J. Michael Ferguson, P.C., J. Michael Ferguson, Anson Financial, Inc. and MBH Real Estate, LLC v. Ghrist Law Firm, PLLC, and Ian Ghrist ( 2021 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-18-00332-CV
___________________________
J. MICHAEL FERGUSON, P.C., J. MICHAEL FERGUSON, ANSON FINANCIAL,
INC., AND MBH REAL ESTATE, LLC, Appellants
V.
GHRIST LAW FIRM, PLLC, AND IAN GHRIST, Appellees
On Appeal from the 17th District Court
Tarrant County, Texas
Trial Court No. 017-287611-16
Before Sudderth, C.J.; Birdwell and Bassel, JJ.
Memorandum Opinion by Chief Justice Sudderth
MEMORANDUM OPINION
I. INTRODUCTION
This appeal follows a jury trial that culminated in the trial court submitting 46
questions to the jury spanning over a dozen claims and counterclaims. After
numerous posttrial hearings, the trial court entered judgment on multiple causes of
action in favor of appellees/cross-appellants Ghrist Law Firm, PLLC and Ian Ghrist
(collectively, “Ghrist”) against appellants/cross-appellees J. Michael Ferguson, P.C.
(“Ferguson Firm”), J. Michael Ferguson (“Ferguson”), Anson Financial, Inc.
(“Anson”), and MBH Real Estate, LLC (“MBH”) (collectively “Ferguson Parties”).
The judgment specified that Ghrist is entitled to a single recovery not to exceed
$220,114.47, as well as attorney’s fees. This sum includes an offset to account for
$1,821.42 in breach of contract damages awarded by the jury to the Ferguson Firm.
The Ferguson Parties assert 17 issues on appeal, including a dozen challenges
to the sufficiency of the evidence to support the jury’s verdict. Ghrist asserts two
cross-issues concerning the offset of damages for breach of contract. We reverse the
judgment against MBH and Anson and render a take-nothing judgment in their favor.
We also reverse that portion of the judgment providing for disgorgement of fees. We
affirm the judgment in all other respects.
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II. BACKGROUND
A. The Fee Sharing Agreement
The Ferguson Firm hired Ghrist after he graduated from law school but before
he passed the bar exam. The parties dispute whether Ghrist was employed by the
firm after he passed the bar or whether he was employed by Anson, a loan servicing
company that was wholly owned and controlled by Ferguson and that was also a
client of the Ferguson Firm.1 Regardless, it is undisputed that Ghrist performed legal
services for Ferguson Firm clients. Ghrist also had his own law firm, which Ferguson
helped set up, and was permitted to take on his own clients as long as Ferguson
approved them.
Ferguson testified that he paid Ghrist a base salary of $42,000. In addition, the
firm and Ghrist had an oral fee sharing agreement under which they would split the
attorney’s fees received on joint cases, 2/3 to the firm and 1/3 to Ghrist. The firm
was also entitled to a percentage of attorney’s fees received on Ghrist’s separate cases,
although the parties disagreed on whether it was entitled to 1/3 or 2/3 of those fees.
The fee sharing agreement also provided that the Ferguson Firm would front
expenses for joint cases and those expenses would be deducted from any client
recovery. Ghrist was not required to repay those expenses. In other words, the firm
1
Ferguson testified that Ghrist was an employee of the Ferguson Firm; Ghrist
testified that he was an employee of Anson, based on the fact that his paychecks were
issued by Anson.
3
would receive money for attorney’s fees, reimburse itself for its expenses, and then
split the fees with Ghrist according to their agreement.
B. The Boles Litigation Recovery
Much of the dispute among the parties has its roots in a Ponzi scheme run by
David Boles and involving his company, Metro Buys Homes. Boles was eventually
imprisoned for his part in the scheme, but not before he victimized a real estate
investor named Shawn Coker. Coker hired the Ferguson Firm to recover the
hundreds of thousands of dollars he lost to Boles and agreed to a contingency fee of
40% of actual collections on the judgment. The firm’s written fee agreement with
Coker was for a 25% contingent fee but Coker testified that he had been told it was
40% and that he did not remember being told otherwise. Coker also did not recall
any agreement concerning the payment of litigation expenses but acknowledged that
those expenses appear to have been deducted from the money collected.
The Ferguson Firm filed suit against Boles and Metro Buys Homes in 2010 and
obtained a $1.8 million default judgment in 2014. Ghrist, who was hired by the firm
after the judgment was obtained, was given the task of collecting on Boles’s assets.
Ghrist became Coker’s primary contact with the firm and it was Coker’s
understanding that the firm had agreed to pay Ghrist 1/3 of its 40% contingent fee,
or 13.33% of the collections on the Boles judgment.
Ghrist developed the idea of using a receivership to facilitate collection on the
Boles judgment. In October 2014, the court signed an order appointing Ghrist as
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receiver and ordering the judgment debtors to turn over various assets to him. In
February 2015, the court signed an order applying certain property to partial
satisfaction of the Boles judgment. That order provided, “With regard to each
property on the attached spreadsheet, [Coker] now owns the real property itself or the
note secured by a deed of trust on the property.” The value of the assets, most of
which were mortgage notes that generated monthly payments (“Boles notes”), was
approximately $1 million.
Ghrist, as receiver, engaged Anson to service the Boles notes. The borrowers
on the notes paid Anson directly and Anson charged the receivership approximately
$600 monthly for its services.
On June 1, 2015, Coker entered a settlement agreement with Jim Diffenwierth,
who had accepted fraudulent transfers of property from Boles. By that settlement,
Diffenwierth conveyed to Coker all of his right, title, and interest in the legal title
and/or deed of trust liens against 23 specifically identified properties (“Diffenwierth
notes”). Ghrist signed the agreement as attorney for Coker.
On July 1, 2015, Ferguson informed Ghrist and Coker by email that he had
formed MBH and instructed Ghrist to prepare all the notes to be transferred to the
new entity. Ferguson also stated that the Ferguson Firm and Coker would be the
managing members of MBH and that Ferguson would draft an operating agreement
to protect them both. Ferguson never provided the promised operating agreement.
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Coker and Ferguson both testified that Ghrist was never a member in MBH and the
entity’s formation documents list only Coker and Ferguson as managing members.
The Boles notes, Diffenwierth notes, and certain other notes identified as
“disputed collateral notes” are collectively referred to by the parties as the “MBH
Portfolio.”
C. The Separation Agreement
Ghrist became upset with Ferguson’s failure to timely pay his share of collected
attorney’s fees under the fee-sharing agreement. When Ghrist complained, Ferguson
told him that bookkeeping was behind; he did not deny that the firm owed Ghrist
fees. Ghrist was also frustrated because he wanted to practice litigation but Ferguson
wanted him to engage in a different kind of legal practice. The relationship between
the two deteriorated until they parted ways in late 2015.
Ghrist presented Ferguson with what he characterized as a list of items to be
addressed in their split and what Ferguson characterized as the first draft of a
separation agreement. They agreed, though, that changes were made by both parties
and the result was a two-page agreement between Ghrist and the Ferguson Firm
signed on December 4, 2015 (“Separation Agreement”).
The Separation Agreement contains the following provisions that are pertinent
to this appeal:
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11. 6712 Plantation Rd., Forest Hill, Texas 76140
Ian Ghrist has a “Net Equity” interest in the property equal to 1/3
less
a. Anson’s Deficiency Judgment including any legal cost to
obtain judgment, filing fees, etc.
b. cost of acquiring the property with interest
c. cost [] incurred in remodeling and marketing the property
with interest.
Ghrist shall receive the Net Equity interest of cash or 1/3 of
cashflow from Net Equity in house.
14. The funds due to Ian Ghrist due to his 13.33% stake in MBH Real
Estate, LLC and property recovered from Cause Nos. 236-269254-
13 and 236-269254-132 will be paid. The Law Office of J. Michael
Ferguson, PC shall first collect $15,000 plus any filing fees incurred
in obtaining the original judgment plus interest on those funds as
the judgment was obtained prior to Ghrist’s involvement in the
case.
19. Any fees paid on behalf of Ghrist Law to form Ghrist Law shall be
reimbursed:
a. Filing Fees with Secretary of State
b. Website fees
c. Other filing fees, signage fees, if any.
20. J. Michael Ferguson, P.C. (JMF) shall be reimbursed by Ghrist for
any monthly fees incurred on or after 12/1/2015 on behalf of
Ghrist for websites, Lexis, etc. JMF shall cooperate and help Ghrist
in transferring the www.ghristlaw.com domain.
22. Ghrist shall return the Company Credit Card and his office key.
2
Ghrist testified that the two identical cause numbers were the result of an
error, and that the cause numbers should have reflected the Boles case and the
Diffenwierth case, which had been severed from the Boles case.
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This agreement closes any and all matters between Ian Ghrist and/or
Ghrist Law and J. Michael Ferguson, PC. If any issue was not addressed
in this agreement, it will not be raised at any time in the future.
D. The Coker Settlement
As a result of a disagreement between Coker and Ferguson concerning the
management and ownership of the MBH Portfolio, Coker entered a settlement
agreement with Ferguson, the Ferguson Firm, and Anson in July 2016 (“Coker
Settlement”). Under that agreement, Coker transferred the Boles judgment to MBH;
Ferguson, the Ferguson Firm, and Anson bought out Coker’s interest in the MBH
Portfolio for $525,493.08; and Coker transferred his interest in MBH to Anson. As a
result, according to Ferguson, MBH was the sole owner of the MBH Portfolio and
the Ferguson Firm was the sole owner of MBH.
Ghrist represented Coker during the settlement negotiations but did not obtain
a conflict waiver from Anson, whom he had previously represented. Ghrist also told
Coker that Ferguson could not find the written contract changing the firm’s fee
agreement with Coker from 25% to 40%. Coker testified that he was shocked to see
the fee agreement providing for 25% because the “narrative” he had received from
Ferguson was that the agreement was for 40%.
Coker paid Ghrist $50,000 during the settlement negotiations. He testified that
the payment was for a “whole body of work” Ghrist performed for him. He also
testified that Ghrist did not ask for that payment; Coker chose to pay it completely on
his own.
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E. The Reynolds Dispute
Teena Reynolds was a client of the Ferguson Firm when Ghrist first became
associated with that firm. She had retained the firm to represent her in a dispute with
her brother-in-law over repayment of a debt. The case remained stagnant until Ghrist
contacted Reynolds and told her he had been hired by the firm and wanted to speak
with her about her case. Ghrist revived the case and obtained a mediated settlement
under which the brother-in-law made monthly note payments to Reynolds through
Anson. Those payments, as well as Anson’s loan service fees, were split 65% to
Reynolds and 35% to the firm.
Reynolds later became upset that Anson was not paying her on time and not
providing information she requested. She attempted to fire Anson and the Ferguson
Firm but the firm refused to return her records to her unless she paid in full what it
would have earned in fees from collections on the brother-in-law’s note. Ghrist, who
had by this time left the Ferguson Firm, represented Reynolds in her dispute with
Anson and, during that dispute, filed a complaint against Anson with the Mortgage
and Savings Board.
F. The Present Lawsuit
1. The Parties’ Claims
On September 20, 2016, Ghrist filed suit asserting over a dozen claims against
the Ferguson Parties. Those parties responded with a variety of counterclaims. The
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evidence adduced concerning those claims and counterclaims is discussed below as it
relates to each of the issues on appeal.
2. The Jury Verdict
At the close of trial, the jury was asked to consider 46 questions addressing
matters relevant to breach of contract, breach of fiduciary duty, conversion, fraud,
negligent misrepresentation, quantum meruit, barratry, damages, exemplary damages,
and attorney’s fees. It returned a verdict containing the following findings:
a. Breach of the Separation Agreement (Questions 1–7)
The Ferguson Firm and Ghrist each breached the Separation Agreement. The
Ferguson Firm breached first and its breach was not excused. Ghrist suffered breach
of contract damages of $104,700.83 for past benefit of the bargain damages,
$131,636.72 for future benefit of the bargain damages, and $119,000.00 for past
“damages after mitigation.” The Ferguson Firm suffered breach of contract damages
of $1,821.42 for past benefit of the bargain damages and $0 for past “damages after
mitigation.” The jury also found that the parties intended to include the disputed
collateral loans in the Separation Agreement.
b. Breach of fiduciary duty (Questions 8-13)
A relationship of trust and confidence existed between Ghrist and Ferguson,
the Ferguson Firm, and Anson. Also, Ghrist entered into a joint venture with
Ferguson and the Ferguson Firm. The Ferguson Firm, Ferguson, and Anson each
breached fiduciary duties to Ghrist. Ghrist suffered breach of fiduciary duty damages
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of $104,700.83 for past benefit of the bargain damages and $131,636.72 for future
benefit of the bargain damages. In addition, the Ferguson Firm and Anson charged
fees of $56,462.12 to the MBH Portfolio, $7,528.09 of which should be disgorged to
Ghrist.
c. Conversion (Questions 14 and 15)
The Ferguson Firm, Ferguson, Anson, and MBH committed conversion,
resulting in $234,516.13 in damages to Ghrist.
d. Fraud and negligent misrepresentation (Questions 16–18)
The Ferguson Firm, Ferguson, and Anson committed fraud against Ghrist.
The Ferguson Firm and Ferguson also committed negligent misrepresentation.
Ghrist suffered damages of $104,700.83 for past economic loss and $131,636.72 for
future economic loss.
e. Quantum meruit (Questions 19 and 20)
Ghrist performed compensable work valued at $234,516.13 for the Ferguson
Firm and Ferguson.
f. Attorney’s fees (Question 21)
Ghrist’s reasonable and necessary attorney’s fees were $119,000 plus fees for
appeal.
g. Exemplary damages (Questions 22 and 23)
The Ferguson Firm and Ferguson acted with malice, gross negligence, or fraud,
but the jury assessed $0 in exemplary damages.
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h. Counterclaim for breach of a Rule 11 agreement (Questions 27–29)
Ghrist breached a March 9, 2017 Rule 11 agreement and his breach was not
excused, but the jury assessed $0 damages.
i. Counterclaim for breach of fiduciary duty (Questions 30–34)
A relationship of trust and confidence existed between Ferguson, the Ferguson
Firm, Anson, or MBH and Ghrist. Ghrist breached fiduciary duties owed to Anson
but not to the others. The jury assessed $0 damages. It also found that Ghrist
charged Coker $0 in fees and, of that amount, $0 should be disgorged.
j. Counterclaim for attorney’s fees (Questions 41 and 42)
The Ferguson Firm’s and MBH’s reasonable and necessary attorney’s fees were
each $119,000 plus fees for appeal.
k. Rejected counterclaims (Questions 24–26, 35–40, 43, and 44)
The jury rejected counterclaims asserted against Ghrist for breach of the fee-
sharing agreement, conversion and barratry, and did not award exemplary damages.
l. Findings on ownership interests (Questions 45 and 46)
Prior to the Separation Agreement, Ferguson and Ghrist agreed that Ghrist had
a 13.33% ownership interest in the MBH Portfolio. In the Separation Agreement,
they agreed that Ghrist had a 13.33% ownership interest in MBH and property
recovered from the Boles and Diffenwierth litigations.
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3. The Judgment
Although not specifically delineated in the judgment, Ghrist stated at the
hearing on his motion for judgment that he elected to recover against the Ferguson
Firm for breach of contract, against Ferguson for fraud, against MBH for conversion,
and against Anson for breach of fiduciary duty.3
Ghrist acknowledged that the Ferguson Parties were entitled to certain offsets
to the damage award and the judgment thus reduces his recovery for past benefit of
the bargain damages from $104,700.83 to $96,605.16. The judgment also reduces
Ghrist’s recovery for conversion and future benefit of the bargain damages by
$15,655.20. Although not explained in the judgment, it appears that this reduction
was also by agreement of the parties. The judgment then recites that the total amount
of damages awarded to Ghrist against the Ferguson Firm is $220,114.47; the total
damages awarded against Anson is $220,114.47; the total damages awarded against
MBH is $212,586.68; and the total damages awarded against Ferguson is $212,586.68.
The judgment next states that these damage awards are not cumulative and that
Ghrist is “entitled to a single recovery of not more than $220,114.47 in total actual
damages, not counting pre or post judgment interest, from all Defendants.” It further
recites that the Ferguson Firm is entitled to damages of $1,841.22 and that that sum
3
The judgment generally recites that Ghrist “elected to recover based on the
jury’s answers to Questions 1, 2, 5(a), 7, 8, 9, 10, 12, 13, 14, 15, 16, 18(b), 21 and 45
and 46 as the primary basis for the judgment herein entered.”
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shall be deducted from the damages owed to Ghrist as an offset. Finally, the
judgment awards Ghrist’s attorney’s fees as found by the jury.
4. Posttrial and Postjudgment Motions
The parties filed a plethora of motions between receipt of the jury verdict and
entry of judgment, as well as after the judgment was entered. The motions that are
pertinent to this appeal are discussed below in the context of the issues to which they
relate.
All parties filed notices of appeal. The Ferguson Parties raise 17 issues
challenging the relief granted to Ghrist and the failure to grant certain relief to the
Ferguson Firm and Anson. Ghrist raises three cross-issues challenging the finding
that he breached the Separation Agreement and the award of damages to the
Ferguson Firm.
III. THE FERGUSON PARTIES’ APPEAL
A. Incorporating Trial Court Arguments by Reference
The Ferguson Parties repeatedly state in their opening and reply briefs that they
incorporate by reference arguments they made in numerous documents encompassing
hundreds of pages filed in the trial court. They cite no authority authorizing such an
expansion of their appellate briefs.
Parties may not incorporate trial court arguments into their briefs by reference.
To do so “would be an open door for parties to circumvent the appellate brief [word]
limitations” and would reduce appellate briefs “to a simple appellate record reference
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to a party’s trial court arguments.” Guerrero v. Tarrant Cty. Mortician Servs. Co., 977
S.W.2d 829, 832–33 (Tex. App.—Fort Worth 1998, pet. denied). Instead, “[a] claim
of error on appeal must be argued in the party’s brief; it is insufficient simply to refer
the appellate court to the party’s trial court arguments.” Allen v. United of Omaha Life
Ins. Co., 236 S.W.3d 315, 325 (Tex. App.—Fort Worth 2007, pet. denied). We will
therefore consider only the specific arguments articulated in the Ferguson Parties’
briefs. See id.B. Legal Bars to Recovery
1. Economic Loss Rule (Issue Three)
The Ferguson Parties urge that Ghrist’s causes of action other than breach of
contract are barred by the economic loss rule. That rule “generally precludes recovery
in tort for economic losses resulting from a party’s failure to perform under a contract
when the harm consists only of the economic loss of a contractual expectancy.”
Chapman Custom Homes, Inc. v. Dall. Plumbing Co., 445 S.W.3d 716, 718 (Tex. 2014) (per
curiam).
Ghrist argues that the economic loss rule does not apply to strangers to the
contract. See JPMorgan Chase Bank, N.A. v. Prof’l Pharmacy II, 508 S.W.3d 391, 422
(Tex. App.—Fort Worth 2014, pet. denied), judgm’t withdrawn & appeal dism’d, 2015
WL 1119894, at *1 (Tex. App.—Fort Worth Mar. 12, 2015, no pet.) (mem. op.). He
notes that the supreme court has “applied the economic loss rule only in cases
involving defective products or failure to perform a contract.” Sharyland Water Supply
15
Corp. v. City of Alton, 354 S.W.3d 407, 418 (Tex. 2011). But the court in Sharyland
expressly recognized that it has applied the rule to parties not in privity. Id.The Sharyland court also recognized that the economic loss rule does not bar
recovery of purely economic losses in a variety of tort actions, including negligent
misrepresentation, breach of fiduciary duty, fraud, and fraudulent inducement. Id. at
418–19. In addition, the supreme court has specifically declined to extend the
economic loss rule to claims of fraudulent inducement, stating that “the legal duty not
to fraudulently procure a contract is separate and independent from the duties
established by the contract itself.” Formosa Plastics Corp. USA v. Presidio Eng’rs &
Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998); see Matlock Place Apartments, L.P. v.
Druce, 369 S.W.3d 355, 377–78 (Tex. App.—Fort Worth 2012, pet. denied)
(recognizing economic loss rule does not bar fraudulent inducement claim). We
conclude that Ghrist’s claims for negligent misrepresentation, breach of fiduciary
duty, fraud, and fraudulent inducement are not barred by the economic loss rule. See
Sharyland, 354 S.W.3d at 417–18. But the question remains whether that rule bars his
claim for conversion.
Conversion is “the wrongful exercise of dominion and control over another’s
property in denial of or inconsistent with his rights.” Green Int’l, Inc. v. Solis, 951
S.W.2d 384, 391 (Tex. 1997). The gist of Ghrist’s conversion claim is that each of the
Ferguson Parties wrongfully exercised dominion and control over assets in the MBH
Portfolio that Ghrist contends belong to him. The origin of those purported
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ownership rights is contractual, being found in Ghrist’s fee sharing agreement with
the Ferguson Firm and the Separation Agreement between the two.
Ferguson, Anson, and MBH are not parties to those agreements. But that fact
alone is not sufficient to preclude applying the economic loss rule. See Sharyland, 354
S.W.3d at 419 (recognizing that economic loss rule can apply where there is no privity
of contract). The more pertinent inquiry is whether “the duty allegedly breached is
independent of the contractual undertaking and the harm suffered is not merely the
economic loss of a contractual benefit.” Chapman, 445 S.W.3d at 718.
The opinion in Brandon v. Wells Fargo Bank, N.A., No. 13-18-00393-CV, 2020
WL 2776714 (Tex. App.—Corpus Christi–Edinburgh May 28, 2020, no pet.), is
instructive. Wells Fargo Bank sued Brandon for defaulting on promissory notes held
by Wells Fargo and serviced by Midland Loan Services. Id. at *1. During the
litigation, a receiver sold the collateral securing the notes and the proceeds of sale
were applied to pay off the balance of the notes. Id. Brandon then filed
counterclaims against Wells Fargo and third-party claims against Midland disputing
their handling of the excess sale proceeds. Id. The trial court awarded Brandon a
substantial recovery following a bench trial. Id.
One of the claims on which Brandon recovered was conversion based on the
wrongful withholding of the excess sale proceeds and escrow funds. Id. at *12. The
court of appeals recognized that “[t]he parties’ respective obligations and duties were
contractual in nature, deriving from the loan documents.” Id. It also recognized that
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the only identified losses were economic injuries based on the loan contract and that
Brandon did not present any evidence of an independent injury outside the economic
loss associated with that contract. Id. The court therefore concluded that the
economic loss rule barred Brandon’s recovery for conversion. Id. It specifically noted
that this conclusion was not altered by the fact that there was no contract between
Brandon and Midland. Id. at *14 n.4.
In the present case, the fee sharing agreement and Separation Agreement are
the sources of Ghrist’s purported ownership of the assets that are the subject of his
conversion claim. Ferguson’s, Anson’s, and MBH’s obligations to collect, hold,
account for, and distribute those assets to Ghrist also derive from those agreements.
Finally, Ghrist’s asserted loss—the value of the assets to which he claims ownership
by virtue of the agreements—is purely economic loss associated with those
agreements. We conclude that Ghrist’s conversion claim is barred by the economic
loss rule.
The assertion of the economic loss rule in issue three is sustained as to the
conversion claim and otherwise overruled.
2. One Satisfaction Rule
In addition to invoking the economic loss rule, the Ferguson Parties contend in
issue three that Ghrist’s claims for damages are barred by the one satisfaction rule.
They do not, however, present any argument or authorities in support of this
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contention; they merely point out that the jury awarded the same damages on multiple
causes of action.
“For an issue to be properly before this court, the issue must be supported by
argument and authorities and must contain appropriate citations to the record.
Trebesch v. Morris, 118 S.W.3d 822, 825 (Tex. App.—Fort Worth 2003, pet. denied)
(citing Tex. R. App. P. 38.1). Failure to adequately brief an issue may result in waiver
on appeal. Id. The “one satisfaction rule” complaint is waived as inadequately
briefed. See id.; Tex. R. App. P. 38.1(i).
In any event, the judgment specifically recognizes that the jury awarded the
same damages for multiple causes of action against different parties and orders that
Ghrist is entitled “to a single recovery of not more than $220,114.47 in total actual
damages, not counting pre or post judgment interest, from all Defendants.” The
judgment thus ensures that Ghrist receive only one satisfaction on his claims. The
assertion of the one satisfaction rule in issue three is overruled.
3. Merger Clause (Issue Eleven)
In their eleventh issue, the Ferguson Parties argue that a merger clause in the
Separation Agreement bars all of Ghrist’s claims except for breach of contract. The
clause at issue reads: “This agreement closes any and all matters between Ian Ghrist
and/or Ghrist Law and J. Michael Ferguson, PC. If any issue was not addressed in
this agreement, it will not be raised at any time in the future.”
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“A ‘merger clause’ is ‘[a] provision in a contract to the effect that the written
terms may not be varied by prior or oral agreements because all such agreements have
been merged into the written document.’” IKON Office Sols., Inc. v. Eifert, 125 S.W.3d
113, 126 n.6 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (quoting Black’s
Law Dictionary 989 (6th ed. 1990)). Ghrist questions whether the contractual
provision quoted above is a merger clause at all. While we share this question, we
need not decide it to resolve the issue presented.
The only parties to the Separation Agreement are Ghrist and the Ferguson
Firm. The so-called merger clause specifies that it closes all matters between those
parties. It makes no mention of Ferguson, Anson, or MBH, or any matters between
Ghrist and those parties. The Ferguson Parties do not present any argument or
authorities establishing that the clause applies to, much less bars, Ghrist’s claims
against nonparties to the Separation Agreement. Further, it is not necessary to
determine whether the clause bars Ghrist’s noncontractual claims against the
Ferguson Firm because, as is discussed in detail below in connection with issue two,
we uphold Ghrist’s recovery against the firm for breach of contract.
Issue eleven is overruled.
C. Admitting Expert Testimony (Issue One)
1. The Role of the Courts
The role of a trial court when considering the admissibility of an expert’s
opinion is not to determine whether that opinion is true or false. E.I. du Pont de
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Nemours & Co. v. Robinson, 923 S.W.2d 549, 558 (Tex. 1995). Rather, “the trial court’s
role is to make the initial determination whether the expert’s opinion is relevant and
whether the methods and research upon which it is based are reliable.” Id. In other
words, “[t]he trial court is not to determine whether an expert’s conclusions are
correct, but only whether the analysis used to reach them is reliable.” Gammill v. Jack
Williams Chevrolet, Inc., 972 S.W.2d 713, 728 (Tex. 1998).
We review the trial court’s decision on admissibility of an expert’s opinion for
an abuse of discretion. See Robinson, 923 S.W.2d at 558. Thus, we will not disturb that
decision unless the trial court “acted without reference to any guiding rules or
principles.” See id.
2. Pretrial Motion to Strike
The Ferguson Parties first assert that the trial court abused its discretion by
denying their pretrial motion to exclude Brandon Lim’s expert testimony. But that
motion was not timely filed. An agreed pretrial scheduling order set a deadline of
September 8, 2017, to file motions to strike all or part of an expert’s testimony. The
order further provided that its deadlines could be changed only by Rule 11 agreement
signed by all parties or by filing a motion to extend demonstrating good cause for the
extension.
The Ferguson Parties filed their motion to strike Lim’s testimony on February
20, 2018, over five months after the deadline set in the agreed scheduling order. The
record does not reflect that they either obtained a Rule 11 agreement to extend that
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deadline or filed a motion to extend demonstrating good cause. The trial court did
not abuse its discretion by denying the pretrial motion to strike Lim’s testimony.
3. Trial Objection
During Lim’s trial testimony, the Ferguson Parties moved for a Rule 705
hearing. See Tex. R. Evid. 705. Rule 705 provides that, before an expert states an
opinion or discloses the facts or data underlying that opinion, an adverse party may be
permitted to examine him about the underlying facts or data outside the presence of
the jury. Id. If the underlying facts or data do not provide a sufficient basis for the
expert’s opinion, the opinion is inadmissible. Id.
Outside the presence of the jury, the Ferguson Parties conducted a voir dire
examination of Lim and then moved to exclude his opinions as unreliable because his
report purportedly contained over $70,000 in errors. The trial court denied the
motion.
4. Appellate Argument
The Ferguson Parties argue on appeal that Lim’s testimony is not relevant or
reliable because his expert report contains errors totaling more than $250,000. Their
brief contains a chart purporting to show that Lim wrongly classified some income
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and wrongly excluded some expenses from his calculation of damages.4 Ghrist
responds that the chart of purported errors is not supported by the record.
The Ferguson Parties do not argue that Lim’s opinions are unreliable because
his methodology was flawed.5 Their argument, in essence, is that Lim’s opinions are
wrong. This, however, is not a basis upon which to exclude his testimony. See
Gammill, 972 S.W.2d at 728 (stating court determines only if expert’s method is
reliable, not if conclusions are correct); Robinson, 923 S.W.2d at 558 (stating court’s
role is not to determine truth or falsity of expert opinion). The Ferguson Parties’
complaints about Lim’s opinions go to their weight, not their admissibility. See Ford
Motor Co. v. Ledesma, 242 S.W.3d 32, 40–41 (Tex. 2007); Heritage Operating, L.P. v. Rhine
Bros., LLC, No. 02-10-00474-CV, 2012 WL 2344864, at *10 (Tex. App.—Fort Worth
June 21, 2012, no pet.) (mem. op.).
The Ferguson Parties extensively cross-examined Lim and pointed out what
they perceived to be errors in his calculations and conclusions. It was then up to the
4
The Ferguson Parties’ brief also discusses a deposition taken of Lim in a
different case. We will not consider that discussion because the deposition was not
before the trial court and is not a part of the appellate record. See Ahmed v. Sosa, 514
S.W.3d 894, 896 (Tex. App.—Fort Worth 2017, no pet.) (stating court will not
consider document not formally part of appellate record).
5
The Ferguson Parties state in their brief that “Lim did not prepare his reports
and testimony using methodology in accordance with Generally Accepted Accounting
Principles (GAAP).” They do not, however, present any argument that this failure
caused Lim’s expert opinions to be unreliable. That issue is waived as inadequately
briefed. See Tex. R. App. P. 38.1(i).
23
jury—not the trial court—to determine what weight to give those calculations and
conclusions. See City of Keller v. Wilson, 168 S.W.3d 802, 819 (Tex. 2005) (explaining
that jurors are the sole judges of the credibility of witnesses and the weight to be given
their testimony).
The trial court did not abuse its discretion by denying the Ferguson Parties’
request to exclude Lim’s expert opinions. Issue one is overruled.
C. Sufficiency of the Evidence
1. Standards of Review and Preservation of Error
a. Legal sufficiency
Whether there is legally sufficient evidence to support a jury finding is
determined by “viewing the evidence in the light favorable to the verdict, crediting
favorable evidence if reasonable jurors could, and disregarding contrary evidence
unless reasonable jurors could not.” City of Keller, 168 S.W.3d at 807. A legal
sufficiency challenge will be sustained only if “(1) the record discloses 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 mere scintilla; or (4) the
evidence establishes conclusively the opposite of the vital fact.” Marathon Corp. v.
Pitzner, 106 S.W.3d 724, 727 (Tex. 2003) (per curiam).
A legal sufficiency challenge must be preserved for review by (1) objecting to
the charge, (2) moving for directed verdict, (3) moving to disregard the finding, (4)
24
moving for judgment notwithstanding the verdict, or (5) moving for new trial.
Hutchison v. Pharris, 158 S.W.3d 554, 562 (Tex. App.—Fort Worth 2005, no pet.)
(citing Cecil v. Smith, 804 S.W.2d 509, 510–11 (Tex. 1991)). The Ferguson Parties
preserved their various legal sufficiency challenges by objecting to the jury charge,
moving to disregard certain jury findings, and filing several motions for judgment
notwithstanding the verdict.
b. Factual sufficiency
Factual sufficiency is assessed by considering and weighing all of the evidence.
Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001) (per curiam). A fact finding
will be set aside under this standard only if it is “so against the great weight and
preponderance of the evidence that it is clearly wrong and unjust.” Id. (citing Pool v.
Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986) (op. on reh’g)). A complaint that the
evidence is factually insufficient to support a jury finding must be raised in a motion
for new trial to be preserved for appellate review. Tex. R. Civ. P. 324(b)(2); Hutchison,
158 S.W.3d at 562.
The Ferguson Parties filed several postjudgment motions in which they
requested that the court grant a new trial. But the basis for this request in each
motion was the Ferguson Parties’ assertion that they were entitled to a mistrial. None
of these motions contains a request for a new trial based on factual insufficiency of
the evidence.
25
The Ferguson Parties’ “Ninth Motion For Judgment Non-Obstante Verdicto
And Supplemental Motion For Mistrial And For New Trial” does contain assertions
of factual insufficiency as a basis for requesting a new trial. But a motion for new trial
must be filed within 30 days after the judgment is filed. Tex. R. Civ. P. 329b(a). The
judgment in this case was signed on October 9, 2018. The thirtieth day following that
date was November 8, 2018. The ninth motion was filed on November 9, 2018, one
day late. As a result, that motion is ineffective to preserve any factual sufficiency
challenges for our review. See id.; Defterios v. Dall. Bayou Bend, Ltd., 350 S.W.3d 659,
664 (Tex. App.—Dallas 2011, pet. denied) (“To preserve a factual sufficiency
challenge for appeal, a party must present the specific complaint to the trial court in a
motion for new trial.”).
Many of the Ferguson Parties’ issues on appeal are phrased in terms of whether
there is “any evidence or legally sufficient evidence” to support a particular jury
finding. Other issues are phrased in terms of whether there is “any evidence or
sufficient evidence.” Still others refer to the failure to award certain relief as being
“manifestly unjust and against the great weight and preponderance of the evidence.”
Insofar as these issues are intended to assert factual insufficiency of the evidence, they
are not preserved for our review. Our discussion of the Ferguson Parties’ sufficiency
issues is therefore confined to the legal sufficiency of the evidence.
26
2. Breach of the Separation Agreement (Issue Two)
In issue two, the Ferguson Firm challenges the legal sufficiency of the evidence
to support the jury’s finding that it breached the Separation Agreement. It contends
that Ghrist had agreed that he would not receive any payment from the Ferguson
Firm until all expenses he owed to the firm were paid. The firm asserts that
undisputed evidence shows that Ghrist owed it expenses at the time suit was filed and
that Ghrist did not present any evidence that the firm owed him anything as of that
date. The firm concludes that it could not have breached the Separation Agreement
because it had no obligation to pay Ghrist as long as he owed it any money.
The premise underlying the Ferguson Firm’s argument—that Ghrist was
required to repay all of the expenses under every paragraph of the Separation
Agreement before he was entitled to receive payment under any of those
paragraphs—was hotly disputed. Ferguson testified that he considered all of the
Separation Agreement provisions to be intermingled and stated, as an example, that
Ghrist would not be entitled to any payment under paragraph 14 of the agreement
(concerning payments on the MBH Portfolio) until he had paid all of the expenses he
owed under paragraph 11 (concerning expenses on the Plantation property). Ghrist
denied having discussed any agreement to that effect.
In addition, the Separation Agreement itself does not support the Ferguson
Firm’s premise. The agreement is set out in 13 discrete paragraphs (strangely
numbered 10 through 22). There is no language making any payment due to Ghrist
27
under one paragraph contingent on his payment to the firm under any other
paragraph. For example, paragraph 14 recites that funds due to Ghrist relating to the
Boles and Diffenwierth litigations “will be paid,” and provides that the firm “shall
first collect $15,000 plus any filing fees incurred in obtaining the original judgment
plus interest on those funds.” Paragraph 11 recites that Ghrist has a “net equity”
interest in the Plantation property equal to 1/3 less certain costs relating to acquiring,
remodeling, and marketing the property. It then provides that “Ghrist shall receive
the Net Equity interest of cash or 1/3 of cashflow from Net Equity in house.”
Neither paragraph 11 nor paragraph 14 refers to the other and nothing else in the
agreement ties the parties’ obligations under one paragraph to their obligations under
another.
The jury could reasonably have rejected the Ferguson Firm’s interpretation of
the Separation Agreement and concluded instead that the firm owed Ghrist under
paragraph 14 when it had collected the expenses due under that paragraph, regardless
of the status of payments due under paragraph 11 or any other provision of the
agreement.6 For that reason, the premise underlying the Ferguson Firm’s first issue is
faulty and the issue may be overruled on that basis alone.
6
No party has asserted that the Separation Agreement is unambiguous and
should be construed as a matter of law.
28
Nevertheless, the issue also lacks merit because the record contains evidence
that, even accounting for all of the expenses identified in the Separation Agreement,
the Ferguson Firm owed Ghrist money at the time Ghrist filed suit. Lim’s expert
report demonstrates that as of September 20, 2016 (the date Ghrist filed suit), the
total note balance owed to Ghrist was $153,781.37. The total cash owed to Ghrist
was $61,237.45 and the outstanding expenses relating to Ghrist’s law firm expenses
totaled $1,821.42. The net cash balance owed to Ghrist was thus $59,416.03. Adding
that amount to the note balance owed results in a total amount owed to Ghrist of
$213,197.41.7 Lim explained each of these calculations to the jury and testified that, in
reaching the amount owed to Ghrist, he deducted all of the fees and expenses
Ferguson provided to him.
Lim’s expert report and Lim’s accompanying testimony provide evidence that,
even lumping together all of Ghrist’s obligations under the Separation Agreement, the
Ferguson Firm owed him a substantial sum at the time Ghrist filed suit. The jury
could reasonably have found from that evidence that the firm’s failure to pay that sum
was a breach of the Separation Agreement. The evidence is therefore legally sufficient
to support that finding.
7
Lim’s calculation appears to be off by one cent. $153,781.37 + $61,237.45 –
$1,821.42 = $213,197.40 not $213,197.41.
29
The Ferguson Firm also contends in issue two that the parties entered into two
Rule 11 agreements that modified the Separation Agreement and that there is no
evidence that it breached either of those agreements. The first agreement provided
that payments from the MBH Portfolio would be made in trust to Ghrist’s attorney
and that a $5,000 payment would be made to Ghrist. But the parties also agreed that
they still disputed who was entitled to those funds and the trial court acknowledged
that the purpose of the agreement was “to just get us off the docket today.” Nothing
in the agreement indicates any intent by the parties to modify the Separation
Agreement.
The Ferguson Firm describes the second Rule 11 agreement as providing that
certain payments would be made into the registry of the court. It cites to appendix 28
to its brief but that document is the same as appendix 27, which is the first Rule 11
agreement just discussed. We decline to search the voluminous record for evidence
of a second Rule 11 agreement. In any event, the Ferguson Firm does not explain
how an agreement to pay funds into the registry of the court during the course of
litigation constitutes a modification of the contract that is the subject of that litigation.
The jury’s breach of contract finding against the Ferguson Firm is expressly
limited to breach of the Separation Agreement. We have determined above that there
is legally sufficient evidence to support that finding. Issue two is overruled.
30
3. Benefit of the Bargain Damages (Issue Four)
The trial court submitted two questions asking the jury to find Ghrist’s benefit
of the bargain damages. Question five inquired about those damages in the context
of Ghrist’s breach of contract claim, and question eleven made the same inquiry in the
context of his breach of fiduciary duty claim. The jury was instructed in both
contexts that “[l]oss of the benefit of the bargain means the difference, if any,
between the value of the agreement that was bargained for and the value of what was
received, if anything.”
The Lim report states that, as of December 31, 2017, the net cash balance
owed to Ghrist was $107,127.11 and the jury found that Ghrist’s past benefit of the
bargain damages were $104,700.83. The Lim report also states that the total note
balance owed to Ghrist was $131,636.72 and the jury found that Ghrist’s future
benefit of the bargain damages were that same amount. As previously explained, the
judgment reduced the jury’s past award to $96,605.16 and the future award to
$115,981.52.
In their fourth issue, the Ferguson Parties contend that the trial court erred by
submitting benefit of the bargain damages to the jury and that there is legally
insufficient evidence to support the jury’s findings on those damages. Because a court
is required to submit to the jury requested questions that are supported by the
pleadings and any evidence, the contention that the court should not have submitted
the benefit of the bargain questions is subsumed within the contention that the
31
evidence is legally insufficient to support the jury’s verdict.8 See Elbaor v. Smith, 845
S.W.2d 240, 243 (Tex. 1992) (explaining that trial courts are required to submit
requested questions to the jury if pleadings and any evidence support them); Tex. R.
Civ. P. 278 (providing court shall submit questions raised by pleadings and evidence).
The Ferguson Parties first argue that there is no evidence to support any
damages because Lim’s testimony and report should have been excluded. We have
determined above that the trial court did not abuse its discretion by admitting that
evidence.
The Ferguson Parties next assert that Lim’s testimony and report do not detail
the alleged loss of the benefit of the bargain, the jury’s verdict is not supported by the
application of any accounting from Lim’s testimony or report, and the testimony and
report do not contain any evidence of the “value” of the loss of Ghrist’s benefit of
the bargain. They simply state these complaints without presenting any supporting
argument or citation to authorities. This portion of issue four is inadequately briefed
and, as a consequence, is waived. See Trebesch, 118 S.W.3d at 825; Tex. R. App. P.
38.1(i).
The remainder of the Ferguson Parties’ arguments under issue four consist of
disagreements with the content of Lim’s testimony and report. For example, they
The Ferguson Parties raise these same contentions concerning the submission
8
of “damages after mitigation,” but we need not address those complaints because the
judgment does not contain an award for those damages.
32
argue that the Lim report does not account for all of the expenses Ghrist owed. Lim
repeatedly testified, though, that he relied on Ferguson to supply the data included in
his report, that he included in that report all of the expenses Ferguson disclosed to
him, and that he relied on Ferguson for the accuracy of the data.
Regardless of any disagreement the Ferguson Parties may have with Lim’s
testimony and report, the fact remains that that they constitute evidence on which the
jury was entitled to rely. The Ferguson Parties subjected Lim to extensive cross-
examination and presented considerable testimony explaining their own theory of
what was owed to and by Ghrist. The jury was the sole judge of the credibility of the
witnesses and the weight to give their testimony. City of Keller, 168 S.W.3d at 819.
That the jury accepted Ghrist’s version of damages rather than the Ferguson Parties’
version does not render the evidence insufficient to support its assessment of
damages.
We acknowledge that the jury verdict appears to include amounts that the
parties agreed should be credited to the Ferguson Parties, such as a $5,000 payment
made to Ghrist. But even if we were to conclude that the evidence does not support
including those amounts, there is no reversible error because the trial court later
applied the agreed credits to reduce Ghrist’s recovery in the judgment. In other
words, the error did not probably cause rendition of an improper judgment. See Tex.
R. App. P. 44.1.
33
The Ferguson Parties have not demonstrated that the evidence is legally
insufficient to support the jury’s findings on benefit of the bargain damages. Issue
four is overruled.
4. Joint Venture (Issue Nine)
Ferguson and the Ferguson Firm challenge the legal sufficiency of the evidence
to support the finding that they entered into a joint venture with Ghrist. The
formation of a joint venture is governed by the same law as governs partnerships. See
Tex. Bus. Orgs. Code Ann. § 152.051(b) (providing “an association of two or more
persons to carry on a business for profit as owners creates a partnership, regardless of
whether . . . the association is called a ‘partnership,’ ‘joint venture,’ or other name”).
The Business Organizations Code lists five factors to consider in determining
whether a partnership or joint venture exists:
(1) receipt or right to receive a share of profits of the business;
(2) expression of an intent to be partners in the business;
(3) participation or right to participate in control of the business;
(4) agreement to share or sharing:
(A) losses of the business; or
(B) liability for claims by third parties against the business; and
(5) agreement to contribute or contributing money or property to the
business.
Id. § 152.052(a). While the common law required proof of each of these factors, the
statute does not. See Ingram v. Deere, 288 S.W.3d 886, 896 (Tex. 2009) (noting in the
context of construing a predecessor statute that formation of a partnership is now
determined by the totality of the circumstances).
34
The source of any joint venture between the parties must be the oral fee
sharing agreement rather than the Separation Agreement. The fee sharing agreement
governed the parties’ relationship in the context of the present and future
representation of clients; the Separation Agreement evidenced the termination of that
relationship. Ghrist testified that he and the Ferguson Firm were engaged in a joint
venture to represent clients and to split the attorney’s fees 2/3 to the firm and 1/3 to
himself. He further testified that each individual case was a separate joint venture.
Ferguson and the Ferguson Firm argue that there can be no joint venture
because there is no evidence that Ghrist had any right of control or that he agreed to
share business losses. Ghrist responds, in reliance on Ingram, that he was not required
to present evidence of those factors and that whether the parties entered a joint
venture is determined by the totality of the circumstances. See id. 895–96.
Ghrist is correct that, in the usual case, a party seeking to establish a joint
venture need not prove every element listed in Section 152.052 or required by the
common law. See id. But the sufficiency of the evidence is not measured by the usual
case. Rather, it is measured by the particular charge given to the jury when there has
been no objection to that charge. Green v. Dall. Cty. Schs., 537 S.W.3d 501, 506 (Tex.
2017) (per curiam); see Romero v. KPH Consol., Inc., 166 S.W.3d 212, 221 (Tex. 2005).
The jury in this case was instructed that “[a] joint venture must be based on an
agreement that has all the following elements: l. A community of interest in the venture[,]
2. An agreement to share profits, 3. An express agreement to share losses, and 4. A
35
mutual right of control or management of the venture.” [Emphasis added.] The
record does not reflect any objection to this instruction. The instruction thus governs
our sufficiency review and Ghrist’s failure to present sufficient evidence of any of the
listed elements will require reversal.
We need look no further than the element of an agreement to share losses.
The Ferguson Firm fronted the expenses for cases that were worked jointly with
Ghrist, and those expenses were then reimbursed from the client’s recovery. The firm
took the risk that those expenses would not be recouped if it did not obtain any
recovery for the client. Ghrist, on the other hand, had no liability to pay any expenses
that were not reimbursed by the client.
Reimbursed case expenses are not losses. Thus, deducting those expenses
before splitting attorney’s fees under the fee sharing agreement does not constitute a
sharing of losses. Unreimbursed expenses that exceed collected fees, such as
expenses fronted on cases that ultimately result in no recovery, are losses. But the
evidence is undisputed that Ghrist did not agree to pay any portion of those
unreimbursed expenses. In other words, he did not agree to share losses.
The evidence is legally insufficient to support a finding that Ghrist agreed with
either Ferguson or the Ferguson Firm to share losses. As measured by the charge
submitted to the jury, the evidence is legally insufficient to support the finding that
Ghrist entered into a joint venture with Ferguson or the Ferguson Firm. See Green,
36
537 S.W.3d at 506 (explaining that sufficiency of the evidence is measured by the
charge). Issue nine is sustained.
5. Breach of Fiduciary Duty (Issue Eight)
“Generally, the elements of a claim for breach of fiduciary duty are (1) the
existence of a fiduciary duty, (2) breach of the duty, (3) causation, and (4) damages.”
First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 220 (Tex. 2017). In
their eighth issue, the Ferguson Parties contend that the evidence is legally insufficient
to support findings on each of these elements against the Ferguson Firm, Ferguson,
or Anson. We need not consider these issues in relation to the Ferguson Firm
because we have concluded above that the firm is liable for breach of the Separation
Agreement, the claim on which Ghrist elected to recover. A finding that it is also
liable for a breach of fiduciary duty would not alter the judgment against the firm and
is therefore not necessary to the final disposition of this appeal. See Tex. R. App. P.
47.1.
Texas law recognizes that certain formal relationships, such as an attorney-
client or trustee relationship, give rise to fiduciary duties as a matter of law. Meyer v.
Cathey, 167 S.W.3d 327, 330–31 (Tex. 2005) (per curiam) (citing Johnson v. Brewer &
Pritchard, P.C., 73 S.W.3d 193, 199 (Tex. 2002)). It also recognizes “an informal
fiduciary duty that arises from ‘a moral, social, domestic or purely personal
relationship of trust and confidence.’” Id. (quoting Associated Indem. Corp. v. CAT
Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998)). The courts do not, however, create
37
informal fiduciary relationships lightly. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d
171, 177 (Tex. 1997).
“To impose an informal fiduciary duty in a business transaction, the special
relationship of trust and confidence must exist prior to, and apart from, the agreement
made the basis of the suit.” Associated Indem., 964 S.W.2d at 288. Prior arms-length
transactions for the parties’ mutual benefit do not establish a basis for a fiduciary
relationship, nor does subjective trust create such a relationship. Meyer, 167 S.W.3d at
331; Associated Indem., 964 S.W.2d at 288.
It is undisputed that there was no formal relationship between Ghrist and
Ferguson that would give rise to any fiduciary duties between the two. There was a
formal attorney-client relationship between Ghrist and Anson, but given that Ghrist
was the attorney and Anson was the client, that relationship did not give rise to any
fiduciary duties owed by Anson to Ghrist. See Joe v. Two Thirty Nine Joint Venture, 145
S.W.3d 150, 154 (Tex. 2004) (recognizing attorneys owe clients fiduciary duties). The
question, then, is whether there is evidence of an informal fiduciary duty owed to
Ghrist by Ferguson or Anson as a result of a special relationship of trust and
confidence existing prior to, and apart from, the Separation Agreement.9 See Meyer,
167 S.W.3d at 331; Associated Indem., 964 S.W.2d at 288.
9
We focus on the Separation Agreement because there is no evidence that
Ghrist had any relationship at all with Ferguson or Anson prior to the fee sharing
agreement.
38
Ghrist testified that he believed Ferguson and the defendant entities, which
include Anson, owed him a fiduciary duty because they were “holding and being
responsible for the monies that were being collected and also for the accountings that
were being done for those monies,” a percentage of which belonged to Ghrist. He
also testified that he trusted Ferguson with this money because the fee sharing
agreement had worked many times before. Ghrist further explained that he believed
Ferguson owed him fiduciary duties because Ferguson had the authority to direct
what happened to the money held by the entities and was the “real person” whom
Ghrist contacted when dealing with those entities.
Ghrist’s testimony is insufficient to establish the existence of a fiduciary
relationship with either Ferguson or Anson. While he testified that he trusted
Ferguson, his subjective trust cannot create such a relationship. See Meyer, 167 S.W.3d
at 331; Associated Indem., 964 S.W.2d at 288. In addition, Ghrist’s relationship with
Ferguson prior to the Separation Agreement consisted of arms-length business
transactions for their mutual benefit. See Meyer, 167 S.W.3d at 331; Associated Indem.,
964 S.W.2d at 288. Ferguson and Ghrist worked together to provide legal services to
clients. Ghrist was permitted to choose which cases he participated in and was also
permitted to represent clients independently of Ferguson and his firm. Ferguson and
his firm benefitted from Ghrist’s assistance on cases and from receiving a portion of
the fees he generated; Ghrist benefitted from participating in Ferguson’s cases and
from receiving a portion of the fees Ferguson generated.
39
Ghrist’s relationship with Anson, other than the attorney-client relationship
previously noted, also consisted of arms-length business transactions for their mutual
benefit. Ghrist, as receiver, hired Anson to collect from the borrowers on the Boles
notes. Anson, in return, was paid a fee for its services.
The core of Ghrist’s position that Ferguson and Anson owed him fiduciary
duties is that they controlled money or property that belonged to him. Ghrist cites In
re Harwood, 637 F.3d 615 (5th Cir. 2011), and McBeth v. Carpenter, 565 F.3d 171 (5th
Cir. 2009), for the proposition that such control is sufficient to establish a fiduciary
relationship. But both of those cases concerned parties who were in a formal
partnership relationship. See Harwood, 637 F.3d at 620-22; McBeth, 565 F.3d at 177-78.
No such relationship exists in this case; Harwood and McBeth are inapposite.
There is no evidence that Ghrist’s business relationship with Ferguson or
Anson rose to the level of a special relationship of trust and confidence.
Consequently, the evidence is legally insufficient to support the jury’s finding that
such a relationship existed. Without that finding, there is no basis upon which to find
that either Ferguson or Anson breached any fiduciary duty to Ghrist. Issue eight is
sustained.
6. Fraud and Negligent Misrepresentation (Issue Twelve)
The jury found that Ferguson, the Ferguson Firm, and Anson each committed
fraud against Ghrist, and that Ferguson and the Ferguson Firm also committed
negligent misrepresentation. These parties challenge the legal sufficiency of the
40
evidence to support these findings. The judgment includes recovery for fraud but not
for negligent misrepresentation. As a result, it is not necessary to address the latter
claim. It is also not necessary to determine whether the Ferguson Firm is liable for
fraud because we have concluded above that it is liable for breach of contract, the
claim on which Ghrist elected to recover. See Tex. R. App. P. 47.1
a. Reliance
Reliance is an essential element of fraud. Anderson v. Durant, 550 S.W.3d 605,
614 (Tex. 2018); Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143, 153 (Tex. 2015).
Although the Ferguson Parties broadly assert that the evidence is legally insufficient to
support the jury’s finding of fraud, reliance is the only element they specifically
address.10 Consequently, we restrict our analysis to this element.
Ghrist testified that he would not have moved receivership assets into MBH
but for his understanding from Ferguson that Ghrist would be a 13.33% owner of
MBH. There is also evidence that Ghrist was induced to enter the Separation
Agreement by relying on Ferguson’s representations that all expenses were already
covered by collections and that monthly payments would begin in January. This
10
The Ferguson Parties also state in their opening brief that there is no evidence
of damages, but they merely refer to their argument under issue one. Similarly, they
state that fraud and negligent misrepresentation are barred by the economic loss rule,
but they merely refer to their argument under issue three. We have addressed issues
one and three above. Finally, in their reply brief, they challenge Ghrist’s factual
statements concerning misrepresentations but they do not present any argument or
authorities challenging the sufficiency of the evidence of that element of fraud.
41
evidence is sufficient to support the reliance element of fraud as asserted against
Ferguson. The record does not, however, contain any evidence that Ghrist relied on
any misrepresentation by Anson. Issue twelve is sustained as to Anson and overruled
as to Ferguson.
b. Disgorgement of fees
The jury found that the Ferguson Firm and Anson charged $56,462.12 in fees
to the MBH Portfolio and that $7,528.09 of those fees should be disgorged to Ghrist.
The Ferguson Parties contend that there is no evidence to support either of these
findings.
Disgorgement is an equitable remedy for breach of fiduciary duty and fraud.
See Sw. Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 729 (Tex. 2016) (recognizing
disgorgement as remedy for breach of fiduciary duty); Robertson v. ADJ P’ship, Ltd., 204
S.W.3d 484, 494 (Tex. App.—Beaumont 2006, pet. denied) (recognizing disgorgement
as remedy for fraud and breach of fiduciary duty). We have held above that the
evidence is legally insufficient to support findings of breach of fiduciary duty or fraud
against Anson. As a result, there is no basis upon which to order Anson to disgorge
any fees charged to MBH.
Ghrist elected to recover against the Ferguson Firm for breach of contract, not
breach of fiduciary duty. This is apparent both from Ghrist’s statement to the trial
court that he sought judgment against the firm only on the contract claim and from
the award of attorney’s fees contained in the judgment, which is expressly predicated
42
on the breach of contract claim. There is thus no basis upon which to order the
Ferguson Firm to disgorge any fees it charged to MBH.
Issue twelve is sustained as to Anson’s liability.
7. Alter Ego (Issue Thirteen)
Ferguson argues that he cannot be held individually liable for fraud because he
is not a party to the Separation Agreement and because Ghrist abandoned his
assertion of alter ego.
“Because fraudulent inducement arises only in the context of a contract, the
existence of a contract is an essential part of its proof.” Anderson, 550 S.W.3d at 614.
But Ferguson has not cited any authority, and we are aware of none, that requires that
the perpetrator of the fraud be a party to the resulting contract. Indeed, imposing
such a requirement would permit the individual representatives of contracting entities
to engage in fraudulent misrepresentations with impunity. It is sufficient in this case
that Ferguson made misrepresentations on which Ghrist relied to induce Ghrist to
enter the Separation Agreement. That Ferguson is not individually a party to that
agreement does not negate his liability for fraud.
Ghrist’s abandonment of the alter ego theory similarly does not relieve
Ferguson of individual liability for his own misrepresentations. “The law is well-
settled that a corporate agent can be held individually liable for fraudulent statements
or knowing misrepresentations even when they are made in the capacity of a
representative of the corporation.” Kingston v. Helm, 82 S.W.3d 755, 759 (Tex. App.—
43
Corpus Christi–Edinburg 2002, pet. denied); see Miller v. Keyser, 90 S.W.3d 712, 717
(Tex. 2002) (recognizing “Texas’ longstanding rule that a corporate agent is personally
liable for his own fraudulent or tortious acts”). It was therefore not necessary for
Ghrist to obtain an alter ego finding to hold Ferguson personally liable for his own
fraud.
Ferguson also argues that the lack of an alter ego finding precludes his
individual liability for other causes of action. Because we uphold Ferguson’s liability
for fraud, we need not determine his liability, with or without a finding of alter ego,
under any additional causes of action.
Issue thirteen is overruled.
8. Conversion (Issue Six)
The jury found that the Ferguson Firm, Ferguson, Anson, and MBH each
committed conversion against Ghrist and that Ghrist suffered damages of
$234,516.13 as a result. The Ferguson Parties challenge the legal sufficiency of the
evidence to support these findings. We have previously determined that Ghrist’s
conversion claim is barred by the economic loss rule. As a result, it is not necessary to
address the sufficiency of the evidence to support that claim. Issue six is overruled.
9. Quantum Meruit (Issue Ten)
The Ferguson Parties complain that there is legally insufficient evidence to
support Ghrist’s quantum meruit claim. But the judgment does not include any
44
recovery on this claim. It is therefore not necessary to resolve this issue in order to
dispose of this appeal. See Tex. R. App. P. 47.1. Issue ten is overruled.
10. Ghrist’s Attorney’s Fees (Issue Seven)
a. Actual damages
The trial court awarded Ghrist $119,000 in attorney’s fees on his claim for
breach of contract against the Ferguson Firm. The firm first challenges that award on
the ground that Ghrist failed to establish breach of contract damages. But we have
determined in the context of issue one that he did.
b. Typographical error in the jury charge
The Ferguson Firm next argues that the jury could not award any fees for
services performed by Caleb Moore, Ghrist’s trial attorney. Moore conducted the
entirety of the trial on Ghrist’s behalf. He examined the witnesses, gave opening and
closing arguments to the jury, engaged in bench conferences, and testified at length
concerning his attorney’s fees.
The firm contends that Ghrist was not entitled to recover Moore’s fees because
the question submitted to the jury was limited to fees for services performed by
Ghrist. Question 21 asked, “What is a reasonable fee for the necessary services
performed by Ian Ghrist/Ghrist Law Firm, attorney in this case pursuing claims for
breach of the Separation Agreement against J. Michael Ferguson, P.C.?” In
comparison, Question 41 asked, “What is a reasonable fee for the necessary services
45
performed by J. Michael Ferguson, P.C.’s, attorney in this case pursuing claims for
breach of contract against Ian Ghrist/Ghrist Law Firm?” [Emphasis added.]
Ghrist contends that Question 21 contains a typographical error—“Ian
Ghrist/Ghrist Law Firm” should be followed by an apostrophe and an “s,” just as “J.
Michael Ferguson, P.C.” is followed by an apostrophe and an “s” in Question 41.
Ghrist further contends that the jury was not confused or misled by this typographical
error.
The jury charge as a whole, and portions of the record relating to that charge,
support the conclusion that Question 21 contains a typographical error. Indeed, both
Questions 21 and 41 contain an additional typographical error—the inclusion of a
comma before the phrase “attorney in this case.” In addition, the trial court
instructed the jury that the charge contained two identified typographical errors and
possibly others that had not been identified:
Well, ladies and gentlemen of the jury, as you heard, it was a very long
night for us last night. And so the charge, it’s not perfect, but it’s the
best that we could do, but the Court, with the permission of counsel --
and I believe I do have the permission of counsel. You’re going to possibly
find some other typographical errors, but there are two things that I want to
correct for you.
[Emphasis added.]
The court then informed the jury of corrections to Question 25 (concerning
excuse for Ghrist’s breach of contract) and Question 31 (concerning breach of
fiduciary duty by Ghrist).
46
Giving the jury credit for exercising common sense in the face of the court’s
express warning that the charge might contain typographical errors and the fact that
Questions 21 and 41 contain the same inquiry except for the apostrophe “s,” we
conclude that the jury was permitted to include Caleb Moore’s fees in its attorney’s fee
award to Ghrist. See Eagle Oil & Gas Co. v. Shale Expl., LLC, 549 S.W.3d 256, 280
(Tex. App.—Houston [1st Dist.] 2018, pet. dism’d) (noting that a “verdict should not
be reversed based on a typographical error if the error is susceptible to commonsense
detection by the jury”).
c. Award exceeding the attorney’s bills
The Ferguson Firm’s next complaint is that Ghrist’s attorney’s fee award
exceeds the amount contained in the attorneys’ billing records by $11,100. But the
firm overlooks that Moore testified that he reviewed his and Ghrist’s billing records,
segregated fees for the breach of contract claim, reduced some of the fees, and
concluded that the total amount of reasonable and necessary fees was $119,000—the
precise amount awarded by the jury.
The jury was not asked to find the amount of attorney’s fees billed to or
incurred by Ghrist; it was asked to find a reasonable fee for the necessary services
performed in pursuing Ghrist’s breach of contract claim. “Texas courts have held
that a party entitled to attorneys’ fees need not show that the fees requested were
actually incurred unless the statute authorizing a fee award requires such proof.” Van
Dyke v. Builders W., Inc., 565 S.W.3d 336, 345–46 (Tex. App.—Houston [14th Dist.]
47
2018, pet. denied). Section 38.001 of the Texas Civil Practice and Remedies Code, the
statute that authorizes the recovery of attorney’s fees for a breach of contract claim,
does not require proof that fees were actually incurred. See Tex. Civ. Prac. & Rem.
Code Ann. § 38.001.
We have expressly recognized that “[t]he existence of a fee contract and proof
of fees actually incurred or paid are not prerequisites to the recovery of attorney’s fees
in Texas.” Gluck v. Hadlock, No. 02–09–00411–CV, 2011 WL 944439, at *5 (Tex.
App.—Fort Worth March 17, 2011, no pet.) (mem. op.) (quoting AMX Enters., L.L.P.
v. Master Realty Corp., 283 S.W.3d 506, 520 (Tex. App.—Fort Worth 2009, no pet.) (op.
on reh’g). The San Antonio Court of Appeals has similarly affirmed an attorney’s fee
award in circumstances where there was “no assertion that the attorney’s fees
requested or awarded in this case were unreasonable or unnecessary, only that they
were not ‘incurred.’” Sloan v. Owners Ass’n Of Westfield, Inc., 167 S.W.3d 401, 405 (Tex.
App.—San Antonio 2005, no pet.).
We conclude that Ghrist was entitled to recover reasonable and necessary
attorney’s fees regardless of whether the fees awarded by the jury were included in his
and Moore’s billing records.
The Ferguson Firm contends that some of the fees included in Ghrist’s billing
records were not reasonable and necessary. But Moore acknowledged that some of
Ghrist’s fees were not recoverable and testified that, in reaching the $119,000 figure,
he reduced the hours included for Ghrist’s time from 405 hours to 220 hours. The
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Ferguson Firm does not demonstrate that the fees about which it complains are
included in the $119,000 requested by and awarded to Ghrist. Also, it does not assert
that $119,000 as a whole is an unreasonable or unnecessary fee for pursuing Ghrist’s
breach of contract claim.
Because the record supports the reasonableness and necessity of the attorney’s
fees awarded to Ghrist, and because the statute authorizing those fees does not
require that they be actually incurred, we overrule the Ferguson Firm’s complaint
concerning the amount of the fee award.
d. Improper contingent fee
The Ferguson Firm’s fourth complaint relating to Ghrist’s attorney’s fee award
is that Moore is improperly attempting to recover a contingent fee without having a
contract for such a fee. Moore testified that his original fee agreement with Ghrist
was based on an hourly rate but that they later entered a second fee agreement
providing for a contingency fee on any recovery of exemplary damages.
Whether Moore had an enforceable contingent fee contract is of no
consequence to this appeal. The jury did not award Ghrist any exemplary damages
and so the contingency stated in Moore’s second fee contract did not occur. As noted
above, Moore testified that Ghrist’s reasonable and necessary attorney’s fees, based on
an hourly rate for services rendered by Moore and by Ghrist, totaled $119,000. That
is the precise amount awarded by the jury. Because the attorney’s fee award to Ghrist
49
is not a contingent fee, the Ferguson Firm’s complaint regarding the validity of a
contingent fee contract presents no error and is overruled.
e. Pro se attorney’s fees
The Ferguson Firm next asserts that Ghrist cannot recover attorney’s fees for
his own services because pro se litigants are not entitled to recover such fees. See
Jackson v. State Office of Admin. Hearings, 351 S.W.3d 290, 300 (Tex. 2011) (holding pro
se litigant cannot recover attorney’s fees under Texas Public Information Act because
Act requires fees be incurred). But the supreme court has acknowledged that a law
firm may recover fees for representation by its own attorney and that an attorney may
recover fees for representing himself. See Rohrmoos Venture v. UTSW DVA Healthcare,
LLP, 578 S.W.3d 469, 488 (Tex. 2019).
We note that the Ferguson Firm raised the same argument concerning pro se
attorney’s fees in another case involving Ghrist, and this argument was rejected:
We observe that other courts have held that a law firm can be awarded
fees for representation by its own attorneys and that attorneys can be
awarded fees for their own pro se representation. See Rohrmoos Venture v.
UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 488 (Tex. 2019)
(discussing arrangements encompassed within requirement that party
must be represented by an attorney to secure an award of attorney’s fees)
(citing Campbell, Athey & Zukowski v. Thomasson, 863 F.2d 398, 400 (5th
Cir. 1989)); Beckstrom v. Gilmore, 886 S.W.2d 845, 847 (Tex. App.—
Eastland 1994, writ denied); see also AMX Enters., L.L.P. v. Master Realty
Corp., 283 S.W.3d 506, 520–21 (Tex. App.—Fort Worth 2009, no pet.)
(op. on reh’g) (discussing right to recover in-house attorney’s fees).
Therefore, we decline to reverse the trial court’s award of attorney’s fees
on this basis.
50
J. Michael Ferguson, PC v. Ghrist, No. 07-20-00027-CV, 2020 WL 7549944, at *11 (Tex.
App.—Amarillo Dec. 21, 2020, no pet.) (mem. op.).11
In Beckstrom, one of the cases on which the Amarillo court relied, the Eastland
Court of Appeals rejected a claim that a pro se attorney may not recover attorney’s
fees under Chapter 38 of the Texas Civil Practice and Remedies Code. 886 S.W.2d at
847. That court reviewed the requirements for recovering fees under that statute,
including the requirement that the claimant be represented by an attorney, and
concluded there is no requirement that the attorney be a person other than the
claimant. Id.
In accordance with the authorities cited above, we conclude that Ghrist, a
licensed attorney, is entitled to recover attorney’s fees under Chapter 38 for
representing himself and his law firm. See Rohrmoos Venture, 578 S.W.3d at 488; Ghrist,
2020 WL 7549944, at *11; Beckstrom, 886 S.W.2d at 847.
f. Presentment of the claim
The Ferguson Firm’s last complaint concerning attorney’s fees is that Ghrist
did not prove that he presented his claim as required by statute. See Tex. Civ. Prac. &
Rem. Code Ann. § 38.002. Section 38.002 requires that a party seeking attorney’s fees
11
This case was originally appealed to the Second Court of Appeals and was
transferred to the Seventh Court of Appeals by the Texas Supreme Court. Ghrist,
2020 WL 7549944, at *1 n.1. The Seventh Court of Appeals thus applied the Second
Court of Appeals’ precedent. Id. (citing Tex. R. App. P. 41.3).
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“present the claim to the opposing party or to a duly authorized agent of the opposing
party.” Id. § 38.002(2). “The purpose of presentment is to allow the person against
whom the claim is asserted an opportunity to pay a claim within thirty days after
notice of the claim without incurring an obligation for attorneys’ fees.” McDowell v.
Bier, No. 2-09-231-CV, 2010 WL 1427244, at *6 (Tex. App.—Fort Worth Apr. 8,
2010, no pet.) (mem. op.) (citing Jones v. Kelley, 614 S.W.2d 95, 100 (Tex. 1981)).
Presentment is not required to be in any particular form. Town Ctr. Mall, L.P. v.
Dyer, No. 02-14-00268-CV, 2015 WL 5770583, at *7 (Tex. App.—Fort Worth Oct. 1,
2015, pet. denied) (mem. op.) (citing France v. Am. Indem. Co., 648 S.W.2d 283, 286
(Tex. 1983)). “[A]ll that is necessary is that a party show that its assertion of a debt or
claim and a request for compliance was made to the opposing party, and the opposing
party refused to pay the claim.” Id. (quoting Standard Constructors, Inc. v. Chevron Chem.
Co., 101 S.W.3d 619, 627 (Tex. App.—Houston [1st Dist.] 2003, pet. denied)).
Plaintiffs’ exhibit 9(c) is an email from Ghrist to Ferguson dated May 6, 2016,
four months before he filed suit, in which Ghrist calculates the amounts he asserts are
due based on the information available to him. He states that those amounts have not
been paid and expressly demands payment. Ferguson’s response to that email, which
is contained in the same exhibit, shows that he recognized, but refused, that demand.
The Ferguson Firm argues that the May 6, 2016 email does not constitute a
demand sufficient to satisfy Section 38.002 because it does not state a “just amount
due” or provide that the firm has 30 days in which to pay. We disagree. The
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requirement of presentment is liberally construed to promote its purpose. Jones, 614
S.W.2d at 100. Ghrist’s May 6, 2016 was sufficient to assert a debt owed to him by
the Ferguson Firm, to request that the firm pay that debt, and to give the firm the
opportunity to avoid incurring an obligation to pay Ghrist’s attorney’s fees. No more
was required to satisfy the statute and promote its purpose. See Dyer, 2015 WL
5770583, at *7; McDowell, 2010 WL 1427244, at *6.
Issue seven is overruled.
11. Failure to Award Additional Relief to the Ferguson Firm (Issue
Fifteen)
The jury found that the Ferguson Firm sustained damages of $1,821.42 as a
result of Ghrist’s failure to comply with the Separation Agreement. The firm
acknowledges that this is the amount of startup costs Ghrist owed the firm under
paragraphs 19 and 20 of that agreement. It argues, though, that the jury’s failure to
award it additional damages is manifestly unjust because it conclusively proved it was
entitled to recover $40,685.67 in other expenses.
The Ferguson Firm relies on evidence that Ghrist had not paid it any money to
cover expenses referenced in paragraphs 11 and 14 of the Separation Agreement.
Ghrist testified at trial that he had not written any checks to pay off any expenses
identified in the agreement. But that does not end the matter because the jury could
have concluded that Ghrist was not required by the agreement to pay all of those
53
expenses.12 We bear in mind that the most important consideration in interpreting
any contract is the plain meaning of its operative language. Endeavor Energy Res., L.P.
v. Energen Res. Corp., 615 S.W.3d 144, 149 (Tex. 2020).
Paragraph 11 of the Separation Agreement states:
6712 Plantation Rd., Forest Hill, Texas 76140
Ian Ghrist has a “Net Equity” interest in the property equal to 1/3 less
a. Anson’s Deficiency Judgment including any legal cost to obtain
judgment, filing fees, etc.
b. cost of acquiring the property with interest
c. cost [] incurred in remodeling and marketing the property with
interest.
Ghrist shall receive the Net Equity interest if cash or 1/3 of cashflow
from Net Equity in house.
Paragraph 11, by its plain language, calculates Ghrist’s net equity in the
Plantation property by accounting for certain costs associated with that property. It
does not require Ghrist to make any out-of-pocket payment of those costs. For this
reason, Ghrist’s failure to pay those costs was not a breach of contract and those costs
do not constitute breach of contract damages to the Ferguson Firm.
The same analysis holds true for paragraph 14. That paragraph states:
The funds due to Ian Ghrist due to his 13.33% stake in MBH Real
Estate, LLC and property recovered from Cause Nos. 236-269254-13
and 236-269254-13 will be paid. The Law Office of J. Michael
Ferguson, PC shall first collect $15,000 plus any filing fees incurred in
12
Again, no party contends the Separation Agreement should be construed as a
matter of law.
54
obtaining the original judgment plus interest on those funds as the
judgment was obtained prior to Ghrist’s involvement in the case.
The paragraph’s plain language provides that the firm shall “collect” certain
funds before the funds due to Ghrist are paid. It does not provide that Ghrist must
pay those funds to the firm. Ghrist testified that he understood the provision as
being in accordance with the parties’ previous dealings—that the expenses would be
taken out of the gross revenues before distributions were made. Based on this
testimony and the plain language of paragraph 14, the jury could reasonably have
interpreted this provision to mean that the firm was to recoup $15,000 and other
expenses from collections made on the notes before Ghrist was entitled to receive his
percentage of those collections. Thus, Ghrist’s failure to pay the expenses noted in
paragraph 14 was not a breach of contract and those expenses do not constitute
breach of contract damages to the Ferguson Firm.
The evidence does not conclusively establish that the Ferguson Firm suffered
breach of contract damages in addition to those found by the jury. Issue fifteen is
overruled.
12. Failure to Award Relief to Anson (Issue Sixteen)
a. Preservation of error
The jury found that Ghrist failed to comply with a fiduciary duty owed to
Anson but awarded $0 damages for that breach. Anson contends that this failure to
award any damages is manifestly unjust and against the great weight and
55
preponderance of the evidence because it proved its damages as a matter of law. It
appears that Anson is attempting to assert both legal and factual sufficiency challenges
to the jury’s failure to award damages. As explained above, however, Anson did not
preserve its factual sufficiency challenge for review. See Tex. R. Civ. P. 324(b)(2);
Defterios, 350 S.W.3d at 664.
b. Bases for the jury’s breach of fiduciary duty finding
Anson identifies two potential bases for the jury’s finding that Ghrist breached
its fiduciary duty to Anson. The first concerns the Coker Settlement under which
Ferguson, the Ferguson Firm, and Anson agreed to pay approximately $525,000 to
buy out Coker’s interests in MBH and the MBH Portfolio. Ghrist, who had
previously represented Anson, represented Coker during the settlement negotiations
but did not obtain a conflict of interest waiver.
The second potential basis for the jury’s breach of fiduciary duty finding
concerns Ghrist representing Reynolds in her attempt to fire Anson and filing an
administrative complaint against Anson.
c. Actual damages for breach of fiduciary duty
Anson proclaims that it is entitled to judgment “in at least the amount of
$250,000 related to the [Coker Settlement] and in actual damages for the loss of
income caused by Ghrist.” Anson provides two record citations in support of this
statement. The first citation is to the following testimony by Ferguson:
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Q. So I just wanted to get some categories of your damages. The loss of
the benefit of the bargain on Mr. Coker, that’s how much you paid for
that contract?
A. That’s correct, the 525,000.
The second record citation is to testimony by Ferguson that his law firm’s revenues
had fallen by over $250,000 because of the litigation with Ghrist.
The Ferguson Firm’s loss of revenue is no evidence of any damages incurred
by Anson. And the mere fact that Anson participated in buying out Coker’s interests
in MBH and the MBH Portfolio does not establish that Anson incurred any actual
damages. In fact, the evidence is that Ferguson, not Anson, paid Coker the $525,000
buyout price. Further, Anson does not identify any evidence of actual damages
associated with Ghrist’s representation of Reynolds or his filing an administrative
complaint against Anson.
Finally, the jury was asked to find the amount of damages, if any, that were
proximately caused by Ghrist’s breach of fiduciary duty. Thus, to establish error in
the jury’s $0 answer, Anson was required to show not only that it incurred actual
damages but that those damages were proximately caused by Ghrist’s breach. Anson
does not, however, address the causation element in its brief or identify any evidence
that would support a finding of causation.
Anson has not demonstrated that it conclusively proved its entitlement to
actual damages for breach of fiduciary duty.
57
d. Disgorgement of legal fees
The jury found that Ghrist charged Coker $0 in attorney’s fees and that he
should be ordered to disgorge $0 of that amount. Anson contends that it conclusively
proved that Ghrist charged Coker $50,000 to represent him against Anson and that
the trial court erred by refusing to order Ghrist to disgorge $50,000 in attorney’s fees.
It is undisputed that Coker paid Ghrist $50,000 during the period that Coker
and Ferguson were negotiating the Coker Settlement. Coker testified that he paid
Ghrist that sum because Ghrist had “done a tremendous amount of work” for him,
he felt obligated to pay Ghrist, and $50,000 was “the number [he] arrived at.” When
asked whether the payment was for Ghrist representing him in settling with Ferguson,
Coker testified that it was for a “body of work” Ghrist had performed for him and
that the payment was in Coker’s discretion, not because of a contractual obligation.
The specific question to the jury was whether Ghrist charged Coker any fees.
Coker’s testimony that he voluntarily paid Ghrist an amount of his own choosing
supports the jury’s finding that Ghrist did not charge Coker any fees. Whether we
would have answered the question in the same manner is of no consequence; the
jurors were the sole judges of the witnesses’ credibility and the weight to be given
their testimony. See City of Keller, 168 S.W.3d at 819.
In addition, whether to order disgorgement of fees was a matter within the trial
court’s discretion. See Wagner & Brown, Ltd. v. Sheppard, 282 S.W.3d 419, 428–29 (Tex.
2008) (stating that trial court’s ruling on equitable relief is reviewed for abuse of
58
discretion); Burrow v. Arce, 997 S.W.2d 229, 245 (Tex. 1999) (recognizing fee forfeiture
as equitable relief). As noted above, the jury may have based its breach of fiduciary
duty finding on Ghrist’s representation of Reynolds rather than his representation of
Coker. In that case, there would be no basis upon which to order Ghrist to disgorge
fees received from Coker. As a result, we cannot conclude that the trial court abused
its discretion by refusing to order that Ghrist disgorge $50,000.
Issue sixteen is overruled.
E. Ownership Issues (Issue Five)
Question 45 asked whether Ferguson and Ghrist agreed prior to the Separation
Agreement that Ghrist had a 13.33% ownership interest in the MBH Portfolio.
Question 46 asked whether the Ferguson Firm and Ghrist agreed in the Separation
Agreement that Ghrist had a 13.33% ownership interest in MBH and property
recovered from the Boles and Diffenwierth lawsuits. The jury answered both
questions, “Yes.”
The Ferguson Parties urge that the trial court erred by “permitting” Ghrist to
assert ownership claims in MBH and the MBH Portfolio and by submitting Questions
45 and 46. These are, in essence, assertions of legal insufficiency of the evidence
because the trial court had no discretion to refuse to submit pleaded claims that were
supported by any legally cognizable evidence. See Tex. R. Civ. P. 278 (providing court
shall submit questions raised by pleadings and evidence). The Ferguson Parties also
59
assert that the ownership issues are barred by the merger clause and the Statute of
Frauds.
It is not necessary to determine whether the trial court erred by submitting
Questions 45 and 46 because the Ferguson Parties have not demonstrated any such
error is reversible. See Tex. R. App. P. 44.1 (providing that error is reversible if it
probably caused rendition of an improper judgment). Ghrist’s recovery, as provided
in the judgment, is purely monetary. The judgment not only does not award any
ownership interests to Ghrist, it does not mention ownership at all. In short,
disregarding the jury’s answers to Questions 45 and 46 would have no impact on the
judgment and furnishes no cause for reversing that judgment. Issue five is overruled.
F. The Ferguson Firm’s Attorney’s Fees (Issue Fourteen)
The Ferguson Firm argues that the trial court erred by failing to award it
attorney’s fees. Whether attorney’s fees are available under a particular statute is a
question of law which we review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d
91, 94 (Tex. 1999) (per curiam); Taylor Elec. Servs., Inc. v. Armstrong Elec. Supply Co., 167
S.W.3d 522, 532 (Tex. App.—Fort Worth 2005, no pet.).
The statute here at issue is Section 38.001 of the Texas Civil Practice and
Remedies Code. Under that statute, a party may recover attorney’s fees if it prevails
on a cause of action for which attorney’s fees are recoverable and recovers damages.
See Tex. Civ. Prac. & Rem. Code Ann. § 38.001; Green Int’l, 951 S.W.2d at 390. The
Ferguson Firm urges that it is a prevailing party entitled to recover attorney’s fees
60
because it obtained findings that Ghrist breached the Separation Agreement and that
breach caused the firm $1,821.42 in damages. Ghrist responds that the firm is not
entitled to recover attorney’s fees because its recovery was fully offset by damages
awarded to Ghrist.
The supreme court has held that, although a prevailing party must recover
damages to be entitled to recover its attorney’s fees, it need not obtain a net recovery.
McKinley v. Drozd, 685 S.W.2d 7, 10–11 (Tex. 1985); see Matthews v. Candlewood Builders,
Inc., 685 S.W.2d 649, 650 (Tex. 1985). The court specifically applied this principle to
the recovery of fees under the predecessor statute to Section 38.001. See Drozd, 685
S.W.2d at 10–11. Thus, the mere fact that the Ferguson Firm’s damages were wholly
offset by damages awarded to Ghrist does not, in itself, preclude the firm from
recovering its attorney’s fees.
Ghrist also contends that the firm was not entitled to recover its attorney’s fees
because the claim on which the jury awarded damages to the firm was uncontested.
We addressed a similar situation in Taylor Electrical Services, Inc. v. Armstrong Electrical
Supply Co., 167 S.W.3d 522 (Tex. App.—Fort Worth 2005, no pet.). While
recognizing that the supreme court in Drozd had abolished the “net recovery rule,” we
stated that it was necessary to determine which party prevailed on the main issue in
the case to resolve whether a party was entitled to attorney’s fees. Id. at 532–33. As
we explained, “[t]he prevailing party is the party who is vindicated by the judgment
rendered. The determination of who is the prevailing party should focus on who was
61
successful on the merits. If multiple parties receive judgment, the party which
received judgment on the ‘main issue’ is the prevailing party.” Id. (citations and
internal quotation marks omitted).
Taylor, a contractor, sued Armstrong, a subcontractor, for breach of contract,
fraud, and violation of the DTPA. Id. at 525. The factual basis of the claims was
Armstrong’s failure to timely deliver certain materials. Id. Taylor paid Armstrong but
deducted $6,110 because of the late deliveries. Id. at 525. Armstrong contended that
Taylor still owed it $6,169.05 at the time of trial. Id. at 525–26. The jury awarded
Armstrong damages of $6,110, which was offset by its award to Taylor of $27,500. Id.
at 533. The trial court awarded Armstrong attorney’s fees of over $57,000. Id. at 532.
On appeal, the parties disputed whether Armstrong was a prevailing party entitled to
recover its attorney’s fees.
We first noted that the jury found that Taylor was successful in virtually all of
its claims against Armstrong. See id. at 533. We also noted that while Taylor had
withheld a portion of the amounts Armstrong had billed under its contracts, it “never
contested liability for or compensability of the balance, only whether there would
ultimately be any money due Armstrong in light of Taylor’s claims for breach of
contract and liquidated damages.” Id.We concluded that, “[b]ecause Taylor conceded the issue of the amount that it
had not yet paid to Armstrong, it is difficult to see how Armstrong incurred attorney’s
fees in pursuing its claim against Taylor.” Id. at 534 (emphasis in original). We further
62
concluded that, considering the litigation in its entirety, Taylor was successful in the
main issue litigated. Id. As a result, we held that “Taylor was the prevailing party
entitled to recover attorney’s fees under section 38.001 and that Armstrong was not.”
Id.The present case is governed by Taylor. The jury’s findings reflect that Ghrist
was successful in virtually all of his claims against the Ferguson Firm. In addition, the
record shows that Ghrist did not contest that he owed the Ferguson Firm $1,821.42.
Rather, as in Taylor, he withheld that amount as an offset in light of his own claims for
breach of contract. See id. at 533. That precise amount is repeatedly identified in
Ghrist’s damages calculations as being owed to the firm.
Considering the litigation in its entirety, we conclude that Ghrist was successful
in the main issue litigated with the Ferguson Firm—that the firm breached its
obligations under the Separation Agreement to make substantial payments to Ghrist.
We therefore hold that Ghrist was a prevailing party entitled to attorney’s fees under
Section 38.001 and the Ferguson Firm was not. Issue fourteen is overruled.
G. Motions for New Trial (Issue Seventeen)
In their final issue, the Ferguson Parties assert that the trial court erred by
denying their requests for a new trial which were incorporated into their numerous
JNOV motions. They present no argument in support of this issue other than making
general references to the JNOV motions and improperly attempting to incorporate
them by reference. See Allen, 236 S.W.3d at 325 (noting brief cannot simply refer to
63
trial court arguments); Guerrero, 977 S.W.2d at 832–33 (rejecting incorporation by
reference of trial court arguments).
Issue seventeen is inadequately briefed and is overruled. See Tex. R. App. P.
38.1(i) (requiring that appellant’s brief contain concise argument with citation to
authorities and the record).
IV. GHRIST’S APPEAL
A. Factual Sufficiency of the Evidence (Cross-Issue One)
In his first issue on cross-appeal, Ghrist challenges the factual sufficiency of the
evidence to support the jury’s finding that he breached the Separation Agreement.13
A point in a motion for new trial is a prerequisite to an appellate complaint that the
evidence is factually insufficient to support a jury finding. Tex. R. Civ. P. 324(b)(2).
Ghrist did not file a motion for new trial; his complaint of factual insufficiency is not
preserved for our review. See id.; Defterios, 350 S.W.3d at 664. Cross-issue one is
overruled.
B. Offset (Cross-Issue Two)
In his second issue on cross-appeal, Ghrist contends that he did not breach the
Separation Agreement as a matter of law because he was entitled to offset the
13
The Ferguson Parties argue that there is evidence to support a finding that
Ghrist breached a Rule 11 agreement. We need not address this argument because
the jury’s breach of contract finding is expressly limited to breach of the Separation
Agreement.
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amounts he owed the Ferguson Firm for his own firm’s startup and operating costs
by the amount the firm owed him under the fee sharing and Separation Agreements.
The supreme court explained the principle of offset (or setoff) in Bandy v. First
State Bank, Overton, 835 S.W.2d 609 (Tex. 1992) (op. on reh’g):
The effect of setoff was to allow a defendant in a suit for a debt to raise
a debt owed by the plaintiff to the defendant as a defense or
counterclaim. If the setoff was allowed the amount that the plaintiff
would recover from the defendant was reduced by the amount that the
plaintiff owed the defendant.
Id. at 618.
It is apparent from this explanation that the right of offset, when properly
raised, simply affects the judgment amount one party may be required to pay another.
This is precisely what the trial court accomplished in the judgment by ordering that
the Ferguson Firm’s damages for Ghrist’s breach of contract “shall be deducted from
the amounts awarded [to Ghrist] in the judgment because of the offset or setoff as
permitted by law.”
Ghrist argues, though, that the fact that he is not required to pay the firm
means that he was never in breach of his contract with the firm. More specifically, he
argues that because the firm owed him more than he owed it, he was entitled to
extrajudicially offset those amounts and negate his contractual obligation to pay.
Having unilaterally negated that obligation, he urges, his failure to pay the firm is not a
breach of contract.
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Ghrist relies on Bandy for his “offsetting damages means no breach” argument.
The supreme court there recognized that a bank is entitled to extrajudicially offset a
customer’s debts against the customer’s deposits. See 835 S.W.2d at 618–19. But the
bank’s right to do so derives from a “mutual debtor/creditor relationship, which
occurs when a depositor also borrows money from the bank,” a situation that does
not exist in this case. Id. at 619. Nothing in Bandy supports Ghrist’s assertion that his
right to offset precludes a finding that he committed a breach of contract. In fact, a
second case on which Ghrist relies—Trueheart v. Braselton, 875 S.W.2d 412 (Tex.
App.—Corpus Christi–Edinburgh 1994, no writ)—refutes that contention.
The court in Trueheart explained that “[s]et-off is the doctrine of bringing into
the presence of each other the obligation of A to B and B to A and by the judicial action
of the court making each obligation extinguish the other.” Id. at 415 (emphasis added).
This explanation demonstrates that a party has no unilateral, extrajudicial right to
determine that it has no obligation to the other because it believes the other party’s
obligation to exceed its own. On the contrary, both parties owe obligations which are
ultimately determined “by the judicial action of the court.” Id.
The fundamental flaw in Ghrist’s argument is that it confuses an obligation to
pay with satisfaction of that obligation. As determined by the jury, Ghrist had a
contractual obligation to pay the Firm $1,821.42 and his failure to pay that amount
was a breach of contract. The Firm had a contractual obligation to pay Ghrist
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$104,700.8314 and its failure to pay that amount was a breach of contract. By
deducting the amount Ghrist owed the Ferguson Firm from the amount the firm
owed Ghrist, the judgment satisfied Ghrist’s obligation to the firm. But the fact that
the obligation was satisfied does not mean it never existed. Stated another way, the
fact that the firm’s breach of contract damages were satisfied by offset does not mean
that Ghrist did not commit a breach of contract.
Our holding in this regard does not conflict with our holding above that the
Ferguson Firm is not entitled to recover attorney’s fees. Our conclusion regarding
attorney’s fees is based on the fact that the firm did not prevail on the main issue
litigated between it and Ghrist. That analysis does not negate the fact that the firm
established that Ghrist was contractually required to pay it $1,821.42 and did not
fulfill that requirement. Indeed, by deducting that sum from his calculation of
damages, Ghrist acknowledged not only that he owed it but that he had not paid it.
In essence, Ghrist agreed that he was in breach of the Separation Agreement.
We conclude that the trial court did not err by refusing to disregard the jury’s
finding that Ghrist breached the Separation Agreement. Cross-issue two is overruled.
14
This is the amount the jury awarded for past benefit of the bargain damages.
The trial court reduced that amount to $96,605.16 based on the parties’ agreements.
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C. Double Recovery (Cross-Issue Three)
Finally, Ghrist argues that deducting $1,821.42 from his recovery against the
Ferguson Parties constitutes a double recovery to those parties because his damages
calculation already accounted for that sum. The record does not reflect, however, that
Ghrist preserved this error by raising it in the trial court. See Tex. R. App. P. 33.1.
Ghrist urges that the “setoff issue was raised in post-trial motions” and
specifically cites to his proposed judgment and his second amended motion for
judgment. Both of those documents assert arguments based on a right of offset. But
neither document contains any assertion of a potential double recovery, and we have
not found anywhere else in the record that Ghrist brought this complaint to the
attention of the trial court. Cross-issue three is waived. See id.
V. CONCLUSION
The only claim Ghrist submitted to the jury against MBH was for conversion.
Because we hold that that claim is barred by the economic loss rule, MBH is entitled
to rendition of a take-nothing judgment.
Ghrist obtained favorable findings on his claims against Anson for breach of
fiduciary duty, conversion, and fraud. Because we hold that there is legally insufficient
evidence to support the findings of breach of fiduciary duty and fraud, and because
the conversion claim is barred by the economic loss rule, Anson is entitled to
rendition of a take-nothing judgment.
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We uphold Ferguson’s individual liability for fraud and Ghrist’s recovery of
damages related to that claim.
Finally, we uphold the Ferguson Firm’s liability for breach of contract and
Ghrist’s recovery of damages and attorney’s fees related to that claim. But because
Ghrist has elected to recover against the firm for breach of contract rather than for
breach of fiduciary duty, that portion of the judgment requiring the firm to disgorge
$7,528.09 is reversed.
In conclusion, the trial court’s judgment is reversed insofar as it grants relief
against Anson and MBH. Judgment is rendered that Ghrist take nothing on his
claims against those parties. The judgment is modified to delete the requirement that
the Ferguson Firm disgorge $7,528.09 and to reflect that the total amount of damages
awarded against the firm is $212,586.68. The judgment is otherwise affirmed.
/s/ Bonnie Sudderth
Bonnie Sudderth
Chief Justice
Delivered: May 20, 2021
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