Jerry Grisaffi v. Rocky Mountain High Brands, Inc. F/K/A Republic of Texas Brands, Inc. ( 2022 )

DISSENT; Opinion Filed October 18, 2022
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-20-00538-CV
JERRY GRISAFFI, Appellant
V.
ROCKY MOUNTAIN HIGH BRANDS, INC. F/K/A REPUBLIC OF TEXAS
BRANDS, INC., Appellee
On Appeal from the 192nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-17-15441
DISSENTING OPINION
Before Justices Schenck, Osborne, and Partida-Kipness
Opinion by Justice Schenck
Our previous opinion’s mandate remanded this case to the trial court for
appellee Rocky Mountain to make an election of remedies between a monetary
award and a declaratory judgment that the ten million shares of stock issued to
Hilltop Trust and reissued to appellant Grisaffi were void ab initio. The issue in the
first appeal was whether Rocky Mountain could obtain both forms of relief in this
case and from this defendant. As the opinion laid out, the one-satisfaction or single-
recovery rule requires a prevailing plaintiff to elect a single remedy to avoid a
windfall. After determining return of the stock and damages paid for that stock
would remediate for the same injury, we concluded that Rocky Mountain could not
have both forms of relief from Grisaffi in this case. Because that rule also applies
to foreclose multiple recoveries against multiple defendants in the same or different
cases, it should control the outcome here as well.
Contrary to the majority, I do not view our earlier mandate as vitiating the
one-satisfaction rule or leaving the trial court with no choice but to render a judgment
awarding damages to Rocky Mountain on remand when presented with proof that
Rocky Mountain, after entry of the original judgment, had obtained return of the
shares from a co-defendant in a severed action. See Jefferson v. Geico Cty. Mut.
Ins., No. 05-20-00067-CV, 2022 WL 3908547, at *3 (Dallas Aug. 31, 2022, no pet.
h.) (mem. op.) (citing Cessna Aircraft Co. v. Aircraft Network, LLC, 345 S.W.3d
139, 144 (Tex. App.—Dallas 2011, no pet.)) (scope of appellate court’s mandate
determined with reference to both appellate court’s opinion and mandate itself).
Instead, the trial court was required only to permit Rocky Mountain to make that
election. In my view, Rocky Mountain made that election when, after the entry of
the judgment subject to the earlier appeal, it obtained a second judgment in another
cause of action awarding to Rocky Mountain the declaratory relief that “the shares
issued to Jerry Griasaffi” were void ab initio, such that the instant trial court’s
judgment awarding monetary damages to Rocky Mountain constitutes a double
recovery.
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While the parties before us now debate whether either of them should have
disclosed the separate judgment in the earlier appeal, that debate could not have
controlled our disposition of the judgment then on appeal. Because that judgment
had already been rendered (with an appeal pending) before the separate Judgment
was even entered, the latter judgment would not be part of the appellate record, and
the trial court’s failure to account for the latter could not amount TO error in any
event.
Having already answered that Rocky Mountain could not have two recoveries
from a single defendant and must make an election in that case, the question posed
on remand was (and remains) whether the single-recovery rule permits multiple
recoveries from different defendants in different cause numbers for a single injury.
As we and other courts have repeatedly answered that question in the negative in
other cases, I would adhere to those holdings. E.g., Stewart Title v. Sterling, 822
S.W.2d 1, 6 (Tex. 1991) (“There is no reason we should allow a windfall double
recovery in cases involving multiple defendants when double recovery is clearly
prohibited against a single defendant.”); Byrd v. Woodruff, 891 S.W.2d 689, 702
(Tex. App.—Dallas 1994, writ denied) (citing Stewart Title, 822 S.W.2d at 9).
Accordingly, I dissent from the majority’s decision to affirm the trial court’s
judgment.
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BACKGROUND
I find no fault with the majority’s recitation of the facts and will only repeat
those necessary for context and to explain the basis for my dissent.
Grisaffi is a former officer and director of Rocky Mountain. Grisaffi caused
ten million shares of Series A Preferred Stock to be issued in the name of Hilltop
Trust, a trust for the benefit of Grisaffi’s children. He subsequently caused Hilltop
Trust to request cancellation of the shares and to request transfer or reissuance of
one million shares to himself. Grisaffi then sold those one million shares to LSW
Holdings, LLC (LSW) for $3.5 million pursuant to an agreement that did not include
Rocky Mountain. Grisaffi later resigned.
Rocky Mountain sued Grisaffi, asserting claims for breach of fiduciary duty,
conversion, and fraudulent conveyances arising from, inter alia, the issuance of the
Series A Preferred Stock. In the same lawsuit, Rocky Mountain also asserted claims
against LSW and Lily Li (a managing member of LSW), among others. The trial
court issued death-penalty discovery sanctions against Grisaffi, striking his
pleadings; barring him from filing any further pleadings; and awarding Rocky
Mountain a default judgment with respect to its claims against Grisaffi. The trial
court also severed Rocky Mountain’s claims against LSW, Li, and the other
remaining defendants.
The trial court rendered a default judgment as to Grisaffi. In addition to other
relief not at issue here, the judgment (1) ordered Rocky Mountain to recover from
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Grisaffi the sum of $3.5 million “for funds obtained through fraud, breach of
fiduciary duty and conversion with respect to Series A Preferred Stock” and (2)
declared void ab initio and of no legal force or effect the “10,000,000 shares (later
reissued as 1,000,000 shares) of Series A Preferred Stock in [Rocky Mountain] that
were issued to Hilltop Trust and reissued to Jerry Grisaffi.” That default judgment
was rendered on August 30, 2018.
Grisaffi appealed to this Court, challenging only the relief granted, arguing
that by both declaring the issuance of the Series A Preferred Stock void ab initio and
awarding Rocky Mountain $3.5 million in monetary damages, the trial court’s
judgment contained an impermissible double recovery. We agreed with Grisaffi,
and, after noting it was unclear which award would give Rocky Mountain the greater
recovery, we remanded the case to the trial court for Rocky Mountain to make an
election of remedies.
On remand, Rocky Mountain filed an Election of Remedies and Motion for
Entry of Final Judgment, choosing “to recover an award of $3.5 million against Jerry
Grisaffi” and moving for entry of a final judgment in accordance with our judgment.
The trial court signed a final judgment as to Jerry Grisaffi, which omitted the
declaration that the “10,000,000 shares (later reissued as 1,000,000 shares) of Series
A Preferred Stock in [Rocky Mountain] that were issued to Hilltop Trust and
reissued to Jerry Grisaffi” were void ab initio and of no legal force or effect. The
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judgment otherwise awarded all the same relief as the Original Judgment, including
the $3.5 million monetary award.
When Grisaffi filed post-judgment motions, the trial court held a status
conference and ordered the parties to file a joint stipulation of facts. Among the
facts stipulated by the parties was that in the severed action against LSW and Li, the
trial court had awarded to Rocky Mountain the declaratory relief that the shares
issued to Grisaffi and later sold by him to LSW were void ab initio and that Rocky
Mountain recover, of and from LSW and Li, jointly and severally with Grisaffi,
actual damages of $3.5 million for their knowing participation in Grisaffi’s wrongful
conduct. That judgment is dated August 12, 2019.
Grisaffi subsequently filed a motion for new trial based on the judgment and
relief Rocky Mountain obtained against LSW and Li in the severed action during the
pendency of the first appeal of this case, citing our previous opinion as support for
his argument that Rocky Mountain could not recover both the $3.5 million award
and the declaratory relief related to the stock issuance. When the trial court failed
to reverse its judgment on remand, Grisaffi filed this appeal.
DISCUSSION
The supreme court first articulated the one-satisfaction principle in Bradshaw
v. Baylor University:
It is a rule of general acceptation that an injured party is entitled to
but one satisfaction for the injuries sustained by him. That rule is in
no sense modified by the circumstance that more than one
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wrongdoer contributed to bring about his injuries. There being but
one injury, there can, in justice, be but one satisfaction for that injury.
Sky View at Las Palmas, LLC v. Mendez, 555 S.W.3d 101, 107 (Tex. 2018) (quoting
Bradshaw v. Baylor Univ., 84 S.W.2d 703, 705 (1935)) (emphasis added). Our
previous opinion explained that awarding to Rocky Mountain both a monetary award
of $3.5 million for the stock Grisaffi wrongfully caused to be issued and declaratory
relief voiding ab initio the issuance of that same stock constituted a double recovery
in violation of that rule. See Grisaffi v. Rocky Mountain High Brands, Inc., No. 05-
18-01020-CV, 2020 WL 948377, at *4 (Tex. App.—Dallas Feb. 27, 2020, no pet.)
(mem. op.).
The majority concludes the trial court’s judgment does not contain the same
double-recovery problem we previously identified. In support of this conclusion,
the majority reasons that our previous mandate did not permit the trial court to re-
litigate the existence or amount of damages caused by Grisaffi’s conduct and instead
only permitted the trial court to allow Rocky Mountain to choose between the
monetary award and the declaratory relief. I disagree.
Nothing in either our mandate or our opinion purported to address the effect
of any actions or judgments in any other case as to any other party. Indeed, it could
not have had that effect with respect to the case (and judgment) involving LSW and
LI, as that judgment had not been rendered at the time of judgment then on appeal.
Gristafi could not have asserted the trial court’s failure to recognize it as error or to
seek relief on that basis. See Nw. Indep. Sch. Dist. v. Carroll Indep. Sch. Dist., 441
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S.W.3d 684, 692 (Tex. App.—Fort Worth 2014, pet. denied). The appellate record
on review from a default judgment such as this1 is limited to what was before the
trial judge at the time he entered judgment. Armstrong v. Minshew, 768 S.W.2d 883(Tex. App.—Dallas 1989, no writ); see also Armendariz v. Barragan, 143 S.W.3d
853, 856 (Tex. App.—El Paso 2004, no pet.). Because the second judgment had not
been rendered, much less shown of record in this case at the time of the original
judgment, this Court could not have properly considered, much less directed relief,
on this basis on the first appeal. At most, the Court might have provided suggestions
in dicta to direct the trial court to continue to adhere to the single-recovery rule going
forward.2
And, regardless of the scope of the first appeal, the scope of our mandate is
determined by reference to the Court’s opinion. See Jefferson, 2022 WL 3908547,
at *3 (citing Cessna Aircraft Co., 345 S.W.3d at 144) (scope of appellate court’s
mandate). That opinion set forth the context of the facts of this case and made it
clear that Rocky Mountain suffered a single injury from Grisaffi’s actions and that
“the pleadings [did] not establish how Rocky Mountain was injured by Grisaffi’s
sale to LSW of the Series A Preferred stock Grisaffi had acquired.” See Grisaffi,
2022 WL 948377, at *3. The corollary to this conclusion is that there is nothing to
1
See also Perry Homes v. Cull, 258 S.W.3d 580 n.89 (Tex. 2008) (motion to compel arbitration); David
Powers Homes v. Rendleman Co., 355 S.W.3d 327 n.2 (Tex. App.—Houston [1st Dist.] 2011, no pet.)
(summary judgment).
2
This is not to suggest, as a general matter, that counsel should not endeavor at all times to inform this
and other courts of potentially material matters.
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establish that LSW’s or Li’s actions in purchasing this stock caused a separate injury
to Rocky Mountain. Having already answered that Rocky Mountain could not have
both cancellation of the stock issuance and return of its purchase price from a single
defendant, I see no basis in the law (or our earlier mandate) suggesting that it might
recover twice but from different defendants.
Thus, I disagree with the majority opinion that the double-recovery problem
does not exist where Rocky Mountain obtained the same relief in two separate
actions against two sets of defendants for the same injury. This is simply a rejection
of the ancient one-satisfaction rule as our supreme court recognized in Sky View.
See Sky View, 555 S.W.3d at 107; Stewart Title, 822 S.W.2d at 6; see also Janusz v.
City of Chicago, 832 F.3d 770 (7th Cir. 2016) (summary judgment affirmed in
federal case where defendant established plaintiff already recovered for same injury
in state court action); Yates v. Nimeh, 486 F. Supp. 2d 1084, 1087 (N.D. Cal. 2007)
(discussing California single satisfaction rule requiring reduction of others’ liability
where satisfaction received from one defendant); E.A. Prince & Son, Inc. v. Selective
Ins. Co. of Se., 818 F. Supp. 910, 916 (D.S.C. 1993) (discussing South Carolina law
allowing recovery of multiple judgments, but allowing only one satisfaction of
damages assessed in those judgments); Gionfriddo v. Gartenhaus Café, 557 A.2d
540, 542–43 (Conn. 1989) (double recovery via multiple judgments is foreclosed by
rule that only one satisfaction may be obtained for loss that is subject of two or more
judgments).
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Accordingly, I would conclude that the trial court had before it conclusive
evidence that Rocky Mountain had already elected its remedy and obtained one
satisfaction of its injury when it obtained the judgment in the severed action against
LSW and Li. Therefore, the only judgment the trial court could sign was one that
omitted both the declaratory relief and the monetary award.
CONCLUSION
Civil judgments assure a prevailing plaintiff of the greatest lawful recovery
available for a compensable injury, but not a duplicative windfall. This is what
separates courts from lotteries and game shows. In light of the parties’ stipulations
and this Court’s previous opinion and mandate limiting Rocky Mountain to a single
recovery for its injury, I would hold the trial court was bound by the one-satisfaction
rule and prohibited from signing a judgment that awards to Rocky Mountain a
double recovery albeit from different parties. Because the majority concludes
otherwise and affirms the trial court’s judgment, I dissent.
/David J. Schenck/
DAVID J. SCHENCK
JUSTICE
200538DF.P05
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