Affirmed and Memorandum Opinion filed March 4 , 2014

.

In t he 

## Fourteenth Court of Appeals

NO. 14

- 12

- 00940

- CV NO. 14

- 12

- 01077

- CV NO. 14

- 12

- 01139

- CV

WCW INTERNATIONAL, I NC. , AND CHRIS WILMOT ,

Appellants/Cross

- Appellees

V. JERRY W. BROUSSARD, RONNIE D. LABORDE, DAVID M. KERNION, DAVID O. STRICKLAND, CRAIG M. BOREL, KEVI N J. ROUSSEL, GEORGE A. LOWERY , AND CARLOS O. GIRON ,

Appell ees/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. S trickland, 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, wi th 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 s ued 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 most ly fav orable 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. F ACTUAL AND P ROCEDURAL B ACKGROUND 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. Labo rde, 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 d iligence 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 1 6, 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 mi llion 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 representa tions regarding Spectrum’s financial statements and status with regard to its customers, disclosures, accounts, and any litigation. The Shareholders 4 agreed to repay any outstanding indebtedness on company loans.
WCW did not provide the initial considerat ion 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 W CW 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 con sideration 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 O ctober 31, 2008, along with the LOC. WCW also agreed to pay off or cause Shareholders’ guarantees on Spectrum’s lin e of credit at Whitney National
Bank to be released by October 20, 2008. The amendment authori zed 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, Share holders 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
rel eased 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 t he 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. Specif ically, 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 an d 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. Sh areholders 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 the ir damage s proximately caused by WCW’s breach: Borel, $63,264.80; Broussar d, $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 compe nsate 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, $504,08 2

— 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 . T he 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 n o damages against Wilmot. The trial court awarded Shareholders attorneys’ fees in a n 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 th at 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 Sharehol ders 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. L EGAL S UFFICIENCY S TANDARD OF R E VIEW 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
favorabl e evidence if a reasonable fact finder could and disregarding any contrary
evidence unless a reasonable fact finder could not. Id. at 827. We assume jurors
made all inferences in favor of their verdict if reasonable minds could, and disregard ed 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. I

d. at 822. The fac tfinder is the only judge of witness credibility and the weight to give to testimony. I d. 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 o nly 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 pr oof, 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. A NALYSIS

A. The evidence is legally sufficient to support the jury’s fin dings 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 failin g 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 lates t. 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
, B roussard, 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 conc lusively 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 thei r alleged nondisclosures or mis re pre sentations did not constitute breaches of the SPA, were not material, and were excused. Shareholders also argue that the Nonexemp t Shareholders planned to offset the ir loans, and the jury9

reasonably could have found that their failure to repay the de minimi s officer loans at closing was excused.
A party breaches a contract when it neglects or refuses to perform a contractual obligat ion. 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 H iles 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 part y 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 sta ndards 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 lega lly 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 t he re 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 brea ched 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 an d 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 “c losing” 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 provid e the LOC. In other words, the Nonexempt Shareholders would not be required to pay back their officer loans

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

—

until WCW fulfilled its “closing” requirements.

Moreo ver, 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 c omply 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. Thu s, 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 l egally sufficient to support the jury’s finding that WCW breached first. Further , b ased 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’ failure s 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
failure s thus cured ; the Nonexempt Shareholders stood to forfeit significant percentages of ownership in Spectrum (over 90%) if their failure s to pay back their
loans w ere treated as mate rial; and the failure to pay back $4 6,000 when the purchase price for Shareholders’ c ompanies 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; s ee 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 Shar eholders breached the
SPA. 8 Moreover, t he 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 co mply 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 prove s they breached section 2.8 9 ; a threatening letter from one of Spectrum’s major clients, N AWS , conc lu s ively

proves Shareholders breached section 2.13; Shareholders’ failure to list any “unresolved customer disputes” conclusively proves they breached sectio n 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 take

nothing 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 th e term “gross revenues” in Spec t r

um’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 “ n o confirm ation 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 pr operly 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 the y 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 pro ves 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 repres ented 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 eviden ce 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 exami ne 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 r egard 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 [G AAP ] consistently applied, th e financial position of the Company as of the dates
indicated .” T hrough WCW’s team’s own due diligence process, WCW and
Wilmot w ere 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. Although14

WCW had not eng aged 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.

W hen 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. ” Spec ifically, w ith 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]ccoun ting 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

s chedule 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 Ba ker
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
discl osed 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 ab out 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 a ware 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 reason able 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 p ending 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 th e 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 o f 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 mid

November 2008, there had not been any arbitration filed

. It was not until November 25, 2 008 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 Septem ber 2008. Moreover, aside from noting the budget issues and the write down reserves for the NAWS project,
Shareholders attached to schedu le 2.10(d) of the SPA over 50 pages relating to the project. This included correspondence between NAWS and Spectrum c oncerning “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 o n 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 p ut 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 sec tion 2.13. See id

. With regard to customers an d 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

o f 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 regarding17

hydrostatic test pre ssures” 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 Fate mizadeh 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 Enter prise Product s comprised over 70% of Spectrum’s 2007 rev enue, 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 l eft Spectrum in mid

November 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 un til 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 Shareh olders 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 a re 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.” T he
evidence detailed above indicates Shareholders had disclosed $1,450,000 in wri te down reserves through June 30
, 2008; WCW and Wilmot also were aware that Spectrum’s trea tment 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 Sp ectrum 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 e xcused 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 prove n the vital fact that it suffered damage s 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 rel y on the same evidence of the other alleged breaches. However, we already have found that WCW has not met its burden to conclusive ly 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 f ound that WCW was not excused by any prior material breach by Shareholders of section 2.27, 2.29, or 2.30. See id.

W e 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 Spe ctrum 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, wit h 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, conclusiv ely 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 Sheshu noff 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.2d20

492, 496 (Tex. 1991). It is a present ex change 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 con s ideratio n is upon the pleader. Rodriguez v. Sw. Drug Corp. , 619 S .W.2d 469, 472 (Tex. Civ. App.

— Houston [14th Dist.] 1981 , no writ ) ; s ee 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 con sideration 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, p arol evidence may be used to show want or failure of
consi deration

. 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 .”) . T he SPA expressly recites:

WHEREAS, Sellers, in the aggregate, own 9,800 shar es (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 Sha res upon and subject to the term s and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual pre mises, covenants and agreements set forth herein and in reliance upon the representations and warranties contained herein, the parties heret o 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, T HEREFORE, 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 four

times to six

- times EBITDA would be in the “typical” range for valuation on a purch ase of an enginee ring 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 4 95. 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 challeng e 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 Spect rum’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 o f

- $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 sign ed 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 t he “neighborhood” of $2.8 million , and agr eed 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
val ue as of July or September 200 8 ; 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 b ased

on a $4.8 million valuation and there wa s 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 b y Ramey during his testimony, yields positive figures. Perhaps this explains why Ramey was not cross

- examined except as to end

- of

2008 EBITDA.

14 WCW and Wilmot contend such evidence of valuation is incompetent because it was23

evidence that by November 2008, the financial markets had “crashed. ”
Based on the trial evidence, viewed in the light most favora ble to the verdict,
we conclude that WCW has failed to overcome t he 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 th at 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.

W hether 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 t estimony. 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 t o 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. I n Anderson Machine Co. v. Harber , the appeals court in fact did not find total failure of consideration as a ma tter 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)

. W here appropriate, a trial court may base its legal determinat ion 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 o perating 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 ha ve 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 su bmit 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 r equire 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 e vidence 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 tha n 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, t he precise fact issue that WCW was required t o 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 evidence25

such that reasonable jurors could answer the requested questions with “ $0.00. ”
E ven view in g the evidence and inferences in the light most favorable to WCW , and disregarding evidence and inferences to the contrary
, see Elb a o r , 845 S.W.2d at 243, e vidence of Spectrum’s end

- of

- 2008 EBITDA at best only creates a “mere suspicion” that Spectrum was e ntirely 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 , 84 5 S.W.2d at 243,
in concluding that trial court did not abuse discretion in refusing to submit proposed jury question s where no evidence warranted submission).

W e overrule WCW and Wilmot’s second issue.

C. Shareholders are not limited to $500,000 in damages f or 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 fact ual dispute on Spectrum’s “worthlessness

. ” We disagree. Shareholders expressly argued that “there is no evidence” Spectrum’s value was negative when WCW took contr ol.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 o r warranty on the part of Bu yer under the te rm s of this Agreement; B. any nonfulfillment of any covenant or agreement on the part of Buyer under the te rms 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 sha ll 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 reme dy with respect to a breach of the matters contained in this Agreement.”

B oth 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 damag es clause whereby the parties agreed that the most
Shareholders would be entitled to in the ev ent 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 f or a breach of the SPA by Shareholders , including a cap on Shareholders’ liability of 40% of the purchase price. Such limitation s are not at issue here.27

the initial consideration. Thus, the jury’s an swer to question 15 should be disregarded because the a ward 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 o verruled 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 damage s” 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, “t he right of competent parties to make their own bargains is not unlimited. ” See Stewart v.
B asey , 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 T he trial court overruled the r equest because it did not find this “straight on” plaintiff

versus

- 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 ru ling by a lower court on any legal theory before it. Guar. C n ty. 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] up on 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 und er a contract. See El Paso Field Servs

. , L.P. v. MasTec N. Am., Inc. , 389 S.W.3d 802, 8 11

– 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 (T ex. 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 perm it 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 la w for cou rts to decide. Phillips v. Phillips , 820 S. W.2d 785, 788 (Tex. 1991) (citation omitted).

In Phillips , the Texas Su preme 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 m eet 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

— cap pin g 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 c onsideration 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 a lso Cmty. Dev. Serv., Inc. v. Replacement Parts Mfg., Inc. , 679 S.W.2d 721, 72 6

– 2 7 (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 reparatio n for any default under the contract ” ); Bethel v. Butler Drilling Co.
, 635 S.W.2d 834, 837 (Tex. App.

— Hous ton [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 equ ally 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 Ridg e, 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, p er the jury’s finding in ques tion 15 , Shareholders suffered actual30

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 da mages, 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

a n indemnification cap of $500,000 for its breach of the SPA

. See Phillips , 820
S.W.2d at 788

– 8 9. Thus, t he 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 th eir argument present s 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 evide nce 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 percentage s an d 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 pr oportionality 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 fair

minded jury could award this amount of damages for WCW’s breach of the SPA.
See City of Keller , 168 S.W.3d at 827

. W e overrule WCW and Wilmot’s third issue.

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

.
In t heir 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 wa s 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, Pu rchase 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 Bu yer 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, prov ides:

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 fo llowing 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 o therwise 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 sha ll be evidenced by a promissory note of the fo rm 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” rat e 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), an d, 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 tr ansfer 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 trans fer 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 any33

Kernion, R

. Laborde, and Strickland were not employed as of the dates the second and third Note installments came due, they forfeited these later payme nts. 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 e mployment 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 r eceive 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 Broussar d, 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 perfo rm 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 a s “ if, ” “ provided that, ” or “ on condition that ” must generally be included in order to make performance specifically conditional. Solar Applica tions Eng’ g, Inc. v. T.A. Operating Corp. , 327 S.W.3d 104, 109 (Tex. 2010)

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

the Notes themselves state that WCW “is executing and delivering this Promissory Note purs uant 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 ess ential element of the plaintiff’ s case. Id.
Under r ule 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 D airyland Cnty

. Mut. Ins. Co. of Tex

. v. Roman , 498 S.W.2d 154, 15 8

– 59 9 (Tex. 1973) (allegation that plaintiff failed to comply with condit ions 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. denie d) (mem. op.) (“[I]t is not sufficient to simply deny that all conditions precedent have
been satisf

ied, 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,” forf eit 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, w rit 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 necess ary 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 su fficiently specific)

. Within their breach of contract count for both the SPA and the Notes, Shareholders pleaded that they “ fully performed all conditions preced ent under the
SPA and the Notes. ” Thus, they were required to prove only the conditions preced ent WCW specifically denied. See Tex. R. Civ. P. 54, Bencon Mg m t. , 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 section s 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 a ctual 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 t o 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 faile d to satisfy the specific employment conditions precedent to their recovery of deferred consideration, i.e., their payments due under the Notes, and36

that they failed to obtain findings even if any “ good reason ” exception to the conditions precedent m ay app ly. 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 w ere not required to prove the specific c onditions 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

. W e 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 c ourt 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 judgme nt against Wilmot based on the g uaranty because the evi dence 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 d amages finding b ased on Wilmot’s breach of the g uaranty

. 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 f inding and to ent er judgment on sums due on the g uaranty, which motion the trial court considered and denied.
Assuming without deciding that Shareholders did not waive an appellate37

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 g uaranty damages finding an d amend the judgment to reflect damage s against Wilmot in the amount of $7.9 million fo r the sums due on the

g uaranty ($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

- j udgm ent interest in trial court’ s judgment by making different argument before trial court).

IV. C ONCLUSION Accordingly, we affirm the trial court’s judgment.

/s/ Marc W. Brown Justice

Panel consists of Justices Ch ristopher, 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.