Opinion
No. 14-00-01160-CV
Memorandum Opinion filed September 11, 2003.
On Appeal from the 165th District Court, Harris County, Texas, Trial Court Cause No. 99-15954
Affirmed as Modified
Panel consists of Justices ANDERSON, HUDSON, and FROST.
MEMORANDUM OPINION ON REMAND
In our original opinion, we affirmed the trial court's judgment without addressing the merits, because appellant did not request the entire reporter's record. See Bennett v. Cochran, 92 S.W.3d 8, 9-10 (Tex.App.-Houston [14th Dist.] 2001), rev'd, 96 S.W.3d 227, 228-30 (Tex. 2002). The Texas Supreme Court reversed this court's judgment, holding that, under the circumstances of this case and under Rule 34.6 of the Texas Rules of Appellate Procedure, this court should review appellant's issues on appeal based on the partial reporter's record. See Bennett v. Cochran, 96 S.W.3d 227, 228-30 (Tex. 2002). On remand, we address the merits of the case.
This appeal arises out of a dispute between the two former partners of the law firm Bennett Cochran, L.L.P. Appellant Robert S. Bennett, the defendant and counter-plaintiff in the court below, claims the trial court erred in disregarding jury questions finding that appellee Les Cochran, the plaintiff and counter-defendant in the court below, breached an agreement to pay half of the expenses and overhead of Bennett Cochran, L.L.P. Bennett also claims that the evidence is legally insufficient to support the jury's affirmative finding as to Cochran's negligent-misrepresentation claim. We hold the trial court did not err in disregarding the jury's findings as to Cochran's alleged agreement; however, we also hold that there is no evidence to support the jury's finding on Cochran's negligent-misrepresentation claim. Therefore, we modify the trial court's judgment to delete the award of damages to Cochran based on his negligent-misrepresentation claim, and, as modified, we affirm the trial court's judgment.
I. Factual and Procedural Background
Cochran and Bennett are both lawyers. In the spring of 1997, Cochran contacted Bennett and the two had lunch together. After discussions and correspondence, on July 15, 1997, they agreed to practice law together and formed Bennett Cochran, L.L.P., a Texas limited liability partnership; however, the two lawyers never entered into a written partnership agreement. Cochran made an initial capital contribution of $50,000, and later made another capital contribution of $40,000. In October of 1997, Cochran suffered a stroke. As a result of the stroke, Cochran had a reduced work schedule for a time. On March 24, 1999, Bennett gave Cochran notice of his request for a winding up of the partnership. Later that month, Cochran filed this suit against Bennett.
The record indicates that the name of the partnership was initially Bennett, Cochran Krenek, L.L.P. and that the name was later changed to Bennett Cochran, L.L.P.; however, this name change is not relevant to the issues on appeal.
Cochran asserted various contract and tort claims against Bennett, and Bennett filed a counterclaim asserting a variety of claims against Cochran. After a jury trial, the jury found no liability on various claims by and between the parties; however, the jury returned a verdict of liability and damages on some of the claims, specifically finding the following: (1) Cochran justifiably relied on negligent misrepresentations by Bennett that proximately caused Cochran $50,000 in damages; (2) Bennett suffered $5,000 in damages as a result of Cochran's assault on him; (3) Cochran agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P.; and (4) Cochran's breach of this agreement caused Bennett $24,000 in damages.
The trial court entered judgment on the jury's findings as to Bennett's assault claim and Cochran's negligent-misrepresentation claim; however, the trial court granted Cochran's motion to disregard the jury findings relating to Bennett's breach-of-contract claim and granted a take-nothing judgment as to this claim.
II. Issues Presented
Bennett asserts the following issues for appellate review:
1. Is there legally sufficient evidence to support the jury's answers to questions 27(b), 28, 30 and 31, finding that Cochran failed to comply with an oral partnership agreement under which he agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P.?
2. Is there legally sufficient evidence to support the jury's findings regarding Bennett's attorney's fees in question 26?
3. Is there legally sufficient evidence to support the jury's negligent-misrepresentation findings in question 13?
III. Standard of Review
All of Bennett's issues involve a no-evidence analysis, in which we review the evidence in a light that tends to support the disputed findings and disregard all evidence and inferences to the contrary. Lee Lewis Constr., Inc. v. Harrison, 70 S.W.3d 778, 782 (Tex. 2001). If more than a scintilla of evidence exists, it is legally sufficient. Id. More than a scintilla of evidence exists if the evidence furnishes some reasonable basis for differing conclusions by reasonable minds about a vital fact's existence. Id. at 782-83.
IV. Issues and Analysis
A. Is there any evidence Cochran agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P.?
In his first issue, Bennett challenges the trial court's granting of Cochran's motion to disregard the following findings of the jury: (1) Bennett and Cochran had an oral partnership agreement; (2) Cochran agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P., (3) Cochran failed to comply with this agreement; and (4) $24,000 would fairly and reasonably compensate Bennett for damages resulting from this failure to comply. In his motion, Cochran asked the trial court to disregard these findings because there was no evidence to support them and because the statute of frauds operated to bar the enforcement of any such oral agreement by Cochran. Without stating its reasons, the trial court granted Cochran's motion to disregard the jury's findings and entered a take-nothing judgment against Bennett on Bennett's breach-of-contract claim. Bennett disputes both of the grounds asserted in Cochran's motion to disregard.
Bennett argues that the trial court erroneously disregarded the jury's finding that Cochran orally agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P. Bennett asserts this issue was determined as a matter of law based on admissions in Cochran's petition and based on Cochran's failure to file a verified denial of the existence of a partnership in response to Bennett's allegation of partnership in his counterclaim. Cochran admitted in his petition that he was "a participant in the law firm of Bennett Cochran L.L.P." Cochran admitted that there was no written partnership agreement and that the agreement, if any, was oral. In his counterclaim, Bennett alleged that Cochran was a partner with Bennett in a limited liability partnership. Cochran did not file a verified denial. Presuming for the sake of argument that Cochran's failure to file a verified denial of partnership established as a matter of law the existence of a limited liability partnership, of which Cochran was a partner, this would not undermine the trial court's disregarding of the jury finding that Cochran orally agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P. Subject to an exception that does not apply to this case, a partner in a registered limited liability partnership is not individually liable, directly or indirectly, for debts and obligations of the registered limited liability partnership, unless that partner agrees to be individually liable. See Tex. Rev. Civ. Stat. art. 6132b-3.08(a) (stating general rule of nonliability); Tex. Rev. Civ. Stat. art. 6132b-1.03 (stating that, subject to exceptions not applicable here, statutory partnership rules govern the relationship between the partners and the partnership to the extent the partnership agreement does not otherwise provide). At trial, Cochran admitted that he was a partner of a limited liability partnership, and the evidence showed that the partnership was a registered limited liability partnership. Therefore, the issue is not whether a limited liability partnership existed but whether there is legally sufficient evidence to support the jury's finding that Cochran orally agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P.
In examining whether there is no evidence to support this jury finding, we presume that the partial reporter's record designated by the parties constitutes the entire record for the purposes of reviewing the issues presented. See Tex.R.App.P. 34.6(c); Bennett, 96 S.W.3d at 229.
In support of his assertion that more than a scintilla of evidence supports this jury finding, Bennett cites evidence relating to the existence of Bennett Cochran, L.L.P. However, for the reasons just cited, this evidence is not on point. Beyond this evidence, Bennett directs the court to only two places in the record to support his argument. First, Bennett points to Cochran's petition in which Cochran alleged that Bennett and he were each "entitled to fifty percent (50%) of the income and assets of Bennett Cochran L.L.P., after debts are paid and appropriate offsets." Even if this is a binding judicial admission, it does not address whether Cochran agreed to be personally liable for any part of the expenses and overhead of Bennett Cochran, L.L.P.; rather, in this pleading, Cochran only states that his partnership interest is entitled to share in any equity remaining after the partnership debts are paid. Second, Bennett cites his testimony concerning his understanding of the terms of the partnership:
Q. What did you [Bennett] consider the terms of the partnership at that point in terms of income and expenses?
A. At that time we were certainly functioning as fifty/fifty partners. And that was my understanding, fifty/fifty as to everything, debt, expenses, lunches, whatever it was.
Given the undisputed fact that Bennett and Cochran were partners in a registered limited liability partnership, the above testimony does not furnish a reasonable basis for differing conclusions by reasonable minds as to whether Cochran agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P. See Lee Lewis Constr., Inc., 70 S.W.3d at 782-83. This testimony shows that Bennett believed that Cochran and he were partners and that they would be equally burdened by the debts and expenses of the partnership. Bennett did not testify that Cochran agreed with Bennett's understanding, and, in another part of his testimony, Bennett indicated that Cochran and he were not in agreement as to the terms of their limited liability partnership. Furthermore, Bennett did not state that Cochran and he would be personally liable for the expenses and overhead of the partnership, as opposed to only having their partnership interests burdened equally by these financial obligations.
When testifying as to what he understood his oral partnership agreement with Cochran to be, Bennett stated: "And obviously that was not set down in writing. Obviously that was not cleared up. That was an issue of disagreement. And obviously that was one of the reasons the firm ultimately broke up."
In another part of his testimony, Bennett stated that Cochran reached an agreement with regard to a formula concerning the risks and rewards of the partnership. Bennett was then impeached with his prior deposition statement that Cochran and he did not come to an agreement regarding a formula concerning the risks and rewards for their partnership. In any event, Bennett never testified that Cochran agreed to a formula that included an agreement by Cochran to be personally liable for half of all expenses and overhead of Bennett Cochran, L.L.P. Cochran testified that Bennett and he did not enter into a partnership agreement, but that they were partners in Bennett Cochran, L.L.P. Cochran testified he believed that, under this arrangement, the two partners would split evenly any profits and losses from Bennett Cochran, L.L.P. after the bills were paid.
The following deposition testimony of Bennett was read to the jury:
Q. Did you finally come to an agreement regarding a formula concerning the risk and reward for Bennett Cochran?
A. No, absolutely no.
Q. You never reached an agreement of a formula?
A. Never a written agreement.
Bennett has not cited, and we have not found, any evidence in the record to support the jury's finding that Cochran orally agreed to pay half of all expenses and overhead of Bennett Cochran, L.L.P. Under the applicable standard of review, we conclude that there is no evidence to support this finding. See Lee Lewis Constr., Inc., 70 S.W.3d at 782-83; Salinas v. Rafati, 948 S.W.2d 286, 289 (Tex. 1997). Therefore, Bennett's breach-of-contract claim fails as a matter of law, and the trial court did not err in disregarding the jury's answers and rendering a take-nothing judgment against Bennett as to this claim. See Salinas, 948 S.W.2d at 289. Accordingly, we overrule Bennett's first issue.
Because we affirm the trial court's ruling on this basis, we do not address the statute of frauds issue.
Bennett's second issue complains only of the trial court's failure to award attorney's fees as to his breach-of-contract claim. Bennett cannot recover attorney's fees under Chapter 38 of the Texas Civil Practice and Remedies Code if he takes nothing on his contract claim. See Tex. Civ. Prac. Rem. Code § 38.001; Grapevine Excavation, Inc. v. Maryland Lloyds, 35 S.W.3d 1, 2 (Tex. 2000). Therefore, we overrule Bennett's second issue.
B. Is there any evidence to support the jury's negligent-misrepresentation finding?
In his third issue, Bennett asserts that there is no evidence to support the jury's finding that Cochran justifiably relied on negligent misrepresentations Cochran claims Bennett made to him. In response, Cochran cites five pages of testimony from the reporter's record and identifies three statements as misrepresentations that Bennett allegedly made to him: (1) Bennett had a $250,000 line of credit; (2) Bennett, Krenek Hilder, L.L.P. was a viable law firm, with substantial cases on its docket; and (3) Bennett's "formaldehyde docket" consisted of "good cases that were worth a lot of money."
The elements of a claim for negligent misrepresentation are: (1) the defendant makes a representation in the course of his business, or in a transaction in which he has a pecuniary interest; (2) the defendant supplies "false information" for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffers pecuniary loss by justifiably relying on the representation. See Federal Land Bank Ass'n of Tyler v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991). The sort of "false information" contemplated in a negligent-misrepresentation case is a misstatement of existing fact, not a promise of future conduct. See Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex.App.-Houston [14th Dist.] 1999, pet. denied).
As to the first alleged misrepresentation, Cochran testified that Bennett told him Bennett had a $250,000 line of credit and that Bennett did not tell Cochran he had drawn on his line of credit. We hold that there was no evidence that Bennett made a misstatement of existing fact regarding his line of credit. Cochran had his own line of credit and never stated that he was unfamiliar with how lines of credit work. There is no evidence that Bennett stated he had not drawn on his line of credit or that Bennett led Cochran to believe that the full $250,000 was currently available when it was not. It is undisputed that Bennett had a $250,000 line of credit. Bennett's bare statement to this effect was true, and it was not a misstatement of existing fact regarding how much Bennett had drawn on the line of credit. Therefore, we hold there is legally insufficient evidence that Bennett supplied Cochran with false information in this regard. See Allied Vista, Inc., 987 S.W.2d at 141. Furthermore, Cochran never testified that he relied on Bennett's statement that Bennett had a $250,000 line of credit. Accordingly, we hold there is no evidence that Cochran justifiably relied on any alleged representation in this regard. See Lee Lewis Constr., Inc., 70 S.W.3d at 782-83; Bluebonnet Sav. Bank, F.S.B. v. Grayridge Apartment Homes, Inc., 907 S.W.2d 904, 909 (Tex.App.-Houston [1st Dist.] 1995, writ denied).
As to the second alleged misrepresentation, Cochran asserts Bennett represented to him that the law firm with which Bennett was then affiliated — Bennett, Krenek Hilder, L.L.P. — was a viable firm, with substantial cases. The only evidence Cochran cites to support this alleged misrepresentation is the following testimony concerning Cochran's thoughts when he made his initial capital contribution in July of 1997:
"At that time I thought that we were merging into a viable law firm with a substantial number of cases and with competent staff and I thought I was merging in with a partner with whom I could work."
This testimony speaks only to Cochran's thoughts and beliefs; it does not address what caused Cochran to have these thoughts or form these beliefs. Reviewing the evidence in a light that tends to support the jury's findings and disregarding all evidence and inferences to the contrary, this evidence does not furnish a reasonable basis for differing conclusions by reasonable minds as to whether Bennett stated to Cochran that Bennett, Krenek Hilder, L.L.P. was a viable firm, with substantial cases. See Lee Lewis Constr., Inc., 70 S.W.3d at 782-83. We have not found any other evidence in the record that would support this alleged misrepresentation. Therefore, applying the applicable standard of review, we find there is no evidence that Bennett represented to Cochran that Bennett, Krenek Hilder, L.L.P. was a viable firm, with substantial cases. See Lee Lewis Constr., Inc., 70 S.W.3d at 782-83; Allied Vista, Inc., 987 S.W.2d at 141 (holding that there was no evidence of a misstatement of existing fact that would allow recovery for negligent misrepresentation).
As to the third alleged misrepresentation, Cochran asserts Bennett represented to him that Bennett's "formaldehyde docket" consisted of "good cases that were worth a lot of money." In support of this alleged misrepresentation, Cochran cites his testimony that Eddie Krenek, then a partner in Bennett, Krenek Hilder, L.L.P., told Cochran, in Bennett's presence, that the firm's "formaldehyde cases" were "great cases" and that Bennett and Cochran "were going to make a ton of money." While there is evidence that Krenek was an agent of Bennett, Krenek Hilder, L.L.P. at the time of these alleged statements, Cochran has not asserted negligent misrepresentation against Bennett, Krenek Hilder, L.L.P. Cochran has asserted this claim only against Bennett in his individual capacity. There is no evidence in the record to support a finding that Krenek was an agent of Bennett in his individual capacity. Though Cochran testified that Bennett was present when Krenek made these statements and that Bennett did not correct Krenek, Cochran has not cited, and we have not found, authority that would impose negligent-misrepresentation liability on Bennett for his failure to correct Krenek in these circumstances. Even if section 551 of the Restatement (Second) of Torts applied to negligent misrepresentation, and even if the Texas Supreme Court were to adopt it, this section would not impose a duty to disclose on Bennett in these circumstances. See Bradford v. Vento, 48 S.W.3d 749, 755-56 (Tex. 2001) (noting that Texas Supreme Court has not adopted section 551 of the Restatement (Second) of Torts and holding that, even if the court were to adopt it, there was legally insufficient evidence to support fraud liability); Allied Vista, Inc., 987 S.W.2d at 141 (stating that misstatement of existing fact is required for negligent-misrepresentation liability); Restatement (Second) of Torts § 551 (1977).
In this regard, we note that the jury found that Bennett did not commit fraud upon Cochran. In the jury charge, fraud was defined as both intentional misrepresentation and fraudulent concealment, i.e., "when: (a) a party conceals or fails to disclose a material fact within the knowledge of that party, (b) the party knows that the other party is ignorant of the fact and does not have an equal opportunity to discover the truth; [sic] (c) the party intends to induce the other party to take some action by concealing or failing to disclose the fact, and (d) the other party suffers injury as a result of acting without knowledge of the undisclosed fact." Cochran has not challenged these findings.
In any event, the record contains the following other testimony from Cochran regarding Bennett's statements about the "formaldehyde cases":
Q. Okay now, what did [Bennett] tell you about his formaldehyde cases or his formaldehyde docket?
A. He told me that he had made a lot of money in the past on the formaldehyde cases and he told me that he had a number of cases that were worked [sic] on the firm. I think he told me that Eddie Krenek was the attorney who was supposedly handled [sic] the cases.
Q. Did he tell you how good those cases were?
A. He told me that there was [sic] good cases and there was a lot of money to be made on the formaldehyde cases.
Q. Did he tell you anything else about the formaldehyde cases?
A. He did not tell me —
Q. Let's talk about what he did tell you and we'll go back to what he did not?
A. That's all I recall right now.
Cochran's testimony indicates that Bennett made these alleged statements to him after May 27, 1997, and before July 8, 1997. Cochran asserts that, in April of 1997, Bennett's firm lost a "formaldehyde trial" due to federal preemption, which meant that the "formaldehyde cases" were worth much less than the firm previously had thought. Cochran has not cited, and we have not found, any evidence in the record showing that this trial was lost in April of 1997. One document indicates that this trial occurred sometime in June of 1997, and another document suggests that the trial ended sometime before June 23, 1997. Therefore, the evidence in the record indicates that this trial ended in June of 1997, not in April of 1997.
Even if we were to presume that Bennett made these statements to Cochran after the trial in question had ended, we still must conclude that Bennett's alleged statements — that his "formaldehyde docket" consisted of "good cases" on which "there was a lot of money to be made" — are nonactionable "puffing" or expressions of opinion as to the value of these cases. See Transp. Ins. Co. v. Faircloth, 898 S.W.2d 269, 276-77 (Tex. 1995) (holding that alleged fraudulent misrepresentations regarding the value of an unliquidated tort claim were not actionable as a matter of law because they were nonactionable expressions of opinion); Prudential Ins. Co. of Am. v. Jefferson Associates, Ltd., 896 S.W.2d 156, 163 (Tex. 1995) (holding that statements that building was "superb," "super fine," and "one of the finest little properties in the City of Austin" were not actionable misrepresentations but merely "puffing" or opinion); Allied Vista, Inc., 987 S.W.2d at 141 (stating that misstatement of existing fact is required for negligent-misrepresentation liability). Therefore, we hold that, under the applicable standard of review, there is no evidence that the third alleged misrepresentation is actionable.
Furthermore, even if this alleged misrepresentation were actionable, we conclude that there is no evidence that Cochran justifiably relied on it in making his initial capital contribution. Although there is some evidence Cochran relied on this alleged misrepresentation, we find no evidence that this reliance was justifiable. Cochran testified that he has been practicing law since 1960. Under the applicable standard of review, Bennett did not tell Cochran one way or the other whether Cochran would be able to examine any documents relating to Bennett, Krenek Hilder, L.L.P. before becoming a partner with Bennett; however, Cochran never asked to have any such records and never asked for any documents about the firm. Under these circumstances, we hold that there is no evidence that Cochran's reliance on general statements by Bennett that the "formaldehyde cases" were "good cases" and that "there was a lot of money to be made on these cases" was justifiable. See Beal Bank, S.S.B. v. Schleider, —S.W.3d —, —, 2003 WL 22053855, at *9-*10 (Tex.App. Houston [14th Dist.] Sep. 4, 2003, no pet. h.) (holding that, under the circumstances of the case, there was no evidence of justifiable reliance by the plaintiff, an experienced businessperson); Bluebonnet Sav. Bank, F.S.B., 907 S.W.2d at 909 (holding there was no evidence of justifiable reliance by a reasonable businessperson).
We conclude there is no evidence to support the jury's finding that Bennett was liable for negligent misrepresentation. Accordingly, we sustain Bennett's third issue, modify the trial court's judgment to delete the award to Cochran based on his negligent-misrepresentation claim (i.e., $50,000 in damages plus prejudgment and postjudgment interest) and to order that Bennett recover from Cochran $5,000 in damages plus prejudgment and postjudgment interest. As modified, we affirm the trial court's judgment.
Although Cochran has not appealed the $5,000 award to Bennett based on Bennett's assault claim, the trial court's judgment credits this award against the negligent-misrepresentation award in favor of Cochran. Therefore, to grant relief on the third issue, we need to modify the trial court's judgment to award the assault damages directly rather than as an offset.