Anna Michelle O'Brien v. Daniel L. Daboval, Individuallly and as Member of the Firm of Daboval & O'Brien, P.L.L.C and Wendy Daboval, Individually , 388 S.W.3d 826 ( 2012 )

Opinion issued August 30, 2012
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00436-CV
———————————
ANNA MICHELLE O’BRIEN, Appellant
V.
DANIEL L. DABOVAL, INDIVIDUALLY AND AS A MEMBER OF THE
FIRM OF DABOVAL & O’BRIEN, P.L.L.C AND WENDY DABOVAL,
Appellees
On Appeal from the 281st District Court
Harris County, Texas
Trial Court Cause No. 2006-63969
OPINION
Appellant, Anna Michelle O’Brien (“Shelly”), challenges the trial court’s
judgment, entered after a bench trial, in favor of appellees, Daniel L. Daboval
(“Dan”), individually and as a member of the firm of Daboval & O’Brien, P.L.L.C.
(“D&O”), and Wendy Daboval (“Wendy”), in the Dabovals’ suit against Shelly for
fraud. In five issues, Shelly contends that the trial court’s judgment does not
conform to the trial court’s findings of fact, any statements made by Shelly to the
Dabovals were “mere expressions of opinion” and are “not actionable,” the
Dabovals presented no evidence that they relied or justifiably relied upon any
statement made by Shelly, the evidence “conclusively established” that Dan was
“responsible for nearly all the damages” incurred by the Dabovals, Dan “failed to
meet his burden of proving the actual amount of alleged loss,” and, alternatively,
the case should be remanded for a new trial if there is evidence of “some
damages.”
We affirm.
Background
In their second amended petition, the Dabovals alleged that, in late 2002,
J.R. O’Brien (“J.R.”), who was Shelly’s husband, decided to leave his former law
firm, Bush & O’Brien P.L.L.C. (“BOPC”), to join a firm being created by Dan,
D&O. The Dabovals further alleged that J.R. and Shelly, who was “involved in
J.R.’s practice” and later worked as a bookkeeper for D&O, failed to disclose that
2
the O’Briens’ personal finances were in “dire straits,” J.R.’s practice was “failing,”
and J.R. owed BOPC outstanding amounts. The Dabovals asserted that the
O’Briens made affirmative misrepresentations to them regarding the status of
J.R.’s practice and the O’Briens’ financial situation. The Dabovals claimed that
Dan was fraudulently induced to enter into a partnership with J.R., establish a “line
of credit,” fund a firm account from which the O’Briens took “excessive draws,”
and post a personal bank account as collateral. The Dabovals sought damages
totaling $273,688, including $157,847 for J.R.’s negative capital account with
D&O and $101,175 for the loss of a personal bank account. After J.R. and Shelly
divorced and J.R. filed for bankruptcy, the Dabovals dismissed their claims against
J.R. and presented their fraud claims against Shelly.
At trial, Dan testified that in late 2002, he had decided to start his own firm
and, during a dinner conversation with his wife and the O’Briens, he learned that
J.R. was looking to leave BOPC to “do better on his own.” After agreeing to form
the D&O firm, Shelly handled “a lot of stuff” in D&O’s “startup,” including filing
papers, obtaining tax identification numbers, and looking for office space to lease.
Dan opened up D&O’s operating bank account, furnishing $25,000 in November
2002 and another $35,000 at a later time. The O’Briens subsequently informed
Dan that they could not contribute cash capital as they “needed to wait for the
money to come in” from BOPC “and for the cases to start rolling in.” However,
3
the O’Briens assured Dan that “they were expecting about $30,000 to $50,000”
from BOPC.
In regard to Shelly’s participation in these discussions, Dan explained that
Shelly “talked about [BOPC] and what J.R. was doing there and what he had
there.” “[F]rom the very first meeting,” Shelly commented “what a great book of
business and things that J.R. had there.” Additionally, both J.R. and Shelly had
“talked about Allstate” as a “primary client” of J.R.’s, and they indicated that J.R.
was “building a plaintiff’s practice.” Dan noted that, “in terms of finances,” Shelly
was “very, very knowledgeable” and it was “clear right from the get go that if you
wanted to talk anything financially with J.R,” then you spoke with Shelly. Shelly
was “very intimately involved” with “finances,” she was “part of the discussions”
about the “expectation” of the money that the O’Briens were to receive from
BOPC, and she “had a hand in preparing” a financial statement concerning the
O’Briens’ finances that J.R. submitted to Dan.
Dan further testified that his original agreement with J.R. was for him and
J.R. to both capitalize the firm with cash contributions, retain their profits, and
share expenses. However, at some point in December 2002, the O’Briens told Dan
that they “couldn’t put up the cash,” and they asked Dan to help them obtain a
“line of credit” and “meet with the bank” for approval. Prior to the bank meeting,
4
the O’Briens provided Dan with their financial statement.1 Dan explained that,
being “most concerned” with the O’Briens’ “financial condition and wherewithal
to pay back . . . any line of credit or cover their expenses,” he was interested in
confirming their assets, liabilities, and debt levels. The financial statement, which
was signed by J.R. and dated December 6, 2002, showed that the O’Briens had no
“contingent liabilities,” “income tax claim or dispute[s],” partnership-related debt,
or credit-card debt. And it showed that the O’Briens possessed a “net cash flow”
of $46,850. Dan commented to the O’Briens that he was “impressed” with the fact
that they did not have any credit-card debt. The financial statement also contained
the following recital: “The income listed was income earned as a shareholder of
[BOPC]. As shown by the materials previously provided, I project this income to
be higher. . . . Additionally, upon resignation from [BOPC], I anticipate I will
receive compensation for my shareholder interest of $25,000 to $50,000,
depending on various factors.” The information disclosed by the O’Briens in the
written financial statement, which was filed with the bank on December 10, 2002,
was consistent with the O’Briens’ oral representations. Dan agreed that Shelly was
not present for the meeting with the bank to obtain the line of credit.
Dan explained that the line of credit was obtained to “cover” D&O’s and the
O’Briens’ expenses, including for “financ[ing] cases” and covering the O’Briens’
1
Although Dan first stated that either Shelly or J.R. had provided him with the
financial statement, he also testified that he received a “copy from them.”
5
“living expenses that they needed.” Dan agreed that the O’Briens could withdraw
$10,000 monthly for living expenses, with the expectation that “at some point in
time” the draws would no longer be necessary because J.R. would “catch up.” Dan
stated that Shelly, who had previously worked as a project engineer and performed
“cost accounting work” in that capacity, was given the authority to draw on the line
of credit without his authorization because she handled D&O’s bookkeeping and
she had “set up all the finances for the firm and the financial stuff.” Business
records introduced into evidence show that in December 2002 and January 2003,
D&O bank account checks were made out to J.R. Also introduced into evidence
were communications between Shelly and the bank in which Shelly requested
draws on the line of credit. Dan explained that he trusted the O’Briens
“completely” as “friends” and “partners.”
The Dabovals also introduced into evidence a copy of an original petition
that had been filed by Bush, J.R.’s former law partner, against J.R. in May 2003
(the “BOPC lawsuit”). The petition reflects that there had been financial disputes
between Bush and J.R. regarding J.R.’s practice at BOPC. Attached to the petition
is a document, signed by J.R. on December 18, 2002, pertaining to the settling of
disputes between J.R. and Bush. The document, entitled “Release of All Claims,”
states that J.R. “guarantee[d] the collection” of certain outstanding accounts
receivables,” identified on an attached exhibit, totaling $87,865. The exhibit
6
reflects that these guaranteed receivables were “aging”: 47% of the receivables
were “120 days out,” 1% were “90 days out,” and 13% were “60 days out.” The
release further provides that any of these guaranteed amounts “not collected within
six months” would be paid in full by J.R. Although the release recites that J.R.
was assigned certain unbilled fees and expenses, it required that J.R pay BOPC
$24,000 incrementally, at $3,000 a month. Dan noted that at no point during
December 2002, which was about the same time that he had formed and
capitalized D&O and the O’Briens had furnished the financial statement to him,
did J.R. or Shelly inform him that “things [had] changed” with BOPC or J.R. had
guaranteed accounts receivables to BOPC and had agreed to pay an outstanding
debt to BOPC. Dan noted that he would have been “concern[ed]” and “inquired
further” had he known about this release agreement from the BOPC lawsuit and
the age of the guaranteed receivables.
Dan explained that, in obtaining the letter of credit, he had relied upon what
the O’Briens had told him about waiting on the “collections in [J.R.’s] cases” to
“start[] paying off.” Although Dan agreed that there were no “particular”
discussions about the O’Briens’ “personal financial situation” at the time D&O
was formed, he noted that the O’Briens never told him that “they were broke,” but
rather, “by all appearances,” they “looked like they were . . . doing okay” and their
financial statement reflected “healthy” finances.
7
Dan further testified that Shelly assumed the role of D&O’s bookkeeper
immediately, she handled the accounting system, and she met with the firm’s
accountants. Until Shelly left D&O in 2004, Dan looked to her to obtain financial
reports on the financial condition of D&O. Dan noted that in the first six months
of 2003, he was extremely busy, was out of the office trying cases, did not have
time to check D&O’s books and records, and completely relied upon Shelly for the
“financial stuff.” Sometime in 2003, Dan learned that J.R. had “lost most of the
Allstate [business], or all of it,” and he and J.R. agreed to “change the
compensation agreement” so that they would “split the [firm’s] profits 50/50” and
Shelly would “start getting a paycheck.” In July 2003, Dan sent an e-mail to
Shelly to inform her that he and J.R. had agreed that, going forward, one partner
would be required to sign any checks made out to the other partner. In this e-mail,
Dan also asked Shelly whether J.R. had been taking draws on D&O’s account. At
this same time, a D&O associate notified Dan that J.R. was “billing all this money”
but “not collecting it very quickly.” Up to this point, Dan had not been paying
attention to whether the O’Briens were taking draws, and he had not been totaling
any draws. In response to his e-mail inquiry, Shelly told Dan that the O’Briens had
been taking the $10,000 monthly draw. However, other evidence indicated that
the O’Briens had taken draws in excess of this amount. Dan noted that the
8
O’Briens had never informed him that they needed to take a monthly draw
exceeding $10,000 and, had he known, he would have made further inquiry.
In August 2003, Dan and Shelly engaged in e-mail communications in
which Dan noted that D&O was “in a hole” regarding its “firm expense ratio.”
Dan explained that he had been noticing that D&O was “out of whack,” and he
was becoming concerned. Although J.R. was copied on these communications,
Shelly continued “handling the accounting and the finances and stuff.” Dan was
concerned that the O’Briens were taking “more out than [they] were entitled to in
profits,” and he asked Shelly to check with the firm’s accountant. Shelly
responded that she had spoken with D&O’s accountant, and he told her that if the
O’Briens were “under water” at year’s end, the discrepancy would be “classified as
a loan” and they would then “execute loan documents and notes to the firm.” Dan,
noting that the O’Briens had always understood that they had a joint obligation and
responsibility, allowed them to continue making draws. And the Dabovals
introduced into evidence tax documents reflecting J.R.’s negative capital account
with D&O. Dan also noted that he continued to leave his share of profits in
D&O’s bank account.
Dan, who remained busy trying cases, agreed that, at this time, he still had
not consulted “the source documents” or “the firm book and records” to do his own
analysis. He continued to rely upon Shelly for this information. And, although
9
J.R. continued to take draws on D&O’s account, Dan did not object to the draws.
Dan continued to believe the O’Briens’ promises that they would “get even this
year,” and he considered the financial relationship with the O’Briens as “pretty
much” a “bridge loan.” In February 2004, Shelly told Dan that she was leaving her
position with D&O to “work full time to help get even.” The O’Briens also
continued to tell Dan that J.R.’s former partner Bush “owed them” money, and
they claimed that they had sued Bush for J.R.’s partnership share.
In May 2004, Dan decided to stop practicing law effective June 2004, and
Dan and J.R. agreed to terms so that J.R. would continue D&O. J.R. represented
that he would handle renewing the line of credit, on which J.R. only had to pay the
interest. Dan agreed to leave his money in the D&O account until the end of 2004
so that J.R. would have operating capital. In September 2004, Dan received a
letter from the firm’s bank, informing him that the line of credit was in default.
The bank sued Dan, and when he contacted J.R., J.R. agreed to address the
situation, but he did not. Upon learning that the bank was going to take a default
judgment, Dan entered into an agreement with the bank to post as collateral a
personal bank account, which totaled approximately $102,000. The O’Briens told
Dan that they would “substitute that collateral out by something” or get a loan
from a family member.
10
In May 2005, Dan, who was no longer actively practicing law, learned from
another D&O employee that, among other things, D&O was not paying its vendors
and was in financial distress. Dan still remained on the line of credit because the
O’Briens had not fulfilled their agreement to substitute collateral. D&O was
ultimately wound up through judicial proceedings instituted by Dan. Dan stated
that he would not have set up the line of credit “had [he] known any of that stuff”
and would “not have allowed [the O’Briens] to have draws if there wasn’t profits.”
Andrew Rossi, a certified public accountant, testified that he had been hired
to prepare the partnership tax records for D&O, finalize the accounting for years
2004 to 2006, and close out the financial records and books of D&O so that it
could be wound up. Rossi calculated J.R.’s capital account for the years 2002
through 2006, which he explained accounted for the individual partner’s balance of
their distributions, contributions, and proportionate share of income and expenses.
He noted that J.R.’s capital account at the end of 2006 equaled a negative $171,207
balance. Rossi explained that this meant that J.R. owed this amount of money to
D&O. He further noted that, in addition to this amount, J.R. also owed “a $5,500
withdrawal distribution back from 2002” and a “$8,500 collection of law firm
invoices” that J.R. “cashed in his personal account.” Thus, J.R. owed to D&O a
total of $185,207, which Rossi contended was “conservative.” Rossi broke down
11
his figures for the court, and he explained that J.R.’s negative balance with D&O at
the end of 2004 was $152,347 and, at the end of 2005, a negative $158,513.
J.R. testified that he did not have any reason to disagree with the assertion
that the financial statement was a form “put together” by him and Shelly. He
conceded that from December 2002 through January 2003, money for him and
Shelly was “tight.” J.R. also acknowledged that his family had credit accounts
with American Express, Visa, and “maybe” a MasterCard, although he did not
believe that these accounts were “maxed out.” He also agreed that he had
“discussed things” with Shelly regarding the BOPC release agreement and Shelly
knew about his meeting with Bush to settle the dispute with BOPC. J.R., because
he is “numerically challenged,” had Shelly help him by looking at accounts
receivables and compensation formulas so that he could discuss “actual numbers.”
Specifically, in regard to Shelly’s involvement in the dispute and settlement with
Bush, the following exchange took place,
[Counsel]: But you don’t recall if she got heavily involved in
crunching numbers to assist you in your negotiations
with Mr. Bush?
[J.R.]: Before this release of claims was filed, yes, she did help
in looking at the CCAs as compensation formulas—and
what I have outstanding would have been accounts
receivable—and helping—I’m numerically challenged, I
guess is a way to put it.
....
12
[Counsel]: So she assisted you in taking a look at those documents
that would have allowed you to meet with Mr. Bush to
discuss the actual numbers. Is that a –
[J.R.]: Yes.
J.R. further agreed that, in the release, he had guaranteed Bush the collection
of $87,865.17 and, as a result, he was personally liable for these collections. He
also agreed that he was obligated to pay Bush $24,000, in $3,000 monthly
installments, for his “negative balance” or “overdrawn deposit account.” J.R.
acknowledged that he had made one payment of $3,000 for his debt to BOPC by
using funds obtained from D&O’s bank account because he did not personally
have the money to make the payment.
Shelly testified that money was “tight” for the O’Briens in 2003 and they
were “bouncing” checks in December 2002 before they were able to obtain funds
from the D&O account. She agreed that she had seen the books of BOPC prior to
J.R.’s meeting with Bush, and she acknowledged that, at some point before writing
a $3,000 check to Bush in January 2003, she became aware of the $3,000 monthly
obligation that J.R. had agreed to pay Bush. Moreover, the BOPC release reflected
that the $24,000 obligation owed by J.R. related to her “use of the Bush firm credit
card” on which she had purchased “various and sundry things.” Shelly explained
that she had used the BOPC credit card at J.R.’s instruction, and she had
“anticipated” that this would “even out” when J.R. left BOPC. Although she
13
presented conflicting testimony on this matter, Shelly, at one point in her
testimony, conceded that she knew as of January 2003 that “there was no money
coming in from” Bush. She noted that in the first six months of 2003, the
O’Briens took $87,000 from D&O’s bank account, but she explained that J.R., who
was practicing law at the time, had, by her calculations, $115,000 “coming in from
his clients.”
Although Shelly agreed that one of the purposes for the line of credit was so
that the O’Briens could take a draw, J.R., at the time the line of credit was
established, “thought he was going to receive a check from [BOPC] for around 40
to $50,000.” Shelly conceded that she had never told Dan that the O’Briens
needed to withdraw more than $10,000 a month from the D&O account. And she
was aware that a judgment had been entered against J.R. in the BOPC lawsuit.
Nevertheless, she did not disclose this fact to Dan. She acknowledged that Dan
had relied upon her to be truthful and to provide full disclosure if she knew that
“something going on with the firm’s account wasn’t right.” Shelly also admitted
that, while working for D&O, she was involved in financial reporting, writing
checks, and drawing on the line of credit.
Shelly’s testimony and other documentary evidence reveals that the
O’Briens had significant credit-card debt and outstanding taxes that were not
disclosed to Dan. Although Dan had furnished funds and was liable on the line of
14
credit, Shelly stated that it “never crossed [her] mind” that, as of August 2003, she
would have any personal “obligation with respect to the money.” Rather, it was
her understanding that “money was going to come from the business that was
generated” by D&O. On August 27, 2003, in response to Dan’s e-mail inquiry
about his concerns that D&O’s profits were not covering the amounts being
withdrawn by the O’Briens, Shelly did tell him that, if at the end of the year “[t]he
draw exceeds the profits,” then “we will classify it as a loan” and “we will have a
document showing when repayment is expected.” However, Shelly denied that, by
using the word “we,” she was referring to herself or J.R. And she did not believe
that she and J.R. had any personal obligation regarding the funds that she and J.R.
had withdrawn from D&O’s bank account.
Wendy testified that during the couples’ first conversation about the
formation of D&O, Shelly described J.R.’s book of business as “substantial and
healthy and that it was certainly enough for them to bring to the firm and live on.”
Wendy also participated in discussions with Dan and Shelly when the bank was
threatening to seize the Dabovals’ bank account, which the Dabovals had posted as
collateral for the line of credit. Wendy explained that Shelly had promised to
repay the debt by refinancing their home and signing a promissory note. Also,
Shelly represented that the O’Briens intended to repay any amounts placed at risk
by the Dabovals.
15
In its final judgment, the trial court found that Shelly “committed common-
law fraud by making false representations and failing to disclose material
information.” The trial court awarded the Dabovals damages in the amount of
$157,847. In its findings of fact and conclusions of law, the trial court found that,
5. Prior to his partnership with [Dan], [J.R.] practiced law with the
firm of [BOPC]. . . . [J.R.] and his former partner entered an
agreement setting out the terms of their “formal business
divorce” . . . [in a release]. . . dated December 18, 2002.
6. Pursuant to the Release, [J.R.] guaranteed collection of
$87,865.17, representing past due accounts payable, and agreed
to repay $24,000[.]
7. A lawsuit for breach of the agreement regarding BOPC was
filed a few months later against [J.R.] and [Shelly] intervened
....
8. At about the same time that [J.R.] was negotiating his
agreement regarding BOPC, [J.R.] and [Shelly] were discussing
with the Dabovals forming a new law firm, [D&O].
9. [Shelly] represented that they would be receiving several
thousand dollars as part of the windup of BOPC . . . [and] her
husband had a thriving practice with established clients.
10. Initially, the plan was for each partner to make a capital
contribution into [D&O]. [J.R.] and [Shelly] each explained
that they were not able to make a capital contribution at this
time but would have the funds as soon as the BOPC windup
was completed.
11. To carry [J.R.] and [Shelly] until the BOPC windup was
completed and his practice was self-sufficient, [Dan] agreed to
establish a line of credit for [D&O]. As part of establishing the
line of credit, [J.R.] was required to submit a Financial
Statement to [the Bank]. . . . [J.R.] signed the Financial
16
Statement; [Shelly] did not. A copy of the Financial Statement
signed December 6, 2002, was given to the Dabovals.
12. The December 6, 2002 Financial Statement showed a positive
cash flow, no credit card debt, and no liabilities other than a
mortgage. Further, it stated, “I anticipate I will receive
compensation for my shareholder interest [from BOPC] of
$25,000–$50,000 depending upon various factors.” . . . .
13. [J.R.] testified that he is “numerically challenged.” [Shelly]
handled the family finances and was familiar with the status of
her husband’s collection efforts . . . . The preponderance of the
evidence indicates that she was at least aware of the contents of
the Financial Statement if, in fact, she did not prepare it.
14. The statements [Shelly] made to the Dabovals were false.
[J.R.’s] practice was failing, his primary client was about to fire
him, and many of his bills were over 120 days past due. It was
highly unlikely that his practice would be self-sufficient in just
a few months. The family finances were at a critical point with
several credit cards at their limit. Moreover, [Shelly] was
aware that instead of receiving money from BOPC, there would
be a substantial liability owed to BOPC.
15. [Shelly] knew the representations were false at the time she
made them.
16. [Shelly] knew that the Dabovals were not aware of [J.R.’s]
obligations to BOPC, the true status of his practice, and the
inaccuracies in the Financial Statement and failed to disclose
them.
17. [Shelly] intended for the Dabovals to rely upon her
representations and the Financial Statement. Specifically, she
intended to induce [Dan] into forming a partnership with her
husband and capitalizing it with a line of credit that she could
use to payoff other obligations. She feared that if she disclosed
her family’s true financial condition, and the actual state of
[J.R.’s] law practice, then [Dan] would not form [D&O], or at a
17
minimum would restrict her and [J.R.’s] ability to withdraw
money from [D&O].
18. As a further inducement to [Dan] to secure a line of credit,
[J.R.] agreed to limit [J.R.’s] draws to $10,000 per month,
pretax, until he was generating more than that amount plus his
share of expenses. [Shelly] was aware of the amount of draws
to which her husband was entitled.
19. Based on the Financial Statement given to the Bank and their
knowledge of the O’Briens’ lifestyle, the Dabovals’ reliance on
her statements was reasonable and justified. The Dabovals did
not know that the representations were false.
20. Had [Dan] known the truth, he would not have formed [D&O],
would not have capitalized it with his and his wife’s money,
and would not have secured the line of credit for the benefit of
[J.R.] and [Shelly].
21. [Dan’s] primary motivation in securing the line of credit was to
provide funds for [J.R.] and [Shelly] to draw upon in the time it
took for [J.R.’s] practice to become self-sufficient and for the
wind up of BOPC to be completed.
22. In December 2002, [J.R.] and [Dan] formed [D&O]. [D&O]
was organized . . . [so] that each partner would have to collect
enough to cover his share of expenses and then would receive
the remaining percentage of his collections.
23. [Shelly] was involved in the formation of [D&O]. She was a
volunteer employee at [D&O] from its inception and later a
paid employee. [Shelly] served as [D&O’s] bookkeeper from
its inception through the spring of 2004, when she left.
24. Immediately after formation of [D&O], [J.R.] began
withdrawing more than the agreed upon $10,000 per month,
despite not collecting enough to cover his expenses. As the
bookkeeper, [Shelly] knew that [J.R.] was withdrawing more
than the agreed upon amount . . . [and] [Shelly] signed some of
the checks.
18
25 . [J.R.’s] primary client was [Allstate]. Allstate terminated
[J.R.’s employment] soon after formation of [D&O]. After
losing Allstate, [J.R.’s] collections were. . . not even bringing in
enough money to cover his expenses. He continued to take a
draw and increase the debt owed to [D&O].
26. While acting as [D&O’s] bookkeeper, [Shelly] failed to
disclose to [Dan] [J.R.’s] true financial situation, even though
she had a duty to do so.
27. Her fiduciary responsibility to [D&O] and its partners ended
when she left the employ of [D&O].2
28. As a result of reliance on the false representations and
concealment of material facts by [Shelly], the Dabovals
suffered damages.
29. [J.R.’s] capital account with [D&O] for 2002 was a negative
$5,500, meaning that he owed [D&O] $5,500.
30. [J.R.’s] capital account with [D&O] for 2003 was a negative
$76,547, meaning that he owed that much to [D&O], plus his
balance from 2002.
31. [J.R.’s] capital account with [D&O] for 2004 was a negative
$75,800, meaning that he owed that much to [D&O], plus his
balance from 2002 and 2003.
32. [D&O] was dissolved and [Dan] is the successor-in-interest to
[D&O].
....
The trial court concluded,
2
Although the trial court found that the O’Briens owed the Dabovals a fiduciary
duty, it concluded that the Dabovals failed to establish a specific breach of that
duty.
19
1. This Court previously declared [D&O] to be judicially wound
up and terminated and that [D&O’s] claims are personal claims
of [Dan]. Therefore, [Dan] is entitled to pursue [D&O’s]
claims against [Shelly] in his individual capacity.
2. [Shelly] had a duty to disclose information concerning the
current financial condition of [J.R.] to [Dan].
3. [The Dabovals] recover from [Shelly] for fraud and fraudulent
concealment in the amount of $157,847.00.
....
Standard of Review
In an appeal of a judgment rendered after a bench trial, a trial court’s
findings of fact have the same weight as a jury’s verdict, and we review the legal
and factual sufficiency of the evidence used to support them just as we would
review a jury’s findings. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994);
Daniel v. Falcon Interest Realty Corp., 190 S.W.3d 177, 184 (Tex. App.—Houston
[1st Dist.] 2005, no pet.).
In conducting a legal-sufficiency review of the evidence, we must consider
all of the evidence in the light most favorable to the verdict and indulge every
reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d
802, 822 (Tex. 2005). In determining whether legally-sufficient evidence supports
the finding under review, we must consider evidence favorable to the finding, if a
reasonable fact finder could consider it, and disregard evidence contrary to the
20
finding, unless a reasonable fact finder could not disregard it. Id. at 827; Brown v.
Brown, 236 S.W.3d 343, 348 (Tex. App.—Houston [1st Dist.] 2007, no pet.).
However, if the evidence at trial would enable reasonable and fair-minded people
to differ in their conclusions, then jurors must be allowed to do so. City of Keller,
168 S.W.3d at 822; see also King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751
(Tex. 2003). When a party attacks the legal sufficiency of an adverse finding on
which it did not have the burden of proof, it must demonstrate that there is no
evidence to support the adverse finding. Croucher v. Croucher, 660 S.W.2d 55, 58
(Tex. 1983); Bellino v. Comm’n for Lawyer Discipline, 124 S.W.3d 380, 385 (Tex.
App.—Dallas 2003, pet. denied). We will sustain a legal-sufficiency or “no
evidence” challenge if the record shows one of the following: (1) a complete
absence of evidence of a vital fact, (2) rules of law or evidence bar the court from
giving weight to the only evidence offered to prove a vital fact, (3) the evidence
offered to prove a vital fact is no more than a scintilla, or (4) the evidence
establishes conclusively the opposite of the vital fact. City of Keller, 168 S.W.3d
at 810.
In reviewing a factual-sufficiency challenge, we consider and weigh all of
the evidence supporting and contradicting the challenged finding and set aside the
finding only if the evidence is so weak as to make the finding clearly wrong and
manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); see Plas-Tex,
21
Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). When a party attacks
the factual sufficiency of an adverse finding on an issue on which it did not have
the burden of proof at trial, it must show that there is insufficient evidence to
support the adverse finding. Vongontard v. Tippit, 137 S.W.3d 109, 112 (Tex.
App.—Houston [1st Dist] 2004, no pet.).
We review a trial court’s conclusions of law de novo, and we will uphold the
conclusions if the judgment can be sustained on any legal theory supported by the
evidence. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex.
2002); In re Moers, 104 S.W .3d 609, 611 (Tex. App.—Houston [1st Dist.] 2003,
no pet.). Although a trial court’s conclusions of law may not be challenged for
factual sufficiency, we may review the legal conclusions drawn from the facts to
determine whether the conclusions are correct. BMC Software Belgium, N.V., 83
S.W.3d at 794; Holloway–Houston, Inc. v. Gulf Coast Bank & Trust Co., 224
S.W.3d 353, 357 (Tex. App.—Houston [1st Dist.] 2006, no pet.). If we determine
that a conclusion of law is erroneous, but the trial court nevertheless rendered the
proper judgment, the error does not require reversal. BMC Software Belgium,
N.V., 83 S.W.3d at 794.
Finally, we note that the trial court acts as fact finder in a bench trial and is
the sole judge of the credibility of witnesses. See Murff v. Murff, 615 S.W.2d 696,
22
700 (Tex. 1981); HTS Servs., Inc. v. Hallwood Realty Partners, L.P., 190 S.W.3d
108, 111 (Tex. App.—Houston [1st Dist.] 2005, no pet.).
Judgment Conforming to Findings of Fact
In her first issue, Shelly argues that the judgment rendered in favor of
Wendy must be reversed because it does not conform to the trial court’s findings of
fact. Shelly asserts that the trial court “expressly found” that the damages it
awarded to the Dabovals “consisted of J.R.’s negative capital account with the
Firm.” Shelly notes that, in the trial court’s order “winding up and terminating”
D&O, it ordered that D&O’s claims “became Dan’s personal claims, individually.”
When a trial court makes findings of fact, they “shall form the basis of the
judgment upon all grounds of recovery.” TEX. R. CIV. P. 299. If the findings of
fact and the judgment are in conflict, the unchallenged findings control over the
judgment. See Morton v. Hung Nguyen, 369 S.W.3d 659, 676 (Tex. App.—
Houston [14th Dist.] 2012, no pet.); see also Lone Star Ford, Inc. v. McGlashan,
681 S.W.2d 720, 725 (Tex. App.—Houston [1st Dist.] 1984, no writ) (stating that
“the judgment of the court should conform to its findings of fact”).
In their pleadings, and during trial, the Dabovals sought recovery of
damages for the financial losses that they suffered as a result of Shelly’s fraud, and
they presented evidence demonstrating a variety of damages and losses. The
Dabovals presented evidence of J.R.’s negative capital account with D&O from
23
2002 through 2006. The Dabovals also presented evidence of the amount that Dan
funded to the D&O bank account and the amount of the personal bank account that
the Dabovals posted as collateral for the firm’s obligation. In its judgment, the
trial court concluded that Shelly had committed common law fraud by making
false representations and failing to disclose material information, “thereby
damaging [the Dabovals] in the amount of $157,847.” The trial court found,
among other things, that Shelly fraudulently induced Dan to form a partnership
with J.R. and fund the firm account so that Shelly could “pay off other
obligations.” It also found that J.R. took excessive draws from this account, Shelly
knew that J.R. was taking more than the agreed upon draws, and Shelly signed
“some of the checks.” The trial court further found that, as a result of their reliance
on Shelly’s false representations and concealment of material facts, the Dabovals
“suffered damages.” Also, within its findings, the trial court calculated J.R.’s
capital account for the years of 2002, 2003, and 2004, which totaled a negative
amount of $157,847. The trial court noted in its findings that this meant that J.R.
owed D&O this amount of money. However, the trial court did not make any
additional findings pertaining to damages, and it did not directly tie, at least in its
findings of fact, the actual amount of damages that it awarded in its judgment to
any specific piece of evidence or factual theory of recovery.
24
Although the amount of damages awarded by the trial court corresponds to
the trial court’s findings regarding J.R.’s negative capital account for the years
2002 through 2004, and although the court concluded that Dan was entitled to
pursue any D&O claims personally because D&O had dissolved and he was its
successor, we cannot say that the trial court’s judgment in favor of Wendy is
inconsistent or fails to conform with the findings in such a way that the judgment
must be modified. It is true that the trial court did not make any findings
suggesting that Wendy should recover in any capacity as a successor to D&O.
However, simply because the trial court found that D&O was dissolved and Dan
succeeded to any D&O claims does not create a conflict, in any legal sense, with
its award of damages to Wendy.3 Accordingly, we hold that the trial court’s award
of damages to Wendy in the judgment does not conflict with its findings of fact in
such a way that the judgment must be modified to conform to the findings of fact.
We overrule Shelly’s first issue.
Misrepresentations
In her second issue, Shelly argues that the “affirmative misrepresentations”
found by the trial court to have been made by her do not support the trial court’s
judgment because these representations constitute “mere expressions of opinion”
3
Shelly has separately challenged the legal- and factual-sufficiency of the evidence
supporting the damages awarded to both Dan and Wendy, and we address these
arguments below.
25
and are “not actionable” for common law fraud. Shelly asserts that “[f]uture
predictions and opinions” cannot form the basis of a fraud claim, there is no
evidence that she “had special knowledge of future events,” and there is no
evidence that Shelly knew her statements about the status of J.R.’s law practice
were false.
The elements of common law fraud are (1) that a material representation was
made; (2) the representation was false; (3) when the representation was made, the
speaker knew it was false or made it recklessly without any knowledge of the truth
and as a positive assertion; (4) the speaker made the representation with the intent
that the other party should act upon it; (5) the party acted in reliance on the
representation; and (6) the party thereby suffered injury. Italian Cowboy Partners,
Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011). “Material
means a reasonable person would attach importance to and would be induced to act
on the information in determining his choice of actions in the transaction in
question.” Id. “Pure expressions of opinion are not representations of material
fact,” and, as such, cannot give rise to a fraud claim. Id. at 337–38. “Whether a
statement is an actionable statement of ‘fact’ or merely one of ‘opinion’ often
depends on the circumstances in which a statement is made.” Id. at 338 (citing
Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 276 (Tex. 1995)). Relevant
circumstances include the statement’s specificity, the speaker’s knowledge, the
26
comparative levels of the speaker’s and the hearer’s knowledge, and whether the
statement relates to the present or the future. Transport Ins. Co., 898 S.W.2d at
276; see also Italian Cowboy Partners, Ltd., 341 S.W.3d at 338 (“Special or one-
sided knowledge may help lead to the conclusion that a statement is one of fact,
not opinion.”). Additionally, there are exceptions to this general rule that an
opinion cannot support an action for fraud. Italian Cowboy Partners, Ltd., 341
S.W.3d at 337–38. For example, when an opinion is based on past or present facts,
special knowledge may support a fraud claim. Id.; see also Transport Ins. Co., 898
S.W.2d at 277 (“Superior knowledge by one party may also provide the occasion
for fraud.”).
Shelly’s argument is based on an overly-narrow interpretation of the trial
court’s findings. She asserts that the trial court found that she made only two
“affirmative representations”: (1) that J.R. would be “receiving several thousand
dollars” from BOPC and (2) that J.R. “had a thriving practice with established
clients.” However, the trial court’s findings were not so limited. The trial court
further found that Shelly “handled the family finances”; was “familiar with the
status of [J.R.’s] collection efforts in his practice”; was “at least aware of the
contents of the Financial Statement [supplied to Dan], if in fact, she did not prepare
it”; was aware that “instead of receiving money from BOPC” there would be a
“substantial liability”; knew that the Dabovals “were not aware of J.R.’s
27
obligations to BOPC, the true status of his practice, and the inaccuracies in the
Financial Statement and failed to disclose them”; intended for the Dabovals to
“rely upon her representations and the Financial Statement”; intended to induce
Dan to form and capitalize D&O for her and J.R.’s personal financial gain and
benefit and to pay other obligations; and feared that disclosure of her family’s
financial condition and the “actual state” of J.R.’s practice would result in Dan not
forming D&O or would restrict her ability to access D&O’s account and funds.
Thus, the trial court’s findings, when considered as a whole, include a more
general finding that Shelly was well aware of the contents of the financial
statement and she intended to induce Dan, at least in part, with this financial
statement, to form D&O and continue to operate it for her and her family’s
financial benefit. The evidence also supports the trial court’s finding that the
representations made by Shelly, including the representations in the financial
statement upon which Shelly intended for Dan to rely, were false.
Moreover, the trial court’s finding that Shelly had represented that J.R.
would be receiving “several thousand” dollars from the wind up of BOPC is more
significant when considered in the context of the trial court’s other findings and
supporting evidence. The trial court also found that Shelly was “familiar with the
status of [J.R.’s] collection efforts in his practice,” and the evidence supports this
finding. As noted above, there is evidence that, during the same general time
28
frame that Dan was forming D&O, with the assistance of Shelly, J.R. was, also
with the assistance of Shelly, resolving a dispute with BOPC. There is also
evidence that Shelly was involved in preparing J.R. for his negotiations with
BOPC to settle their outstanding financial disputes. J.R. testified that Shelly was
involved in looking at compensation formulas and receivables so that he could
discuss “actual numbers.” The Dabovals also presented evidenced that, despite all
of this, neither Shelly nor J.R. made any mention of the significant outstanding
obligations that J.R. owed to BOPC. In fact, as found by the trial court, instead of
disclosing any obligation whatsoever, Shelly and J.R. instead represented that
BOPC owed J.R. significant amounts of money. Thereafter, the O’Briens
continued to represent that they were expecting to receive substantial sums of
money from BOPC, even though Shelly also provided conflicting testimony that
she became aware shortly after the formation of D&O that no funds would be
obtained from BOPC. As indicated in the financial statement, J.R. represented that
he was anticipating the receipt of $25,000 to $50,000 from BOPC. There is also
evidence that although the financial statement was signed only by J.R., Shelly was
involved in preparing it. And the trial court found that Shelly specifically intended
for Dan to rely upon the information in the financial statement in making his
decisions to form, capitalize, and continue to operate D&O.
29
In support of her argument that her representations in this case constitute
mere non-actionable opinions, Shelly relies upon Bennett v. Cochran, No. 14-00-
01160-CV, 2004 WL 852298 (Tex. App.—Houston [14th Dist.] Apr. 22, 2004, no
pet.) (mem. op.). In Bennett, Cochran alleged that his former law partner, Bennett,
had made negligent misrepresentations prior to their forming a law firm. Id. at *4–
5. Cochran asserted that Bennett had represented that his current law firm “was a
viable firm, with substantial cases” and his “formaldehyde docket” consisted of
“good cases that were worth a lot of money.” Id. In support of the allegations,
Cochran testified that, “I thought that we were merging into a viable law firm with
a substantial number of cases and with competent staff and I thought I was
merging in with a partner with whom I could work.” Id. The court of appeals
concluded that this evidence concerned only Cochran’s “thoughts and beliefs” and
did not reflect any actual representation. Id. In regard to the representation
concerning the “formaldehyde docket,” Cochran testified that Bennett had told him
that they were “good cases and there was a lot of money to be made.” Id. at *6
The court of appeals concluded that such statements constitute “nonactionable
‘puffing’ or expressions of opinion as to the value of these cases.” Id. at *6
(citation omitted).
The specific financial information and representations at issue in this case,
and the continued false representations and non-disclosures of material fact
30
throughout the parties’ relationship, cannot be compared to the general statements
of opinion concerning “good” cases in Bennett. Here, there is evidence that Shelly
was involved in preparing the financial statement provided to Dan and the
statement included material, false representations and omissions of material fact
concerning both the O’Briens’ personal financial situation and J.R.’s expectation
of significant compensation due from BOPC. Dan testified that the information in
the financial statement addressed his concerns regarding the O’Briens’ ability to
pay the line of credit, and it is undisputed that the financial statement was
presented to and used by the bank to issue the line of credit. Accordingly, we hold
that the record evidence supports the trial court’s findings that Shelly made
material, false representations that legally support a fraud claim. Thus, the trial
court’s judgment does not fail on the ground that the pertinent statements and
representations made by Shelly were merely non-actionable statements of opinion.
We overrule Shelly’s second issue.
Reliance
In her third issue, Shelly argues that the “undisputed evidence conclusively
negates Dan’s purported reliance” on the financial statement supplied to him
because “Dan opened the Firm operating account—thus committing to the
formation of the firm with J.R.—before he ever saw the Financial Statement” and
D&O “had already been created before J.R. signed the Financial Statement.”
31
Although there is evidence that Dan and J.R. had agreed to form D&O prior
to Dan’s review of any financial statement, and although there is evidence that the
parties had already taken affirmative steps to form D&O, there is also evidence
that supports the trial court’s fact finding that the financial statement was prepared
and presented to Dan to induce him to continue to operate and capitalize D&O and
to agree to be bound to a letter of credit. We note that, while there is evidence that
Dan had agreed to start the process of forming D&O prior to any financial review,
the Dabovals presented evidence that the initial agreement had been for both the
Dabovals and the O’Briens to capitalize D&O with cash contributions. This initial
oral agreement changed when the O’Briens notified Dan that they could not
furnish any capital. And Dan testified that he relied upon the provided financial
statement, and the material representations made therein, in making his decisions
to proceed to form and continue to operate D&O. Accordingly, we hold that the
evidence is legally sufficient to support the trial court’s finding that Dan relied on
Shelly’s false representations in making his decisions to form, continue to operate,
and capitalize D&O and to obtain the line of credit for the benefit of D&O and the
O’Briens.
We overrule Shelly’s third issue.
32
Justifiable Reliance
In her fourth issue, Shelly argues that the evidence “conclusively
establishes” that Dan’s purported reliance on the O’Briens’ “Financial Statement”
and “lifestyle” was unjustifiable as a matter of law because Dan “admitted he never
had any discussions with the O’Briens about their financial situation at the time the
line of credit was being considered,” Dan’s testimony “reveals nothing more than
[his] subjective trust in the O’Briens” as “friends” and “partners,” Dan had no
“check or balance” on Shelly’s duties, Dan did not check the books and records,
and Dan did not ask for documentation to support J.R.’s expectation of receiving
thousands of dollars from BOPC.
To recover on a fraud claim, a plaintiff must show actual and justifiable
reliance. Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913,
923 (Tex. 2010). To determine whether reliance is justifiable, “we must inquire
whether, ‘given a fraud plaintiff’s individual characteristics, abilities, and
appreciation of facts and circumstances at or before the time of the alleged fraud[,]
it is extremely unlikely that there is actual reliance on the plaintiff’s part.’” Id.
(citing Haralson v. E.F. Hutton Grp., Inc., 919 F.2d 1014, 1026 (5th Cir. 1990)
(applying Texas law)). A plaintiff “may not justifiably rely on a representation if
there are ‘red flags’ indicating such reliance is unwarranted.” Id. (citation
omitted).
33
Dan would not have been entitled to justifiably rely merely upon the
O’Briens’ “lifestyle” in agreeing to form, operate, and fund D&O and to continue
to operate D&O and allow the O’Briens to make withdrawals from the D&O
account. But, even setting aside the fact finding regarding the O’Briens’
“lifestyle,” we cannot say that the evidence is insufficient to support the trial
court’s findings that Dan justifiably relied on the provided financial statement and
Shelly’s representations, which occurred throughout the parties’ business
relationship. Dan testified that, before agreeing to the O’Briens’ request for a line
of credit, he wanted to first review the O’Briens’ financial statement, which was
ultimately filed with the bank. This financial statement, sworn to by J.R.,
purportedly disclosed all of the O’Briens’ assets and liabilities. And the record
supports the trial court’s finding that Dan and J.R. discussed the financial
statement and the information disclosed therein before Dan agreed to obtain the
line of credit, i.e., Dan relied upon the information provided to him in the financial
statement. The record also supports the trial court’s finding that Shelly was aware
of the statement and intended that it be used to induce Dan into forming, funding,
and continuing to operate D&O. Although the financial statement makes reference
to the existence of other documents, and although Dan agreed that he did not see
these other documents, we cannot say that, under these circumstances, it was
34
unjustifiable, as a matter of law, for Dan to have relied upon information disclosed
to him by the O’Briens in a sworn financial statement.
We also cannot say that it was unjustifiable, as a matter of law, for Dan to
have relied upon Shelly’s other statements made to him in her capacity as D&O’s
bookkeeper regarding financial information pertaining to the continued operation
of D&O. The record reveals that Shelly, considered to be a knowledgeable and
trusted bookkeeper and employee based upon her financial and project
management background, was given authority over D&O’s accounts and financial
matters. The evidence demonstrates that Shelly worked with D&O accountants
and had significant involvement in starting and operating the firm. And she
acknowledged that Dan relied upon her for information concerning the financial
status of D&O. Accordingly, we hold that the evidence is legally sufficient to
support the trial court’s finding that Dan justifiably relied on Shelly’s false
representations.4
4
In support of her arguments regarding justifiable reliance, Shelly again cites
Bennett v. Cochran, No. 14-00-01160-CV, 2004 WL 852298 (Tex. App.—
Houston [14th Dist.] Apr. 22, 2004, no pet.) (mem. op.). In Bennett, after holding
that certain statements made by Bennett to Cochran were mere “puffing,” the court
alternatively noted that Cochran had not justifiably relied upon Bennett’s
statements that he had “good cases” on which “a lot of money” could be made. Id.
at *6. The court noted that Bennett had not told Cochran “one way or the other”
whether he could review any documents relating to Bennett’s prior law firm and
Cochran had never asked to review any such records. Id. The court concluded
that, under these circumstances, there was no evidence that Cochran’s reliance on
“general statements” about “good cases” worth “a lot of money” was justifiable.
Id. Here, there is evidence that, during the initial months of the partnership, the
35
We overrule Shelly’s fourth issue.
Damages
In her fifth issue, Shelly argues that the evidence “conclusively established”
that Dan was “responsible for nearly all the damages” because Dan “made a
conscious decision in 2003 and 2004 to continue” D&O and allow J.R. to take his
$10,000 monthly draws, all while D&O was “in the hole” and J.R. was “under
water.” Within this issue, Shelly also argues that “the judgment may not be
affirmed on the ground that Dan was fraudulently induced into continuing to
operate the Firm” because the trial court made no findings in this regard. Finally,
Shelly alternatively asserts that the case should be remanded for a new trial if there
is any legally sufficient evidence of “some damages.”
The ordinary measure of damages in a fraud case is the actual amount of the
plaintiff’s loss that directly and proximately results from the defendant’s fraudulent
conduct. Tilton v. Marshall, 925 S.W.2d 672, 680 (Tex. 1996); McWhorter v.
Sheller, 993 S.W.2d 781, 785 (Tex. App.—Houston [14th Dist.] 1999, pet. denied).
The trial court found that Shelly intended to induce Dan into forming a
partnership and capitalizing it so that she could “payoff other obligations.” The
trial court also found that Shelly feared that if she disclosed to Dan certain material
O’Briens submitted to Dan a sworn financial statement that contained material and
false representations upon which the O’Briens intended him to rely to induce him
to form, operate, and capitalize D&O.
36
facts, he would have restricted her access to the firm account, again indicating that
Shelly’s fraudulent conduct resulted not only in Dan’s formation and capitalization
of D&O but also his continued operation of D&O. The trial court further found
that Shelly was D&O’s bookkeeper from its inception through the spring of 2004;
during this time, she failed to disclose that J.R. was withdrawing from the firm’s
bank account amounts that exceeded what Dan had agreed to allow; she failed to
disclose J.R.’s “true financial situation” during the partnership, even though she
had a duty to do so; and the Dabovals suffered damages in reliance upon Shelly’s
false representations and failures to disclose material information. Thus, the
evidence presented at trial does not establish that Dan was responsible for “nearly
all” of his damages.
The record demonstrates that because Dan was induced into forming,
capitalizing, and continuing to operate D&O, the amount of damages is not
necessarily subject to an exact calculation. Thus, the award of damages was a
matter well suited for the fact finder to resolve. We note that although the trial
court’s findings do not directly tie the Dabovals’ damages to a specific factual
theory, the findings indicate that the trial court may have sought to limit the
Dabovals’ claimed damages to those losses sustained through some point in 2004.
The findings of fact also suggest that the trial court determined that the Dabovals
were entitled to recover an amount generally consistent with J.R.’s negative capital
37
account through that time period, but there is no express finding that the damages
were limited on this basis. Rossi testified that his calculations, which accounted
for firm profits and expenses, were “conservative.”
Whether Dan’s continued reliance upon Shelly’s and J.R.’s representations
through 2004 remained justifiable was also a fact issue well suited for resolution
by the fact finder. As Shelly notes, there is some evidence that would likely have
supported a finding that Dan’s reliance became unjustifiable at some point during
the partnership when he realized that the O’Briens remained “under water” and
J.R. was not “catch[ing] up.” But, as explained above, there is also evidence that,
during the relationship and partnership, the O’Briens continued to represent that
they were expecting to receive payments from BOPC, they would provide
substitute collateral, and they understood that they were personally liable for what
Dan considered to be a “bridge loan.” There is also evidence that the Dabovals
remained unaware that the O’Briens representations made in the sworn financial
statement were false, the O’Briens’ dealings and disputes with BOPC resulted in a
significant financial obligation for them, and the O’Briens had taken draws from
D&O’s bank account in excess of amounts agreed by Dan. Based upon our review
of the record, we cannot say, as a matter of law, that Dan’s reliance became
unjustifiable at any specific point in 2004.
38
Additionally, Shelly does not appear to argue that the amount of J.R.’s
negative capital account was irrelevant to a determination of damages or the trial
court would have erred in at least considering the amount of the account. Again,
the Dabovals presented the testimony of Rossi, an accountant who reviewed all the
partnership records, considered all of the profits and expenses, and calculated that
J.R. owed an amount generally consistent with the trial court’s award. As noted
above, Rossi explained that his suggested figure was “conservative.” The
Dabovals also presented evidence that, in addition to losses in an amount
consistent with J.R.’s negative capital account, they sustained additional losses
related to the bank’s seizure of their personal bank account, which contained over
$100,000.
Based upon this evidence, as well as the evidence supporting the trial court’s
findings that Shelly’s fraud induced Dan to form, capitalize, and continue to
operate D&O, we cannot say that the trial court’s award of damages in an amount
generally consistent with J.R.’s negative capital account through 2004 resulted in
the award of excessive damages that lacks sufficient evidentiary support.
Accordingly, we hold that the evidence is legally and factually sufficient to support
the trial court’s award of damages.
39
Conclusion
We affirm the judgment of the trial court.
Terry Jennings
Justice
Panel consists of Justices Jennings, Massengale, and Huddle.
40