Court Opinion

ID: 3074266
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:00:31.852383+00
Date Added: 2024-06-11T12:46:44.242036
License: Public Domain

In The

                                Court of Appeals
                       Ninth District of Texas at Beaumont
                            ____________________
                               NO. 09-12-00114-CV
                            ____________________

               VALERI S. VARNADO, ADMINISTRATRIX
           OF THE ESTATE OF VERNON VARNADO, Appellant

                                        V.

               R & D MARBLE, INC., RANDALL CHELETTE
                     AND JAMES TRAHAN, Appellees
_______________________________________________________            ______________

                On Appeal from the County Court at Law No. 2
                        Montgomery County, Texas
                      Trial Cause No. 10-08-08378 CV
________________________________________________________            _____________

                           MEMORANDUM OPINION

      Vernon Varnado owned a sole proprietorship, doing business as Southern

Manufacturing. At the time of Vernon’s death in October 2006, Vernon’s son-in-

law, Randall Chelette was acting as the general manager of the business. Vernon

died without a will.

      On May 24, 2007, Valeri Varnado (Vernon’s daughter and Chelette’s wife at

the time), filed an application for letters of administration, and she was appointed

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as the dependent administrator of her father’s estate. She later became the

independent administrator. On July 23, 2007, the probate court granted Valeri the

authority to operate Southern Manufacturing, including the power to incur debt on

behalf of the business and to enter into contracts.

      The next month, Chelette submitted an application for credit to R&D

Marble, Inc., a supplier of materials. The company name on the application was

Southern Manufacturing. R&D had not previously conducted business with

Southern Manufacturing. The application was approved in August, and R&D

immediately began selling product to Southern Manufacturing.

      On September 6, Valeri filed an application with the probate court to form a

limited liability company, Southern Manufacturing Co., L.L.C. The probate court

approved the application. The certificate of formation was filed with the Secretary

of State on September 21, 2007.

      According to Chelette, now Valeri’s ex-husband, Valeri fired him in October

2008; Valerie claims he quit. According to her, James Trahan took over the duties

of general manager. In 2009, R&D required an updated credit application as part of

its routine business practice. Trahan signed the new application. Valeri fired

Trahan in February 2010.

                                          2
      Southern Manufacturing paid over $300,000 for materials purchased from

R&D. Invoices for $44,309.13 of material from December 2009 to June 2010 were

never paid. R&D sued Chelette, Trahan, and Valeri S. Varnado, individually and

doing business as Southern Manufacturing, to recover the unpaid amount. An

amended petition added appellant Valeri S. Varnado, as independent administrator

of the estate of Vernon Varnado, as a defendant.

      Trahan filed a counterclaim for fraud against R&D and a cross-claim for

indemnification against Southern Manufacturing. Chelette filed a cross-claim for

indemnification against Southern Manufacturing.

      The trial court granted a directed verdict in favor of Valeri S. Varnado,

individually. The jury found that R&D and Valerie Varnado, as administrator of

the estate of Vernon Varnado, doing business as Southern Manufacturing, had an

agreement regarding the purchase of goods, and that appellant failed to comply

with the agreement. The jury also found that Chelette and Trahan had failed to

comply with their personal guarantees, but that their failure to comply was

excused.

      The court signed a judgment on the jury’s verdict. The judgment provided

that appellant Valeri S. Varnado, as independent administrator of the estate of

Vernon Varnado, pay R&D Marble, Inc. damages of $44,309.13, plus pre-

                                        3
judgment interest, post-judgment interest, and attorney fees. The judgment

incorporated the jury’s verdict in favor of Chelette and Trahan on the cross-actions

against Valerie S. Varnado, as administrator, and ordered her as administrator to

pay Chelette’s and Trahan’s attorney fees. The trial court ordered that R&D

Marble, Inc. take nothing against Valeri S. Varnado, individually, and that Chelette

and Trahan take nothing on their counterclaims against R&D Marble, Inc.

                                  THE EVIDENCE

      Richard Holt testified that he was an independent contractor managing sales

for R&D. He had known Randy Chelette since 1993 and knew he was married to

Valeri. Before his affiliation with R&D, Holt had business dealings with Chelette

at Southern Manufacturing. Holt knew that prior to Vernon Varnado’s death,

Vernon was the owner of Southern Manufacturing and Chelette was the general

manager of the company. A vendor told Holt that Chelette had indicated he would

like to buy product from R&D. Holt called Chelette at Southern Manufacturing.

Because Holt knew Vernon had passed away, Holt asked Chelette if he was still in

charge of the company. Chelette said he was still the company’s general manager.

Holt faxed a blank credit application to Southern Manufacturing. Chelette filled

out the application.

                                         4
       Todd Downey, president and an owner of R&D, testified that he was aware

Vernon had passed away, and he assumed that Valeri had inherited the company.

Downey explained that when he processed the first credit application, he looked at

the credit of both Southern Manufacturing and Chelette. When he reviewed

Southern Manufacturing’s credit, Downey believed it showed Vernon Varnado as

the company’s owner. He knew Valeri and Chelette were married and believed that

Chelette, who had signed the credit application and was listed as the manager of

Southern Manufacturing on Chelette’s credit report, had the authority to enter into

contracts on behalf of the company.

       When Valeri and Chelette divorced, Downey believed that Valeri was

running the company. Downey believed at all times that he was doing business

with Valeri Varnado as the administrator of Vernon’s estate, and that the materials

were being shipped to Southern Manufacturing, a sole proprietorship. Valeri spoke

with Downey on at least three occasions. Neither Valeri nor anyone else with

Southern Manufacturing ever advised Downey that a limited liability company had

been formed. Downey explained that he believed Chelette’s and Trahan’s

signatures on the credit applications were also their personal guarantees of the

account. Downey was not aware of the limited liability company until after R&D

filed suit.

                                        5
      The applications for credit signed by Chelette and Trahan are both in the

name of Southern Manufacturing and include the company information at the top.

The bottom of the applications includes a section entitled “personal guarantee”

which includes a signature line for the guarantor. Below the signature line, the

form states, “Form must be complete to be considered for credit. Please make sure

application has been signed both as a company and/or representative and

individually.”

      Chelette testified he and Valeri were married in 1990. He began working for

Southern Manufacturing in 1991 and took more of a managerial position around

1998. Vernon ran the business until he passed away, and then Chelette was general

manager of the business and Valeri ran the company. He explained that the credit

application he signed for R&D in August 2007 had different wording than the

other credit applications he had completed. He stated that when he signed the

credit application he was still married to Valeri, the owner of the company.

Chelette testified that at some point the company became a limited liability

company. But he testified that at the time he signed the application, he was

guaranteeing the payment for products of a “d/b/a” and he expected the company

to pay the debt. The earliest unpaid R&D invoice is dated December 15, 2009, at

                                       6
least thirteen months after Chelette was fired. The invoice did not include any

products ordered by Chelette on behalf of the company.

      Trahan testified that after Vernon died, Valeri owned Southern

Manufacturing and Chelette was general manager. According to Trahan, after

Chelette left, no one served as general manager. Trahan handled most of the sales

and purchased materials but had no authority to hire or fire, and no access to

Southern Manufacturing bank accounts. Trahan told Holt that Trahan did not have

authority to sign the credit application, and Holt indicated R&D just needed a

signature and to not worry about filling out the rest of the form. Trahan read the

application which said it had to be complete for the applicant to be considered for

credit. Trahan signed the document but did not complete the application. Trahan

testified he did not fill out the top portion of the application, and the handwriting

on the rest of the application was not his.

      Valeri testified that the business assets were moved from the estate to the

L.L.C., and that the business was operated as a limited liability company while the

business was administered by the estate. Valeri admitted she does not remember

ever telling anyone with R&D that R&D was no longer doing business with

Southern Manufacturing as a d/b/a. Even though the business accounts changed to

a different bank at one point, at all times Valeri paid R&D from checks bearing the

                                              7
name of Southern Manufacturing, the name of the sole proprietorship. She

conceded she never advised R&D that she had formed an L.L.C. or that she

intended for the L.L.C. to be responsible for the debt. According to Valeri,

Chelette ceased managing the sole proprietorship and began managing the limited

liability company upon the date of the limited liability company’s formation. This

arrangement continued until Chelette’s employment with the company ceased.

Valeri maintains that any orders received after September 21, 2007 would have

been received by Southern Manufacturing Co., L.L.C.

                                     SUFFICIENCY

      As independent administrator, Valeri Varnado filed this appeal. In

appellant’s first issue, she argues there is no legally or factually sufficient evidence

supporting the finding that she, as the independent administrator of her father’s

estate, incurred the debt reflected on the outstanding invoices on behalf of the

estate. She contends that Chelette and Trahan were employees of Southern

Manufacturing Co., L.L.C., and were not authorized to enter into agreements with

R&D on her behalf. She maintains there is no statutory requirement that she notify

creditors of Southern Manufacturing Co., L.L.C.’s existence.

                                           8
      To address a legal sufficiency challenge, an appellate court reviews the

entire record, and credits favorable evidence if reasonable jurors could, and

disregards contrary evidence unless reasonable jurors could not. See City of Keller

v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). We must assume in this case that the

jurors decided questions of credibility or conflicting evidence in favor of the

verdict if they reasonably could do so. Id. at 819-20. The test for legal sufficiency

is whether the evidence at trial would enable reasonable and fair-minded people to

reach the verdict under review. Id. at 827. If the evidence “would enable

reasonable and fair-minded people to differ in their conclusions, then jurors must

be allowed to do so.” Id. at 822. (footnote omitted). An appellate court cannot

substitute its judgment for that of the trier-of-fact if the evidence falls within the

“zone of reasonable disagreement.” Lee v. Hasson, 286 S.W.3d 1, 13 (Tex. App.—

Houston [14th Dist.] 2007, pet. denied) (citing City of Keller, 168 S.W.3d at 822).

When a court of appeals reviews a jury finding for factual sufficiency, the court

considers and weighs all the evidence, and concludes that the finding is not

supported by factually sufficient evidence only if the finding is so contrary to the

overwhelming weight of the evidence as to be clearly wrong and unjust. Id. at 14.

(citing Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986)).

                                          9
      Southern Manufacturing Co., L.L.C. did not exist when Southern

Manufacturing submitted its initial application for credit to R&D. Based on the

application for credit, R&D agreed to sell materials to the sole proprietorship,

Southern Manufacturing. The probate court granted Valeri Varnado, as

administrator of the estate, the power to operate Southern Manufacturing,

including the authority to incur debt on behalf of the business. The evidence

indicates R&D was unaware that Southern Manufacturing Co., L.L.C. had

subsequently been formed. Valeri Varnado paid for the materials with checks from

Southern Manufacturing. R&D believed at all times that it was doing business with

Southern Manufacturing. The record does not reflect the filing of a new assumed

name certificate or a “statement of abandonment” for the sole proprietorship. See

Tex. Bus. & Com. Code Ann. § 71.152 (West Supp. 2012) (A new assumed name

certificate is to be filed within sixty days of an event “that causes the information

in a certificate to become materially misleading[,]” including a change in “name,

identity, entity, [or] form of business[.]”); see also Tex. Bus. & Com. Code Ann. §

71.153(b) (West 2009).

      The jury could reasonably reject some or all of the testimony of any witness,

including those witnesses testifying in favor of appellant’s position. The jury could

reasonably conclude that the business was carried on under the same name, and

                                         10
that R&D was not notified and had no knowledge of the limited liability company.

The jury could reasonably conclude that R&D believed it was dealing with the sole

proprietorship, Southern Manufacturing, and advanced credit. Under the

circumstances, the formation of a new entity did not release the estate of its

liability under the contract. The evidence is legally and factually sufficient to

support the jury’s verdict that appellant in her representative capacity had an

agreement with R&D to extend credit; appellant purchased the goods represented

in the unpaid invoices; and appellant in her representative capacity for the estate

was responsible for payment of the debt. Issue one is overruled.

                                 ATTORNEY FEES

      Appellant also maintains that the evidence supporting the jury’s finding of

$17,500 in attorney fees is legally and factually insufficient. Appellant argues

R&D’s counsel did not segregate the fees between recoverable fees for suit on

sworn account/breach of contract and unrecoverable fees for quantum meruit and

unjust enrichment. Appellant argues there was no segregation of attorney fees

between claims against appellant on the sworn account/breach of contract causes of

action and on the claims R&D had against Chelette and Trahan regarding personal

guarantees. Appellant argues the trial court awarded R&D attorney fees for R&D’s

counsel’s pursuit of “claims against Chelette and Trahan even though [R&D] did

                                        11
not recover from Chelette and Trahan.” R&D counters that it did not have to

segregate attorney fees because the claims are “inextricably intertwined.”

      Generally, a party seeking to recover attorney fees is “required to segregate

fees between claims for which they are recoverable and claims for which they are

not.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006). But

to the extent attorney fees “would have been incurred on a recoverable claim alone,

they are not disallowed simply because they do double service.” Id. at 313. Here,

the attorney fees related to R&D’s claims against appellant and against Chelette

and Trahan on their personal guarantees were for the same debt. The claims were

so intertwined that their prosecution entailed essentially the same work and proof.

See id. at 313-14 (“[A] claimant must segregate recoverable from unrecoverable

fees [and] it is only when discrete legal services advance both a recoverable and

unrecoverable claim that they are so intertwined that they need not be

segregated.”). Under the circumstances here, the fact that other defendants have

avoided liability for the debt does not relieve appellant of liability for the fees

incurred in recovering a judgment on the debt. Issue one is overruled.

                               JUDGMENT INTEREST

      In her second issue, appellant asserts that even if she is liable to R&D as

independent administrator of her father’s estate, there is no legal or factual basis

                                        12
for the court’s award of interest at eighteen percent. Appellant argues that because

she, as independent administrator of her father’s estate, did not have a written

agreement with R&D, the trial court should have applied the sections of the

Finance Code which provide the interest rates where the rates are not specified in

an agreement.

      We have concluded that the evidence is sufficient to support the jury’s

verdict, and that appellant is liable under the contract. Post-judgment interest in a

contract case where the contract provides for interest is the lesser of the interest

rate specified in the contract or eighteen percent a year. See Tex. Fin. Code Ann. §

304.002 (West 2006); see also Johnson & Higgins of Tex., Inc. v. Kenneco Energy,

Inc., 962 S.W.2d 507, 532 (Tex. 1998). If the contract does not provide for a rate

of interest, then the interest rate is calculated based on the statutory rate provided

in the Finance Code. See Tex. Fin. Code Ann. § 304.003 (West 2006).

      The application for credit provided to R&D was for Southern

Manufacturing. The approval of the application allowed Southern Manufacturing

to acquire hundreds of thousands of dollars of materials and stated that “[a]ll

amounts due [R&D] and not received at [R&D’s] offices at the address listed on or

before closing of each month and which amounts are past 30 days old shall be

subject to a finance charge of 1.5% per month which is an annual percentage rate

                                         13
of 18%.” The trial court properly awarded R&D interest in the amount of the

contracted rate. See Tex. Fin. Code Ann. § 304.002. Issue two is overruled.

              CHELETTE’S AND TRAHAN’S INDEMNIFICATION CLAIMS

      In her third issue, appellant argues there is no legal basis and no sufficient

evidence to support the awards of damages and attorney fees to Chelette and

Trahan on their claims for indemnification. Chelette and Trahan filed with this

Court a letter brief stating that they no longer wish to pursue their claims for

attorney fees. We therefore modify the trial court’s judgment by deleting in its

entirety the award of attorney fees in favor of Chelette and Trahan. We affirm the

trial court’s judgment as modified.

      AFFIRMED AS MODIFIED.

                                           ________________________________
                                                    DAVID GAULTNEY
                                                          Justice

Submitted on June 18, 2013
Opinion Delivered October 31, 2013

Before Gaultney, Kreger, and Horton, JJ.

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