Affiliated Capital Corp. v. Musemeche

• Decision Date: 24 January 1991
• Docket Number: No. A14-90-0163-CV,A14-90-0163-CV
• Citation: 804 S.W.2d 216
• Parties: AFFILIATED CAPITAL CORPORATION and Billy B. Goldberg, Appellants, v. Robert J. MUSEMECHE and Patricia M. Musemeche, Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 216

804 S.W.2d 216

AFFILIATED CAPITAL CORPORATION and Billy B. Goldberg, Appellants, v. Robert J. MUSEMECHE and Patricia M. Musemeche, Appellees.

No. A14-90-0163-CV.

Court of Appeals of Texas Houston (14th Dist.).

Jan. 24, 1991.

Rehearing Denied Feb. 21, 1991.

Herbert N. Lackshin, Houston, for appellants.

Robert W. Musemeche, Houston, for appellees.

Before J. CURTISS BROWN, C.J., and JUNELL and MURPHY, JJ.

OPINION

JUNELL, Justice.

Appellees, Robert J. Musemeche and Patricia M. Musemeche, accepted a $500,000 promissory note from Affiliated Capital Corporation in exchange for their interest in a Houston office building. When Affiliated defaulted in 1986, appellees sued on the note, contending that Affiliated's president, Billy B. Goldberg, defrauded them by causing Affiliated to be merged into a "shell" corporation in 1983, and consequently, Affiliated's assets were denuded and it could not pay on the note. In addition, appellees complained that Goldberg represented to them that cash flow problems prevented Affiliated from paying its February, 1986 installment on the note, although in the same month, Affiliated received some $9.7 million in settlement of a cable television lawsuit. A jury found against appellees' theory that Affiliated was "a mere tool or business conduit" of another Goldberg corporation, but answered other special issues in appellees' favor, resulting in a judgment of $455,196 plus $45,519 in attorneys' fees plus interest against Goldberg and Affiliated, jointly and severally, and $500,000 in punitive damages against Goldberg, individually. In twenty-eight points of error, appellants contend that (1) appellees failed to establish they are the owners and holders of the note, (2) appellees' pleadings failed to put appellants on notice of any alleged fraudulent activities at any time other than the 1983 merger, (3) there is no evidence or insufficient evidence to support findings of individual liability or malice against Goldberg, (4) the trial court erred in setting the amount of judgment, (5) proposed explanatory instructions should have been given to the jury, and (6) improper evidence was admitted. We reverse and remand.

Appellees invested their life savings into a joint venture agreement with Affiliated Capital Corporation and a third partner, Louis Marichal, to design and develop an office building in Houston. At completion in late 1982, the building was appraised and valued at $10 million. Appellees sold their twenty-five percent equity interest in the project to Affiliated for $500,000, accepting a promissory note, dated February 25, 1983, to be paid in five annual installments of $100,000 each, plus semi-annual interest payments.

After the parties agreed to the sale but before the transaction actually occurred, Affiliated was merged into a Delaware corporation called ACC Acquisition, which became a completely owned subsidiary of Goldberg, Inc., a company which Goldberg owned and controlled. Mr. Musemeche testified that he closed the agreement with Affiliated with knowledge of the merger and the fact that all of Affiliated's assets and liabilities were transferred into ACC Acquisition, which later changed its name to Affiliated Capital Corporation.

Affiliated paid installments on the note in February of 1984 and 1985. However, Goldberg informed appellees that Affiliated would "not be in a position to make" its February 25, 1986 payment, and he invited appellees to discuss "a restructuring of the note provisions." No further installments were paid. Appellees brought suit against Affiliated to recover the unpaid principal and interest balance owed on the note.

In their first six points of error, appellants contend that appellees failed to establish they are the owners and holders of the promissory note in question. Without objection, appellees introduced a copy of the note, which shows on its face it was issued to their order. Mr. Musemeche testified this was a "true and correct copy" of the note, that he had been paid part of the money owed, and that he was "still trying to collect." Similarly, in Zarges v. Bevan, 652 S.W.2d 368, 369 (Tex.1983), the plaintiffs established they were the sole owners and holders of an absent promissory note by offering a photocopy of the note and affirming it to be a true and correct copy of the note which they lawfully held. Here, as in Texas Airfinance Corp. v. Lesikar, 777 S.W.2d 559, 562 (Tex.App.--Houston [14th Dist.] 1989, no writ), appellants presented no proof that appellees are not the owners and holders of the note, nor was there any evidence suggesting that the note had ever been pledged, assigned, transferred, or conveyed. We hold, therefore, absent controverting evidence, the proof was sufficient to show that appellees are the owners and holders of the note. We overrule points of error one through six.

Although Goldberg did not sign the note, appellees also asserted several theories of recovery against Goldberg, individually. In their Third Amended Original Petition, on which they went to trial, appellees alleged the following in support of their claims of constructive fraud and sham to perpetrate a fraud:

"8. Plaintiffs will show that after Goldberg agreed to purchase the Partnership interest of Robert J....