Opinion
No. 05-08-00440-CV
Opinion Filed March 17, 2009.
On Appealed from the 101st Judicial District Court, Dallas County, Texas, Trial Court Cause No. 05-02456-E.
Before Justices FRANCIS, LANG-MIERS, and MAZZANT.
Opinion By Justice MAZZANT.
MEMORANDUM OPINION
Suzanne Coates and 2055 Incorporated, plaintiffs in the trial court, appeal a take-nothing judgment rendered against them on a jury verdict. On appeal they raise two issues complaining of jury-charge error and one issue challenging the factual sufficiency of the evidence. We conclude that the jury-charge issues were not preserved in the trial court, and we overrule the factual-sufficiency challenge on the merits. Accordingly, we affirm.
I. Background
A.
Facts
Robert and Suzanne Coates were married. Beginning in 1980, they co-owned a company called Management Insights, Inc. (MII), later renamed 2055 Incorporated. MII provided consulting services to assist clients in taking advantage of certain tax credits.
Robert and Suzanne decided to divorce in 2001. The divorce proceedings took place in Illinois. During the pendency of the divorce, Robert and Suzanne decided to sell MII. Ultimately they agreed to sell certain assets and business operations of MII (but excluding MII's accounts receivable) to Business Incentives, Inc. (BII), a newly formed company that was wholly owned by two MII officers and employees named Joseph McTague and Cindy Sprigg. The purchase price was $1 million. Allegedly without Suzanne's knowledge, Robert also negotiated two side agreements with McTague and Sprigg. One was a "Shareholders' Agreement" whereby McTague and Sprigg agreed to sell an 80% share of BII to Robert's brother Chris or to Robert's children within two years. The other was a "Personal Guaranty" in which Robert personally guarantied BII's obligation to pay the purchase price for the MII assets. These documents were executed in February 2004. BII purchased the MII assets by Asset Purchase Agreement dated March 8, 2004. Robert and Suzanne were divorced in January 2005.
B.
Procedural history
In March 2005, only a few months after the Coateses' divorce became final, Robert filed this lawsuit against BII, McTague, and Sprigg. Robert alleged that in January 2005 McTague and Sprigg refused Chris's demand to sell him 80% of BII's stock pursuant to the terms of the February 2004 Shareholders' Agreement. He further alleged that Chris had assigned all of his rights under the Shareholders' Agreement to Robert and Suzanne. Accordingly, Robert sued BII, McTague, and Sprigg for fraud, breach of contract, and specific performance. Suzanne intervened in the lawsuit in April 2005.
In June 2005, the parties settled some of the pending claims. The defendants agreed to resell MII's assets within one year and to distribute the proceeds, and Suzanne and Robert agreed to dismiss their individual claims against the defendants and to change MII's name to "2055 Incorporated." BII sold the assets in December 2005 for $24 million, of which $1 million were disbursed to MII in payment of the purchase price and $8.6 million were paid into the registry of the trial court for distribution to Robert and Suzanne.
After the settlement, Suzanne amended her pleadings to assert claims against Robert for fraud, statutory fraud, breach of fiduciary duty, and restitution. 2055 Incorporated joined in those claims. The essence of the claims was that the assets that MII sold to BII were worth far more than $1 million, such that Robert defrauded Suzanne and MII out of millions of dollars. Suzanne and 2055 Incorporated sought both actual damages and disgorgement of any benefits Robert derived from his alleged wrongful conduct.
The claims against Robert were tried to a jury. The first question in the court's charge asked the jury to determine the fair market value of the MII assets that were sold on March 8, 2005. The charge instructed the jury not to answer the other questions in the charge, such as those concerning Robert's alleged fraud, breaches of fiduciary duty, and malice, unless they answered the first question with an answer greater than $1 million. The jury answered the first question "$1,000,000," and accordingly answered no other questions. The trial court signed a judgment ordering Suzanne and 2055 Incorporated to take nothing on their claims and distributing the money in the court's registry to Robert and Suzanne.
II. Jury-Charge Issues
In their second and third issues on appeal, appellants argue that the trial court erred by submitting a conditioning instruction before Question 2 that read, "If your answer to Question 1 is more than $1,000,000.00, answer the remaining questions in this charge unless instructed otherwise. If your answer to Question 1 is $1,000,000.00 or less, do not answer any of the remaining questions." Robert argues that appellants did not preserve their arguments in the trial court. We agree with Robert.
"A party objecting to a charge must point out distinctly the objectionable matter and the grounds of the objection." Tex. R. Civ. P. 274. The test for error preservation is whether "the party made the trial court aware of the complaint, timely and plainly, and obtained a ruling." State Dep't of Highways Pub. Transp. v. Payne, 838 S.W.2d 235, 241 (Tex. 1992). Objections to the court's charge that are not properly presented are waived. Tex. R. Civ. P. 272; Bobbora v. Unitrin Ins. Servs., 255 S.W.3d 331, 337 (Tex.App.-Dallas 2008, no pet.).
After the trial judge had informally discussed his draft jury charge with counsel, he furnished counsel with the final version of the jury charge and permitted appellants' counsel to state their objections on the record. Their attorney stated as follows:
With regard to Question Number 1, the plaintiffs object to the omission of the element of proximate causation tying any subsequent finding of fraud or breach of fiduciary duty on the part of Robert Coates to a specific measure of damages.
The trial judge overruled the objection. We hold that this oral objection does not preserve any complaints about the conditioning instruction that preceded Question 2. The objection does not mention the conditioning instruction at all. Moreover, the objection complains about an omission from the charge-an omission of the element of proximate causation-and not the inclusion of an erroneous instruction. We cannot say that this oral objection fairly put the trial court on notice of any error in the inclusion of the conditioning instruction.
Appellants also argue that they preserved error by submitting two complete proposed jury charges to the trial court, one before trial and one after seeing the charge drafted by the trial judge. Ordinarily, tendering a complete jury charge to the trial court, without more, does not preserve error. Munoz v. Berne Group, Inc., 919 S.W.2d 470, 472 (Tex.App. 1996, no writ). Appellants do not refer us to any place in the record where they drew the court's attention to their pretrial jury charge in any way, so the filing of that document preserved no error. As to the complete charge that they tendered to the trial court just before closing arguments, the record reflects that the trial judge looked through that document and remarked briefly on the record whether and how each question was being submitted to the jury in the court's charge, e.g., "Question Number 2 is being submitted in substantially the form tendered. Question Number 3 is refused." But the court did not remark on the conditioning instructions or absence thereof in that proposed charge, nor did appellants specifically urge the court not to submit the conditioning language preceding Question 2 in the court's charge. We conclude that appellants' submission of the second complete proposed jury charge likewise did not preserve the objections they now urge on appeal.
Finally, appellants refer us to portions of the informal charge conferences that preceded the formal objection that we quoted above. We have reviewed those excerpts, and, even assuming that we should consider them in aid of interpreting appellants' formal objections to the charge, we see nothing in them sufficient to alert the trial court that appellants wanted the conditioning instruction removed. In the informal charge conferences, as well as in their formal objection, appellants' complaints centered on the absence of a proximate-cause question. They did not mention the conditioning instruction as an objectionable feature of the court's draft charge.
We overrule appellants' second and third issues for lack of preservation of error in the trial court.
III. Sufficiency of the Evidence
In their first issue, appellants argue that the jury's answer to Question 1 is against the great weight and preponderance of the evidence. That question read as follows:
What was the fair market value on March 8, 2004 of the assets of MII that were included in the MII Asset Sale?
"Fair market value" means the amount a willing buyer, who desires to buy but is under no obligation to buy, would pay a willing seller, who desires to sell, but is under no obligation to sell.
The jury answered the question "$1,000,000." In conducting our review, we review all of the evidence and set the finding aside only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam); Arthur J. Gallagher Co. v. Dieterich, 270 S.W.2d 695, 703 (Tex.App.-Dallas 2008, no pet.). In this case, that means ascertaining whether the overwhelming weight of the evidence showed that the fair market value of the sold assets exceeded $1 million. We conclude that appellants have not met this standard.
A.
Evidence supporting the verdict
Robert testified at trial that during the second half of 2003 he did not think MII was worth very much. At that point in time, the Coateses had been unable to sell the business or partner with anyone. He further testified that he thought it was an unprofitable venture that was "facing substantial difficulties in the tax credit rules area." He testified that the tax-credit business of MII lost money every year from 1998 to 2003. Moreover, there was uncertainty in 2003 as to whether legislative changes in the tax laws might also damage the viability of the business. He also testified that at the time of his and Suzanne's divorce in January 2005, he did not think the tax-credit business had any value.
Robert also testified that Suzanne and her divorce attorney, Marc Samotny, were the ones who set the purchase price for MII's assets and that he had no reason to believe they did not think it was a fair price. Other evidence showed that Samotny thought the $1 million sale price was a "great deal" and he did not think there was "anything wrong" with the price. Appellants argue that this evidence is not probative because Suzanne was ignorant of Robert's side agreements with Sprigg and McTague and because the sale price was not based on actual financial data. But other evidence undercuts appellants' arguments. Even if Suzanne was ignorant of Robert's side agreements, Samotny testified that those side agreements would not have caused Robert and Suzanne to get a lower price for the MII assets. Indeed, a jury could have concluded that the side agreements, by lessening the risk to Sprigg and McTague, actually helped Robert and Suzanne obtain a higher purchase price than they would have received for the assets standing alone. As to Suzanne's alleged lack of actual financial data about MII, Robert testified that as of October 2003 he had provided Suzanne's valuation consultant Bruce Richman with "98 percent" of the documents Richman had requested. He further testified the missing documents were not relevant to the valuation issue because they concerned assets that were not being sold to BII in the transaction. Thus, the jury could have believed Robert's testimony and concluded that Suzanne's approval of the $1 million purchase price was based on "actual financial data" about the assets being sold.
Scott Hakala, Ph.D., a financial analyst, also testified about the value of MII. He was retained in 2002 to value the business for purposes of the Coateses' divorce. As he described it, he "did an extensive amount of financial analysis," although he also acknowledged that he performed only a "preliminary valuation" in 2002. He concluded in February 2002 that the value of MII's operating assets, as opposed to accounts receivable, was zero. Before trial, Hakala reviewed additional materials and concluded that the value of the operating side of the business as of March 2004 had not substantially changed from his prior conclusion in 2002. Appellants point out Hakala also testified that he did not perform a "valuation of MII's operating assets as of March 8th, 2004" or an "appraisal." But to the extent Hakala's testimony was inconsistent, it was for the jury to assess and give whatever weight it desired. See Cain v. Pruett, 938 S.W.2d 152, 159 (Tex.App.-Dallas 1996, no writ) ("The jury may accept or reject all or part of the witnesses' testimony."). Finally, Robert points to the actual sale price of $1 million as some evidence of the fair market value of MII's assets. We have said "the actual sales price of property provides some evidence of fair market value." Edlund v. Bounds, 842 S.W.2d 719, 728 (Tex.App.-Dallas 1992, writ denied); see also Flukinger v. Straughan, 795 S.W.2d 779, 790 (Tex.App. 1990, writ denied) ("In most cases where personal property valuation are involved, evidence of what an article or commodity actually sold for is some evidence of market value."); cf. Matheus v. Sasser, 164 S.W.3d 453, 462 (Tex.App.-Fort Worth 2005, no pet.) ("The price agreed on by two parties is some evidence to support a fact finding on fair market value of property as represented in an action under the DTPA."). Appellants argue that Robert's side agreements with McTague and Sprigg negate the application of this principle, citing cases holding that an actual sale price "is prima facie evidence of market value, unless there is something which indicates the sale is out of the ordinary in some way." Gulf, Colo. Santa Fe Ry. Co. v. Hillis, 320 S.W.2d 687, 691 (Tex.Civ.App.-Waco 1959, no writ); accord SPT Fed. Credit Union v. Big H Auto Auction, Inc., 761 S.W.2d 800, 801 (Tex.App. 1988, no writ). In this case, however, we need not decide the evidentiary value of the actual sale price because the other evidence in the record is sufficient to sustain the jury's verdict.
B.
Evidence that the fair market value exceeded $1 million
Appellants rely on the following evidence in support of their contention that the jury's finding was against the great weight and preponderance of the evidence.
They contend that Robert testified in his deposition that he did not want to sell the assets to Sprigg and McTague for $1 million because it was "a lousy deal." The testimony is not quite as clear as that. The question, as read to the jury, was "And why didn't you want to sell it on those terms?" His response was, "Because it was a lousy deal." There is no explanation to what "those terms" were, so it is not altogether clear that Robert was complaining about the purchase price of $1 million.
Appellants also point to evidence that Robert caused MII to slow down its billing of customers as the time of the sale approached so BII would have working capital of $2 million or more available after the sale went through. But appellants do not explain how this evidence supports a higher fair market value for the MII assets that were being sold. If McTague and Sprigg wanted this extra concession or "seller financing," as Robert referred to it, as a condition of the sale, this suggests that they thought the assets by themselves were worth less than $1 million, not more.
Appellants rely on evidence that a third-party buyer, TALX Corporation, paid $24 million for the same assets in December 2005, about 20 months after the sale to BII. Robert, however, points to his own testimony and that of Hakala explaining that this sale was the product of substantial changes in market conditions. This testimony, which the jury was entitled to credit, tended to show TALX paid an "inflated" price because significant changes in the tax laws caused a "run" on the smaller companies in the tax-credit industry.
Appellants' expert witness, Roger Grabowski, testified directly that the fair market value of the sold assets at the time of the sale was between $15 and $17 million. Robert's expert witness, Hakala, testified to the contrary and also criticized the underpinnings of Grabowksi's opinions. The jury was free to accept or reject any or all of the experts' testimony. See SAS Assocs., Inc. v. Home Mktg. Servicing, Inc., 168 S.W.3d 296, 300 (Tex.App.-Dallas 2005, pet. denied).
Otherwise, appellants principally emphasize the disarray of MII's financial records and the lack of testimony from many of the trial witnesses about how much the sold assets were actually worth. But these facts do not aid their case. As the plaintiffs, they bore the burden of proving the assets were worth more than the $1 million sale price, so an absence of evidence, or evidence that valuation was difficult, cannot advance their position that the jury's answer was against the great weight and preponderance of the evidence.
C.
Conclusion
Even disregarding the evidence of the actual sale price of $1 million, Robert adduced some evidence tending to show that the sold assets were worth that much or less. Although appellants adduced evidence to the contrary, largely in the form of expert testimony, we conclude that their evidence was not so overpowering as to make the jury's finding clearly unjust and wrong. We overrule appellants' first issue on appeal.
III. Disposition
For the foregoing reasons, we affirm the judgment of the trial court.