Pacific World Energy LTD v. PIE Investments LLC

In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-19-00155-CV
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PACIFIC WORLD ENERGY LTD, Appellant
V.
PIE INVESTMENTS LLC, Appellee
__________________________________________________________________
On Appeal from the 410th District Court
Montgomery County, Texas
Trial Cause No. 18-01-00271-CV
__________________________________________________________________
MEMORANDUM OPINION
Appellant Pacific World Energy LTD (“Pacific”) appeals from the trial
court’s orders dismissing Pacific’s petition for writ of mandamus, granting summary
judgment in favor of appellee PIE Investments LLC (“PIE”), denying Pacific’s
motion for summary judgment, and denying Pacific’s request for attorney’s fees. We
affirm the trial court’s judgments.
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BACKGROUND
The proceedings below began on January 8, 2018, when Pacific filed a petition
for mandamus to compel PIE “to permit an examination and copying of PIE’s books
and records[.]” 1 Pacific pleaded that it had entered into an agreement with Philippe
E. Mulacek, the director of PIE, to purchase 25% of the membership interests in PIE
for $100,000,000. Pacific asserted that it paid the $100,000,000 and now owns 25%
of the membership interests in PIE. According to Pacific’s petition, Mulacek owns
the remaining 75% of the membership interests in PIE. Pacific pleaded that its
owner, Carlo Civelli, has been a co-investor with Mulacek “in other businesses for
many years.” Pacific maintained that it made multiple requests for information from
PIE orally, by email, and by letter. According to Pacific, before November 16, 2017,
its counsel requested PIE’s corporate books and records from PIE’s counsel and
Mulacek, but PIE only produced two Company Unit Certificates, which showed
ownership by Mulacek and Pacific, and “a copy of a partial assignment and
assumption of a membership interest dated September 24, 2014.”
Pacific pleaded that after PIE failed to produce the requested records, Pacific’s
counsel sent a written demand letter to PIE on November 16, 2017, which requested
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“A method for the enforcement of the right of inspection or examination of
the books and records of a corporation is by mandamus.” Uvalde Rock Asphalt Co.
v. Loughridge, 425 S.W.2d 818, 820 (Tex. 1968) (citing Moore v. Rock Creek Oil
Corp., 59 S.W.2d 815, 817 (Tex. Comm’n App. 1933, judgmt. adopted)).
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(1) PIE’s organization and governance documents; (2) any voting agreement, voting
trust, proxy or other instrument to which any member of PIE is a party and which
directly or indirectly relates to the voting of membership interests in PIE; (3) any
instruments evidencing any sale, conveyance, assignment, gift, donation, or other
transfer by any member of PIE from its inception to November 16, 2017; (4) the unit
ledger identifying all present unit-holders and each’s unit ownership interests in PIE
as of November 16, 2017; (5) complete financial statements and accounts from PIE’s
inception to November 16, 2017; (6) evidence of timely filing of all required Texas
and federal tax returns, as well as information reports required to be filed with the
Texas State Comptroller’s Office; and (7) all written resolutions, consents, “or other
similar written approvals or actions” of PIE’s members or directors, from PIE’s
inception until November 16, 2017. According to Pacific, PIE’s counsel emailed that
PIE would reply in due course, but when PIE had not responded by December 5,
2017, Pacific’s counsel “followed up with counsel for PIE,” and PIE’s counsel
“promised to provide all of the requested document on or before January 15, 2018[.]”
Pacific pleaded that PIE’s counsel provided PIE’s “unaudited financials since
inception and franchise tax filings[,]” but never provided other documents.
Pacific pleaded that PIE’s balance sheet of September 30, 2017, “showed
assets of only $4,410.94.” According to Pacific, PIE’s balance sheet for September
2016 showed assets of $449,729.17, and the balance sheet for September 2014
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showed assets of $500,000. According to Pacific, Mulacek had represented that PIE
“had substantial oil and gas assets and the company would be used to acquire other
substantial oil and gas assets in the United States.” Pacific maintained that Mulacek
also represented that “he would be investing his own money into PIE to acquire the
other oil and gas assets.” Pacific pleaded that the documents PIE provided “do not
show any oil and gas interests owned by PIE at the time of [Pacific]’s investment or
thereafter.”
Pacific pleaded that the purposes for its inspection request were to obtain an
understanding of (1) PIE’s full ownership history, (2) the full extent of PIE’s assets
and liabilities from September 2014 to date, including contributions by members and
any oil and gas interests held or divested by PIE, and (3) the full history of PIE’s
management and operations since Pacific became a member. Pacific pleaded that
PIE’s failure to produce the requested documents violated section 101.502 of the
Texas Business Organizations Code (“TBOC”), and Pacific asserted that it has the
right to recover its costs and expenses under section 101.503. Finally, Pacific
pleaded that it had no other adequate remedy to compel PIE to allow inspection and
copying of its books and records.
In its response to Pacific’s petition for mandamus, PIE asserted that Pacific’s
request to inspect PIE’s records was made in bad faith, intended solely for
harassment, and was not made for a proper purpose. According to PIE, the
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documents underlying the purchase agreement establish that Pacific “had sufficient
information before making the investment.” PIE asserted that Pacific’s request in
Texas constituted an attempt to avoid the parties’ alleged agreement that disputes
would be resolved under Singapore law. PIE maintained that the trial court should
award PIE attorney’s fees “because PIE’s denial of access is proper and because
[Pacific] is not acting in good faith and does not have a proper purpose for its
inspection.” PIE argued that, in the alternative, the trial court should deny Pacific’s
request for attorney’s fees because PIE had a good faith basis for “resisting” Pacific’s
request. In its reply to PIE’s response, Pacific contended that (1) no agreement exists
to pursue the request in Singapore; (2) PIE is a Texas company headquartered in The
Woodlands; and (3) PIE is not a party to any arbitration agreement between Pacific
and Mulacek.
PIE filed a surreply, in which it reasserted that the Texas mandamus was filed
to harass Mulacek and stated that the parties’ disputes “will undoubtedly be resolved
in Singapore.” PIE also reiterated its contention that Civelli was a sophisticated
investor who represented that he had reviewed all necessary documents regarding
PIE when the purchase agreement was executed. PIE further asserted that it raised a
fact issue as to Pacific’s motives and is entitled to a jury trial, and it contended it was
not required to file an answer yet because it had moved to stay the proceeding under
the Federal Arbitration Act. The trial judge signed an order granting a jury trial on
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the issue of whether Pacific sought the records for an improper purpose. Pacific filed
a supplemental petition for writ of mandamus, in which it asserted that PIE had
waived its right to claim that Pacific’s request was for an improper purpose because
PIE agreed on multiple occasions to produce its books and records.
PIE filed a hybrid motion for summary judgment, in which it asserted that it
agreed to produce the records, and that Pacific cannot recover its attorney’s fees and
expenses because PIE’s refusal is an essential element of Pacific’s claim. PIE
maintained that although it had promised to produce the requested documents by
January 15, 2018, Civelli sued Mulacek in Singapore on December 8, 2017, and on
December 11, Civelli sued Mulacek in the Southern District of Texas. PIE asserted
that Pacific’s “race to the courthouse prior to the parties’ agreed January 15 deadline
revealed its true motives: it seeks to harass Mulacek, make him spend money
unnecessarily, and recover its attorney’s fees in the process.” According to PIE, the
requested documents were provided on December 2, 2018. Citing Westerburg v.
Western Royalty Corporation, PIE argued that refusal to provide records is an
essential element of Pacific’s claim for attorney’s fees, and that Pacific had no
evidence of refusal by PIE. See Westerburg v. W. Royalty Corp., No. 07-15-00082-
CV, 2015 WL 8781425, at *5 (Tex. App.—Amarillo Dec. 11, 2015, pet. denied)
(mem. op.). PIE asserted that its claimed defense of lack of proper purpose applied
both to Pacific’s records request and Pacific’s claim for attorney’s fees.
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According to PIE, the evidence demonstrates that PIE promised to provide the
records to Pacific, but Pacific filed a petition for mandamus instead. PIE asked the
trial court to dismiss Pacific’s mandamus and deny Pacific’s claim for attorney’s
fees because PIE never refused to provide the records, and Pacific had the requested
records. Attached to PIE’s motion as evidence were several pieces of
correspondence, in which PIE and Mulacek stated that they would provide the
requested records, as well as copies of some of the documents PIE provided to
Pacific.
In its response to PIE’s motion for summary judgment, Pacific asserted that
under section 101.501 of the TBOC, PIE had five days to make its corporate records
available for inspection, and PIE failed to comply with that statutory deadline.
Additionally, Pacific argued that “PIE’s defense that it did not refuse to provide
records is not a basis for dismissal of the case.” According to Pacific, PIE’s defense
of lack of refusal is relevant only to the award of attorney’s fees and “has nothing to
do with PIE’s obligation to provide records under the statute.” Pacific argued that
“PIE’s position must be that by resisting production, demanding a jury trial on
improper purpose, and requiring the court and parties to prepare for such a trial up
to the day of trial, PIE did not refuse to provide records[]” and asserted that there is
no good faith basis for such an argument. Pacific argued that Westerburg is
distinguishable and is not binding authority, and Pacific asserted that the holding in
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Westerburg is contrary to the statute’s purpose of providing for recovery of
attorney’s fees “as a penalty when records are not provided.”
In its reply brief regarding its motion for summary judgment, PIE argued that
the undisputed facts demonstrate that PIE agreed to produce its books and records
to Pacific on or before January 15, 2018, but then asserted statutory defenses after
Pacific filed suit and Civelli initiated “multiple suits in two countries against Phil
Mulacek.” According to PIE, the only issues in the case are whether PIE must
produce its books and records and whether Pacific is entitled to recover its attorney’s
fees, and PIE “resolved the first issue by producing its books and records before
trial.” PIE further argued that Pacific has no evidence and no legal support for its
argument that PIE’s failure to produce the requested records in five days constituted
a refusal.
Pacific filed a traditional and no-evidence motion for partial summary
judgment as to the issues of (1) whether Pacific is entitled to recover costs, expenses,
and attorney’s fees due to PIE’s refusal to allow Pacific to examine and copy the
requested records and (2) whether PIE waived its claims of improper purpose or
improper written demand. Pacific asserted that its letters of December 22, 2016, and
November 16, 2017, in which it demanded production of records, were written
because PIE’s in-house counsel had told Pacific’s counsel that the requested records
were not located in Montgomery County, Texas, but were instead located in
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Singapore, and “the parties believed it would be easier to scan and email the
records.” According to Pacific, PIE did not assert that Pacific’s request was for an
improper purpose or that the written form of Pacific’s demand was improper or did
not comply with the requirements of the applicable statutes; rather, in response to
both demands, PIE agreed to arrange to provide whatever information to which
Pacific was entitled. Pacific asserted that because PIE “refused” to produce records,
PIE’s “self-imposed deadline of January 15, 2018[.]” Pacific again argued that
section 101.501(a) of the TBOC required PIE to make responsive documents
available on the fifth date after a written request. In addition, Pacific argued that PIE
had failed to controvert Pacific’s allegation that it sought the records for a proper
purpose. According to Pacific, PIE’s failure to allow examination and copying of the
records upon written request entitled Pacific to attorney’s fees. Pacific maintained
that PIE waived any claim of improper purpose or lack of good faith, as well as any
deficiency of the notice letters, because PIE agreed to provide all statutorily-required
records and produced some corporate records on December 5, 2016, and “a majority
of its records on December 2, 2017[.]” Pacific argued that PIE has no evidence that
Pacific acted “with an improper purpose or not in good faith.”
In its response to Pacific’s hybrid motion for summary judgment, PIE asserted
that PIE never refused to provide documents, and that “proper purpose” is a separate
defense to a claim for attorney’s fees, and PIE specifically reserved that claim at the
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December 3 pretrial conference. PIE again cited Westerburg for the proposition that
a shareholder was not entitled to attorney’s fees because the corporation never
refused to provide the requested records. See Westerburg, 2015 WL 8781425, at *3-
4. According to PIE, Westerburg is the only reported case that is on point, and the
Westerburg court’s decision is “well-reasoned and supports PIE’s motion for
summary judgment.” PIE asserts that it produced share certificates and financial
statements “on or before December 5, 2017[,]” but Civelli nevertheless subsequently
sued Mulacek. PIE also argued that although Pacific states that its request was made
to determine PIE’s ownership history, assets and liabilities, and its management and
operations, Pacific knew PIE’s ownership and financial status before filing suit.
Moreover, PIE asserted that its willingness to produce books and records does not
waive its defenses to Pacific’s claim for attorney’s fees. Specifically, PIE argued that
“a party can produce books and records while still contending that the requesting
party is not acting in good faith and does not have a proper purpose.” PIE further
argued that Pacific’s request did not state a purpose, and that although PIE agreed to
fully respond by January 15, 2018, and immediately provided financial statements,
Pacific filed a petition for writ of mandamus. According to PIE, “[s]pecifically-
pleaded facts regarding improper purpose, coupled with evidentiary support for
those facts,” are sufficient to raise a fact issue as to proper purpose. PIE asserted that
its verified amended response to Pacific’s petition for mandamus constitutes
10
“evidence that [Pacific] brought this mandamus action in bad faith and for an
improper purpose.”
On April 26, 2019, the trial court signed an order granting PIE’s hybrid motion
for summary judgment, dismissing the petition for writ of mandamus, and denying
Pacific’s request for attorney’s fees, as well as an order denying Pacific’s hybrid
motion for summary judgment. Pacific then filed this appeal, in which it asserts that:
(1) its written requests complied with the plain language of the TBOC; (2) PIE’s
failure to provide records for a year after the mandamus was filed constituted a
refusal to produce records as a matter of law; (3) PIE waived its challenges to
Pacific’s recovery of fees; and (4) Pacific raised genuine issues of material fact
regarding its right to recover fees. We interpret Pacific’s issues as challenging the
trial court’s orders granting summary judgment in favor of PIE and denying Pacific’s
motion for partial summary judgment.
ANALYSIS
“We review a petition for writ of mandamus under a clear abuse of discretion
standard.” In re Dyer Custom Installation, Inc., 133 S.W.3d 878, 880 (Tex. App.—
Dallas 2004, orig. proceeding) (citing Walker v. Packer, 827 S.W.2d 833, 839-40
(Tex. 1992) (orig. proceeding)). The trial court clearly abuses its discretion when it
errs in analyzing or applying the law to the facts, or if the trial judge has but one
reasonable decision and does not make that decision.” Id. (citing Walker, 827
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S.W.2d at 840). As the Westerburg court noted in its opinion, “[t]he case is before
us in an unusual posture[]” because although the parties presented the case on cross-
motions for summary judgment, the suit began as a petition for writ of mandamus,
and “the issues and argument on appeal are not couched in terms typical of those
following a summary judgment.” Westerburg, 2015 WL 8781425, at *2 n.3, *4.
Therefore, “the proper standard of review focuses on sufficiency of the evidence,
rather than the de novo standard by which summary judgments are reviewed.” Id. at
*5 (citing City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005); Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005)).
In reviewing the legal sufficiency of the evidence, we review the evidence in
the light most favorable to the trial court’s findings, crediting evidence favorable to
that party if a reasonable fact finder could and disregarding contrary evidence unless
a reasonable fact finder could not. City of Keller, 168 S.W.3d at 827. Evidence
conclusively establishes a vital fact when the evidence is such that reasonable people
could not disagree in their conclusions. Id. at 814-17. In reviewing the factual
sufficiency of the evidence, we weigh all of the evidence, and we will set aside the
judgment only if it is so against the great weight and preponderance of the evidence
that it is clearly wrong and unjust. Id. at 826; see also Cain v. Bain, 709 S.W.2d 175,
176 (Tex. 1986). In a bench trial, the trial court acts as the fact finder, is the sole
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judge of the weight and credibility of the witnesses and evidence, and is entitled to
resolve any conflicts in the evidence. See City of Keller, 168 S.W.3d at 819.
Section 3.153 of the TBOC provides that each owner or member of a filing
entity may examine the filing entity’s books and records “to the extent provided by
the governing documents of the entity and the title of this code governing the filing
entity.” Tex. Bus. Orgs. Code Ann. § 3.153. Under section 3.152(b) of the TBOC, a
court may require a filing entity to open its books and records for inspection or
copying upon a showing that, among other things, (1) a demand to inspect the
entity’s books and records was made and (2) the entity refused the good faith demand
to inspect its books and records. Id. § 3.152(b). Section 101.501 of the TBOC
requires a limited liability company to keep certain records at its principal office in
the United States, or to make available to a person at its principal office in the United
States, certain categories of documents “not later than the fifth day after the date the
person submits a written request to examine the books and records of the company
under Section 3.152(a) or 101.502[.]” Id. § 101.501(a). Section 101.502 of the
TBOC provides that a member of a limited liability company may, “on written
request and for a proper purpose . . . examine and copy at any reasonable time and
at the member’s or assignee’s expense” records that the TBOC requires the limited
liability company to keep. Id. § 101.502. Pursuant to section 101.503 of the TBOC,
which is entitled “Penalty for Refusal to Permit Examination of Certain Records[,]”
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a limited liability company that refuses to allow a member to examine and copy
records “on written request that complies with Section 101.502(a) . . . is liable to the
member . . . for any cost or expense, including attorney’s fees, incurred in enforcing
the member’s . . . rights. Id. § 101.503(a). Additionally, section 101.503 provides
that it is a defense that the person or entity suing “was not acting in good faith or for
a proper purpose in making the . . . request for examination.” Id. § 101.503(b)(2).
The trial court did not specify its basis for granting PIE’s hybrid motion for
summary judgment. Therefore, if any of the grounds alleged in the motion are
meritorious, we will affirm the summary judgment. See Harwell v. State Farm Mut.
Auto Ins. Co., 896 S.W.2d 170, 173 (Tex. 1995).
The parties agree that PIE eventually provided all the requested documents,
thus leaving the issue of whether the trial court erred by denying Pacific the right to
recover attorney’s fees as the issue to be decided in this appeal.2 Under section
101.503, a limited liability company that “refuses” to comply with a records request
that was made in good faith and for a proper purpose is liable for the requesting
party’s attorney’s fees. Tex. Bus. Orgs. Code Ann. § 101.503. The Westerburg court
2
In its four appellate issues, Pacific argues that (1) its written requests
complied with the TBOC, (2) PIE’s failure to provide records for a year after the
mandamus was filed constitutes a “refusal” as a matter of law, (3) PIE waived its
defenses of improper purpose and Pacific’s alleged failure to include the proper
content in its requests, and (4) Pacific raised genuine issues of material fact regarding
its right to recover fees.
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explained that the party asking the trial court to order production of records has the
burden of persuasion. See Westerburg, 2015 WL 8781425, at *5. To recover
attorney’s fees, section 101.503 explicitly requires that the requesting party
demonstrate that the limited liability company refused to comply with the request.
See Tex. Bus. Orgs. Code Ann. § 101.503(a). As was the case in Westerburg, section
101.503 does not define the term “refuse.” See Westerburg, 2015 WL 8781425, at
*5. We therefore afford the term “its common, ordinary meaning, as stated in a
dictionary.” Id. (internal citation omitted). If a word has more than one common
meaning, we will apply the meaning that is most consistent with its statutory context.
Id. “Refuse” means “‘[t]o deny, decline, reject[,]’” and it is distinguishable from the
term “fail” because “‘refuse involves an act of the will, while ‘fail’ may be an act of
inevitable necessity.’” Id. (quoting BLACK’S LAW DICTIONARY 1282 (6th ed.
1990)). Another commonly accepted meaning of “refuse” is “‘to show or express
unwillingness to do or comply with.’” Id. (quoting MERRIAM-WEBSTER’S
COLLEGIATE DICTIONARY 1047 (11th ed. 2003)). “Fail may be defined as
falling short.” Id.
In this case, as in Westerburg, the undisputed evidence demonstrates that PIE
consistently agreed to produce documents, initially produced some responsive
documents, and ultimately produced all responsive documents. Considering the
entire record, we conclude that the trial court’s implicit conclusion that PIE did not
15
refuse to provide the requested documents is supported by sufficient evidence. See
Westerburg, 2015 WL 8781425, at *5-6. In addition, having concluded that the
evidence supports the trial judge’s implicit conclusion that PIE did not refuse to
comply with Pacific’s request, we need not decide (1) whether Pacific’s requests
complied with the plain language of the TBOC or (2) whether PIE waived its
defenses of improper purposes and the form of Pacific’s requests, so we need not
address issues one and three. See Tex. R. App. P. 47.1. Pacific cited section 101.503
itself, but otherwise cited no authority in support of its contention that PIE’s refusal
to provide records for a year after the mandamus was filed constitutes a refusal as a
matter of law under section 101.503 of the TBOC. See Westerburg, 2015 WL
8781425, at *5-6; see also Tex. R. App. P. 38.1(i) (stating that appellate briefs must
contain appropriate citations to authorities and to the record); Plummer v. Reeves,
93 S.W.3d 930, 931 (Tex. App.—Amarillo 2003, pet. denied) (An issue that is
unsupported by argument or citation to any legal authority presents nothing for the
court to review.). The text of section 101.503 does not support such a contention,
and, as discussed above, Westerburg holds to the contrary. See Tex. Bus. Orgs. Code
Ann. § 101.503(a); see also Westerburg, 2015 WL 8781425, at *5-6.
For all these reasons, we conclude that the trial judge did not abuse her
discretion by denying Pacific’s request for attorney’s fees and dismissing the petition
for writ of mandamus. Accordingly, we overrule issues two and four and affirm the
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trial court’s judgments dismissing the petition for writ of mandamus, granting PIE’s
motion for summary judgment, denying Pacific’s motion for summary judgment,
and denying Pacific’s request for attorney’s fees.
AFFIRMED.
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STEVE McKEITHEN
Chief Justice
Submitted on February 18, 2020
Opinion Delivered September 3, 2020
Before McKeithen, C.J., Kreger and Horton, JJ.
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