Enzo Invs., LP v. White

• Decision Date: 04 June 2015
• Docket Number: NO. 14–13–00509–CV,14–13–00509–CV
• Citation: 468 S.W.3d 635
• Parties: Enzo Investments, LP, Appellant v. Charles White, Appellee Charles White, Cross–Appellant v. Enzo Investments, LP ; IP Investments, LLC; and IP Real Estate, LLC, Cross–Appellees
• Court: Texas Court of Appeals

468 S.W.3d 635

Enzo Investments, LP, Appellant

v.Charles White, Appellee

Charles White, Cross–Appellant

v.Enzo Investments, LP ; IP Investments, LLC; and IP Real Estate, LLC, Cross–Appellees

NO. 14–13–00509–CV

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

Opinion filed June 4, 2015

Jonathan David Saikin, Tanya Nicole Garrison, Houston, TX, for Appellant.

W. Perry Zivley, Jr., Mark A. Carrigan, Houston, TX, Darrin M. Walker, Kingwood, TX, for Appellee.

Panel consists of Justices Christopher, Donovan, and Wise.

SUBSTITUTE OPINION

Tracy Christopher, Justice

In this breach-of-contract case, Charles W. “Bill” White alleged that he presented Enzo Investments, LP with the opportunity to acquire all of the assets of a railcar-cleaning business through a “friendly foreclosure.” Enzo and White were to form a new company, which would then operate a similar business. In exchange for brokering the deal, White was to receive a $150,000 commission and 10% of the new company. A jury found that Enzo breached its agreement with White, and assessed damages of over $1.3 million dollars, but the trial court granted Enzo's motion for judgment notwithstanding the verdict on the ground that White's business-valuation evidence used the wrong date, and there was no evidence of the value of White's share of the new company at the time that he should have received it. The trial court reduced the damages to award only the amount of the commission that had not been paid, together with nearly $400,000 in attorney's fees for work performed in the trial court. White contends that the trial court erred in failing to award him the damages assessed by the jury, or alternatively, in failing to grant him equitable relief by ordering specific performance or imposing a constructive trust. Enzo challenges the award of attorney's fees.

White neither introduced legally sufficient business-valuation evidence nor established his right to equitable relief; thus, we affirm those parts of the judgment. Because the evidence regarding White's attorney's fees is legally insufficient to support the full amount awarded for work performed in the trial court, we suggested a remittitur to reduce the award to an amount supported by the evidence. White has timely filed a remittitur. We therefore modify the trial court's judgment to reduce the amount of trial attorney's fees awarded to $209,192.50 and affirm the judgment as modified.

I. Background

Business broker Bill White learned in May 2008 that a railcar-cleaning company known as GalCo was insolvent and in default on a $6 million note held by Royal Bank.¹ The security for the note included GalCo's assets and real property owned by GalCo's owner Ken Bigham and by Bigham's daughter. In order to avoid foreclosure by the Bank on his family's individual property, Bigham wanted to transfer GalCo's assets through a “friendly foreclosure” with a third party. White prepared a “Distressed Property Investment Proposal” to interest investors in purchasing the business. In the proposal, White stated, “The carrot in the deal is that General Electric has conditionally committed to a $30M contract with the company subject to a change in ownership/management and the company making $5.1M in capital improvements [short 3–month construction period].”² The identity of the distressed company is not stated in the proposal.

A. Events Before Enzo's Breach

On May 20, 2008, a friend referred White to Enzo Investments, LP as a potential investor. White first met with Enzo's principal Rami Amir, but White would not disclose the identity of the distressed business until Amir signed the “Non-circumvention & business brokerage agreement” that White had prepared. After Amir signed the agreement, White met with Enzo's remaining principals, Ronnie Aliezer and Ohad Yannay, and they decided to proceed with the acquisition. Two days later, White and Enzo signed a second agreement in which they stated that Enzo would have the exclusive right to participate in the venture to acquire GalCo's assets; that GalCo's assets would be transferred to a new company; and that White would receive a $150,000 commission and 10% ownership in the new company.

On May 30, 2008, Enzo and GalCo signed a letter of intent concerning “the general terms and conditions upon which a new entity to be formed by ENZO (Purchaser) as agent for the Purchaser is offering to acquire the assets of [GalCo].” They specified that the new entity would “operate an environmental cleaning company similar to GalCo,” and that Bigham would receive a substantial consulting fee for obtaining releases from certain of GalCo's creditors. The letter of intent also included a schedule for each step in the acquisition. Under this timeline, the new company would foreclose on GalCo's assets in July or August 2008.

In accordance with its agreement with White, Enzo paid White $2,500 as an advance against his $150,000 commission when the letter of intent was signed; however, the remaining terms of Enzo's agreement with White and its letter of intent with GalCo were not fulfilled. Ten days after signing the letter of intent, Enzo missed the deadline for delivering a contract to GalCo, but the parties continued negotiations for another month. This ended when, in the first half of July, Bigham and White learned that Enzo did not plan to perform a friendly foreclosure, but instead had bypassed them and was negotiating directly with the Bank to buy the note and foreclose.

B. Events After Enzo's Breach

Enzo did participate in another entity's acquisition of GalCo's assets, but this was not done through a friendly foreclosure. Enzo's principal Yannay arranged for IP Investments, LLC to purchase the GalCo note from Royal Bank in September 2008. IP Investments is owned by IP Real Estate, LLC, which is wholly owned by Israel Pelta; Pelta is not a party to this action. Enzo's principals also provided all of the money for purchasing the note, but there are no documents requiring the money to be repaid. Yannay admitted at trial that the deal was structured this way because Enzo decided “to go around both Mr. Bigham and Mr. White and try and do this deal directly with the Bank.” Angry at being cut out of the deal, Bigham caused GalCo to file for bankruptcy protection. As a result, IP Investments did not foreclose on the property until May or July of 2009.

C. White Sues Enzo, IP Investments, and IP Real Estate

Even before IP Investments foreclosed on GalCo's property, White sued Enzo, alleging that Enzo failed to pay White's entire fee and failed “to tender to White 10% of the ownership of the new entity formed to acquire Galco's assets.” By the time the case proceeded to a jury trial, White had amended his petition to add IP Investments and IP Real Estate as defendants. Although White raised a number of additional claims in his pleadings, the only claims that were submitted to the jury were White's claims against Enzo for breach of contract, fraud, and statutory fraud. The jury found Enzo liable under each of the three theories.

The jury was instructed to measure the damages for Enzo's breach of contract as “[t]he difference, if any, between the value of the benefits Enzo Investments, LP promised to provide to Charles W. White under the agreement and the value of the benefits Charles W. White actually received.” The jury was told to measure the damages for Enzo's fraud as “[t]he difference, if any, between the value of the benefits that Charles W. White actually received and the value the benefits would have had if they had been as Enzo Investments, LP represented.” Both questions contained the same instruction about the time at which the difference in value was to be measured: “The difference in value, if any, of a benefit shall be determined at the time Charles W. White should have received the benefit.” In answer to each damage question, the jury assessed damages of $1,324,000. The parties have consistently treated the damages findings as the sum of the damages from Enzo's breach of two contractual obligations: the obligation to pay White a commission of $150,000, and the obligation to convey to White a 10% ownership interest in the company acquiring GalCo's assets.

D. Challenges to the Evidence of Damages and Attorney's Fees

Enzo moved for judgment notwithstanding the verdict (“JNOV”), arguing that there was no evidence that White was entitled to anything more than $147,500, which was the amount of the unpaid commission. As for White's promised 10% ownership of the new company, Enzo pointed out that White's expert used valuation dates in November 2010. Enzo argued that White used the wrong valuation date, and that there was no evidence of the company's value in 2008. The trial court granted the motion, and awarded White actual damages of $147,500 on his contract claim, together with attorney's fees of $377,567.50 for work performed through the date of trial, and $20,625.00 for post-verdict work, for a total of $398,192.50. The trial court also made contingent awards of attorney's fees in the event that White was the prevailing party on appeal.

Enzo filed a post-judgment motion in which it challenged the award of attorney's fees and asked the trial court to order a new trial of the issue, to modify the judgment, or to suggest a remittitur. The trial court denied the motion, and Enzo brought this appeal.

White similarly filed a motion in which he asked the trial court to reconsider the JNOV, or in the alternative, to modify the judgment to either (1) order specific performance of Enzo's obligation to convey 10% of IP Investments to him, or (2) impose a constructive trust in White's favor on an undivided 10% interest in the IP entities' assets. The trial court denied this motion as well, and White filed this cross-appeal.³

II. White's Challenge to the JNOV

In his first issue, White contends that the trial court erred in granting Enzo's JNOV motion regarding damages. We review a JNOV under the legal-sufficiency standard, crediting evidence...