Lifshutz v. Lifshutz

• Decision Date: 26 April 2006
• Docket Number: No. 04-05-00117-CV.,04-05-00117-CV.
• Citation: 199 S.W.3d 9
• Parties: James G. LIFSHUTZ, Liberty Financial Corporation, Liberty Properties Partnership, Texas Home Improvements, Inc., and Berlee Lumber Company, Inc., Appellants, v. Kymberly Benson LIFSHUTZ, Appellee.
• Court: Texas Court of Appeals

199 S.W.3d 9

James G. LIFSHUTZ, Liberty Financial Corporation, Liberty Properties Partnership, Texas Home Improvements, Inc., and Berlee Lumber Company, Inc., Appellants, v. Kymberly Benson LIFSHUTZ, Appellee.

No. 04-05-00117-CV.

Court of Appeals of Texas, San Antonio.

April 26, 2006.

Rehearing Overruled June 29, 2006.

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From the 150th Judicial District Court, Bexar County, Texas, Trial Court No. 97-CI-13199; Michael Peden, Judge Presiding.¹

Ellen B. Mitchell, Cox Smith Matthews Inc., and James M. Pearl, Casseb & Pearl, Inc., Richard R. Orsinger, McCurley, Orsinger, McCurley, Nelson & Downing, Cheryl L. Wilson, Wilson & Pennypacker, L.L.P., San Antonio, for appellants.

Sam C. Bashara, Law Offices of Sam C. Bashara, San Antonio, for appellee.

Sitting: ALMA L. LÓPEZ, Chief Justice, SARAH B. DUNCAN, Justice, REBECCA SIMMONS, Justice.

OPINION

Opinion by ALMA L. LÓPEZ, Chief Justice.

This is the second appeal relating to the divorce between James Lifshutz and Kymberly Benson Lifshutz. See Lifshutz v. Lifshutz, 61 S.W.3d 511 (Tex.App.-San Antonio 2001, pet. denied). In this appeal, James presents five issues asserting: (1) the trial court punished James when it reconsidered the property division on remand; (2) the trial court erred in finding that the stock of Berlee Lumber Company Inc. was distributed to James and his brothers before being contributed to Liberty Financial Corporation; (3) the evidence is insufficient to support the trial court's finding that the community estate was entitled to a Jensen² reimbursement; (4) the trial court abused its discretion in awarding Kymberly attorneys' fees; and (5) the property division is not just and right. Liberty Financial Corporation, Liberty Properties Partnership, Texas Home Improvements, Inc., and Berlee Lumber Company, Inc. (the "Entities") are entities owned directly or indirectly by James and his brothers. The Entities filed a separate appeal contending: (1) the evidence is legally and factually insufficient to support the trial court's finding that James did not breach his fiduciary duty; (2) the trial court violated the law of the case and the scope of the remand by making a finding of alter ego on remand, the evidence is legally insufficient to support the alter ego finding, and alter ego is not a defense to the breach of fiduciary duty claim; (3) the evidence is legally and factually insufficient to support the trial court's findings of ratification and actual and apparent authority. We overrule James's issues relating to both the trial court's punishing him on remand and the distribution of the Berlee stock. We sustain James's issue relating to the Jensen reimbursement claim. We sustain the Entities' issues and reverse the trial court's judgment as to the Entities' breach of fiduciary duty claim. Because liability as to the breach of fiduciary duty claim was contested and damages are unliquidated, we remand the breach of fiduciary duty claim to the trial court for further proceedings consistent with this opinion. "Any change in the trial court's judgment on liability or damages for breach of fiduciary duty could potentially result in a loss of property from both the community estate and Kymberly's separate estate. Because of this possibility, the property division must be remanded, including the award of attorney's fees." Lifshutz I, 61 S.W.3d at 518. Accordingly, we need not address James's fourth and fifth issues.

BACKGROUND

James and Kymberly were married in 1990 and separated in 1997. During the marriage, James managed the business of each of the Entities. The Entities paid various personal expenses for James and Kymberly, including a $95,000 addition to their home. The Entities were primarily involved in real estate, including the purchase and collection of notes and rental real estate. During the marriage, James purchased notes and rental real estate for the personal benefit of James and Kymberly.

During the divorce proceedings, Kymberly sought to pierce the corporate veil of the Entities so that James's interest in the Entities would be included as a community property asset. The Entities filed a breach of fiduciary duty claim against James seeking damages for the personal expenses the Entities paid on his behalf and a constructive trust or damages for the business opportunities James usurped for the personal benefit of James and Kymberly. Following a bench trial, the trial court found James had breached his fiduciary duty but denied the Entities' claim for damages or a constructive trust based on the trial court's alter ego finding. Because the trial court found alter ego, it increased the community estate by the amount of James's interest in the Entities.

In the first appeal, we held that "the trial court improperly pierced the corporate entities" because the evidence was legally insufficient to support a finding of alter ego in a divorce case. Lifshutz, 61 S.W.3d at 518. We further held that the trial court improperly pierced Liberty Properties Partnership because it was a partnership. Id. Because the trial court denied damages for the Entities' breach of fiduciary duty claim based on its alter ego finding, we "reverse[d] and remand[ed] for [a] new trial on breach of fiduciary duty and the division of community property." Id. at 519. In the opinion, we noted, "If the evidence supports a finding that James was undercompensated for his time and talent spent increasing the value of his separate interests, Kymberly may have a claim for reimbursement to the community." Id. at 518 n. 5.

On remand, the trial court reviewed the evidence developed at the original trial along with bank statements regarding the funds received from the sale of James's carried interest in Hotel Partners. The trial court found that one-third of the stock in Berlee was distributed to James by Liberty Properties Partnership and then recontributed to Liberty Financial Corporation, making the stock a community property asset. The trial court further found that James was undercompensated and that the community estate was entitled to reimbursement. Finally, the trial court found that the breach of fiduciary duty claim should be denied because: (1) the claim is not just; (2) James is the alter ego of the Entities; (3) any diversion of corporate opportunities was ratified through agreement, consent, or acquiescence or James had actual or apparent authority to divert the opportunities.

STANDARD OF REVIEW

When a complete reporter's record is filed, the trial court's fact findings may be reviewed for legal and factual sufficiency under the same standards as jury verdicts. David L. Smith & Assocs., L.L.P. v. Advanced Placement Team, Inc., 169 S.W.3d 816, 819 (Tex.App.-Dallas 2005, pet. filed); Min v. Avila, 991 S.W.2d 495, 500 (Tex.App.-Houston [1st Dist.] 1999, no pet.). We do not review a trial court's conclusions of law for factual sufficiency. David L. Smith & Assocs., L.L.P., 169 S.W.3d at 819. Rather, we evaluate the conclusions independently, determining whether the trial court correctly drew the legal conclusions from the facts. Id. Incorrect conclusions of law will not require a reversal if the controlling findings of fact will support the judgment under a correct legal theory. Id.

When a party not bearing the burden of proof on an issue challenges the legal sufficiency of the evidence, we review the evidence in the light most favorable to the verdict giving "credit [to] favorable evidence if reasonable jurors could, and disregard[ing] contrary evidence unless reasonable jurors could not." City of Keller v. Wilson, 168 S.W.3d 802, 827-28 (Tex. 2005). Evidence is legally insufficient when the record discloses: (1) a complete absence of evidence of a vital fact; (2) the court is barred by rules of law from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. Id. at 810.

When a party attacks the legal sufficiency of an adverse finding on an issue on which it has the burden of proof, the party must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex.2001). In reviewing a "matter of law" challenge, the reviewing court must first examine the record for evidence that supports the finding, while ignoring all evidence to the contrary. Id. If there is no evidence to support the finding, the reviewing court will then examine the entire record to determine if the contrary proposition is established as a matter of law. Id. The point of error should be sustained only if the contrary proposition is conclusively established. Id.

When a party not bearing the burden of proof on an issue attacks the factual sufficiency of the evidence, we examine the entire record to determine whether there is some probative evidence to support the jury finding, after which we determine whether the evidence supporting the finding is so weak or so contrary to the overwhelming weight of the evidence as to be clearly wrong and manifestly unjust. Potter v. GMP, L.L.C., 141 S.W.3d 698, 702 (Tex.App.-San Antonio 2004, pet. dism'd). When a party attacks the factual sufficiency of an adverse finding on an issue on which it has the burden of proof, the party must demonstrate on appeal that the adverse finding is against the great weight and preponderance of the evidence. Id. at 242. The court of appeals must consider and weigh all of the evidence, and can set aside a verdict only if the evidence is so weak or if the finding is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Id. In doing so, the court of appeals must "detail the evidence relevant...