ASR 2620-2630 Fountainview, LP, Fountainview Park Plaza, LLC, and ASRP Investments, LLC v. ASR 2620-2630 Fountainview GP, LLC, American Spectrum Operating Partnership LP, American Spectrum Realty, Inc., and American Spectrum Realty Management, LLC

Affirmed as Modified and Opinion filed February 7, 2019.
In The
Fourteenth Court of Appeals
NO. 14-17-00271-CV
ASR 2620-2630 FOUNTAINVIEW, LP, FOUNTAINVIEW PARK PLAZA,
LLC, AND ASRP INVESTMENTS, LLC, Appellants
V.
ASR 2620-2630 FOUNTAINVIEW GP, LLC, AMERICAN SPECTRUM
REALTY OPERATING PARTNERSHIP, LP, AMERICAN SPECTRUM
REALTY, INC., AND AMERICAN SPECTRUM REALTY
MANAGEMENT, LLC, Appellees
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Cause No. 2013-25806
OPINION
This appeal arises out of a partnership dispute. The limited partnership and
the two class A limited partners complain that the trial court erred in rendering
judgment in favor of the class B limited partner on its claim against the limited
partnership for breach of the limited partnership agreement. They say the
general partner, not the limited partnership, had the duty to make the
distributions at issue in this claim. The limited partnership and the two class A
limited partners also assert that the trial court erred in assessing an offset against
their recovery against a former general partner. We modify the judgment and
affirm as modified.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2010, the general partner and three limited partners executed a Limited
Partnership Agreement (the “Agreement”) in which they formed a Delaware
limited partnership named ASR 2620-2630 Fountainview, LP (the “Limited
Partnership”). Under the Agreement, ASR 2620-2630 Fountainview GP, LLC
(the “First General Partner”) was the general partner of the Limited Partnership.
Fountain View Park Plaza, LLC and ASRP Investments, LLC (collectively the
“Class A Partners”) were the two Class A Limited Partners, and American
Spectrum Realty Operating Partnership, LP (the “Class B Partner”) was the sole
Class B Limited Partner.
The Class A Partners became dissatisfied with the First General Partner’s
performance of its duties as general partner. In April 2013, the Class A Partners
removed the First General Partner and selected Fountainview New GP, LLC (the
“Second General Partner”) to be the general partner of the Limited Partnership
following the removal of the First General Partner.
The Limited Partnership and the Class A Partners (collectively the “Park
Plaza Parties”) filed this lawsuit, asserting claims for breach of the Agreement
and breach of fiduciary duty against (1) the First General Partner, (2) the Class
B Partner, (3) American Spectrum Realty, Inc., a company that is the general
partner of the Class B Partner as well as the general partner of the First General
2
Partner’s sole member, and (4) American Spectrum Realty Management, LLC, a
property-management company retained by the First General Partner
(collectively the “American Spectrum Parties”).
Agreed Temporary Injuction
The trial court signed an agreed temporary injunction providing that any
money received from the sale of two office buildings owned by the Limited
Partnership was to be placed in a segregated bank account. The two buildings
owned by the Limited Partnership were sold, and the proceeds were placed in
the segregated bank account.
A dispute arose over entitlement to the sales proceeds. The Class B
Partner filed counterclaims against the Park Plaza Parties alleging, among other
things, that the Limited Partnership had breached the Agreement by failing to
disburse the sales proceeds. No party, including the Class B Partner, asserted
any claim against the Second General Partner, which is not a party in this
litigation.
The American Spectrum Parties took issue with a payment made from the
segregated bank account by Pamela Castleman, a representative of the Second
General Partner. The American Spectrum Parties asserted that Castleman
violated the temporary injunction by paying an improper real estate commission
in the amount of $266,400 from this account to Victory Realty Solutions, Inc.
Neither Castleman nor Victory Realty Solutions, Inc. is a party in this litigation.
The Contempt Order
The American Spectrum Parties filed a motion asking the trial court to
hold Castleman in contempt. After a pre-trial evidentiary hearing, the trial court
signed an order in which it granted the motion for contempt and found that
Castleman caused the payment from the segregated account in violation of the
3
temporary injunction (the “Contempt Order”). The trial court found and ordered
“that the appropriate remedy for Ms. Castleman’s conduct is an adjustment to
the jury’s verdict in the amount of the funds paid out in violation of the Court
orders.”
Jury Findings
In the jury trial that followed, the jury did not find that either the First
General Partner or the Class B Partner breached the Agreement. The jury found
in favor of the Park Plaza Parties as to liability and damages on their breach-of-
fiduciary-duty claims against the First General Partner. The jury found that the
Limited Partnership failed to comply with the Agreement by not paying
distributions under section 6.2 of the Agreement and that $1,197,866 fairly and
reasonably would compensate the Class B Partner for its damages that resulted
from the Partnership’s failure to comply.1
Trial Court’s Judgment
After trial, the First General Partner asked the trial court to enforce the
remedy announced in the Contempt Order by deducting $266,400 from
$371,147 — the total amount of damages found by the jury as to the Park Plaza
Parties’ breach-of-fiduciary-duty claims against the First General Partner. The
Park Plaza Parties objected and argued that the trial court would err in doing so
for various reasons. The trial court rendered a final judgment in which it
ordered that the Park Plaza Parties recover $104,747 — the damages found by
the jury “less an offset of $266,400 as set forth in the [Contempt Order]” — plus
prejudgment interest and court costs. The trial court also rendered judgment that
the Class B Partner recover from the Limited Partnership $1,197,866 plus
1
The jury made other findings not relevant to this appeal.
4
prejudgment interest and court costs, in accordance with the jury’s verdict.
II. ISSUES AND ANALYSIS
On appeal from the trial court’s judgment, the Park Plaza Parties assert
two appellate issues:
1. Who owes the contractual duty to make distributions under
Section 6.2 of the [Agreement]? That is, does the duty fall on
the [Limited Partnership], or does it fall on the general partner
instead?
2. Did the trial court err when it reduced the [Park Plaza Parties’]
recovery on the verdict by $266,400 because of the acts of a
non-party?
A. Did the trial court err in rendering judgment against the Limited
Partnership because the general partner, not the Limited
Partnership, has the duty to make distributions under section 6.2?
Under their first appellate issue, the Park Plaza Parties assert that the
general partner, not the Limited Partnership, has the duty to make distributions
under section 6.2 of the Agreement. The Park Plaza Parties assert that the trial
court erred in asking the jury in Question 7 whether the Limited Partnership
failed to comply with the Agreement by failing to pay distributions under
section 6.2, over the Park Plaza Parties’ objection that the trial court wrongly
pinned on the Limited Partnership the general partner’s contractual duty to make
any necessary distributions under section 6.2. According to the Park Plaza
Parties, only the Second General Partner had any duty to make the distribution
that was the basis of the Class B Partner’s breach-of-contract claim, yet the
Class B Partner did not assert any claim against the Second General Partner, an
entity that is not a party to this litigation. The Park Plaza Parties preserved error
in the trial court on their first issue.
The First General Partner, the Class A Partners, and the Class B Partner
5
(collectively the “Partners”) formed the Limited Partnership under the Delaware
Revised Limited Partnership Act (the “Act”). See 6 Del. C. § 17–101, et seq.
The Partners agreed that the “Agreement and the rights of the parties hereunder
shall be governed by, [and] interpreted and enforced in accordance with, the
internal laws (exclusive of the choice of law provisions thereof) of the State of
Delaware as to all matters, including, but not limited to, matters of validity,
construction, effect, performance[,] and remedies.” Under the Act, a partnership
agreement that provides for the application of Delaware law shall be governed
by and construed under Delaware law in accordance with its terms. 6 Del. C. §
17–1101(i). The trial court ruled that Delaware law applies to the Class B
Partner’s claim against the Limited Partnership for breach of the Agreement.
We conclude that the Act and Delaware law apply to the interpretation of the
Agreement and to our analysis of the first appellate issue. See id.
The Act’s stated policy is “to give maximum effect to the principle of
freedom of contract and to the enforceability of partnership agreements.” 6 Del.
C. § 17–1101(c). Under the Act “[a] partnership agreement may provide for the
limitation or elimination of any and all liabilities for breach of contract and
breach of duties (including fiduciary duties) of a partner or other person to a
limited partnership or to another partner or to an other [sic] person that is a party
to or is otherwise bound by a partnership agreement; provided, that a partnership
agreement may not limit or eliminate liability for any act or omission that
constitutes a bad faith violation of the implied contractual covenant of good faith
and fair dealing.” 6 Del. C. § 17–1101(f).
Under Delaware law, the proper interpretation of language in a contract is
a question of law. Allied Capital Corp. v. GC-Sun Holdings, L.P., 910 A.2d
1020, 1030 (Del. Ch. 2006). When the language of a contract is plain and
6
unambiguous, courts give binding effect to the contract’s evident meaning. Id.
Only when the contract’s language is susceptible of more than one reasonable
interpretation may a court look to parol evidence; otherwise, the court must
consider only the language of the contract itself in determining the intentions of
the parties. Id. Courts construe unambiguous terms according to their ordinary
and usual meaning. Id. Absent some ambiguity, Delaware courts will not distort
or twist contract language under the guise of construing it. Id. When the
contract language is clear and unequivocal, a party will be bound by the plain
meaning of the words. Id.
Under section 6.2, entitled “Distribution of Partnership Capital Event
Receipts,” the Partners agreed that “[n]o later than fifteen (15) days after the
closing of any Capital Transaction, all Partnership Capital Event Receipts
(subject to requirements of applicable law with respect to the priority of other
creditors of the Partnership, if any) shall be paid or distributed” according to a
formula for calculating the amount of the distribution to the Class A Partners
and possibly to the Class B Partner. The Park Plaza Parties do not dispute that
the sale of the buildings generated Partnership Capital Event Receipts that were
required to be distributed under section 6.2. The Park Plaza Parties do not assert
that the evidence is insufficient to prove that under section 6.2 the Class B
Partner was entitled to receive a distribution of $1,197,866 fifteen days after the
closing of this sale (the “Distribution”), nor do they claim that the Class B
Partner has received any part of this distribution from any entity. Instead, the
Park Plaza Parties argue that the Class B Partner should have sued the Second
General Partner rather than the Limited Partnership to recover the distribution
owed to the Class B Partner under section 6.2.
The Park Plaza Parties assert that the Limited Partnership is not liable for
7
the failure to pay the Distribution to the Class B Partner because section 6.2
does not require the Limited Partnership to make any distribution. According to
the Park Plaza Parties, only the general partner of the Limited Partnership has a
duty to make a distribution under section 6.2, and therefore only the Second
General Partner may be liable for the failure to pay the Distribution.
In section 6.2, the Partners used the passive voice in the critical sentence.
They stated “shall be paid or distributed” without identifying which entity or
entities must pay or distribute the Partnership Capital Event Receipts. The Park
Plaza Parties acknowledge this use of the passive voice, and they rely on other
provisions of the Agreement in support of their argument that only the general
partner of the Limited Partnership has a duty to make a distribution under
section 6.2. They note that under section 7.1 of the Agreement, “[t]he General
Partner shall be responsible for, and shall have the exclusive right and power, at
Partnership expense, to manage Partnership affairs and control all decisions
relating to the business and operations of the Partnership.”2
The American Spectrum Parties assert that under the Agreement, the
Limited Partnership, rather than the general partner, is obligated to make any
distributions under section 6.2. They claim the general partner is not liable for
the failure to make these distributions. The American Spectrum Parties rely on
section 7.5, which relieves the general partner from liability in certain
circumstances:
The General Partner shall endeavor to perform its duties under this
Agreement with ordinary prudence and in a manner reasonable under
the circumstances. The General Partner shall not be liable to the
Partnership or the Limited Partners for any loss or liability caused by
any act, or by the failure to do any act, unless such loss or liability
2
In addition to section 7.1, the Park Plaza Parties also cite sections 4.1, 4.4, 4.6, and 7.8(e).
8
arises from the General Partner’s fraud, intentional misconduct,
known violation of the law[,] or gross negligence. In no event shall
the General Partner be liable by reason of a mistake in judgment made
in good faith, or action or lack of action based on the advice of legal
counsel. Further, the General Partner shall in no event be liable for its
failure to take any action unless it is specifically directed to take such
action under the terms of this Agreement.3
The American Spectrum Parties also cite (1) the phrase “distributions
from the Partnership (pursuant to Section 6.1 and 6.2 of this Agreement)”4 in
section 1.1’s definition of “Internal Rate of Return”; (2) the phrase “the amount
of money distributed to such Partner by the Partnership”5 in section 1.1’s
definition of “Capital Account”; (3) section 7.4’s indemnification provision
covering the general partner; and (4) section 10.12, which contains another
limitation of the general partner’s liability.
Section 17-606 of the Act, entitled “Right to distribution,” provides as
follows:
(a) Subject to §§ 17-607 and 17-804 of this title, and unless otherwise
provided in the partnership agreement, at the time a partner becomes
entitled to receive a distribution, he or she has the status of, and is
entitled to all remedies available to, a creditor of the limited
partnership with respect to the distribution.
6 Del. C. § 17–606. No party pleaded or proved the applicability of the
limitation on distributions contained in section 17-607 of the Act or the
limitation contained in section 17-804 of the Act. See 6 Del. C. §§ 17–607, 17-
804. The Agreement does not provide that when a partner becomes entitled to a
distribution, the partner does not have the status of a creditor of the Limited
3
(emphasis added).
4
(emphasis added).
5
(emphasis added).
9
Partnership with respect to the distribution or that such a partner is not entitled
to the remedies available to a creditor of the Limited Partnership with respect to
the distribution. Therefore, even presuming that no language in the Agreement
imposes on the Limited Partnership a duty to make the Distribution under
section 6.2 of the Agreement, under section 17-606 of the Act, because the
Agreement does not provide otherwise,6 when the Class B Partner became
entitled to receive the Distribution, the Class B Partner became a creditor of the
Limited Partnership with respect to the Distribution, and was entitled to assert a
claim against the Limited Partnership for breach of the Agreement by failing to
pay the Distribution owed under section 6.2. See 6 Del. C. § 17–606; Schuss v.
Penfield Partners, L.P., No. 3132-VCP, 2008 WL 2433842, at *4 (Del. Ch. Jun.
13, 2008) (not designated for publication).7
In the Schuss case, limited partners withdrew from a limited partnership
and were entitled to receive a distribution under section 10.01 of the limited
partnership agreement, a provision that used the passive voice “shall be paid or
distributed,” without stating which entity or entities must do the paying or
distributing. See Schuss, 2008 WL 2433842, at *2, 6. The limited partnership
agreement contained a provision limiting the liability of the general partner of
the limited partnership. See id. at *2. The limited partners received a
distribution, but they alleged a breach of the partnership agreement based on the
failure to make “a full and timely final distribution” and on the failure to make
“ratable, in kind distributions.” See id. at *4.
6
Neither the sections of the Agreement cited by the Park Plaza Parties nor the remaining
provisions of the Agreement provide otherwise.
7
Under Delaware law, unpublished opinions from the Court of Chancery are precedential.
See Case Fin., Inc. v. Alden, No. 1184–VCP, 2009 WL 2581873, at *6, n. 39 (Del. Ch. Aug. 21,
2009) (not designated for publication); Connolly v. Gasmire, 257 S.W.3d 831, 841 n.6 (Tex.
App.—Dallas 2008, no pet.).
10
The limited partners asserted a breach-of-fiduciary-duty claim against the
general partner in a way that did not conflict with the limitation of the general
partner’s liability. See id. at *2–3. But, the limited partners did not assert a
claim against the general partner for breach of the partnership agreement;
instead, the general partners claimed that the limited partnership breached the
partnership agreement. See id. at *3–4. The limited partnership moved to
dismiss for failure to state a claim, asserting that the limited partnership could
not be liable for breach of the partnership agreement because the partnership
was not a party to the limited partnership agreement and because the limited
partners had not alleged that the partnership did anything to cause a breach of
the agreement. See id. at *4. The Delaware chancery court concluded that
under section 17-606 of the Act, the limited partners had the status of creditors
of the limited partnership with respect to the distributions, and the limited
partnership had to pay the distributions to the limited partners and thus could be
sued for breach of the partnership agreement. See id. The chancery court did
not base its ruling on any language in the limited partnership agreement
purportedly imposing on the limited partnership a duty to make the distribution.
See id.
Citing various Delaware cases, the Park Plaza Parties assert that a limited
partner can seek to resolve a dispute over a distribution by seeking declaratory
relief, an injunction, or money damages against the general partner. The cited
cases do not conflict with our analysis of the first issue, and a limited partner’s
ability to seek various forms of relief against the general partner does not
mandate the conclusion that the limited partner may not sue the limited
partnership for breach of the partnership agreement based on its failure to pay a
distribution owed to the limited partner.
11
We conclude that under section 17-606 of the Act, when the Class B
Partner became entitled to receive the Distribution, the Class B Partner became a
creditor of the Limited Partnership with respect to the Distribution, and was
entitled to assert a claim against the Limited Partnership for breach of the
Agreement by failing to pay the Distribution owed under section 6.2. See 6 Del.
C. § 17–606; Schuss, 2008 WL 2433842, at *2–4. Accordingly, we overrule the
Park Plaza Parties’ first issue.
B. Did the trial court err by reducing the Park Plaza Parties’ recovery of
damages against the First General Partner by $266,400 to punish a
non-party for her contempt of court in violating the temporary
injunction?
Under their second issue, the Park Plaza Parties assert that the trial court
erred in reducing the amount of their recovery against the First General Partner
by $266,400 based on Castleman’s contempt of court in violating the trial
court’s temporary injunction. The American Spectrum Parties took issue with
the payment Castleman made from the segregated bank account. They asserted
that Castleman violated the temporary injunction by paying an improper real
estate commission to Victory Realty Solutions, Inc., a corporation Castleman
owns.
The American Spectrum Parties filed a motion asking the trial court to hold
Castleman in contempt. After a pre-trial evidentiary hearing on the motion, the
trial court signed the Contempt Order, finding that Castleman caused the
payment from the segregated account in violation of the temporary injunction.
In the Contempt Order, the trial court found “that a fine or incarceration would
not be appropriate punishment for such contempt.” The court found and ordered
“that the appropriate remedy for Ms. Castleman’s conduct is an adjustment to
the jury’s verdict in the amount of the funds paid out in violation of the Court
12
orders.” The jury found that a total of $371,147 would fairly and reasonably
compensate the Park Plaza Parties for their damages that were proximately
caused by the First General Partner’s breach of fiduciary duty. In its final
judgment, the trial court ordered that the Park Plaza Parties recover $104,747 —
$371,147 (the damages found by the jury) “less an offset of $266,400 as set
forth in the [Contempt Order]” — plus prejudgment interest and court costs.
No party has proved or obtained a jury finding as to any alter-ego theory or
basis for piercing any entity’s corporate veil. Thus, even presuming that
Castleman controlled the Second General Partner and the Class A Partners, each
of which are limited liability companies, we still must treat each actor involved
in this case as a separate legal entity. See Sherman v. Boston, 486 S.W.3d 88, 94
(Tex. App.—Houston [14th Dist.] 2016, pet. denied) (concluding that limited
liability company was a legal entity separate from its sole member); Peterson
Group, Inc. v. PLTQ Lotus Group, L.P., 417 S.W.3d 46, 58–59 (Tex. App.—
Houston [1st Dist.] 2013, pet denied) (concluding that, though alter-ego and
corporate-veil-piercing theories generally do not apply in the context of limited
partnerships, if these theories were to apply and were proved, they would make
a limited partner or a person in control of the limited partnership’s business
responsible for the liabilities of the limited partnership); Daniels v. Empty Eye,
Inc., 368 S.W.3d 743, 752 (Tex. App.—Houston [14th Dist.] 2012, pet. denied)
(holding that Mr. Daniels, a limited partner who also was president of the
corporation serving as general partner of the limited partnership, was an entity
distinct from the corporate general partner); In re BPZ Resources, Inc., 359
S.W.3d 866, 876 n.6 (Tex. App.—Houston [14th Dist.] 2012 [mand. denied],
orig. proceeding) (treating two affiliated corporations as distinct legal entities
even though the real parties in interest alleged an alter ego theory and sought to
13
pierce the corporate veil, because the real parties in interest did not prove these
allegations); Watkins v. Basurto, No. 14-10-00299-CV, 2011 WL 1414135, at
*7 (Tex. App.—Houston [14th Dist.] Apr. 14, 2011, no pet.) (mem. op.)
(concluding that alter-ego and corporate-veil-piercing theories apply in the
context of limited liability companies); WesternGeco, L.L.C. v. Input/Output,
Inc., 246 S.W.3d 776, 785 (Tex. App.—Houston [14th Dist.] 2008, no pet.)
(treating two corporations as separate entities because no party pleaded or
proved a theory for piercing the corporate veil).
We presume for the purposes of our analysis that (1) Castleman violated
the temporary injunction by paying an improper real estate commission in the
amount of $266,400 from the segregated account to Victory Realty Solutions,
Inc.; (2) without addressing the punishment for the criminal contempt, the trial
court properly held Castleman in criminal contempt based on her violation of the
temporary injunction;8 and (3) this court should review the trial court’s offset of
the $266,400 against the Park Plaza Parties’ recovery against the First General
Partner under an abuse-of-discretion standard. Even under these presumptions,
the trial court still abused its discretion by offsetting an amount that Castleman
withdrew from the segregated account (which did not contain funds owned by
the First General Partner) and paid to Victory Realty Solutions, Inc. against the
First General Partner’s liability to the Park Plaza Parties (none of whom is
Castleman or Victory Realty Solutions, Inc.). See Western Shoe Co. v. Amarillo
Nat. Bank, 94 S.W.2d 125, 128 (Tex. 1936) (holding that for one obligation to
8
Courts use civil contempt to coerce parties to comply with a court order, usually through a
conditional penalty. See Khan v. Valliani, 439 S.W.3d 528, 536 (Tex. App.—Houston [14th
Dist.] 2014, no pet.). There is no express statutory limit to the fine or confinement that a court
can impose by a civil-contempt order. See id. If a fine is assessed in a civil-contempt order, the
court cannot order that the fine be paid to a private litigant. See id. In today’s case, the trial
court did not use its civil-contempt power. See id.
14
be offset against another there must be mutuality; in other words, the obligor of
the first obligation must be the obligee of the second obligation and the obligee
of first obligation must be the obligor of the second obligation); FDIC v.
Projects American Corp., 828 S.W.2d 771, 772–73 (Tex. App.—Texarkana
1992, writ denied) (same as Western Shoe Co).
The American Spectrum Parties assert that Castleman was in contempt of
court based on her violation of the temporary injunction by her improper
withdrawal of $266,400 from the Limited Partnership’s segregated bank account
and her payment of this amount to Victory Realty Solutions, Inc., a company she
owned. The American Spectrum Parties argue that the offset ordered by the trial
court was a penalty for contempt of court that the trial court had discretion to
order, so the trial court did not abuse its discretion in determining that the
appropriate equitable remedy for this contempt of court is a reduction of the
Park Plaza Parties’ recovery against the First General Partner. According to the
American Spectrum Parties, it would not be equitable to allow the Class A
Partners to avoid any consequences for Castleman’s violation of the temporary
injunction. They also assert that Castleman controls the Class A Partners and is
their agent. But even presuming that Castleman controlled the Class A Partners
and sometimes acted as their agent, no witness testified at the contempt hearing
that Castleman was acting on behalf of the Class A Partners when she withdrew
the $266,400 from the segregated bank account and had that amount paid to
Victory Realty Solutions, Inc. Nor did the trial court find that Castleman was
acting on behalf of either of the Class A Partners when she engaged in this
contemptuous conduct.
The American Spectrum Parties cite Downer v. Aquamarine Operators,
Inc., a case in which the Supreme Court of Texas affirmed the trial court’s
15
death-penalty discovery sanction under Texas Rule of Civil Procedure 215. See
701 S.W.2d 238, 240–43 (Tex. 1985). The Downer court held that the trial
court had authority to issue the sanction based on the failure of the defendant’s
president to appear for a deposition, relying on a procedural rule that covered the
failure to appear for deposition of “a party or an officer or managing agent of a
party.” Id. at 241. Today’s case does not involve such a rule, nor does it
involve death-penalty discovery sanctions. The Downer case is not on point.
See id. at 240–43.
The American Spectrum Parties also cite State v. Texas Pet Foods, Inc., a
case in which the Supreme Court of Texas concluded that when a jury finds
statutory violations occurring and continuing up to or near the trial date, in
making the equitable determination as to whether to issue a permanent
injunction, the trial court may determine that the defendant has engaged in a
settled course of conduct and may assume that this conduct will continue, absent
clear proof to the contrary. See 591 S.W.2d 800, 804 (Tex. 1979). The
American Spectrum Parties assert that the trial court’s equitable determination in
Texas Pet Foods as to whether the defendant was likely to engage in that
conduct in the future is analogous to the trial court’s decision in today’s case to
remedy Castleman’s contemptuous conduct by offsetting $266,400 against the
Park Plaza Parties’ recovery against the First General Partner. See id. Though
Texas Pet Foods involved equitable issues as to whether the trial court erred in
issuing a permanent injunction, that case did not involve contempt of court, the
proper punishment for contemptuous conduct, or the propriety of an offset
against a party’s recovery. See id. at 803–05. The Texas Pet Foods case is not
on point. See id. at 240–43.
Even presuming the trial court had the authority to punish Castleman’s
16
criminal contempt by a means other than a fine or confinement in jail, the trial
court still abused its discretion in punishing Castleman’s contemptuous conduct
by assessing an offset against the recovery of three distinct legal entities, none of
whom is Castleman or Victory Realty Solutions, Inc. See Western Shoe Co., 94
S.W.2d at 128; Sherman, 486 S.W.3d at 94; Daniels, 368 S.W.3d at 752;
WesternGeco, L.L.C., 246 S.W.3d at 785; Projects American Corp., 828 S.W.2d
at 772–73. In addition, under Texas Government Code section 21.002, the only
punishments the trial court could properly assess for Castleman’s criminal
contempt were a fine of not more than $500, confinement in the county jail for
not more than six months, or both. See Tex. Gov’t Code Ann. § 21.002(b)
(West, Westlaw through 2017 1st C.S.). Longstanding, binding precedent
construing this statute or one of its predecessors holds that the only punishments
available for criminal contempt are a fine, confinement in jail, or both, and that
civil damages may not be awarded to a private party as punishment for contempt
because such damages are not a fine. See Tex. Gov’t Code Ann. § 21.002(b);
Cannan v. Green Oak Apts., 758 S.W.2d 753, 754 (Tex. 1988); Edrington v.
Pridham, 65 Tex. 612, 617–18 (1886); Khan v. Valliani, 439 S.W.3d 528, 536–
37 (Tex. App.—Houston [14th Dist.] 2014, no pet.); In re Hereweareagian, Inc.,
383 S.W.3d 703, 710 (Tex. App.—Houston [14th Dist.] 2012, orig. proceeding).
We conclude that the trial court abused its discretion by reducing the
amount of the Park Plaza Parties’ recovery against the First General Partner by
$266,400 based on Castleman’s contempt of court in violating the trial court’s
temporary injunction. Accordingly, we sustain the Park Plaza Parties’ second
issue.
III. CONCLUSION
Under section 17-606 of the Act, when the Class B Partner became entitled
17
to receive the Distribution, the Class B Partner became a creditor of the Limited
Partnership with respect to the Distribution and was entitled to assert a claim
against the Limited Partnership for breach of the Agreement by failing to pay
the Distribution owed under section 6.2 of the Agreement. Thus, the trial court
did not err in rejecting the complaint asserted under the Limited Partnership’s
first issue. The trial court abused its discretion by reducing the amount of the
Park Plaza Parties’ recovery against the First General Partner by $266,400 based
on Castleman’s contempt of court in violating the trial court’s temporary
injunction. We therefore modify the trial court’s judgment by deleting this
offset so that the principal amount of the Park Plaza Parties’ recovery against the
First General Partner is $371,147, and we affirm the judgment as modified.
/s/ Kem Thompson Frost
Chief Justice
Panel consists of Chief Justice Frost and Justices Bourliot and Poissant.9
9
Originally, this case was submitted with oral argument to a panel consisting of Chief Justice
Frost and Justices Jamison and Donovan. Before the court decided this case, Justices Jamison
and Donovan ceased serving as justices on this court, and this case was resubmitted without oral
argument to the current panel of Chief Justice Frost and Justices Bourliot and Poissant.
18