Ralph Rather and Enexco, Inc. v. AAA Well Service, LLC ( 2018 )

Affirmed and Opinion Filed June 29, 2018
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-17-00262-CV
RALPH RATHER AND ENEXCO, INC., Appellants
V.
AAA WELL SERVICE, LLC, Appellee
On Appeal from the 192nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-15-02337
MEMORANDUM OPINION
Before Chief Justice Wright, Justice Bridges, and Justice Evans
Opinion by Justice Bridges
Ralph Rather and Enexco, Inc. appeal the trial court’s judgment, following a jury trial,
awarding AAA Well Service, LLC $34,464.64 on its breach of contract claim against Enexco and
its piercing the corporate veil/alter ego claim against Rather individually. In four issues, Rather
and Enexco argue the evidence is legally and factually insufficient to show they committed “actual
fraud” and that “they did it primarily for Rather’s direct personal benefit.” We affirm the trial
court’s judgment.
Rather is the president and fifty percent owner of Enexco, an oil and gas operating company
that previously operated wells in various parts of Texas. By the time of trial, Enexco had “pretty
much shut down.” Rather was also president and fifty percent owner of N&R Resources, Inc., a
company that maintained working interests in a number of wells operated by other companies,
including some wells operated by Enexco. AAA provides workover rigs to already-drilled oil and
gas wells and repairs the wells.
In 2010, N&R obtained 100% of the working interest on a lease in Hardeman County,
Texas. N&R assigned seventy-five percent of the working interest to other non-operating working
interest owners and retained twenty-five percent. N&R hired Enexco to operate the “Fowler Well”
on the lease because N&R was not licensed to operate wells in Texas, but Enexco was a licensed
operator. Enexco received overhead costs for serving as operator and assuming monetary risks
associated with the well. Overhead costs included “taking care of all the accounting functions, all
the regulatory functions” and “an overhead amount on a monthly basis after production was
established.” Rather testified that, because he was president and fifty-percent owner of both N&R
and Enexco, it was to his benefit to hire an operator at the cheapest price possible. With respect
to the Fowler Well, Enexco agreed to operate the well for only its overhead costs with no additional
profit.
Rather testified that Enexco hired him individually to serve as a consultant in connection
with the Fowler Well. AAA’s counsel asked if Rather was paid $68,000 as a consultant on the
Fowler Well. Rather denied being paid $68,000 and said he was paid “I think $3500.” AAA’s
counsel showed Rather an October 11, 2013 settlement statement from Enexco used to show
working interest owners the amounts they owed for their proportionate shares of ownership in the
well. The statement showed a payment to Rather of $3000, which Rather did not deny receiving.
However, Rather denied receiving payments of $27,601.35 and $20,115.61 that were listed on the
statement. Rather testified he was not aware there were other settlement statements showing
amounts charged by Enexco for Rather’s invoices.
In December 2013, Rather contacted AAA, and Enexco thereafter contracted with AAA to
provide a rig and crew to work the Fowler Well. Although AAA performed the work, Rather and
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Enexco never paid. In February 2015, AAA sued Enexco and Rather asserting, among other
things, a breach of contract claim against Enexco and a piercing the corporate veil/alter ego claim
against Rather individually. In November 2016, the case was tried before a jury. AAA’s
operations manager, Deecye Bedell, testified AAA performed work on the Fowler Well in August
and September 2013. Bedell had “a lot of discussions” with Rather about paying AAA before
contracting with Enexco in December 2013, and Rather stated he “could and would pay AAA for
its services.” Bedell relied on Rather’s statement in deciding to send a rig and crew to perform the
services on the Fowler Well in December 2013, and AAA performed the work. Jin Chua, manager
of AAA’s accounting, testified an invoice for $34,464.64 was mailed to Enexco on January 22,
2014, but the invoice was never paid.
Rather testified that, “shortly before” AAA worked on the Fowler Well, Rather personally
guaranteed payment to AAA by another company for which Enexco was doing a contract operating
job. Rather testified he first received AAA’s invoice in this case when he was served with AAA’s
lawsuit in February 2015. Rather testified that, in 2010, Enexco had “a well that had a significant
cost overrun,” and a number of investors left Rather “holding the bag.” In 2011 and 2012, Enexco
“had some outstanding debts and liabilities.” As of November 2013, Rather testified “we had
some problems because of the cost overrun and I was trying to remedy that by paying – I paid a
lot of it out of my pocket.” Rather testified he and his father “levered some of our assets with
Enexco to pay the bills.” Rather confirmed that Platinum Pipe Rentals made a claim for an unpaid
amount of $21,535.59 as of October 15, 2013 and ultimately obtained a default judgment in that
amount for work performed on the Fowler Well. Rather testified another vendor, Weatherford,
had a balance due for work performed in August 2013. On April 28, 2014, Weatherford notified
Rather that his account with Weatherford was closed because of a total past due balance of
$11,366.31.
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Rather testified that his brother Michael was not an employee of Enexco, but “on occasion
he would be an independent contractor.” Rather testified Michael charged $3065.27 to Enexco in
connection with the Fowler Well. AAA’s counsel referred Rather to a file he and Enexco produced
showing invoices and receipts for charges billed to Enexco by Michael. The invoices showed
Michael charged for, among other things, hotels, mileage on his personal vehicle, gasoline for his
personal vehicle, $577.36 for tires for his personal vehicle, $207.99 for a tuneup of his personal
vehicle, cigarettes, $219.73 for work boots, and a “double hot caramel sundae” from Braum’s.
Rather testified Enexco kept the invoices in Michael’s “file of reimbursements,” but Rather had
“no idea” whether the invoices were actually paid to Michael. Rather testified that his son and
Michael’s son also worked on the Fowler Well, and they worked together on the same day to paint
a “tank battery” and both charged for “those same services.” AAA’s counsel asked whether, if
Enexco had “not been paying tens of thousands of dollars to [Rather], Michael Rather your brother,
your nephew and your son,” Enexco would have had enough money to pay AAA. Rather replied
that “there was money there to pay AAA,” but he “never received an invoice until two years later.”
Rather denied that Enexco knew by December 2013 “that its financial difficulties had put them in
a position it was going to be winding down,” and “rather than give up what assets it had to pay
third-party creditors,” Enexco “funneled that money out” to Rather, his brother, his nephew, and
his son.
The jury found that AAA and Enexco agreed that AAA would perform work at the Fowler
Well in exchange for payment, Enexco failed to comply with the agreement, $34,464.64 would
fairly compensate AAA for its damages, and Rather was responsible for the conduct of Enexco.
The trial court entered final judgment in that amount, plus interest and attorney’s fees, against
Enexco and Rather individually. This appeal followed.
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In their first and second issues, Rather and Enexco argue the evidence is legally and
factually insufficient to show they committed “actual fraud.” In their third and fourth issues, they
argue the evidence is legally and factually insufficient to show that, if they did commit actual
fraud, they did it primarily for Rather’s direct personal benefit. Because of the interrelated nature
of these arguments, we address them together.
When reviewing the legal sufficiency of the evidence, we consider all the evidence in the
light most favorable to the prevailing party, indulging every reasonable inference in that party’s
favor. See Solar Soccer Club v. Prince of Peace Lutheran Church of Carrollton, Tex., 234 S.W.3d
814, 820 (Tex. App.—Dallas 2007, no pet.). We must credit the favorable evidence if reasonable
jurors could and disregard the contrary evidence unless reasonable jurors could not. City of Keller
v. Wilson, 168 S.W.3d 802, 807, 827 (Tex. 2005). A “no evidence” point will be sustained if there
is no more than a scintilla of evidence to support the finding. Gen. Motors Corp. v. Sanchez, 997
S.W.2d 584, 588 (Tex. 1999). If the evidence furnishes some reasonable basis for differing
conclusions by reasonable minds about a vital fact's existence, more than a scintilla of evidence
exists. Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995); Kindred v. Con/Chem,
Inc., 650 S.W.2d 61, 63 (Tex. 1983).
When considering a factual sufficiency challenge to a jury’s verdict, courts of appeals must
consider and weigh all of the evidence, not just that evidence which supports the verdict. Maritime
Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex. 1998). A court of appeals can set aside
the verdict only if it is so contrary to the overwhelming weight of the evidence that the verdict is
clearly wrong and unjust. Id. at 407; see also Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per
curiam); Solar Soccer, 234 S.W.3d at 820. In conducting our review of both the legal and factual
sufficiency of the evidence, we are mindful that the jury, as fact-finder, was the sole judge of the
credibility of the witnesses and the weight to be given their testimony. Keller, 168 S.W.3d at 819.
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Accordingly, the court of appeals may not pass upon the witnesses’ credibility or substitute its
judgment for that of the jury, even if the evidence would clearly support a different result.
Maritime Overseas, 971 S.W.2d at 407.
The trial court’s charge measures the sufficiency of the evidence when, as here, the
opposing party fails to object to the charge. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000).
Question number four of the court’s charge, which asked if Ralph Rather was responsible for the
conduct of Enexco, provided the following instructions:
Ralph Rather is “responsible” for the conduct of Enexco, Inc. if Ralph Rather used
Enexco, Inc. for the purpose of perpetrating and did perpetrate an actual fraud on
AAA Well Service, LLC primarily for the direct personal benefit of Ralph Rather.
OR
Ralph Rather is “responsible” for the conduct of Enexco, Inc. if Ralph Rather used
Enexco, Inc. as a means of evading an existing legal obligation for the purpose of
perpetrating and did perpetrate an actual fraud on AAA Well Service, LLC
primarily for the direct personal benefit of Ralph Rather.
For purposes of this charge, “actual fraud” occurred if either:
1.(a) Enexco, Inc. concealed or failed to disclose a material fact within the
knowledge of Enexco, Inc.; (b) Enexco, Inc. knew that AAA Well Service, LLC
was ignorant of the fact and did not have an equal opportunity to discover the truth;
(c) Enexco, Inc. intended to induce AAA Well Service, LLC to take some action
by failing to disclose the fact; and (d) AAA Well Service, LLC suffered injury as a
result of acting without knowledge of the undisclosed fact.
OR
2. (a) Enexco, Inc. made a material misrepresentation; (b) the misrepresentation
was made with knowledge of its falsity or made recklessly without any knowledge
of the truth and as a positive assertion; (c) the misrepresentation was made with the
intention that it should be acted on by AAA Well Service, LLC; and (d) AAA Well
Service, LLC relied on the misrepresentation and thereby suffered injury.
“Misrepresentation” means (a) false statement of fact or (b) a promise of future
performance made with an intent, at the time the promise was made, not to perform
as promised.
The jury answered this question “Yes.”
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The record shows that, by November 2013, Rather had financial troubles “because of the
cost overrun,” and Rather was paying “a lot of it out of [his] pocket.” One vendor, Platinum Pipe
Rentals, made a claim for an unpaid amount of $21,535.59 as of October 15, 2013 and ultimately
obtained a default judgment in that amount for work performed on the Fowler Well. Rather
testified another vendor, Weatherford, had a balance due for work performed in August 2013, and
Weatherford closed Rather’s account in April 2014 because of a total past due balance of
$11,366.31. In this context, when Rather approached AAA to perform work on the Fowler Well,
Bedell had “a lot of discussions” with Rather about paying AAA before contracting with Enexco
in December 2013, but Rather stated he “could and would pay AAA for its services.” Bedell relied
on Rather’s statement in deciding to send a rig and crew to perform the services on the Fowler
Well in December 2013, and AAA performed the work.
Throughout this same time period in late 2013, Rather, president and fifty-percent owner
of both N&R and Enexco, was using Enexco to operate the Fowler Well on a lease owned by
N&R. Instead of operating at a profit to Enexco, Rather operated the Fowler Well in such a way
that Enexco only received operating costs, and Rather was paid at least $50,000 as a “consultant.”
Rather’s brother, nephew, and son also received payments for expenses associated with the Fowler
Well and other, non-work-related expenses. The jury was free to disbelieve Rather’s testimony
that “there was money there to pay AAA” but he “never received an invoice until two years later.”
Chua testified AAA billed Enexco for its work on January 22, 2014. The record is clear that
Enexco never paid AAA for its work. We conclude that the evidence is legally and factually
sufficient to show that Rather and Enexco committed actual fraud and that they did it primarily for
Rather’s direct personal benefit. See City of Keller, 168 S.W.3d at 827; Maritime Overseas, 971
S.W.2d at 406-07. We overrule Rather and Enexco’s first, second, third, and fourth issues.
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We affirm the trial court’s judgment.
/David L. Bridges/
DAVID L. BRIDGES
JUSTICE
170262F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
RALPH RATHER AND ENEXCO, INC., On Appeal from the 192nd Judicial District
Appellants Court, Dallas County, Texas
Trial Court Cause No. DC-15-02337.
No. 05-17-00262-CV V. Opinion delivered by Justice Bridges. Chief
Justice Wright and Justice Evans
AAA WELL SERVICE, LLC, Appellee participating.
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that appellee AAA WELL SERVICE, LLC recover its costs of this
appeal from appellant RALPH RATHER AND ENEXCO, INC.
Judgment entered June 29, 2018.
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