Hunt, et al v. Pkwy Transport Inc, et al

1Pursuant to 5th Cir. R. 47.5, this Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5th Cir. R.
47.5.4.
1
United States Court of Appeals
Fifth Circuit
F I L E D
November 18, 2003
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 02-50321
_____________________
In the Matter of: R.H. Transport Inc.
Debtor
_________________________________________________________________
Rocky Hunt; Sylvia Ayala Hunt; R. H. Transport Inc; Johnny W.
Thomas, Trustee,
Appellees – Cross-Appellants,
versus
Parkway Transport Inc.; Parkway Distributors Inc; Parkway Custom
Carriage Inc,
Appellants – Cross Appellees.
_________________________________________________________________
Appeals from the United States District Court
for the Western District of Texas
(98-CV-393)
_________________________________________________________________
Before WIENER, CLEMENT and PRADO, Circuit Judges.
PRADO, Circuit Judge.1
Appellants Parkway Transport, Inc., Parkway Distributors,
Inc., and Parkway Custom Carriage, Inc. (collectively “Parkway”)
appeal from a judgment in favor of Rocky Hunt and his wife Sylvia
Hunt, along with R.H. Transport, Inc., – the Hunts’ company– and
RHT’s bankruptcy trustee. For the following reasons, we vacate

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and remand.
Facts
In November 1991, Rocky and Sylvia Hunt started a business
leasing trucks to Parkway, a subsidiary of San Antonio-based
grocery chain H.E.B. Hunt, a truck salesman, had never before
run a trucking company. Hunt bought his first two trucks in
December 1991. On April 9, 1992, Hunt incorporated as R.H.
Transport, Inc. (RHT). In 1992, Hunt added six more trucks and
another in early 1993, financing all through the 100% financing
offered by the HEB Credit Union to Parkway operators. Hunt
ultimately purchased eleven trucks, but never had more than nine
at one time. Hunt alleges that Roland Hamel, manager of
contractor development at Parkway, told him a single-driver truck
would get 3,000-5,000 miles per week and a team truck, 5,000-
8,000 miles per week. Hunt says he relied on this representation
when he started his trucking business and financed additional
trucks. Hamel denies making any promises regarding mileage.
Parkway and Hunt entered into a lease for each of the eleven
trucks, whereby Hunt leased the trucks to Parkway for hauling
freight and Parkway agreed to pay Hunt based on an attached rate
schedule. These leases allowed either party to terminate with 15
days notice, but did not contain any provision as to mileage.
Also not in the lease was Parkway’s first-in, first-out policy as
to dispatches, which Hunt testified was breached by Parkway, or

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Parkway’s exclusivity rule, whereby its contractors could not run
trucks at other carriers who competed with Parkway. The leases
did, however, contain an integration clause. When Hunt did not
receive the 3,000/5,000 miles per week that he felt he had been
promised, he complained to Parkway. In 1993, Hunt was having
severe cash flow problems, and in June 1993, Hunt reduced his
fleet. On August 26, 1993, Hunt gave written termination notice
to Parkway on five trucks, indicating that he would keep two
trucks, with Parkway. Jaye Wells, manager of contractor
development for Parkway, asked Hunt to stagger removal of his
trucks and Hunt agreed. On September 8, 1993, without written
notice, Parkway recalled a Hunt driver from a run and suspended
the leases on all seven Hunt trucks. Hunt moved the seven trucks
to another company, Pan American Express, in September 1993. In
February and April of 1994, the credit union repossessed the
trucks, and Hunt and RHT subsequently filed for bankruptcy.
Procedural History
This case has a procedural history few would envy. A non-
core bankruptcy proceeding, the case originally worked its way
through the bankruptcy court. After granting summary judgment on
several of Hunt and RHT’s claims, the bankruptcy court held a
bench trial in December 1997 on Hunt and RHT’s contract and fraud
claims. These claims were: (1) that Parkway breached its oral
promise to provide 3,000-5,000 individual miles and 5,000-8,000

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team miles; (2) that Parkway committed fraud; (3) that Parkway
breached an implied contract term to provide Hunt with reasonable
miles; (4) that Parkway breached its first-in, first-out
policy;(5) that Parkway breached its no-forced-dispatch policy;
(6) that Parkway improperly controlled its contractors’
employees; and (7) that Parkway failed to comply with the
termination provisions in the lease.
On April 3, 1998, the bankruptcy court issued a report and
recommendation to the district court, finding that Hunt and RHT
had failed to prove that Parkway had promised Hunt any mileage
amount. Therefore, the claims for fraud and for breach of an
oral promise to provide 3,000-5,000 miles per week for individual
trucks and between 5,000- 8,000 miles for team trucks must fail.
The bankruptcy court did, however, find three breaches of
contract. First, the bankruptcy court found that the contract
contained an implied provision to provide reasonable miles and
that Parkway breached that provision. In reaching this
conclusion, the bankruptcy court determined that national mileage
averages provided by Parkway’s expert were “reasonable miles.”
Additionally, the bankruptcy court found that Parkway breached
the termination and employee control provisions of Hunt’s leases.
Ultimately, however, the bankruptcy court recommended that Hunt
and RHT take nothing because any calculation of lost profits
would be entirely too speculative in light of RHT’s chronic

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operation at a loss.
Hunt and RHT filed motions for reconsideration. The
district court referred these motions to the bankruptcy court.
On July 28, 1999, approximately one and a half years after the
bench trial, the bankruptcy court altered its conclusions and
determined that it could not consider the national averages as
reasonable miles because these averages were based on hearsay.
Instead, the bankruptcy court determined that the 2,700 / 4,500
miles figure used in Hunt and RHT’s expert’s calculations were
the appropriate measure of “reasonable miles.” The bankruptcy
court decided, in contrast to its original determination, that
lost profits through the end of the contract were not too
speculative. Because of this change, the bankruptcy court
recommended awarding Hunt and RHT $337,790.00 in damages, plus
pre-judgment and post-judgment interest. The bankruptcy court
did not alter its conclusion that future profits were too
speculative.
On August 6, 1999, Parkway moved for an extension of time to
file its objections to the bankruptcy court’s report and
recommendations. The bankruptcy court granted this motion,
giving Parkway “an additional twenty (20) days” beyond the
original deadline, “or until September 2, 1999.” Unfortunately
for Parkway, the two dates were not the same: 20 days from the
original deadline was August 30, not September 2. Parkway filed

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2Hunt and RHT also filed objections to the bankruptcy
court’s supplemental report and recommendation.
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its objections with the district court on September 2, 1999, and
Hunt and RHT moved to strike them because they were two days
late.2 Parkway, Hunt, and RHT each filed objections to the
supplemental recommendation; Hunt and RHT also filed a motion to
strike Parkway’s objections as untimely. The district court
found that Parkway’s objections were untimely, but considered the
objections in accepting the bankruptcy court’s recommendation.
Judgment was entered in favor of Hunt and RHT in the amount of
$337,790.00, plus pre-judgment interest of $285,733.88 and post-
judgment interest.
On February 5, 2001, the bankruptcy court recommended
awarding fees and expenses in the amount of $246,661.45 to Hunt’s
attorney, $156,903.91 to RHT's attorney and its trustee, and
conditional appellate fees of $100,000 each to Hunt and RHT. The
district court modified the rate of prejudgment interest,
accepted the remaining findings and entered a judgment. Parkway
filed a timely notice of appeal, and Hunt and RHT filed timely
notices of cross-appeal.
Standard of Review
Generally, if a party fails to timely file objections to a
report and recommendation, we review the district court’s
acceptance of that report and recommendation only for plain

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error. Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1417
(5th Cir. 1996) (en banc). But we engage in de novo review
where, as here, (1) the parties complied in good faith with the
(albeit erroneous) instructions of the trial court (here the
bankruptcy court), and (2) the district court engaged in de novo
review. See Morin v. Moore, 309 F.3d 316, 320 (5th Cir. 2002).
Implied Reasonable Miles Term
The parties’ contracts did not contain an express mileage
provision. Hunt and RHT argue that because the contract provides
no obligation on Parkway’s part, a “reasonable miles” term must
be read into the contract to prevent it from lacking mutuality of
obligation. The bankruptcy and district courts agreed and read
in the term, relying on a Texas intermediate appellate court
case, Holguin v. Twin Cities Services, Inc., 750 S.W.2d 817 (Tex.
App. – El Paso 1988, no writ).
Texas law generally disfavors reading an implied term into a
contract, permitting it "where no other consideration is shown,
making an implied obligation necessary to avoid holding the
contract void for lack of consideration.” Northern Natural Gas
Co. v. Conoco, Inc., 986 S.W.2d 603, 607 (Tex. 1998)
Consideration is "either a benefit to the promisor or a loss or
detriment to the promisee," id. at 607, or, in other words, “a
bargained-for exchange of promises.” Fed. Sign v. Tex. S. Univ.,
951 S.W.2d 401, 409 (Tex. 1997). A court may not, however, read

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3We remain skeptical, however. The Texas Supreme Court
requires that the test for mutuality be applied at the time when
enforcement is sought, not at the time when the promises are
made:
Though a contract be void for lack of mutuality at the time
it is made, and while it remains wholly executory, yet, when
there has been even a part performance by the party seeking
to enforce the same, and in such part performance such party
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an implied promise into a contract to make it “fair, wise, or
just.” Nalle v. Taco Bell Corp., 914 S.W.2d 685, 687 (Tex. App.
– Austin 1996, writ denied).
The court in Holguin held that an otherwise illusory
contract may be saved by reading into it an implied obligation to
provide the subject matter of the contract. Holguin, 750 S.W.2d
at 819. In Holguin, a carrier and a trucking owner-operator
entered into a three-year contract for freight delivery. Id. at
818. After attempting to renegotiate the contract to add a non-
competition clause, the carrier stopped providing any freight and
attempted to terminate the contract. Id. In arguing that its
contract was illusory, and thus void, the carrier contended that
it had no obligation under the contract. Id. Thus, the carrier
argued that it was not bound at all. The court disagreed, holding
that the contract was enforceable because it contained an implied
obligation on the part of the carrier to provide the subject
matter of the contract. Id. at 819.
These contracts, like the contract in Holguin, may very well
require us to read in an obligation to provide the subject matter
of the contracts.3 Yet assuming without deciding that they do

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has rendered services or incurred expense contemplated by
the parties at the time such contract was made, which
confers even a remote benefit on the other party thereto,
such benefit will constitute an equitable consideration, and
render the entire contract valid and enforceable.
Hutchings v. Slemons, 141 Tex. 448, 174 S.W.2d 487, 489 (1943)
(quoting Big Four Ice & Cold Storage Co. v. Williams, 9 S.W.2d
177, 178 (Tex.Civ.App. - Waco 1928, writ ref'd). As a result,
even though the leases may have lacked mutuality at the time they
were signed, once Parkway provided Hunt over 2,300 miles per week
for twenty months and paid Hunt over $1 million dollars for
transporting the freight, these actions constituted equitable
consideration. This was not a de minimus provision of freight.
In fact, this was the bargained-for promise: Parkway promised to
pay Hunt between $0.72 and $0.86 per mile and Hunt promised to
make his truck available and to haul freight. As the bankruptcy
court found, the parties did not bargain for a definite or fixed
amount of miles, and a definite amount of miles is unnecessary to
find mutuality.
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contain such an implied obligation, we still must reverse the
judgment.
Even if we follow Holguin and read into the parties’
contracts an “obligation to provide the subject matter of the
contract,” Hunt and RHT have failed to establish the parameters
of this obligation or that it was, in fact, breached.
Originally, Hunt and RHT argued that 3,000 individual and 5,000
team miles (not coincidentally, the miles they claimed – but
failed to prove – they had been promised) were the “reasonable
miles” that must be read into the contract. This appears to be
little more than an attempt to get around the unchallenged
finding that they had never been promised these, or any, miles.
In its original report and recommendation, the bankruptcy court

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noted that “these amounts [3,000/5,000] are not substantiated.”
After reviewing the record, we agree with the bankruptcy court.
On reconsideration, however, the bankruptcy court determined that
Hunt and RHT’s expert’s mileage calculations, which were based on
3,000/5,000 miles (discounted by 10% for downtime) were
“credible” and “supported by the testimony of other witnesses,
including defendants’ own corporate representative, Mr. Tom
Crouch.” The bankruptcy court, therefore, altered its initial
finding that the 3000/5000 amount was not substantiated. In
making this alteration, however, the bankruptcy court committed
clear error.
We conclude that a finding is clearly erroneous “when,
although there is evidence to support it, the reviewing court
based on all of the evidence is left with the definite and firm
conviction that a mistake has been committed." In re Luhr Bros.,
Inc., 325 F.3d 681, 684 (5th Cir. 2003)(quoting Walker v. Braus,
995 F.2d 77, 80 (5th Cir.1993)).
Initially, we note that the bankruptcy court’s determination
that Dr. Hubbard’s testimony was credible does not support its
finding that 2,700 individual and 4,500 team miles per week must
be read into the contracts as the missing reasonable miles term.
Dr. Hubbard testified that Hunt and RHT had given him these
numbers, and that they were not based on his knowledge of
reasonable miles. His credibility, therefore, is irrelevant to
the whether these mileage amounts constitute the missing term.

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4We note that Crouch also testified that individual drivers
could only drive 3,000 miles a week on an occasional basis.
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Second, the bankruptcy court’s initial determination that
these numbers were unsubstantiated comports with the testimony,
whereas the reconsidered findings, made approximately one and a
half years later, leave us with the firm impression of error.
Hunt and RHT rely on testimony by other former owner-operators
that an implied promise of 3,000 miles was reasonable. Yet,
because of these operators’ personal disputes with Parkway, the
bankruptcy court expressly found, in its initial report, that “it
is hard for us to say that [the former owner-operators’]
testimony was entirely disinterested.” Hunt and RHT also point
to the testimony of Tom Crouch, Parkway’s corporate
representative as evidence that 4,500-5,100 miles were typical
for team trucks. An analysis of Crouch’s testimony, however,
shows that it does not actually support Hunt and RHT’s
contention. Crouch’s deposition testimony, introduced at trial,
was that 4,500 to 5,000 miles were the most a team truck could
run in a week because that was typically what drivers would want.4
This does not adequately support the bankruptcy court’s
conclusion that 4,500 team miles should be read into the
contract, particularly in light of the other evidence in this
case. For example, Hunt indicated on credit applications that he

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5This amount is also more in line with what Hunt received at
Pan American Express after the contract with Parkway was
terminated.
6The elements of a breach of contract claim under Texas law
are (1) a valid contract, (2) the plaintiff’s performance, (3)
the defendant’s breach, and (4) damages. Hussong v. Schwan’s
Sales Enters., Inc., 896 S.W.2d 320, 326 (Tex. App. – Houston
[1st Dist.] 1995, no writ).
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expected to receive 2,300 miles per week.5
Similarly, the testimony fails to support the bankruptcy
court’s implied finding that the miles Parkway provided Hunt and
RHT were unreasonable. The bankruptcy court’s decision does not
specifically provide any support for this implied finding, nor
can we find support for it. Therefore, Hunt and RHT failed to
establish a breach of the implied requirement to provide the
subject matter of the contract. This was, of course, their
burden.6
For these reasons, we conclude that the bankruptcy court was
correct in its original report and recommendation and that the
judgment of the district court, based on the revised report and
recommendation, should be vacated. We remand for entry of a
take-nothing judgment.
VACATED AND REMANDED.

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