initial public offering
of Common Stock” occurred on October 3,
 1994.  We agree with
ACS.  Construction of a contract is a
question of law.  Elliott-Williams, 9 S.W.3d at 803. 
Because the phrase “initial public offering” is not specifically defined
in either plan, we apply the plain, ordinary, and generally accepted
meaning.  DeWitt County Elec. Coop., Inc. v. Parks, 1 S.W.3d
96, 101 (Tex.
1999).  In the securities context, an
“initial public offering” is the commonly used term for the first offering of
equity securities of an issuer to the public pursuant to a registration
statement.  See 69A Am. Jur. 2d Securities
Regulations–State § 101, n.93 (1993); see
also Black’s Law Dictionary 1082
(6th ed. 1990) (defining “public offering” as the offering of securities at
random and in general to anyone who will buy, and noting that public offerings
are generally regulated by federal and state laws and regulations).  The Securities and Exchange Commission issued
an order declaring ACS’s registration statement
effective at “4:30 PM EST September 26, 1994.”  The effective date of a registration
statement is generally considered the commencement of a public offering.  See,
e.g., Olkey v. Hyperion 1999 Term Trust, Inc., 98
F.3d 2, 3 (2d Cir. 1996).  This is the
first date on which ACS could sell its stock to the public.  We conclude the plain meaning of the term
“initial public offering of Common Stock” as used in both the Original and
Amended Plans refers to the effective date of ACS’s
registration statement—September
 26, 1994.
            Next,
the parties dispute how to calculate the date the options expire.  ACS argues “three years after” September 26, 1994, ended
just before midnight on September 25, 1997.  Thus, according to ACS, any action taken by
the option holders on September
 26, 1997, would have been too late.  While we agree with ACS’s
method of calculating the three-year period, we disagree with its use of midnight as the cut-off.  By law, ACS was not entitled to offer its
common stock to the public until 4:30 p.m. on September 26, 1994.  Accordingly, three years did not pass from ACS’s initial public offering until the same time on September 26, 1997.
            The
option holders contend they had a right to a one-year extension of the exercise
period under the Original Plan.  However,
this provision applies only if ACS first determined “in its sole discretion”
that no exemption from registration of the stock to be issued is available with
respect to an option holder. 
Furthermore, the Original Plan states if ACS declines to issue stock
under this provision, the option holder is “entitled to opt” for an extension
of the exercise period.  The option
holders presented no evidence they sought such an extension.  Thus, the three-year period for exercising
options was not extended.
            Finally,
ACS contends because the Cease and Desist Order was not terminated until September 26, 1997, the
options expired before they could be legally exercised by the option
holders.  We disagree.  Both the Original Plan and the Amended Plan
provide only for the expiration of “unexercised” options.  The plans further state, “Options may be
exercised . . . by written notice to [ACS] . . . accompanied by full payment,
if any, for the shares . . . .”  While
the Cease and Desist Order expressly prohibited ACS from issuing stock to the
option holders, it did not prohibit the option holders from exercising their
options by delivering written notice to ACS accompanied by payment.  With the sole exception of Don Rice, the
option holders conclusively established that each of them provided written notice
to ACS of their intent to exercise their options, with payment, before 4:30 p.m. on September 26, 1997.  Because the record affirmatively shows Rice
did not exercise his options before they expired, we conclude ACS is entitled
to judgment as a matter of law on Rice’s claim for breach of the Original
Agreement.  As for the remaining option
holders, however, the trial court properly held the options were timely
exercised.
            Based
on our conclusion judgment should have been entered against Rice on his breach-of-contract
claim, ACS urges us to render judgment that Rice take nothing.  The option holders respond that rendition is
inappropriate because issues of negligent misrepresentation and fraud remain
for consideration.[19]  The trial court expressly granted ACS summary
judgment on the option holders’ negligent-misrepresentation claims, and the
option holders have not assigned error to this ruling.  Although ACS also moved for summary judgment
on the option holders’ fraud claims, the trial court held that those claims
were rendered moot by the court’s ruling that the Amendments were void for lack
of consideration.  Thus, the trial court
never reached this issue.  Furthermore,
the parties did not brief the question of whether ACS is entitled to judgment
on the option holders’ fraud claims. 
Accordingly, we reverse Don Rice’s portion of the judgment and remand it
to the trial court to consider whether ACS is entitled to summary judgment on
Rice’s fraud claim.  See Monsanto Co. v. Boustany, 73 S.W.3d 225, 232–33 (Tex. 2002) (remanding
claims to the court of appeals that were not reached by that court and were not
briefed in the supreme court).
                                                           Measure of Damages
            Both
parties complain on appeal the trial court erred in measuring the option
holders’ damages on their breach-of-contract claims.  Determining the proper method for measuring
damages is a question of law for the court. 
See Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex. App.—Houston
[14th Dist.] 1999, pet. denied).  When,
as here, the damage components are undisputed, damages may be calculated as a
matter of law.  See Taylor Publ’g Co. v. Systems Mktg. Inc., 686 S.W.2d 213, 217
(Tex. App.—Dallas 1984, writ ref’d n.r.e.).  The trial
court calculated damages based on the value of ACS common stock on the date of
trial.  The option holders argue they are
entitled to recover damages based on the highest value of the stock between the
date of ACS’s breach and the date of trial.  ACS contends damages should be determined
based on the stock’s value at the time of the breach.  We conclude damages in this case should be
calculated based on the value of ACS stock on the first day after ACS’s breach on which the option holders were entitled to
receive their stock.
            The
ultimate goal in measuring damages for a breach-of-contract claim is to provide
just compensation for any loss or damage actually sustained as a result of the
breach.  See Stewart v. Basey, 150 Tex. 666, 245
S.W.2d 484, 486 (1952).  In a case
involving a contract to deliver stock, the proper measure of damages for breach
of that contract is the same as for other contracts:  the difference between the price contracted
to be paid and the value of the article at the time when it should have been
delivered.  Miga v. Jensen, 46 Tex. Sup. Ct.
J. 89, 94, 2001 WL 34038821, at *5 (Oct. 31, 2002) (citing Randon v. Barton,
4 Tex. 289, 293
(1849)).  While this rule would normally
require damages to be calculated based on the stock’s value on the date of the
breach, in this case each option holder was not necessarily entitled to receive
the stock on the date ACS breached the Original Agreement.  For example, ACS breached its agreement with
Robert Butler on August 26,
 1997, when it rejected his exercise of the options and returned
his payment.  However, ACS was prohibited
from issuing stock while the Cease and Desist Order was in effect.  Thus, Butler would not
have been entitled to receive his shares until the first business day after the
Cease and Desist Order was lifted on September 26, 1997. 
Therefore, to compensate Butler for his actual losses resulting from ACS’s breach of the Original Agreement, Butler’s damages
should be calculated based on the value of ACS stock on September 29, 1997, the
first date after ACS’s breach on which he actually
could have taken delivery of the stock. 
The parties stipulated the fair market value of one share of ACS common
stock on September
 29, 1997, was $25.375. 
Thus, Robert Butler’s damages for breach of the Original Agreement
should be calculated based on this value, less the exercise price of his
options, times the number of shares.
                                                          Prejudgment Interest
            Finally,
ACS complains the trial court erred in awarding the option holders prejudgment
interest at a rate of ten percent per year. 
ACS argues the court should have awarded prejudgment interest at the
rate of six percent per year pursuant to section 302.002 of the Texas Finance
Code.  We hold that this statute does not
apply to an award of prejudgment interest.
            Until
1997, article 5069–1.03 of the Texas Revised Civil Statutes provided for
prejudgment interest at the rate of six percent per year on a
breach-of-contract claim involving a contract in which the amount payable could
be ascertained with reasonable certainty. 
See Great Am. Ins. Co. v. North Austin Mun. Util. Dist. No. 1, 950 S.W.2d 371, 373–74 (Tex. 1997).[20]  In 1997, the Texas Legislature repealed
article 5069–1.03 when it enacted the Texas Credit Title.  See
Act of June 2, 1997, 75th Leg., R.S., ch. 1396, §§ 1,
48, 1997 Tex. Gen. Laws 5202, 5203, 5250 (repealing, among others, articles
5069–1.01 to –1.14 and 5069–1A.01 of the Texas Revised Civil Statutes and
enacting articles 5069–1B.001 to –1H.103). 
In a separate act in the same legislative session, however, article
5069–1.03 was codified, with no substantive changes, as section 302.002 of the
Texas Finance Code.  See Act of May 24,
 1997, 75th Leg., R.S., ch. 1008, § 1,
1997 Tex. Gen. Laws
3091, 3422.  When a code provision
conflicts with a statute enacted by the same legislature that enacted the code,
the statute controls.  Tex. Gov’t Code Ann.
§ 311.031(d) (Vernon
1998).  Thus, even though it appeared as
part of the Texas Finance Code, article 5069–1.03 was no longer in effect after
September 1, 1997.  Because the trial court’s judgment in this
case was rendered in December 1998, article 5069–1.03 does not apply.  See
Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 n.9 (Tex. 1998)
(noting that prejudgment interest is governed by the law in effect at the time
the trial court renders judgment).
            When
the Texas Legislature enacted the Texas Credit Title in 1997, it apparently
superseded former article 5069–1.03 with article 5069–1C.002.  In 1999, the Legislature amended Texas
Finance Code section 302.002 to delete the language of former article 5069–1.03
and substitute the language of article 5069–1C.002.  See
Act of Apr. 23, 1999, 76th
Leg., R.S., ch. 62, § 7.18, 1999 Tex. Gen. Laws 127,
222–54.  The Legislature noted that the
purpose of this amendment was not to make a substantive change, but rather it
was intended to conform the Texas Finance Code to the 1997 enactment of the
Texas Credit Title.  See id.  Therefore, we look to article 5069–1C.002 to
determine whether the option holders’ contract claim is subject to a statutory
rate of prejudgment interest.
            The
relevant portion of article 5069–1C.002 provides as follows:
If a
creditor has not agreed with an obligor to charge the obligor any interest, the
creditor may charge and receive from the obligor legal interest at the rate of
six percent a year on the principal amount of the credit extended by the
creditor to the obligor beginning on the 30th day after the date on which the
amount is due.
Act of June 2,
 1997, 75th Leg., R.S., ch. 1396, § 1,
1997 Tex. Gen. Laws 5202, 5205 (codified at Tex.
Fin. Code Ann. § 302.002 (Vernon Supp.
2002)).  The Texas Credit Title
specifically excludes “judgment interest” from the definition of “legal
interest” in this provision.  Id., 1997 Tex.
Gen. Laws at 5203 (codified at Tex. Fin.
Code Ann. § 301.002(a)(8)). 
“Judgment interest” is defined as “interest on a money judgment, whether
the interest accrues before, on, or after the date the judgment is
rendered.”  Id. (codified
at Tex. Fin. Code Ann. §
301.002(a)(7)).  In addition, the statute
excludes a judgment creditor from the definition of “creditor,” and the
definition of “obligor” excludes a judgment debtor.  Id., 1997 Tex.
Gen. Laws at 5203–04 (codified at Tex.
Fin. Code Ann. § 301.002(a)(3), (13)). 
Thus, we conclude that article 5069–1C.002, now Texas Finance Code
section 302.002, does not apply to an award of prejudgment interest.
            ACS
argues that this construction of section 302.002 conflicts with this court’s
prior opinion in Academy Corp. v.
Interior Buildout & Turnkey Construction, Inc.,
21 S.W.3d 732 (Tex. App.—Houston [14th Dist.] 2000, no pet.).  In Academy,
a panel of this court held that a 1998 judgment for breach of contract was
subject to the six-percent rate of prejudgment interest set forth in section
302.002 of the Finance Code.  Id. at 744.  Although Academy
appears to cite the current version of section 302.002,[21] it
provides no analysis explaining why that statute applied.  Instead, it cites Great American Insurance Co. v. North Austin Municipal Utility District
No. 1, in which the Texas Supreme Court applied article 5069–1.03 to a
pre-1997 judgment.  See Academy, 21 S.W.3d
at 744 (citing Great American, 950
S.W.2d at 372–73).  As explained above,
article 5069–1.03 does not apply to post-1997 judgments.  To the extent Academy stands for
the proposition that the current version of Finance Code section 302.002
applies to a claim for prejudgment interest, we decline to follow it.[22]
            Because
section 302.002 does not govern the award of prejudgment interest in this case,
we overrule ACS’s complaint regarding the trial
court’s method of calculating prejudgment interest.[23]

 class=Section4>

                                                                    Conclusion
            We
conclude the trial court did not err in entering judgment in favor of Robert
Butler on his claim for breach of the Original Agreement; however, the trial
court erred in calculating his damages. 
We reverse those portions of the trial court’s judgment (1) determining
that the measure of damages for ACS’s failure to
transfer its stock is based on the value of the stock at the time of trial and
(2) awarding Butler actual
damages of $910,813.00.  We remand to the
trial court to recalculate Butler’s damages
based on the value of ACS stock on September 29, 1997. 
Because the trial court’s award of prejudgment interest in a specified
amount was presumably based on the amount of Butler’s actual
damages, we modify the judgment to delete the court’s reference to Butler’s
prejudgment interest “being the sum of $19,463.94.”  As modified, we affirm the remainder of the
trial court’s judgment in favor of Butler.
            The
trial court also erred in entering judgment for Don Rice on his
breach-of-contract claim because, as a matter of law, his options expired
before they were exercised.  We reverse
the portion of the trial court’s judgment in favor of Rice and remand for
consideration of Rice’s fraud claim.
            As to the remaining option holders, we conclude the trial
court erred in granting summary judgment on their claim the Amendments should
be rescinded for lack of consideration. 
Additionally, we conclude the trial court erred in granting summary
judgment in favor of James Shield on ACS’s
affirmative defense of waiver.  We
reverse the judgment in favor of these option holders and remand for further
proceedings consistent with this opinion.
 
                                                                                    
                                                                        /s/        Leslie Brock Yates
                                                                                    Justice
 
Judgment rendered and Majority and Dissenting
Opinions on Motions for Rehearing filed January 16,
 2003.
 
Panel
consists of Justices Yates, Edelman, and Wittig.[24]  (Edelman, J., dissenting.)
 
 


 




Appellants/Cross-Appellees’ Motion for
Rehearing Granted in Part and Overruled in Part; Appellee/Cross-Appellant’s
Motion for Rehearing Overruled; Opinion of August 29, 2002, Withdrawn; Affirmed
as Modified in Part, Reversed and Remanded in Part, and Majority and Dissenting
Opinions on Motions for Rehearing filed January 16, 2003.
 
 
In The
 
Fourteenth Court of Appeals
_______________
 
NO. 14-99-00075-CV
_______________
 
PATRICK A. WALDEN, CHARLES ACKERMAN, JOHN AVERETT,
SAM BAUGHMAN, ROBERT BUTLER, RALPH CANNADY,
MIKE CLENDENNEN, MILTON COWDEN, WILLIAM DELONG,
LESLIE FLYNNE, LINDA HEWLETT, JAMES HURST, DONALD IMRIE, GEOFFREY
JOHNSTON, LARRY KERSHNER, JERRY KILLINGSWORTH, MYRA MAYER, DON RICE, LINNEA
ROSE, JAMES SHIELD, and
JERE SHOPF, Appellants and Cross-Appellees
 
V.
 
AFFILIATED COMPUTER SERVICES, INC. f/k/a 
AFFILIATED COMPUTER SYSTEMS, INC., Appellee
and Cross-Appellant
______________________________________________________________________
 
On Appeal from the 127th District Court
Harris County, Texas
Trial Court Cause No. 96-25829
______________________________________________________________________
 
D I S S E N T I N G   O P I N I O N
 
            The dissenting opinion issued in
this case on August 29,
 2002 is withdrawn and replaced by this opinion.
            I agree with the majority opinion
except with regard to the trial court’s actions at the pretrial
conferences.  In the absence of a
no-evidence or traditional motion for summary judgment, admission, stipulation,
or agreement of the parties on an issue, I do not agree that: (1) a trial court
has authority in a pretrial conference to decide that sufficient evidence does
not exist to allow that issue to be tried; or (2) such a decision by a trial
court can be reviewed under a directed verdict standard.
            Before a trial court may decide, by
way of a summary judgment, that sufficient evidence does not exist to allow an
issue to be tried, a motion must be filed at least 21 days before the matter is
decided, during which time the non-moving party is on notice to submit evidence
on the specified issue(s).[25]  A motion for summary judgment must be filed
by a party,[26] not
sua sponte by the
trial court.  Moreover, a summary
judgment may be granted and affirmed only on grounds expressly set forth in the
motion[27] and
can readily be reviewed on that basis. 
Unless a motion for summary judgment is properly granted, a party cannot
be denied the right to present his evidence (or lack thereof) at a trial based
on the insufficiency of that evidence.
            By contrast, if a trial court is
going to be allowed in a pretrial conference to decide whether sufficient
evidence exists to allow an issue to be tried without a motion for a summary
judgment being filed, there are no safeguards to assure that: (1) parties will
be apprised in advance that evidence will need to be presented at the
conference, on what issues, and in what forms, i.e., affidavits or live testimony; (2) the no-evidence grounds
will be those raised by an opposing party, not the trial court; or (3) the
means will exist to create an adequate record of what and how evidence was
presented.  How then can a pretrial
conference ruling be reviewed under a directed verdict standard, particularly
if no actual trial ever takes place at which the adversely affected party can
make an offer of proof or bill of 

 class=Section6>

exceptions?
            The purpose of pretrial conferences
is to simplify the trial to those issues not disposed of by admissions,
agreement of the parties, or other rulings contemplated by the rules of
procedure, such as summary judgments, not to circumvent the safeguards afforded
by those rules.[28]  Under the majority holding, pretrial conferences
can be used as gatekeeping proceedings in which trial
courts, rather than opponents, can put parties to task to demonstrate the
sufficiency of their evidence before trials on those issues will be
allowed.  Even if there were merit in
allowing such a gatekeeping step in the litigation
process, the current lack of uniform procedures for doing so in a rule 166
pretrial conference make that an ill-suited mechanism for effecting it.  Therefore, I would reverse and remand the
judgment on the claims that were disposed of at the pretrial conferences other
than by summary judgment, admission, stipulation, or agreement clearly
reflected in the record.
 
 
                                                                                    
                                                                        /s/        Richard H. Edelman
                                                                                    Justice
 
Judgment
rendered and Majority and Dissenting Opinions filed January 16, 2003.
Panel
consists of Justices Yates, Edelman, and Wittig.[29]
 




            [1]  Among other things, the Amended Plan altered
the vesting provision in the Original Plan to provide for vesting of options
upon a “Change of Control” of ACS, rather than Old Gibraltar.


            [2]  One of the option holders in the 113th
District Court also brought a claim for breach of the Amended Agreement.


            [3]  Subsequent pleadings also named as defendants
Darwin Deason; Charles M. Young, ACS’s
president; and ACS Government Services, Inc. 
Young was later nonsuited, and neither Deason nor ACS Government Services is a party to this
appeal.


            [4]  Robert Butler, who never signed the
Amendment, did not assert a claim for fraud or negligent misrepresentation.


            [5]  Only nine of the option holders asserted
claims for breach of the Amended Agreements.


            [6]  As noted above, however, the parties entered
into a stipulation regarding attorneys’ fees.


            [7]  The option holders argue, in the alternative,
the Amendments are void because they were not adopted in conformity with ACS’s by-laws.  This
argument was not presented as a ground for summary judgment in the options
holders’ motion, but rather it appears for the first time in a “supplemental
reply” filed by the option holders. 
Therefore, we cannot consider this argument on appeal.  See
Guest v. Cochran, 993 S.W.2d 397,
402–03 (Tex. App.—Houston [14th Dist.] 1999, no pet.).


            [8]  A third case cited by ACS, Winters v. FDIC, 812 F. Supp. 1 (D. Me.
1992), involved the same contract language (and the same insolvent bank) as in Hibyan.  See Hibyan, 812 F. Supp. at 274.


            [9]  The Hibyan court’s conclusion was based on the use of the active
voice in the change-of-control provision: “The contract language plainly states
that a change of control event occurs if ‘The Company or the Bank shall . . . sell, exchange or transfer all or
substantially all of its assets to some other person . . . .’”  812 F. Supp. at 274 (emphasis in
original).  In contrast, the
change-of-control provision in this case uses the passive voice: “[A] ‘Change
of Control’ shall have occurred if . . .
all or substantially all of the assets of [Old] Gibraltar are sold to any other person . . . .”


            [10]  Title IV of the National Housing Act was
repealed when FSLIC was abolished in 1989; however, any rights, duties, or
obligations that arose under Title IV and existed before August 9, 1989, were
unaffected by the abolishment of FSLIC.  See Pub. L. No. 101-73, § 401(f)(1), 103
Stat. 183, 356 (1989).


            [11]  The only other regulation ACS cites is one
relating to employment contracts between a savings association and its
employees.  See 12 C.F.R. § 563.39 (2001). 
ACS fails to demonstrate how this regulation applies to ACS’s issuance of options to employees of Old Gibraltar and
First Texas.


            [12]  Under the Amended Plan, each option holder
“earned” twenty percent of his or her options each year for five years from the
date the options were granted.  Upon the
termination of an option holder’s employment (other than for cause) with Old
Gibraltar, First Texas, or a successor in interest, the option holder would become
vested in all options that had been earned to that time.  The option holder could then exercise those
options for a period of sixty days from the date of termination.


            [13]  ACS also points to a short excerpt from the
deposition of Kenneth Biederman, whom ACS does not
otherwise identify.  We find nothing in
the cited excerpt supporting ACS’s position that the
existence of the data-processing agreement was consideration for either the
Original or Amended Agreements.


            [14]  Notably, at the November 5, 1998 hearing, in response to ACS’s general objection that “there are fact issues that
should be submitted to the jury,” the trial court repeatedly indicated its
willingness to sustain the objection and asked ACS to identify those issues
that should have been submitted to a jury. 
With the sole exception of the proper measure of damages, for which the
only factual dispute was later resolved by stipulation, ACS refused to identify
a single issue.


            [15]  Furthermore, while ACS objected to the
presentation of evidence during the various hearings, it filed an extensive
offer of proof with exhibits (totaling over 3000 pages) in opposition to the
court’s proposed rulings.


            [16]  The trial court’s approach is similar to that
recognized by several federal circuits under the federal counterpart to Rule
166.  See
Fed. R. Civ.
P. 16.  At least four courts of
appeals have held Federal Rule 16 permits the trial court to dispose of issues
summarily and without a motion when the pretrial conference discloses that no
material facts are in dispute.  See Berkovitz v. Home Box Office, Inc., 89 F.3d 24, 29 (1st Cir. 1996); Portsmouth Square, Inc. v. Shareholders
Protective Comm., 770 F.2d 866, 869 (9th Cir. 1985); Diaz v. Schwerman Trucking Co., 709 F.2d
1371, 1375 n.6 (11th Cir. 1983); Wirtz v. Young Elec.
Sign Co., 315 F.2d 326, 327 (10th Cir. 1963); but see Syracuse Broad. Corp.
v. Newhouse, 271 F.2d 910, 914 (2d Cir. 1959)
(“Rule 16 confers no special power of dismissal not otherwise contained in the
rules.”).
 
            The dissent expresses some concerns
with the use of Rule 166 in this way, most notably that a party may not be
apprised of the need to present its evidence at the pretrial conference and a
party may not be able to create an adequate record of the evidence
presented.  However valid these concerns
may be in the abstract, they do not apply here. 
The pretrial conference in this case began the same day the case was set
for trial; thus, ACS clearly was on notice it should be prepared to present its
evidence and all claims and defenses were subject to final disposition.  As for ACS’s
ability to make a record, the trial court twice continued the pretrial
conference and repeatedly gave ACS the opportunity to present evidence it
believed raised a triable issue of fact.  ACS ultimately filed an offer of proof
consisting of over 3000 pages of affidavits and exhibits.  Accordingly, ACS had the opportunity to and
did create an adequate record for this court to review.


            [17]  At the time Stearns wrote this letter, the
Cease and Desist Order was still in effect.


            [18]  The Southwest Plan was a program adopted by
the Federal Home Loan Bank Board in the late 1980s and designed to induce
private capital investors to bail out failed savings-and-loan associations in
the southwestern United States.  See
generally Bluebonnet Sav. Bank v. FDIC, 891 F. Supp. 332, 333–34 & n.3
(N.D. Tex. 1995).  According to ACS, the
parties believed Old Gibraltar would be a “survivor” under the Southwest Plan,
which would result in the assets of other failed savings associations being
consolidated into Old Gibraltar.


            [19]  Rice did not allege breach of the Amended
Agreement.


            [20]  As amended, article 5069–1.03 stated:
 
            When no
specified rate of interest is agreed upon by the parties, interest at the rate
of six percent per annum shall be allowed on all accounts and contracts ascertaining
the sum payable, commencing on the thirtieth (30th) day from and after the time
when the sum is due and payable.
 
Act
of May 24, 1979, 66th
Leg., R.S., ch. 707, 1979 Tex. Gen. Laws 1718
(repealed 1997).


            [21]  We presume Academy was applying the current version of section 302.002 based
on its cite to the version of the statute appearing in the 2000 supplement to
the Vernon’s bound
volume of the Texas Finance Code.  See Academy, 21 S.W.3d
at 744.  We note, however, that the
opinion does not set forth the statute’s language.  Furthermore, the parties’ briefs in that case
referred only to the pre-1999 version of section 302.002, which had purportedly
codified article 5069–1.03.


            [22]  ACS also claims our decision conflicts with
this court’s opinion in Certain
Underwriters of Lloyd’s London v. Smith, 77 S.W.3d 859 (Tex. App.—Houston [14th
Dist.] 2002, no pet.).  In Smith, another panel of this court
stated, in dicta, that the current version of section 302.002 is “a recodification of . . . article 5069–1.03.”  Id. at
871.  Because this statement was merely
dicta, it is without precedential authority.  See
American Golf Corp. v. Colburn, 65
S.W.3d 277, 281 (Tex. App.—Houston [14th
Dist.] 2001, pet. denied).  Furthermore,
this court has since withdrawn its opinion in Smith, and thus that opinion has no precedential
value.  Certain Underwriters of Lloyd’s, London v. Smith, No.
14-00-00391-CV, 2002 WL 31720280 (Tex. App.—Houston [14th
Dist.] Dec. 5, 2002) (order
withdrawing opinions of April 25,
 2002); see Frizzell v. Cook, 790 S.W.2d 41, 43 (Tex.
App.—San Antonio 1990, writ denied) (stating that a withdrawn opinion has no precedential value).


            [23]  On appeal, the only issue regarding
prejudgment interest is whether the trial court should have applied the
statutory rate of six percent per year. 
We otherwise express no opinion on the trial court’s calculation of
prejudgment interest.


            [24]  Senior Justice Don Wittig sitting by
assignment.


            [25]  See
Tex. R. Civ.
P. 166a(c), (i).


            [26]  See Tex. R. Civ. P. 166a.


            [27]  See
Tex. R. Civ.
P. 166a(c); Johnson v. Brewer
& Pritchard, P.C., 73 S.W.3d
193, 204 (Tex. 2002).


            [28]  See
Provident Life & Accident Ins. Co. v. Hazlitt,
147 Tex. 426, 429, 216 S.W.2d 805, 807 (1949) (“The purpose of this rule [166]
is to simplify and shorten the trial and limit ‘the issues for trial to those
not disposed of by admissions or agreements of counsel.’ . . .  Of course, no controverted
issues of fact could be adjudicated at this conference, but orders could be
entered disposing of issues which are founded upon admitted or undisputed
facts.”); Mason v. Tobin, 408 S.W.2d
243, 244 (Tex. Civ. App.—Houston 1966, no writ)
(“There is nothing in the rule [166] authorizing the trial court to determine
the merits of the issues raised by the pleadings at a pre-trial hearing, where
the parties do not agree to limit the issues, and the issues raised by the
pleadings are not disposed of by admissions.”).


            [29]  Senior Justice Don Wittig sitting by
assignment.


