Stergiou v. General Metal Fabricating Corp.

• Court: Texas Court of Appeals
• Writing for the Court: Adele Hedges
• Citation: Stergiou v. General Metal Fabricating Corp., 123 S.W.3d 1 (Tex. App. 2003)
• Decision Date: 27 March 2003
• Docket Number: No. 01-01-00691-CV.,01-01-00691-CV.
• Parties: John STERGIOU and Main Marine Repair and Industrial Cleaning Co., Appellants, v. GENERAL METAL FABRICATING CORPORATION; G.M.F. Leasing, Inc.; and Arnold Curry, Appellees.

123 S.W.3d 1

John STERGIOU and Main Marine Repair and Industrial Cleaning Co., Appellants, v. GENERAL METAL FABRICATING CORPORATION; G.M.F. Leasing, Inc.; and Arnold Curry, Appellees.

No. 01-01-00691-CV.

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

March 27, 2003.

Rehearing Overruled July 11, 2003.

Jeff Nobles, Beirne, Maynard & Parsons, L.L.P., Anastassios Triantaphyllis, Kerri J. Dorman, Andrew Kaplan, Weycer, Kaplan, Pulaski & Zuber, P.C., Houston, TX, for Appellant.

Edmund L. Cogburn, Helen A. Cassidy, Storey, Moore & McCally, Houston, TX, for Appellee.

Panel consists of Justices HEDGES, JENNINGS, and ALCALA.

OPINION

ADELE HEDGES, Justice.

Plaintiffs/appellees, General Metal Fabricating Corporation; G.M.F. Leasing, Inc.; and Arnold Curry, sued defendants/appellants, John Stergiou and Main Marine Repair and Industrial Cleaning Co., for breach of an oral contract, breach of fiduciary duty, and fraud. Stergiou counterclaimed for violations of the Business Corporation Act, breach of fiduciary duty, and other causes of action. The jury found in favor of Curry. The trial court rendered judgment based on the verdict and awarded Curry damages in the amount of $50,000 for fraud, $50,000 for punitives, $10,000 for breach of fiduciary duties, and $140,000 for attorney's fees. The trial court rendered a take-nothing judgment on Stergiou's counterclaims. We reverse and remand.

Background

Arnold Curry is a metal fabricator, an artisan who cuts and shapes industrial metal parts. John Stergiou owns Main Marine Repair and Industrial Cleaning Co. (Main Marine), a business that specializes in ship repair. The two men had known each other for several years because Curry had performed metal work for Main Marine in the past.

In April 1996, Curry wanted to start his own metal fabrication company and approached Stergiou for help. Stergiou offered Curry an unused shop space within the Main Marine facilities to begin operating. In exchange, Curry agreed to do maintenance jobs and to perform small fabrication projects for Main Marine free of charge. In April 1996, Curry began General Metal Fabricating (GMF) as a sole proprietorship. Stergiou provided the workspace, equipment, and initial funding. Curry's wife, Janet Curry, assisted in the business.

As GMF expanded, Curry sought to build a new, larger facility. Stergiou conveyed some land next to Main Marine for GMF to build the "blue building." Stergiou assumed personal liability for a loan from Frost Bank that GMF used to finance the blue building.

After five months of operation, GMF was incorporated on September 18, 1996. Curry and Stergiou were the incorporators and initial directors. On October 18, 1996, GMF issued stock certificates representing 4,000 shares: 2,000 were issued to Curry and 2,000 were issued to Stergiou. On February 27, 1997, GMF Leasing, Inc. was formed and incorporated to manage and purchase the real estate used in the GMF business.

In September 1999, a dispute arose regarding the ownership of the companies. Curry asserted that Stergiou did not really own stock in GMF or GMF Leasing; instead, the stock was issued to Stergiou as collateral. According to Curry, the parties had agreed that Stergiou would return the stock when (1) Stergiou was repaid for his financial contributions to the GMF corporations, and (2) Stergiou was released from liability on the Frost Bank loan. In response, Stergiou contended that the stock certificates issued to him correctly represented his shares of ownership in the corporations. The jury found for Curry, and the trial court rendered judgment based on the verdict.

In six issues, Stergiou contends that (1) the evidence is legally and factually insufficient to establish an oral agreement; (2) the statute of frauds bars the alleged oral agreement; (3) the elements of a stock pledge were not satisfied; (4) the conditions precedent under the alleged oral contract were not satisfied; (5) the trial court erred in excluding evidence; and (6) the trial court erred in overruling the motion for new trial based on newly-discovered evidence.

Exclusion of Evidence

In the fifth issue, Stergiou contends that the trial court erred in excluding evidence.

The agreement in this case is set forth in Jury Question No. 2 as follows:

Did John Stergiou and Arnold Curry agree that if (a) Arnold and the GMF Corporations made payment of the loans made by John, Angela Stergiou, and Main Marine to Arnold and the GMF Corporations and (b) obtained release of the guaranty and cosigned obligations of John, Angela, and Main Marine for Arnold and the GMF Corporations, then John would transfer and cause transfer to Arnold of all of the stock in the GMF Corporations owned or controlled by John.

ANSWER: YES.

The jury agreed with Curry's contention that the parties had an oral agreement that Stergiou would surrender his stock once he was repaid and released from corporate obligations. Stergiou's position, in contrast, was that he owned the stock outright and could sell it as he wished. Stergiou attempted to introduce evidence showing that Curry recognized Stergiou's outright ownership of the stock. For example, Stergiou sought to introduce evidence of Curry's offers to buy Stergiou's shares, which are inconsistent with the terms of the oral contract. According to Stergiou, it is illogical that Curry would try to buy Stergiou's shares if the parties did indeed have an oral contract that Stergiou would later surrender those shares.

Set forth below, we will analyze whether the trial court properly excluded: the Zuber letter [Defense Exhibit 19a] and various documents and testimony alleged to be offers to compromise and settle, which include Curry's timeline [Defense Exhibit 38], two Letters of Intent [Defense Exhibits 12A & 37], and Zuber's testimony.

The 1997 Zuber Letter

Stergiou complains that the trial court improperly excluded Defense Exhibit 19a, a letter dated April 11, 1997, from Stergiou's attorney, Gordon Zuber, to Stergiou and Curry. The letter enclosed "a draft copy of a proposed Buy-Sell Agreement." Zuber drafted the attached Buy-Sell Agreement, which stated as follows:

Shareholders [Stergiou and Curry] are the owners of all of the Shares of the Company; and ... the parties believe that it is in the best interest of the Company and the Shareholders to make provisions for the future disposition of the Shares of the Company now owned or hereafter acquired by the Shareholders.

Stergiou attempted to introduce the Zuber letter during the cross-examination of Curry. Curry's counsel objected that the letter was a self-serving hearsay communication. Tex.R. Evid. 801(d). The letter is on Zuber's firm's letterhead and was signed by Zuber. Curry did not sign, approve, ratify, or adopt it. The trial court sustained the objection and excluded the letter. Stergiou again attempted to introduce the Zuber letter in a bill of exceptions during the re-direct examination of Zuber. The trial court ruled that it had previously sustained the hearsay objection and "stays with the objection."

Stergiou did not establish any exceptions to the hearsay rule, such as the business record exception. See Tex.R. Evid. 802, 803, 804. We hold that the trial court did not err in excluding the Zuber letter.

The 1999 Compromise and Settlement Evidence

Stergiou contends that the trial court improperly excluded other evidence that proved his outright ownership of the corporate stock. Defense Exhibit 38 is a timeline prepared by Curry in 1999. Defense Exhibits 12A and 37 are letters of intent dated 1999.

Curry sought to exclude these documents under Rule of Evidence 408, which prohibits evidence of attempts to compromise a claim. Tex.R. Evid. 408. Curry argued that the documents were created after the dispute arose; therefore, they are inadmissible on the grounds of compromise and settlement. The trial court sustained the objections and excluded the evidence.

As authority for his position, Stergiou relies on this Court's opinion in GTE Mobilnet of South Texas Ltd. Partnership v. Telecell Cellular, Inc., 955 S.W.2d 286 (Tex.App.-Houston [1st Dist.] 1997, writ denied). In GTE, this Court held that a letter was not an offer to settle a claim because it did not request that the plaintiffs drop any of their claims or relinquish any of their rights. Id. at 298. It did not ask for any concessions or seek to impose any conditions. Id. The defendants' subjective belief that the letter was a settlement offer was a legal conclusion and was not evidence that the letter was, in fact, a settlement offer. Id. at 299.

Curry contends that Stergiou waived this argument because he did not present it to the trial court. Tex.R.App. P. 33.1. When Stergiou attempted to introduce the evidence at trial, Curry objected based on an offer to compromise and settle. Stergiou did not respond with the argument set forth in GTE. Curry contends that Stergiou's failure to respond constitutes a waiver. We disagree. Generally, to preserve error regarding a ruling admitting evidence, a party must make a timely, specific objection when evidence is offered. Tex.R. Evid. 103(a)(1); Tex. R.App. P. 33.1(a)(1). Curry does not assert that Stergiou failed to object. Curry complains instead that...