Kunz v. Huddleston

• Court: Texas Civil Court of Appeals
• Writing for the Court: WARD
• Citation: Kunz v. Huddleston, 546 S.W.2d 685 (Tex. Ct. App. 1977)
• Decision Date: 26 January 1977
• Docket Number: No. 6517,6517
• Parties: Harold KUNZ, Jr., et al., Appellants. v. H. Glenn HUDDLESTON, Appellee.

Page 685

546 S.W.2d 685

Harold KUNZ, Jr., et al., Appellants. v. H. Glenn HUDDLESTON, Appellee.

No. 6517.

Court of Civil Appeals of Texas El Paso.

Jan. 26, 1977.

Rehearing Denied Feb. 23, 1977.

Alfred W. Offer, San Antonio, for appellants.

Foster, Lewis, Langley, Gardner & Banack, Inc., Edward Kliewer, III, San Antonio, for appellee.

OPINION

WARD, Justice.

This cas involves the dissolution of a partnership, Kunz-Huddleston Interest. H. Glenn Huddleston filed suit against his partner, Harold Kunz, Jr., for injunctive relief, for dissolution of the partnership, for an accounting, and for damages. Joined as a Defendant was Kunz Construction Company, Inc., which filed a cross-action against the partnership, and in which, among other things, it sought judgment for the balance due under a construction contract. Trial was to a jury, which in the main determined that certain actions of the Defendants breached the fiduciary duty owed to the Plaintiff, that the Plaintiff had been damaged in the amount of $3,187.50, and that the unpaid balance owed by the partnership to the Defendants on the construction contract was $33,934.72. Thereafter, a judgment of accounting was entered, and the Plaintiff recovered $3,187.50 as damages from the Defendant, Harold Kunz, Jr.; Kunz Construction Company, Inc., recovered $33,934 .72 against the partnership; the partnership was dissolved, and the Plaintiff, as the partner not in the wrong, was given the right of first refusal to purchase all partnership assets as provided under the terms of Article 6132b, Sec. 38(2)(b), Tex.Rev.Civ.Stat.Ann. The Defendants have appealed. We affirm the judgment after modification in one respect.

Huddleston and Kunz entered into a verbal partnership agreement in 1972 that they would purchase, construct, and manage certain small drive-in shopping centers, it being agreed that Huddleston would secure the locations, tenants, and financing, and finally manage the completed properties, and that Kunz would be the general contractor. The parties secured two locations which they proceeded to develop, one in Schertz and one on Bandera Road in Bexar County. The Bandera Road property was acquired in the summer of 1972; some work was done on it in that year, but the main construction was not undertaken until 1973. In June, 1972, $125,000 .00 was secured as an interim construction loan from the Bexar County National Bank of San Antonio, the note being executed by the two partners and being secured by a deed of trust on the Bandera Road property. Thereafter, the Plaintiff secured a permanent loan commitment from Transport Life Insurance Company in the amount of $150,000.00, which the partners accepted in May, 1973, and for which the partnership paid a loan commitment fee of about $6,500.00. During this time, the Schertz property had been acquired, and a drive-in grocery and ice house had been constructed and occupied and was being managed by the partnership at the time of trial. The two partners entered into a written partnership agreement on June 14, 1973, and it was the parties' different interpretation of that agreement that precipitated their dispute.

The agreement provided that neither party should receive any salary or compensation for their services during the initial acquisition, financing, construction, or leasing of the properties. One provision provided that Kunz would, without compensation, profit, or reimbursement for personal expense, act as a general contractor 'either informally, or at his option, with a standard AIA form construction contract with himself or with Kunz Construction Company, Inc., or with such other firm as he may designate, for the improvements to be erected on Partnership properties.' The signatures of both partners were required in connection with such building contracts.

In undertaking his part of the partnership project, the Defendant Kunz elected to proceed through Kunz Construction Company, Inc., of which he was president and eighty-five percent of the capital stock of which was owned by him. On August 15, 1973, the Plaintiff received a bill from Kunz Construction Company in the amount of $34,589.85 on the Schertz property. This bill was paid by the partnership, but the Plaintiff immediately questioned the markup and the profit to the corporation as not being in harmony with the spirit of the partnership agreement. Again, on January 30, 1974, the Plaintiff received a bill from Kunz Construction Company showing that $57,101.00 was then owing on the balance of the construction. Upon examination by the Plaintiff, the statement reflected a profit figure on construction by Kunz, or his company, of $5,773.57, this again being contrary to the Plaintiff's understanding of the partnership terms. The Plaintiff also objected because the contract with the corporation had not been approved by the Plaintiff. Other charges were also shown which the Plaintiff felt were excessive. This disagreement delayed the final closing of the permanent loan and resulted in the loss of the commitment. On February 14th, after lengthy discussion and examination of the bills, Kunz changed his demand to $54,841.16, and the Plaintiff again refused to permit the bill to be paid from partnership funds as it was still excessive.

On February 18, Mr. Kunz, as President of Kunz Construction Company, Inc., executed and then filed an affidavit to secure an involuntary lien on the Bandera Road property regarding this debt for $54,841.16. On March 11, without any notice being given to the Plaintiff, the corporation purchased the $125,000.00 partnership note from the Bexar County National Bank of San Antonio, together with the lien of the deed of trust security, paying therefor the sum of $3,467.06 in interest due and the balance being a corporation note for $99,216.10, payable to the bank and being the amount then owing on the principal of the partnership note. As collateral for the last note, the corporation, by Mr. Kunz, granted to the bank a security interest in the partnership note, reserving to the corporation the right to foreclose under the deed of trust. Also on March 11, the corporation, by substitute trustee, posted the Bandera Road property for foreclosure sale and the Plaintiff was notified of the posting on March 14th. The Plaintiff then filed the present suit.

At the trial on the merits, the jury was instructed by the Court that they would treat the acts of the Defendant, Kunz Construction Company, Inc., in dealing with the Kunz-Huddleston Partnership and/or the Plaintiff, as the acts of the Defendant, Harold Kunz, Jr. In answer to Special Issues Nos. 1 through 5, the jury determined that the actions were taken by Harold Kunz, Jr., acting by and through the Kunz Construction Company, Inc., in submitting the $57,101.00 construction bill, in purchasing the $125,000.00 real estate lien note from the Bexar County National Bank of San Antonio, in filing the involuntary lien and attempting to foreclose the partnership property, and Kunz's refusal to execute the final loan closing documents, were all a breach of the fiduciary duty owed to the Plaintiff by the Defendant, Harold Kunz, Jr. In answer to Special Issue No. 6, the jury found that such actions were done in fraud of the Plaintiff, and in answer to Special Issue No. 8, the jury determined that the damages sustained by the Plaintiff due to the breach of the fiduciary duty by the Defendant, Kunz, was $3,187.50. By Special Issue No. 9, the jury found that the Plaintiff would suffer irreparable harm if the Defendants were allowed to foreclose on the property. In answer to Special Issue No . 14, the jury found that as to the disputed bill, the reasonable value of the labor and materials unpaid and furnished by Harold Kunz, Jr., and/or Kunz Construction Company, Inc., was $33,934.72.

Plaintiff, by two counterpoints, contests our consideration of any points based on the amended motion for new trial and any points of error complaining of the charge, as the Defendants in these areas have failed to follow the applicable briefing rules. Rules 274 and 320, Tex.R.Civ.P. The contest is brought about because the Defendants' objections to the charge consist of some forty pages in the transcript, and the amended motion for new trial consists of thirty-nine pages with 153 assignments of error, many relating to alleged errors appearing at three other places during the trial, for a total of 288 assignments of error. The above is compounded as the Defendants' brief contained fifty-one points of error, none of which point out the germane assignments of error, and are contrary to Rule 418(b), Tex.R.Civ.P. Regardless of the validity of the Plaintiff's challenges as to many areas of the brief, they will be overruled insofar as they apply to the Defendants' first five points, which complain of the Court's instruction to the jury that in making their answers they would treat the acts of Kunz Construction Company, Inc., in dealing with the partnership or with the Plaintiff, as the acts of Harold Kunz, Jr., individually. Essentially, these first five points assert that there was no evidence that Kunz and the corporation constituted a single entity; that the corporation was not a sham; and that it was error to disregard the corporate fiction and to 'pierce the corporate veil.'

The actions described as occurring in 1974 are without dispute. The Defendants' argument ignores the applicable relationship of one partner being a fiduciary and accountable as such to the partnership . Art. 6132b, Sec. 21, Tex.Rev.Civ.Stat.Ann.; Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786 (1938); 19 Hamilton, Texas Practice, Sec. 129. As pointed out in the cited authorities, the fiduciary duty established by this section of the Act should be broadly construed, and runs not only to the partnership, but to the other partner as well. At the time that Kunz, while acting for his corporation, executed and filed the affidavit to secure the...