christine-adiuku-kate-opara-caramela-nzenwa-and-angela-alimole-v-kelechi ( 2015 )

Affirmed in Part, Reversed and Rendered in Part, and Reversed and
Remanded in Part and Memorandum Opinion filed February 24, 2015.
In The
Fourteenth Court of Appeals
NO. 14-13-00722-CV
CHRISTINE ADIUKU, KATE OPARA, CARAMELA NZENWA, AND
ANGELA ALIMOLE, Appellants
V.
KELECHI IKEMENEFUNA, CHINYERE AGONSI, BEATRICE OPARAJI,
ANN EBERE, KELECHI OGUN, MARIA ARRIRIGUZO, CHINYERE
AGIM, AND VIRGINIA AKUCHIE ON BEHALF OF ADA MBAISE
ASSOCIATION OF HOUSTON, Appellees
On Appeal from the County Civil Court at Law No. 4
Harris County, Texas
Trial Court Cause No. 1012911
MEMORANDUM OPINION
This appeal arises out of a dispute among members of ADA Mbaise
Association of Houston, a non-profit association (the Association), regarding the
results of an officer election and the actions that followed. Appellees Kelechi
Ikemefuna, Chinyere Agonsi, Beatrice Oparaji, Anne Ebere, Kelehi Ogu, Maria
Arririguzo, Chinyere Agim, and Virginia Akuchie (collectively “plaintiffs”) sued
appellants Christine Adiuku, Kate Opara, Carmela Nzenwa, and Angela Alimole
(collectively “defendants”). Asserting that they were the new officers of the
Association and were suing on its behalf, plaintiffs alleged that defendants had
breached fiduciary duties owed to the Association, converted the Association’s
funds, committed fraud against the Association, and violated both the Texas
Business Organizations Code and the Texas Administrative Code by forming a
corporation with a name deceptively similar to that of the Association. Plaintiffs
also sought a declaratory judgment and their attorney’s fees.
Plaintiffs moved for summary judgment on all of their causes of action. The
trial court granted partial summary judgment on three of them: breach of fiduciary
duty, conversion, and the statutory violation regarding use of a deceptively similar
name. The trial court then conducted a bench trial on plaintiffs’ two remaining
causes of action. At the conclusion of the bench trial, the court signed a final
judgment awarding plaintiffs $26,600 in actual damages and $5,000 in attorney’s
fees.
In multiple issues, defendants challenge the partial summary judgment as
well as the final judgment. We hold plaintiffs failed to prove their breach of
fiduciary duty, conversion, and statutory violation causes of action as a matter of
law and were therefore not entitled to summary judgment on those claims. We
therefore reverse the trial court’s partial summary judgment regarding liability and
damages and remand plaintiffs’ breach of fiduciary duty, conversion, and statutory
violation causes of action to the trial court for further proceedings in accordance
with this opinion. We overrule defendants’ issue challenging the declaratory
judgment, however, because sufficient evidence supports the trial court’s implied
2
declaration. We further hold that the evidence is legally insufficient to support
both the trial court’s determination that defendants committed fraud by non-
disclosure and the award of plaintiffs’ attorney’s fees. We therefore reverse that
part of the trial court’s final judgment and render a take-nothing judgment on
plaintiffs’ claim of fraud by nondisclosure and request for attorney’s fees.
BACKGROUND
The Association is an unincorporated non-profit charitable organization
operating under an assumed name certificate filed in Harris County. The record
indicates two factions developed among the membership. Adiuku, the
Association’s president at the time, called for an officer election to take place on
November 20, 2011. Adiuku and Ikemefuna were the opposing presidential
candidates. Disturbances erupted during the election and the police were called to
the meeting. The results of the November 20 election are disputed. Defendants
claim the election was cancelled as a result of the disruptions and another election,
which they claim Adiuku won, was called in February 2012. Plaintiffs, on the
other hand, claim the voting was completed on November 20 but the ballots could
not be counted that day as a result of the meeting disruptions. They go on to assert
that a special meeting was called a week later, during which the ballots were
counted and Ikemefuna won the presidential position.
This litigation arose out of the election dispute. Plaintiffs allege that
defendants breached fiduciary duties they owed to the Association when they
withdrew money from the Association’s bank account after the election and
without authorization. Plaintiffs also alleged that defendants converted the
Association’s money when they made the allegedly unauthorized withdrawal.
They also alleged that defendants committed fraud by non-disclosure when they
withdrew the Association’s funds. Finally, plaintiffs asserted that defendants
3
violated section 79.39 of the Texas Administrative Code and section 5.053 of the
Texas Business Organizations Code by forming a corporation named Original
ADA Mbaise, Inc., after the election.1 See Tex. Admin. Code Ann. § 79.39 (West,
Westlaw through 2014); Tex. Bus. Orgs. Code Ann. § 5.053 (West 2012).
According to plaintiffs, defendants violated these statutes because the new
corporation’s name is deceptively similar to that of the Association.
A. The partial summary judgment
During the course of the litigation, plaintiffs sought discovery from
defendants. Believing defendants’ discovery responses were inadequate, plaintiffs
filed a motion to compel, which the trial court granted. Defendants supplemented
their discovery responses in March 2013. Soon thereafter, plaintiffs filed a
traditional motion for summary judgment asserting they were entitled to judgment
as a matter of law on all of their causes of action. Plaintiffs based their motion in
part on the trial court’s granting of their motion to compel and their allegation that
defendants failed to provide any of the documents required by the trial court’s
discovery order. Plaintiffs also attached the following items to their motion: (1)
defendants’ answer to the lawsuit; (2) the trial court’s order granting plaintiffs’
motion to compel discovery responses; (3) two JP Morgan/Chase Bank withdrawal
slips totaling $25,600;2 (4) a Franchise Tax Certification of Account Status for
1
We will refer to plaintiffs’ complaints regarding defendants’ use of a deceptively
similar name as the statutory violation claim or cause of action.
2
The withdrawal slips contain the following identification information: the customer’s
name, Christine Adiuku, and an account number. Appellees did not submit any summary
judgment evidence tying the account number on the withdrawal slips to the Association. The
first withdrawal slip withdrew $22,000 from the account. The slip also states: “If Purchasing a
Cashier’s Check Provide Payee Name” with Ada Mbaise Association handwritten on the slip.
The first withdrawal slip was signed by Christine Adiuku. The second withdrawal slip withdrew
$3,600 from the same account, identified Adiuku as the customer, and was signed by Adiuku.
Unlike the first withdrawal slip, it does not identify a payee.
4
Original ADA Mbaise, Inc.; (5) a printout of a Texas Secretary of State Business
Organization Inquiry for Original ADA Mbaise, Inc.; (6) a Franchise Tax
Certification of Account Status for the Association; (7) defendants’ discovery
responses, including minutes from meetings of the Association and copies of
various JPMorgan Chase Bank, N.A. deposit and withdrawal receipts for at least
two different accounts; 3 (8) an Association meeting agenda for the November 20,
2011 meeting; (9) a December 13, 2011 letter from Ikemefuna to Adiuku notifying
her that she had lost the officer election and asking Adiuku to turn over all
Association property; (10) a February 2, 2012 letter from Ikemefuna to Adiuku
asking Adiuku to stop representing herself as an officer of the Association and
notifying her that she was not authorized to use the funds she withdrew from the
Association’s Chase account; and (11) what appears to be a printout from the
website of the Harris County Clerk reflecting the Association’s assumed name
filing. Plaintiffs did not attach an affidavit or any deposition testimony to their
motion for summary judgment.
Defendants filed a response to plaintiffs’ motion for summary judgment in
which they presented a different version of the events at issue here. In addition to
their discovery responses, defendants attached affidavits of Adiuku and Theresa
Nduka to their response. Adiuku and Nduka explained that the November 20,
2011 election was cancelled as a result of disruptions. Adiuku explained that she
called a second election in which she was re-elected as president. The affidavits
also explained that Original ADA Mbaise, Inc. was incorporated as the successor
to the Association and that the incorporation was the result of a decision previously
made by the Association’s membership. The affidavits also explained that Adiuku
set up a bank account for the corporation at Bank of America and that the
3
No account number is visible on the copy of one receipt, and the copies of the
remaining receipts show only partial account numbers.
5
withdrawal of $25,600 from the Association’s Chase account was done as a result
of a decision by the members. Finally, both Adiuku and Nduka denied misuse of
any of the Association’s funds and instead asserted that all Association funds had
been accounted for at the group’s monthly meetings. Both affidavits also stated
that the Association still operated both the Chase and Bank of America accounts.
The trial court granted summary judgment for plaintiffs on their breach of
fiduciary duty, conversion, and statutory violation causes of action. It also granted
summary judgment for plaintiffs on defendants’ alleged affirmative defenses that
(1) plaintiffs failed to state a cause of action; (2) plaintiffs lacked standing to bring
the lawsuit; and (3) plaintiffs were not officers of the Association. The trial court
also made the following finding in its partial summary judgment order:
The Court finds that pursuant to [Rule 215 of the Texas Rules of Civil
Procedure], Defendants failed to comply with discovery requests and
orders that the matters regarding which the order was made or any
other designated facts shall be taken to be established for the purposes
of the action in accordance with the claim of the party obtaining the
order; that Defendants are prohibited from introducing designated
matter and that a judgment by default should be rendered against
Defendants.
The trial court’s order did not designate any facts that were to be taken as
established, nor did the order granting plaintiffs’ motion to compel. In addition,
the trial court did not prohibit defendants from introducing any evidence during the
subsequent bench trial.
The trial court also granted plaintiffs summary judgment on the damages
caused by defendants’ breach of fiduciary duty, conversion, and statutory violation
causes of action. The trial court awarded plaintiffs $25,600 as damages for both
the breach of fiduciary duty cause of action and for the conversion claim. The trial
court also awarded plaintiffs $1,000 as damages on their statutory violation cause
6
of action.
B. The bench trial and judgment
The trial court then conducted a bench trial on plaintiffs’ fraud by non-
disclosure and declaratory judgment causes of action. Before trial began, the court
expressly informed the parties that she would not revisit the granting of the partial
summary judgment and the only issues to be resolved during the bench trial were
plaintiffs’ remaining claims for fraud by non-disclosure and for declaratory
judgment. 4
Four witnesses testified during the bench trial. Ikemefuna testified first.
She testified that during the election meeting, Adiuku resigned her position as
president of the Association prior to the start of the voting and a temporary officer
was appointed to conduct the election. She then testified that as the election was
being completed, Adiuku disrupted the meeting by attempting to grab the
completed ballots. Ikemefuna testified that, despite this disruption, the voting was
completed and she was elected president of the Association as a result of the vote.5
Plaintiff Virginia Akuchie testified next. Akuchie testified that she was
present at the November 20, 2011 meeting, the election was completed that day
4
During this same pre-trial conference, the trial court denied having assessed a “death
penalty” sanction against defendants. Death penalty sanctions adjudicate a party’s claim and
preclude presentation of the merits of the party’s case. In re RH White Oak, L.L.C., 442 S.W.3d
492, 501 (Tex. App.—Houston [14th Dist.] 2014, orig. proceeding). They are normally assessed
when a party’s hindrance of the discovery process justifies a presumption that the party’s claims
lack merit. Id. While normally assessed through the striking of pleadings or rendering a default
judgment, any sanction that is case determinative, such as excluding essential evidence, may be a
death penalty sanction. Id. Because the trial court did not strike any of defendants’ pleadings or
exclude any evidence offered by defendants based on a discovery sanction, we agree with the
trial court’s statement from the bench. Because we conclude that the trial court did not assess a
death penalty sanction against defendants, we need not reach any arguments raised by defendants
that the trial court abused its discretion when it assessed death penalty sanctions against them.
5
Ikemefuna testified that, as a result of Adiuku’s disruptions, the Association had to call
an emergency meeting a week later to complete the ballot counting.
7
despite disruptions, and that Ikemenefuna was elected president.
Defendant Carmela Nzebwa also testified during the bench trial. While she
agreed there were disruptions during the election meeting, she testified that the
election officer canceled the election as a result of the disruptions and no one was
declared the winner of the election. She also testified that Adiuku sent out a letter
to the membership for another election meeting to be held in February.
Adiuku also testified during the bench trial. She admitted that she resigned
from the presidency during the November 2011 election meeting. She further
testified that the election meeting was disrupted and the election officer canceled
the election as a result. Adiuku then testified that she called a special Association
meeting and was elected president at that meeting in February 2012.
Each witness’s testimony also covered events occurring after the November
election. Ikemefuna testified during the bench trial that the day after the election
meeting, Adiuku withdrew $22,000 from the Association’s Chase bank account.
Akuchie similarly testified that after the November 20 election, Ikemenefuna went
to the Association’s bank and learned that someone had withdrawn the majority of
the Association’s money. A copy of the withdrawal slip was admitted into
evidence and Adiuku’s signature is the only signature on the withdrawal slip.
Ikemefuna testified that the Association’s rules and procedures required two
signatures to withdraw money from the Association’s account.6 Ikemefuna further
testified that Adiuku did not inform any other members of the Association’s
executive board that she had made the withdrawal, nor did she have the
Association’s authorization to make the $22,000 withdrawal.
6
Plaintiffs offered no documentary evidence regarding the number of signatures required
to withdraw money from the Association’s Chase account pursuant to the terms of the account
agreement with Chase.
8
Ikemefuna testified that Adiuku returned to Chase on November 23, 2011,
when she withdrew $3,600 more from the Association’s account. Adiuku’s
signature was the only signature on the November 23 withdrawal slip. Ikemefuna
then testified that as a result of Adiuku withdrawing $25,600 of the Association’s
funds, the Association was unable to fund any of its mission activities.
Adiuku, during her trial testimony, admitted she withdrew the money from
the Association’s bank account after she had stepped down as president of the
Association. Adiuku explained that closing the Association’s bank account after
each election was standard practice for the Association. Nzebwa testified that she
was present when Adiuku withdrew the $25,600 from the Association’s Chase
bank account. Nzebwa asserted that under the Association’s rules, two members
had to be present to withdraw money from the Association’s bank account but only
one signature was required.
Adiuku also testified that she deposited the money into the Bank of America
account of a corporation, Original ADA Mbaise, Inc., that was incorporated on
November 22, 2011. Adiuku explained that the articles of incorporation for
Original ADA Mbaise, Inc. had been sent to the Secretary of State’s office prior to
the November 2011 election but were not accepted until after the election.
After the bench trial, the trial court signed a final judgment in favor of
plaintiffs. The final judgment incorporated the partial summary judgment and also
found that plaintiffs had met their burden of proof on their fraud by non-disclosure
cause of action and “grant[ed] the claim.” The trial court also “granted” plaintiffs’
declaratory judgment claim but did not include any declarations in the final
judgment. As for damages, the trial court found “that as a result of Defendants’
actions, Plaintiff has sustained actual damages to the amount of [$25,600]; and
[$1,000] for registering an organization with a deceptively similar name to
9
Plaintiffs, as provided in the Partial Summary Judgment Order[.]” Finally, the trial
court awarded plaintiffs $5,000 as their reasonable and necessary attorney’s fees.
This appeal followed.
ANALYSIS
Defendants raise multiple issues on appeal, which we consolidate into four.
The first issue challenges the trial court’s partial summary judgment. The second
challenges the sufficiency of the evidence supporting the trial court’s
determination in the final judgment that defendants committed fraud by
nondisclosure. Defendants’ third issue contends the evidence is insufficient to
support the declaratory judgment. The fourth issue challenges the trial court’s
award of attorney’s fees. We address defendants’ issues in order.
I. The trial court erred in granting partial summary judgment for
plaintiffs.
Plaintiffs moved for traditional summary judgment on all of their causes of
action. The trial court granted summary judgment on three: breach of fiduciary
duty, conversion, and the statutory violation regarding use of a deceptively similar
name. On appeal, defendants contend the trial court erred when it granted the
partial summary judgment because plaintiffs did not prove all elements of those
causes of action as a matter of law. We agree with defendants.
A. Standard of review
We review the trial court’s grant of summary judgment de novo. Ferguson
v. Bldg. Materials Corp. of Am., 295 S.W.3d 642, 644 (Tex. 2009) (per curiam)
(citing Tex. Mun. Power Agency v. Pub. Util. Comm’n of Tex., 253 S.W.2d 184,
192 (Tex. 2007)). We consider all of the evidence in the light most favorable to
the nonmovant, crediting evidence favorable to the nonmovant if a reasonable
factfinder could, and disregarding contrary evidence unless a reasonable factfinder
10
could not. See Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006).
The movant for traditional summary judgment has the burden of showing
that there is no genuine issue of material fact and that it is entitled to judgment as a
matter of law. Tex. R. Civ. P. 166a(c); Mann Frankfort Stein & Lipp Advisors,
Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). In particular, a plaintiff
moving for summary judgment must conclusively prove all essential elements of
its claim. Cullins v. Foster, 171 S.W.3d 521, 530 (Tex. App.—Houston [14th
Dist.] 2005, pet. denied) (citing MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.
1986)). The nonmovant has no burden to respond to a summary judgment motion
unless the movant conclusively establishes each element of its causes of action as a
matter of law. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222–23 (Tex. 1999).
B. The trial court erred in granting summary judgment on
conversion and breach of fiduciary duty because there is no
summary judgment evidence that defendants’ actions were
unlawful or violated a fiduciary duty owed to the Association.
Plaintiffs moved for summary judgment on their claim that defendants
converted the Association’s funds when Adiuku withdrew $25,600 from the
Association’s Chase bank account. To prove their conversion claim, plaintiffs had
to produce summary judgment evidence establishing that (1) they owned or had
legal possession of the property or entitlement to possession; (2) defendants
unlawfully and without authorization assumed and exercised dominion and control
over the property to the exclusion of, or inconsistent with, plaintiffs’ rights as
owners; (3) plaintiffs demanded return of the property; and (4) defendants refused
to return the property. Greater Houston German Shepherd Dog Rescue, Inc. v.
Lira, 447 S.W.3d 365, 372 (Tex. App.—Houston [14th Dist.] 2014, pet. filed).
Plaintiffs failed to meet their summary judgment burden to conclusively
prove all elements of their conversion cause of action. Viewing the summary
11
judgment evidence summarized above in favor of defendants, we conclude
plaintiffs failed to conclusively prove that Adiuku’s withdrawal of the $25,600 was
unlawful. Together, plaintiffs’ documentary evidence and the Adiuku and Nduka
affidavits show that there is a genuine issue of material fact regarding the
plaintiffs’ ownership and control of the Chase account, and therefore regarding the
propriety of Adiuku’s withdrawal of the funds from that account. See Thu Binh Si
Ho v. Saigon Nat’l Bank, 438 S.W.3d 871, 874 (Tex. App.—Houston [14th Dist.]
2014, no pet.) (reversing summary judgment after concluding that documents,
without supporting affidavit testimony, were insufficient to conclusively establish
elements of plaintiff’s cause of action); Okafor v. Anambria State Cmty., No. 01-
12-00562-CV, 2013 WL 4680381, at *4–*5 (Tex. App.—Houston [1st Dist.] Aug.
29, 2013, no pet.) (mem. op.) (reversing summary judgment after determining that
plaintiff failed to conclusively prove elements of conversion claim because there
was a genuine issue of material fact concerning ownership and control of account
and thus the propriety of the withdrawal from that account). Because plaintiffs’
summary judgment evidence does not establish as a matter of law that Adiuku’s
withdrawal was unlawful, we hold the trial court erred when it granted summary
judgment on that cause of action.
The result is the same when we turn to plaintiffs’ breach of fiduciary duty
cause of action. Plaintiffs based their allegations of breach of fiduciary duty on the
same conduct underlying their conversion cause of action. To be entitled to
summary judgment on their breach of fiduciary duty cause of action, plaintiffs had
to prove conclusively the following elements: (1) a fiduciary relationship existed
between the plaintiff and defendant; (2) the defendant breached its fiduciary duty;
and (3) the breach resulted in injury to the plaintiff or benefit to the defendant.
Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.—Houston [14th Dist.] 2008,
12
pet. denied). Because the summary judgment evidence shows that there is a fact
issue regarding ownership and control of the Chase account, we conclude plaintiffs
failed to prove conclusively that Adiuku’s withdrawal breached a fiduciary duty
owed to the Association. See Okafor, 2013 WL 4680381, at *6 (reversing
summary judgment because plaintiff failed to conclusively prove defendant’s
withdrawal of funds breached a fiduciary duty). We therefore hold that the trial
court erred when it granted summary judgment on appellees’ breach of fiduciary
duty cause of action.
On appeal, plaintiffs cite testimony introduced during the bench trial to
support summary judgment on both their conversion and breach of fiduciary duty
causes of action. Plaintiffs cannot rely on trial testimony to establish their
entitlement to a pre-trial summary judgment, however. See Blankinship v. Brown,
399 S.W.3d 303, 309 (Tex. App.—Dallas 2013, pet. denied).
To the extent plaintiffs based their motion for summary judgment on their
request for discovery sanctions, we conclude the judgment cannot be supported on
that basis. The trial court’s discussion of sanctions in its partial summary
judgment order did not specify any facts found by default, and we are unable to
identify any such facts by referring to the trial court’s order granting plaintiffs’
motion to compel. Cf. Spohn Hosp. v. Mayer, 104 S.W.3d 878, 881 (Tex. 2003)
(reviewing Rule 215.2(b)(3) sanction instructing jury to accept specifically listed
facts as established for purposes of the trial). Accordingly, plaintiffs cannot rely
on the trial court’s determination regarding sanctions to carry their summary
judgment burden.
Because plaintiffs did not meet their summary judgment burden to
conclusively prove all essential elements of their conversion and breach of
fiduciary duty causes of action, we hold the trial court erred when it granted
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summary judgment on those claims.
C. The trial court erred in granting summary judgment on the
statutory violation regarding use of a deceptively similar name.
Defendants next argue that the trial court erred when it granted summary
judgment on plaintiffs’ statutory violation claim because the statutes cited by
plaintiffs do not apply to the Association. We agree with defendants.
Defendants’ challenge to the trial court’s summary judgment on plaintiffs’
statutory violation claim presents a question of statutory construction, which we
review de novo. Texas Dep’t of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex.
2002). Section 5.053 of the Texas Business Organizations Code provides that “a
filing entity may not have a name . . . that is the same as, or that the secretary of
state determines to be deceptively similar to . . . the name of another existing filing
entity. . . .” Tex. Bus. Orgs. Code Ann. § 5.053. Therefore, to be protected by
section 5.053, the Association must be a “filing entity” as defined by the statute.
The Business Organizations Code defines “filing entity” as “a domestic entity that
is a corporation, limited partnership, limited liability company, professional
association, cooperative, or real estate investment trust.” Id. § 1.002(22). It is
undisputed that the Association is a group operating under an assumed name
certificate and is not a corporation, limited partnership, limited liability company,
professional association, cooperative, or real estate investment trust. We conclude,
therefore, that the Association is not a filing entity and section 5.053 does not
apply. See id. § 5.053; see also id. § 1.002(57) (defining “nonfiling entity” as a
domestic entity that is not a filing entity and includes nonprofit associations).
The result is the same under section 79.39 of the Texas Administrative
Code. Section 79.39 provides that “a proposed entity name is deemed to be
deceptively similar to an entity name on file” if any of the listed circumstances are
14
present. See Tex. Admin. Code Ann. § 79.39. Because the Association’s name
was listed in an assumed name certificate filed with the Harris County Clerk and
therefore was not on file with the Texas Secretary of State, we conclude this
section does not apply. Because neither provision cited by plaintiffs applies to the
facts before us, we hold the trial court erred when it granted summary judgment on
plaintiffs’ statutory violation theory. 7
Having determined that the trial court erred when it granted summary
judgment on plaintiffs’ conversion, breach of fiduciary duty, and statutory
violation causes of action, we sustain defendants’ first issue on appeal. We
therefore reverse the trial court’s partial summary judgment on these claims and
associated damages and remand the claims to the trial court for further proceedings
in accordance with this opinion.8
II. The evidence is legally insufficient to support the trial court’s
determination that defendants committed fraud by nondisclosure.
In their second issue, defendants argue the evidence from the bench trial is
legally insufficient to support the trial court’s determination that they committed
fraud by nondisclosure when Adiuku withdrew $25,600 from Chase Bank. When
a bench trial is conducted and the court does not make findings of fact and
conclusions of law to support its ruling, all facts necessary to support the judgment
7
Because we have determined that section 5.053 of the Texas Business Organizations
Code and section 79.39 of the Texas Administrative Code do not apply to the facts before us, we
need not decide whether these provisions, either singly or collectively, create a private right of
action to enforce their limitations on deceptively similar names.
8
We note that defendants did not file a cross-motion for summary judgment on these
claims. In addition, defendants did not challenge the trial court’s partial summary judgment on
their affirmative defenses on appeal, and we therefore do not disturb the partial summary
judgment regarding those defenses. See Navarro v. Grant Thornton, L.L.P., 316 S.W.3d 715,
720 (Tex. App.—Houston [14th Dist.] 2010, no pet.).
15
are implied. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.
2002); Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 666 (Tex. 1987).
Because the trial court signed a final judgment in favor of plaintiffs, but did not
sign findings of fact and conclusions of law, we review defendants’ complaints
with the presumption that all findings of fact and conclusions of law were made in
favor of appellees. The judgment of the trial court must be affirmed if it can be
upheld on any legal theory that finds support in the evidence. In the Interest of
W.E.R., 669 S.W.2d 716, 717 (Tex. 1984).
When the appellate record includes the reporter’s and clerk’s records,
implied findings are not conclusive and may be challenged on the basis of legal
and factual sufficiency. BMC Software Belg., 83 S.W.3d at 795. We review the
trial court’s decision for legal sufficiency of the evidence using the same standards
applied in reviewing the evidence supporting a jury’s finding. Catalina v. Blasdel,
881 S.W.2d 295, 297 (Tex. 1994). We review the evidence in the light most
favorable to the challenged finding and indulge every reasonable inference that
would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). We
credit favorable evidence if a reasonable factfinder could and disregard contrary
evidence unless a reasonable factfinder could not. Id. at 827.
When a legal sufficiency challenge concerns an issue on which the appellant
does not bear the burden of proof, we review it under a “no evidence” standard:
“No evidence” points must, and may only, be sustained when the
record discloses one of the following situations: (a) a complete
absence of evidence of a vital fact; (b) the court is barred by rules of
law or evidence from giving weight to the only evidence offered to
prove a vital fact; (c) the evidence offered to prove a vital fact is no
more than a mere scintilla; (d) the evidence establishes conclusively
the opposite of the vital fact.
Foley v. Capital One Bank, N.A., 383 S.W.3d 644, 646–47 (Tex. App.—Houston
16
[14th Dist.] 2012, no pet.) (quoting City of Keller, 168 S.W.3d at 810). Evidence
does not exceed a scintilla if the trier of fact would have to guess whether a vital
fact exists. Id. at 647 (citing City of Keller, 168 S.W.3d at 813). The final test for
legal sufficiency is whether the evidence at trial would enable reasonable and fair
minded people to reach the verdict under the review. Id. (citing City of Keller, 168
S.W.3d at 827). Therefore, we must examine the record in this case to determine
whether some evidence exists to support the trial court’s determination that
defendants committed fraud by nondisclosure.
Plaintiffs base their fraud by nondisclosure claim on the same conduct
alleged in their conversion claim: Adiuku’s withdrawal of $25,600 from a Chase
account. Plaintiffs alleged that the money was withdrawn from the Association’s
bank account, that Adiuku did not have authorization to make the withdrawal, and
that she concealed her intention to withdraw the money. The elements of fraud by
nondisclosure are (1) the defendant deliberately failed to disclose material facts to
the plaintiff that the defendant had a duty to disclose, (2) the defendant knew the
plaintiff was ignorant of the facts and that the plaintiff did not have an equal
opportunity to discover them, (3) by failing to disclose the facts, the defendant
intended to induce the plaintiff to take some action or refrain from acting, and (4)
the plaintiff relied on the nondisclosure and suffered injury as a result of that
reliance. Horizon Shipbuilding, Inc. v. Blyn II Holding, L.L.C., 324 S.W.3d 840,
850 (Tex. App.—Houston [14th Dist.] 2010, no pet.).
Fraud is not usually susceptible of direct proof but must be proven by
circumstantial evidence. Southwest Olshan Foundation Repair Co., L.L.C. v.
Gonzales, 345 S.W.3d 431, 440 (Tex. App.—San Antonio 2011, affirmed 400
S.W.3d 52 (Tex. 2013)). While circumstantial evidence may be used to establish
any material fact, it must transcend mere suspicion. Id. In addition, a vital fact
17
cannot be established by piling inference upon inference. Id. at 440–41.
As detailed above, the evidence admitted during the bench trial established
that Adiuku resigned as president of the Association prior to the actual casting of
ballots during the November 20, 2011 meeting. The admitted evidence also
established that a new president was not elected that day because the voting
process was disrupted.9 Adiuku admitted that the day after the November 20
election, she, in the presence of another member of the Association, withdrew
$22,000 from the Association’s Chase account and withdrew $3,600 more on
November 23, 2011. The evidence also establishes that the Association’s rules
required two persons to be present for money to be withdrawn from the
Association’s account. Adiuku further admitted during the bench trial that she
deposited the money withdrawn from Chase into the bank account of a corporation,
Original ADA Mbaise, Inc. Adiuku also testified that it was standard practice for
the Association to close its bank account with each election and that the creation of
Original ADA Mbaise, Inc. was done at the request of the Association’s
membership. Finally, there was contrary evidence admitted during the bench trial
that Adiuku made the two withdrawals from the Association’s account without the
Association’s approval. 10
9
The evidence establishes that the earliest a new president and other officers of the
Association could have been elected was a week after the November 20, 2011 meeting, when the
plaintiffs’ faction of the Association called a special meeting to count the ballots.
10
Ikemenefuna also testified that Adiuku did not inform the members of the
Association’s executive board that she was going to withdraw the $25,600. The admitted
evidence conclusively establishes, however, that, at the time of the two withdrawals, there was
no executive board in place as Adiuku’s board had resigned during the November 20, 2011
meeting and the successor board was not elected until, at the earliest, a week later when the
November 20, 2011 ballots were finally counted.
18
While there is evidence in the record supporting an implied finding that
Adiuku did not disclose her intention to withdraw the majority of the money from
the Association’s bank account prior to doing so, we conclude there is no evidence
supporting an implied finding that Adiuku did not disclose her plan with the intent
of preventing plaintiffs from taking some action. First, there is no evidence in the
bench trial record as to what that action might have been. A possible action would
have been to stop Adiuku from making the withdrawals. To reach that conclusion,
however, we would have to infer that someone had that authority. There is no
direct evidence on which to base such an inference. See Entex, a Div. of Noram
Energy Corp. v. Gonzalez, 94 S.W.3d 1, 8 (Tex. App.—Houston [14th Dist.] 2002,
pet. denied) (stating that facts from which inferences may be properly drawn must
be established by direct evidence, not other inferences).
We further conclude that there is no evidence supporting an implied finding
that plaintiffs relied to their detriment on Adiuku’s non-disclosure of her plan to
withdraw money from the Association’s account. A plaintiff asserting that a
defendant committed fraud establishes reliance by showing the defendant’s failure
to disclose a material fact induced her to either act or refrain from acting, to her
detriment. See Worldwide Asset Purchasing. L.L.C. v. Rent-A-Center East, Inc.,
290 S.W.3d 554, 566 (Tex. App.—Dallas 2009, no pet.). As mentioned above,
there is no evidence of actions plaintiffs took or failed to take as a result of
Adiuku’s nondisclosure of her plan to withdraw money from the Association’s
account. For these reasons, the evidence is legally insufficient to support the trial
court’s determination that defendants committed fraud by nondisclosure, and we
sustain defendants’ second issue on appeal.
19
III. Sufficient evidence supports the trial court’s implied declaration that
Adiuku is no longer president of the Association.
In their third issue, defendants challenge the legal and factual sufficiency of
the evidence supporting the trial court’s declaratory judgment. Before reaching the
merits of defendants’ third issue, we must first determine what declarations the
trial court made in its final judgment.
The trial court’s judgment determined that plaintiffs had met their burden of
proof on their declaratory judgment cause of action and “grant[ed] the claim.” The
judgment did not include any declarations, however. In this situation, we may
examine plaintiffs’ amended petition to determine the declaratory relief granted by
the trial court’s judgment. See SunTrust Bank v. Flanagan, No. 14-13-00756-CV,
2014 WL 6998099, *2 (Tex. App.—Houston [14th Dist.] Dec. 11, 2014, no pet.)
(mem. op.) (examining plaintiff’s original petition to determine the relief awarded
by trial court in its final judgment); see also WesternGeco, L.L.C. v. Input/Output,
Inc., 246 S.W.3d 776, 779–80 (Tex. App.—Houston [14th Dist.] 2008, no pet.)
(examining declarations requested in motion for summary judgment to determine
implied declarations made by the trial court when it granted motion).
Having examined the final judgment in conjunction with plaintiffs’ amended
petition, we conclude the plaintiffs requested and the trial court made a single
unambiguous implied declaration: that Adiuku was no longer president of the
Association.11 We review declaratory judgments under the same standards as other
11
While plaintiffs also asked the trial court to declare that Adiuku breached her fiduciary
duties when she withdrew money from the Association’s bank account, we cannot imply such a
declaration because, during the bench trial on declaratory relief, the trial court announced her
refusal to revisit the causes of action on which she had previously granted summary judgment.
To the extent the final judgment could be construed as containing an implied declaration that
Adiuku committed fraud by nondisclosure, we have already determined that the evidence is
legally insufficient to support that cause of action. Therefore, the evidence is likewise
insufficient to support such an implied declaration. Plaintiffs also asked the court to declare
20
judgments. Tex. Civ. Prac. & Rem. Code Ann. § 37.010 (West 2008). We look to
the procedure used to resolve the issue to determine the standard of review on
appeal. Guthery v. Taylor, 112 S.W.3d 715, 720 (Tex. App.—Houston [14th Dist.]
2003, no pet.). Here, the trial court determined the declaratory judgment issue
after a bench trial. We therefore apply the same legal sufficiency standard of
review set forth in Part II above. See Black v. City of Killeen, 78 S.W.3d 686, 691
(Tex. App.—Austin 2002, pet. denied).
In reviewing factual sufficiency, we must examine the entire record,
considering both the evidence in favor of, and contrary to, the challenged findings.
2900 Smith, Ltd. v. Constellation NewEnergy, Inc., 301 S.W.3d 741, 746 (Tex.
App.—Houston [14th Dist.] 2009, no pet.). We may set aside the verdict for
factual sufficiency only if it is so contrary to the overwhelming weight of the
evidence as to be clearly wrong and unjust. Id. We may not pass upon the
witnesses’ credibility or substitute our judgment for that of the jury, even if the
evidence would support a different result. Id. If we determine the evidence is
factually insufficient, we must detail the evidence relevant to the issue and state in
what regard the contrary evidence greatly outweighs the evidence supporting the
trial court’s judgment; we need not do so when affirming the judgment. Id.
Applying these standards, we conclude there is legally and factually
evidence—particularly testimony from Ikemefuna and Akuchie—supporting an
implied finding that the members of the Association completed the casting of
ballots before the November 20, 2011 meeting ended. There is also evidence
whether Adiuku had withdrawn from the Association when she organized Original ADA Mbaise,
Inc., but their petition did not request a particular answer to that question, so we cannot imply
such an answer from the court’s judgment. Nor is there evidence to support a declaration that
Adiuku had withdrawn from the Association when she organized the corporation. Finally,
plaintiffs did not ask the trial court for a declaration that Ikemenefuna won the November 20,
2011 election, so we cannot imply such a declaration.
21
supporting an implied finding that Adiuku lost that election once those ballots had
been counted. Although the defendants also offered contrary evidence, this factual
dispute was for the fact-finder to resolve. Because there is sufficient evidence to
support the trial court’s implied declaration that Adiuku is no longer the president
of the Association, we overrule defendants’ third issue on appeal.
IV. The evidence is insufficient to support the trial court’s award of
attorney’s fees to plaintiffs.
In their final issue on appeal, defendants contend the evidence is legally
insufficient to support the trial court’s award of attorney’s fees to plaintiffs because
they offered no evidence at trial of the fees they had incurred. We agree.
Generally, to recover attorney’s fees, a prevailing party must (1) prevail on a
cause of action for which attorney’s fees are available, and (2) recover damages.
Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). Under the Declaratory
Judgments Act, however, an award of attorney’s fees is within the trial court’s
sound discretion and is not dependent on the claimant’s success. 12 Barshop v.
Medina Cnty. Underground Water Conservation Dist., 925 S.W.2d 618, 637 (Tex.
1996). We review an award of attorney’s fees under the Declaratory Judgments
Act by determining whether the trial court abused its discretion by awarding fees
when there was insufficient evidence that the fees were reasonable and necessary
or when the award of fees was inequitable or unjust. Bocquet v. Herring, 972
S.W.2d 19, 21 (Tex. 1998). Whether the fees are reasonable and just are questions
of fact, and whether they are equitable and just are questions of law. Id. A trial
court abuses its discretion if it awards attorney’s fees when there is no evidence to
support the award. Id.; Amaro v. Wilson Cnty., 398 S.W.3d 780, 789 (Tex. App.—
12
Plaintiffs’ declaratory judgment claim is the only cause of action they alleged that
would support an award of attorney’s fees.
22
San Antonio 2011, no pet.).
Here, plaintiffs rested their case during the bench trial without presenting
evidence regarding the attorney’s fees they incurred. The parties did not stipulate
to the amount of plaintiffs’ attorney’s fees or that the amount of fees incurred was
reasonable and necessary. In addition, there is nothing in the record establishing
that the parties agreed to submit the issue of fees to the trial court after it had made
a decision on the merits of the case. Accordingly, we may not consider the post-
trial fee affidavit filed by plaintiffs’ attorney.
There is no presumption that a request for attorney’s fees under the
Declaratory Judgments Act is reasonable. Gorman v. Gorman, 966 S.W.2d 858,
867 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) (citing GeoChem Tech
Corp. v. Verseckes, 929 S.W.2d 85, 93 (Tex. App.—Eastland 1996), rev’d on other
grounds, 962 S.W.2d 541 (Tex. 1998)). A trial court is also not permitted to take
judicial notice of reasonable and necessary fees under the Declaratory Judgments
Act. Id. Because there is no evidence in the trial record whatsoever about the
amount of attorney’s fees plaintiffs incurred or that the amount of fees incurred
was reasonable and necessary, we sustain defendants’ fourth issue.
CONCLUSION
Having sustained defendants’ first issue on appeal, we reverse the portion of
the trial court’s partial summary judgment imposing liability and damages for
plaintiffs’ conversion, breach of fiduciary duty, and statutory violation causes of
action, and we remand those claims to the trial court for further proceedings
consistent with this opinion. Having sustained defendants’ second issue on appeal,
we reverse the trial court’s judgment awarding plaintiffs $26,500 damages on their
fraud by nondisclosure cause of action and render judgment that they take nothing
on that claim. Having sustained defendants’ fourth issue on appeal, we reverse the
23
trial court’s award of attorney’s fees to plaintiffs and render judgment that they
take nothing on their claim for attorney’s fees. Having overruled defendants’ third
issue on appeal, we affirm the trial court’s declaratory judgment that Adiuku is no
longer the president of the Association.
/s/ J. Brett Busby
Justice
Panel consists of Justices Boyce, Busby, and Wise.
24