Power Reps, Inc., Bob Bergin and Jeff Jacquin v. Cy Cates, Power Reps Industrial, LLC, and Global Transformer Specialists, Inc. ( 2015 )

Opinion issued August 11, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-00856-CV
———————————
POWER REPS, INC., BOB BERGIN, AND JEFF JACQUIN,
Appellants / Cross-Appellees
V.
CY CATES, POWER REPS INDUSTRIAL, LLC, AND GLOBAL
TRANSFORMER SPECIALISTS, INC., Appellees / Cross-Appellants
On Appeal from the 400th District Court
Fort Bend County, Texas
Trial Court Case No. 10-DCV-183723
MEMORANDUM OPINION
Power Reps, Inc., Bob Bergin, Jr., and Jeff Jacquin appeal from a judgment
on a jury verdict that resulted in a net award to Cy Cates, Power Reps Industrial,
LLC, and Global Transformer Specialists, Inc. For clarity and in accordance with
the parties’ conventions, we will refer to Power Reps, Inc., as “PRI” and to Global
Transformer Specialists as “GTS.” We will refer to Power Reps Industrial, LLC,
also known as Cy Cates Energy Reps, LLC, as “Industrial.” Cates, Industrial, and
GTS cross-appeal.
Bergin, Jacquin, and PRI assert 11 issues on appeal: (1) the trial court erred
by asking the jury whether a document signed on April 12, 2010, was an
agreement, rather than ruling on that issue as a matter of law; (2) the trial court
erred by failing to award Bergin, Jacquin, and PRI damages for Cates’s breach of
the April 12 “agreement,” despite the fact that the jury was not asked about such
damages; (3) there was no or insufficient evidence to support the jury’s verdict that
Bergin and Jacquin were fiduciaries of Cates; (4) there was no or insufficient
evidence to support the jury’s damages findings with respect to Cates’s claim for
tortious interference with prospective contracts; (5) the trial court erred in
awarding damages on the commission split and rent agreement because any such
agreement was subsumed in the April 12 “agreement”; (6) there was no or
insufficient evidence to support the jury’s verdict that PRI converted Cates’s
property; (7) there was no or insufficient evidence to support the jury’s verdict that
Bergin and Jacquin engaged in oppressive conduct towards Cates; (8) the
attorney’s fees awarded to Cates, Industrial, and GTS by the jury were
unreasonable and excessive, not properly segregated, and not recoverable because
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Cates did not prevail on any claim for which fees are recoverable; (9) the trial court
should have disregarded the jury’s verdict that PRI was not damaged by Cates’s
breach of his employment agreement and therefore should have awarded Bergin,
Jacquin, and PRI their attorney’s fees; (10) the trial court erred in awarding Cates
ownership and control of the PRIHouston.com domain, website, and email
addresses; and (11) the trial court erred by awarding Cates, Industrial, and GTS
prejudgment interest on the jury’s “net” award, inclusive of both damages and
attorney’s fees, and by awarding interest on the awards against Bergin and Jacquin
individually.
Cates, Industrial, and GTS respond that Bergin, Jacquin, and PRI waived
their issues 1 through 3, 5, and 7 through 10; that all 11 issues lack merit; and that,
even if Bergin, Jacquin, and PRI could demonstrate error, they have not
demonstrated reversible error with respect to any issue. See TEX. R. APP.
P. 44.1(a)(1).
Cates, Industrial, and GTS also raise two issues on their cross-appeal: (1) the
trial court erred as a matter of law by failing to award Cates the damages found by
the jury for Bergin and Jacquin’s breach of the April 12 agreement because Cates’s
breach did not excuse performance by Bergin and Jacquin; and (2) the trial court
erred by refusing to award as costs of court the cost of the accounting expert
retained by Cates, Industrial, and GTS and the cost of the discovery special master.
3
We affirm in part, reverse in part, and remand for the trial court to
recalculate the correct amounts of prejudgment interest and any offsets between
awards.
Background
A. Bergin, Jacquin, and Cates do business together
This case arises from a falling-out between Bergin and Jacquin on the one
side and Cates on the other side over the management of Power Reps, Inc. PRI, a
closely-held Texas corporation, operates as an independent sales representative for
a number of manufacturers and distributing companies that sell electrical
equipment, parts, and accessories. PRI has two general categories of customers or
clients, which it classifies as “utility” or “industrial,” depending on the business of
that customer or client and the type of customers or clients that it, in turn, serves.
Within the “utility” classification, PRI serves two subtypes of customers:
(1) “public power” companies, including cooperatives and municipal utilities, and
(2) investor-owned utility companies.
PRI has three principal shareholders and officers, each of whom works as a
sales representative. Bergin, an original shareholder, serves as PRI’s president and
handles primarily “public power” accounts. Cates, another original shareholder, is
a vice president and serves primarily “industrial” accounts. Jacquin became a
shareholder when his company merged with PRI approximately 10 years ago; he is
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a vice president and serves primarily investor-owned utility accounts. The only
other shareholder, Robert E. Bergin, Sr., is retired and inactive in the corporation’s
affairs. Cates was assisted in his work by another PRI employee, Celine Wilson.
By convention, commissions received by PRI were divided as follows:
approximately 70% of each commission went to the salesman or team that
generated the sale, and the remainder went to PRI for overhead. At least one
document indicates that Bergin, Jacquin, and Cates discussed fixing the split at
precisely 70-30 from December 2009 forward, although it does not indicate that
they reached an actual agreement. 1
Cates also owned and controlled Global Transformer Specialists, a company
that offered accessories for the types of equipment that PRI sold. 2 Cates was the
sole owner, officer, director, and bank signatory of GTS. According to Jacquin,
Cates, at his own discretion, used PRI funds to meet GTS’s needs and used GTS
funds to meet PRI’s needs.
1
Cates, GTS, and Industrial argue that this document constitutes a formal
agreement. But the document in question, an email from Bergin to Jacquin
and Cates, specifically identifies the 70-30 split as an “item[] that need[s] to
be voted on.” There is no indication in that document that PRI’s principals
ever voted to formalize the division of commissions.
2
Although GTS is a party to the suit and a named appellee and cross-
appellant, none of the parties’ briefs in this Court identifies GTS, explains its
origins, or meaningfully explains its relevance to the claims, counterclaims,
or defenses raised in this case. The facts herein are therefore drawn from
our own review of the record.
5
B. The shareholders negotiate their disagreements
In 2009, PRI found itself unable to make its full payroll on several
occasions. Bergin and Jacquin came to believe that the blame for the shortfalls in
PRI’s finances lay with Cates. Specifically, they believed that Cates was misusing
corporate funds and engaging in undisclosed deals with PRI clients, both through
GTS and otherwise.
Bergin, Jacquin, and Cates attempted to resolve their differences by
negotiating a spin-off of the “industrial” component of PRI’s business, to be run by
Cates. To that end, they exchanged a series of emails in late March 2010. Cates
drafted the first email, proposing “[m]y idea of this spin-off” and suggesting terms
for a sale of his PRI shares to PRI, payment of PRI debts, allocation of expenses
and income, allocation of clients, separation of the corporate data into two sets, and
other terms. Bergin responded, interspersing his own comments amongst Cates’s
statements, distinguishing them by typing them in an orange font. Cates replied,
interspersing additional comments among the existing statements, this time in a
bold font. On April 12, 2010, Cates, Bergin, and Jacquin each signed their names
to a printed copy of this email chain.
At first, Bergin, Jacquin, and Cates apparently treated the April 12 document
as reflecting an agreement among the three of them and began taking actions to
divide PRI’s existing business between PRI and a new entity to be operated by
6
Cates. Cates formed a new entity, Power Reps Industrial, LLC, in April 2010 and
registered the internet domain name PRIHouston.com in August 2010.
It soon became clear, however, that the parties did not agree on the terms of
their agreement. For example, Cates paid for the domain name PRIHouston.com
and stated that he intended to use it for Industrial, although Bergin and Jacquin saw
the initials “PRI” as capable of referring only to Power Reps, Inc., such that the
domain name would cause confusion. In addition, Cates interpreted the document
as requiring Bergin and Jacquin to form their own entity, Power Reps Utility, but
Bergin and Jacquin did not do so and disputed that they had an obligation to do so.
In fact, Bergin and Jacquin maintain that the April 12 document had no binding
effect, while Cates maintains that it constitutes an enforceable agreement. Despite
these disagreements—and despite Bergin and Jacquin’s insistence that the April 12
document was not a contract—Bergin and Jacquin, on one side, and Cates, on the
other, each concluded that the other side had breached obligations set forth in the
April 12 document.
Meanwhile, when Cates created Industrial, he hired Wilson, who had
worked with him at PRI, as an Industrial employee. Wilson began working for
Industrial in April or May 2010. She resigned, however, in September 2010 and
returned to PRI shortly thereafter. According to Cates, when Wilson left, she took
Industrial property with her, including office equipment and confidential
7
information. According to Wilson, however, the property in question all belonged
to PRI.
C. PRI files suit
In September 2010, PRI filed suit against Cates, Industrial, and GTS,
alleging breach of fiduciary duty, fraud, conversion, conspiracy to defraud PRI,
deceptive trade practices, and against Cates individually for breach of an
employment contract with PRI. Cates, Industrial, and GTS countersued PRI and
sued as third-party defendants Bergin, Jacquin, and Wilson, alleging breach of
contract based on the April 12 document, breach of fiduciary duty, shareholder
oppression, conversion, a claim under the Texas Theft Liability Act, tortious
interference with prospective and existing contracts, and an equitable claim to the
PRIHouston.com domain name and associated email accounts, among other causes
of action.
D. The case proceeds to trial
During discovery, the parties disagreed over the production of certain
emails, leading Cates, Industrial, and GTS to file a motion to compel discovery and
resulting in the trial court’s appointment of a special discovery master. The parties
also each retained a forensic accountant to determine the balances, if any, due from
each party to each other party. Pursuant to an agreed order, the parties agreed that
the accountants would produce a joint report and that the accountants’ fees would
8
be treated as costs of court. In a subsequent Rule 11 agreement, they agreed that
the accountants would produce a second, supplemental report and that the
accountants’ costs would be “total, then split equally between the parties.”
In April 2013, after a five-week trial, the trial court presented 60 questions to
the jury. Bergin, Jacquin, and PRI made no objections to the jury charge. Cates,
Industrial, and GTS objected to the submission of jury Questions 56 through 59,
regarding an employment agreement between PRI and Cates, on the ground that no
evidence showed the existence of such an agreement.
The first question in the charge asked, “Do you find that the writing of April
12, 2010 constituted an agreement whereby Cy Cates, Bob Bergin, and Jeff
Jacquin agreed to divide the business of Power Reps, Inc.?” If the jury answered
that the document was an agreement, Questions 2 through 5 asked the jury to
determine whether Bergin, Jacquin, or Cates breached the agreement (Question 2),
who breached first (Question 3), whether any breach by Cates was excused
(Question 4), and the amount of damages to Cates, Industrial, and GTS for any
breach by Bergin or Jacquin (Question 5). Question 55 asked,
Do you find that the April 12, 2010 agreement, if any, permitted Cy
Cates to operate and market his business as Power Reps Industrial
(now Cy Cates Energy Reps, LLC) and Cy Cates purchased the
internet domain “PRIHouston.com” and developed the website with
Cy [Cates’s] funds in furtherance of that agreement[?]
9
In response to jury Questions 1 through 3, the jury found that the April 12
document was an agreement, that Bergin, Cates, and Jacquin each breached that
agreement, and that Cates breached it first. It then found, in response to jury
Questions 4 and 5, that Cates’s breach was not excused, but that Cates, Industrial,
and GTS were damaged in the amount of $283,000 by Bergin and Jacquin’s
subsequent breach of the agreement. It also found, in response to Questions 6
through 12, that Cates breached fiduciary duties that he owed to PRI, but Bergin
and Jacquin, in turn, breached fiduciary duties that they owed to Cates. In
response to Question 55, the jury found that the April 12, 2010 agreement
“permitted” Cates to operate and market his business as Power Reps Industrial and
that Cates purchased and developed the PRIHouston.com domain name with his
own funds in furtherance of that agreement.
The jury further found, in response to Questions 16–28, 34–43, 46–51, and
56–59, that PRI tortiously interfered with prospective and existing contracts of
Cates, Industrial, and GTS (Questions 16–21); PRI defamed and disparaged Cates,
Industrial, and GTS (Questions 22–28); PRI stole and converted property of Cates,
Industrial, or GTS (Questions 34–37); Bergin and Jacquin engaged in oppressive
conduct against Cates (Questions 38–40); PRI defrauded Cates, Industrial, or GTS
(Questions 41–43); Cates defrauded PRI (Questions 48–49); Cates converted
property of PRI (Questions 50–51); PRI breached an agreement regarding
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distribution of commissions and payment of rent (Questions 46–47); and Cates
breached an employment agreement with PRI (Questions 56–59). It also found, in
response to Questions 54 and 60, amounts certain of attorney’s fees for both
groups of parties.
E. The parties’ post-trial motions
Bergin, Jacquin, and PRI filed 16 motions for judgment notwithstanding the
verdict, each of which the trial court denied. Cates, Industrial, and GTS also filed
a motion for judgment notwithstanding the verdict, which the trial court denied.
Cates, Industrial, and GTS also asked the trial court to award to them as costs of
court the fees of their accounting expert and costs related to the discovery master,
but the trial court refused to do so.
The trial court entered judgment on the jury’s verdict, but declined to award
damages to Cates, Industrial, and GTS for breach of the April 12 agreement on the
ground that Cates breached the agreement first. Bergin, Jacquin, and PRI then
moved for a new trial and, while that motion was pending, filed a notice of appeal.
The trial court subsequently entered an amended final judgment, modifying the
application of prejudgment interest. Cates, Industrial, and GTS then filed their
own notice of appeal. Subsequently, Bergin, Jacquin, and PRI amended their
motion for new trial, which was overruled by operation of law.
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Immaterial Question: The April 12 Document
In their first issue, Bergin, Jacquin, and PRI argue that the April 12
document is unenforceable as a matter of law and that the trial court therefore erred
in submitting a jury question asking whether the document was an agreement. The
first question posed to the jury asked whether “the writing of April 12, 2010
constituted an agreement.” Instead of submitting this question, Bergin, Jacquin,
and PRI argue, the trial court should have ruled as a matter of law that the April 12
document was not a contract or, at most, an unenforceable “agreement to agree.”
As support, they point to the document’s express statement that “[a] letter of intent
is necessary to proceed,” as well as various terms that the document states “will
have to be discussed,” that the parties “will need to discuss,” or that are simply
unclear. In the alternative, if the document is an enforceable agreement, they argue
in their second issue that the trial court erred in refusing to make a finding as to
their damages from Cates’s breach of the agreement.
Cates, Industrial, and GTS respond that Bergin, Jacquin, and PRI waived
their first argument—that the document is not an enforceable agreement and that
the trial court erred in submitting the issue to the jury—by failing to raise it during
the jury charge conference. They also argue that whether the document is a
contract is a fact issue for the jury. Finally, Cates, Industrial, and GTS respond
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that the trial court properly rejected Bergin and Jacquin’s request for a damages
award because no question on those damages was submitted to the jury.
A. Immateriality of jury finding on enforceability of contract
“Whether parties intend to make a contractual agreement is usually a
question of fact.” Chapman v. Mitsui Eng’g & Shipbuilding Co., Ltd., 781 S.W.2d
312, 316 (Tex. App.—Houston [1st Dist.] 1989, writ denied); see Scott v. Ingle
Bros. Pac. Inc., 489 S.W.2d 554, 556 (Tex. 1972); Henry C. Beck Co. v. Arcrete,
Inc., 515 S.W.2d 712, 716 (Tex. Civ. App.—Dallas 1974, writ dism’d). “But
whether a particular agreement constitutes a valid contract is generally a legal
determination that the court must make.” Chapman, 781 S.W.2d at 316; see Lone
Star Steel Co. v. Scott, 759 S.W.2d 144, 156–157 (Tex. App.—Texarkana 1988,
writ denied); Success Motivation Inst., Inc. v. Jamieson, 473 S.W.2d 275, 280
(Tex. Civ. App.—Waco 1971, no writ). This well-settled rule is grounded in the
logic that “determination of whether a written instrument constitutes a contract or
not requires a construction of the instrument, and is therefore addressed to the
court and not the jury.” Success Motivation Inst., 473 S.W.2d at 280.
When a trial court asks a jury to answer a question of law, the jury’s finding
on that question is immaterial to the judgment that the trial court should enter.
Spencer v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994); Fazio v.
Cypress/GR Houston I, L.P., 403 S.W.3d 390, 394 (Tex. App.—Houston [1st
13
Dist.] 2013, pet. denied); Ballesteros v. Jones, 985 S.W.2d 485, 499 (Tex. App.—
San Antonio 1998, pet. denied). Both the trial court and, on appeal, the appellate
court should disregard an immaterial jury finding. Spencer, 876 S.W.2d at 157;
Fazio, 403 S.W.3d at 394; see TEX. R. CIV. P. 301 (upon motion and reasonable
notice, trial court may disregard jury finding if directed verdict was proper or if
finding has no support in evidence).
B. Waiver of enforceability argument
Cates, Industrial, and GTS argue that Bergin, Jacquin, and PRI waived their
argument that the jury’s answer to Question 1 was immaterial by failing to raise it
at the charge conference.
Waiver is “an intentional relinquishment of a known right or intentional
conduct inconsistent with claiming that right.” Jernigan v. Langley, 111 S.W.3d
153, 156 (Tex. 2003). “Waiver is largely a matter of intent, and for implied waiver
to be found through a party’s actions, intent must be clearly demonstrated by the
surrounding facts and circumstances.” Id. To preserve error when the trial court
submits or refuses to submit a question or instruction to the jury, the complaining
party “must point out distinctly the objectionable matter and the grounds of the
objection” before the charge is submitted to the jury. TEX. R. CIV. P. 274; see TEX.
R. APP. P. 33.1(a); TEX. R. CIV. P. 278. A party is not required, however, to object
before submission of the jury charge to preserve a complaint that a jury question is
14
immaterial. Ballesteros, 985 S.W.2d at 499; Sunwest Bank of El Paso v. Basil
Smith Eng’g Co., Inc., 939 S.W.2d 671, 673 n.1 (Tex. App.—El Paso 1996, writ
denied).
Throughout the trial, Bergin, Jacquin, and PRI argued to the trial court that
the document was not a contract. They were not required to object at the charge
conference to preserve their complaint that the jury’s answer to Question 1 was
immaterial. Ballesteros, 985 S.W.2d at 499; Sunwest Bank of El Paso, 939 S.W.2d
at 673 n.1. Under these facts, we decline to find that they waived the issue for
purposes of this appeal.
We also reject Cates, Industrial, and GTS’s waiver argument because Cates
himself seeks to enforce the April 12 document as a contract and would have us
hold that he was entitled to the jury’s award of damages for Bergin and Jacquin’s
breach of the parties’ agreement. Cates, Industrial, and GTS base their argument
in part on whether the jury found a material breach of the agreement and on
whether Bergin and Jacquin demanded performance after Cates’s breach. These
arguments necessarily require us to determine what responsibilities, if any, the
parties bore under the purported agreement.
Finally, throughout trial and in their appellate briefs, the parties have pointed
to the April 12 document as defining their respective rights and responsibilities.
These rights and responsibilities touch on numerous other issues raised on appeal,
15
including the existence of fiduciary duties, conversion of property, rights to the
PRIHouston.com domain name and associated assets, and whether Industrial had
prospective contracts with which PRI could have tortiously interfered. We cannot
address those issues without first determining whether the April 12 document is a
legally-binding contract.
C. Enforceability of the April 12 document
Having held that the issue of whether the April 12 document is a contract is
properly before us, we turn to the merits. Whether the April 12 document itself
was an enforceable contract is a question of law, not a question of fact. See
Chapman, 781 S.W.2d at 316.
“Parties form a binding contract when the following elements are present:
(1) an offer, (2) an acceptance in strict compliance with the terms of the offer,
(3) meeting of the minds, (4) each party’s consent to the terms, and (5) execution
and delivery of the contract with the intent that it be mutual and binding.”
Winchek v. Am. Express Travel Related Servs. Co., Inc., 232 S.W.3d 197, 202
(Tex. App.—Houston [1st Dist.] 2007, no pet.). “In order to be legally binding, a
contract must be sufficiently definite in its terms so that a court can understand
what the promisor undertook.” T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847
S.W.2d 218, 221 (Tex. 1992).
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“The issue of whether [an] . . . agreement fails for lack of an essential term is
‘a question of law to be determined by the court, unless there is ambiguity or
unless surrounding facts and circumstances demonstrate a factual issue as to an
agreement.’” Gen. Metal Fabricating Corp. v. Stergiou, 438 S.W.3d 737, 744
(Tex. App.—Houston [1st Dist.] 2014, no pet.) (quoting Ronin v. Lerner, 7 S.W.3d
883, 888 (Tex. App.—Houston [1st Dist.] 1999, no pet.)). “A binding [agreement]
may exist when parties agree upon some terms, understanding them to be an
agreement, and leave other terms to be made later.” Id. (citing Oakrock
Exploration Co. v. Killam, 87 S.W.3d 685, 690 (Tex. App.—San Antonio 2002,
pet. denied)). “When an agreement leaves essential (or material) matters open for
future negotiation and those negotiations are unsuccessful, however, the agreement
‘is not binding upon the parties and merely constitutes an agreement to agree.’” Id.
(footnote omitted) (quoting Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22
S.W.3d 831, 846 (Tex. 2000)). “While Texas courts favor validating transactions
rather than voiding them, a court may not create a contract where none exists and
generally may not add, alter, or eliminate essential terms.” Id. at 744–45.
We begin by noting that the signed copy of the April 12 document bears a
large number of handwritten comments that are not initialed, dated, or—at least on
the face of the document—attributed to any particular author. For example, in
several places, “spin-off” is crossed out, and “reorg” is written in. In another, the
17
handwritten words “1.5 yr max” appear next to the statement that Cates would sell
his existing shares “once the Bank of America Loan is paid off, and within 1 year,”
but immediately above the statement, “Power Reps, Inc. continues as normal until
effective date of spin-off reorg.” We cannot ascertain which statement the
handwritten term modifies. In other places, the handwritten comments include
statements such as “Bob and Jeff Take Wells Fargo Note. Cy [indecipherable]
BOA Note.” 3
In two places, the April 12 document indicates that the parties contemplated
a formal “letter of intent” before proceeding with the spin-off or reorganization of
PRI. First, the typed text of the email chain includes the statements:
A letter of intent is necessary to proceed with the spin-off. This letter
of intent will be signed by each of the stockholders.
Second, immediately above the principals’ signatures appear the handwritten
words, “Letter of intent to follow,” although “to follow” is crossed out and
“Follow” is written in.
The document’s material terms are incomplete or, in some instances, wholly
absent. For example, the document explicitly states that a letter of intent signed by
all shareholders “is necessary to proceed” with the division of PRI’s business, but
it does not state what terms such a letter of intent must contain. The parties agree
3
There is no testimony in the record clarifying this statement.
18
that no such letter was ever signed. The document includes broad and vague
statements that “Expenses (including employees) are split,” “Income is split,” and
“Power Reps, Utility and Industrial must settle the debt to GTS.” It is silent as to
how such amounts were to be “split” and as to the amount and nature of the debt in
question. One comment in the document refers to how expenses could be split
“[i]f we use 60/40,” but there is no indication that the parties actually agreed to that
proportion, nor is it clear who would bear each share of such a split. Rather, the
document leaves open the possibility that the parties eventually decided to split
income and expenses equally into halves, in proportion to each shareholder’s stake
in the company, in proportion to the relative contributions of the utility and
industrial customers, or in any number of other ways. But the division of income
and expenses is an essential term of the proposed agreement.
The April 12 document also includes multiple statements contemplating
further discussion of material terms. For example, the sixth numbered paragraph
states,
[Typed:] There is a Wells Fargo note from the Buy Out of
Westmoreland Engineering in the amount of about $70,000 that will
need to be discussed. I am not sure whose name is on it. I don’t
think I have signed any personal guarantee. My paying the BOA
note off is enough – I think. [Handwritten:] Bob & Jeff Take Wells
Fargo Note. Cy [indecipherable] BOA Note.
19
(emphasis in original). The parties disputed responsibility for the Bank of America
note in question, but the parties have not identified any evidence from which we
might determine the meaning of the indecipherable portion of the handwriting.
Regarding payment of an unspecified “debt to GTS,” the document is
similarly imprecise. Its ninth numbered paragraph reads, in full:
9. Power Reps, Utility and Industrial must settle the debt to GTS.
******* 4 We will need to discuss this one also. I am willing to look
at possibly removing Cy’s name from #6 above in exchange for
removing PRI Utility from [indecipherable] OR we combined [sic] the
two and split 3 ways[.]
We have been through this several times and you know my feelings
on this[.] I am willing to look at some type of compromise but I still
feel this debt is no different [than] monies owed to me[.]
(emphasis in original). In this paragraph, in particular, we cannot say with
certainty who wrote which words, much less which terms, if any, the parties
intended to be binding. On the contrary, the final statement indicates no more than
an agreement to “look at some type of compromise.” 5 In addition, this paragraph
implies that the parties contemplated combining responsibility for the Bank of
4
The document contains a series of dots or asterisks of uneven shape and
positioning. Based on the document in the record, we cannot tell whether
these dots are typed or handwritten, nor can we determine their original
color. Similar dots appear in several of the paragraphs in the document, but
it is not clear from the record what they signify, if anything.
5
The only reference to this term that we have found in the record is Jacquin’s
testimony that Cates “believed that monies were owed to GTS from Power
Reps. . . . [b]ecause that’s what he felt.”
20
America loan with responsibility for other debts, casting further doubt on who bore
responsibility for the former.
Likewise, the parties discussed the question, “How will we split data
information or programs?” The response to that question, printed in bold font,
was,
I’m discussing the options with programmers. I suggest we operate 2
separate databases. Migrating data to each. The existing server
should handle both. Password protection will control access to each.
We can determine what data to migrate examples: (all customer TEC,
all customer Centerpoint, etc.) This could apply to contacts and
transactions. Another possibility is we each sign a confidentiality
agreement and migrate all data to both databases. All new
information will be limited.
Again, we cannot determine what the parties agreed to with respect to data or
software ownership, if anything. But the division of these assets was a material
term of the proposed agreement; the document itself reflects that the parties held
significant concerns about access and confidentiality, and even the parties’
appellate briefs reflect a focus on ownership and confidentiality of data.
Because the April 12 document does not contain essential terms of the
parties’ purported agreement, it is unenforceable as a matter of law. See Fort
Worth Indep. Sch. Dist., 22 S.W.3d at 846; Oakrock Exploration Co., 87 S.W.3d at
691. The document is not legally binding for the additional reason that it is not
sufficiently definite to enable us to understand what each party promised to do.
T.O. Stanley Boot Co., 847 S.W.2d at 221. Finally, the parties’ signatures
21
notwithstanding, the document reflects that there was no “acceptance in strict
compliance with the terms of the offer” because the responses expressed ongoing
disagreement and uncertainty regarding various terms. See Winchek, 232 S.W.3d
at 202. The document does not evince a “meeting of the minds” as to numerous
material terms because the text of the document contains incompatible proposals,
with no indication of which terms form the parties’ agreement. Id. For each of
these reasons, the document is not enforceable as a contract. See id. We therefore
sustain Bergin, Jacquin, and PRI’s first issue and hold that the trial court erred in
entering judgment on the jury’s answer to Question 1, rather than disregarding it as
an immaterial finding on a question of law. 6
Bergin, Jacquin, and PRI’s second issue addresses whether the trial court
should have determined the amount of damages due for Cates’s breach of the
6
Cates, Industrial, and GTS argue in a footnote, “Should this Court find error,
[Bergin, Jacquin, and PRI] fail to demonstrate reversible error,” citing Texas
Rule of Appellate Procedure 44.1(a)(1). They reiterate this same argument,
always in footnotes and using exactly the same language, regarding each of
the eleven issues raised by Bergin, Jacquin, and PRI. They do not elaborate
on these arguments with any citations to other authority, the record, or any
briefing whatsoever. Cates, Industrial, and GTS have thus not raised any
particular issue or argument with respect to reversible error. See TEX. R.
APP. P. 38.1(i) (“The [appellant’s] brief must contain a clear and concise
argument for the contentions made, with appropriate citations to authorities
and to the record.”), 38.2(a)(1) (“An appellee’s brief must conform to the
requirements of Rule 38.1,” with exceptions not relevant here.). We have,
however, considered and applied the reversibility requirements set forth in
Rule of Appellate Procedure 44.1 to each issue raised by the parties. See
TEX. R. APP. P. 44.1.
22
purported April 12 agreement and entered judgment in that amount. Because we
hold that the April 12 document is not an enforceable contract, we overrule that
issue as moot.
Evidentiary Sufficiency
We now turn to Bergin, Jacquin, and PRI’s evidentiary sufficiency issues,
namely their issues three through seven and nine.
A. Standard of review
When we consider whether legally sufficient evidence supports a challenged
finding, we must consider evidence that supports the finding if a reasonable
factfinder could do so, and we must disregard contrary evidence unless a
reasonable factfinder could not do so. See City of Keller v. Wilson, 168 S.W.3d
802, 827 (Tex. 2005). We may not sustain a legal insufficiency, or “no evidence,”
point unless the record demonstrates (1) a complete absence of evidence of a vital
fact; (2) that 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) that the evidence offered to
prove a vital fact is no more than a mere scintilla; or (4) that the evidence
conclusively establishes the opposite of the vital fact. Id. at 810.
“When reviewing a jury verdict to determine the factual sufficiency of the
evidence, the court of appeals must consider and weigh all the evidence, and
should set aside the verdict only if it is so contrary to the overwhelming weight of
23
the evidence as to be clearly wrong and unjust.” Cain v. Bain, 709 S.W.2d 175,
176 (Tex. 1986); see Vill. Place, Ltd. v. VP Shopping, LLC, 404 S.W.3d 115, 124
(Tex. App.—Houston [1st Dist.] 2013, no pet.).
A no-evidence argument is an attack on the legal sufficiency of the evidence
and must be preserved for appeal through (1) a motion for instructed verdict; (2) a
motion for judgment notwithstanding the verdict; (3) an objection to the
submission of the issue to the jury; (4) a motion to disregard the jury’s answer to a
vital fact issue; or (5) a motion for new trial. T.O. Stanley Boot Co., 847 S.W.2d at
220. Similarly, a factual-sufficiency argument must be preserved by a motion for
new trial. TEX. R. CIV. P. 324(b).
B. Fiduciary duties
In their third issue, Bergin, Jacquin, and PRI argue that there is no or legally
insufficient evidence to support the jury’s verdict that Bergin and Jacquin are
fiduciaries of Cates. Specifically, they argue that the evidence is insufficient for
three reasons: (1) “the underlying facts are undisputed,” making the existence of a
fiduciary duty a question of law; (2) Bergin and Jacquin’s actions relevant to this
case were all taken in their capacities as directors and officers of PRI; and (3) the
economic loss rule bars any recovery by Cates for Bergin and Jacquin’s breach of
their fiduciary duties.
24
Cates, Industrial, and GTS respond that Bergin, Jacquin, and PRI waived
this issue by failing to raise it at the jury charge conference. In the alternative, they
argue that sufficient evidence supports the judgment.
1. Waiver
A party may preserve a legal-sufficiency issue through a motion for
instructed verdict, an objection to submission of an issue to the jury, a motion for a
judgment notwithstanding the verdict, a motion to disregard the jury’s answer to a
vital fact issue, or a motion for a new trial. Salinas v. Fort Worth Cab & Baggage
Co., Inc., 725 S.W.2d 701, 704 (Tex. 1987); see Williams v. S. Pac. Transp. Co.,
804 S.W.2d 132, 134 (Tex. App.—Houston [1st Dist.] 1990, writ denied). Bergin,
Jacquin, and PRI filed a motion to disregard the jury’s findings regarding Bergin
and Jacquin’s fiduciary duties to Cates. They have thus preserved this issue.
2. Existence and breach of fiduciary duty
“The elements of a breach-of-fiduciary-duty claim are (1) the existence of a
fiduciary relationship between the plaintiff and defendant; (2) the defendant’s
breach of the fiduciary duties arising from that relationship; and (3) injury to the
plaintiff, or benefit to the defendant, resulting from that breach.” Plotkin v. Joekel,
304 S.W.3d 455, 479 (Tex. App.—Houston [1st Dist.] 2009, pet. denied); Jones v.
Blume, 196 S.W.3d 440, 447 (Tex. App.—Dallas 2006, pet. denied).
25
“A fiduciary duty is an extraordinary duty that is not lightly created.”
Wayne Duddlesten, Inc. v. Highland Ins. Co., 110 S.W.3d 85, 96 (Tex. App.—
Houston [1st Dist.] 2003, pet. denied); Garrison Contractors, Inc. v. Liberty Mut.
Ins. Co., 927 S.W.2d 296, 301 (Tex. App.—El Paso 1996), aff’d on other grounds,
966 S.W.2d 482 (Tex. 1998). Thus, fiduciary duties arise only out of certain
special relationships. See, e.g., Nat’l Plan Adm’rs, Inc. v. Nat’l Health Ins. Co.,
235 S.W.3d 695, 700 (Tex. 2007); J.P. Morgan Chase Bank, N.A. v. Tex. Contract
Carpet, Inc., 302 S.W.3d 515, 536 (Tex. App.—Austin 2009, no pet.). “In certain
formal relationships, such as an attorney-client or trustee relationship, a fiduciary
duty arises as a matter of law.” Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex.
2005). Texas courts “also recognize 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)). Cates argues that an informal fiduciary relationship existed
between him and Bergin and Jacquin.
“A [corporate] director’s fiduciary duty runs only to the corporation, not to
individual shareholders or even to a majority of the shareholders.” Richardson v.
Newman, 439 S.W.3d 538, 542 (Tex. App.—Houston [1st Dist.] 2014, no pet.)
(quoting Somers ex rel. EGL, Inc. v. Crane, 295 S.W.3d 5, 11 (Tex. App.—
Houston [1st Dist.] 2009, pets. denied)). “While corporate officers owe fiduciary
26
duties to the corporation they serve, they do not generally owe fiduciary duties to
individual shareholders unless a contract or confidential relationship exists
between them in addition to the corporate relationship.” Somers, 295 S.W.3d at
11 (quoting Cotten v. Weatherford Bancshares, Inc., 187 S.W.3d 687, 698 (Tex.
App.—Fort Worth 2006, pet. denied) (emphasis added)). Further, the relationship
between shareholders in a closely-held corporation, taken alone, does not give rise
to fiduciary duties. Cardiac Perfusion Servs., Inc. v. Hughes, 436 S.W.3d 790, 791
n.1 (Tex. 2014).
When the underlying facts are undisputed, the determination of whether a
fiduciary relationship exists is a question of law for the court. Meyer, 167 S.W.3d
at 330; Envtl. Procedures, Inc. v. Guidry, 282 S.W.3d 602, 627 (Tex. App.—
Houston [14th Dist.] 2009, pet. denied). Thus, “[a]lthough the existence of facts
giving rise to a fiduciary duty is a question for the factfinder’s determination, the
issue of whether those facts give rise to a formal fiduciary relationship is a
question of law.” Envtl. Procedures, 282 S.W.3d at 627; see Brewer & Pritchard,
P.C. v. Johnson, 7 S.W.3d 862, 867 (Tex. App.—Houston [1st Dist.] 1999), aff’d,
73 S.W.3d 193 (2002).
We consider a variety of factors to determine whether an informal fiduciary
relationship exists. Gregan v. Kelly, 355 S.W.3d 223, 228 (Tex. App.—Houston
[1st Dist.] 2011, no pet.). Our first consideration is the nature of the parties’
27
relationship. Id.; see Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962) (“The
existence of the fiduciary relationship is to be determined from the actualities of
the relationship between the persons involved.”); Lee v. Hasson, 286 S.W.3d 1,
14–16 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (analyzing (1) parties’
closeness, including whether relationship is close personal friendship or close
business relationship, (2) whether parties’ transactions were conducted at arm’s
length, and (3) terms of any contracts between parties). As part of the parties’
relationship, we must consider whether the purported fiduciary exercised
dominance and undue influence over the other party. See R.R. St. & Co., Inc. v.
Pilgrim Enters., Inc., 81 S.W.3d 276, 306 (Tex. App.—Houston [1st Dist.] 2001)
(“[F]iduciary relationships juxtapose trust and dependence on one side with
dominance and influence on the other”), rev’d in part sub nom., 166 S.W.3d 232
(Tex. 2005).7 We also consider the length of the parties’ relationship, although a
long personal relationship alone is insufficient to create a fiduciary relationship.
Lee, 286 S.W.3d at 15; Hoggett v. Brown, 971 S.W.2d 472, 488 (Tex. App.—
7
See also Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276,
287 (Tex. 1998) (“[T]he law recognizes the existence of confidential
relationships in those cases ‘in which influence has been acquired and
abused, in which confidence has been reposed and betrayed.’” (quoting
Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591,
594 (Tex. 1992))); Pope v. Darcey, 667 S.W.2d 270, 275 (Tex. App.—
Houston [14th Dist.] 1984, writ ref’d n.r.e.) (“A confidential relationship
exists where one person has a special confidence in another to the extent that
the parties do not deal with each other equally, either because of dominance
on one side or weakness, dependence, or justifiable trust on the other.”).
28
Houston [14th Dist.] 1997, pet. denied) (observing that long personal relationship
alone is insufficient to create fiduciary relationship).
A second factor is whether the plaintiff actually relied on the purported
fiduciary “for moral, financial, or personal support or guidance.” Trostle v.
Trostle, 77 S.W.3d 908, 915 (Tex. App.—Amarillo 2002, no pet.); see Lee, 286
S.W.3d at 15. Third, we examine whether such reliance is justifiable. Ins. Co. of
N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998) (stating informal fiduciary
relationship “may arise when the parties have dealt with each other in such a
manner for a long period of time that one party is justified in expecting the other to
act in its best interest”); Thigpen, 363 S.W.2d at 253 (“[W]e hold that in this case
there is not such evidence of justifiable trust and confidence as will create a
fiduciary relationship”); Gregan, 355 S.W.3d at 228 (“[O]ne factor we consider is
whether party claiming to be owed a fiduciary relationship justifiably placed
special confidence in the other party to act in his best interest.”).
In addition to these factors, there is one bright-line temporal requirement
that must be satisfied to establish an informal fiduciary relationship: “[t]o 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.” Meyer, 167 S.W.3d at 331; Wayne Duddlesten, Inc., 110 S.W.3d at 96;
see Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997).
29
Applying these factors, we first consider the nature of the relationship
between Bergin, Jacquin, and Cates. Gregan, 355 S.W.3d at 228; see Thigpen, 363
S.W.2d at 253; Lee, 286 S.W.3d at 14–16. The record does not contain any
agreement, whether written or oral, that creates an informal fiduciary relationship.
The record shows that these men had a long-standing relationship spanning more
than 20 years. That relationship, however, began with and centered on the
management and eventual breakup of PRI. No evidence indicates that the
relationship was especially close or intimate such that it might rise to the level of
an informal fiduciary relationship. Cf. Lee, 286 S.W.3d at 14–16 (evidence of
long-standing business relationship and personal friendship in which parties
vacationed together with their families was legally and factually sufficient to
support jury’s finding of informal fiduciary relationship); Flanary v. Mills, 150
S.W.3d 785, 794 (Tex. App.—Austin 2004, pet. denied) (legally and factually
sufficient evidence existed that shareholder in homebuilding corporation had
confidential relationship with corporation’s other shareholder who was both his
uncle and former partner in another business). Further, nothing in the record
indicates that the purported fiduciaries—Bergin and Jacquin—exercised
dominance and undue influence over Cates. See R.R. St. & Co., 81 S.W.3d at 306.
This first factor therefore does not support the existence of an informal fiduciary
relationship.
30
We next look at whether Cates actually relied on Bergin and Jacquin “for
moral, financial, or personal support or guidance.” Trostle, 77 S.W.3d at 915; see
Lee, 286 S.W.3d at 15. No evidence indicates that he did. Rather, the three men
operated somewhat independently, and it was Cates, not the others, who eventually
opted to leave PRI and operate his business independently. This second factor
does not support the existence of a fiduciary relationship. The absence of support
for this factor also renders the third factor—whether Cates’s reliance is
justifiable—inapplicable.
Finally, we note that “the special relationship of trust and confidence must
exist prior to, and apart from, the agreement made the basis of the suit.” Meyer,
167 S.W.3d at 331; see Schlumberger, 959 S.W.2d at 177. No evidence indicates
that the parties had such a special relationship that pre-dated the purported
agreements at issue in this suit.
We hold that, as a matter of law, the evidence does not support the jury’s
finding that Bergin and Jacquin were fiduciaries of Cates. 8 We sustain Bergin,
8
We note that the jury awarded damages to PRI for Cates’s breach of a
fiduciary duty. No party challenges that award or the jury’s liability findings
underlying the award. We note, however, that the award to PRI is based on
a different theory—Cates’s relationship to PRI—than that supporting
Cates’s recovery against Bergin and Jacquin and is therefore not affected by
our holding here.
31
Jacquin, and PRI’s third issue 9 and reverse the trial court’s awards of damages for
breach of fiduciary duties by Bergin and Jacquin. 10
C. Tortious interference with prospective contracts
Bergin, Jacquin, and PRI argue in their fourth issue that no or insufficient
evidence supports the jury’s liability finding and damages award to Cates,
Industrial, and GTS for tortious interference with prospective contracts in response
to jury Questions 16 and 18. Therefore, according to Bergin, Jacquin, and PRI, the
trial court should have disregarded the jury’s findings relevant to that claim.
Bergin, Jacquin, and PRI do not cite any authority in connection with their
fourth issue. They do not identify the elements of a claim for tortious interference
with prospective business relations, nor do they explain which element or elements
of the claim are supported by insufficient evidence. 11 Because Bergin, Jacquin,
9
Because we sustain this issue based on Bergin, Jacquin, and PRI’s first two
arguments, we do not reach their arguments regarding the economic loss
rule.
10
The trial court awarded these damages in two apparently overlapping
portions. In paragraph 13 of the judgment, it awarded $281,000, the amount
found by the jury, against “Bergin . . . jointly and severally with . . .
Jacquin.” Then, in paragraph 14 of the judgment, it awarded 40% of that
amount to “Jacquin, jointly and severally with . . . Bergin.” We reverse both
awards, as both depend on the same liability findings.
11
We also note that, contrary to PRI’s position, a claim for tortious
interference with prospective business relations does not necessarily require
proof of a prospective contract; it may instead involve interference with a
continuing relationship that has not been reduced to a formal contract. See,
e.g., Heil–Quaker Corp. v. Mischer Corp., 863 S.W.2d 210, 214 (Tex.
32
and PRI have inadequately briefed this issue, they have waived it. See TEX. R.
APP. P. 38.1(i) (“The brief must contain a clear and concise argument for the
contentions made, with appropriate citations to authorities and to the record.”); see
also, e.g., Tesoro Petroleum Corp. v. Nabors Drilling USA, Inc., 106 S.W.3d 118,
128 (Tex. App.—Houston [1st Dist.] 2002, pet. denied). Moreover, to the extent
that Bergin, Jacquin, and PRI raise any complaint regarding the jury charge’s
question on liability, they waived it by failing to object at the jury charge
conference. See TEX. R. CIV. P. 272, 274.
With respect to damages, Bergin, Jacquin, and PRI assert that “the evidence
shows clearly that Cates suffered no damage from any actions or conduct by PRI,
Bergin or Jacquin that interfered with [his] business relations or ‘contracts.’” This
briefing is inadequate in that it fails to identify legal authority relevant to the
applicable standard of review, the law of tortious interference, or damages. It does
not identify the evidence that “shows clearly that Cates suffered no damage” due to
their actions. Nor do Bergin, Jacquin, and PRI discuss, in either their opening brief
or their reply brief, the evidence to which Cates points as support for the tortious
interference finding: disparaging remarks by Bergin, Jacquin, and PRI to Cates’s
App.—Houston [14th Dist.] 1993) (citing RESTATEMENT (SECOND) OF
TORTS § 766B, cmts. a, c (1979)), writ granted w.r.m., 877 S.W.2d 300
(Tex. 1994); see also Faucette v. Chantos, 322 S.W.3d 901, 915 (Tex.
App.—Houston [14th Dist.] 2010, no pet.).
33
actual and potential customers, meetings between Wilson and Cates’s actual
customer Olsun, and PRI’s attempt to have a commission check payable to
Industrial reissued and made payable to PRI. By failing to brief their complaint by
addressing neither the relevant law nor the evidence, Bergin, Jacquin, and PRI
have waived this issue. See TEX. R. APP. P. 38.1(i).
We hold that Bergin, Jacquin, and PRI have waived their fourth issue.
D. Commission-split and rent agreement
In their fifth issue, Bergin, Jacquin, and PRI argue that the trial court should
have disregarded the jury’s findings regarding the purported 70-30 commission-
split and rent agreement. In support, they make two arguments: (1) “any
agreement relating to commission split and payment of rent was subsumed in the
incomplete April 12, 2010 agreement draft which the jury found Defendant Cates
breached first,” and (2) there is no evidence or legally insufficient evidence that
PRI did not comply with its obligations “under an alleged agreement to make
commission payments.”
Bergin, Jacquin, and PRI again cite no legal authority in connection with this
issue. They do cite to the record, but their record references do not support their
argument that the parties intended that the April 12 document would supersede the
purported commission-split and rent agreement, nor do they demonstrate that Cates
received all monies that he claimed under that agreement. We also note that their
34
briefing regarding the purported commission-split and rent agreement in the trial
court, like their briefing here, fails to cite any legal authorities supporting the
argument that the agreement had been superseded or subsumed into any other
agreement. Finally, we note that the April 12 document—which we have already
held was not a binding contract—does not contain a merger clause or other
indication that the parties intended it to supersede any prior agreements. Bergin,
Jacquin, and PRI do not articulate any argument as to why we should construe it as
having such an effect, even assuming that it was binding.
Because Bergin, Jacquin, and PRI do not cite legal authority or evidence to
support their fifth issue, we overrule it as inadequately briefed. See TEX. R. APP.
P. 38.1(i); see also Tesoro Petroleum, 106 S.W.3d at 128.
E. Conversion
In their sixth issue, Bergin, Jacquin, and PRI argue that there is no or
insufficient evidence to support the jury’s liability finding and damages award, in
response to jury Questions 34 and 35, for PRI’s conversion of property belonging
to Cates, Industrial, or GTS. They contend that, when the disputed property is
money, an action for conversion is generally inappropriate, citing Edlund v.
Bounds, 842 S.W.2d 719 (Tex. App.—Dallas 1992, writ denied). According to
Bergin, Jacquin, and PRI, the evidence showed that all funds or property to which
35
Cates was entitled were either released to Cates or credited against amounts that he
owed to PRI.
Cates, Industrial, and GTS respond that the jury could have found that PRI
converted computer and phone equipment, confidential information, and
commissions that Cates and Industrial earned and that were received and
wrongfully withheld by PRI.
“Conversion is the wrongful assumption and exercise of dominion and
control over the personal property of another to the exclusion of, or inconsistent
with, the owner’s rights.” Lee v. Lee, 411 S.W.3d 95, 108–09 (Tex. App.—
Houston [1st Dist.] 2013, no pet.); Burns v. Rochon, 190 S.W.3d 263, 267–68
(Tex. App.—Houston [1st Dist.] 2006, no pet.).
To establish a claim for conversion, a plaintiff must prove that (1) the
plaintiff owned or had possession of the property or entitlement to
possession; (2) the defendant unlawfully and without authorization
assumed and exercised control over the property to the exclusion of,
or inconsistent with, the plaintiff’s rights as an owner; (3) the plaintiff
demanded return of the property; and (4) the defendant refused to
return the property.
Lee, 411 S.W.3d at 109. “An action for the conversion of money will lie if the
money can be identified as a specific chattel.” Edlund, 842 S.W.2d at 727 (citing
Eckman v. Centennial Sav. Bank, 757 S.W.2d 392, 398 (Tex. App.—Dallas 1988,
writ denied)). But “[w]hen an indebtedness can be discharged by payment of
36
money generally, an action in conversion is inappropriate.” Id. (quoting Eckman,
757 S.W.2d at 398).
Jury Question 34 asked whether “[PRI], Bergin, and/or Jacquin convert[ed]
property belonging to Cy Cates individually, [Industrial], and/or [GTS].” The
accompanying instructions properly instructed the jury regarding the elements of
conversion, although they did not distinguish between personal property and
money. Instead, the instructions defined “personal property” to include “items
ordinarily considered to be personal property (e.g. cars, jewelry), in addition to
confidential information, such as customer lists and trade secrets, and money,
including bank deposits and rental proceeds.” They did not define “confidential
information” or “trade secrets.”
The record does not contain any evidence that Cates, Industrial, or GTS had
any right to computer and phone equipment or confidential information that they
obtained from PRI. Rather, their claims to such equipment and information are
premised on the purported terms of the parties’ agreement to split PRI into two
entities. But, as we have already held, no legally-binding agreement exists. As for
commissions that Cates and Industrial earned, the parties make no attempt to
identify that money as associated with a particular chattel. An action for
conversion of that money is therefore inappropriate. See Edlund, 842 S.W.2d at
727 (quoting Eckman, 757 S.W.2d at 398).
37
We hold that the record contains legally insufficient evidence that PRI
converted any property of Cates, Industrial, or GTS. We therefore sustain Bergin,
Jacquin, and PRI’s sixth issue.
F. Oppressive conduct
Bergin, Jacquin, and PRI contend in their seventh issue that there is no or
insufficient evidence to support the jury’s liability finding and damages award for
Bergin and Jacquin’s oppressive conduct against Cates. They contend that they
took all of the allegedly oppressive actions in their capacities as officers and
directors of PRI, not as individuals, and that such actions were proper.
Cates, Industrial, and GTS argue that Bergin, Jacquin, and PRI failed to raise
this issue in the trial court and thus did not preserve it for appeal. Although PRI’s
initial motion for new trial challenged the sufficiency of the evidence regarding
oppressive conduct, Bergin and Jacquin did not join that motion. They did,
however, join PRI’s amended motion for new trial after the trial court amended its
judgment. They have therefore preserved their legal-sufficiency argument on
oppressive conduct for purposes of appeal. See TEX. R. CIV. P. 324(b); T.O.
Stanley Boot Co., 847 S.W.2d at 220.
On appeal, however, they have waived this issue by inadequate briefing.
Bergin, Jacquin, and PRI do not cite any evidence in support of their argument
other than testimony that PRI held a board meeting to which Cates was invited.
38
They cite only three cases in support of their arguments, all of which have been
overruled or disapproved by the Supreme Court of Texas. See Willis v. Donnelly,
118 S.W.3d 10 (Tex. App.—Houston [14th Dist.] 2003), overruled in part, 199
S.W.3d 262, 279 (Tex. 2006); Willis v. Bydalek, 997 S.W.2d 798, 801 (Tex.
App.—Houston [1st Dist.] 1999, pet. denied), disapproved by Ritchie v. Rupe, 443
S.W.3d 856, 870–71 n.17 (Tex. 2014); Davis v. Sheerin, 754 S.W.2d 375, 383
(Tex. App.—Houston [1st Dist.] 1988, writ denied), disapproved by Ritchie, 443
S.W.3d at 876. Moreover, these cases do not support the proposition for which
Bergin, Jacquin, and PRI argue: that, as a matter of law, a shareholder of a closely-
held entity does not oppress another shareholder, so long as he acts solely in an
official capacity to carry out the allegedly oppressive acts.
We hold that Bergin, Jacquin, and PRI have waived their seventh issue.
G. Employment agreement
In their ninth issue, Bergin, Jacquin, and PRI argue that no or insufficient
evidence supports the jury’s award of zero damages for Cates’s breach of his
employment agreement with PRI and that the trial court therefore erred in denying
PRI attorney’s fees on that claim. The jury found that Cates breached his
employment agreement, but it awarded no damages for that breach. Although the
jury awarded attorney’s fees to PRI, the trial court did not award those fees in the
39
judgment because PRI did not recover damages on its breach-of-contract claim
related to the employment agreement.
Bergin, Jacquin, and PRI do not cite to any authority in support of their
argument. More significantly, they also do not cite to any relevant evidence. In
fact, they do not cite to or identify the employment agreement or its terms. Rather,
they cite only to expert testimony regarding damages caused by Cates’s actions
generally. They do not explain how any action by Cates breached any term of the
alleged employment agreement or explain what damages suffered by PRI are
attributable to any such breach.
Given their failure to identify the employment agreement, its terms, or any
relevant authority, we hold that Bergin, Jacquin, and PRI have waived their ninth
issue by inadequately briefing it. See TEX. R. APP. P. 38.1(i); Tesoro Petroleum,
106 S.W.3d at 128.
Attorney’s Fees
In their eighth issue, Bergin, Jacquin, and PRI challenge the trial court’s
award of attorney’s fees to Cates, Industrial, and GTS. They contend that (1) the
fee amounts awarded by the jury were unreasonable and excessive; (2) Cates,
Industrial, and GTS did not segregate their attorney’s fees between claims for
which fees are recoverable and those for which they are not; and (3) Cates either
did not recover or should not have recovered on each claim for which fees are
40
recoverable. Cates, Industrial, and GTS argue that Bergin, Jacquin, and PRI
waived this issue by failing to raise it in the charge conference or when the
evidence of fees was presented.
The following comprises the entirety of the briefing on Bergin, Jacquin, and
PRI’s first two arguments:
The Court erred in failing to disregard the jury’s answers to Question
No 54 and in awarding attorney fees to Defendants Cates, Power Reps
Industrial, LLC, (now Cy Cates Energy Reps, LLC) and Global
Transformer Specialists, Inc. for the reasons that
(a) the fee amounts found by the jury were unreasonable and
excessive relative to any respective claims upon which
Defendants could have been entitled to recover attorney fees;
[and]
(b) Defendants’ [sic] failed to segregate its [sic] claims for attorney
fees for any respective claim on which Defendants sought to
recover attorney fees[.]
Bergin, Jacquin, and PRI do not cite or refer to any authority or evidence to
support these arguments. We therefore hold that they have waived these points.
See TEX. R. APP. P. 38.1(i); Tesoro Petroleum, 106 S.W.3d at 128.
In their third argument, Bergin, Jacquin, and PRI attack each basis on which
Cates, Industrial, and GTS could have recovered attorney’s fees. Specifically, they
contend that the jury’s finding that Cates breached the April 12 “agreement”
undermines recovery on that basis. They also insist that the trial court should have
disregarded the jury’s finding on Cates, Industrial, and GTS’s theft claim because
41
the only evidence of any theft was that Cates stole property from PRI. Finally,
they assert that the trial court should have disregarded the jury’s finding that PRI
breached the purported 70-30 commission-split and rent agreement.
Bergin, Jacquin, and PRI have waived this third argument, as well. They
again fail to cite any authority in support of their contentions. Their only citations
to the record are to demonstrate purported bad acts by Cates, not to demonstrate
the absence of evidence supporting any portion of the judgment regarding a cause
of action for which fees are recoverable. We therefore hold that they have waived
their third attack on the attorney’s fees award by inadequately briefing it. See TEX.
R. APP. P. 38.1(i); Tesoro Petroleum, 106 S.W.3d at 128.
Because Bergin, Jacquin, and PRI have waived their eighth issue, we
overrule it.12
12
We note that Bergin, Jacquin, and PRI raise a fourth argument under the
heading of “Argument on Point of Error Eight:” that the trial court should
have disregarded the jury’s award of zero damages for Cates’s breach of his
employment agreement. This point, however, has nothing to do with the
trial court’s award of attorney’s fees to Cates, Industrial, and GTS, as those
parties cannot recover fees in connection with that claim. See 1/2 Price
Checks Cashed v. United Auto Ins. Co., 344 S.W.3d 378, 383 (Tex. 2011)
(explaining that TEX. CIV. PRAC. & REM. CODE ANN. § 38.001 establishes
“one-way fee shift,” under which defendant is liable for successful plaintiff’s
fees in breach-of-contract action, but reverse is not true). Indeed, Bergin,
Jacquin, and PRI do not mention fees in connection with this point. Rather,
the argument focuses entirely on damages connected to the employment
agreement. We have therefore considered this argument in connection with
Bergin, Jacquin, and PRI’s ninth issue, addressed above.
42
Declaratory Judgment Regarding PRIHouston.com and Associated Assets
In their tenth issue, Bergin, Jacquin, and PRI contend that the trial court
erred in declaring that Cates owns the domain name PRIHouston.com and the
associated website and email addresses. Specifically, they argue that these assets
are indelibly associated with and are property of PRI, and “[t]here is no legal or
equitable basis for the [trial court’s] judgment awarding [these assets] to
Defendants.” They continue, “The use of those names or marks by Defendants is
certain to promote confusion as to the source, endorsement, affiliation or
sponsorship of the user company and/or its products, and will damage Plaintiff
Power Reps, Inc.” In conclusion, they contend,
The use of the internet domain, website or the name ‘PRIHouston’ is
and will be unfair competition per se, will be an identifying mark that
is deceptively similar to the business name and internet presence of
Plaintiff, Power Reps, Inc., will be confusing to the business relations,
clients and customers of Plaintiff, is error and must be set aside.”
Declaratory judgments are authorized by Section 37.003 of the Civil Practice
and Remedies Code, which provides, “A court of record within its jurisdiction has
power to declare rights, status, and other legal relations whether or not further
relief is or could be claimed.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.003(a)
(West 2015). A trial court’s decision to enter or refuse a declaratory judgment
rests within the sound discretion of the trial court. See, e.g., Space Master Int’l,
Inc. v. Porta-Kamp Mfg. Co., Inc., 794 S.W.2d 944, 947 (Tex. App.—Houston [1st
43
Dist.] 1990, no pet.). A trial court abuses its discretion if it “rule[s] arbitrarily,
unreasonably, or without regard to guiding legal principles.” Bocquet v. Herring,
972 S.W.2d 19, 21 (Tex. 1998).
Bergin, Jacquin, and PRI do not provide any citations to the record in
support of their contentions, nor do they cite any authorities regarding the nature of
declaratory judgments or the applicable standard of review. The four cases that
they do cite all address either the law of unfair competition, which is not at issue in
this case, or the “four corners” rule of interpretation of contracts. None of these
cases provides any basis for overturning the trial court’s declarations.
First, Bergin, Jacquin, and PRI rely on Pebble Beach Co. v. Tour 18 I Ltd.,
155 F.3d 526 (5th Cir. 1998), for the proposition that the trial court’s judgment
“merely establishes a basis and opportunity for use by Defendants to unfairly
compete with the now separate business entities.” They do not cite to any
particular portion of the Fifth Circuit’s thirty-page opinion in Pebble Beach as
authority for their contentions. Moreover, Pebble Beach has since been partially
abrogated by the Supreme Court of the United States. TrafFix Devices, Inc. v.
Mktg. Displays, Inc., 532 U.S. 23, 121 S. Ct. 1255 (2001), partially abrogating
Pebble Beach, 155 F.3d 526, as recognized by Nola Spice Designs, L.L.C. v.
Haydel Enters., 783 F.3d 527, 544–45 (5th Cir. 2015). Unlike Pebble Beach, this
case does not involve any claims of unfair competition, nor do the parties’ disputes
44
over the PRIHouston.com domain name and related assets center on the likelihood
of confusion among the public. Rather, those disputes turn on the parties’
respective claims to ownership and control of those assets in the first place. We
find no support in the since-abrogated Pebble Beach opinion for Bergin, Jacquin,
and PRI’s argument that Cates’s ownership of the PRIHouston.com domain and
associated assets nonetheless depends on the law of unfair competition. Pebble
Beach has no bearing on this case.
Bergin, Jacquin, and PRI then argue that the “four corners” rule, as applied
to the April 12 document, precludes a finding that the document gave Cates
ownership or control rights over the assets in question. As support, they provide
their three remaining citations to authority in connection with this issue, each of
which simply states the “four corners” rule: Lakin Enters. v. Sebastian, No. 05-08-
00213-CV, 2009 WL 428491 (Tex. App.—Dallas Feb. 23, 2009, no pet.) (no pin
cite provided); P. Bordages–Account B, L.P. v. Air Prods., L.P., 127 F. App’x 724
(5th Cir. Apr. 15, 2005) (no pin cite provided); and P. Bordages–Account B, L.P. v.
Air Prods., L.P., 369 F. Supp. 2d 860 (E.D. Tex. 2004) (no pin cite provided). We
agree with Bergin, Jacquin, and PRI that the April 12 document does not mention
the PRIHouston.com domain name or associated assets and that the document is
not enforceable as a contract. It therefore does not explicitly confer upon Cates
any ownership or rights to control the assets at stake.
45
Our inquiry does not end there, however, as the rights conferred by the
April 12 document are not the only bases upon which the trial court could have
rendered its judgment. Jury Question 55 asked:
Do you find that the April 12, 2010 agreement, if any, permitted Cy
Cates to operate and market his business as Power Reps Industrial
(now Cy Cates Energy Reps, LLC) and Cy Cates purchased the
internet domain “PRIHouston.com” and developed the website with
Cy Cates’ funds in furtherance of that agreement[?]
The judgment stated simply, “Cy Cates is awarded full and exclusive right,
custody, use, and control of [the] PRIHouston.com website, domain, webpage, and
associated email accounts.”
In other words, neither Question 55 nor the judgment depended on rights
expressly conferred by the April 12, 2010 document. Rather, the jury was asked
whether it “permitted” Cates to take certain actions, including purchasing the
PRIHouston.com domain name and developing the associated website.
It is undisputed that Cates purchased the PRIHouston.com domain name,
using his personal credit card, in August 2010, months after execution of the April
12, 2010 document. The document does not mention that domain name, nor does
it prohibit Cates from using any particular names or marks in marketing and
promoting Industrial. The jury’s finding thus is compatible with the evidence: in
the absence of an enforceable agreement in the April 12 document prohibiting
Cates’s actions, and given testimony that Cates attempted to act consistently with
46
that document in registering the domain name, there is evidence that the document
“permitted” his actions and that he acted “in furtherance of” the purported
agreement.
Bergin, Jacquin, and PRI make no attempt to show that the trial court abused
its discretion by granting declaratory relief. They do not cite the Uniform
Declaratory Judgments Act or any standard of review. Instead, they simply argue
that (1) the April 12 document does not support the declaration and (2) the
declaration will promote unfair competition. But as we have already observed,
neither jury Question 55 nor the trial court’s judgment was expressly based on
rights conferred by the April 12 document. Rather, the question posed to the jury
was whether the document “permitted” his actions, and the jury’s affirmative
finding is not inconsistent with the evidence. As to the second argument, unfair
competition was not a cause of action or defense in this case, and the trial court
was not required to address questions of unfair competition in order to enter
judgment on the jury’s verdict regarding ownership of the disputed assets.
We hold that Bergin, Jacquin, and PRI have failed to show that the trial
court abused its discretion in granting declaratory relief to Cates. We therefore
overrule their tenth issue.
47
Cates, Industrial, and GTS’s Cross-Appeal
A. Damages for breach of the April 12 agreement
Cates, Industrial, and GTS argue in their first issue on cross-appeal that the
trial court erred by failing to award damages of $283,000 for Bergin and Jacquin’s
breach of the April 12, 2010 document, as found by the jury in response to
Question 5. They contend that, because Bergin, Jacquin, and PRI did not raise
Cates’s prior material breach of that document as an affirmative defense, it was
error for the trial court to apply that breach as a bar to recovery. We do not reach
those arguments because the April 12, 2010 document is not an enforceable
contract. We therefore overrule the first cross-issue as moot.
B. Expert witness fees and costs related to special master
We now turn to Cates, Industrial, and GTS’s second and final issue, which
has the potential to affect the amounts recoverable under the judgment, before
turning to the calculation of interest on those amounts. First, Cates, Industrial, and
GTS argue that the trial court erred in refusing to award as costs their accountant’s
fees, to which they claim they were entitled for “good cause” shown under Rule of
Civil Procedure 141 by virtue of a pair of Rule 11 agreements. Second, they argue
that they were entitled to an award of expenses related to the discovery special
master. Bergin, Jacquin, and PRI respond to both arguments that such costs were
48
not recoverable and, to the extent that the trial court had discretion to award them,
it did not abuse that discretion.
“The successful party to a suit shall recover of his adversary all costs
incurred therein, except where otherwise provided.” TEX. R. CIV. P. 131. “‘Costs,’
when used in legal proceedings, refer not just to any expense, but to those paid to
courts or their officers . . . .” In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d
168, 175 (Tex. 2013). “As [the Supreme Court of Texas has] recognized for
decades, the term costs is generally understood [to mean] the fees or compensation
fixed by law collectible by the officers of court, witnesses, and such like items, and
does not ordinarily include attorney’s fees which are recoverable only by virtue of
contract or statute.” Id. (quoting Johnson v. Universal Life & Accident Ins. Co., 94
S.W.2d 1145, 1146 (Tex. 1936)) (internal quotation marks omitted).
For purposes of Rule 131, “[a] ‘successful party’ is ‘one who obtains
judgment of a competent court vindicating a civil right or claim.’” Henry v.
Masson, 453 S.W.3d 43, 50 (Tex. App.—Houston [1st Dist.] 2014, no pet.)
(quoting City of Houston v. Woods, 138 S.W.3d 574, 581 (Tex. App.—Houston
[14th Dist.] 2004, no pet.)).
Rule 141 provides an exception to the mandate of Rule 131: “The court may,
for good cause, to be stated on the record, adjudge the costs otherwise than as
provided by law or these rules.” TEX. R. CIV. P. 141. “‘Good cause’ is a very
49
elusive concept which can only be determined on a case-by-case basis.” Rogers v.
Walmart Stores, Inc., 686 S.W.2d 599, 601 (Tex. 1985). The award and allocation
of court costs under Rules 131 and 141 are matters for the trial court’s discretion
and will not be overturned on appeal unless the trial court abused its discretion.
See Furr’s Supermarkets, Inc. v. Bethune, 53 S.W.3d 375, 376 (Tex. 2001);
Rogers, 686 S.W.2d at 601; Henry, 453 S.W.3d at 50–51.
1. Expert witness fees
Cates, Industrial, and GTS first argue that they are entitled to an award for
the expense of paying their forensic accountant. They contend that (1) the parties
filed two Rule 11 agreements with the court requiring such an award, and (2) they
thus showed “good cause” under Rule 141.
A prevailing party may not recover the costs of accountants and other expert
witnesses under Rule 141, regardless of whether good cause is shown. See, e.g.,
Griffin v. Carson, No. 01-08-00340-CV, 2009 WL 1493467, at *7 (Tex. App.—
Houston [1st Dist.] May 28, 2009, pet. denied) (mem. op.); Headington Oil Co.,
L.P. v. White, 287 S.W.3d 204, 212 (Tex. App.—Houston [14th Dist.] 2009, no
pet.); see also Richards v. Mena, 907 S.W.2d 566, 571 (Tex. App.—Corpus Christi
1995, writ dism’d) (“Regardless of any good cause shown, costs of experts are
incidental expenses in preparation for trial and not recoverable.”); King v. Acker,
725 S.W.2d 750, 755 (Tex. App.—Houston [1st Dist.] 1987, no writ) (costs of
50
experts “are litigation expenses and are not recoverable”); Whitley v. King, 581
S.W.2d 541, 544 (Tex. App.—Fort Worth 1979, no writ) (Rule 141 “good cause”
finding cannot support award of expert costs).
Cates, Industrial, and GTS nevertheless argue that Headington Oil Co., L.P.
v. White, 287 S.W.3d 204 (Tex. App.—Houston [14th Dist.] 2009, no pet.),
provides support for an award of expert expenses as costs under Rule 141. On the
contrary, Headington Oil overturned a trial court’s award of such “costs” because
the award lacked support in the record. 287 S.W.3d at 212–13. Our sister court
did not hold that such expenses were recoverable under Rule 141. Moreover, our
own precedent and the weight of authority in other courts hold to the contrary. See
Griffin, 2009 WL 1493467, at *7; see also Richards, 907 S.W.2d at 571; King, 725
S.W.2d at 755; Whitley, 581 S.W.2d at 544.
These cases notwithstanding, Cates, Industrial, and GTS argue that the trial
court was required to award them the costs of their forensic accountant by virtue of
a pair of agreements.
The first agreement, an agreed order, states merely that the costs of the first
report would be “treated as cost[s] of this suit,” which we interpret to mean that
those costs would be recoverable by the “successful party” under Rule 131.
Indeed, Cates, Industrial, and GTS argue that, as “the prevailing party,” they are
51
entitled to have the full cost of the first report taxed against Bergin, Jacquin, and
PRI.
But Cates, Industrial, and GTS are not the only prevailing parties in this
case. The trial court’s judgment awarded damages to PRI and against Cates for
breach of fiduciary duty and conversion. Moreover, Cates, Industrial, and GTS do
not attempt to link the costs of the financial audit to any particular claim or
defense, nor did they attempt to do so in their motion for costs in the trial court.
They complain that the costs were necessary and assert that they prevailed, but the
record does not support their assertions. On the contrary, to the extent that the
financial audits were relevant to the claims that Cates breached a fiduciary duty or
converted property of PRI, those are claims on which Cates lost. We cannot say,
based on this record, that the trial court abused its discretion in allowing each party
to bear its own costs in connection with the first accounting audit and report.
The second agreement, made under Rule of Civil Procedure 11, governed a
subsequent report. It provides, “Each accountant[’s] costs in complying with this
Rule 11 and issuance of the amended/supplemental report shall be totaled, then
split equally between the parties.” According to Cates, Industrial, and GTS, in this
document “the parties agreed on a way to treat these costs in this enforceable court
order, which constitutes sufficient ‘good cause’ to tax at least half of the total cost
of the Supplemental Joint Report against PRI, Bergin and Jacquin.” They
52
conclude that the trial court “erred in not taxing them as such,” relying on Rule 11
and Eaton Metal Products, L.L.C. v. U.S. Denro Steels, Inc., No. 14-09-00757-CV,
2010 WL 3795192 (Tex. App.—Houston [14th Dist.] Sept. 30, 2010, no pet.)
(mem. op.), for the proposition that a trial court has “a ministerial duty to enforce a
valid Rule 11 agreement” and thus no discretion to do otherwise. Eaton Metal
Prods., 2010 WL 3795192, at *2.
The Rule 11 agreement did not, however, specify that the costs of the
supplemental report were to be taxed as costs of court. Its only use of the term
“costs” was in the context of the phrase “[e]ach accountants’ [sic] costs in
complying with this Rule 11 and issuance of the amended/supplemental report,”
not in the sense of costs of court. Further, the Rule 11 agreement did not require
the trial court to do anything with respect to the costs of the supplemental report.
Instead, it provided merely that the costs “shall be totaled, then split equally.” It
made no mention of court costs, Rule 131, Rule 141, or any other basis for the trial
court to award the expenses in question as costs, which the trial court otherwise
has no authority to do. Instead, the Rule 11 agreement merely created a
contractual obligation in each group of parties to pay one-half of all parties’
combined accountant costs. The trial court was not obligated—and, indeed, had no
power—to enforce that agreement through an award of costs under Rules 131 or
53
141. See Griffin, 2009 WL 1493467, at *7; see also Richards, 907 S.W.2d at 571;
King, 725 S.W.2d at 755; Whitley, 581 S.W.2d at 544.13
We hold that the trial court did not abuse its discretion in declining to award
Cates, Industrial, and GTS the costs of their forensic accountant.
2. Special master
Cates, Industrial, and GTS also argue that they should recover as costs
$4,995 in expenses that they incurred in connection with the special master whom
the trial court appointed to conduct electronic searches and make privilege
determinations to resolve discovery disputes between the parties regarding
production of emails. Their reasoning is based entirely on Rule 141. 14 Again,
however, they do not attempt to tie the special master’s costs to any particular
claim or defense, nor do they identify any particular documents produced as a
13
Instead, to enforce the Rule 11 agreement, Cates, Industrial, and GTS have a
claim for substantive relief, namely enforcement of a contract. See, e.g., EP
Energy E&P Co., L.P. v. Cudd Pressure Control, Inc., No. 14-13-00734-
CV, 2014 WL 7345938, at *3 (Tex. App.—Houston [14th Dist.] Dec. 23,
2014, pet. denied) (mem. op.); In re M.A.H., 365 S.W.3d 814, 818–19 (Tex.
App.—Dallas 2012, no pet.); ExxonMobil Corp. v. Valence Operating Co.,
174 S.W.3d 303, 309 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
14
Costs incurred in connection with special masters are actually governed by
Rule 171. TEX. R. CIV. P. 171. No party, however, mentions Rule 171 in its
briefs, nor did Cates, Industrial, and GTS mention it in their motion for
costs. Cates, Industrial, and GTS have therefore not preserved any argument
based on Rule 171 for appeal. We note, however, that we would reach the
same conclusion if they had preserved it, as they fail to show that they were
prevailing parties for purposes of a costs award.
54
result of the special master process. Instead, they argue that the entire special
master process was important because “[a] majority of Cates et al.’s affirmative
causes of action and defenses in this suit derive from email communications
between the parties, their employees, customers, and manufacturers.” Although
they argue that “32 emails produced in this search played a critical role in trial,”
they do not identify the emails in question or explain their relevance to any cause
of action or defense. Moreover, the award of costs under Rule 141 is a matter for
the trial court’s discretion. Cates, Industrial, and GTS do not demonstrate that the
trial court abused that discretion.
Because Cates, Industrial, and GTS have failed to demonstrate that they are
entitled to an award of costs related to the forensic accounting audits or the special
master, we overrule their second issue.
Prejudgment Interest
Finally, in their eleventh issue, Bergin, Jacquin, and PRI argue that the trial
court erred in assessing prejudgment interest on the net amount of damages and
attorney’s fees due to each party under the judgment. Cates, Industrial, and GTS
respond that each portion of the trial court’s calculations and interest award was
supported by the evidence and controlling or persuasive authority.
The trial court’s judgment first awarded $351,000 to PRI against Cates for
breach of fiduciary duty and conversion. It then awarded $200,000 to Cates,
55
Industrial, and GTS against PRI for tortious interference, conversion, and breach of
the commission-split and rent agreement. The trial court offset these amounts and
added to the result $682,000 in attorney’s fees, which it awarded to Cates,
Industrial, and GTS. The trial court concluded that this resulted in a net judgment
to Cates, Industrial, and GTS against PRI in the amount of $531,000. The trial
court awarded prejudgment interest on this amount.
The trial court then proceeded to award $283,000 to Cates, against Bergin
and Jacquin, jointly and severally, for breach of fiduciary duty and oppressive
behavior, along with prejudgment interest on that amount. It then awarded 40% of
that same amount, or $113,200, to Cates, against Bergin and Jacquin, jointly and
severally, for the same claims, and further prejudgment interest on that amount. 15
Although we reverse portions of the trial court’s judgment today, numerous
awards of fees and damages remain undisturbed: (1) the award to Cates, Industrial,
and GTS for tortious interference with prospective contracts, (2) the award to Cates
for oppressive conduct, (3) the award to Cates, Industrial, and GTS for breach of
the commission-split and rent agreement, (4) the award to PRI for Cates’s breach
15
In our holding on Bergin, Jacquin, and PRI’s third issue, however, we
determined that no evidence supported the jury’s finding that Bergin and
Jacquin breached a fiduciary duty owed to Cates. These awards are
therefore reversed to the extent that they reflect damages for Cates’s breach
of fiduciary duty claim, and we mention them here only to explain the trial
court’s calculations relevant to prejudgment interest.
56
of fiduciary duties, (5) the award to PRI for conversion, and (6) the attorney’s fees
awarded to each party. We therefore consider whether the trial court’s judgment
contains error in its award of prejudgment interest on these amounts.
A. Prejudgment interest on attorney’s fees
Bergin, Jacquin, and PRI first argue that the effect of the trial court’s
judgment was to award prejudgment interest on attorney’s fees and that this
constitutes error. We agree.
Generally speaking, prejudgment interest is not available on attorney’s fees.
See Hervey v. Passero, 658 S.W.2d 148, 149 (Tex. 1983); Sentinel Integrity
Solutions, Inc. v. Mistras Grp., Inc., 414 S.W.3d 911, 931 (Tex. App.—Houston
[1st Dist.] 2013, pet. denied); Cushman & Wakefield, Inc. v. Fletcher, 915 S.W.2d
538, 547 (Tex. App.—Dallas 1995, writ denied); Berry Prop. Mgmt., Inc. v.
Bliskey, 850 S.W.2d 644, 670 (Tex. App.—Corpus Christi 1993, writ dism’d by
agr.). Cates, Industrial, and GTS attempt to avoid this rule by arguing that they
paid $90,555.62 in attorney’s fees before trial. 16 As they observe, some courts
have allowed prejudgment interest on attorney’s fees actually paid by a party
16
We also note that Cates, Industrial, and GTS do not support their
calculations. They cite to 127 consecutive pages of the record apparently
reflecting various charges and payments of fees. They also cite to an
appendix to their brief, which is not in the record and cannot be considered
on appeal. We are not required to scour the record to perform our own
calculation of the amounts paid before trial, and we decline the invitation to
do so.
57
before judgment. See Nova Cas. Co. v. Turner Constr., 335 S.W.3d 698, 706 (Tex.
App.—Houston [14th Dist.] 2011, no pet.) (allowing such recovery); A.V.I., Inc. v.
Heathington, 842 S.W.2d 712, 717 (Tex. App.—Amarillo 1992, writ denied)
(same); see also MMR Int’l Ltd. v. Waller Marine, Inc., Civ. A. No. H-11-1188,
2013 WL 6491186, at *12 (S.D. Tex. Dec. 10, 2013) (same). To the extent that
this Court has considered the issue, however, we have held that no interest is
recoverable on attorney’s fees. See Sentinel Integrity Solutions, 414 S.W.3d at 931
(prejudgment interest on attorney’s fees is unavailable in suit under Covenants Not
to Compete Act); Moore v. Bank Midwest, N.A., 39 S.W.3d 395, 406 n.10 (Tex.
App.—Houston [1st Dist.] 2001, pet. denied) (noting in dicta that prejudgment
interest is not available on attorney’s fees).
Cates, Industrial, and GTS argue that this case presents a case of first
impression because no Texas court of appeals has considered whether prejudgment
interest is proper on an award that offsets damages with attorney’s fees. We
disagree that this case calls for any special consideration or novel analysis with
respect to interest calculations. Applying the prejudgment interest rate to the
combined parts of the net judgment has the same effect as applying that rate to
each component of the judgment, assuming the starting dates are chosen correctly.
In other words, the legal question is simply whether prejudgment interest is
available on attorney’s fees, not whether it is available on a sum that happens to
58
involve attorney’s fees. While this case may present an unusual factual posture, it
does not present any legal issues of first impression.
We hold that the trial court erred by applying prejudgment interest to the
attorney’s fees award to Cates, Industrial, and GTS. We note that the judgment
does not identify the dates from which prejudgment interest should run against any
party, nor does it calculate prejudgment interest up to the date of judgment. We
therefore remand the case to the trial court for correction of its interest
calculations. On remand, the trial court should determine the appropriate start date
for prejudgment interest on each award of damages and calculate that interest
separately for each award of damages. It should not apply any prejudgment
interest on attorney’s fees. Only after performing these calculations should the
trial court consider whether any offsets in the resulting amounts are appropriate.
B. Prejudgment interest against Bergin and Jacquin
Bergin, Jacquin, and PRI also argue that the trial court’s award of
prejudgment interest against Bergin and Jacquin constitutes error. They premise
this argument on two assertions: (1) “the damages found by the jury for breach of
fiduciary duty and oppressive conduct were already considered by the Court in
offsetting the damage awards to arrive at the prejudgment interest on the ‘net’
judgment amount noted in the preceding paragraph;” and (2) once the “excessive
and improper attorney fee award for Cates” is removed from the calculation, there
59
is no net judgment for Cates, Industrial, and GTS for purposes of prejudgment
interest calculations. They do not cite to the record or to any authority in support
of these arguments.
The first argument is factually incorrect. The offsetting awards in the
judgment are the award to PRI for breach of fiduciary duty and conversion and the
award to Cates, Industrial, and GTS against PRI for tortious interference,
conversion, and breach of the commission-split and rent agreement. The awards to
Cates individually for Bergin and Jacquin’s breaches of fiduciary duty—which we
have reversed—and oppression are not included in the calculation. We therefore
reject the first argument.
We also reject the second argument—that the “excessive and improper
attorney fee award to Cates” must be removed—because we have already held that
Bergin, Jacquin, and PRI waived their attack on the attorney’s fees award itself by
inadequately briefing their eighth issue.
We sustain Bergin, Jacquin, and PRI’s eleventh issue in part and overrule it
in part.
Conclusion
We reverse the trial court’s judgment to the extent that it relies on the jury
finding that the April 12, 2010 document was an enforceable agreement and
declare that it is unenforceable. As an unenforceable agreement, that document
60
cannot serve as a basis for awarding damages or attorney’s fees. We also reverse
the trial court’s award of damages against Bergin and Jacquin for breach of
fiduciary duties owed to Cates. We further reverse the award against PRI for
conversion and render judgment that Cates take nothing by that claim. Finally, we
reverse the trial court’s inclusion of attorney’s fees in its calculation of
prejudgment interest. We otherwise affirm the judgment of the trial court. We
remand the case to the trial court for calculation of prejudgment interest in
accordance with this opinion.
Harvey Brown
Justice
Panel consists of Justices Keyes, Higley, and Brown.
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