## In the Cou rt of Appeals Second Appellate District of Texas at Fo rt Worth

_

__________________________ No. 02

- 20

- 00070

- CV

___________________________

On Appeal from the 352nd District Court Tarrant County, Texas Trial Court No. 352

- 301461

- 18
Before Birdwell, Womack, and Walla c h, JJ. Memorandu m Opinion by Justice Birdwell 

### J OHN 

### N GUYEN AND 

### J ESLYN 

### T RAN 

### , Appellants

V


### . M INH 

### N GUYEN AND 

### N GA 

### L E 

### , Appellees2 MEMORANDUM OPINIO N Appe llants Joh n Nguyen and Jeslyn Tran (Managers) appe al from a summary judgment for appellees Minh Nguyen and Nga Le (Co

- owners)

. Managers claim that th e trial cour t erred by granting summ a ry judgment for Co

- owners bas ed in large part

o n de emed admissio ns and that with out those deemed admissions, they raised a genuine issue of material fact as to the damages element of Co

- ow ners ’ claims. Managers also claim that they proved their affirmativ e defense that th e dispute ha d been settled and that the trial co urt erred by awa rding Co

- owners attorney ’ s fees. We affirm

. Background Because Managers ’ conduct during the suit bears on the trial court ’ s deemed

admi s sions ruling, we s et forth t h e procedur al ba ckground in detail. The Lawsuit
I n 2 016, Manag er s and Co

- owners agreed to form SJN Holl ywood Nails & Spa LLC as an entity to own and op erate Holl ywood Nails & Spa

. Co

- owners own ed 50% of SJN and we r e entitled to 50% of the pr o fits from the b usiness. M anagers own ed the oth er 50% and m anage d the busi n ess . “ F rom the time SJN acquired [ the busi n e ss ] in 201 6 through March 2018, the [ busi ness ] generated over $1.5 million for SJN (after paying its nai l/beauty technician s ). ” Manag ers made n umerous cash wi thdra wals from the busi ness and admitte dly did not “ fully ” pay Co

- o w ners “ for all of the dis tri butio ns ” Co

- owners were “ enti tled to r ec eive from SJN ’ s profits. ”3 In 2018, Co

- owner s began to realiz e th at they had not bee n f ully paid for all dist ributions to which they we re entitled a s o wners of SJN. In June 2018, Co

- owners and Mana gers agreed to ta ke two

- week turns man agin g the busi ness and to provide each other wit h the to tal income and expen ses for tha t two

- week peri od ; they also agreed (1) to change the lo cks o n the storage faci lity where Managers had been keeping the business ’ s r ecord s so th at on ly Managers and Co

- owners would have

access , (2) that they w ould co ordinate a time to g o ov er the recor ds together , an d (3 ) th at Co

- owners could access the busi nes s ’ s “ POS system to access r ecords. ” Finally , the parties agreed to sell the busi nes s to a buyer willi ng to pay at least $900,000 “ with the distributions b etween t he parti es t o be deter mi ned at a later date bu t before th e sal e. ” On June 1 8 , 2018 , Minh tried to m ee t with John at the stor age facility to go over the rec eipts , but John s aid there was no agre em ent to meet that day and that he would have to h ear back fr om hi s la wyer to d ete rmine a day the y co uld meet. Minh noticed th at at least tw o
- thirds of the s a les

- receipt r ecords were m issing, and John told him Co

- owner s “ had taken them home

. ” Consequently, Co

- owners ’ attorney sent a letter to Managers ’ then

- c ounsel ind i c ati ng concern th at Ma nagers were engaging in de lay so that they c ould hide and destro y reco rds

. The letter also asked Managers to rep lace any ite ms ta ken from the stor ag e faci lity and w arned t hat further attempts to

remove the stor ed rec ords wou ld be con sid ered evidence s p oliation

.4 The parties were not a ble to res olve matters, and in August 2018 , Co

- owners sued Managers to r ecover th e ful l amount of unpa id distributions they c l aimed t o be

ow ed. Co

- owners listed the follow ing causes of actio n i n their o rigina l petition

–– the only petition in the appellate r ecord and referenc ed by the parties : br eac h of fid uciary duty, money ha d and received, viola tion s of the Te xas Business Organiza tions Code for fa il ing to provid e access to book s and records , st atutory fraud, negligent misrepresentation, and temporary and p ermanent injunctiv e relief

. Tex. Bus. Org s . Cod e Ann. §§ 3.153, 101. 501

– .02. Co

- owners did not expr essly state a c laim for breach of the SJN agree ment , but in a dema nd letter attached as an exhibit to the petition and incorporated into it b y referen ce, Co

- owners ’ cou nsel stated that she had been h ired to b ring a claim for “ breach of the SJN . . . Company Agreeme nt, ” among other things

. Co

- owners soug ht attorn ey ’ s fees under Ci vil Prac tice and R e medies Code Section s 37.009 a nd 38.001, as well as Business and Commerce Code Section 27.01 (e)

. Co

- owners atta ched discovery requests to their petition, which included eighty
requ est s for admission (First Reque sts)

. The Prec inct 6 Constable ’ s offic e rec eived citation for Manag e rs on Au gust 14, 2018, but did not effect service until Octo ber 16, 2018. Managers filed a n answer with a general denial the same day. TRO Req uest The day before the constable s e rved citation, Co

- owners had filed a n A pplication for Immediate Action a nd Relief , in which they alleg ed that since the suit5 had been filed, Managers “ verbally t hreat ened and harassed [ Co

- owners ] not to sue

t hem, . . . disrupted the busi ness . . . , and fri gh tened the wor kers. ” Additio nally , Co

o wners alleged t hat a buy er had been found and that they anticipated an October 17, 201 8 closing, but th a t Manag ers had t hreat ened not to close unless Co

- owners agreed not to sue them. Co

- owners requested i n junctive relief , a s well as an or d er gi ving them sole author ity to manage and sel l the business , with the sale proceed s to be paid into the court ’ s registry. Minh filed a n aff idavit in connection with the application , in which he averred that when th e p artie s forme d SJN, Manager s co nvin ce d Co

- owners “ to entrust all o f the busines s operations and mana gement of bo th SJN a nd [the busi ness ] . . . to them, promising [ Co

- owners ] that t hey would operate both SJN and the [ busi n e ss ] in a p r udent a n d honest manner and ma ke fair and equ it able distrib utions to [ Co

- owners ] whenever SJN had profits. ” Accordin g to Minh, Manager s “ designated John Nguyen as Presid ent, themselves as the only ma na gers, and assumed full co ntrol and

ma nagemen t o f SJN a n d t he [ business ], including bu t not limite d to, [the] ba nk account and all other assets, a ccounting, bookkee ping, payroll, expenses, making di str ibutions, p ay ing taxes, et c. ” Accor ding to Minh, wh en Co

- o wners began accessi ng the business ’ s bank

acco unt in 2018 , they not iced that no t o nly h ad t h e [ busi n e ss ] been pro fiting, . . . there

was mor e than enough for [ Man age r s] to make much bigger distributions ” t o th em . He also averred tha t as of October 2 018 , Managers had “ refused to grant [them] full6 access to t he re cords ( in particular, the e xpen ses f or 201 6 and 2017 and other

re cords) ” while claiming tha t “ their cash [ with draw al s ] w ere for ‘ e xpenses ’ [with out] disclos[ing ] ex actly what those expenses ” w ere . Minh also stated that a previous pro sp ective buyer h a d backed out of a s ale, “ telling [ Co

- owne rs ] th e reason bei ng that [ Managers ] told the buyer the [ busi ness ] was not pro fiting. ” Minh opined th at because of Manager s ’ “ mismanagement, and conseque ntly , the ri sing tension between the part ies, the [ busi ness had ] s uffered a decline and loss of si x wo rkers ” as w ell as its enti ty stat us . Minh further averr ed that a new buye r had off ered to buy the business fo r $ 780,000, “ a sales price that [ Managers ] and [ C o
ow n e rs ] have all agreed to. ” Howev er, in Minh ’ s words , “ With the sale expected to close on this week, we have now bee n told by the buyer that [Managers] have said that

t hey will impede this sale unl ess we sign a letter agreeing not to sue them, which

wou ld me an relinquishing our r ight to seek justi ce. ” Min h feared that if the business

were n ot s old , it wo uld “ cont inue to decline and los e worker s to the point whe re it [would] be incapab le of making a profit and no one would want to buy it. ” Mi nh alleged th at Ma nagers had “ tried to i nt i midate and threat en [Co

- Owners] into . . . signing a let ter not to sue. ” He r elated that d uring on e of C o
- owners ’

ma nagement periods, John “ tried to pressure [them] into signing a covenant not to sue him and his wife

. . . [and was ] tr [ying ] to start an argument r egarding whom can serve as a receptionist wh en we are mana g ing the Business

. ” According to Minh, when Co

- ow ners refused, John “b ecame heated, raised his voice, and caused a7 disturbance in the Business

. ” They exchanged “some wo r ds , ” and John said in Vietnamese , “ [I] f I die, you will die

. ” Mi nh st at ed that John then “ we nt outside [,] paced back and forth at the front door , ” and remain ed there until af ter closing t ime. Minh wa s afraid and asked an employee to walk him to his c ar . A c cordi ng t o Minh, “[w] ith what [they had] seen and hear d, [t he y ] were . . . very scared and on guard ” when leaving t he h ouse and when arri ving at and leaving the busi ness . M anagers moved for and obtained a continuance on the motion for emerg ency
tem p ora ry r elief , and the tr ial court set it for a hearin g on O ctober 25 , 201 8. But o n Oct obe r 24, 2018, Co

- owners ’ co unsel fi led a Notice of Cancellation of Hearing on the appl ication for immediate relief, assert ing that the parties had r eached a tentative
agree ment
. Cou nsel d id not give the co urt any details a bout that tentative agreement , however

. First Summ ary Judg me nt Motion and Rule 91a Dismissal Motion Almo st two months later, Co

- owners filed a motion for summary ju dgment based on the First R e quests , t o wh ich Manag ers h ad failed to respon d

. Managers responde d b y filing a Rule 91a motion to dismiss, claimi ng that the trial court la cked jurisdiction because the issues in controver sy were moot, that the parties had

c ontract ually agreed to dism is s the ca se , tha t Co

- owne r s were estopped to deny th e settlement agre ement, and that the motion for summar y judgment had been brought in bad fa ith. In the alternative, Manage rs sought an addition al thirt y days to respond

t o disco very and to the mo tion for summary judgmen t
.8 M a nager s included with their motion to dismiss John ’ s affidavit , in which he explained that M anagers and Co

- owners had met and com e to a n agreement abo ut the dis pute t hat they ha ndwrote in Vietnamese , and t hen in English , and had both documents sig ned an d no tariz ed. Late r tha t d ay, they signed a more comprehensive settlement agreement drafted by Co

- owners ’ attorney

. Attached to John ’ s affidavit are a copy of an agreement purpor tedly in Vietnames e, wit h the Englis h tr anslation following, as wel l as the sub sequ ent a greeme nt d r afted by Co

- owne r s ’ attorney
. The

text o f that agreement (Settlement Agreement) reads as follows: A GREEME NT REG ARDING THE SALE OF HOLLYWOOD NAILS AND SPA John Nguyen , Jeslyn Tran, Minh Nguyen, and Nga Le ( co llectively the “ Parties ” ), c urr e nt ow ners of S J N Hollywood Nails and Spa, LLC ( “ S J N ” ), wh ich wholly owns and operates Hollywood Nails and Spa (the

“ Busin ess ” ) located at 6248 Camp Bowie Blvd [.] , Fort Worth [, ] Texas 76 116, hereby agr ee to sell the Business a t the price of SEV EN HUNDRE D EI GH T Y THOUSAND AND 00/ l00 DOLLARS ($780,000.00), in which sal es proceeds shall be split 50% going to John Ngu yen and Jeslyn T r an and 50% to Minh Ng uyen and Nga Le. Af t er the s ale of Bus iness is c omple ted with [1] a sales price an d [2] S J

N prof it distri bu ti on s s atisfactory to the Parties, the Parties agree to fully release one another, their agents and attorneys, from an y and any [ sic] and all past, present and future claims, li ens, cause s of ac tion (in cluding any previously file d or c laimed), d emands, d am ag es , e xpenses, and compensation whatsoever, whether based on tort, co ntract, property damage, or other theory of reco very, which the undersigned now has or which may hereaf te r ac crue on account of or i n any way growing out of an y and all known and unk no wn , fo r es een and unfores een claims, expenses and damages, including but not limited to compensatory damages for and/or p unitive dam ages, arising out of the Bu siness, S J N, or any a greement o r dealings betw een the Parties, and Minh N guyen and Nga Le will dis mi ss t h e lawsuit styled Cause No. 352

- 30146 1

- 1 8, Minh9 Nguyen and N ga Le v . John Nguyen and Jeslyn Tran, [i] n the 352 nd Di s trict Court, Tar rant County, Texas

. [ T

] h e Parties agree that this Ag reement shall s upersede and take precedenc e over any [] oth er agre em en ts b e tween the Parties dated October 24, 2018 or prior [

. ] [Emphasis added.] Managers a l so attached to the ir motion to dism iss an affidavit from their then

attorney , in which he averred, It is an d was my b elief that onc e the parties ’ business , Holl yw oo d Na ils a nd Spa, was sold, and the proceeds theref rom split in accordance with the contract, which occurred on Octo ber 26, 2018, the suit between the parties had been f ully compromised an d set tled, and that there was no issue to be r esolved and no need to r esp on d t o Plaintiff s ’ requests for discovery

. Then, to my disbelief, Plaintiffs filed their Motion for Summar y Judgment bas[ed] upon un

- responded to R equests for Admis sion s and un
- answere d dis covery. Attached to his affidavit is an email with Co

- owne rs ’ c ou n se l d iscussing executi on of the Settlement A greement , in which Managers ’ then

- counsel stated : “ I wil l advise my client accordingly to execute. Do you want to suspend discovery otherwi se I will have to do something? I don ’ t l ike to wai t. ” Co

- o wner s ’ cou nsel resp onded, “ I t hink this will all get resolved, but if it doesn ’ t by mid

- November, I have no problems giving you an extension. ” Ma nagers also atta ched an Asset S a le and Pu rchase Agreeme n t “ by and
among ” SJN, Mana gers and Co

- owners indiv idually , and TQ N TX , LLC , purs uant to which TQN would purc hase SJN ’ s assets for $780,0 00

. T h e closi ng date was to be October 26, 2018. According to Joh n, the closing took place on that date.10 In response to the motion to dismiss, Co

- ow ners at tached thei r counsel ’ s aff id av it, in wh ich she averred, Because the Plaintiffs wanted to be sure that Defendants did not interpret the signing of the Agreement Regarding the Sale of Ho llywood Nails and Spa t o mean that all is sues betwe en the parties had be en resolved , the second para gr aph speci fically states the parties agree to a mutual release and that Plaintiffs would dismiss the pending lawsuit only “After t he sale of Bus iness is co mpleted with a sales price and SJN profit distribut ions satisfact ory to the Parties (emphasis a dded) .” Co unsel further s tated that , “ [t] o this day, the parties have no t been able to come to an agreement relating to SJN profit distributions

. ” At tached to her affidavit is an email ex cha nge with Managers ’ then

- counsel dated No vemb er 7, 2018

–– after the closin g
–– i n whi ch she calcu late d “ the amounts owed by Defendants t o the company fo r the years 2016, 2017, and 2018 using the figures [ Co

- owners ] have been able to recently obtain from the Bu si ness ’ s computer records and t he expenses provided by

. . . John ” as “ $ 4 34, 20 7.5 5 . . . , half of which , $217,103.78 , is owed direct ly to my clients as members holding 50% interest. ” He responded on November 24, 201 8, “ I

sent it to the m. Let me ask t hem if they ha ve verified the n umbers. ” Nothin g in t he record show s tha t the tri al co urt ruled on the motion to d ismiss , but on January 24, 2019, it denied Co

- owners ’ motio n for summ ary judgment and
gave M a nage rs thirty days to respond to Co

- owners ’ First R equests and other pendi ng discovery

. T h at same day, Co

- ow ners provided Mana ger s ’ new counsel wit h courtesy

c opies o f the First R equests and served a second s et of requ est s for production and11 seco nd set of requ ests for admissions (Se cond R equests)

. Managers responded in
some way to all pending d iscovery e xcept for interrogatories for J esly n Tra n and certain isolated parts of oth er interrogatories and request s fo r production ; Co

- owners
cont end that when Managers finally pro vided interrogatory answers for Tran , they were in complete and contained improper objections. Motions to Compel and Co nt empt Motio ns O n March 28, 2019, Co

- owners moved to c om pel Manager s to “ fully and

c ompletely r espond ” to dis covery. Co

- ow n ers attached their counsel ’ s af f idav i t , in which she stated th a t although Ma nagers ’ counsel had “ dropped off ” several sets of d isc overy responses at her office, he had omitted Tra n ’ s interrogato ry respons es , as well as “ ot her informatio n and documents, ” an d that despite her communications wi th him about the missing di scovery, M anagers still had not provided it

. Addition ally, she comp laine d that Managers ’ counsel would not serv e disco very electronically. Attac hed to counsel ’ s affidavit was a c opy of an email exc hange she had wit h Managers ’ cou nsel, in which h e stated, “ Mr. Nguyen is going t o bri ng out the papers he has had in stora ge, hopef ully on Wednesday, and we can set up a date for you to go through the pa pers. He says that there are a lot of papers and too many to copy

. ” In it s order granting the motion to c ompel , the tri al cour t found that Manag e r s had “ abused the discover y pro c ess i n an attempt to hinder [ Co

- owners ] from obtaining relevant in formation. ” The trial cou rt also ordered payment of $962.50 t o12 Co

- owners ’ counsel on “ conclusion of litigation. ” The t rial court ’ s order contain s the following warning: The Court sternly rep riman ds Defendants for their misconduct. Discovery is a fundament al right of litigant s and is necessary for the effective administrati on of justice. By ignoring his obligations under t he ru les of discovery, Def endants interfer ed with a t least one core func tion of the court (enfo rcement of judgment) and Def endants ’ misco nduct will not be to lerated. Further misconduct will yie ld sanctions in the future, including the possibility of contem pt. Managers failed to timely c omply with t he trial court ’ s order, and Co

- o wners moved fo r contempt. Co

- owne rs supported t heir motion with aff idavits from their counsel and from Minh

. According to Minh, “ As of the date of this aff idavi t, we still have not received any of the things required in the O rder Granting Plaintif fs ’ Motio n to Compel Disco very Responses

. ” Co

- owners als o at tached an email from their counsel to Manager s ’ counsel specifying at least two categories of inf ormat ion still requested :

- All itemized r eceipts/evidence sho wing any expenses Defendants ar e clai ming they paid on beha lf of the Busi ness or SJN (shopping receipts, receipts/evidence justifyi ng Defend ants ’ cash withdrawals from the Business or SJN ’ s acco unts or monies, etc.), n ot just receipts s howing how much was paid to the workers. Defendants speci fica lly s tated during our June 2018 meeting with both part ies and their counsel present that D efendants kept all receipts to all the expenses to show they we re le gitimate, including for all purchas es .

- ADP records and ac cess to the account for the Busine ss a nd SJ N, and anythi ng which speci fically shows the sour ce of the money Defendants used to p ay for th eir own personal income tax to the IRS

. . . . The tri al co urt issued a show

- cause order. After a hearing on May 2, 2019, the trial c o urt found that “ t he p artie s should be give n a fin al opportunity to reso lv e or13 streamline th[e] discovery d i spute wit hout Court intervention

. ” In its o rder, t he tria l

cou rt pointed the pa rties to Dondi Pro p e rties Corp. v. Commerc e Sav ings & Loan Ass ’ n , 121 F.R.D. 284 (N.D. T ex. 19 88 ), and to the Tex as Law y er ’ s Creed for standard s of dis covery
- related condu ct. The trial court ordered lead counsel for both parties to

“ con fer in

- person in an attempt to resolv e all matters in dispute ” and to submit a joint status report so that the tr ial court coul d “ determine the respe ctive posit ions o f each party regard ing the subject mat ter of the dispute in a single written submissi on . ”
In t h e later

- filed joint statu s report , the parties indicat ed that the y had agreed

“ regarding all of t he i tems in t h e ” motion

- to

- compel or der , and t hey r equested an extensio n of the trial date until September 2019 “ to allow the parties time to comp lete d i scove ry and mediat e . ” Before the parties could mediat e, howeve r, Co

- owners filed a second m otion to comp el, in which t hey alleged that John had re fused to answer certain questi on s in his June 201 9 dep osi tion “ regarding transactions shown on certain b usine ss financial records that were presented to him (such as th e ba nk statements for Ho llywood Nails and Spa) ” b ecau se “ h e could not verify wheth er the documents were authentic and that anyone c ould put the b ank logo on anything. ” According to Co

- o wners , “ [t]hese doc uments wer e the very ones pro duced by [ Managers] i n response to [Co

- owners ’ ] dis covery reques ts. ” Co

- owne r s al so indi cate d that although th eir counsel had ask ed Manag ers ’ counsel on numerous occasions to elec tronically serve “ all d ocume nts produced in response to [Co

- owners ’ ] discovery14 reque sts in b ates

- labeled format and verified with [ Managers ’ ] n otariz e d s ignat ures, ” he ha d not do n e so. In rulin g on the second motion to compel, t he trial judge took judicial no tice of the f ile and grant ed the motion , finding that “ John [had] abused the discovery process in an attempt to hinder [ Co

- owners ] fro m obtaining rel evant an d pertinent information by r efusi ng to answer questions du r ing his deposition pe rtaining to bus iness transa ction s and records

. ” T h e court also f ound that M a nagers , “ by el ectronically serving all disco very re sponse s and document s pro duced in bat es
l abele d and ver ified format, would c lear an y confusion as t o w hat discovery was in fact pro duced by ” Managers

. T h e court or dered Managers to produce the discovery in the prop er format “ no later than August 9, 2019 , ” o rdered Manager s to “ answer all quest ions rela t in g to Hollywood Nails Salon and Spa or th e record s produced by [ Managers ] without any objection or reservation (oth er th an those prot ected by attorney [

–

] client or spo usal privilege ) , ” and ordered payment o f $612 .50 to Co

owne rs ’ counsel

. T he tri al c ourt inc lu ded the same discovery

- misconduct repri mand languag e from the prior motion

- to

- compel order, this time naming John specifically

. On August 13, 2019, Man agers ’ counsel filed a m otion seeking a n exte nsion of time to comply with the sec ond order to c om pe l. He stated that he had bee n una ble

to ret urn to work after his wife ’ s surgery because he had been he r sol e caregiver d uring her recovery after she wa s relea sed from the hospital on July 28, 2019

. He als o explained,15 Defendant s’ Counsel [] has neve r pr ovide d Bates

- Labeled docume nts a nd does not have the equipment to perform such tasks and has obtained the services of F edx Kinkos to label and scan th e documents requested with an estimated deliv ery date of Au gust 14, 2019, at which time Defendant s are to verif y the d ocuments before a no tary public . Further, Defendants’ Counsel does not have the ability t o ele ctronically s erve all responses and document s except through providing Plaintiffs a Thumb Drive with th e stored documents. And [counsel] requests that the court find [] that the Thumb Drive complies with t he Court’s Order to “electronically serve all responses an d doc uments.” The trial court d id not sign an order. Co

- owners fi led a seco nd m otion for contempt, alleging that Managers had failed to p a y th e ord ere d attorney ’ s fee a nd had failed to el ectronically serve all response s and documents responsive to the discovery req uests
. They att ached their attorney ’ s affida vit in which she averred she had not be en paid the $612.50 and that Managers ’ attorne y ha d “ c h ose [n] to hand deliver a flash d rive of [ Managers ’ ] discovery re sponses and documents, without any verified/not a rized signatures, on August 14, 2019, co mpletely cont rary to the ” order. The trial court issued a show

ca use order but did not hold Man ager s in con tempt. F ro m the appellate record, it appear s that Manager s ’ counsel never elect ronically ser ved the d iscovery. Se cond M otion for Su mmary Judgment T h e trial c ourt order ed the parties to m ediation , and the parties mediate d in October 2019

. A ltho ugh t h e m ediator inf ormed the trial cour t that “ an agreement was not reache d in our meeting, ” she believed it wo ul d be “ premature to declare an impasse in that the parties are cont inuing with their discovery

. ” [Emphasis a dded.]16 After the m edi ati on, Co

- owne rs s erved additional discovery, including Third
R e quests for A d miss i ons ( Th ird Requests) , which Co

- own er s s erved on Managers ’

attor ney on Novemb er 20, 2 019 , an d whic h were due on December 20, 2019

. The doc ket sheet notes t hat t he partie s entered into an ag reed sche duling order in Decembe r 2019, but that order is n ot in cluded in the appellate record

. Managers did

not respond to the Third Req uests. O n Jan uary 2 , 2020, Managers filed a Defendant ’ s Origin al Answer 1 containing
a g enera l denial and affirmative de f ens es ba sed largely on the S e ttlement A gre ement :

accor d and satisfaction ( “ [SJN] was so ld a nd sales price divided in accordance wi th such agree ment s. ” ), estoppel ( “ [T]he parties settled this c ase and agreed to d isc har ge each other from liability for [SJN] and cann ot now se ek to sue for any da mages . ” ), payment ( “ All of [SJN ’ s ] lia bilities have be en paid, [SJN] sold a nd the procee ds divided in accordance with the written agreeme nt of the parties. ” ), unc lean hands ( “ [Co

- owners] represented to [Managers] that this ca se had been s ettled and a ll liability extinguished, and then con tinued on with the su it. ” ), and bre ach of t he S ettlement A greement
. Managers a lso raised the fol lowing verified pleas t ha t were contrary to admissions they had made in answering the Fir st R eques ts : they alleged that Mi nh lack s capacity and standing to sue becaus e he “ is not an owner of the company abou t which this suit is brought ” a n d that “ there is a defect of parties ”

1 Because Ma nager s had already filed an a ns wer, thi s pleading was more in the nature of an amende d or supplemental answer. See Tex. R. Civ. P. 71.17 beca use “ [a]t some point in the process of establishi ng the company, Ste ph en Nguyen ’ s name replaced that o f ” Minh ’ s. Managers did not bring a co u nterclaim for breach o f the Settlem ent Agreement , but they did see k attorney ’ s fees because “ under the provi s ions of the Civil Practice and Remedies Code, this case is brought for Bre ach o f Contract among other r equests for relief

. ” The next d ay, Co

- owners filed an am ended moti on for summary judg m ent, based on Managers ’ answe r s to their First R equest s as well as the deemed admissions to their Third Requests. The motion did not exp ress ly ad dress any of Manag ers ’ affirmative def enses. Managers r esponded to the motion , contending (1) that the case had been

sett le d and the procee ds had already been divid ed according to the Settlement Agreement ’ s t erms ; (2) t hat many of the “ deemed ” a d miss ions from the T hird
R eq uest s wer e duplicates of those in the First R e ques ts and Sec o nd R equests and ha d thus already been asked and answered ; (3 ) that damages were unliqu idated and the summary judgment evidence di d not prove the damages amounts ; and (4 ) th at Co

owners had not shown a ny statutory authority for their requested attor ney ’ s f ees and had n ot proved that the fees they so ught by affidavit were reasonable and neces sary . Managers did not ex pressl y request to withd raw the deemed Th ird R equests but app eared to argue that they had re sponded to t hem by the time th e summary judgment res ponse was fil ed

.18 Managers ’ response relied o n (1) affidavits f rom John and Managers ’ fo rmer counsel to explain the circumstances of the S et tlement Agreement ’ s execution ; (2) the af fidavit of a CPA who had reviewed t he busi ness ’ s finan cial records and who

–– in th e words used in the response

–– had “ the opini on that the accoun ting information upo n whi ch P laintiff s rely

. . . is accurate ” ; 2 and ( 3) Managers ’ then

- attorney ’ s aff idav it

“ s tating why response to discovery was not timely made. ” The CPA averred in h er affidavit that she had reviewed computer summaries of

“ Tota l Sales Reports, ” bank st atements, che cks, W 2s, 1099s, and tax re turns for SJN for 2018, and Total Sales Repo rts, W 2 s, 1099s , and tax returns for 2016 and 20 17. After doing so, she concl ud ed that “ the computerized tape s shown as ‘ Total S ales Repo rts , ’ ” which pu rport to be the summaries of the business ’ s income , “ do not

re flect amounts that co incide with the total s of t he Bank Statements, W2 r eports [,] and 10 99 reports iss ued to empl oyees and contract labo rers , and the checks issued to such workers and the tax return of SJN

. . . for th e twel ve mon ths ended 2018. ” She stated that in her professiona l o pinio n, t he To t al Sa les Reports “ are not accurate and

cann ot be relie d upon to provide acc urate financi al infor mation concernin g the s ales receipts ” of the business, “ making it difficult, if not impossible, to determ ine the

actua l income and expenses of th e bus iness , an d the net profits that were to be split
equa lly between the owners. ” M anagers ’ coun sel av erred the following in hi s affidavit :

2 This s tatem ent appears to be a typo

.19 “ On November 20, 2019, Plaintiffs ’ attorney filed through e

- service

‘ Plaintiffs ’ Con solidated Discovery Req uests
. ’ I did not se e the f ili n g com e in an d was unaware of it until Plaintiffs filed their Motion for Su mmary Judg ment and discov e red that it, in fact, ha d been filed. During the time, beginni ng the following week aft er discove ry wa s filed, I became sick, with a pneumo nia/ast h ma li ke c ondition, [sic] in fact a t a status conference in this case o n December 6, 2019, both Plaintiffs ’ a t torney and I were ill with similar symptoms
.

“ The following weeks I did not work beca use is [si c] wa s ill with c oughing and runny nose. My condi t ion w as s o bad that my doctor debated putting me in the hospital so th at the medici ne could be delivered int r avenously, but decided I would probably be better off at home. I finally started feelin g bett er C hrist mas week, after the discovery due date. Even if I had seen the discovery requests, I could not have answered them.

“ Since rec eiving P laintiffs ’ Motion for Summary Judgment, I worked hard to supplement al l of the D iscovery by the due date of January 10, 2020. Again I, did not see th e Request for D i scove ry u ntil I saw it attached to P la intiff s ’ Motion for Summary Judg ment. ” In their reply, Co

- owne r s presented documentation fr om the e

- filing service provider s howing that the discovery electroni cally serv ed on Manag e r s ’ counsel was opened by him (or someo ne using his email) on Nove mber 20, 201 9 , at 12:3 3 p.m. Therefore, the y argued that Manager s had not s hown good cause that would allow them to withdraw tho se deemed ad missi ons and that this evidence, as well as Managers ’ past pattern of discovery abu s e , sh ows th at Managers int entionally chose

not to answer t h e discovery

. After a heari ng, a r ecor d of which was not provided by M anagers on appeal , th e trial court si gned a fi nal judgment , in which it granted the summary judgmen t moti on . The trial court ’ s judgm ent states t hat the judge took judicial not ice of the fi le20 and c onsidered “ all ti mely filed pleadings, all timely filed and competent summary jud gment evidence, ” and “ the a rguments of counsel. ” The trial court also made the following findings : (1) th a t the admi ssions in the Third Re quests had been deemed ad mitted and (2) that “ [b ]ased on [the] deemed admissions, [Managers ’ ] direct admission [s ] , other evidence submitt ed by [Co

- ow ners] , and the documents on file , ” Co

- owners showed that “ the facts suppor t all the e lemen ts for [their] causes of ac tion

. . . fo r bre ac h of contract , bre ach of fiduc iary duty, disgorgem ent, money had and received, vio lation o f the Texas Busin ess O rga nizations Code, sta tutory fraud, and negligent misr epresentation. ” T h e court a w arded Co

- owners damages of $217,103.7 8 and attorne y ’ s fees of $26,500. T h is appea l followed. Issues on Appeal Managers raise t he fol lowing iss ues o n appeal :

° “ The Trial Court erred in granting Summary Judgment for [Co

- ow ners] by ignoring the Parties’ Wr i tten Agreements dated Oct ober 24, 2018, which contract ually settle d their dispute

. ” Accordin g to Managers , “ the net pr oceeds fro m the sale were equally divided between the parties in acco rdance with the con tractual terms of the ” S ettlement Agreement , whic h shou ld have end ed the disput e, and Co

- owners wrongful ly continu ed the suit.

° “ The Trial Court erred in deeming Pl ainti ffs’ Reque st for Admissions to be admitted. ” Managers argue that their response to the motion for summary j udgment

s hows that “ there we r e m an y material issues of fact left to be determi ned and that the21 lack of timely respons e . . . was not a s a result of c onscious i ndifference but that the electronic e

- mail service on [Managers ’ ] attorney was not seen when deli vered

. ” Managers contend th a t with out th e deemed admissions Co

- ow ners did not concl usively prove the damages element s of their cl aims.

° “ The Trial Court erred in granting Plaintiffs’ Summary Judgment based on Deemed Admissions, most of which had prev iously been den ied. ” According t o Manag ers , “ Many of the Requests in t he first two sets of Requests were the same or very similar in c ontent as Plaintiffs’ Thi rd Set of Requests ” ; thus, Co

- owners should

not have gotten a second bite at the app le

.

° “ The Trial Cour t erred in a warding Plain t iffs Attorney’s fees. ” M anagers argue that “ [t]his cause of action was brought in torts and no t contract and none of [the types of claims listed in Section ] 38.001

. . . were alleged or pled. ”

Stand ard o f R eview We revi ew a summary judg ment de novo. Trave l ers I ns. v. Joachi m , 315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence pre sented in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jur ors could and disrega rding evidence co ntrary to the nonmo v ant u nless r easona ble jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fieldin g

, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every reasonable inference and resolve any doubts in the

n onmovant’s favor. 208 01, Inc. v. Parke r , 249 S.W.3d 392, 3 99 (T ex. 200 8). A plaintiff is entitled to summary judgment on a cause of action i f it conclusively proves all22 essential elements of the claim. Se e Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jone s , 710 S.W.2d 59, 60 (Te x. 1986)

. “In the contex t of a plain t iff ’ s tradit ional motion for partial
summary judgment to dispose of a defendant ’ s affirmative defense , a pl aintiff may prevail by conclusively negating at least one element of the defense.” Berry Co ntracting, L.P. v. Ma nn , 549 S.W.3d 31 4, 322 (Tex. App.

— C o rpu s Christi

– Edinburg 2018, pet. denied). Because Co

- owners were not “ using the su mmary j udgment process to attack ” Managers ’ affirmative defenses , they had the initial burden only to conclusivel y p rove al l essential el ements of their o wn c l ai ms . Se e Cust o mer C tr. of D FW Inc. v. RPAI N. Richland Hills Davis Ltd. P ’ ship , No. 02

- 20

- 00189

- CV, 2021 WL 2149623, at * 2 (Tex. App.

— Fort Worth May 27, 2021, no pet. h.) (mem. o p.) ; s ee also MMP, Ltd. , 710 S.W.2 d at 60 ; Charles Gl en Hyde, Nw. R eg ’ l Airpo rt, Inc. v. Nw

. Reg ’ l Airpo rt Prop. O wners Ass ’ n, Inc. , 583 S.W.3d 644 , 648 (Tex. App.

— Fort Worth 20 18, pet. denied). O nly if Co

- owners had done so did Managers then have “the burden

. . . to r ai se a genuine issue of materia l fact p recluding summa ry j udgme n t , ” Luj an v. N avist ar, Inc

. , 555 S.W.3d 79, 84 (Tex. 2018) , a s well as to present evidence suff icie nt to raise a fact issue on each element of any affirmative defe nse. Custom er Ctr. of D FW , 20 21 WL 2149623, at *2 ; s e e Am. Petrofina , Inc. v. Allen , 88 7 S.W .2d 829, 830 ( T ex. 1 994); H & H Steel Fa bricators, Inc. v. Wells Fargo Equi p. Fin., Inc. , No. 02

- 15

- 00391

- CV, 2016 WL 6 277371, at *5 (Tex. App

. — Fort Wor th Oct. 27, 2016, no pet.) (mem. op.).23 Co
- owners ’ Claim s In their second an d th ird issue s , Manager s conten d tha t t he t rial court a bused its discre tion by not allowing the m to wit hdraw their deemed admiss i ons , without whi ch Manag ers contend Co

- owners failed to prove the damages ele ments of their claims . Manag ers cla im that even though they never filed a motion to wi thdraw the d eemed a dmissions , they suf ficiently brought such a requ est to the trial court ’ s attention

. S ee Wheeler v. Green , 157 S. W.3d 439, 442 (Tex. 2005 ) . They also claim that Co

- owners ’ reli ance on the Third R equ ests was improper because “ [m]any of the [r]eq u ests in the first two sets of [r] equest s wer e the same or ve r y similar in content ”

to the Third R equests
. According to Managers, if th is summary judgment were allowed to stand, “ what a w ise (or shady) litigant would ne ed to do is keep fi ling requests in h o pes t hat the othe r par ty might not respond timel y, and use that non

re spo nse to obtain jud gment. ”
E ven i f Manager s ’ summary judgment response was sufficie n t to re quest withdrawal o f the deemed admissions, the trial cou rt did not ab use it s discretion by fi n ding that Managers had not shown good caus e for withdrawal and that summary judgment cou ld be based, in part, on th e admissions in the Third R equests
. Further , considering the deem ed admissions, a nd the other summary j udgment evide nce
–– which include s Mana g ers ’ answers to the First R equests

–– Co

- own ers conclusively proved t he damages e lements of their claims.24 Deem ed Admissions If a party fail s to timely r espond to request s for admissi ons, the request s are deemed to be adm itted. Tex. R. Civ. P. 198.2(c) . A tr i al co urt may permi t a party to withdraw de emed admissions if the p arty shows good cause for the withdrawal an d if

“ the court finds that t he parties rel ying upon the responses and d eemed admissions will not be unduly pr ejudiced and that the presentat ion of the m erits of the action will be subserved by permitting the party to amend or withdraw the admission. ” Tex. R. Civ. P. 198.3. W hen admissions are deemed as a discovery sanct ion to preclude a presentation of the merits , they im pli cate the sa me due p rocess conce rns as other

case
- ending discovery sa nctions. Marino v. King , 355 S. W.3d 629, 632 (Tex. 2011)

. Thus, to substantiate a s ummary judgment based solely on deemed admissions , we d etermine whether the party relying on the deemed a dmissions has shown flagr a nt ba d faith or callous disregard for the rules

. Id. at 633. If su ch a showing is made,

a dmissions of fact on file at the time of a summary judgment hearing are proper proof

to sup port a motion for summary judgment. Se e Dall

. Dra in Co. v. Wel sh , No. 05

- 14

- 0 0831

- CV, 2015 WL 4114976 , at *5 (Tex. Ap p.

— Dallas July 8, 2015, no pet.) (mem. op.). But a deemed admission involving a purely legal issue is of no substant i ve evidentia ry effect. See id. A trial co urt has broad disc retion in ru ling on a request to withd r aw de emed admissions. Wheeler , 157 S.W.3d at 443

. An appellate co urt may set asi de the trial

court ’ s rul ing “only if, after reviewing the entire record, it is clear that t he trial court25 abused its di scretion.” Ste lly v. Papania , 927 S.W.2d 620, 622 (Tex. 1 996) ; Saum v. Am. Express Nat ’ l Bank , N o . 02

- 19

- 00415

- CV, 2021 WL 1034146, at *7 (Tex. App.

— Fort Worth M ar. 18, 2021, pet. denied ) (mem. op.)

. A trial court does not a buse its disc retion by finding a lack of good cau s e to withdra w deemed a dm issions when a party pr esents p roof t hat t he op posing pa rty was properly electro nically served with t he admissions and did not timely respond, and the opposing party provides no pro of of nonrecei pt
. See In re City I nfo Experts , LLC , No. 01

- 20

- 0 0364

- CV , 2 020 WL 6435782, a t *11 (T ex . App.

–– Houston [1 st D ist.] Nov

. 3, 2020, orig. proceed ing) (mem. op.) ( noting that under Rule of Civil Procedure 21a(b)( 3), e lectronic service is complete upon tr ansmiss ion to the e
- f iling service provider ) ; Garcha v. Chatha , No . 05

- 17

- 00084

- CV , 2018 W L 1755391, at *3 (Tex. A pp.

— Dalla s Apr. 12, 2018, no pet. ) (mem. op.) ( holding that trial court d id not abuse its d iscretion by refusing to withdraw deemed admissions when d iscovery wa s prope rly served initiall y on Garcha , and then emailed to couns e l aft er Garcha hired him , and counsel at tempted to blame the lac k of response on a departing associate and , alternatively, the way counsel had programmed his own email system )

. Pre suming that the Managers ’ summary j ud g ment respon se can be constru ed as

see k ing w ithdrawal o f the deemed admissions, we do not believe the t rial court abused it s discretion by impliedly finding that they did not mee t the Rule 198.3 standard to allow withdr awal of those deemed admissions.26 Here , Co

- owners provided p roof that the ad m issio ns were pro perly electro nically ser ved on Managers ’ attorne y and that so meone at his email address opened them on the day they were served

. And even though Manager s ’ attorney averred that he became ill the week a fter the dis c o very was served and coul d not work in the weeks before the discov ery was due, he admitted attending a status conference while ill, and the trial court was not required to believe his explanation, esp eciall y i n light of the trial court ’ s prior findin gs th at Manager s had engag ed in p rolo nged discovery miscon duct involving the withho lding of disc overy directly related to the matters sought to be adm itted

. We do not have a reporter ’ s record from the summary j ud gment hearing to know what , if anythi ng, was a r gu ed to the trial court in t h is

re gard

. Moreover, ba sed on Managers ’ significant pretrial dis covery a buses and d e lay, of which the trial court took judicial not ice, the trial court did not a buse its discretion by determining that Co

- owners would be unduly pr ejudiced b y allowing Manag e rs to withdraw their deemed admissions

. Managers also take issue with Co

- owners ’ serving a third set of r eq uests, claiming that many of them are duplic ates of the First Requests an d Second Requests and t hat a party sh ould not be allowed to keep servi ng di s cover y in an attempt to trap the opposin g party into admitting f acts by m istake

. While th e latter may be true , th e record shows that is not what happened here

. All but two of the a dmissions in the Thir d R equests are i n response t o the part ies ’ m ediation a n d t o calculations made by a CPA hired b y Mana g er s . Th ese events occurred after the First R equests and Second27 Requests were served and answered but while Managers wer e still , as determined by the trial c our t, evadin g o ther di scovery. Although the S econd R e q uests are not included i n the appellate record, Co

owners attached both the answered First R eque sts and deemed Third Requests to

t heir motion for summary judgment

. I n com paring the two, we note only two

a dm issions that are g eneral

–– rather than c ompr ising s peci f ic respon ses to th e mediation and CPA calcu lations

–– and that app ear to d uplicate the Fi r st R equests : (1 ) “ Defendants ha ve intentionally and wrongfully withheld Plaintiff s ’ share of th e Company prof its ” and (2 ) “ Defend ants have no intention of paying P laint iffs their fair sh ar e of the Busi n e ss ’ s pro fits that Def endants still owe. ” Considering that M a nagers had a dmitted in their First R equests th at they had n ot paid Co

- owners all the ir sh are of the busi nes s ’ s profi t s and considering the p rolonged discov e ry mi scon duct in which the trial court d et ermined Managers engaged , we do not see how Managers were harmed by the repeat of th ese two que stions

. See T ex. R. Ap p. P. 44. 1(a)

. T here f o re , the trial c ourt did no t abuse i ts discretion by deciding the summary j u dgmen t motion based in part on the deem ed admissions

. The fact issue s Managers claim to have raised challenge only the calculati on of damages, n ot the other el ements of Co

- owners ’ claims . Because specifi c da mage

amou nts were include d in the deemed admissi o ns, M anagers ’ contrary evidence was inadmi ssible. See Sadeghian v. Wright , No. 06

- 18

- 00062

- CV, 2019 WL 255741, at *3 (Tex. App.

— Texarkana Jan. 18, 2019, pet s . denied) (mem . op.) ( “ [A] dmissions, onc e28 made or d eemed by the court, may n ot be contradicted by a ny ev idence, wh ether in the form of live te stimony or summary judgment affidavits

. ” (quoting Luke v. Unifund CCR Partners , No. 02

- 06

- 00444

- CV, 2007 WL 2460327, at *2 (Tex. App.

— Fort Worth Au g. 31, 2007, no pe t.) (mem . op.) ) )

. Thus, Manage rs did not raise a fac t issue on damages. W e overrule Managers ’ secon d a nd t hird issues. R e lease In their first i ssue, Managers argue that the trial court erred by gr anting Co

o wners summary j udgment because they pr oved their affi rmat ive de fe nse that the suit had been full y sett led i n accordance wit h the Settleme nt Agr e emen t , which they claim obligated Co

- owners to release all their claims in the suit

. A r elease extinguishes a c l aim or cause of ac tion to which it app lies and is an abso lute bar to any right of action on t he r eleas ed matter. Dresser I ndus., Inc. v. Page Petroleu m, Inc. , 853 S.W.2d 505, 508 (Tex. 1993)

. T hus, the releasing instrument mu st “men tion” the claim to be re leased. Victoria Bank & Tr

. Co. v. B rady , 811 S.W .2 d 9 31, 938 (Tex. 1991); see Keck, Mahin & Cat e v. N at ’ l Union Fire In s. Co. of Pittsburgh, Pa. , 2 0 S.W.3d 692, 6 97

– 98 (Tex. 2000). Claims not clearly within the subject matter of the release are not discha rged, even if those claims exist when t he releas e i s ex ecute d. Keck , 20 S.W.3d at 698. It is n ot neces sary, however, for th e parties to anticipate and explicitly identify every potential cause of action relating to the subject matter of the29 release. Id. Al though releases include claims existing a t the t ime of execu tion, they may also include unknow n c laims and damages that dev elop in the future. See id. As a contract, th e Settlement Agreement is subject to the n ormal rules of

c ont ract construction, includin g the rules of ambiguity. Nat ’ l Union F ire Ins. Co. of Pittsburgh, Pa. v. Ins. Co. of N. Am. , 95 5 S.W. 2d 120, 127 (Tex. App

. –– Houston [14th Dist.] 1997 ), aff ’ d

, 20 S.W.3d 692 (Tex. 2 000). In construing a release, as with other

contra cts, the primary effort is to ascertain and give effect to the intentio n o f the parties to the releas e, considering the instr ument as a whole. Sta fford v. Allstate Life Ins

. , 175 S.W.3d 537, 541 (Tex. App.

– –

Texarkana 2005, no pet.) (reasoning that a contrac t must be read as a wh ole rather than isolating a certain phr ase, sent enc e, or section of the agre ement). The co ntrac t ’ s lan guage is to be given i ts plain grammatical meaning unless doing so would defeat the parties ’ intent. Id. T h e plain lang uage of the Settlement Agree ment sh ows that in th e first pa ragraph, th e pa rties ag reed to se ll the business and split the “ sales pr o ceeds

. ” But the release la n guage in the second par agra ph is conting ent on the completion of the sale “ with a s ales price and SJN profit distributions [ not “ sal es proceeds ” ] satisfa c tory to the [p]ar ties

. ” [ Em ph a sis added.] Thus, the Settlement Agreement ’ s langu age evidence s the par ties ’ intent to release the claims in the suit not only when the busin ess was sol d and the sales procee ds split in h alf, but also whe n the partie s were able to agree on an acceptab le p rofit dist rib ution, the subject of the suit

. N othin g in Managers ’ summar y judgment responsive eviden ce indicates that the parties agreed o n30 profit distri butions so as to s atisfy the r el ease ’ s prerequisite

. We therefore overrule Managers ’ firs t issue. P ropr iety o f Attor ney ’ s Fees In their fourth issu e , Man agers challenge the b asis of the attorney ’ s fees award

. Managers conten d that “[t]his cause of action was brought in torts and not c ontract ” and, thus, th at Co

- owners were not entitled to attor ney ’ s fe es u nder Section 38.001 of the Civil Practice and Remed ies Code. Tex. Civ. P rac. & Rem. Code Ann. § 38.0 01(8). But Managers j u dicially admitted in their original answer tha t a breach of contract cl aim was at issue. See, e.g. , Lee v. Lee , 43 S .W

. 3d 636, 641

– 42 (Tex. App.

–– Fort Worth 2001, n o pet.) (provid i ng st andard fo r whe n party is deemed to ha ve judicially admitted a fact) ; see also Horizon/CM S Healthc are Corp. v. Auld , 34 S.W.3d 887, 896

– 97 (Tex . 2000) ( n oting t hat Texas follows “ fai r notice ” st andard for pleading s, which looks to whether pleading all e ges s ufficient facts for opposing party to prep are a defense )

. We therefore overrule Managers ’ fo urth issue. C onclusion Because we have overruled Managers ’ four issues, we affirm the tr ial cour t ’ s judgment. /s/ Wade Birdwell Wade B irdwell Justice Deliv ered: August 26, 2 021