*1 argues although she also Manns GROUP, INC., counsel, The PETERSON did “not know PGI she appointed
had L.P., statutory Development Group, dead- year a one that there was times, was Wellington Yu, At Manns Appellants to her case.” all line plan require- its the service aware of v. in- May temporary order ments. The be a sta- Manns that there would formed GROUP, LOTUS L.P. and Cubo 11, date, July on 2012. On this hearing tus Group, L.L.C., Appellees. finding entered orders the trial court No. 01-10-00529-CV. had reviewed and understood Manns her “unless she plan [was] and warned Texas, Appeals Court provide the child with a willing and able Dist.). (1st Houston ... environment within the reason- safe specified plan, of time in the period able 17, 2013. Oct. duties and parental her custodial subject [might] be to restriction rights Rehearing En Banc Overruled The to termination.” court also informed 19, Dec. 2013. permanency the date Manns that 2012, 14,
hearing would be November “important” get Manns “to
that it was rolling.” hearing, After a
things “a judge warned Manns that she had do,” entered a
lot of work the court 15, 2012, informing
November order the case trial on
Manns that was set for and that the date of dis-
April May the cause
missal for judge told Manns that he had “asked ... coordinator this date pick court
[his] some to do give additional time [Manns] Thus, to, things do.” [she] needfed] statutory was made
Manns aware early as 2012.16
deadline as November Manns’ applied overrule constitu-
We challenges alleged
tional based lack family
of “a date or dates certain in the” plan complaint
service because we find the wholly
to be without merit. for rehearing
Manns’ motion is denied. 13, 2013, following setting 16. On March another the trial date. hearing, the trial court another order entered
OPINION MASSENGALE, Justice. MICHAEL appeal This is an from a judgment after jury arising trial a case from two real estate Appellants transactions. L.P., Inc., Group, PGI Development, Wellington appellees PLTQ Yu sued Lotus (col- Group, L.P. and Cubo L.L.C. lectively, “PLTQ”) money under due purchase agreement a real estate de- velopment agreement. PLTQ countersued of the development agreement br'each fraud connection with the real es- tate development project. PLTQ also ar- gued that Peterson and Yu were *5 alter egos of PGI. PLTQ
The found for jury against Peter- son and Yu on claim. Group the fraud jury found for PGI PLTQ against also the contract breach of claim. After the verdict, the court found a matter of as law Group that Peterson Yu were and alter egos of PGI. As to the fraud cause of action, damages the court awarded found by jury, plus pre- post-judgment and interest, in favor of PLTQ against and and Group Peterson Yu. As to the contract claim, damages the court awarded found by jury, plus pre- post-judgment and attorney’s fees, interest and in favor of PGI, against Peterson Group, and Yu. Thus Peterson Group and Yu were jointly egos held liable as alter for PGI’s attorney’s breach of contract and for fees awarded based on cause of action. issues, first two Mazzone, appellants Michael J. Matthew Deffe- L.L.P., the trial bach, Boone, challenge ruling court’s that Pe- Haynes and Christina Houston, Group terson and Yu Crozier,- TX, egos were alter Appellants. PGI and the trial court’s award attor- Meade, Dawn R. J. Gregory Finney, The ney’s against Group fees Peterson and Yu. Houston, TX, Firm, Spencer Law Ap- issues, In their third аnd appellants fourth pellees. argue PLTQ’s was fraud claim barred KEYES, that, Panel consists of Justices the economic loss rule HIGLEY, alternative, MASSENGALE. was to elect required arranged Yu a construction loan of con- center. fraud and breach remedy between Bank, issue, which used to appellants fifth con- from Metro was satis- tract. In their grant- fy court have the loan from First Bank and to fund tend that the trial should judgment purchase n.o.v. as to of the additional two acres. ed their motion damages for lost tenant breach-of-contract loan The construction was also to cover the spec- were too damages rent because such developing property cost of into a ulative to have been awarded. center, shopping they called the Royal Shopping Oaks Yu formed Center. conclude that the trial court erred We PGI partnership, Development limited by finding Group Peterson and Yu L.P., for the purpose developing conclude egos alter of PGI. We further Shopping Oaks Peter- Center. not barred PLTQ’s fraud claim was GP, Realty general son I Inc. is the part- loss rule nor was economic partner ner of PGI. Yu is a limited remedy to elect a between fraud required GP, president Realty of Peterson I con- Finally, and breach of contract. we Inc., president Group. Peterson damages that the awarded for lost clude speculative. tenant rent were not Shortly after the two additional acres purchased were for the pro- judgment We reverse the trial court’s ject, Nguyen Yu showed Dr. some land insofar it for breach awarded that he developing strip as a center contract Commons, Stonegate near Yu, fees, residential de- attorney’s we af- including velopment on the northwest side of Hous- respects. firm in all other ton. Yu owned two acres of land there *6 Background develop, that he to and intended he had a contract to purchase eight an additional spring Nguyen, In the of Dr. Loi a adjacent persuaded acres to the land. He PLTQ practicing cardiologist, formed Lo- acres, Nguyen buy Dr. to six of those and Group, tus L.P. for the of invest- purpose in August Nguyen signed pur- Dr. a ing developing in and real estate. Cubo chase agreement, Stonegate “the con- Group, general the of partner LLC is Group tract.” Yu and la- Peterson would PLTQ Group, Nguyen Lotus and Dr. Nguyen ter contend that Dr. owed them Dr. president Group. Nguyen the of Cubo $730,000on this transaction. purchased land in Houston with the inten- building tion of a medical center where his By Nguyen November Yu and Dr. purchased office would be located. He the Royal proceeding were with the Oaks land with a loan from First Bank. Jackie project. On November Shopping Center Nguyen, who is Dr. former wife Nguyen’s 13, 2003, PLTQ Peterson аnd Lotus Group agent, and a real estate introduced Dr. Group development agree- entered into to Yu. Yu is a real Nguyen Wellington Royal one-page agree- ment for Oaks. This developer, primarily developing estate Group, ment established that Peterson as shopping centers the Houston suburbs. (1) the to: developer, responsible would Yu conducts his real-estate (2) land; negotiate the of purchase the primarily through company, work his Pe- facility, including design engineer and Group, terson Inc. (3) permits; construction lease obtaining (4) center; persuaded Nguyen purchase Yu Dr. to construct shopping (5) center; adjoining shopping obtaining two additional acres the land he assist (6) purchased financing; perform accounting had for the medical center and bank on (7) develop shopping project; to the land instead as a the cost of the and oversee contract, PLTQ advantage that he never took and construction. and tenant move-in it. agreed pay to Peterson of Group Lotus $650,000 fee of in five Group developer July PLTQ entered into a con- by signed This contract was installments. Company tract with Atlantic Builder signature Dr. on a line that identi- Nguyen architect, an Consolidated Architectural PLTQ “President” of Lotus
fied him as (“CAPS”), Planning Service con- line Yu on a that identified Group by shopping struction center. D.W. Peterson Group. him president as architect, CAPS, Tan is an president Nguyen vice-president Yu and Dr. and the of Atlantic day, The next Builder. signed development agreement requests directly Tan a second submitted draw money Metro project. Oaks This contract Bank to obtain from Dr. Nguyen’s was Lotus identi- construction loan. When he re- between ” ‘Client,’ bank, money ceived from the he fied as “the identified would it representative, as This con- deliver to Yu or his ‘Developer.’” five-page “the give more detail the duties of Yu would him checks for his fee and provided tract developer, specifically stating pay that the Tan subcontractors. testified requests practice submit to the that it was developer would his and Yu’s inflate from requests bank to receive funds the construc- amount of the draw above the actual According tion loan. This contract executed on construction costs. Tan, Group Ngu- money behalf of Lotus Dr. total amount of withdrawn yen, signature in the as from the approxi- identified block construction loan was (the president mately $900,000 general part- of Cubo in excess of actual con- Group), ner on behalf struction Lotus costs. Tan testified at one (the GP, Realty I Yu point, prepare Peterson Inc. him to PGI asked false PGI). general change partner signed Yu order to submit to the bank in Inc., GP, $400,000 Realty order to identified obtain an additional financing. entity’s рresident. Although change Tan knew false, “reluctantly” order was prepared he began developing Yu *7 anyway. it Tan had no contact with Dr. By the Shopping Center. summer Nguyen during design and construction of he had become frustrated with both Dr. the After shopping center. construction Nguyen’s unavailability and the finished, Nguyen inquired was Dr. about itself, which Yu was occu- project felt the use of the construction loan. Tan pying expense too much of his time the accounting showed him the information he development projects. In June his own had and that he had explained submitted PLTQ-PGI development agree- the bank, draws to the within the amount of The developer ment was amended. fee loan, the bank which exceeded the actual $770,000 was increased to the lesser of construction costs. project 11% cost. of the total The amend- provided Though ment also would add later Nguyen Dr. would contend signatory pro- Yu an authorized for the that he the surprised accounting as was ject’s Bank, project, account at Metro and it au- on this practices employed Yu tes- pay Nguyen thorized Yu to reasonable and neces- tified that Dr. wanted him to take sary from development costs the account the fee from the development construction limitation, “including, Develop- without loan because he felt the fee trial, At Yu part ment Fee.” testified that he was of the total cost construction. did why provision Nguyen not know was in the Dr. testified that he wanted also problems, including bankruptcy, con- and their fee included developer’s loan, but, ability pay required by to the rent signing after the loan struction questionable. that Metro Bank leases became Construction he learned paperwork, tenants apparent bank defects became that. Because the permit would not spaces, their but rather than seek- developer’s fee readied did not want to include loan, defects, up repair have the ing in the cost of the Yu marked builder remedy of Yu authorized the tenants to of construction to take the fee out cost PLTQ. To charge But Yu also solic- defects and the costs anyway. the bank loan end, directly from Yu Dr. that another payments Nguyen ited and received this told Nguyen during period. required complete the same time million was Dr. $1 repairs and custom tenant build-outs. 30, 2005, Dr. Nguyen On March Yu sent informing February on PGI letterhead him Metro Bank sent Dr. a letter $633,965 satisfy Nguyen informing a letter him that his of a shortfall funds to letter, “project In the Yu costs will ... overrun loan the construction costs. [the] $295,391” Dr. of his financial obli- balance Nguyen reminded as of the date of the stating, “An letter. The letter continued: gations regarding project, money enormous amount of time and has assuming you This is can control spent hopes making been to date this your tenants’ build-out cost to finish the success, project you made have com- project. prospective con-
mitments tenants and We think this is a critical situation on (including Development tractors PGI your project. injec- Additional equity Group) project-related under various leas- required you tion is from to assure Nguyen es and other contracts.” Dr. project can be continued to finish with- wrote a note on the bottom of the letter interruption. out agreeing to contribute an additional By point, delays, this frustrated with cost $600,000, April in three installments: overruns, transparency and lack of as to construction, midway through upon money spent, Nguyen how his Dr. completion of construction. became more involved in the project. copies appli-
The record also included day he received the letter from Metro payment cations for submitted to Metro loan, exceeding Bank about the costs his project, Bank on the construction sta- Nguyen Dr. dismissed Jackie and sent Yu reports tus On June photographs. a letter addressed to “Peterson 29, 2005, Nguyen Dr. signed Yu both Inc.,” demanding accounting pro- an $400,000 approving document an additional ject other information and seeking *8 Ngu- construction costs “based on Dr. response, resigned documentation. Yu yen request changes.” and Mr. Yu’s of project developer, as but he demanded payment remaining portion
By the end of the shell of the developer’s fee. Royal Oaks Shopping complet- Center was PLTQ ready Group ed and for custom build-out ten- Peterson and PGI sued (collectively, ants who proper- Group Group had been secured for the Lotus and Cubo restaurants, ty. “PLTQ”) PLTQ-PGI The tenants included a for breach of the de- shop, velopment agreement coffee and a cash-advance storefront. and breach of the Jackie, working prop- Stonegate They sought who had been as the contract. attor- erty manager, collecting ney’s was not the rent fees under Practice and Reme- Civil due under the leases. There were other 38.001 for contract dies Code section both problems. Some tenants had financial claims. af- a bro-
PLTQ pleaded prepared and several document commercial answered PLTQ filed a counter- Group. firmative defenses. ker to and addressed Peterson petition Yu third-party against claim and “Peter- Nguyen Dr. wrote checks both to in this and others who are not involved Yu, directly including and Group” son to Yu alleged that and Peter- appeal. PLTQ $100,000 April one to Yu dated 2005 for egos alter of each other. Group son were a reading, “Development with notation Fee Yu, Group, and PGI PLTQ sued Peterson Tan, parties, 2nd Draw.” Other such fraud, Yu, alleging that оn specifically they were Peterson working believed with his own behalf and on behalf Peterson trial, Group. explained Yu he was At that PGI, misrepre- and made material Group Group employee sole Peterson services he “regarding sentations PGI, he a and because does not wear companies provide developing his would uniform, he on a is when is worksite there PLTQ alleged Oaks Center.” way no for others to determine if he that he and his misrepresented that Yu for Peterson or for PGI. working develop shopping would center entities Perhaps importantly PLTQ, most to perform the tasks enumerated in the PLTQ-PGI contract a provision included PLTQ further development agreement. limiting developer’s liability solely to alleged misrepresentations that made Yu entity, yet the PGI PGI no assets— had on center shopping progress- as work not a bank asked even account. When ed, monitoring specifically regard trial, about this at Yu said he did not that using the funds construction loan and believe needed a account: PGI bank PLTQ for construction of the center. al- “[Sjince sign I Nguyen’s do Dr. “intentionally leged that Yu took draws account, checking I do not touch his mon- loan for construction unautho- ey, money do not touch his loan from Oaks,” expenses rized not related Bank, so, only Metro that and that he “knew and intended that few checks PLTQ rely upon representations his of was from going pay Nguyen Dr. honesty and trustworthiness myself for a fee.” same,” it rely upon causing did to suffer Dr. Nguyen testified his dam- about result damage “financial as a of Yu’s ages. disagreed He Yu’s method of treachery.” PLTQ pleaded also a cause of developer’s calculating the fee based on action for breach of the development providing amendment that he earn that it set out agreement, saying the duties project Nguyen 11% the cost. Dr. dis- Yu, PGI, Group, which Peterson agreed items such as on the interest to perform. each failed also sued loan included should be in the cost GP, Inc., I Realty general Peterson formed the basis Yu’s 11% fee be- partner of but it later this dropped doing from cause so created an party pleadings. sought its incentive Yu, declaratory judgment delay. Nguyen Dr. thought Likewise egos all alter PGI were of each costs, tenant including excessive build-out other. Yu, approved by were created di- *9 managing sincentive for costs because
Throughout litigation, PLTQ raised high costs increase tenant build-out would entity the issue of which or person —Peter- However, the developer’s Ngu- fee. Dr. Yu, Group, actually son or PGI —had done yen conceded that at the entered time he Royal project. on the work Oaks For PLTQ-PGI into its in- contract and example, some documents showed the amendment, volvement Peterson as a understood devel- such he that thе project costs was instructed to consider one ele- would be based on oper’s fee fraud, damages ment of as to including tenant build-out costs. was: PLTQ’s without “Money knowledge used was not Nguyen Dr. testified that he PLTQ’s or consent and not for direct or developer’s of the seeking a total refund jury indirect benefit.” The awarded accomplished that Yu fee. He testified $184,000 PLTQ Group Lotus for fraud. he indicat- project’s goals, some of the with some of the ed that he was satisfied jury The also found that PGI failed to project. tenants that Yu secured for the comply Royal with the Oaks development However, Dr. testified that he was Nguyen question The for agreement. contract seeking a reimbursement of the “extra” damages granulated. jury was The said, money Dr. charged. Nguyen Yu PLTQ following awarded sums as dam- return “Whatever he didn’t earn he should (1) ages for breach of PGI’s contract: Nguyen to me.” Dr. testified that he was $158,000 “[mjoney paid to tenants for seeking following other elements of build-outs in excess of what agreed was damages in addition to the excessive devel- under their leases or otherwise agreed to (1) (2) oper’s money; fee: lost rent lost (2) $53,000 by PLTQ”; “[mjoney PLTQ (3) money; tenant build-out additional paid to tenant subcontractors as a result of cash he ei- required provide that (3) liens”; or workman liens threatened satisfy requirements ther to bank loan or “[tjhe $48,000 for reasonable and neces- (4) project obligations; employ- the cost of sary repair cost to ... work [construction] ing repair new contractor to construction Center”; Shopping at the (5) defects; commissions for leases (4) “[ljoss $136,021for of tenant rent in the opened businesses that never have past it would received had the (6) shortly opening; pay- closed after agreement performed.” jury been The anticipated ment of a lien on behalf of an following awarded no on the ele- tenant that filed for He bankruptcy. also (1) “[bjroker ments of damages: paid fees he against testified that borrowed his life by PLTQ in excess of fees that have would money insurance and withdrew from his paid agreement per- been had the been pay project retirement account to ex- (2) formed”; paid by PLTQ loan interest penses, but he was unable to quantify Group Lotus in excess of interest money value of taking lost those ac- paid agreement would have been had the tions. (3) been performed; loss of tenant rent the future that it would receive had the jury
The found that failed to com- (4) contract, agreement performed; been mon- ply with the Stonegate real estate ey withdrawn from the Oaks con- but that its failure comply was excused struction loan that would not have performance because “a different was ac- agreеment had to had the been pay per- cepted as full satisfaction of performance formed. original obligations agree- compliance ment” and because was waived verdict, After the the court ruled as a Thus, Group. jury Peterson did matter of Yu Group law Peterson Group damages not award Peterson on its egos were alter of PGI. The court ren- breach of contract claim. judgment dered on the verdict as to the jury The found that Yu fraud cause of action in favor of and Peterson against PLTQ, Group committed fraud at- and Yu. As to the claim, tributing 5% of the fraud to Yu and 95% of breach of contract the court ren- jury judgment the fraud to Peterson on the verdict in favor of Group. dered *10 56 Group, alter-ego theory pierce Peterson a limited Yu, entity’s PGI “veil” partnership’s impose Yu. Peterson liabilities on a The need partner.1 limited
appealed. any equitable veil-piercing doctrine is Analysis fundamentally to the applied dubious as of a partnership. liabilities limited Unlike ego I. Alter person doing corpora- a with business a issue, argue appellants In their first tion, doing person a business with a limit- by ruling trial court that erred partnership always ed has recourse Group Yu were liable for Peterson against any general partner in the same development agreement breach of the be- partners the lia- manner are liable for they egos cause were alter of PGI. No partnership of a without limited bilities to the alter-ego question presented Orgs.Code 158.152(b) Tex. Bus. § partners. Instead, jury. granted the trial court a 2012).2 (West The general identities of the ego directed verdict that PGI was the alter a partners partnership limited are Peterson Yu. It made of both readily they must be ascertainable because findings alter-ego involving gen- no PGI’s reported periodically secretary to the GP, partner, Realty eral Inc. Id. 153.802(a)(1)(E). § state. argue alter-ego Appellants rul- ing alter-ego general was in error partners, because In contrast limited theory ap- not veil-piercing simply partners partnership gen- does in a are limited Indeed, to limited Texas ply partnerships. erally responsible part- for the limited uniformly apply nership’s obligations they courts have declined to unless take some 549, case, Morgan, summary judgment although Seidler v. See 277 S.W.3d 558 in the 2009, denied); (Tex.App.-Texarkana pet. judge reasoning magistrate n. 5 the actual of the Foothill, Fargo depend finding Asshauer v. Wells 263 upon did not that veil- 468, 2008, denied); (Tex.App.-Dallas piercing principles partner- pet. apply 474 to limited Solutions, ships. Experian Props., v. Lex- Pinebrook Ltd. v. Brookhaven Lake Inc. Info. L.P., Ass'n, 487, 4:10-CV-144, ington Prop. Allen No. 2011 Owners 499-500 1637935, 28, 2011) 2002, (E.D.Tex. denied); Apr. WL at *1 (Tex.App.-Texarkana pet. Join- findings (adopting Paper and conclusions of the Supply, er v. Coast & 13-07-00623- No. Instead, CV, 2895851, magistrate judge). magistrate (Tex.App.- 2008 WL *6 n. 10 at 29, 2008, judge’s premised (mem. recommendation was July Corpus pet.) Christi no statute, Houtz, partnership the Texas limited op.); McDaniel v. No. 06-05-00077- CV, 3626325, provides partner partici- that a limited who (Tex.App.-Texar- 2006 WL *1at 14, 2006, pates partnership’s in control (mem. busi- pet.) op.); kana Dec. see no may parties ness liable to third who Prospect Energy Corp. also v. Dallas Gas Part- partner- LP, transact business with the limited ners, 579, F.Supp.2d 602 n. 23 ship partner in the belief that the limited is Inc., (S.D.Tex.2011); Holdings, Waller v. DB3 general partner. Experian Solu- 3:07-CV-0491-D, No. 2008 WL Info. tions, 2011 WL at *9 (N.D.Tex. 12, 2008). Feb. *10 suggests Miller, The case we generally have found 2. See Elizabeth S. Are There contrary conclusion Texas law is Ex Liability? Liability under Limits on Limited Owner Solutions, perian Lexing Inc. v. Piercing Protection and the Veil Texas Busi- Information L.P., Entities, magistrate ton Allen which a federal ness J. L. Tex. Bus. (2009) ("There judge persuaded ego dealing was "not ... alter is little case law liability partner apply piercing presum- does not to limited partnerships, veil of limited 4:10-CV-144, ships." ably always gen- No. 2011 WL because there at least one (E.D.Tex. 7, 2011). Apr. at *9 partner personal liability eral who for the has accepted mag obligations partnership federal district court debts judge’s deny istrate recommendation
57
ipation
in “control of the business” for
accept
subject
or
themselves
action
Indeed,
purposes
third-party liability pursuant
ex-
liability.3
such
statute
pressly provides
partner
that a limited
“is
to section 153.102. As relevant
to this
(A)
obligations
appeal,
acting
not liable for the
of a limited
such actions include
as
partnership unless” one of two circum-
contractor for or an officer
other agent
or
(1)
applies:
partner
stances
the limited
or employee
partnership;
of the limited
(2)
(B)
general partner;
agent
also a
or
in addition
a contractor for or an
or employ-
(C)
officer,
to the
the limited
ee of a
partner’s
general partner;
exercise of
or
an
director,
rights
powers
partner,
as a limited
corporate
or stockholder of a
gen-
153.103(1).
partner participates
§
limited
in the control
eral partner.
Id.
153.102(a);
§
of the business.
Id.
see also
In defense of the trial
alter-ego
court’s
158.003(c) (“A
§
partner
id.
limited
shall
finding, PLTQ
rely
any
does not
any obligation
duty
gener-
not have
of a
statutory provisions
these
to establish that
partner
solely by
being
al
reason of
or Yu are liable for the
partner.”).
plain implication
limited
obligations of the PGI
partnership,
limited
of the
partner may
statute is that a limited
general
either as
or limited partners.
In
obligations
become liable for the
stead, PLTQ
exclusively
relies
on common-
partnership
limited
due to the limited part-
principles suppоrting
law
the alter-ego
participation
ner’s
the “control of the
doctrine,
veil-piercing
supposedly ap
business,” though
liability
is limited plied in Speedemissions,
Capital
Inc. v.
C.
person
statute to “a
who transacts busi-
Ltd.,
01-07-00400-CV,
Enterprises,
No.
ness with the
partnership
limited
reason-
former
general partner
nonsuited the
it later
black-
forth the
though
opinion
the
set
Peterson
proceed solely against
chose to
theo-
alter-ego
the
pertaining
law
to
letter
Yu,
argument,
and PGI. At oral
veil, the case
piercing
corporate
the
ry and
PLTQ
that
explained
counsel for
because
basis,
there
on a different
that
was decided
the
general partner
the
is liable for
debts
support
“triable
of fact” to
were no
issues
against
partnership,
judgment
Enterprises
that
argument
Capital
the
C
impose liability
PGI would be sufficient to
ego
Speedemis-
alter
of the former
was the
GP,
However,
Realty
Peterson I
Inc.
on
Similarly, in
Id. at *9.
employee.
sions
sought by
impo-
the
the relief
is not
Fourteenth
Consulting,
Solutioneеrs
GP,
liability
Realty
on
I
sition of
Peterson
Appeals recited the black-letter
of
Court
instead,
Inc.;
is,
seeking
impose
it
to
liabil-
veil, and
piercing
corporate
on
law
ity
Group
on Peterson
and Yu for the
that
evidence
concluded
there was no
then
obligations of PGI.
jury’s
that Solutio-
support
to
verdict
its
Consulting
ego
was the alter
of
neers
ap
as
veil-piercing
The
doctrine
Consulting,
287
owner.
Solutioneers
plied
corporate
egos
to
alter
has never
Thus,
at 387-88.
neither case ac-
lia
indiscriminately applied
impute
been
to
any
arguably
bystanders—
tually applied
theory
bility
responsible
or
to
alter-ego
applied
operators
it is
to the owners and
subject a lim-
veil-piercing theory
other
to
firm,
“shareholders, officers,
including
to the
a limited
partner
liability
ited
directors” who
would ordi
otherwise
partnership.
narily
liability
corpo
be insulated from
alter-
significance
The
of the trial court’s
See,
obligations.
e.g., Castleberry
rate
v.
ego finding
this case is that it is
(Tex.1986).
Branscum,
721 S.W.2d
holding
Group
Peterson
and Yu
basis
words,
Or in other
the “fiction”
when
for PGI’s
liable
breach of the
entity
or
form is disre
corporate
other
expressly
But
agreement.
agreement
that
its
garded
“pierced”—
“veil” is
—when
developer’s liability
limited the
to the “as-
objective
must be
basis for
there
some
Moreover,
entity.
of the PGI
sets”
identifying
persons
those
or other entities
undisputed
fact
is that
Lotus
reality
responsible
who in
were
for the
Group’s
counterparty
sole contractual
and the
actions of
liabilities created
itself,
agreement
expressly
that
was PGI
entity.
disregarded
equi
To the extent the
signature
in the agreement’s
identified
could
applied
table doctrine
be
to a limited
agree-
a limited
partnership.
block as
it
partnership,
only apply
likewise would
ment was executed
behalf of PGI
liability to
impute
analogous constituents
Inc.,
Realty GP,
as
Peterson
identified
partnership,
the limited
such as
general partner,
signed
PGI’s
it was
partners
managers responsible
limited
Yu,
that
as
entity by
on behalf of
identified
Moreover,
controlling
the business.5
Realty
Peterson I
president.
GP’s
application
the doctrine would be
PLTQ alleged in
that Pe-
pleadings
its
limited to
the limit
circumstances which
egos
terson
were alter
partnership
perpetrate
Yu
ed
was used to
ac
direct,
limited partnership. Although
personal
tual fraud for the
benefit
partner-
remedy
course to the
seek
5. Of
extent a limited
did not
in this case.
general partner
general
ship's
corporation
its
is itself
It nonsuited
claims
liability-limiting entity just
proceeded solely
equita-
PGI’s
partner,
or other
and it
on an
—
general partner
theory
corporation
was a
ble
and Yu could be
held
—then
may
egos
entity
subject
veil-piercing.
itself
liable as alter
оf PGI.
153.102,
Walden,
pursuant
ties
to section
v.
Shook
of the defendant. Cf.
allegation
there has been no
(Tex.App.-Austin
particular
denied) (“claimants
pierce
PLTQ reasonably
believed that
seeking
proof
pet.
of PGI.7 To
general partner
must meet
the same Yu was a
the veil of an LLC
*13
entity
liability
limited
on
they
impose
partnership’s
would if the
a
requirements
as
partner
in this case under the
its limited
corporation”).6
were a
doctrine
guise
equitable veil-piercing
Here,
only two identifi
there are
statutory
would eviscerate the
framework
of PGI’s
parties behind the “veil”
able
lim-
governing
liability
the limitation of
general
partnership
limited
structure —its
expressed
as
in
partnerships
ited
section
Inc.)
(Peterson
GP,
Realty
partner
153.102(b), and thus
decline to apply
we
it
(Yu). PLTQ aban
partner
its sole limited
Shook,
in this case.
368
at 621
S.W.3d
Cf.
sought
pierce
its
which
to
pleading
doned
(emphasizing
importance
deferring
GP,
Realty
veil of Peterson I
corporate
standards
legislative
governing
to
veil
Inc.,
litigated
question
and it never
piercing
corporations).8
al
Group
whether Peterson
and Yu were
We conclude that
the trial court erred
egos
general partner.
ter
Nor did
by
that
finding
Group
Peterson
and Yu are
PLTQ plead
prove
Group
that Peterson
the alter
of PGI.
egos
We sustain the first
partner
a limited
such that
it
issue, and we hold that
Group
Peterson
obligations,
could be held liable for PGI’s
and Yu are not liable for PGI’s breach of
pursuant
either
to section 153.102 of the
contract.
Organizations
by equita
Business
Code or
veil-piercing. Finally, PLTQ
ble
has not
Attorney’s
II.
fees
asserted in the trial
or on appeal
court
Yu,
trial,
partner,
as limited
can be
At
the parties stipulated
lump-
held
fees,
partnership’s
attorney’s
liable for the limited
liabili-
sum
segre-
which were not
conduct,
Contrary
suggestion, appli-
partner’s
to the dissent’s
based on the limited
veil-piercing
partner
general
cation of the
partner.”).
doctrine in this
the limited
is a
hinge
unsupport-
Although
dissenting colleague
case also should not
on the
our
would hold
153.102(b)
speculation
comply
ed
purely
that PGI failed to
Yu liable under section
regulatory formality.
some
Adherence to cor-
of the control he
”[b]ecause
exercised over
PGI,”
porate
de-emphasized by
apparently
formalities has been
the activities of
without re-
conducting
veil-piercing
gard
scope
most Texas courts
for the substantial
of activities
153.103,
analysis
legislative
by
ever since the
admonition
covered
safe
harbor of section
corporate obligations
plain
liabilities
not be
it is nevertheless
that mere control is
imposed
corporate
on
stakeholders based
not sufficient—a claimant must also demon-
belief,
upon
corporation
“the failure of the
to ob-
strate a reasonable
based on the limit-
conduct,
any corporate formality.”
partner’s
serve
ed
own
that the limited
Tex. Bus.
see,
Orgs.Code
21.223(a)(3) (West 2012);
general partner.
§
partner is a
e.g.,
Corp.,
Howell v. Hilton Hotels
(Tex.App.-Houston
714
[1st Dist.]
bankruptcy
Adelphia,
8. Even the
in
court
denied) (“Under
pet.
Corporation
Business
recognized
possibility
a theoretical
2.21,
corporate
Act article
observance of
for-
equitable veil-piercing
partnerships
of limited
longer
malities is
can
law,
no
factor that
pierc-
under Delaware
warned
"veil
determining
ego.”).
in
considered
alter
ing
equitable
and other
remedies cannot be
proof
utilized as an 'end run' around the
Orgs.Code
153.102(b) (“If
required
§
7. See Tex Bus.
Section 17-303
Delaware
[the
Orgs.Code
partner participates
counterpart
limited
in the control of
Tex.
Bus.
business,
permit
§§
partner
only
party
the limited
is liable
a third
153.102-103]
person
prevail
showing.”
Adelphia
ato
who transacts business with the
on a lesser
In re
Commc’ns,
partnership
reasonably believing,
limited
gated by for their own attor stipulated responsible Texas are court awarded litigation.” expenses In their second fees and attorney’s ney’s fees. amount of Res., Inc., Partners, the trial Ltd. v. issue, contend that ECO appellants Ashford (Tex.2012). 41 Tex ruling that Under by court erred S.W.3d attorney’s law, may attorney’s award fees responsible and Yu were a court argue appellants Specifically, authorized statute or fees. when Yu cannot be Group and v. Corp. that Peterson MBM Fin. parties’ contract. Co., of PGI for attor- egos alter held liable as Operating Woodlands PLTQ’s (Tex.2009). cause of ney’s party fees awarded is enti Whether *14 development attorney’s action for breach an award of fees is tled to seek they ar- things, other agreement. Among review de novo. of law that we question a to recover PLTQ is not entitled gue Stores, Inc., that 1 Holland v. Wal-Mart it attorney’s pleaded fees when contractual (Tex.1999). 91, 94 S.W.3d statutory attorney’s fees. only for Practice and Remedies The Civil First, held that Peterson having person may that recov provides “[a] Code egos alter and Yu are not Group attorney’s fees from an indi er reasonable held liable they that cannot be
we conclude corporation, in addition to vidual or PLTQ’s attorney’s fees awarded on for the costs, claim and if the amount of a valid PLTQ- of action for breach cause for ... an oral or written con claim is agreement. PGI tract.” Tex. Civ. Prac. & ANN. Rem.Code. Nevertheless, PLTQ that it is contends (West Supp.2012). § To obtain an 38.001 from attorney’s recover fees entitled to under Section attorney’s award of fees of a trial Group both becausе Peterson (1) 38.001, prevail “a must on a cause party con- Stonegate under the stipulation and attorney’s fees are re of action for which provision included a tract. This contract (2) coverable, damages.” recover attorney’s fees in a suit to awarding 384, Int’l, Solis, 951 Inc. v. S.W.2d Green interpret enforce or the contract: (Tex.1997). 390 any If action Attorney’s Fees. 11.15. necessary to equity However, at law or in becomes free to “[p]arties are term, any provision interpret enforce or either fee-recovery contract for a standard Contract, prevail- or condition of this In Chapter or stricter than 38’s.” looser to recover the ing party shall be entitled KB Home Grp. P’ship v. tercontinental fees, costs, attorney’s (Tex. reasonable 650, L.P., 295 653 Lone Star S.W.3d necessary (including, but disbursements 2009). provi a parties include such When to, fees and expert not limited witness contract, language in a sion costs) incurred or made it deposition controls, language rather than the contract it any other relief to which in addition to (reviewing the statute. Id. at 654-56 may become entitled. party” under con “prevailing definition of whether who plaintiff tract to determine argu- all of PLTQ argues appellants’ that any damages actual segre- failure to had not recovered really ments are about fees). Thus, attorney’s to recover Group Peterson entitled gate. disagree. We successfully who defends breach arguments, party alternative Yu have advanced but does not recover and the of contract claim including segregate the failure to attorney’s damages might entitled to for attor- argument they are not liable provision a contractual even fees under ney’s at all. fees
61 PLTQ did not to attor cause recover re he would not be entitled though Stonegate contract, Robbins lated to the it is not Chapter fees under 38. See ney’s (Tex. 18, 22-23, attorney’s Chapter 27 100 entitled to fees under Capozzi, v. S.W.3d Enters., Weng jury finding 38 on basis of its favorable pet.); no App.-Tyler Inc., Travel, Stonegate 837 Embassy on the contract. See Green Inc. v. World Int'l, at 390. (Tex.App.-Houston [1st 222-23 We hold that S.W.2d Lion, 1992, writ); awarding attorney’s v. judgment no Silver Inc. fees Dist.] St., 010700370CV, Inc., sup and Yu Dolphin No. cannot be basis of at (Tex.App.-Houston ported at *18 on the the contractual WL denied) 20, 2010, May pet. torney’s provision Stonegate fees in the Dist.] [1st (mem. Fowler, op.); Epps (stating see also v. 351 contract. P. See Tex.R. Civ. (Tex.2011) (holding judgment 868-69 must conform to the plead prevailing party pur ings); Grp. P’ship, defendant Intercontinental poses attorney’s (holding of award of fees when S.W.3d at 659 waived party plaintiff prejudice). right attorney’s nonsuits case with its to recover fees under light application of this difference in contractual attоr provision pleading for fees, statutory attorney’s 38); ney’s *15 and contractual fees under also Chapter see 679, judgment Thompson, a court’s must con Stoner v. 578 682- and because S.W.2d (Tex.1979) pleadings, (holding may form the see Civ. P. 84 that not party Tex.R. 301, attorney’s who fees relief party pleads granted a for in the absence of plead relief). Chapter ings 38 waives claim for that support under its provi fees under attorney’s a contractual Finally, stipula the parties’ trial P’ship, sion. Grp. See Intercontinental amount, reasonableness, and tion as to the at 659. 295 S.W.3d an what necessity agreement was as to trial, attorney’s amount of fees the would In at court pleading its live prevailing party. award to the It attorney’s for PLTQ pleaded reasonable an a for award of fees. attorney’s basis Chapter fees under 38 of the Texas Civil Partners, See 401 at S.W.3d Practice and Remedies It did not Code. Ashford plead attorney’s “pre for fees under issue, this We sustain and hold that provision Stonegate vailing party” by rendering judgment trial court erred PLTQ theory contract. first raised this PLTQ attorney’s its fees awarded motion to post-trial pleadings. a amend its and Yu. Appellants opposed this on the motion grounds preju that it would cause them III. loss rule Economic PLTQ consistently had de dice because appellants In issue argue their third the existence of that contract. nied claim PLTQ’s fraud was barred response, PLTQ argued that it was suffi rule a economic loss because it arose from pleaded attorney’s it had fees cient that con- breach established of duties harassment, frivolity op as based on PGI Lotus tract between posed provision. the contractual How Group. Appellants thus contend that ever, appellate record does not include by denying motions trial court erred their actually al any pleading amended judgment for directed verdict and notwith- leging recovery entitlement attor claim. verdict on the fraud standing the under the contract. ney’s Stonegate fees Moreover, a may disregard in favor A trial court although jury found defense, findings grant on its be- a motion jury’s affirmative
62 simultaneously a ver in contract in tort. only when directed judgment n.o.v. separate id. a tort cause proper. been See See To maintain dict would have Tex.R. action, 301; Cnty. Drainage must show he plaintiff Bend Civ. P. Fort (Tex. 392, distinct, Sbrusch, injury 818 S.W.2d 394 has “suffered an Dist. v. 1991); Ins. v. Fin. also Prudential Co. from the eco separate, independent see (Tex. Servs., Inc., 74, 29 S.W.3d 77 Review nomic recoverable under breach of losses 2000). Chems., granted n.o.v. should be Judgment Sterling Inc. v. contract claim.” (Tex. precludes recovery. 793, legal principle Inc., when a Texaco 259 797 S.W.3d Beckman, denied) v. 2007, B Inc. 305 Supply, See & pet. W App.-Houston [1st Dist.] (Tex.App.-Houston [1st 15 S.W.3d (citing Indep. D.S.A. Inc. v. Hillsboro Sch. denied). 2009, pet. (Tex.1998)). Dist., Dist.] 973 663-64 S.W.2d Therefore, loss has while the economic rule “Although Supreme the Texas applied negligence prod been to bar ‘something term as Court described the action liability ucts causes of when misnomer,’ general one formulation of subject injury alleged was also matter rule, applicable to this the economic loss contract, Sharyland Sup of a see Water case, may not recover in party is that 417-18, it ply, 354 at has not been S.W.3d tort economic losses suffered to purely recovery for extended to bar fraud or matter of a contract.” James subject 418; fraudulent inducement. See id. at Corp. Monte Shipping J. v. Del Flanagan Plastics, 46; Formosa 960 S.W.2d at see Inc., N.A., Fresh Produce S.W.3d Flanagan Shipping, also (Tex.App.-Houston no [1st Dist.] 365; Apartments, Matlock Place L.P. v. Sharyland Supply pet.) (quoting Water Druce, 355, 378 (Tex.App.-Fort *16 Alton, 407, 415, Corp. City 354 S.W.3d v. denied) (holding Worth that eco pet. (Tex.2011)). 418 To determine whether recovery nomic rule did not bar loss applies, the loss rule consider economic we fraud). statutory duty the to “both the source of defendant’s (whether solely the act it arose out of Here, PLTQ’s fraud claim is duty) contract or from some common-law misrepresentations based on material remedy sought by nature of the the by PGI, made and Yu. plaintiff.” the Corp. Formosa Plastics development agreement While the enu Contractors, & Eng’rs USA v. Presidio Yu merated the various tasks that and his Inc., (Tex.1998) 41, 45 (quoting 960 S.W.2d perform entities would furtherance of Inc., Sign, v. Ace Crawford Oaks, Royal PLTQ’s fraud developing (Tex.1996)). 12 look to We the substance to claim was not based on a failure accom action, not of the cause of the manner in plish negligence carrying these tasks or which the pleaded, it was determine Rather, PLTQ’s them out. claim fraud type brought. that is action Jim Walter separate harm it suf based on Homes, Reed, 711 Inc. v. S.W.2d 617- misrepresenta fered as a result of Yu’s (Tex.1986). nature injury 18 “The of the dishonesty tions and acts of did not duty most often determines which or goal developing Royal further the injury duties are breached. When the is Oaks For Shopping example, Center. only the subject the economic loss to of a PLTQ “Peterson covertly contends that itself, the action in con contract sounds spearheaded the theft funds” tract at 618. alone.” Id. Atlantic Builders Tan to encouraging circumstances, PLTQ’s some how submit false bank draws on loan
Under ever, may all party’s expend- actions breach duties account. These funds were not
63
Oaks,
duty
However the
would
not to commit
Royal
ed on
such
independent
fraud is different from and
contemplated
obtain a benefit
duty
comply
with the terms of a
contrary,
agreement. To the
development
Corp.,
contract. See Formоsa Plastics
Yu orchestrated
the evidence showed that
at 47-48. And as to
S.W.2d
its claim for
loan
withdrawals from the construction
fraud, PLTQ sought to recover for a cate
from the
away
which were then directed
gory
damages
distinctly
that was
differ
$124,442.63
project, including
Oaks
ent from the
damages: “[m]oney
contract
development
Stonegate
to Yu’s
at
diverted
knowledge
used without
or consent
[its]
$60,000 paid
to Peterson for undocu-
and not for
direct or indirect benefit.”
[its]
expenses
phantom
mented
related to
ten-
injury money
The nature of the fraud
ants.
In the
damages question,
fraud
lost as a result of Yu’s deceitful
jury
quantify
was asked to
the amount of
actions,
simply
not
economic loss related to
money
PLTQ’s knowledge
“used without
itself, i.e.,
shopping
subject
center
PLTQ’s
or consent and
not
direct
matter
Flanagan
contract. See
benefit,”
in response
indirect
to this
Thus,
Shipping,
question
jury
found
alleged
injury
fraud
not
did
arise from the
$184,000.9
amount of
contract, and the economic loss rule does
id.,;
Plastics,
apply.
See
Formosa
jury agreed
and found
47;
Sharyland
S.W.2d at
see also
Water
that Peterson and Yu committed fraud.
Supply,
(noting
Dist.] liability, speculative. a tenant rent was too theories lost alternate pleads argue each alter lost rents awarding damages appellants on do not judgment if the theories for breach may upheld were not available theory nate injuries agreement, and distinct and for separate depend damages find they and distinct separate and if of this issue we assume purposes theory.” Madi Instead, j.n.o.v., made as to each motion for ings are in their were. 158; v. son, at see 241 S.W.3d tenant rent was an they argued that lost Birchfield 361, 747 S.W.2d Hosp., Mem’l Texarkana measure of inappropriately speculative (Tex.1987). the one-satisfac 367 “Under a new Royal Oaks was damages because [however,] rule, is entitled plaintiff a tion no established track enterprise and had suf recovery any damages only one thus contend that Appellants record. injury.” a Utts particular because of fered evidence from which the lost there was no (Tex.2002); Short, 822, 831 v. 81 S.W.3d profits could be estimated. I, L.P. v. Cha Tony
accord
Gullo Motors
damages for breach
To recover
(Tex.2006);
299, 303
Crown
pa, 212 S.W.3d
contract,
must show that he
plaintiff
a
Casteel,
378,
22
390
v.
S.W.3d
Ins. Co.
Life
loss as a result of the
pecuniary
suffered
(Tex.2000);
v.
Stewart Title Guar. Co.
Servs.,
City
Inc. v.
S. Elec.
breach.
(Tex.1991);
1, 7
Mad
Sterling, 822 S.W.2d
(Tex.
Houston,
319, 323-24
355 S.W.3d
ison,
principle
241
at 158. The
S.W.3d
denied).
2011, pet.
App.-Houston [1st Dist.]
“the trial court elects the
applies when
profit damages,
plaintiff
lost
To recover
remedy
injured plaintiff
affords an
by competent evidence
must show the loss
single
favorable relief
the most
ERI
certainty.
reasonable
See
and with
multiple theories of liabili
defendant when
Swinnea, 318
Consulting Eng’rs, Inc. v.
Madison,
injury.”
ty cause an indivisible
(Tex.2010);
Utts,
867,
158-59;
Tex. Instru
81 S.W.3d
compare
241 S.W.3d at
ments,
Mgmt.,
Energy
Inc. v. Teletron
at
Sterling,
822 S.W.2d
S.W.3d
(Tex.1994).
Inc.,
Birchfield, 747 S.W.2d at
natural, proba
“Such losses must be the
Chapa,
65 Robinson, 86, (Tex.App. seeking lost-profits damages, 227 96 business the v. S.W.3d (cit denied) 2006, pet. inquiry experience -Houston should focus on the [1st Dist.] Jensen, 213 ing Miga v. the involved in people enterprise, (Tex.2002)). complaint appeal on activity, nature of the business specula were that the awarded relevant market. Id.
tive, pertaining and the settled case law Under agree profits the award of lost is instructive. ment, developer was required over reasonably cer “What constitutes leasing see of the project. contend profits tain evidence of lost is a fact inten ed that tenants that Yu found for the sive determination.” Holt Atherton In shopping center were unable to meet their dus., Heine, Inc. v. 84 S.W.2d obligations and Yu’s failure to find tenants (Tex.1992). minimum, opinions “As a or who were able to pay the rent was a profits estimates of lost on must be based breach of contract. Dr. Nguyen secured facts, objective figures, or data from which tenants, replacement and the old and new the amount of lost can be ascer profits leases were introduced into evidence at Id. profits tained.” Lost cannot be based trial without objection. pure speculation or thinking. wishful PLTQ sought lost tenant rents based on Instruments, Tex. at 279. The S.W.2d the difference between the rents in the Supreme Court of Texas has stated: leases secured Yu and which are largely speculative, Profits and those for the replacement tenants. activity from an dependent on uncertain There suggestion replace- is no conditions, changing or market or on ment unprofitable leases were or that they chancy opportunities, business or on expenses, resulted in increased so the dif- promotion products entry of untested ference in the rent between original markets, into unknown or unviable or on replacement leases and the leases corre- unproven success of a new and en- sponds profit. to lost terprise, cannot be recovered. Factors like these and others which make a busi- Although PLTQ was new to real risky ness venture in prospect preclude business, estate Yu and Peterson Grouр recovery profits of lost in retrospect.... were not. Contrary appellants’ to the ar- hope The mere for success of an untried guments, jury had the actual leases enterprise, even when that hope is real- from the tenants that Yu secured as a istic, enough recovery is not of lost basis from which it could assess lost ten- profits. case, damages. ant rent In this the par- Id. at 279-80. ty responsible overseeing the leases
However, market, experience had in the relevant the fact that a busi not an ness is new does not which was untested business. absolutely preclude 280; Rather, recovery of lost it profits. leasing See id. at of commercial Sovereign Hernandez v. Nation real estate in a strip Cherokee mall. The relevant Tejas, 343 (Tex.App.-Dal market included restaurants and busi- denied). Rather, pet. las nesses providing goods “[w]hen and services. No- *19 there are firmer reasons to expect tably, a busi the introduction of the them- leases yield profit, ness to a the enterprise provided is not selves evidence from which the prohibited recovering merely from jury because could estimate tenant lost rents Instruments, it is new.” Tex. speculation. Accordingly, 877 S.W.2d without we con- Thus, at 280. in the case of an untested clude that the lost tenant rents were not awarded, we the Peter- Appellants, and estate transactions. to be speculative too (“the Group”), err in Inc. Group, trial did not Peterson that the court son hold (“PGI”), n.o.v. on LP judgment Development Group, the motion for PGI and denying (collectively, Develop- overrule this issue. Yu “the ground. Wellington this We ers”), appellees, PLTQ Group, Lotus sued Conclusion (collectively, and L.L.C. L.P. Cubo Group “PLTQ”), purchase due under a respect money to Peterson Solely with note, Yu, a judgment promissory reverse as to and real agreement, we the and in- development agreement, development the ar- agreement. estate breach attorney’s In all other re- had debts cluding gued fully fees. that it satisfied its case to affirm. We remand this spects Developers we and countersued breach pre-and court for calculation of the trial and development agreement fraud for further interest and post-judgment develop- in connection the real estate opin- in accordance with this proceedings that project. PLTQ argued ment also ion. egos Group Peterson and Yu were alter PGI, partnership par- the limited that was KEYES, dissenting.
Justice ty agreement. to the Justice, KEYES, V. EVELYN jury against The found for and dissenting. Yu on Group PLTQ’s and found jury fraud claim. The also pres- This case respectfully dissent. PLTQ against PLTQ’s PGI on breach of eco- regarding the important ents issues post-trial multiple contract claim. After theory. ego loss doctrine alter nomiс and motions, (1) the trial court issued a final judg- un- majority’s seriously holdings court also ment on the verdict. The found by per- dermine the economic loss doctrine judgment, rulings in the after various be- recovery damages the double mitting trial, after in which it fore and vacillated express- both fraud and contract for losses issue, Group that on the the Peterson and ly by covered of the contract terms (2) egos alter PGI. The Yu were court radically alter-ego Texas change by jury awarded found theory by holding alter-ego law does Yu against Group the Peterson pierce veil apply corporate action, PLTQ’s plus pre- fraud cause of shielding person entity liability from post-judgment interest. The Peterson mere through corporate entities formed as Group jointly and Yu were also held liable entity so long business conduits alter egos PLTQ’s with PGI as of PGI on liability is a ultimately lodged is breach of contract claim I would re- phantom partnership. limited post- held they pre- were liable for omitted encompass state the facts facts interest claim. judgment Finally, on that by majority are material I believe case, the trial court awarded its attor- and I proper disposition to the of this stipulated in a ney’s fees amount. restate the I would affirm would law. part part and reverse in on different (1) issues, Developers: In five chal- grounds major- from those asserted trial lenge ruling court’s Pe- I would to the ity, and remand the case Group egos terson and Yu are alter trial court for consistent with proceedings (2) PGI; challenge the trial court’s award opinion. this attorney’s fees against the Peterson (3) Yu; appeal
This an after judgment argue PLTQ’s from a in a case two real jury arising trial from fraud claim is barred the economic loss *20 (4) rule; alternatively, PLTQ First Bank with the intention of argue, building medical center where his office would be required remedy to elect a between (5) contract; Jaclyn Nguyen, located. Nguyen’s former fraud and breach of con- wife and a real estate agent, introduced grant- tend that the trial court should have Nguyen to Yu. Yu is a real develop- estate judgment ed their motion for notwith- (“JNOV”) develops er who shopping centers in standing the verdict as to the Houston suburbs. Yu conducts his real- damages breach-of-contract for lost tenant estate primarily work damages spec- rent because such were too through company, his the Peterson Group. ulative to have been awarded. persuaded Yu Nguyen purchase two Contrary to I majority, the would hold additional acres adjoining the land Nguyen PLTQ’s fraud claim is barred already had purchased for the medical cen- that, economic loss rule. I would also hold ter develop and to the land instead as a although by failing the trial court erred shopping center. Yu arranged Nguyen require PLTQ to elect a remedy between to obtain a construction loan from Metro contract, fraud and breach of that issue is Bank, which was used to satisfy Nguyen’s moot. I would further hold that the dam- loan from First Bank for purchase ages PLTQ awarded for lost tenant rent the property and to fund purchase and, therefore, speculative were not recov- the additional two acres. The Metro Bank erable. I would reverse the trial court’s loan was also to cover the cost of develop- judgment foregoing as to the claims and as ing property center, into a shopping pre- post-judgment interest on Nguyen Yu and Royal called the them. I would affirm the unchallenged (“the Oaks Shopping Center Project”). judgment as to PLTQ’s other contract loan, Pursuant to the Metro Bank Nguyen PGI, claims I and would affirm the maintained a construction account at Met- trial finding court’s in the final judgment ro Bank to fund construction of the Pro- that the Peterson and Yu are alter ject. egos of PGI and therefore hable pay- ment of awarded to on Development Oaks PLTQ’s Agreement Finding PLTQ’s contract claims. fraud and contract claims to be inextrica- In February Yu special formed a intertwined, bly affirm I would also purpose PGI, partnership, limited for the trial court’s award of stipulated attorney’s purpose sole of developing PLTQ.
fees to I Accordingly, would affirm Shopping Center. He also formed Peter- judgment in part part and reverse in (“Peterson GP, Realty son I Inc. I Real- and remand the proceed- case for further ty”) general to be the partner of PGI. ings in opinion. accordance with this Realty Peterson I incorpo- filed articles of February ration on 2004. Yu was the
Background sole director. PGI filed a certificate of spring Dr. Loi Nguyen, 27, 2004, partnership February limited practicing cardiologist, formed Lo- designating Realty gener- as its L.P., Group, tus for the purpose partner. of invest- al Yu signed the certificate of ing developing real estate. partnership Cubo limited president; as the no Group, general partner LLC is the of person entity was identified as a limited is, thus, Lotus and Nguyen partner. is the Yu partner sole president of Group. Nguyen pur- Cubo employee of special purpose enti- chased land in Houston with a loan ty develop Project; from he formed to *21 Developer’s' thoroughly described the of Peterson more president and
sole shareholder Group replaced and the Peterson gener- to be the duties he formed Realty, which terms, Developer. By its PGI; with PGI as and the sole sharehold- partner al of develop- superseded the agreement of the Peter- this er, employee and president, day. previous ment of the company. agreement Group, development his son office, Yu Group has an and The Peterson 2(a) Devel- Royal of the Oaks Paragraph Group for both the Peterson works there that PGI Agreement provided opment office or bank ac- PGI. PGI has no and (i) local market condi- would: research count of its own. (ii) tions; regarding perform diligence due PLTQ entered Peterson and accessories, utilities, zoning for the and agreement develop- for development into a (Hi) PLTQ diligence Project; advise on due Shopping Oaks Center ment of the Pro- associated with the property for the one-page 2008. This on November obtain acquisition, its and ject, supervise the Peterson agreement established (iv) for financing Project; apply for the respon- be developer, as the would Group, and li- necessary permits and obtain all activities: following for the sible (v) censes; engage, expense at of the Land Negotiate purchase 1. architects, contractors, engi- PLTQ, all neers, designers, professionals and other Designing/engineering/Obtaining 2. necessary appropriate by PGI permits deemed construction construction, develop- and “design, for the Leasing shopping center 3. (vi) negotiate and Project”; ment of the 4. Construction into, in the name of enter on behalf of and obtaining bank loan financ- 5. Assist agree- and other PLTQ, “all contracts ing documents, (including loan ments Accounting project on the cost of 6. Client) only by the nec- shall be executed Tenant move-in and con- Oversee design, for the con- essary or desirable struction struction, Project”; development and PLTQ “pay[ing] for responsible was to (vii) plans prepare cause the architect to all with the associate[d] costs approved by specifications and to be activity timely on a basis” and for “com- (viii) PLTQ; plan comple- “provide developer, Group, Peterson pensat[ing] (ix) work”; portions tion of various $250,000 development fee of [with a] PLTQ an estimate prepare and submit $400,000 II,” for Phase in five Phase I and every sixty days; expenditures at least beginning pay- with a 20% installments (x) from contractors to ver- review invoices construction. The ment at the start of the ify delivery of the work and completion signed by Nguyen presi- contract was (xi) materials; in the name of purchase, president and Yu as dent expense, furnishings, “all its Group. fixtures, Project equipment (xii) installation”; day, Nguyen signed supervise The next Yu and its requests all draw “[pjrepare for the and submit development agreement second (“the provided shall be to and Development copies of which Project [PLTQ] to the approved by This contract was between the Client Agreement”). loan for the as “the lendеr of the construction Lotus identified ” ‘Client,’ receive the Project “the ‘De- [Metro Bank] identified as ” deposit agreement, which was en- advanced thereunder and veloper.’ This funds account established and attorney, such funds an tered into on the advice of Yu’s *22 member, desig- manager, at a bank client. No maintained the client offi- cer, stockholder, by PLTQ. nated” employee, agent or representative Developer 2(b) of Royal Oaks Devel- Paragraph shall be personally [PGI] liable opment Agreement provided for PGI to hereunder, liability all such being Para- leasing Project. oversee the of limited to the assets of the Develop- 2(c) graph that PGI would provided [PGI], er “[ojversee im- the construction of tenant provements and tenant move-in in connec- added.) (Emphasis tion with the leasing any space initial of This contract was executed on behalf of 2(d) Project.” Paragraph provided PLTQ by Nguyen, signa- identified in the PLTQ that PGI would advise promptly of ture president block as Cubo developments concerning design, material general partner PLTQ, and on behalf of construction, financing. Paragraph PGI by Realty, Peterson I general 2(e) provided for PGI to all other “[d]o partner signed of PGI. Yu for Peterson I things, in expense the name of and at the Realty president. as its [PLTQ] necessary or desirable in the judgment reasonable of Developer to cause Royal 2. Amendment to the Oaks De- completion’ ‘final ... of Project to velopment Agreement II occur.” began Yu developing Royal Oaks Paragraph Royal 8 of the Oaks Develop- Shopping By Center. summer Agreement ment granted PGI “all authori- he had become Ngu- frustrated with both ty necessary carry responsibili- to out its yen’s unavailability Royal and the Oaks ties Agreement” required under this itself, Project which Yu felt occupying was provide to such written confirma- too much of expense his time at the of his tion of authority at PGI’s request, own development projects. except that PGI was not authorized to In June parties an signed “take any [PLTQ] action to cause to incur “Amendment to Development Agreement” any indebtedness” or to take any action to (“the Amendment”) in the capacities same cause to sell part all or as Development before. The Fee in- property associated with the Project. $770,000 creased to the lesser of or 11% of Paragraph provided for the payment the total project cost. The amendment of the Development Fee in installments in provided also would add Yu as $250,000 the amount of Phase an signatory Project’s authorized for the $400,000 for Phase II. Paragraph 6 af- Bank, disbursement account at Metro firmed that this was an length” “arm’s it pay authorized Yu to reasonаble and transaction professional and that a stan- necessary development costs from the ac- dard of care in community accordance with limitation, “including, count without applied. standards Oaks Devel- Development Fee.” It provided further opment Agreement also included a limita- Yu, PGI, PLTQ indemnify and Peterson liability tion of provision: liabilities, costs, I Realty any or ex- 8. Liability. Limitation No mem- penses, fees, including attorney’s incurred ber, officer, stockholder, manager, any as a result of actions taken PGI employee, agent representative pursuant authority granted to the in the [PLTQ] personal- Client shall be Development Agreement. hereunder, ly liability liable all such being limited to the assets of the Specifically, provided: the Amendment Barker-Cypress Highway exe- following the near practicable As soon two acres there that he [PLTQ] Yu owned of land Agreement, of this Client cution develop, he had a contract be add- intended D. Yu to Wellington shall cause adja- eight an additional acres purchase for the signatory ed as an authorized Nguyen the land. Yu persuaded cent to account Project’s disbursement *23 assured six of those acres after Yu buy hereby Developer Bank. [.PG1] Metro purchase (or they him that could structure the pay account such authorized from not have Nguyen so that would agreement account) all any and any replacement payment. to make a cash down necessary expenses and which are costs Developer’s in reasonable or desirable pur- August Nguyen signed In the de- in connection with discretion agreement, “Stonegate Con- chase the marketing, development, sign, and/or tract,” prevailing provided that the (including, with- leasing Project the attorney’s recover fees in an party might Fee, limitation, Development out interpret to enforce or the contract: action subject to the of Section requirements Attorney’s any 11.15. Fees. If action above). solely [PLTQ] be Client shall necessary to equity law or in becomes by incurred responsible any amounts term, interpret any provision or enforce to the author- Developer pursuant [PGI] Contract, prevail- condition of this (regardless of ity granted hereunder be ing party shall entitled to recover maintained whether sufficient funds are fees, costs, and attorney’s reasonable account(s)), Project in the bank necessary (including, but disbursements de- hereby agrees indemnify, Client to, fees and expert not limited witness Par- Developer and hold harmless costs) made it deposition incurred or fend (as Development ties in the any it in addition to other relief to which defined any and Agreement) may entitled. from become liabilities, losses, damages, costs or all Group the Peterson would later Yu and attor- expenses (including reasonable $730,000 Nguyen contend that owed them fees) by any Developer neys’ incurred on this transaction. Party as a result actions taken Royal Development 4. Oaks authority Developer pursuant to the Project may herein. granted This Section July In entered into a con- by any evidence party relied on third as Company tract with Atlantic Builder Developer’s authority to incur costs architect, Architectural an Consolidated Project at Owner’s connection (“CAPS”), Planning for con- Service as set expense forth above. Royal Shopping struction of the Oaks Cen- added.) “Developer Par- (Emphasis The ter. was the owner of the listed as Amendment were ties” referenced contract, property on the construction Develop- in the Royal not defined Oaks Group Atlantic Builder and the Peterson Agreement. ment managers. were listed as construction Stonegate Contract architect, president Tan is an D.W. CAPS, the ad- of Atlantic Shortly Nguyen purchased vice-president after acres Oaks Pro- Tan that his construc- ditional two for the Builder. testified Group. that he contract was with ject, Nguyen Yu showed some land tion any center near developing strip The Peterson did not do work, Commons, develop- management but Tan Stonegate a residential construction they had of Houston listed it on the contract because ment on northwest side According costs. past. in the Bank construction successfully together worked Tan, money never heard of PGI. amount of He had the total withdrawn approxi- from the construction loan was duties with its contractual accordance $900,000 mately in excess of actual con- Agree- Development under costs. Tan struction testified that at one ment, developing shop- PGI worked at him point, prepare Yu asked a false through Yu. It obtained and ping center change order to submit to the bank in Tan’s architectural firm to worked with center, $400,000 order to obtain an additional design the with Tan’s construction it, to build and with a real estate company financing. Although Tan knew the change broker, Jaclyn Nguyen, to find tenants. false, “reluctantly” prepared order was he Yu also located several tenants for the anyway. it *24 through personal center contacts. his 30, 2005, Nguyen On March Yu sent a Royal The Amendment to the Oaks De- letter PGI informing on letterhead him of velopment Agreement provided had also $633,965 a shortfall in funds satisfy the Development that the Fee was to be taken letter, construction costs. the Yu re- the from construction loan. Yu testified Nguyen obligations minded of his financial Nguyen wanted him to take the De- the regarding project, stating, “An enor- velopment Fee from the lоan construction money mous amount of time and has been felt Development because he the Fee was spent hopes making to date this part total cost of construction. Al- success, project you and have made com- though Nguyen contended at trial that he to prospective mitments tenants and con- surprised by was accounting practices (including tractors PGI Development employed project, on this Nguyen testified Group) project-related under various leas- that he Development wanted the Fee in- es and other contracts.” Nguyen hand However, cluded in the construction loan. wrote a note on the bottom of the letter he signing paper- learned after the loan agreeing to contribute an additional work that permit Metro Bank would not $600,000 in three April installments: that. Because bank did not want to construction, midway through upon and Development include the Fee in the cost completion of construction. The note loan, Yu up marked the cost of con- roughly agreement reflected the reached struction to take the fee out of the bank Royal Development in the Oaks anyway. Agree- loan Yu also solicited and received payments directly ment that Nguyen during responsible from would period same time paying cover all costs associated with the devel- costs, contemplated by Oaks opment timely on a basis in five incre- Development Agreement. ments, including payment an initial at the payment start of construction and a final construction,
During Tan submitted upon completion Project. The rec- draw requests directly to Metro Bank to copies applications ord also included money Nguyen’s obtain from construction payment submitted to Metro Bank loan. money When he received from the Project, and construction reports status bank, he would deliver it to Yu or his photographs. Ngu- with On June representative, and Yu him give would yen signed ap- and both a document checks for Yu pay his fee and to the subcon- $400,000 proving tractors. Tan an additional construc- testified that it was his and Nguyen Yu’s tion costs “based on Dr. Mr. practice to inflate the amount of the requests draw above the actual request changes.” Metro Yu’s Inc.,” to “Peterson letter addressed the shell the end of By Project complet- demanding accounting was an Center Shopping by ten- build-out other information docu- ready seeking for custom ed proper- Ngu- for the had been secured mentation. Tan had no contact ants who leased, fully Initially, the center ty. design and construction of the yen during restaurants, shop, a coffee with several Only after construction shopping center. bar, cashing company and a check martini Nguyen inquire about the was finished did in the center. spaces to build out prepared Tan of the construction loan. showed use delays However, a number of there were information he had and accounting him the Katri- including Hurricane problems, draws to that he submitted explained had na, issues, workmanship issues tenant bank, of the bank within amount had Jaclyn Nguyen, who by the builder. loan, the actual construc- which exceeded manager, working property as the been tion costs. collecting the rent due under
was not making take over the Nguyen began to prob- had financial leases. Some tenants from Yu. of business decisions When lems, including bankruptcy, and their abili- short, eight spaces PGI parking lot was required by the rent the leases ty pay creating park- more suggested plan *25 de- questionable. Construction became instead, canceled one of ing, Nguyen, but as tenants readied apparent fects became leases. Yu worked with the restaurant’s but, seeking rather than to spaces, their that of the bar to devise a menu the owner defects, Yu repair have the builder satisfy Texas Alcoholic Bever- would remedy to the de- authorized tenants (“TABC”), had re- age Commission PLTQ. To charge and the costs to fects license, cancelled Nguyen fused a bar but end, that another Nguyen this Yu told $1 contrary these that lease too. Because of to re- required complete million was decisions, project after the shell of the was tenant build-outs. pairs and custom that complete, Nguyen Yu informed he sent February Metro Bank Project, he demanded leaving wás but informing a letter him that his Nguyen of the payment remaining portion of the ... loan costs will overrun “project [the] Fee. Development $295,391” the date balance as of continued: letter. The letter Project, Nguyen Yu left the locked After you can control assuming This is immediately of the center four tenants out to finish the your tenants’ build-out cost failure prior taking occupancy to their project. Although eventually rent. some pay a critical situation on returned, think this is original We tenants ei- most injec- project. equity Additional your out of business or had their ther went you assure the required tion is from by Nguyen. leases terminated to finish with- project can be continued Lawsuit 5. The interruption. out PGI sued Group The Peterson delays, By point, this frustrated Royal Oaks Devel- overruns, PLTQ breach of the transparency and a lack of cost opment Agreement and breach of the Nguyen money spent, to how his They sought attor- Stonegate Contract. project. more involved in the became Practice and Reme- ney’s from Metro fees under Civil day he received the letter loan, 38.001 for both contract dies Code section exceeding the costs his Bank about Yu a claims. Jaclyn and sent Nguyen dismissed pleaded prepared by several af- a commercial broker and ad- answered PLTQ filed a counter- Group. Nguyen
firmative defenses. dressed to the Peterson against Yu third-party petition claim and wrote checks both to “Peterson Group” and others who are not involved this Yu, directly including one to Yu appeal. PLTQ that Yu and the alleged 4, 2005, $100,000 April dated with a Group egos Peterson were alter of each reading, notation “Development Fee 2nd Yu, other. It sued the Peterson Tan, parties, Draw.” Other like believed Yu, PGI for It alleged fraud. on they were working with the Peterson his own behalf and on behalf of the Peter- trial, Group. At Yu testified that he was PGI, Group son made material mis- employee sole representations “regarding services he PGI, and, and of because he does not wear companies and his provide would devel- uniform, when he is on a worksite there oping Royal Oaks Center.” way is no for others to determine whether alleged misrepresented Yu that he working he is for the Peterson Group or and his entities would develop shop- for PGI. ping perform center and the tasks enumer- respect With to the provision in the ated in Oaks Development Development Agreement limit- Agreement. PLTQ alleged further ing the Developer’s liability sole- misrepresentations Yu made as work on ly to which lacked even a bank ac- shopping center progressed, specifical- count, Yu testified that he did not believe ly regard to monitoring the construction PGI needed a bank account: I do “[S]inee loan using the funds for construc- sign Nguyen’s on Dr. checking ac- tion of the PLTQ alleged center. that Yu count, I do not money, touch his I do not “intentionally took draws the con- *26 Bank, touch money so, his loan from Metro struction loan expenses for unauthorized only a few checks that was going pay to Royal not related to Oaks” and that Yu from Dr. Nguyen myself to for a develop- “knew PLTQ rely and intended that upon ment fee.” representations his honesty and trust- PLTQ worthiness and did rely upon Nguyen same” testified about his damages. and suffered “financial damage as a result disagreed He with Yu’s method of calculat- treachery.” PLTQ of Yu’s pleaded also ing the Development Fee based on the cause of action Royal for breach of the Amendment to the Development Agree- Development Agreement, Oaks saying that providing ment for Yu to earn 11% of the Agreement Yu, the set out the duties of cost, Project payable in installments. PGI, the Peterson Group, and which each Nguyen disagreed that such as in- items perform. PLTQ failed to also sued Peter- terest on the loan should be included the I Realty, general son the partner of cost that formed the basis for Yu’s fee 11% it dropped but lаter this party from its doing because so created an incentive for pleadings. PLTQ sought declaratory Likewise, delay. Nguyen thought that in- Yu, judgment the Peterson Group, cluding costs, excessive tenant build-out and PGI were all alter egos of each other. Yu, which were approved by created a Throughout managing the disincentive for costs because litigation, PLTQ raised high the issue of which tenant build-out person entity or costs would increase —the Yu, However, Peterson Group, actually Development Nguyen or PGI —had the Fee. that, done the work Royal Project. on the Oaks conceded at the time he entered into Some Royal documents showed the involvement Oaks Development Agreement Amendment, of the Peterson Group, such as a document and its he understood that contract claim ages based on on its breach of Fee would be Development costs, PLTQ respect with to Stone- against build-out including tenant Project gate Contract. costs. Nine, through Questions was not seek- In Seven testified that he
Nguyen not fail to com- jury Fee. found that did Development refund of the a total ing Royal Development some of with the Oaks accomplished ply that Yu He testified that Agreement. he indicated Project’s goals, and tenants with some of the he was satisfied Eleven, jury Ten Questions However, Project. for the that Yu secured Peterson Group found that Yu and the seeking reim- that he was Nguyen testified PLTQ, fraud attribut- against committed money Yu “extra” bursement and 95% of the ing 5% of the fraud to Yu said, he Nguyen “Whatever charged. Group. jury The fraud to Ngu- he should return to me.” earn didn’t to one was instructed consider ele- fol- seeking that he was yen testified fraud, damages ment of as to was: damages in addi- lowing other elements of PLTQ’s “Money knowledge used without (1) Fee: Development the excessive tion to PLTQ’s direct or or consent not for (2) build-out money; rent lost tenant lost found, jury also indirect benefit.” The (3) that he was money; additional cash Thirteen, Question to that none response satisfy bank provide either to required Developers Yu, the Peterson — Project obligations; or requirements loan or to enter PGI —induced (4) cost of a new contractor employing Agree- Development into the (5) defects; repair construction commis- jury ment fraud. The awarded on that never for leases businesses sions $184,000 fraud, pre- plus Lotus shortly open- after closed opened PLTQ’s post-judgment interest (6) on behalf of ing; payment of a lien fraud claim. for bank- anticipated tenant that filed an found, Question jury response The He also that he had bor- ruptcy. testified Seventeen, comply PGI failed his insurance and had rowed life Agreement. Oaks Development money from his retirement ac- withdrawn question contract Project but he pay еxpenses, count to *27 Question In to granulated. response quantify money to a value of was unable jury PLTQ the Eighteen, the awarded fol- by taking those lost actions. lowing damages sums as for PGI’s breach Disposition Below $158,000 “[m]oney paid of contract: for to trial, the in of Following case was submitted tenants for build-outs excess what Questions In One to leases or jury. response agreed to was under their other- to $53,000 Six, PLTQ PLTQ”; through jury agreed by found that wise for PLTQ paid comply “[mjoney failed to with the terms to tenant subcontrac- Bank Promissory by Note issued Metro tors as a result of liens or threat- workman Contract, liens”; $48,000 respect Stonegate to the ened reasonable “[t]he necessary repair was excused cost to comply but that its failure and [construction] ac- ... performance Royal Shopping “a different work Oaks because Center”; $136,021 of performance full and tenant cepted “[IJoss satisfaction have original obligations agree- past rent in the that it would received was waived compliance agreement performed.” ment” and because had the been The Thus, jury damages following no on the Group. jury the Peterson awarded damages: paid fees Group not award the dam- elements of “[b]roker did Peterson on, PLTQ have was not ruled and did PLTQ in excess of fees that would Contract agreement per- post-trial had been not file a amended answer paid been seek- formed”; PLTQ in paid by interest ing fees. “[l]oan such excess of interest that would have been 20, 2010, January On the trial court performed”; been paid agreement had the judgment, mistakenly signing entered rent in the future that it of tenant “[l]oss PLTQ’s September proposed judg- agreement would receive had the been ment instead of its December pro- “[m]oney and performed”; withdrawn posed judgment, which failed to reflect the construction loan that from the Oaks post-trial rulings. relevant Develop- The PLTQ pay would not have had to had the ers judgment, moved to correct the and agreement performed.” been The con- PLTQ asked the court to prior revisit its damages PLTQ tract amount- awarded rulings that the Group Peterson and Yu $895,996 attorney’s plus ed to fees egos were not alter of PGI. In a second stipulated pre- post-judg- amount and and judgment, the trial court purported to re- ment interest. instate prior its directed verdict on this trial, After process reaching a point, actually but broadened it to include judgment year final took over a and result- Yu as well as the Peterson Group. The final judgments. ed three Prior to en- Developers again moved for a corrected try judgment, the trial court denied the judgment. Developers’ motion for a directed verdict judgment, its third and final from on fraud under the economic rule and loss taken, which this appeal is the trial court speculative on the nature of lost tenant ruled as a matter of law that the Peterson PLTQ entry judg- rent. then moved for Group and Yu alter egos were of PGI. The verdict, ment on the arguing that it did not judgment court entered on the verdict as remedy have to elect a between breach of PLTQ’s fraud cause of action in favor of contract and The fraud. court ruled that PLTQ against Group Peterson required remedy. was not to elect a Likewise, Yu. the court judgment entered The trial rejected PLTQ’s newly court on the verdict favor that, raised arguments under the Texas PGI, against Group, the Peterson and Yu Act, piercing Limited reverse Partnership PLTQ’s breach of contract claim with theory, single business enterprise the- respect Development to the ory, and Yu were re- Agreement. The court also awarded PGI; sponsible against found PLTQ attorney’s fees on this claim liability it ruled that it would not extend the Peterson Yu. beyond PGI for breach of contract. court pre- post- also awarded *28 mediation, PLTQ After unsuccessful judgment interest on both its fraud claim proposed judgment submitted a new in and its contract claim under the requested attorney’s which it against fees Development Agreement. both PGI and the Peterson on the Developers appeal. The ground “prevailing party” that it was a under the terms of the Stonegate Con- Economic Loss Rule tract. Because ground recovery this issue, had not been In pled, Developers moved for leave their third ar- post-trial. PLTQ’s gue PLTQ’s by to amend its answer fraud claim is barred attorney’s “pre- motion for fees under the it economic loss rule because arose vailing in party” provision Stonegate by from a breach of duties established
76
as a breach of
“only be characterized
Agreement be-
Development
Royal Oaks
contract,
cannot
and breach of contract
PLTQ.
Developers
PGI and
tween
recovery
exemplary
dam-
by
support
court erred
that the trial
thus contend
Id. at 618.
ages.”
motions for directed verdict
denying their
PLTQ’s fraud claim.
and JNOV
Relying on the tort and contract dis
PLTQ’s
Developers
agree with
in
articulated
Jim Walter
tinctions
by the economic loss
claim is barred
fraud
Homes,
again applied the economic
we
rule.
Telephone
Bell
loss rule in Southwestern
(Tex.
DeLanney,
A trial 1991). case, In that we considered only grant a motion for JNOV findings and negli a cause of action “whether have been a directed verdict would when by allegation an that a gence is stated 301; P. Fort Bend Tex.R. Civ. proper. company negligently failed Sbrusch, telephone v. 818 Cnty. Drainage Dist. publish a Yellow perform its contract (Tex.1991); 392, 394 see Pruden S.W.2d DeLanney, advertisement.” 809 Servs., Inc., Pages 29 Ins. v. Fin. Review tial Co. that, held because at 493. We (Tex.2000). S.W.2d 74, JNOV should S.W.3d 77 damages for breach plaintiff sought legal principle pre when a granted contract, as duty of a created under Inc. recovery. Supply, See B cludes & W law, duty imposed by tort opposed to Beckman, (Tex.App. 305 S.W.3d v. unavailable. Id. at 494. denied). damages were 2009, pet. Dist.] -Houston [1st Here, that the eco Developers allege Supply Corp. City v. Sharyland Water PLTQ’s recovery precludes nomic loss rule (Tex.2011). Alton, 354 S.W.3d damages awarded to for fraud because explained: The court further are the same economic PLTQ for fraud may duties party acts of a breach [T]he it of con damages awarded to for breach contract alone or simulta- tort or tract. inju- neously in both. The nature of the provides
The economic loss rule duty or ry most often determines which injury only is the economic “[w]hen injury are When the breached. .duties itself, subject of a contract loss to the subject the economic loss to the alone.” action sounds contract Jim a contract itself the action sounds Homes, Reed, Inc. v. Walter contract alone. (Tex.1986). the Texas DeLanney, 809 S.W.2d (quoting Id. at 417 rule, stating, clarified Supreme Court Homes, 711 at 495 and Jim Walter part: in relevant 618). distinguished damages The court ], examined Homes we Walter [I]n [Jim torts like fraudulent inducement due to between contract duties the difference interference from and tortious contractual arising and tort duties under ground due to breach of contract on the That case involved a relationships. causes of action cause economic such by homeowners their claim those injuries different from caused builder, and we had to decide whether therefore, breach; are, they not barred supported tort an award independent an rule. See id. at 418-19. the economic loss *29 exemplary damages against of the build- hold that the economic loss rule I would Homes, 711 S.W.2d at er. Jim Walter clearly applies in this case. from injury Because the resulted 617. found, construction, Questions Ten and jury we held The negligent Eleven, Group the Peterson that Yu and disappointed expectations could such (h) “[mjoney PLTQ, performed; which it ment been and committed fraud the Peter- Royal attributed 5% to Yu and 95% to withdrawn from the Oaks construc- Group. jury The was instructed son tion loan that would not have had makes a materi- party fraud occurs when pay agreement to had the per- been with the intention misrepresentation al jury damages formed.” The awarded with by party that it be acted on the other who (a), (b), (c), (f). to respect and It awarded on “there- misrepresentation relies (d), damages (e), no with respect (g), to by injury.” It in- suffers was further (h). only structed to consider one element of PLTQ contended that “Peterson covert- damages “Money as to fraud: used with- ly spearheaded the theft of the by funds” PLTQ’s knowledge out or consent encouraging Atlantic Builders and Tan to PLTQ’s direct or indirect benefit.” bank PLTQ’s submit false draws on loan However, found, jury Question also account and that this constituted fraud as Thirteen, that neither Yu nor the Peterson opposed to breach of contract. The evi- fraudulently nor PGI induced shows, however, dence the funds PLTQ to enter the Royal into Oaks Devel- PLTQ contends were “stolen” were funds opment Agreement. drawn from Metro Bank under the Metro Seventeen, In response Question con- Bank loan and used either for development cerning breach the Royal of Oaks Devel- expenses or payment for the Devel- Yu’s opment Agreement, which asked opment Fee —both of which were express- comply
whether PGI failed to ly contractually agreed by PLTQ in the Agreement, the jury “yes.” answered Royal Development Agreement Oaks There was no instruction elements the Amendment. of breach of contract or on damages avail- that, majority concedes as to breach Instead, Question Eigh- able breach. contract, PLTQ sought to recover sums simply jury teen asked the to award a money paid toward the specific money amount of eight for each of Oaks Shopping Center that it (a) enumerated “elements of damages”: would not have had to if the pay agree- money paid by PLTQ to tenants for build- ment performed, had been “such as excess outs in agreed excess of amounts to under costs, tenant build-out money paid to ten- their leases or otherwise agreed satisfy ant subcontractors workman (b) PLTQ; “[mjoney PLTQ paid to tenant liens, hens or avoid the imposition of subcontractors as a result of workman necessary the reasonable and costs to re- (c) hens”; hens or threatened reasonable pair performed by work Atlantic.” Op. at necessary costs to repair per- work claim, It distinguishes PLTQ’s fraud formed by Tan’s construction at company however, that, ground on the as to it Center; (d) fraud Shopping claim, “[bjroker PLTQ sought to recover “for a cate- paid by PLTQ fees in excess of gory distinctly that was differ- fees that would have been paid had the (e) ent from the contract damages,” including agreement performed”; been interest “[mjoney used without paid by PLTQ knowledge [its] on loans in excess of inter- consent and not for est that would have direct or indirect paid [its] been had the (f) agreement majority benefit.” Id. The performed; been loss of cites “undocu- past expenses phantom tenant rent mented related to ten- would have money received had the ants” and “diverted agreement per- been to Yu’s devel- formed; (g) opment Stonegate” loss of future tenant rent that examples PLTQ would have received agree- had the fraudulent draws not authorized *30 is, Agreement. Op. agreement performed.” been That the Development
Royal Oaks jury PLTQ’s all of losses con- expenses related to found that at 62-63. Draws Fee, pay sisted it would to Development money and have had tenants Yu’s other or under terms of the if the projects agreement he was free to to the “divert” were, however, performed. All of way, agreement in had been spend any to other PLTQ’s damages damages. to were contract both economic losses due breach And, indeed, the Development the evidence demonstrates duties created under money that withdrawn from the con- Agreement. Skaryland, See the evidence, PLTQ all together money 417. This with the struction loan was that at Royal jury findings Development cited be- owed under the Oaks other evidence and low, refutes, costs, supports, Agreement than construction the De- rather as Fee, PLTQ other jury’s finding velopment contractually that suffered dam- or as- ages separate signed in fraud from economic loss costs. subject
to the of the contract. Thus, literally there no evidence PLTQ expressly agreed any to all fraudulent writing damages attributable to charged against misrepresentations by sep- the fees expenses Developers claim nothing damages Roy- it. Its that it knew about arate from for breach of the Development draws and was therefore al The specific Agreement. defraud- Oaks signed PLTQ own by agree- ed is contradicted its losses to identified as losses fraud either support damages. ments and will not for breach or fraud are due to provided Project specifically The Amendment failure of the to achieve the PLTQ “to pay hoped by PGI was authorized from economic both Yu success disbursement account with Metro and the Nguyen [the need for additional (or account) any any replacement agreed Bank] finish funds — —to Project. all costs ... expenses including, limitation, Development without disagree Accordingly, majori- with the Nguyen Fee....” testified he wanted ty’s holding that the economic loss rule Development included Fee in the con- Op. does apply. not 63. And I further loan, struction Yu also testified that disagree its reliance as Skaryland on him take the Nguyen Develop- wanted support ruling for its on ground ment Fee from construction be- loan the Developers fiduciary duty breached a Nguyen Development cause felt the Fee PLTQ. (citing See id. at 63-64 part was the total cost of construction. proposition S.W.3d at 418 for that “eco- parties The did not alter amend this nomic losses are recoverable for breach of after agrеement they between them dis- fiduciary duty”). Sharyland’s holding that covered that Metro Bank would permit damages plaintiff were available to the Fee payment Development from the both contract and tort predicated construction loan funds. fiduciary defendant’s breach of Moreover, duty. jury expressly Royal Development found that Oaks Developers fraudulently Agreement did not induce II was an length arm’s trans- businessmen, Develop- sophisticated to enter the action between itself, Agreement. expressly acknowledged ment And it found as in the agreement “[mjoney no withdrawn court unchal- the trial entered an lenged PLTQ’s from the Oaks construction verdict rejecting loan directed to pay allegations fiduciary duty. would not have had had the of breach of
79
settling
parties,”
loss rule
defendants or other third
I
hold that the economic
would
Supreme
and that
the Texas
has also
PLTQ’s
bars
fraud claims
Court
used
denying
Develop-
process by
“to describe the
trial court erred
term
which
claims.
remedy
motion for JNOV on those
the trial court elects the
ers’
Therefore,
Developers’
injured
I would sustain the
an
plaintiff
affords
the most favor
single
third issue.
able relief
defendant when
multiple
liability
theories of
cause an indi
Remedies
Election of
Madison,
injury.”
visible
v. 81 S.W.3d 831 (Baker, J., Award of Lost Tenant Rent concurring); Tony accord Gullo I, 212 Chapa, Motors L.P. v. S.W.3d issue, Developers argue their fifth (Tex.2006); 303 v. Crown Ins. Co. Life granting that the trial court erred Casteel, (Tex.2000); 390 $136,021 their motion for JNOV as to Sterling, Stewart Title v. 822 Guar. Co. jury’s damages award of contract Madison, (Tex.1991); S.W.2d They rent. argue lost tenant these 158-59. speculative were because the “Although Project enterprise the traditional ‘one satisfac- was a new record; thus, principle applies tion’ to cases in which an track and had no established injured plaintiff wholly compensated by there was no evidence from which the lost *32 (2) the enterprise; in the persons involved agree estimated. I could be
profits (3) the activity; of the business nature Developers. Id. at 280. “The mere relevant market. damages for compensatory recover To enterprise, untried hope for success of an contract, must plaintiff show breach of realistic, hope when that is even loss as a result pecuniary it suffered a Id. recovery profits.” of lost enough Servs., City Inc. v. S. Elec. of the breach. damages are for the loss profits “Lost (Tex. 819, Houston, 324 355 S.W.3d and, broadly to a business net income denied). 2011, pet. App.-Houston [1st Dist.] reflect income from lost-business speaking, plaintiff profit damages, lost To recover activity, expenses less that would have evidence by competent the loss must show activity.” Kell been attributable to that ERI certainty. See and with reasonable Inc., Integrations, mann v. Workstation Swinnea, 318 Eng’rs, Inc. v. Consulting 679, (Tex.App.-Houston 684 332 S.W.3d (Tex.2010) 867, (citing Holt 876 S.W.3d Miga v. pet.) (citing no [14th Dist.] Heine, Indus., 835 Inc. v. S.W.2d Atherton (Tex.2002)). Jensen, 96 213 S.W.3d Instruments, (Tex.1992)); Inc. Tex. 84 reasonably certain evi “What constitutes Inc., Energy Mgmt., v. Teletron profits of lost is a fact intensive dence (Tex.1994). Compensato S.W.2d Indus., Atherton determination.” Holt natural, proba ry damages “must be minimum, opin at 84. “As a 835 S.W.2d ble, consequence of the and foreseeable profits or of lost must be ions estimates Servs., 355 conduct.” S. Elec. defendant’s facts, objective figures, or data based may not plaintiff at 324. A recover S.W.3d profits the amount of lost can from which “if dam damages those breach-of-contract Id. cannot profits be ascertained.” Lost remote, contingent, speculative, are ages speculation or wishful pure be based on may 324. Nor conjectural.” or Id. at Instruments, thinking. Tex. 877 S.W.2d lost-profit recover plaintiff 279-80. enterprise is new and unestab “where the ” Instruments, .... Tex. 877 S.W.2d lished Here, Develop- under “Thus, the absence of a causal at 279. Agreement, required ment PGI was alleged breach connection between leasing Project. and did oversee preclude will recov damages sought However, disputes arose over the tenants Servs., at 324. ery.” S. Elec. PLTQ contended procured. PGI and Yu explained court has the law: supreme that Yu found for the the tenants largely speculative, Profits which are to meet their shopping center were unable on uncertain activity dependent from an and that Yu’s failure to find obligations conditions, or on changing or market rent pay tenants who were able to or on chancy opportunities, business PLTQ sought was a breach of contract. products entry of untested or promotion the difference lost tenant rents based on markets, or on into unknown unviable in the leases secured between the rents en- unproven the success of a new and Group and those by Yu and the Peterson Factors cannot be recovered. terprise, tenants later secured replacement for the like these and others which make busi- by The old and new leases were Nguyen. preclude risky prospect ness venture at trial without introduced into evidence profits retrospect. recovery of lost addition, jury had the objection. Instruments, 877 at 279. Tex. that Yu se- actual leases from the tenants it could as- determining cured as a basis from which Factors to be considered (1) damages. rent But sess lost tenant experience lost are: profits had to incur to make sup- would have the leases PLTQ produced no other evidence Thus, made and subtracted from prof- its claim of lost tenant rents. viable was port its; was no evidence to show data there and no was introduced to show leases af- profits gained to be from those comparable projects success of in the Project subtract- ter the costs of the were projects comparable area or developed *33 wishful anything ever more than ed were Yu that the suggest project any- to was facts, Indeed, thinking. fig- objective thing highly than a speculative other ures, affirmatively and data demonstrate enterprise. untried Indus., opposite. See Holt Atherton The clear that of hope law is mere “[t]he (stating at 84 what consti- that here, untried enterprise,” success of an as of lost reasonably certain evidence tutes recovery is not for enough profits. of lost is fact profits intensive determination Instruments, 877 See Tex. at 280. facts, figures, objective must based on therefore, hold, I would that the trial court data). or awarding PLTQ erred in lost damages for that, accept-
The data shows rather than profits, Develop- and I would sustain the ing PGI’s recommendations that would ers’ fifth issue. necessary satisfied to requirements
have
leases,
original
Nguyen
maintain the
be-
Ego
Alter
making
to take over from
of
gan
Yu the
disagree-
delays,
business decisions due to
issue,
Developers
In their first
argue
over
proper way
proceed,
ments
to
court erred
ruling
that the trial
that the
costs,
unexpected
to
including costs due
Group and
Yu were liable for
mistakes and build-out mis-
construction
breach of the
Oaks Development
by the
takes
tenants themselves. When
alter
Agreement
egos
of PGI. The De-
short,
lot
parking
eight spaces
was
velopers
that the
of
argue
alter-ego theory
suggested
plan
creating
PGI
a
more
does
veil-piercing
apply
not
to limited
Nguyen
but
one
parking,
instead canceled
partnerships.
majority agrees
with
of the restaurant’s
leases. Yu worked
I
Developers.
disagree.
the owner
a menu
with
of the bar to devise
that PGI
would hold
and the Peterson
TABC,
satisfy
that would
which had
egos
alter
of Yu
of
Group are both
license,
Nguyen
refused
bar
but
canceled
purpose
spirit
each other. The
that lease too.
merely
alter
cannot be
ego statute
evaded
Project
Ngu-
After Yu left the
due to
illusory, special
an
forming
purpose
decisions,
yen’s overriding
Nguyen
his
entity in the form
phantom
of a limited
im-
locked four tenants out of the center
equally illusory
with an
partnership,
corpo-
mediately prior
occupancy
taking
to their
general partner,
to
ration as its
shield
newly
completed spaces
of their
failure
entity
an
corporate
another
individual
eventually
rent.
pay
Although
some
for their
liability
from
actions under
returned,
ei-
original
most of the
tenants
they procured
contract
and would be obli-
went out of business
had their
ther
or
in their
had
gated
perform
own name
by Nguyen.
leases terminated
No record
corporate
partner-
and limited
illusory
payment
of
was
to show
actual
introduced
formed.
ship entities been
profits
lost
at the
or the
Project
actual
Organization
expectation
profits;
of
Business
Code section
reasonable
future
21.228,
liability
expenses
governing
corpora-
no tabulation
theory,1
pet.) (construing predecessor
no
stat-
alter-ego
provides,
tions under an
21.223(b)
part:
holding
relevant
ute
section
corpo-
that solicited
(a)
shares,
corporation
owner
an
any
owner of
A holder of
shares,
sponsorship
rate
for clients
not its
interest in
or a sub-
beneficial
whose
subscription
ego
purposes
pro-
for shares
owner’s
scriber
alter
any
or
accepted,
has been
affiliate
that owner enjoyed
vision absent evidence
owner,
holder,
or
or
subscriber
such
personal
resulting
direct
benefits
from
may
corporation,
not be held fraud).
corporation
obligees
its
liable to the
previously
This Court has
addressed the
respect
proper
Organiza-
of Business
construction
21.223(a)(b):
tions Code section
*34
(2) any
obligation of the
contractual
normally
corporate
“The
form
insulates
any
relating
or
matter
corporation
officers,
shareholders,
and directors
the
arising
obligation
or
from
on
corporate
liability
from
obli
holder,
the basis that the
beneficial
Branscum,
v.
gations.
Castleberry
...”
subscriber,
owner,
affiliate
or
is or
270,
(Tex.1986);
271
721 S.W.2d
see
ego of the corporation
was the alter
Gladstrong
v.
Partners
Invest
[SSP
or on the basis of actual or con-
(USA)
444,
fraud,
Corp., 275 S.W.3d
451
perpe-
a sham to
ments
structive
(Tex.2008) However,
fraud,
theory;
corpo
or similar
n. 29
the
].
trate
an
may
pierced
alter-ego
rate veil
on
theory
is
corporation
organized
“where a
(b)
(a)(2)
prevent
does not
or
Subsection
operated
a mere tool or
business
holder,
liability
the
of a
beneficial
limit
Castleberry,
conduit of another....”
721
owner, subscriber, or
if the
affiliate
ego applies
“Alter
holder,
S.W.2d at 272.
when
that the
obligee demonstrates
owner,
unity
corporation
there
such
between
subscriber or affili-
beneficial
corporation
separateness
that the
ate caused the
to be used
individual
of
of
purpose
perpetrating
for the
corporation
holding
the
has ceased and
actual
the
perpetrate
did
an
fraud on
corporation
liable would result
for the
obligee primarily
per-
direct
injustice.”
Id. “It is shown
from
holder,
benefit of the
beneficial
sonal
dealings
corporation
total
and the
subscriber,
owner,
or affiliate.
individual, including
degree
to which
Orgs.Code
corporate formalities have been followed
21.223(a)(2),(b)
§
Tex. Bus.
Ann.
(Vernon 2012).
and individual
corporate
property
“Actual fraud
dis
involves
kept separately,
have
intent
been
amount
honesty
purpose
of
to deceive.”
interest, ownership
of
Consulting,
financial
and con
Solutioneers
Ltd. v. Gulf
Partners, Ltd.,
379,
trol
maintains
Greyhound
237
individual
over the
S.W.3d
corporation, and whether the
(Tex.App.-Houston
corpora-
[14th Dist.]
387-89
Corporation
early adoption.
I
Business
elected
note that the Texas
Anderson Petro-
I,
812,
State,
Equip.,
January
Act
expired effective
2010 and was
Inc. v.
816 n.
denied).
replaced
(Tex.App.-Austin
pet.
Nothing
Organizations
Texas Business
13, 2003,
May
Leg.,
in the
that the
Code. See Act of
R.S.,
78th
record indicates
entities here
However,
182, §
early adoption.
2003 Tex.
Laws 595.
elected
because
ch.
Gen.
provisions
Organizations
The
of the Business
there is
difference
no substantive
between
apply
January
provisions
Corpora-
until
relevant
the Business
Code did
2010 to
Code,
1, 2006,
January
Organization
Act
formed before
such
tion
and the Business
entities
case,
entity
id.
as thе entities in this
unless the
cite the current statute. See
determining personal
liability
ation in
personal pur-
tion has been used
under section 21.223—whether the use
Id.
poses.”
liability
limited
illegitimate.
Enters.,
Robinson, 390
Inc. v.
Tryco
Partners, 275 S.W.3d at
[SSP
455.]
(Tex.App.-Houston
[1st
That determination is made
“based
dism’d).
2012, pet.
We further ex-
Dist.]
careful evaluation
the policies sup-
plained:
porting
principle
liability.”
limited
pierce
corporate
impose
To
veil and
Therefore,
Id.
we must
look to SSP
liability
ego theory
under an alter
Castleberry
Partners and
to see whether
Partners,
liability pursuant
to SSP
corporate
fiction was used as a
(l)that
plaintiff
persons
must show:
“perpetrat[ing]
means of
an actual fraud
impose
or entities on whom he seeks to
obligee
primarily
on the
...
for the
debtor,
liability
egos
are alter
personal
direct
benefit of the ... own-
(2)that
corporate
fiction was used
two defendant
er[s]”
[the
entities].
illegitimate purpose,
for an
in satisfac-
21.223(b).
§
Tex. Bus.
Ann.
ORG.Code
requirements
tion of the
of article 2.21
supreme
court
observed
SSP
Corporations
the Business
[of
Act]—now
Partners that
“disregard
courts
the cor-
Organizations
Business
section
Code
fiction,
porate
though corporate
even
21.223(a)
(b).
*35
formalities have been observed and cor-
satisfy
To
the first
consideration
porate
property
and individual
have
piercing
corporate veil—whether the
kept separately,
been
when the corpo-
persons
sought
charged
or entities
to be
rate form has been
part
used as
of a
liability
with
are alter
egos
pri-
basically unfair
device
achieve an in-
mary
relationship
debtor —the
between
equitable result.”
losses between the entities is un-
(5)
corporate
where the
fiction is used
clear.
statute;
to circumvent a
(internal
Id. at 508-09
citations to SSP
(6)
corporate
where the
fiction is relied
Partners,
450-51,
Texas takes closely related business Realty I all shared in determin- focusing equity” proach names; Group’s shared the Peterson they veil should be corporate ing whether office; employee, they had one 273; Castleberry, pierced. Yu, of both Peterson Real- president Davis, v. also Wilson see Group. PGI had no ty and ithe Peterson (Tex.App.-Houston [1st Dist.] account, testimony estab- bank and Tan’s no pet.). contract was lished that construction Id. at 509-10. Indeed, Group. the Peterson is, therefore, test two-pronged There was original agreement before a creditor that must be satisfied the Peterson signed by president Yu as corporate veil and hold may pierce the next superseded and was then entity liability person attach Development day by the (1) persons of another: that the ego alter agreement detailed Agreement more —a impose he seeks to or entities on whom matters —which was ex- covering the same debtor, liability egos are alter and sole president ecuted Yu as the (2) PGI, was used for corporate general partner that the fiction shareholder Realty. agreement, id. at 508-10. Peterson I The later illegitimate purpose. an See expressly merged, into which the first was the test was satisfied I would hold limiting liability on the contained a clause here. special purpose entity contract to Relationship corporate entities Agree- solely performing formed partnership and limited ment, just general partner as its Here, alter-ego theory it is clear Agreement. solely formed to execute the *36 prong the first of the test applies, and thus any apart Neither had assets or existence satisfied, veil corporate Group. the is Al- piercing for from Yu and the Peterson unity between the though PLTQ in that there is such was listed as the owner contract partnership, corporate property its the on the construction limited Builder, Tan, Atlantic company, with Tan’s Realty, Peterson I general partner, as the Group the Peterson were listed and separate- Yu that the Group, Peterson and managers, and Tan testified construction partnership and its ness of the limited working thought that he he was general partner “has ceased corporate pro- on other Group, Peterson аs he had corporation liable would holding was also evidence of the com- jects. There injustice.” (quoting in See id. at 508 result and of drawn on mingling of funds funds 272). Likewise, Castleberry, 721 at S.W.2d being contract used for the construction evident alter-ego theory applies is Yu and of the Peterson the benefit of the limited dealings” from the “total Group. corporate general partner, its partnership, Yu, “including the Group, therefore,
the Peterson hold, I the rela- would have corporate PGI, Yu, to which formalities degree tionship among Peterson corporate Realty, followed and and individual I been and also Peterson separately, property kept have been to make Yu and the Peterson such as interest, ownership and and of PGI Group egos amount of financial alter of each other maintains an alter- determining control the individual over under the factors for corporation relationship whether the set out SSP Partners. corporation, ego 455-56; Tryco, at see also personal purposes.” used for See See 275 S.W.3d has been at 508-09. 390 S.W.3d id.
85
partner-
of the limited
Formation
governing
visions
limited partnerships
ship
illegitimate purpose
for an
clearly
liability
do not shield Yu from
obligations
of the limited partnership
addition,
the evidence establishes
case,
under
circumstances of this
as is
PGI were
Realty
both Peterson I
clear from the terms of the statute itself.
part
basically
“used as
of a
unfair device to
partner
A limited
subject
liability
inequitable
achieve an
result” —the limita-
partnership obligations if he
a gen
is also
liability
phan-
tion of
to the assets of the
if,
eral
partner or
addition to exercising
partnership
thereby satisfy-
tom limited
—
partner’s rights
powers,
limited
he
of the test for
ing
prong
piecing
second
participates
the control of the business.
theory.
veil on an
corporate
alter-ego
153.102(a)
§
Partners,
454;
See SSP
S.W.3d
Tex. Bus. ORGS.Code Ann.
(Vernon 2012);
Props.,
Pinebrook
v.
Ltd.
Tryco,
Contrary arguments major- taking to the no event should [individuals ity, Organizations pro- the Business part Code the control of the business Group’s incorporation, as as Peterson articles of capacities well
their individual be corporate capacities] permitted which, likewise, their have behind them. nothing statutory liability which escape to the no evidence that Yu formed There is upon them if there would have devolved Rather, any legitimate purpose. PGI for interposition of attempted had been no evidence establishes un-rebutted against personal lia- corporate shield Yu, the of both PGI and the employee sole Otherwise, statutory require- bility. Group, corporation, Peterson executed general partner one ment of at least Development Agreement in a Oaks liability part- limited general with can circumvented or vitiated nership president gener- in his as of PGI’s capacity operating part- partners limited partner, entity I Realty, al Peterson an nership corporation with mini- though just for that as specially purpose, formed mini- capitalization mum therefore specially perform PGI was formed to liability. mum Agreement originally under the services Id.; Props., 77 see Pinebrook performed by contracted to be the Peter- ego rule that (holding 499-500 alter Realty, son PGI and Peterson I Group. apply partnerships has been does existed, through the extent either worked by statutory creation of limited altered Yu Yu from the office had—the office partner “a in a partnerships; general Group. Peterson Yu interacted has the of a partnership limited liabilities Project contractor for in a partner partnership without limited architect, Tan, in an undefined part- other than partners persons capacity thought that Tan that of the nership partners”; and the other that lim- Peterson with which he had worked general partner may partner ited also be before. Tan had never PGI. heard of participate in control business and persons who transact become liable the control he over Because of exercised partnership business with limited reason- PGI, Yu, limited activities the sole ably believing partner general limited is partner president of PGI and and sole ego can partner; that alter be used to corporate part- is general shareholder of general partner of pierce corporate veil of ner, can Realty, clearly Peterson I be held general limited even when partnership, liable the debts of PGI the ex- under liability partner company). limited 153.102(b). See press language of section Development Agree- 153.102(b) Orgs.Code § Tex. Bus. Ann. ment, the contract on which Peterson if limited (providing partner partici- liability Group’s Yu’s fraud was business, pates liable to in control he is based, was executed on behalf of PGI person transacts limited who business with partner I Realty, general *38 partnership reasonably believing, on basis signed Realty Yu Peterson I PGI. conduct, limited partner gen- of his that is separates All that a president. its then, partner). eral question, is partnership, limited from either its sole whether can reach assets of the the Yu, partner, general partner, limited or its Group party Peterson to was not —which I limit- Realty, Peterson certificate of Agree- the Oaks Development has partnership, nothing ed which behind Yu and Peterson through the it, Realty’s of in- and Peterson articles ment — each Group egos as alter of PGI and of have behind corporation, nothing judgment other collect a for breach anything separate them either. Nor does Group except Development Agreement. Yu from Peterson I would attorney’s fees on successful con- covery of of the facts on the basis that it can hold claim). tract recited above. ego alter that PGI was an
I would hold appeal, PLTQ contends that it is On and Yu and Group the Peterson of both of attor- entitled to recover the amount illegitimate pur- it was formed for an that ney’s fees awarded to it from the Peterson corporate veil can pose. Thus Group only recovery because of attor- Group and Yu pierced and the ney’s permit- fees for breach of contract is judgment debt of PGI. held liable for 38.001, by par- section but because the ted Therefore, Develop- overrule the I would stipulated ties at trial as to the amount of ers’ first issue. incurred, attorney’s fees it and because a Stonegate provided clause Contract
Attorney’s Fees attorney’s for an award of fees a suit to issue, Developers their second interpret enforce or the contract: by ruling the trial court erred contend that Attorney’s any 11.15. Fees. If action and Yu were re- Group that the Peterson equity necessary at law or in becomes attorney’s Specifically, fees. sponsible for term, interpret any provision enforce or Developers argue the Peterson Contract, prevail- or condition of this be held liable as Group and Yu cannot ing party shall be entitled to recover the attorney’s PGI fees egos alter fees, costs, attorney’s reasonable PLTQ’s cause of action for awarded necessary (including, disbursements but Development Agreement. breach of the to, expert not limited witness fees and they is not entitled argue And costs) deposition by incurred or made it attorney’s to recover contractual fees un- any in addition to other relief to which it party” provision in the “prevailing der may become entitled. only since it Stonegate pleaded Contract The Peterson argue and Yu statutory attorney’s by fees allowed Civil attorney’s they are not liable for fees at Remedies Practice and Code section 38.001 all, but, are, if they attorney’s fees PLTQ responds for breach of contract. improper award was because of the failure is proper the award under section segregate. 38.001; trial; prevailed it its claims are rule, general litigants “As a in Texas are intertwined; inextricably par- all and the attorney’s responsible for their own fees stipulated ties as to the amount of attor- litigation.” Part expenses awarded; therefore, ney’s to be fees Ashford ners, Res., Inc., Ltd. v. ECO attorney’s is entitled to all fees awarded to (Tex.2012). law, 35, 41 Texas Under attorney’s it. I would affirm the award of attorney’s fees when may court award PLTQ. fees to parties’ authorized statute PLTQ sought attorney’s fees under Civil Corp. contract. MBM Fin. v. Woodlands Remedies section 38.001 Practice and Code (Tex. Co., Operating on its cause of action for breach of con- 2009). party Whether a is entitled sеek tract, including both breach of the attorney’s question fees is a an award and the as- Development Agreement law that we review de novo. Holland v. sertion of a successful affirmative defense *39 Stores, Inc., 91, 1 S.W.3d 94 Wal-Mart Contract, Stonegate on the as well as the (Tex.1999). ancillary proving services rendered on al- Practice and Remedies Code sec- ego. ter See Tex. Civ. Prac. & Rem.Code Civil 2012) (Vernon may (providing provides person § for re- tion 38.001 that “[a] 38.001 88 from an P. 301 attorney’s reasonable fees
recover (providing Tex.R. Civ. that court’s corporation, in addition to the individual or judgment pleadings). shall conform to costs, if a valid claim and amount of Here, trial, PLTQ in its live pleading at ... an con- claim is for oral or written only attorney’s for fees pleaded reasonable tract.” Tex. Ann. Civ. Prac. & Rem.Code. Chapter plead under It did not for 38.001(8). attor- § To obtain an award of attorney’s par- fees “prevailing under the 38.001, party “a ney’s fees under section ty” provision Stonegate Contract. (1) prevail must a cause of action recovery raised theory first this recoverable, attorney’s fees are post-trial plead- in a motion amend its (2) Int’l, damages.” recover Inc. v. Green ings upon by that was not ruled the trial (Tex.1997). Solis, 384, 390 court, file did not amended addition, “[p]arties con are free to support pleadings its claim. fee-recovery for a either tract standard agree judg I with the that the majority In Chapter looser stricter than 38’s.” awarding attorney’s ment fees Grp. v. KB Home P’ship tercontinental sup and Yu cannot be (Tex. L.P., 650, 295 Lone Star 653 S.W.3d basis ported on the of the contractual at 2009). parties attorney’s When include an torney’s provision Stonegate fees in the contract, in a provision language fee (stating See Tex.R. P. 301 Contract. Civ. the contract rather than the lan controls must judgment pleadings); conform to (re guage of the statute. Id. at 654-56 Intercontinental 295 Grp. P’ship, S.W.3d un viewing “prevailing party” definition (holding right at 659 waived its party plaintiff contract to determine der whether attorney’s to recover fees under contractu any had not actual who recovered provision by attorney’s al fees fees). pleading for attorney’s was entitled recover 38); only Chapter v. under see also Stoner Thus, party successfully who a defends (Tex. 679, 578 Thompson, S.W.2d 682-83 contract not re breach of claim but does 1979) (holding party may not be damages might to attor cover be entitled ney’s provision granted pleadings fees under contractual relief absence relief). hold, though he entitled to support even would not be I would attorney’s therefore, fees 38. See Chapter under that the trial court did not err 18, Capozzi, Robbins v. 26-27 S.W.3d by failing attorney’s to award fees under 2002, (Tex.App.-Tyler pet.); Weng no En “prevailing part/’ provision in the Travel, Inc., ters., Inc. v. Embassy World Contract, Stonegate even if this issue had (Tex.App.-Houston S.W.2d 222-23 not been waived. 1992, writ); Lion, no Silver Inc. [1st Dist.] however, majority, goes on to find St., Inc., 010700370CV, Dolphin v. No. for awarding attorneys’ no basis fees un- (Tex.App. at WL *17-18 der Practice sec- Civil and Remedies Code May pet. Dist.] -Houston de [1st tion 38.001. would affirm award. nied) (mem. However, op.). light clearly entitled to recover application statutory difference claims, attorney’s fees for attorney’s fees, its contract but contractual and because a claims, their fraud under section judgment court’s must conform to provision it party attor 38.001—the under which pleadings, pleads who However, sought attorney’s at trial. ney’s Chapter fees under 38 waives fees Supreme a con the Texas has held that attorney’s its claim fees under Court provision. tractual “when the causes of action involved in the See Intercontinental 659; Grp. P’ship, 295 see also dependent upon suit are the same set of *40 circumstances and thus are ‘inter- reverse the trial judgment facts or court’s award- being point inseparable,’ ing PLTQ twined to the damages for fraud and would party suing attorney’s may fees nothing by declare that it take that claim. covering recover the entire amount all I would also reverse the trial judg- court’s claims.” Chapa, (quot- S.W.3d at awarding PLTQ ment damages for lost 11-12). ing Sterling, 822 S.W.2d at It profits, but would otherwise affirm the further held that when discrete “[i]t damages award of for breach legal services advance both a recoverable Development Agreement against the claim that they unrecoverable are so and Yu. I would they intertwined that need segre- not be affirm the trial court’s award of attorney’s gated party suing attorney’s and the PLTQ. Finally, fees to I would remand the may fees recover the entire amount.” Id. case to the trial court for calculation of at 313-14. pre- post-judgment interest and for further proceedings consistent with
Here, this above, PLTQ’s as discussed fraud opinion. claims were inextricably so intertwined
with its breach of contract claims
render fraud unrecoverable un- Thus,
der the economic loss rule. I would
hold that the in Chapa applies, rule attorneys’ sought entire amount of fees properly awarded under section
38.001. Moreover, parties stipulated as to THOMAS, Dadrian Appellant Terrell
the amount properly recoverable on the case. A stipulation type is construed as a v. of contract between the parties and be- Texas, Appellee. The STATE of parties
tween the Court. First Kinabrew, 137, Nat’l Bank v. 589 S.W.2d No. 07-12-00446-CR. 142-43 (Tex.Civ.App.-Tyler writ ref d Texas, of Appeals Court n.r.e.). Stipulations generally are favored Amarillo. by the courts binding par- and are on the ties. Amoco Prod. Co. v. Tex. Elec. Serv. Nov. Co., 196 (Tex.Civ.App.- writ). Houston [14th Dist.] no reasons,
For foregoing I would over-
rule Developers’ second issue and af-
firm the trial court’s award of attorney’s PLTQ.
fees to
Conclusion
I would affirm that part of the trial judgment
court’s final holding that the Pe-
terson and Yu are egos alter of PGI each other. I would further hold PLTQ’s fraud claim is barred rule; and, therefore,
economic loss I would