Andrew Haut v. Green Cafe Management, Inc. and Alabama Green, LLC ( 2012 )

Affirmed and Majority and Dissenting Opinions filed June 12, 2012.
In The
Fourteenth Court of Appeals
___________________
NO. 14-10-01224-CV
___________________
ANDREW HAUT, Appellant,
V.
GREEN CAFE MANAGEMENT, INC. AND ALABAMA GREEN, LLC, Appellees.
On Appeal from the 270th District Court
Harris County
Trial Court Cause No. 2009-63168
MAJORITY OPINION
A jury found that appellant Andrew Haut breached a fiduciary duty to two
companies in which he owned minority shares of stock and membership interests. The trial
court found that Haut’s breach of fiduciary duty was clear and serious, warranting the
remedy of equitable forfeiture of Haut’s stock and membership interests in the companies.
We affirm.
I
Green Café Management, Inc. (GCM), is a corporation that franchises ―Ruggles
Green‖ restaurants. Alabama Green, LLC, operates a Ruggles Green restaurant at 2311
West Alabama in Houston. As franchisor, GCM sold the Ruggles Green franchise to
Alabama Green. Haut owned 10% of the shares in GCM and 5% of the membership
interests in Alabama Green. Haut is not an officer, director, or manager of either company.
In 2007, Federico Marques, along with Bruce Molzan and Robert Guillerman,
developed the concept of the first green restaurant in Houston—one certified by the Green
Restaurant Association’s food-industry standards.1 Later that year, Marques discussed the
business plan for the Ruggles Green restaurant with Haut. Marques had known Haut as a
business acquaintance and friend for about ten years, and over the years he had discussed
other business plans and ideas with Haut.
As the Ruggles Green concept took shape, Haut increasingly participated with
Marques, Molzan, and Guillerman in discussions about the structure and operation of the
nascent business. Eventually, Haut began to draft legal documents, including a GCM
shareholders agreement, a franchise agreement between GCM and Alabama Green, and an
operating agreement for Alabama Green. Haut testified that, in addition to drafting legal
documents for the companies, he performed other services such as preparing financial
projections for investors, budgeting, helping acquire a suitable restaurant location, and
obtaining licenses and insurance.
Marques, Molzan, and Guillerman knew Haut was in law school at the time and was
not a licensed attorney. Haut testified that, as a law student, he had agreed to take a ―first
cut‖ at drafting the legal documents, but it was always understood that the final versions
would be forwarded to an attorney for review. According to Haut, he, Marques, Molzan,
1
Marques, who previously worked on environmental projects for Bayer Corporation and holds
several patents, conceived and spearheaded the execution of the green restaurant concept. Molzan is a chef
and long-time restaurant owner of Ruggles Grille in Houston. Guillerman oversees the daily operation of
the Ruggles Green restaurant.
2
and Guillerman would meet regularly to review and discuss in detail the various provisions
in the documents he prepared. Marques testified that Haut would explain any provisions
they did not understand. Although Marques, Molzan, and Guillerman were experienced
businessmen, none of them were lawyers. According to Marques, Haut was ―very
insistent‖ about what the law required and how things needed to be done, and so they
accepted his advice.
Haut testified Marques told him that an attorney named Tom Coleman, an
acquaintance of Molzan, would review the documents when they were finalized. Marques
disputed this. According to Marques, although the group considered hiring Coleman at one
time and met with him briefly, Coleman was never hired to represent GCM or Alabama
Green. Marques also stated that Haut was critical of Coleman’s competence, which
influenced their decision to not hire him. Molzan testified that they could not afford to
retain Coleman, and because Haut had criticized Coleman’s legal skills, he agreed to have
Haut do all the legal work for them in exchange for shares in the company.
Marques testified that he believed Haut could contribute to the business because he
had a finance degree from the University of Pennsylvania’s Wharton School, had
previously run his own business, and was in law school. According to Marques, Haut said
he was ―very familiar‖ with the documents they would need to prepare, and he also had
access to professors and other resources at law school to help with drafting the documents.
Marques testified that he and the others trusted Haut to contribute his financial and legal
knowledge to the enterprise and originally agreed to give Haut a 3% ownership interest in
GCM in exchange for his efforts, including the drafting of legal documents. According to
Marques, he asked Molzan and Guillerman to increase Haut’s interest to 10% after Haut
complained that he was doing a lot of work and needed a larger share.
Marques also testified that he, Molzan, and Guillerman were uncertain about
structuring the business as a franchise, but Haut insisted that a franchise would be the
legally proper way to proceed. Haut agreed that he advised the group that the business
3
should be structured as a franchise even though Marques, Molzan, and Guillerman were
against this initially. Haut described the advice he gave as ―business‖ or ―financial‖ advice
rather than legal advice. Haut acknowledged, however, that he had no prior experience in
franchise law and had never operated a franchise. He explained that he gave the group
financial advice based in part on his legal research, but he denied that this constituted
giving legal advice. Before drafting the agreements, Haut admitted that he conducted legal
research into the requirements for a uniform franchise offering circular and franchise
agreement.
Haut testified that Marques never discussed paying Haut for performing legal work
on behalf of Ruggles Green. He also denied that he drafted the documents in exchange for
stock in the companies. Instead, Haut testified, he contributed $300 for his shares in GCM
and $100 for his interest in Alabama Green. He acknowledged, however, that his interests
were increased from 3% in each company to 10% in GCM and 5% in Alabama Green
because he ―was working so hard‖ to provide financial and legal services to the companies.
Haut also admitted that he had no previous experience in drafting corporate documents.
Ultimately, the GCM shareholders agreement was signed in May 2008 by Molzan,
Marques, Guillerman, and Haut. Molzan, Marques, and Guillerman also signed the
agreement on behalf of GCM. The shareholders agreement reflected that Molzan, Marques
and Guillerman would be directors of GCM, but Haut would not. The next month, the
Alabama Green operating agreement was signed by Molzan, Marques, Guillerman, and
Haut, as well as Randy Bower, the sole investor in the restaurant, and Jennifer McGehee, a
friend of Bower’s who had introduced him to Molzan. Of these, only Molzan, Marques,
and Guillerman were designated managers of the company. Molzan’s title was ―Chief
Executive Manager.‖
Haut acknowledged at trial that Molzan, Marques, and Guillerman wanted to make
sure they had exclusive control over the operation and management of the business. To
ease their concern that investors might interfere with their management, at one point Haut
4
sent an email to them stating that there were ―any number of legal maneuvers available to
management to stifle investor interference‖ and ―the law is on your side.‖ Haut denied that
his statements could properly be described as legal advice. But Haut admitted that the final,
signed documents did not give Marques, Molzan, and Guillerman, the directors of GCM,
exclusive authority over the management of Alabama Green. Marques testified that,
among other things, Haut drafted the GCM shareholders agreement and the Alabama
Green operating agreement to give himself veto rights, effectively divesting GCM’s
directors and Alabama Green’s managers of their ability to control the management of the
respective companies.2
In November 2008, the Ruggles Green restaurant opened for business. According to
Haut, however, the restaurant was losing money from its inception, and Haut believed it
would soon run out of money and have to close. After about three weeks of operation, Haut
contacted Bower to encourage him to replace Molzan and Guillerman as managers and
take control of the restaurant.3 Haut admitted he did this secretly without Molzan’s and
Guillerman’s knowledge. Bower did not agree to Haut’s proposal, and Bower instead
contacted Molzan and Guillerman to tell them what Haut had said. The next day, according
to Haut, Molzan and Guillerman gave Haut an ultimatum—either he goes or they go. Haut,
who had no prior restaurant experience and was not a chef, chose to cease participating in
2
The complained-of provision in the Alabama Green operating agreement reads as follows: ―This
Agreement represents the entire agreement between the parties. Any modifications must be in writing and
signed by all parties.‖ A similar provision is also included in the GCM shareholders agreement. Marques
testified that Haut’s drafting of the Shareholders Agreement was contrary to the directors’ understanding
that a majority of the directors would make the decisions, and it enabled Haut, a 10% shareholder, to ―hold
up‖ the owners of the remaining 90%. As an example of how control was divested, Marques explained that
the operating agreement originally provided that members would receive ―VIP Cards‖ entitling them to a
specified dollar amount of restaurant credit each month. When the restaurant first opened and was losing
money, everyone—including Haut—agreed to forego the food card. Later, however, Haut refused to agree
in writing to forego the card even though it was detrimental to the business. (Haut later asserted in his
lawsuit that the failure to issue him a VIP Card constituted a breach of contract by Alabama Green.)
3
Under the Alabama Green franchise agreement, Molzan, Marques, and Guillerman were named
managers and members, holding interests of 16 2/3%, 14 1/6%, and 11 1/6% respectively. Members Bower,
Haut, and McGehee held interests of 50%, 5%, and 3% respectively. Bower and either Haut or McGehee
together carried a majority interest in Alabama Green.
5
the business. According to Marques, Haut complained that the company was being
mismanaged, it was going to fail, and he no longer wanted to be part of a ―sinking ship.‖
On December 20, Haut sent an email to the shareholders and members of GCM and
Alabama Green informing them that he would no longer be involved in any aspect of the
restaurant and also would consider selling his interests in the companies.
Bower testified that before Haut’s departure, Haut would come in the restaurant and
insult the employees if they were not doing things exactly as he preferred. Marques also
testified that Haut was ―volatile‖ and would yell at employees in front of customers. He
described Haut as believing he was ―smarter than everybody‖ and ―very arrogant.‖ Bower
also testified that since Haut’s departure, Ruggles Green was doing very well financially
and was extremely well run under the management of Molzan, Marques, and Guillerman.
Marques expressed the opinion that if Molzan or Guillerman had been removed as Haut
wanted, the company would have failed.
In August 2009, Haut sent Marques a spreadsheet reflecting Haut’s estimated
valuation of his interests in GCM and Alabama Green at $603,582.63. After the parties
failed to reach an agreement to buy out Haut’s interests in the companies, Haut filed a
lawsuit against GCM and Alabama Green seeking access to the books and records of both
companies and damages for breach of contract by Alabama Green. GCM and Alabama
Green answered and filed counterclaims against Haut for breach of fiduciary duty,
negligence, unjust enrichment, negligent misrepresentation, fraudulent inducement, and
unauthorized practice of law.
At trial, the jury was asked to consider Haut’s claims against GCM and Alabama
Green, as well as GCM’s and Alabama Green’s counterclaims, which were now limited to
breach of Haut’s fiduciary duty. After hearing the evidence presented, the jury found
against Haut on his claims and in favor of GCM and Alabama Green. The jury found that a
relationship of trust and confidence existed between Haut and the companies, and that Haut
breached his fiduciary duties to the companies. The jury was not asked to assess actual
6
damages for the fiduciary-duty claims; instead, GCM and Alabama Green asked the trial
judge to order the equitable forfeiture of Haut’s stock and membership interests in the
companies.
On November 10, 2010, the trial court signed a final judgment reflecting the jury’s
findings and reciting the following: ―After considering factors relating to equitable
forfeiture, the Court finds that Andrew Haut’s breach of fiduciary duty to Defendants was
clear and serious and as a result that the remedy of equitable forfeiture is appropriate.‖ The
trial court entered a take-nothing judgment against Haut and further ordered that he was not
entitled to inspect additional books and records of the companies. Further, the trial court
ordered that Haut forfeit his 10% shares of stock in GCM and his 5% membership interest
in Alabama Green. Haut requested findings of fact and conclusions of law on the equitable
forfeiture issue, but the trial court did not make them. This appeal followed.
II
On appeal, Haut raises five issues: (1) because GCM and Alabama Green had no
standing to assert breach-of-fiduciary-duty claims against Haut, the trial court lacked
subject-matter jurisdiction; (2) Haut, a minority shareholder, owed no formal or informal
fiduciary duty to the corporations as a matter of law; (3) the evidence is insufficient to
support a finding that Haut breached any fiduciary duty owed to the companies; (4) the trial
court’s failure to file findings of fact and conclusions of law on the equitable-forfeiture
issue is harmful error; and (5) the remedy of equitable forfeiture was inappropriate because
Haut paid for his stock by check and forfeiture is appropriate only in exceptional
circumstances. Haut does not challenge the jury’s negative findings on his claims against
GCM and Alabama Green.
A
In his first issue, Haut contends GCM and Alabama Green lack standing to assert
breach-of-fiduciary-duty claims against him because the claims arising from the
7
shareholders and operating agreements are between the shareholders and members
respectively, not the companies, and the companies have suffered no injury.
Haut argues without citation to authority that corporations ―are indifferent as to how
the shareholders divide rights among themselves,‖ and therefore ―any breach of fiduciary
duty giving Haut more rights than co-shareholders harmed only co-shareholders,‖ not the
companies. Therefore, Haut maintains, ―[d]isputes arising from the GCM shareholder
agreement and the Alabama Green operating agreement must be brought by the
shareholders, not the [c]ompanies.‖
The general rule in Texas is that a corporate shareholder has no individual cause of
action for damages caused by a wrong done solely to the corporation. Wingate v. Hajdik,
795 S.W.2d 717, 719 (Tex. 1990). Causes of action for injury to the property of a
corporation or for impairment or destruction of its business are vested in the corporation, as
distinguished from its shareholders, even though the shareholders may be harmed
indirectly by a loss of earnings. Id. It is the nature of the wrong, whether directed against
the corporation only or against the shareholder personally, not the existence of injury,
which determines who may sue. Redmon v. Griffith, 202 S.W.3d 225, 234 (Tex.
App.—Tyler 2006, pet. denied).
GCM and Alabama Green allege that they relied on Haut to perform legal services
on their behalf in exchange for equity in the companies because Haut represented that he
was competent to do the work based on his legal education and research. Instead, however,
Haut gave legal advice and drafted the companies’ documents in a manner contrary to their
interests and detrimental to their operations. Further, they allege that Haut wrongfully
attempted to oust the founders and managers of the companies shortly after Alabama
Green’s franchise opened.
We conclude that these allegations are sufficient to assert claims belonging to GCM
and Alabama Green because the companies allege that Haut’s wrongful acts impaired
GCM and its ability to manage the Alabama Green franchise and thus directly harmed both
8
companies. There are no claims that Haut breached any duty owed to the shareholders or
members of the companies individually. Further, GCM and Alabama Green were the
parties to the franchise agreement, and GCM was a signatory to the shareholder agreement.
The companies’ claims include allegations directed to Haut’s advice concerning the
structure of the business as well as the drafting of the agreements. Therefore, GCM and
Alabama Green were entitled to assert their claims directly against Haut. See Wingate, 795
S.W.2d at 719; Redmon, 202 S.W.3d at 233–34; see also Corona v. Pilgrim’s Pride Corp.,
245 S.W.3d 75, 78–79 (Tex. App.—Texarkana 2008, pet. denied) (counterclaims for harm
done to corporation belonged to corporation, not shareholder and guarantor of corporation
and could not be asserted by shareholder and guarantor in creditor’s suit on sworn
account). We overrule Haut’s first issue.
B
Before addressing Haut’s remaining issues, we must address the state of the record
before us.
As GCM and Alabama Green point out, Haut filed only a partial reporter’s record in
this court. The reporter’s record consists of six volumes: one master index, three volumes
of testimony, and two volumes of exhibits. The reporter’s record does not include voir dire,
the parties’ opening statements or closing arguments, or the charge conference.
In addition, the clerk’s record and reporter’s record in this appeal indicate that we do
not have a complete record of the testimony and evidence presented at trial. At the end of
each reporter’s record volume for the first two trial days (June 14–15 of 2010), the trial
court states that the court is recessing for the day. At the end of the third volume for June
16, 2010, there is no such statement from the trial court. Instead, the third volume ends
with counsel for appellees stating that the defendants rest their case-in-chief.
Significantly, the reporter’s record does not contain a statement from Haut’s counsel as to
whether Haut offered any evidence in a rebuttal case, nor does the record contain any
statement from the trial court that the evidence is closed. We cannot discern from this
9
record, for example, whether Haut presented rebuttal evidence, whether the appellees
presented surrebuttal evidence, or whether the trial court reopened the evidence to admit
additional evidence on a party’s motion. The volumes of trial testimony in the reporter’s
record are labeled ―Jury Trial Excerpt,‖ and there is no statement in the reporter’s record
that it contains all of the evidence offered at trial. On the contrary, the clerk’s record
contains the trial court’s docket sheet, which states that evidence was presented on June 17,
2010, after which the jury deliberated and rendered its verdict. But, the reporter’s record
on appeal contains no record of any evidence offered on June 17, 2010. Indeed, the
reporter’s record contains no record at all regarding the trial proceedings on June 17, 2010.
Entries on docket sheets may not be used to contradict trial court orders and are not
generally considered to be trial court orders or findings. See N-S-W Corp. v. Snell, 561
S.W.2d 798, 799 (Tex. 1977) (orig. proceeding); Andrews v. Smith, No. 03-05-00835-CV,
2006 WL 2785719, at *1, n.2 (Tex. App.—Austin Sept. 29, 2006, no pet.) (mem. op.).
Nonetheless, docket entries may be used by appellate courts to determine what transpired
in the trial court.4 See Quaestor Invs., Inc. v. State of Chiapas, 997 S.W.2d 226, 229 (Tex.
1999); N-S-W Corp., 561 S.W.2d at 799; Andrews, 2006 WL 2785719, at *1, n.2; In re
Lausch, 177 S.W.3d 144, 147 & n.1 (Tex. App.—Houston [1st Dist.] 2005, orig.
proceeding); Jimenez v. Transwestern Prop. Co., 999 S.W.2d 125, 127 & n.2 (Tex.
App.—Houston [14th Dist.] 1999, no pet.); Pruet v. Coastal States Trading, Inc., 715
S.W.2d 702, 705 (Tex. App.—Houston [1st Dist.] 1986, no writ). In this case, the
reporter’s record and clerk’s record show that the trial court’s docket entries accurately
describe the trial court proceedings on the first three days of trial. The clerk’s record also
shows that the jury deliberated and reached a verdict during the afternoon of June 17, 2010,
thus confirming the accuracy of the other two items in the trial court’s docket entry for that
4
The case cited by our dissenting colleague does not hold to the contrary. See post at pp. 2–3
(citing Rush v. Barrios, 56 S.W.3d 88, 95–96 (Tex. App.—Houston [14th Dist.] 2001, pet. denied), in
which the court held that docket entries could not be used as the trial court’s findings of fact and
conclusions of law, though the court stated that docket entries could be considered for other purposes).
10
day. Nothing in the clerk’s record or reporter’s record indicates that the reporter’s record
contains all of the trial evidence.5 This court may rely upon the trial court’s docket entry to
conclude that evidence was presented on June 17, 2010. See Quaestor Invs., Inc., 997
S.W.2d at 229; N-S-W Corp., 561 S.W.2d at 799; Andrews, 2006 WL 2785719, at *1, n.2;
In re Lausch, 177 S.W.3d at 147 & n.1; Jimenez, 999 S.W.2d at 127 & n.2; Pruet, 715
S.W.2d at 705. On the record before us, we conclude that this appeal involves a partial
reporter’s record that does not contain all evidence presented at trial.
If an appellant requests a partial reporter’s record, the appellant must include in the
request a statement of the points or issues to be presented on appeal, and the appellant will
then be limited to those points or issues on appeal. Tex. R. App. P. 34.6(c)(1). It is
presumed that a partial reporter’s record designated by the parties constitutes the entire
record for purposes of reviewing the stated points or issues. Tex. R. App. P. 34.6(c)(4).
However, if the appellant entirely fails to file a statement of points or issues, he is not
entitled to the presumption that the record is complete for appellate review purposes, and,
instead, an appellate court presumes that the material missing from the reporter’s record
supports the trial court’s judgment. See Bennett v. Cochran, 96 S.W.3d 227, 229–30 (Tex.
2002) (per curiam); Mason v. Our Lady Star of the Sea Catholic Church, 154 S.W.3d 816,
819 (Tex. App.—Houston [14th Dist.] 2005, no pet.).
Haut did not file a request for a partial reporter’s record with a statement of the
points or issues on appeal. See Tex. R. App. P. 34.6(b), (c)(1). Although the supreme court
cautioned in Bennett that ―appellate rules are designed to further the resolution of appeals
on the merits,‖ it also instructed that ―litigants who ignore our rules do so at the risk of
forfeiting appellate relief.‖ 96 S.W.3d at 230. In fact, the Bennett court specifically stated
that ―[t]here is no question that, had [the appellant] completely failed to submit his
5
Haut was required to make his request for the preparation of the reporter’s record in writing and
to file a copy of this written request with the trial court below. See Tex. R. App. P. 34.6(b). Apparently,
Haut did not file this request in the trial court because, though the trial court clerk must include any such
request in the clerk’s record, the clerk’s record does not contain such a request. See Tex. R. App. P.
34.5(a)(9).
11
statement of points or issues, Rule 34.6 would require the appellate court to affirm the trial
court’s judgment.‖ Id. at 229 (citing Tex. R. App. P. 34.6).
Because Haut failed to follow the requirements for Rule 34.6, we must presume
―that the omitted portions of the record are relevant and support the trial court’s judgment‖
on issues in which evidentiary review is required. See Christiansen v. Prezelski, 782
S.W.2d 842, 843 (Tex. 1990); Mason, 154 S.W.3d at 819; Richards v. Schion, 969 S.W.2d
131, 133 (Tex. App.—Houston [1st Dist.] 1998, no pet.).6 Therefore, we analyze Haut’s
remaining issues in light of this presumption.
1
In his second issue, Haut contends that as a matter of law he does not owe either a
formal or an informal fiduciary duty to either company. The only argument Haut makes
regarding informal fiduciary duty is that there was no trial evidence that Haut had a special
relationship of trust and confidence prior to and apart from the agreement made the basis of
the suit. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997)
(stating that, to impose an informal fiduciary duty in a business transaction, the special
relationship of trust and confidence must exist prior to and apart from the agreement made
the basis of the suit). To sustain this argument, this court would have to conclude that,
considering all the trial evidence in the light most favorable to the challenged finding,
indulging every reasonable inference that would support the finding, crediting favorable
evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable
6
In W & F Transportation, Inc. v. Wilhelm, the parties agreed that the court reporter would make no record
at all of the closing arguments. See 208 S.W.3d 32, 37, 39 (Tex. App.—Houston [14th Dist.] 2006, no pet.).
In Wilhelm, this court noted that the reporter’s record contained all of the evidence offered at trial, the trial
court’s pronouncement that the evidence was closed, and the entire charge conference. See id. at 37, 40.
The Wilhelm court emphasized that the omitted closing arguments contained only arguments of counsel.
See id. at 37. In the case under review, (1) there is no indication that the court reporter failed to make a
record of any part of the trial proceedings or that the parties made any agreement in this regard; (2) the
reporter’s record and clerk’s record indicate that the reporter’s record does not contain all of the evidence
offered at trial; (3) the reporter’s record does not contain the trial court’s pronouncement of the close of the
evidence or any part of the charge conference; and (4) the omitted portions are not limited to only
arguments of counsel, indeed the charge conference would contain any substantive objections of counsel to
the charge. For these reasons, this court’s opinion in Wilhelm is not on point.
12
jurors could not, the evidence at trial would not enable reasonable and fair-minded people
to find that Haut had a special relationship of trust and confidence prior to and apart from
the agreement made the basis of the suit. See City of Keller v. Wilson, 168 S.W.3d 802, 823,
827 (Tex. 2005). But because Haut failed to comply with the requirements of Rule 34.6(c)
when he designated a partial record for appeal, we must presume the omitted evidence is
relevant and supports the trial court’s judgment on the jury’s findings. See, e.g., Bennett, 96
S.W.3d at 229–30; Mason, 154 S.W.3d at 819. Applying this presumption, Haut cannot
succeed in his argument under the second issue.
In addition, even if the partial record did not require us to presume that the evidence
supports the jury’s finding in this regard, Haut’s second issue would still lack merit. The
trial court’s charge did not instruct the jury that a pre-existing relationship of trust and
confidence was necessary for the jury to find a relationship of trust and confidence. Unless
Haut timely objected to the absence of such an instruction from the jury charge, this court
would review the evidence using the charge given, even if the charge does not correctly
state the law. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000) (holding that appellate
court could not review the sufficiency of the evidence based on a particular legal standard
because that standard was not submitted to the jury and no party objected to the charge on
this ground or requested that the jury be charged using this standard); Hirschfeld Steel Co.
v. Kellogg Brown & Root, Inc., 201 S.W.3d 272, 283–86 (Tex. App.—Houston [14th Dist.]
2006, no. pet.) (reviewing sufficiency of evidence based on unobjected-to jury instruction
and rejecting various arguments based on different legal standards). Under the charge
given, Haut’s only argument under his second issue lacks merit because the jury did not
need to find such a pre-existing relationship under the charge given. See Osterberg, 12
S.W.3d at 55; Hirschfeld Steel Co., 201 S.W.3d at 283–86. But the only indication in the
record before us that Haut voiced an objection in this regard is a document entitled
―Proposed Instruction on Fiduciary Duty,‖ contained in the clerk’s record. Presuming that
the document contains the signature of the trial court next to the notation ―Rejected
6-17-10,‖ our record would still be insufficient to show a timely objection. To be timely,
13
the objection would have had to have been made before the jury started deliberating on
June 17, 2010. See Osterberg, 12 S.W.3d at 55; Bayer Corp. v. DX Terminals, Ltd., 214
S.W.3d 586, 602–03 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). But we have no
record of the charge conference and the document in the clerk’s record does not reflect
when on June 17, 2010 the notation on it was made. Under the partial record presumption
resulting from the failure of the reporter’s record to contain a record of the charge
conference, this court would presume that Haut did not timely tender the document on June
17, 2010.7 See Bennett, 96 S.W.3d at 229–30; Mason, 154 S.W.3d at 819. Therefore, even
if the reporter’s record contained all of the trial evidence, we would still review the jury’s
finding under the charge submitted, and Haut’s only argument under his second issue
would lack merit.8 See Osterberg, 12 S.W.3d at 55; Hirschfeld Steel Co., 201 S.W.3d at
283–86.
Accordingly, we overrule Haut’s second issue.
2
In his third issue, Haut asserts that the evidence is legally insufficient to support the
jury’s finding that Haut breached his fiduciary duty. To sustain this argument, this court
would have to conclude that the evidence is legally insufficient to support the jury’s
finding. But because Haut failed to comply with the requirements of Rule 34.6(c) when he
designated a partial record for appeal, we must presume the omitted evidence is relevant
and supports the trial court’s judgment on the jury’s findings. See, e.g., Bennett, 96 S.W.3d
7
In addition, the failure of the record to reflect a timely request or objection would itself be a basis
to apply the charge given to the jury. See Osterberg, 12 S.W.3d at 55; Hirschfeld Steel Co., 201 S.W.3d at
283–86.
8
Further, under the proposed instruction, the jury is told that (1) the jury must ―determine . . . the
existence of a fiduciary relationship between the plaintiff and defendant,‖ (2) damage to the plaintiff is
necessary for there to be a breach of fiduciary duty, (3) ―an informal fiduciary duty is not lightly
recognized,‖ and (4) ―to impose an informal fiduciary duty in a business transaction,‖ there must be a
pre-existing relationship of trust and confidence. Because this proposed instruction contains inaccurate
statements of law and statements inappropriate for submission to the jury, it is not in substantially correct
form. See Tex. R. Civ. P. 278; Ford Motor Co. v. Ledesma, 242 S.W.3d 32, 43 (Tex. 2007); Plainsman
Trading Co. v. Crews, 898 S.W.2d 786, 791 (Tex. 1995).
14
at 229–30; Mason, 154 S.W.3d at 819. Applying this presumption, Haut cannot succeed in
his arguments under the third issue.
In addition, even if the partial record did not require us to presume that the evidence
supports the jury’s finding in this regard, the issue would be whether—considering all the
trial evidence in the light most favorable to the challenged finding, indulging every
reasonable inference that would support the finding, crediting favorable evidence if
reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could
not—the evidence at trial would not enable reasonable and fair-minded people to find that
Haut did not show each of the following:
a. The transactions in question were fair and equitable to [GCM or
Alabama Green];
b. [Haut] made reasonable use of the confidence that was placed in him by
[GCM or Alabama Green] ;
c. [Haut] acted in the utmost good faith and exercised the most scrupulous
honesty toward [GCM and Alabama Green];
d. [Haut] placed the interests of [GCM or Alabama Green] before his own,
did not use the advantage of his position to gain any benefit for himself at the
expense of [GCM or Alabama Green], and did not place himself in any
position where his self-interest might conflict with his obligations as a
fiduciary; and
e. [Haut] fully and fairly disclosed all important information to [GCM or
Alabama Green] concerning the transactions.
Even absent the presumption regarding the partial record, the trial evidence would be
legally sufficient to support such a finding by the jury. See Keck, Mahin & Cate v. Nat’l
Union Fire Ins. Co. of Pittsburg, Pa., 20 S.W.3d 692, 699 (Tex. 2000); Kormanik v.
Seghers, 362 S.W.3d 679, 688–89 (Tex. App.—Houston [14th Dist.] 2011, pet. denied).
Accordingly, we overrule Haut’s third issue.
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3
In his fourth issue, Haut contends the trial court’s failure to file findings of fact and
conclusions of law on the issue of equitable remedy is harmful error. Haut contends the
trial court ―needed to explain its factual and legal basis for ordering the forfeiture of [his]
stock‖ and its failure to do so is presumed harmful. In response, GCM and Alabama Green
contend that, among other things, Haut’s failure to timely file a notice of past due findings
of fact and conclusions of law waives his right to complain about the trial court’s failure to
file findings of fact and conclusions of law.
Under Texas Rule of Civil Procedure 296, when a party makes a proper and timely
request for findings of fact and conclusions of law and the trial court fails to comply, harm
is presumed unless the record affirmatively shows that the requesting party was not harmed
by their absence. Tenery v. Tenery, 932 S.W.2d 29, 30 (Tex. 1996) (per curiam); Alsenz v.
Alsenz, 101 S.W.3d 648, 652 (Tex. App.—Houston [1st Dist.] 2003, pet. denied). Error is
harmful if it prevents an appellant from properly presenting a case to the appellate court.
Tenery, 932 S.W.2d at 30; Alsenz, 101 S.W.3d at 652.
It is undisputed that Haut timely filed his request for findings of fact and
conclusions of law. But he failed to file and serve his notice of past due findings of fact and
conclusions of law within thirty days after filing his original request as required. See Tex.
R. Civ. P. 297. Haut did not file his reminder notice until thirty-three days after he filed his
original request. Therefore, Haut has waived this issue. See Hardin v. Hardin, 161 S.W.3d
14 (Tex. App.—Houston [14th Dist.] 2004), judgm’t vacated, op. not withdrawn, No.
14-03-00342-CV, 2005 WL 310076 (Tex. App.—Houston [14th Dist.] Feb. 10, 2005, no
pet.) (mem. op.); see also Las Vegas Pecan & Cattle Co. v. Zavala Cnty., 682 S.W.2d 254,
255 (Tex. 1984) (holding appellant’s complaint that trial court failed to file findings of fact
and conclusions of law was waived when appellant filed reminder notice four days after
deadline provided in earlier version of rule). We overrule Haut’s fourth issue.
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4
In his fifth issue, Haut contends the equitable remedy of forfeiture of his interests in
the two companies is inappropriate as a matter of law because Haut paid $100 for his
interest in Alabama Green and $300 for his stock in GCM and because forfeiture is only
applied in exceptional circumstances. Under this issue, Haut argues that (1) no legal
standard has been established for determining whether fee forfeiture should be awarded
against a fiduciary who is a minority shareholder a company; (2) Haut paid $100 for his
interest in Alabama Green and $300 for his stock in GCM; and (3) the trial court erred to
the extent it concluded that Haut’s breach of fiduciary duty was clear and serious and that
equitable forfeiture of his interests in Alabama Green and GCM was appropriate.
The Supreme Court of Texas has made it clear that the legal standard from Burrow
v. Arce applies, even to situations in which the fiduciary is not an attorney. See ERI
Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 873 (Tex. 2010) (citing Burrow for
the proposition that ―even if a fiduciary does not obtain a benefit from a third party by
violating his duty, a fiduciary may be required to forfeit the right to compensation for the
fiduciary’s work‖); Burrow v. Arce, 997 S.W.2d 229, 237 (Tex. 1999) (stating that ―a
person who renders service to another in a relationship of trust may be denied
compensation for his service if he breaches that trust‖).
Evidence of Haut’s payment of $100 in connection with receipt of his interests in
Alabama Green and $300 in connection with receipt of his stock in GCM does not preclude
the trial court, as a matter of law, from determining under the Burrow legal standard that
Haut’s conduct was a clear and serious breach of duty and that Haut’s interests in these
companies should be forfeited. See Burrow, 997 S.W.2d at 237–46.
On this partial record, we must presume the omitted portions of the record support
the trial court’s determination that Haut’s breaches of fiduciary duty to GCM and Alabama
Green were clear and serious based on the relevant factors and that the remedy of equitable
forfeiture was warranted on the facts presented. See, e.g., Bennett, 96 S.W.3d at 229–30;
17
Mason, 154 S.W.3d at 819; Burrow, 997 S.W.2d at 237–46. Even absent the presumption
regarding the partial record, we would still conclude that the trial court did not err in
making these determinations. See Burrow, 997 S.W.2d at 237–46; Jackson Law Office,
P.C. v. Chappell, 37 S.W.3d 15, 22–23 (Tex. App.—Tyler 2000, pet. denied).
Accordingly, we overrule Haut’s fifth issue.
***
We overrule Haut’s issues and affirm the trial court’s judgment.
/s/ Jeffrey V. Brown
Justice
Panel consists of Justices Frost, Brown, and Christopher. (Christopher, J., Dissenting).
18