A.P. McMaster, Steve Richtman and Sun Glo Juices v. Richard Davidson and Southwest Juice Associates ( 2005 )

                                    NUMBER 13-03-533-CV

                                 COURT OF APPEALS

                     THIRTEENTH DISTRICT OF TEXAS

                         CORPUS CHRISTI B EDINBURG

A.P. MCMASTER, STEVE RITCHMAN AND

SUN GLO JUICES,                                                                          Appellants,

                                                             v.

RICHARD DAVIDSON AND

SOUTHWEST JUICES ASSOCIATES,                                            Appellees.

                     On appeal from the 93rd District Court

                                        of Hidalgo County, Texas.

                                M E M O R A N D U M   O P I N I O N

     Before Chief Justice Valdez and Justices Hinojosa and Rodriguez

      Opinion by Chief Justice Valdez  

This is an appeal from a judgment in a bench trial stemming from a business arrangement gone awry. Appellants, A. P. McMaster and Steve Richtman, sued appellees, Richard Davidson and Southwest Juice Associates, seeking (1) a declaration that a partnership existed among the parties, (2) unpaid profit disbursements from the partnership, and (3) unpaid commissions owed Richtman for his work as a broker for Southwest.  Appellees countersued for (1) damages based on alleged non-compete violations and (2) lost profits from a terminated contract.

The trial court entered final judgment holding that (1) McMaster and Richtman take nothing by their causes of action, (2) no partnership existed among the parties, and (3) Richtman owed appellees actual damages in the amount of $50,000, plus post judgment interest at the rate of 10% annually.  No findings of fact and conclusions of law were requested or appear in the final judgment.

Appellants contest the judgment and claim the court erred (1) in finding no partnership existed, because there was sufficient evidence to show that it did exist, (2) in awarding appellees $50,000, because there was no evidence or insufficient evidence to show liability or arrive at that amount, and (3) in denying Richtman his brokerage commissions, because their unpaid status was uncontested.  We affirm the judgment of the trial court.

I.  Facts and Procedural History

A.  Parties to the Suit

Davidson owns Southwest Juice Associates (d/b/a Southwest Associates, hereinafter ASouthwest@), a business operating in Hidalgo County, Texas.  McMaster is an employee of Southwest.  Richtman is a juice broker in California operating under the name R&H Marketing.  R&H Marketing had a brokerage contract with Southwest to sell its juice to customers on the west coast.  McMaster and Richtman also own a separate California corporation called Sun Glo Juices, Inc. (ASun GloBCA@).  Sun GloBCA leased a 50,000 gallon juice tank at a Sunkist facility in California.  Each month Sunkist billed Sun GloBCA for use of its tank, and Sun GloBCA forwarded the bill to Southwest for payment.  In the summer of 2001, the parties discussed selling Davidson a one-third interest in Sun GloBCA, but Davidson recommended setting up a limited liability corporation instead.  Davidson had an attorney draft the paperwork and called it McRich Sun Glo, LLC. Although the corporation was chartered, it remained inactive, doing no business. 

B.  Sun Glo Operation

Southwest began shipping Mexican orange juice to a Sunkist facility in California for blending with other juices.  This operation, though separate from the California corporation, was also called Sun Glo (ASun GloBTX@).  With regard to this operation, Davidson, Richtman, and McMaster managed the finances, sales and procurement, respectively. As compensation for their involvement, each was to receive one-third of the net profits the operation generated. A Southwest employee handled accounting for the Sun GloBTX operation and kept separate balance sheets from those of Southwest.

Richtman received checks from Southwest for his share of the profits from the Sun GloBTX operation. The memos on the checks read Asettlement of 2001 profit distribution of Sunglo@ and ASunglo distribution.@

C.  Claims of the Parties

1. Partnership

McMaster and Richtman claim the Sun GloBTX operation functioned as a partnership wherein each party had one-third ownership.  They claim that while the business was initially operated under Southwest, the parties intended to later break away from Southwest.  Davidson denies such a partnership ever existed and asserts the project operated solely under Southwest.  No legal paperwork formally establishes Sun GloBTX as a partnership.

2.  Unpaid Disbursements of Profits

Although a Southwest employee handled accounting for Sun GloBTX as a division of Southwest, Richtman had his own accountant tracking the records for Sun GloBTX.  In January 2002, Richtman compared his accountant=s report against Davidson=s report and found apparent discrepancies.  Richtman contacted Davidson and asked for his distribution of the profits, noting that the discrepancies could be discussed later.  Over the course of the year, Richtman alleged discrepancies relating to freight bills, juice costs, and inventory, totaling $36,000.  Richtman claims that in November 2002, he and Davidson went over the balance sheet, and Davidson agreed the amounts should be corrected. 

Richtman testified that he did not receive any disbursement of profits after June 2002, and that by his calculations he is owed $60,500 and McMaster is owed $77,800. Richtman said that when he asked Davidson for his profits, Davidson denied a partnership existed and said there were no profits to distribute. 

One source of contention is the calculation of juice costs Southwest billed back to the Sun GloBTX operation. Richtman testified that Sun GloBTX used Southwest to buy juice for three cents a pound over Southwest=s cost. Richtman contended Southwest charged Sun GloBTX based on the actual cost of obtaining juice from one supplier rather than on an average price of all the suppliers, resulting in Sun GloBTX being charged eleven cents per pound more than other customers.  He admits he did not know the actual cost to Southwest, so he used the market value to make his calculation.  Davidson claims the agreement was to use actual costs, not average costs, in the calculation.

3.  Unpaid Brokerage Commissions

Richtman claims that Davidson owes him $7,700 in outstanding brokerage commissions but that he had not been paid since December 2002. 

4.  Violations of Non-Compete Clauses

Davidson denied appellants= claims and counterclaimed that Richtman and McMaster had violated their agreements with Southwest.  Specifically, he claimed Richtman breached his exclusive marketing agreement with Southwest by marketing the juice of competitors to the damage of Southwest. He claimed McMaster, an employee of Southwest, had sold juice for his own account or for competitors of Southwest, resulting in lost profits to Southwest.  Richtman denies there was an exclusive contract, but paragraph 9 of the brokerage agreement between Richtman and Southwest states that Aas long as Southwest is able to supply the required citrus juice concentrates or single strength citrus juices at competitive prices, the broker will only represent citrus juices from Southwest.@

5. Termination of the Sunkist Contract

In June and July 2002, Southwest made two purchase orders with Sunkist Growers.  The first purchase order was for fifteen tankers of tangerine concentrate.  The words ASun Glo@ do not appear on the purchase order.  The second purchase order was for one million pounds of Valencia juice concentrate. The ship-to address reads ASouthwest Associates,@ followed by ASun Glo Juice@ in parenthesis. The purchase order is signed, ARichard Davidson, Southwest Juice Associates.@  Both purchase orders called for the product to be used or sold by December 31, 2002.  Not all the product was moved by that deadline, and Sunkist granted an extension until the end of January 2003. 

On January 6, Richtman filed an original petition against Southwest.  In that petition, he alleged that Southwest was selling and shipping juice Southwest had purchased on behalf of Sun GloBTX and thereby undermining his share of the profit.  He requested and obtained a restraining order preventing Southwest from selling the disputed juice.  The court granted a set-aside order on February 3 stating, A[i]n the event any juice which is to be received by either party from Sunkist in California is sold between the date of this order and the hearing on the Temporary Injunction, the proceeds of such sale shall be segregated and deposited into the registry of the Court.@  Richtman stated that because he was a party to the suit, he interpreted this language as giving him the right to sell the juice so long as he placed the proceeds from the sale into the registry of the court.

Richtman approached Sunkist through R&H Marketing to purchase some of the disputed juice.  He explained that he was motivated by knowledge that Southwest needed to move the product quickly yet had no orders for it.  Neither Richtman nor R&H Marketing had a direct arrangement with Sunkist to receive any of the juice.   On February 25, Sunkist terminated its contract with Southwest, resulting in a loss of the inventory.

The parties dispute the reason why Sunkist terminated.  Davidson blames Richtman for the termination, noting that Sunkist terminated the contract a few days after Richtman improperly tried to acquire Southwest=s juice from Sunkist.  The email to Davidson from Sunkist that terminated the contract explains, ASunkist does not need to be involved in any way with your legal issues at this time.@  Richtman argues that the contract terminated because Southwest failed to move the product by the deadline.  Davidson counters that Southwest could not have moved the product by the deadline because of the restraining order.  At trial, Richtman testified that he had no paperwork to show that Southwest had purchased the disputed juice on behalf of Sun GloBTX because it was a verbal agreement.  He estimated the lost inventory cost Sun GloBTX $150,000 in profits.

D.  Final Judgment

The trial court entered a final judgment on June 17, 2003, holding that (1) McMaster and Richtman take nothing by their causes of action, (2) no partnership existed among the parties, and (3) Richtman owed Davidson and Southwest actual damages in the amount of $50,000, plus post-judgment interest at the rate of 10% annually.  No findings of fact and conclusions of law were requested or filed.

II.  Standard of Review

In nonjury trials such as this, any party may request the court to state in writing its findings of fact and conclusions of law.  Tex. R. Civ. P. 296.  The record does not show any such request by the parties.  Where findings of fact and conclusions of law are not filed, the trial court is presumed to have made all the necessary findings to support its judgment.  Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex. 1989).  When a reporter=s record is part of the record, legal and factual insufficiency of implied findings may be challenged on appeal the same as a trial court=s findings of fact. Id.  The applicable standard of review is the same regardless of whether the findings come from a bench or jury trial.  Id.  The judgment of the trial court should be affirmed if it can be upheld on any legal theory that finds support in the evidence.  Bishop v. Bishop, 359 S.W.2d 869, 871 (Tex. 1962).

III.  Damages to Davidson and Southwest

Richtman first claims the trial court erred in awarding Southwest $50,000 in actual damages because there was no evidence, or factually insufficient evidence, presented at trial to show his liability or to show $50,000 in damages.  We address the no-evidence and factual insufficiency claims separately below.

A.  No Evidence

In reviewing a "no evidence" claim, we may consider only evidence and inferences that tend to support challenged findings while disregarding all evidence and inferences to the contrary.  Sherman v. First Nat'l Bank, 760 S.W.2d 240, 242 (Tex. 1988).  The no-evidence challenge cannot be sustained if there is more than a scintilla of evidence to support the findings.  Id.  If more than a scintilla of evidence exists, it is legally sufficient. Browning‑Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex. 1993).  More than a scintilla of evidence exists if the evidence furnishes a sufficient basis for reasonable minds to reach differing conclusions about the existence of a vital fact.  Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983).

In this case, there is very little evidence in the reporter=s record to explain how the court might have arrived at $50,000 in damages.  The reporter=s record shows almost no discussion during trial relating to damage awards sought by Davidson in his counterclaim.  Davidson offered no evidence during trial of damages resulting from appellants= alleged selling of juice outside their contractual rights.  In estimating damages from the terminated contract, Davidson said he believed Richtman=s estimate of lost profits was too high but did not offer his own estimate.

Davidson=s counterclaim sought unspecified damages resulting from McMaster and Richtman=s breach of non-compete agreements.  After Sunkist cancelled the contract with Southwest, both parties filed a motion for continuance.  Both parties claimed further damages based on the lost inventory and needed more time to calculate them.  McMaster and Richtman filed an amended petition but again declined to list any specific amounts in damages resulting from the cancelled contract.  Davidson did not file an amended answer.  Davidson=s brief as appellee is similarly unhelpful.  He justifies the trial court=s finding of liability solely on the argument that Sunkist cancelled right after Richtman tried to purchase the juice:  AMr. Richtman=s attempt to acquire the juice and Southwest=s objection to any such sale . . . resulted in the termination of the contract.@

In short, the record shows Sunkist terminated its contract with Southwest, resulting in lost inventory.  Richtman estimated the lost profit value of that inventory at $150,000.  Though the evidence is slight, we hold it furnishes a reasonable basis for reasonable minds to reach differing conclusions about the existence of a vital fact.  See Kindred, 650 S.W.2d at 63.  We conclude the evidence is legally sufficient.  Sherman, 760 S.W.2d at 242. 

B.  Factual Sufficiency

In determining the factual sufficiency of the evidence, we must consider all the evidence, setting aside the verdict only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.  Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).  Without the trial court=s reasoning to guide us, we must presume the trial court made all the necessary findings to support its judgment.  Roberson, 768 S.W.2d at 281.  After consideration of the entire record, as summarized above, we cannot say that the verdict is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Thus, the evidence is factually sufficient.

This issue is overruled.

IV.  Sun Glo Partnership

McMaster and Richtman claim the trial court erred in holding the Sun GloBTX partnership did not exist.             In determining whether a partnership existed among the parties, McMaster and Richtman refer us to the business organizations code section 152.051, defining a partnership.  See Tex. Bus. Org. Code Ann. ' 152.051 (Vernon 2004-05).  The cited business organizations code section becomes effective January 1, 2006.  We therefore turn instead to contemporary provisions in effect at this time.

A partnership is Aan association of two or more persons to carry on a business for profit as owners . . . , whether the persons intend to create a partnership and whether the association is called a >partnership,= >joint venture,= or other name.@  Tex. Rev. Civ. Stat. Ann. art. 6132b‑2.02 (Vernon Supp. 2004-05).  The factors indicating the creation of a partnership include (1) receipt of or right to receive a share of profits in the business, (2) expression of intent to be partners in the business, (3) participation or right to participate in control of the business, (4) sharing or agreeing to share losses of the business or liability for claims by third parties against the business, and (5) contributing or agreeing to contribute money or property to the business.  Id. at art. 6132b-2.03.  Not all of these factors need be present for a partnership to exist, and no one factor is dispositive.  See McDowell v. McDowell, 143 S.W.3d 124, 129 (Tex. App.BSan Antonio 2004, pet. denied).  The receipt of a share in the profits, alone, does not by itself constitute proof of a partnership.  See id.

Richtman agues that there was a verbal agreement to form a partnership.  However, during trial, Richtman admitted that Sun GloBTX was not formally established:  ABecause we had not set up Sun Glo, I had a brokerage agreement with Southwest.@  In his deposition, when asked what capital contribution he made toward the formation of a partnership, he replied, AThat was never formed.@  Richtman explained at trial that by this he meant that the partnership was never formally signed.  He explained that Sun GloBTX was a separate entity from Southwest Aas far as keeping track of costs, expenses, sales.  But as far as legal, it was part of Southwest.@  McMaster made similar assertions about the existence of a partnership, but when asked in his deposition what type of business entity he thought Sun GloBTX was, he answered that ASun Glo was only in the making.@

Nothing in our review of the record demonstrates McMaster or Richtman acted in an ownership capacity or established any other factors tending to show the existence of a partnership with regard to Sun GloBTX.  See McDowell, 143 S.W.3d at 129.  We find no evidence that Sun GloBTX was anything more than a division of Southwest.  Roberson, 768 S.W.2d at 281.  This issue is overruled.

V.  Damages to Richtman

Richtman claims the trial court erred in denying him unpaid broker commissions from Southwest. He stated during trial that Southwest owed him $7,700 in unpaid commissions, and Southwest=s accountant did not dispute this.  The accountant explained that Davidson had told him to withhold Richtman=s commission check because there were offsetting claims against it.

Again, the record does not explicitly demonstrate why the trial court granted nothing to Richtman.  Davidson argues on appeal that the trial court, presented with evidence of a $150,000 loss to Southwest and a $7,700 loss to Richtman, may have offset the award to Southwest by the broker commissions owed to Richtman.  With nothing in the record to guide us, we have no basis to disagree, as it was appellant=s burden to show that the trial court=s judgment was not supported by any legal theory raised by the evidence.  See Point Lookout West, Inc. v. Wharton, 742 S.W.2d 277, 278 (Tex. 1987) (per curiam).  This issue is overruled.

VI. Conclusion

We affirm the judgment of the trial court.

Rogelio Valdez,

Chief Justice

Memorandum Opinion delivered and filed

this 22nd day of August, 2005.