Affirmed and Memorandum Opinion filed March 4, 2014.

In the

Fourteenth Court of Appeals

NO. 14-12-00940-CV

NO. 14-12-01077-CV 

NO. 14-12-01139-CV

WCW INTERNATIONAL, INC., AND CHRIS WILMOT, 

Appellants/Cross-Appellees

V.

JERRY W. BROUSSARD, RONNIE D. LABORDE, DAVID M. KERNION, 

DAVID O. STRICKLAND, CRAIG M. BOREL, KEVIN J. ROUSSEL, 

GEORGE A. LOWERY, AND CARLOS O. GIRON, 

Appellees/Cross-Appellants

On Appeal from the 152nd District Court

Harris County, Texas

Trial Court Cause No. 2009-12773

M E M O R A N DUM O P I N I O N

This consolidated appeal concerns a Stock Purchase Agreement (“SPA”) 

entered into among appellant/cross-appellee WCW International, Inc. (“WCW”), 
2

and appellees/cross-appellants Jerry Broussard, Ronnie D. Laborde, David M. 

Kernion, David O. Strickland, Craig M. Borel, Kevin J. Roussel, George A. 

Lowery, and Carlos O. Giron. In the SPA, WCW agreed to purchase stock from 

appellees/cross-appellants,1 who were shareholders in two engineering firms. This 

purchase was to be made partly in cash, with the rest to be represented by 

promissory notes. Appellant/cross-appellee Chris Wilmot, WCW’s CEO and 

President, also executed a guaranty, wherein he agreed to be bound with WCW and 

deliver a letter of credit to Shareholders. 

Shareholders ultimately sued WCW and Wilmot for breach of the SPA, the 

promissory notes, and the guaranty, and for fraud and fraudulent inducement. 

WCW and Wilmot counterclaimed for breach of the SPA, and for fraud and 

fraudulent inducement. The jury rendered findings mostly favorable to 

Shareholders and awarded damages to them on WCW’s breach of the SPA and the 

promissory notes, and on the fraud claims. The trial court granted JNOV on the 

fraud findings and otherwise entered judgment on the verdict. WCW and Wilmot 

present six issues on appeal; Shareholders present one issue on cross-appeal.2 We 

affirm the trial court’s judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

In late 2007, WCW, a company that provides engineering and other services, 

and Wilmot, WCW’s sole shareholder, CEO, and President, expressed interest in 

purchasing two consulting engineering companies, Spectrum Engineering, Inc., 

and Spectrum Services, Inc. (collectively, “Spectrum”). Spectrum was owned by a 

group of eight shareholders: Jerry Broussard, Ronnie D. Laborde, David M. 

Kernion, David O. Strickland, Craig M. Borel, Kevin J. Roussel, George A. 

 

1 We refer to the appellees/cross-appellants collectively as “Shareholders.”

2

The granting of JNOV on the fraud findings is no longer at issue in the cross-appeal.
3

Lowery, and Carlos O. Giron. Starting in January 2008, WCW negotiated with 

Shareholders and engaged in due diligence for the purchase of 100% of Spectrum’s 

outstanding stock. WCW/Wilmot’s due diligence team consisted of Eric Amoako, 

Ed Laborde,3 Musheer Robinson, Hal Bouknight, Mike Hagarty, Abe and Ahmad 

Fatemizadeh. WCW also retained CPA Dan Ramey with the accounting firm PKF

Texas (“PKF”) to provide a written due diligence report, which Ramey provided in 

February 2008 and updated in June 2008. PKF’s report was based on financial 

data provided by Spectrum from 2005 through May 30, 2008.

WCW and Shareholders entered into the SPA, which had an effective date of 

July 16, 2008. The full purchase price was based on a four-times multiple of 

Spectrum’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and 

Amortization) at the end of 2007. WCW agreed to provide initial consideration of 

$4.6 million in cash on July 16, 2008; $3.8 million in deferred consideration, to be 

represented by promissory notes (the “Notes”) to Shareholders and to be secured 

by a letter of credit (“LOC”); and $2.8 million in earnout consideration, for a total 

amount of $11.2 million. The $3.8 million represented by the Notes was to be paid 

in three installments: (1) $1 million on January 31, 2009; (2) $1 million on January 

31, 2010; and (3) $1.8 million on January 31, 2011. The SPA included provisions 

wherein Shareholders made certain representations regarding Spectrum’s financial 

statements and status with regard to its customers, disclosures, accounts, and any 

litigation. The Shareholders4agreed to repay any outstanding indebtedness on 

company loans.

WCW did not provide the initial consideration or provide the LOC on July 

 

3

Ed Laborde is not related to Shareholder Ronnie Laborde.

4

Each of the Shareholders classified as “Nonexempt”—Broussard, R. Laborde, 

Strickland, and Kernion—owed a loan to Spectrum in the amount of $11,551. They agreed to 

repay their loans at closing.
4

16, 2008. Wilmot advised that the funds and LOC would be delivered on July 21. 

They were not. WCW and Shareholders then entered into a deposit agreement, 

wherein WCW agreed to place $250,000 in escrow, to be forfeited if WCW failed 

to pay the initial consideration and deliver the LOC by July 29, 2008. WCW failed 

to meet the deadline, and the $250,000 was forfeited to Shareholders.

In September 2008, WCW and Shareholders amended the SPA, requiring 

WCW to pay the initial consideration in three installments: (1) $250,000 by 

September 24, 2008; (2) $250,000 by October 8, 2008; and (3) the $4.1 million 

balance by October 31, 2008, along with the LOC. WCW also agreed to pay off or 

cause Shareholders’ guarantees on Spectrum’s line of credit at Whitney National 

Bank to be released by October 20, 2008. The amendment authorized a delay 

payment of $250,000 as liquidated damages for failure to timely pay the initial 

consideration and timely deliver the LOC. With this amendment, Shareholders 

released all closing documents to WCW, the stock transferred, and WCW assumed 

full management of Spectrum. The amendment had an effective date of July 16, 

2008. At the same time as the amendment, Wilmot executed a commercial 

guaranty, wherein he agreed to be bound with WCW under the SPA, up to the sum 

of $4.1 million, and agreed to deliver the LOC.

WCW paid Shareholders $250,000 on September 25, 2008, and $250,000 on 

October 8, 2008. WCW did not pay or cause Spectrum’s bank indebtedness to be 

released by October 20, 2008. WCW did not make the remaining $4.1 million 

cash payment or provide the LOC by October 31, 2008. On November 10, 2008, 

Shareholders sent a notice of default letter to WCW. On November 26, 2008, 

WCW paid Shareholders $1 million but still had not delivered the LOC. WCW did 

not make its $1 million first payment on the Notes on January 31, 2009, and failed 

to make any subsequent payments.
5

In February 2009, Shareholders filed suit against WCW for breach of 

contract, against Wilmot for breach of guaranty, and against WCW and Wilmot for 

fraud and fraudulent inducement. WCW and Wilmot counterclaimed for breach of 

contract, and fraud and fraudulent inducement. The jury returned findings in favor 

of Shareholders on most issues. Specifically, in pertinent part, the jury found:

 WCW, Broussard, Kernion, R. Laborde, and Strickland breached the 

SPA.

 WCW failed to comply with the SPA first.

 WCW’s failure to comply with the SPA was not excused.

 Broussard, Kernion, R. Laborde, and Strickland’s failures to comply

with the SPA were excused.

 WCW failed to pay all of the Shareholders’ Notes.

 WCW’s failure to pay the Notes was not excused.

 Wilmot failed to comply with the guaranty.

 Wilmot’s failure to comply with the guaranty was not excused.

 WCW and Wilmot committed fraud in the inducement of a contract 

against all of the Shareholders. Shareholders did not commit fraud in 

the inducement of a contract against WCW and Wilmot.

 WCW and Wilmot committed common law fraud against all the 

Shareholders. Shareholders did not commit common law fraud 

against WCW and Wilmot.

 The following sums, if paid now in cash, would fairly and reasonably 

compensate the respective Shareholders for their damages

proximately caused by WCW’s breach: Borel, $63,264.80; 

Broussard, $1,601,713.80; Giron, $63,264.80; Kernion, $399,673.30; 

R. Laborde, $399,673.30; Lowery, $63,264.80; Roussel, $63,264.80; 

Strickland, $399,673.30—a total of just over $3 million.

 The following sums, if paid now in cash, would fairly and reasonably 

compensate the respective Shareholders for their damages 

proximately caused by WCW’s failure to pay the Notes: Borel, 

$77,551; Broussard, $1,977,550; Giron, $77,551; Kernion, $504,082; 

R. Laborde, $504,082; Lowery, $77,551; Roussel, $77,551; 
6

Strickland, $504,082—a total of $3.8 million.

 No damages to Shareholders resulted from Wilmot’s breach of the 

guaranty.

 The jury also awarded Shareholders damages on the fraud claims 

against WCW and Wilmot.

Shareholders moved for entry of judgment on the jury’s verdict. WCW and 

Wilmot moved to disregard all of the jury’s adverse findings. The trial court 

granted their motion as to the fraud findings, but otherwise entered judgment on 

the verdict—thus awarding the full amount of damages on the breach claims 

against WCW and no damages against Wilmot. The trial court awarded 

Shareholders attorneys’ fees in an amount stipulated to by WCW. All parties

appealed from the final judgment.

WCW and Wilmot attack the judgment in six issues. First, they contend 

there is no evidence that WCW breached the SPA first and conclusive evidence 

that Shareholders materially breached the SPA first. Second, WCW and Wilmot 

argue that there was a failure or lack of consideration as a matter of law, and the 

trial court erred by refusing to submit a jury question on Spectrum’s value. Third, 

they argue that indemnification provisions in the SPA limit Shareholders’ recovery 

to $500,000 as a matter of law. Fourth, they also argue that the SPA either 

precludes or limits the recovery of certain Shareholders as to the Notes. Fifth, 

WCW and Wilmot contend that Shareholders’ attorney’s fee award must be 

reversed if the judgment against WCW is reversed or reduced. Finally, they argue 

that if a new trial is ordered on Shareholders’ breach claims against WCW, then 

the new trial must include WCW and Wilmot’s breach and fraud counterclaims. In 

their cross-appeal, Shareholders argue that the trial court erred in not holding 

Wilmot jointly and severally liable as to WCW’s breach.
7

II. LEGAL SUFFICIENCY STANDARD OF REVIEW

The test for legal sufficiency is whether the evidence at trial “would enable 

reasonable and fair-minded people to reach the verdict under review.” City of 

Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In making this determination, 

we must view the evidence in the light most favorable to the verdict, crediting any 

favorable evidence if a reasonable factfinder could and disregarding any contrary 

evidence unless a reasonable factfinder could not. Id. at 827. We assume jurors 

made all inferences in favor of their verdict if reasonable minds could, and 

disregarded all other inferences. Id. at 821. We cannot substitute our judgment for 

that of the jury, so long as the evidence falls within the zone of reasonable 

disagreement. Id. at 822. The factfinder is the only judge of witness credibility 

and the weight to give to testimony. Id. at 819. We will sustain a legal sufficiency 

challenge only when: (1) the record discloses the complete absence of a vital fact, 

(2) the court is barred by rules of law or evidence from giving weight to the only 

evidence offered to prove a vital fact, (3) the only evidence offered to prove a vital 

fact is no more than a mere scintilla, or (4) the evidence conclusively establishes 

the opposite of a vital fact. Id. at 810. More than a scintilla of evidence exists if 

the evidence “rises to a level that would enable reasonable and fair-minded people 

to differ in their conclusions.” Service Corp. Int’l v. Guerra, 348 S.W.3d 221, 228 

(Tex. 2011). Evidence is conclusive only if reasonable people could not differ in 

their conclusions, which depends on the facts of each case. City of Keller, 168 

S.W.3d at 816. To successfully challenge the legal sufficiency of an adverse 

finding on an issue on which it has the burden of proof, such as an affirmative 

defense, a party must conclusively establish all vital facts in support of that issue. 

Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (per curiam).
8

III. ANALYSIS

A. The evidence is legally sufficient to support the jury’s findings that WCW 

breached the SPA first, the Nonexempt Shareholders’ breaches were 

excused, and WCW’s breach was not excused.

WCW argues that, at the most, it breached the SPA by failing to release 

Spectrum’s line of credit on October 20, 2008, and by failing to pay the remaining 

initial consideration and deliver the LOC by October 31, 2008. WCW and Wilmot 

contend that Shareholders’ material breaches of the SPA occurred months earlier 

on July 16 or at the time of the amendment in September 2008, at the latest. They 

argue the trial record conclusively demonstrates that Shareholders—all of them—

breached by failing to disclose or misrepresenting information they were required 

to provide to WCW under seven separate provisions of the SPA: sections 2.8 

(Financial Statements), 2.13 (Litigation), 2.14 (Customers and Suppliers), 2.15 

(Accounts Receivable and Accounts Payable), 2.27 (Brokers/Advisors), 2.29 (Due 

Diligence Information), and 2.30 (Disclosure Schedules). They also argue that the 

Nonexempt Shareholders, Broussard, R. Laborde, Strickland, and Kernion, whom 

the jury found breached the SPA, committed their breaches on the same day by not 

paying back their company loans as required by section 1.4.

Shareholders argue there is some evidence, or the evidence conclusively 

proves, that WCW breached the SPA first and without excuse, and that there is no 

evidence or conflicting evidence that Shareholders materially breached and 

breached first. They assert that WCW breached the SPA on July 16, 2008, when it 

failed to pay the initial consideration and failed to deliver the LOC. Shareholders 

argue that their alleged nondisclosures or misrepresentations did not constitute 

breaches of the SPA, were not material, and were excused. Shareholders also 

argue that the Nonexempt Shareholders planned to offset their loans, and the jury 
9

reasonably could have found that their failure to repay the de minimis officer loans 

at closing was excused.

A party breaches a contract when it neglects or refuses to perform a 

contractual obligation. Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.—

Houston [14th Dist.] 2006, pet. denied). If the breach is material, the other party is 

excused from further performance of the contract. Mustang Pipeline Co. v. Driver 

Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam) (citing Hernandez v. 

Gulf Grp. Lloyds, 875 S.W.2d 691, 692 (Tex. 1994)). Generally, the issue of 

whether a breach rises to the level of a material breach presents a dispute for 

resolution by the trier of fact. See Hiles v. Arnie & Co., P.C., 402 S.W.3d 820, 831 

(Tex. App.—Houston [14th Dist.] 2013, pet. filed). Materiality depends on several 

circumstances, including:

(a) the extent to which the injured party will be deprived of the benefit 

which he reasonably expected; 

(b) the extent to which the injured party can be adequately

compensated for the part of that benefit of which he will be deprived;

(c) the extent to which the party failing to perform or to offer to 

perform will suffer forfeiture; 

(d) the likelihood that the party failing to perform or to offer to 

perform will cure his failure, taking account of the circumstances 

including any reasonable assurances; [and] 

(e) the extent to which the behavior of the party failing to perform or 

to offer to perform comports with standards of good faith and fair 

dealing.

Mustang Pipeline, 134 S.W.3d at 199 (citing Rest. (2d) of Contracts § 241 (1981)). 

Because we are dealing with dual findings that WCW and certain Shareholders

breached the SPA, we must determine whether there is legally sufficient evidence 

that WCW materially breached first. See Casarez v. Alltec Constr. Co., Inc., 
10

No. 14–07–00068–CV, 2007 WL 3287933, at *4 (Tex. App.—Houston [14th 

Dist.] Nov. 6, 2007, no pet.) (mem. op.).

We conclude that there is legally sufficient evidence to support the jury’s 

findings. WCW does not contest that it materially breached the SPA, but instead 

emphasizes the materiality and earlier timing of the Nonexempt Shareholders’ 

breaches and of the alleged article 2 breaches by all Shareholders. With regard to 

the timing of the respective breaches actually found by the jury in question 1, even 

if we agree with WCW that its breach date was October 31, 2008, we cannot agree 

that there is no evidence or merely a scintilla of evidence that WCW breached first, 

as found by the jury in question 2. The SPA initially required WCW to pay the 

initial consideration of $4.6 million and deliver the $3.8 million dollar LOC on 

July 16, 2008—the SPA’s designated closing date for “the consummation of the 

sale and purchase of the Stock.” The Nonexempt Shareholders’ obligation to pay 

their Spectrum loans back in section 1.4 was expressly tied to “closing.” However, 

there is more than a scintilla of evidence from which a reasonable jury could 

conclude that this “closing” date was pushed back to when WCW and 

Shareholders entered into the amendment, and effectively pushed back even further 

to October 31, 2008, the date when the amendment required WCW to pay the last 

installment on the initial consideration and provide the LOC. In other words, the 

Nonexempt Shareholders would not be required to pay back their officer loans—

according to Broussard,5they were going to be “offset against the money that was 

owed to us”—until WCW fulfilled its “closing” requirements.

Moreover, the jury also determined that the Nonexempt Shareholders’ 

failures to comply with the SPA were excused in question 3. Within a “Failure to 

Comply/Excused Instruction,” expressly linked to questions 2 and 3, the jury was 

 

5 Broussard was the majority Shareholder in Spectrum.
11

instructed that a failure to comply must be material and was provided with the 

Mustang Pipeline factors. The jury also was instructed that a failure to comply by 

one party is excused by the other party’s previous failure to comply with a material 

obligation of the same agreement. Thus, under the charge as given, the jury could 

conclude that a failure to comply with the SPA was excused where the other party 

materially breached first or where that failure to comply was not “material.”6 We 

already have determined that the evidence was legally sufficient to support the 

jury’s finding that WCW breached first. Further, based on the amount of the four 

unpaid officer loans, in the amount of $11,551 each, the jury reasonably could 

have concluded that the circumstances weighed in favor of the Nonexempt 

Shareholders’ failures to comply not being material. WCW was deprived of a 

benefit of approximately $46,000 in unpaid loans due; WCW was obligated to pay 

Shareholders a substantially larger amount in initial consideration of $4.6 million 

cash so the due and owing amounts reasonably could have been offset and the 

failures thus cured; the Nonexempt Shareholders stood to forfeit significant 

percentages of ownership in Spectrum (over 90%) if their failures to pay back their 

loans were treated as material; and the failure to pay back $46,000 when the 

purchase price for Shareholders’ companies was for a total of $11.2 million, 

including initial consideration in cash of $4.6 million, does not strongly offend 

standards of good faith and fair dealing. See Mustang Pipeline, 134 S.W.3d at 

199; see also Hernandez, 875 S.W.2d at 693–94 (extent to which party prejudiced 

by breach factors into materiality).

Finally, the evidence does not conclusively prove WCW’s affirmative 

 

6

In a footnote, WCW and Wilmot attempt to argue because there is no evidence that 

WCW committed a prior material breach (one of Shareholders’ defensive theories), there is a 

Crown Life Insurance Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000), problem within question 3 

warranting a new trial. However, Casteel does not apply where, as we conclude here, such

theory was not improperly submitted. Id. at 389.
12

defense of prior material breach as a matter of law; i.e., that all the Shareholders 

materially breached the SPA on July 16, 2008, or otherwise before WCW, by their 

alleged failures to comply with various disclosure and representation 

requirements.7 The jury only found that the Nonexempt Shareholders breached the 

SPA.8 Moreover, the charge instructed the jury that a failure to comply must be 

material, and is excused by the other parties’ previous failure to comply with a 

material obligation of the same agreement. And the jury found that WCW’s failure 

to comply with the SPA was not excused in question 3. 

WCW and Wilmot primarily argue testimony from their expert witness, 

CPA Scott Bayley, that Shareholders’ financial statements failed to comply with 

multiple GAAP standards conclusively proves they breached section 2.89; a 

threatening letter from one of Spectrum’s major clients, NAWS, conclusively 

proves Shareholders breached section 2.13; Shareholders’ failure to list any 

“unresolved customer disputes” conclusively proves they breached section 2.14 in 

light of Spectrum’s disputes with three of its largest clients, Enterprise Products, 

 

7 WCW and Wilmot assert that Shareholders’ prior material breaches also require a takenothing judgment in WCW’s favor on the Notes.

8 WCW and Wilmot contend that Shareholders conceded they committed a breach but 

only disagree as to materiality. We disagree. Shareholders argue first that they committed no 

breach, and “even if any technical breach is found,” that it was not material. 

9

Specifically, WCW and Wilmot point to Bayley’s testimony that use of the term “gross 

revenues” in Spectrum’s financial statements was not in accordance with GAAP because project 

write downs were not separately deducted as a line item; the statements were not accompanied 

by statements of cash flows and notes to financial statements as required by GAAP; Spectrum 

recorded contingent receivables with respect to client N.A. Water Systems (“NAWS”) not 

permitted by GAAP; there was “no confirmation that the company’s financial statements have 

been prepared in accordance with Generally Accepted Accounting Principles” because they were 

not audited by an independent CPA and R. Laborde, Spectrum’s CFO, was not a CPA; and the 

statements failed to properly reserve for litigation and bad debt liabilities with respect to clients 

NAWS and Baker Petrolite in accordance with GAAP. Bayley also testified that adherence to 

GAAP is “important” to buyers of companies essentially so they can understand what they are 

purchasing.
13

Baker Petrolite, and NAWS; Bayley’s testimony regarding Spectrum’s accounts 

receivable as not being in accordance with GAAP and being overstated

conclusively proves they breached section 2.15; Broussard’s testimony regarding 

broker Tim Barfield conclusively proves they breached section 2.27; and the 

evidence that Shareholders omitted material facts in making their representations 

and disclosures and falsely represented there were no undisclosed facts that would 

have an adverse effect on the value of Spectrum conclusively proves they breached 

sections 2.29 and 2.30.

Because WCW had the burden to establish prior material breach, we first 

examine the record for evidence supporting the jury’s finding that WCW’s failure 

to comply was not excused due to Shareholders’ prior material breach, while 

ignoring all contrary evidence. See Dow Chem., 46 S.W.3d at 241. If there is no 

evidence to support the finding, then we examine the entire record to determine 

whether Shareholders’ prior material breach is established as a matter of law. See 

id. We conclude WCW has not met its burden to conclusively establish that 

Shareholders committed a prior material breach. See id.

With regard to Spectrum’s financial statements, section 2.8 states that the 

provided statements are “unaudited” but that they “are true and correct in all 

material respects and, taken as a whole, fairly present, in accordance with [GAAP] 

consistently applied, the financial position of the Company as of the dates 

indicated.” Through WCW’s team’s own due diligence process, WCW and 

Wilmot were aware of Spectrum’s “unaudited and unreviewed financial 

statements.” Through retained due diligence examiner PKF’s report, WCW and 

Wilmot were aware that “[t]he Company’s books have not been audited or under 

gone a review by a CPA.” WCW and Wilmot also were aware that Spectrum’s 

financial statements were not consistent with GAAP in certain respects. Although 
14

WCW had not engaged PKF to perform a full audit of Spectrum’s financials, PKF

reported that some of Spectrum’s journal and adjusted journal “descriptions/entries 

are not standard accounting terminology/practices” and “[t]here were a few 

accounting terms and entries used by the Company that are inconsistent with the 

profession’s standards.” At trial, Ramey testified regarding his impression of 

Spectrum’s financial records: 

A. . . . They had some issues with some of the naming of the accounts, 

but we worked through those issues. And as soon as I know what 

they are just translate them to what that would be in normal practice.

Q. So, some of this terminology was different than what you were

used to?

A. Right.

Q. But once you understood the terminology?

A. Then I was fine.

When asked whether Spectrum’s accounting procedures were “not up to GAAP” 

and had “certain GAAP problems,” Ramey stated: “There are with like three or 

four just the name on the accounts were different or unique and that is okay. We 

work around that.” Specifically, with regard to accounts receivable and bad debts, 

PKF reported that “Spectrum does not use an Allowance for Doubtful Accounts 

methodology,” but instead immediately writes off accounts when it deems them 

uncollectible. PKF reported that “[a]ccounting appears to be at the proper level of 

detail” and “appears to be appropriate to provide management with information to 

make business decisions.” PKF also reported that through May 30, 2008, 

Spectrum’s financials reflected reserved “write-offs” in the amount of $1,301,000 

for “two major projects” for clients NAWS and Baker Petrolite. Finally, within

schedule 2.10(d)10 attached to the SPA, Shareholders disclosed “two projects with 

 

10 WCW and Wilmot do not argue that Shareholders breached section 2.10 of the SPA, 
15

budget issues which will result in unbilled costs” for clients NAWS and Baker 

Petrolite. Shareholders disclosed that these budget issues “are the result of quality 

problems (rework), poor project management, manpower shortages, clients’ refusal 

to accept change orders and low initial engineering estimates.” This schedule 

disclosed that through May 2008, Spectrum’s financial statements reflected write 

downs of $1,301,000; additional write downs of approximately $139,000 would be 

reflected in Spectrum’s June 2008 financial statement. At trial, Wilmot 

acknowledged that he knew about these two write down reserves for NAWS and 

Baker Petrolite when he signed the SPA, but they were “not significant” and “not a 

big deal.” Thus, there is evidence Shareholders disclosed that Spectrum’s financial 

statements were not audited and WCW was aware of that; WCW was aware that 

Spectrum’s financials had GAAP problems, particularly with how receivables and 

bad debt were recorded; despite these problems, Spectrum’s financials were 

appropriately detailed to allow for business decisions; Shareholders disclosed write 

down reserves on two significant projects; and WCW was aware of those reserves, 

but Wilmot was not concerned. Viewing the evidence in the light most favorable 

to the verdict, we find there is legally sufficient evidence from which a reasonable 

jury could have found that WCW was not excused by any prior material breach by 

Shareholders of section 2.8. See id.

With regard to litigation, section 2.13 states that “[t]here are no actions, 

claims, suits, investigations, inquiries or proceedings pending against the Company 

or in rem against any of the Assets, or to the knowledge of the Company or any 

Seller threatened . . . at law or in equity, in any court, or before or by any 

Governmental Body.” Broussard testified that as of the execution of the SPA and 

 

Absence of Certain Changes or Events. In section 2.10, Shareholders made representations 

about the absence of changes with respect to, e.g., commencement of litigation, liabilities not 

disclosed in the financial statements, and accounting methods.
16

the amendment, Spectrum had not received any demand for arbitration or any 

intent to file arbitration from NAWS. By the time Broussard left Spectrum in midNovember 2008, there had not been any arbitration filed. It was not until 

November 25, 2008 that Spectrum filed a demand for arbitration against NAWS. 

There was testimony from Ed Laborde, who participated in drafting the SPA, 

agreeing that such November 2008 arbitration and NAWS’ later counterclaim 

would not be “pending” as of July or September 2008. Moreover, aside from 

noting the budget issues and the write down reserves for the NAWS project, 

Shareholders attached to schedule 2.10(d) of the SPA over 50 pages relating to the 

project. This included correspondence between NAWS and Spectrum concerning 

“several issues” regarding the project they were working on for their client 

Marathon. Within its letter, NAWS agreed if Spectrum felt it necessary that 

Spectrum could initiate dispute resolution procedures against NAWS to advance its 

position on certain change orders. However, NAWS indicated it wanted to 

cooperate “to get this relationship and Work back on track.” Spectrum agreed, 

“The issues can be resolved if we work together.” According to Broussard, “What 

we knew at that time is what we put in [the schedule].” Viewing the evidence in 

the light most favorable to the verdict, we find there is legally sufficient evidence 

from which a reasonable jury could have found that WCW was not excused by any 

prior material breach by Shareholders of section 2.13. See id.

With regard to customers and suppliers, section 2.14 states that “[t]he 

relationships of the Company with the Largest Customers and Suppliers are good, 

and except as set forth on Schedule 2.14 there are no unresolved disputes with any 

of such Largest Customers and Suppliers.” In addition to the budget issues and 

write down reserves with NAWS and Baker Petrolite disclosed in schedule 2.10(d), 

Shareholders also disclosed that they were having a “design issue regarding 
17

hydrostatic test pressures” on a project for Enterprise Products, such that they had 

informed their professional liability insurance agent. Shareholders attached the 

email to their agent from Kernion, who described the issue as “troubling.” 

Broussard also forwarded Abe Fatemizadeh this email in conjunction with their 

discussions about this Enterprise Products project. According to Broussard, for 

several months prior to the July closing, he discussed the NAWS, Baker Petrolite, 

and Enterprise Products project issues with Abe because Abe was WCW’s agent 

and “pointman” who was going to take Broussard’s place as president of the new 

company. WCW and Wilmot also were aware, through PFK’s diligence efforts, 

that because Enterprise Products comprised over 70% of Spectrum’s 2007 revenue, 

there was a “high risk of revenue collapse if Enterprise finds another service 

provider” and that by May 2008, Spectrum’s revenue stream from Enterprise 

Products had declined to 27.5%. They were aware through WCW’s diligence 

efforts that Enterprise Products presented “[v]olatile business” and had recently 

undergone “[k]ey management change” with “[u]nknown effect.” Broussard 

wanted to “flag” the change for WCW because the new management might not 

provide Spectrum with as much work. When Broussard left Spectrum in midNovember 2008, Enterprise Products had not made any complaint, formal or 

informal, about the design issue. Enterprise Products did not stop doing business 

with Spectrum until 2009. Baker Petrolite did not file suit against Spectrum until 

March 2010; Ed Laborde agreed that a lawsuit filed in 2010 likely was not 

“pending” in 2008; Broussard and Borel stated that in 2008 they did not know 

Baker Petrolite would file suit; and Borel stated Baker Petrolite had not made any 

claim by the time he left Spectrum in September 2009. Viewing the evidence in 

the light most favorable to the verdict, we find there is legally sufficient evidence 

from which a reasonable jury could have found that WCW was not excused by any 

prior material breach by Shareholders of section 2.14. See id.
18

With regard to accounts receivable, section 2.15 states that “trade and other 

accounts and notes receivable of the Company which are classified as current 

assets on the Financial Statements or are listed on Schedule 2.15A are bona fide

receivables, are stated in accordance with GAAP and are fully collectible, subject 

to the reserve for doubtful accounts reflected in the Financial Statements.” The 

evidence detailed above indicates Shareholders had disclosed $1,450,000 in write 

down reserves through June 30, 2008; WCW and Wilmot also were aware that 

Spectrum’s treatment of their receivables had GAAP issues; and Wilmot testified 

that such write downs were not a “big deal.” In addition, Broussard and R. 

Laborde verified that Spectrum had disclosed all anticipated receivable reserves as 

of the July closing. Viewing the evidence in the light most favorable to the verdict, 

we find there is legally sufficient evidence from which a reasonable jury could 

have found that WCW was not excused by any prior material breach by 

Shareholders of section 2.15. See id.

In a footnote, WCW and Wilmot make their arguments with regard to how 

the evidence conclusively shows Shareholders breached sections 2.27, 2.29, and 

2.30 of the SPA. With regard to section 2.27 on brokers/advisors, there is evidence 

that WCW was aware Barfield represented Shareholders in the negotiations.11 In 

any event, WCW has not conclusively proven the vital fact that it suffered

damages due to any section 2.27 breach. With regard to section 2.29 on due 

diligence information and section 2.30 on disclosure schedules, WCW and Wilmot 

cumulatively rely on the same evidence of the other alleged breaches. However, 

we already have found that WCW has not met its burden to conclusively establish 

 

11 Communications between Broussard and WCW/Bouknight during December 2007 and 

January 2008 resulting in WCW/Wilmot’s letter of intent occurred via Barfield. WCW’s due 

diligence team shared their February 2008 findings with Broussard and Barfield, which Wilmot 

acknowledged.
19

that Shareholders committed a prior material breach with regard to these respective 

sections. Therefore, viewed in the light most favorable to the verdict, we find there 

is legally sufficient evidence from which a reasonable jury could have found that 

WCW was not excused by any prior material breach by Shareholders of section

2.27, 2.29, or 2.30. See id.

We overrule WCW and Wilmot’s first issue.

B. Lack or complete failure of consideration

1. WCW and Wilmot did not prove as a matter of law that Spectrum 

had no value at the time of sale.

As part of their second issue, WCW and Wilmot argue that the only legally 

sufficient and unrebutted evidence of Spectrum’s value when WCW took control, 

based on Ramey’s testimony, was that Spectrum was worthless, with a negative 

EBITDA of -$182,506. Thus, because Spectrum had no actual value, there was a 

lack or complete failure of consideration and the SPA was unenforceable.

Shareholders respond that WCW did not meet its burden to prove this

affirmative defense. To prove total failure of consideration, WCW had to, and did 

not, conclusively prove that Spectrum’s stock, representing an operational 

engineering firm with assets, clients, and projects, was worthless at the time of 

purchase. We conclude that WCW has not met its burden to show a lack or

complete failure of consideration.

Generally, a contract must be supported by consideration to be enforceable. 

McLernon v. Dynegy, Inc., 347 S.W.3d 315, 335 (Tex. App.—Houston [14th Dist.] 

2011, no pet.) (citing Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 

644, 659 (Tex. 2006)). Consideration consists of either a benefit to the promisor or 

a detriment to the promisee. See Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 
20

492, 496 (Tex. 1991). It is a present exchange bargained for in return for a 

promise. Id. It may consist of some right, interest, or profit, or benefit that accrues 

to one party, or, alternatively, of some forbearance, loss or responsibility that is 

undertaken or incurred by the other party. Angelou v. African Overseas Union, 33 

S.W.3d 269, 280 (Tex. App.—Houston [14th Dist.] 2000, no pet.). The rule is well 

settled in Texas that the burden of proving a want or failure of consideration is 

upon the pleader. Rodriguez v. Sw. Drug Corp., 619 S.W.2d 469, 472 (Tex. Civ. 

App.—Houston [14th Dist.] 1981, no writ); see Kish v. Van Note, 692 S.W.2d 463, 

467 (Tex. 1985) (op. on reh’g) (citing Tex. R. Civ. P. 94); McLernon, 347 S.W.3d 

at 335 (same). “The burden rests upon the party alleging lack of consideration to 

prove the same because of the general rule a written contract is presumed to be 

supported by consideration.” Rodriguez, 619 S.W.2d at 472; see McLernon, 347 

S.W.3d at 335. However, parol evidence may be used to show want or failure of 

consideration. McLernon, 347 S.W.3d at 335 (citation omitted).

Here, the presumption of consideration applies. See id. (“[A] written 

instrument reciting a consideration imports one, and with such a recitation we 

presume the consideration [to be] sufficient.”). The SPA expressly recites:

WHEREAS, Sellers, in the aggregate, own 9,800 shares (the 

“Shares”) of the no par value common stock of each of Spectrum 

Engineering, Inc. and Spectrum Services, Inc., respectively (the 

“Stock”” [sic]) constituting all of the issued and outstanding Shares of 

the Stock; and

WHEREAS, Buyer desires to acquire from the Sellers, and

Sellers desire to sell, all of said Shares upon and subject to the terms 

and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual premises, 

covenants and agreements set forth herein and in reliance upon the 

representations and warranties contained herein, the parties hereto 

covenant and agree as follows . . . .
21

The amended SPA recites: 

WHEREAS, the parties desire to amend the Stock Purchase 

Agreement dated as of July 16, 2008 (the “Stock Purchase 

Agreement”), pursuant to which, among other things, the Buyer has 

agreed to acquire the Company;

WHEREAS, the parties desire to amend the Stock Purchase 

Agreement as set forth below:

NOW, THEREFORE, in consideration of the premises, and 

other good and valuable consideration, the receipt and sufficiency of 

which is hereby acknowledged, the parties hereto agree as follows . . . 

.

There is no dispute that the agreed purchase price for Spectrum’s stock was based 

on a four-times multiple of Spectrum’s end-of-2007 EBITDA, which was $2.8 

million.

12

 The parties also generally agree that somewhere between three- or fourtimes to six-times EBITDA would be in the “typical” range for valuation on a 

purchase of an engineering company of Spectrum’s size.

To succeed on this issue, WCW and Wilmot must demonstrate that they 

conclusively proved their affirmative defense of lack or complete failure of 

consideration as a matter of law. See Roark, 813 S.W.2d at 495. They must

conclusively rebut the presumption of consideration and conclusively establish that 

Shareholders provided no consideration to support the SPA. See Walden v. 

Affiliated Computer Servs., Inc., 97 S.W.3d 303, 319 (Tex. App.—Houston [14th 

Dist.] 2003, pet. denied); Rodriguez, 619 S.W.2d at 472. Because WCW and 

Wilmot had the burden at trial and because they challenge the legal sufficiency of 

the evidence in this appeal, they bear the appellate burden to show “that the 

 

12

 In addition to the initial consideration of $4.6 million and the deferred consideration of 

$3.8 million, the SPA also provided that, if Spectrum’s EBITDA at the end of 2010 equaled or 

exceeded $2.8 million, WCW was to pay $2.8 million to Shareholders as earnout consideration

on or before February 28, 2011. If Spectrum’s end-of-2010 EBITDA was less than $2.8 million, 

WCW would reduce the payout of earnout consideration accordingly.
22

evidence establishes, as a matter of law, all vital facts in support of the issue.” See 

Dow Chem., 46 S.W.3d at 241.

WCW and Wilmot argue that Spectrum had a negative value when WCW 

took control. They rely on Ramey’s testimony that Spectrum’s financials showed a 

negative EBITDA of -$182,506. However, Ramey calculated this figure based on 

Spectrum’s financials for the entirety of 2008—that is to say, he provided 

Spectrum’s end-of-2008 EBITDA. Ramey did not provide any testimony that 

Spectrum’s end-of-2007 EBITDA of $2.8 million, to which he had provided 

adjustments during the negotiations that resulted in its reduction, was incorrect. 

Nor did he provide any testimony as to Spectrum’s EBITDA as of July 16, 2008, 

or as of sometime in late September 2008, when the amendment was signed and, 

according to Wilmot, WCW had “assumed ownership and management of the 

company.”13 Bayley also did not testify regarding Spectrum’s EBITDA at the time 

of closing or takeover. Bayley testified that he recalled Spectrum’s EBITDA 

figures for 2007 in the “neighborhood” of $2.8 million, and agreed that 2007 had 

been a “profitable year” for Spectrum. He also stated that Spectrum had “positive” 

cash flows through the end of 2008. Bayley did not opine that Spectrum had no 

value as of July or September 2008; instead, he opined that Spectrum’s value then 

was less than the purchase price of $11.2 million. There also was evidence that, in 

late 2007, the other Shareholders offered to “internally” buy out Broussard based 

on a $4.8 million valuation and there was a valuation associated with a potential 

“strategic” offer by third party Energy Allied of $8.7 million.14 Further, there was 

 

13 Quick calculation of Spectrum’s 2008 EBITDA through June (month before July 

closing) and through August (month before September takeover), based on the same 2008 

balance sheet and using the exact same formula used by Ramey during his testimony, yields 

positive figures. Perhaps this explains why Ramey was not cross-examined except as to end-of2008 EBITDA.

14 WCW and Wilmot contend such evidence of valuation is incompetent because it was 
23

evidence that by November 2008, the financial markets had “crashed.”

Based on the trial evidence, viewed in the light most favorable to the verdict, 

we conclude that WCW has failed to overcome the presumption of consideration

and has failed to meet its burden to conclusively establish its affirmative defense 

that the SPA lacked consideration. See id.15

2. The trial court did not abuse its discretion in refusing WCW’s 

requested valuation questions.

Next, WCW contends that at the least it should be granted a new trial 

because the trial court refused to submit WCW’s proffered jury questions on the 

value of Spectrum. Here, WCW requested that the jury be asked to find “the value 

of” the respective Spectrum companies as of July 16, 2008 and as of September 25, 

2008.16 The trial court refused the submission.

Whether consideration is adequate or fails is a question of law for the court. 

Hall v. Hubco, Inc., 292 S.W.3d 22, 28 (Tex. App.—Houston [14th Dist.] 2006, 

pet. denied); Schepps Grocery Co. v. Burroughs Corp., 635 S.W.2d 606, 608 (Tex. 

 

speculative and based on lay testimony. However, WCW still bears the burden to conclusively 

prove want of consideration, and even discounting such evidence, there is no evidence that 

Spectrum was completely worthless at takeover. Moreover, both CPA Ramey and CPA Bayley 

testified as to Spectrum’s end-of-2007 EBITDA, the agreed basis of valuation for the SPA.

15 WCW’s cited cases do not advance its position. Unlike in Kish, here, there is not 

“ample” evidence that Spectrum was not “functional” and “worthless” at closing, and at the time

of transfer, WCW took over a functioning engineering firm with clients, projects, and still 

positive cash flows. Cf. 692 S.W.2d at 465, 467. In Anderson Machine Co. v. Harber, the 

appeals court in fact did not find total failure of consideration as a matter of law where the 

purchaser had made some use of the scraper machinery at issue. 584 S.W.2d 480, 482 (Tex. Civ. 

App.—Austin 1979, no writ). And unlike in Worm v. Huffman, here, there was no conclusive 

evidence that Spectrum was completely “unfit” at the time of takeover. Cf. 244 S.W.2d 899, 900 

(Tex. Civ. App.—San Antonio 1951, writ ref’d n.r.e.).

16 Although not raised by the parties, these requested questions misplaced the burden of 

proof. Appropriate questions would have asked whether Spectrum had no value at the time of 

closing.
24

App.—Houston [14th Dist.] 1982, no writ). Where appropriate, a trial court may 

base its legal determination on lack or failure of consideration on underlying facts 

as found by the jury. Schepps, 635 S.W.2d at 608 (not improper to submit jury 

question “as to whether appellee failed to provide the necessary service and parts 

to maintain the computer in good operating condition”—trial court may have

decided there was enough evidence to submit issue). However, ultimately it is “the 

duty of the court (not the jury) to determine whether there was a failure of 

consideration.” Id. As detailed above, we already have concluded WCW and 

Wilmot failed to prove that Spectrum had no value at the time of sale or transfer 

such that the SPA lacked consideration as a matter of law.

WCW relies on rule 278 in arguing that the trial court abused its discretion

in refusing to submit its valuation questions. Rule 278 requires trial courts to 

submit questions that are properly raised by the pleadings and the evidence. See

Tex. R. Civ. P. 278. However, WCW has not provided, and we have not located, 

any case applying rule 278 to require submission of an underlying fact question on 

the legal question of consideration in this precise context. Assuming solely for 

purposes of our analysis that rule 278 applies, a trial court may properly refuse to 

submit a question to the jury if no evidence exists to warrant its submission. 

Elbaor v. Smith, 845 S.W.2d 240, 243 (Tex. 1992). “When the evidence offered to 

prove a vital fact is so weak as to do no more than create a mere surmise or 

suspicion of its existence, the evidence is no more than a scintilla and, in legal 

effect, is no evidence.” Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.

1983). Although its requested questions asked about the value of Spectrum as of 

July and September 2008, the precise fact issue that WCW was required to raise to 

show lack or complete failure of consideration was the complete absence of 

Spectrum’s value at these times. That is, WCW needed to present some evidence
25

such that reasonable jurors could answer the requested questions with “$0.00.” 

Even viewing the evidence and inferences in the light most favorable to WCW,

and disregarding evidence and inferences to the contrary, see Elbaor, 845 S.W.2d 

at 243, evidence of Spectrum’s end-of-2008 EBITDA at best only creates a “mere 

suspicion” that Spectrum was entirely worthless five and a half months earlier at 

closing or three months earlier at takeover.17 See Kindred, 650 S.W.2d at 63.

Thus, we reasonably construe the trial court’s statement during the charge 

conference—“Refused. There is no evidence of the value of SCI or SSI . . . .”—to 

mean it was ruling that there was no evidence of the lack of Spectrum’s value on 

those dates.

Therefore, we conclude that the trial court did not abuse its considerable 

discretion or act without regard to guiding principles in refusing the submission. 

See Tex. Dep’t of Human Servs. v. E.B., 802 S.W.2d 647, 649 (Tex. 1990) (op. on 

reh’g); 4901 Main, Inc. v. TAS Auto., Inc., 187 S.W.3d 627, 633, 635 (Tex. App.—

Houston [14th Dist.] 2006, no pet.) (citing rule 278 and Elbaor, 845 S.W.2d at 243, 

in concluding that trial court did not abuse discretion in refusing to submit 

proposed jury questions where no evidence warranted submission).

We overrule WCW and Wilmot’s second issue.

C. Shareholders are not limited to $500,000 in damages for WCW’s SPA 

breach.

In their third issue, WCW and Wilmot argue that the indemnification 

provisions in the SPA contractually limit and cap any breach damages at $500,000. 

They specifically point to section 9.2, Indemnification of Seller Indemnitees, 

 

17 WCW and Wilmot insist that Shareholders conceded a factual dispute on Spectrum’s 

“worthlessness.” We disagree. Shareholders expressly argued that “there is no evidence” 

Spectrum’s value was negative when WCW took control.
26

which provides:

Buyer agrees to defend, indemnify and hold Seller Indemnitees 

(as defined below) harmless from and against all Damages arising out 

of, based upon or resulting from:

A. any misrepresentation, breach of representation or warranty 

on the part of Buyer under the terms of this Agreement;

B. any nonfulfillment of any covenant or agreement on the part 

of Buyer under the terms of this Agreement; and

C. the unlawful conduct of the operations and business of the 

Company or the ownership of the Assets on or after the Closing Date.

They also point to section 9.4, Limitations on Indemnification, which, in pertinent 

part, provides:

B. The indemnification provided for in Section 9.2 hereof shall 

be subject to the following limitations:

. . .

(2) The Sellers shall not be entitled to indemnification 

from Buyer under Section 9.2 in excess of Five Hundred 

Thousand Dollars ($500,000).

And they point to section 9.6, Exclusive Remedy, which provides: “The indemnity 

provided in this Article 9 shall be the exclusive remedy with respect to a breach of 

the matters contained in this Agreement.” 

Both before the trial court and on appeal, WCW and Wilmot argued that 

these provisions, while “couched” in indemnity language, actually operate as a 

straightforward liquidated damages clause whereby the parties agreed that the most 

Shareholders would be entitled to in the event of any breach of the SPA by WCW 

is $500,000,18 even where such breach concerns nonpayment of over $3 million of 

 

18 Article 9 provides a different set of “indemnification” limitations that would apply to 

WCW for a breach of the SPA by Shareholders, including a cap on Shareholders’ liability of 

40% of the purchase price. Such limitations are not at issue here.
27

the initial consideration. Thus, the jury’s answer to question 15 should be 

disregarded because the award exceeded the liquidated damages cap. Shareholders 

sought to avoid application of this limitation, arguing article 9 was unenforceable 

where WCW had not paid full consideration. The trial court overruled WCW’s 

request to apply article 9.19

WCW and Wilmot insist such limitation of liability is commonplace in 

Texas contracts, and these sophisticated parties were free to agree to “a liquidated 

damages figure for part of the deal.”

20 “Liquidated damages” ordinarily refers to 

an acceptable measure of damages that parties stipulate in advance will be assessed 

in the event of a contract breach. Flores v. Millennium Interests, Ltd., 185 S.W.3d 

427, 431 (Tex. 2005) (citing Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 

664 (Tex. 2005)). Although freedom of contract generally allows parties to 

allocate risk as they see fit, including through liquidated damages, “the right of 

competent parties to make their own bargains is not unlimited.” See Stewart v. 

Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952). Moreover, “[t]he ultimate goal 

in measuring damages for a breach-of-contract claim is to provide just 

 

19 The trial court overruled the request because it did not find this “straight on” plaintiffversus-defendant case to involve, and no party sued for, indemnification. In any event, even if 

the trial court gave an incorrect reason, we will uphold a correct ruling by a lower court on any 

legal theory before it. Guar. Cnty. Mut. Ins. Co. v. Reyna, 709 S.W.2d 647, 648 (Tex. 1986) (per 

curiam). Although Shareholders did not expressly use the term “penalty,” they placed the issue 

of unenforceability of article 9 before the trial court. Moreover, “[i]nasmuch as [WCW and 

Wilmot’s] own pleading establishes that the contractual provision [they] rel[y] upon is an 

unenforceable penalty . . . as a matter of law, [Shareholders] w[ere] not required to plead 

penalty.” See Phillips v. Phillips, 820 S.W.2d 785, 789–90 (Tex. 1991).

20 None of WCW and Wilmot’s cited cases deals with a situation involving the limitation 

of liability through liquidated damages in advance of a breach involving failure to pay the 

purchase price under a contract. See El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 

S.W.3d 802, 811–12 (Tex. 2012) (risk allocation for undiscovered foreign crossings on pipeline 

construction route was permissible); Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 62 (Tex. 

2008) (disclaimer of reliance precluded fraudulent inducement claim); Sw. Bell Tel. Co. v. FDP 

Corp., 811 S.W.2d 572, 576–77 (Tex. 1991) (limitation of liability for warranty breach in yellow 

pages advertising contract was permissible).
28

compensation for any loss or damage actually sustained as a result of the breach.”

Walden, 97 S.W.3d at 328 (citing Stewart, 245 S.W.2d at 486). That is:

[A] party generally should be awarded neither less nor more than his 

actual damages. A party has no right to have a court enforce a 

stipulation which violates the principle underlying that rule. In those

cases in which courts enforce stipulations of the parties as a measure 

of damages for the breach of covenants, the principle of just 

compensation is not abandoned and another principle substituted 

therefor. What courts really do in those cases is to permit the parties 

to estimate in advance the amount of damages, provided they adhere 

to the principle of just compensation.

Stewart, 245 S.W.2d at 486. Texas common law, however, has “long recognized a 

distinction between liquidated damages and penalties.” Flores, 185 S.W.3d at 431 

(citing Stewart, 252 S.W.2d at 485–86). Whether a contractual provision is an 

enforceable liquidated damages provision or an unenforceable penalty is generally 

a question of law for courts to decide. Phillips v. Phillips, 820 S.W.2d 785, 788 

(Tex. 1991) (citation omitted).

In Phillips, the Texas Supreme Court restated the common law test for 

determining whether to enforce a liquidated damages provision. Id. “In order to 

enforce a liquidated damages clause, the court must find: (1) that the harm caused 

by the breach is incapable or difficult of estimation, and (2) that the amount of 

liquidated damages called for is a reasonable forecast of just compensation.” Id.

(citing Rio Grande Valley Sugar Growers, Inc. v. Campesi, 592 S.W.2d 340, 342 

n.2 (Tex. 1979)). The Phillips court determined that the contractual provision at 

issue—“by which one party agrees to pay the other some multiple of actual 

damages for breach of the agreement”—was unenforceable on its face because it 

did not meet either part of the legal test for an enforceable liquidated damages 

provision. Id. at 789.
29

The “indemnity” provisions in article 9 of the SPA clearly attempt to set a 

stipulated measure of damages in case of any breach by WCW—liquidated 

damages—capping the damages to be assessed against WCW at $500,000. 

However, we conclude that, under these circumstances, these provisions fail the 

common law test from Phillips. First, the harm caused by the breach in question 

here—failure of WCW to pay the initial consideration of the purchase price of the 

SPA (or some portion thereof)—is certainly not incapable or difficult of 

estimation. See 820 S.W.2d at 788. Second, $500,000 as the cap on liquidated 

damages is not a reasonable forecast of just compensation for “any nonfulfillment 

of any covenant or agreement” by WCW—such as where WCW’s breach consists 

of failure to pay most, here, approximately two-thirds, of the initial consideration 

(unless that unpaid portion just happens to $500,000 or less). See id.; see also 

Cmty. Dev. Serv., Inc. v. Replacement Parts Mfg., Inc., 679 S.W.2d 721, 726–27 

(Tex. App.—Houston [1st Dist.] 1984, no writ) (holding liquidated damages 

provision was penalty “[b]ecause the clause in this case subjects the parties to the 

same reparation for any default under the contract”); Bethel v. Butler Drilling Co., 

635 S.W.2d 834, 837 (Tex. App.—Houston [14th Dist.] 1982, writ ref’d n.r.e.)

(same where “[t]he liquidated damage provision was not carefully drawn and as it 

was written, it applied equally to any breach of any provision of the contract by 

appellee”).

Moreover, a party can demonstrate that a liquidated damages provision is 

unreasonable by showing the liquidated damages are disproportionate to the actual 

damages at issue. See Garden Ridge, L.P. v. Advance Int’l, Inc., 403 S.W.3d 432, 

439–40 (Tex. App.—Houston [14th Dist.] 2013, pet. filed) (discussing Phillips and 

Baker v. Int’l. Record Syndicate, Inc., 812 S.W.2d 53 (Tex. App.—Dallas 1991, no 

writ)). Here, per the jury’s finding in question 15, Shareholders suffered actual 
30

damages from WCW’s breach in the amount of just over $3 million. Thus, 

$500,000 as liquidated damages is entirely disproportionate—although the jury 

found the Shareholders were entitled to over $3 million in actual damages, article 9 

would cap those damages at less than 17% of that amount.21

Therefore, as a matter of law, we conclude that, under these circumstances, 

the article 9 provisions are unenforceable as a penalty and WCW is not entitled to 

an indemnification cap of $500,000 for its breach of the SPA. See Phillips, 820 

S.W.2d at 788–89. Thus, the trial court did not err in refusing to apply article 9. 

See Cmty. Dev. Serv., 679 S.W.2d at 727.

Alternatively, WCW and Wilmot argue that no evidence supports the jury’s 

finding of collective breach damages of over $3 million for WCW’s SPA breach. 

However, rather than argue their position based on the trial evidence, they rely on 

the impermissible article 9 liquidated damages cap. To the extent their argument 

presents a challenge to the legal sufficiency of the evidence supporting the jury’s 

award of breach damages in the amount of $3,053,792.90, we disagree. Here, the 

SPA and amendment required WCW’s payment of initial consideration in cash of 

$4.6 million. The evidence shows that WCW made only three payments toward 

the initial consideration, totaling $1.5 million. The jury’s award indicates that it 

divided the remaining balance of $3.1 million among the Shareholders based on 

their respective ownership percentages and that it offset for the unpaid loans of the 

Nonexempt Shareholders—all within a margin of error of about 1% for each 

Shareholder. Viewing the evidence in the light most favorable to the verdict and 

 

21 While this proportionality comparison is usually in the context of stipulated liquidated 

damages being disproportionately higher than actual damages, we see no reason that a 

“disproportionately lower than actual damages” liquidated damages cap could not be construed 

as operating as a penalty against Shareholders here. Cf. Garden Ridge, 403 S.W.3d at 440–41 

(liquidated damages of chargebacks assessed against supplier at $79,457 and $13,000 

disproportionate to actual damages of $0 suffered by retailer).
31

indulging every reasonable inference, we conclude that a reasonable and fairminded jury could award this amount of damages for WCW’s breach of the SPA. 

See City of Keller, 168 S.W.3d at 827.

We overrule WCW and Wilmot’s third issue.

D. Shareholders are not limited in their breach recoveries under the Notes.

In their fourth issue, WCW and Wilmot assert there is legally insufficient 

evidence to support any breach or damages findings as to the Notes claims of 

certain Shareholders, and that the evidence conclusively proves that that any 

failure to pay on the Notes was excused, contrary to the jury’s finding in question 

5. With regard to Broussard, Kernion, and R. Laborde, WCW and Wilmot contend 

because these Nonexempt Shareholders resigned without “good reason,” they 

forfeited any unpaid amounts on their Notes under section 1.5 of the SPA.22 Also, 

 

22 Section 1.5, Purchase Price Adjustment for Termination of Employment, in relevant 

part, provides:

A. Adverse Termination.

Following the Closing Date, should the employment of any Seller 

designated as “Nonexempt” on Schedule 1 be terminated (a) by Resignation or (b) 

by Buyer for Cause in either case, (an “Adverse Termination”), such Seller shall 

forfeit all rights to receive any unpaid Deferred Consideration, Earnout 

Consideration and Bonus Consideration as of and following the effective date of 

the Adverse Termination.

B. For purposes of this Agreement:

. . .

(2) the term “Good Reason” means the termination of a Seller’s 

employment with the Company or its affiliates by the Seller by reason of (i) the 

Company’s or any of its affiliates (including the Buyer after the Closing Date) 

material breach of this Agreement or any employment agreement to which Seller 

is a party after two (2) written notices and opportunity to cure has been given by 

such Seller affected . . . . .
32

WCW and Wilmot argue that, at a minimum, under section 1.2(B),23 because 

 

23 Section 1.2(B) of the SPA, Deferred Consideration, provides:

B. Deferred Consideration.

Buyer shall pay to Sellers the aggregate amount of Three Million Eight 

Hundred Thousand Dollars ($3,800,000) (the “Deferred Consideration”), 

allocated among Sellers in accordance with Schedule 1, in three annual payments 

following the Closing pursuant to the payment schedule specified below; 

provided, however, that in the event that any Nonexempt Seller (as identified on 

Schedule 1) other than Jerry W. Broussard (“Broussard”) is not employed by 

Company as of the date that is one (1) year after the Closing Date for reason of (i) 

voluntary resignation by Seller without Good Reason (as defined below) 

("Resignation") or (ii) termination of said Seller’s employment by Buyer for 

Cause (as defined below), the Deferred Compensation otherwise due such Seller 

in accordance with Schedule 1 shall be forfeited by such Seller and retained by 

Buyer, and the aggregate Purchase Price and the Deferred Consideration shall be 

reduced by said amount. The Deferred Consideration due each Seller shall be 

evidenced by a promissory note of the form attached as Exhibit A, to be delivered 

to each Seller at Closing (as to each Seller, a “Note” and collectively, the 

“Note(s)”); each Note shall be payable with interest, compounded monthly at the 

“Prime” rate as published in the Wall Street Journal, which rate shall be fixed on 

the Closing Date and adjusted on the 15th day of September, December, March 

June for the rate as published on said date(s) so long as any balance remains 

outstanding on the Note(s), and, in the case of Nonexempt Sellers other than 

Broussard, shall be conditioned upon employment of the Seller by Company as of 

the respective payment due dates. The schedule for the installment payments and 

the aggregate maximum amount of the installments due under the Notes, less any 

amount otherwise payable to any Seller whose employment has terminated for the 

reasons specified in (i) and (ii) above, shall be as follows:

(1) One Million Dollars ($1,000,000) plus accrued interest payable 

in cash by wire transfer on January 31, 2009;

(2) One Million Dollars ($1,000,000) plus accrued interest payable 

in cash by wire transfer on January 31, 2010; and

(3) One Million Eight Hundred Thousand Dollars ($1,800,000) 

plus accrued interest payable in cash by wire transfer on January 31, 2011.

The Note(s) shall be secured by a letter of credit in substantially the form 

attached as Exhibit B (the “Security”).

The proportionate Deferred Consideration due under the Note held by 

each Exempt Seller (as identified on Schedule 1) shall be payable notwithstanding 

termination of such Seller’s employment for any reason; provided, however, that

the amount of Deferred Consideration payable to any such Exempt Seller whose 

employment has terminated on or before the due date for payment of any 
33

Kernion, R. Laborde, and Strickland were not employed as of the dates the second 

and third Note installments came due, they forfeited these later payments. Finally, 

with regard to Broussard, WCW and Wilmot argue that, under section 1.2(B), 

Broussard’s Notes damages must be reduced by the amount of the Notes payable to 

the Exempt Shareholders (Borel, Giron, Lowery, and Roussel) because they ended 

their employment before the second and third payments were due.

While the parties advance their respective interpretations, there is no dispute 

that these sections of the SPA contain certain conditions precedent to WCW’s 

performance of paying Shareholders all or even any of the deferred compensation 

portion of the purchase price.24 The first condition, applying to Nonexempt 

Shareholders except Broussard, is that they must still be employed at Spectrum one 

year after closing unless they resign with good reason to receive any deferred 

compensation. The second condition, again applying to Nonexempt Shareholders 

except Broussard, is that they must be employed as of the Note installment due 

dates to receive those payments. And the third condition, applying to Broussard, is 

that the Exempt Shareholders must be employed as of the Note installment due 

dates for him to receive his full amount of deferred consideration.25 In addition, 

 

installment thereof, as aforesaid, shall be deducted from Deferred Consideration 

otherwise due Broussard. The Deferred Consideration evidenced by the Note 

held by Broussard shall be subject to no conditions, limitations or reductions for 

any cause other than deductions in respect of payments of Deferred Consideration 

to Exempt Sellers whose employment has been terminated and otherwise as 

provided in this Agreement.

(Emphases added).

24 A condition precedent that affects a party’s obligation to perform is an act or event that 

must occur after the making of a contract before a right to immediate performance arises and 

before there may be a breach of contractual duty. Centex Corp. v. Dalton, 840 S.W.2d 952, 956 

(Tex. 1992). Conditional language such as “if,” “provided that,” or “on condition that” must 

generally be included in order to make performance specifically conditional. Solar Applications 

Eng’g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104, 109 (Tex. 2010).

25 These three conditions precedent are contained in section 1.2(B). Section 1.5, 
34

the Notes themselves state that WCW “is executing and delivering this Promissory 

Note pursuant to the terms and conditions of” the SPA. The Notes also state: 

“Payments to Payee of the principal amount of this Promissory Note shall be

subject to the provisions of Section 1.2(B) of” the SPA.

Where a contract contains conditions precedent, there must be some 

allegation by the plaintiff that the conditions have been met. Grimm v. Grimm, 864 

S.W.2d 160, 161 (Tex. App.—Houston [14th Dist.] 1993, no writ). Performance 

of any condition precedent is an essential element of the plaintiff’s case. Id.

Under rule 54, if a plaintiff pleads generally the performance of conditions 

precedent, the plaintiff need only prove performance of those conditions 

specifically denied by the defendant. Tex. R. Civ. P. 54; Cmty. Bank & Trust, 

S.S.B. v. Fleck, 107 S.W.3d 541, 542 (Tex. 2002) (per curiam); Bencon Mgmt. & 

Gen. Contracting, Inc. v. Boyer, Inc., 178 S.W.3d 198, 203 (Tex. App.—Houston 

[14th Dist.] 2005, no pet.); Grimm, 864 S.W.2d at 162. That is, a defendant’s 

general denial that all conditions precedent to a plaintiff’s right to recover have 

been performed is not sufficient under rule 54. See Tex. R. Civ. P. 54; compare 

Dairyland Cnty. Mut. Ins. Co. of Tex. v. Roman, 498 S.W.2d 154, 158–599 (Tex. 

1973) (allegation that plaintiff failed to comply with conditions of insurance policy 

accompanied by copy of policy’s “conditions” section held not sufficient); Coastal 

Terminal Operators v. Essex Crane Rental Corp., No. 14–02–00627–CV, 2004 

WL 1795355, at *7 (Tex. App.—Houston [14th Dist.] Aug. 12, 2004, pet. denied)

(mem. op.) (“[I]t is not sufficient to simply deny that all conditions precedent have 

been satisfied, even if the word ‘specifically’ is included in the denial.”); and

 

consistent with the first two conditions, provides that Nonexempt Shareholders whose 

employment is terminated due to “Resignation,” defined in section 1.2(B) as “voluntary 

resignation without Good Reason,” forfeit any unpaid deferred consideration as of their 

termination. 
35

Kartalis v. Lakeland Plaza Joint Venture, 784 S.W.2d 64, 67 (Tex. App.—Dallas 

1989, writ denied) (allegation “that the Plaintiff has failed to comply with each and 

every of the provisions of the Agreement and that all conditions precedent 

necessary to the maintenance of this action and, [sic] has not met all the conditions 

precedent necessary to the institution of this action” held not sufficient), with Betty 

Leavell Realty Co. v. Raggio, 669 S.W.2d 102, 103–04 (Tex. 1984) (allegation that 

purchaser failed to obtain financing within 20-day period required by paragraph 17

of contract held sufficiently specific).

Within their breach of contract count for both the SPA and the Notes, 

Shareholders pleaded that they “fully performed all conditions precedent under the 

SPA and the Notes.” Thus, they were required to prove only the conditions 

precedent WCW specifically denied. See Tex. R. Civ. P. 54, Bencon Mgmt., 178 

S.W.3d at 203. WCW and Wilmot’s second amended answer does not contain the 

term “condition precedent,” much less any specific denials as to the alleged 

conditions precedent in sections 1.2(B) and 1.5 of the SPA asserted by them

against certain Shareholders in their fourth issue. In their second amended answer, 

under affirmative defenses, WCW and Wilmot state: “Defendants assert that 

Plaintiffs’ claims are barred by the terms of the actual relevant documents and 

Defendants’ contractual defenses.” They also state: “Defendants assert that 

Plaintiffs neglected their contractual employment duties, and therefore breached 

the contracts and agreements.” Neither of these statements amounts to a specific 

denial or allegation that Shareholders failed to comply with the conditions 

precedent to their right to recover deferred consideration under the SPA and the 

Notes. Nonetheless, WCW and Wilmot complain on appeal that certain 

Shareholders failed to satisfy the specific employment conditions precedent to their 

recovery of deferred consideration, i.e., their payments due under the Notes, and 
36

that they failed to obtain findings even if any “good reason” exception to the 

conditions precedent may apply. However, it was WCW and Wilmot that failed to 

specifically deny that Shareholders performed these conditions. Under these 

circumstances, and based on this state of the pleadings, we conclude that 

Shareholders were not required to prove the specific conditions precedent 

regarding their employment status and dates under sections 1.2(B) and 1.5 of the 

SPA to be able to recover their deferred consideration under the Notes. See 

Dairyland, 498 S.W.2d at 159; Bencon Mgmt., 178 S.W.3d at 205; Kartalis, 784 

S.W.2d at 67.

We overrule WCW and Wilmot’s fourth issue.

Because we overrule WCW and Wilmot’s first four issues, we do not reach 

their two remaining issues, which are dependent on reversal of the trial court’s 

judgment. See Tex. R. App. P 47.1.

E. The trial court did not err by not holding Wilmot jointly and severally 

liable as to WCW’s breach.

In their sole remaining cross-appeal issue, Shareholders argue that the trial 

court erred by not signing a judgment against Wilmot based on the guaranty 

because the evidence conclusively shows that he is jointly and severally liable with 

WCW on the SPA and the Notes. WCW and Wilmot contend that Shareholders 

waived this issue by moving for the trial court to sign a judgment on the jury’s 

findings—which included a $0.00 damages finding based on Wilmot’s breach of 

the guaranty. Shareholders assert they did not waive the issue where the trial court 

did not sign their proposed judgment that they “approved as to form,” and where 

they filed a motion to disregard that damages finding and to enter judgment on 

sums due on the guaranty, which motion the trial court considered and denied. 

Assuming without deciding that Shareholders did not waive an appellate 
37

attack on the judgment by filing their motion, the record reveals that what 

Shareholders requested and argued below was not joint and several liability against 

Wilmot with WCW on the breach of the SPA and the Notes, but rather that the trial 

court disregard the guaranty damages finding and amend the judgment to reflect

damages against Wilmot in the amount of $7.9 million for the sums due on the 

guaranty ($4.1 million in initial consideration plus the $3.8 million LOC).26 

Shareholders’ complaint and request on appeal does not comport with their

objection and request below. As such, they have failed to preserve, and thus we 

overrule, this issue. See Tex. R. App. P. 33.1(a); Wohlfahrt v. Holloway, 172 

S.W.3d 630, 639 (Tex. App.—Houston [14th Dist.] 2005, pet. denied) (party 

waived particular argument on calculation of post-judgment interest in trial court’s 

judgment by making different argument before trial court).

IV. CONCLUSION

Accordingly, we affirm the trial court’s judgment.

/s/ Marc W. Brown

Justice

Panel consists of Justices Christopher, Donovan, and Brown.

 

26 While joint and several liability was discussed during the hearing on the entry of 

judgment, it was in the specific context of the jury’s fraud findings against both WCW and 

Wilmot.