Phap v. Nguyen, Andy Ngo and Dung T. Vu v. Manh Hoang and Dung Le ( 2015 )

ACCEPTED
01-15-00352-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
7/29/2015 1:38:52 PM
CHRISTOPHER PRINE
CLERK
NO. 1-15-00352-CV
______________________________
FILED IN
1st COURT OF APPEALS
IN THE HOUSTON, TEXAS
FIRST COURT OF APPEALS 7/29/2015 1:38:52 PM
AT HOUSTON, TEXAS CHRISTOPHER A. PRINE
Clerk
______________________________
PHAP V. NGUYEN, ANDY NGO, and DUNG T. VU,
Appellants
VS.
MANH HOANG and DUNG LE,
Appellees
______________________________
Appealed from the 55th Judicial District Court of
Harris County, Texas
______________________________
APPELLANTS’ BRIEF
______________________________
TOM RORIE
State Bar No. 17238000
210 North Street
Nacogdoches, TX 75961
(936) 559-1188
FAX (936) 559-0099
ATTORNEY FOR APPELLANTS
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
In accordance with Rule 38.1(a) of the TEXAS RULES OF APPELLATE PROCEDURE , Appellants
Phap V. Nguyen, Andy Ngo, and Dung T. Vu provide the following list of all parties, and the names
and addresses of all counsel:
Appellants: Phap V. Nguyen
Andy Ngo
Dung T. Vu
Counsel: Tom Rorie
Attorney at Law
210 North Street
Nacogdoches, TX 75961
(936) 559-1188
FAX (936) 559-0099
Email: trorie@sbcglobal.net
Appellees: Manh Hoang
Dung Le
Counsel: Scott K. Bui
Robert B. Pham
Bui, Pham & Nhan, PLLC
3921 Ocee
Houston, TX 77063
(713) 783-2466
FAX (713) 783-0787
email: sbui@buinhanlaw.com
ii
TABLE OF CONTENTS
Page
Identity of Parties and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Index of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Statement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Summary of the Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
Points of Error . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Point of Error No. 1:
There is insufficient evidence as a matter of law to establish a partnership
between the parties; therefore, there is no liability for breach of a partnership
agreement.
Point of Error No. 2:
The evidence is legally insufficient to establish that appellants breached a
contract with appellees.
Point of Error No. 3:
The evidence is insufficient to show any damages for breach of a
partnership agreement.
Point of Error No. 4:
The evidence is insufficient to show any damages for breach of a contract.
Point of Error No. 5:
The trial court erred in awarding judgment for damages for both breach
of a partnership agreement and breach of contract when both causes of
action arose from the same facts or events.
iii
Point of Error No. 6:
The evidence is insufficient to establish any liability by Appellee Dung Vu
because there is insufficient evidence that she engaged in any conduct for
which Appellees complain.
Arguments and Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Point of Error No. 1 Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Receipt or Right to Receive a Share of Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Expression of Intent to Be Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Right to Control the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Sharing or Agreeing to Share in Any Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Contributing or Agreeing to Contribute Money or Property to the Business . . . . . . . . . 14
Summary: The Totality of the Evidence Shows that Appellees were not
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Point of Error No. 2 Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Point of Error No. 3 Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Point of Error No. 4 Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Payment of 20% of Net Profits to Appellants a Breach of a Partnership
Agreement or Contract? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Is Withholding Money from a Distribution of Profits to pay Federal Taxes a
Breach of a Partnership Agreement Or Contract? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Was It a Breach of a Partnership Agreement or Breach of Contract to Divide
Proceeds between Appellant Le and Tuan Ngo Rather than Pay All the Proceeds
to Appellee Le? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Point of Error No. 5 Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
iv
Point of Error No. 6 Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Certificate of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Certificate of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
v
INDEX OF AUTHORITIES
Cases Page
Baldwin v. Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
586 S.W.2d 624 (Tex.Civ.App.–Tyler 1979), reversed on other grounds 611 S.W.2d 611
(Tex.1980)
Big Easy Cajun Corp. v. Dallas Galleria Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
293 S.W.3d 345 (Tex.App.–Dallas 2009, pet.rev.den’d.)
Black Lake Pipe Line Company v. Union Construction Company . . . . . . . . . . . . . . . . . . . . . . . 19
538 S.W.2d 80 (Tex. 1976)
Brown v. Keel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2012 Tex.App. LEXIS 1854 (Tex.App.–Houston [1st] 2012, no writ hist.)
Cintrin Holdings, LLC v. Minnis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2013 Tex.App. LEXIS 5723 (Tex.App.–Houston [14th] 2013, pet.rev.den’d.)
Crown Life Ins. v. Casteel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22 S.W.3d 378 (Tex. 2000)
Gannon v. Baker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
830 S.W.2d 706 (Tex.App.–Houston (1st] 1992, writ den’d)
Greenberg Traurig, LLP v. National American Insurance Company . . . . . . . . . . . . . . . . . . . . . 23
448 S.W.3d 115 (Tex.App.–Houston [14th] 2014)
Guerrero v. Salinas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2006 Tex.App. LEXIS 8562 (Tex.App.–Corpus Christi 2006, no pet.)
Hoss v. Alardin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
338 S.W.3d 635 (Tex.App.–Dallas 2011, no pet.)
Ingram v. Deere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,6,7,8,9
288 S.W.3d 886 (Tex. 2009)
Knowles v. Wright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
288 S.W.3d 136 (Tex.App.–Houston [1st] 2009, pet.rev.dism’d.)
Malone v. Patel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
397 S.W.3d 658 (Tex.App.–Houston [1st] 2012, pet.rev.den’d.)
vi
Murphy v. Canion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
797 S.W.2d 944 (Tex.App.–Houston [14th] 1990, no writ hist.)
Murphy v. Seabarge, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,25
868 S.W.2d 929 (Tex.App.–Houston [14th] 1994, aff’d.)
Prime Prods, Inc. v. S.S.I. Plastics, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
97 S.W.3d 631 (Tex.App.–Houston [1st] 2002, pet. denied)
Rankin v. Naftalis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
557 S.W.3d 940 (Tex.1977)
Reagan v. Lyberger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
156 S.W.3d 925, 928 (Tex.App.–Dallas 2005, no pet.)
Schuhardt Consulting Profit Sharing Plan v. Double Knobs Mt. Ranch, Inc. . . . . . . . . . . . . . . 23
2014 Tex.App. LEXIS 13417 (Tex.App.–San Antonio 2014, rev’d. in part; aff’d. as
modified)
Sewing v. Bowman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,7,10
371 S.W.3d 321 (Tex.App.–Houston [1st] 2012, pet.rev.dism’d.)
Southern County Mutual Insurance Company v. First Bank & Trust . . . . . . . . . . . . . . . . . . . . . 24
750 S.W.2d 170 (Tex. 1988)
Stewart Title Guaranty Co. v. Sterling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
822 S.W.2d 1 (Tex. 1991)
Tierra Sol Joint Venture v. City of El Paso . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
155 S.W.3d 503 (Tex.App.–El Paso 2004, pet.den’d.)
Truly v. Austin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
744 S.W.2d 934 (Tex. 1988)
Vortt Exploration Company v. Chevron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
787 S.W.2d 942 (Tex. 1990)
Westside Wrecker Service v. Skafi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,7
361 S.W.3d 153 (Tex.App.–Houston [1st] 2011, pet.rev.den’d.)
vii
Codes, Rules and Statutes Page
TEXAS BUSINESS ORGANIZATION CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Texas Deceptive Trade Practices Act, TEXAS BUSINESS AND COMMERCE CODE § 17.41,
et. seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
TEXAS FAMILY CODE § 3.201(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
TEXAS FAMILY CODE § 3.201(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Texas Revised Partnership Act (now repealed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,6
TEXAS RULE OF APPELLATE PROCEDURE 9.4(i)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
TEXAS RULES OF APPELLATE PROCEDURE , Rule 38.1(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
viii
STATEMENT OF THE CASE
Appellees brought suit contending that Appellants had breached a partnership agreement with
them, had breached a contract with them, and had committed fraud. They sought actual damages
for the breaches of the partnership agreement and contract, and exemplary damages as well.
At the close of Appellee’s evidence Appellants moved for an instructed verdict on the
following claims :
1. Those against Appellant Dung Vu for the reason that there was no evidence that she
had participated in any decision about which Appellees complained, that she made
any representation, withheld any information, or assumed any duty to them;
2. Those based on a theory of partnership because there was no evidence of an
agreement to share losses or of joint management and control;
3. Those based on a theory of fraud because there was no evidence of any representation
by Appellants that was false.
The trial judge granted the motion as to the fraud theory, but otherwise denied the motion. (RR Vol.
151-163).
In the Court’s Charge Conference Appellants objected the charge as follows:
1. Again objected to submitting the issues as to Appellant Dung Vu because of a lack
of any evidence that she participated in any decision that Appellees complained of;
2. Objected to the submission of a damages issue for breach of partnership because
there is no evidence of the value of the partnership;
3. Objected to the submission of partnership issues without an adequate definition of
ix
what constitutes “control.”
The jury found that a partnership existed and that Appellants had breached a duty of loyalty.
It awarded damages to both Appellees for breach of that duty. The jury also found a breach of
contract and awarded damages for that breach. The jury did not award exemplary damages.
After return of the jury verdict Appellants filed motions to disregard jury findings and for a
judgment notwithstanding the jury verdict. That motion was denied. The court signed a judgment
for both Appellees for the damages found by the jury and for pre-judgment interest.
Appellants then filed a motion for new trial, which was denied. This appeal followed.
x
STATEMENT OF FACTS
All the parties to this case are members of Vietnamese families who have a strong sense of
family and a tradition of helping each other. Appellants were interested in some type of business in
which they could prosper through diligent work, and learned through friends that one could make
a living by owning and operating a chicken farm, raising chickens for a chicken producer. They
worked on chicken farms to learn the business, and then decided to go into business themselves.
Appellants learned of a farm in Georgia which was for sale. They were approved as a grower
by the chicken producer which provided the chickens for the farm, Sanderson Farms.1
With a grower contract in hand Appellants were able to secure a loan to purchase the farm
they found. But they needed additional funding. So they contacted Appellees and other family
members and offered them the opportunity to invest in exchange for the right to receive a
proportionate part of any profits made.
Appellee Manh Hoang invested $80,000. Appellee Dung Le, together with her live-in
boyfriend Tuan Ngo, invested $50,000. Other family members invested as did Appellants
themselves. Appellants secured a loan from a bank in their names only for approximately one and
one-half million dollars.
With the needed funds in hand Appellants then closed on the purchase of the Georgia chicken
farm and Sanderson placed chickens on the farm. Appellants and Appellant Nguyen’s family all
lived in what was referred to as a “garage.” The farm had only six chicken houses which limited its
income, and times were hard. Appellant Vu, the wife of Appellant Nguyen, worked in her design
1
The Reporter’s Record refers to the producer as “Anderson Farms,” but the correct name is Sanderson
Farms, and that name will used in this brief.
xi
business in New Orleans and helped pay the expenses of the farm with her income. Appellants were
paying themselves a minimal draw or salary as laborers, as they worked in the houses along with
their employees. They knew that they needed to expand the farm and Sanderson authorized them
to add two additional houses. None of the investors had any money to contribute for those houses,
so Appellants drew no wages for a year and used the wages they would normally have paid
themselves to build two additional houses. All the investors benefitted from the additional houses.
After operating the Georgia farm for some time Appellants decided they would like to move
to Texas, where most of their family members were located. They decided to sell the Georgia farm,
and told the investors of their plans. They sold the farm for a profit, deferred the capital gains taxes
on the sale, and then moved to Texas.
While staying in Houston Appellants began searching for some land in central Texas that
could be approved by Sanderson Farms for a chicken farm. They spent approximately a year
searching for land in several counties and got approval from Sanderson for a tract in Robertson
County. Appellants secured a loan, in their names only, for approximately four and one-half million
dollars based on their contract with Sanderson, purchased a tract in Robertson County, and built a
chicken farm with 16 houses. Appellants secured a contractor for the houses, had a water well
drilled, utilities installed, and provided all management of the farm as well as working on the farm.
Appellants received no income for approximately a year while they were searching for the land and
constructing the chicken farm in Texas.
Appellants learned that Sanderson would provide them chickens for eight additional houses.
Appellant Nguyen personally borrowed $400,000 to secure the funds to build those houses. All the
investors benefitted from the income earned by those houses, although none of the other investors
xii
had any liability for the loan.
Appellants successfully operated the farm in Texas. They worked hard. According to
Appellee Vu her husband worked from 6:30 a.m. to 9:00 or 10:00 p.m. each day. Appellee Hoang
worked as a laborer in the farm, but was “fired” by Appellants because of his poor work habits and
one event in which he left the farm unattended when it was his duty to be present. Appellee Le never
worked on either of the farms and seldom was present. Appellants decided to sell the farm, in part
because they no longer wanted to continue any type of business relationship with Appellees.
Appellants then offered the farm for sale, sold it, and several months later called a meeting
with the investors, including Appellees, to distribute the profits made. Appellees insisted on being
paid in cash, and in order to protect themselves Appellants recorded the meeting on a video camera.
At the meeting Appellant Ngo provided the investors with a worksheet in which he showed the
profits made and any deductions from profits. At trial a certified public accountant testified that in
his opinion the worksheet was a reasonable and fair accounting of the chicken farm business.
The worksheet that Appellants provided the investors showed that Appellants were
withholding from the distribution of profits 20% of those profits as compensation to them for their
services and contributions to the venture. They also deducted the amount of capital gains taxes that
Appellant Ngo calculated would be due and the taxes on ordinary income they would owe due to
depreciation recapture and withheld those amounts from the distribution. While the other investors
did not object, Appellees objected to both of these deductions. Appellee Le also objected to the
division of the distribution of profits between her and Tuan Ngo. Appellees took the money despite
their objections.
After all the business affairs of the farm were completed, Appellants distributed a final
xiii
additional amount to each investor out of the funds accumulated. The final tally on the investments
of Appellees was that Hoang invested $80,000 and realized about $400,000 from his investment
while Le invested $50,000 and Appellants paid back over $200,000.
xiv
SUMMARY OF THE ARGUMENT
The judgment by the trial court cannot stand because there is insufficient evidence to support
the jury’s finding that a partnership was created between the parties. The totality of the evidence
shows no competent evidence to create a partnership, no agreement to share losses or be liable to
third parties for debts of the business, and a complete lack of control, the ability to make “executive
decisions” by Appellees.
There is also legally insufficient evidence of a breach of a partnership agreement or breach
of contract. Any payment by Appellants to themselves for their uncompensated services over four
years are compensable through the theory of quantum meruit. There is no express agreement for
their compensation for those services.
The withholding of funds to pay the Internal Revenue Service on the profits earned cannot
be a basis for a breach of a partnership agreement or contract between the parties for the reason that
a party has no legal right to compel another to violate the laws that apply to the transaction.
The division of the payment of proceeds to Appellant Le and her former boyfriend, Tuan
Ngo, is not a breach of an implied contract to pay only her because the evidence is insufficient to
show any such implied contract. That division is likewise not a breach of any express contract to
pay only Appellant Le because there is no evidence of any express contract.
The “contract” claim and “partnership” claim of Appellees are in fact the same. The only
contract was the same agreement Appellees call an agreement to be partners. The damages that
Appellee claim arise out of the same operative facts. Therefore, the trial court erred in awarding
what are the same damages twice, which is not permitted because of the one satisfaction rule.
xv
The evidence is insufficient to show the participation by Appellant Vu in any act or omission
which was a cause of injury or damages to Appellants, and it was error for the trial court to award
a judgment against her as well as against Appellants Nguyen and Ngo.
xvi
POINTS OF ERROR
POINT OF ERROR NO. 1:
THERE IS INSUFFICIENT EVIDENCE AS A MATTER OF LAW TO
ESTABLISH A PARTNERSHIP BETWEEN THE PARTIES;
THEREFORE, THERE IS NO LIABILITY FOR BREACH OF A
PARTNERSHIP AGREEMENT.
POINT OF ERROR NO. 2:
THE EVIDENCE IS LEGALLY INSUFFICIENT TO ESTABLISH THAT
APPELLANTS BREACHED A CONTRACT WITH APPELLEES.
POINT OF ERROR NO. 3:
THE EVIDENCE IS INSUFFICIENT TO SHOW ANY DAMAGES FOR
BREACH OF A PARTNERSHIP AGREEMENT.
POINT OF ERROR NO. 4:
THE EVIDENCE IS INSUFFICIENT TO SHOW ANY DAMAGES FOR
BREACH OF A CONTRACT.
POINT OF ERROR NO. 5:
THE TRIAL COURT ERRED IN AWARDING JUDGMENT FOR
DAMAGES FOR BOTH BREACH OF A PARTNERSHIP AGREEMENT
AND BREACH OF CONTRACT WHEN BOTH CAUSES OF ACTION
AROSE FROM THE SAME FACTS OR EVENTS.
POINT OF ERROR NO. 6:
THE EVIDENCE IS INSUFFICIENT TO ESTABLISH ANY LIABILITY
BY APPELLEE DUNG VU BECAUSE THERE IS INSUFFICIENT
EVIDENCE THAT SHE ENGAGED IN ANY CONDUCT FOR WHICH
APPELLEES COMPLAIN.
1
ARGUMENTS AND AUTHORITIES
Most people who receive a return of several times their investment without any effort on their
part are grateful. Appellee Manh Hoang invested $80,000 with Appellants in their purchase,
operation and sale of chicken farms in Georgia and Texas, and received in return approximately
$400,000. Appellee Dung Le invested $50,000 and received in return approximately $200,000. But
instead of gratitude, they felt resentment.
It bothered them that Appellants received some income in which they did not share.
Oblivious of the critical importance of management in making a successful business venture, or
simply resentful that Appellants received money when they did not, they objected when Appellants
told them they were taking part of the profits earned as their compensation for several years of work,
risk, and sacrifice. Appellees brought suit because they wanted all the profits distributed to the
investors strictly in accordance with their monetary contribution.
Appellees also objected when Appellants withheld funds from the distribution to the
investors to pay the Internal Revenue Service for capital gains taxes and taxes they expected to owe
because of depreciation recapture. To Appellees payment of taxes was abstract or hypothetical, and
they would worry about that later, but the money on the table was real, and they wanted all of it
distributed.
Appellee Le also complained that Appellants divided the profit on what she called her
investment to between her and a brother of Appellant Ngo, Tuan Ngo, who lived with her for several
years, including the time that monies were invested to buy each of the chicken farms.
This case is complicated by the absence of any written agreement between the parties. While
2
not explicitly stated at trial, it appears there is a custom among families of Vietnamese descent to
consider written agreements either unnecessary or undesirable. Therefore, much of the trial of this
case consisted of the parties recounting what each said, or in many cases, their interpretation or
understanding of what was said.
The case was submitted to the jury inquiring about two primary causes of action. First,
Appellees claimed that a partnership existed, and that Appellants breached that partnership agreement.
Second, they claimed that a contract existed between the parties and Appellants breached that
contract. As will be shown the contract was actually the same as what Appellees call an agreement
to create a partnership. In this case, the “contract” is the same thing as the “partnership.”
All the damages found by the jury are based on claims that arose at the same time and from
the same event, i.e. when Appellants distributed the proceeds from the chicken house investment. The
jury found damages arising from both a breach of partnership and from a breach of contract, but did
not award any exemplary damages. There is no way to separate damages arising from a breach of
partnership from those arising from a breach of contract, and Appellants will show that the court
granted Appellees an impermissible double recovery.
3
STANDARD OF REVIEW
This court has already set out the standard of review in a case of this nature, where an
appellant attacks jury findings on issues on which he did not have the burden of proof, in Westside
Wrecker Service v. Skafi, 361 S.W.3d 153 (Tex.App.–Houston [1st] 2011, pet.rev.den’d.), and in
Sewing v. Bowman, 371 S.W.3d 321 (Tex.App.–Houston [1st] 2012, pet.rev.dism’d.).
4
Point of Error No. 1 Restated: THERE IS INSUFFICIENT EVIDENCE AS A MATTER OF LAW
TO ESTABLISH A PARTNERSHIP BETWEEN THE PARTIES; THEREFORE, THERE IS NO
LIABILITY FOR BREACH OF A PARTNERSHIP AGREEMENT.
Partnership law in Texas has evolved over the past several years in light of the adoption of
the Texas Revised Partnership Act and the later adoption of the TEXAS BUSINESS ORGANIZATION
CODE. None of the parties to this suit have ever argued that the TRPA does not control. The
agreement of the parties was made in 2006 and the last farm was sold in 2010.
Any analysis of a partnership claim must begin with a review of Ingram v. Deere, 288 S.W.3d
886 (Tex. 2009). That case involved a psychiatrist, Deere, who agreed to serve as the medical
director of a pain clinic and who claimed that he became a partner with a psychologist, Ingram.
Initially they had no written agreement. Fourteen months later Ingram presented to Deere a
“Physician Contractual Employment Agreement” which Deere refused to sign because he contended
he was to be a partner. Deere brought suit claiming he was entitled to damages as a partner.
The Court applied the TRPA, which provides that “an association of two or more persons to
carry on a business as owners creates a partnership,” and then enunciates the elements of a
partnership. Those elements are:
(1) receipt or right to receive a share of profits of the business;
(2) expression of an intent to be partners in the business;
(3) participation or right to participate in control of the business;
(4) sharing or agreeing to share:
(A) losses of the business, or
5
(B) liability for claims by third parties against the business; and
(5) contributing or agreeing to contribute money or property to the business.
The elements that control under the TRPA vary somewhat from the common law requirements, as
the court noted. Ingram, p. 895-896. Instead of requiring proof of all elements, the Court held that
a “totality-of-the-circumstances test” would be the measure by which courts would determine the
existence of a partnership. If none of the elements exist, then a partnership cannot be created.
Conversely, if conclusive evidence on all the factors is found, a partnership exists as a matter of law.
This case now before the court falls in between the two ends of the spectrum: there is evidence on
some factors and none on others. Each element will be considered in the order listed in Ingram.
Receipt or Right to Receive a Share of Profits:
No dispute exists that the parties agreed to share profits. It was uncontradicted that Appellant
Ngo contacted his brother, Tuan Ngo, who lived with Appellee Le, and told him if they contributed
money toward Appellants’ purchase of a chicken farm in Georgia that they would share in any profits
made. Appellants made the same offer to Appellee Hoang. There is no dispute that Appellee Hoang
contributed $80,000 and that he received in return approximately $400,000. There is a disagreement
as to whether Appellee Le alone, or she together with Tuan Ngo, made a contribution, but no dispute
that a contribution of $50,000 was made which resulted in a return of over $200,000.
Expression of Intent to Be Partners:
The expression by the parties of their intent to be partners can be shown in several ways.
Some examples noted by the Court in Ingram are “statements that they are partners, one party holding
the other party out as a partner on the business’s letterhead or name plate, or in a signed partnership
6
agreement.” Ingram, p. 900. Another indication might be a party referring to another as his partner
in a conversation with a third party. An example of such a reference to another as his “partner” is
found in Cintrin Holdings, LLC v. Minnis, 2013 Tex.App. LEXIS 5723 (Tex.App.–Houston [14th]
2013, pet.rev.den’d.).
There must be some evidence that both parties expressed their intent to be partners. Reagan
v. Lyberger, 156 S.W.3d 925, 928 (Tex.App.–Dallas 2005, no pet.); Hoss v. Alardin, 338 S.W.3d 635,
641 (Tex.App.–Dallas 2011, no pet.); Brown v. Keel, 2012 Tex.App. LEXIS 1854
(Tex.App.–Houston [1st] 2012, no writ hist.).
The court must inquire separately whether there exists evidence of an intent to be partners,
and a court should “only consider evidence not specifically probative of the other factors.” Sewing
v. Bowman, 371 S.W.3d 321, 333-334 (Tex.App.–Houston [1st] 2012, pet.rev.dism’d.), citing Ingram.
Thus the court can only look to the expressions of intent by the parties or to their representations to
third parties.
This case involves a purely oral agreement, which creates other issues. The terms of an oral
contract must be “clear, certain, and definite.” Knowles v. Wright, 288 S.W.3d 136
(Tex.App.–Houston [1st] 2009, pet.rev.dism’d.); Gannon v. Baker, 830 S.W.2d 706, 709
(Tex.App.–Houston (1st] 1992, writ den’d). Reliance on what one party says does not establish what
both agreed to. There must be evidence that “both parties expressed their intent to be partners.” Hoss
v. Alardin, p. 644. The opinion of a lay witness that a partnership has been created is not competent
evidence of a partnership. Westside Wrecker Service v. Skafi, 361 S.W.3d 153, 169
(Tex.App.–Houston [1st] 2011, no writ hist.).
7
There is absolutely no documentary evidence of a partnership in this case. No document ever
referred to any of the parties as partners. All documents executed in connection with the purchase,
improvement, operation and sale of the two chicken farms show Appellants only as the owners. All
loan documents executed with financial institutions were executed solely in Appellants’ names. All
contracts and correspondence with the chicken producer, Sanderson Farms, name Appellants alone
as owners. No bank account or record showed or referred to the names of Appellees, but instead
showed Appellants as owners of the account.
There is likewise no testimony by any third party that any of the parties represented to them
that they were partners nor is there is any evidence that any of the partners referred to themselves as
partners.
The only evidence in this case of an intent to be partners is by Appellee Hoang. He testified
that “we all agreed we are owners.” (RR Vol. 2, p. 118). Yet there is no evidence of that intent being
expressed to anyone any time, to a lender, contractor, chicken producer, employee, or to anyone.
Another portion of Appellee Hoang’s testimony really says what the parties agreed to. His counsel
asked him if he wanted to be a “partner” and his response was “we agreed at the first time if we make
it, everybody will make it.” (RR Vol. 3, p.126). That testimony is consistent with Appellants’. They
testified that if they made profits all would share in them. But an agreement to share profits alone is
not evidence of an intent to be partners. Appellant Ngo made the distinction when he said Appellees
were not owners or partners, but that “they invest–what I call is they put in money in there to earn the
profit.” (RR Vol. 3, p. 27).
The court noted in Ingram that “[t]he Legislature does not indicate that it intended to spring
surprise or accidental partnerships on independent business persons” (p. 898). The intent to be
8
partners must be mutual, and the evidence in this case lacks evidence of mutual intent to be partners.
Right to Control the Business:
The right to control is generally considered one of the most important of the factors considered
in evaluating whether a partnership existed. Big Easy Cajun Corp. v. Dallas Galleria Ltd., 293
S.W.3d 345, 348 (Tex.App.–Dallas 2009, pet.rev.den’d.). The court in Ingram said that the right
involves “the right to make executive decisions.” So a review of the evidence in this case of the right
of the parties to make those “executive decisions” is in order.
One of the first “executive decisions” a party makes is controlling access to the business’s
books and records. In Ingram the court cited Tierra Sol Joint Venture v. City of El Paso, 155 S.W.3d
503 (Tex.App.–El Paso 2004, pet.den’d.), as holding that a party cannot be in control of a business if
he does not have control over and access to its books. In this case, there is no evidence that Appellees
had any control over the books and records of the chicken farms. Instead, Appellants kept the books
themselves and were the only parties who even knew whether the chicken farms had made a profit.2
Another of the “executive decisions” made by those who are partners is to have the right to
write checks on the business checking account. Guerrero v. Salinas, 2006 Tex.App. LEXIS 8562
(Tex.App.–Corpus Christi 2006, no pet.), cited by the court in Ingram. Appellees failed to show they
even knew where Appellants had a bank account, much less had access to it.
There is some evidence that Nguyen and Ngo talked to Hoang and Le on a few occasions about
2
W hen Appellees came to the final distribution of profits they had no idea of what would be distributed or
what profit, if any, was made from the chicken farms. Appellee Hoang testified that he knew the farm was paid when
batches of chicken were sold, but those payments are not income. Income is what is left after payment of fixed
expenses such as servicing the debt on the farm and variable expenses such as labor costs, the cost of utilities, costs
of upkeep and management, etc. Deere, p. 898. Since Appellee Hoang had no knowledge of the amount of those
expenses he had no knowledge of the income from the farms.
9
their plans, i.e. deciding to sell the farm in Georgia, the decision to buy property and build a farm in
Robertson County in Texas, but the decision to sell the Texas farm and distribute the proceeds was
made by Appellants alone. (RR Vol. 3, p. 186-187). In Malone v. Patel, 397 S.W.3d 658, 676
(Tex.App.–Houston [1st] 2012, pet.rev.den’d.), this court addressed the claim by one party that he had
“control” because the other discussed with him decisions that were made, and the financial condition
of the business, and concluded that this was no evidence that he actually made any executive decisions
and had control. To phrase it differently, conversation does not equal control. Sewing v. Bowman, 371
S.W.3d 321 (Tex.App.–Houston [1st] 2012, pet.rev.dism’d.).
What does the evidence show in this case? It shows first that it was the decision of Appellants
to go into the chicken business. They first worked on farms owned by friends to learn how to operate
a chicken farm and found a farm to purchase, negotiated an agreement with Sanderson Farms, the
chicken producer, and qualified as a grower for Sanderson before they ever talked to Appellees about
investing. According to Appellants’ testimony they could have found the money to make the purchase
elsewhere, so the Appellees’ participation was not critical to the venture. (RR Vol. 4, p 78). Further,
neither of the Appellees had any knowledge or experience that was necessary to operate a chicken
farm: they were investors only.
Appellants also made all the arrangements for financing, to borrow over a million dollars to
purchase the Georgia farm. There is no evidence that Appellees chose the lender, investigated the loan
terms to decide if the loan was suitable, or discussed the loan with the lender. In fact, no evidence
exists that the lender even knew that Appellees existed.
When Appellants decided to buy land and build a chicken farm in Texas it was their decision
where to purchase property. (RR Vol. 2, p. 110). There is no evidence that the approval of Appellees
10
or any other investor was either sought or acquired. In this farm as well as in Georgia, Appellants
decided who would work on the farm and what they would be paid. Appellee Hoang’s own testimony
testimony makes clear his lack of control. (RR Vol. 2, pp. 132-142). He had nothing to do with any
of the negotiations for the land, the construction of the farm, the grower contract, or the bank loan
required to purchase the land and build chicken houses. He did not even meet the contractors who
prepared the site and built the chicken houses. He did not keep the bank account nor did he pay any
bills for the business. Appellants handed the checkbook and signed checks.
In responses to questions about the relationship between the chicken farm and Sanderson
Farms, the producer, Appellee Hoang testified that he had no dealings with Sanderson, that “The
chicken company they only deal with the owners of the company” (emphasis added). (RR Vol. 2,
p.140). Those “owners” were Appellants, not him. He also testified that “I just do whatever Phap
Nguyen and Andy Ngo tell me to do.” (RR Vol. 2, p.141).
When asked “what you did without talking to Andy and Phap first” Hoang responded:
A When I drive the tiller to prepare the road, and I just drive the
lawnmower. I do not need to talk to them or ask them. As to the
anything need to be done, I do it.
Q Can you tell me anything else that you ever did on the farm without
asking them first?
A Many things, but I cannot.
Q Tell me what they are.
A This cleaning the ditches to make the road so that the vehicle can
drive in. Pave the cement. Do the flooring for the mobile home.
From his testimony it is apparent that Appellee Hoang made no executive decisions in operating the
chicken farm. Actually the evidence showed that Appellee Hoang worked as a laborer in the chicken
11
houses and that Appellants “fired” him as an employee because of their dissatisfaction with his job
performance and his lack of responsibility. (RR Vol. 3, pp 185-186; Vol. 3, p. 34-36).
Finally, one of the most telling admissions by Appellee Hoang of a lack of control over the
venture was this response:
Q The chicken farm in Texas, who made the decision to sell it?
A Those two, because of their name on the document.
Further, when asked about the sale of the chicken farm in Georgia Appellee Hoang stated “ the deal
was handled by those two people.” (RR Vol. 3, p. 131). Appellee Nguyen testified that the decision
to sell the farm in Georgia was his and Appellee Ngo’s, and they did not talk to Appellees about selling
it before they made the decision. (RR Vol. 3, p. 176). There can be no executive decision more
important to a business venture than to sell the business itself and cease all operations. A sale of the
chicken farm would end the venture and the relationship of the parties. One who has no say in such
a decision cannot claim he had the right to make executive decisions.
There is no evidence at all that Appellee Le ever participated in any decision necessary in the
purchase, operation or sale of the chicken farms in Georgia and Texas. She was present at the final
distribution of funds from the venture, but there is no evidence that she participated in any of the
business decisions that were made.
Sharing or Agreeing to Share in Any Losses:
An agreement to share losses of a business or to pay debts to third parties is a good indicator
of an ownership status. This case lacks any evidence that either Appellee ever paid, or expected to
pay, any losses of the business or to pay a debt of the chicken farm to a third party. It was clear from
12
the beginning that only Appellants stood to lose if the venture failed. (RR Vol. 2, p. 63). Appellee
Ngo understood at all times that if the business failed he would lose everything, his time, for the
liability for the bank loans, everything. But he did not expect Appellees to be responsible for any
losses. (RR Vol. 2, p. 81).
At every stage it was Appellants who made up any shortfall. For example, in Georgia, when
the farm with its initial six chicken houses was not producing enough income to even pay the farm
utilities and operating expenses, it was Appellants who came up with the funds. For a time the needed
funds came from the income of Appellant Dung Vu, earned in her decorating business in New Orleans.
(RR, Vol. 3, pp 170-171). Appellees contributed nothing.
When Appellants realized that building two more chicken houses on the farm in Georgia was
necessary to make the farm economically viable, they invested back into the farm what they would
normally have paid themselves as labor expense (they paid themselves and all employees an amount
whenever a batch of chickens was sold to defray their basic living expenses ) in order to have the funds
necessary to build the additional houses. (RR Vol. 2, p. 84-85; Vol 3, p. 171). Appellees contributed
nothing.
In both Georgia and Texas it was Appellants who assumed the full legal liability for bank loans
to purchase and/or build the farm. (RR Vol. 2, p. 81).
After Appellants made the decision to move to Texas and build a farm in Robertson County,
they learned that Sanderson Farms would allow them to add another eight chicken houses, expanding
from 16 to 24 and increasing the farm’s profitability. It was Appellant Nguyen who borrowed
$400,000 from family or friends to come up with the necessary funds. (RR Vol. 3, p. 87-88).
Appellees incurred no legal liability.
13
Appellants never told a creditor of the chicken farms that Appellees had anything to do with
the farm, much less that they would be liable for debts incurred. Likewise, there is no evidence that
Appellees ever told a creditor or third party that they were liable for debts of the business. In this case
it is clear that evidence does not exist on this element of a partnership.
Contributing or Agreeing to Contribute Money or Property to the Business:
It is not contested that Hoang invested $80,000 and Le (with Tuan Ngo) $50,000 to purchase
the chicken farm in Georgia.
Summary: The Totality of the Evidence Shows that Appellees were not Partners:
Appellees satisfy two of the elements necessary to the creation of a partnership. They both
contributed money and were entitled by agreement to a portion of the profits earned. But in many
critically important ways there is no evidence of a partnership. No evidence exists that the parties
referred to themselves as partners or represented to others that a partnership existed. There is no
evidence that Appellee’s ever lost or stood to lose anything other than their investment. And most
important of all, Appellee’s had no control over the executive decisions made in the business, a clear
indicator that they were investors but not partners.
Point of Error No. 2 Restated: THE EVIDENCE IS LEGALLY INSUFFICIENT TO ESTABLISH
THAT APPELLANTS BREACHED A CONTRACT WITH APPELLEES.
Point of Error No. 3 Restated: THE EVIDENCE IS INSUFFICIENT TO SHOW ANY DAMAGES
FOR BREACH OF A PARTNERSHIP AGREEMENT.
Point of Error No. 4 Restated: THE EVIDENCE IS INSUFFICIENT TO SHOW ANY DAMAGES
FOR BREACH OF A CONTRACT.
14
As the breach of partnership and breach of contract claims are based on the same operative
facts and the same damages were claimed for both alleged breaches, Appellants will address the issue
of damages in a combined argument applicable to both claims.
Appellee Hoang was asked what he claimed that Appellants had done to harm or injure him.
His answer was that (1) they had paid themselves 20% of the profits made from purchase,
management, and sale of the chicken farms as compensation for their management of the chicken
farms, and (2) they had held out funds from the distribution made after the farm in Texas was sold to
pay the Internal Revenue Service.
Appellee Le’s testimony is somewhat confusing. She is clear that she objected to Appellants
paying themselves any compensation for their services, about withholding any funds to pay taxes, and
about the division between the distribution between her and her former boyfriend. (RR Vol. 2, p. 57-
58).
On the issue of labor, she seems to assert that Appellants were already paid for their services.
(RR Vol. 2, p.20). She testifies that they were paid $3,500 per month. Later, it becomes clear that this
testimony is incorrect. She admits that they were paid $3,500 per batch of chickens sold and that five
batches a year were sold (RR Vol. 2, p. 47-48), which means that Appellants received only $17,500
per year, paltry compensation for working 12-14 hours a day, going without pay for nearly two years,
and assuming personal liability for about $7,000,000 in bank loans.
With respect to Appellants’ withholding of funds to pay taxes she testified that “the tax money
had been deducted before giving this money to me.” (RR Vol. 2, p. 51). She said she had not reported
the gain she received because “Andy said he had already paid tax for that portion already. When asked
what she wanted, she said “I just want Andy to pay me the tax back to me so I can report to the IRS.
15
(RR Vol. 2, p. 54). Of course, the problem with that position, as explained by Appellants’ accounting
expert, is that the IRS considers Appellants as the taxpayer because Appellants were the purchasers
and sellers of the farms.
Le also complains that Appellants should not have divided the profits from the chicken farm
operations with Tuan Ngo. (RR Vol. 2, p. 57). Her testimony fails to show that Appellants should
have known that only she was entitled to profits. She admitted that when the money was sent to
Appellant Ngo that there was nothing with the money “that said whose money its was.” (RR Vol. 2,
p. 42). She likewise admitted that she never gave anything that said that “this is my part and this is
Tuan’s part.” (RR Vol. 2, p. 42). Other evidence shows that Tuan Ngo’s paycheck from working on
the chicken farm went to Appellee Le and that distribution of funds made by Appellants on another
occasion was divided between Appellee Le and Tuan Ngo.
Payment of 20% of Net Profits to Appellants a Breach of a Partnership Agreement or Contract?:
It was uncontradicted that when Appellants made a final distribution of profits from the sale
of the chicken farm in Robertson County that they deducted from the amount distributed to the
investors 20% of the profits as compensation to them for their services provided. It is uncontradicted
that the parties did not discuss at the beginning of the business that Appellants would charge for their
services. Counsel for Appellee Hoang asked Appellant Ngo why he should be entitled to
compensation out of profits while Appellee should not, when he also worked on the farm. Appellant
Ngo clearly explained the difference between one who is a common laborer and can be replaced, and
one if has overall responsibility for managing the business. (RR Vol. 2, p. 106-107).
Appellants believe that the basic source of error in the jury verdict in this case was a
16
presumption by the jury that a party is only entitled to be paid for services rendered if there is an
express agreement to that effect, while the law in Texas is actually that a party is entitled to
compensation unless an express agreement establishes the compensation due for those same services.
There is a fundamental difference in compensation to Appellants for a return on the monies
they invested, and the services they provided. They are entitled to be paid a return on their monetary
investment just as are Appellees. But Appellees refused to accept that Appellants were also entitled
to be paid for their management services, additional investments, sacrifices, and assumption of debts
on the business. Appellee Hoang’s opinion at trial was that “we are all the same,” meaning that a
return on investment is all anyone is entitled to receive. (RR Vol 3, p. 129).
His opinion is incorrect under Texas law. Texas recognizes that a party may have a claim for
services rendered even when there is no contract providing for that compensation. Truly v. Austin, 744
S.W.2d 934, 936 (Tex. 1988). The underlying theory is that it would be unjust for a party to receive
benefits as the result of the efforts of another without paying the value of those benefits to the party
who did the work. Baldwin v. Smith, 586 S.W.2d 624, 632 (Tex.Civ.App.–Tyler 1979), reversed on
other grounds 611 S.W.2d 611 (Tex. 1980); Murphy v. Canion, 797 S.W.2d 944 (Tex.App.–Houston
[14th] 1990, no writ hist.).
The elements of a claim in quantum meruit are as follows:
1. valuable services were rendered;
2. for the person sought to be charged;
3. the services were accepted by the person sought to be charged, used and enjoyed by
him;
4. under circumstances as reasonably notified the other person that there was an
expectation of being paid.
17
Vortt Exploration Company v. Chevron, 787 S.W.2d 942 (Tex. 1990).
There is no doubt that Nguyen and Ngo rendered valuable services. They spent uncompensated
time learning the chicken business before deciding to enter it, secured grower contracts, financed the
construction of two chicken houses in Georgia by foregoing any payment of even basic living expenses
to themselves so that the farm could build the houses; assumed debt in excess of seven million dollars;
went months without compensation in Georgia while they operated a chicken farm there (they
reinvested their wages for their farm labor, while no other investor did so); worked long hours (RR
Vol. 3, p. 209) while the other investors were free to engage in other gainful employment; went
without compensation for a year after selling the Georgia farm while they purchased and constructed
the farm in Texas (RR Vol. 3, p. 180); and then operated the farm in Texas on a full-time basis and
negotiated a sale of it at a substantial profit to all investors.
The services were rendered for all investors, not just Appellees. While Appellants also
received a distribution of profits, their proportionate part of those profits on their monetary investment
was no greater than that of the other investors. And the amount of the return they received on their
monetary investment was only a small fraction of what they earned for all investors.
Appellants’ services were accepted by all the investors, including Appellees. While Appellees
were not in control of the operations of the chicken farms, they were aware that the farms had been
purchased by Appellants; that Appellants were living on the farms and operating them; that Appellants
received no compensation for long periods of time while they put together the deals; that Appellants
put in many, many hours managing the farms; that Appellants had over the time the farms were
operating assumed personal liability for approximately seven million dollars in debt; and that the farms
would never have been purchased and would have never earned any return to the investors without
18
Appellants’ management skill and effort.
Finally, was there anything about what Appellants did that would put Appellees on notice that
they expected to be compensated for their services? Appellees were free to run their own businesses
or seek other employment but Appellants were committed to full-time operation of the farms.
Appellees knew that for substantial periods of time Nguyen and Ngo were working without any
compensation at all for their services. That knowledge alone was sufficient to put anyone on notice
that a return on their monetary investment alone would not fully compensate Appellants and at some
point they expected to be compensated by something more.
An agreement to divide any return on a monetary investment in the chicken houses would not
preclude Appellants from claiming compensation for their management services and labor. In Black
Lake Pipe Line Company v. Union Construction Company, 538 S.W.2d 80 (Tex. 1976), the court held
that even if the parties have an express contract that provides compensation for some services a party
can recover the reasonable value of other services which were rendered and accepted that were not
covered by the express contract.
This case is in an unusual posture. It is not a suit by Appellants seeking a judgment that
Appellees should be ordered to pay them reasonable compensation, but instead a suit by Appellees to
recover damages because Appellants already paid themselves that compensation. Since the
compensation has already been paid, Appellants contend they had no duty at trial to prove that their
compensation was reasonable, but that Appellees had a burden to show it was unreasonable.
When the agreement between the parties was silent on the question of compensation by
Appellants for their services there is no evidence that by charging for their efforts they breached any
partnership agreement. If the jury found a breach of a partnership agreement or contract because
19
Appellants were paid for their services, it is not supported by any evidence because it is presumes that
Appellants were only entitled to be paid for their services if they expressly contracted to be paid.
Is Withholding Money from a Distribution of Profits to pay Federal Taxes a Breach of a Partnership
Agreement Or Contract?:
Appellees also contended at trial that Appellants breached their “partnership agreement” by
withholding monies to pay the Internal Revenue Service for taxes on capital gains arising from the
purchase and sale of the chicken farms and for taxes on ordinary income as a result of recapture of
depreciation expense deductions taken on the farms. Appellees claimed that Appellants should instead
give them the amount of money withheld for payment of taxes and it would be up them whether to
report the income and pay taxes on it.
Those taxes were explained by Michael Halls, a C.P.A. called by Appellants as an expert. He
testified that there would be a capital gains tax liability on the sale of the chicken farm(s), and in his
opinion the Internal Revenue Service would assess that liability against Appellants because they were
shown as the owners of the farm. (RR Vol. 4, p. 21).
Halls also testified that there would be a tax liability in the form of a “recapture” of depreciation
expensed on the farm. (RR Vol. 4, p. 15). His testimony was that Appellants would be responsible for
payment of those taxes. He further testified that while the methodology used by Appellant Ngo to
calculate the expected tax liability was not the same as a certified public accountant would use, it was
a reasonable method of calculating the tax liability. (RR Vol. 4, p. 21).
The issue here is whether one can be in breach of a contract by compliance with the Internal
Revenue Code. Appellants argued that any tax liability from the sale of the chicken farm will fall on
them, so they are justified in withholding the amount of that tax liability from the proceeds distributed.
20
In other words, they take the funds because they will owe the taxes. Appellants had no way of
compelling Appellees to pay the IRS if they distributed all the profits to them. Appellants did not trust
Appellees. That Appellees insisted on being paid in cash at the time of the final distribution contributed
to Appellants’ doubt Appellees would report and pay taxes on any profits distributed to them. (RR Vol.
3, p. 59). It was not unreasonable for Appellants to hold the money that would be owed.
Appellees questioned whether the sale of the chicken farm in Robertson County and the
reinvestment by Appellants properly qualified as what was referred to as a “Section 1031 exchange,”
in an attempt to raise doubt with the jury as to whether a tax liability actually existed. If the
transaction does not qualify as a Section 1031 exchange, Appellants will be liable immediately for the
taxes. (RR Vol. 4, p. 71). Deferring payment of the capital gain taxes in no way injures Appellees:
they have what was distributed to them free and clear of any tax liability because Appellants assume
payment of any taxes due.
Was It a Breach of a Partnership Agreement or Breach of Contract to Divide Proceeds between
Appellant Le and Tuan Ngo Rather than Pay All the Proceeds to Appellee Le?:
In addition to those claims on which she joins Appellee Hoang, Appellee Le makes an additional
claim, i.e. that Appellants breached their agreement with her by paying part of the distribution of profits
to Tuan Ngo. She claims she contributed $50,000 and she alone is entitled to a return on the investment
of that amount. To understand this issue requires reviewing the facts and circumstances under which
the investment was made.
There is no evidence that Appellants ever represented to anyone that they would pay a
proportionate part of any distribution solely to Appellee Le. If there is any basis for that claim, it must
be an implied promise. The evidence shows, however, that the investment Appellee Le claims to have
21
solely made was actually made as the result of a conversation between Tuan Ngo and Appellant Ngo,
not as the result of a conversation between Appellee Le and Appellant Ngo.
Tuan Ngo and Appellee Le lived together for seven years. (RR Vol. 2, p. 41). Appellant Ngo’s
uncontradicted testimony was that he contacted Tuan Ngo about investing in the purchase of the farm.
Tuan Ngo told him he would talk to Appellee about it. Tuan Ngo, not Appellee Le, then contacted
Appellant Ngo and said that “they” would invest in the farm.
Appellant Ngo then received a check in the agreed amount of the investment drawn on an
account solely in Appellee Le’s name. Neither Appellee Le nor Tuan Ngo gave anything to Appellant
Ngo that said whose money was being invested. (RR Vol. 2, p. 42). Appellant Ngo later learned other
information that confirmed the investment was made jointly. Tuan Ngo worked on the farm for a
period of time as a laborer and instructed Appellant Ngo to make his paychecks payable to Appellee
Le and those checks were sent to her. When asked how Appellant Ngo “is supposed to know that Tuan
is not supposed to get any of the money?” Appellee Le responded “Because of my money.” (RR Vol.
2, p. 42).
A distribution of some accumulated profits was made at one time to Appellee Le in the amount
of $14,000: she told Appellee Ngo that she divided those funds with Tuan Ngo. (RR Vol. 2, p. 113).
At the time of the distribution of the funds Appellant Ngo put the money down on the table to pay
Appellee Le and then she told him to give Tuan Ngo his part, and he did so. (RR Vol. 2, p. 117).
Is the evidence sufficient to show the existence of an implied agreement to pay only Appellee
Le? To put the question another way, should Appellant Ngo have known from the facts and
circumstances that only she was to be paid at the time of the final distribution of the proceeds from the
sale? Given the circumstances, the answer is “no.” Appellee Le’s real complaint is not that Appellant
22
disregarded any agreement or understanding, but rather that she and Tuan Ngo have parted ways and
she did not want to split the profit from the investment with her ex-boyfriend.
An implied agreement may arise out of the regular course of conduct between the parties.
Schuhardt Consulting Profit Sharing Plan v. Double Knobs Mt. Ranch, Inc., 2014 Tex.App. LEXIS
13417 (Tex.App.–San Antonio 2014, rev’d. in part; aff’d. as modified). There must exist a meeting of
the minds. Prime Prods, Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex.App.–Houston [1st] 2002,
pet. denied).
In this case there is insufficient evidence to support a finding that an implied agreement between
Appellee Le and Appellants existed that only she should be paid any proceeds from the investment
made by her and Tuan Ngo. She cannot hold Appellants liable on an implied agreement to pay only
her because there was no meeting of the minds that she alone would be paid. Prime Prods, Inc. There
is no basis for a finding of breach of an agreement because of the payment of the proceeds from an
investment to both investors.
Counsel for Appellee also alluded several times during the trial that there was some duty by
Appellants, either by contract or by implication, to include Appellees as owners on the chicken farms
they owned at the time of trial. (RR Vol. 2, p. 100). This argument is essentially that once someone
is partner he has a right to be a partner thereafter in any venture and to participate in other ventures of
Appellants. As a matter of law that claim is not valid. Rankin v. Naftalis, 557 S.W.3d 940 (Tex.1977);
Greenberg Traurig, LLP v. National American Insurance Company, 448 S.W.3d 115
(Tex.App.–Houston [14th] 2014). Appellants agreed to participate with Appellees in one venture, a
chicken farm, and when that farm was sold no continuing business relationship continued. (RR Vol.
2, p. 100). Further, there is no competent evidence of the value of Appellants’ farms or any other basis
23
upon which the jury could have calculated Appellee’s damages based on that argument.
Point of Error No. 5 Restated: THE TRIAL COURT ERRED IN AWARDING JUDGMENT FOR
DAMAGES FOR BOTH BREACH OF A PARTNERSHIP AGREEMENT AND BREACH OF
CONTRACT WHEN BOTH CAUSES OF ACTION AROSE FROM THE SAME FACTS OR
EVENTS.
Texas long ago adopted what is called the “one recovery rule.” Southern County Mutual
Insurance Company v. First Bank & Trust, 750 S.W.2d 170 (Tex. 1988); Stewart Title Guaranty Co.
v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991); Crown Life Ins. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000).
This means that generally when a party recovers damages under two different theories or causes of
action that arise from the same operative facts he must elect one but cannot recover on both.
That rule was illustrated in a partnership case, Murphy v. Seabarge, Ltd., 868 S.W.2d 929
(Tex.App.–Houston [14th] 1994, aff’d.). One party claimed that the other had paid himself more than
their partnership agreement allowed. Those payments became an issue, because unlike this case, the
partnership was unable to service its debt and funds were not available to pay a management fee. The
jury found that the payments made were self-dealing, a breach of the partnership agreement and a
breach of fiduciary duty. The court noted there was no distinction between the acts that constituted self-
dealing, a breach of fiduciary duty, or violations of the Partnership Agreement: all were based on the
same actions. The court held that the plaintiff was only entitled to recover one compensation for its loss
as the result of the conduct of the defendant, and that since the jury questions inquired about damages
for the same conduct the judgment resulted in an impermissible double recovery. Murphy p. 937.
Appellants recognize that in some situations, when there is an additional basis for damages
together with actual damages, that a party may recover additional damages arising from the same fact
24
situation. For example, one could be found to have committed a violation of a common law duty and
also to have violated the Texas Deceptive Trade Practices Act, TEXAS BUSINESS AND COMMERCE CODE
§ 17.41, et. seq. In that case it is possible to recover additional damages allowed by statute. But in the
case before the court, the jury did not award any exemplary damages and only awarded actual damages.
Murphy is on all fours with the case before this court. In this case there is only one contract,
according to Appellees, which they say was an agreement to form a partnership. The acts they complain
of are the payment by Appellees to themselves of compensation for their management and labor,
withholding funds to pay taxes, and for Appellee Le, a complaint that someone else received funds she
was entitled to solely receive. All of these complaints arise out of the same event, i.e. the distribution
of funds by Appellees. And the “contract” is the “partnership agreement.” Therefore, awarding
damages both for “breach of contract” and for “breach of a partnership agreement” is a double recovery
of damages for the same conduct.
Point of Error No. 6 Restated: THE EVIDENCE IS INSUFFICIENT TO ESTABLISH ANY
LIABILITY BY APPELLEE DUNG VU BECAUSE THERE IS INSUFFICIENT EVIDENCE THAT
SHE ENGAGED IN ANY CONDUCT OF WHICH APPELLEES COMPLAIN.
All the evidence shows regarding Appellant Vu is that she is married to Appellant Nguyen, she
provided financial support to the chicken farm in Georgia with funds she earned in her business, and
she was a signatory on the title documents for the farms and on the loan documents with the lenders.
There is no evidence that she calculated the amounts that Appellants Nguyen and Ngo decided to
withhold from the final division of proceeds and there is no evidence that she made the decision to
withhold funds from the distribution to the investors.
25
A wife is not automatically liable for any obligations created by her spouse. TEXAS FAMILY
CODE § 3.201(a). A spouse is only liable for the acts of her spouse if the spouse acts as her agent or
if the debt is created for “necessaries.” There is no evidence that Appellees provided Appellant Vu’s
family “necessaries.” There is no evidence that Appellant Nguyen was acting as an agent for Appellant
Vu.
TEXAS FAMILY CODE § 3.201(c) explicitly states that a spouse is not automatically considered
an agent because parties are married. Some evidence of an agency relationship is required. Appellee
Vu signed the title documents and loan papers herself. There is no evidence that her spouse acted for
her under a power of attorney or delegation of authority. There is no basis for an award of damages
against Appellant Vu.
26
CONCLUSION
Appellants request that this court reverse the judgment of the trial court and render judgment
that Appellees take nothing by way of this suit.
If this court rules that the evidence is insufficient to show the parties were partners it should
render judgment that no partnership existed between the parties and reverse the award of damages for
breach of partnership against Appellants.
If the court affirms the judgment of the trial court that the parties were partners, the award of
damages for breach of partnership should be reversed as there is legally insufficient evidence of such
a breach.
The court should reverse the award of damages for breach of contract for the reason that the
evidence of breach is legally insufficient to support that award.
If the court affirms the judgment of the trial court that the parties were partners and that both
a breach of the partnership agreement and a breach of contract occurred, the court should require
Appellees to elect which damages they choose to retain, as the award of damages on both claims is an
impermissible double recovery of damages arising from the same facts.
The court should reverse any judgment against Appellant Dung Vu as the evidence is
insufficient that she committed any act or omission which Appellees claim was a cause of injury to
them resulting in damages.
The court should award all costs of this appeal to Appellants.
27
Respectfully submitted,
Tom Rorie
State Bar No. 17238000
210 North Street
Nacogdoches, TX 75961
(936) 559-1188
FAX (936) 559-0099
ATTORNEY FOR APPELLANTS
CERTIFICATE OF COMPLIANCE
Pursuant to TEXAS RULE OF APPELLATE PROCEDURE 9.4(i)(3), I hereby certify that this brief
contains 10,743 words (excluding any caption, identity of parties and counsel, statement regarding oral
argument, table of contents, index of authorities, statement of the case, statement of issues presented,
statement of jurisdiction, statement of procedural history, signature, proof of service, certification,
certificate of compliance, and appendix). This is a computer-generated document created in
WordPerfect, using 12-point typeface for all text. In making this certificate of compliance, I am relying
on the word count provided by the software used to prepare the document.
Tom Rorie
CERTIFICATE OF SERVICE
I certify that a copy of the foregoing document has been served on counsel for Appellees this
th
29 day of July, 2015, by e-file service.
Tom Rorie
28
NO. 1-15-00352-CV
______________________________
IN THE
FIRST COURT OF APPEALS
AT HOUSTON, TEXAS
______________________________
PHAP V. NGUYEN, ANDY NGO, and DUNG T. VU,
Appellants
VS.
MANH HOANG and DUNG LE,
Appellees
______________________________
Appealed from the 55th Judicial District Court of
Harris County, Texas
______________________________
APPENDIX TO APPELLANTS’ BRIEF
______________________________
TOM RORIE
State Bar No. 17238000
210 North Street
Nacogdoches, TX 75961
(936) 559-1188
FAX (936) 559-0099
ATTORNEY FOR APPELLANTS
ORAL ARGUMENT REQUESTED
APPENDIX
No. Document
1 Plaintiffs’ Original Petition
2 Charge of the Court
3 Final Judgment
4 Motion for Judgment Notwithstanding Verdict, Motion to Disregard Jury Findings,
and Objections to Proposed Final Judgment
5 Motion for New Trial
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\nctrnP-fu*
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.. Deprcciation and Arnodization
(lncluding Informatlon on Listed property)
ffim#-fslff*'Y 201 0
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ldcriltyl4g r*nnbtr
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2 500 000
3
4 2,000, 000:
5
6
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BAA
Form 4562 (2010)
ROBArr.f B. ITHAM & ASSOC-ATES, P.C.
Attorneys and. Cclunrclors at La'iv
9999 Bellalrc Blvd,, Suire # I122
Tel: (?f 3) 7'16-33J3
Hous(orr, 'l'exas 71036
Irax: (? l3) '176-3335
rsbcd$sD@pdsdd
Junc 30,201 1
YIA CERTIFIED MAIL, Rzur ?OO4 25IO O(}OO 6496 I4SIAND REGULAR MAIL
Phat V. Nguycn
Dung T. Vu
l8722Timber'I'wisr
Humblg Tsxas 77346
Rer our clients: Manh lloang & Dung l,e
Dear Mr. Nguycn and Ms, Vu:
Plcaso be advised that I am rcpresenting the above-mentioned clicnts
-,- regarding
--o'--.----Q thoir partnerships in your
farms in Texas and Georgia
I have roviewed your profit.sharing calculations (see
attached Bxhibit A) and apparontly, per my clients, it
does not rcflect the true division oi in"ome
fl-tl':^iiT", ploase accept this lctter a,s a formal denrand for additional $250,000 per
$250,000.00 for Ms. Le.
Mr. I{oang and
If I do not recoive tho said $500,000.00 for my
olicnts as.of July 31, 2011, I will file a lawsuit against you
and will ask for attimey fees.
Ifyou have any questions, please contact nre at the addross
listed above,
Sinccrelv ,./
./// ,/ /7r//
/^'4/{*l-...--
Robert Pham
Attorney at Law
ri
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+
Ir.
JI
I q!'iqu
r
W Postag€
I A_[r_!u
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i.**ffi;tr+,ffi:r s 0 /i?i*;
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fuof^kt (WW);D-r.ilqE
f #,x,r, jl:]rt{fivby=d,+
RO,BN T B. ]3HAM & ASSOC I,'TES, P-C.
A;ttoflreys And Counselore at La\y
99V) Dellafue Blvd., Sufte #l I22
Houston, Tcxas ?7036 Tcl: (713)77G3333
Fax: (713) 776.3335
rclcqdiam@pds,lcl
Jme 30,201I
WA CEITTIFIED MAIL, RRR 7OO4 2510 OOOO 6496 94?4 AND REGULAI{ MAIL
Andy Ngo
I8722 Timber Trvist
Humble, iexa,s 7ii4d
Re: Our Clicnts: Manh Hoang & Dung Le
Dear Mr. Ngo;
Pleasc be advised that I anr ropresenting
the above-mentioned clients regarding their partnerships
fanns in T'exas and Georgia. in your
I have rovierued vour pro.fit.sharing calculations
(see attaohed Exhibit A) and apparontly, per
docs not reflect t-hc true division nly clients, it
oiin*nrc
At this time. olease a&ept this retter as a rvrrrrqr
$250,000.00'for Ms. Lc. ' fo,,nar uvr'rurru tul iarlditio.ar $2i0,000 per Mr, Hoang
domand for
and
If I do not receive the said $500,000.00 for
my clicnts as of July 3r,201r, t witt file a lawsuit against you
and rvill ask for attomcy fees.
Sirrcerolv
Robcrt Phanr
"W
If yo, havc any questiorrs, prease contacrr
rne at tho address listed atrovo.
Attor:rey at Law
:t.
I.
o
F @ffiE c IA
I
I
rfrrix
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c^#*H[jiffiit[H r,2\ po$Jn6Jt{
(#H*RT.tT,ff 3 I tfltt
lbld poet60o
& F€€s
CAUSE NO. 2A11.72"1L9
RECE],I]T NO. 1-3801. 0.00 cl-v
09-28-2012 - TR#72830822-
PIJAINTIFF: HOANG, MANTI
In The ssLh
.rudlcial oistrict Court
DEFENDANT: NGUYEN' PHAP V
of Harris County' T'cxas
55TTI D:I:STRICT COURT
HousLon' TX
CITATION
THE STATE OI.' TEXAS
County of Harris
TOr NGUYEN, PLIAP V
832 COUNTY ROAD 4849 TIMPSON \X'159'15
ALLaclred ,i.s a copy of pLATNTIFF'S-QBI-C:IIA!-!E'IM9N
,I.his lnstrunent was fi.l.ed on tlre 28th-d4y of ,9ept-elrnber, 201'2, in Lhe above clted cause nunilcer
you'
and. cour:h. The insLrument, abtached describes t-he claint against'
YOU HAVE BEEN SUED, You may employ an attorney' If you ol: your aLtol:ney do noL' fite a
writ-Len ansvier wil.h t-he DisLricL clerk riho,issued this citati,on by 10r00 a'm' and peL-'i'tion'
on t-he Monday
next foLlowiDg i-he explration of 20 days after you were served this cibaLion
a defaulL junly a very lirnited e{te,nt. Slhe
e
joined the other defendants in applying for and securing finiencinlg to purchase bpth of tde
chickrn
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farms involved in this case. She executed clocuments to sell each of the two farms. She li.{red on the
farm in Georgia, traveling back anLd .forth to New Orleans to eiarn inco.me to support her fan{il'y. None
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of those acts form the basis for arLy of the plaintiffs' breach of contra.ct claims; in fact, th{ plaintilfs
benefitted from those acts.
op
There is no evidence that Dung Vu made any decisic,n as to omployment of and phyment to
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any of the participants nor made decisions regarding the nLanagernent of the faims. The! evidence
ial
shows, and is uncontradicted, that the decision to charge connpensation for services (20% of profits
fic
from the farm sales) was made by Andy Ngo; that the calculaticns of capitaX gains rfa;538
S.W.2d 80 (Tex.1976).
Since Plaintiffs failed to prove the existence of any express ragreement that lDefi
ts Ngo
and Nguyen would work and provi288 S.W.3d 886 (Tex.2009).
k
Defendants conceded that trial that the plaintiffs contributed money to
the busin, ilnd each
ler
had a right to share in the profits of the business. Howe.ver, those factons
alone do n support a
f,rnding that apartnership existed.. .And there is no evidence of any
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of the other factors.
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There is no evidence that any of the parties ever refened to each other
as partners. T'he court
in Ingram noted that the best evidence of the intent of the parlies to be partners
ist
is found ir u'hat they
wrote, both to each other and to others, how they held themserlves out to others,
etc. In thi case there
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is no evidence that any of the parties ever held themselves o,ut to third parties
as pantnel erxecuted
any document as a"partner" witlL each other, or referred to themselves as partners
nie
in any
or conespondence. To the contrary, the evidence shows thaLt the Defendants contracted
ith many
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third parties while representing they were the sole owners, r,vith the knowledge of the pl
ntiffs.
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There is likewise no eviclence that the plaintiffs either parl"icipated in or had
t right to
participate in control of the business. 'Ihe court in Ingramnotedireverul *uy,
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in which t right to
control would be manifested. It defines "control" as the riglrt to rnake executive deci
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Some
examples of control would be:
of
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1. Access to the books and records of the business: t"here is no evirjence that the Iaintiffb
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ever had access to the books and records. The court in .[n|yam sraid party
rrot ha-ye
control ifhe does not have access to the business, books.
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2. The right to write checks onL the lbusiness checking accourrt: ther:e is that the
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plaintiffs ever wrote a check over aperiod ofseveral years.
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3. The right to make decisiions regarding the major property of the business, i.e.,
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chicken
houses. The decisions to purchase land, hire a contrarctor, culs into a grower,s c , selll
fic
each of the chicken farms, etc. were made solely by the defendants.
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4. The right to hire and fire employr:es. The eviderLce shows no right to hire anc
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r,e by the
plaintiffs, and even shows that defendants Ngo and Nguyen..flrred,;plaintiff Hoar flom his
job working in the chicken houses.
Likewise, there is no evidence of any agreement to share losses or assume ljiabilir to third
parties for liabilities of the business. The only evidence in this carse regarding
sharing of
losses is the testimony tUanft lloang that he "would have shared 1n any loises.,, But
_bV is nLo
evidence that he ever offered to do so, was expected to do so, or that:he ever became
co Itv
bound in any way to pay any debt to a third party.
Ingram says no one factor is determinative in the existerrce, of a partnership,
bu given the
evidence that there was no evidence of intent to be partne:rsr, no j oint management
and c ntrol, and
no agreement or obligation by the plaintiff's to assume lossers, the
evidenceis simply ins fficient as
a matter of law to support the jury answer to
Question Nc,. 7, and the court should di regard the
answer and enter judgment that fte plaintiffs take nothing a.s pafl;ners.
6.
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THERE IS NO EVIDIi,NCE OF'AN]' DAMTAGES THAT
ler
RESULTED FROM A BREACH OF A PAR:TNERSHIP
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AGRE,EMENT BETWEEN'THE PA,R'TIES
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It is unclear whether the darnages found by the jury in resp,onse to ()uestion lrlo. 9
the same as those found by the jury in their answer to
[nd l5 are
Questiott l,lo, 3 and 6. What is c(ear is that
ist
Plaintiffs only evidence of any damages arising from any hreach of the alleged partnersh]ip
;",- fij
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the 20%o of net profits deducted ernd (2) the amounts withhetd to pay federaiinct*.
tu*"[.
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In order for the plaintiffs tto recover for breach of a duty as a partner they have to uiro*
,o.n"
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damages that resulted from the breach of the partnership agreement. PlairLtiffs
of the value of a business enterprise as a continuing business. They could not because
offe:red nd evidence
thb bu;in;s;
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itself, a chicken farm, had been sold. No evidence exists o:f any goodwill. There is no p[rtn.trfrjo
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asset that was lost: all the assets were sold and the proceedls distrjbuted
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The plaintiffs argued attrialthat the defendants had s,cme ilut'y to continue to stay
ih business
of
with them, to allow the plaintiffs to participate in any businesrs venture they might enter inq[
after the
e
sale of the chicken farm. There is no such duty as a matter of'law. ,Sa,linas v.
Riyan,q+S S.W.ZJ Zg6
ffic
(Tex.1997)
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Plaintiffs offered the amounts of capital gain and or:d.inary income taxes with no Iculation
of damages from any breach of a pertnership agreement upo,n wlichL the jury could find
amount
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of damages other than the porlion of net profits paid to the defendants and capital gains withheld.
Since there is no distinction between a breach of an "agreeme:nt" between the partie
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and the
purported "partnership" between rthe parties, there is no legal basis for an avyard of
ial
damages
for dissolution of the business or for any lost value of the businesrs.
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The court should disregard the jury answers to
of
Questions 9)ald 15 and render ju
matter of law that the plaintiffs take nothing on their claim fbr darnages for breach of a
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agreement.
WHEREFORE, DEFENDANTS request that the Mtotion
be GRANTED in all
that a judgment be rendered that plaintiffs take nothing
frorm their suit.
R.espect ftrlly submitted,
k
ler
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Stale Bar lrtro. 17238000
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210 North Street
ist
NaoogdochLes,TX 75961
(e36) sse-1 1s8
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FAX (936) ss9-00e9
nie
ATTORN]DY F'OR DEF'END
Da
is
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CERTIFICATE OF SEEIreE
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I certify thatacopy oflhe foregoing document has been served
on opposing co this 23'd
of
day of January,2015,by facsimile and email. to-wit:
e
ffic
Mr. Scott K. Bui
Bui, Pham & Nhan, PLLC
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FAX (713) 783-0787
email : sbui@buinhanlaw. com
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of
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2/25/2015 2:25:01 PM
Chris Daniel - District Clerk Harris County
Envelope No. 4280986
By: Deandra Mosley
Filed: 2/25/2015 2:25:01 PM
NO. 201t-72719
MANH HOANG and $ IN THE DISTRICT COURT OF
DLING LE
VS. $ HARzuS COUNTY, TEXAS
PHAP V. NGUYEN,
ANDY NGO and
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ler
DUNG T. VU $ 55'H JUUCIAL DISTRICT
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MOTION FOR NEW TRIAL
ist
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TO THE HONORABLE COURT:
nie
PHAP V. NGUYEN, ANDY NGO, and DTING T. VU, Defendants, move this Court to set
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aside the judgment rendered on January 27,2015, in the above styled and numbered case and to
is
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order a new trial, and in support of this motion show as follows:
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L
of
e
INSUFFICIENT EVIDENCE OF ANY BREACH OF
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AGREEMENT BY DLING T. VU
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In order for the jury to find that defendant Dung T. Vu breached any contract with the
y
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plaintiffs there must exist proof of a valid contract between them, a breach by her of some term or
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provision of that agreement, some evidence of injury, and proof of damages arising from that injury.
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Southwell v. University of the Incarnate Word,974 5.W.2d351,354-355 (Tex.App.-San Antonio
of
998, pet.den.); Mead v. Johnson Group, 5 S.W.2d 685, 687 (Tex. 1 98 1).
Un
1 6 1
The evidence in this case shows Dung T. Vu's involvement to only a very limited extent.
She joined the other defendants in applying for and securing financing to purchase both of the
Page 1
Hoang vs. Nguyen
Mtn New Trial
chicken farms involved in this case. She executed documents to sell each of the two farms. She
lived on the farm in Georgia, traveling back and forth to New Orleans to eam income to support her
family. None of those acts form the basis for any of the plaintiffs' breach of contract claims; in fact,
the plaintiffs benefitted from those acts.
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There is insufficient evidence that Dung T. Vu made any decision as to employment of and
ler
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payment to any of the participants nor made decisions regarding the management of the farms. The
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evidence shows, and is uncontradicted, that the decision to charge compensation for services (20%
ist
of profits from the farm sales) was made by Andy Ngo; that the calculations of capital gains taxes
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and withholding of them from a distribution to the partners was made by Andy Ngo; that the
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calculations of depreciation and recapture of depreciation was made by Andy Ngo; that the decision
is
to defer payment of capital gains taxes was made by Andy Ngo, with the assent of Phap Nguyen; the
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calculation of the amounts due each participant was made by Andy Ngo; and the distribution of
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of
funds to the participants was made by AndyNgo. Therefore, there is insuffrcient evidence thatany
e
ffic
act or omission by Dung T. Vu could constitute a breach of any agreement.
O
L.
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INSUFFICIENT EVIDENCE TO SHOW THAT DUNG T. VU
C
IS LIABLE FOR ACTS OR OMISSIONS OF
OTHER DEFENDANTS
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A wife is not automatically liable for obligations incurred by her husband. Tnxes Fervnry
of
Un
CooB $ 3.201(a) provides that a spouse is liable for the acts of his or her spouse only if the spouse
acts as the agent for the other or the debt is for "necessaries." There is insufficient evidence that the
debt claimed by the plaintiffs was created because "necessaries" were provided to the family. There
Page2
Hoang vs. Nguyen
Mtn New Trial
is insufficient evidence that defendant Phap V. Nguyen was acting as an agent for Dung T. Vu.
The Texes Fevnv Conn $ 3.201(c) explicitly states that a spouse is not automatically
considered an agent because of the mariage relationship. Therefore, some evidence of an agency
agreement was required: there is none in this case. She executed any necessary legal documents to
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buy and sell the chicken farms herself. The trial record is devoid of any evidence that she herself
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committed any act or omission that caused injury to the plaintiffs.
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Thus, there is insufficient evidence to support the answer of the jury to Questions No. 2 and
ist
No. 5 that Dung T. Vu breached a contract or agreement with the plaintiffs.
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nie
3.
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INSUFFICIENT EVIDENCE OF ANY BREACH OF
AGREEMENT BY ANDY NGO BY PAYMENT
is
FOR SERVICES RENDERED
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There is no evidence that the parties ever agreed that defendant Andy Ngo would be or would
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of
not be compensated for his assumption of liability, loss of eamings, fuIl-time devotion to the chicken
e
ffic
fatms, labor, and services. Plaintiffs assume there was an agreement not to be paid for those services
O
due to that absence. But no evidence exists that the parties agreed that Ngo would not be paid for
y
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his assumption of debt and liability, time, and labor. There is no evidence that Ngo ever represented
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at any time that he would work for free. Therefore, the evidence is insufficient to show any breach
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of an agreement by his payment to himself for his services.
of
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There is no assumption that a party who provides valuable services will work without
compensation. In fact, the assumption is that unless there is an express agreement for compensation
that valuable services will be compensated. Grynberg v. Gwaltney, 1983 Tex. App. LEXIS 4467
Page 3
Hoang vs. Nguyen
Mtn New Trial
(Tex.App.-Ft. Worth 1983, no writ hist.); Black Lake Pipe Line Company v. Union Construction,
538 S.W.2d 80 (Tex. 1976).
Plaintiffs failed to prove by sufficient evidence the existence of any agreement that Defendant
Ngo would work and provide services without compensation. Such an agreement cannot be implied.
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There is insufficient evidence that his payment to himself for services rendered is a breach of any
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contract with the plaintiffs.
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4.
ist
INSUFFICIENT EVIDENCE OF ANY BREACH OF
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AGREEMENT BY ANDY NGO BY WITHHOLDING
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FLINDS FOR PAYMENT OF TAXES
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A tax liability for either capital gains or ordinary income is created by the laws of the United
is
States of America. There is no evidence that any of the defendants ever represented to any of the
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participants that any profit they realized would be tax-free. As a matter of law it cannot be a breach
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of
of a contract to insist on complying with the laws of the United States of America.
e
ffic
There is insuffrcient evidence that the actions of defendant Ngo in withholding from any
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distribution of profits the amounts of expected federal taxes breaches any express or implied
y
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agreement between the parties.
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5.
fic
INSUFFICIENT EVIDENCE OF ANY BREACH OF
of
AGREEMENT BY ANDY NGO BY PAYING PART
Un
OF PROFITS TO TIEN NGO
Dung Le asserted that the defendants breached their contract with her by paying a portion of
the distribution of profits from the sale of the chicken farm(s) to Tien Ngo, her former boyfriend (and
Page 4
Hoang vs. Nguyen
Mtn New Triai
brother of Andy Ngo). The evidence is insufficient to show that defendant Atrdy Ngo ever agreed,
either expressly or by implication, to pay her and her alone a portion of the profits from the sale of
the chicken farm(s).
The evidence at trial is uncontested that the initial conversations regarding investing were
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between Andy Ngo and Tien Ngo; that Dung Le and Andy Ngo never had any discussions at all;thx
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Dung Le and TienNgo jointly made the investment; that aprior distribution of profits was divided
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between Dung Le and Tien Ngo; and that Tien Ngo's chicken farm paycheck ftom working on the
ist
chicken farm was sent to Dung Le.
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There is insufficient evidence from which the jury could have found that dividing the funds
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distributed between Dung Le and Tien Ngo was a breach of any agreement.
is
6.
hr
INSUFFICIENT EVIDENCE OF ANY BREACH OF
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AGREEMENT BY PHAP V. NGUYEN BY PAYMENT
of
FOR SERVICES RENDERED
e
ffic
There is no evidence that the parties ever agreed that defendant Phap V. Nguyen would be
O
or would not be compensated for his assumption of liability, loss of eamings, full-time devotion to
y
op
the chicken farms, labor, and services. Plaintiffs assume there was an agreement not to be paid for
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those services due to that absence. But no evidence exists that the parties agreed that Nguyen would
ial
fic
not be paid for his assumption of debt and liability, time, and labor. There is no evidence that
of
Nguyen ever represented at any time that he would work for free. Therefore, the evidence is
Un
insufficient to show any breach of an agreement by his payment to himself for his services.
There is no assumption that a party who provides valuable services will work without
Page 5
Hoang vs. Nguyen
Mtn New Trial
compensation. In fact, the assumption is that unless there is an express agreement for compensation
that valuable services will be compensated. Grynberg v. Gwaltney, 1983 Tex. App. LEXIS 4467
(Tex.App.-Ft. Worth 1983, no writ hist.); Black Lake Pipe Line Company v. (Jnion Construction,
538 S.W.2d 80 (Tex. 1916).
k
Plaintiffs failedto prove by suffrcient evidencethe existence ofany agreementthatDefendant
ler
Nguyen would work and provide services without compensation. Such an agreement cannot be
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implied. There is insuffrcient evidence thathis paymentto himself for services rendered is abreach
ist
of any contract with the plaintiffs.
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nie
7.
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INSUFFICIENT EVIDENCE OF ANY BREACH OF
AGREEMENT BY PHAP V. NGUYEN BY WITHHOLDING
is
FUNDS FOR PAYMENT OF TAXES
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A tax liability for either capital gains or ordinary income is created by the laws of the United
C
of
States of America. There is no evidence that any of the defendants ever represented to any of the
e
ffic
participants that any profit they realized would be tax-free. As a matter of law it cannot be a breach
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of a contract to insist on complying with the laws of the United States of America.
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There is insufficient evidence that the actions of defendant Nguyen in withholding from any
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distribution of profits the amounts of expected federal taxes breaches any express or implied
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agreement between the parties.
of
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Page 6
Hoang vs. Nguyen
Mtn New Trial
8.
INSUFFICIENT EVIDENCE OF ANY BREACH OF
AGREEMENT BY PHAP V. NGUYEN BY PAYING
PART OF PROFITS TO TIEN NGO
Dung Le asserled that the defendants breached their contract with her by paying a portion of
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the distribution ofprofits from the sale ofthe chicken farm(s) to TienNgo, her former boyfriend (and
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brother of Andy Ngo). The evidence is insufficient to show that defendant Phap V. Nguyen ever
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agreed, either expressly or by implication, to pay her and her alone a portion of the profits from the
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sale of the chicken farm(s).
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The evidence at trial is uncontested that the initial conversations regarding investing were
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between Andy Ngo and Tien Ngo; that Dung Le and Phap V. Nguyen never had any discussion at
is
aII;that Dung Le and Tien Ngo jointly made the investment; that a prior distribution of profits was
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divided between Dung Le and TienNgo; and that TienNgo's chicken farm paycheck from working
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on the chicken farm was sent to Dung Le.
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ffic
There is insuffrcient evidence from which the jury could have found that dividing the funds
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distributed between Dung Le and Tien Ngo was a breach of any agreement.
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9.
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INSUFFICIENT EVIDENCE TO ESTABLISH
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EXISTENCE OF A PARTNERSHIP
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BETWEEN THE PARTIES
of
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There is insufficient evidence to support the jury's answer to Question No. 8 finding the
existence of a pattnership. The evidence offered by the plaintiffs to support a claim of a partnership
is insufficient as a matter of law to support a partnership finding.
Page 7
Hoang vs. Nguyen
Mtn New Trial
The elements to show existence of a partnership are:
1. The right to receive a share of profits of the business;
2. Expression of intent to be partners;
3. Participation or right to participate in control of the business;
4.
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Sharing or agreeing to share either losses of the business or liability to third parties;
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and
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5. Contributing or agreeing to contribute money or property to the business.
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Ingram v. Deere,288 S.W.3d 886 (Tex. 2009).
ist
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Defendants conceded attrial that the plaintiffs contributed money to the business and each
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had a right to share in the profits of the business. However, those factors alone do not support a
finding that apartnership existed.
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There is no evidence that any of the parties ever referred to each other as partners. The court
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rn Ingram noted that the best evidence of the intent of the parties to be partners is found in what they
of
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wtote, both to each other and to others, how they held themselves out to others, etc. In this case
ffic
there is no evidence that any of the parties ever held themselves out to third parlies as partners,
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executed any document as a"partner," or referred to themselves as partners in any document or
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correspondence. To the contrary, the evidence shows that the defendants contracted with many third
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parties while representing they were the sole owners, with the knowledge of the plaintiffs.
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There is likewise no evidence that the plaintiffs either participated in or had the right to
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participate in control of the business. The most important factors in determining the existence of a
partnership are the sharing ofprofits and the control of the business. Big Easy Cajun Corp. v. Dallas
Galleria, Ltd.,293 S.W.3d 345 (Tex.App.-Dallas 2009, no writ hist.). The court in Ingram noted
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several ways in which that right to control would be manifested. It defines "control" as the right to
make executive decisions. Some examples of control would be:
1. Access to the books and records of the business: there is no evidence that the
plaintiffs ever had access to the books and records. The court in Ingram said party
does not have control ifhe does not have access to the business' books.
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2. The right to write checks on the business checking account: there is no evidence that
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the plaintiffs ever wrote a check over aperiod ofseveral years.
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J. The right to make decisions regarding the major property of the business, i.e. the
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chicken houses. The decisions to purchase land, hire a contractor, cuts into a
grower's contract, sell each of the chicken farms, etc., were made solely by the
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defendants.
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4. The right to hire and fire employees. The evidence shows no right to hire and fire by
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the plaintiffs, and even shows that defendants Ngo and Nguyen "fired" plaintiff
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Hoang from his job working in the chicken houses.
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There is essentially no evidence of any agreement to share losses or assume liability to third
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parties for liabilities of the business. The only evidence in this case regarding sharing of losses is
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the testimony by Manh Hoang that he "would have shared in any losses." But there is no evidence
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that he ever offered to do so, was expected to do so, or that he ever became contractually bound in
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any way to pay any debt to a third party.
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No one factor is determinative in the existence of a partnership, but given the fact that there
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was no evidence of intent to be partners, no joint management and control, and no agreement or
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obligation by the plaintiffs to assume losses, the evidence is simply insufficient as a matter of law
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to support the jury answer to Question No. 7.
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10.
INSUFFICIENT EVIDENCE OF DAMAGES
FOR BREACH OF PARTNERSHIP AGREEMENT
Plaintiffs' only evidence of any damages arising from any breach of the alleged partnership
was (1) the2}Yoofnetprofits deducted andpaidto defendantsNgo andNguyen, and (2)the amounts
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withheld to pay federal income taxes. That is not proof of damages for a breach of a partnership
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agreement.
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In order for the plaintiffs to recover for breach of a duty as a partner they have to show some
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damages that resulted from the breach of the partnership agreement. Plaintiffs offered no evidence
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of the value of a business enterprise as a continuing business. They could not because the business
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itself, a chicken farm, had been sold. Plaintiffs offered no evidence of any goodwill or value of the
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alleged partnership as an entity. Plaintiffs offered no evidence that partnership assets were lost: all
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the assets were sold and the proceeds distributed.
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Defendants had no duty to continue to stay in business with Plaintiffs or to allow the
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plaintiffs to participate in any business venture they might enter into after the sale of the chicken
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farm. There is no such duty as a matter of law. Salinas v. Rafati,948 S.W.2d 286 (Tex. 1997).
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Plaintiffs offered no calculation of damages from any breach of a partnership agreement upon
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which the jury could find any amount of damages. There is no distinction between the damages the
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jury found for breach of an agreement between the parties and the evidence of damages for breach
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of partnership. The evidence is insufficient to support any award of damages for breach of
partnership.
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11.
THE INTEREST AWARDED ON THE DAMAGE,S
FOLIND BY THE JURY IS COMPUTED INCORRECTLY
One of the primary purposes of awarding pre-judgment interest to a plaintiff who prevails
is to provide a disincentive to a defendant to delay the trial and disposition of case.
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In this case it was the plaintiffs who failed to promptly set the case for trial. In fact, on
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June 6, 2014,the Court dismissed the case for want ofprosecution. The case was reinstated by order
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dated July 1, 2014, upon motion by the plaintiffs.
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The Texas Supreme Court discussed the purpose of pre-judgment interest in Johnson &
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Higgins v. Kenneco Energy,962 S.W.2d 507 (Tex. 1996). It referred to principles of "equity" and
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mentioned providing disincentives for defendants to delay. The Court noted that normally when
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there is a "tolling agreement" that the accrual of interest is also tolled. In this case it was the
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plaintiffs who caused delay, but they seek to recover interest that accrued during the period they
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delayed. A party that causes the delay should not benefit from the accrual ofinterest; therefore,
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Defendants contend that the Court should modify the award of pre-judgment interest accordingly.
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Pre-judgment interest should be disallowed after June 6, 20l4,the date on which the Court
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dismissed the suit due to the failure of the plaintiffs to pursue it diligently. By that date the Court
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itself has sufficient evidence of a failure by the plaintiffs to timely prosecute their suit. In the
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altemative, interest from June 6, 2014,until July l,2014,should be disallowed for during thatperiod
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of time the case had been dismissed.
WHEREFORE, Defendants pray the Courl grant this Motion for New Trial and the relief
requested.
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Respectfu lly submitted,
State Bar No. 17238000
210 North Street
Nacogdoches, TX 75961
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(936) ss9-1188
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FAX (936) ss9-0099
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ATTORNEY FOR DEFENDANTS
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CERTIFICATE OF SERVICE
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certifu that a copy of the foregoing document has been served on opposing counsel this
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d2 :'day of February,2015, by facsimile and email, to-wit:
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Mr. Scott K. Bui
Bui, Pham & Nhan, PLLC
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FAX (713) 783-0787
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email : sbui@buinhanlaw.com
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of
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