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concluding that evidence of management or control of the business was the right to write checks on the business's checking account
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No. 13-05-323-CV
Memorandum Opinion Delivered and Filed August 10, 2006.
On Appeal from the 332nd District Court of Hidalgo County, Texas.
Before Chief Justice VALDEZ and Justices YAÑEZ and CASTILLO.
MEMORANDUM OPINION
Appellants, Javier Guerrero ("Guerrero") and Homer Pena ("Pena"), bring nine issues, appealing from the trial court's judgment following a bench trial. Judgment was entered February 1, 2005, in favor of appellee, Rene Salinas ("Salinas"), on his claims for breach of contract and breach of fiduciary duty, and awarding damages against Guerrero and against Guerrero and Pena, jointly and severally. Appellants' motion for new trial was denied and this appeal ensued. We affirm the judgment, as modified with respect to damages awarded against Guerrero, individually, and remand solely for recalculation of prejudgment interest as to that award.
I. Background
Salinas alleges that in 1998, he and Guerrero desired to open a business removing gasoline tanks and providing other environmental services. The two men had known each other since childhood, although they had recently become better reacquainted while working on projects for the City of McAllen. Salinas testified he "trusted" Guerrero. Salinas alleged an agreement by which Guerrero, then an engineer for the City of McAllen, would come to work for Salinas's construction company, G.A.S. Enterprises, Inc. ("G.A.S."). While there, Guerrero was to work as Salinas's partner in G.A.S. Environmental Services ("the environmental services business") to secure new service contracts and build up that business. G.A.S. was to provide office space, support services and personnel, and pay Guerrero's salary until the environmental services business generated enough money to take over those salary payments. G.A.S. did pay Guerrero's salary for nearly a year, after which Guerrero left that business. Guerrero began work for G.A.S. in July 1998; that same month Salinas and Guerrero filed an assumed name certificate for the environmental services business as a partnership. They proceeded to open and operate a bank account in its name, secured a tax identification number for it from the Internal Revenue Service, and filed a tax return in its name as a partnership. All expenses of the environmental services business were allegedly paid by G.A.S.
Although Guerrero was able to secure some contracts, Salinas alleged that Guerrero never provided them to him or produced all of them, so Salinas was unable to tender all contracts into evidence. Salinas did testify as to four contracts.
Guerrero's annual salary with G.A.S. exceeded the salary he earned while employed with the City of McAllen.
In addition, Salinas alleges a second agreement with Guerrero and Pena, which involved operations of a laundromat. Salinas alleges an agreement by which he finished the building of the laundromat and made investments into the corporation, The Smart Factory, Inc. ("Smart Factory"). In return, one-third of the shares in that company were to be transferred to Salinas. Salinas contends his actual costs to finish the Smart Factory laundromat building, the value of his employees' associated labor (approximately $7,000), plus his monetary investments in Smart Factory totaled $36,343.78. It is undisputed that no shares were ever transferred to Salinas and he was never provided with any accounting. Salinas alleges he received no return whatsoever for his combined investment in the two enterprises.
Salinas filed suit in July 2000. The first amended petition includes claims for breach of contract, breach of fiduciary duty, fraud, and conversion against Guerrero, individually (relative to the environmental services business), and against Guerrero and Pena jointly (relative to Smart Factory). Salinas sought actual and exemplary damages, as well as attorney fees. Guerrero's and Pena's answer includes the affirmative defenses of failure of consideration, illegality, payment, statute of frauds, and contributory negligence.
Salinas states that because Smart Factory's corporate charter was later forfeited, he sued Guerrero and Pena, individually, as the corporation's sole shareholders.
Guerrero and Pena counter that no environmental services partnership or other agreement was ever formed; instead, they argue they only engaged in discussions. Guerrero also contends that formation of a business known as Quality Tank was essentially a prerequisite to his work in the environmental services business. With respect to Smart Factory, they allege there were no investments and no agreement to transfer shares of the company.
After a three-day bench trial, judgment was entered in favor of Salinas on his claims for breach of contract and breach of fiduciary duty, awarding (1) as against Guerrero (with respect to the environmental partnership), $26,513.00 in actual damages, and $7,649.07 in prejudgment interest; (2) as against Guerrero and Pena, jointly and severally (with respect to Smart Factory), $36,343.78 in actual damages and $10,485.28 in prejudgment interest; (3) postjudgment interest; and (4) $6,930.00 in attorney fees. The motion for new trial was denied and this appeal ensued.
II. Issues on Appeal
Guerrero and Pena bring nine issues on appeal, contending the trial court erred in: (1) denying their special exceptions (issue one); (2) denying their motion for directed verdict (issue two); (3) entering judgment against Guerrero (issue three) or Pena (issue four), individually, because evidence was insufficient to support either (a) that a partnership was formed or (b) damages; (4) finding the evidence sufficient to support a judgment against Guerrero for breach of contract, breach of fiduciary duty, or an award of $26,513 (issue five); (5) finding the evidence sufficient to support a judgment against Guerrero and Pena, jointly and severally, for breach of contract, breach of fiduciary duty, or an award of $36,343.78 (issue six); (6) failing to apply the statute of frauds to the actions for breach of contract (issue seven); (7) failing to enter findings of fact and conclusions of law (issue eight); and (8) finding the evidence sufficient to award attorney fees (issue nine).
III. Special Exceptions
Guerrero and Pena contend, in their first issue, that the trial court erred in denying their special exceptions regarding the causes of action brought against them.
A. Standard of Review
The trial court has wide discretion in ruling on special exceptions. Mulvey v. Mobile Producing Tex. N.M., 147 S.W.3d 594, 603 (Tex.App.-Corpus Christi 2004, pet. denied); Kutch v. Del Mar College, 831 S.W.2d 506, 508 (Tex.App.-Corpus Christi 1992, no writ). To determine whether a trial court abused its discretion, we must decide whether the trial court acted without reference to any guiding rules or principles, in other words, whether the act was arbitrary or unreasonable. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). Merely because a trial court may decide a matter within its discretion in a different manner than an appellate court would in a similar circumstance does not demonstrate that an abuse of discretion has occurred. Id.
B. Analysis
Texas Rules of Civil Procedure 90 and 91 provide the means for a party to specially except to an adverse party's pleadings. TEX. R. CIV. P. 90, 91; Adams v. First Nat'l Bank of Bells/Savoy, 154 S.W.3d 859, 876 (Tex.App.-Dallas 2005, no pet.). The purpose of special exceptions is to furnish a party with a medium by which to force clarification of an adverse party's pleadings when they are not clear or sufficiently specific. Adams, 154 S.W.3d at 876 (citing Villarreal v. Martinez, 834 S.W.2d 450, 451 (Tex.App.-Corpus Christi 1992, no writ)). Rule 45 requires that pleadings consist of statements giving an opponent fair notice of the allegations as a whole. TEX. R. CIV. P. 45; Perez v. Briercroft Serv. Corp., 809 S.W.2d 216, 218 (Tex. 1991). The purpose is to provide the opposing party with sufficient information to enable him to prepare a defense. Paramount Pipe Supply Co. v. Muhr, 749 S.W.2d 491, 494-95 (Tex. 1988).
While special exceptions, as a general rule, are to be filed either with a defendant's answer or shortly thereafter, they may even be raised during trial, so long as, in a nonjury trial, they are raised before the judgment is signed. Tex. R. Civ. P. 90; Harlingen Irrigation Dist. Cameron County No. 1 v. Caprock Commc'ns Corp., 49 S.W.3d 520, 534 (Tex.App.-Corpus Christi 2001, pet. denied). Here, Guerrero and Pena filed their special exceptions, in conjunction with a first amended answer, at 4:45 p.m. on November 9, 2004. A supplemental answer, adding the affirmative defenses of the statute of frauds and contributory negligence, was apparently filed on November 12, 2004. Trial was scheduled for and proceeded on November 15, 2004. All parties generally acknowledge the special exceptions were implicitly denied. We construe the record as reflecting an implicit denial of the exceptions.
The supplemental answer, although included in the clerk's record, is not file-date-stamped by the clerk.
In their motion for directed verdict, Guerrero and Pena challenged the sufficiency of Salinas's evidence, but did not raise the issue of special exceptions. In their motion for new trial and on appeal, Guerrero and Pena contend the trial court erred in "denying" the special exceptions. Salinas states in his brief that the special exceptions were denied because (1) they were untimely, being filed after the deadline set forth in the docket control order, (2) leave of court was neither sought nor obtained, and (3) there was no attempt by Guerrero and Pena to have them heard. The record does not contain the docket control order, any hearing transcript, any trial court ruling, or any order denying the special exceptions. Generally, a party challenging the pleadings must secure a hearing on the special exceptions or the exceptions are waived. Atkins v. Tinning, 2001 Tex. App. LEXIS 3043, at *7 (Tex.App.-Corpus Christi May 3, 2001, pet. denied) (designated as opinion); Brooks v. Housing Auth., 926 S.W.2d 316, 322 (Tex.App.-El Paso 1996, no writ); Smith v. Grace, 919 S.W.2d 673, 678 (Tex.App.-Dallas 1996, writ denied) (holding the movant has the burden to obtain a hearing to present its special exceptions to the trial court and obtain a ruling). Where the record does not show the movant obtained a ruling on the special exceptions, the movant has failed to preserve this complaint for appellate review. DART v. Edwards, 171 S.W.3d 584, 587 (Tex.App.-Dallas 2005, pet. denied) (citing Smith, 919 S.W.2d at 678). Here, however, because trial did proceed on the pleadings as filed, and because the trial court's denial of the special exceptions is essentially acknowledged by all parties and supported by the record, we infer that the trial court denied the special exceptions. See, e.g., In re The Lynd Co., No. 05-432, 2006 Tex. LEXIS 547, at *10 (Tex. June 9, 2006) (publication status pending) (finding ample evidence to imply a finding from the fact of the trial court's order).
The special exceptions attack nearly all of Salinas's petition. With respect to the environmental partnership and the claims against Guerrero, Guerrero and Pena allege that Salinas's petition failed to plead all elements of the various causes of action, and lacked sufficient detail to provide them with fair notice of the nature and issues of the controversy, such that they could not adequately determine what testimony would be relevant. They contend that allegations of conversion, fraud and breach of contract were inadequate to provide fair notice of the claims alleged. With respect to Smart Factory and the claims against both Guerrero and Pena, they similarly specially excepted that allegations (1) failed to differentiate between Guerrero and Pena as parties to any agreement, (2) failed to state the basis for any alleged fiduciary duty, (3) failed to identify contracts allegedly entered into by Guerrero and Pena on behalf of Smart Factory, and in which Salinas claimed an interest, (4) failed to cite elements of the various causes of action, and, in general, (5) failed to provide sufficient facts in support of the allegations to state a cause of action.
Guerrero and Pena similarly specially excepted to the damages questions, requesting that Salinas identify the maximum amount of damages he sought. While a party should designate the maximum amount claimed as a whole, see Phillips v. Vinson Supply Co., 581 S.W.2d 789, 791 (Tex.App.-Houston [14th Dist.] 1979, no writ), Guerrero and Pena do not contend error in that regard in this appeal. Further, damage issues raised in this appeal are addressed in our analysis of factual and legal sufficiency of the evidence.
In their motion for new trial and on appeal, Guerrero and Pena claim that the trial court erred because the amended pleadings "failed to specify what cause of action, and the required elements thereof, were being alleged as to each Defendant."
When evaluating special exceptions, the trial court must accept as true all material factual allegations and all factual statements reasonably inferred from the allegations in the pleadings being challenged. Sorokolit v. Rhodes, 889 S.W.2d 239, 240 (Tex. 1994). Consistent with the trial court's discretion, pleadings are to be construed liberally. See Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210, 213 (Tex. 1988). We ignore any factual propositions outside the petition that tend to contradict the petition. Hur v. City of Mesquite, 893 S.W.2d 227, 233 (Tex.App.-Amarillo 1995, writ denied).
The rule on special exceptions does not require that a plaintiff set out in his pleadings the evidence upon which he relies to establish his asserted cause of action. Tex. R. Civ. P. 45; Paramount Pipe, 749 S.W.2d at 494-95. It is not a valid objection to complain that the pleading does not set out enough factual details, if fair notice of the claim is given. Sw. Bell Tel. Co. v. Garza, 164 S.W.3d 607, 616 (Tex. 2004) (citing Roark v. Allen, 633 S.W.2d 804, 810 (Tex. 1982)). Similarly, complaining that a petition does not state a cause of action is inadequate, unless the defendant also specifically points out the defect or the reason the claim is invalid. Mowbray v. Avery, 76 S.W.3d 663, 677 (Tex.App.-Corpus Christi 2002, pet. denied). If a plaintiff does not plead all elements of a cause of action, a defendant may file special exceptions requesting a more specific pleading, but in doing so must specifically identify any alleged missing elements. Id. "A special exception shall not only point out the particular pleading excepted to but it shall also point out intelligibly and with particularity the defect, omission, obscurity, duplicity, generality or other insufficiency in the allegations in the pleading excepted to." TEX. R. CIV. P. 91; Spencer v. City of Seagoville, 700 S.W.2d 953, 957 (Tex.App.-Dallas 1985, no writ).
Here, the petition separately addresses the facts and allegations with respect to both the alleged environmental services partnership and Smart Factory. The facts and allegations are clearly separated, both as to the alleged wrongful breaches, as well as to the defendants involved with each business. We conclude the petition adequately apprises the parties of the claims against each of them. Further, Guerrero and Pena did not specifically identify missing elements in the alleged causes of action. See Mowbray, 76 S.W.3d at 677.
We also cannot ignore that trial proceeded below without further mention of the special exceptions in the record. Despite claiming that the pleadings were so defective that they failed to apprise Guerrero or Pena of what causes of action were in issue as to each of them, no related objections were raised with respect to any of the testimony or documentary evidence presented. No objections were raised alleging inadequate discovery because of inadequate notice of the claims, or impaired ability to prepare a defense. There was no allegation of surprise. Guerrero and Pena both actively participated in the trial. Each had the opportunity to and did testify; their counsel conducted full cross-examination of all witnesses. See Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993) (citing TEX. R. CIV. P. 67; Austin Area Teachers Fed. Credit Union v. First City Bank-Northwest Hills, 825 S.W.2d 795, 800 (Tex.App.-Austin 1992, writ denied)) (recognizing that trial by consent can occur where it is clear from the record that issues allegedly not raised by the pleadings are tried by the express or implied consent of the parties).
We conclude the trial court did not abuse its discretion in denying the special exceptions. Further, Guerrero and Pena have not shown reversible error. TEX. R. APP. P. 44.1(a). We overrule the first issue on appeal.
IV. Statute of Frauds
In issue seven, Guerrero and Pena complain that the trial court erred in failing to apply the statute of frauds by implicitly finding that the parties contemplated the possibility of performance within one year, thereby satisfying the statute of frauds (pleaded as an affirmative defense). Neither contract in issue was written.
The statute of frauds, set forth in section 26.01 of the Texas Business and Commerce Code, provides that, to be enforceable, a promise or agreement which cannot be performed within one year from the date of making the agreement must be in writing and signed by the person to be charged with the promise. Tex. Bus. Com. Code Ann. § 26.01(b)(6) (Vernon Supp. 2005); Niday v. Niday, 643 S.W.2d 919, 920 (Tex. 1982); Beverick v. Koch Power Co., 186 S.W.3d 145, 149 (Tex.App.-Houston [1st Dist.] 2005, pet. denied). Whether a contract falls within the statute of frauds is a question of law. Beverick, 186 S.W.3d at 149 (citing Iacono v. Lyons, 16 S.W.3d 92, 94 (Tex.App.-Houston [1st Dist.] 2000, no pet.)). A contract that could possibly be performed within a year, however improbable performance within one year may be, does not fall within the statute of frauds. Niday, 643 S.W.2d at 920 (stating that, if an agreement, either by its terms or by the nature of the required acts, cannot be performed within one year, it falls within the statute of frauds and must be in writing). Beverick, 186 S.W.3d at 149 (citing Hall v. Hall, 308 S.W.2d 12, 15, (Tex. 1957)). The fact that the entire performance within one year is not required, or expected, will not bring an agreement within the statute. Id. (citing Iacono, 16 S.W.3d at 95).
In Gano v. Jamail, 678 S.W.2d 152, 154 (Tex.App.-Houston [14th Dist.] 1984, no pet.), Gano urged that partnership agreements terminable at will are susceptible of performance within a year and therefore not subject to the statute of frauds. Id. (citing Boutell v. Hill, 498 S.W.2d 713, 714 (Tex.Civ.App.-El Paso 1973, no writ); Heathington v. Heathington Lumber Co., 398 S.W.2d 822, 826 (Tex.Civ.App.-Amarillo 1966), on second appeal, 420 S.W.2d 252 (Tex.Civ.App.-Amarillo 1967, writ ref'd n.r.e.); Howell v. Bowden, 368 S.W.2d 842, 846 (Tex.Civ.App.-Dallas 1963, writ ref'd n.r.e.); Palmetto Lumber Co. v. Gibbs, 52 S.W.2d 120, 128 (Tex.Civ.App.-Beaumont 1932), aff'd, 80 S.W.2d 742 (1935)). In each of these cases, although no time limit was set, the entire agreement was capable of being fully performed within one year if the parties so desired. Id. Gano was distinguishable because the agreement, by Gano's own testimony as to the nature of the cases, was not capable of such performance within the one-year period. Id. Thus it fell clearly within the Niday rule. Id. (citing Niday, 643 S.W.2d at 920). Where evidence conclusively proves that the agreement, either by its terms or by the nature of the required acts, cannot be completed within a year of its making, then an oral contact violates the statute of frauds as a matter of law and is unenforceable. Gano, 678 S.W.2d at 153 (citing Niday, 643 S.W.2d at 920).
Evidence that the agreements could not be completed within one year is not in the record. With respect to the environmental services business, the contracts on which Salinas seeks recovery were in fact completed within the time of the alleged partnership, which was less than one year. Similarly, with respect to Smart Factory, Salinas's alleged contributions, including his investment of monies and the completion of the building, were indisputably completed within the year. The paperwork connected with any obligation to tender ownership in shares in exchange therefor could also have been completed within the year. See Beverick, 186 S.W.3d at 149. Where, as here, the time of performance is not specifically set and there is no agreement that the objects of the partnership cannot be performed within a year, the general rule is that such an oral agreement will not violate the statute of frauds. Gano, 678 S.W.2d at 153; see Miller v. Riata Cadillac Co., 517 S.W.2d 773, 775 (Tex. 1974) (stating that if a contract can, from the terms of the agreement, be performed within one year, it is not within the statute of frauds). The trial court implicitly found that because the contracts were capable of being performed in a year and were performed within the year, the statute of frauds did not apply. We conclude that the finding is supported by the record and, thus, the court did not abuse its discretion. We overrule Guerrero's and Pena's seventh issue on appeal.
V. Failure to Provide Findings of Fact
In issue eight, Guerrero and Pena contend the trial court erred in failing to provide requested findings of fact and conclusions of law. However, their "request" for findings is actually a listing encompassed within their proposed final judgment, forwarded to the court on January 31, 2005. There is neither a separate request nor a reference to the proposed findings and conclusions either in the cover letter to the court or in the title of the proposed final judgment. The final judgment does not include findings of fact and conclusions of law. Guerrero's and Pena's motion for new trial, filed February 28, 2005, similarly makes no mention of any request for findings of fact and conclusions of law. No notice of past due findings of fact and conclusions of law was filed.
Rule 296 provides that any party may request the court to state in writing its findings of fact and conclusions of law. Such a request is to be entitled "Request for Findings of Fact and Conclusions of Law." TEX. R. CIV. P. 296. There is no such separate request in the record. Rule 297 then provides that if such findings are not provided by the trial court, the requesting party must timely file a "Notice of Past Due Findings of Fact and Conclusions of Law." Tex. R. Civ. P. 297. There is no such notice in the record. The failure to file such a notice constitutes a waiver of Guerrero's and Pena's right to complain about the trial court's failure to file findings of fact and conclusions of law. TEX. R. APP. P. 33.1; Curtis v. Comm'n for Lawyer Discipline, 20 S.W.2d 227, 232 (Tex.App.-Houston [14th Dist.] 2000, no pet.); Salinas v. Beaudrie, 960 S.W.2d 314, 317 (Tex.App.-Corpus Christi 1997, no pet.).
Indeed, any findings made by the trial court are not to be included in the judgment. Salinas v. Beaudrie, 960 S.W.2d 314, 317 (Tex.App.-Corpus Christi 1997, no pet.) (citing Valley Mech. Contractors, Inc. v. Gonzales, 894 S.W.2d 832, 834 (Tex.App.-Corpus Christi 1995, no writ); R.S. v. B.J.J., 883 S.W.2d 711, 720 (Tex.App.-Dallas 1994, no writ)); see Sutherland v. Cobern, 843 S.W.2d 127, 131 n. 7 (Tex.App.-Texarkana 1992, writ dism'd w.o.j.) ("Findings of fact contained in the body of a judgment may not be considered on appeal. . . . Therefore, for our purposes, we review this case as one in which no findings of fact were made.").
There is similarly no reference to past due findings of fact and conclusions of law in the motion for new trial.
Because Guerrero and Pena waived error, we overrule their eighth issue on appeal.
VI. Sufficiency of the Evidence
In issues three, four, five, six and nine, Guerrero and Pena challenge the sufficiency of the evidence to support the trial court's judgment, as to the environmental partnership, Smart Factory, and attorney fees. In their second issue, Guerrero and Pena complain that the trial court erred in denying their motion for directed verdict, based upon insufficiency of the evidence. Because both review of the legal sufficiency of the evidence and the denial of a motion for directed verdict involve the same legal sufficiency standard of review, City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005), we construe the complaint involving the motion for directed verdict as a challenge to the legal sufficiency of the evidence.
Technically, the use of the term "directed verdict" in a bench trial is incorrect because there is no jury to direct. In this situation, the correct procedure is for the defendant, at the close of the plaintiff's evidence, to make a "motion for judgment." Grounds v. Tolar Indep. Sch. Dist., 856 S.W.2d 417, 422 n. 4 (Tex. 1993) (superseded by statute on other grounds) (citing McDaniel v. Carruth, 637 S.W.2d 498, 503 n. 1 (Tex.App.-Corpus Christi 1984, no writ)).
Where there are no findings of fact or conclusions of law, and any complaint related thereto has been waived, the judgment of the trial court implies all necessary findings of fact to support it. Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 52 (Tex. 2003) (citing BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002); Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990)). However, we are not thereby precluded, as suggested by Salinas, from reviewing the legal or factual sufficiency of the evidence. Where, as here, the appellate record includes both the reporter's and clerk's records, implied findings of fact may be challenged for legal or factual sufficiency. Sixth RMA Partners, 111 S.W.3d at 52 (citing BMC Software, 83 S.W.3d at 795; Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex. 1989) (per curiam)); Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992). We review implied findings by the same standards we use in reviewing the sufficiency of the evidence to support a jury's answers or a trial court's fact findings. Casino Magic Corp. v. King, 43 S.W.3d 13, 19 (Tex.App.-Dallas 2001, pet. denied) (op. on reh'g); Roberson, 768 S.W.2d at 281.
Salinas suggests that disposition of Guerrero's eighth issue also necessarily disposes of Guerrero's third, fourth, fifth, and sixth issues on appeal. We disagree.
A. Standard of Review 1. Legal Sufficiency
We address legal-sufficiency challenges as either "no-evidence" or "matter-of-law" issues. Gooch v. Am. Sling Co., 902 S.W.2d 181, 183-84 (Tex.App.-Fort Worth 1995, no writ). We analyze the issue as a "no-evidence" challenge when, as here, the party complaining on appeal did not bear the burden of proof at trial. Id. Guerrero and Pena must show the record presents no evidence to support the adverse judgment. Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983).
The final test for legal sufficiency must always be whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review. Whether a reviewing court begins by considering all the evidence or only the evidence supporting the verdict, legal-sufficiency review in the proper light must credit favorable evidence if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not.
City of Keller, 168 S.W.3d at 827. We review the evidence "in the light most favorable to the [judgment], disregarding all contrary evidence that a reasonable [fact finder] could have disbelieved." Ysleta Indep. Sch. Dist. v. Monarrez, 177 S.W.3d 915, 917 (Tex. 2005) (per curiam). The trier-of-fact remains the sole judge of the credibility of the witnesses and the weight to be given to their testimony. Keller, 168 S.W.3d at 819. It may choose to believe one witness and disbelieve another, and a reviewing court cannot impose its own opinions to the contrary. Id. "A reviewing court cannot substitute its judgment for that of the trier-of-fact, so long as the evidence falls within this zone of reasonable disagreement." Id. at 822. "[T]he court must consider evidence in the light most favorable to the [judgment], and indulge every reasonable inference that would support it. But if the evidence allows for only one inference, neither jurors nor the reviewing court may disregard it." Id.
We overrule a legal-sufficiency issue if the record reflects any evidence of probative force to support the finding. ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997). We sustain a legal-sufficiency challenge when: (1) the record establishes the complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence conclusively establishes the opposite of a vital fact. Marathon Corp. v. Pitzner, 106 S.W.3d 724, 727 (Tex. 2003) (per curiam); Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997); Hines v. Comm'n for Lawyer Discipline, 28 S.W.3d 697, 701 (Tex.App.-Corpus Christi 2000, no pet.). If there is more than a scintilla of evidence to support the finding, the legal-sufficiency challenge fails. Formosa Plastics Corp. USA v. Presidio Eng'rs Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998).
The evidence is no more than a scintilla and, in legal effect, is no evidence "[w]hen the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence." Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983). Conversely, more than a scintilla exists when the evidence "rises to a level that would enable reasonable and fair-minded people to differ in their conclusions." Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 25 (Tex. 1994). We reverse and render judgment when we sustain a legal-sufficiency point. Vista Chevrolet, Inc. v. Lewis, 709 S.W.2d 176, 177 (Tex. 1986) (per curiam); Heritage Res., Inc. v. Hill, 104 S.W.3d 612, 619 (Tex.App.-El Paso 2003, no pet.).
2. Factual Sufficiency
When reviewing factual sufficiency of the evidence, the party attacking a finding on which an adverse party bore the burden of proof must show that the record presents "insufficient evidence" to support the finding. Gooch, 902 S.W.2d at 184. We examine and consider all the evidence. Golden Eagle Archery v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003); Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex. 1998). The finding is set aside only if the evidence standing alone is too weak to support the finding, or it is so against the overwhelming weight of the evidence as to manifestly unjust and clearly wrong. Golden Eagle, 116 S.W.3d at 761.
B. The Law-Breach of Contract
To prevail on a breach-of-contract claim, a party must prove that (1) a valid agreement between plaintiff and defendant existed, (2) the plaintiff performed or tendered performance, (3) the defendant breached the agreement, and (4) the plaintiff sustained damages as a result of the breach. Beverick, 186 S.W.3d at 150 (citing Prime Prod., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex.App.-Houston [1st Dist.] 2002, pet. denied)). The elements of a valid contract are: (1) an offer, (2) an acceptance, (3) a 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. Id. (citing Prime Prod., 97 S.W.3d at 636). In determining the existence of an oral contract, the court looks to the communications between the parties and to the acts and circumstances surrounding those communications. Id.; Prime Prods., 97 S.W.3d at 636.
C. The Law-Breach of Fiduciary Duty
The relationship between partners is fiduciary in character, and "imposes upon all the participants the obligation of loyalty to the joint concern and of the utmost good faith, fairness, and honesty in their dealings with each other with respect to matters pertaining to the enterprise." Bohatch v. Butler Binion, 977 S.W.2d 543, 545 (Tex. 1998) (quoting Fitz-Gerald v. Hull, 237 S.W.2d 256, 264 (Tex. 1951)).
Additionally, an informal fiduciary relationship may arise where one person trusts and relies upon another, whether the relationship is a moral, social, domestic, or purely personal one. Meyer v. Cathey, 167 S.W.3d 327, 331 (Tex. 2005); Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 176 (Tex. 1997). To impose an informal fiduciary relationship in a business transaction, a special relationship of trust and confidence must exist prior to, and separate from, the parties' agreement. Schlumberger Tech. Corp., 959 S.W.2d at 177.
D. Analysis-The Environmental Services Business 1. Liability
Salinas alleges that Guerrero breached his agreement with Salinas to develop the environmental services business, and to share its profits and losses as a partner. He also alleges that Guerrero breached the fiduciary duty he owed to Salinas.
A partnership in Texas is an association of two or more persons to carry on as co-owners of a business for profit. TEX. REV. CIV. STAT. ANN. art. 6132b, § 6(1) (Vernon 1970); Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576, 584 (Tex.App.-Houston [14th Dist.] 1999, no pet.); State v. Houston Lighting Power Co., 609 S.W.2d 263, 267 (Tex.Civ.App.-Corpus Christi 1980, writ ref'd n.r.e.). An express or implied partnership agreement has four essential elements: (1) a community of interest in the venture, (2) an agreement to share profits, (3) an agreement to share losses, and (4) a mutual right of control or management of the enterprise. Valero, 2 S.W.3d at 585 (citing Schlumberger, 959 S.W.2d at 176). As a matter of law, a partnership does not exist if any one of these elements is not established. Id.; Stephanz v. Laird, 846 S.W.2d 895, 900 (Tex.App.-Houston [1st Dist.] 1993, no writ).
The question of the existence of a partnership is one of fact. Cherokee Village v. Henderson, 538 S.W.2d 169, 174 (Tex.Civ.App.-Houston [1st. Dist.] 1976, writ dism'd w.o.j.); Fuller v. Fuller, 518 S.W.2d 250, 251 (Tex.Civ.App.-Beaumont 1974, writ ref'd n.r.e.); see also Tex-Co Grain Co. v. Happy Wheat Growers. Inc., 542 S.W.2d 934, 936 (Tex.Civ.App.-Amarillo 1976, no writ). The burden of proof is upon the person seeking to establish a partnership or joint venture, and the intention of the parties is the real test. Houston Lighting Power, 609 S.W.2d at 267. No single fact may constitute a complete and final test of partnership, because each case must rest on its own particular facts in determining the presence or absence of the attributes of a partnership relation. Id.; Davis v. Gilmore, 244 S.W.2d 671, 673 (Tex.Civ. App-San Antonio 1951, writ ref'd). "The trier of fact must consider all of the evidence bearing on the issue and make a fact finding as to whether a partnership was formed. If there is substantial and probative evidence supporting the finding, it will not be disturbed on appeal." Tex-Co. Grain Co., 542 S.W.2d at 937. As noted above, we here imply all findings in favor of the trial court's judgment. Sixth RMA Partners, 111 S.W.3d at 52; BMC Software, 83 S.W.3d at 795.
At trial, Salinas presented evidence to show a partnership with Guerrero to provide environmental services. Evidence included his testimony, an assumed name certificate filed July 2, 1998, a copy of a 1998 tax return tendered to the bank, bank account records, including establishment of the account as a partnership (signed by both Salinas and Guerrero), a business card of Salinas in the name of the partnership, and a copy of a letter by Guerrero to solicit business, written on business letterhead of the partnership. Evidence tendered to establish Salinas's investment in the environmental services business, in addition to the provision of office space and support supplies and personnel included the following: (1) Salinas's expenditures to pay for Guerrero's environmental licenses, certifications, and continuing education (totaling $3,156.86); (2) Salinas's purchase of survey equipment necessary for the business which was never returned by Guerrero (at a cost of $2,200); and (3) Salinas's purchase of a laptop computer and zip drive to facilitate Guerrero's development of the business, which was also never returned by Guerrero (at a cost of $1,388.73 plus $335.53, or $1,724.26). Salinas contends none of these expenses would have been made to benefit the construction company. He maintains that, instead, these expenditures were made to further development of the environmental services business. Salinas also tendered (1) a copy of a contract between the environmental services business and the City of McAllen, (2) copies of permits issued to that business for it to remove a tank for an individual in Houston, (3) a copy of a communication from Guerrero relating to an invoice for "consulting services" which Salinas alleged was evidence of another contract, and (4) communications between the environmental services company and an environmental laboratory relating to the No. 002, 4th Street, Elsa, Texas, project. The bank records reflect numerous checks and deposits made to the account, several checks written to Guerrero, and upon closing of the bank account, that all remaining funds were transferred directly to Guerrero's account. It was uncontested that Salinas never received any monies from the environmental services business or its bank account.
The bank account was operated, with checks written and deposits and withdrawals made, until it was closed in July 1999.
Salinas testified the environmental certifications were of no use to the construction company, and would only benefit the environmental services business.
Salinas testified that the licenses and certifications were of no use to his construction company, and that this expertise of Guerrero was sought specifically for the benefit of the environmental services business.
Guerrero argues that there was never any partnership, despite all the filings, the assumed name certificate, and the operation of the bank account on which both individuals remained at all times, because the business of Quality Tanks admittedly never became operational. He contends they only discussed formation of the environmental services business, but it never happened. However, we note that the assumed name certificate filed for Quality Tanks was filed in January 1998. Guerrero did not leave his position with the City of McAllen until June or July 1998, and the assumed name certificate and other steps undertaken to form the environmental services business were not initiated until July 1998. If operation of the business of Quality Tanks was a necessary prerequisite for Guerrero's participation in the environmental services business, these events would not have occurred in this sequence.
Evidence was tendered to support that (a) Salinas and Guerrero shared a community of interest in the environmental services business, (b) actions were undertaken with third parties holding out the business as a partnership, and (c) there was an agreement to share the profits. As to the fourth element, we conclude there was similarly evidence to share losses; whether or not such agreement was explicit, it was certainly implicit. First, Salinas testified to his understanding that he agreed to share in profits and losses, and that profits necessarily would not result if they were offset by losses. Second, the evidence reflects that if the business was not profitable, Guerrero would suffer the loss of his time and energy in getting the business established. Salinas would suffer the loss of the support monies he contributed to the further the business, including the monies expended to ensure Guerrero had the appropriate environmental licenses and continuing education, as well as various office services and personnel Salinas provided. Third, evidence reflected that both Salinas and Guerrero enjoyed a mutual "right" of control or management of the enterprise, including the right to write checks on the bank account, whether or not such a right was simultaneously or consistently exercised by each.
Evidence of probative force was tendered to support the trial court's conclusion that the relationship between Salinas and Guerrero was a partnership, and that Guerrero breached his agreement with Salinas. ACS Investors, Inc., 943 S.W.2d at 430. As partners, Salinas and Guerrero owed each other a fiduciary duty as a matter of law. Bohatch, 977 S.W.2d at 545. The evidence was therefore legally sufficient. Id. We conclude the evidence was similarly factually sufficient in this regard, as the trial court's finding is not so against the overwhelming weight of the evidence as to be manifestly unjust or clearly wrong. Golden Eagle, 116 S.W.3d at 761.
2. Damages
With respect to damages, we note that no punitive damages were awarded. Salinas sought economic damages, including one-half of the profits of the environmental services business. The trial court awarded damages of $26,513.00 as against Guerrero. There is no evidence of costs or obligations of the business, other than that Salinas's construction company bore all those expenses.
Evidence was tendered to show a contract between the City of McAllen and the environmental services business, including a copy of the contract and copies of checks reflecting payment by the City on the contract to the environmental services business in the total amount of $18,803.00. A second contract was alleged with a B. Salazar for tank removal. Evidence reflected that permits were issued by the City of Houston in the name of the environmental services business to remove the tank during the term of the partnership. Salinas testified that a deposit made into the partnership account in the amount of $1,250 related to this contract. While there is documentary evidence of this deposit, nothing affirmatively connects it to this contract. Later in his testimony, Salinas stated that he understood the value of the contract with Salazar was $15,000. However, on cross examination, he conceded that was just what "someone" told him, and he had no personal knowledge or evidence to justify that claim for $15,000. Guerrero did not dispute existence of the agreement with Salazar, but said it was on behalf of the construction company and that, in any case, Salazar never paid anything for this tank removal.
Salinas acknowledged that he did receive one check from the City in the amount of $1,250, which he deposited into his corporation's account, and which he deducted from his claim for damages. Guerrero contended that the contract with the City was for his own benefit, and was put under the name of the environmental services company solely to help build its resume. He also argued that, when the City's checks were received at the environmental services business's post office address, they were given to him by Salinas's accountant, so they were meant for him personally. Salinas stated he "trusted" Guerrero and presumed the checks were put into the business account, but apparently that did not occur.
Salinas alleged that a third agreement to perform services on behalf of an "I. Peralez" had a value of $3,750.70, based upon a bill he found in Guerrero's offices at G.A.S. The bill was generated by Guerrero in December 1998 for work he performed for Peralez as a consultant between March 31 and July 13, 1998. Guerrero testified he didn't remember providing any environmental services for her and that she was a lawyer. A fourth agreement was alleged in connection with "Job 0002" for 4th Street in Elsa. Salinas testified he believed that job had a value of $10,000, but had no hard evidence of that fact. Documentary evidence showed that an environmental laboratory performed soil analysis related to this project for the environmental services business in December 1998; no other evidence was produced. Guerrero testified this related to a tank removal, but that work was again performed by the construction company and no one was paid for this job.
Guerrero and Pena have challenged the sufficiency of the evidence to support the damages award. We conclude that the evidence is legally insufficient to support the total award given by the trial court.
We interpret Salinas's expenditures for Guerrero's licenses, the survey equipment, and the laptop computer as investments into the environmental services business. Duncan v. Lichtenberger, 671 S.W.2d 948, 953 (Tex.App.-Fort Worth 1984, writ ref'd n.r.e.) (finding the plaintiff entitled to recover monies invested in return for a share of the company). By prevailing on his claim for breach of fiduciary duty, Salinas was entitled to recover his actual damages, including out-of-pocket losses and economic injuries resulting from the breach of that duty. "The breach of a fiduciary duty is the type of wrong for which the courts of this State will afford a remedy." Id. The investment for Guerrero's licenses and continuing education totaled $3,156.86. The value of the survey equipment and the computer which Guerrero did not leave with the business when he left was $3,924.26.
With respect to the claim for lost profits from the four alleged contracts (relating to the breach of contract claim), we conclude there is legally insufficient evidence to award damages based on three of the four alleged contracts. There is no evidence "[w]hen the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence." Kindred, 650 S.W.2d at 63. Suspicion linked to other suspicion produces only more suspicion, not some evidence. Pitzner, 106 S.W.3d at 727-28. Pure speculation as to the existence of a contract, its value, or receipt of payment for the contract is no evidence. See id. There is legally and factually sufficient evidence to support damages based on the contract with the City of McAllen, which was valued at $18,803.
We conclude the evidence supports an award against Guerrero with respect to the environmental services business in the total amount of $15,232.62. Accordingly, we overrule Guerrero's and Pena's issues two, three, and five as to sufficiency of the evidence related to the environmental services business, except as they relate to the amount of damages. We modify the judgment in this regard to reflect an award of $15,232.62.
We conclude the evidence supports an award for $3,156.86 for Salinas's investment in Guerrero's licenses and certifications, $3,924.26 for the costs of the survey equipment and the laptop computer, and one-half of the value of the contract with the City of McAllen, or $9,401.50, less the $1,250 already paid to Salinas.
E. Analysis-The Laundromat and Smart Factory 1. Liability
With respect to Salinas's allegations related to Smart Factory, in addition to his testimony, Salinas tendered (1) a copy of the company's articles of incorporation filed in 1996, along with records reflecting forfeiture of the corporate charter for failure to pay franchise taxes, and (2) copies of checks from G.A.S. to Smart Factory which Salinas contended represented his investments into the company. Salinas also tendered a separate check for $16,603.29, which he stated did not represent investments into Smart Factory, but instead reflected his reimbursement to that company for his use of Smart Factory's lines of credit at McCoy's and Builder's Square. Similarly, Salinas tendered copies of receipts and checks made payable to Guerrero as reimbursements (including numerous reimbursements for purchases at McCoy's and Builder's Square).
Additional testimony presented by Salinas included that of his bookkeeper and his attorney (relating to attorney fees).
Salinas testified that in exchange for his investments and work done on the building, he was to be given one-third interest in Smart Factory, pursuant to his discussions with Guerrero. Salinas testified that he worked to "finish out" the building so that the laundromat could become operational, including completion of some interior wall work, interior and exterior painting, and trenching of a gas line. He did not tender receipts for related expenditures, but testified that labor contributed by his employees to finish the building totaled approximately $7,000.
Pena and Guerrero disputed that Salinas had an interest in Smart Factory, and contended that all monies Salinas paid to Smart Factory were reimbursements for charges on behalf of his construction company on Smart Factory's lines of credit at McCoy's and Builder's Square. No receipts or other evidence of those expenditures or lines of credit were tendered into evidence. Guerrero and Pena also testified that some of the monies received from Salinas were a loan to Smart Factory. They testified that Salinas only painted the exterior of the building and trenched the gas line, and urged that an estimated value of that work was approximately $200. Both agreed Salinas never received any shares in Smart Factory, or any monies from that business. They contended he never had any right to control the business of Smart Factory.
Salinas concedes he used Smart Factory's, as well as Guerrero's, lines of credit at McCoy's and Builder's Square to benefit his construction business. He tendered evidence of a check from him to Smart Factory for reimbursement. Salinas tendered other checks from his business to Smart Factory as evidence of investments in, rather than reimbursements to, Smart Factory. Although Guerrero and Pena contend all were actually reimbursements for use of the credit line, they tendered no evidence other than their testimony to support those contentions.
Evidence also included other checks written by Salinas to Guerrero, personally, as reimbursements for use of his personal line of credit.
Some evidence of Salinas's work on the buildings and investments into the company existed. We conclude the evidence was legally sufficient to support the trial court's conclusions on the merits with respect to Smart Factory. "[L]legal-sufficiency review in the proper light must credit favorable evidence if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not." City of Keller, 168 S.W.3d at 827.
With respect to factually sufficiency, the finding of the trial court will be set aside only if the evidence standing alone is too weak to support the finding or the finding is so against the overwhelming weight of the evidence as to be manifestly unjust and clearly wrong. Golden Eagle, 116 S.W.3d at 761. Here, sufficient evidence was tendered to support Salinas's contentions, including his testimony and some documentary evidence, that he did work on behalf of and made investments into Smart Factory but received nothing in return. Opposing evidence consisted principally of contradictory testimony.
The trier-of-fact, whether the trial court or the jury, remains the sole judge of the credibility of the witnesses and the weight to give their testimony. Keller, 168 S.W.3d at 819. We consider evidence in the light most favorable to the verdict, and indulge every reasonable inference that would support it. Id. Additionally, here we imply all necessary findings of fact to support the judgment. Sixth RMA Partners, 111 S.W.3d at 52; BMC Software, 83 S.W.3d at 795.
We note that Smart Factory is a corporation and not a partnership. Guerrero was an officer (Vice President) and director of that corporation. We imply a finding by the trial court that Guerrero had either authority or apparent authority to enter into contracts on behalf of the corporation. When an agent acts within the scope of this apparent authority, the acts bind the principal as though the agent actually possessed such authority. In re Weekly Homes, L.P., 180 S.W.3d 127, 131 n. 15 (Tex. 2005); Biggs v. U.S. Fire Ins. Co., 611 S.W.2d 624, 629 (Tex. 1981). We further note that no defense was ever raised that Guerrero, by entering into such a contract, did so outside his capacity as an agent of the corporation or without its authority.
Here, Salinas sued the individual shareholders, Guerrero and Pena, instead of Smart Factory because its charter had already been forfeited. In a suit against a corporation whose right to sue was forfeited by nonpayment of franchise taxes, although it retains legal title to its assets, beneficial title has passed to the stockholders. M M Constr. Co. v. Great Am. Ins. Co., 747 S.W.2d 552, 555 (Tex.App.-Corpus Christi 1988, no writ). Those stockholders may then prosecute or defend such actions as may be necessary to protect their property rights. Id. We further note, in any event, that no defense was raised, either in any pleading, at trial or on appeal, to challenge the capacity of Guerrero or Pena to be named as defendants or sued in their individual capacities. Any such potential defense has therefore been waived. Sixth RMA Partners, 111 S.W.3d at 56; Werner v. Colwell, 909 S.W.2d 866, 870 (Tex. 1995).
A corporation is an existing entity separate and distinct from its owners, its shareholders, but only by virtue of the law and only in the contemplation of the law. Wright v. Ewens Chevrolet-Pontiac-Buick Co., 481 S.W.2d 447, 448-49 (Tex.App. Houston [14th Dist.] 1972, writ ref'd n.r.e.). The sovereignty that enables the corporation's creation and gives it the capacity to sue and be sued may also suspend or terminate that capacity. Id. Failure to timely report and pay franchise taxes authorizes the Secretary of State of Texas to declare the corporate charter forfeit. Id. Such is the case here.
We conclude the evidence was legally and factually sufficient to support a finding of breach of contract with respect to Smart Factory. We have concluded Guerrero had apparent authority to enter into the contract on behalf of Smart Factory. Regardless of whether there were communications on the subject between Salinas and Pena, Pena as well as Guerrero retained beneficial title to the assets of Smart Factory subsequent to the forfeiture of its charter.
2. Damages
The trial court awarded damages related to the Smart Factory against Guerrero and Pena, jointly and severally, in the amount of $36,343.78. This sum reflects the value of Salinas's monetary investments in Smart Factory ($29,343.78) plus the value of his employees' labor to finish out the laundromat building ($7,000). We conclude the evidence is legally and factually sufficient to support this award.
We overrule Guerrero's and Pena's issues two, four, and six as to sufficiency of the evidence related to Smart Factory.
F. Analysis-Attorney Fees
In issue nine, Guerrero and Pena contest the sufficiency of evidence to support the award for attorney fees. To recover such fees, the plaintiff must prove they were reasonable and necessary for the prosecution of the case. Arthur Andersen Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818-19 (Tex. 1997). While eight factors have been used to determine reasonableness of attorney fees, a plaintiff need not present evidence on all eight factors. See Academy Corp. v. Interior Buildout Turnkey Constr., Inc., 21 S.W.3d 732, 742 (Tex.App.-Houston [14th Dist.] 2000, no pet.).
Testimony presented by Salinas's attorney addressed his qualifications to give a legal opinion on the issue, the time spent, hourly rate, total amount, and reasonableness of the fees incurred. That testimony was uncontested in any manner. We conclude it was legally and factually sufficient to support the trial court's award of $6,930 in attorney fees.
Accordingly, we overrule Guerrero's and Pena's third, fourth, fifth, sixth and ninth issues on appeal.
VII. Conclusion
We overrule Guerrero's and Pena's issues on appeal except with respect to the sufficiency of the evidence to support the award of damages against Guerrero, individually. We modify the judgment to reflect that award as $15,232.62 We remand the award of pre-judgment interest to the trial court for recalculation. See Royal Maccabees Life Ins. Co. v. James, 146 S.W.3d 340, 354 (Tex.App.-Dallas 2004, pet. denied).