Beauty Elite Group, Inc., PetSilk, Inc., and Basim Shami v. Irwin Palchick

Affirmed and Memorandum Opinion filed March 18, 2008

Affirmed and Memorandum Opinion filed March 18, 2008.

In The

Fourteenth Court of Appeals

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NO. 14-07-00058-CV

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BEAUTY ELITE GROUP, INC., PETSILK, INC., and BASIM SHAMI, Appellants

V.

IRWIN PALCHICK, Appellee

On Appeal from the 164th Judicial District Court

Harris County, Texas

Trial Court Cause No. 2004-45700

M E M O R A N D U M  O P I N I O N

Appellants Beauty Elite Group, Inc., PetSilk, Inc., and Basim Shami (collectively AShami@) appeal a judgment in favor of Irwin Palchick on grounds that the trial court erred in (1) denying Shami relief on claims for trademark infringement and unfair competition; (2) awarding attorney=s fees to Palchick when Palchick pleaded and proved presentment of an amount exceeding the amount actually recovered on his contract claim; and (3) denying Shami recovery of attorney=s fees under the Lanham Act.  We affirm.

Background

In March 2003, Shami hired Palchick as an independent contractor to sell pet care supplies under the PetSilk label and human hair care products under the Beauty Elite label.  Shami orally contracted with Palchick to sell these products for a five percent commission on gross receipts.   Shami terminated the oral agreement with Palchick on June 7, 2004.  After the termination, Palchick registered certain assumed names Asimilar@^[1] to Shami=s registered trademarks and began operating his own corporation called ABeauty Signature Group.@

On August 26, 2004, Palchick sued Shami for breach of the oral sales commission contract.  Shami answered and filed a counterclaim against Palchick seeking injunctive relief and damages based on common law claims for trademark infringement and unfair competition.  In his counterclaim, Shami asserted that Palchick=s use of the names ASilky Pet,@ APet Silk Flight Pack,@ and ABeauty Signature Group@ caused Adamages in an amount in excess of the minimum jurisdictional limits of this Court.@  Shami also requested injunctive relief, alleging Airreparable harm because the damages sustained by PetSilk will be unpredictable and unending.@  Shami requested a temporary and permanent injunction barring Palchick from doing business under the foregoing names; damages; attorney=s fees; and prejudgment and postjudgment interest.  

After a bench trial, the trial court awarded Palchick $18,540.97 in damages for Shami=s breach of the oral sales commission contract; this represented the difference between $191,085.78 (five percent of $3,821,715.52 in gross receipts generated by Palchick) and $172,544.81 (the commission paid to Palchick).  The trial court signed findings of fact and conclusions of law on December 19, 2006.   The trial court found that Palchick had made a timely demand for amounts owed under the oral sales commission contract, and that Shami had refused to tender performance.  Accordingly, the trial court awarded Palchick $18,428.75 in reasonable and necessary attorney=s fees. The trial court=s final judgment denied all relief to Shami on his counterclaim.    The trial court ordered that Shami take nothing and pay all costs of court.  Shami now appeals.

Injunctive Relief

Shami=s first issue contends that the trial court erred in denying injunctive relief on his common law claims for trademark infringement and unfair competition.^[2]

Standard of Review   

            A court can grant injunctive relief only when the movant has proven (1) the existence of a wrongful act; (2) the existence of imminent harm; (3) the existence of irreparable injury; and (4) the absence of a remedy at law.  Jim Rutherford Invs., Inc. v. Terramar Beach Cmty. Ass=n, 25 S.W.3d 845, 849 (Tex. App.CHouston [14th Dist.] 2000, pet. denied).

The decision to grant or deny a permanent injunction is reviewed for clear abuse of discretion. Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993);  Jim Rutherford Invs. Inc., 25 S.W.3d at 849.  We must uphold the trial court=s determination against issuing injunctive relief unless it is made without reference to any guiding rules or principles.  See generally Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-41 (Tex. 1985) (discussing abuse of discretion standard). 

A trial court acts within its discretion when it makes a decision based upon conflicting evidence, with some evidence supporting the court=s determination and other evidence contrary to the court=s determination.   All Am. Builders, Inc. v. All Am. Siding of Dallas, Inc., 991 S.W.2d 484, 487 (Tex. App.CFort Worth 1999, no pet.).  AA clear abuse of discretion in denying injunctive relief arises only when the trial court=s decision is not supported by some evidence of substantial and probative character.@ GTE Mobilnet of S. Tex. Ltd. P=ship v. Pascouet, 61 S.W.3d 599, 620 (Tex. App.CHouston [14th Dist.] 2001, pet. denied).   In a nonjury trial or hearing, determining the credibility of the witnesses and the weight of testimony lies within the trial court=s sole discretion.  Griffin Indus., Inc. v. Honorable Thirteenth Court of Appeals, 934 S.W.2d 349, 355 (Tex. 1996).

Analysis          

Shami focuses on the trial court=s Finding of Fact No.12, which states: AThere was no evidence adduced at trial that [Shami] suffered any damages as a result of any alleged unfair competition by [Palchick=s] alleged misappropriation of [Shami=s] trademarks.@  Shami asserts that this finding of fact Agives rise to the inference that the trial court found Beauty Elite and PetSilk could not prevail on their trademark and unfair competition claims because there was no showing of damages.@  Shami does not challenge on appeal the trial court=s finding that he proved no damages.   Shami instead argues that proof of monetary damages is not required to prevail on a trademark infringement or an unfair competition claim because injunctive relief is available.  See  Qaddura v. Indo-European Foods, Inc., 141 S.W.3d 882, 889 (Tex. App.CDallas 2004, pet. denied) (injunctive relief is the most common type of relief sought in a trademark infringement case).

Proving a wrongful act, standing alone, is insufficient to obtain injunctive relief; each of the remaining elements for injunctive relief must be established.  See Samuel v. KTVU P=ship,  No. 08-02-00010-CV, 2003 WL 21954925, at *8-9 (Tex. App.CEl Paso Aug. 15, 2003, pet. denied) (an admission of a wrongful act does not establish the other elements of injunctive relief).  Shami pleaded a claim for injunctive relief premised upon Airreparable harm because the damages sustained@ would be Aunpredictable and unending.@ But Shami failed to establish non-monetary harm B such as Aloss of goodwill, clientele, marketing techniques, office stability@ B  that are predicates for injunctive relief.  See Graham v. May Kay Inc., 25 S.W.3d 749, 753 (Tex. App.CHouston [14th Dist.] 2000, pet. denied) (injunctive relief is proper where party proves non-compensable harm or damages that are difficult to calculate); see also David v. Bache Halsey Stuart Shields, Inc., 630 S.W.2d 754 (Tex. App.CHouston [1st Dist.] 1982, no writ) (employee=s use of confidential information regarding former employer=s customer=s financial assets and preferences can constitute a non-monetary injury suitable for injunctive relief).

When a trial court=s findings of fact address one or more of the elements of a claim but are silent regarding the remaining elements, and more specific findings of fact are not requested, a Apresumption in support of the judgment@ is made as to the remaining elements. See Tex. R. Civ. P. 299; Lindner v. Hill, 691 S.W.2d 590, 592 (Tex. 1985) (Awhile the trial court did not specifically address all these elements in its findings of fact, any omitted findings will be deemed to support the judgment if evidence exists to support such findings@); Vickery v. Comm=n for Lawyer Discipline, 5 S.W.3d 241, 251-52 (Tex. App.CHouston [14th Dist.] 1999, pet. denied) (Awhile findings of fact serve to limit the issues on appeal . . . the reviewing court will indulge every reasonable presumption in favor of the findings and judgment of the trial court, and no presumption will be indulged against the validity of the judgment . . . the presumption of validity will provide the omitted element by implication@); see also Ott v. Bell, 606 S.W.2d 955, 957 (Tex. App.CWaco 1980, no writ) (applying Rule 299 to supply omitted findings in context of claim for injunctive relief). 

Even treating Finding of Fact No. 11 as an express finding that a wrongful act occurred, there is sufficient evidence in the record to support additional implied findings in conformity with the trial court=s judgment denying injunctive relief on grounds that the record fails to demonstrate imminent harm, irreparable injury, or any damage for which there is no remedy at law.  Palchick testified that the names ASilky Pet,@ AEquiSilk,@ ASilky Pet Spa,@ ACool Dog@ and APet Silk@  had been abandoned before trial; that no business had been conducted under those names; that no products had been sold under those names; and that Palchick had no intention of doing so. Palchick testified at trial that no customers contacted Palchick=s Beauty Signature Group thinking they were contacting Shami=s Beauty Elite Group.  Palchick further testified that both corporations are diversion corporations,^[3] and that their product labels do not contain the names of Palchick=s Beauty Signature Group or of Shami=s Beauty Elite Group.           

Shami asserted at trial that the similarity of the names used by Palchick was Adestruction to my company,@ and stated that the Adeceptively similar name@ of Beauty Signature Group was Avery confusing to customers.@^[4]  Even if it is assumed that Shami did proffer some evidence, there is sufficient competing evidence of lack of harm to support implied findings in conformity with the trial court=s judgment denying injunctive relief.

Shami=s first issue is overruled.

 Attorney=s Fees

Shami=s second issue contends that the trial court abused its discretion in awarding attorney=s fees because Palchick sought an amount for his contract claim exceeding the amount actually recovered as contract damages.^[5]

Standard of Review

As a general rule, attorney=s fees are not recoverable in Texas unless allowed by contract or statute.  Brainard v. Trinity Universal Ins. Co., 216 S.W.3d 809, 817 (Tex. 2006).  Determining whether attorney=s fees are available under a statute is a question of law reviewed de novo.  See Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999).  The reasonableness of the amount of attorney=s fees is a question for the trier of fact.  Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 12 (Tex. 1991).  AWhere allowed by statute, the allowance of attorney=s fees is within the discretion of the trial court and will only be reversed for an abuse of that discretion.@  Llanes v. Davila, 133 S.W.3d 635, 640 (Tex. App.CCorpus Christi 2003, pet. denied) (citing Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 881 (Tex. 1990)).

Under statute, a party may recover reasonable attorney=s fees on a contract claim.  Tex. Civ. Prac. & Rem Code Ann. ' 38.001(8) (Vernon 1997).  To recover attorney=s fees, a party must (1) prevail upon a cause of action for which attorney=s fees are available; and (2) recover damages.  Green Int=l Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). 

Additionally, before attorney=s fees can be recovered, a party must plead and prove presentment of a contract claim to the opposing party, and the opposing party must fail to tender timely performance. Tex. Civ. Prac. & Rem Code Ann. ' 38.002(2),(3) (Vernon 1997); Brainard, 216 S.W.3d at 817.  AThe term >present= has been defined to mean simply a demand or request for payment.@  Llanes, 133 S.W.3d at 641.  No particular form of presentment is mandated, and this requirement may be satisfied in writing or orally. Qaddura, 141 S.W.3d at 892-92; Harrison v. Gemdrill Int=l, Inc., 981 S.W.2d 714, 719 (Tex. App.CHouston [1st Dist.] 1998, pet. denied).  The presentment requirement provides an opportunity for payment of the claimed contract amount before attorney=s fees have been incurred.  Brainard, 216 S.W.3d at 818. 

A creditor who presents an excessive demand to a debtor is not entitled to attorney=s fees for subsequent litigation required to recover the debt. Findlay v. Cave, 611 S.W.2d 57, 58 (Tex. 1981).  Excessive demand is an affirmative defense that must be pleaded, and the evidence must demonstrate unreasonableness or bad faith.  Kurtz v. Kurtz, 158 S.W.3d 12, 21 (Tex. App.CHouston [14th Dist.] 2004, pet. denied) (excessive demand is an affirmative defense that is waived if not pleaded).

In Findlay, the Texas Supreme Court instructed that the prohibition on recovery of attorney=s fees following an excessive demand applies only when (1) the claim is for a liquidated debt; and (2) the creditor refused the debtor=s tender of the liquidated amount actually due or indicated that such a tender would be refused. Findlay, 611 S.W.2d at 58; see also Hernandez v. Lautensack, 201 S.W.3d 771, 777 (Tex. App.CFort Worth 2006, pet. denied) (rule is limited to situations where the creditor refuses a tender or indicates he will refuse a tender of what is actually owed); Tuthill v. Sw. Pub. Serv. Co., 614 S.W.2d 205, 212 (Tex. App.CAmarillo 1981, writ ref=d n.r.e.) (demand is not excessive unless the creditor wrongfully demands more than the amount due and creditor refuses or indicates he will refuse tender of the amount actually due). 

An award of an amount less than the demand is not dispositive.  See Findlay, 611 S.W.2d at 58; Alford v. Johnston, 224 S.W.3d 291, 298 (Tex. App.CEl Paso 2005, pet. denied) (absent additional showing of unreasonableness or bad faith, award of attorney=s fees is not precluded solely because the amount of damages awarded is less than the amount sought); Oyster Creek Fin. Corp. v. Richwood Invs. II, Inc.,  176 S.W.3d 307, 318 (Tex. App.CHouston [1st Dist.] 2004, pet. denied) (AThe dispositive question in determining whether a demand is excessive is whether the claimant acted unreasonably or in bad faith@).

Analysis

Shami=s second issue encompasses two sub-issues: whether presentment was made, and whether the presentment was excessive so as to bar recovery.

With respect to whether presentment was made, there is no indication in the record that Shami objected in the trial court that Palchick failed to present his claim for contract damages.^[6] Palchick prevailed in a contract suit and recovered damages.  Palchick pleaded and established that he fulfilled the condition precedent to recovery of attorney=s fees by offering Shami an opportunity to perform the contract before suit was filed.  See Green Int=l Inc., 951 S.W.2d at 390.  Both the pleadings and the record establish proper presentment.

Palchick=s third amended petition recited as follows:

Pursuant to Texas Civil Practice and Remedies Code Sections 38.001 and 38.002, Plaintiff would show that he may recover his reasonable and necessary attorney=s fees incurred in presenting and prosecuting the within suit.  To wit, the claim is one for breach of oral contract as provided at Section 38.001(8) or services rendered or labor performed pursuant to Section 38.001(1) and (2).  Timely demand for payment was made and refused as required by Section 38.002.

Shami did not challenge the filing of or the contents of Palchick=s third amended petition.^[7] Shami did not contest Palchick=s allegation that all conditions precedent to the recovery of attorney=s fees were satisfied.  Shami cannot complain for the first time on appeal about an asserted failure of presentment.  See Landscape Design & Constr., Inc. v. Harold Thomas Excavating, Inc., 604 S.W.2d 374, 378 (Tex. App.CDallas 1980, writ ref=d n.r.e.) (rejecting defendant=s argument there was no evidence of presentment because it was not raised in the trial court); Trout v. Patterson, No. B14-93-00149-CV, 1994 WL 151442, at *6 (Tex. App.CHouston [14th Dist.] April 28, 1994, writ denied) (same). 

The presentment requirement was satisfied on this record.  At trial, Shami offered into evidence two e-mails from Palchick dated after the June 7, 2004 termination. In the first e-mail, dated June 9, 2004, Palchick demanded payment for commissions on outstanding orders, for expenses incurred, and for commissions owed.  Palchick offered to Adiscuss your intentions through my attorney on a scheduled date.@  In the second e-mail, dated June 10, 2004, Palchick again demanded payment for expenses, compensation for late-paid commissions, and compensation for underpaid commission checks.  Palchick asserted that Shami had refused to sign commission checks presented to him by Shami=s bookkeeper.  In this June 10, 2004 e-mail, Palchick asked Shami to meet with Palchick and Palchick=s attorney to settle all outstanding accounts. The June 10, 2004 e-mail also references Aincoming orders.@  Palchick testified during trial about repeated oral demands he made without success upon Shami for payment of commissions due under the parties= oral contract. Shami=s bookkeeper, Beverley Diaz, confirmed that Palchick had argued with Shami about the amount on each occasion when the commission check was less than five percent and requested additional payment.   These requests were denied.

This correspondence and series of oral demands satisfies the presentment requirement.  See Huff v. Fid. Union Life Ins. Co., 158 Tex. 433, 312 S.W.2d 493, 500 (1958) (sufficient presentment was made where Aoral demands and the letter asserting plaintiff=s claims were made known to the defendant@).

With respect to excessiveness, Shami cannot now contest attorney=s fees on grounds that the contract damages Palchick recovered were less than those requested. In order to preserve an excessiveness challenge, Shami was required to (1) plead excessive demand as an affirmative defense to the claim for attorney=s fees; and (2) request and obtain findings of fact regarding the essential elements of excessive demand.   See Kurtz, 158 S.W.3d at 21 (excessive demand is affirmative defense that must be pleaded); Tuthill, 614 S.W.2d at 212 (excessive demand is affirmative defense that must be pleaded, and the party asserting excessive demand must request and obtain findings of fact on the essential elements of excessive demand); Sanchez-O=Brien Oil & Gas Corp. v. Austin Res. Corp., No. 14-96-00240-CV, 1998 WL 322686, at *3 n.3 (Tex. App.CHouston [14th Dist.] June 18, 1998, pet. denied) (a party must plead excessive demand and then establish that the opposing party acted in bad faith or unreasonably).  Shami did not plead excessive demand as an affirmative defense in his live trial pleadings, and he obtained no findings regarding unreasonableness or bad faith.

Shami=s second issue is overruled.

Attorney=s Fees Under the Lanham Act

Shami=s third issue contends that the trial court erred in denying Shami recovery of attorney=s fees under the Lanham Act, 15 U.S.C. '1117(a), because this case constitutes an Aextraordinary@ case.  Shami did not plead any claims under the Lanham Act, nor were any Lanham Act claims tried by consent.^[8] See Tex. R. Civ. P. Rule 67; Latch v. Gratty, Inc., 107 S.W.3d 543, 546 (Tex. 2003) (a trial court=s judgment may only be upheld if the cause of action was pleaded or if the issue was tried by consent); Edinburg Hosp. Auth. v. Trevino, 941 S.W.2d 76, 79 n.2 (Tex. 1997) (a cause of action not alleged in the pleadings and not tried by consent is waived). Because Shami did not assert a claim under the Lanham Act, he cannot invoke that statute as a basis for recovering attorney=s fees.

Shami=s third issue is overruled.

Conclusion

The trial court=s judgment is affirmed.

/s/        William J. Boyce

Justice

Judgment rendered and Memorandum Opinion filed March 18, 2008.

Panel consists of Chief Justice Hedges, Justices Anderson and Boyce.

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^[1]  This is the word used by the trial court in its Finding of Fact No. 11 dated December 19, 2006.

^[2]  Although Shami pleaded both trademark infringement and unfair competition, these claims are premised on the same underlying contention B that Palchick improperly used trade names identical or similar to those used by Shami. The contours of a trademark infringement action under Texas common law track those of a federal trademark infringement action.  See Zapata Corp. v. Zapata Trading Int=l, Inc., 841 S.W.2d 45, 47 (Tex. App.CHouston [14th Dist.] 1992, no writ). Shami sought both damages and injunctive relief in his counterclaim.

^[3]  A diversion corporation does not manufacture products.  Rather, it buys products on the market and distributes them to retail outlets.

^[4]  Shami points to Plaintiff=s Exhibit 31 as evidence of customer confusion.  This exhibit is an e-mail from Palchick to a former Beauty Elite customer.  In the e-mail, Palchick tells the customer that Palchick no longer is affiliated with Beauty Elite and offers to do business with the customer as a newly formed entity, Beauty Signature Group LLC.  This exhibit is no evidence of customer confusion regarding which entity Palchick represented.  When pressed on cross-examination, Shami also named two individuals at two companies who he contended had become confused by Palchick=s use of the names. These individuals did not testify and were not deposed.

^[5]  Palchick sought recovery for deficiencies in commission payments on past sales and for commissions on future sales that had not been delivered at the time of termination.  The commissions on past sales were valued between $6,000 and nearly $35,000.  The commissions on future sales were valued at nearly $150,000.  Shami combines these amounts and contends that Palchick sought more than $180,000 in damages.  Shami does not challenge the computation of the attorney=s fees themselves.

^[6]  Shami conceded in the trial court that Palchick had sought payment of past-due commissions.  In a June 10, 2004 e-mail, Palchick requested payment of commissions on pending sales that had not been consummated.

^[7]  Palchick filed his third amended petition during trial, and thus did not meet the deadline set forth in Texas Rule of Civil Procedure 63.  Leave to file a late amended pleading is presumed when there is evidence the petition was before the trial court, and when there is (1) no indication that the trial court refused leave to file; and (2) no motion to strike the amended petition due to surprise or prejudice. Goswami v. Metro. Sav. & Loan Ass=n, 751 S.W.2d 487, 490 (Tex. 1988).  Shami did not object to the petition when it was brought before the trial court, and the Findings of Fact and Conclusions of Law affirmatively state they are based upon the pleadings before the trial court.  See Wilson v. Korthauer, 21 S.W.3d 573, 578 (Tex. App.CHouston [14th Dist.] 2000, pet. denied) (when a final judgment states that the judgment is based upon the pleadings filed therein, this establishes that the trial court did not refuse to consider the amended petition); Dentler v. Perry, No. 04-02-00034-CV, 2002 WL 31557302, at *4 (Tex. App.CSan Antonio Nov. 20, 2002, no pet.) (even when the final judgment does not affirmatively state that all pleadings were considered, in the absence of evidence to the contrary, there is a presumption the trial court considered the late-filed amended pleading).  Shami did not move to strike the third amended petition. Therefore, we conclude that leave was granted to file Palchick=s third amended petition, and that it is the operative pleading.

^[8]  Neither the counterclaim of PetSilk Inc. nor Beauty Elite Group Inc.=s counterclaim cites the Lanham Act. No claim under the Lanham Act was tried by consent.  A claim is tried by consent when there is an understanding by the parties that the issue is in the lawsuit, and evidence is introduced at trial and not objected to by the other party.  See Frazier v. Havens, 102 S.W.3d 406, 411 (Tex. App.CHouston [14th Dist.] 2003, no pet.)  (AA party=s unpleaded issue may be deemed tried by consent when evidence on the issue is developed under circumstances indicating both parties understood the issue was in the case, and the other party fails to make an appropriate complaint@).  Trial by consent generally does not apply if evidence supporting the unpleaded issue is relevant to other issues raised in the pleadings.  Sage St. Assoc. v. Northdale Constr. Co., 863 S.W.2d 438, 446 (Tex. 1993). This record does not indicate an understanding that a Lanham Act claim was being tried because evidence regarding similarity of marks was relevant to Shami=s common law claims.