                                  In The
                             Court of Appeals
                    Seventh District of Texas at Amarillo
                             ________________________

                                  No. 07-12-00293-CV
                             ________________________

      REGENBOGEN DE RYDY LTD., A TEXAS LIMITED PARTNERSHIP, AND
             REGENBOGEN ENTERPRISES, LLC, APPELLANTS

                                           V.

                             DAVID RUNKLE, APPELLEE



                          On Appeal from the 423rd District Court
                                  Bastrop County, Texas
             Trial Court No. 423-852, Honorable Christopher Duggan, Presiding


                                    August 8, 2013

                           MEMORANDUM OPINION
                  Before QUINN, C.J., and HANCOCK and PIRTLE, JJ.

      Appellants, Regenbogen De RyDy Ltd. and Regenbogen Enterprises, LLC,

(collectively “Regenbogen”) appeal from a judgment in favor of Appellee, David Runkle,

in a breach of contract action sounding in quantum meruit. In support, Regenbogen

asserts (1) there is no evidence Runkle performed compensable work for Regenbogen

because Jimmy Sissom did not have apparent authority to act on Regenbogen’s behalf
when he contracted with Runkle to renovate Sissom’s building and (2) Runkle failed to

offer any evidence of the reasonable cost of his work. Because we sustain the first

issue, we pretermit the second issue, and reverse and render judgment that Runkle

take nothing from Regenbogen.


                                       Background


         Regenbogen De RyDy, Ltd. is a Texas limited partnership, formed February 22,

2008.     Regenbogen Enterprises, LLC is its general partner and Edit Louden is the

president of Regenbogen Enterprises, LLC. It is undisputed that Regenbogen De RyDy

Ltd. is the owner of the real property commonly known as 1002 College Street, Bastrop,

Texas.     Jimmy Sissom leased that property from Regenbogen based upon an oral

lease.


         On January 27, 2009, Runkle, a contractor, entered into a general agreement

with Sissom to renovate a portable building located at 1002 College Street, for the

general purpose of establishing a restaurant.       Per the agreement, Runkle was to

provide certain renovation services in exchange for six months of free rent. After the

six-month period, Runkle was to continue leasing the property for a rental payment to

be determined. The first $10,000 of renovation costs was to be provided by Sissom,

with the remainder to be provided by Runkle. When the agreement was executed,

Runkle believed Sissom owned both the building and the lot.          Runkle immediately

commenced work.


         On June 16, 2009, the City of Bastrop issued a building permit for the renovation

that named Regenbogen De RyDy, Ltd. as owner of the property. Based on that permit,

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Runkle testified he began thinking he was providing work for Regenbogen, however, he

did not speak with anyone at Regenbogen to inquire whether Sissom had authority to

act on the partnership’s behalf. Instead, he “just assumed [Sissom] was acting as a

family member, and a representative of whomever owned the property.” (Emphasis

added). When Runkle observed a for-sale sign posted on the property in September,

he ceased work.


        Runkle filed suit against Regenbogen alleging that Sissom was acting as its

agent. Sissom was never made a party to the suit. Runkle’s active pleadings sought

specific performance, quantum meriut, foreclosure of a mechanic’s lien and orders for

sale.   At trial, Louden testified she was the only person with authority to act on

Regenbogen’s behalf. She indicated she bought the College Street property as an

investment with the intention of helping her niece, Susan Sissom, and her husband,

Jimmy establish an income. She agreed to let Sissom use the property to support his

family and gave him free reign to generate income from the property. She testified she

did not have the ability to direct Sissom with regard to the property—“[j]ust Jimmie (sic)

working for Jimmie.” There was no written agreement and she had no right to share in

any income Sissom generated from the property.


        Louden further testified Sissom was not authorized to represent Regenbogen,

was not an employee and held no ownership interest in either the partnership or the

property in question.   She learned of the general agreement between Sissom and

Runkle after the fact and knew only that Sissom had moved his building onto the

property. She did not have any dealings with Runkle and believed he was working for

Sissom. She was unaware of any construction permits until after Runkle’s suit was filed

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and testified Sissom was not authorized to sign any permits or make any applications

on Regenbogen’s behalf. “If he did, he did not have authority or asked her permission.”


      Following trial testimony, the jury was given the following instruction:


      QUESTION NO. 1

      Did Jimmy Sissom have apparent authority to act on behalf of
      Regenbogen?

      A party’s conduct includes the conduct of another who acts with apparent
      authority.

      Apparent authority exists if a party (1) knowingly permits another to hold
      himself out as having authority, or (2) through lack of ordinary care,
      bestows on another such indications of authority that lead a reasonably
      prudent man to rely on the apparent existence of authority to his
      detriment.

      Only the acts of Regenbogen may be considered in determining whether
      apparent authority exists. The actions or statements of Jimmy Sissom
      may not be considered in determining whether apparent authority exists.

      Answer: Yes or No


      The jury affirmatively answered Question No. 1. Finding that Runkle performed

services for Regenbogen based on that apparent authority, the trial court awarded

Runkle damages of $24,412, and attorney’s fees of $ 27,000. This appeal followed.


      Legal Sufficiency -- Standard of Review


      In reviewing the legal sufficiency of the evidence, we must consider the evidence

in the light most favorable to the fact-finder’s decision and indulge every reasonable

inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex.




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2005). We must credit favorable evidence if reasonable jurors could, and disregard

contrary evidence unless reasonable jurors could not. Id. at 827.


      When a party challenges the legal sufficiency of an adverse finding on an issue

for which it did not have the burden of proof, it must demonstrate there is no evidence to

support the adverse finding. Exxon Corp. v. Emerald Oil & Gas Co., L.P., 348 S.W.3d

194, 215 (Tex. 2011). Such a no-evidence challenge will be sustained when (1) there is

a complete absence of evidence of a vital fact, (2) the court is barred by rules of law or

of evidence from giving weight to the only evidence offered to prove a vital fact, (3) the

evidence offered to prove a vital fact is no more than a scintilla, or (4) the evidence

conclusively establishes the opposite of the vital fact. King Ranch, Inc. v. Chapman,

118 S.W.3d 742, 751 (Tex. 2003) (quoting Merrell Dow Pharms., Inc. v. Havner, 953

S.W.2d 706, 711 (Tex. 1997)).      More than a scintilla of evidence exists when the

evidence “rises to a level that would enable reasonable and fair-minded people to differ

in their conclusions.” Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004)

(quoting Havner, 953 S.W.2d at 711). Evidence does not exceed a scintilla if it is so

weak as to do no more than to create a mere surmise or suspicion that the fact exists.

Id.


      Apparent Agency


      “An agent is one authorized by another to transact some business for the

principal; the relationship is a consensual one between two parties by which one party

acts on behalf of the other, subject to the other’s control.”       Jamison v. Nat’l Loan

Investors, L.P., 4 S.W.3d 465, 468 (Tex.App.—Houston [1st Dist.] 1999, pet. denied).


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Authorization to act and control of the action are two essential elements of agency.

Gonzales v. Am. Title Co., 104 S.W.3d 588, 593 (Tex.App.—Houston [1st Dist.] 2003,

pet. denied). An agent’s authority to act on behalf of a principal depends on words or

conduct by the principal either to the agent (actual authority) or to a third-party

(apparent authority). Reliant Energy Services, Inc. v. Cotton Valley Compression, LLC,

336 S.W.3d 764, 784 (Tex.App.—El Paso 2004, no pet.).


       The law does not presume agency, and the party asserting agency has the

burden to prove it.    IRA Res., Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007).

Apparent authority is the power of an agent to affect the legal relations of the principal

by transactions with a third person. Nears v. Holiday Hospitality Franchising, Inc., 295

S.W.3d 787, 793 (Tex.App.—Texarkana 2009, no pet.) (citing Ames v. Great S. Bank,

672 S.W.2d 447, 450 (Tex. 1984)). Apparent authority is based on estoppel, and only

the conduct of the principal in leading a third party to believe that the agent has

authority may be considered. Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). A

declaration of authority by an alleged agent, without more, does not establish either the

existence or the scope of the alleged authority; id. at 183-84, and a good faith belief on

the part of a third-party that a person with whom it is dealing is the agent of another is

not enough to bind the purported principal. 2616 S. Loop LLC v. Health Source Home

Care, Inc., 201 S.W.3d 349, 356 (Tex.App.—Houston [14th Dist.] 2006, no pet.).

Rather, the reviewing court looks to acts of participation, knowledge, or acquiescence

by the principal in the acts of the agent. Reliant Energy Services, Inc., 336 S.W.3d at

784.




                                            6
      Apparent authority arises either from (1) a principal knowingly permitting an

agent to hold himself out as having authority, or (2) a principal’s actions which lack such

ordinary care as to clothe an agent with indicia of authority, thus leading a reasonably

prudent person to believe that the agent has the authority he purports to exercise.

Gaines, 235 S.W.3d at 182. The standard used is that of a “reasonably prudent person,

using diligence and discretion to ascertain the agent’s authority.” Id. at 182-83 (citing

Chastain v. Cooper & Reed, 152 Tex. 322, 257 S.W.2d 422, 427 (Tex. 1953)). In order

for apparent authority to be established, it is essential that the principal have full

knowledge of all material facts at the time of the conduct alleged to be the basis for the

estoppel. Gaines, 235 S.W.3d at 182. Because apparent authority is an estoppel

principle, a party seeking to recover under such legal theory must also show justifiable

reliance on the principal’s words or conduct resulting in harm to the party. See Tex. S.

Rentals, Inc. v. Gomez, 267 S.W.3d 228, 246 (Tex.App.—Corpus Christi 2008, no pet.)

(citing Baptist Mem’l Hosp. v. Sampson, 969 S.W.2d 945, 948 & n.2 (Tex. 1988)).

Accordingly, in order to determine an agent’s apparent authority, we examine the

conduct of the principal and the reasonableness of the third party’s assumptions

regarding authority. See Gaines, 235 S.W.3d at 183.


      Analysis


      Runkle’s evidence establishes Sissom’s use and enjoyment of the property

located at 1002 College Street, Bastrop, Texas, on his own behalf but not on behalf of

Regenbogen.      See Crooks v. M1 Real Estate Partners, 238 S.W.3d 474, 483-84

(Tex.App.—Dallas 2007, pet. denied). Neither does Runkle produce any evidence as to

Louden’s---or anyone else representing Regenbogen—conduct to him as to Sissom’s

                                            7
alleged authority to act on Regenbogen’s behalf. Id. at 484. See also Baptist Mem’l

Hosp., 969 S.W.2d at 950. Instead, we have a written agreement between Runkle and

Sissom with Runkle looking to Sissom for the initial financing and a grace period on a

future lease with Sissom when the renovation is completed. At the time the agreement

was entered into and work commenced, Runkle did not know Regenbogen was the

property’s record owner. That Runkle subsequently saw Regenbogen’s name on a

permit creates, at best, no more than a mere surmise or suspicion that Sissom may

have been acting as Regenbogen’s agent. Accordingly, Runkle cannot assert he relied

upon any conduct by Regenbogen that would lead a reasonably prudent person to

believe Sissom had authority to act on Regenbogen’s behalf. This is particularly so

when both Louden and Runkle testified neither one of them had any dealings with the

other.    See Gibson v. Bostick Roofing and Sheet Metal, 148 S.W.3d 482, 491

(Tex.App.—El Paso 2004, no pet.).


         Alternatively, even if Runkle’s belief that Sissom represented Regenbogen were

reasonable, which is doubtful, that belief must be based on or generated by some

conduct on the part of Louden and/or Regenbogen. Since the court may only consider

Louden’s or Regenbogen’s conduct in determining whether Runkle could reasonably

believe that Sissom had authority, there is no evidence of apparent authority. See

Crooks, 238 S.W.3d at 483-84; Gibson, 148 S.W.3d at 491.


         Accordingly, because the jury’s finding that Sissom had apparent authority to act

for Regenbogen was unsupported by the evidence, we sustain Regenbogen’s first

issue. This pretermits the remaining issues. TEX. R. APP. P. 47.1.



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                                   Conclusion


      The trial court’s judgment is reversed and a take-nothing judgment is rendered

against Runkle.


                                             Patrick A. Pirtle
                                                 Justice




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