Asta Partners, LLC v. Palaniswamy

• Decision Date: 04 November 2021
• Docket Number: 02-20-00371-CV
• Parties: Asta Partners, LLC and Asta Gold 1, LLC, Appellants v. Velumani Palaniswamy, Appellee
• Court: Court of Appeals of Texas

Asta Partners, LLC and Asta Gold 1, LLC, Appellants v. Velumani Palaniswamy, Appellee

No. 02-20-00371-CV

Court of Appeals of Texas, Second District, Fort Worth

November 4, 2021

On Appeal from the 462nd District Court Denton County, Texas Trial Court No. 17-1244-431

Before Sudderth, C.J.; Bassel and Womack, JJ.

MEMORANDUM OPINION

DABNEY BASSEL, JUSTICE

I. Introduction

This is a case in which a founding co-manager-Appellee Velumani Palaniswamy (Velu)-siphoned funds from Appellants Asta Partners, LLC and Asta Gold 1, LLC from 2009 to 2015. Appellants then sued Velu, ^[1] alleging claims for theft conversion, breach of contract, breach of fiduciary duty fraud, and malice and seeking loss-of-use damages prejudgment interest, and attorneys' fees. The claims were resolved piecemeal via a summary judgment, a jury trial, and a bench trial. The trial court granted summary judgment for Appellants on their claims for theft, conversion, and breach of contract. The damages related to those claims were tried to a jury, as well as the claims for breach of fiduciary duty, fraud, and malice. After both sides rested in the jury trial, the trial court granted Appellants' motion for a directed verdict on their breach-of-fiduciary-duty claim; the jury found no fraud or malice and, following the agreed-to mitigation-of-damages instruction that was included in the jury charge, awarded Appellants $130, 100 as damages for theft, conversion, and breach of contract. The trial court held a bench trial on prejudgment interest, loss-of-use damages, and attorneys' fees and awarded Appellants $52, 040 in attorneys' fees for the trial proceedings and $0 for prejudgment interest. The trial court's final judgment included only the jury's damages award, the award of trial attorneys' fees, and a statement that no prejudgment interest was awarded; thus, the judgment omitted any reference to the claim for loss-of-use damages and to the directed verdict on the breach-of-fiduciary-duty claim. Appellants filed a motion to correct the judgment so that it would reference the directed verdict on the breach-of-fiduciary-duty claim. Within that motion, they also sought a judgment notwithstanding the verdict (JNOV) on the damages award, asking the trial court to disregard the jury's finding that Appellants could have avoided $102, 563.73 of the damages for theft, conversion, and breach of contract by exercising reasonable care and claiming that they conclusively proved $232, 663.73 in damages. But the trial court denied the motion.

On appeal, Appellants raise five issues contending that the trial court erred by denying their JNOV and by not awarding the full amount of damages that they claim were conclusively proven; that the trial court abused its discretion by failing to award the full amount of proven attorneys' fees and any appellate attorneys' fees, prejudgment interest, and loss-of-use damages; and that the trial court abused its discretion by failing to amend the judgment to include the directed verdict on the breach-of-fiduciary-duty claim. Based on the analyses below for Appellants' first, second, fourth, and fifth issues, we hold that the trial court did not err or abuse its discretion because

• the jury charge specifically allowed the jury to reduce the damages by the amount that the jury found Appellants could have avoided by the exercise of reasonable care, regardless of the discovery date of the breach; thus, sufficient evidence supported the jury's answer to the mitigation instruction;

• the general principles of equity governing prejudgment interest did not warrant an award of prejudgment interest under the facts here;

• Appellants failed to conclusively establish that they had incurred loss-of-use damages based on their pleadings; and

• the ruling on the directed verdict merged into the trial court's judgment.

But because the trial court's findings of fact reflect that the trial court failed to follow the two-step lodestar method for calculating trial attorneys' fees and because the trial court failed to award any appellate attorneys' fees despite that Appellants were entitled to an award of appellate attorneys' fees, we sustain Appellants' third issue and reverse and remand solely for a redetermination of trial attorneys' fees and for the trial court to determine the amount of appellate attorneys' fees.

II. Background

Asta Partners, LLC and Asta Gold 1, LLC were formed in 2008^[2] by an initial group of twenty members-consisting of family, friends, and relatives of Velu and Selvi and Ramasamy Eswaran (Samy) and his wife-who pooled together over $400, 000 and purchased a building the following year. The members agreed to have a property-management company manage the building's day-to-day operations and selected Vintage Realty to serve as the property manager. Vintage Realty held the checkbook for Asta Gold.

Velu and Samy served as Appellants' initial co-managers, but Velu served as the point person. Although Samy was authorized to sign checks on Appellants' account at PointBank and had equal online access to the account, Velu held the only checkbook for Asta Partners and was the only one with access to the QuickBooks® for Asta Partners. Vintage sent profit-and-loss reports only to Velu. Dale Downing served as the CPA who prepared Appellants' tax returns, but he did not serve as a bookkeeper; instead, Velu was in charge of the bookkeeping and supplied Downing with the financial statements that he prepared on QuickBooks.® According to the Company Agreements, the members were entitled to annual financial statements. In 2009, Samy and other members started asking Velu for the financial statements. Velu gave excuses for why he could not provide the financials. Samy continued to ask Velu quarterly for financial statements for the following six years but did not take any additional steps despite receiving no financial statements from Velu. Samy became concerned only when PointBank called him in June 2015 and told him that the prior year's taxes had not been paid.

The following month, the members received an email from Velu in which he stated that he had loaned money to himself from Appellants and that he would pay it back with nominal interest. Velu did not state the amount that he had taken.

In August 2015, Velu turned over Appellants' financial statements to Samy.^[3]The amount calculated from QuickBooks® that Velu had turned over showed that he had taken $155, 000, but a calculation that was made at a later date using Velu's personal bank statements showed that he had taken $232, 000.

After Velu failed to repay the money, Appellants filed the underlying suit alleging claims for theft, conversion, breach of contract, breach of fiduciary duty, fraud, and malice and seeking actual damages, loss-of-use damages, prejudgment interest, and attorneys' fees. As noted above, the trial court granted summary judgment in favor of Appellants on their claims for theft, conversion, and breach of contract.

During the jury trial on the damages for the theft, conversion, and breach-of-contract claims, Velu agreed that from 2009 to 2015, he had taken over $412, 000 out of Appellants' accounts by check and transferred it to his account, listing the transactions on the financial statements as "loan to others."^[4] From the $412, 000, he made annual tax payments and a $25, 000 payment back to Asta Partners. He admitted that he had not paid back $232, 663.73-an amount that Appellants' attorney said reflected a deduction for the $25, 000 payment.

Velu agreed that he should not have made the loans to himself because they were prohibited by the Company Agreement. Velu testified that Samy did not know about the loans and that July 2015 was the first time that Velu had told the members that he had taken money. Even Velu's wife, who was a member, did not know that her husband had stolen money from Appellants.^[5]

Samy testified that he did not know prior to Velu's July 2015 email that Velu had taken money from Appellants. Samy said that he had asked Velu quarterly for the financial statements because he wanted to know the amount they were saving and the return on investment. Samy agreed that he could have gone to the bank during the 2009 to June 2015 time frame and looked at the bank statements, but the withdrawals would not have been identified as loans to Velu or "loans to others."^[6] Samy admitted that the tax returns did note a loan to members. Samy knew who served as Appellants' accountant, but he never asked Downing to provide a copy of the tax returns from 2009 to 2015. Samy also admitted that he had met the account manager at Vintage and could have called her and asked to receive the property-management reports. Samy testified that he should have looked at the tax returns, the financials, and Vintage's reports from 2009 to 2015 but that he had trusted Velu 100%. Samy agreed that under the Company Agreement, it was his job as a co-manager to look at those documents.

During cross-examination, defense counsel questioned Samy about how long he should have waited for financial information from Velu before seeking to obtain the information from other sources:

Q. How many years do you think somebody has to deny you basic financial information before you are failing to use ordinary care to call Vintage, who knew you were a manager and you could get the information from, Dale Downing, who knew you were the manager and you could get information from, or PointBank, who knew you were the manager and you could get information from?

How many years do you have to not get information before you're not using ordinary care as a manager to get the information?

A. I never suspected him, so that's why I didn't make an attempt. But because the other members were

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