### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-14-00406- CV

Gar y P hill ips, Ap pellant

v. Boo 2 You, LL C; G eorge Steven Sm ith; and L ind a K. Sm ith, App ellees

F ROM TH E CO UNTY COURT AT LAW NO . 4 O F WI LLIAM SO N COUNTY NO. 12- 0966 -CC4, HO NORAB LE JO HN MCM ASTER, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N Appellant Gar

y Phill ips ap p eals from the summary judgme nt and sanctions order rende red by the county court at law of Wil liamson County in a suit seeking to establish the exis tence of a partner ship. Appellee s are Geor g e S teven Sm ith and L inda K. Smit h, husband and wife, and Boo 2 Y ou, L L C, a Texas L imited L iability Company

(B oo). We will affirm the judg ment. Phill ips pleade d that in the spring of 2010, the par t i es cr eate d a partne rship and

en t er ed into an ag ree ment relating to the operation of a business selling Hallowee n products. Phill ips asser

ted further that appellee s failed to distribute to him his share of the profits, $29,638.80, claiming that such failure constit uted a brea ch of the partnership ag ree ment as we ll as a breach of contra ct, bre ach of

fiduciar y duty , and unjust enrichme nt. 1

Phill ips burdens review of this cause by improperly citing to and relying upon Ru l e 1 98 1 “dee med” admissions when, in fac t, those admissions had been set asi d e b y t h e court befor e the summary -judg ment hear ing. By motion, appellee s reque sted this Court to sanction Phill ips ba sed,Appellee s’ motion for summary judgme nt asser ted among other things that there

was no evidenc e of one or more of the statutory fac tors that indicated the pa rties i ntended to form a par tnership. 2 Appellee s’ summary -judg ment proof shows that Boo is a limit ed-liability company eng ag ed in the seasona l business of selling Hallowee n merc handise on consig nment. Steven Smit h is the manag ing member of Boo and L inda, who i s n o t a member of Boo, helps him operate the bus iness. For two or m ore Hallowee n seasons, Phillips had lent substantial sums of m oney to Boo for its annual operations. These loans wer e evidenc ed by promissory notes that wer e repa id wit h interest. The summary -judg ment proof showed further that in 2010 Phill ips approa ched Steven Smit h about becominga member of Boo. Smit h did not ag ree to this reque st, but did of fer Phill ips an opportunity to share profits in three of Boo’ s stores for the upcoming Hallowee n season provided that Phillips pay one-ha lf of the expenses and participate in t he oper ation of those stores throug hout the Hallowee n season. Phill ips contributed one-ha lf of the expenses of the three stores, but he failed to help in their opera tion throug hout the season. As a result, Boo did not share profits from the operation of t hose st ores with Phill ips, b u t i t did repa y him $80,000 with interest for the loans that he ha d made to B oo to fund the 2010 sea son.

in par t , u p o n h i s citing the “dee med” admissions in his brief, there by repr esenting to the Court that s uch admissions wer e part of the summary -judg ment proof. We will overr ule appellee s’ motion. I n our re view of the rec ord, we will, of course , disreg ard the deeme d admissions. I t appea rs that appellee s’ motion for s u m m ar y j udg ment was draw n pursuant to 2 Texas Rule o f C i v i l Procedur e 166a(i). Although not require d, appellee s prese nted supporting summary -judg ment evidenc e. 2I n his summary -judg ment response , Phill ips asser ted that in Marc h 2010, the parties signe d a L etter of Under standing (L OU) perta i n i n g to the operation of a business eng ag ed in selling Hallowee n merc handise. Phill ips maintained that the L OU “evide nced both the cre ation of a par tnership as we ll as Phil lips’s right to one- half of the net proc eeds.”

The L OU provide s as follows:

L etter of Under standing This L etter of Under standing (L OU) will confirm what was d i s cu s s ed this date by L inda and Steve Smith and Gar y Phill ips. Steve and L inda Smit h dba Boo 2 You, L L C and Gar y Phill ips have agree d to ope n sever al more stores under the fra nchise g rante d to Boo 2 You, L L C by pare nt company Spirit Hallowee n, Eg g Har bor Township, New J erse y . The partie s have ag ree d to o p en stores in Huntsville and Waco, Texas and any other store opportunities that Spirit Hallowee n may g rant to B oo 2 You, L L C in the future. The partne rship betwee n the parties has been ag ree d [si c] to provide for a 50/50 split in the net proce eds of the above mentioned stores. This shall require both parties to equally share in the expenses of opening such stores. This date a c heck in the a mount of $5,000 is be ing tender ed to B oo 2 You, L L C by Gar y Phill ips which shall repr esent 50% of the consig nment deposit that is require d by Spirit Ha lloween. These monies shall be expressly used for this purpose and no other purpose. I t is understood that the consig nment deposit shall be the first monies disbursed to the par

ties after satisfying all expense associate d with the operation of the stores above. After these monies ha[ve] been disbursed to the respe ctive parties, all net proce eds shall be split 50/50. E ac h p arty shall be individually liable for all fede ral, state, loc al and a

ny other taxes that may

be owe d.

After a hear ing, the trial court g rante d appellee s’ motion for summary judgme nt and imposed sanctions on Phill ips, concluding t h at his lawsuit was frivolous and was vexatiousl y prosec uted for the purposes of ha rassment.

3Existence of P artner ship I n Texas, a g ener al partne rship is an association of two or m o re p er s o n s to car ry

on a business for profit as owne rs, re g ardle ss of whethe r the pe rsons intend to c rea te a partne rship

o r whether the association is called a “partnership.” Tex. Bus. Org s. Code § 152.051(b). Fa cto rs indicating that persons have cr eate d a par tnership include: (1) rec eipt or rig ht to rece ive a sha re of the profits of the busine ss; (2) expression of an intent to be par tners in the business; (3) participation or rig ht to participate in c ontrol of the business; (4) ag ree ment to share or sharing : A. losses of the business; or B. liability

for c laims by

third parties a g ainst the business; and (5) ag ree ment to contribute or c ontributing money or prope rty

to the business.

Id. § 152.052(a)

. 3

The Supreme Court has adopted a “totality -of- the-c ircumstance s test” for partners h i p fo rm at ion. See Ingram v. Dee re , 288 S.W .3d 886, 896 (Tex. 2009). I n Ingram , the court acknow ledg ed that the totality -of- the-c ircumstance s test may be difficult to apply uniformly , but it offe red g uidelines for application. See id

. at 898. An absenc e of evidenc e as to all five fac tors will p re cl u d e t h e rec og nition of a partne rship and even conclusive evidenc e of only one fac tor

The previous statute, Texas Revised Partnership Act, expired on J anuar y 1, 2010, sever al 3 months befor e all of the events made the basis of t h i s appea l. Gene ral partne rships are now g overne d by Chapter 152 of the Texas Business Org aniz at i o n s C ode. See Tex. Bus. Org s. Code §§ 152.001–.914. 4will normally be insufficient to establish the exis tence of a p ar t n er ship. Id

. On the other hand,

conclusive evidenc e of all five fac tors will establish the exis tence of a partne rship as a matter of law. Id

. Points on the spectrum betwee n the extremes prese nt the “cha lleng e” of the totality -of- t h ecircumstances test. Id. I n Ingram , the court conclude d that the proponent of the par t n er s h i p ag ree ment adduce d no evidenc e of any of the five fac tors, and there fore that t h er e was no p ar tnership as a matter of law. See id

. at 904; see also Hoss v. Alardin , 338 S.W .3d 6 3 5 , 6 5 0 (Tex. App.—Dallas 2011, no pet.) (conc luding that beca use proponent of partne rship adduce d

no evidenc e of four fac tors and only weak evidenc e of fifth fac tor, there was no partne rship as matter of la

w). I n his summary -judg ment response , Phill ips relies upon his aff idavit, his deposition testimony , the L OU, and the “dee m ed ” ad m i s s i ons as support for all of the section 152.052(a) fac tors. We will consider whether there is any g enuine issue of materia l fa ct as to the fac tors indicative of a

partne rship. I nitially , we observe that statements i n Phill ips’s aff idavit and dep o s i t i o n t o t he eff

ect that the parties ag ree d to enter into a partne rship are leg al conclusions by

a l ay wi t n es s an d d o not prove the exis tence of a partne rship. See Hoss , 338 S.W .3d at 644–45 (c i t i n g Ben Fitzgerald Realty Co. v. Muller , 846 S.W .2d 110, 121 (Tex. App.—Tyler 1993, writ denied) ).

P rofit Sh aring

Phill ips claims that he produce d “almost insurmountab le evidenc e” that the partne rship exis ted. He sug g ests that the L OU memorializes the partne rship formation and sets out 5its terms. He points to the lang uag e in the L OU providing for a “50/50 split in the net proce eds” of

the three stores as satisfy ing the profit-shar ing f actor

. See Tex. Bus. Org s. Code § 152.052(a) (1). The L OU does ref

er to a profit-shar ing agree ment of some char acte r b etween the parties arising from the operation of three stores. The Smit hs claim, howeve r, that the ag ree ment

was conditioned upon Phill ips lending t h e business $80,000 to be repa id with interest when the 2010 Hallowee n s ea s o n ’s books wer e closed and upon Phill ips working at the three stores throug hout the 2010 Hallowee n season. Although nothing in the L OU ref ers to an “ag ree ment” for Phill ips to provide labor, Steven Smit h’s summary -judg ment proof indicates that the profit-shar ing ag ree ment included Phillips ’s provision of some cha rac ter of la

bor at the thre e stores. Phill ips lent the business the money that was repa id with interest, but he did not work in the stores throug h the Hallowee n season. After a dispute with L inda Smit h at the end of the second w eek in Oc tober, Phillips l eft wor k and did not return. The rec eipt or rig ht to rec eive a share of the profits of the business is one factor i n d icating that persons have cre ated a partne rship. Howeve r, an ag ree ment to share profits does not, alone, establish the fac t of partne rship beca use part nerships are not the only business

ar ra n gements in which profits are share d. See Tex. Bus. Org s. Code § 152.052(b)( 1). I f p er s o n s sharing profits do not inte n d t o share them as co-ow ners, they are not partne rs. See Strawn Nat’l Bank v. Marchbank

s , 74 S.W .2d 447, 450 (Tex. Civ. App.—Eastland 1934, writ ref ’d); see also TexCo Grain Co. v. Happy W heat Growers, Inc ., 542 S.W .2d 934, 936–37 (Tex. Civ. App.—Amar illo 1976, no writ). Fur

thermore , the Texas Business Org anizations Code in its definition of partne rship

rec og nizes owner ship as an element of partne rship. See Tex. Bus. Org s. Code § 152.051(b). Upon

6this authority , the Smit hs then argue that the profit-shar ing ag ree ment was not based upon Phill ips’s

co-ow nership of the busin es s , but instead upon his perf ormanc e of work at the stores for the Hallowee n season.

To the contra

ry , Phill ips summary -judg ment proof indicates that he did not have a commitment to work at the stores. Instead, he was working there for “fun” and to ha ve something to do to fill out the day s.

We c onclude that the summary -judg ment rec ord raises a g enuine issue of fac t as to this factor. Expression of

Intent to Be P artner s The exp re s s i o n of an intent to be partne rs in the business is one of the fac tors employ ed in deter

mining whether a partne rship exis ts. See id. § 152.052(a) (2). The Supreme Court in Ingram made clea

r that this fac tor is distinct from the other four fac tors and that courts, in revie wing fac ts said to support this fac tor, should only consider evidenc e not specific ally probative of the other

fac tors. See 288 S.W .3d at 900. As we understand Phill ips’s brief, he relies primarily upon the L OU to establish that the parties intended to form a partne rship. Howeve r, becaus e Phill ips relied upon the L OU in his eff ort to demonstrate the rig ht to rec eive a share of the profits of the business, he may not a lso rely upon the L OU to establish an intent to form a partne rship. See i d

. T h er e i s n o o ther summary judgme nt proof t h at t h e p ar t ies even discussed or used the word “par tnership” to descr ibe their relationship other than Phill ips’s non-probative deposition testimony reg arding the execution of the L OU and the single mention of “pa rtnership” in the L OU.

7When considering whether the parties expressed an intent to be partne rs, courts

should revie w the putative partne rs’ speec h, writing , and conduct. Id. at 899. Evidence of inte nt to become partne rs could include the parties’ statements that they are partne rs, one party holding the ot her party out as a partne r on the bus iness’s l et t er h ea d o r name plate, or a signe d partne rship ag ree ment. Id. at 900.

Phill ips does not direc t our attention to any proof in his summary -judg ment response that the parties ref

err ed to eac h other as partne rs, held themselves out as partne rs, or had stationery , letterhe ad, business car ds, or a ba nk acc ount f

or the claimed partne rship. Acc ording ly , there is no summary -judg ment proof that the pa rties expressed a

n intent to be partne rs in the business.

Control Shared rig hts to control the business, along with share d rig hts to profits, are g ener ally considere d the most important fac tors in e stablishing the exis tence of a partne rship. Id

. at 896. I n his deposition, P hillips admitted that he had no c ontrol or manag eria l authority

. Sharin g of L osses and L iabil ity for Th ird-P arty C laim s

I n his aff idavit, Phill ips tries to char acte rize his loans to Boo as his risk of loss. But there is no summary -judg ment proof that the parties even discussed losses or liabiliti es for claims by third parties, much less ag ree d that Phill ips’s loan of $80,000 for expenses would cap his exposure for losses. See id

. at 902 (finding no evidenc e of this fac tor when the parties never discussed losses, only expenses).

8Contributions of Money or P ropert y F o r th e 2010 Hallowee n season, Steven Smit h asked Phill ips for sev e r a l lo a n s to ta li n g $80,000 for operation of the business

. T h es e s ums wer e repa id along with 12% interest in less than a y ear . Phill ips char acte rizes the $80,000 loan as a “ca pital contribution” with no further explanatory argument or authority

. View ed in isolation, Phill ips’s loans might be reg arde d as partne rship contributions. Howeve r, we are char g ed not to view the partne rship evidenc e in isolation but rather in the “totality

of the c ircumstance s.” Id. at 897–98. Phill ips and the Smit hs had a history of a lender –borrower re l at i o n ship for some time befor e 2010. The money Phill i p s l en t i n 2 010 and it s repa y ment at 12% interest are entirely consistent with their past lender –borrowe r pattern. These loans appea r less like a contribution from

a partne r and more akin to a loan from a lender

. We conclude that the summary -judg ment proof does not raise a

g enuine f

act issue on this fac tor. We have deter

mined that Phill ips failed to raise fac t issues with respe ct to four of the five statutory fac tors. Phill ips r aised a fac t issue a s to only an ag ree ment to sha re profits. Most of the summary -judg ment proof, howeve r, was inconsistent with the proposition that Phill ips and the appellee s formed a partne rship. Under the totality -of- the-c ircumstance s test presc ribed by Ingram , we conclude t h at t h e s u m m ary -judg ment proof failed to raise a g enuine issue of fac t as to the exis tence of a pa

rtnership. See H

oss , 338 S.W .3d at 650.

P hill ips’s Rem ainin g Claim s Appellee s mo v ed for summary judgme nt on Phill ips’s claims for brea ch of contra ct, brea ch of fiduciar y duty , and unjust enric hment. The court g rante d the motion for summary

9judgme nt in its entirety

. As we read Phi llips’s brief, he has either failed to complain on appe al of

the court’s dispositi on of these claims or has failed to pr ovide brief ing a nd argument in support of any such complaints. Appellate complaints are require d to be supported by argument and authority , and if not so supported, the complaints are waived. See Tex. R. App. P

. 38.1 (re quiring appellate brief to include “cle ar and concise argument for the contentions made, with appropr iate citations to authorities and to the rec ord”) ; Hale v. Ramsey , 524 S.W .2d 436, 438 (Tex. Civ. App.—Austin 1975,

no writ) (citing Rayburn v. Giles , 182 S.W .2d 9, 13 (Tex

. Civ. App.—San Antonio 1944, writ ref ’d)) ; see also Fredonia State Bank v. Gene ral Am. Lif e In s. Co. , 881 S.W .2d 279, 284 (Tex. 1994) (ac knowledg ing appellate courts’ discretion t o d ee m i nadequately briefe d issues waived)

. Order Set ting Aside Rule 198 Admissions

I n his reply brief, Phill ips, for the first time, attacks the trial court’s order setting aside the Rule 198 admissions. Phill ips’s argument will not be considere d. An appellant may not include in his reply brief a new i s s u e n o t ra i sed in the orig inal brief. Howell v. Texas W orkers’ Comp. Comm’n , 143 S.W .3d 416, 439 (Tex. App.—Austin 2004, pet. denied) (citing Tex. R. App. P. 38.1 (limiti ngappellant’ s reply brief to “ addre ssing a

ny matter in the a

ppellee’ s brief” )).

Sanctions O rder The co u rt granted appellee s’ motion for sanctions and signe d an order requiring Phill ips to pay appellee s $10,000 in attorney ’s fee s and costs for filing the suit that the court found to be “fr ivolous and vexatiousl y prosec uted for the purposes of hara ssment.” See Tex. Civ. Prac. &

10Rem. Code § 10.001 (sig ning of pleading or motion indicates, among other things, signatory ’s belief

that document not prese nt ed for “any improper purpose,” including to hara ss, cause delay , or incre ase c osts; and claims, defe nses, and leg al contentions ar e wa rra nted and nonf

rivolous). The court considere d the motion for sanctions immediately following the summary judgme nt hear ing. Appellee s’ counsel’s aff idavit provingup attorney ’s fees i n the s um of $7,500

was befor e the court as was the summary -judg ment proof. At the hear ing, counsel repr esente d that his attorney ’s fee s had incre ased to $16,000 from the date of his aff idavit to the date of the summary judgme nt hear ing

Appellee s’ cou n sel direc ted the court’s attention to: (1) an element of Phill ips’s damag e claim and (2) sever al discovery matters previously hear d by the court. Wit h respe ct to the damag e cla im, Phi llips sought $6,250 for the “ useful life” of shelves that appellee s had purc hased with money t h at P h i l l i p s had lent them even though the loan had been fully repa id with interest. Under the circ umstances, Phill ips had no leg itimate claim to proper ty purcha sed with funds from his loan. Counsel also rec alled to the court’s attention sever al discovery hear ings in which Phill ips had attempted to obtain appellee s’ financ ial rec ords ref lecting transac tio n s o c c u

r r in g a f te r th e ti me period involved in the lawsuit.

An appellate court revie ws a trial court’s imposit ion o f sanctions for an abuse of discretion. Low v. Henry , 221 S.W .3d 609, 614 (Tex. 2007); Benne tt v. Grant , 460 S.W .3d 220, 255 (Tex. App.—Austin 2015, pet. filed). The revie wing court must deter mine that the sanctions wer e appropr iate or just. See American Flood Researc h, Inc. v. Jones , 192 S.W .3d 581, 583 (Tex. 2006). A s an ction is just if there is a direc t nexus betwee n the improper conduct and the sanctions

11imposed, and if the sanction is not excessive. See id. (citing T r a nsAmerican Nat. Gas Corp. v. Powell , 811 S.W .2d 913, 917 (Tex. 1991)).

The trial court had befor e it the summary -judg ment rec ord demonstrating the l ac k

o f m er i t o f Phill ips’s partne rship claim. The court could also consider the fanc iful damag e cl ai m (the shelves) a

nd the history of Phill ips’s hara ssing discovery battles. Phill ips doe s not de fend his damag e theory (the shelves), nor does he dispute the occur renc e of the discovery hear ings. Fur ther, Phill ips doe s not contend that the amount of the sanctions orde r wa s excessive. We c onclude that the sanc tion order wa s just and not an abuse of discretion. The judg ment is affirme d.

Bob E. Shannon, Justice Be fore J ustices Goodwin, B ourland, a nd Shannon* Affir med Filed: May

13, 2016

* Be fore Bob E. Shannon, Chief J ustic e (r et i re d ), Third Court of Appeals, sitti ng by assig nment. See Tex. Gov’t Code § 74.003(b).

12