Adam & Bary Alfia, Oshi, Inc v. Overseas Service Haus, Inc. ( 2013 )

Affirmed in part; Reversed and Remanded in part; Opinion Filed July 9, 2013.
SIn The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-11-01390-CV
ADAM & BARRY ALFIA, OSHI, INC., REVISED EASI, INC., & REVISED OII, INC.,
Appellants
V.
OVERSEAS SERVICE HAUS, INC., Appellee
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 07-14742
MEMORANDUM OPINION
Before Justices Lang, Myers, and Evans
Opinion by Justice Lang
Adam Alfia, Barry Alfia, OSHI, Inc., Revised EASI, Inc., and Revised OII, Inc.,
(“Appellants”) appeal from a take-nothing judgment on their breach-of-contract counterclaim
following a jury trial. In a single issue, Appellants contend the trial court erred by denying their
request for findings and motion for judgment as to damages and by denying their motion for new
trial on the issue of damages because there was insufficient evidence to support a deemed finding
of no damages. Overseas Service Haus, Inc. (“OSHI”) 1 contends Appellants waived any
objections regarding damages because Appellants did not submit to the trial court any jury
questions addressing damages as to their breach-of-contract counterclaim. We conclude there
1
Appellants styled their brief as “Adam and Barry Alfia et al v. OSHI, Inc, et al.” However, no other parties to the
trial court’s judgment were named as appellees in Appellants’ appellate brief.
was factually insufficient evidence to support the trial court’s deemed finding of no damages.
Accordingly, we reverse and remand for further proceedings consistent with this opinion.
Because all dispositive issues are clearly settled in the law, we issue this memorandum opinion.
See TEX. R. APP. P. 47.4.
I. FACTUAL & PROCEDURAL BACKGROUND
Appellants sold the business assets of their automotive business to OSHI in 2006. The
purchase price included a promissory note in the amount of $2,915,754 payable by OSHI to
Appellants. That promissory note stated “[t]he lien securing this note is subordinate to the liens
securing another note . . . payable to the order of Park Cities Bank.” In 2007, Appellants and
OSHI agreed to refinance the promissory note and transfer it from Park Cities Bank to Dallas
City Bank with the First Modification Agreement (“FMA”). The FMA reduced the principal
amount from $2,915,754 to $1,750,000, provided for 5% interest per annum, and extended the
maturity date to October 24, 2012. As consideration for reducing the principal amount,
Appellants received a lump sum amount of $550,000. As part of the refinancing transaction,
Dallas City Bank, Appellants, and OSHI entered into a Subordination Agreement, which
subordinated Appellants’ lien to that of Dallas City Bank.
Subsequently, OSHI, R.N. Development, Inc., and Ramez Nour, former owner of OSHI,
filed suit against Appellants for claims related to the sale of business assets in 2006, including
conspiracy to commit fraud, common law fraud, fraudulent inducement, statutory fraud,
negligence, negligent misrepresentation, civil conspiracy, breach of contract, and violation of the
Texas Deceptive Trade Practices Act. 2 Dallas City Bank then filed suit against Appellants for
breach of contract, arguing Appellants had breached the Subordination Agreement by attempting
2
Although all the plaintiffs in the case below acted together, we will refer to actions in the trial court as those of
OSHI.
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to foreclose on and sell the property securing the debt underlying the FMA. Appellants denied
OSHI’s claims, asserted affirmative defenses, and raised counterclaims against OSHI and Dallas
City Bank, including breach of contract, fraud in the inducement, common law fraud, and
tortious interference with business and contractual relations. OSHI responded to Appellants’
counterclaims by filing a general denial answer and raising affirmative defenses that are not
relevant to our analysis.
In May 2011, the case was tried before a jury that decided against OSHI on its claims and
affirmative defenses and against Appellants’ counterclaim against Dallas City Bank. However,
the jury answered “yes” to the two questions regarding Appellants’ breach-of-contract
counterclaim against OSHI. Specifically, the jury found OSHI “breached the Agreement for the
Purchase and Sale of Assets with the Alfia Group by failing to make principal and interest
payments.” The jury also found OSHI “breached its contracts with the Alfia group.” Further, the
jury decided against OSHI’s affirmative defenses to Appellants’ breach-of-contract
counterclaim. No jury questions were submitted addressing damages regarding Appellants’
breach-of-contract counterclaim.
Before the jury returned with its verdict, Appellants notified the trial court of their failure
to request a jury question as to damages regarding Appellants’ breach-of-contract counterclaim.
Appellants argued the trial court could decide the damages were established as a matter of law.
The trial court judge responded, “That, I guess, can be argued after the verdict comes in and
everybody’s trying to submit it for a proposed judgment.” After the jury delivered its verdict and
was discharged, but before the trial court rendered its judgment, Appellants filed a “Request for
Finding and Motion for Judgment.” The motion for judgment requested the trial court find
damages respecting the breach-of-contract counterclaim. In support of their request, Appellants
asserted that “[t]he amount of damages [was] uncontroverted as Nour’s testimony at trial was
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that he paid on the revised note of $1,750,000 until the end of 2007 and made no further
payments after the lawsuit was filed.” Appellants summarily identified the amount of damages
allegedly due without citation to the record or explanation of their calculations. 3 Without
expressly ruling on Appellants’ motion for judgment, the trial court rendered a take-nothing
judgment on all of OSHI’s claims and Appellants’ counterclaims.
Appellants then filed their motion for new trial in which they requested the trial court
grant a new trial on the issue of damages “and then grant them judgment as set forth herein.” In
their motion for new trial, Appellants explained in detail how they contended damages should be
calculated, citing evidence and attaching exhibits from the trial record. However, the trial court
signed an order that generally denied Appellants’ motion for new trial.
On appeal, Appellants argue the trial court erred by denying their “Request for Finding
and Motion for Judgment” and by denying their Motion for New Trial because there was
insufficient evidence to support the trial court’s deemed finding of no damages.
II. WAIVER
First, we address OSHI’s contention that “Appellants waived any objections to the
damages questions which were omitted from the jury charge.” According to OSHI, “Rule 279
specifically says that a party waives such a ground on appeal by failing to submit the issue to the
jury.” OSHI continues, “[I]t is well-settled law in Texas that if a party does not tender a jury
question regarding an issue, that party waives the complaint.”
3
Appellants’ motion for judgment stated in part:
The amount of damages is uncontroverted as Nour’s testimony at trial was that he paid on the
revised note of $1,750,000.00 until the end of 2007 and made no further payments after the
lawsuit was filed and made no further payments on the $125,000.00 note after the lawsuit was
filed. The damages on the revised $1,750,000.00 note is $2,075,276.10. The damages on the
$125,000.00 note are $128,074.18.
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OSHI is correct that Rule 279 provides in pertinent part that “[u]pon appeal all
independent grounds of recovery or of defense not conclusively established under the evidence
and no element of which is submitted or requested are waived.” TEX. R. CIV. P. 279. However,
Rule 279 does not stop there. It also provides and case law recognizes that when a party’s theory
of recovery or defense consists of multiple elements necessary to support that theory and the
charge omits an element without objection, the omission does not waive the entire claim. Smith
v. Maximum Racing, Inc., 136 S.W.3d 337, 340 (Tex. App.—Austin 2004, no pet.) (citing TEX.
R. CIV. P. 279; Turner, Collie & Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 165 (Tex.
1982)). 4 Additionally, “[t]he rule provides that, at a party’s request, the trial judge may make
written findings on the omitted element.” Gulf States Utilities Co. v. Low, 79 S.W.3d 561, 565
(Tex. 2002). “When an element of a claim is omitted from the jury charge without objection and
no written findings are made by the trial court on that element then the omitted element is
deemed to have been found by the court in such a manner as to support the judgment.” Serv.
Corp. Int’l v. Guerra, 348 S.W.3d 221, 228-29 (Tex. 2011) (citing TEX. R. CIV. P. 279).
The elements of a breach-of-contract claim include “(1) the existence of a valid contract
between plaintiff and defendant, (2) the plaintiff’s performance or tender of performance, (3) the
defendant’s breach of the contract, and (4) the plaintiff’s damage as a result of the breach.”
4
Rule 279 provides in its entirety as follows.
Upon appeal all independent grounds of recovery or of defense not conclusively established under
the evidence and no element of which is submitted or requested are waived. When a ground of
recovery or defense consists of more than one element, if one or more of such elements necessary
to sustain such ground of recovery or defense, and necessarily referable thereto, are submitted to
and found by the jury, and one or more of such elements are omitted from the charge, without
request or objection, and there is factually sufficient evidence to support a finding thereon, the trial
court, at the request of either party, may after notice and hearing and at any time before the
judgment is rendered, make and file written findings on such omitted element or elements in
support of the judgment. If no such written findings are made, such omitted element or elements
shall be deemed found by the court in such manner as to support the judgment. A claim that the
evidence was legally or factually insufficient to warrant the submission of any question may be
made for the first time after verdict, regardless of whether the submission of such question was
requested by the complainant. TEX. R. CIV. P. 279.
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Hunter v. PriceKubecka, PLLC, 339 S.W.3d 795, 802 (Tex. App.—Dallas 2011, no pet.). It does
not appear from the record that OSHI disputed that the first two elements of a breach-of-contract
claim were proven. Left to be resolved by the finder of fact were the elements of breach and
damage. The jury was asked whether OSHI “breached its contracts” with Appellants, and it so
found. No objections were made by any party to the omission of a jury question on the element
of damages.
In their motion for judgment, Appellants requested the trial court make a finding on the
omitted element of damages pursuant to Rule 279, arguing “[t]he amount of damage is
uncontroverted” and “there is factually sufficient evidence to support the missing element.”
When the trial court failed to make findings on the omitted element of damages, Rule 279
operated to deem findings in support of the judgment, which in this case means a finding of no
damages is deemed to support the take-nothing judgment. However, “just as with any other
finding, there must be evidence to support a deemed finding.” Guerra, 348 S.W.3d at 229 (citing
TEX. R. CIV. P. 279).
Following rendition of the judgment, Appellants argued in their motion for new trial, “the
damages were established by the evidence as a matter of law” and “[t]he [trial court’s] finding of
a take-nothing judgment is against the great weight and preponderance of the evidence at trial.”
We conclude Appellants have not waived their claim for damages by failing to submit a jury
question on the element of damages nor have they waived arguments as to the legal and factual
sufficiency of the trial court’s deemed finding. See PopCap Games, Inc. v. MumboJumbo, LLC,
350 S.W.3d 699, 713 (Tex. App.—Dallas 2011, pet. denied) (concluding appellant adequately
preserved its argument that the trial court’s deemed finding was supported by insufficient
evidence when appellant asserted the argument in its “postverdict ‘motion to disregard (and for
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judgment notwithstanding) certain jury findings’”) (citing TEX. R. CIV. P. 33.1(a) (general rule
for error preservation)).
On appeal, Appellants argue there is “legally and factually sufficient evidence to support
a deemed finding of damages” and “[t]here is no evidence or factually insufficient evidence to
support the take-nothing judgment.” We construe Appellants’ issue to challenge the legal and
factual sufficiency of the trial court’s deemed finding of no damages. See TEX. R. APP. P. 38.1(f),
38.9; Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989) (“[I]t is our practice to
construe liberally points of error in order to obtain a just, fair and equitable adjudication of the
rights of the litigants.”).
III. SUFFICIENCY OF EVIDENCE OF DEEMED FINDING
A. Standard of Review & Applicable Law
When both legal sufficiency and factual sufficiency challenges are raised, the appellate
court should consider the legal sufficiency issue first. Glover v. Tex. Gen. Indem. Co., 619
S.W.2d 400, 401 (Tex. 1981) (per curiam).
“When a party attacks the legal sufficiency of an adverse finding on an issue on which
she has the burden of proof, she must demonstrate on appeal that the evidence establishes, as a
matter of law, all vital facts in support of the issue.” Dow Chem. Co. v. Francis, 46 S.W.3d 237,
241 (Tex. 2001) (per curiam). “A party attempting to overcome an adverse finding as a matter of
law must surmount two hurdles.” U.S. Bank, Nat’l Ass’n v. Am. Realty Trust, Inc., 275 S.W.3d
647, 652 (Tex. App.—Dallas 2009, pet. denied) (citing Sterner v. Marathon Oil Co., 767 S.W.2d
686, 690 (Tex. 1989)). “First, the record must be examined for evidence that supports the
finding, while ignoring all evidence to the contrary.” Id. (citing Sterner, 767 S.W.2d at 690).
“Second, if there is no evidence to support the finding, then the entire record must be examined
to see if the contrary proposition is established as a matter of law.” Id. (citing Sterner, 767
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S.W.2d at 690). “Only if the contrary position is conclusively established will the point of error
be sustained.” Id. “A matter is conclusively established ‘only if reasonable people could not
differ in their conclusions . . . .’” Id. (quoting City of Keller v. Wilson, 168 S.W.3d 802, 816
(Tex. 2005)).
“In reviewing the factual sufficiency of the evidence, we consider all of the evidence in
the record.” Id. (citing Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996)). “When a party attacks
the factual sufficiency of an adverse finding on an issue on which she has the burden of proof, it
must demonstrate on appeal that the adverse finding is against the great weight and
preponderance of the evidence.” Id. at 652-53. “In reviewing a factual sufficiency issue, we must
first examine the record to determine if there is some evidence to support the finding; if so, then
we must determine whether the failure to find is so contrary to the overwhelming weight and
preponderance of the evidence as to be clearly wrong and manifestly unjust.” Id. at 652. “We
may reverse only when we conclude the non-finding is against the great weight and
preponderance of the evidence.” Id. “We are also mindful the trial court is the sole arbitrator of
the credibility of the witnesses and the weight to be accorded their testimony.” Id.
B. Application of Law to Facts
Appellants argue the trial court erred by denying their motion for judgment and by
denying their motion for new trial. They assert the award of damages for their breach-of-contract
counterclaim “can be established mathematically by the terms of the note itself and the testimony
of Nour without reference to any other evidence.” According to Appellants, “[t]he principal
amount of the note ($1,750,000.00), the interest rate (5%), the number of monthly payments
(60), the monthly payment ($7291.66) and the maturity date (October 2012) are all conclusively
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established by the First Modification Agreement.” 5 They contend “[t]he only remaining factor
was to determine the date of default, which was established by the testimony of OSHI’s own
representative, Ramez Nour, as January, 2008.” Finally, Appellants argue the damages “can be
mathematically established at $2,048,958.00, representing the $1,750,000.00 principal due on
October 24, 2012 plus the interest payments of $87,500.00 for three years of 2008-9 plus five
months of interest payments of $7291.66 for $36,458.00 for 2011 through the month of trial” in
May 2011. 6
Appellee responds “at trial, Appellants failed to present sufficient evidence of the
amounts due under any contract to adequately allow the jury to determine what damages were
owed.” According to Appellee, “neither the specific amounts paid on the contract nor the amount
remaining under the contract was ever introduced to the jury.” Appellee argues “[t]he only
evidence offered by Appellants was the testimony of Plaintiff, Ramez Nour . . . [whose]
testimony only supported the fact that a contract existed and that, at some point in time, [OSHI]
made no further payments under a contract.” Appellee contends “neither the specific amounts
paid on the contract nor the amount remaining under the contract was ever introduced to the
jury” and “the contracts . . . (that were allegedly breached) were never introduced to the Jury.”
“As such, no evidence was presented to allow the jury, as factfinder, to determine the amount of
possible damages.”
First, we consider Appellants’ legal sufficiency challenge by examining the record for
evidence that supports the trial court’s deemed finding, while ignoring all evidence to the
5
We note the FMA does not specifically state the number of payments to be sixty (60) or the monthly payment
amount to be 7291.66. However, the number of months between the signing date of September 25, 2007, and the
maturity date of October 24, 2012, is sixty. Additionally, the monthly payment amount can be calculated as five
percent of the principal divided by twelve months.
6
The motion for new trial was filed in May 2011, which accounts for the five months of interest in 2011. We
construe the “three years of 2008-9” of interest to be for interest payments due under the FMA, but not paid in
2008, 2009, and 2010.
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contrary. See U.S. Bank, 275 S.W.3d at 652. The record shows Appellee presented no evidence
to dispute Nour’s testimony where he stated he executed the FMA and had not made any
payments under the agreement since December 2007. We have been cited no evidence and our
review reveals no evidence in the record to support a finding Appellants sustained no damages
from Appellee’s breach.
However, Appellant had the burden of proof as to the damages issue. Appellants cannot
succeed on a legal sufficiency challenge unless Appellants’ damages were established as a matter
of law. See U.S. Bank, 275 S.W.3d at 652; see also Kitchen v. Frusher, 181 S.W.3d 467, 475
(Tex. App.—Fort Worth 2005, no pet.) (“because the evidence failed to establish a particular
value for [appellant’s] compensable work as a matter of law, her legal sufficiency challenge must
fail”).
In addition to the testimony of Ramez Nour, former owner of OSHI, and the terms of the
FMA in the record that Appellants cite in support of their argument, the record also contains the
testimony about damages from Adam Alfia, president of Revised EASI, Inc. and Revised OII,
Inc. He testified Nour had not made any payments since the FMA was signed in September
2007, which contradicted Nour’s testimony he made payments under the FMA through
December 2007. Also, when Alfia was asked “how much [he] lost as a result of the refinancing
transaction in real dollars,” he testified “the 1.75 million has never been paid back,” that he
“gave up $700,000 as consideration for getting $550,000 early” in the FMA, and concluded his
damages were “roughly about $2.5 million.” On this record, we conclude there is no evidence to
support the trial court’s deemed finding of no damages, but because there is inconsistency in the
damages evidence as described above, we cannot conclude the evidence established $2,048,958
in damages as a matter of law. See U.S. Bank, 275 S.W.3d at 652; Kitchen, 181 S.W.3d at 475.
Therefore, we decide against Appellants as to their legal-sufficiency challenge.
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We now consider Appellants’ factual-sufficiency challenge. Although the record
demonstrates there is no conclusive evidence of a specific amount of damages, there is evidence
Appellants sustained damages from Appellee’s breach of “its contracts with [Appellants].” The
evidence described above showed that Appellee failed to make interest-only payments from at
least January 2008 until the trial in May 2011 and failed to pay the principal amount. The trial
court’s deemed finding of no damages is so contrary to the overwhelming weight and
preponderance of the evidence as to be clearly wrong and manifestly unjust. See U.S. Bank, 275
S.W.3d at 653; Kitchen, 181 S.W.3d at 475 (holding evidence that showed a range of values for
appellant’s compensable work, although not a specific value, was factually insufficient to
support a jury’s zero value finding). Accordingly, we conclude that the evidence is factually
insufficient to support the trial court’s deemed finding of no damages. Therefore, Appellants’
sole issue is decided in their favor.
IV. CONCLUSION
In their case at trial, Appellee contested liability as to Appellants’ breach-of-contract
counterclaim, and Appellants’ claimed damages were unliquidated. Because we conclude the
evidence is factually insufficient, we must remand this case for new trial as to both liability and
damages regarding Appellants’ breach-of-contract counterclaim against OSHI. See Glover, 619
S.W.2d at 402; see also TEX. R. APP. P. 44.1(b) (prohibiting separate trial solely on unliquidated
damages when liability is contested); Rancho La Valenicia, Inc. v. Aquaplex, Inc., 383 S.W.3d
150, 152 (Tex. 2012).
Appellants assert the parties stipulated before the case was submitted to the jury that
attorney’s fees of $125,000 was reasonable and necessary. However, since this case is being
remanded for new trial as to Appellants’ breach-of-contract counterclaim against OSHI, the issue
of attorney’s fees is likewise remanded. We affirm the trial court’s judgment in all other respects.
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See TEX. R. APP. P. 44.1(b) (authorizing remand of only part of a case if error only affects that
part).
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
111390F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
ADAM & BARRY ALFIA, OSHI, INC., On Appeal from the 160th Judicial District
REVISED EASI, INC., & REVISED OII, Court, Dallas County, Texas
INC., Appellants Trial Court Cause No. 07-14742.
Opinion delivered by Justice Lang. Justices
No. 05-11-01390-CV V. Myers and Evans participating.
OVERSEAS SERVICE HAUS, INC.,
Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED IN PART and REVERSED IN PART.
We REVERSE that portion of the trial court's judgment on the breach-of-contract
counterclaim against appellee OVERSEAS SERVICE HAUS, INC., and we REMAND for
further proceedings as to that claim. In all other respects, the trial court's judgment is
AFFIRMED.
It is ORDERED that appellants ADAM & BARRY ALFIA, OSHI, INC., REVISED
EASI, INC., & REVISED OII, INC. recover their costs of this appeal from appellee OVERSEAS
SERVICE HAUS, INC.
Judgment entered this 9th day of July, 2013.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
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