Cynthia Ann Fleming v. Davis Hays Fleming, Jr. ( 2012 )

Opinion issued December 28, 2012
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00635-CV
———————————
CYNTHIA ANN FLEMING, Appellant
V.
DAVIS HAYS FLEMING, JR., Appellee
On Appeal from the 312th District Court
Harris County, Texas
Trial Court Case No. 2007-09643
MEMORANDUM OPINION
In this post-divorce division of marital property case, appellant, Cynthia
Fleming (“Cindy”), petitioned the trial court to divide alleged community assets
that the court did not divide in the original divorce decree dissolving her marriage
to appellee, Davis Fleming (“Davis”). The trial court denied this petition and
refused to divide the alleged marital assets. In two issues, Cindy contends that the
trial court erred in failing to divide (1) Davis’s alleged ownership interest, or the
proceeds from the sale of his ownership interest, in Con-Dive, L.L.C. (“Con-
Dive”), a company in which he had previously been a member; and (2) Davis’s
alleged outstanding stock options, or proceeds from the exercise of these options,
granted to him by his former employer, Stolt Offshore, S.A. (“Stolt”).
We affirm.
Background
During the pendency of Cindy and Davis’s divorce, the trial court signed an
agreed temporary order, which provided, among other things:
Sale of Stock Options. IT IS ORDERED that DAVIS HAYS
FLEMING, JR. shall, on or before September 1, 2005, pay to
CYNTHIA ANN FLEMING 50% of the net proceeds from the sale of
all stock options issued by [Stolt], which amount shall be applied to
any attorney’s fees incurred by [Cindy] in this proceeding.
IT IS FURTHER ORDERED that [Davis] shall not exercise any other
stock options granted to him by [Stolt] without the express written
consent of [Cindy].
The trial court signed the final divorce decree on July 27, 2006. This decree
divided Cindy and Davis’s community property, including Davis’s retirement
benefits “in the Stolt Offshore Inc., 401k Profit Sharing Plan and Trust
2
(administered by Charles Schwab) arising out of [Davis’s] employment with Stolt
Offshore.” The decree did not include a specific division of stock options.
On February 19, 2007, Cindy filed an “Original Petition for Post-Divorce
Division of Property,” and she named both Davis and Con-Dive, a Louisiana
limited liability company, as respondents. Cindy alleged that the divorce decree
“failed to dispose of the parties’ marital interest in Con-Dive,” and she requested
that the court divide the ownership interest in a just and right manner.1 Cindy also
requested the award of exemplary damages against Con-Dive, which, she alleged,
was “actively assisting” Davis in concealing his ownership interest in the company
and was perpetuating an “ongoing fraud” against her. Cindy later nonsuited her
claims against Con-Dive.
At trial, Cindy testified that she brought the post-divorce proceeding because
“at the time of divorce [she] could not prove that [Davis] had the ownership in
[Con-Dive] that he was denying that he owned.” She stated that, around October
2005, Davis left his employment at Stolt, and he “tried to get rid of [Stolt] stock
options without [her] knowing about it.” Cindy alleged that Davis had stock
options from Stolt, and she knew that he exercised some options and then sold
1
Cindy’s amended petition, which is not included in the clerk’s record, additionally
requested that the trial court divide Davis’s Stolt stock options that remained
outstanding and unexercised on the date of divorce.
3
those shares in 2005 and 2006. She believed that Davis had an additional 2,250
shares of Stolt stock that were not divided in the divorce decree.
Cindy also testified that Con-Dive was a company formed in September
2005 “to buy boats and do diving offshore to repair pipes” and owned by Davis,
Duane Smith, and Kevin Lorio. Cindy testified that Davis had signed Con-Dive’s
Operating Agreement on November 11, 2005, which reflected that he owned 5% of
the company and that his initial capital contribution was $25,000. Cindy
introduced, and the trial court admitted, a document entitled “Action by Requisite
Vote of Membership Interests of Con-Dive, L.L.C.” that attempted to remove
Davis and Lorio as Con-Dive members because they had failed to pay their initial
capital contribution.2 This document was executed July 28, 2006, the day after the
trial court signed the final divorce decree. Cindy testified that she derived no
benefit from Davis’s interest in Con-Dive and that she never received any share of
Davis’s ownership interest or his salary or bonuses.
Davis testified that he had shares in Stolt, but only as part of his 401(k). He
believed that the last time that he had sold any Stolt shares was in November
2
Although this document refers to deleting the interests of “Messrs. Davis and
Lorio,” the document also states that the Con-Dive Operating Agreement provided
that “Davis H. Fleming, Jr.” had contributed $25,000 for a membership interest,
but that “Davis H. Fleming, Jr.” had, in fact, failed to contribute his required initial
capital contribution.
4
2005.3 He stated that the divorce decree did not award stock to either him or
Cindy, other than what was included in his 401(k), but all of his Stolt stock options
had been exercised and the resulting stock sold prior to that date. Davis testified
that he believed that he had to exercise the stock options before he left his
employment at Stolt or he would lose them. He also testified that, pursuant to the
trial court’s agreed temporary order, he paid Cindy 50% of the proceeds from the
options that he had exercised and that he did not exercise any options after
agreeing to the temporary order. Davis unequivocally testified that he never
concealed from Cindy any Stolt stock options, or proceeds from the exercise of
Stolt stock options, and that he had no stock options available to him on the date of
the final divorce decree.
Davis also repeatedly testified that he never had an ownership interest in
Con-Dive and that he was formally removed from Con-Dive records as a member
on July 28, 2006. He stated that he was removed because he had never paid his
required capital contribution to the company. In March 2007, Davis received
3
In his deposition, Davis testified that he exercised some of his Stolt stock options
to purchase 250 shares of stock, which he then sold for $10,721.11, in February
2006. At trial, Davis testified that he believed his deposition testimony was
incorrect.
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$550,000 in bonuses from Con-Dive.4 He testified that he received this bonus
because of the “work [he] performed” for Con-Dive, not as a result of cashing out
an ownership interest in Con-Dive.
The trial court also admitted the deposition testimony of several individuals
associated with Con-Dive, including Wesley Freeman, Lorio, Greg Ruiz, and
Smith, who testified concerning whether Davis had an ownership interest in Con-
Dive. Freeman, a managing director and former CEO of Con-Dive, testified that
he and Smith formed Con-Dive and that “there was [the] opportunity for two other
minor interest partners that had the opportunity to—to be part of [Con-Dive] that
never fulfilled it,” referring to Lorio and Davis. According to Freeman, Smith was
the only other person who “actually had any money in [Con-Dive],” and Davis
never owned an interest in Con-Dive because he never made his capital
contribution. Freeman also testified that, in 2007, the Con-Dive leadership decided
to pay bonuses to all Con-Dive employees, regardless of whether they had an
ownership interest in the company, and they “rated [the employees’] value to the
company and what they’d done” for the company to determine the bonus amounts.
Lorio characterized both himself and Davis as 25% owners of Con-Dive, but
he testified that their ownership percentages decreased to 5% several months after
4
Davis acknowledged that an unrelated company called Patty-Cam, which held a
5% ownership interest in Con-Dive, like Cindy alleged that Davis himself owned,
later sold its interest in the company for around $600,000.
6
Con-Dive formed. He testified that he “believed” that Davis made his initial
contribution in cash, but he also stated that it was possible to become an owner
through “sweat equity” by bringing in accounts for the company. He stated that he
and Davis were both “under the impression” that they were owners of Con-Dive.
Ruiz previously worked as a civil engineer with a company called W&T,
which did business with Con-Dive. He testified that he personally knew the
“forming partners” of Con-Dive: Kevin Lorio, Davis Fleming, and Duane Smith.
To his understanding, these three men were the owners of Con-Dive at the time
that W&T contracted with Con-Dive. Ruiz testified that, during contract
negotiations, Davis represented that he owned an interest in Con-Dive.
Smith testified that he was not sure who the original owners of Con-Dive
were, and, although he thought that he was the original owner of the company, he
stated that the owners “could have been a combination of [another company called
Conmaco], [himself], Davis Fleming, and Kevin Lorio.” He acknowledged that, at
one point, he, Davis, and Lorio were involved in “the process of negotiating . . . an
ownership structure” for Con-Dive. He also acknowledged that it “could be true”
that Davis’s work on behalf of Con-Dive “was what was performing some of his
capital contributions,” but he did not know for sure. He stated that “if [Davis] put
in $25,000, it was probably sweat equity.”
7
At the end of the trial, the trial court stated that it would read the deposition
testimony and take the case under advisement. On March 16, 2011, the trial court
sent the parties a letter rendering judgment.5
After the trial court’s rendition letter, Cindy filed a “Motion for Clarification
of Rendition,” in which she argued that the rendition letter did not address the fact
that she demonstrated at trial that Davis “had sole control and management over
his negotiated relationship with Con-Dive LLC, and if the court found that [Davis]
did not tender or otherwise fund his initial capital requirement . . . his failure was a
breach of his obligation to the community.” She argued that Davis should be
disgorged of the “windfall” he received from Con-Dive and that that amount
should be split between them. She also argued that 2,250 Stolt shares were not
sold in 2006 and were not represented in Davis’s 2005 Form 1099. She stated that
at least 2,000 shares remained outstanding and were not divided in the divorce
decree. She requested that the trial court address these “omitted issues.”
On May 13, 2011, the trial court signed an “Order on Petition for Post-
Divorce Division of Property and on Motion for Clarification of Rendition.” In
this order, the trial court issued the following findings relevant to Cindy’s petition
for post-divorce division of property:
1. The Court finds that the evidence does not support a finding
that [Davis], held an ownership interest in Con-Dive, L.L.C.,
5
This letter is not included in the clerk’s record.
8
that remained undivided from the original judgment of divorce
rendered on July 27, 2006. The Court therefore denies relief as
requested in Paragraph 3(a) of the First Amended Petition for
Post-Divorce Division of Property.
2. The Court further finds that the evidence does not support a
finding that [Davis] concealed the proceeds of the sale of stock
options received from Stolt Offshore, Inc., that remained
undivided from the original judgment of divorce rendered on
July 27, 2006. The Court therefore denies relief as requested in
Paragraph 3(b) of the First Amended Petition for Post-Divorce
Division of Property.
The trial court also denied Cindy’s requests for clarification of rendition
concerning Davis’s alleged Con-Dive ownership interest and his alleged
outstanding Stolt stock options. Cindy moved for a new trial, which was overruled
by operation of law. This appeal followed.
Post-Divorce Division of Property
In her first and second issues, Cindy contends that the trial court erred in
failing to divide (1) the alleged community interest in Con-Dive or the proceeds
from Davis’s disposition of his ownership interest and (2) the alleged outstanding
Stolt stock options or the proceeds from Davis’s exercise of these options. Cindy
contends that the trial court’s findings that Davis did not have an ownership
interest in Con-Dive and that Davis did not have outstanding Stolt stock options
that remained undivided in the final divorce decree are not supported by legally
sufficient evidence.
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A. Standard of Review
Texas Family Code section 9.201 provides that, after a divorce proceeding,
“[e]ither former spouse may file a suit . . . to divide property not divided or
awarded to a spouse in a final decree of divorce or annulment.” TEX. FAM. CODE
ANN. § 9.201(a) (Vernon 2006); Brown v. Brown, 236 S.W.3d 343, 347 (Tex.
App.—Houston [1st Dist.] 2007, no pet.). “If a court of this state failed to dispose
of property subject to division in a final decree of divorce . . . the court shall divide
the property in a manner that the court deems just and right, having due regard for
the rights of each party . . . .” TEX. FAM. CODE ANN. § 9.203(a) (Vernon 2006).
Here, Cindy, as the post-divorce petitioner, bears the burden to prove that the trial
court did not consider or dispose of Davis’s alleged ownership interest in Con-
Dive and Davis’s alleged outstanding Stolt stock options in the final divorce
decree. See Brown, 236 S.W.3d at 349 (“[A]s the petitioner in this statutory post-
divorce action, George has the burden to prove that the divorce court did not
consider or dispose of the 401(k) plan or the accrued bonuses in the final decree.”);
Stephens v. Marlowe, 20 S.W.3d 250, 254 (Tex. App.—Texarkana 2000, no pet.)
(“Marlowe, as the party requesting partition, had the burden to prove in the
partition action that the divorce court did not consider or dispose of the settlement
proceeds.”).
10
In a bench trial, findings of fact carry the same weight as a jury’s verdict.
OAIC Commercial Assets L.L.C. v. Stonegate Vill., L.P., 234 S.W.3d 726, 736
(Tex. App.—Dallas 2007, pet. denied). When a party attacks the legal sufficiency
of an adverse finding on an issue on which she had the burden of proof at trial, she
must demonstrate on appeal that the evidence establishes, as a matter of law, all
vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241
(Tex. 2001) (per curiam) (citing Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690
(Tex. 1989)); Reliant Energy Servs., Inc. v. Cotton Valley Compression, L.L.C.,
336 S.W.3d 764, 781 (Tex. App.—Houston [1st Dist.] 2011, no pet.). In reviewing
a “matter of law” challenge, we must first examine the record for evidence that
supports the finding, while ignoring all evidence to the contrary. Francis, 46
S.W.3d at 241; see also Brown, 236 S.W.3d at 348 (“In determining whether
legally sufficient evidence supports the finding under review, we must consider
evidence favorable to the finding if a reasonable fact finder could consider it, and
disregard evidence contrary to the finding unless a reasonable fact finder could not
disregard it.”) (citing City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005)).
If there is no evidence supporting the finding, we will then examine the entire
record to determine if the contrary position is established as a matter of law.
Francis, 46 S.W.3d at 241. We will sustain this challenge only if the contrary
11
proposition is conclusively established. Id. (citing Croucher v. Croucher, 660
S.W.2d 55, 58 (Tex. 1983)).
The ultimate test for legal sufficiency is whether the evidence would enable
a reasonable and fair-minded fact finder to reach the verdict under review. City of
Keller, 168 S.W.3d at 827. The fact finder is the sole judge of witness credibility
and the weight to give their testimony. See id. at 819. “Consequently, we may not
replace a finding simply because we would reach a different answer on the
evidence.” Brown, 236 S.W.3d at 348 (citing Maritime Overseas Corp. v. Ellis,
971 S.W.2d 402, 407 (Tex. 1998)).
B. Alleged Ownership Interest in Con-Dive
In Finding of Fact One, the trial court found “that the evidence does not
support a finding that [Davis], held an ownership interest in Con-Dive, L.L.C., that
remained undivided from the original judgment of divorce rendered on July 27,
2006.”
At trial, Davis repeatedly testified that he never had an ownership interest in
Con-Dive. Davis stated that he was given the opportunity to invest in Con-Dive
and become a member, but he never did so because he could not pay the $25,000
initial capital contribution. Con-Dive’s Operating Agreement, which originally
stated that Davis had paid his capital contribution and listed Davis as a member,
was later amended to remove both Davis and Lorio as members explicitly because
12
neither of them actually paid their capital contributions. Davis also testified that,
although he later received $550,000 from Con-Dive, this payment was a bonus for
the services that he had performed for Con-Dive and it was not a payment for
cashing out an ownership interest in the company. Wesley Freeman, a managing
director and former CEO of Con-Dive, corroborated all of Davis’s testimony
concerning an alleged ownership interest in Con-Dive in his deposition.
Viewing the evidence in the light most favorable to the finding under
review, as we must in a legal sufficiency review, we conclude that a reasonable
and fair-minded fact finder could have credited Davis’s and Freeman’s testimony
that Davis never held an ownership interest in Con-Dive. See Francis, 46 S.W.3d
at 241; Brown, 236 S.W.3d at 348; see also City of Keller, 168 S.W.3d at 827
(providing standard for legal sufficiency review). We therefore hold that the trial
court’s finding that Davis never had an ownership interest in Con-Dive was
supported by legally sufficient evidence.
In her first issue, Cindy states that she “specifically challenges findings of
fact 1 and 4.” In Finding of Fact Four, the trial court found “that the evidence does
not support a finding that [Davis] concealed cash assets of the community prior to
the divorce and that remained undivided from the original judgment of divorce
rendered on July 27, 2006.” Cindy provides no indication of which cash asset she
refers to when she “specifically challenges” Finding Four, and she provides no
13
argument specifically addressing this finding. Thus, to the extent that she
challenges this fact finding, she has waived this issue due to inadequate briefing.
See TEX. R. APP. P. 38.1(i).
Cindy also argues that “[a]lthough the court did not make a specific finding
as to fraudulent concealment and unjust enrichment, no recovery was granted on
these theories. The trial court’s denial of relief on these issues is also challenged
here for all the same reasons.” Texas Rule of Civil Procedure 299 governs omitted
findings of fact and conclusions of law and provides,
When findings of fact are filed by the trial court they shall form the
basis of the judgment upon all grounds of recovery and of defense
embraced therein. The judgment may not be supported upon appeal
by a presumed finding upon any ground of recovery or defense, no
element of which has been included in the findings of fact . . . .
TEX. R. CIV. P. 299. When none of the findings address a ground of recovery or a
defense and the appellant does not file a request for additional or amended findings
of fact, the appellant waives her ground of recovery or defense. See Pinnacle
Homes, Inc. v. R.C.L. Offshore Eng’g Co., 640 S.W.2d 629, 630 (Tex. App.—
Houston [14th Dist.] 1982, writ ref’d n.r.e.); see also Stanley Works v. Wichita
Falls Indep. Sch. Dist., 366 S.W.3d 816, 824 (Tex. App.—El Paso 2012, pet. filed)
(“A party asserting an affirmative defense in a trial before the court must request
findings in support of the defense to avoid waiver. If the trial court’s findings do
not include any of the elements of the defense asserted, the party must specifically
14
request additional findings relevant to the defense.”) (internal citations omitted).
Here, the trial court made no findings or conclusions concerning Cindy’s claim of
unjust enrichment, but she did not request additional findings or conclusions on
this claim. Thus, we conclude that she has waived her claim for unjust enrichment.
We overrule Cindy’s first issue.
C. Alleged Outstanding Stolt Stock Options
In Finding of Fact Two, the trial court found “that the evidence does not
support a finding that [Davis] concealed the proceeds of the sale of stock options
received from Stolt Offshore, Inc., that remained undivided from the original
judgment of divorce rendered on July 27, 2006.”
Both Cindy and Davis testified that, as part of his compensation, Davis
received stock options from Stolt. Davis testified that he exercised Stolt stock
options throughout 2005 and early 2006 and then sold the stock that he received
from exercising the options. Davis acknowledged that, during the pendency of the
divorce, the trial court entered an agreed temporary order requiring him to pay
Cindy 50% of the net proceeds from the sale of all Stolt stock options and
prohibiting him from exercising any further Stolt stock options without Cindy’s
express written consent. Davis testified that, pursuant to this order, he paid Cindy
50% of the proceeds from his exercise of the stock options. Davis also testified
that he left Stolt around September 2005 and that he believed that he had to
15
exercise all of his stock options before he ended his employment or else the
options would be lost. He further stated that the only outstanding shares of Stolt
that he possessed were part of his Stolt 401(k) plan, which the trial court divided
equally between him and Cindy in the final divorce decree. He unequivocally
testified that he never concealed any Stolt stock options or proceeds from Stolt
stock options from Cindy and that he did not own any unexercised Stolt stock
options on the date of the final divorce decree.
Again, viewing the evidence in the light most favorable to the finding under
review, as we must, we conclude that Davis’s testimony is some evidence that he
did not possess any unexercised Stolt stock options or undivided proceeds from the
exercise of Stolt stock options on the date of the final divorce decree. See Francis,
46 S.W.3d at 241; Brown, 236 S.W.3d at 348; see also City of Keller, 168 S.W.3d
at 827 (providing standard for legal sufficiency review). We therefore hold that
the trial court’s finding that Davis did not conceal proceeds from the sale of Stolt
stock options that remained undivided on the date of the final divorce decree was
supported by legally sufficient evidence.
We overrule Cindy’s second issue.
16
Conclusion
We affirm the judgment of the trial court.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Massengale, and Brown.
17