Laronda Zurovec, Jeremy Chaffin and Collaborative Services, LLC v. Nehemias Rueben ( 2022 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
________________
NO. 09-21-00379-CV
________________
LARONDA ZUROVEC, JEREMY CHAFFIN AND
COLLABORATIVE SERVICES, LLC, Appellants
V.
NEHEMIAS RUEBEN, Appellee
________________________________________________________________________
On Appeal from the 457th District Court
Montgomery County, Texas
Trial Cause No. 21-10-14352-CV
________________________________________________________________________
MEMORANDUM OPINION
Appellee Nehemias Rueben sued Appellants Laronda Zurovec, Jeremy
Chaffin, and Collaborative Services, LLC (CS) asserting multiple causes of action.1
Rueben sought equitable relief prohibiting Appellants from transferring certain
1Inhis Verified First Amended Petition, Rueben also named Collaborative
Generators and Power Solutions LLC, Joshua Paninski, Justin Dahlberg, Rebecca
Dahlberg, and Michael Shane Guest as defendants, but they are not parties to this
appeal.
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property or assets to a new entity Zurovec and Chaffin formed with other individuals,
Collaborative Generators and Power Solutions, LLC (CGPS), including a temporary
injunction, which the trial court granted. In this interlocutory appeal, Appellants
raise six issues challenging the trial court’s temporary injunction. See Tex. Civ. Prac.
& Rem. Code Ann. § 51.014(a)(4) (permitting interlocutory appeal of grant or denial
of temporary injunction). We hold that, while the trial court did not abuse its
discretion in granting a temporary injunction to preserve the status quo, it abused its
discretion in crafting the temporary injunction order. We declare the temporary
injunction order void and dissolve the order since it is overly broad and fails to
comply with Texas Rule of Civil Procedure 683. See Tex. R. Civ. P. 683.
I. Background
A. Parties’ Relationship and CS Formation
Rueben, an electrician by trade, and Chaffin, an instrument technician, met in
2012 while working on an oil rig. At the end of 2018, the two of them and Chaffin’s
wife, Zurovec, discussed starting a new business and splitting everything fifty-fifty.
In early 2019, Zurovec filed a dba (doing business as) form with Montgomery
County and began operating CS, which provided electrical services and specialized
in generator installation in Houston and the surrounding areas. In approximately
March of 2019, Rueben began working as a project manager for CS. In October
2
2019, Zurovec filed a Certificate of Formation with the Texas Secretary of State for
CS. The Certificate of Formation listed Zurovec as the sole managing member.
In 2019, Rueben received a 1099 from CS showing total payments of $14,000.
In 2020, Rueben received a W-2 from CS, which showed he received a salary of
$59,000, and in May 2021, Rueben received a raise, which increased his salary to
$9,000 per month. In October 2021, CS severed its relationship with Rueben.
According to Zurovec and Chaffin, Rueben began causing problems on jobs,
behaving erratically, and was using drugs, so they terminated his at-will employment
with CS.
Rueben argues he made multiple monetary contributions to CS, the parties
agreed prior to CS’s formation they were going into business together and would
split everything down the middle, and he owned an interest in the business. Zurovec
and Chaffin countered that Rueben’s monetary contributions to the company were
loans, which were repayable on demand, and in consideration for these loans, he
received an increased salary in 2021. There was no written documentation
memorializing the terms of these loans.
On September 30, 2021, a Certificate of Formation was filed with the Texas
Secretary of State for CGPS, naming Zurovec, Chaffin, Rebecca Dahlberg, Justin
Dahlberg, Josh Paninski, and Michael Guest as managing members. CGPS provides
similar services as CS but serves an expanding market in North Texas. On October
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2, 2021, Rueben received a text message from Chaffin notifying him they were going
to part ways with him. On October 5, 2021, Rueben filed a Certificate of Formation
for Mr. Watts Electrical naming himself and Stacy Doll as managing members. Mr.
Watts provides electrical and generator installation services in the Houston area like
the services CS provides.
B. Rueben’s Claims
Rueben pleaded causes of action for breach of contract, fraud, breach of
fiduciary duty, conspiracy, conversion, and he also filed claims based on promissory
estoppel, quantum meruit, unjust enrichment, specific performance, and he asked for
a declaratory judgment. 2 In his claim seeking a declaratory judgment, Rueben asked
the court to determine the rights of the parties based on their oral partnership
agreement, and he asked the court to declare that Zurovec and Chaffin had breached
the partnership agreement. Rueben also sought a temporary and permanent
injunction. Rueben supported his First Amended Petition with a verification. He also
attached CGPS’s Certificate of Formation, a copy of CGPS’s Facebook page, and
CS’s Certificate of Formation as exhibits.
2In hisVerified Second Amended Petition filed the night before the temporary
injunction hearing, Rueben included claims for fraudulent inducement, fraudulent
concealment, and alter ego against Zurovec and CS.
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C. Temporary Injunction Hearing and Evidence
At the hearing’s outset, Rueben argued that he wanted to enjoin CS from
transferring their goods, services, and assets to CGPS. Appellants countered that
Rueben is a former employee who started another business, Mr. Watts, that is now
a “direct competitor” of CS, and he is trying to prevent CS from expanding its
business. Appellants further argued that CGPS was started to service CS customers
who have needs outside Montgomery County. Appellants also contended that
Rueben was not entitled to a temporary injunction for three reasons, because: money
could remedy the harm that resulted from their alleged breach of the alleged
agreement; Rueben could not demonstrate he would probably succeed on the merits;
and Rueben could not show the parties had reduced the alleged agreement to writing.
Rueben’s Testimony
Rueben testified that he met Chaffin on an oil rig in 2012. Rueben has been
an electrician for twenty-five years. Rueben said that before he left his previous
employer, he, Zurovec, and Chaffin discussed starting a business together toward
the end of 2018. When the three of them had that discussion, they agreed “Hey, let’s
get together and we’ll just split everything down the middle, 50/50.” Rueben agreed
that they never created a written business plan or formally discussed a business plan
or a specific process for their business. Rueben testified that before 2019, Chaffin
and Zurovec had never provided electrical services to the public.
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Rueben explained that he provided operating capital to the business the three
of them established. He also testified that he received proceeds from their business.
Rueben denied the contributions he made to the business were loans; instead, he
said: “I invested.” According to Rueben, no one characterized his contributions as
loans, terms for the alleged loans were never discussed and he was never provided
any documents for any alleged loans.
While Rueben acknowledged he knew a dba filing occurred in Montgomery
County for the CS name in early 2019, Chaffin and Zurovec never discussed the
filing with Rueben or told him it was Chaffin and Zurovec’s company, not his. Over
nine months passed between CS’s dba filing and the filing of the Certificate of
Formation in October 2019. Ruben said that Zurovec and Chaffin never discussed
the fact they filed a Certificate of Formation with him. When Rueben learned the
LLC paperwork excluded him in May 2020, he spoke to Zurovec and Chaffin and
then brought the subject up every couple of months. Ultimately, Rueben said he
retained an attorney to help him. After Rueben retained an attorney, the law firm he
hired prepared a partnership agreement and questionnaire, which he forwarded to
Chaffin and Zurovec. When they responded, they said there were too many legal
terms in the documents, and they told Rueben to provide them with documents they
could all understand. Rueben testified that Chaffin and Zurovec never told him he
would not be a member of CS or they did not believe he would be a good partner.
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Rueben said he filed his petition to protect his interest in the company. When
asked why he felt the company needed to be restrained, Rueben responded, “Because
I accidentally found out that they opened up another company when Rebecca and
Justin tagged me on a Facebook post, and then in there, I figured they were going to
be running our assets out of that company into the other.”
He received a text message from Chaffin on October 2, 2021, which said,
“We’re making some changes and I think it’s best if we just part ways.” Rueben
testified he spoke to Chaffin the same day or the next day and asked him what was
going on, what were they going to do, and told Chaffin they needed to go through
the books. Rueben said Chaffin responded that they would go through the books and
inventory, and Rueben would get fifty percent of everything. Rueben testified that
three days after Chaffin sent the text message, CS sent him a check signed by
Zurovec with a memo noting it was a partial return on investment.
Rueben alleged that CS began transferring materials and assets to CGPS at a
loss. He provided spreadsheets he prepared with material costs that he said he
obtained from CS’s vendors.
Zurovec’s Testimony
Zurovec testified she is the controller of CS and has a BS in accounting and
an MBA. Zurovec testified that CS began in January 2019 as a dba, and in October
2019, she converted it to an LLC. She said that Rueben became involved in CS in
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February or March 2019 as a project manager and contract employee, and they did
not discuss him becoming a member or owner of CS. In October 2019, when she
converted CS to an LLC, she did not consider making Rueben a member. Zurovec
is the sole member, manager, and owner of CS, and she testified CS’s Company
Agreement shows her as the sole member.
Zurovec testified Rueben never purchased a membership interest in CS, never
received profit distributions from CS, and never made capital contributions to CS,
but he loaned CS money. According to Zurovec, when Rueben loaned CS money, it
was not for an ownership interest; occasionally, the company had cash flow issues
and needed to purchase generators, so he loaned them money for that, and it was
understood he would be well compensated. The loan agreements were verbal, and in
exchange for the loans, Rueben’s compensation increased. CS did not pay interest
on the loans. Zurovec explained that when she wrote “return of partial investment”
on the check, it was repayment of part of the loans Rueben made to CS. The loans
were repayable on demand, and every time Rueben asked for repayment, he was
paid. Zurovec testified no written documentation existed on the loans, and CS had
no documents to prove the money Rueben provided CS was extended to CS as loans
rather than as investments in the company. Zurovec acknowledged that although
Rueben sent her an email about expanding his role with the company, she never
responded because she did not want him to become an owner.
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She explained that Rueben did not have check-writing authority and his name
was not on the bank account. She denied Rueben had authority to hire and fire
employees. When CS hired Rueben, he was a journeyman electrician, and they tried
to help him become a master electrician and paid for him to get that certification, but
it never happened. Zurovec testified Rueben was an officer of CS. Zurovec denied
that she told Laura Vazquez, CS’s insurance agent, Rueben was an owner, but she
agreed she might have told Vazquez he was an officer. Zurovec testified that she
never represented to the public that Rueben had an ownership interest in the
company.
Zurovec testified she was the only employee to receive a K-1 in 2020 and
2021, because she was the only owner of the company. Zurovec testified that Rueben
was paid at the same time as other employees, but there may have been a delay
paying him once.
Zurovec testified they started CGPS at the very end of September or beginning
of October 2021 because some existing customers asked them to install generators
in North Texas, but CS did not have the capacity to do that work, so they started a
new company. If CS could not serve existing customers in new markets, then they
risked losing those customers.
Zurovec disagreed with the cost of materials Rueben provided in his
spreadsheets and explained that the generators cost CS about $4500 as opposed to
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the $6500 Rueben claimed. She denied that CS gave materials to CGPS and
explained it would not make sense for her to do so, because CS is 100% hers, and if
she gave it away to CGPS, she would lose eighty-five cents on the dollar. She
testified that CS has been or will be compensated for anything transferred to CGPS,
but as of the hearing date, CGPS had not paid CS for any items transferred to it. She
said there were invoices from CS to CGPS, but she was uncertain of the net payout
on them.
She agreed that the allegation in Rueben’s petition that CS had gross revenues
of $1.7 million in 2020 was “close” but was probably closer to $1.5 million. She
disagreed that he owned fifty percent, testified that the company never had $1.7
million in inventory, and the most they had was $700,000. She also disputed
Rueben’s allegation that the company had $1.25 million in paid inventory that had
not yet been delivered. Instead, she valued the inventory at around $36,000. Zurovec
said that currently, CS is working on eighty projects, and Rueben secured only two
of those. According to Zurovec, CS did not have $750,000 in the bank as Rueben
alleged; instead, as of September 2021, they had a little over $131,000. Zurovec said
that CS has not lost or turned down any contracts since Rueben left. She testified
that CS has the capacity to timely handle all its contracts in the Houston area, and
they have a journeyman electrician.
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Zurovec testified that they terminated Rueben because he stopped responding
to customers, became disruptive in the workplace, other employees threatened to
quit in response to him, and he became a liability. His behavior began to deteriorate
in May or June, shortly after he received his raise.
Chaffin’s Testimony
Chaffin testified that he is an account manager who works full-time at CS, but
he is not an owner. According to Chaffin, Zurovec is the sole owner of CS and his
wife. Chaffin said he does not receive a salary from CS, even though he works there
full-time.
Chaffin denied he ever held Rueben out as an owner of CS, but he had heard
Rueben refer to himself as an owner in front of clients, customers, and those in their
trade. Chaffin agreed that when that occurred, he never corrected Rueben in public
or in private.
Rueben expressed an interest in being an owner of CS and sent them an email
about it, which he and Rueben discussed the following day. He did not want to be
co-owners with Rueben, and Chaffin did not have that authority anyway, because he
was not an owner. Chaffin explained he would not want Rueben to be an owner,
because Rueben had not filed taxes in several years, there was litigation related to
an accident Rueben was involved in with his prior employer, and Rueben was a drug
user.
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Chaffin testified he was unsure exactly how Rueben came to loan CS money,
but they traveled together often, and Rueben overheard Chaffin’s phone calls asking
to borrow capital to purchase generators. In exchange for loaning CS money, Rueben
received a raise. Once Rueben’s loans to them reached a certain amount, Chaffin
approached him about repaying the money. Rueben responded that if he had it back,
he would spend it, and leaving it in the company was like having money in the bank.
Zurovec also loaned CS money when necessary.
Chaffin testified that Zurovec took a draw from CS to purchase some lots on
Barberry street, but when the properties were purchased, the titles were placed in
Chaffin’s name. The lots were later sold at a profit of around $30,000, which was
supposed to split with Rueben. Although the lots were sold around four months
before the hearing, Chaffin could not recall exactly how the money was distributed.
Chaffin said he was unaware that CS wired Rueben $40,000 within days of selling
the lots, but he said that if that happened, he would not be surprised.
Chaffin offered another explanation for sending Ruben $40,000. According
to Chaffin, Rueben asked Chaffin for $40,000 so he could bail his brother out of jail.
Chaffin said he considered Ruben’s request as a request for a return on his
investment, so on that basis CS wired Rueben the $40,000 he demanded. Chaffin
explained that by “invested,” he meant “loaned.” Chaffin acknowledged that Rueben
provided the company with money, which Chaffin testified the company considered
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it owed and planned to pay back, yet that in Chaffin’s opinion did not make Rueben
an owner. Chaffin testified that there was no deal promised, made, or discussed
where the parties agreed that Rueben would own fifty percent of CS.
Chaffin terminated Rueben by text, because he would not answer his phone,
which was one of the reasons they fired him. Chaffin described an incident that
occurred shortly before they terminated Rueben where Rueben damaged a doctor’s
home by incorrectly installing a generator because he was high.
Chaffin testified he owns a part of CGPS, but he said the company does not
pay him a salary. Chaffin explained they started CGPS to service the Dallas market
and to assist their “solar partners” by installing generators. He said that he and
Zurovec did not intend to bankrupt CS by starting CGPS, and CGPS intends to pay
CS for any materials it obtained from CS.
Rebecca Dahlberg’s Testimony
CS’s director of sales, Rebecca Dahlberg, testified. She began working for CS
in July 2020 and became director of sales in February 2021. Rebecca testified that
Rueben was never held out to her as an owner of CS. Rueben expressed his
frustration at wanting to be a partner in the company, and they discussed how that
worked in the business world. Rebecca testified that Rueben acknowledged to her
that he was not an owner, Zurovec was the only owner, but Rueben wanted to
become an owner.
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Rebecca described a situation earlier in the summer where she was riding with
Rueben and felt unsafe, because he drove erratically, yelled, and was upset about
business dealings. She had observed Rueben drink and smoke marijuana at work,
including while driving a car on the job.
As sales director, she had contact with customers and beginning in early
summer, she had to salvage customer relationships Rueben damaged. She tried to
speak to Rueben about it, but he became angry and told Rebecca she was not doing
her job. She testified she considered quitting because of Rueben’s on-the-job
behavior, which she described as “[c]ompletely inappropriate, being loud,
obnoxious, taking over people’s computers unnecessarily, you know, smelling like
drugs, drinking. I mean, there were countless -- countless times that I had office
people coming to me, threatening to quit, due to, like, sexist jokes at work, remarks.”
Customers also threatened to leave because of Rueben.
Rebecca testified that she and her husband have a minor interest in CGPS. She
said that she has not invested any money or made a capital contribution in CGPS.
They did not ask Rebecca for money or property when they started CGPS, she
guessed her knowledge was her contribution, and they simply told her they would
make her a member. She confirmed that her name was on CGPS’s Certificate of
Formation.
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Other Witnesses
Rueben called several non-party witnesses who had business experience with
CS to testify. The first witness, Raul Martinez, testified that Chaffin and Rueben told
him they were business partners, and they were fifty-fifty partners. CS performed
electrical work for some of the residential projects Martinez worked on.
Rueben next called Jessica Place to testify regarding work CS did for her
landscaping company beginning in 2018. Place said that during her first meeting
with Chaffin, Rueben described him as his business partner with CS.
Brian Gesner owns an HVAC company that had done work with CS and
testified at the hearing. Gesner first met Chaffin through Rueben on a jobsite, and he
met Zurovec at a networking function. When asked what Chaffin told him about CS,
Gesner said they represented themselves as a company that had just formed. Chaffin
and Rueben presented themselves as partners and specifically used the word
“partners.” Gesner’s company has worked with CS on probably ten different jobs.
Michael Rosenhahn, a master electrician who had done work for CS, also
testified for Rueben. He said he was the original master electrician for CS, and his
job was to pull permits. He was introduced to CS through Rueben in 2019 and
worked for CS on a weekly basis. CS needed a master electrician to pull permits,
and Rueben was a journeyman electrician. When Rosenhahn hired on, Zurovec,
Chaffin, and Rueben said they were the owners.
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Vazquez also testified. For the 2021 workers’ compensation policy, Zurovec
and Rueben were the excluded members, and the reason for exclusion on the policy
would be that they are owners. Vazquez testified that the information to exclude
Zurovec and Rueben on the policy came from Zurovec. Vazquez testified she
understood Rueben to be an owner, which Zurovec told her on the phone and in
person. Vazquez described a meeting she had with Zurovec, Chaffin, and Rueben in
May 2021, where Chaffin explained he was in sales and not really an owner, but
Zurovec and Rueben were recognized as CS’s owners. She knew CS was an LLC
but had not seen the company’s registration documents. She was unaware that
Zurovec was the sole member and manager until she received a subpoena to testify.
A January 2021 email Zurovec sent indicated they should include Rueben as an
officer.
Additional Evidence
Multiple exhibits were admitted during the hearing. These included
Certificates of Formation for CS and CGPS. The CS Certificate of Formation
showed Zurovec as the sole managing member, while the Certificate of Formation
for CGPS listed multiple members. CS’s Company Agreement listing Zurovec as
the sole member was also admitted. A copy of a check written to Rueben from CS
and signed by Zurovec with the memo noting partial return on investment was
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admitted. Copies of Zurovec’s K-1, Rueben’s 2019 1099 from CS, and Rueben’s
2020 W-2 from CS were also admitted.
Spreadsheets showing a materials list with prices of items transferred from CS
to CGPS that Rueben prepared were admitted over Appellants’ objection. An
additional spreadsheet showing various real properties was also admitted that
included the properties Rueben claimed he owned an interest in.
D. Trial Court’s Findings and Temporary Injunction
The trial court granted Rueben’s request for a temporary injunction. The trial
court found that “Rueben has a valid cause of action against Defendants, that he has
a probable right of recovery on his cause of action, and that he faces a probable,
imminent and irreparable harm in the absence of this Temporary Injunction.” The
trial court further found that
Plaintiff and Defendants Zurovec and Chaffin agreed to be partners,
members, and/or co-owners of a business (Collaborative Services); that
Plaintiff invested over $100,000 into said business, and in return for
said contributions, Defendants Zurovec and Chaffin agreed pay
Defendant 50% of profits of the business. Defendant Chaffin held
Plaintiff out as a co-owner/partner to various prospective clients.
Defendant Zurovec held Plaintiff out as co-owner to insurance agent
Vasquez, as demonstrated by Defendant Zurovec’s excluding workers
compensation for Plaintiff. Defendants have forced out Plaintiff while
creating a new competing business, Defendant Collaborative
Generators and Power Solutions, where Defendants have made
numerous transactions benefiting Collaborative Generators while
Defendant Collaborative Services took a loss.
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The trial court enjoined Appellants from
A. Selling, disposing of, transferring, or encumbering any inventory,
property or assets of [CS] to or for the benefit of [CGPS], including,
but not limited to, generators currently in stock and on order, cash, bank
accounts, accounts receivable, contracts for current or future work,
vehicles, trailers, forklifts, tools and supplies, and real property. For the
sake of clarity, this Temporary Injunction is not intended to restrain
Collaborative Services from engaging in its day-to-day business
operations;
B. Selling disposing of, transferring or encumbering any property
owned by Plaintiff currently in Defendants’ possession.
The trial court set a $5,000 bond and set the matter for trial in September 2022.
Zurovec, Chaffin, and CS timely appealed.
Standard of Review
“A temporary injunction’s purpose is to preserve the status quo of the
litigation’s subject matter pending a trial on the merits.” Butnaru v. Ford Motor Co.,
84 S.W.3d 198, 204 (Tex. 2002) (citations omitted). To obtain a temporary
injunction, an applicant must show: (1) a cause of action against the defendant; (2)
a probable right to the relief sought; and (3) a probable, imminent, and irreparable
injury in the interim. Id.; see also Abbott v. Anti-Defamation League Austin, Sw., &
Texoma Regions, 610 S.W.3d 911, 916 (Tex. 2020). The temporary injunction
applicant bears the burden of production to offer some evidence establishing a
probable right to recovery. In re Tex. Nat. Res. Conservation Comm’n, 85 S.W.3d
201, 204 (Tex. 2002) (quoting Camp v. Shannon, 348 S.W.2d 517, 519 (Tex.
1961)); Dall. Anesthesiology Assocs., P.A. v. Tex. Anesthesia Grp., P.A., 190 S.W.3d
18891, 896–97 (Tex. App.—Dallas 2006, no pet.). The applicant need not establish
that it ultimately will prevail at trial, only that it is entitled to preservation of the
status quo pending trial on the merits. Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.
1993); Dall. Anesthesiology Assocs., 190 S.W.3d at 897.
The decision to grant or deny a temporary injunction rests within the trial
court’s sound discretion. Butnaru, 84 S.W.3d at 204. We review the evidence
submitted to the trial court in the light most favorable to its ruling, drawing all
legitimate inferences from the evidence, and deferring to the trial court a resolution
of conflicting evidence. CRC-Evans Pipeline Int’l, Inc. v. Myers, 927 S.W.2d 259,
262 (Tex. App.—Houston [1st Dist.] 1996, no writ). Our review of the trial court’s
decision is limited to the validity of its temporary injunction order; we do not
consider the merits of the underlying case. Davis v. Huey, 571 S.W.2d 859, 861–62
(Tex. 1978); see also Henry v. Cox, 520 S.W.3d 28, 33–34 (Tex. 2017). However, a
temporary injunction will be dissolved if it is based on an erroneous application of
the law to the facts. See Dall. Gen. Drivers, Warehousemen & Helpers v. Wamix,
Inc., of Dall., 295 S.W.2d 873, 879 (Tex. 1956). If some evidence reasonably
supports the trial court’s decision, the trial court does not abuse its
discretion. Butnaru, 84 S.W.3d at 211. “An abuse of discretion does not exist where
the trial court bases its decisions on conflicting evidence.” Davis, 571 S.W.2d at
862. An applicant need only plead and present evidence to support one cause of
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action to establish a probable right of recovery. See Am. Med. Home Health Servs.,
LLC v. Legacy Home Health Agency, Inc., No. 04-20-00494-CV, 2022 WL 946521,
at *6 n.5 (Tex. App.—San Antonio Mar. 30, 2022, no pet.) (mem. op.).
III. Analysis
A. Standing
In their sixth issue, Appellants argue that Rueben lacks standing to sue for
harm allegedly incurred by CS. “Because lack of standing deprives the court of
subject-matter jurisdiction, we address this issue first.” BP Am. Prod. Co. v. Laddex,
Ltd., 513 S.W.3d 476, 479 (Tex. 2017); see also Abbott, 610 S.W.3d at 917. “In
Texas, the standing doctrine requires a concrete injury to the plaintiff and a real
controversy between the parties that will be resolved by the court.” Heckman v.
Williamson Cty., 369 S.W.3d 137, 154 (Tex. 2012).
Rueben did not sue to recover on behalf of CS, rather he sued CS. Rueben
alleged that he has an ownership interest in CS, the parties agreed to split profits,
and Zurovec, Chaffin, and others created another entity and began transferring assets
from CS to that entity at a loss. He sought damages in the form of his share of CS’s
profits, inventory, his unreimbursed contributions for the capitalization of CS, and
his share of the proceeds from properties that were sold, among other things. These
are injuries he alleges he incurred due to Appellants’ actions, which shows a real
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controversy between the parties exists and will be resolved by the court. See id. We
overrule this issue.
B. Probable Right to Recovery: Issues One and Two
Of the three requisite elements for a temporary injunction, Appellants
challenge the second two, arguing that Rueben failed to establish his probable right
to recovery and that imminent and irreparable harm would occur in the absence of a
temporary injunction. See Abbott, 610 S.W.3d at 916. In their first two issues,
Appellants contend the trial court abused its discretion by issuing a temporary
injunction 1) where Rueben failed to demonstrate there was a meeting of the minds
on essential terms necessary to create a valid contract and 2) finding there was a
contract regarding CS, because Rueben failed to produce a written contract as
required by the Texas Business Organizations Code. Rueben counters that these
issues improperly seek an advanced determination on the merits of the underlying
claims.
A temporary injunction’s purpose is to preserve the status quo of the
litigation’s subject matter pending a trial on the merits. Butnaru, 84 S.W.3d at 204.
We do not delve into the case’s merits in determining whether there is a probable
right to recovery. See Henry, 520 S.W.3d at 33–34; Davis, 571 S.W.2d at 861–62.
Whether Appellants can defeat the existence of the alleged agreements is at the heart
of this case as they have pleaded and presented evidence challenging them. Their
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ultimate success or failure is a decision for the factfinder, not this court. See GTE
Mobilnet of S. Tex. Ltd. P’ship v. Cellular Max, Inc., 123 S.W.3d 801, 803 (Tex.
App.—Beaumont 2003, pet. dism’d) (reasoning that in the context of an arbitration,
the defendant’s defeat of a contract and “ultimate success or failure is a decision for
the arbitrator, not this court[]”).
Appellants point to factors courts weigh in determining the existence of an
implied partnership and assert that Ruben did not meet these factors. The five factors
courts consider for an implied partnership are: (1) the receipt or right to receive a
share of the profits; (2) the expression of an intent to be partners; (3) the right to
participate in control of the business; (4) an agreement to share losses or liabilities,
and (5) an agreement to contribute money or property to the business. See Tex. Bus.
Orgs. Code Ann. § 152.052(a); Ingram v. Deere, 288 S.W.3d 886, 894 (Tex. 2009).
Here, Rueben testified that he, Zurovec and Chaffin agreed to start a business
in late 2018, and that they agreed he would own fifty percent of the business. By
early 2019, Zurovec admitted she had filed dba paperwork for CS. Zurovec, Chaffin,
and Rueben all testified that Ruben started working at CS soon after. Multiple non-
party witnesses testified that Zurovec, Chaffin, and Ruben held themselves out as
partners, and one witness, Rosenhahn, testified the three represented themselves as
co-owners. Additionally, their insurance agent, Vazquez, testified Zurovec excluded
Rueben from workers’ compensation coverage because he was an owner. Rueben
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testified he had authority to hire and fire employees, even though Zurovec disputed
his testimony.
After operating for almost a year, Zurovec filed a Certificate of Formation
turning CS into an LLC. Rueben testified he only learned of this after the fact and
tried to address it immediately by hiring a lawyer. All three parties agreed that
Rueben provided capital for CS, although they disputed whether these monetary
contributions were loans or investments. Despite Zurovec and Chaffin’s contentions
that these were loans rather than investments, Rueben provided documentary
evidence of a check written by CS and signed by Zurovec with a memo noting it was
a partial return on investment. Rueben also provided testimony that after Chaffin
advised him they were going to part ways, Chaffin told him they would go through
everything and split it fifty-fifty.
While the parties presented conflicting evidence regarding the existence of an
oral agreement, a trial court does not abuse its discretion by basing its decision on
conflicting evidence. See Davis, 571 S.W.2d at 862. Viewing the evidence in the
light most favorable to the trial court’s ruling and deferring to its resolution of
conflicting evidence, we hold the trial court did not abuse its discretion by
determining the parties had an agreement to be partners or share an ownership
interest in CS. See CRC-Evans Pipeline Int’l, Inc., 927 S.W.2d at 262. We overrule
issue one.
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In its second issue, Appellants contend that the trial court abused its discretion
in determining there was a contract pertaining to CS as required by the Texas
Business Organizations Code. Although Appellants dispute this evidence, at least
some evidence existed that the parties entered into an agreement in late 2018 and CS
began operating in early 2019 as a dba. See Henry, 520 S.W.3d at 34; Davis, 571
S.W.2d at 862. In support of this argument Appellants rely heavily on the Sohani
case. See Sohani v. Sunesara, 546 S.W.3d 393 (Tex. App.—Houston [1st Dist.]
2018, no pet.). However, we find that case distinguishable as it involved a jury
verdict on the case’s merits rather than the review of a temporary injunction. See id.
at 396. In reviewing a temporary injunction, we do not delve into the case’s merits.
See Henry, 520 S.W.3d at 33–34; Davis, 571 S.W.2d at 861–62.
Zurovec testified that she did not convert CS to an LLC until October 2019,
and by then, CS had been operating for almost a year. Further, Rueben testified that
when Zurovec filed the LLC Certificate of Formation naming her as the sole
member, they did not apprise him of this information. For these reasons and those
outlined in issue one, we conclude the trial court did not abuse its discretion in
determining an agreement existed despite the absence of a written contract. We
overrule issue two.
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C. Imminent and Irreparable Harm: Issue Three
In their third issue, Appellants argue the trial court abused its discretion by
finding Rueben faces imminent and irreparable harm in the absence of an injunction,
as he only alleged monetary damages. Appellants correctly note that a plaintiff must
plead and prove they will suffer an imminent and irreparable harm for which there
is no adequate remedy at law. See Tex. R. Civ. P. 680; Butnaru, 84 S.W.3d at 204
(listing elements of injunction including imminent, irreparable injury). “An injury is
irreparable if the injured party cannot be adequately compensated in damages or if
the damages cannot be measured by any certain pecuniary standard.” Butnaru, 84
S.W.3d at 204. Courts generally will not enforce a contract with a temporary
injunction, because the damages are monetary. See id. at 211. However, as our sister
court in Texarkana has explained, “[E]ven if damages are subject to a precise
calculation, an injunction will lie to prevent the dissipation of specific funds that
would otherwise be available to pay a judgment.” Hartwell v. Lone Star, PCA, 528
S.W.3d 750, 764 (Tex. App.—Texarkana 2017, pet. dism’d) (citation omitted).
Here, in addition to a breach of contract cause of action, Rueben asserted
claims for breach of fiduciary duty and fraud. There was some evidence presented
at the temporary injunction hearing which established that: (1) Zurovec and Chaffin
“parted ways” with Rueben; (2) Zurovec, Chaffin, and others formed a new entity
CGPS engaged in providing the same services as CS shortly after parting ways with
25
Rueben; (3) materials and inventory from CS were transferred to CGPS; (4) despite
assurances that CGPS would pay for the materials and inventory, at the time of the
hearing CGPS had not made any such payments to CS; (5) there were no terms for
repayment between CGPS and CS for the materials; and (6) Rueben had provided
capitalization to purchase some of the materials and inventory. Rueben also testified
that Chaffin agreed they would go through the inventory and split it fifty-fifty and
denied all he sought was money. Rather, he testified he wanted “what’s mine.”
Appellants focus on Rueben’s claims that he was entitled to a share of the
profits, and therefore monetary damages only. However, Rueben claimed an interest
in the inventory, property, and tools, among other things. The evidence showed that
there was not simply a fear that property would be transferred from CS to CGPS, but
that substantial materials and inventory had already been transferred and CS had not
been paid for that inventory. Viewing the evidence in the light most favorable to the
trial court’s ruling, we conclude that it did not abuse its discretion in determining
that Rueben met his burden of showing an imminent and irreparable injury in the
absence of a temporary injunction. See Henry, 520 S.W.3d at 34; Davis, 571 S.W.2d
at 862; CRC-Evans Pipeline Int’l, Inc., 927 S.W.2d at 262; see also Hartwell, 528
S.W.3d at 764. We overrule issue three.
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D. Admission of Evidence: Issue Four
Appellants next contend the trial court erred by admitting Rueben’s Exhibit
6, and absent the erroneously admitted exhibit, there was no evidence of damages.
Appellants argue that the spreadsheet compiled by Rueben that contained prices for
materials and inventory CS purchased constituted hearsay and that he failed to
produce the underlying information he used to create the spreadsheet at trial. We
review a trial court’s decision to admit or exclude evidence for an abuse of
discretion. In re J.P.B., 180 S.W.3d 570, 575 (Tex. 2005). To show a trial court
abused its discretion by admitting evidence during a temporary injunction hearing,
the complaining party must demonstrate that: “(1) the trial court erred in admitting
the evidence; (2) the erroneously admitted evidence was controlling on a material
issue of the case and was not cumulative; and (3) the error probably caused rendition
of an improper judgment in the case.” Ron v. Ron, 604 S.W.3d 559, 574 (Tex.
App.—Houston [14th Dist.] 2020, no pet.) (citing Tex. R. App. P. 44.1(a)(1); Tex.
Dep’t of Transp. v. Able, 35 S.W.3d 608, 617 (Tex. 2000); Sharma v. Vinmar Int’l,
Ltd., 231 S.W.3d 405, 422 (Tex. App.—Houston [14th Dist.] 2007, no pet.) (other
citations omitted)). The complaining party has the burden to show harm from an
erroneous evidentiary ruling. Id.We disagree that there was no other evidence of damages. Rueben testified
that CS transferred materials and inventory, including generators to CGPS at a loss.
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Appellants themselves confirmed they had transferred materials from CS to CGPS,
and although their intention was for CGPS to pay CS, Zurovec could not recall the
repayment terms, and as of the temporary injunction hearing, CGPS had not paid CS
for any of the materials or inventory. Moreover, Appellants agreed that Rueben
provided monetary contributions to CS for the purchase of generators, among other
things, and although the reasons for nonpayment were disputed, they had not paid
all the money back.
Considering this other evidence, we cannot say that the admission of Rueben’s
Exhibit 6, even if erroneous, probably resulted in the rendition of an improper
judgment. See Tex. R. App. P. 44.1(a)(1); Ron, 604 S.W.3d at 574. The trial court
could have reasonably concluded that Rueben sustained damages based on the
testimony an agreement existed that Rueben and Appellants would split profits,
property, and inventory fifty-fifty, and he had not been paid for those things plus
evidence he contributed capital to CS for the purchase of such items which
admittedly had not been reimbursed in full. We overrule this issue.
E. Vagueness of Injunction: Issue Five
In their last issue, Appellants contend the temporary injunction is
impermissibly vague in violation of Texas Rule of Civil Procedure 683. They assert
the temporary injunction fails to identify the property at issue with any specificity,
which constituted an abuse of discretion. We agree.
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Texas Rule of Civil Procedure 683 requires every order granting an injunction
1) set forth the reasons for its issuance, 2) be specific in terms, and 3) describe in
reasonable detail and not by reference to the complaint or other document, the act or
acts sought to be restrained. See Tex. R. Civ. P. 683. Rule 683’s procedural
requirements “are mandatory, and an order granting a temporary injunction that does
not meet them is subject to being declared void and dissolved.” Qwest Commc’ns
Corp. v. AT & T Corp., 24 S.W.3d 334, 337 (Tex. 2000); see also InterFirst Bank
San Felipe, N.A. v. Paz Const. Co., 715 S.W.2d 640, 641 (Tex. 1986).
Paragraph 4B simply enjoins Appellants from “[s]elling[,] disposing of,
transferring or encumbering any property owned by Plaintiff currently in
Defendants’ possession.” The temporary injunction does not describe the property
owned by Plaintiff in Defendants’ possession. One cannot tell if it is real property,
personal property, or both.
In his brief Rueben notes the language in his First Amended Petition which
“refers to Appellee’s personal property, including but not limited to a work van.”
(Emphasis added.) He further states that “property” as used in the temporary
injunction does not include any claimed interest in real property “as the real
properties are referenced separately throughout the Petition as the defined term
‘Properties.’” Rueben asserts that “[w]ith this understanding, there is no basis for
finding the TI vague.”
29
However, Rule 683’s express language requires a description in “reasonable
detail” and “not by reference to the complaint or other document[.]” Tex. R. Civ. P.
683. Rueben’s need to reference his First Amended Petition to clarify the property
involved indicates the temporary injunction lacks the requisite specificity. 3 Enjoined
parties should be able to review a temporary injunction order, understand it, and not
guess about what they are prohibited from doing upon threat of contempt. See TMRJ
Holdings, Inc. v. Inhance Techs., LLC, 540 S.W.3d 202, 213 (Tex. App.—Houston
[1st Dist.] 2018, no pet.) (“Requiring that an enjoined party search for evidence to
understand what conduct is enjoined undermines the purposes of an injunction,
which are to remedy specific harm and to provide notice of the prohibited conduct.”).
Given the broad ownership interests Rueben claims and Appellants’ steadfast denials
of the same, delineating the property and its character with some degree of
specificity is necessary. We hold the temporary injunction’s phrase “any property
owned by Plaintiff in Defendants’ possession” is impermissibly vague because it
fails to provide adequate notice to Appellants of the specific acts they are enjoined
from performing in terms not subject to reasonable disagreement. See TMRJ
Holdings, 540 S.W.3d at 214 (concluding injunction was impermissibly vague
3Even if Rule 683 allowed us to reference outside documents like Rueben’s
complaint, which it does not, we note that the First Amended Petition does not limit
the type of property involved, as shown by use of the phrase “including but not
limited to[.]”
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where it failed to adequately identify acts that it restrained); Cooper Valves, LLC v.
ValvTechnologies, Inc., 531 S.W.3d 254, 266 (Tex. App.—Houston [14th Dist.]
2017, no pet.) (noting injunction “should inform a party of the acts he is restrained
from doing without requiring inferences or conclusions about which persons might
disagree and which might require additional court hearings”); Austin Housing Fin.
Corp. v. Friends of Brykerwoods LLC, No. 01-20-00314-CV, 2021 WL 2369502, at
*6 (Tex. App.—Houston [1st Dist.] June 10, 2021, no pet.) (mem. op.) (concluding
temporary injunction’s prohibition of “any construction activities” was too vague as
it failed to provide adequate notice of restrained activities in terms “not subject to
reasonable disagreement”); Dickerson v. Acadian Cypress & Hardwoods, Inc., No.
09-13-00299-CV, 2014 WL 1400659, at *7 (Tex. App.—Beaumont Apr. 10, 2014,
no pet.) (mem. op.) (concluding temporary injunction violated Rule 683 as it failed
to adequately define the “current clients” restrained party could not contact); In re
Krueger, No. 03-12-00838-CV, 2013 WL 2157765, at *6 (Tex. App.—Austin May
16, 2013, no pet.) (mem. op.) (concluding injunction did not comply with Rule
683 where it failed to provide specific bank account names and numbers relator was
enjoined from accessing). We sustain this issue.
IV. Conclusion
We conclude the trial court did not abuse its discretion in determining that
Rueben was entitled to a temporary injunction preserving the status quo. However,
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because the trial court’s order fails to comply with Rule 683’s mandatory
requirements, we declare the temporary injunction order void, dissolve the
injunction, and remand the case to the trial court for further proceedings consistent
with this opinion.
REVERSED AND REMANDED.
________________________________
W. SCOTT GOLEMON
Chief Justice
Submitted on June 16, 2022
Opinion Delivered August 25, 2022
Before Golemon, C.J., Kreger and Horton, JJ.
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