Mark H. Henry M.D. v. Marcos v. Masson M.D. , 2014 Tex. App. LEXIS 12704 ( 2014 )

Opinion issued November 25, 2014
In The
Court of Appeals
For The
First District of Texas
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NO. 01-13-00898-CV
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MARK H. HENRY, M.D., Appellant
V.
MARCOS V. MASSON, M.D., Appellee
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Case No. 2003-40678
OPINION
This Court has issued two previous opinions in this case involving claims
arising out of the winding up of a medical practice. Our judgment and mandate in
the second opinion awarded appellant, Mark. H. Henry, M.D., a $50,000 judgment
against appellee, Marcos V. Masson, M.D., “plus such other further relief to which
[Henry] is entitled.” On remand, Henry sought the award of pre-judgment interest,
court costs, and a contribution judgment against Masson. The trial court denied
this relief. In four issues, Henry argues that (1) this Court’s mandate in the second
opinion does not limit the trial court from granting him relief beyond the $50,000
judgment; (2) he is entitled to a $59,500 contribution judgment against Masson,
plus pre- and post-judgment interest on that amount; (3) he is entitled to
prejudgment interest on the $50,000 judgment; and (4) he is entitled to court costs.
We affirm.
Background
Henry and Masson formed a partnership to conduct an orthopedic surgery
practice, Houston Hand and Upper Extremity L.L.P. (“Houston Hand”). In 2003,
after ongoing disputes, Masson sued Henry for, among other things, breach of
contract, and Henry filed several counterclaims. The parties agreed to wind up
Houston Hand and ultimately entered into a settlement agreement, which included
agreed-upon steps necessary to winding up Houston Hand and provided that Henry
and Masson would form new entities to continue their medical practices, Hand and
Wrist Center of Houston, P.A., and ROC Houston, P.A., respectively. Both Henry
and Masson later amended their claims to assert various breaches of the settlement
agreement. In November 2004, a jury found that both Henry and Masson had
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materially breached the settlement agreement but that Henry breached the
agreement first, which excused Masson’s material breach. The trial court
subsequently issued several summary judgment rulings and orders concerning
other claims in the case and the winding up of Houston Hand.
The trial court signed a final judgment in 2007. In this judgment, the trial
court awarded Masson $75,000 in damages on his breach of the settlement
agreement claim plus $25,000 in attorney’s fees. The judgment also included the
following two paragraphs:
[It is] ORDERED that Houston Hand and Upper Extremity Center,
L.L.P. (“Houston Hand”) is granted judgment for capital contribution
under Article 4.2 of the Agreement of Partnership of Houston Hand
for sums owed to Hand and Wrist Center of Houston, P.A. for the sum
of $148,000.00; 50% ($74,000.00) of which Mark H. Henry is
required to contribute to Houston Hand and 50% ($74,000.00) of
which Marcos V. Masson is required to contribute to Houston Hand.
It is further
ORDERED that Houston Hand is granted judgment for capital
contribution under Article 4.2 of the Agreement of Partnership of
Houston Hand for sums owed to ROC Houston, P.A. for the sum of
$29,000.00; 50% ($14,500.00) of which Mark H. Henry is required to
contribute to Houston Hand and 50% ($14,500.00) of which Marcos
V. Masson is required to contributed to Houston Hand.
In 2010, this Court issued an opinion holding that, because the parties
treated the settlement agreement as continuing after Henry’s material breach,
Masson’s material breach, which involved failing to pay Henry $150,000 after
Henry transferred title to a property to him, was not excused. See Henry v.
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Masson, 333 S.W.3d 825, 841–42 (Tex. App.—Houston [1st Dist.] 2010, no pet.)
(“Henry I”). This Court held that the portion of the judgment referencing Houston
Hand, Hand and Wrist, and ROC Houston, referenced “specific debts owed by
[Houston Hand]” and did not grant any specific relief to Henry’s and Masson’s
new practices. Id. at 847. Instead, the trial court awarded judgment to Houston
Hand, not to the new entities. Id. This Court also affirmed the $100,000 judgment
in favor of Masson relating to Henry’s breach of the settlement agreement and
remanded the case to the trial court for further proceedings. See id. at 839, 850.
On remand, Henry moved the trial court to amend its final judgment to
reflect his entitlement to a $150,000 credit for his transfer of property to Masson.
In response, Masson moved the trial court to grant him a new trial on the $150,000
credit and sever his judgment for Henry’s breach of the settlement agreement from
Henry’s claim for $150,000. The trial court granted the new trial, granted
Masson’s motion to sever, and severed Henry’s claim into a separate cause
number.
Henry then filed a petition for writ of mandamus and a direct appeal in this
Court challenging the severance order. See In re Henry, 388 S.W.3d 719, 725
(Tex. App.—Houston [1st Dist.] 2012, pet. denied) (“Henry II”). This Court noted
that, in Henry I, the panel determined that Henry was entitled to $150,000 for the
transferred property as a matter of law, and, therefore, there were no fact questions
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to consider on remand concerning Masson’s obligation to pay this amount to
Henry. Id. at 728. This Court, therefore, held that the trial court erred in granting
Masson’s motion to sever. Id. We rendered judgment that Henry was entitled to
$150,000 on his breach of the settlement agreement claim, offset by the $100,000
award to Masson on Masson’s breach of the settlement agreement claim. Id. at
729. This Court ordered the trial court to enter final judgment for Henry in the
amount of $50,000, “plus such other further relief to which he is entitled.” Id.
On remand following Henry II, Henry moved the trial court to enter
judgment against Masson in conformity with the appellate mandate. Henry argued
that the trial court should enter judgment against Masson for $50,000, plus other
relief to which Henry was entitled, specifically: (1) prejudgment interest on the
$50,000; (2) a judgment for $59,500, reflecting the net amount Masson was
required to contribute to Houston Hand pursuant to the trial court’s 2007 judgment;
(3) prejudgment interest on the $59,500; and (4) court costs. Henry, therefore,
requested that the trial court enter judgment against Masson in the amount of
$165,240, plus post-judgment interest and court costs.
In response, Masson argued that the mandate from this Court awarded Henry
$50,000 and that this was the “only relief available” to Henry. He argued that this
Court’s mandate did not specifically award prejudgment interest. Masson also
argued that Henry was not entitled to any portion of the contribution judgment
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awarded to Houston Hand in the trial court’s original 2007 judgment. He pointed
out that Houston Hand had been wound up and terminated, and thus it had no
capacity to recover a judgment, and that Henry, as a former individual partner of
Houston Hand, could not recover funds awarded to the partnership itself.
The trial court stated the following in its supplemental final judgment:
IT IS THEREFORE ORDERED, ADJUDGED, and DECREED that
Defendant, Mark H. Henry, M.D., have and recover from Plaintiff,
Marcos V. Masson, M.D., actual damages in the amount of
$50,000.00, plus postjudgment interest thereon at the rate of 7.25
percent per annum from the date of this judgment until paid.
The portion of the Final Judgment granted to Plaintiff, Marcos V.
Masson, M.D. against Defendant, Mark H. Henry, M.D., is offset
against the damages awarded to Mark H. Henry, M.D. resulting in the
net of $50,000 referenced above. The portion of the Final Judgment
where Defendant, Mark H. Henry, M.D. takes nothing for his claims
and counterclaims against Plaintiff, Marcos V. Masson, M.D., is
vacated.
The supplemental final judgment did not award prejudgment interest, a
contribution judgment, or court costs to Henry. This appeal followed.
Limitation of Henry’s Recovery to $50,000
In his first issue, Henry contends that the trial court erred in concluding that
it could not award further relief to Henry beyond the $50,000 specified in this
Court’s mandate in Henry II. Henry argues that the language of this Court’s
mandate allowed him to recover additional relief if he demonstrated that he was
entitled to such relief. We agree.
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When an appellate court reverses a trial court’s decision and remands the
case to the trial court, the trial court is authorized to “take all actions that are
necessary to give full effect to the appellate court’s judgment and mandate.”
Phillips v. Bramlett, 407 S.W.3d 229, 234 (Tex. 2013). The trial court has no
authority to take an action that is inconsistent with or “beyond the scope of that
which is necessary to give full effect to the appellate court’s judgment and
mandate.” Id.
Here, this Court’s mandate in Henry II stated: “The Court remands the case
to the trial court with instructions that it enter final judgment for [Henry] in the
amount of $50,000, plus such other further relief to which [Henry] is entitled.”
The plain language of our mandate thus required the trial court to enter final
judgment for Henry in the amount of $50,000 plus any other amounts Henry could
demonstrate his right to receive.
We sustain Henry’s first issue and now determine whether Henry
demonstrated that he is entitled to a contribution judgment, prejudgment interest,
and court costs.
Contribution Judgment
In his second issue, Henry contends that he is entitled to a contribution
judgment of $59,500 as part of the amount originally awarded to Houston Hand in
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the trial court’s 2007 judgment, plus pre- and post-judgment interest on this
amount from Masson.
In its 2007 judgment, the trial court awarded a judgment to Houston Hand,
requiring both Henry and Masson to contribute sums which were then to be used to
pay debts to Henry’s and Masson’s new entities, Hand and Wrist and ROC
Houston. Neither Henry nor Masson made the capital contributions to Houston
Hand required by the 2007 judgment, and Houston Hand was wound up and
terminated without the capital contributions having been made. Henry now
contends that, in his individual capacity, he is entitled to a portion of this unpaid
award to the terminated partnership as a contribution judgment. Masson argues
that because Houston Hand is a terminated entity, it cannot enforce the judgment in
its favor and that Henry, as a former partner in Houston Hand and a current
member in Hand and Wrist, cannot recover a portion of the award made to
Houston Hand. We agree with Masson.
A partnership, such as Houston Hand, and a professional association, such as
Hand and Wrist, are entities distinct from their partners and members. 1 See Act of
1
Because the events that form the basis of this dispute occurred before the Business
Organizations Code became effective in 2006 and the parties did not elect to be
governed by the Business Organizations Code, we cite to the relevant sections of
the Texas Revised Partnership Act, the law in effect at the time the parties’ causes
of action accrued. We note that the Business Organizations Code contains an
identical provision. See TEX. BUS. ORGS. CODE ANN. § 152.056 (Vernon 2012)
(“A partnership is an entity distinct from its partners.”).
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May 31, 1993, 73d Leg., R.S., ch. 917, § 2.01, 1993 Tex. Gen. Laws 3887, 3890
(expired Jan. 1, 2010); Act of May 28, 1969, 61st Leg., R.S., ch. 840, § 8(B)(1),
1969 Tex. Gen. Laws 2513, 2514 (expired Jan. 1, 2010) (providing, in Texas
Professional Associations Act, that articles of association may provide that
professional association “shall continue as separate entity independent of [its]
members”); see also In re Allcat Claims Serv., L.P., 356 S.W.3d 455, 464 (Tex.
2011) (stating that, in Texas Revised Partnership Act, Texas Legislature explicitly
adopted “entity theory” of partnership, which provides that partnerships are distinct
entities from partners). Furthermore, partnership property “is not property of the
partners.” See Act of May 31, 1993, 73d Leg., R.S., ch. 917, § 2.04, at 3891; see
also In re Allcat Claims Serv., 356 S.W.3d at 464 (noting that Revised Partnership
Act provides that “[a] partner is not a co-owner of partnership property”); Fleming
& Assocs., L.L.P. v. Barton, 425 S.W.3d 560, 571 (Tex. App.—Houston [14th
Dist.] 2014, pet. filed) (“Partnership property is not property of the partners. A
partner does not have an interest in partnership property.”) (internal citations
omitted).
The trial court’s 2007 judgment ordered both Henry and Masson to make
capital contributions to Houston Hand, an entity separate from both of them, and it
then wound up Houston Hand, which no longer continues as an entity. Neither
Henry nor Masson made the required capital contributions to Houston Hand prior
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to its termination. On appeal in Henry I, neither Henry nor Masson challenged the
award of capital contributions to Houston Hand, an entity that has now been
terminated and cannot enforce the judgment in its favor against either of them or in
favor of either of them. Furthermore, Houston Hand, the defunct partnership, and
Hand and Wrist, the entity created by Henry that was a third-party beneficiary of
the 2007 judgment, are both separate and distinct entities from Henry himself.
Henry, as a partner of the now-defunct Houston Hand, did not have an ownership
interest in the unpaid judgment in favor of Houston Hand, and no one is obligated
to pay him any portion of the judgment awarded specifically to Houston Hand.
We overrule Henry’s second issue.
Prejudgment Interest
In his third issue, Henry contends that he is entitled to prejudgment interest
on the $50,000 judgment.
Prejudgment interest is “compensation allowed by law as additional
damages for lost use of the money due as damages during the lapse of time
between the accrual of the claim and the date of judgment.” Johnson & Higgins of
Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998). A trial court
may award prejudgment interest based on an enabling statute or general principles
of equity. See id.; see e.g., TEX. FIN. CODE ANN. § 304.102 (Vernon 2006) (“A
judgment in a wrongful death, personal injury, or property damage case earns
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prejudgment interest.”). Awarding prejudgment interest serves two policy
purposes: encouraging settlements and discouraging delay. See Perry Roofing Co.
v. Olcott, 744 S.W.2d 929, 930 (Tex. 1988) (citing Cavnar v. Quality Control
Parking, Inc., 696 S.W.2d 549 (Tex. 1985)). When, as here, no statute controls the
award of prejudgment interest, the decision to award prejudgment interest is left to
the sound discretion of the trial court, which should rely upon equitable principles
and public policy in making its decision. Citizens Nat’l Bank v. Allen Rae Invs.,
Inc., 142 S.W.3d 459, 487 (Tex. App.—Fort Worth 2004, no pet.); Purcell Constr.,
Inc. v. Welch, 17 S.W.3d 398, 402 (Tex. App.—Houston [1st Dist.] 2000, no pet.)
(stating that we review challenge to trial court’s award of prejudgment interest
using abuse of discretion standard). A trial court abuses its discretion when it acts
without reference to any guiding rules or principles or when it clearly fails to apply
the law correctly. Purcell Constr., 17 S.W.3d at 402; see also Joe v. Two Thirty
Nine Joint Venture, 145 S.W.3d 150, 161 (Tex. 2004) (stating that trial court
abuses its discretion when it reaches decision so arbitrary and unreasonable as to
amount to clear and prejudicial error of law).
Here, “a serious and genuine dispute regarding ultimate liability” existed;
both Henry and Masson contested their own liability for breach of the settlement
agreement in good faith; and the ultimate amount of the damages award was not
determined until Henry I. See Pickens v. Alsup, 568 S.W.2d 742, 744 (Tex. Civ.
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App.—Austin 1978, writ ref’d n.r.e.) (holding that trial court properly denied
award of prejudgment interest because, under facts of case, “there remained a
serious and genuine dispute regarding ultimate liability, which was contested in
good faith by the parties, and the amount of damages could not be ascertained until
final judgment”). We cannot conclude on the basis of the record in this case that
the trial court’s decision not to award Henry prejudgment interest was so arbitrary
or unreasonable as to amount to a clear error of law. See Two Thirty Nine Joint
Venture, 145 S.W.3d at 161; see also Hoelscher v. Kilman, No. 03-04-00440-CV,
2006 WL 358238, at *6 (Tex. App.—Austin Feb. 16, 2006, no pet.) (mem. op.)
(reviewing record in breach of contract case and holding that trial court did not
abuse its discretion when it failed to award prejudgment interest); City of Port
Isabel v. Shiba, 976 S.W.2d 856, 861 (Tex. App.—Corpus Christi 1998, pet.
denied) (holding same).
We overrule Henry’s third issue.
Court Costs
Finally, in his fourth issue, Henry contends that he is entitled to court costs
as a matter of law.
Texas Rule of Civil Procedure 131 provides that “[t]he successful party to a
suit shall recover of his adversary all costs incurred therein, except where
otherwise provided.” TEX. R. CIV. P. 131. The trial court may, for good cause
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stated on the record, award costs in a manner other than what is provided for by
law or the rules of civil procedure. TEX. R. CIV. P. 141; see also Furr’s
Supermarkets, Inc. v. Bethune, 53 S.W.3d 375, 376 (Tex. 2001) (“Rule 131
requires the trial court to order that the winning party recover its costs from the
losing party, allowing a trial court to order otherwise only ‘for good cause, to be
stated on the record.’”). The trial court may state good cause in a written order or
judgment, or orally in a hearing. Marion v. Davis, 106 S.W.3d 860, 868 (Tex.
App.—Dallas 2003, pet. denied). Failure to state on the record a finding of good
cause to deviate from Rule 131 constitutes an abuse of discretion. See id. at 869;
Finlay v. Olive, 77 S.W.3d 520, 528 (Tex. App.—Houston [1st Dist.] 2002, no
pet.).
“When determining whether court costs are appropriate, a court should
consider the judgment rather than the verdict.” May v. Ticor Title Ins., 422 S.W.3d
93, 102 (Tex. App.—Houston [14th Dist.] 2014, no pet. h.). A “successful party”
is “one who obtains judgment of a competent court vindicating a civil right or
claim.” City of Houston v. Woods, 138 S.W.3d 574, 581 (Tex. App.—Houston
[14th Dist.] 2004, no pet.). We review a trial court’s decision regarding whether to
award court costs for an abuse of discretion. May, 422 S.W.3d at 102; Westergren
v. Nat’l Prop. Holdings, L.P., 409 S.W.3d 110, 140 (Tex. App.—Houston [14th
Dist.] 2013, pet. filed).
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Texas Rule of Civil Procedure 303 provides:
When a counterclaim is pleaded, the party in whose favor final
judgment is rendered shall also recover the costs, unless it be made to
appear on the trial that the counterclaim of the defendant was acquired
after the commencement of the suit, in which case, if the plaintiff
establishes a claim existing at the commencement of the suit, he shall
recover his costs.
TEX. R. CIV. P. 303. Several of our sister courts have held that when a party
alleges a counterclaim if neither party is wholly successful on its claims, it is
within the trial court’s discretion to order each party to bear its own costs. 2 See
Niemeyer v. Tana Oil & Gas Corp., 39 S.W.3d 380, 390 (Tex. App.—Austin 2001,
pet. denied); see also Bayer Corp. v. DX Terminals, Ltd., 214 S.W.3d 586, 612
(Tex. App.—Houston [14th Dist.] 2006, pet. denied) (affirming trial court’s refusal
to award court costs when both parties prevailed on their claims); Mobil Producing
Tex. & N.M., Inc. v. Cantor, 93 S.W.3d 916, 920 (Tex. App.—Corpus Christi
2002, no pet.) (holding that trial court did not abuse its discretion in taxing costs
against both sides “where neither party was wholly successful in that one expected
2
We also note that several of our sister courts have held that, when both parties
recover on their claims, the party that received the larger award is entitled to court
costs. See Chilton Ins. Co. v. Pate & Pate Enters., Inc., 930 S.W.2d 877, 895
(Tex. App.—San Antonio 1996, writ denied); see also Brender v. Sanders
Plumbing, Inc., No. 2-05-067-CV, 2006 WL 2034244, at *7 (Tex. App.—Fort
Worth July 20, 2006, pet. denied) (mem. op.) (holding same); Plaza at Turtle
Creek Ltd. v. Henry Building, Inc., No. 08-00-00416-CV, 2002 WL 59603, at *7
(Tex. App.—El Paso 2002, no pet.) (mem. op.) (holding same). We decline to
follow these cases and instead follow our sister courts that have held that if neither
party is wholly successful on its claims, the trial court does not abuse its discretion
when it fails to award court costs.
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to receive more while the other expected to pay less”); Building Concepts, Inc. v.
Duncan, 667 S.W.2d 897, 905–06 (Tex. App.—Houston [14th Dist.] 1984, writ
ref’d n.r.e.) (holding that trial court did not abuse its discretion in awarding portion
of costs to each party when both parties successfully prosecuted their claims).
Here, neither party was wholly successful on its claims for breach of the
settlement agreement. The jury found in favor of Masson on his breach of the
settlement agreement claim, awarding him a total of $100,000 in damages and
attorney’s fees, but then this Court held in Henry I that Henry was entitled, as a
matter of law, to $150,000 from Masson with respect to certain property. See
Henry I, 333 S.W.3d at 841–42. This Court, therefore, ordered the awards to be
offset against each other, resulting in a net recovery of $50,000 in favor of Henry.
See Henry II, 388 S.W.3d at 729. Masson ultimately did not recover anything on
his breach of the settlement agreement claims, while, due to the offset, Henry
recovered $100,000 less than what he originally sought. Under these facts, as
neither Henry nor Masson was entirely successful on his claims, we conclude that
the trial court did not abuse its discretion when it did not assess court costs against
either party. See Bayer Corp., 214 S.W.3d at 612; Cantor, 93 S.W.3d at 920;
Niemeyer, 39 S.W.3d at 390.
We overrule Henry’s fourth issue.
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Conclusion
We affirm the judgment of the trial court.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Sharp, and Huddle.
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