Stephanz v. Laird

• Decision Date: 14 January 1993
• Docket Number: No. 01-91-01302-CV,01-91-01302-CV
• Citation: 846 S.W.2d 895
• Parties: Kenneth R. STEPHANZ and Richard Copeland, Appellants, v. Bill LAIRD, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 895

846 S.W.2d 895

Kenneth R. STEPHANZ and Richard Copeland, Appellants, v. Bill LAIRD, Appellee.

No. 01-91-01302-CV.

Court of Appeals of Texas Houston (1st Dist.).

Jan. 14, 1993.

Rehearing Denied March 11, 1993.

John Roberson, Hill, Parker & Johnson, Houston, for appellant.

Gregory N. Jones, Franklin, Cardwell & Jones, Houston, for appellee.

Before COHEN, DUNN and O'CONNOR, JJ.

OPINION

DUNN, Justice.

This is an appeal by Ken Stephanz and Richard Copeland from a judgment, based on jury findings, in favor of the appellee, Bill Laird. We reverse the trial court's judgment and render judgment that the appellee take nothing.

The jury found for Laird and against Messrs. Stephanz and Copeland for breach of fiduciary duty; against their company, Union Ridge Oil and Gas Corporation (Union Ridge) for breach of contract; and against Stephanz and Union Ridge for fraud and fraud in a stock transaction. Laird was awarded damages from Copeland for breach of fiduciary duty, and from Stephanz and Union Ridge, jointly and severally, for fraud and fraud in a stock transaction. Laird also recovered exemplary damages from Stephanz for intentional breach of fiduciary duty and fraud committed with malice, from Union Ridge for fraud committed with malice, and from Copeland for intentional breach of fiduciary duty. The court also awarded Laird attorneys' fees.

Union Ridge, currently in bankruptcy, is not part of this appeal pursuant to an order of severance signed by the trial court on October 4, 1991.

In 21 points of error, Stephanz and Copeland contend the trial court erred in failing to grant a JNOV and in entering judgment based upon the jury's findings of the existence of a partnership, a breach of fiduciary duty, fraud in a stock transaction, and common-law fraud. They also attack the legal and factual sufficiency of the evidence to support the various findings of the jury.

Before November 1988, the appellee, Bill Laird, was employed as an executive at Union Texas Petroleum, an independent oil and gas operation in Houston. While he had only been with Union Texas Petroleum for four years, he had been involved in the oil and gas industry for 25 years.

Laird testified that in the fall of 1988, he was contacted by a friend, James Short, who told Laird that Stephanz, Copeland, and Short were looking for someone to do new project development for Union Ridge. Laird told Short that he was not interested in changing jobs, but he would be willing to listen to whatever Short's partner, Stephanz, had to say if there was a substantial offer, containing an ownership interest in the company.

Stephanz, Copeland, and Short were the sole shareholders, as well as officers and directors, of Union Ridge, a corporation based in Ann Arbor, Michigan. Stephanz was chairman of the board and chief executive officer; Copeland and Short were vice-presidents.

On October 3, 1988, Stephanz first spoke with Laird about the possibility of joining Union Ridge to open a business development office in Houston. Laird told Stephanz that he would only be interested if he had a 25 percent ownership in the company, but Stephanz told Laird that his request was not feasible.

Laird testified that Stephanz never told him that Union Ridge was losing money, and if he had, there never would have been a deal. Laird also testified that Stephanz told him that Union Ridge was ready to move forward, and to go after projects larger than $1,000,000. However, Stephanz testified Laird was aware Union Ridge was a start-up company with negative cash flow.

After the negotiations were complete, at Laird's request, Stephanz prepared a draft of their agreement. Laird's attorney reviewed the draft before Laird signed it. Laird testified that the references to "partner" in the agreement were important to him and reflected his understanding of their agreement. Stephanz testified that it was clear to him that he was offering Laird an executive position with Union Ridge. Laird would be paid a bonus and a salary, and would also have the opportunity to earn stock options.

Laird had worked for Union Ridge for nearly 18 months when he was terminated in May 1990. Stephanz testified that Laird's performance was deficient in a number of areas and this deficiency was preventing Union Ridge from moving forward as planned. Stephanz and Copeland met with Laird in Houston and attempted to restructure their deal in lieu of terminating him. Laird rejected their several proposals and thus was terminated.

Laird filed suit against Union Ridge, Stephanz, and Copeland for breach of contract, breach of fiduciary duties, common-law fraud, and violations of the stock fraud statute. Laird sought actual and exemplary damages for these causes of action. The jury found for Laird on all of his causes of action. In the resulting judgment, Laird abandoned the breach of contract theory and elected to recover on the tort theories.

The appellants attack both the legal and factual sufficiency of the evidence to support the jury findings. By attacking the legal sufficiency of the evidence to support an adverse finding on issues upon which they did not have the burden of proof, the appellants must demonstrate on appeal that no evidence supports the adverse finding. See Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex.1983). To prevail on a factual insufficiency point of error, the appellants must prove that the evidence to support the finding is so weak that the finding is clearly wrong or manifestly unjust. See generally Pool v. Ford Motor Co., 715 S.W.2d 629, 634-35 (Tex.1986).

In determining whether there is legally sufficient evidence to support the jury's findings, the appellate court must consider only the evidence and inferences which tend to support such findings and must disregard all evidence and inferences to the contrary; if there is any probative evidence which supports the jury's findings, the "no evidence" ¹ points of error must be overruled. International Bank, N.A. v. Morales, 736 S.W.2d 622, 624 (Tex.1987); Winograd v. Clear Lake City Water Auth., 811 S.W.2d 147, 154 (Tex.App.--Houston [1st Dist.] 1991, writ denied).

If the evidence offered furnishes some reasonable basis for differing conclusions by reasonable minds as to the existence of the vital fact, it amounts to more than a scintilla of evidence and the no evidence challenge fails. Sherman v. First Nat'l Bank, 760 S.W.2d 240, 242 (Tex.1988); Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex.1987).

When reviewing for factual insufficiency of the evidence, the court of appeals must examine all of the evidence. Lofton v. Texas Brine Corp., 720 S.W.2d 804, 805 (Tex.1986). When an appellate court reverses a case on grounds of factual insufficiency, it must detail what evidence it considered in deciding that the evidence was factually insufficient. Pool, 715 S.W.2d at 635. The standard of review requires the appellate court to set aside the verdict only if the evidence is so weak that the verdict is clearly wrong and manifestly unjust in light of all of the evidence. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986).

The appellants argue, in their first two points of error that the finding of a fiduciary relationship was error because no partnership existed among Stephanz, Copeland, Short, and Laird. The pivotal question is whether the agreement between the parties is an employment agreement or a partnership agreement. As the appellee was seeking to establish a partnership, he had the burden of proof. Rogers v. Butler, 563 S.W.2d 840, 842 (Tex.Civ.App.--Texarkana 1978, writ ref'd n.r.e.). The appellants argue that there was no evidence to support the jury's finding of a partnership because the November 1, 1988, agreement established, as a matter of law, an employment relationship, not a partnership.

In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). If the written instrument is worded so that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law. Id. Whether a contract is ambiguous is a legal question, reviewable by an appellate court in light of the circumstances present when the parties entered into the contract. Id. at 394; R & P Enter. v. La Guarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518-19 (Tex.1980).

The definition of "partnership" in the statute, and the official comments to that statute, indicates that a partnership can be established between two or more persons who carry on a business for profit. TEX.REV.CIV.STAT.ANN. art. 6132b, § 6(1) (Vernon 1970). Words used by the parties in a contract do not necessarily control the substance of the relationship, nor do the terms used by the parties in referring to the arrangement. Coastal Plains Dev. Corp. v. Micrea, Inc., 572 S.W.2d 285, 288 (Tex.1978). Persons who intend to do the things that constitute a partnership are partners whether their expressed purpose was to create or avoid the relationship. Taylor v. Lewis, 553 S.W.2d 153, 158 (Tex.Civ.App --Amarillo 1977, writ ref'd n.r.e.); see also Coastal Plains, 572 S.W.2d at 287.

The essential elements of a partnership agreement, whether implied or express, are: (1) a community of interest in the venture/partnership; (2) an agreement to share profits; (3) an agreement to share losses; and (4) a mutual right of control or management of the enterprise. TEX.REV.CIV.STAT.ANN. art. 6132b, § 6(1); Coastal Plains, 572 S.W.2d at 287; Taylor v. GWR Operating Co., 820 S.W.2d 908, 911 (Tex.App.--Houston [1st Dist.] 1991, writ denied). Where any one of these elements is absent, no partnership exists. See Federal Deposit Ins. Corp. v. Claycomb, 945 F.2d 853, 858 (5th Cir.1991), cert. denied, 504 U.S. 955, 112 S.Ct. 2301, 119 L.Ed.2d 224 (1992).

Plaintiff's exhibit one, the November 1, 1988, letter...