Mamoon N. Alahmad v. Ismail "Sam" Abukhdair

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-12-00084-CV
MAMOON N. ALAHMAD APPELLANT
V.
ISMAIL “SAM” ABUKHDAIR APPELLEE
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FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY
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MEMORANDUM OPINION1 ON REHEARING
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On January 30, 2014, this court issued an opinion affirming the trial court’s
judgment. Appellant Mamoon N. Alahmad (hereinafter Mike) filed a motion for
rehearing and then an amended motion for rehearing. After due consideration,
we deny Mike’s amended motion for rehearing but withdraw our prior opinion and
judgment dated January 30, 2014, and substitute the following in its place.
1
See Tex. R. App. P. 47.4.
Mike’s amended motion for rehearing presents a single issue for rehearing;
but that issue was not raised as an issue in Mike’s brief, nor was it briefed in any
way in Mike’s brief filed with this court.2 Therefore, the issue presented in the
amended motion for rehearing has been waived, and we will not address it on
rehearing. See, e.g., ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867,
880 (Tex. 2010) (holding that even issues that are expressly raised are waived if
no cogent argument or citation to authorities exists in the parties’ appellate brief
concerning the issue); Coastal Liquids Transp., L.P. v. Harris Cnty. Appraisal
Dist., 46 S.W.3d 880, 885 (Tex. 2001) (explaining that issue raised for first time
on rehearing is waived); Wentworth v. Meyer, 839 S.W.2d 766, 778 (Tex. 1992)
(Cornyn, J., concurring) (“[T]he sole purpose of a motion for rehearing is to
provide the court an opportunity to correct any errors on issues already
presented. . . . A motion for rehearing does not afford a litigant an opportunity to
raise new issues”); Rogers v. Ardella Veigel Inter Vivos Trust No. 2, 162 S.W.3d
281, 291 (Tex. App.—Amarillo 2005, pet. denied) (op. on reh’g) (explaining that
new issues cannot be raised by way of a motion for rehearing); Story Servs., Inc.
2
Mike raised six issues: five issues challenged the trial court’s failure to
grant his motion for new trial on grounds of legal and factual sufficiency of the
evidence to support jury findings other than the finding challenged in the
amended motion for rehearing, and one issue challenged the judgment’s offset of
the jury’s awards. None of these issues raised the issue presented on rehearing,
which is that the trial court erred by “holding that when the plaintiff recovers
compensatory damages based on a finding of actual fraud, which is an
intentional tort, the plaintiff may then recover exemplary damages based on a
separate finding, this time by clear and convincing evidence, that the very same
fraud was committed ‘intentionally.’”
2
v. Ramirez, 863 S.W.2d 491, 505–06 (Tex. App.—El Paso 1993, writ denied)
(same). With this addition to our prior opinion, the balance of our prior opinion
remains unchanged.
I. INTRODUCTION
Mike and Appellee Ismail “Sam” Abukhdair created a business together for
the purpose of purchasing a convenience store; they subsequently decided to
dissolve their business relationship and entered into a “buyout” transaction
concerning the convenience store; the buyout transaction involved several
documents, including a dissolution agreement, a deed of trust, and a security
agreement. Sam sued Mike, alleging fraud by material misrepresentation and by
omission concerning the buyout transaction and the associated documents.
Mike counterclaimed for breach of the various aspects of the buyout transaction.
A jury found for Sam on the fraud claims and awarded actual damages to Sam;
the jury also found by clear and convincing evidence that the harm to Sam
resulted from intentional fraud and awarded exemplary damages to Sam. The
jury found for Mike on his counterclaim against Sam and awarded Mike actual
damages in the same amount as the exemplary damages that it awarded to
Sam. The trial court signed a judgment on the jury’s verdict, crediting the jury’s
award to Mike against the total amount Mike owed to Sam based on the jury’s
award to Sam.
Mike perfected this appeal and in six issues argues that the trial court
erred by not granting him a new trial because the evidence is legally and factually
3
insufficient to support the jury’s findings and because the trial court erred by
offsetting the damage awards. We will affirm.
II. FACTUAL AND PROCEDURAL BACKGROUND
Mike and Sam were the only two witnesses at trial. They gave divergent
testimony on the facts surrounding the lawsuit, as set forth below.
A. Relationship Between Mike and Sam
1. Mike’s Testimony
Mike testified that he and Sam met at a social event in California in 2004
while Mike was a branch manager at U.S. Bank. Sam came to the bank where
Mike worked. At the meeting, Sam talked with Mike about Sam’s portfolios and
real estate transactions. U.S. Bank later fired Mike; Mike testified that they used
the excuse that he had allegedly looked at a family member’s account, which
was a violation of U.S. Bank’s policies, but Mike believed that he was fired
because there had been a change in upper management.
Mike testified that he did not tell Sam anything about his business
background before he went into business with Sam. Mike denied giving Sam a
copy of his résumé3 but admitted telling Sam that he had an MBA.4 Mike testified
that he had disclosed to Sam that he had some financial problems in his past and
that he had filed bankruptcy.
3
A copy of Mike’s résumé was admitted into evidence during his testimony.
4
Mike testified that he had received his MBA via correspondence from
Columbus University.
4
2. Sam’s Testimony
Sam also testified that he and Mike met in California in 2004 at a social
event. Mike told Sam that he was a “banker, investment expert”; that he had
worked for Morgan Stanley, Wells Fargo, and the Meyers Group; and that he was
working for U.S. Bank. Mike solicited Sam’s banking and investment business,
and Sam opened two accounts—a business checking account, in which he
deposited $15,000, and an investment account, in which he deposited
$100,000—with Mike’s bank. Sam said that Mike provided him with investment
advice regarding his funds.
After Mike was terminated from U.S. Bank, he hand-delivered his résumé
to Sam at Sam’s business in Sacramento.5 At that point, Mike was looking for a
job, and Sam wanted to know his qualifications. Sam testified that he felt like
Mike was qualified to purchase a convenience store based on his résumé and his
knowledge about businesses. Mike did not tell Sam that he had filed for
bankruptcy. Sam testified that would have made a difference in his decision to
partner with Mike.
B. Purchase of the Convenience Store
1. Mike’s Testimony
Mike said that he originally looked for a convenience store in Arizona and
that Sam told him that they should look in Texas because Sam has relatives in
5
Sam testified that over the course of his lifetime, he had purchased four or
five convenience stores in California.
5
Texas. Mike responded, “Sure, great, great. Great friend of mine, a guy with 29
years plus experience in the convenience stores and the real estate, I said,
[‘]Why not.[’]” Mike testified that they decided on a convenience store in
Arlington known as LD’s Shortstop and that they both participated in the
negotiations.6 Mike testified that both he and Sam did the due diligence prior to
the purchase; they reviewed the store’s financial statements, visited the store
multiple times, met with the owner, looked at the taxes and sales reports, and
“watched inventories and traffic.” When asked whether he had investigated the
taxes or researched what was done on the liens against the property, Mike
testified that was why they had hired attorneys. Mike said he followed Sam’s
lead on the purchase because Sam had over two decades of experience. Mike
denied providing Sam with his opinion of what the store was worth.
In August 2006 during the negotiations to purchase LD’s Shortstop, Mike
sent an email7 to Laurie D’Alleva, the owner of LD’s Shortstop, stating that they
needed to find a way not to flag the 2003 property tax lien;8 otherwise, it would
raise “so many red flags.” Mike explained to Laurie that he was worried about
raising red flags to the attorneys, specifically Legacy Bank’s attorneys and the
6
In Mike’s deposition, he stated that Sam decided on the store, that he
(Mike) had no active role, and that he was just going along and following the
leader (Sam).
7
The email was admitted into evidence as Plaintiff’s Exhibit 3.
8
Mike testified that the problem with the 2003 taxes was disclosed when
they received the commitment letter from the title company.
6
broker’s attorneys. At trial, Mike denied that he was hiding tax liens from Sam
and that he had signed a side agreement with Laurie to hide from Sam the
problem with the unpaid 2003 property taxes. When Plaintiff’s Exhibit 7 was
admitted, showing a September 6, 2006 agreement between Mike and Laurie
that required Laurie to pay a portion of the unpaid 2003 property taxes and that
required Mike to pay the remainder, Mike testified that the signature on the
document was not his.
Victor Waid, Sam’s attorney in Sacramento, hired Jeff Hacker to represent
Mike and Sam in the transaction to purchase LD’s Shortstop. Mike testified that
they entered into a partnership agreement in September 2006 to form SAMIK,
LLC and that he owned 49.5%. To make sure that the store could continue to
sell beer and wine, Mike testified that they held on to the seller as a one-percent
owner. Mike testified that he and Sam bought LD’s Shortstop and the real estate
on which it was located. He said that they bought the corporation “as is” in order
to “hold on to everything the way that it was, the [Texas Alcoholic Beverage
Commission] license, the lottery, and the tobacco license.”
When Legacy Bank—which was the holder on the note for LD’s
Shortstop—found out there was a change in ownership, it called the note, and
Mike and Sam had to pay it off; Mike loaned Sam $300,000, and Sam paid the
remaining $888,000. When Mike loaned Sam $300,000 for the Legacy Bank
note, Mike said that he and Sam had an oral agreement that Mike’s payment
included his half of the attorney’s fees to Legacy Bank.
7
After the purchase, Mike ran the day-to-day operations of the convenience
store. Early in November 2006, Mike sent Sam $12,000, which represented his
share of the net profit. In December 2006, Mike sent Sam more money because
the store was continuing to show a profit. Mike testified that he did not remember
the amount of sales taxes that he had paid during the period that he was at the
store. Plaintiff’s Exhibit 29 was thereafter admitted, which contained sales tax
reports for the time period covering October 10, 2006 through April 2, 2007.
Mike testified that the reports show total sales of zero and total taxes due of zero,
that Laurie had filed the reports in October 2006 and January 2007, that Mike
had filed the reports in November and December 2006 and February 2007, and
that Sam had filed the report dated April 2, 2007.9 Sam’s last name is misspelled
in the April sales tax filing; Mike denied that he had filed that return. Despite
showing zero sales and zero sales tax due, Mike testified that the sales tax that
he had paid could have been in excess of $5,000 but was less than $10,000.
Although Mike had testified previously in his deposition that he did not
remember any problems after they bought the store, he testified at trial regarding
numerous problems with the store. Mike found out in early 2007 that there was a
problem with TABC. Mike immediately contacted Sam. The problem was not
fixed while Mike was there, but Mike testified that the store did not lose its liquor
license. Mike testified that from day one, there were problems with issuing
9
No sales tax return was filed in March; presumably, that is why the April 2,
2007 return shows that a late fee was paid.
8
money orders. Mike denied writing money orders for himself for personal
reasons without reimbursing the store. Sam completed paperwork to obtain a
new permit to sell money orders, but it never got approved. Mike testified that
they lost the tobacco license in early March 2007 because he had purchased
cigarettes from a person who was working for Sam’s Club. Mike testified that the
tobacco license was re-obtained two weeks later while he was still at the store.
2. Sam’s Testimony
Sam and Mike began discussing the idea of purchasing a convenience
store early in 2006 after Mike mentioned that he had worked at a Shell gas
station in Roosevelt and was familiar with the business. Mike mentioned to Sam
that he was researching the internet for business locations in Arizona and Texas.
Mike told Sam that he had a friend and some uncles who had bought
convenience stores in Dallas and were making good money, so he was going to
explore that area for a location.
Mike invited Sam to come to Texas to look at some stores and give him
advice on different locations. Sam came to Texas twice with Mike and looked at
five or six stores.
Before the purchase, Mike brought Sam some numbers from LD’s
Shortstop, including some tax returns and numbers from the various businesses
within the business, including gas sales, grocery sales, Laundromat sales, eight-
liner income, check-cashing income, and rental income from a store next to LD’s
Shortstop. Mike told Sam that they could net $40,000 per month from all of the
9
different businesses within the business. Mike also told Sam that he estimated
that if they bought at $3 million, they would make a profit of $1 million once the
deal closed because the real estate was worth $3.9 to $4 million. Based on the
numbers that Mike had presented to Sam, Sam believed that this was plausible.
Sam did not independently research the numbers that Mike had brought to him;
Sam trusted Mike’s judgment. Sam did not personally inquire into things like
property taxes; Mike was handling all of the due diligence, including investigating
liens on the property, liens on the business, taxes owed, and utilities owed. Mike
told Sam that he was looking into those things. Mike did not tell Sam that there
were unpaid taxes on the property totaling $80,000. Sam testified that would
have been a red flag for him; he would have insisted on having the taxes paid
before the purchase. Sam did not have any conversations with Laurie before he
agreed to purchase the business.
Sam and Mike formed a limited liability company called SAMIK, LLC 10 to
purchase LD’s Shortstop from Laurie for $3,135,000, and SAMIK, LLC assumed
the debt of approximately $2.4 million that was owed to Legacy Bank and
Business Loan Express. Sam gave Laurie a cashier’s check for $450,000, and
Mike provided a $239,000 cashier’s check. There was another note for the
leased equipment in the Laundromat for approximately $80,000, which Sam and
10
Sam testified that he believed that Mike had created SAMIK, LLC to act
as an agent to LD’s Shortstop; he was surprised to learn that the only listing for
SAMIK is a name change from a previous corporation and that it was created in
2000.
10
Mike agreed to pay. Sam did not know of any other debts. Sam’s understanding
for why they bought the business, LD’s Shortstop, rather than the assets of the
business was that they were not qualified to assume the two loans; Mike assured
Sam that if they kept paying the two loan payments, the banks would not call the
notes.
After the purchase, Mike moved from California to Texas to run the day-to-
day business. Sam received a call on March 7, 2007 from the store manager
saying that Mike had been arrested and that all tobacco products had been
seized from the store. Sam came to Texas and asked Mike what had happened;
Mike told him that he had been buying cigarettes from Sam’s Club. Sam also
first learned during this trip that they could not sell money orders. Mike told Sam
that a customer had purchased five $50 money orders, that the money order
company had found that suspicious, and that they had pulled out the money
order machine because of misuse. Sam testified that they were able to sell
lottery tickets for a while, but then that license was eventually revoked because
the license was under the old ownership and Mike did not get a new permit to sell
lottery tickets.
C. Dissolution of Business Relationship
1. Mike’s Testimony
After the loss of the tobacco license, Mike and Sam reached an agreement
to end their business relationship. Mike testified that Sam offered him $709,000
to buy out his portion of the partnership; Mike agreed to this offer and executed
11
an agreement of dissolution on March 30, 2007.11 The terms of the dissolution
agreement required Mike to loan Sam $300,000 to assist Sam in the payoff of the
loan existing with Legacy Bank. Mike testified that he had loaned Sam $300,000
and that he had a copy of the official check, but the check was not admitted into
evidence.
Mike testified that he had fulfilled all of his obligations under the dissolution
agreement. Mike initially denied that at the time of the dissolution, the
convenience store inventory was short by $32,401; the dissolution agreement
provided that at the time of the buyout, “the inventory value shall be no less than
$144,260.00 at cost” and that should the inventory be less than that, the
difference would be subtracted from the amount Sam owed Mike for the buyout.
Mike later conceded that Sam was entitled to a $32,000 credit for the difference
in the inventory12 and a $12,000 credit for a payment that Sam had made to
Legacy Bank.13 Under the dissolution agreement, Mike was also required to
11
Mike believed that by signing the dissolution agreement he had sold,
assigned, transferred, released, and granted to Sam any and all interest that
Mike had owned in SAMIK, LLC. Mike admitted that when he sold his interest,
he was no longer a partner in SAMIK, LLC, despite the statement to the contrary
that was included and sworn to in his original answer and counterclaim.
12
Mike testified that they had recovered $16,000 on the cigarettes that
were seized but that the cigarettes had not been recovered as of the dissolution
on March 30, 2007. Mike admitted that the dissolution agreement did not provide
any benefit for him if the confiscated cigarettes were later recovered.
13
Plaintiff’s Exhibit 26, a letter from Jeff Hacker to Sam setting forth certain
credits and indebtedness, was admitted into evidence during Sam’s testimony.
The letter lists over $72,000 worth of credits. Mike testified that the letter
12
have the Ballard system installed on the gas pumps to bring them up to code.
Mike testified that he had made arrangements to have the Ballard system
installed, but at the time he left, the system had not been installed; Mike was not
aware that Sam had paid $7,000 to have the Ballard system installed. Mike
testified that he had paid all of the utility bills and all of the water bills. Mike
testified that the fuel bills were paid automatically through the business account
that was supposed to be under his name.
Mike testified that under the dissolution agreement he had agreed to pay
all of the taxes for the period when he was running the store and that at the time
of the dissolution, all of the taxes that had been incurred had been paid. Mike
testified that the store was still paying $4,000 per month on the unpaid 2003
property taxes at the time of the dissolution. When he and Sam took over the
business, Mike believed that the sales tax had been paid. He testified that he did
not learn that until a couple of weeks before the trial that the unpaid sales taxes
from October 1, 2005 through June 30, 2007 totaled $765,000. Mike could not
recall how much sales tax he had paid since he had left on March 29, 2007.
Mike testified that he was not aware of any personal property taxes and that no
real estate taxes were due while he worked at the store.
mistakenly adds the $72,000 worth of credits to the amount due from Sam. It
would also appear that the letter mistakenly identified both the $12,000 payment
made to Legacy Bank and the $23,000 gas payment as having been paid by
Mike.
13
Mike testified that he had not been paid any of the $709,000 owed to him
by Sam. Mike’s attorney Jeff Hacker sent Sam a demand letter dated August 7,
2007, requesting that Sam pay Mike.
At the conclusion of Mike’s testimony, Sam offered Defendant’s Exhibits 3
(bill of sale), 5 (the deed of trust), and 8 ($300,000 promissory note signed by
Sam). On cross-examination, Mike could provide no explanation for why the first
time a signed version of the $300,000 promissory note (Defendant’s Exhibit 8)
appeared was the Monday of the week of trial; he said that the copy had been
with his attorney “for a while.” Mike conceded that Defendant’s Exhibit 5, the
deed of trust, does not mention a $300,000 promissory note and that the
signature page of Defendant’s Exhibit 8 containing Sam’s signature is darker
than the other pages of the note. Mike denied creating a signed signature page
as a way to strengthen his case at the last minute. Mike testified that he had
watched Sam sign the documents in Hacker’s office and that he had left the
documents at Hacker’s office because some of the documents needed to be
recorded.
2. Sam’s Testimony
Sam testified that after the tobacco incident, he and Mike came to an
agreement for Sam to buy out Mike. Mike’s attorney, Jeff Hacker, prepared the
dissolution agreement. On March 30, 2007, Mike and Sam signed the dissolution
agreement, and Sam executed a deed of trust, a security agreement, and a
promissory note for $709,000 and became the sole owner of the property. The
14
note was due June 30, 2007. Sam testified that he had not paid Mike the
$709,000 owed under the promissory note because Mike owed him money.
Sam testified that SAMIK, LLC was dissolved on March 30, 2007, and that
IMA10, LLC started in its place; IMA10, LLC owned the same things that SAMIK,
LLC had owned before it was dissolved; SAMIK, LLC had owned the store but
not the property, which was owned by Mike and Sam. Sam testified that
although Laurie had owned a one-percent share of SAMIK, LLC, she did not sign
off on the dissolution agreement because Jeff Hacker did not include her name
among the signature blocks. Sam’s understanding was that SAMIK, LLC had
ceased to exist and that Laurie therefore did not own any interest in the new
corporation. Sam testified that he never agreed to pay the back property taxes if
Laurie would agree to the dissolution.
Beginning April 1, 2007, when Sam took over, there were no records for
the store. Sam testified that he had not seen any indication that sales taxes were
paid during the time that Mike ran the business. Mike did not tell Sam that there
was a problem with the sales tax; Sam first learned that sales taxes had not been
paid when he received letters from the State Comptroller in May 2010. Due to
the nonpayment of the sales taxes for the time prior to April 1, 2007 when Sam
took over the store,14 the State Comptroller came to the store, seized the cash
that was in the register, and emptied Sam’s bank account of $48,000. Sam
14
Sam testified that after he took over the convenience store, he reported
all the sales and paid all of the taxes due on those sales.
15
testified that the State Comptroller assessed the prior sales taxes against IMA10,
LLC. Sam said that he holds Mike responsible for the sales taxes incurred during
the period before April 1, 2007.
The inventory on the date that Sam took over was supposed to be
$144,000, but it was only $111,000. The $111,000 inventory included $23,000
worth of fuel that Mike had not paid for and for which he did not reimburse Sam.
When Sam took over the store on April 1, 2007, there were unpaid utility bills in
the amount of $11,000. Mike was supposed to have paid for the Ballard system
to be installed so that the hoses on the gas pumps would meet code
enforcement; Mike had paid a deposit but did not pay the $7,200 balance, which
Sam had to pay.
After April 2007 and before June 30, 2007, when Sam’s note to Mike
became due, Sam learned that property taxes for 2003, which totaled $22,000,
had not been paid. Under the dissolution agreement, Mike was required to pay
the property taxes for January through March 2007; Sam testified that Mike also
did not pay the prorated property taxes of $10,000. Sam also learned that
personal property taxes from 2003 through 2006 had not been paid, which
totaled $61,000. Mike also had not paid the personal property taxes from
January through March 2007, which totaled $2,000. When Sam saw Laurie in
August 2009, he asked why she had not paid the property tax and the personal
property tax, and she said that Mike had agreed to pay for those personally.
Laurie showed Sam a document that Mike had signed, agreeing to pay for the
16
taxes; thus, Sam believed that Mike was responsible for the taxes. Sam testified
that Tarrant County filed a lawsuit against Sam and Mike for the property taxes
and that the lawsuit had been resolved because he (Sam) negotiated to pay
$5,000 down and to pay $1,000 per month toward the back taxes.
Sam also learned that they were “having some serious problem[s]
acquiring a TABC license” and that Mike had not applied for a license as of the
date that Sam took over the store’s operations. Sam was informed that he could
not get a liquor license because he was not a Texas resident. He was told to
create a corporation and have a Texas resident as a manager; he did that and
named Omar Subhi as manager. Sam testified that he had to hire an attorney to
create a new corporation to satisfy TABC in order to obtain a liquor license. 15
Sam testified that he is now the sole owner of the new corporation, SuperTrak
Arlington, Inc., and its only asset is the store; Sam owns the property. Sam said
that he had secured a liquor license as of the time of the trial.
Sam also obtained a new license to sell tobacco and replaced the tobacco
that had been confiscated.
Sam testified that under the dissolution agreement, Mike was supposed to
loan Sam $300,000 to pay off the Legacy Bank note, which had been called once
Legacy Bank found out that there was a change of ownership; Mike came up with
$280,000. Sam paid Legacy Bank $888,000 by taking out loans against his
15
Sam testified that he is not requesting attorney’s fees for obtaining the
liquor license.
17
house in California and other properties in order to come up with the money.
Sam paid $8,200 for the attorney’s fees; Mike did not pay Sam for his half of the
attorney’s fees.
Sam said that if he had known about all of the issues that he had learned
about after the dissolution, he would not have agreed to the buyout.
D. Jury’s Findings and Trial Court’s Judgment
After hearing the above evidence, with respect to the buyout transaction of
March 30, 2007, the jury found that Mike had committed fraud against Sam by
material misrepresentation, that Mike had committed fraud against Sam by
material omission, that a relationship of confidence and trust had existed
between Mike and Sam before the buyout, and that Mike had not complied with
his fiduciary duty to Sam. The jury awarded Sam actual damages of $949,000.
The jury also found by clear and convincing evidence that the harm to Sam had
resulted from intentional fraud and awarded Sam exemplary damages of
$709,000. The jury further found on Mike’s counterclaim for breach of contract
that Sam had failed to comply with the terms of the buyout transaction and
awarded Mike actual damages of $709,000. The trial court awarded attorney’s
fees to Mike and entered a judgment on the jury’s damage awards to the parties.
18
III. LEGALLY AND FACTUALLY SUFFICIENT EVIDENCE SUPPORTS
THE JURY’S FINDINGS
A. Standards of Review
1. Legal Sufficiency
We may sustain a legal sufficiency challenge only when (1) the record
discloses a complete absence of evidence of a vital fact, (2) the court is barred
by rules of law or of evidence from giving weight to the only evidence offered to
prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a
mere scintilla, or (4) the evidence establishes conclusively the opposite of a vital
fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998),
cert. denied, 526 U.S. 1040 (1999); Robert W. Calvert, “No Evidence” and
“Insufficient Evidence” Points of Error, 38 Tex. L. Rev. 361, 362–63 (1960). In
determining whether there is legally sufficient evidence to support the finding
under review, we must consider evidence favorable to the finding if a reasonable
factfinder could and disregard evidence contrary to the finding unless a
reasonable factfinder could not. Cent. Ready Mix Concrete Co. v. Islas, 228
S.W.3d 649, 651 (Tex. 2007); City of Keller v. Wilson, 168 S.W.3d 802, 807, 827
(Tex. 2005).
Anything more than a scintilla of evidence is legally sufficient to support the
finding. Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996);
Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex. 1996). When the evidence offered
to prove a vital fact is so weak as to do no more than create a mere surmise or
19
suspicion of its existence, the evidence is no more than a scintilla and, in legal
effect, is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.
1983). More than a scintilla of evidence exists if the evidence furnishes some
reasonable basis for differing conclusions by reasonable minds about the
existence of a vital fact. Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co., 77 S.W.3d
253, 262 (Tex. 2002).
2. Factual Sufficiency
When reviewing an assertion that the evidence is factually insufficient to
support a finding, we set aside the finding only if, after considering and weighing
all of the evidence in the record pertinent to that finding, we determine that the
credible evidence supporting the finding is so weak, or so contrary to the
overwhelming weight of all the evidence, that the answer should be set aside and
a new trial ordered. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986)
(op. on reh’g); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Garza v. Alviar,
395 S.W.2d 821, 823 (Tex. 1965).
B. Legally and Factually Sufficient Evidence Supports Jury’s Finding that
Mike Committed Fraud by Material Misrepresentation
In his first issue, Mike argues that the trial court erred by failing to grant his
motion for new trial because there was no evidence or insufficient evidence to
support the jury’s finding that he committed fraud by material misrepresentation.
To recover under a fraud claim, the following elements must be proven:
(1) a material representation was made; (2) the representation was false; (3)
20
when the misrepresentation was made, the speaker knew it was false or made it
recklessly without any knowledge of the truth and as a positive assertion; (4) the
speaker made the misrepresentation with the intent that the other party should
act upon it; (5) the party acted in reliance on the misrepresentation; and (6) the
party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758
(Tex. 2001) (orig. proceeding); Formosa Plastics Corp. USA v. Presidio Eng’rs &
Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998). When no objection is made to
a jury instruction, evidence to support a finding based on the instruction should
be assessed in light of the instruction given. Wal-Mart Stores, Inc. v. Sturges, 52
S.W.3d 711, 715 (Tex. 2001).
The court’s charge, which was not objected to by Mike, instructed the jury
on the elements of fraud in Question No. 1, asking whether Mike had committed
fraud against Sam by material misrepresentation. The word “misrepresentation”
was defined as “a false statement of fact.” The jury answered “yes.”
The agreement of dissolution contains the following affirmative statement:
Mike warrants and represents, as a material part of this
Agreement, that all unpaid and owing debts, expenses, claims,
taxes, and other fees incurred on behalf of the business between
September 1, 2006 and April 1, 2007 (with the exception of the first
lien held by Legacy Texas Bank and any potential liability resulting
from the pending lawsuit against the business, Laurie D’Alleuva [sic],
et al[.]), shall be or has been paid in full by Mike Alahmad prior to
April 1, 2007; . . . .
Mike testified at trial that at the time of the dissolution, all of the taxes that
had been incurred had been paid. But Sam’s exhibits, including Plaintiff’s Exhibit
21
31—a sales tax statement from Susan Combs, the Texas Comptroller of Public
Accounts—show that the sales tax “liability is for reporting periods October 1,
2005 through June 30, 2007” in the amount of $751,835.23. Due to the
nonpayment of these sales taxes for the time prior to April 1, 2007, when Sam
took over the store, the State Comptroller came to the store, seized the cash that
was in the register, and emptied Sam’s bank account of $48,000.
The jury also heard testimony that Mike knew about the delinquent 2003
property taxes while he was negotiating the purchase of the convenience store.
The jury even saw a document titled, “Letter Agreement between Mamoon
Alahmad and Laurie D’Alleva,” which states that it is a supplemental agreement
to the contract of sale for LD’s Shortstop. The letter agreement was signed by
only Laurie and Mike; Laurie agreed to pay for a portion of the delinquent 2003
property taxes, and Mike agreed to pay the remainder. Despite this letter
agreement, Mike testified that he did not sign a side agreement with Laurie
D’Alleva to hide the problem with the 2003 taxes from Sam and that the signature
on the document was not his. Instead, Mike testified at trial that at the time of the
dissolution, he was still making payments through the store of $4,000 per month
on the delinquent 2003 property taxes. Sam testified that he did not learn about
the delinquent 2003 property taxes until he took over the business after the
dissolution, at which time $21,000 in back property taxes remained unpaid.
Finally, although Mike testified that he had fulfilled all of his obligations
under the dissolution agreement, he conceded that the inventory did not meet the
22
dollar value required in the dissolution agreement and conceded that Sam was
entitled to a credit for the difference. And although Mike testified that he had paid
all of the utility bills, that the fuel bills were automatically paid through an account
under his name, and that he had paid for the Ballard system to be installed for
the fuel pumps, Sam testified that the inventory included $23,000 worth of fuel
that Mike had not paid for; that there was $11,000 worth of utility bills that were
unpaid when Sam took over the store; and that although Mike had paid a deposit
for the Ballard system, a $7,000 balance remained, which Sam had to pay.
Having considered evidence favorable to the finding of fraud by material
misrepresentation if a reasonable factfinder could and having disregarded
evidence contrary to the finding of fraud by material misrepresentation unless a
reasonable factfinder could not, we hold that more than a scintilla of evidence
supports the jury’s finding that Mike committed fraud against Sam by material
misrepresentation because Mike made numerous material misrepresentations
that were false, he knew they were false, he made the misrepresentations with
the intent that Sam should act upon them, and Sam acted in reliance on the
misrepresentations and suffered injury. See Formosa Plastics Corp. USA, 960
S.W.2d at 48–49 (holding that testimony at trial provided more than a scintilla of
evidence supporting appellee’s contention that appellant intentionally made
representations that it never intended to keep in order to induce appellee to enter
into the contract at a low bid price and that appellee relied on the
misrepresentations to its detriment); Drury Sw., Inc. v. Louie Ledeaux #1, Inc.,
23
No. 04-12-00837-CV, 2013 WL 5812989, at *6 (Tex. App.—San Antonio Oct. 30,
2013, no pet. h.) (holding evidence legally sufficient to support jury’s finding that
appellant fraudulently induced appellee into entering into lease by making
knowing misrepresentations). After considering and weighing all of the evidence
in the record pertinent to the finding of fraud by material misrepresentation, we
hold that the credible evidence supporting the finding is not so weak, or so
contrary to the overwhelming weight of all the evidence, that the jury’s answer
should be set aside and a new trial ordered. See W.L. Lindemann Operating Co.
v. Strange, 256 S.W.3d 766, 780–81 (Tex. App.—Fort Worth 2008, pet. denied)
(holding evidence legally and factually sufficient to support finding that appellant
committed fraud against appellee). We hold that legally and factually sufficient
evidence supports the jury’s finding that Mike committed fraud by material
misrepresentation, and thus the trial court did not abuse its discretion by denying
Mike’s motion for new trial on this ground. We overrule Mike’s first issue.16
16
Mike’s second issue challenges the jury’s finding that Mike also
committed fraud by material omission, and his third issue challenges the jury’s
finding that a fiduciary relationship existed between Mike and Sam. The jury’s
$949,000 damage award was conditioned upon an affirmative finding on the
fraud-by-material-misrepresentation question or the fraud-by-material-omission
question or the breach-of-a-fiduciary-relationship question. Because we have
found the evidence legally and factually sufficient to support the jury’s answer to
the fraud by the material misrepresentation question, we need not address
Mike’s second or third issues. See Tex. R. App. P. 47.1 (requiring appellate
court to address only issues necessary to final disposition of appeal); see also
Barnett v. Coppell N. Tex. Court, Ltd., NTC, 123 S.W.3d 804, 820–21 (Tex.
App.—Dallas 2003, pet. denied).
24
C. Legally and Factually Sufficient Evidence Supports Jury’s Finding
Awarding Actual Damages of $949,000 to Sam
In his fourth issue, Mike argues that the trial court erred by failing to grant
his motion for new trial because there was no evidence or insufficient evidence to
support the jury’s finding awarding Sam actual damages of $949,000.
The jury has the discretion to award damages within the range of evidence
presented at trial, so long as a rational basis exists for the jury’s calculation. See
id. at 787. Here, the jury’s award of $949,000 corresponds closely with Sam’s
testimony about the amounts that Mike had failed to pay under the terms of the
dissolution agreement. The following chart summarizing Sam’s testimony was
admitted into evidence:
Inventory deficiency ($144,000 per contract, but actually $111,000) $33,000
Ballard system 7,000
2003 real estate taxes 21,000
2003 – 2006 personal property taxes 61,000
Jan. – March 2007 real estate taxes 10,000
Jan. – March 2007 personal property taxes 2,000
Attorney fees re: Legacy Bank (Mike’s half) [17]
8,000 4,000
Utility bills 11,000
Fuel bill 23,000
Sales taxes & penalties per State Comptroller 765,000
TOTAL $941,000 $937,000
Although the chart summarizing Sam’s testimony includes only $937,000 of
payments made by Sam on Mike’s behalf, Mike conceded during his case in
chief that Sam was entitled to a credit for a $12,000 payment that Sam had made
17
This number and the total at the bottom of the chart were stricken
through, and the numbers reflected in the column were written in by hand.
25
to Legacy Bank, which is in addition to the amounts set forth in Sam’s chart.
Accordingly, we hold that the jury’s actual damage award of $949,000 to Sam is
supported by legally and factually sufficient evidence and that the trial court did
not abuse its discretion by denying Mike’s motion for new trial on this ground.
See id. at 788 (holding evidence sufficient to support jury’s damage award). We
overrule Mike’s fourth issue.
D. Legally and Factually Sufficient Evidence Supports Jury’s Finding
Awarding Exemplary Damages of $709,000 to Sam
In his fifth issue, Mike argues that the trial court erred by failing to grant his
motion for new trial because there was no evidence or insufficient evidence to
support the amount of exemplary damages that the jury awarded to Sam—
$709,000—or to support a finding of malice.
Exemplary damages may be awarded only if the claimant proves by clear
and convincing evidence that the harm with respect to which the claimant seeks
recovery of exemplary damages results from fraud, malice, or gross negligence.
Tex. Civ. Prac. & Rem. Code Ann. § 41.003(a) (West Supp. 2013). “Clear and
convincing” evidence means “the measure or degree of proof that will produce in
the mind of the trier of fact a firm belief or conviction as to the truth of the
allegations sought to be established.” Id. § 41.001(2) (West 2008). This
intermediate standard falls between the preponderance standard of civil
proceedings and the reasonable doubt standard of criminal proceedings. In re
26
G.M., 596 S.W.2d 846, 847 (Tex. 1980); State v. Addington, 588 S.W.2d 569,
570 (Tex. 1979).
This higher burden of proof alters the appellate standard of legal
sufficiency review. In evaluating the evidence for legal sufficiency, we must
determine whether the evidence is such that a factfinder could reasonably form a
firm belief or conviction that its finding was true. State v. K.E.W., 315 S.W.3d 16,
20 (Tex. 2010); Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d
238, 248 (Tex. 2008). We review all the evidence in the light most favorable to
the finding. U-Haul Int’l, Inc. v. Waldrip, 380 S.W.3d 118, 138 (Tex. 2012);
Hogue, 271 S.W.3d at 248. We resolve any disputed facts in favor of the finding
if a reasonable factfinder could have done so. K.E.W., 315 S.W.3d at 20; Hogue,
271 S.W.3d at 248. We disregard evidence contrary to the finding unless a
reasonable factfinder could not. K.E.W., 315 S.W.3d at 20; Hogue, 271 S.W.3d
at 248. The factfinder, not this court, is the sole judge of the credibility and
demeanor of the witnesses. In re J.O.A., 283 S.W.3d 336, 346 (Tex. 2009).
This higher burden of proof also alters the appellate standard of factual
sufficiency review. In evaluating the evidence for factual sufficiency, we
determine whether, on the entire record, a factfinder could reasonably form a firm
conviction or belief that its finding was true. In re H.R.M., 209 S.W.3d 105, 108
(Tex. 2006). If, in light of the entire record, the disputed evidence that a
reasonable factfinder could not have credited in favor of the finding is so
27
significant that a factfinder could not reasonably have formed a firm belief or
conviction in the truth of its finding, then the evidence is factually insufficient. Id.
Here, question 8 in the court’s charge was conditioned upon an affirmative
finding to one of the two fraud questions—fraud by material misrepresentation
and fraud by material omission—and upon a finding of actual damages, and it
asked whether the jury found by clear and convincing evidence that the harm to
Sam resulted from intentional fraud. Question number 9 then asked what
amount of money, if any, should be awarded as exemplary damages and set
forth the relevant Alamo Nat’l Bank v. Kraus18 factors for the jury’s
consideration.19
In order to determine whether the amount of exemplary damages awarded
was reasonable, we consider the factors set forth in Alamo National Bank v.
Kraus, which include the nature of the wrong, the character of the conduct
involved, the degree of culpability of the wrongdoer, the situation and sensibilities
of the parties concerned, and the extent to which such conduct offends a public
sense of justice and propriety. See, e.g., Zorrilla v. AYPCO Constr. II, LLC, 421
S.W.3d 54, 72 (Tex. App.—Corpus Christi Oct. 3, 2013, pet. filed) (quoting
Khorshid, Inc. v. Christian, 257 S.W.3d 748, 767 (Tex. App.—Dallas 2008, no
pet.)).
18
616 S.W.2d 908, 910 (Tex. 1981).
19
Mike did not object to the court’s charge.
28
As set forth above, the jury heard considerable evidence that Mike had
fraudulently misrepresented to Sam that all expenses and taxes that were due
while he was operating the business had been paid. Sam testified that he
learned only after he had agreed to buy Mike out of the business for $709,000,
that Mike had failed to pay 2003 property taxes, had failed to pay property taxes
since 2003, had failed to pay sales taxes, had failed to pay personal taxes, had
failed to install the Ballard System on the gas pumps, had failed to re-obtain a
liquor license, had failed to pay utility bills, had failed to pay for gas that was
delivered; he also learned that the inventory was not what Mike had represented
it to be. Sam also testified to the financial harm he suffered from Mike’s conduct,
including having to mortgage his home to pay off the Legacy Bank loan. From
Sam’s testimony and the documentary evidence supporting it, the jury could have
reasonably determined that Mike’s conduct indicated a pattern of deceptive
dealings with Sam and that his conduct was offensive to public notions of
fairness and propriety and showed a degree of culpability on Mike’s part that
rendered an award of $709,000 in exemplary damages reasonable. The
exemplary damages award is less than the actual damage award to Sam of
$949,000, which is unchallenged on appeal.
Giving due deference to the jury’s role in determining the weight and
credibility to be given a witness’s testimony and applying the above standards of
review, we hold that the amount of exemplary damages awarded by the jury is
29
reasonable; the award is not so against the great weight and preponderance of
the evidence as to be manifestly unjust. See id.
Concerning Mike’s challenge to the sufficiency of the evidence to support a
malice finding by the jury, because Sam’s recovery of exemplary damages was
predicated on a finding by the jury of intentional fraud, Sam was not required to
prove malice. See Tex. Civ. Prac. & Rem. Code Ann. § 41.003(a)(1) (specifically
enumerating fraud as one of three separate grounds that can be proven to obtain
an award of exemplary damages); cf. Huynh v. Phung, No. 01-04-00267-CV,
2007 WL 495023, at *11 (Tex. App.—Houston [1st Dist.] Feb. 16, 2007, no pet.)
(mem. op.) (stating that the jury’s finding of fraud included an implicit finding of
malice). Because we hold that the evidence is legally and factually sufficient to
support the amount of the exemplary damage award to Sam, the trial court did
not abuse its discretion by denying Mike’s motion for new trial on this ground.
We overrule Mike’s fifth issue.
IV. MIKE’S COUNTERCLAIM AND THE ONE-FINAL-JUDGMENT RULE REQUIRE
SUBTRACTION OF THE DAMAGE AWARDS
The final judgment includes the following provision under the heading
“Offsetting Awards and Limitations on Execution”:
Having herein awarded actual and exemplary damages to
Plaintiff/Counter-Defendant Abukhdair, totaling Nine Hundred Forty-
Nine Thousand Dollars and No Cents ($949,000.00), and Seven
Hundred and Nine Thousand Dollars and No Cents ($709,000.00),
respectively, as well as actual damages and attorney’s fees to
Defendant/Counter-Plaintiff Alahmad, totaling Seven Hundred and
Nine Thousand Dollars and No Cents ($709,000.00), and Forty-
Three Thousand, One Hundred Eighty-Seven Dollars and Fifty
30
Cents ($43,187.50[]), respectively, the Court hereby finds that the
total amount awarded herein to Defendant/Counter-Plaintiff Alahmad
partially offsets the total amount awarded herein to Plaintiff/Counter-
Defendant Abukhdair, leaving only the Remainder of Nine Hundred
and Five Thousand, Eight Hundred and Twelve Dollars and Fifty
Cents ($905,812.50), subject to enforcement, execution[,] and
collection; it is, therefore,
ORDERED, ADJUDGED[,] and DECREED that only the
Remainder of the total amount of actual and exemplary damages
awarded herein to Plaintiff/Counter-Defendant Abukhdair is subject
to enforcement, execution[,] and collection; . . . .
In his sixth issue, Mike argues that the trial court erred by allowing
offsetting awards and limitations of execution. Specifically, Mike argues that
Sam did not plead for a setoff as an affirmative defense and therefore was not
entitled to a setoff.
A counterclaim is defined as a “claim, which, if established will defeat or in
some way qualify a judgment to which the plaintiff is otherwise entitled . . . [and]
embraces both setoff and recoupment” or a “claim presented by a defendant in
opposition to or deduction from the plaintiff’s claim.” See CDB Software, Inc. v.
Kroll, 992 S.W.2d 31, 35–36 (Tex. App.—Houston [1st Dist.] 1998, pet. denied).
Where both the plaintiff and defendant are entitled to recover differing amounts
from each other, the court is required to determine which party is entitled to the
greater recovery and render judgment for that party in the amount of the excess.
See Chilton Ins. Co. v. Pate & Pate Enters., Inc., 930 S.W.2d 877, 894 (Tex.
App.—San Antonio 1996, writ denied); see also Tex. R. Civ. P. 301 (permitting
only one final judgment in any cause).
31
Here, Mike pleaded a counterclaim, which if proven, by its very definition
“embraces both setoff and recoupment” and will be deducted from any award
given to the plaintiff Sam. Because the jury awarded damages to Sam (on the
claims raised in his petition) and to Mike (on his counterclaim), the trial court was
required under both the definition of counterclaim and the one-final-judgment rule
to deduct the lesser damages, which were given to Mike on his counterclaim,
from the greater damages awarded to Sam on his fraud claim. See Tex. R. Civ.
P. 301; Chilton Ins. Co., 930 S.W.2d at 894–95. We therefore hold that the trial
court did not err by rendering judgment for Sam in the amount of the excess, and
we overrule Mike’s sixth issue.20
V. CONCLUSION
Having overruled the issues necessary for final disposition of the appeal,
we affirm the trial court’s judgment.
/s/ Sue Walker
SUE WALKER
JUSTICE
PANEL: DAUPHINOT, WALKER, and MEIER, JJ.
DELIVERED: June 5, 2014
20
We note that case law over the years has not consistently applied the
legal definitions of the words “setoff,” “offset,” and “recoupment” but instead has
used the words interchangeably. We need not, however, delve into this
inconsistency to resolve Mike’s sixth issue because it can be resolved, as set
forth above, by applying the definition of “counterclaim” and the one-final-
judgment rule.
32